10-12G

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934

PATHEON INC.

(Exact name of registrant as specified in its charter)

Canada	Not Applicable
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4721 Emperor Boulevard, Suite 200 Durham, NC	27703
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (919) 226-3200

Securities to be registered pursuant to Section 12(b) of the Act: None.

Securities to be registered pursuant to Section 12(g) of the Act:

Restricted Voting Shares

(Title of Class)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	¨

TABLE OF CONTENTS

Item 1.	Business	1
Item 1A.	Risk Factors	11
Item 2.	Financial Information	27
Item 3.	Properties	52
Item 4.	Security Ownership of Certain Beneficial Owners and Management	53
Item 5.	Directors and Executive Officers	55
Item 6.	Executive Compensation	60
Item 7.	Certain Relationships and Related Transactions, and Director Independence	84
Item 8.	Legal Proceedings	93
Item 9.	Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters	93
Item 10.	Recent Sales of Unregistered Securities	103
Item 11.	Description of Registrant’s Securities to be Registered	103
Item 12.	Indemnification of Directors and Officers	104
Item 13.	Financial Statements and Supplementary Data	104
Item 14.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	104
Item 15.	Financial Statements and Exhibits	104
SIGNATURES		108
APPENDIX A		109
EXHIBIT INDEX		111
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		113

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This registration statement contains statements that we believe are “forward-looking statements.” These statements reflect management’s expectations regarding our future growth, results of operations, performance (both operational and financial) and business prospects and opportunities. Where possible, words such as “plans,” “expects” or “does not expect,” “budget,” “forecasts,” “anticipates” or “does not anticipate,” “believes,” “intends” and similar expressions or statements that certain actions, events or results “may,” “could,” “would,” “might” or “will” be taken, occur or be achieved, have been used to identify these forward-looking statements. Although the forward-looking statements contained in this registration statement reflect management’s current assumptions based upon information currently available to management and based on assumptions that management believes to be reasonable, we cannot be certain that actual results will be consistent with these forward-looking statements. Current material assumptions relate to foreign exchange rates, customer volumes and regulatory compliance. A number of factors could cause actual results, performance or achievements to differ materially from the results expressed or implied in the forward-looking statements, including those listed in “Item 1A. Risk Factors” of this registration statement. These factors should be considered carefully, and readers should not place undue reliance on the forward-looking statements. Forward-looking statements necessarily involve significant known and unknown risks, assumptions and uncertainties that may cause our actual results, performance, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things: customer demand for our services; supply arrangements; exposure to complex production issues; global economic environment; international operations and foreign currency fluctuations; competition; credit and customer concentration; rapid technological change; dependence upon key management personnel and executives; pension plans; derivative financial instruments; divestitures and restructurings; impacts of acquisitions; the existence of a significant shareholder; substantial financial leverage; interest rate risks; regulatory matters affecting manufacturing and pharmaceutical development services; potential environmental, health and safety liabilities; product liability claims; and intellectual property. See “Item 1A. Risk Factors.” Although we have attempted to identify important risks and factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors and risks that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, as noted above, readers should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date of this registration statement and, except as required by law, we assume no obligation to update or revise them to reflect new events or circumstances.

General

All references to “$” or “dollars” in this registration statement are to U.S. dollars unless otherwise indicated.

Item 1. Business.

Overview

We are a leading provider of commercial manufacturing outsourcing services (“CMO”) and outsourced pharmaceutical development services (“PDS”) to the global pharmaceutical industry. We believe we are the world’s second-largest CMO provider and the world’s largest PDS provider. We offer a wide range of services from developing drug candidates at the pre-formulation stage through the launch, commercialization and production of approved drugs. During the fiscal year ended October 31, 2010 (“fiscal 2010”), we provided services to approximately 300 customers throughout the world, including 19 of the world’s 20 largest pharmaceutical companies, six of the world’s 10 largest biotechnology companies and five of the world’s 10 largest specialty pharmaceutical companies. In fiscal 2010, we manufactured 10 of the top 100 selling drug compounds in the world and our products were distributed in approximately 60 countries. We are also currently developing nine of the top 100 developmental stage drugs in the world on behalf of our customers.

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Our CMO business focuses primarily on prescription products in sterile dosage forms and solid, semi-solid and liquid conventional dosage forms. We have also developed a wide range of specialized capabilities in high potency, controlled substances and sustained release products. Our PDS business provides a broad range of development services, including finished dosage formulation across approximately 40 dosage forms, clinical trial manufacturing and associated analytical services. We have established our position as a market leader by leveraging our scale, global reach, specialized capabilities, broad service offerings, scientific expertise and track record of product quality and regulatory compliance to provide cost-effective solutions to our customers.

Company History

The heritage of our company dates back to 1974, when we established Custom Pharmaceuticals Ltd., a contract manufacturing business, in Fort Erie, Canada. We increased our contract manufacturing capabilities in 1982 by building a new manufacturing facility in Burlington, Canada, and from 1994 through 2002, we continually expanded our contract manufacturing capabilities by building or acquiring facilities in Canada, Europe and the United States and entered into the PDS business.

We completed our last major acquisition in fiscal 2005, with the acquisition of MOVA Pharmaceutical Corporation (“MOVA”), a leading U.S. prescription pharmaceutical contract manufacturer located in Puerto Rico. During 2006 and 2007, we determined that the carrying value of MOVA’s intangible assets, long-lived depreciable assets and goodwill were impaired as a result of the suspension of production of a major product due to concerns over product shelf life and the decline of another major product as a result of the approval by the U.S. Food and Drug Administration (the “FDA”) of a generic version of the product, which culminated in a significant increase in losses reported by the Puerto Rico operations, and the completion of a long-range plan that showed a significant reduction in earnings relative to prior forecasts. The impairment charges associated with these write-downs were $78.0 million for intangible assets, $52.0 million for long-lived depreciable assets and $172.5 million for goodwill. Following the acquisition of MOVA and associated impairments, we shifted our focus from external expansion to reviewing opportunities to improve our financial stability and operational efficiencies.

In 2006 and 2007, we conducted a review of strategic and financial alternatives that resulted in a $150,000,000 investment in us by JLL Partners Inc., a New York private equity firm (“JLL Partners”), and a refinancing of our North American indebtedness. As a result of this investment, an affiliate of JLL Partners received two series of preferred stock, one of which it converted into restricted voting shares in 2009 and the other of which entitles it to elect up to three members of our Board of Directors (our “Board”). See “Item 7. Certain Relationships and Related Transactions, and Director Independence—Arrangements with JLL.” Affiliates of JLL Partners currently beneficially own approximately 56% of our restricted voting shares.

In 2007, we announced a plan to restructure our Canadian network of six pharmaceutical manufacturing facilities to align with our strategy of focusing on developing and manufacturing prescription, rather than over-the-counter, products. To improve capacity utilization and profitability at our Whitby facility, we began decommissioning our York Mills facility and transferring all services undertaken at that site to, primarily, our Whitby facility. In the fiscal year ended October 31, 2008 (“fiscal 2008”), we sold our Niagara-Burlington operations to Pharmetics Inc.

In fiscal 2008, we announced a plan to restructure our Puerto Rican operations. In January 2009, we closed our Carolina facility in Puerto Rico and are marketing the remaining assets for sale. Later in 2009, we announced our intention to consolidate our two remaining Puerto Rico operations into our manufacturing site in Manatí and ultimately close or sell our plant in Caguas. The consolidation is expected to be substantially completed by the end of the fiscal year ended October 31, 2011 (“fiscal 2011”). There will likely continue to be some operations in the fiscal year ended October 31, 2012 (“fiscal 2012”) due to customer regulatory filing delays.

In November 2008, we opened a U.S. headquarters in Research Triangle Park, North Carolina, and a new analytical development laboratory facility in nearby Morrisville, North Carolina, which is also part of the

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Research Triangle Park. In 2008, we also opened a new early phase development facility in Milton Park, in Oxfordshire, United Kingdom, and a new European headquarters in Zug, Switzerland, near Zurich.

In November 2009, we completed the PDS facility inside our existing commercial manufacturing site in Ferentino, Italy. The expansion doubled PDS manufacturing capabilities for clinical batches. This area, which was designed for future expansion, was set up specifically for the scale-up of products for clinical use following the completion of development activities on site.

In January 2010, we began construction to expand our manufacturing facility in Bourgoin, France to include a pharmaceutical development center offering a full range of solid dose services as part of our PDS business. The construction was completed during the first quarter of fiscal 2011.

On April 23, 2010, we completed the issuance of $280 million, 8.625% senior secured notes, due April 15, 2017 (the “Notes”), in a private placement to certain qualified institutional buyers. We used the net proceeds of $268.5 million to repay all of our indebtedness under our then existing senior secured term loan and asset-based revolving credit facility (“ABL”), certain other indebtedness and expenses and fees. We are using the remaining proceeds for general corporate purposes. Concurrently, we entered into an amended and restated $75 million ABL. As a result of this amendment, the ABL now matures in 2014.

Our Segments

Although we were historically organized and managed as a single business segment providing commercial manufacturing and pharmaceutical development services, due to the continued growth in our operations and a change in our executive management structure, in fiscal 2008 we organized ourselves into two operating segments: CMO and PDS. In addition, we categorize certain selling, general and administrative costs and foreign exchange gains and losses under a separate segment reporting line item referred to as “corporate costs.” In fiscal 2010, our CMO and PDS segments accounted for 81.2% and 18.8% of our total revenues, respectively. Financial information about these segments and information regarding net sales and long-lived assets attributable to operations in Canada, the United States, Europe and other countries is contained in “Note 16—Segmented Information” of our consolidated financial statements beginning on page F-1 of this registration statement. Additional financial information about our segments is contained in “Item 2. Financial Information—Management’s Discussion and Analysis.” For a discussion of risks attendant to our foreign operations, please see “Item 1A. Risk Factors—Risks Related to our Business and Industry.”

The illustration below sets forth the various stages of the drug development and manufacturing process.

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Commercial Manufacturing

We believe we are the world’s second-largest CMO provider with an approximate 5% global market share in 2009. We operate nine facilities located throughout North America and Europe. We manufacture various sterile dosage forms, as well as solid, semi-solid and liquid conventional dosage forms. Our sterile dosage forms include aseptically (sterile) filled and terminally sterilized liquids and powders in ampoules, vials, bottles and pre-filled syringes and sterile lyophilized (freeze-dried) products in both vials and ampoules. Conventional dosage forms include both coated and uncoated compressed tablets, hard shell gelatin capsules, powders, ointments, creams, gels, syrups, suspensions, solutions and suppositories. Currently, our capacity utilization is higher for our facilities for sterile dosage forms than for conventional dosage forms. We further differentiate ourselves by offering specialized capabilities relating to high potency, controlled substance and sustained release products. In fiscal 2010, our CMO segment generated 81.2% of our total revenues.

Set forth below is a table illustrating our various dosage forms.

Conventional dosage forms
Solids	•   Tablets •   Capsules •   Powders	Specialized capabilities	•   High potency •   Controlled substances
Semi-solids	•   Creams •   Ointments •   Suppositories •   Gels		•   Sustained release products •   Soft gels •   Liquid filled hard shell capsules
Liquids	•   Syrups •   Solutions •   Suspensions		•   Nasal sprays
Sterile dosage forms
	•   Aseptically (sterile) filled and terminally sterilized liquids and powders (in ampoules, vials, bottles and pre-filled syringes) •   Pre-filled syringes and sterile lyophilized (freeze-dried) products (in vials and ampoules) •   Sterile (injectable) cephalosporin powder filling

We operate a segregated sterile (injectable) cephalosporin powder filling and lyophilisation facility in the United Kingdom. The combination of sterile cephalosporin capabilities and our 31,000 square foot lyophilisation plant dedicated to lyophilized cephalosporin products allows us to provide a full range of dosage forms for this category of antibiotics.

In fiscal 2010, we had a diverse CMO customer base with large pharmaceutical companies, specialty companies and large biotechnology companies comprising 55%, 27% and 5% of our fiscal 2010 CMO revenues, respectively, with the remainder being derived from our early stage pharmaceutical, generic and other customers.

Pharmaceutical Development Services

We believe we are the world’s largest PDS provider with an approximate 10% global market share in 2009, offering a broad range of development services across approximately 40 different dosage forms. We operate eight development centers and one clinical trial manufacturing facility located throughout North America and Europe. Our PDS offerings support customers across various stages of the drug development process, including (i) pre-formulation, formulation and development of dosage forms; (ii) manufacturing of development stage products during the regulatory drug approval process, including manufacturing of pilot batches; (iii) scale-up and technology transfer services designed to validate commercial-scale drug manufacturing processes; and

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(iv) development of analytical methods and delivery of analytical services. In fiscal 2010, our PDS offerings were provided to a diverse customer base with specialty companies, large pharmaceutical companies and large biotechnology companies comprising 32%, 30% and 37% of our fiscal 2010 PDS revenues, respectively, with the remaining 1% being derived from our early stage pharmaceutical, generic and other customers.

During fiscal 2010, we worked on approximately 395 projects for our customers, including eight drug candidates at the new drug application (“NDA”) stage. Among the projects we worked on during fiscal 2010, 87 projects were at Phase I, 93 projects were at Phase II, 85 projects were at Phase III, and 130 projects were at the pre-clinical or post-approval stage. During fiscal 2010 and 2009, we developed six products for customers that received new market approval. Since the beginning of fiscal 2001, our PDS business has developed, on behalf of our customers, 28 new molecular entities (“NME”) that have been approved for marketing by regulatory authorities, as well as numerous new formulations of existing NMEs. Our development group, comprised of approximately 600 scientists and technicians, including approximately 80 holding doctoral degrees, has extensive development experience across a wide variety of pharmaceutical dosage forms. Our PDS business serves as a pipeline for future commercial manufacturing opportunities. Since most of these products are at the beginning of their patent life, these products typically present long-term manufacturing opportunities. From the beginning of fiscal 2008 through the end of fiscal 2010, we were awarded CMO contracts for 27 new products that had been developed by our PDS business. In fiscal 2010, our PDS segment generated 18.8% of our total revenues.

Performance Enhancement Initiatives

We are committed to providing quality products and services to our customers. We are undertaking a series of initiatives to reduce operating expenses and increase manufacturing efficiency, including launching the Patheon Advantage^TM Lean 6 Sigma program and upgrading our information technology infrastructure. We have established a number of key performance indicators to measure the benefits of these initiatives, including on-time delivery, right first time batches and inventory turns. Over the last three fiscal years, the following initiatives were introduced:

• Patheon Advantage^TM is a companywide program that combines “lean” manufacturing practices with “six sigma” manufacturing to streamline operations, remove production bottlenecks, increase capacity utilization and improve performance throughout the network. All of our sites have completed their Lean 6 Sigma leadership training and at least one round of initial activities.

• One Patheon^TM is our global initiative to create one consistent customer interface by providing customers with consistent quotes and proposals, technical documents, invoice procedures, workflow management, ongoing performance communication and project execution.

• Quick to Clinic^TM is a program designed to accelerate drug development timelines for customers through rapid distribution of clinical trial materials for Phase I (First Time in Human) studies and delivery of finished drug product within four months from receipt of active pharmaceutical ingredients (“API”). To this end, our Milton Park (U.K.) and Whitby (Canada) facilities are designated as delivery centers.

• Quick to Market^TM offers accelerated transfer of commercially available products from our customers’ or their supplier’s manufacturing plants to our facilities.

• The Patheon Performance Guarantee, launched in June 2009, is a new term to be added to commercial manufacturing contracts for customers with critical supply requirements that guarantees, in writing, delivery performance and legacy of quality. The average on-time, in-full delivery across our entire network was approximately 93% in fiscal 2010.

• We have developed a four-year information technology master plan that sets the overall direction for systems and services for our business. It centers on the development of strategic information technology assets that will drive competitive advantages for our business and includes both the addition of new information technology assets and the enhancement of existing information technology assets.

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Successful implementation of these initiatives has enabled us to improve our performance as measured by key performance indicators, including increasing our frequency of on-time, in-full delivery of customer orders across our entire network from 85% in the first quarter of fiscal 2008 to approximately 93% in the first quarter of fiscal 2011.

Customers

In fiscal 2010, we provided services to approximately 300 customers throughout the world, including 19 of the world’s 20 largest pharmaceutical companies, six of the world’s 10 largest biotechnology companies and five of the world’s 10 largest specialty pharmaceutical companies. We are also currently developing on behalf of our customers nine of the 100 top developmental stage drugs in the world, based on the potential revenues for the products reported by EvaluatePharma^®. During fiscal 2010, no single customer accounted for more of 10.0% of our total revenues in our CMO business or PDS business. In fiscal 2010, our top 20 customers in our CMO segment accounted for approximately 81% of our CMO revenues. As described above, in June 2009, we launched a new performance guarantee initiative designed to enhance our service to customers. The Patheon Performance Guarantee was added as a new feature in CMO contracts for customers with critical supply requirements.

We have recently entered into several master service agreements with customers that contemplate long-term multi-product and multi-site commercial manufacturing and/or PDS, including a seven-year manufacturing agreement that led to construction of a new manufacturing facility within one of our existing sites with significant financing from the customer, a five-year master supply agreement with a global pharmaceutical company to provide development and manufacturing services and “carve-out” arrangements at certain of our facilities under which sizeable parts of our current production have been transferred to us from facilities owned by our customers that were slated for closure or downsizing. These arrangements are part of a trend towards developing broader and longer-term relationships with our customers.

Our CMO customers typically provide a yearly forecast of anticipated product demand. Customers also deliver firm purchase orders, typically three months prior to scheduled production, after which time they may adjust contract quantities or delivery dates within certain limits, provided that we are reimbursed for any expenses incurred in connection with such adjustment. Upon delivery to us of a customer purchase order confirming the quantity and delivery date, the order is scheduled for production. Our CMO customer contracts, typically with multi-year terms, formalize the standard business arrangements outlined above, including production based on the delivery of firm purchase orders. In addition, the contracts typically provide for six to 18 months’ advance notice for the transfer or discontinuance of any product. The customer assumes liability for all material commitments made in accordance with purchase orders. We maintain the right to pass on price increases to the customer over and above some predetermined minimum percentage. The actual revenues generated by our major customer agreements are based on volumes that are determined by market demands for the customer’s product from time to time.

Our PDS business provides services on a fee-for-service basis. We typically respond to a customer request and prepare a quotation which, if accepted, typically forms the basis of the contract with the customer. Our PDS contracts typically require us to perform development services within a designated scope. Frequently, the continuation of our work on a particular project will depend on various factors such as research results and the customer’s needs.

Sales and Marketing

Our global sales and marketing group is responsible for generating new business for our CMO and PDS businesses. Our sales team is broken into two distinct groups—territory-based sales executives and key account executives. Each of our territory-based sales teams is responsible for seeking potential customers and generating

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sales to all customers within its territory that are not named as a key account. Our North America territory-based sales team is comprised of 18 team members and covers the United States and Canada. We also have a territory-based sales team covering Europe and Japan, which is comprised of 10 members. In addition, we have six global key account executives who act as our primary interface with our most significant accounts; currently approximately 35 of our customers have key account status. Despite the functional and geographical delineation of our sales teams, each sales team or executive seeks to generate sales in both our CMO and PDS segments across our entire network. Determination of which site, or sites, will perform specific services is dictated by the nature of the customer’s product, our capabilities and customer preferences.

The projects of our existing customers are managed by site-based project managers and business managers, who also play an integral role in the sales process by ensuring that the existing projects are meeting customers’ expectations. Our sales executives work closely with the site-based teams to understand our customers’ projects and evolving needs, enabling the sales executives and site-based teams to obtain additional work on existing projects and to identify new projects.

Our sales team is supported by global marketing, sales operations and business intelligence groups located at our U.S. headquarters in Research Triangle Park, North Carolina, and regional support resources in Europe.

Supply Arrangements

For our contract manufacturing operations, we are required to source various APIs, excipients, raw materials and packaging components from third-party suppliers and/or our actual customers. Our customers specify these components, raw materials and packaging materials in line with their product registration files, and, in some cases, they specify the actual supplier from whom we must purchase these inputs. In most cases, our customers manage the sourcing and physical delivery of the API to us at no cost. We generally source and procure all other input materials from established local or regional suppliers specialized towards serving the pharmaceutical sector.

Supply arrangements are an inherent part of our ability to produce products for our customers in a timely manner and thus create a degree of dependence that could negatively impact revenues if such supply is interrupted. Such interruptions can be either localized to a specific supplier issue or as a result of wider supply interruptions due to natural disasters or international disruptions caused by geopolitical issues or other events. See “Item 1A. Risk Factors—Risks Related to Our Business and Industry.” We work closely with suppliers at both a local and corporate level to establish clear supply agreements that set forth the supply relationship expectations and the legal terms and conditions of the agreements, including potential liabilities for supply interruption situations. These agreements are critical to our ability to manage and mitigate risk across our supply chain.

Competition

We operate in a market that is highly competitive. We compete to provide CMO and PDS to pharmaceutical companies around the world.

Our competition in the CMO market includes full-service pharmaceutical outsourcing companies; contract manufacturers focusing on a limited number of dosage forms; contract manufacturers providing multiple dosage forms; and large pharmaceutical companies offering third-party manufacturing services to fill their excess capacity. In addition, in Europe, there are a large number of privately owned, dedicated outsourcing companies that serve only their local or national markets. Also, large pharmaceutical companies have been seeking to divest portions of their manufacturing capacity, and any such divested businesses may compete with us in the future. We compete primarily on the basis of the security of supply (quality, regulatory compliance and financial stability), service (on-time delivery and manufacturing flexibility) and cost-effective manufacturing (prices and a commitment to continuous improvement).

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Our competition in the PDS market includes a large number of laboratories that offer only a limited range of developmental services, generally at a small scale; providers focused on specific technologies and/or dosage forms; and a few fully integrated companies that can provide the full complement of services necessary to develop, scale-up and manufacture a wide range of dosage forms. We also compete in the PDS market with major pharmaceutical and chemical companies, specialized contract research organizations, research and development firms, universities and other research institutions. We may also compete with the internal operations of pharmaceutical companies that choose to source PDS internally. We compete primarily on the basis of scientific expertise, knowledge and experience in dosage form development, availability of a broad range of equipment, on-time delivery of clinical materials, compliance with current good manufacturing practices (“cGMPs”), regulatory compliance, cost effective services and financial stability.

Some of our competitors may have substantially greater financial, marketing, technical or other resources than we do. Additional competition may emerge and may, among other things, result in a decrease in the fees paid for our services.

One of the many factors affecting competition is the current excess capacity within the pharmaceutical industry of facilities capable of manufacturing drugs in solid and semi-solid dosage forms. Thus, customers currently have a wide range of supply alternatives for these dosage forms. Another factor causing increased competition is that a number of companies in Asia, particularly India, have been entering the CMO and PDS sectors over the past few years, have begun obtaining approval from the FDA for certain of their plants and have acquired additional plants in Europe and North America. One or more of these companies may become a significant competitor to us.

Employees

As of January 31, 2011, we had approximately 3,800 employees. National works councils are active at all of our facilities in the United Kingdom, France and Italy consistent with local labor laws. There is no union representation at any of our North American sites. Our management believes that we generally have a good relationship with our employees around the world and the works councils that represent a portion of our European employee base.

Intellectual Property

We rely on a combination of trademark, patent, trade secret and other intellectual property laws of the United States and other countries. We have applied in the United States and in certain foreign countries for registration of a limited number of trademarks and patents, some of which have been registered or issued. Also, many of the formulations used by us in manufacturing products to customer specifications are subject to patents or other intellectual property rights owned by or licensed to the relevant customer. Further, we rely on non-disclosure agreements and other contractual provisions to protect our intellectual property rights and typically enter into mutual confidentiality agreements with customers that own or are licensed users of patented formulations.

We have developed and continue to develop knowledge and expertise (“know how”) and trade secrets in the provision of services in both our PDS and CMO businesses. Our know-how and trade secrets may not be patentable, but they are valuable in that they enhance our ability to provide high-quality services to our customers.

To the extent that we determine that certain aspects of the service provided by our CMO and PDS businesses are innovative and patentable, we have filed and pursued, and plan to continue to file and pursue, patent applications to protect such inventions, as well as applications for registration of other intellectual property rights, as appropriate. However, we do not consider any particular patent, trademark, license, franchise or concession to be material to our overall business.

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Regulatory Matters

We are required to comply with the regulatory requirements of various local, state, provincial, national and international regulatory bodies having jurisdiction in the countries or localities where we manufacture products or where our customers’ products are distributed. In particular, we are subject to laws and regulations concerning research and development, testing, manufacturing processes, equipment and facilities, including compliance with cGMPs, labeling and distribution, import and export, and product registration and listing. As a result, most of our facilities are subject to regulation by the FDA, as well as regulatory bodies of other jurisdictions, such as the European Medicines Agency of the European Union (the “EMEA”) and/or the National Health Surveillance Agency in Brazil (the “NHSA”), depending on the countries in which our customers market and sell the products we manufacture and/or package on their behalf. We are also required to comply with environmental, health and safety laws and regulations, as discussed in “—Environmental Matters.” These regulatory requirements impact many aspects of our operations, including manufacturing, developing, labeling, packaging, storage, distribution, import and export and record keeping related to customers’ products. Noncompliance with any applicable regulatory requirements can result in government refusal to approve (i) facilities for testing or manufacturing products or (ii) products for commercialization. The FDA and other regulatory agencies can delay, limit or deny approval for many reasons, including:

• Changes to the regulatory approval process, including new data requirements, for product candidates in those jurisdictions, including the United States, in which we or our customers may be seeking approval;

• A product candidate may not be deemed to be safe or effective;

• The ability of the regulatory agency to provide timely responses as a result of its resource constraints; and

• The manufacturing processes or facilities may not meet the applicable requirements.

In addition, if new legislation or regulations are enacted or existing legislation or regulations are amended or are interpreted or enforced differently, we may be required to obtain additional approvals or operate according to different manufacturing or operating standards or pay additional product or establishment user fees. This may require a change in our research and development and manufacturing techniques or additional capital investments in our facilities.

Our pharmaceutical development and manufacturing projects generally involve products that must undergo pre-clinical and clinical evaluations relating to product safety and efficacy before they are approved as commercial therapeutic products. The regulatory authorities having jurisdiction in the countries in which our customers intend to market their products may delay or put on hold clinical trials, delay approval of a product or determine that the product is not approvable. The FDA or other regulatory agencies can delay approval of a drug if our manufacturing facility is not able to demonstrate compliance with cGMPs, pass other aspects of pre-approval inspections or properly scale up to produce commercial supplies. The FDA and comparable government authorities having jurisdiction in the countries in which our customers intend to market their products have the authority to withdraw product approval or suspend manufacture if there are significant problems with raw materials or supplies, quality control and assurance or the product we manufacture is adulterated or misbranded.

Some of our manufactured products are listed as controlled substances. Controlled substances are those products that present a risk of substance abuse. In the United States, these types of products are classified by the U.S. Drug Enforcement Agency (the “DEA”) as Schedule II, III, and IV substances under the Controlled Substances Act of 1970. The DEA classifies substances as Schedule I, II, III, IV or V substances, with Schedule I substances considered to present the highest risk of substance abuse and Schedule V substances the lowest risk. Scheduled substances are subject to DEA regulations relating to manufacturing, storage, distribution, import and export and physician prescription procedures. For example, scheduled drugs are subject to distribution limits and a higher level of recordkeeping requirements. Furthermore, the total amount of controlled substances for

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manufacture or commercial distribution is limited by the DEA and allocated through quotas. Our quotas or our customers’ quotas, if any, may not be sufficient to meet commercial demand or to economically produce the product.

Entities must be registered annually with the DEA to manufacture, distribute, dispense, import, export and conduct research using controlled substances. State controlled substance laws also require registration for similar activities. In addition, the DEA requires entities handling controlled substances to maintain records, file reports, follow specific labeling and packaging requirements and provide appropriate security measures to control against diversion of controlled substances. If we fail to follow these requirements, we may be subject to significant civil and/or criminal penalties and possibly a revocation of one of our DEA registrations.

Products containing controlled substances may generate significant public health and safety issues, and in such instances, federal or state authorities can withdraw or limit the marketing rights or regulatory approvals for these products. For some scheduled substances, the FDA may require us or our customers to develop product attributes or a risk evaluation and mitigation strategy to reduce the inappropriate use of the products, including the manner in which they are marketed and sold, so as to reduce the risk of diversion or abuse of the product. Developing such a program may be time-consuming and could delay approval of product candidates containing controlled substances. Such a program or delays of any approval from the FDA could adversely affect our business, results of operations and financial condition.

Audits are an important means by which prospective and existing customers gain confidence that our operations are conducted in accordance with applicable regulatory requirements. In fiscal 2010, our facilities and development centers were audited by 187 separate customer audit teams, representing both prospective and existing customers. These audits contribute to our ongoing improvement of our manufacturing and development practices. In addition to customer audits, we, like all commercial drug manufacturers, are subject to audits by various regulatory authorities. In fiscal 2010, 22 such audits by regulatory authorities were conducted at our sites in North America and Europe, involving multiple products. Responses to audit observations were accepted and product approval was granted, with the exception of two inspections that are still pending. It is not unusual for regulatory agencies or customers to request further clarification and/or follow-up on the responses we provide.

Environmental Matters

Our operations are subject to a variety of environmental, health and safety laws and regulations in each of the jurisdictions in which we operate. These laws and regulations govern, among other things, air emissions, wastewater discharges, the handling and disposal of hazardous substances and wastes, soil and groundwater contamination and employee health and safety. We are also subject to laws and regulations governing the destruction and disposal of raw materials and non-compliant products, the handling of regulated material that is included in our offerings and the disposal of our offerings at the end of their useful life. These laws and regulations have increasingly become more stringent, and we may incur additional expenses to ensure compliance with existing or new requirements in the future. Any failure by us to comply with environmental, health and safety requirements could result in the limitation or suspension of our operations. We also could incur monetary fines, civil or criminal sanctions, third-party claims or cleanup or other costs as a result of violations of or liabilities under such requirements. In addition, compliance with environmental, health and safety requirements could restrict our ability to expand our facilities or require us to acquire costly pollution control equipment, incur other significant expenses or modify our manufacturing processes.

Our manufacturing facilities, in varying degrees, use, store and dispose of hazardous substances in connection with their processes. At some of our facilities, these substances are stored in underground storage tanks or used in refrigeration systems. Some of our facilities, including those in Puerto Rico, have been utilized over a period of years as manufacturing facilities, with operations that may have included on-site landfill or other waste disposal activities and have certain known or potential conditions that may require remediation in the future, and several of these have undergone remediation activities in the past by former owners or operators.

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Some of our facilities are located near third-party industrial sites and may be impacted by contamination migrating from such sites. A number of our facilities use groundwater from onsite wells for process and potable water, and if these onsite sources became contaminated or otherwise unavailable for future use, we could incur expenses for obtaining water from alternative sources. In addition, our operations have grown through acquisitions, and it is possible that facilities that we have acquired may expose us to environmental liabilities associated with historical site conditions that have not yet been discovered. Some environmental laws impose liability for contamination on current and former owners and operators of affected sites, regardless of fault. If remediation costs or potential claims for personal injury or property or natural resource damages resulting from contamination arise, they may be material and may not be recoverable under any contractual indemnity or otherwise from prior owners or operators or any insurance policy. Additionally, we may not be able to successfully enforce any such indemnity or insurance policy in the future. In the event that new or previously unknown contamination is discovered or new cleanup obligations are otherwise imposed at any of our currently or previously owned or operated facilities, we may be required to take additional, unplanned remedial measures and record charges for which no reserves have been recorded.

Seasonality

Revenues from some of our CMO and PDS operations have traditionally been lower in our first fiscal quarter, being the three months ending January 31. We attribute this trend to several factors, including (i) the reassessment by many customers of their need for additional product in the last quarter of the calendar year in order to use existing inventories of products; (ii) the lower production of seasonal cough and cold remedies in the first fiscal quarter; (iii) limited project activity towards the end of the calendar year by many small pharmaceutical and biotechnology customers involved in PDS projects in order to reassess progress on their projects and manage cash resources; and (iv) the Patheon-wide facility shutdown during a portion of the traditional holiday period in December and January.

Research and Development

We have not spent any material amount in the last three fiscal years on company-sponsored research and development activities.

Item 1A. Risk Factors.

Risks Related to Our Business and Industry

We are dependent on our customers’ spending on and demand for our manufacturing and development services. A reduction in spending or demand could have a material adverse effect on our business.

The amount of customer spending on pharmaceutical development and manufacturing, particularly the amount our customers choose to spend on outsourcing these services, has a large impact on our sales and profitability. Consolidation in the pharmaceutical industry may impact such spending as customers integrate acquired operations, including research and development departments and manufacturing operations.

Many of our customers finance their research and development spending from private and public sources. We have experienced slowdowns in our customers’ spending on pharmaceutical development and related services, which we believe have been primarily due to the lack or decreased availability of capital for specialty and emerging pharmaceutical companies and the consolidation within the pharmaceutical industry, which resulted in the postponement of certain projects. Any reduction in customer and potential customer spending on pharmaceutical development and related services may have a material adverse effect on our business, results of operations and financial condition.

Furthermore, demand for our CMO segment is driven, in part, by products we bring to market for our PDS customers. Due to the long lead times associated with obtaining regulatory approvals for many of these products,

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particularly dosage forms, and the competitive advantage that can come from gaining early approval, it is important that we maintain a sufficiently large portfolio of pharmaceutical products and such products are brought to market on a timely basis. If we experience a reduction in research and development by our customers, the decrease in activity in our PDS segment could also negatively affect activity levels in our CMO business. Any decline in demand for our services may have a material adverse effect on our business, results of operations and financial condition.

The consumers of the products we manufacture for our customers may significantly influence our business, results of operations and financial condition.

We are dependent on demand for the products we manufacture for our customers and have no control or influence over the market demand for our customers’ products. Demand for our customers’ products can be adversely affected by, among other things, delays in health regulatory approval, the loss of patent and other intellectual property right protection, the emergence of competing products, including generic drugs, the degree to which private and government drug plans subsidize payment for a particular product and changes in the marketing strategies for such products.

If the products we manufacture for our customers do not gain market acceptance, our revenues and profitability will be adversely affected. The degree of market acceptance of our customers’ products will depend on a number of factors, including:

• the ability of our customers to publicly establish and demonstrate the efficacy and safety of such products, including compared to competing products;

• the costs to potential consumers of using such products; and

• marketing and distribution support for such products.

If production volumes of key products that we manufacture for our customers and related revenues are not maintained, it may have a material adverse effect on our business, results of operations and financial condition. Additionally, any changes in product mix due to market acceptance of our customers’ products may adversely affect our margins.

Our services and offerings are highly complex, and if we are unable to provide quality and timely offerings to our customers, our business could suffer.

The services we offer are highly exacting and complex, due in part to strict regulatory requirements. A failure of our quality control systems in our business units and facilities could cause problems to arise in connection with facility operations or during preparation or provision of products, in both cases, for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials or environmental factors. Such problems could affect production of a particular batch or series of batches, requiring the destruction of products, or could halt facility production altogether. In addition, our failure to meet required quality standards may result in our failure to timely deliver products to our customers, which in turn could damage our reputation for quality and service. Any such incident could, among other things, lead to increased costs, lost revenue, reimbursement to customers for lost APIs, damage to and possibly termination of existing customer relationships, time and expense spent investigating the cause and, depending on the cause, similar losses with respect to other batches or products. If problems are not discovered before the product is released to the market, we may be subject to regulatory actions, including product recalls, product seizures, injunctions to halt manufacture and distribution, restrictions on our operations, civil sanctions, including monetary sanctions, and criminal actions. In addition, such issues could subject us to litigation, the cost of which could be significant.

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Our PDS projects are typically for a shorter term than our CMO projects, and any failure by us to maintain a high volume of PDS projects, including due to lower than expected success rates of the products for which we provide services, could adversely affect our business, results of operations and financial condition.

Unlike our CMO segment, where our contracts are typically multi-year in duration, our PDS segment contracts are generally shorter in term and typically require us to provide development services within a designated scope. Since our PDS business focuses on products that are still in the developmental stages, the viability of many of our PDS projects is not certain. As a result, many of these projects fail to progress to the subsequent development phase. Even if a customer wishes to proceed with a project, the product we are developing on its behalf may fail to receive necessary regulatory approval, or other factors, such as the development of a competing product, may hinder the development of the product.

If we are unable to continue to obtain new projects from existing and new customers, our PDS segment could be adversely affected. Furthermore, although our PDS business acts as a pipeline for our CMO segment, we cannot predict the turnover rate of our PDS projects or how successful we will be in winning new projects that lead to a viable product. As such, an increase in the turnover rate of our PDS projects may negatively affect our CMO segment at a later time. In addition, the discontinuation of a project as a result of our failure to satisfy a customer’s requirements may also affect our ability to obtain future projects from the customer involved or from new customers.

Continued volatility and disruption to the global capital and credit markets and the global economy have adversely affected, and may continue to adversely affect, our business and results of operations and have adversely affected, and may continue to adversely affect, our customers and suppliers.

Recently, the global capital and credit markets and the global economy have experienced a period of significant uncertainty, characterized by the bankruptcy, failure, collapse or sale of various financial institutions and a considerable level of intervention from governments around the world. These conditions have adversely affected the demand for our products and services, which has negatively affected our business and results of operations. In addition, interest rate fluctuations, financial market volatility or credit market disruptions may limit our access to capital, and may also negatively affect our customers’ and our suppliers’ ability to obtain credit to finance their businesses on acceptable terms or at all. As a result, customers’ need for and ability to purchase our products or services may decrease. For example, certain of our customers have decreased their research and development spending due to their lack of access to capital. In addition, lack of access to capital may cause our suppliers to increase their prices, reduce their output or change their terms of sale. If our customers’ or suppliers’ operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, our customers may not be able to pay, or may delay payment of, accounts receivable owed to us, and our suppliers may restrict credit or impose different payment terms. Any inability of our customers to pay us for our products and services or any demands by suppliers for different payment terms may adversely affect our earnings and cash flow.

As the contraction of the global capital and credit markets has spread throughout the broader economy, the United States and other major markets around the world have experienced very weak or negative economic growth. These recessionary conditions have impacted, and will continue to impact, consumer demand for the products we manufacture for our customers.

Our operations outside the United States and Canada are subject to a number of economic, political and regulatory risks.

Our operations outside the United States and Canada could be substantially affected by foreign economic, political and regulatory risks. These risks include:

• the difficulty of enforcing agreements and collecting receivables through some foreign legal systems;

• fluctuations in currency exchange rates;

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• customers in some foreign countries potentially having longer payment cycles;

• changes in local tax laws, tax rates in some countries that may exceed those of Canada or the United States and lower earnings due to withholding requirements or the imposition of tariffs, exchange controls or other restrictions;

• seasonal reductions in business activity;

• the credit risk of local customers and distributors;

• general economic and political conditions;

• unexpected changes in legal, regulatory or tax requirements;

• relationships with labor unions and works councils;

• the difficulties associated with managing a large global organization;

• the risk that certain governments may adopt regulations or take other actions that would have a direct or indirect adverse impact on our business and market opportunities, including nationalization of private enterprise;

• non-compliance with applicable currency exchange control regulations, transfer pricing regulations or other similar regulations; and

• violations of the Foreign Corrupt Practices Act by acts of agents and other intermediaries whom we have limited or no ability to control.

If any of these economic or political risks materialize and we have failed to anticipate and effectively manage them, we may experience adverse effects on our business and results of operations. Additionally, if we do not remain in compliance with current regulatory requirements or fail to comply with future regulatory requirements, then such non-compliance may subject us to liability and have a material adverse effect on our business and results of operations.

Fluctuations in exchange rates could have a material adverse effect on our results of operations and financial performance.

Our most significant transaction exposures arise in our Canadian operations. Prior to the refinancing in the second quarter of fiscal 2010, the balance sheet of our Canadian division included U.S. dollar denominated debt which was designated as a hedge against our investments in subsidiaries in the United States and Puerto Rico. The foreign exchange gains and losses related to the effective portion of this hedge were recorded in other comprehensive income. In the third quarter of fiscal 2010, we changed the functional currency of our corporate division in Canada to U.S. dollars, thereby eliminating the need to designate this U.S. dollar denominated debt as a hedge. In addition, approximately 80% of the revenues of the Canadian operations and approximately 10% of its operating expenses are transacted in U.S. dollars. As a result, we may experience transaction exposures because of volatility in the exchange rate between the Canadian and U.S. dollar. Based on our current U.S. denominated net inflows, as of October 31, 2010, fluctuations of +/-10% would, everything else being equal, have an effect on loss from continuing operations before taxes of approximately +/- $11.9 million, prior to hedging activities.

The objective of our foreign exchange risk management activities is to minimize transaction exposures and the resulting volatility of our earnings. To mitigate exchange-rate risk, we utilize forward foreign exchange contracts in certain circumstances to lock in exchange rates with the objective that the gain or loss on the forward contracts will approximately offset the loss or gain that results from the transaction or transactions being hedged. As of October 31, 2010, we had entered into forward foreign exchange contracts to cover approximately 60% of our Canadian-U.S. dollar cash flow exposures for fiscal 2011.

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Translation gains and losses related to certain foreign currency denominated intercompany loans are included as part of the net investment in certain foreign subsidiaries and are included in accumulated other comprehensive income in shareholders’ equity. We do not currently hedge translation exposures.

While we attempt to mitigate our foreign exchange risk by engaging in foreign currency hedging activities using derivative financial instruments, we may not be successful. We may not be able to engage in hedging transactions in the future, and if we do, we may not be able to eliminate foreign currency risk, and foreign currency fluctuations may have a material adverse effect on our results of operations and financial performance.

Because a significant portion of our revenues comes from a limited number of customers, any decrease in sales to these customers could harm our business, results of operations and financial condition.

In fiscal 2010, our top 20 customers in our CMO segment accounted for approximately 80% of our CMO revenues. This customer concentration increases credit risk and other risks associated with particular customers and particular products, including risks related to market demand for customer products and regulatory and other operating risks. Disruptions in the production of major products could damage our customer relationships and adversely impact our results of operations in the future. Revenues from customers that have accounted for significant sales in the past, either individually or as a group, may not reach or exceed historical levels in any future period. The loss or a significant reduction of business from any of our major customers may have a material adverse effect on our business, results of operations and financial condition.

We operate in highly competitive markets and competition may adversely affect our business.

We operate in a market that is highly competitive. We compete to provide CMO and PDS to pharmaceutical companies around the world.

Our competition in the CMO market includes full-service pharmaceutical outsourcing companies; contract manufacturers focusing on a limited number of dosage forms; contract manufacturers providing multiple dosage forms; and large pharmaceutical companies offering third-party manufacturing services to fill their excess capacity. In addition, in Europe, there are a large number of privately owned, dedicated outsourcing companies that serve only their local or national markets. Also, large pharmaceutical companies have been seeking to divest portions of their manufacturing capacity, and any such divested businesses may compete with us in the future. We compete primarily on the basis of the security of supply (quality, regulatory compliance and financial stability), service (on-time delivery and manufacturing flexibility) and cost-effective manufacturing (prices and a commitment to continuous improvement).

Our competition in the PDS market includes a large number of laboratories that offer only a limited range of developmental services, generally at a small scale; providers focused on specific technologies and/or dosage forms; and a few fully integrated companies that can provide the full complement of services necessary to develop, scale-up and manufacture a wide range of dosage forms. We also compete in the PDS market with major pharmaceutical and chemical companies, specialized contract research organizations, research and development firms, universities and other research institutions. We may also compete with the internal operations of pharmaceutical companies that choose to source PDS services internally. We compete primarily on the basis of scientific expertise, knowledge and experience in dosage form development, availability of a broad range of equipment, on-time delivery of clinical materials, compliance with cGMPs, regulatory compliance, cost effective services and financial stability.

Some of our competitors may have substantially greater financial, marketing, technical or other resources than we do. Additional competition may emerge and may, among other things, result in a decrease in the fees paid for our services, which would affect our results of operations and financial condition.

One of the many factors affecting competition is the current excess capacity within the pharmaceutical industry of facilities capable of manufacturing drugs in solid and semi-solid dosage forms. Thus, customers

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currently have a wide range of supply alternatives for these dosage forms. Another factor causing increased competition is that a number of companies in Asia, particularly India, that have been entering the CMO and PDS sectors over the past few years, have begun obtaining approval from the FDA for certain of their plants and have acquired additional plants in Europe and North America. One or more of these companies may become a significant competitor to us. Competition may mean lower prices and reduced demand for CMO and PDS, which could have an adverse effect on our business, results of operations and financial condition.

We may not be able to successfully offer new services.

In order to successfully compete, we will need to offer and develop new services. The related development costs may require a substantial investment, and we may not have the financial resources to fund such initiatives.

In addition, the success of enhanced or new services will depend on several factors, including our ability to:

• properly anticipate and satisfy customer needs, including increasing demand for lower cost services;

• enhance, innovate, develop and manufacture new offerings in an economical and timely manner;

• differentiate our offerings from competitors’ offerings;

• meet quality requirements and other regulatory requirements of government agencies;

• obtain valid and enforceable intellectual property rights; and

• avoid infringing the proprietary rights of third parties.

Even if we were to succeed in creating enhanced or new services, those services may not produce revenues in excess of the costs of development and capital investment and may be quickly rendered obsolete by changing customer preferences or by technologies or features offered by our competitors. In addition, innovations may not be accepted quickly in the marketplace because of, among other things, entrenched patterns of clinical practice, the need for regulatory clearance and uncertainty over third-party reimbursement.

We rely on our customers to supply many of the necessary ingredients for our products, and for other ingredients, we rely on other third parties. Our inability to obtain any necessary materials or ingredients for the products we manufacture would adversely impact our business, results of operations and financial condition.

Our operations require various APIs, components, compounds and raw materials supplied primarily by third parties, including our customers. Our customers specify the components, raw materials and packaging materials required for their products and, in some cases, specify the suppliers from which we must purchase these inputs. In most cases, the customers supply the APIs to us at no cost. We generally source our components, compounds and raw materials locally, and most of the materials required by us for our CMO business are readily available.

In some cases, we manage the supply chain for our customers, including the sourcing of certain ingredients and packaging material from third-party suppliers. In certain instances, such ingredients or packaging material can only be supplied by a limited number of suppliers or in limited quantities. Any failure by a customer or a third-party supplier to supply an API for a pharmaceutical product or other raw materials on a timely basis may negatively impact our ability to produce our products and thus may negatively impact the revenues that we generate from our products.

Furthermore, customers or third-party suppliers may fail to provide us with raw materials and other components that meet the qualifications and standards required by us or our customers. Even if we timely identify quality issues with such raw materials and components, we may not be able to find alternative sources on satisfactory terms and in a timely manner, or at all. If third-party suppliers are not able to provide us with products that meet our or our customers’ specifications on a timely basis, we may be unable to manufacture products, or products may be available only at a higher cost or after a long delay, which could prevent us from

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delivering products to our customers within required timeframes. Any such delay in delivering our products may create liability for us to our customers for breach of contract or cause us to experience order cancellations and loss of customers. In the event that we produce products with inferior quality components and raw materials, we may become subject to product liability or warranty claims caused by defective raw materials or components from a third-party supplier or from a customer, or our customer may be required to recall its products from the market.

It is also possible that any of our supplier relationships could be interrupted due to natural disasters, international supply disruptions caused by geopolitical issues or other events or could be terminated in the future. Any sustained interruption in our receipt of adequate supplies could have an adverse effect on our business and financial results. In addition, while we have supply chain processes intended to reduce volatility in component and material pricing, we may not be able to successfully manage price fluctuations. Price fluctuations or shortages may have an adverse effect on our results of operations and financial condition.

Technological change may cause our offerings to become obsolete over time. If customers decrease their purchases of our offerings, our business, results of operations and financial condition may be adversely affected.

The healthcare industry is characterized by rapid technological change. Demand for our services may change in ways that we may not anticipate because of evolving industry standards or as a result of evolving customer needs that are increasingly sophisticated and varied or because of the introduction by competitors of new services and technologies. Any such decreased demand may adversely affect our business, results of operations and financial condition.

We are dependent on key management and scientific personnel.

We are dependent upon the continued support and involvement of a number of key management personnel. Our business is also dependent on our technical and scientific personnel. The loss of the services of one or more of such personnel could have a material adverse effect on our business. Our ability to manage our business activities and, hence, our success, will depend in large part on the efforts of these individuals. If we are not able to continue to attract and retain such personnel, it may materially adversely impact our business.

Certain of our pension plans are underfunded, and additional cash contributions may be required, which may reduce the cash available for our business.

Certain of our employees in Canada, France and the United Kingdom are participants in defined benefit pension plans that we sponsor. As of October 31, 2010, the unfunded pension liability on our pension plans was approximately $27.6 million in the aggregate. The amount of future contributions to our defined benefit plans will depend upon asset returns and a number of other factors and, as a result, the amounts we will be required to contribute to such plans in the future may vary. Such cash contributions to the plans will reduce the cash available for our business.

In relation to our U.K. pension plan, the trustees are authorized to accelerate the required payment of future contribution obligations if they have received actuarial advice that the plan is incapable of paying all the benefits that have or will become due for payment as they become due. If the trustees of our U.K. pension plan were to be so advised and took such a step, our U.K. subsidiary would be required to meet the full balance of the cost of securing the benefits provided by the plan through the purchase of annuities from an insurance company, to the extent that it was able to do so. The cost would be likely to exceed the amount of any deficit under the plan while the plan was ongoing.

We are, or may be, party to certain derivative financial instruments, and our results of operations may be negatively affected in the event of non-performance by the counterparties to such instruments.

From time to time, we enter into interest rate swaps and foreign exchange forward contracts to limit our exposure to changes in variable interest rates and foreign exchange rates. When we enter into such swaps and

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contracts, we are exposed to credit-related losses, which could impact our results of operations and financial condition in the event of non-performance by the counterparties to such instruments.

Any failure of our information systems could adversely affect our business and results of operations.

We rely on information systems in our business to obtain, rapidly process, analyze and manage data to:

• facilitate the manufacture and distribution of thousands of inventory items to and from our facilities;

• receive, process and ship orders on a timely basis;

• manage the accurate billing of, and collections from, our customers;

• manage the accurate accounting for, and payment to, our vendors; and

• schedule and operate our global network of manufacturing and development facilities.

If these systems are interrupted, damaged by unforeseen events or fail for any extended period of time, including due to the actions of third parties, then we may not be able to effectively manage our business, and our results of operations could be adversely affected.

From time to time, we may seek to restructure our operations, which may require us to incur restructuring charges, and we may not be able to achieve the cost savings that we expect from any such restructuring efforts.

To improve our profitability, we recently restructured our Canadian manufacturing operations. We also are in the process of restructuring our Puerto Rican operations as part of our efforts to eliminate operating losses and develop a long-term plan for our business. As part of our restructuring efforts, we incurred $6.8 million of charges during fiscal 2010. We expect to adopt additional restructuring plans in order to improve our operational efficiency.

We may not be able to achieve the level of benefits that we expect to realize from these or any future restructuring activities, within expected timeframes, or at all. Furthermore, upon the closure of any facilities in connection with our restructuring efforts, we may not be able to divest such facilities at a fair price or in a timely manner. In addition, as part of any plant closures and the transfer of production to another facility, we are required to obtain the consents of our customers and the relevant regulatory agencies, which we may not be able to obtain. Changes in the amount, timing and character of charges related to our current and future restructurings and the failure to complete or a substantial delay in completing our current and any future restructuring plan could have a material adverse effect on our business.

We may in the future engage in acquisitions and joint ventures and may divest non-strategic businesses or assets. We may not be able to complete such transactions, and such transactions, if executed, pose significant risks.

Our future success may depend on our ability to acquire other businesses or technologies or enter into joint ventures that could complement, enhance or expand our current business or offerings and services or that might otherwise offer us growth opportunities. We may face competition from other companies in pursuing acquisitions and joint ventures. Our ability to enter into such transactions may also be limited by applicable antitrust laws and other regulations in the United States, Canada and foreign jurisdictions in which we do business. We may not be able to complete such transactions for reasons including, but not limited to, a failure to secure financing. Any transactions that we are able to identify and complete may involve a number of risks, including:

• the diversion of management’s attention to negotiate the transaction and then integrate the acquired businesses or joint ventures;

• the possible adverse effects on our operating results during the negotiation and integration process;

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• significant costs, charges or writedowns;

• the potential loss of customers or employees of the acquired business; and

• our potential inability to achieve our intended objectives for the transaction.

In addition, we may be unable to maintain uniform standards, controls, procedures and policies with respect to the acquired business, and this may lead to operational inefficiencies. To the extent that we are successful in making acquisitions, we may have to expend substantial amounts of cash, incur debt and assume loss-making divisions.

We may also seek to sell some of our assets in connection with the divestiture of a non-strategic business or as part of internal restructuring efforts. To the extent that we are not successful in completing such divestitures or restructuring efforts, we may have to expend substantial amounts of cash, incur debt and continue to absorb loss-making or under-performing divisions. Any divestitures that we are unable to complete may involve a number of risks, including diversion of management’s attention, a negative impact on our customer relationships, costs associated with retaining the targeted divestiture, closing and disposing of the impacted business or transferring business to other facilities. Furthermore, our ability to initiate and complete such transactions may be hindered by our Investor Agreement (the “Investor Agreement”) with JLL Patheon Holdings, LLC (“JLL Patheon Holdings”), an affiliate of JLL Partners. For example, under the terms of the Investor Agreement, we need majority independent director approval to engage in certain types of transactions. See “Item 7. Certain Relationships and Related Transactions, and Director Independence—Arrangements with JLL—Investor Agreement.”

JLL has significant influence over our business and affairs, and its interests may differ from ours and those of our other shareholders.

On July 29, 2009, JLL Patheon Holdings converted its 150,000 convertible Class I, Preferred Shares, Series C (“Series C Preferred Shares”) into a total of 38,018,538 shares of our restricted voting shares, in accordance with the terms of the Series C Preferred Shares. As of February 15, 2011, JLL Patheon Holdings and its affiliates (together, “JLL”) owned an aggregate of 72,077,781 restricted voting shares, representing approximately 56% of our total restricted voting shares outstanding. JLL Patheon Holdings also owns an aggregate of 150,000 special voting Class I, Preferred Shares, Series D (“Series D Preferred Shares”), pursuant to which it is entitled to elect up to three of our directors based on the number of restricted voting shares that it holds. See “Item 7. Certain Relationships and Related Transactions, and Director Independence—Arrangements with JLL—Investor Agreement.”

In addition, in connection with the investment by JLL Patheon Holdings in our shares, on April 27, 2007, we entered into the Investor Agreement. See “Item 7. Certain Relationships and Related Transactions, and Director Independence—Arrangements with JLL—Investor Agreement.” Under the Investor Agreement, we currently are required to seek the approval of JLL Patheon Holdings before we undertake certain actions, including share issuances, the payment of dividends, share repurchases, any merger, consolidation or sale of all or substantially all of our assets or a similar business combination transaction and the incurrence of certain indebtedness in excess of $20 million.

JLL exercises significant influence over us as a result of its majority shareholder position, voting rights, board appointment rights and its rights under the Investor Agreement. As a result, JLL has control over our decisions to enter into any corporate transaction and has the ability to prevent any transaction that requires shareholder approval. This concentration of ownership and JLL’s rights may prevent a change of control of us that might be considered to be in the interests of shareholders or other stakeholders. In addition, if we are unable to obtain requisite approvals from JLL, we may be prevented from executing critical elements of our business strategy.

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Our stock price is volatile and could experience substantial declines.

The market price of our common stock has historically experienced, and might continue to experience, volatility. Our quarterly operating results or anticipated future results, changes in general conditions in the economy or the financial markets, both of which experienced uncertainty in the year ended October 31, 2009 (“fiscal 2009”) and fiscal 2010 due to the effects of the global financial crisis, and other developments affecting us or our competitors have caused and could continue to cause the market price of our common stock to fluctuate substantially. Some of these factors are beyond our control, such as changes in revenue and earnings estimates by analysts, market conditions within our industry, disclosures by product development partners and actions by regulatory authorities with respect to potential drug candidates and changes in pharmaceutical and biotechnology industries and the government sponsored clinical research sector. In addition, in recent years, the stock market has experienced significant price and volume fluctuations. The stock market, and in particular the market for pharmaceutical and biotechnology company stocks, has also experienced significant decreases in value in the past. This volatility and valuation decline have affected the market prices of securities issued by many companies, often for reasons unrelated to their operating performance, and might adversely affect the price of our common stock.

You might have difficulty enforcing civil liabilities found in U.S. court judgments against us, enforcing U.S. judgments in a Canadian court or bringing an original action in Canada to enforce liabilities based upon U.S. federal securities laws.

We are a corporation organized under the Canada Business Corporations Act, and some of our directors and officers reside principally outside of the United States. As a result, it may not be possible for you to enforce judgments obtained in U.S. courts against us or them within the United States, because a substantial portion of our assets and the assets of these persons are located outside the United States. In addition, a Canadian court may not agree to recognize and enforce a judgment of a U.S. court. Accordingly, even if you obtain a favorable judgment in a U.S. court, you may be required to re-litigate your claim in other jurisdictions. In addition, it is possible that a Canadian court would not take jurisdiction over a matter involving a claim based on foreign laws, such as the federal securities laws of the United States.

Risks Relating to Regulatory and Legal Matters

Failure to comply with existing and future regulatory requirements could adversely affect our business, results of operations and financial condition.

Our industry is highly regulated. We are required to comply with the regulatory requirements of various local, state, provincial, national and international regulatory bodies having jurisdiction in the countries or localities in which we manufacture products or in which our customers’ products are distributed. In particular, we are subject to laws and regulations concerning research and development, testing, manufacturing processes, equipment and facilities, including compliance with cGMPs, labeling and distribution, import and export, and product registration and listing. As a result, most of our facilities are subject to regulation by the FDA, as well as regulatory bodies of other jurisdictions such as the EMEA and/or the NHSA, depending on the countries in which our customers market and sell the products we manufacture and/or package on their behalf. These regulatory requirements impact many aspects of our operations, including manufacturing, developing, labeling, packaging, storage, distribution, import and export and record keeping related to customers’ products. Noncompliance with any applicable regulatory requirements can result in government refusal to approve (i) facilities for testing or manufacturing products or (ii) products for commercialization. The FDA and other regulatory agencies can delay, limit or deny approval for many reasons, including:

• changes to the regulatory approval process, including new data requirements for product candidates in those jurisdictions, including the United States, in which we or our customers may be seeking approval;

• that a product candidate may not be deemed to be safe or effective;

• the ability of the regulatory agency to provide timely responses as a result of its resource constraints; and

• that the manufacturing processes or facilities may not meet the applicable requirements.

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Any delay in, or failure to receive, approval for any of our or our customers’ product candidates or the failure to maintain regulatory approval for our or our customers’ products could negatively impact our revenue growth and profitability.

In addition, if new legislation or regulations are enacted or existing legislation or regulations are amended or are interpreted or enforced differently, we may be required to obtain additional approvals, operate according to different manufacturing or operating standards or pay additional product or establishment user fees. This may require a change in our research and development and manufacturing techniques or additional capital investments in our facilities. Any related costs may be significant. If we fail to comply with applicable regulatory requirements in the future, then we may be subject to warning letters and/or civil or criminal penalties and fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, restrictions on the import and export of our products, debarment, exclusion, disgorgement of profits, operating restrictions and criminal prosecution and the loss of contracts, including government contracts, and resulting revenue losses. Inspections by regulatory authorities that identify any deficiencies could result in remedial actions, production stoppages or facility closure, which would disrupt the manufacturing process and supply of product to our customers. In addition, such failure to comply could expose us to contractual and product liability claims, including claims by customers for reimbursement for lost or damaged APIs or recall or other corrective actions, the cost of which could be significant.

Our pharmaceutical development and manufacturing projects generally involve products that must undergo pre-clinical and clinical evaluations relating to product safety and efficacy before they are approved as commercial therapeutic products. The regulatory authorities having jurisdiction in the countries in which our customers intend to market their products may delay or put on hold clinical trials or delay approval of a product or determine that the product is not approvable. The FDA or other regulatory agencies can delay approval of a drug if our manufacturing facility is not able to demonstrate compliance with cGMPs, pass other aspects of pre-approval inspections or properly scale up to produce commercial supplies. The FDA and comparable government authorities having jurisdiction in the countries in which our customers intend to market their products have the authority to withdraw product approval or suspend manufacture if there are significant problems with raw materials or supplies, quality control and assurance or the product we manufacture is adulterated or misbranded. If our pharmaceutical development projects and their related revenues are not maintained, it could materially adversely affect our results of operations and financial condition.

We are subject to regulatory requirements for controlled substances, which may adversely affect our business or subject us to liabilities if we fail to comply.

Some of our manufactured products are listed as controlled substances. Controlled substances are those products that present a risk of substance abuse. In the United States, these types of products are classified by the by the DEA as Schedule II, III, and IV substances under the Controlled Substances Act of 1970. The DEA classifies substances as Schedule I, II, III, IV or V substances, with Schedule I substances considered to present the highest risk of substance abuse and Schedule V substances the lowest risk. Scheduled substances are subject to DEA regulations relating to manufacturing, storage, distribution, import and export and physician prescription procedures. For example, scheduled drugs are subject to distribution limits and a higher level of recordkeeping requirements. Furthermore, the total amount of controlled substances for manufacture or commercial distribution is limited by the DEA and allocated through quotas, and we or our customers’ quotas, if any, may not be sufficient to meet commercial demand or to economically produce the product.

Entities must be registered annually with the DEA to manufacture, distribute, dispense, import, export and conduct research using controlled substances. State controlled substance laws also require registration for similar activities. In addition, the DEA requires entities handling controlled substances to maintain records, file reports, follow specific labeling and packaging requirements and provide appropriate security measures to control against diversion of controlled substances. In addition, certain of the non-U.S. jurisdictions in which our customers market their products have similar restrictions with respect to controlled substances. If we fail to follow these

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requirements, we may be subject to significant civil and/or criminal penalties and possibly a revocation of a DEA registration.

Products containing controlled substances may generate significant public health and safety issues, and in such instances, federal or state authorities can withdraw or limit the marketing rights or regulatory approvals for these products. For some scheduled substances, the FDA may require us or our customers to develop product attributes or a risk evaluation and mitigation strategy to reduce the inappropriate use of the products, including the manner in which they are marketed and sold, so as to reduce the risk of diversion or abuse of the product. Developing such a program may be time-consuming and could delay approval of any product candidates. Such a program or delays of any approval from the FDA could adversely affect our business, results of operations and financial condition.

Decisions of the governmental agencies that regulate us and our customers may affect the demand for our products and significantly influence our business, results of operations and financial condition.

We are dependent on the ability of our customers to obtain regulatory approval and successfully market and obtain third-party coverage and reimbursement for their products and have no control or influence over the regulatory approval process. Delays in obtaining regulatory approval may have a material impact on our operations since our pharmaceutical development and manufacturing projects often involve products that must undergo safety and clinical evaluations before they are approved as commercial therapeutic products. In recent years, our revenues have been negatively impacted due to delays in the regulatory approval of certain of our customers’ products.

By way of example, on February 7, 2010, a unit of Johnson & Johnson (“J&J”) announced that it received a complete response letter from the FDA regarding an NDA for Ceftobiprole that requested additional information and recommended additional clinical studies before approval. The company originally submitted the application in May 2007, and Ceftobiprole has been approved in Canada and in Switzerland. On June 24, 2010, the Committee for Medicinal Products for Human Use (the “CHMP”), after re-examination, confirmed refusal of Janssen-Cilag International N.V.’s marketing authorization for Cerftobiprole. On September 9, 2010, Basilea Pharmaceutica Ltd. announced that Janssen-Cilag AG, a J&J company, will be discontinuing sale of Ceftobiprole (Zevtera™) for the treatment of complicated skin and soft tissue infections in Switzerland. Janssen-Cilag AG, the holder of the Marketing Authorization in Switzerland, has requested Swissmedic to withdraw the marketing authorization of Zevtera™ and discontinued sale of Zevtera™ as of September 17, 2010. This action was taken based on the unfavorable assessments of the marketing authorization applications for Ceftobiprole in the United States and the European Union. In the first quarter of fiscal 2011, we amended our manufacturing and supply agreement with J&J for Ceftobripole to terminate the agreement two and a half years earlier than was originally planned, which will negatively impact our future revenue streams from J&J for this product.

Since we develop and manufacture products that require regulatory approval, failure to gain all such regulatory approvals in a timely manner may adversely reduce our production levels, which would adversely affect our business, results of operations and financial condition. In the event that regulatory authorities fail to approve the products that we develop and/or manufacture, we may not receive payment from our customers under our contracts.

We are subject to environmental, health and safety laws and regulations, which could subject us to liabilities, increase our costs or restrict our operations in the future.

Our operations are subject to a variety of environmental, health and safety laws and regulations in each of the jurisdictions in which we operate. These laws and regulations govern, among other things, air emissions, wastewater discharges, the handling and disposal of hazardous substances and wastes, soil and groundwater contamination and employee health and safety. We are also subject to laws and regulations governing the destruction and disposal of raw materials and non-compliant products, the handling of regulated material that is

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included in our offerings and the disposal of our offerings at the end of their useful life. These laws and regulations have increasingly become more stringent, and we may incur additional expenses to ensure compliance with existing or new requirements in the future. Any failure by us to comply with environmental, health and safety requirements could result in the limitation or suspension of our operations. We also could incur monetary fines, civil or criminal sanctions, third-party claims or cleanup or other costs as a result of violations of or liabilities under such requirements. In addition, compliance with environmental, health and safety requirements could restrict our ability to expand our facilities or require us to acquire costly pollution control equipment, incur other significant expenses or modify our manufacturing processes.

Our manufacturing facilities, in varying degrees, use, store and dispose of hazardous substances in connection with their processes. At some of our facilities, these substances are stored in underground storage tanks or used in refrigeration systems. Some of our facilities, including those in Puerto Rico, have been utilized over a period of years as manufacturing facilities, with operations that may have included on-site landfill or other waste disposal activities and have certain known or potential conditions that may require remediation in the future, and several of these have undergone remediation activities in the past by former owners or operators. Some of our facilities are located near third-party industrial sites and may be impacted by contamination migrating from such sites. A number of our facilities use groundwater from onsite wells for process and potable water, and if these onsite sources became contaminated or otherwise unavailable for future use, we could incur expenses for obtaining water from alternative sources. In addition, our operations have grown through acquisitions, and it is possible that facilities that we have acquired may expose us to environmental liabilities associated with historical site conditions that have not yet been discovered. Some environmental laws impose liability for contamination on current and former owners and operators of affected sites, regardless of fault. If remediation costs or potential claims for personal injury or property or natural resource damages resulting from contamination arise, they may be material and may not be recoverable under any contractual indemnity or otherwise from prior owners or operators or any insurance policy. Additionally, we may not be able to successfully enforce any such indemnity or insurance policy in the future. In the event that new or previously unknown contamination is discovered or new cleanup obligations are otherwise imposed at any of our currently or previously owned or operated facilities, we may be required to take additional, unplanned remedial measures and record charges for which no reserves have been recorded.

We are subject to product and other liability risks that could adversely affect our results of operations and financial condition.

We may be named as a defendant in product liability lawsuits, which may allege that products or services we have provided have resulted or could result in an unsafe condition or injury to consumers. We may also be exposed to other liability lawsuits, such as other tort, regulatory or intellectual property claims. Such lawsuits could be costly to defend and could result in reduced sales, significant liabilities and diversion of management’s time, attention and resources. Even claims without merit could subject us to adverse publicity and require us to incur significant legal fees.

Historically, we have sought to manage this risk through the combination of product liability insurance and contractual indemnities and liability limitations in our agreements with customers and vendors. In the past, we have been able to obtain liability insurance for the operation of our businesses. If our existing liability insurance is inadequate or we are not able to maintain such insurance, there may be claims asserted against us that are not covered by such insurance. A partially or completely uninsured claim, if successful and of sufficient magnitude, could have a material adverse effect on our results of operations and financial condition.

We and our customers depend on trademarks, patents, trade secrets, copyrights and other forms of intellectual property protections, but these protections may not be adequate.

We rely on a combination of trademark, patent, trade secret and other intellectual property laws in Canada, the United States and other foreign countries. We have applied in Canada, the United States and in certain countries for registration of a limited number of patents and trademarks, some of which have been registered or

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issued. Our applications may not be approved by the applicable governmental authorities, and third parties may seek to oppose or otherwise challenge our registrations or applications. We also rely on unregistered proprietary rights, including know-how and trade secrets related to our PDS and CMO services. Although we require our employees to enter into confidentiality agreements prohibiting them from disclosing our proprietary information or technology, these agreements may not provide meaningful protection for our trade secrets and proprietary know-how. Further, third parties who are not party to confidentiality agreements may obtain access to our trade secrets or know-how, and others may independently develop similar or equivalent trade secrets or know-how. If our proprietary information is divulged to third parties, including our competitors, or our intellectual property rights are otherwise misappropriated or infringed, our competitive position could be harmed.

If we are unable to protect the confidentiality of our customers’ proprietary information, we may be subject to claims.

Many of the formulations used by us in manufacturing or developing products to customer specifications are subject to trade secret protection, patents or other protections owned or licensed by the relevant customer. We take significant efforts to protect our customer’s proprietary and confidential information, including requiring our employees to enter into agreements protecting such information. If, however, any of our employees breaches the non-disclosure provisions in such agreements, or if our customers make claims that their proprietary information has been disclosed, then our business may be materially adversely impacted.

Our services and our customers’ products may infringe on or misappropriate the intellectual property rights of third parties.

While we believe that our services do not infringe upon in any material respect or misappropriate the proprietary rights of other parties and/or that meritorious defenses would exist with respect to any assertions to the contrary, our services may be found to infringe on the proprietary rights of others. Any claims that our services infringe third parties’ rights, including claims arising from our contracts with our customers, regardless of their merit or resolution, could be costly and may divert the efforts and attention of our management and technical personnel. We may not prevail in such proceedings given the complex technical issues and inherent uncertainties in intellectual property litigation. If such proceedings result in an adverse outcome, we could be required, among other things, to pay substantial damages, license such technology and/or cease the manufacture, use or sale of the infringing processes or offerings, any of which could adversely affect our business.

Tax legislation initiatives or challenges to our tax positions could adversely affect our results of operations and financial condition.

We are a multinational corporation with global operations. As such, we are subject to the tax laws and regulations of Canadian federal, provincial and local governments, the United States and many international jurisdictions. From time to time, various legislative initiatives may be proposed that could adversely affect our effective tax rate or tax payments. In addition, tax laws and regulations are extremely complex and subject to varying interpretations. If our tax positions are challenged by relevant tax authorities, we may not be successful in defending such a challenge and may experience an adverse impact on our results of operations and financial condition.

Changes in healthcare reimbursement in Canada, the United States or internationally could adversely affect customers’ demand for our services and our results of operations.

The healthcare industry has changed significantly over time, and we expect the industry to continue to evolve. Some of these changes, such as healthcare reform, adverse changes in government funding of healthcare products and services, legislation or regulations governing the privacy of patient information, or the delivery or pricing of pharmaceuticals and healthcare services or mandated benefits, may cause healthcare industry participants to reduce the amount of our services and products they purchase or the price they are willing to pay

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for our services and products. For example, the recent passage of healthcare reform legislation in the United States changes laws and regulations governing healthcare service providers and specifically includes certain cost containment measures that may adversely impact some or all of our customers and thus may have an adverse impact on our business. Changes in the healthcare industry’s pricing, selling, inventory, distribution or supply policies or practices could also significantly reduce our revenue and profitability. In particular, volatility in individual product demand may result from changes in public or private payer reimbursement or coverage.

Risks Relating to Our Debt

Our substantial level of indebtedness could adversely affect our financial health.

Our total interest-bearing debt as of October 31, 2010 was $278.3 million. As of October 31, 2010, we had approximately $87.8 million available for additional borrowings under the ABL and other lines of credit, taking into account our borrowing base limitations.

Our substantial financial leverage poses risks to us. Debt service requirements in future periods may be higher than in prior years as a result of a number of factors, including increased borrowing and increases in floating interest rates. In addition, we may incur substantial fees from time to time in connection with debt amendments or refinancing. If our cash flow is not sufficient to service our debt and adequately fund our business, we may be required to seek further additional financing or refinancing or dispose of assets. We may not be able to effect any of these alternatives on satisfactory terms or at all. In addition, our financial leverage could adversely affect our ability to raise additional capital to fund our operations, could impair our ability to respond to operational challenges, changing business and economic conditions and new business opportunities and may make us vulnerable in the event of a downturn in our business.

If we fail to satisfy our obligations under our indebtedness or fail to comply with the financial and other restrictive covenants contained in the agreements governing such indebtedness, such failure could result in an event of default in respect of any or all such indebtedness. An event of default under one or more of our debt instruments could result in all of our indebtedness becoming immediately due and payable and could permit the holders of our Notes and our other secured lenders to foreclose on our assets securing such indebtedness.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments or to refinance our debt obligations depends on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may not be able to maintain a sufficient level of cash flow from operating activities to permit us to pay the principal and interest on our Notes and our other indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or seek to restructure or refinance our indebtedness, including our Notes. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of such cash flows and resources, we could face substantial liquidity problems and might be required to sell material assets or operations to attempt to meet our debt service and other obligations. The instruments governing our indebtedness restrict our ability to conduct asset sales and/or use the proceeds from asset sales. We may not be able to consummate those asset sales to raise capital or sell assets at prices and on terms that we believe are fair and any proceeds that we receive may not be adequate to meet all debt service obligations then due. If we cannot meet our debt service obligations, the holders of our debt may accelerate our debt and, to the extent such debt is secured, foreclose on our assets. In such an event, we may not have sufficient assets to repay all of our debt.

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Our debt agreements contain restrictions that limit our flexibility in operating our business and our ability to raise additional funds.

The agreements that govern the terms of our debt contain, and the agreements that govern our future indebtedness may contain, covenants that restrict our ability and the ability of our subsidiaries to, among other things:

• incur additional indebtedness;

• pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments;

• enter into agreements that restrict distributions from restricted subsidiaries or restrict our ability to incur liens on certain of our assets;

• sell or otherwise dispose of assets, including capital stock of restricted subsidiaries;

• enter into transactions with affiliates;

• create or incur liens; and

• merge, consolidate or sell substantially all of our assets.

A breach of the covenants or restrictions under our indebtedness could result in a default, which may allow our lenders and note holders to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In the event our lenders and note holders accelerate the repayment of our indebtedness, we may not have sufficient assets to repay such indebtedness or be able to borrow sufficient funds to refinance it. Even if we are able to obtain new financing, it may not be on commercially reasonable terms or on terms acceptable to us. As a result of these restrictions, we may be:

• limited in how we conduct our business and execute our business strategy;

• unable to raise additional debt or equity financing to operate during general economic or business downturns; or

• unable to compete effectively or to take advantage of new business opportunities.

These restrictions may affect our ability to grow in accordance with our plans.

The amount of borrowings permitted under the ABL may fluctuate significantly, which may adversely affect our liquidity, results of operations and financial condition.

The amount of borrowings permitted at any time under the ABL is limited to a periodic borrowing base valuation of our and certain of our subsidiaries’ inventory and accounts receivable. As a result, our access to credit under the ABL is potentially subject to significant fluctuations depending on the value of the borrowing base eligible assets as of any measurement date and certain discretionary rights of the agent in respect of the calculation of such borrowing base value. The inability to borrow under, or the early termination of, the ABL may adversely affect our liquidity, results of operations and financial condition.

Despite our substantial level of indebtedness, we may still be able to incur significant additional amounts of debt, which could further exacerbate the risks associated with our substantial indebtedness.

We and our subsidiaries may be able to incur substantial additional indebtedness, including additional secured indebtedness, in the future. The terms of the indenture governing our Notes restrict, but do not completely prohibit, us from doing so. In addition, the indenture governing our Notes allows us to issue additional senior secured notes and other indebtedness under certain circumstances and does not prevent us from incurring other liabilities that do not constitute indebtedness. If new debt or other liabilities are added to our current debt levels, then the related risks that we and our subsidiaries now face could intensify.

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Item 2. Financial Information.

Selected Financial Data

The selected financial data set forth below are derived from the accompanying consolidated financial statements, which form part of this registration statement. Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada (“Canadian GAAP”). See “—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 21—Additional Disclosures Required Under U.S. Generally Accepted Accounting Principles” to our consolidated financial statements beginning on page F-1 of this registration statement for a detailed description of the differences between Canadian GAAP and accounting principles generally accepted in the United States (“U.S. GAAP”) relating to our company. The following selected financial data should be read in conjunction with “—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto included beginning on page F-1 of this registration statement.

Canadian GAAP

The following table shows selected financial information for the fiscal years indicated in accordance with Canadian GAAP:

	Years Ended October 31,
	2006(1)			2007(2)			2008(3)		2009(4)			2010(5)
	(Dollar information in millions of U.S. dollars (“USD”), except per share information)
	$			$			$		$			$
Statement of (loss) income data:
Revenues		625.3			634.1			717.3		655.1			671.2
(Loss) income before discontinued operations		(247.7	)		(36.5	)		20.3		1.0			(3.3	)
Adjusted EBITDA		63.1			80.5			82.6		74.0			91.7
Basic and diluted income (loss) per share from continuing operations		(2.67	)		(0.39	)		0.21		(0.10	)		(0.03	)
Weighted-average number of shares outstanding—basic and diluted (in thousands)		92,868			92,834			90,737		100,964			129,168
Balance sheet data:
Total assets		807.8			803.7			701.9		790.8			808.9
Long-term debt		61.9			203.6			200.5		221.1			274.8
Deferred revenues		23.4			26.0			22.5		41.7			45.9
Convertible preferred shares—debt component		—			139.9			—		—			—
Other long-term liabilities		24.3			22.1			16.4		21.5			22.9
Total shareholders’ equity		245.0			174.3			237.2		271.3			273.0

(1) Loss before discontinued operations included a non-cash impairment charge of $216.0 million related to the Puerto Rico operations, $13.0 million in repositioning expenses and $8.0 million in costs associated with cancellation and prepayment of our North American credit facilities.

(2) Loss before discontinued operations included a non-cash impairment charge of $48.6 million related to the Puerto Rico operations, $15.8 million in repositioning expenses, a $12.4 million non-cash foreign exchange gain on the revaluation of certain U.S. dollar denominated debt in Canada and $7.1 million in non-cash accreted interest on the Series C Preferred Shares. The 2007 liabilities reflected the debt component of JLL Patheon Holdings’ purchase of the 150,000 units of Series C Preferred Shares for the price of $150.0 million.

(3) Income before discontinued operations included $19.9 million in repositioning expenses, a $6.4 million non-cash foreign exchange loss on the revaluation of certain U.S. dollar denominated debt in Canada, $13.5 million in non-cash accreted interest on the convertible Series C Preferred Shares and the $34.9 million

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non-cash gain on the deemed repayment of debt discussed below. The reduction in total liabilities from the fiscal year ended October 31, 2007 (“fiscal 2007”) was primarily the result of the completion of the Redemption Waiver Agreement (as defined in “Item 7. Certain Relationships and Related Transactions, and Director Independence—Arrangements with JLL—Redemption Waiver Agreement”) in fiscal 2008, which resulted in the full carrying value of the Series C Preferred Shares being classified within shareholders’ equity on our balance sheet and the reclassification of $131.8 million of debt to equity. The entry into the Redemption Waiver Agreement resulted in a deemed repayment of the debt and equity components of the Series C Preferred Shares. As such, we recognized a non-cash gain of $34.9 million on the deemed repayment of the debt component.

(4) Income before discontinued operations included $2.1 million in repositioning expenses and $8.0 million in costs associated with the Special Committee (as defined in “—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Fiscal 2010 Compared to Fiscal 2009—Operating Income Summary”) and the JLL Offer (as defined in “Item 7. Certain Relationships and Related Transactions, and Director Independence—Arrangements with JLL—Transactions with JLL”).

(5) Loss before discontinued operations included $6.8 million in repositioning expenses, $12.2 million in refinancing costs, $3.6 million in non-cash impairment charges, $7.2 million in non-cash reduction in costs for the utilization of prior years’ investment tax credits, a non-cash tax benefit of $13.8 from the release of the valuation reserve in our Canadian operations and $3.0 million in costs associated with the Special Committee and the JLL Offer. The long term debt increased from fiscal 2009 due to the issuance of the $280.0 million in senior secured notes, the proceeds from which were used to repay all of the outstanding indebtedness under our then-existing senior secured term loan and our $75.0 million ABL, to repay certain other indebtedness and to pay related fees and expenses. See “—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Summary of Cash Flows—Cash Provided by Financing Activities”).

References to “Adjusted EBITDA” are to income (loss) from continuing operations before repositioning expenses, interest expense, foreign exchange losses reclassified from other comprehensive income, refinancing expenses, gains and losses on sale of fixed assets, gain on extinguishment of debt, income taxes, asset impairment charge, depreciation and amortization and other non-cash expenses.

Since Adjusted EBITDA is a non-GAAP measure that does not have a standardized meaning, it may not be comparable to similar measures presented by other issuers. Readers are cautioned that Adjusted EBITDA should not be construed as an alternative to net income (loss) determined in accordance with Canadian GAAP as an indicator of performance. Adjusted EBITDA is used by management as an internal measure of profitability. We have included Adjusted EBITDA because we believe that this measure is used by certain investors to assess our financial performance before non-cash charges and certain costs that we do not believe are reflective of our underlying business.

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A reconciliation of Adjusted EBITDA to income (loss) from continuing operations is set forth below:

	Years Ended October 31,
	2006(1)			2007(2)			2008(3)			2009(4)			2010(5)
	(in millions of USD)
	$			$			$			$			$
Adjusted EBITDA:
Net (loss) income for the period		(288.7	)		(96.3	)		0.8			(6.8	)		(5.0	)
(Loss) from discontinued operations		(41.0	)		(59.8	)		(19.5	)		(7.8	)		(1.7	)
(Loss) income from continuing operations		(247.7	)		(36.5	)		20.3			1.0			(3.3	)
Add (deduct):
Provision for income taxes		11.3			19.7			1.5			12.5			(3.0	)
Gain on extinguishment of debt		—			—			(34.9	)		—			—
Gain on sale of fixed assets		—			—			(0.7	)		—			0.2
Foreign exchange loss on foreign operations		—			0.8			—			—			—
Refinancing expenses		1.6			13.5			—			—			12.2
Interest expense, net		20.6			29.1			30.7			15.4			19.5
Repositioning expenses		12.4			14.5			19.9			2.1			6.8
Depreciation and amortization		41.7			39.4			45.3			42.6			55.8
Asset impairment charge		216.0			—			0.4			—			3.6
Amortization of deferred financing costs		0.9			—			—			—			—
Write-off of deferred financing costs		6.3			—			—			—			—
Other		—			—			0.1			0.4			(0.1	)
Adjusted EBITDA		63.1			80.5			82.6			74.0			91.7

U.S. GAAP

Our financial statements have been prepared in accordance with Canadian GAAP, which differs in certain respects from U.S. GAAP. The differences between Canadian GAAP and U.S. GAAP that affect our financial statements are described in detail in “Note 21—Additional Disclosures Required Under U.S. Generally Accepted Accounting Principles” to our consolidated financial statements beginning on page F-1 of this registration statement.

Had we followed U.S. GAAP certain selected financial information reported above, in accordance with Canadian GAAP, would have been reported as follows:

	Years Ended October 31,
	2006			2007			2008		2009			2010
	(Dollar information in millions of USD, except per share information)
	$			$			$		$			$
Statement of (loss) income data:
Revenues		625.3			634.1			717.3		655.1			671.2
(Loss) income before discontinued operations		(247.5	)		(41.5	)		4.9		1.1			(2.9	)
Adjusted EBITDA		59.8			66.4			89.6		74.0			80.9
Basic (loss) income per share from continuing operations		(2.67	)		(0.52	)		0.09		(0.10	)		(0.02	)
Diluted income per share from continuing operations		—			—			0.01		—			—
Weighted-average number of shares outstanding during period—basic (in thousands)		92,868			92,834			90,737		100,964			129,168
Weighted-average number of shares outstanding during period—diluted (in thousands)		—			—			123,634		—			—
Balance sheet data:
Total assets		806.0			805.8			703.5		794.2			815.3
Long-term debt		61.9			207.5			203.2		223.5			281.1
Deferred revenues		23.4			26.0			22.5		41.7			45.9
Other long-term liabilities		24.3			28.4			30.6		49.5			47.2
Convertible preferred shares—temporary equity		—			155.2			—		—			—
Total shareholders’ equity		243.8			167.4			222.2		244.6			249.1

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A reconciliation of Adjusted EBITDA to income (loss) from continuing operations is set forth below:

	Years Ended October 31,
	2006			2007			2008			2009			2010
	(in millions of USD)
	$			$			$			$			$
Adjusted EBITDA:
Net loss for the period		(288.5	)		(101.3	)		(14.0	)		(6.7	)		(4.6	)
Income (loss) from discontinued operations		(41.0	)		(59.8	)		(19.5	)		(7.8	)		(1.7	)
(Loss) income from continuing operations		(247.5	)		(41.5	)		5.5			1.1			(2.9	)
Add (deduct):
Provision for (benefit from) income taxes		8.1			18.0			2.2			12.6			(13.8	)
Gain on extinguishment of debt		—			—			—			—			—
(Gain) loss on sale of fixed assets		—			—			(0.7	)		—			0.2
Foreign exchange loss on foreign operations		—			0.8			—			—			—
Refinancing expenses		1.6			13.5			—			—			12.2
Interest expense, net		20.6			22.0			17.2			15.4			19.6
Repositioning expenses		12.4			14.5			19.9			2.1			6.8
Depreciation and amortization		41.4			39.1			45.0			42.4			55.6
Asset impairment charge		216.0			—			0.4			—			3.6
Amortization of deferred financing costs		0.9			—			—			—			—
Write-off of deferred financing costs		6.3			—			—			—			—
Other		—			—			0.1			0.4			(0.4	)
Adjusted EBITDA		59.8			66.4			89.6			74.0			80.9

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is designed to provide a better understanding of our consolidated financial statements, including a brief discussion of our business and products, key factors that impact our performance and a summary of our operating results. You should read the following discussion and analysis of financial condition and results of operations together with our consolidated financial statements and the related notes beginning on page F-1 of this registration statement. Our consolidated financial statements and MD&A have been prepared in accordance with Canadian GAAP. The impact of significant differences between Canadian GAAP and U.S. GAAP on the financial statements is disclosed in “Note 21—Additional Disclosures Required Under U.S. Generally Accepted Accounting Principles” to our consolidated financial statements beginning on page F-1 of this registration statement. In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from those anticipated by the forward-looking statements due to important factors including, but not limited to, those set forth under “Item 1A. Risk Factors” of this registration statement.

Executive Overview

We are a leading provider of contract manufacturing and development services to the global pharmaceutical industry, offering a wide range of services from developing drug candidates at the pre-formulation stage through the launch, commercialization and production of approved drugs. We have established our position as a market leader by leveraging our scale, global reach, specialized capabilities, broad service offerings, scientific expertise and track record of product quality and regulatory compliance to provide cost-effective solutions to our customers. We have improved and continue to improve efficiency by consolidating existing facilities, engaging in cost containment and implementing a system of continuous improvement through a Lean 6 Sigma program called “Patheon Advantage.”

We have two reportable segments, CMO and PDS. Our CMO business manufactures prescription products in sterile dosage forms as well as solid, semi-solid and liquid conventional dosage forms, and we differentiate

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ourselves by offering specialized manufacturing capabilities relating to high potency, controlled substance and sustained release products. Our PDS business provides a broad range of development services, including finished dosage formulation across approximately 40 dosage forms, clinical trial manufacturing and associated analytical services. Additionally, our PDS business serves as a pipeline for future commercial manufacturing opportunities.

Fiscal 2010 Highlights

The following is a summary of key financial results and certain non-financial results achieved during fiscal 2010:

• In June 2010, we signed an expanded contract manufacturing agreement with Merck & Co., Inc. (known as MSD outside of the United States and Canada). The expanded agreement solidifies our status as a key preferred supplier to Merck. Our projects and services will be delivered to Merck from eight of our global facilities.

• In April 2010, we issued the Notes in a private placement for an aggregate principal amount of $280 million.

• In March 2010, we entered into a long-term agreement with Orexigen Therapeutics for the commercial manufacturing of Contrave (a sustained release obesity drug) as well as the development of future formulations of Orexigen products.

• In January 2010, we announced that we had signed two five-year manufacturing agreements with Sanofi-Aventis. These agreements relate to products manufactured in our Swindon, England and Bourgoin, France facilities.

• In December 2009, we successfully released the first commercial shipments of SUMAVEL^® DosePro^TM (sumatriptan injection) to Zogenix, a specialty pharmaceutical company, in anticipation of its commercial product launch in the United States in January 2010. This product is a new, needle-free drug product/delivery system, and its successful production is the culmination of joint manufacturing process and equipment development between us and Zogenix.

• In December 2009, we announced our plan to consolidate our Puerto Rico operations into our manufacturing site located in Manatí and ultimately close or sell our plant in Caguas. We expect the sale of our Caguas facility to close during fiscal 2011 for a purchase price of approximately $7.0 million. In conjunction with the purchase offer, we reassessed the carrying value of the facility, increased the previous impairment charge by $2.1 million to $3.6 million and reduced the time frame in which to accelerate depreciation. We also modified our restructuring program, which raised its anticipated costs from $7.0 million to approximately $9.0 million, of which $6.8 million was booked in fiscal 2010. The consolidation will also result in additional accelerated depreciation of Caguas assets of approximately $12.0 million by the end of the project. Because the business in our Caguas facility is being transferred within the existing site network, its results of operations are included in continuing operations in our consolidated financial statements.

• We closed our Carolina facility in Puerto Rico effective January 31, 2009. In the second half of fiscal 2010, we received a letter of intent on the property which led management to complete another impairment analysis and completely write down the assets as the fair value less the cost to sell was nil. The results of the Carolina operations have been reported in discontinued operations in fiscal 2010 and 2009.

Opportunities and Trends

Our target markets include the highly fragmented global market for the manufacture of finished dosage forms and for PDS. According to PharmSource, the CMO market is expected to grow up to 6.2% annually from 2011 to 2015. PharmSource also estimates that the outsourced PDS market was approximately $1.3 billion in 2010, with growth projections in the upcoming 2011 to 2015 period ranging from 7.4% to 10% annually. We are one of only a few industry participants that can provide a broad range of CMO and PDS services.

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Pharmaceutical outsourcing service providers have faced challenges in recent years due to the uncertain economic environment. In the research and development area, emerging pharmaceutical companies have faced funding uncertainties due to limited access to capital, and many larger companies have decreased or delayed product development spending due to uncertainties surrounding industry consolidation and overall market weakness. As a result, decision-making related to the awarding of new outsourcing projects has slowed during recent years for similar reasons.

Selected Annual Financial Information

	Years ended October 31,
(in millions of USD, except per share information)	2010			2009			2008
	$			$			$
Revenues		671.2			655.1			717.3
Adjusted EBITDA		91.7			74.0			82.6
Net loss attributable to restricted voting shareholders		(5.0	)		(17.9	)		(0.7	)
Basic and diluted loss per share		(0.04	)		(0.18	)		(0.01	)
Total assets		808.9			790.8			701.9
Total long-term liabilities		346.6			311.2			265.6

For more information concerning significant variances in our results of operations and in our financial condition, see “—Results of Operations” and “—Liquidity and Capital Resources.”

Reconciliations of Adjusted EBITDA to income (loss) from continuing operations is included in “—Selected Financial Data” and “Note 16—Segmented Information” to our consolidated financial statements beginning on page F-1 of this registration statement.

Results of Operations

The results of the Carolina operations have been segregated and reported as discontinued operations in fiscal 2010, 2009 and 2008, while the Niagara-Burlington operations have been segregated and reported as discontinued operations in fiscal 2008 only.

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Consolidated Statements of Loss

	Years ended October 31
(in millions of USD, except per share information)	2010			2009			$			%
	$			$			Change			Change
Revenues		671.2			655.1			16.1			2.5
Cost of goods sold		526.2			511.2			15.0			2.9
Gross profit		145.0			143.9			1.1			0.8
Selling, general and administrative expenses		110.6			105.5			5.1			4.8
Repositioning expenses		6.8			2.1			4.7			223.8
Operating income		27.6			36.3			(8.7	)		-24.0
Interest expense, net		19.5			15.4			4.1			26.6
Impairment charge		3.6			—			3.6			—
Foreign exchange (gain) loss		(1.5	)		7.0			(8.5	)		-121.4
Loss on sale of fixed assets		0.2			—			0.2			—
Refinancing Expenses		12.2			—			12.2			—
Other		(0.1	)		0.4			(0.5	)		-125.0
(Loss) income from continuing operations before income taxes		(6.3	)		13.5			(19.8	)		-146.7
Current		6.7			7.7			(1.0	)		-13.0
Future		(9.7	)		4.8			(14.5	)		-302.1
(Benefit from) provision for income taxes		(3.0	)		12.5			(15.5	)		-124.0
(Loss) income before discontinued operations		(3.3	)		1.0			(4.3	)		-430.0
Loss from discontinued operations		(1.7	)		(7.8	)		(6.1	)		-78.2
Net loss for the period		(5.0	)		(6.8	)		(1.8	)		-26.5
Dividends on convertible preferred shares		—			11.1			(11.1	)		-100.0
Net loss attributable to restricted voting shareholders		(5.0	)		(17.9	)		(12.9	)		-72.1
Basic and diluted loss per share
From continuing operations	$	(0.026	)	$	(0.100	)
From discontinued operations	$	(0.013	)	$	(0.077	)
	$	(0.039	)	$	(0.177	)
Weighted-average number of shares outstanding during period—basic and diluted (in thousands)		129,168			100,964

Fiscal 2010 Compared to Fiscal 2009

Operating Income Summary

Revenues for fiscal 2010 increased $16.1 million, or 2.5%, to $671.2 million, from $655.1 million for fiscal 2009. Excluding currency fluctuations, revenues for fiscal 2010 would have increased by approximately 2.3%. CMO revenues for fiscal 2010 increased $15.3 million, or 2.9%, to $545.3 million, from $530.0 million for fiscal 2009. PDS revenues for fiscal 2010 also increased $0.8 million, or 0.6%, to $125.9 million, from $125.1 million for fiscal 2009.

Gross profit for fiscal 2010 increased $1.1 million, or 0.8%, to $145.0 million, from $143.9 million for fiscal 2009. The increase in gross profit was due to higher volume, partially offset by a decrease in gross profit margin to 21.6% for fiscal 2010 from 22.0% for fiscal 2009. The decrease in gross profit margin was due to unfavorable foreign exchange impact on cost of goods sold (-1.7%), higher depreciation (-1.3%) and higher lease expense (-0.3%), partially offset by the favorable impact of prior years’ Canadian research and development investment tax credits (+1.1%) and higher volume.

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Selling, general and administrative expenses for fiscal 2010 increased $5.1 million, or 4.8%, to $110.6 million, from $105.5 million for fiscal 2009. The increase was primarily due to higher compensation expenses and stock option amortization ($6.9 million), unfavorable foreign exchange ($1.9 million) and higher depreciation ($2.6 million), partially offset by costs of a special committee of independent directors (the “Special Committee”) of $3.0 million for fiscal 2010 compared to $8.0 million for fiscal 2009. Fiscal 2009 also included $2.0 million of transitional expenses for the opening of our new U.S. headquarters.

Repositioning expenses for fiscal 2010 increased $4.7 million, or 223.8%, to $6.8 million, from $2.1 million for fiscal 2009. The increase was due to higher expenses in connection with the Caguas closure and consolidation in Puerto Rico in fiscal 2010 compared to expenses in connection with the ongoing shut down and transition of business out of our York Mills facility and manufacturing restructuring in Puerto Rico in fiscal 2009.

Operating income for fiscal 2010 decreased $8.7 million, or 24.0%, to $27.6 million (4.1% of revenues), from $36.3 million (5.5% of revenues) for fiscal 2009 as a result of the factors discussed above.

Interest Expense

Interest expense for fiscal 2010 increased $4.1 million, or 26.6%, to $19.5 million, from $15.4 million for fiscal 2009. The increase in interest expense primarily reflects the higher interest rates on the Notes versus the rates of our previous debt, as well as overall higher debt levels.

Impairment Charge

During fiscal 2010, we recorded an impairment charge of $3.6 million in connection with the consolidation of our Puerto Rico operations into our manufacturing site located in Manatí. This charge wrote down the carrying value of the Caguas facility’s long-lived assets to their anticipated fair value upon closure of the facility.

Foreign Exchange (Gains) Losses

Foreign exchange gain for fiscal 2010 was $1.5 million, compared to a loss of $7.0 million for fiscal 2009. The foreign exchange gain was primarily due to the overall strengthening of the Canadian dollar against the U.S. dollar during fiscal 2009 and favorable hedging contracts in the Canadian operations during fiscal 2010, which resulted in gains of $4.0 million for fiscal 2010 compared to losses of $9.2 million for fiscal 2009.

Refinancing Expenses

During fiscal 2010, we incurred expenses of $12.2 million in connection with our refinancing activities. These expenses include fees paid to advisors and other related costs.

(Loss) Income from Continuing Operations Before Income Taxes

We reported a loss from continuing operations before income taxes of $6.3 million for fiscal 2010, compared to income of $13.5 million for fiscal 2009. The $12.2 million of refinancing expenses during the second and third quarters of fiscal 2010, along with the other operating items discussed above, were the primary drivers of the year over year variance.

Income Taxes

Income taxes were a benefit of $3.0 million for fiscal 2010, compared to an income tax expense of $12.5 million for fiscal 2009. The benefit was primarily due to releasing the valuation allowance pertaining to future tax assets and recognition of the current net operating loss benefits in our Canadian operations. We have determined that this valuation allowance is no longer required based on our assessment of the future prospects of our Canadian operations.

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(Loss) Income before Discontinued Operations and (Loss) Income Per Share from Continuing Operations

We recorded a loss before discontinued operations for fiscal 2010 of $3.3 million, compared to income before discontinued operations of $1.0 million for fiscal 2009. The loss per share before discontinued operations for fiscal 2010 was 2.6¢ compared to a loss per share of 10.0¢ for fiscal 2009, after taking into account the dividends of $11.1 million on the Series C Preferred Shares for fiscal 2009.

Loss and Loss Per Share from Discontinued Operations

Discontinued operations for fiscal 2010 and 2009 include the results of the Carolina, Puerto Rico operations. Financial details of the operating activities are disclosed in “Note 3—Discontinued Operations, Assets Held for Sale, and Plant Consolidations” of our consolidated financial statements beginning on page F-1 of this registration statement. The loss from discontinued operations for fiscal 2010 was $1.7 million, or 1.3¢ per share, compared to a loss of $7.8 million, or 7.7¢ per share, for fiscal 2009. On-going costs of discontinued operations relate to maintaining the Carolina building for sale.

Net Loss, Loss Attributable to Restricted Voting Shareholders and Loss Per Share

Net loss attributable to restricted voting shares for fiscal 2010 decreased $12.9 million, or 72.1%, to $5.0 million, or 3.9¢ per share, from $17.9 million, or 17.7¢ per share, for fiscal 2009. Fiscal 2009 results include dividends on the Series C Preferred Shares of $11.1 million. Dividends were recorded until July 28, 2009, the date when the preferred shares were converted to restricted voting shares by JLL Patheon Holdings. Because we reported a loss for fiscal 2010 and 2009, there is no impact of dilution.

Revenues and Adjusted EBITDA by Business Segment

	Years Ended October 31,
(in millions of USD)	2010			2009			Change			Change
	$			$			$			%
Revenues
Commercial Manufacturing
North America		251.6			249.0			2.6			1.1
Europe		293.7			281.0			12.7			4.5
Total Commercial Manufacturing		545.3			530.0			15.3			2.9
Pharmaceutical Development Services		125.9			125.1			0.8			0.6
Total Revenues		671.2			655.1			16.1			2.5
Adjusted EBITDA
Commercial Manufacturing
North America		20.6			19.2			1.4			7.4
Europe		51.7			52.0			(0.3	)		-0.6
Total Commercial Manufacturing		72.3			71.2			1.1			1.6
Pharmaceutical Development Services		46.8			32.7			14.1			43.1
Corporate Costs		(27.4	)		(29.9	)		2.5			-8.4
Total Adjusted EBITDA		91.7			74.0			17.7			24.0

Commercial Manufacturing

Total CMO revenues for fiscal 2010 increased $15.3 million, or 2.9%, to $545.3 million, from $530.0 million for fiscal 2009. Changes in foreign exchange rates between fiscal 2009 and 2010 did not have a material impact on fiscal 2010 CMO revenues as compared to fiscal 2009 CMO revenues.

North American CMO revenues for fiscal 2010 increased $2.6 million, or 1.1%, to $251.6 million, from $249.0 million for fiscal 2009. Had the Canadian dollar remained constant to the rates of fiscal 2009, North

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American CMO revenues for fiscal 2010 would have been approximately 0.2% higher than for fiscal 2009. The increase was primarily due to a favorable foreign exchange impact from Canada, higher revenues in Cincinnati as a result of accelerated deferred revenue recognition (+$7.2 million) and stronger performance in Puerto Rico (+$2.0 million), partially offset by lower revenues from the Canadian operations (-$9.0 million).

European CMO revenues for fiscal 2010 increased $12.7 million, or 4.5%, to $293.7 million, from $281.0 million for fiscal 2009. Had European currencies remained constant to the rates of fiscal 2009, European CMO revenues for fiscal 2010 would have been approximately 5.3% higher than for fiscal 2009. The increase was primarily due to higher revenues in the United Kingdom from increased take-or-pay and accelerated deferred revenue recognition, partially offset by the weakening of the Euro against the U.S. dollar.

Total CMO Adjusted EBITDA for fiscal 2010 increased $1.1 million, or 1.6%, to $72.3 million, from $71.2 million for fiscal 2009. This represents an Adjusted EBITDA margin (Adjusted EBITDA as a percentage of revenues) of 13.3% for fiscal 2010 compared to 13.4% for fiscal 2009. Had local currencies remained constant to fiscal 2009 rates, and after eliminating the impact of all foreign exchange gains and losses, CMO Adjusted EBITDA would have been approximately $3.5 million higher for fiscal 2010.

North American Adjusted EBITDA for fiscal 2010 increased $1.4 million, or 7.4%, to $20.6 million, from $19.2 million for fiscal 2009. The increase was primarily driven by higher revenue and favorable foreign exchange rates, inclusive of hedging (+$1.5 million), partially offset by unfavorable production mix and higher compensation costs. Included in the North American Adjusted EBITDA is a loss in the Puerto Rico operations of $11.9 million, up slightly from fiscal 2009. The continued weak Puerto Rico performance was due to the cost of operating two facilities, inventory provisions, high energy prices and various performance issues during the first half of fiscal 2010. We expect losses in Puerto Rico to be significantly reduced during fiscal 2011 due to improved operating performance and product mix, and the initial financial benefits of actions to integrate the Caguas site into Manatí during fiscal 2011. North American CMO had $6.8 million in repositioning expenses and $3.4 million in impairment charges relating to the Puerto Rican operations in fiscal 2010 that were not included in Adjusted EBITDA.

European Adjusted EBITDA for fiscal 2010 decreased $0.3 million, or 0.6%, to $51.7 million, from $52.0 million for fiscal 2009. Higher revenues for fiscal 2010 were more than offset by unfavorable transactional foreign exchange ($4.9 million), higher employee benefit related costs ($2.0 million), higher lease expense ($0.8 million) and higher supplies and maintenance ($0.8 million).

Pharmaceutical Development Services

Total PDS revenues for fiscal 2010 increased by $0.8 million, or 0.6%, to $125.9 million, from $125.1 million for fiscal 2009. Had the local currency rates remained constant to fiscal 2009, PDS revenues for fiscal 2010 would have decreased approximately 0.2% from fiscal 2009.

Total PDS Adjusted EBITDA for fiscal 2010 increased by $14.1 million, or 43.1%, to $46.8 million, from $32.7 million for fiscal 2009. Had local currencies remained constant to the rates of fiscal 2009 and after eliminating the impact of all foreign exchange gains and losses, PDS Adjusted EBITDA for fiscal 2010 would have been approximately $2.6 million lower. PDS Adjusted EBITDA for fiscal 2010 includes $7.2 million in prior years Canadian research and development investment tax credits that were recognized this year and benefits from a tightly controlled cost structure.

Corporate Costs

Corporate costs for fiscal 2010 decreased $2.5 million, or 8.4%, to $27.4 million, from $29.9 million for fiscal 2009. This decrease was primarily due to lower Special Committee costs and the non recurrence of $2.0 million of transitional expenses for the opening our U.S. headquarters in Research Triangle Park, North Carolina,

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partially offset by higher compensation expenses and stock option amortization. Fiscal 2010 included $3.0 million associated with the Special Committee costs compared to $8.0 million of Special Committee costs for fiscal 2009.

Consolidated Statements of Loss

	Years ended October 31
(in millions of USD, except per share information)	2009			2008			$			%
	$			$			Change			Change
Revenues		655.1			717.3			(62.2	)		-8.7
Cost of goods sold		511.2			560.2			(49.0	)		-8.7
Gross profit		143.9			157.1			(13.2	)		-8.4
Selling, general and administrative expenses		105.5			121.3			(15.8	)		-13.0
Repositioning expenses		2.1			19.9			(17.8	)		-89.4
Operating income		36.3			15.9			20.4			128.3
Interest expense, net		15.4			30.8			(15.4	)		-50.0
Impairment charge		—			0.4			(0.4	)		-100.0
Foreign exchange loss (gain)		7.0			(1.5	)		(8.5	)		-566.6
Gain on extinguishment of debt		—			(34.9	)		(34.9	)		-100.0
Gain on sale of fixed assets		—			(0.7	)		(0.7	)		-100.0
Other		0.4			—			0.4			—
Income from continuing operations before income taxes		13.5			21.8			(8.3	)		-38.1
Current		7.7			13.9			(6.2	)		-44.6
Future		4.8			(12.4	)		(17.2	)		-138.7
Provision for income taxes		12.5			1.5			11.0			733.3
Income before discontinued operations		1.0			20.3			(19.3	)		-95.1
Loss from discontinued operations		(7.8	)		(19.5	)		(11.7	)		-60.0
Net (loss) income for the period		(6.8	)		0.8			(7.6	)		-950.0
Dividends on convertible preferred shares		11.1			1.5			9.6			640.0
Net loss attributable to restricted voting shareholders		(17.9	)		(0.7	)		17.2			2457.1
Basic and diluted (loss) income per share
From continuing operations	$	(0.100	)	$	0.207
From discontinued operations	$	(0.077	)	$	(0.215	)
	$	(0.177	)	$	(0.008	)
Weighted-average number of shares outstanding during period—basic and diluted (in thousands)		100,964			90,737

Fiscal 2009 Compared to Fiscal 2008

Operating Income Summary

Revenues for fiscal 2009 decreased $62.2 million, or 8.7%, to $655.1 million, from $717.3 million for fiscal 2008. Excluding the effect of currency fluctuations, revenues for fiscal 2009 would have decreased by approximately 3.2%. CMO revenues for fiscal 2009 decreased $47.8 million, or 8.3%, to $530 million, from $577.8 million for fiscal 2008. PDS revenues for fiscal 2009 decreased $14.4 million, or 10.3%, to $125.1 million, from $139.5 million for fiscal 2008.

Gross profit for fiscal 2009 decreased $13.2 million, or 8.4%, to $143.9 million, from $157.1 million for fiscal 2008. Gross profit margin increased to 22.0% for fiscal 2009, from 21.9% for fiscal 2008. The increase in

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gross profit margin resulted from a favorable currency exchange impact (+1.7%), improved cost structure (+0.4%) and lower inventory obsolescence charges (+0.2%), partially offset by unfavorable commercial product mix caused by a higher proportion of low margin products and lower PDS volumes on a relatively fixed overhead cost basis (-2.2%).

Selling, general and administrative expenses for fiscal 2009 decreased $15.8 million, or 13.0%, to $105.5 million, from $121.3 million for fiscal 2008. The decrease was attributable to favorable currency exchange rates ($8.3 million), lower bonus and equity based compensation ($4.4 million) and cost saving initiatives implemented in fiscal 2009. These expense reductions were partially offset by the Special Committee costs of $8.0 million and $2.0 million of transitional expenses for the opening of our U.S. headquarters in North Carolina, which included severance and relocation expenses. Fiscal 2008 was impacted by a voluntary severance program in Cincinnati ($3.3 million), costs related to recruiting and relocation for executive management ($3.6 million) and operational and strategic initiatives ($2.7 million).

Repositioning expenses for fiscal 2009 decreased $17.8 million, or 89.4%, to $2.1 million, from $19.9 million for fiscal 2008. The decrease was primarily driven by lower expenses incurred in connection with the ongoing shut down and transition of business out of the York Mills facility and manufacturing restructuring in Puerto Rico. The decrease was also attributable to expenses incurred during fiscal 2008 in connection with changes in senior and executive management, a workforce reduction initiative in Swindon, United Kingdom.

Operating income for fiscal 2009 increased $20.4 million, or 128.3%, to $36.3 million (5.5% of revenues), from $15.9 million (2.2% of revenues) for fiscal 2008. This change was due to the factors discussed above.

Interest Expense

Interest expense for fiscal 2009 decreased $15.4 million, or 50.0%, to $15.4 million, from $30.8 million for fiscal 2008. The decrease in interest expense primarily reflects the elimination of $13.5 million of accretive interest as a result of the completion of the Redemption Waiver Agreement (as defined in “Item 7. Certain Relationships and Related Transactions, and Director Independence—Arrangements with JLL—Redemption Waiver Agreement”) and lower interest rates that were partially offset by the impact of higher borrowings in fiscal 2009.

Foreign Exchange (Gains) Losses

Foreign exchange losses for fiscal 2009 were $7.0 million for fiscal 2009, compared to a foreign exchange gain of $1.5 million for fiscal 2008. The increased strength of the U.S. dollar led to $7.0 million in losses primarily related to cash flow hedges in fiscal 2009 compared to $7.9 million in gains from transactional foreign exchange for fiscal 2008. Fiscal 2008 also contained $6.4 million in losses associated with the revaluation of certain U.S. dollar denominated debt in Canada that was not hedged.

Gain on Extinguishment of Debt

In fiscal 2008, we recorded a non-cash gain of $34.9 million in connection with the Redemption Waiver Agreement (as defined in “Item 7. Certain Relationships and Related Transactions, and Director Independence—Arrangements with JLL—Redemption Waiver Agreement”) to eliminate the cash redemption requirement on the Series C Preferred Shares. The gain reflects the difference between the fair value of the deemed proceeds on settlement of the debt component of the Series C Preferred Shares and the carrying value thereof. See “Item 7. Certain Relationships and Related Transactions, and Director Independence—Arrangements with JLL—Redemption Waiver Agreement.”

Income from Continuing Operations Before Income Taxes

Income from continuing operations before income taxes for fiscal 2009 decreased $8.3 million, or 38.1%, to $13.5 million, from $21.8 million for fiscal 2008. This change was due to the factors discussed above.

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Income Taxes

Income tax expense for fiscal 2009 increased $11.0 million, or 733.3%, to $12.5 million, from $1.5 million for fiscal 2008. This increase was due to tax expense in the United Kingdom versus a benefit for fiscal 2008 and a much lower tax benefit in the United States. The higher expense in the United Kingdom was a result of favorable operating results and an adjustment to future tax assets. The reduction in the tax benefit in the United States was driven by favorable operating results and the use of a future tax asset for fiscal 2009 which resulted in a significant refund. Our effective tax rate for fiscal 2009 was 87.3%, compared to 7.5% for fiscal 2008.

Income Before Discontinued Operations and (Loss) Income Per Share from Continuing Operations

Income from continuing operations for fiscal 2009 decreased $19.3 million, or 95.1%, to $1.0 million, from $20.3 million for fiscal 2008. The fiscal 2008 income included a $34.9 million gain on the extinguishment of debt. The loss per share from continuing operations, after taking into account the dividends on the Series C Preferred Shares, for fiscal 2009 was 10.0¢ compared to income of 20.7¢ for fiscal 2008. The fiscal 2008 gain on extinguishment of debt accounted for 39.0¢ per share of the income.

Loss and Loss Per Share from Discontinued Operations

Discontinued operations for fiscal 2009 and 2008 include the results of the Niagara-Burlington operations up to their divestiture date of January 31, 2008 and the Carolina operations. The comparable results for fiscal 2008 include both the Carolina and Niagara-Burlington operations. Financial details of the operating activities are disclosed in “Note 3—Discontinued Operations, Assets Held for Sale and Plant Consolidations” to our consolidated financial statements beginning on page F-1 of this registration statement. The loss from discontinued operations for fiscal 2009 was $7.8 million, or 7.7¢ per share, compared to a loss of $19.5 million, or 21.5¢ per share, for fiscal 2008. The loss for fiscal 2009 reflects $3.4 million in restructuring costs related to the shutdown of the Carolina facility, a $0.7 million impairment charge relating to the Carolina assets and other operating losses of the facility. Fiscal 2008 costs include a $0.6 million loss related to the final divestiture of the Niagara-Burlington operations and an impairment charge of $7.7 million relating to assets of the Carolina operations.

Net Loss, Loss Attributable to Restricted Voting Shareholders and Loss Per Share

Net loss attributable to restricted voting shareholders for fiscal 2009 increased $17.2 million, or 2457.1%, to $17.9 million, or 17.7¢ per share, from $0.7 million, or 0.8¢ per share, for fiscal 2008. Dividends on the Series C Preferred Shares were $11.1 million for fiscal 2009 and $1.5 million for fiscal 2008. Dividends were recorded until July 28, 2009, the date when these preferred shares were converted to restricted voting shares by JLL Patheon Holdings. Due to the anti-dilutive nature of the conversion of the Series C Preferred Shares for fiscal 2009 and fiscal 2008, the Series C Preferred Shares had no impact on the earnings per share calculation.

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Revenues and Adjusted EBITDA by Business Segment

	Years Ended October 31,
(in millions of USD)	2009			2008			Change			Change
	$			$			$			%
Revenues
Commercial Manufacturing
North America		249.0			278.6			(29.6	)		-10.6
Europe		281.0			299.2			(18.2	)		-6.1
Total Commercial Manufacturing		530.0			577.8			(47.8	)		-8.3
Pharmaceutical Development Services		125.1			139.5			(14.4	)		-10.3
Total Revenues		655.1			717.3			(62.2	)		-8.7
Adjusted EBITDA
Commercial Manufacturing
North America		19.2			23.1			(3.9	)		-16.9
Europe		52.0			54.4			(2.4	)		-4.4
Total Commercial Manufacturing		71.2			77.5			(6.3	)		-8.1
Pharmaceutical Development Services		32.7			42.1			(9.4	)		-22.3
Corporate Costs		(29.9	)		(37.0	)		7.1			-19.2
Total Adjusted EBITDA		74.0			82.6			(8.6	)		-10.4

Commercial Manufacturing

Total CMO revenues for fiscal 2009 decreased $47.8 million, or 8.3%, to $530.0 million, from $577.8 million for fiscal 2008. On a constant currency exchange basis with fiscal 2008, CMO revenues for fiscal 2009 would have been approximately 2.5% lower than for fiscal 2008.

North American CMO revenues for fiscal 2009 decreased $29.6 million, or 10.6%, to $249.0 million, from $278.6 million for fiscal 2008. On a constant currency exchange basis with fiscal 2008, North American CMO revenues for fiscal 2009 would have been approximately 9.5% lower than for fiscal 2008. This reduction was primarily due to reduction in demand for some products, fewer new product introductions and product repatriations by some customers, partially offset by increased demand for products we produced at our facilities in Puerto Rico.

European CMO revenues for fiscal 2009 decreased $18.2 million, or 6.1%, to $281.0 million, from $299.2 million for fiscal 2008. On a constant currency exchange basis with fiscal 2008, European revenues for fiscal 2009 would have been 4.0% higher than for fiscal 2008. Increased revenues in Ferentino and Swindon were primarily due to the strengthening of local currencies compared to the U.S. dollar.

Total CMO Adjusted EBITDA for fiscal 2009 decreased $6.3 million, or 8.2%, to $71.2 million, from $77.5 million for fiscal 2008. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of revenues) was 13.4% in both periods. On a constant currency exchange basis with fiscal 2008, and after eliminating the impact of all currency exchange gains and losses, total CMO Adjusted EBITDA would have been approximately $5.4 million higher for fiscal 2009. North American CMO had $2.1 million in repositioning expenses relating to the Canadian and Puerto Rican operations in fiscal 2009 that were not included in Adjusted EBITDA. In fiscal 2008, we had $14.0 million in repositioning costs that were not included in Adjusted EBITDA.

North American Adjusted EBITDA for fiscal 2009 decreased $3.9 million, or 17.0%, to $19.2 million, from $23.1 million for fiscal 2008. The decrease in North American Adjusted EBITDA was driven primarily by lower operating results in Canada. Although Puerto Rico reported significantly improved results compared to fiscal 2008, it generated a loss for the period due to operational issues. North American Adjusted EBITDA for fiscal 2008 included a charge of $3.3 million in connection with the early retirement program in Cincinnati.

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European Adjusted EBITDA for fiscal 2009 decreased $2.4 million, or 4.4%, to $52.0 million, from $54.4 million for fiscal 2008. Strong performance in Ferentino and Swindon as a result of revenue mix and improved operating performance were more than offset by lower revenue performance in Bourgoin and unfavorable currency exchange impact.

Pharmaceutical Development Services

Total PDS revenues for fiscal 2009 decreased $14.4 million, or 10.3%, to $125.1 million, from $139.5 million for fiscal 2008. On a constant currency exchange basis, compared to fiscal 2008, PDS revenues for fiscal 2009 would have been approximately 6.2% lower than for fiscal 2008. This decline was primarily due to lower overall demand for development services due to general market conditions.

Total PDS Adjusted EBITDA for fiscal 2009 decreased $9.4 million, or 22.3%, to $32.7 million, from $42.1 million for fiscal 2008. Changes in local currency had a minimal impact on the PDS Adjusted EBITDA compared to fiscal 2008. The impact of relatively fixed costs in the PDS business on lower revenue more than offset the cost control initiatives implemented during the year.

Corporate Costs

Corporate costs for fiscal 2009 decreased $7.1 million, or 19.2%, to $29.9 million, from $37.0 million for fiscal 2008. This decrease was primarily attributable to favorable foreign exchange rates ($3.2 million); lower bonus and equity based compensation ($2.2 million); the non recurrence of fiscal 2008 costs related to recruiting, relocation and severance for executive management ($3.3 million); operational and strategic initiatives ($2.7 million); and $6.4 million in losses associated with the revaluation of certain un-hedged U.S. dollar denominated debt in Canada. These reductions were partially offset by the Special Committee costs of $8.0 million and $2.0 million of transitional expenses for the opening of our U.S. headquarters in North Carolina, which included severance and relocation expenses. In fiscal 2008, corporate costs benefited from a noncash gain of $34.9 million on the deemed repayment of the debt component of the Series C Preferred Shares and $5.3 million in repositioning costs that were not included in Adjusted EBITDA.

Liquidity and Capital Resources

Overview

Our cash and cash equivalents totaled $53.5 million at October 31, 2010. Our total debt was $278.3 million at October 31, 2010.

Our primary source of liquidity is cash flow from operations. Historically, we have also used availability under the ABL for any additional cash needs. Our principal uses of cash have been for capital expenditures, debt servicing requirements, working capital and employee benefit obligations. Our liquidity requirements are expected to be significant.

From time to time, we evaluate strategic opportunities, including potential acquisitions, divestitures or investments in complementary businesses, and we anticipate continuing to make such evaluations. We may also access capital markets through the issuance of debt or equity in connection with the acquisition of complementary businesses or other significant assets or for other strategic opportunities.

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Summary of Cash Flows

The following table summarizes our cash flows for the periods indicated:

	Years ended October 31,
(in millions of USD)	2010			2009			2008
	$			$			$
(Loss) income from continuing operations		(3.3	)		1.0			20.3
Depreciation and amortization		55.8			42.6			45.3
Impairment charge		3.6			—			0.4
Foreign exchange loss on debt		—			—			7.0
Accreted interest on convertible preferred shares		—			—			13.5
Gain on extinguishment of debt		—			—			(34.9	)
Other non-cash interest		2.5			0.6			0.6
Change in other long-term liabilities		(8.6	)		(1.2	)		(3.2	)
Future income taxes		(8.9	)		4.8			(12.4	)
Amortization of deferred revenues		(37.4	)		(1.0	)		(1.9	)
Loss on sale of fixed assets		0.2			—			(0.7	)
Stock-based compensation expense		2.3			1.0			2.6
Other		(0.3	)		0.5			(0.1	)
Working capital		(2.6	)		(10.8	)		(3.6	)
Increase in deferred revenues		47.4			10.5			2.6
Cash provided by operating activities of continuing operations		50.7			48.0			35.5
Cash used in operating activities of discontinued operations		(0.7	)		(8.9	)		(9.1	)
Cash provided by operating activities		50.0			39.1			26.4
Cash used in investing activities of continuing operations		(50.0	)		(49.5	)		(44.9	)
Cash provided by investing activities of discontinued operations		—			0.2			10.4
Cash provided by financing activities		31.6			13.6			4.6
Other		(0.4	)		(1.3	)		(6.8	)
Net increase (decrease) in cash and cash equivalents during the period		31.2			2.1			(10.3	)

Cash Provided by Operating Activities

Cash provided by operating activities for fiscal 2010 increased $12.7, or 26.5%, to $50.7 million, from $48.0 million for fiscal 2009. Year over year change in cash provided by operating activities was primarily due to higher deferred revenue (mainly an early payment for a take or pay amount) and better working capital usage, which was partially offset by refinancing costs, higher interest payments and lower cash flows from the commercial operations excluding the deferred revenue amounts.

Cash provided by operating activities from continuing operations for fiscal 2009 increased $12.5 million, or 35.2%, to $48.0 million, from $35.5 million for fiscal 2008. The improvement in cash flows was primarily due to higher customer funded capital that increased deferred revenue and the use of deferred tax assets during fiscal 2009 compared to building deferred tax assets for fiscal 2008, which also resulted in lower tax payments, partially offset by working capital usage.

Cash used in operating activities from discontinued operations for fiscal 2010 decreased $8.2 million, or 92.1%, to $0.7 million, from $8.9 million for fiscal 2009. The decrease in cash outflow for fiscal 2010 was due to our Carolina facility closing down operations for fiscal 2009 and fiscal 2010 expenses representing primarily utility costs, insurance and maintenance for the building while it is in the process of being sold.

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Cash used in operating activities from discontinued operations for fiscal 2009 decreased $0.2 million, or 2.2%, to $8.9, from $9.1 million for fiscal 2008. Cash outflow for fiscal 2009 was due to severance payments and closing costs during the period versus operating losses in fiscal 2008.

Cash Used in Investing Activities

The following table summarizes the cash used in investing activities for the periods indicated:

	Years ended October 31,
(in millions of USD)	2010			2009			2008
	$			$			$
Total additions to capital assets		(48.7	)		(49.1	)		(55.8	)
Proceeds on sale of capital assets		—			0.1			12.2
Net increase in investments		(1.1	)		(0.3	)		(1.3	)
Investment in intangibles		(0.2	)		(0.2	)		—
Cash used in investing activities of continuing operations		(50.0	)		(49.5	)		(44.9	)
Cash provided by investing activities of discontinued operations		—			0.2			10.4
Cash used in investing activities		(50.0	)		(49.3	)		(34.5	)

Cash used in investing activities from continuing operations for fiscal 2010 increased $0.5 million, or 1.0%, to $50.0 million, from $49.5 million for fiscal 2009.

Cash used in investing activities from continuing operations for fiscal 2009 increased $4.6 million, or 10.2%, to $49.5 million, from $44.9 million for fiscal 2008. The reduced cash outflow for fiscal 2009 was primarily due to $11.9 million in net proceeds from the sale of our York Mills facility in 2008, which was offset by lower capital spending in the aggregate amount of $7.3 million.

Cash provided by investing activities from discontinued operations during fiscal 2009 decreased $10.2 million, or 98.1%, to $0.2 million, from $10.4 million for fiscal 2008. The cash inflow for fiscal 2008 principally reflects net proceeds after transaction costs from the sale of our Niagara-Burlington operations of $10.5 million.

Our principal ongoing investment activities are capital programs at our sites. The majority of our capital allocation is normally invested in projects that will support growth in capacity and revenues.

During fiscal 2010, our major capital projects (in millions of U.S. dollars) were:

•    Facility infrastructure at Cincinnati to support introduction of new customer product	$	9.8
•    Consolidation of Caguas facility in Puerto Rico	$	4.9
•    Addition of PDS capabilities at the Bourgoin site	$	4.5

During fiscal 2009, our major capital projects (in millions of U.S. dollars) were:

•    New ERP system in Canadian operations	$	3.1
•    Additional pilot scale lyophilization capacity in Ferentino, Italy	$	5.7
•    Completion of capacity expansions in Mississauga, Canada	$	2.2
•    Completion of capacity expansions in Whitby, Canada	$	1.4
•    Completion of customer funded projects in Cincinnati, U.S.A.	$	5.3

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During fiscal 2008, our major project-related programs (in millions of U.S. dollars) were:

•     Mississauga region expansion of high potency capabilities	$	5.6
•     Whitby manufacturing and PDS expansion to absorb transfers from York Mills	$	11.3
•     Completion of the intermediate-scale process suite in Cincinnati, U.S.A.	$	4.4

Capital commitments to complete authorized capital projects were $13.3 million at the end of fiscal 2010. Based on current internal projections, we expect to make these expenditures during fiscal 2011, and we expect to finance them with cash flows from operations, existing cash reserves, the ABL and customer funding.

Based on current management assessments, total capital expenditures (including expenditures to complete projects authorized at the end of fiscal 2010) for fiscal 2011 are expected to be near the amount of total capital expenditures for fiscal 2010, which was approximately $48.7 million. We expect to finance our capital expenditures with cash flows from operations, existing cash reserves, the ABL and customer funding. The major capital projects currently anticipated for fiscal 2011 consist of:

• Facility infrastructure at Cincinnati to support introduction of new customer product

• High potency packaging in Mississauga

• Conversion of SAP in Puerto Rico to the new Patheon global instance

• Completion of PDS capabilities at the Bourgoin site

• Consolidation of Caguas facility in Puerto Rico

Our principal ongoing investment activities are sustaining and project-related capital programs at our network of sites. The majority of our capital allocation is normally invested in project-related programs, which are defined as outlays that will generate growth in capacity and revenues, while sustaining expenditures relate to the preservation of existing assets and capacity.

Cash Provided by Financing Activities

The following table summarizes the cash provided by financing activities for the periods indicated:

	Years ended October 31,
(in millions of USD)	2010			2009			2008
	$			$			$
(Decrease) increase in short-term borrowings		(10.7	)		3.0			3.2
Increase in long-term debt		296.2			50.5			40.3
Increase in deferred financing costs		(7.3	)		—			—
Repayment of long-term debt		(246.6	)		(39.9	)		(38.9	)
Convertible preferred share issuance cost—equity component		—			—			(0.2	)
Issuance of restricted voting shares		—			—			0.4
Cash provided by financing activities of continuing operations		31.6			13.6			4.8
Cash used in financing activities of discontinued operations		—			—			(0.2	)
Cash provided by financing activities		31.6			13.6			4.6

Cash provided by financing activities for fiscal 2010 increased $18.0 million, or 132.4%, to $31.6 million, from $13.6 for fiscal 2009.

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In April 2010, we issued $280 million in aggregate principal amount of 8.625% senior secured notes due April 15, 2017 in a private placement. We used the net proceeds of the offering to repay all of the outstanding indebtedness under our then-existing senior secured term loan and our $75.0 million ABL, to repay certain other indebtedness and to pay related fees and expenses. We are using the remaining proceeds for general corporate purposes.

We also amended and restated our existing $75.0 million ABL in connection with the offering to, among other things, extend the maturity date of this facility to 2014.

During fiscal 2010, the cash inflows were primarily due to the refinancing in the second quarter. For fiscal 2009, the cash inflows reflected net drawings on the then-existing credit facilities primarily to fund operations and capital expenditures.

In addition, during fiscal 2009 we recorded a capital lease obligation of $8.5 million related to customer financed equipment. The capital lease relates to a customer contract signed for the Swindon, United Kingdom site in 2006. The lease will be paid down over three years assuming the customer achieves forecast annual production volumes. The remaining obligation at the end of fiscal 2010 was $2.1 million.

Cash provided by financing activities for fiscal 2009 increased $9.0 million, or 195.7%, to $13.6 million, from $4.6 million for fiscal 2008. The cash inflows for fiscal 2009 and 2008 reflect net drawings on existing credit facilities and insurance financing to fund operations, repositioning expenses and Special Committee expenses.

Financing Arrangements

Historical Credit Arrangements

On April 27, 2007, we entered into credit facilities in the aggregate amount of $225.0 million, which were comprised of a seven year, $150.0 million senior secured term loan and the five-year, $75.0 million ABL. We were required to make quarterly installment payments of $0.4 million on the term loan, along with additional mandatory repayments based on certain excess cash flow measures. The interest rate applicable to each alternative base rate borrowing under the term loan was equal to 1.5% plus the greater of the prime rate and the federal funds effective rate plus 0.5%. The interest rate applicable to each Eurocurrency borrowing was equal to an adjusted LIBOR plus 2.5%. The interest rate applicable to the ABL was a floating rate determined by the currency of the loan, plus an applicable margin determined by the leverage ratio. The credit facilities were secured by substantially all of the assets of our operations in Canada, the United States, Puerto Rico and the United Kingdom and our investments in the shares of all other operating subsidiaries. The term loan and any borrowings under our then-existing ABL were paid off as part of the refinancing discussed below.

$280 Million Senior Secured Notes and Amended ABL

In April 2010, we issued the Notes for an aggregate principal amount of $280 million. We used the net proceeds of the offering to repay all of the outstanding indebtedness under our then-existing senior secured term loan and the $75.0 million ABL, to repay certain other indebtedness and to pay related fees and expenses. We are using the remaining proceeds for general corporate purposes.

We also amended and restated our then-existing $75.0 million ABL in connection with the offering to, among other things, extend the maturity date of this facility to 2014. Please refer to “Note 8—Long-Term Debt” of our consolidated financial statements beginning on page F-1 of this registration statement for details.

The Notes and the ABL are secured by substantially all of our assets, and the assets and guaranteed by, and secured by substantially all of the assets of, our subsidiaries in the United States (including Puerto Rico), Canada, the United Kingdom and the Netherlands. The Notes and the ABL are guaranteed on a limited basis by, and secured by certain assets of, our subsidiaries in France, Italy and Switzerland.

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The Notes indenture contains language consistent with the ABL, which contains usual and customary covenants and events of default provisions.

The agreements that govern the terms of our debt, including the indenture that governs the Notes and the credit agreement that governs the ABL, contain covenants that restrict our ability and the ability of our subsidiaries to, among other things:

• incur additional indebtedness;

• pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments;

• enter into agreements that restrict distributions from restricted subsidiaries or restrict our ability to incur liens on certain of our assets;

• sell or otherwise dispose of assets, including capital stock of restricted subsidiaries;

• enter into transactions with affiliates;

• create or incur liens; and

• merge, consolidate or sell substantially all of our assets.

Provided that we are not in default under the ABL or the indenture governing the Notes and are able to satisfy certain tests related to the our Fixed Charge Coverage Ratio (as defined in the indenture governing the Notes), and will have a required minimum amount of remaining borrowing availability under the ABL after giving effect thereto, we are permitted to pay certain limited amounts of dividends or other distributions with respect to our common stock (as more particularly described in the ABL and the indenture governing the Notes, up to $15.0 million plus 50.0% of Excess Cash Flow (as defined in the ABL), plus net proceeds of additional permitted equity offerings under the ABL, or up to 50.0% of Consolidated Net Income (as defined in the indenture governing the Notes) plus net proceeds from additional permitted equity offerings or sales of restricted investments under the Notes).

In addition, under the ABL, if our borrowing availability falls below the greater of $10.0 million and 13.3% of total commitments under the ABL for any two consecutive days (which is defined under the ABL as a “Liquidity Event”), we will be required to satisfy and maintain a Fixed Charge Coverage Ratio of not less than 1.10 to 1.00 until the first day thereafter on which our borrowing availability has been greater than the greater of $10.0 million and 13.3% of our total commitments for 30 consecutive days. We will also be required to satisfy the required Fixed Charge Coverage Ratio in order to borrow on any day when our borrowing availability is below that level but a Liquidity Event has not yet occurred. Our ability to meet the required Fixed Charge Coverage Ratio can be affected by events beyond our control, and we may not be able to meet this ratio. A breach of any of these covenants could result in a default under the ABL.

Convertible Preferred Shares

The $150 million 8.5% preferred shares purchased by JLL Patheon Holdings on April 27, 2007 included 150,000 units, each consisting of one Series C Preferred Share (a convertible preferred share) and one Series D Preferred Share (a special voting preferred share). On July 29, 2009, JLL Patheon Holdings converted its 150,000 Series C Preferred Shares into a total of 38,018,538 of our restricted voting shares, in accordance with the convertible preferred share terms. As a result of the JLL Patheon Holdings conversion, we no longer have any Series C Preferred Shares outstanding. We recorded $11.1 million of dividends in fiscal 2009 related to the Series C Preferred Shares. Please refer to “Note 11—Shareholders’ Equity” of our consolidated financial statements beginning on page F-1 of this registration statement for more information.

Financing Ratios

Total interest-bearing debt at the end of fiscal 2010 was $278.3 million, $27.8 million higher than at the end of fiscal 2009. At the end of fiscal 2010, our consolidated ratio of interest-bearing debt to shareholders’ equity was 102%, compared to 92% at the end of fiscal 2009.

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The following table summarizes the fixed and variable percentages of debt outstanding at the end of fiscal 2010 and 2009, after taking into account the impact of interest rate swap contracts that we had entered into, and the applicable interest rates at the end of each quarter in fiscal 2010.

	% of Debt Outstanding				Interest Rates at End of Each Quarter in Fiscal 2010
	2010		2009		Q4		Q3		Q2		Q1
	%		%		%		%		%		%
Fixed rate		100		62
Variable rate based on:
U.S. LIBOR (1 month)		0		14		0.25		0.31		0.28		0.23
U.K. Base Rate		0		1		0.50		0.50		0.50		0.50
Euribor (3 months)		0		23		1.05		0.90		0.66		0.67
U.K. LIBOR		0		0		0.74		0.75		0.68		0.62

Effects of Inflation

We do not believe that inflation has had a significant impact on our revenues or results of operations since inception. We expect our operating expenses will change in the future in line with periodic inflationary changes in price levels. Because we intend to retain and continue to use our property and equipment, we believe that the incremental inflation related to the replacement costs of such items will not materially affect our operations. However, the rate of inflation affects our expenses, such as those for employee compensation, which could increase our level of expenses and the rate at which we use our resources. While our management generally believes that we will be able to offset the effect of price-level changes by adjusting our service prices and implementing operating efficiencies, any material unfavorable changes in price levels could have a material adverse effect on our financial condition, results of operations and cash flows.

Off-Balance Sheet Arrangements

We do not use off-balance sheet entities to structure any of our financial arrangements. We do not have any interests in unconsolidated special-purposes or structured finance entities.

Tabular Disclosure of Contractual Obligations

Contractual repayments of long-term debt, commitments under operating leases, commitments under capital leases and purchase obligations are as follows:

	Payments Due by Period
(in millions of USD)	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years
	$		$		$		$		$
Long-term debt		281.9		1.0		0.9		—		280.0
Operating leases		23.5		6.8		9.6		4.4		2.7
Capital leases		2.7		2.6		0.1		—		—
Purchase obligations(1)		13.3		13.3		—		—		—
Total contractual obligations(2)		321.4		23.7		10.6		4.4		282.7

(1) Purchase obligations relate to capital commitments to complete authorized capital projects

(2) Not included in the table are other long-term liabilities of unfunded termination indemnities in the amount of $6.5 million, employee future benefits in the amount of $8.1 million and other long-term liabilities in the amount of $8.3 million. These other long-term liabilities either have no fixed payment dates or are not settled in cash. See “Note 9—Other Long-Term Liabilities” and “Note 10—Employee Future Benefits” to our consolidated financial statements beginning on page F-1 of this registration statement.

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Recent Accounting Pronouncements

See “Note 2—Summary of Significant Accounting Policies” to our consolidated financial statements beginning on page F-1 of this registration statement for a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements.

Critical Accounting Estimates

The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are based upon management’s historical experience and are believed by management to be reasonable under the circumstances. Such estimates and assumptions are evaluated on an ongoing basis and form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from these estimates.

Our critical accounting estimates are those we believe are both most important to the portrayal of our financial condition and results and require our most difficult, subjective or complex judgments, often because we must make estimates about the effect of matters that are inherently uncertain. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. We believe the following estimates are the most critical in understanding the judgments that are involved in preparing our consolidated financial statements.

Impairment of Long-lived Depreciable Assets

We test for impairment annually and whenever events or circumstances make it more likely than not that the fair value of our capital assets and identifiable intangible assets (“long-lived depreciable assets”) has fallen below its carrying amount. If such indicators are present, we assess the recoverability of the assets or group of assets by determining whether the carrying value of such assets can be recovered through undiscounted future cash flows. In addition, the useful life over which cash flows will occur, their amount and the asset’s residual value, if any, are considered in the impairment calculation. In turn, measurement of an impairment loss requires a determination of fair value, which is based on the best information available. We derive the required undiscounted cash flow estimates from our historical experience and internal business plans. To determine fair value, we use quoted market prices when available, or our internal cash flow estimates discounted at an appropriate interest rate and independent appraisals, as appropriate. If the sum of undiscounted future cash flows is less than the carrying amount, the excess of the carrying amount over the estimated fair value, based on discounted future cash flows, is recorded as a charge to earnings.

During fiscal 2010, we recorded an impairment charge of $3.6 million in connection with the consolidation of our Puerto Rico operations into our manufacturing site located in Manatí. We recorded this charge to write down the carrying value of our Caguas facility’s long-lived assets to their anticipated fair value upon closure of the facility. Fair value was obtained based on an offer from a third party to purchase the property less management’s best estimate of the costs to sell. In addition, an allocation of the purchase offer between land and building was performed based on current market conditions in Puerto Rico.

We also recorded an impairment charge of $0.8 million in discontinued operations to write down the remaining carrying value of the Carolina operations long-lived assets. This write-down was based on an offer from a third party to purchase the property less management’s best estimate on the costs to sell.

Reserve for Doubtful Accounts

We establish an appropriate provision for non-collectible or doubtful accounts. We consider several factors in estimating the allowance for uncollectible accounts receivable, including the age of the receivable, economic conditions that may have an impact on a specific group of customers or a specific customer and disputed services. Our risk management process includes standards and policies relating to customer credit limits, credit terms and customer deposits. Customer deposits relate primarily to our PDS business.

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At October 31, 2010 and 2009, we had a reserve for doubtful accounts of $0.9 million and $1.7 million, respectively. These are specific reserves, not general reserves, and are based on factors discussed above.

Inventories

Inventories consisting of raw materials, packaging components, spare parts and work-in-process are valued at the lower of cost and net realizable value. These adjustments are customer specific estimates of net realizable value that we may ultimately realize upon the disposition of the inventories. We perform an assessment of excess, obsolete and problem products on an on-going basis.

We procure inventory based on specific customer orders and forecasts. Customers have limited rights of modification (for example, cancellations) with respect to these orders. Customer modifications to orders affecting inventory previously procured by us and purchases of inventory beyond customer needs may result in excess and obsolete inventory for the related customers. Although we may be able to use some excess components and raw materials for other products manufactured, a portion of the cost of this excess inventory may not be returned to the vendors or recovered from customers. Write-offs or write-downs of inventory could relate to:

• declines in the market value of inventory;

• changes in customer demand for inventory, such as cancellation of orders; and

• our purchases of inventory beyond customer needs that result in excess quantities on hand that we may not be able to return to the vendor, use to fulfill orders from other customers or charge back to the customer.

Adjustments above are recorded as an increase to cost of goods sold.

Payments received from customers for excess and obsolete inventories that have not been shipped to customers or otherwise disposed of are netted against inventory reserves.

Our practice is to dispose of excess and obsolete inventory as soon as practicable after such inventory has been identified as having no value to us.

Employee Future Benefits

We provide defined benefit pension plans to certain employees in our Canadian, U.K. and French operations and post-employment health and dental coverage to certain of our Canadian employees.

The determination of the obligation and expense for defined benefit pensions and other post-employment benefits is dependent on certain assumptions used by actuaries in calculating such amounts. The assumptions used in determining the accrued benefit obligation and the benefit expense as of and for the year ended October 31, 2010 were as follows:

	Defined Benefit Pension Plans %		Other Benefit Plans %
Accrued benefit obligation
Discount rate		5.3		5.3
Rate of compensation increase		3.9		—
Benefit costs recognized
Discount rate		5.8		5.3
Expected long-term rate of return on plan assets		6.9		—
Rate of compensation increase		4.1		—

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A 4% to 11% annual rate of increase in the per capita cost of covered health care and dental benefits was assumed for fiscal 2010, with the assumption that the rate will decrease gradually over the next five years to 6% and to remain at that level thereafter. The following table outlines the effects of a one-percentage-point increase and decrease in the assumed health care and dental benefit trend rates.

(in millions of USD)	Benefit Obligation			Benefit Expense
	$			$
Impact of:
1% increase		0.9			0.1
1% decrease		(0.8	)		(0.1	)

Stock-Based Compensation

We use the fair value method of accounting for stock-based compensation. We currently use the Black-Scholes option-pricing model to estimate the fair value of the options granted. The determination of the fair value of stock-based awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include our expected dividends, the risk-free interest rate, the expected life of the award and the expected stock price volatility over the term of the award. The principal assumptions we used in applying the Black-Scholes model are outlined below.

Expected dividend yield	None
Risk-free interest rate	2.22	%
Expected life	5 years
Volatility	59.5	%

We do not intend to pay dividends on our common stock in the foreseeable future and, accordingly, we use a dividend rate of zero in the option-pricing model. The Government of Canada five-year bond rate is used for the risk-free interest rate. The estimated life of the options is five years based on weighted-average life of these options, vesting period and management’s estimate based on stock volatility. The expected volatility is 59.5% based on the guidance for estimating expected volatility as set forth in Canadian Institute of Chartered Accountants Section 3870. In particular, volatility is a measure of the amount by which our common stock price has fluctuated or is expected to fluctuate during a period. We considered the historic volatility of our share price in estimating expected volatility.

If factors change and we employ different assumptions for estimating stock-based compensation expense in future periods or if we decide to use a different valuation model, the stock-based compensation expense we recognize in future periods may differ significantly from what we have previously recorded and could materially affect our operating income, net income and earnings per share. These differences may result in a lack of consistency in future periods and materially affect the fair value estimate of our stock-based awards. They may also result in a lack of comparability with other companies that use different models, methods and assumptions.

Income Taxes

We follow the liability method of income tax allocation. Under this method, future tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Preparation of our consolidated financial statements requires an estimate of income taxes in each of the jurisdictions in which we operate. The process involves an estimate of our current tax exposure and an assessment of temporary differences resulting from differing treatment of items such as depreciation and amortization for tax and accounting purposes. These differences result in future tax assets and liabilities and are reflected in our consolidated balance sheet.

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While evaluating our future tax assets and liabilities during the first half of fiscal 2010, we concluded we would be able to utilize certain investment tax credits (“ITCs”) relating to scientific research and development costs. Therefore, we recorded a decrease of $7.2 million in the cost of goods sold relating to the utilization of all previous years’ ITCs.

During the second quarter of fiscal 2010 we evaluated our valuation reserves. We determined that the valuation allowance on our net Canadian future tax assets is no longer required based on our assessment of the future prospects of our Canadian operations. As a result of this determination, we released $13.8 million of valuation reserves through income tax benefit in the income statement.

Previously, we recorded the ITC’s under future tax assets. Of the $18.4 million on the balance sheet at October 31, 2010, $8.3 million was reclassed from future tax assets to other long-term assets for fiscal 2010 as we are in a position to utilize current and prior period ITCs.

Future tax assets of $ 20.2 million have been recorded at October 31, 2010. These assets consist primarily of accounting provisions related to pension and post-retirement benefits not currently deductible for tax purposes, the tax benefit of net operating loss carryforwards, unclaimed research and development expenditures and deferred financing and share issue costs. We evaluate our ability to realize future tax assets on a quarterly basis. The factors used to assess the likelihood of realization are our forecast of future taxable income and available tax planning strategies that could be implemented to realize the future tax assets. The future tax assets recorded at October 31, 2010 are net of a valuation allowance of $6.5 million.

A future tax liability of $29.7 million has been recorded at October 31, 2010. This liability has arisen primarily on tax depreciation in excess of book depreciation.

Our tax filings are subject to audit by taxation authorities. Although our management believes that it has adequately provided for income taxes based on the information available, the outcome of audits cannot be known with certainty and the potential impact on our consolidated financial statements is not determinable.

Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency

Our business is conducted in several currencies—Canadian dollars and U.S. dollars for our Canadian operations, U.S. dollars for our U.S. operations and Euros and British Sterling for our European operations. We are subject to foreign currency transaction risk because a significant portion of our revenues and operating expenses from our operations in certain countries are denominated in different currencies. Our material foreign currency transaction risk arises from our Canadian operations. Our Canadian operations negotiate sales contracts for payment in both U.S. and Canadian dollars, and materials and equipment are purchased in both U.S. and Canadian dollars. The majority of the non-material costs (including payroll, facilities’ costs and costs of locally sourced supplies and inventory) of our Canadian operations are denominated in Canadian dollars. In fiscal 2010, approximately 80% of revenues and 10% of operating expenses of our Canadian operations were transacted in U.S. dollars. As a result, if we do not effectively hedge such foreign currency exposure, our results of operations will be adversely affected by an increase in the value of the Canadian dollar relative to such foreign currency. In addition, we may experience hedging and transactional gains or losses because of volatility in the exchange rate between the Canadian dollar and the U.S. dollar. Based on our current U.S. denominated net inflows, for each 10% change in the Canadian-U.S. exchange rate, the impact on annual pre-tax income, excluding any hedging activities, would be approximately $11.9 million.

To mitigate exchange-rate risk, we utilize forward foreign exchange contracts in certain circumstances to lock in exchange rates with the objective that the gain or loss on the forward contracts will approximately offset the loss or gain that results from the transaction or transactions being hedged. As of October 31, 2010, we had

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entered into 51 foreign exchange forward contracts covering approximately 60% of our Canadian-U.S. dollar cash flow exposures for fiscal 2011 and had two forward exchange forward contracts covering our Euro-U.S. dollar cash flow. See “Note 13—Financial Instruments and Risk Management” to our consolidated financial statements beginning on page F-1 of this registration statement. We do not hedge any of our other foreign exchange exposures. Our foreign exchange forward contracts mature at various dates through January 2012 and have an aggregate fair value of $79.0 million. An adverse change rate movement of 10% against our foreign exchange forward contracts would result in a pre-tax loss of approximately $5.5 million.

Interest Rate Risk

As of October 31, 2010, our long-term debt consisted of the Notes, which have an aggregate principal amount of $280 million and bear interest at a fixed rate, and the $75 million ABL, which bears interest at a variable rate. As of October 31, 2010, we had not borrowed any amounts under the ABL. Assuming a fully drawn ABL and a 100 basis point increase in applicable interest rates, our interest expense, net, would increase by $0.75 million on an annual basis.

Item 3. Properties.

We have 10 manufacturing facilities and eight development centers located in North America and Europe. The following table provides additional information about our principal manufacturing facilities and development centers:

Facility sites	Country	Segment	Square Feet		Owned/Leased
Burlington(1)	Canada	PDS		45,496		Leased
Mississauga	Canada	CMO/PDS		285,570		Owned
Whitby	Canada	CMO/PDS		233,664		Owned
Cincinnati	U.S.	CMO/PDS		495,700		Owned
Caguas	Puerto Rico	CMO		209,336		Owned
Manatí	Puerto Rico	CMO		546,872		Owned
Ferentino	Italy	CMO/PDS		290,473		Owned
Monza	Italy	CMO		463,229		Owned
Milton Park(2)	U.K.	PDS		13,500		Leased
Swindon	U.K.	CMO/PDS		355,511		Owned
Bourgoin-Jallieu	France	CMO/PDS		355,228		Owned

(1) Our Burlington facility is subject to a lease from Klaus Stephan Reeckmann until 2014, with a minimum annual rent of $256,410.45, based on an average foreign exchange rate of Canadian dollars (“CAD”) to USD for fiscal 2010 of .9634.

(2) Our Milton Park facility is subject to a lease from Lansdown Estates Group Limited until 2020, with a minimum annual rent of $133,000, based on an average foreign exchange rate of British pound sterling to USD for fiscal 2010 of .6038.

We also lease facilities in Research Triangle Park, North Carolina (U.S. headquarters and PDS facility), Zug, Switzerland (European headquarters), Mississauga, Canada (regional administration) and Tokyo, Japan (sales office). Our facilities are pledged as collateral for the Notes and the ABL. See “Item 2. Financial Information—Management’s Discussion and Analysis—Liquidity and Capital Resources—Financing Arrangements.” We believe that our facilities are adequate for our operations and that suitable additional space will be available when needed.

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Item 4. Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth information regarding the beneficial ownership of any class of our voting shares of stock as of February 15, 2011 for:

• each person who is known by us to own beneficially more than 5% of any class of our voting shares;

• each of our named executive officers;

• each of our directors; and

• all of our executive officers and directors as a group.

The number of shares beneficially owned by each shareholder is determined under rules promulgated by the U.S. Securities and Exchange Commission (the “SEC”). The information does not necessarily indicate beneficial ownership for any other purpose. Under SEC rules, the number of shares of voting stock deemed outstanding includes shares issuable upon exercise of stock options held by the respective person or group that may be exercised within 60 days after February 15, 2011. For purposes of calculating each person’s or group’s percentage ownership, shares of voting stock issuable pursuant to stock options exercisable within 60 days after February 15, 2011 are reflected in the table below and included as outstanding and beneficially owned for that person or group but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or group.

The percentages of shares outstanding provided in the table are based on 129,167,926 shares of our restricted voting shares outstanding as of February 15, 2011 and 150,000 shares of our Series D Preferred Shares outstanding as of February 15, 2011. The information as to securities beneficially owned, or controlled or directed, directly or indirectly, by each director, officer or other beneficial owner has been furnished to us by the respective person. Unless otherwise indicated, to our knowledge, all persons named in the table have sole voting and investment power with respect to the shares beneficially owned by them, except, where applicable, to the extent authority is shared by spouses under community property laws.

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The address for the JLL investors is JLL Patheon Holdings, LLC c/o JLL Partners Inc., 450 Lexington Avenue, 31st Floor, New York, New York, 10017. The address of each of our directors and executive officers listed below is c/o Patheon Inc., 4721 Emperor Boulevard, Suite 200, Durham, North Carolina, 27703.

Class of Voting Stock	Name of Beneficial Owner	Number of Outstanding Shares Beneficially Owned		Shares Underlying Options Exercisable Within 60 Days		Total Number of Shares Beneficially Owned		Percentage of Class Beneficially Owned
Class I Preferred Shares, Series D	JLL investors(1)		150,000		—		150,000		100	%
Restricted Voting Shares	JLL investors		72,077,781		—		72,077,781		55.8	%
	James C. Mullen		—		—		—		*
	Wesley P. Wheeler(2)		35,000		1,310,000		1,345,000		1.0	%
	Peter T. Bigelow		—		24,000		24,000		*
	Eric W. Evans		—		188,667		188,667		*
	Geoffrey M. Glass		—		68,000		68,000		*
	Doaa A. Fathallah		—		68,000		68,000		*
	Ramsey A. Frank(3)		—		—		—		*
	Paul S. Levy(4)		—		—		—		*
	Thomas S. Taylor(5)		—		—		—		*
	Daniel Agroskin(6)		—		—		—		*
	Joaquín B. Viso		10,824,053		—		10,824,053		8.4	%
	Derek J. Watchorn		30,825		20,000		50,825		*
	Roy T. Graydon		—		—		—		*
	Brian G. Shaw		—		—		—		*
	All directors and executive officers as a group (18 persons)		10,854,878		618,288		11,473,166		8.8	%

(1) JLL Patheon Holdings beneficially owns, directly or indirectly, 72,077,781 of our restricted voting shares and 150,000 of our Series D Preferred Shares (collectively the “Shares”). The Series D Preferred Shares are held directly by JLL Patheon Holdings, and JLL Patheon Holdings beneficially owns 72,077,781 of our restricted voting shares by virtue of its position as a controlling member of JLL Patheon Holdings, Cooperatief U.A, (“JLL CoOp”), which holds the shares directly.

(2) The number of shares beneficially owned by Mr. Wheeler shown represents the number reported on the System for Electronic Disclosure by Insiders (“SEDI”) as required under Canadian securities laws, up to November 30, 2010 when Mr. Wheeler ceased to be an insider of our company. As the information on Mr. Wheeler’s ownership of shares is not necessarily within our knowledge, we have relied on information reported by Mr. Wheeler in his SEDI insider reports.

(3) Mr. Frank is Chairman of our Board and a Managing Director of JLL Partners. By virtue of his position as sole manager of JLL Patheon Holdings, Mr. Frank may be deemed the beneficial owner of the Shares. Mr. Frank disclaims beneficial ownership of the Shares except to the extent of any pecuniary benefit thereof. Mr. Frank is a stockholder and member of the 11 person nominating committee of JLL Associates G.P. V (Patheon), Ltd. (“Cayman Limited”), the general partner of JLL Associates V (Patheon), L.P., which in turn is the general partner of JLL Partners Fund V (Patheon), L.P. (“Cayman LP”), which controls JLL. By virtue his position as a member of such nominating committee, Mr. Frank has shared voting power with respect to the Shares.

(4) Mr. Levy is a Managing Director of JLL Partners. By virtue of his position as Managing Director of Cayman Limited, Mr. Levy may be deemed the beneficial owner of the Shares. Mr. Levy disclaims beneficial ownership of the Shares except to the extent of any pecuniary benefit thereof.

(5) Mr. Taylor is a Managing Director of JLL Partners. Mr. Taylor is a stockholder and member of the 11 person nominating committee of Cayman Limited. By virtue of his position as a member of such

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nominating committee, Mr. Taylor has shared voting power with respect to the Shares. Mr. Taylor disclaims beneficial ownership of the Shares except to the extent of any pecuniary benefit thereof.

(6) Mr. Agroskin is a Principal at JLL Partners. Mr. Agroskin is a stockholder and member of the 11 person nominating committee of Cayman Limited. By virtue of his position as a member of such nominating committee, Mr. Agroskin has shared voting power with respect to the Shares. Mr. Agroskin disclaims beneficial ownership of the Shares except to the extent of any pecuniary benefit thereof.

Item 5. Directors and Executive Officers.

Executive Officers

Our executive officers, their ages and their positions are as follows:

Name	Age		Position
James C. Mullen		52	Chief Executive Officer
Peter T. Bigelow		56	President, North American Operations
Eric W. Evans		54	Chief Financial Officer
Mark J. Kontny, Ph.D.		53	President, Global Pharmaceutical Development Services, and Chief Scientific Officer
Paul M. Garofolo		40	Executive Vice President and Chief Technology Officer
Geoffrey M. Glass		37	Executive Vice President, Global Strategy, Sales and Marketing
Doaa A. Fathallah		40	Executive Vice President, General Counsel and Corporate Secretary
Andrew Kelley		50	Senior Vice President, Commercial Operations, Europe and Asia Pacific
Antonella Mancuso		45	Senior Vice President and Managing Director, European Operations
Warren A. Horton		52	Vice President, Global Quality Operations

James C. Mullen, age 52, joined Patheon as Chief Executive Officer and became a member of our Board effective February 7, 2011, bringing over 30 years of experience as in the pharmaceutical and biotechnology industries, over twenty of which have been spent at the executive level. Mr. Mullen served as the President and Chief Executive Officer of Biogen Idec Inc. (formerly known as Biogen, Inc.) (“Biogen”) from June 2000 to June 2010. Prior to that, Mr. Mullen held various operating positions at Biogen, including Vice President, Operations and several manufacturing and engineering positions at SmithKline Beckman (now GlaxoSmithKline). Mr. Mullen served on the board of Biogen from 2005 to June 2010 and currently serves on the board of PerkinElmer, Inc. Mr. Mullen holds a Bachelor of Science degree in Chemical Engineering from Rensselaer Polytechnic Institute and a Masters of Business Administration degree from Villanova University. Our Board has determined that Mr. Mullen’s extensive executive experience in the pharmaceutical and biotechnology industries and scientific and business educational background qualify him for service as a member of our Board of Directors and add value to our company.

Peter T. Bigelow, age 56, joined Patheon in February 2010 as President, North American Operations. In December 2010, in connection with the departure of Wesley P. Wheeler, Mr. Bigelow was appointed Interim Chief Executive Officer, where he served until we appointed our current President and Chief Executive Officer, James C. Mullen, on February 7, 2011. Prior to joining Patheon, Mr. Bigelow served for approximately 14 years in several executive posts relating to pharmaceutical manufacturing and technical operations at Wyeth Pharmaceuticals Inc., a large pharmaceutical manufacturing company (“Wyeth”), lastly serving as Senior Vice President, Technical Operations and Product Supply, Latin America from January 2009, where he oversaw Wyeth’s operations in Latin America. From January 2003 through January 2009, he served as Senior Vice President, Technical Operations and Product Supply, Consumer Healthcare Operating Unit, where he was responsible for Wyeth’s global consumer healthcare product manufacturing. Prior to that, Mr. Bigelow spent 13 years with SmithKline Beecham (now GlaxoSmithKline) in a variety of engineering and operations roles.

Eric W. Evans, age 54, joined Patheon as Chief Financial Officer in May 2008, bringing over 24 years of experience in various financial leadership roles in the pharmaceutical, steel, energy and financial services

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industries. Prior to joining Patheon, Mr. Evans was Vice President, Financial Services of Novartis Pharmaceuticals Corporation, a pharmaceutical development company (“Novartis”), from October 2007 to May 2008, Vice President and Controller of Novartis from July 2005 to October 2007, and Chief Financial Officer of Sandoz Inc., a large United States manufacturer of generic pharmaceutical products, from October 2001 to July 2005.

Mark J. Kontny, Ph.D., age 53, joined Patheon in April 2010 as President, Global Pharmaceutical Development Services, and Chief Scientific Officer. Prior to joining Patheon, Dr. Kontny served at Abbott Laboratories Inc., a global pharmaceutical company (“Abbott”), as Divisional Vice President, Global Pharmaceutical and Analytical Sciences from August 2004 to April 2010. Before serving at Abbott, Dr. Kontny was Senior Vice President Research & Development and Chief Scientist for Ventaira Pharmaceuticals, Inc., a U.S. based start-up pharmaceutical company.

Paul M. Garofolo, age 40, joined Patheon in May 2008 as Senior Vice President and Chief Information Officer and was subsequently promoted to Executive Vice President and Chief Technology Officer in November 2008. Prior to joining Patheon, Mr. Garofolo had more than 14 years of information and management consulting leadership experience. Most recently, he served as Chief Information Officer and Vice President of Global IT at Valeant Pharmaceuticals International, a California based global specialty pharmaceutical company (“Valeant”), from 2004 to April 2008, where he was responsible for Valeant’s global IT organization including the implementation of a series of new applications and processes. Prior to his service at Valeant, from 2000 to 2004, Mr. Garofolo was the Chief Technology Officer and Senior Vice President of Technology Services for Broadlane, the fourth largest Group Purchasing Organization within the U.S. healthcare market. He also worked in the management consulting industry for both Ernst & Young Global Limited and Oracle Corp.

Geoffrey M. Glass, age 37, joined Patheon in April 2009 as Senior Vice President, Strategy, Corporate Development and Integration, Sales and Marketing, and was subsequently promoted to Executive Vice President, Global Strategy, Sales and Marketing in October 2009. Prior to joining Patheon, Mr. Glass served approximately five years as an executive at Valeant, including as Senior Vice President, Asian Operations, from April 2007 to June 2008, where he was responsible for all of Valeant’s business affairs in the region, which included over 250 products in 14 countries. Prior to leading the Asian business for Valeant, Mr. Glass served as Senior Vice President and Chief Information Officer of Valeant from March 2004 to April 2007, where he was responsible for all information technology-related matters for the company. Prior to joining Valeant, Mr. Glass was the Global Leader of Life Sciences Operations Excellence Practice for Cap Gemini (formerly known as Ernst & Young LLP Consulting). During his tenure at Cap Gemini, Mr. Glass led global teams through the successful implementation of business transformations at a number of leading life sciences organizations.

Doaa A. Fathallah, age 40, joined Patheon in May 2008 as Senior Vice President, General Counsel, Europe and Global Pharmaceutical Development Services and was subsequently promoted to Executive Vice President, General Counsel and Corporate Secretary in December 2009. Prior to joining Patheon, she was Vice President and General Counsel-Europe, Middle East and Africa of Valeant, from October 2006 to May 2008, where she oversaw the legal affairs of Valeant’s R&D division, 14 subsidiaries and six branch offices in the region. From September 2004 to September 2006, Ms. Fathallah served as Vice President, Assistant General Counsel of Valeant. From 2000 to 2004, Ms. Fathallah was an attorney in the Corporate Department, Corporate Finance Group of Paul, Hastings, Janofsky & Walker LLP, where she gained experience in all aspects of corporate and business law.

Andrew Kelley, age 50, joined Patheon in January 2006 as Vice President of Operations for the United Kingdom and was subsequently promoted to Vice President, Operations for the United Kingdom and France in November 2006. Since February 2009, Mr. Kelley has served as Senior Vice President, Commercial Operations for Europe and Asia Pacific. Prior to joining Patheon, he spent 15 years at Cardinal Health, Inc., a pharmaceutical manufacturing and delivery company, in progressively senior production and operational roles, lastly serving as Vice President, Operations for Europe and Site Leader for the Swindon facility.

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Antonella Mancuso, age 45, joined Patheon in 2001 as Production Manager of Patheon’s facility in Monza, Italy and was appointed Site Director in June 2002. She became Director, Italian Operations in January 2005, with responsibility for integrating and managing both the Monza and Ferentino sites. In February 2009, Ms. Mancuso was appointed to her current position of Senior Vice President and Managing Director, European Operations. Ms. Mancuso is also currently a member of the Patheon Executive Management Committee. Prior to joining Patheon, Ms. Mancuso held progressively senior roles in production and manufacturing during her six years at Bristol-Myers Squibb in Italy, a global biopharmaceutical company.

Warren A. Horton, age 52, joined Patheon in May 2008 as Vice President, Quality Assurance, Environmental, Health & Safety, and Regulatory, bringing more than 25 years of pharmaceutical industry experience in quality and operations roles. Prior to joining Patheon, Mr. Horton held the position of Vice President, Operations from September 2007 to May 2008, Vice President Quality Assurance and Regulatory Affairs from October 2003 to September 2007 and Senior Director Quality Assurance from May 2002 to October 2003 at Royal DSM N.V., a global life sciences company. Prior to that, Mr. Horton spent seven years at Alpharma, LLC, a global animal health company, and nine years at Abbott in a variety of production and quality assurance roles covering a full range of dosage form types.

Directors

In connection with the Investor Agreement, JLL Patheon Holdings has the right to designate up to three nominees for election or appointment to our Board. See “Item 7. Certain Relationships and Related Transactions, and Director Independence—Arrangements with JLL—Investor Agreement.” Pursuant to our settlement agreement with JLL Patheon Holdings dated November 30, 2009 (the “Settlement Agreement”), JLL Patheon Holdings also has the right to select one additional member our Board. See “Item 7. Certain Relationships and Related Transactions, and Director Independence—Arrangements with JLL—Settlement Agreement.”

Our directors (other than Mr. Mullen) their ages and their positions are as follows:

Name	Age		Position
Ramsey A. Frank		50	Director, Chair of our Board
Paul S. Levy		63	Director
Thomas S. Taylor		52	Director
Daniel Agroskin		34	Director
Joaquín B. Viso		68	Director
Derek J. Watchorn		68	Director
Roy T. Graydon		49	Director
Brian G. Shaw		57	Director

Ramsey A. Frank, age 50, joined our Board in 2007 and currently serves as its Chairman. Mr. Frank is a Managing Director of JLL Partners, which he joined in 1999. Prior to joining JLL Partners, Mr. Frank served as Managing Director of Donaldson, Lufkin & Jenrette Securities Corporation, Managing Director of Smith Barney & Co. and Vice President at Drexel Burnham Lambert. Mr. Frank also serves on the boards of Builders FirstSource Inc., C.H.I. Overhead Doors, PGT, Inc., Education Affiliates, Inc., Medical Card System, Inc. and PharmaNet Development Group. Mr. Frank previously served as a director of New World Pasta Company, which filed for protection under Chapter 11 of the U.S. Bankruptcy Code in 2004, and as director of Motor Coach Industries International, Inc., which filed for protection under Chapter 11 of the U.S. Bankruptcy Code in 2008. Mr. Frank holds a Bachelor of Science degree from Indiana University and a Master of Business Administration degree with high honors from the University of Chicago. Our Board has previously determined that Mr. Frank’s extensive service on boards of directors, leadership positions in the finance industry and M.B.A. with high honors from the University of Chicago qualify him for service as a member of our Board of Directors and add value to our company.

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Paul S. Levy, age 63, joined our Board in 2007. Mr. Levy is a Managing Director of JLL Partners, which he founded in 1988. Prior to founding JLL Partners, Mr. Levy was a Managing Director at Drexel Burnham Lambert, an investment bank, where he was responsible for the firm’s restructuring and exchange offer business in New York. Previously, Mr. Levy was Chief Executive Officer of Yves Saint Laurent Inc., New York, a fashion and cosmetics company, Vice President of Administration and General Counsel of Quality Care, Inc., a home healthcare company and an attorney at Stroock & Stroock & Lavan LLP. Mr. Levy also serves on the boards of Builders FirstSource, Inc., PGT, Inc., PharmaNet Development Group, Inc., Education Affiliates, Inc., ACE Cash Express, Inc., CHI Overhead Doors, Inc., MCS Holdings, Inc. and IASIS Healthcare, LLC. Mr. Levy is a director of J.G. Wentworth, LLC and J.G. Wentworth, Inc., which is the managing member of JGW Holdco, LLC. In May 2009, J.G. Wentworth LLC, J.G. Wentworth, Inc., and JGW Holdco, LLC filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Mr. Levy previously served as a director of Hayes Lemmerz International, Inc., which filed for protection under Chapter 11 of the U.S. Bankruptcy Code in 2001, as a director of New World Pasta Company, which filed for protection under Chapter 11 of the U.S. Bankruptcy Code in 2004 and as director of Motor Coach Industries International, Inc., which filed for protection under Chapter 11 of the U.S. Bankruptcy Code in 2008. Mr. Levy holds a Bachelor of Arts degree from Lehigh University, where he graduated summa cum laude and Phi Beta Kappa, and a Juris Doctor degree from the University of Pennsylvania Law School. He also holds a Certificate from the Institute of Political Science in Paris, France. Our Board has previously determined that Mr. Levy’s extensive service on boards of directors, executive experiences and his academic achievements and legal education qualify him for service as a member of our Board of Directors and add value to our company.

Thomas S. Taylor, age 52, joined our Board in 2007. Mr. Taylor is a Managing Director of JLL Partners, which he joined in May 2005. From July 2004 to May 2005, Mr. Taylor served as a Business Strategy Consultant at the Hartford Financial Services Group, Inc., an insurance and financial services provider. Previously, Mr. Taylor was President and Chief Executive Officer of EPIX Holdings Corporation, a human resource outsourcer and Chief Financial Officer of Colorado Prime Corporation, a gourmet home food service provider. He has held various positions at Kraft Foods Inc. and Price Waterhouse (now PricewaterhouseCoopers LLP). Mr. Taylor also serves on the boards of Medical Card Systems, Inc., First Community Bank NA and FC Holdings Inc. Mr. Taylor holds a Bachelor of Science degree from Miami University of Ohio and a Master of Business Administration degree from University of Notre Dame, where he was class valedictorian. Our Board has previously determined that Mr. Taylor’s service on boards of directors, executive experiences and graduation as valedictorian from his M.B.A. class qualify him for service as a member of our Board of Directors and add value to our company.

Daniel Agroskin, age 34, joined our Board in 2009. Mr. Agroskin is a Principal of JLL Partners, which he joined in August 2005. Prior to joining JLL Partners, Mr. Agroskin worked at JP Morgan Partners, a private equity investment firm, and in Merrill Lynch’s Mergers and Acquisitions Group. Mr. Agroskin is also a director on the boards of PGT, Inc and PharmaNet Development Group, Inc. Mr. Agroskin holds a Bachelor of Arts degree from Stanford University and a Masters of Business Administration degree from the Wharton School of the University of Pennsylvania. Our Board has previously determined that Mr. Agroskin’s extensive experience in the finance industry and M.B.A. from the Wharton School qualify him for service as a member of our Board of Directors and add value to our company.

Joaquín B. Viso, age 68, joined our Board in 2004, on which he served until April 29, 2009 and re-joined on December 4, 2009. From August 2005 to December 2006, Mr. Viso served as Chairman of Patheon Puerto Rico, Inc. (“Patheon P.R.”), formerly known as MOVA Pharmaceutical Corporation, which he founded in 1986. From December 2004 to August 2005, Mr. Viso served as President and Chief Executive Officer of Patheon P.R. Prior to founding Patheon P.R., Mr. Viso was with SmithKline Beecham (now GlaxoSmithKline) for 16 years, where he held various senior management positions, including President and General Manager of Glaxo’s operations in Puerto Rico from 1978 to 1986. Currently, he is Chairman of MC-21 Corporation, and a director of Genomas, Inc., a privately held company engaged in the field of DNA-Guided Medicine. Mr. Viso is also a controlling shareholder of Alara Pharmaceutical Corporation, which has two contractual commercial relationships with

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Patheon P.R. Mr. Viso holds a Bachelor of Science in Mechanical Engineering from the University of Puerto Rico and a Master of Science in Engineering from the University of Michigan. Our Board has previously determined that Mr. Viso’s service to our company and extensive experience in the pharmaceutical industry qualify him for service as a member of our Board of Directors and add value to our company.

Derek J. Watchorn, age 68, joined our Board in 1998. Since November 2009, Mr. Watchorn has served as a senior advisor to Armadale Company Ltd. (“Armadale”), a privately held company based in Ontario, Canada, in connection with the proposed redevelopment of the Buttonville Airport lands located in the greater Toronto area. Mr. Watchorn is also currently a member of the Management Committee formed by the joint venture between the Cadillac Fairview Corporation and Armadale to undertake this redevelopment. From January 2007 to June 2009, Mr. Watchorn served as President, Chief Executive Officer and director of Revera Inc., a provider of accommodation and care for seniors. From October 2004 to January 2007, Mr. Watchorn served as President, Chief Executive Officer and a trustee of Retirement Residences Real Estate Investment Trust, also a provider of accommodation and care for seniors, which was acquired by Revera Inc. in January 2007. From October 2004 to December 2007, Mr. Watchorn also held a position as a trustee of IPC US Real Estate Investment Trust, an asset and property management trust. He served as Executive Vice-President, Strategic Initiatives, of Canary Wharf Group plc, a commercial property company, in London, England from January 2003 to June 2004 and as Executive Director of TrizecHahn Europe plc from 1999 until 2001. Before and after his senior management roles in Europe, Mr. Watchorn was a senior partner of the law firm Davies Ward Phillips & Vineberg LLP. Mr. Watchorn is currently a director of Timbercreek Mortgage Investment Corporation, a mortgage loan investment company. Mr. Watchorn holds an LL.B. from the University of Toronto. Our Board has previously determined that Mr. Watchorn’s executive and legal experiences qualify him for service as a member of our Board of Directors and add value to our company.

Roy T. Graydon, age 49, joined our Board in 2009. Since November 2005, Mr. Graydon has served as President, Chief Executive Officer and a director of Aeroquest International Limited, a global information and technology services company (“Aeroquest”). From March 2003 to September 2005, Mr. Graydon served as Executive Vice President and Chief Financial Officer of Call-Net Enterprises Inc., a Toronto Stock Exchange (“TSX”) listed telecommunications services company, and from 2002 to 2003 served as Managing Partner of VGC Capital Partners, a venture capital firm. From May 1995 to October 2001, Mr. Graydon served as Portfolio Manager and Vice President of Relationship Investing at the Ontario Teachers’ Pension Plan Board, where he oversaw the corporate governance activities. From September 1988 to May 1995, Mr. Graydon worked at TD Securities Inc., a Canadian investment bank, in Mergers and Acquisitions and Corporate Finance. Mr. Graydon is a geophysicist by training and holds a Master of Business Administration degree from the University of Western Ontario. Our Board has previously determined that Mr. Graydon’s executive experiences, service as a director of Aeroquest and educational background in geophysics and business administration qualify him for service as a member of our Board of Directors and add value to our company.

Brian G. Shaw, age 57, joined our Board in 2009. Mr. Shaw is an experienced financial industry executive with particular expertise in capital markets and investing activities. From December 2004 to February 2008, Mr. Shaw served as Chief Executive Officer and Chairman of CIBC World Markets, the wholesale banking arm of a leading North American financial institution (“CIBC World”). In addition, from 2002 to December 2004, Mr. Shaw served as the head of CIBC World’s Global Equities Division. Mr. Shaw is currently a director of two privately held companies, Eco-Energy China Group Inc., a biodiesel production company, and Ivey Canadian Exploration, Ltd., a natural resources exploration company. Mr. Shaw is a Chartered Financial Analyst (“CFA”) and currently serves as a director of the Toronto CFA Society. He also holds a Master of Business Administration degree from the University of Alberta. Our Board has previously determined that Mr. Shaw’s executive experiences in the financial services industry, his CFA status and service as a director of the Toronto CFA Society and his educational background in business administration qualify him for service as a member of our Board of Directors and add value to our company.

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Item 6. Executive Compensation.

Compensation Discussion and Analysis

The Compensation Discussion and Analysis describes our executive compensation philosophy, components and policies, including analysis of the compensation earned by our named executive officers for fiscal 2010 as detailed in the accompanying tables.

The following executives were our named executive officers for fiscal 2010:

Name	Position
Wesley P. Wheeler	President and Chief Executive Officer (until November 30, 2010)
Eric W. Evans	Chief Financial Officer
Peter T. Bigelow	President, North American Operations and (between December 1, 2010 and February 6, 2011) Interim Chief Executive Officer
Doaa A. Fathallah	Executive Vice President, General Counsel and Corporate Secretary
Geoffrey M. Glass	Executive Vice President, Global Strategy, Sales and Marketing

Mr. Wheeler’s employment with us terminated as of November 30, 2010. Mr. Bigelow served as our Interim Chief Executive Officer until we appointed our current Chief Executive Officer, James C. Mullen, on February 7, 2011.

Executive Summary

• Setting Fiscal 2010 Compensation. In making compensation decisions for fiscal 2010, our Compensation and Human Resources Committee (our “CHR Committee”) took into account a number of factors, including the difficult economic environment, the intense competition that we face and our ongoing restructuring programs, each of which places significant demands on our executive officers.

• Elements of Compensation. Consistent with our philosophy that executive compensation should incentivize our executive officers to enhance shareholder value, each of our executive officers is compensated with base salary, short-term cash incentives and long-term incentives tied to the value of our restricted voting shares, as well as (to a lesser extent) perquisites and personal benefits, retirement benefits and termination and change of control benefits.

• Key Compensation Decisions During Fiscal 2010. Our CHR Committee and our Board made the following key executive compensation decisions for fiscal 2010:

• We reviewed our base salaries against the market and made targeted adjustments where appropriate based on a combination of market analysis, merit and retention objectives

• We approved a cash incentive plan for fiscal 2010 designed to focus our executive officers on achieving both corporate and individual goals to grow our business.

• We engaged Mercer to assist us in redesigning our long-term incentive compensation program to better align with our long-term objectives of creating shareholder value.

Compensation Philosophy and Objectives

Our compensation philosophy is based on pay for performance. We reward our executive officers for delivering superior performance that contributes to our long-term success and the creation of shareholder value.

The objectives of our compensation program are to:

• attract and retain qualified and experienced individuals to serve as executive officers;

• align the compensation level of each executive officer with his or her level of responsibility;

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• motivate each executive officer to achieve short and long-term corporate goals;

• align the interests of executive officers with those of shareholders; and

• reward executive officers for excellent corporate and individual performance.

Process for Determining Executive Compensation

Role of Our CHR Committee and Board

Our CHR Committee and Board share responsibility for determining executive compensation. Our Board’s involvement in the executive compensation process reflects its desire to oversee compensation decisions regarding our executive officers, particularly our Chief Executive Officer, or CEO. Accordingly, our CHR Committee makes recommendations regarding, and our Board approves, our executive compensation policies and programs, the compensation of our CEO and the grant of equity awards. Our CHR Committee is solely responsible for approving the compensation of our executive officers other than our CEO and for establishing and approving payments under our annual cash incentive plan and for reporting such decisions to our Board.

Role of Executive Officers

Other than providing input into their individual performance objectives, neither our Chief Executive Officer nor our other executive officers have any role in recommending or setting their own compensation. Our Chief Executive Officer makes recommendations to our CHR Committee regarding the compensation of our other executive officers and provides input regarding executive compensation programs and policies generally.

Role of Compensation Consultants

In the first quarter of fiscal 2010, due to the hiring or relocation of a number of executive officers at our U.S. headquarters in Research Triangle Park, North Carolina, we engaged Mercer to advise us regarding our long-term incentive compensation program. Under the terms of its engagement, and in collaboration with us, Mercer:

• constructed a custom peer group of publicly traded companies with U.S. operations that are similar to us in terms of revenue size, industry and operating characteristics to be used to gather market data on existing long-term incentive programs (the “Mercer Peer Group”);

• reviewed typical long-term incentive practices (vehicles, mix, program details) of companies in the Mercer Peer Group;

• summarized program details of companies in the comparable group based on publicly available information;

• compared and contrasted our long-term incentive compensation programs with respect to use and mix of vehicles (such as options, restricted stock and performance shares) and measures, leverage, and other general program design parameters;

• compiled and summarized general market and industry specific trends in incentive plan design;

• assessed the existing long-term incentive compensation program relative to market data, emerging trends and best practices;

• developed alternative long-term incentive compensation program design changes for further consideration based on internal considerations and market data; and

• developed program design specifics pertaining to vesting conditions, termination scenarios and other administrative issues.

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As a result of Mercer’s engagement, we redesigned our long-term incentive compensation program during fiscal 2010. The impact of this redesign on fiscal 2010 compensation is discussed below.

Elements of Compensation

Our overall executive compensation program includes the following major elements:

Element	Form	Performance Period	Determination
Base Salary	Cash	One year	Reviewed against peers and further adjusted based on individual performance
Short-Term Incentives	Annual Cash Incentive Bonus	One year	Subject to our performance against pre-determined corporate objectives Also based on individual achievement of personal performance objectives
Long-Term Incentives	Stock Options	Generally vest over five years: 1/5 on each of the five anniversaries of the grant date	Based on share price appreciation up to a 10-year term with vesting typically over the initial five years Exercise price based on weighted-average market price of restricted voting shares during the two trading days immediately preceding grant date Final value is based on market value at time of exercise relative to the exercise price
Perquisites	Relocation expenses and incentives, automobile allowances, health and sports club memberships, education allowances, enhanced medical, dental, life insurance and disability benefits, executive allowances	Provided in connection with executive recruitment and retention program	Based on individually negotiated terms of employment or as introduced from time to time to enhance executive retention
Broad-Based Benefits	Health, dental, retirement, life insurance and disability	Ongoing	Consistent with the broad-based benefits offered by other multinational organizations
Termination/ Change of Control Benefits	Severance and related benefits in connection with certain terminations and changes of control	Provided in connection with specified events	Based on individually negotiated terms of employment or as introduced from time to time to enhance executive retention

Factors Considered in Making Individual Pay Decisions

Compensation Elements

At this time, we do not target a specific mix of executive compensation by allocating total compensation between cash and noncash pay, between current and long-term pay or among different types of long-term incentive awards. The profile of our executive compensation is driven by decisions made for each component of

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pay separately, which we intend to be appropriately competitive, as well as the impact of our decisions on total compensation. However, consistent with our compensation philosophy, our CHR Committee believes that a significant portion of each named executive officer’s compensation will be at risk.

Role of Company and Individual Performance

Our compensation philosophy is based on pay for performance. We reward our executive officers for delivering superior performance that contributes to our long-term success and the creation of shareholder value. In measuring such performance, we consider the achievement of both corporate and individual goals.

We reward significant contributions by our executive officers through salary increases, payments under our annual cash incentive plans and through long-term equity awards. In particular, our 2010 Annual Performance Incentive Plan (the “2010 Incentive Plan”) was designed to focus our executive officers on the achievement of both corporate and individual performance objectives. The corporate performance objectives under our 2010 Incentive Plan were recommended to our CHR Committee by our Chief Executive Officer and approved (with appropriate changes) by our CHR Committee.

The individual performance objectives under our 2010 Incentive Plan were determined by our CHR Committee in consultation with our Chief Executive Officer. Our Chief Executive Officer submitted individual performance objectives for our executive officers (who had input into the determination of their individual objectives), other than himself, to our CHR Committee. Our CHR Committee reviewed the submitted individual performance objectives and approved them with such changes as it believed appropriate. No individual performance objectives were established for our Chief Executive Officer under our 2010 Incentive Plan.

Internal Pay Equity

We consider internal pay equity when setting compensation for our executive officers. Although we have not established a policy regarding the ratio of total compensation of the Chief Executive Officer to that of the other executive officers, we do review compensation levels to ensure that appropriate equity exists between our CEO and our other executive officers, as well as among our executive officers (other than the CEO). Differences in compensation among our named executive officers are attributable to differences in levels of experience, performance and market demand for executive talent.

Fixed Compensation—Base Salary

Overview

Base salary is intended to reflect the skills, competencies, experience and performance of each named executive officer. Base salary levels also are targeted to be comparable to salaries offered for positions involving similar responsibilities and complexity at other companies. Competitive base salaries enable us to attract and retain qualified individuals to serve as named executive officers. Base salary also aligns the compensation level of each named executive officer to his or her level of responsibility. Base salaries are adjusted annually where appropriate based on levels of responsibility and sustained performance. Base salary is linked to other elements of compensation such as the annual cash incentive bonus, certain retirement plan benefits and termination and change of control benefits.

Fiscal 2010 Base Salaries

During fiscal 2010, we conducted a review of the base salaries of our Chief Executive Officer, Chief Financial Officer and other executive officers. As part of this review, we considered a survey published by Radford, the Radford Global Life Sciences salary survey, as a source of competitive data to ascertain market compensation levels. For benchmarking purposes, our CHR Committee selected base salary data from the survey for companies with greater than 500 employees (the “Radford Peer Group”). A list of these companies can be found in Appendix A to this registration statement. We used this survey because we generally compete for talent with life sciences companies of all sizes from around the world. The purpose of this review was not to target any particular named executive officer’s base salary to a specific market percentile or range. Instead, we conducted this review to ascertain whether our named executive officers’ salaries were appropriately competitive and to make selective adjustments as appropriate.

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The key salary decisions made during fiscal 2010 for our named executive officers were as follows:

• Wesley P. Wheeler. Our CHR Committee determined that an increase in our Chief Executive Officer’s annual base salary from $600,000 to $650,000 was appropriate to bring his salary closer to the median chief executive officer salary from the Radford Peer Group; in light of the CEO’s individual merit, performance and lack of a salary increase since he was hired; and within our available budget. Following the base salary increase, Mr. Wheeler’s annual base salary approximated 83% of the Radford Peer Group median.

• Eric W. Evans. Our CHR Committee (based on a recommendation by our CEO) recommended that Mr. Evans, our Chief Financial Officer, receive an increase in his annual base salary from $350,000 to $371,000 to begin aligning his base salary more closely with the median chief financial officer salary in the Radford Peer Group. In recommending this salary increase, our Chief Executive Officer also took into account our available budget, Mr. Evans’s individual merit, the fact that Mr. Evans had not had a salary increase since fiscal 2008 and considerations regarding internal pay equity. Following the base salary increase, Mr. Evans’s annual base salary approximated 100% of the Radford Peer Group median.

• Peter T. Bigelow. Mr. Bigelow was hired during fiscal 2010, and his salary was based on the amount we determined was appropriate for an individual with his experience and skills and necessary to induce him to join our company. Accordingly, he did not receive any base salary increase as a result of the salary review.

• Doaa A. Fathallah. We increased Ms. Fathallah’s annual base salary in connection with her promotion in December 2009 in light of her performance and increased responsibilities. In connection with this salary increase, we did not engage in any benchmarking of her salary against the salaries of similarly situated executive officers at other companies. Based on the salary review our CHR Committee conducted in fiscal 2010, it determined (consistent with the recommendation of our CEO) that Ms. Fathallah’s salary, as previously adjusted, was appropriately competitive.

• Geoffrey M. Glass: We did not provide Mr. Glass a base salary increase during fiscal 2010. Based on its review of Mr. Glass’s base salary compared to the median salary of the Radford Peer Group, our CHR Committee determined (consistent with the recommendation of our CEO) that Mr. Glass’s current base salary was appropriately competitive.

Variable Compensation—Short-Term and Long-Term Incentives

The variable elements of our compensation include short-term incentives in the form of an annual cash incentive bonus and long-term incentives in the form of stock options. The level of variable compensation offered to our named executive officers is determined, in part, based on an overall assessment of our business performance, including achievement against stated corporate objectives.

Short-Term Incentive—Annual Cash Incentive Bonus

Overview

Under our 2010 Incentive Plan approved by our CHR Committee, our named executive officers and other members of our senior management may receive cash incentive bonuses based on certain performance criteria, subject to certain prescribed limits. The annual cash incentive bonus is intended to motivate our named executive officers to achieve short-term corporate and individual goals and to ultimately reward them for excellent corporate and individual performance.

2010 Bonus Opportunity

Target awards under our 2010 Incentive Plan are set forth in each named executive officer’s employment agreement. All of our named executive officers, other than Mr. Wheeler, have a target bonus of 45% of base

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salary. Mr. Wheeler had a target bonus of 100%. We believe that maintaining the same target bonuses for each of our named executive officers other than our CEO appropriately rewards their performance, is consistent with principles of pay equity and helps us attract and retain the executives we need to run our business. Accordingly, in connection with her promotion in December 2009, we increased Ms. Fathallah’s target bonus from 40% to 45% of her base salary.

For fiscal 2010, the annual cash incentive bonus for our named executive officers and other members of senior management was based on the achievement of certain specified financial, transaction and individual objectives established by our CHR Committee and CEO at the beginning of fiscal 2010. Our CHR Committee approved the various weights allocated to the different financial performance objectives under our 2010 Incentive Plan to incentivize contributions by our named executive officers both to our overall corporate performance and to the areas of our business for which they are primarily responsible. In addition, our CHR Committee determined that part of the bonus opportunity should be based on the achievement of individual objectives to focus our named executive officers to execute on projects without an immediately quantifiable financial impact but that would contribute to both our short-term and long-term success.

The following table sets forth the weightings assigned to different performance objectives for each of our named executive officers:

Name and Position	Corporate Adjusted EBITDA			Region/ Division Adjusted EBITDA			Region/ Division Revenue			PDS New Business			Commercial Technology Transfers			Individual Objectives
Wesley P. Wheeler		80	%		—			—			—			—			20	%
President and Chief Executive Officer (until November 30, 2010)
Eric W. Evans		80	%		—			—			—			—			20	%
Chief Financial Officer
Doaa A. Fathallah		70	%		—			—			—			—			30	%
Executive Vice President, General Counsel and Corporate Secretary
Geoffrey M. Glass		35	%		—			—			17.5	%		17.5	%		30	%
Executive Vice President, Global Strategy, Sales and Marketing
Peter T. Bigelow		20	%		50	%		20	%		—			—			10	%
President, North American Operations and (between December 1, 2010 and February 6, 2011) interim Chief Executive Officer

Financial Objectives

Corporate Adjusted EBITDA is defined as income (loss) from continuing operations before repositioning expenses, interest expense, foreign exchange losses reclassified from other comprehensive income, refinancing expenses, gains and losses on sale of fixed assets, gain on extinguishment of debt, income taxes, asset impairment charge, depreciation and amortization and other non-cash expenses, with additional adjustments for foreign currency exchange differences versus budgeted exchange rates and other one-time non-operating expenses. Region/Division Adjusted EBITDA is defined consistent with the definition of Corporate Adjusted EBITDA, except that it is calculated based on the revenues and expenses of a particular region, as applicable. Region/Division Revenue is defined as net revenue for a particular region. Mr. Bigelow’s region for purposes of our 2010 Incentive Plan was North America, including Puerto Rico. PDS New Business represents the value of sales for new pharmaceutical development business. Commercial Technology Transfers represent the number of signed agreements for services related to the transfer of manufacturing of approved, commercial products to Patheon’s facilities.

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Under our 2010 Incentive Plan, if threshold Corporate Adjusted EBITDA of 90% of target were not met, there would be no payout under the Plan. If the threshold Region/Division Adjusted EBITDA of 90% of target were not met, there would be no payout relating to Region Adjusted EBITDA or Region/Division Revenue performance. If threshold PDS New Business of 80% of target were not met, there would be no payout relating to PDS New Business performance. If threshold Commercial Technology Transfers of 80% of target were not met, there would be no payout relating to Commercial Technology Transfers performance. If performance were to fall between threshold and target or if performance were to fall between target and maximum, payout factors would be interpolated on a straight-line basis.

In setting the financial targets under our 2010 Incentive Plan, our CHR Committee focused on establishing targets for which attainment was not assured and which would require significant effort on the part of our named executive officers. For fiscal 2010, target Corporate Adjusted EBITDA, Region/Division Adjusted EBITDA and Region/Division Revenue were based on our internal operating budget. The target amounts for PDS New Business and Commercial Technology Transfers were based on our internal sales goals as established by our sales and marketing division and approved by our Chief Executive Officer and Chief Financial Officer.

The following table shows the payout percentages related to the achievement of consolidated corporate financial goals (Corporate Adjusted EBITDA) under our 2010 Incentive Plan:

Corporate Adjusted EBITDA
	Goal		Performance (% of Target)			Payout Factor		Payout (% of Target Bonus)
Threshold	$	83.8 million		90	%		0.5x		50	%
Target	$	93.2 million		100	%		1.0x		100	%
Maximum	$	111.8 million		120	%		1.75x		175	%

The following tables shows the payout percentages related to the achievement of regional financial goals (Region/Division Adjusted EBITDA and Region/Division Revenue) under our 2010 Incentive Plan:

North America (including Puerto Rico) Region/Division Adjusted EBITDA
	Goal		Performance (% of Target)			Payout Factor		Payout (% of Target Bonus)
Threshold	$	48.7 million		90	%		0.5x		50	%
Target	$	54.1 million		100	%		1.0x		100	%
Maximum	$	64.9 million		120	%		1.75x		175	%

North America (including Puerto Rico) Region/Division Revenue
	Goal		Performance (% of Target)			Payout Factor		Payout (% of Target Bonus)
Threshold	$	315.8 million		90	%		0.5x		50	%
Target	$	350.9 million		100	%		1.0x		100	%
Maximum	$	421.0 million		120	%		1.5x		150	%

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The following tables show the payout percentages related to the achievement of PDS sales targets (PDS New Business and Commercial Technology Transfers) under our 2010 Incentive Plan:

PDS New Business
	Goal		Performance (% of Target)			Payout Factor		Payout (% of Target Bonus)
Threshold	$	88.0 million		80	%		0.8x		80	%
Target	$	110.0 million		100	%		1.0x		100	%
Maximum	$	132.0 million		120	%		1.5x		150	%

Commercial Technology Transfers
	Goal		Performance (% of Target)			Payout Factor		Payout (% of Target Bonus)
Threshold		19		80	%		0.8x		80	%
Target		25		100	%		1.0x		100	%
Maximum		30		120	%		1.5x		150	%

Individual Objectives

In addition to corporate and/or financial objectives, a component of each of our named executive officer’s bonus eligibility was based on the achievement of individual objectives. The individual goals were weighted in significance, totaling up to 100% of the individual award opportunity for the fiscal year. The threshold performance for the individual objectives was 80%, with a payout of 50% of target; target and maximum performance were each 100%, with a payout of 100% of target.

Individual objectives for each named executive officer (other than Mr. Wheeler, for whom individual objectives were not established in fiscal 2010) include individual performance goals specific to such individual or his or her area of responsibility, as follows:

• Eric W. Evans. Mr. Evans’s individual objectives included supporting corporate initiatives, including new business development, financings, corporate development and cost reduction; supporting financial process improvement initiatives; and improving our financial planning and forecasting processes.

• Peter T. Bigelow. Mr. Bigelow’s individual objectives included stabilizing and improving operational performance at two Puerto Rican sites, establishing customer relationships, developing specific strategies for North American operations, strengthening and developing the North American leadership team and enhancing usage of key performance indicators.

• Doaa A. Fathallah. Ms. Fathallah’s individual objectives included completing our 2010 financing objectives, completing our corporate restructuring, providing support in connection with building a new facility, developing new incentive plans for sites in certain regions and working with the Puerto Rican government to obtain governmental funding incentives.

• Geoffrey M. Glass. Mr. Glass’s individual objectives included completing certain business transactions; overseeing the development and implementation of a sales management, reporting and communication system; and overseeing the production and implementation of new marketing materials for the business.

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2010 Incentive Plan Results

The following table shows the percentage of achievement of the financial objectives applicable to our named executive officers for fiscal 2010:

Financial Objective	Target		Actual		Achievement (%)
Corporate Adjusted EBITDA	$	93.2 million	$	91.7 million		98.4	%
North American (including Puerto Rican) Adjusted EBITDA	$	54.1 million	$	44.0 million		81.3	%
North American (including Puerto Rican) Revenue	$	348.8 million	$	335.3 million		96.1	%
PDS New Business	$	110.0 million	$	91.4 million		83.1	%
Commercial Technology Transfers		25		15		60.0	%

Accordingly, because we exceeded our threshold Corporate Adjusted EBITDA goal of 90%, all of our named executive officers were eligible for payouts under our 2010 Incentive Plan. Although Mr. Wheeler was not employed on the date bonuses were paid, his separation agreement provided that he would remain eligible for a bonus under the 2010 Incentive Plan (see—“Termination and Change in Control Benefits”). In addition, our CHR Committee determined that all of our named executive officers, other than Mr. Wheeler, met their individual performance objectives for fiscal 2010 such that they were eligible for a full payout related to achievement of those objectives. Because specific individual performance goals were not established for Mr. Wheeler, the Board, in its sole discretion, reviewed Mr. Wheeler’s performance in general and determined that no amount should be awarded in respect of his individual performance component of the 2010 Incentive Plan. As we did not achieve the minimum 80% threshold of Commercial Technology Transfers, no payments were made to Mr. Glass in respect of this performance target.

The following table shows the payouts made to each of our named executive officers under the Plan:

Name	Target Bonus Opportunity			Target Fiscal 2010 Bonus ($)		Actual Fiscal 2010 Bonus ($)
Wesley P. Wheeler		100	%		625,000		460,000
Eric W. Evans		45	%		162,225		151,843
Peter T. Bigelow		45	%		143,438		40,736
Doaa A. Fathallah		45	%		183,141		172,885
Geoffrey M. Glass		45	%		158,437		121,589

Long-Term Incentives—Incentive Stock Option Plan

Overview

Long-term incentives are intended to motivate our named executive officers to achieve long-term corporate goals and to ultimately reward them for excellent corporate performance. Long-term incentives do not influence any other element of compensation.

Prior to fiscal 2010, we provided long-term incentives in the form of performance share units under our performance share unit plan and stock options under our amended and restated incentive stock option plan (our “Incentive Stock Option Plan”). Under our performance share unit plan, participants were entitled to a cash payment for each performance share unit equivalent to the market price of one of our restricted voting shares. Performance share units were settled solely for cash; we did not issue any equity under the performance share unit plan.

Further to the work conducted by Mercer and taking into account the practices of the Mercer Peer Group, in fiscal 2010 we determined that our long-term incentive program would no longer consist of performance share units and instead would be comprised solely of option grants under our Incentive Stock Option Plan. As part of

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its review, Mercer constructed the Mercer Peer Group, which consists of publicly traded companies with U.S. operations that are similar to us in terms of revenue size, industry and operating characteristics. The companies comprising the custom peer group were as follows: Albany Molecular Research, Inc., Cambrex Corporation, Catalent Pharma Solutions, Inc., Cephalon, Inc., Charles River Laboratories International, Inc., Royal DSM N.V., Hospira, Inc., ICON plc, inVentiv Health, Inc., Kendle International Inc., Lonza Group Ltd., Nordian Inc., PAREXEL International Corporation and Pharmaceutical Product Development, Inc.

Based on the recommendation from Mercer, our CHR Committee determined that stock options are preferable to performance share units because stock options (i) better align our long-term incentive program with our shareholders’ interests; (ii) are a more competitive form of long-term executive compensation; (iii) reduce the volatility in earnings that result from issuance of performance shares, which are treated as liability awards under applicable accounting literature and are thus marked to market each fiscal quarter; and (iv) do not require us to make additional cash payments to our named executive officers.

Fiscal 2010 Grants

Mercer used the Mercer Peer Group to obtain a general understanding of the equity award practices of comparable companies and to make recommendations to us regarding our equity compensation program. Consistent with Mercer’s recommendation, we made significant option grants in March and June 2010 to a broad group of individuals in key roles, including our named executive officers. The awards were designed to align the interests of our relatively new management team with our shareholders’ interests, while having regard to internal compensation equity among our executives. Our CHR Committee and Board determined that these stock option grants were in the best interests of our company to provide our named executive officers with a significant ownership potential that would further align their interests with those of our shareholders. As part of our philosophy of using stock option awards as long-term incentives, beginning with these grants we extended the vesting terms from three to five years and the option terms from seven to ten years. We currently plan to continue to grant stock options with these extended terms.

In addition to the awards recommended by Mercer, we awarded stock options to Ms. Fathallah on her promotion to Executive Vice President, General Counsel and Corporate Secretary and made a new hire grant to Mr. Bigelow as part of our negotiated employment arrangement with him. We did not benchmark these grants against any peer companies or surveys; instead, we made these grants based on the levels we believed were appropriate to attract and retain the best executives for our company and to achieve compensation equity among executives at the same functional level.

Equity Award Grant Practices

Our stock option grant practices provide that we may not issue stock options during a blackout period as defined in our trading policies. Quarterly blackout periods begin two weeks before the end of each fiscal quarter and end at the close of business on the second business day following the public release of our quarterly or annual financial results. In addition, additional blackout periods are imposed to allow the receipt of material information by the market or in certain cases as determined by our CEO or General Counsel.

Perquisites and Personal Benefits

Our group benefits are intended to provide competitive and adequate protection in case of sickness, disability or death. We offer health, dental, pension or retirement, life insurance and disability programs to all of our employees on the same basis. In addition, our named executive officers receive certain enhanced benefits for medical, dental, vision, life insurance and disability, including premium waivers and enhanced coverage.

Our named executive officers receive automobile allowances (other than Mr. Wheeler, who was provided with a general executive allowance). Executives are also eligible to receive relocation benefits and relocation

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incentives, as may be required to relocate newly hired executives or executives on foreign assignments. In addition, we provide our General Counsel, who is based in Switzerland, travel allowances and child education allowances in connection with her foreign assignment. Social or sports memberships are also provided to certain named executive officers. The level of perquisites and personal benefits provided to our named executive officers does not influence any other element of compensation.

Recent Compensation Decisions Related to our President and Chief Executive Officer

On February 7, 2011, we entered into an employment agreement with James C. Mullen. Mr. Mullen commenced his duties as Chief Executive Officer effective February 7, 2011, at a base salary of $900,000 per year. Under his employment agreement, Mr. Mullen is eligible for a target bonus of not less than 100% of his annual base salary based on achieving 100% of the financial and other targets recommended by him and approved by our Board. Mr. Mullen’s employment agreement also provides that for fiscal 2011 his performance bonus will be no less than 50% of his annual base salary, pro-rated from the effective date of the agreement. In addition, we will grant Mr. Mullen an initial stock option award of 5,000,000 options as soon as practicable after the end of the blackout period in effect on the date of his employment agreement, which period is currently expected to end on March 14, 2011. These options will vest in five annual installments commencing on the first anniversary of the effective date of Mr. Mullen’s employment agreement and will have a ten-year term. Other key provisions of his employment agreement are described in “—Termination and Change in Control Benefits.”

Benefits Relating to Termination and Change in Control

Our named executive officers are covered by termination and change in control provisions in their employment agreements. The events that trigger payment under these arrangements were determined through the negotiation of the applicable employment agreement. In addition, our Stock Option Incentive Plan and certain of the award agreements entered into thereunder contain change in control provisions. These provisions were designed to prevent additional investments by JLL Patheon Holdings from triggering the change in control provisions. See “—Termination and Change in Control Benefits,” below.

Risk Management

Our CHR Committee and our Board endeavor to design our compensation programs to help ensure that these programs do not encourage our executive officers to take unnecessary and excessive risks that could harm our long-term value. We believe that the following components of our executive compensation program, which are discussed more fully above, discourage our executive officers from taking unnecessary or excessive risks:

• Base salaries and personal benefits are sufficiently competitive and not subject to performance risk.

• We have increased the vesting period of our stock option awards from three years to five years to better align our executives’ interests with the long-term interests of our shareholders.

• Our Board has adopted amendments to our Incentive Stock Option Plan, currently subject to future shareholder approval, to reduce the exercise period for options following an employee’s termination of employment.

• Corporate and individual performance objectives for our executive officers are generally designed to be achievable with sustained and focused effort.

• Minimum thresholds apply to all components of our annual incentive plans for both (i) the funding of the plans and (ii) payout levels of performance objectives, including individual performance objectives.

• Our annual incentive plans are, subject to local legislation, discretionary, and we have documented our reserved right to amend or discontinue our incentive plans at any time with or without notice.

• In order for an employee to receive a payout under one of our annual incentive plans, he or she must be employed at the time of payout, unless our Board determines otherwise.

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• In order for an employee to be an eligible participant in one of our annual incentive plans, he or she must have completed at least three months of active employment with us prior to the applicable fiscal year’s end.

Tax and Accounting Considerations

Tax and accounting considerations generally do not have a material impact on our compensation decisions. However, our CHR Committee does consider the accounting and cash flow implications of various forms of executive compensation. As discussed above, we no longer grant performance share units, in part because such units are settled in cash and, for accounting purposes, must be marked to market at the end of each fiscal quarter.

In our consolidated financial statements, we record salaries and bonuses as expenses in the amount paid or to be paid to the named executive officers. Accounting rules also require us to record an expense in our consolidated financial statements for stock option awards, even if such awards are not paid as cash to employees. Our CHR Committee believes that the many advantages of equity compensation more than compensate for the non-cash accounting expense associated with it.

Policy with Respect to Short-Term Trading and Short Selling

Under our trading policy, except with prior approval of our Chief Executive Officer or our General Counsel, our directors, officers and certain designated employees may not buy and sell, or sell and buy, our restricted voting shares within a six-month time period. Our directors, officers and certain designated employees are also prohibited from short selling our restricted voting shares.

Compensation Program Risk Assessment

We have conducted a risk assessment of our compensation policies and practices for all of our employees (not just our executive officers). Based on this review, we concluded that risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on us. Our risk assessment included a review of program policies and practices; program analysis to identify risk and risk control related to the programs; and determinations as to the sufficiency of risk identification, the balance of potential risk to potential reward, risk control and the support of the programs and their risks to our strategy. Although we reviewed all compensation programs, we focused on the programs with variability of payout (e.g., short-term and long-term incentive programs), with the ability of a participant to directly affect payout and the controls on participant action and payout. As part of our review, we specifically noted the following factors that reduce the likelihood that excessive risk taking would have a material adverse effect on us: (i) a strong internal control structure, including business, legal and finance review of our customer contracts prior to entry into such contracts; (ii) payment to our employees of competitive base salaries and benefits that are not subject to performance risk; and (iii) a mix between cash and noncash and short-term and long-term compensation.

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Summary Compensation Table

Name and Principal Position	Fiscal Year		Salary ($)(1)		Bonus ($)(2)		Option Awards ($)(3)		Non-Equity Incentive Plan Compensation ($)(4)		All Other Compensation ($)(5)		Total ($)
Wesley P. Wheeler		2010		625,000		—		532,188		460,000		102,133		1,719,321
Chief Executive Officer (until November 30, 2010)
Eric W. Evans		2010		360,500		—		335,031		151,843		32,003		879,377
Chief Financial Officer and Executive Vice President
Peter T. Bigelow		2010		318,750		100,000		442,338		40,736		76,299		978,123
President, North American Operations (and Interim Chief Executive Officer between December 1, 2010 and February 6, 2011)
Doaa A. Fathallah(6)		2010		415,281		—		400,436		172,885		198,781		1,187,383
Executive Vice President, General Counsel and Corporate Secretary
Geoffrey M. Glass		2010		350,000		—		269,434		121,589		210,997		952,020
Executive Vice President, Global Strategy, Sales and Marketing

(1) We have entered into employment agreements with each of our named executive officers that set an initial base salary at the time of hire. Thereafter, base salary for our CEO is determined by our Board, and base salary for our other executive officers is determined by our CHR Committee. See “—Compensation Discussion and Analysis—Fixed Compensation—Base Salary.”

(2) In fiscal 2010, Mr. Bigelow received a signing bonus of $100,000.

(3) The amounts shown in this column represent the aggregate grant date fair value of awards granted during fiscal 2010 computed in accordance with FASB Accounting Standard Codification Topic 718 and do not reflect the compensation actually received by the named executive officer. These award values have been determined based on certain assumptions, which are described in “Item 2. Financial Information—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Stock Based Compensation.”

(4) This column reflects the amounts paid under our 2010 Incentive Plan. The amount shown for Ms. Fathallah’s non-equity incentive plan award represents the $U.S. dollar equivalent of the amount of the bonus award calculated as a percentage of Ms. Fathallah’s base salary in CHF, based on the exchange rate in effect as of the last business day of fiscal 2010 of 1 USD to 0.9851 CHF. Mr. Wheeler’s bonus was paid pursuant to the terms of his separation agreement with us effective November 30, 2010. See “—Termination and Change in Control benefits.”

(5) The amounts shown in this column represent company matching contributions to the 401(k) retirement plan, the cost of supplemental health and insurance benefits, the cost of automobile allowances, relocation expenses, tax gross-ups and other perquisites or personal benefits. Details are provided below in “—All Other Compensation Table.”

(6) Until December 17, 2009, Ms. Fathallah’s employment agreement provided that she would receive a gross base salary of $300,000 per year, payable in Swiss Francs (“CHF”) in 12 monthly installments based on an exchange rate of 1 USD equaling 1.2213 CHF. In connection with her promotion to Executive Vice President, General Counsel and Corporate Secretary, Ms. Fathallah’s annual base pay was increased to 400,000 CHF, payable in 12 monthly installments. The monthly exchange rates in the table below were used

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to calculate the U.S. dollar equivalents of amounts actually paid to Ms. Fathallah in CHF and reflected in the Summary Compensation Table.

Fiscal 2010: CHF to USD

11/1/09	12/1/09	1/1/10	2/1/10	3/1/10	4/1/10	5/1/10	6/1/10	7/1/10	8/1/10	9/1/10	10/1/10
0.9785	0.9944	0.9652	0.9464	0.9262	0.9484	0.9209	0.8641	0.9439	0.9323	0.9841	1.0267

All Other Compensation Table

The following table sets forth each component of the “All Other Compensation” column of the Summary Compensation Table for fiscal 2010.

Name	401(k) Matching Contribution($)		Cost of Supplemental Health and Insurance Benefits($)(1)		Cost of Automobile Allowance($)(2)		Relocation Expenses($)(3)		Other($)(4)		Tax Gross-Ups($)(5)		Total($)
Wesley P. Wheeler		13,800		9,123		—		24,083		46,828		8,299		102,133
Eric W. Evans		9,800		7,803		14,400		—		—		—		32,003
Peter T. Bigelow		2,849		10,510		10,800		29,093		—		23,047		76,299
Doaa A. Fathallah		—		19,485		36,639		94,876		47,781		—		198,781
Geoffrey M. Glass		1,750		9,991		14,400		121,602		—		63,254		210,997

(1) The amounts in this column represent the incremental dollar value of medical, vision, dental, life and long-term disability insurance premiums paid by us on behalf of our named executive officers in fiscal 2010 above the amounts generally available to all employees, as well as supplemental health benefits, including enhanced medical benefits beyond those generally available to all employees, duplicate medical coverage in the United States and Switzerland for Ms. Fathallah, health and wellness allowances for Mr. Bigelow, Mr. Glass and Ms. Fathallah and executive physicals for Mr. Bigelow and Mr. Glass.

(2) Some of our named executive officers receive a car allowance to pay for automobile-related expenses. The amounts in this column reflect the cost of such allowances. Ms. Fathallah’s automobile allowance represents the CHF equivalent of $30,000 based on an exchange rate of 1 USD equaling 1.2213 CHF.

(3) In fiscal 2010, Mr. Wheeler, Mr. Bigelow and Mr. Glass received benefits pursuant to our executive relocation program. Ms. Fathallah received a relocation benefit pursuant to her employment agreement that was intended to offset the higher cost of living due to her foreign assignment in Zug, Switzerland. See “—Narrative Discussion of Summary Compensation Table and Grant of Plan-Based Awards Table—Employment Agreements.” These amounts are taxable benefits, which are “grossed-up” based on the individual’s applicable tax rate.

(4) For Mr. Wheeler, this amount represents his $25,000 general executive allowance to pay for the cost of an automobile, financial planning and additional insurance, as well as travel, sports club and other miscellaneous personal benefits. For Ms. Fathallah, this amount includes $37,493 for the cost of annual, roundtrip travel for Ms. Fathallah and her family between Europe and the United States and an additional amount for child education in connection with her assignment to Zug, Switzerland.

(5) The amounts in this column represent tax-gross ups paid to our name executive officers in connection with relocation expenses benefits provided to them.

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Grants of Plan-Based Awards in Fiscal 2010

The following table provides information about stock options and non-equity incentive plan awards granted to our named executive officers in fiscal 2010. All stock options were granted under our Incentive Stock Option Plan. All non-equity incentive plan awards were granted under our 2010 Incentive Plan.

					Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1)
Name	Grant Date		Approval Date(2)		Threshold ($)		Target ($)		Maximum ($)		All Other Option Awards: Number of Securities Underlying Options (#)		Exercise or Base Price of Option Awards (Canadian $/share)(3)		Grant Date Fair Value of Option Awards ($)
Wesley P. Wheeler						312,500		625,000		1,000,000
		03/17/10		03/12/10								385,000		2.59		532,188
Eric W. Evans						81,113		162,225		259,560
		03/17/10		03/12/10								110,000		2.59		152,054
		06/15/10		06/10/10								135,000		2.60		182,978
Peter T. Bigelow						71,714		143,428		233,071
		03/17/10		03/12/10								320,000		2.59		442,338
Doaa A. Fathallah						91,571		183,141		279,290
		12/22/09		12/17/09								50,000		2.46		63,233
		03/17/10		03/12/10								90,000		2.59		124,408
		06/15/10		06/10/10								157,000		2.60		212,796
Geoffrey M. Glass						95,854		158,437		227,753
		03/17/10		03/12/10								90,000		2.59		124,408
		06/15/10		06/10/10								107,000		2.60		145,027

(1) The dollar amounts in these columns represent the potential threshold, target and maximum cash payouts under our 2010 Incentive Plan. Our performance measures and financial results are discussed more fully in “—Compensation Discussion and Analysis.” The actual amounts paid for fiscal 2010 are shown in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.

(2) This column indicates the dates on which our Board approved options that could not be granted on the same day due to a blackout period in effect at that time.

(3) The exercise prices displayed for these grants equal the weighted-average market price of our restricted voting shares on the TSX during the two trading days immediately preceding such grant dates.

Narrative Discussion of Summary Compensation Table and Grant of Plan-Based Awards Table

This section discusses certain plans and arrangements pursuant to which our named executive officers received the compensation reported in the Summary Compensation Table and Grant of Plan-Based Awards Table. For further information about the process for determining executive compensation, compensation decisions made for fiscal 2010 and the relationships among different elements of compensation, see “—Compensation Discussion and Analysis.”

Employment Agreements

We have entered into employment agreements with each of our named executive officers that generally outline, among other things, the officer’s term of employment, initial base salary, signing bonus, initial option grants and performance bonus eligibility. Our named executive officers are generally entitled to participate in all benefit plans, including deferred compensation and retirement, welfare, perquisites, fringe benefit and life insurance plans, that may be in effect from time to time for senior executives generally. Additional information regarding the material terms of our employment agreements with each of our named executive officers, including information regarding

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signing bonuses paid and initial option awards granted during fiscal 2010, is described below. For information about the termination and change in control benefits provided for in these agreements, see “—Termination and Change in Control Benefits.”

Wesley P. Wheeler

We employed Mr. Wheeler as our President and Chief Executive Officer, effective December 3, 2007. His initial term of employment was two years, with automatic renewal for successive one-year terms unless either we or Mr. Wheeler notified the other of intention not to renew the agreement for an additional term at least 90 days prior to each anniversary of the effective date of the agreement.

Under his employment agreement, as amended, Mr. Wheeler was entitled to an initial annual base salary of $600,000, subject to revisions by our Board, for increase only, and to receive a target performance bonus of up to 100% of his base salary based on achieving financial and other targets set by our Board and our CHR Committee. In fiscal 2010, our Board approved an increase in Mr. Wheeler’s salary to $650,000. In addition, Mr. Wheeler was entitled to an allowance of $25,000 per year for the cost of an automobile, financial planning services and additional insurance not already provided by us. Mr. Wheeler was also entitled to relocation assistance in connection with the opening of our U.S. headquarters in the form of closing and moving costs.

Mr. Wheeler’s employment with us was terminated effective November 30, 2010.

Eric W. Evans

We employed Mr. Evans as our Chief Financial Officer for an indefinite term, effective May 27, 2008. Under his employment agreement, Mr. Evans was entitled to an initial annual base salary of $350,000, subject to review by our Chief Executive Officer, for increase only, and is entitled to receive a performance bonus of not less than 45% of his base salary based on achieving financial and other targets set by our Chief Executive Officer. In fiscal 2010, our CHR Committee approved a base salary increase for Mr. Evans to $371,000, effective May 1, 2010. In addition, Mr. Evans is entitled to $2,000 annually for club membership expenses, $1,200 per month for car related expenses and certain relocation benefits pursuant to our executive relocation program.

Peter T. Bigelow

We employed Mr. Bigelow as our President, North American Operations, for an indefinite term, commencing on February 1, 2010. Under his employment agreement, Mr. Bigelow is entitled to an annual base salary of $425,000, subject to review by our Chief Executive Officer, for increase only, and a target bonus of not less than 45% of his annual base salary based on achieving financial and other targets as set by our Chief Executive Officer. In addition, Mr. Bigelow is entitled to a car allowance of $1,200 per month, temporary living accommodations for up to 12 months and certain relocation benefits pursuant to our executive relocation program. Mr. Bigelow received a signing bonus of $100,000 in fiscal 2010 under his employment agreement.

Pursuant to his employment agreement, in fiscal 2010 Mr. Bigelow received an initial award of 200,000 stock options under our Incentive Stock Option Plan. These options vest in three equal installments on the first, second and third anniversaries of the date of grant and have a seven-year term.

Doaa A. Fathallah

We employed Ms. Fathallah as our Senior Vice President, General Counsel, Europe and Global Pharmaceutical Development Services, effective May 6, 2008. In this role, Ms. Fathallah was entitled, under her then-existing employment agreement, to a gross base salary of $300,000 per year, payable in Swiss Francs in 12

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monthly installments based on an exchange rate of 1 U.S. dollar equaling 1.2213 Swiss Francs. Ms. Fathallah was also entitled to receive a target bonus of 40% of her gross base salary based on achieving predetermined targets set by her supervisor in consultation with her, subject to the terms and conditions of our annual performance incentive plan.

We promoted Ms. Fathallah to Executive Vice President, General Counsel and Corporate Secretary effective December 17, 2009. Under her employment agreement, as amended pursuant to this promotion, Ms. Fathallah became entitled to a gross base salary of 400,000 Swiss Francs per year, less applicable deductions, payable in 12 monthly installments. Ms. Fathallah’s target bonus was also increased to 45% of her gross base salary, subject to the terms and conditions of our annual performance incentive plan. In connection with her promotion, Ms. Fathallah received an award of 50,000 stock options under our Incentive Stock Option Plan. These options vest in three equal installments on the first, second and third anniversaries of the date of grant and have a seven-year term.

Ms. Fathallah is also entitled to an additional allowance equal to 25% of her gross base salary for so long as she is working for us in Switzerland; a car allowance of $2,500 per month; duplicate U.S. health and medical insurance coverage; and annual roundtrip travel for Ms. Fathallah and her family between Europe and the United States.

Geoffrey M. Glass

We employed Mr. Glass as our Senior Vice President, Strategy, Corporate Development and Integration, effective April 1, 2009, and promoted him to our Executive Vice President, Global Strategy, Sales and Marketing, effective October 1, 2009. Under his employment agreement, as amended, Mr. Glass is entitled to an annual base salary of $350,000, subject to review by our Chief Executive Officer, for increase only, and a target bonus of 45% of his annual base salary based on achieving predetermined financial and other targets set by our Chief Executive Officer. In addition, Mr. Glass is entitled to a car allowance of $1,200 per month and certain relocation benefits pursuant to our executive relocation program.

Option Awards

During fiscal 2010, we made option awards under our Incentive Stock Option Plan. These option awards included awards in March 2010 and June 2010 based on recommendations from Mercer in connection with changes in our long-term incentive program. In addition, we granted Ms. Fathallah options in December 2009 in connection with her promotion, and we awarded Mr. Bigelow a new hire grant pursuant to his employment agreement. See “—Employment Agreements—Peter T. Bigelow.” All fiscal 2010 option awards, except the initial option award to Mr. Bigelow and the December 22, 2009 grant to Ms. Fathallah, vest in five annual installments commencing on the first anniversary of the grant date and have a term of ten years. The other awards vest in three annual installments commencing on the first anniversary of the grant date and have a term of seven years. The exercise price of restricted voting shares subject to an option is determined at the time of grant and the price may not be less than the weighted-average market price of our restricted voting shares on the TSX during the two trading days immediately preceding the grant date. Our Board has adopted an amendment to the Incentive Stock Option Plan that, if approved by our shareholders, will provide that the exercise price cannot be less than the closing price of the restricted voting shares on the TSX (or on such other stock exchange in Canada or the United States on which restricted voting shares may be then listed and posted) on the date of the grant.

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Outstanding Equity Awards as of October 31, 2010

				Option Awards
Name	Grant Date			Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price (Canadian $/share)		Option Expiration  Date (1)
Wesley P. Wheeler		12/18/07	(3)		470,000		—		3.14		12/18/14
		12/18/07	(3)		840,000		420,000		3.14		12/18/14
		03/17/10	(4)		—		385,000		2.59		03/16/20
Eric P. Evans		06/19/08	(3)		133,333		66,667		4.16		06/19/15
		10/26/09	(3)		33,333		66,667		2.58		10/26/16
		03/17/10	(4)		—		110,000		2.59		03/16/20
		06/15/10	(4)		—		157,000		2.60		06/14/20
Peter T. Bigelow		03/17/10	(3)		—		120,000		2.59		03/16/17
		03/17/10	(4)		—		200,000		2.59		03/16/20
Doaa A. Fathallah		06/19/08	(3)		33,333		16,667		4.16		06/19/15
		12/22/09	(3)		—		50,000		2.46		12/22/16
		03/17/10	(4)		—		90,000		2.59		03/16/20
		06/15/10	(4)		—		157,000		2.60		06/14/20
Geoffrey M. Glass		10/26/09	(3)		50,000		100,000		2.58		10/26/16
		03/17/10	(4)		—		90,000		2.59		03/16/20
		06/15/10	(4)		—		107,000		2.60		06/14/20

(1) Options have either a seven-year or a ten-year term. Upon termination of employment, the recipient forfeits all rights to unvested options. In addition, depending on the nature of the termination and whether our CHR Committee exercises its discretion in certain circumstances, vested options generally expire on the earlier of the expiration date shown and between 12 and 24 months following termination if not exercised. Our Board has adopted an amendment to the Incentive Stock Option Plan that, if approved by our shareholders, will shorten the post-termination expiration period for vested options to generally be between three and 12 months following termination.

(3) This option grant vests in three equal installments of one-third on each of the first, second and third anniversaries of the Grant Date.

(4) This option grant vests in five equal installments of one-fifth on each of the first, second, third, fourth and fifth anniversaries of the Grant Date.

Termination and Change in Control Benefits

The following contracts, agreements, plans and arrangements provide for payments to the applicable named executive officers at, following or in connection with either (i) certain terminations of employment or (ii) a change in control of our company.

Stock Option Awards

Our Incentive Stock Option Plan includes change in control provisions. Under our Incentive Stock Option Plan, a change in control means the occurrence of any of the following: (i) any person, other than JLL, becomes a beneficial owner of more than 30% of the voting power of our then outstanding securities entitled to vote generally in the election of directors (with certain exceptions); or (ii) the consummation of a merger, amalgamation, arrangement, business combination, reorganization or consolidation or sale or other disposition of substantially all of the assets of our company, with certain exceptions (a “Plan Change in Control”). In the event of a Plan Change in Control, each option granted and outstanding under our Incentive Stock Option Plan shall

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become immediately exercisable, even if such option is not otherwise vested or exercisable in accordance with its terms. Further, in the event of a Plan Change in Control or potential Plan Change in Control, our Board shall have the power, subject to restrictions on amendments for which shareholder approval is required, to change the terms of the options as it considers fair and appropriate in the circumstances.

In addition, in connection with granting options to certain of our executive officers as part of our long-term incentive program, in March 2010, we revised the terms of our option awards to (i) extend the vesting period from three to five years, (ii) extend the expiry term from seven to 10 years and (iii) include a change in control definition that supersedes that in our Incentive Stock Option Plan. See “—Compensation Discussion and Analysis—Variable Compensation—Short-Term and Long-Term Incentives—Long-Term Incentives—Incentive Stock Option Plan—Fiscal 2010 Grants.” Under these revised option terms, a change in control means the occurrence of any of the following: (i) any person other than JLL becomes a beneficial owner of more than 50% of the voting power of our then outstanding securities entitled to vote generally in the election of directors; (ii) our shareholders’ approval of a dissolution or liquidation of our company; (iii) the consummation of a reorganization, merger, consolidation or amalgamation to which our company is a party and, as a result of which, persons other than the shareholders of our company immediately prior to such reorganization, merger, consolidation or amalgamation cease to own at least 50% of the voting power of the then outstanding voting securities of the surviving corporation in such reorganization, merger, consolidate or amalgamation entitled to vote generally in the election of directors; (iv) the sale or other disposition of all or substantially all the assets of our company; and (v) a majority of the seats of our Board, other than vacant sets, are held by persons who were not directors at the option’s grant date and were neither (a) nominated for election by our Board nor (b) appointed by directors so nominated.

Employment Agreements

Our employment agreements with our named executive officers contain certain provisions concerning benefits in the event of their termination generally or their termination after a change in control of our company. The employment agreements generally provide that upon termination within a certain period of time following a change in control, to the extent not otherwise provided in our Incentive Stock Option Plan or the stock option award agreement, the executive officer’s unvested stock options will immediately vest and become exercisable.

Additionally, the employment agreements generally provide that if we terminate an executive officer without Cause (as defined below) or if he or she terminates his or her employment for Good Reason (as defined below), our Affiliated Group (defined as our company or any entity controlled by, controlling or under common control with our company) shall pay or provide, or cause to be paid or provided, to the executive officer any other amounts or benefits required to be paid or provided or which the executive officer is eligible to receive under any plan, program, policy or practice or contract or agreement of our Affiliated Group, in accordance with the terms of such plan, program, policy or practice or contract or agreement, based on accrued and vested benefits through the date of such termination. Generally, executive officers are only entitled to receive severance benefits under their employment agreements if they execute and do not revoke a waiver and release drafted by us within a prescribed time following termination of employment.

In addition, the employment agreements with each of our named executive officers include requirements related to confidentiality, nonsolicitation and noncompetition. The nonsolicitation and noncompetition requirements extend for 12 months following each named executive officer’s termination of employment (24 months for Mr. Wheeler). These requirements apply to all terminations, except that Mr. Evans’s and Mr. Glass’s noncompetition provisions do not apply if those executives are terminated other than for Cause (as defined in the applicable agreement).

Additional information regarding the material terms of our employment agreements with each of our named executive officers is described below.

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James C. Mullen

Mr. Mullen’s employment agreement provides that if we terminate his employment without Cause, or if he terminates his employment for Good Reason, we are required to pay him severance equal to two years of his then current base salary, payable in 24 equal monthly installments. In addition, with respect to the initial grant to him of 5,000,000 options, if we terminate Mr. Mullen’s employment without Cause, for incapacity or for death, or if he terminates his employment for Good Reason, a pro-rata portion of such options in which Mr. Mullen would have become vested on the following anniversary of the effective date of his agreement will become immediately vested and exercisable on the date of his termination; provided, however, that if such termination occurs within six months of the effective date of his agreement, 500,000 of such options will immediately become vested and exercisable as of the date of such termination. If Mr. Mullen is terminated under circumstances entitling him to accelerated vesting of his options, he will be permitted to exercise his vested options within three months after the date of such termination. Mr. Mullen’s right to such benefits is contingent upon his continued compliance with the confidentiality, non-disparagement, non-solicitation and non-competition provisions of his agreement.

Wesley P. Wheeler

Mr. Wheeler’s employment agreement, as amended, provided that, during the term of his employment agreement, if we terminated his employment other than for Cause, if he terminated his employment for Good Reason or if his employment terminated as a result of his death or disability, we were required to pay him severance equal to his annual base salary for two years, in 24 equal monthly installments. If such termination of Mr. Wheeler’s employment by us or him occurred at any time within a six-month period following a Change in Control (as defined below), Mr. Wheeler would have instead been entitled to receive his annual base salary for two years, plus his target performance bonus for two years, in 24 equal monthly installments.

Mr. Wheeler’s employment with us was terminated other than for Cause effective November 30, 2010. In accordance with the terms of his employment agreement, Mr. Wheeler will receive a total of $1,300,000 in salary continuance payments, payable in 24 equal monthly installments. Mr. Wheeler was also awarded a bonus of $460,000 based on the terms of our 2010 Incentive Plan, pursuant to the terms of his separation agreement, which provides, in part, that Mr. Wheeler remained eligible for a bonus under the 2010 Incentive Plan payable in accordance with the terms of such plan, as determined in the sole discretion of our Board and in a manner consistent with the method used to determine incentive plan payouts of our other senior executives. This amount is reported in as non-equity incentive plan compensation in our Summary Compensation Table. In addition, the separation agreement contained the general release referenced under “—Employment Agreements,” and Mr. Wheeler did not revoke it during the prescribed period.

Eric W. Evans

Mr. Evans’s employment agreement provides that if we terminate his employment other than for Cause or if he terminates his employment for Good Reason, we are required to pay him a lump sum severance payment equal to his annual base salary for one year, plus the average bonus he earned during the previous two years of employment prior to the termination, within 30 days after termination. If such termination occurs at any time within a 12-month period following a Change in Control, Mr. Evans will instead be entitled to receive a lump sum severance payment equal to his annual base salary, plus his target annual bonus, within 60 days of the termination date.

Peter T. Bigelow

Mr. Bigelow’s employment agreement provides that if we terminate his employment other than for Cause or if he terminates his employment for Good Reason, we are required to pay him severance equal to his annual base salary, plus an amount determined by our Board in its sole discretion to reflect the annual incentive Mr. Bigelow would have otherwise earned during the year in which the termination occurs, in 12 equal monthly installments.

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Doaa A. Fathallah

Ms. Fathallah’s employment agreement, as amended, provides that if we terminate her employment without Cause or if she terminates her employment for Good Reason, we are required to pay her a severance payment equal to her annual base salary, plus an amount based on one year’s bonus payment she would reasonably be expected to have earned during the year following termination, within 30 days following termination. If such termination occurs at any time within a six-month period following a Change in Control, Ms. Fathallah will instead be entitled to receive her annual base salary, plus her target performance bonus, in 12 equal monthly installments.

In addition, Ms. Fathallah’s employment agreement provides that as compensation for her agreement not to compete and not to hire our employees or the employees of our affiliates, we will pay her a monthly payment in an amount equal to her last monthly salary prior to termination for the one year period after such termination.

Geoffrey M. Glass

Mr. Glass’s employment agreement, as amended, provides that if we terminate his employment other than for Cause or if he terminates his employment for Good Reason, we are required to pay him severance equal to his annual base salary, plus an amount determined by our Board in its sole discretion to reflect the annual incentive Mr. Glass would have otherwise earned during the year in which the termination occurs, in 12 equal monthly payments.

For purposes of the employment agreements with our named executive officers, the terms below have the following meanings:

“Cause” means the determination, in good faith, by our Board, after notice to the executive officer and, if curable, a reasonable opportunity to cure, that one or more of the following events have occurred: (i) the executive officer has failed to perform his material duties, and such failure has not been cured after a period of 30 days notice from us; (ii) any reckless or grossly negligent act by the executive officer having the effect of injuring the interests, business or reputation of any member of our Affiliated Group; (iii) the executive officer’s commission of any felony (including entry of a nolo contendere plea); (iv) any misappropriation or embezzlement of the property of any member of our Affiliated Group; or (v) breach by the executive officer of any material provision of his employment agreement. Under Mr. Mullen’s employment agreement, such breach of a material provision must, if curable, remain uncured for a period of 30 days after receipt by him of written notice from us of such breach, which notice shall contain the specific reasonable cure requested, in order to constitute “Cause.”

“Change in Control” means any of the following events: (i) any person, other than JLL, becomes a beneficial owner of more than 50% of the voting power of our then outstanding securities entitled to vote generally in the election of directors; (ii) consummation of a merger or consolidation of our company or any of our direct or indirect subsidiaries with any other company (with certain exceptions); or (iii) shareholder approval of complete liquidation or dissolution of our company or disposition by us of all or substantially all of our assets.

“Good Reason” means the occurrence of any of the following events without the executive officer’s consent: (i) a material reduction in the executive officer’s duties or responsibilities or the assignment to the executive officer of duties materially inconsistent with his position; or (ii) a material breach by us of the executive officer’s employment agreement. Under Mr. Bigelow’s employment agreement, such events also include a requirement by us that the executive officer work more than 50 miles from his principal office on commencement of his employment. Under Ms. Fathallah’s employment agreement, such events also include a requirement by us that she work more than 30 miles from her principal office upon commencement of employment, material breach by us of company policy, which breach remains uncured for a period of 30 days after receipt by us of written notice from Ms. Fathallah, or removal of her from her position. Under Mr. Glass’s employment agreement, any future reduction or total elimination of Mr. Glass’s global sales and marketing

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duties or responsibilities by us will not constitute, for the purposes of determining the existence of Good Reason, (i) a material reduction by us of Mr. Glass’s duties or responsibilities; (ii) the assignment of duties or responsibilities materially inconsistent with his position; or (iii) a material breach of the employment agreement. A termination of the executive officer’s employment by him is not deemed to be for Good Reason unless (i) he gives notice to us of the existence of the event or condition constituting Good Reason within 30 days after such event or condition initially occurs or exists; (ii) we fail to cure such event or condition within 30 days after receiving such notice; and (iii) his “separation from service” within the meaning of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), occurs not later than 90 days after such event or condition initially occurs of exists. Under Mr. Mullen’s employment agreement, “Good Reason” also includes removal of him from his position. Mr. Mullen’s agreement also provides that no termination for Good Reason is effective until (i) he gives us written notice within 60 days of becoming aware of the initial occurrence of the event or condition constituting Good Reason and the specific reasonable cure requested by him; (ii) we have failed to cure such event or condition within 30 days of receiving such notice; and (iii) he resigns within 30 days of the initial occurrence. Furthermore, Mr. Mullen may not resign for Good Reason if, on the date of notice to us, (i) grounds exist for his termination by us for Cause or (ii) he has already given us notice of (a) the non-renewal of his agreement at the end of its term or (b) his intention to resign without Good Reason.

Potential Payments Upon Termination or Change in Control

The following table summarizes the estimated amounts payable to each named executive officer in the event of a termination of employment or change in control, or both. These estimates are based on the assumption that the various triggering events occurred on October 31, 2010, the last day of fiscal 2010.

We have noted below the other material assumptions used in calculating the estimated payments under each triggering event. The actual amounts that would be paid to a named executive officer upon termination of employment can only be determined at the time an actual triggering event occurs.

Name	Triggering Event(1)	Severance($)		Bonus($)(2)		Equity($)(3)		Total($)
Wesley P. Wheeler(4)	Death/Disability		1,300,000		—		—		1,300,000
	Other than for Cause/For Good Reason		1,300,000		—		—		1,300,000
	Change in Control		1,300,000		1,300,000		—		2,600,000
Eric W. Evans	Other than for Cause/For Good Reason		371,000		157,500		—		528,500
	Change in Control		371,000		166,950		—		537,950
Peter T. Bigelow	Other than for Cause/For Good Reason		425,000		40,736		—		465,736
	Change in Control		425,000		40,736		—		465,736
Doaa A. Fathallah(5)	Without Cause/For Good Reason		408,000		172,885		—		580,885
	Change in Control		408,000		183,600		—		591,600
Geoffrey M. Glass	Other than for Cause/For Good Reason		350,000		121,589		—		471,589
	Change in Control		350,000		121,589		—		471,589

(1) The triggering event is termination from employment as described in the preceding section except that, in the case of a change in control, the triggering event is termination other than for cause (or without cause) or for good reason (as defined) following a change in control (double trigger) for all elements except equity (as the value of accelerated vesting occurs upon a change in control regardless of whether employment is terminated).

(2) The values shown represent the payments that could have been made to our named executive officers pursuant to their respective employment agreements. See “—Employment Agreements.”

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(3) No value was included in this column for the assumed exercise of any stock options as the exercise prices of the outstanding stock option awards were all above the closing price of our stock on the TSX on October 31, 2010.

(4) Mr. Wheeler’s employment with us was terminated effective November 30, 2010. See “—Employment Agreements—Wesley P. Wheeler.”

(5) Ms. Fathallah’s severance payments were calculated using an exchange rate of CHF to USD of 1.02 on October 29, 2010, the last business day of fiscal 2010. Ms. Fathallah’s employment agreement provides that, in connection with a termination without Cause or for Good Reason and not following a Change in Control, Ms. Fathallah is entitled to payment of an amount equal to the annual bonus payment she would reasonably be expected to have earned during the year following termination. The $172,885 amount reported herein for this purpose represents the bonus that Ms. Fathallah earned during fiscal 2010. In addition to the termination payments reported above, we have agreed to pay Ms. Fathallah a monthly payment equal to her last monthly salary prior to termination for the one year period after termination of the employment agreement as compensation for her agreement not to compete and not to hire our employees or employees of our affiliates. The monthly payment would have been $34,000 as of the last business day of fiscal 2010, totaling $408,000 for the one-year period. Together with the termination payments noted in the table above, such payments would have resulted in an aggregate payment of $988,885 to Ms. Fathallah.

Director Compensation

Name	Fees Earned or Paid in Cash ($)(1)		Stock Awards ($)(2)		Total ($)
Claudio Bussandri(3)		76,057		—		76,057
Paul W. Currie(4)		49,723		—		49,723
G. Wesley Voorheis(5)		46,059		—		46,059
Roy T. Graydon		92,382		32,000		124,382
Joaquín B. Viso(6)		69,790		61,130		130,920
Derek J. Watchorn(7)		89,513		32,000		121,513
Ramsey A. Frank		143,560		—		143,560
Paul S. Levy		45,500		32,000		77,500
Thomas S. Taylor		76,497		32,000		108,497
Daniel Agroskin(8)		53,459		61,130		114,589
Brian G. Shaw(9)		60,574		61,130		121,704

(1) Amounts in this column represent fees earned or paid in cash. For Messrs. Watchorn, Levy and Taylor, such amounts include $35,000 in retainer fees elected to be received in deferred share units. For Mr. Frank and Mr. Shaw, such amounts include $67,000 and $15,931 in retainer fees elected to be received in deferred share units in retainer fees elected to be received in deferred share units. For Messrs. Viso and Agroskin, such amounts include $31,862 in retainer fees elected to be received in deferred share units. See “—Discussion of Director Compensation Table.”

(2) These stock awards represent the value of deferred share units credited to our directors for Board retainers. See “—Discussion of Director Compensation Table.”

(3) Mr. Bussandri resigned from our Board effective December 4, 2009 but received Board and Committee retainers until the expiry of his term on April 29, 2010.

(4) Mr. Currie resigned from our Board effective December 4, 2009 but received Committee retainers until the expiry of his term on April 29, 2010.

(5) Mr. Voorheis was elected to our Board on April 29, 2009. Mr. Voorheis resigned as a director effective December 4, 2009 but received Board and Committee retainers until the expiry of his term on April 29, 2010.

(6) Mr. Viso received an initial retainer upon being appointed to our Board pursuant to the Settlement Agreement and a pro-rated portion of both his base and annual retainers for fiscal 2010. See “—Discussion of Director Compensation Table.”

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(7) As of October 31, 2010, Mr. Watchorn held an aggregate of 20,000 stock options outstanding. There were no other stock option awards outstanding as of October 31, 2010 for any of our directors.

(8) Mr. Agroskin received an initial retainer upon being appointed to our Board pursuant to the Settlement Agreement and a pro-rated portion of both his base and annual retainers for fiscal 2010. See “—Discussion of Director Compensation Table.”

(9) Mr. Shaw received an initial retainer upon being appointed to our Board pursuant to the Settlement Agreement and a pro-rated portion of both his base and annual retainers for fiscal 2010. See “—Discussion of Director Compensation Table.”

Discussion of Director Compensation Table

Our compensation program for non-employee directors consists of (i) cash retainers and fees and (ii) deferred share units (“DSUs”) granted pursuant to a directors deferred share unit plan (the “DSU Plan”), all as more fully described below.

Cash Retainers and Fees

The following table summarizes the cash retainers and fees to which our directors were entitled in fiscal 2010. Each director except the Chair of our Board was entitled to (i) an annual retainer; (ii) an annual committee Chair retainer, if applicable; (iii) an annual committee member retainer, if applicable; and (iv) meeting attendance fees, as applicable. The Chair of our Board was entitled to an annual retainer and an annual committee member retainer.

Position	Retainer Per Annum (per meeting for meeting fees)  ($)
Initial Retainer (upon being appointed or elected to our Board)		32,000	(1)
Board Retainer		67,000	(2)
Chairman Retainer		140,000	(3)
Committee Chair Retainer
Chair of Audit Committee		14,000
Chair of Other Standing Board Committee		5,000
Committee Member Retainer
Member of Audit Committee		6,000
Member of Other Standing Board Committee		4,000
Board and Standing Committee Meeting Attendance Fees		1,500	(4)
Special Committee Meeting Attendance Fees (Chair and Members)		2,500	(5)

(1) This amount is payable in DSUs.

(2) $32,000 of this amount is payable in DSUs, and the remainder is payable in cash or DSUs at the election of the director. See “—Deferred Share Unit Plan.”

(3) $67,000 out of $140,000 is payable in cash or DSUs at the election of the Chair, and the remainder is payable in cash.

(4) The Chair of our Board is not entitled to any meeting attendance fees for Board or standing committee meetings.

(5) During the existence of the Special Committee, Mr. Bussandri was entitled to meeting attendance fees for these Special Committee meetings. The Special Committee was disbanded effective December 4, 2009.

Deferred Share Unit Plan

The DSU Plan was first approved by our Board on February 22, 2008 and was amended on March 27, 2008. The purposes of the DSU Plan are to (i) promote a greater alignment of interests between our directors and our shareholders and (ii) provide a compensation system for directors that, together with our other director

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compensation mechanisms, is reflective of the responsibility, commitment and risk accompanying Board membership and the performance of duties required of the various committees of our Board. Only our directors who are not our employees of employees of any of our affiliates, including any non-executive Chair of our Board (each an “Eligible Director”) are eligible to participate in the DSU Plan. The DSU Plan is administered by our CHR Committee.

Under the DSU Plan, each Eligible Director (other than the Chair of our Board) will receive in DSUs (i) an initial retainer fee for serving as a director payable on initiation of the DSU Plan or on being elected or appointed a director (the “Initial Retainer”) and (ii) a base retainer in respect of each fiscal year (the “Base Retainer”). In addition, each Eligible Director may elect to receive an annual retainer for serving as a director (the “Annual Retainer”) or an annual chairman’s retainer (the “Chair’s Retainer”), as applicable, in the form of DSUs or cash or any combination thereof.

DSUs allocated to an Eligible Director pursuant to the DSU Plan are credited to an account maintained by us on the last day of each fiscal quarter in which the remuneration provided in DSUs accrued. The number of DSUs is determined by dividing the remuneration provided in DSUs by the “Market Price” on the particular payment day. The “Market Price” is defined to mean, in respect of any date, the weighted-average price at which our restricted voting shares have traded on the TSX during the two trading days immediately prior to such date. If any dividends are paid on our restricted voting shares, an Eligible Director will be credited with dividend equivalents in respect of the DSUs credited to his account as of the record date for payment of dividends, which dividend equivalents will be converted into additional DSUs. DSUs are fully vested upon being credited to an Eligible Director’s account.

An Eligible Director will be paid the value of the DSUs credited to his account on voluntary resignation or retirement, death or disability, removal from our Board whether by shareholder resolution or failure to be re-elected, and in the case of an Eligible Director who is a U.S. taxpayer, on the date on which he has a “separation from service” within the meaning of the Code. Each DSU represents the right to receive a payment for such DSU equal to the Market Price on the redemption date applicable to such DSU.

Under the current compensation program, our Board approved the Initial Retainer of $32,000 (to be paid in DSUs), the Base Retainer of $32,000 (to be paid in DSUs) and the Annual Retainer of $35,000 (to be paid in cash or DSUs) for Eligible Directors other than the Chair of our Board. Our Board approved the Chair’s Retainer of $140,000 ($67,000 of which to be paid in cash or DSUs) for the Chair of our Board.

During fiscal 2010, a total of 233,089 DSUs were credited to Eligible Directors under the DSU Plan. As of October 31, 2010, a total of 524,136 DSUs were outstanding.

Item 7. Certain Relationships and Related Transactions, and Director Independence.

Arrangements with JLL

Our controlling shareholder is JLL Partners, a New York private equity firm that owns its shares through various affiliated entities. In 2007, in connection with a $150 million investment in our company, we issued Series C Preferred Shares and Series D Preferred Shares to JLL Patheon Holdings, an affiliate of JLL Partners. In July 2009, JLL Patheon Holdings converted its Series C Preferred Shares into a total of 38,018,538 restricted voting shares and, on August 26, 2009 pursuant to a tender offer, acquired an additional 33,854,708 of our restricted voting shares. As of February 15, 2011, affiliates of JLL Partners beneficially owned 72,077,781, or approximately 56%, of our outstanding restricted voting shares. As a result of various arrangements with us, which are more fully described below, JLL Partners and its affiliates currently have the right to determine four of our nine board seats and the right to approve our entry into certain types of transactions. The following further describes our transactions and relationships with JLL Partners and its affiliates.

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Transactions with JLL

On March 1, 2007, we entered into a definitive agreement with JLL Partners Fund V L.P., under which its affiliate, JLL Patheon Holdings, purchased our convertible Series C Preferred Shares and special voting Series D Preferred Shares through a private placement with aggregate gross proceeds to us of $150 million. JLL Patheon Holdings also acquired a number of rights in connection with the private placement, including the right to elect up to three directors to our Board pursuant to the terms of the Series D Preferred Shares. The private placement was approved by our shareholders on April 19, 2007 and was completed on April 27, 2007. In connection with certain rights under the terms of the Series C Preferred Shares held by JLL Patheon Holdings, we entered into an agreement with JLL Patheon Holdings on September 4, 2008, pursuant to which JLL Patheon Holdings waived its redemption rights under the Series C Preferred Shares in exchange for the issuance of additional restricted voting shares and the right to acquire, through the facilities of the TSX, over a one-year period, up to 1.26 million restricted voting shares.

On December 8, 2009, JLL Patheon Holdings announced its intention to make an unsolicited offer to acquire any or all of our outstanding restricted voting shares that it did not already own at a price of $2.00 per share in cash (the “JLL Offer”). On March 11, 2009, JLL Patheon Holdings commenced the JLL Offer and filed a take-over bid circular on the System for Electronic Document Analysis and Retrieval. Our Board recommended that our shareholders reject the JLL Offer as inadequate, based on the unanimous recommendation of the Special Committee.

Joaquín B. Viso and another shareholder delivered a requisition dated May 5, 2009 for a special shareholders meeting to consider certain proposals, including the removal from office of certain of our directors, and to fill the vacancies created by the election of nominees to be proposed by Mr. Viso and his co-applicant.

On May 22, 2009, in connection with the JLL Offer and related matters, we commenced an action in the Ontario Superior Court of Justice against JLL Patheon Holdings and its nominees to our Board.

On July 29, 2009, JLL Patheon Holdings converted its 150,000 Series C Preferred Shares into a total of 38,018,538 restricted voting shares. On the expiry of the JLL Offer on August 26, 2009, a total of 33,854,708 restricted voting shares, representing approximately 38% of our outstanding restricted voting shares, had been validly deposited in response to the JLL Offer and thus were acquired by JLL Patheon Holdings.

On August 27, 2009, in response to the action we commenced on May 22, 2009, JLL Patheon Holdings commenced a legal action against each of the then current and former members of the Special Committee in respect of such members’ conduct in connection with the JLL Offer and other related matters.

On November 30, 2009, we entered into the Settlement Agreement with JLL Patheon Holdings in respect of all of legal actions then outstanding in connection with the JLL Offer and related matters. See “—Settlement Agreement.”

Following the settlement of the litigation between us and JLL Patheon Holdings, which, among other things, provided for the removal of certain directors and the reappointment of Mr. Viso and Wesley P. Wheeler to our Board, Mr. Viso withdrew his requisition for a special meeting and obtained an order dismissing the application in connection with the requisitioned meeting in return for the payment by us of $350,000 for legal and meeting expenses.

As of February 15, 2011, JLL affiliates beneficially owned an aggregate of 72,077,781 restricted voting shares, representing approximately 56% of our total restricted voting shares outstanding. Our Board currently consists of four nominees of JLL Patheon Holdings.

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Series D Preferred Shares

The Series D Preferred Shares provide JLL Patheon Holdings with the right to elect the following number of directors to our Board:

• so long as JLL Patheon Holdings holds at least 22,811,123 restricted voting shares, it has the right to elect three members to our Board;

• so long as JLL Patheon Holdings holds at least 11,405,561 restricted voting shares, it has the right to elect two members to our Board; and

• so long as JLL Patheon Holdings holds at least 5,702,781 restricted voting shares, it has the right to elect one member to our Board.

Investor Agreement

On April 27, 2007, we entered into the Investor Agreement with JLL Patheon Holdings in connection with its purchase of our Series C Preferred Shares and Series D Preferred Shares with aggregate gross proceeds to us of $150 million. The following is a summary of the key terms of the Investor Agreement:

Special Approval Rights

Provided that JLL Patheon Holdings holds at least 13,306,488 restricted voting shares, the approval of JLL Patheon Holdings is required before we may:

• create or issue any shares of capital stock ranking pari passu with or senior to the Series C Preferred Shares, or issue any additional restricted voting shares or other equity securities, or securities convertible for or exchangeable into such securities, other than pursuant to our Incentive Stock Option Plan or any other security-based compensation arrangement consented to by JLL Patheon Holdings;

• declare or pay dividends or other distributions (including capital) on our restricted voting shares or other equity securities;

• redeem, repurchase or acquire any restricted voting shares or other equity securities;

• change our articles of amalgamation;

• change the rights of our existing classes of shares;

• merge, consolidate or sell all or substantially all of our assets or undertake any similar business combination transaction;

• incur any indebtedness for borrowed money in excess of $20 million, excluding borrowings under our credit facilities;

• initiate any insolvency, restructuring or reorganization process, voluntary liquidation, dissolution or winding-up of our company;

• change our Chief Executive Officer; or

• change the size of our Board.

Standstill

Unless JLL Patheon Holdings or any of its affiliates makes an offer to acquire all of our outstanding restricted voting shares (or an offer, made in conjunction with the offer to acquire our restricted voting shares, to acquire all of any class or series of convertible securities then outstanding) by way of a take-over bid circular and in compliance with the terms of our shareholder rights plan (if we have such a plan then in effect), JLL Patheon

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Holdings has agreed not to acquire or offer to acquire, directly or indirectly, any restricted voting shares or Series C Preferred Shares or direct or indirect rights or options to acquire any restricted voting shares, without our prior written approval, other than restricted voting shares received through (i) a stock dividend or a recapitalization of Patheon, (ii) any dividend reinvestment plan, (iii) a rights offering to all holders of restricted voting shares, (iv) our shareholders rights plan, or (v) conversion of the Series C Preferred Shares. JLL Patheon Holdings has also agreed not to act jointly or in concert with any third party to propose or effect any take-over bid, amalgamation, merger, arrangement or other business combination with respect to us or to propose or effect any acquisition or purchase of any of our assets. JLL Patheon Holdings will not solicit votes or proxies to attempt to alter the structure of our Board as it existed on April 27, 2007. Subsequent to the Investor Agreement, we have agreed to provide a limited waiver of these standstill provisions. See “—Redemption Waiver Agreement.”

The standstill provisions set forth above will expire on the earliest of (i) April 27, 2012, (ii) the date upon which JLL Patheon Holdings and its wholly owned subsidiary or subsidiaries that hold restricted voting shares or convertible shares (A) cease to own beneficially, directly or indirectly, restricted voting shares and Series C Preferred Shares that represent at least 20% of the number of restricted voting shares then issued and outstanding and (B) no longer have the right to nominate a representative to our Board, and (iii) the date on which our Board approves any of the following actions: (A) the sale of restricted voting shares or Series C Preferred Shares representing more than 35% of the fully diluted shares held by JLL Patheon Holdings to any third party other than a member of JLL Patheon Holdings and its wholly owned subsidiary or subsidiaries that hold restricted voting shares or convertible shares or any person acting jointly or in concert with any member of JLL Patheon Holdings and its wholly owned subsidiary or subsidiaries that hold restricted voting shares or convertible shares and its affiliates; (B) a consolidation, merger, arrangement or amalgamation (statutory or otherwise) of us with any such third party; or (C) the acquisition by any such third party or group of such third parties of restricted voting shares or Series C Preferred Shares representing more than 35% of the fully diluted shares held by JLL Patheon Holdings.

Transfer of Series D Preferred Shares

The Series D Preferred Shares are not transferable, except to an affiliate of JLL Patheon Holdings.

Registration Rights

JLL Patheon Holdings may request us to effect a qualification under Canadian securities laws (or, if we are eligible to use Form F-10 and JLL Patheon Holdings so requests, under the Securities Act) of the distribution to the public in any or all of the provinces of Canada (or in the United Stated, if applicable) of all or part of the Series C Preferred Shares (or restricted voting shares received on conversion) held by JLL Patheon Holdings (a “Demand Registration”), subject to a maximum of two Demand Registrations. In addition, each time we elect to proceed with the preparation and filing of a prospectus under any Canadian securities laws in connection with a proposed distribution of any of our securities for cash, JLL Patheon Holdings will be entitled to request that we cause any or all of the shares held by JLL Patheon Holdings to be included in such prospectus (an “Incidental Registration”). We will bear all registration expenses, excluding underwriting or placement discounts and commissions. The Demand Registration rights terminate when JLL Patheon Holdings and its affiliates no longer beneficially own Series C Preferred Shares (or restricted voting shares received on conversion) representing at least 12,500,000 fully diluted restricted voting shares, and the Incidental Registration rights terminate when JLL Patheon Holdings and its affiliates no longer beneficially own Series C Preferred Shares (or restricted voting shares received on conversion) representing at least 6,250,000 fully diluted restricted voting shares.

The Investor Agreement also contains other customary provisions such as, among other things, general indemnification provisions by which we indemnify JLL Patheon Holdings and JLL Patheon Holdings indemnifies us.

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Board Representation

In furtherance of the right to elect directors to our Board pursuant to the terms of the Series D Preferred Shares, the Investor Agreement provides that our Board will consist of up to nine members and that JLL Patheon Holdings has the right to designate nominees for election or appointment to our Board (the “JLL Representatives”) as follows:

• so long as JLL Patheon Holdings holds at least 22,811,123 restricted voting shares, it has the right to designate three JLL Representatives;

• so long as JLL Patheon Holdings holds at least 11,405,561 restricted voting shares, it has the right to designate two JLL Representatives; and

• so long as JLL Patheon Holdings holds at least 5,702,781 restricted voting shares, it shall be entitled to designate one JLL Representative.

We have agreed to cause the JLL Representatives to be included as nominees proposed by our Board to the shareholders at future meetings and to use reasonable commercial efforts to cause the election of the JLL Representatives and solicit proxies in favor of their election.

In the event that JLL Patheon Holdings no longer holds any Series D Preferred Shares and is therefore not entitled to elect directors to our Board pursuant to the terms thereof, the board representation provisions of the Investor Agreement will be controlling.

Redemption Waiver Agreement

On September 4, 2008, we entered into an agreement (the “Redemption Waiver Agreement”) with JLL Patheon Holdings pursuant to which JLL Patheon Holdings agreed to waive the mandatory redemption requirement in respect of the Series C Preferred Shares that it held. The mandatory redemption provision required us to redeem for cash all of the Series C Preferred Shares on April 27, 2017, if not previously converted, for a redemption price expected to be at least $185 million. In consideration of this waiver, we agreed to issue to JLL Patheon Holdings 400,000 restricted voting shares, representing approximately 0.4% of our restricted voting shares outstanding at that time. We also agreed to provide a limited waiver of the standstill provisions of the Investor Agreement to permit an affiliate of JLL Patheon Holdings to acquire, through the facilities of the TSX, over a one-year period, up to 1,256,929 restricted voting shares (determined on a partially diluted basis, taking into account our restricted voting shares issuable on conversion of the Series C Preferred Shares). See “—Investor Agreement.” In September 2008 and October 2008, an affiliate of JLL Patheon Holdings purchased an aggregate of 1,250,000 restricted voting shares on the TSX.

Settlement Agreement

On November 30, 2009, we entered into the Settlement Agreement with JLL Patheon Holdings to settle all claims filed by us against JLL Patheon Holdings and by JLL Patheon Holdings against us in connection with the JLL Offer and related matters. The Settlement Agreement provides, among other things, that:

• Upon the effective date of the Settlement Agreement, our Board would be modified to consist of (i) three nominees of JLL Patheon Holdings, (ii) one additional director selected by JLL Patheon Holdings, (iii) Roy T. Graydon and Derek J. Watchorn (the “Board Nominees”), (iv) Brian G. Shaw (the “Third Independent Nominee” and, collectively with the Board Nominees, the “Independent Directors”), (v) our Chief Executive Officer (who, at the time, was Wesley P. Wheeler and who is now James C. Mullen) and (vi) Joaquín B. Viso. At each meeting of shareholders held prior to March 1, 2011 at which directors are to be elected, JLL Patheon Holdings will vote all of its shares in favor of the re-election of, and will otherwise use its reasonable commercial efforts to re-elect, each of the Independent Directors and, at any requisitioned meeting called for the purpose of removing directors,

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JLL Patheon Holdings will vote all of its shares against the removal of any of the directors specified above. If either of the Board Nominees does not stand for re-election or vacates his office, a replacement nominee will be selected by our Board with the unanimous approval of the Independent Directors then in office, and JLL Patheon Holdings will vote all of its shares in favor of the election of, and will otherwise use its reasonable commercial efforts to elect or cause to be appointed, such replacement nominee as a director of our company. If the Third Independent Nominee does not stand for re-election or vacates his office, JLL Patheon Holdings would identify a replacement nominee who would be a qualifying independent director. At each meeting of shareholders held after March 1, 2011 and prior to March 1, 2012, JLL Patheon Holdings will vote all of its shares in favor of the election of, and against the removal of, and will otherwise use its reasonable commercial efforts to elect, at least three persons (who may or may not be one or more of the Independent Directors then in office) to our Board who would be “qualifying independent directors.” For these purposes, a “qualifying independent director” means a person who would be an independent director under the definition in the TSX Company Manual; provided, however, that the Third Independent Nominee will not be disqualified as an independent director under the definition in the TSX Company Manual solely by virtue of the fact that he or she has been identified by JLL Patheon Holdings. If any such Independent Director vacates his or her office, a replacement nominee will be selected by our Board with the unanimous approval of the Independent Directors then in office, and JLL Patheon Holdings will vote all of its shares in favor of the election of, and will otherwise use its reasonable commercial efforts to elect or cause to be appointed, such replacement nominee as a director of our company.

• JLL Patheon Holdings agreed not to acquire any additional restricted voting shares of Patheon for a one-year period, which expired on November 29, 2010. Thereafter, and until April 27, 2012, JLL Patheon Holdings will not acquire any additional restricted voting shares unless, among other things, the acquisition complies with the standstill provisions of the Investor Agreement, and (i) if the acquisition is to be effected by means of a merger, consolidation, amalgamation or similar transaction requiring a vote of shareholders, the acquisition is approved by a majority vote of the holders of the outstanding restricted voting shares not already held by JLL Patheon Holdings or its associates, affiliates and/or joint actors and (ii) if the acquisition is to be effected by means of a takeover bid, the bid is subject to an irrevocable condition requiring the valid tender to the bid of at least a majority of the outstanding restricted voting shares not already held by JLL Patheon Holdings or its associates, affiliates and/or joint actors.

• Until April 27, 2012, certain transactions by us, including certain rights offerings, issuer bids and related party transactions, would require approval by a majority of the independent directors.

• Unless approved in advance by a majority of the independent directors, until April 27, 2012, JLL Patheon Holdings will not enter into, or agree to, any oral or written agreement, arrangement or understanding, formal or informal, direct or indirect, with any of our other shareholders, in respect of the acquisition of any of our securities or in respect of any merger, consolidation, amalgamation or similar transaction involving us.

• We agreed to pay JLL Patheon Holdings $1.5 million in connection with the settlement.

Cost Sharing Arrangement

In fiscal 2010, Patheon and JLL Partners entered into a cost sharing arrangement with respect to certain third-party consulting fees. From the time Patheon and JLL Partners entered into the cost sharing arrangement until January 31, 2011, Patheon has reimbursed JLL Partners approximately $140,000, and JLL Partners has not provided Patheon any reimbursements. Related to these transactions, there is currently no outstanding payable to JLL Partners. These transactions were conducted in the normal course of business and are recorded at the exchanged amounts.

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Other Related Person Transactions

Shareholders’ Agreement and Sales and Marketing Agreement with BSP Pharmaceuticals S.r.L.

We hold an equity interest of 18% in BSP Pharmaceuticals S.r.l., an entity over which Aldo Braca, a former President of Patheon Europe, either directly or indirectly through entities controlled by Mr. Braca, holds an aggregate equity interest of 47%. BSP, a privately held Italian company, operates an oncology production facility in Latina, Italy, that specializes in providing third-party development and manufacturing of cytotoxic pharmaceutical products. On March 30, 2007, we entered into a service agreement with BSP. During fiscal 2008, we charged BSP $2.5 million for management services and other fees. We have not charged BSP for management services or other fees since fiscal 2008. We conducted these services in the normal course of business and recorded them at the exchanged amounts.

On July 2, 2008, we entered into a shareholders’ agreement and a sales and marketing agreement with BSP. Pursuant to the terms of the shareholders’ agreement, Mr. Braca was appointed Chief Executive Officer of BSP. We have committed to provide equity in BSP up to an overall amount of $3.4 million, of which we have provided $3.3 million as of October 31, 2010, each based on the Euro-to-dollar exchange rate in effect on October 31, 2010. We have further guaranteed up to $1.5 million if BSP does not fulfill its obligations under its loan obligations, based on the Euro-to-dollar exchange rate as of October 31, 2010.

Under the terms of the sales and marketing services agreement with BSP, we agreed to promote BSP’s manufacturing capacity and development services, and BSP agreed to provide referral services to us. To date, neither party has paid the other for any such services.

Relationships with Alara Pharmaceutical Corporation

We have two contractual commercial relationships with Alara Pharmaceutical Corporation (“Alara”), an entity that is wholly owned by Joaquín B. Viso, a member of our Board. Mr. Viso, together with his wife, jointly own approximately 8.4% of our issued and outstanding restricted voting shares as of February 15, 2011.

• On January 1, 2002, Patheon P.R. entered into a commercial manufacturing agreement with Alara. This agreement pertains to a significant product for Patheon P.R., and under this agreement, Patheon P.R. has the right to manufacture 85% of the worldwide requirements of Alara for such product. The approximate dollar amount of value derived from this agreement from November 1, 2007 through January 31, 2011 was $35.0 million. The right to place orders for such product has been assigned to a third party who purchases this product directly from Patheon P.R.; however, the NDA for such product remains the property of Alara. This agreement was amended in 2002 and 2004 and expires in 2019. We believe that terms of this agreement are standard for agreements of this nature.

• On January 1, 2004, Patheon P.R. also entered into a Product Development and Technology Transfer Agreement (the “Development Agreement”) with Alara, under which Patheon P.R. has agreed to develop, transfer and submit to the FDA pharmaceutical products identified and selected by Alara. The payments made by Alara to Patheon P.R. are negotiated on a per-project basis and are based on Patheon P.R.’s commercial rates set forth in the Development Agreement. The approximate dollar amount of value derived from this agreement from November 1, 2007 through January 31, 2011 was $1.2 million. The initial term of the Development Agreement was five years and automatically extends for consecutive two year terms unless either party gives 12 months advance notice of its desire not to extend the Development Agreement.

Policies and Procedure Regarding Review, Approval or Ratification of Related Person Transactions

Prior to December 16, 2010, we had not adopted any policies or procedures regarding the review, approval or ratification of related person transactions other than for executive compensation. See “Item 6. Executive Compensation—Compensation Discussion and Analysis.” However, we are incorporated under, and subject to

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the requirements of, the Canada Business Corporations Act (the “CBCA”), which requires a director or officer to disclose the nature and extent of any interest that he or she has in any material contract or transaction, whether made or proposed, with us if he or she (i) is party to the contract or transaction; (ii) is a director or officer, or an individual acting in a similar capacity, of a party to the contract or transaction; or (iii) has a material interest in a party to the contract or transaction.

In addition, on December 16, 2010, our Board adopted written policies and procedures for the review of any transaction, arrangement or relationship in which we are a participant, the amount involved exceeds $120,000 and one of our executive officers, directors, director nominees or 5% stockholders (or their immediate family members), each of whom we refer to as a “related person,” has a direct or indirect material interest.

If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to our General Counsel. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by the Audit Committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the Audit Committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chair of the Audit Committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the Audit Committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.

A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the Audit Committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the Audit Committee will review and consider:

• the related person’s interest in the related person transaction;

• the approximate dollar value of the amount involved in the related person transaction;

• the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;

• whether the transaction was undertaken in the ordinary course of our business;

• whether the terms of the transaction are no less favorable to us than the terms that could have been reached with an unrelated third party;

• the purpose of, and the potential benefit to us of, the transaction; and

• any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

The Audit Committee may approve or ratify the transaction only if the committee determines that, under all of the circumstances, the transaction is in, or is not in conflict with, our best interests. The Audit Committee may impose any conditions on the related person transaction that it deems appropriate.

In addition to the transactions that are excluded by the instructions to the Securities and Exchange Commission’s related person transaction disclosure rule, Item 404(a) of Regulation S-K, our Board has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:

• interests arising solely from the related person’s position as an executive officer of another entity (whether or not the person is also a director of such entity), that is a participant in the transaction, where (i) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (ii) the related person and his or her immediate family members are not involved

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in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, and (iii) the amount involved in the transaction equals less than the greater of $200,000 or 5% of the annual gross revenues of the company receiving payment under the transaction; and

• a transaction that is specifically contemplated by provisions of our charter or bylaws.

The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by our CHR Committee in the manner specified in its charter.

Director Independence

Composition of our Board

Our articles of amalgamation provide that our Board shall consist of a minimum of three directors and a maximum of 12 directors. The Investor Agreement further provides that our Board shall consist of up to nine members and that JLL Patheon Holdings must approve any change in the size of our Board. As we are not listed on a U.S. national securities exchange or an inter-dealer quotation system that has requirements that a majority of the board of directors be independent, we use the definition of independence of the NASDAQ Capital Market (“NASDAQ”) to determine whether our directors are independent for purposes of U.S. securities laws. Our Board has determined that Derek J. Watchorn, Roy T. Graydon, Brian G. Shaw and Joaquín Viso are independent directors as defined by NASDAQ Rule 5605(a)(2).

Our securities are listed on the TSX, and we are a Canadian reporting issuer. Canadian securities laws employ a different definition of independence than NASDAQ. As prescribed in National Instrument 58-101—Disclosure of Corporate Governance Practices, in all Canadian jurisdictions other than British Columbia, independence is determined by Section 1.4 of National Instrument 52-110—Audit Committees (“NI 52-110”). In addition, our Board has considered the independence of each of the independent directors under the definition of independence in the TSX Company Manual, in order to determine whether each is, or continues to be, a “qualifying independent director” under the terms of the Settlement Agreement. Under these provisions, a director is generally considered to be independent unless in the view of our Board, a director has a direct or indirect material relationship with us that could be reasonably expected to interfere with the exercise of the director’s independent judgment. Our Board has determined that Derek J. Watchorn, Roy T. Graydon, Brian G. Shaw and Joaquín Viso are independent under the Canadian securities laws.

Our Board has determined that the following five directors are not independent under either the NASDAQ rules or Canadian securities laws: Ramsey A. Frank, Paul S. Levy and Thomas S. Taylor (each a Managing Director of JLL Partners); Daniel Agroskin (a Principal of JLL Partners); and James C. Mullen, our President and Chief Executive Officer. Specifically, under NASDAQ Rule 5605(a)(2) and NI 52-110, Messrs. Frank, Levy, Taylor and Agroskin are not independent directors because of their positions with JLL Patheon Holdings or its affiliates and the degree of control that JLL Patheon Holdings exercises over us (these four directors are hereinafter also referred to as “JLL Nominees”). Mr. Mullen is not independent because he is a member of our management.

Board Committees

We have three standing committees of our Board: our Audit Committee, our Corporate Governance Committee and our CHR Committee. As each of our committees includes the participation of one or more directors who are JLL Nominees and who are considered non-independent, none of our committees is composed entirely of independent directors. However, in respect of those JLL Nominees who participate in one or more committees, our Board has determined that each such nominee is able, notwithstanding his affiliation to JLL Patheon Holdings or its affiliates, to exercise the impartial judgment necessary to fulfill his responsibilities as a committee member.

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The charters of each of our committees are provided on our website: www.patheon.com. The information contained on, or accessible from, our website is not part of this registration statement.

Audit Committee

Our Audit Committee is currently comprised of the following three members: Brian G. Shaw (Chairman), Joaquín B. Viso and Thomas S. Taylor. Mr. Shaw and Mr. Viso are considered to be “independent” within the meaning of NI 52-110 and NASDAQ Rule 5605(c)(2), the Canadian and NASDAQ rules concerning Audit Committee independence, respectively. Mr. Taylor is not considered to be independent because of his position with JLL Partners and the degree of control that JLL Partners exercises over us. Each of the members of our Audit Committee is “financially literate” within the meaning of NI 52-110.

For the purposes of compliance with audit committee composition requirements under NI 52-110, we are relying on the exemption found in section 3.3(2) (Controlled Companies) thereunder from the requirement that every audit committee member be independent. Sections 3.3(2) and 3.7 of NI 52-110 permit us, in certain circumstances, to have a non-independent director serve on our Audit Committee, as long as a majority of our Audit Committee members (in our case, two out of three) are independent. For purposes of reliance on this exemption, our Board has determined in its reasonable judgment that Mr. Taylor is able to exercise the impartial judgment necessary for fulfillment of his responsibilities as an Audit Committee member and his appointment is in the best interests of us and our shareholders.

Corporate Governance Committee

Our Corporate Governance Committee is currently comprised of the following three members: Mr. Frank, Mr. Taylor and Mr. Viso. Mr. Frank and Mr. Taylor are considered not to be independent because of their positions with JLL Patheon Holdings and/or its affiliates. As a result, the Corporate Governance Committee, which serves as our Board’s nominating committee, is not composed entirely of independent directors.

Compensation and Human Resources Committee

Our CHR Committee is currently comprised of the following three members: Mr. Taylor, Mr. Agroskin and Mr. Viso. Mr. Taylor and Mr. Agroskin are considered not to be independent because of their positions with JLL Partners. As a result, our CHR Committee, which serves as our Board’s compensation committee, is not composed entirely of independent directors.

Item 8. Legal Proceedings.

Neither we, nor any of our subsidiaries, are involved in any material pending legal proceeding. Additionally, no such proceedings are known to be contemplated by governmental authorities.

Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.

Market Information

Our restricted voting shares are traded on the TSX under the trading symbol “PTI.” There is no established public trading market for our shares in the United States. The following table sets forth the reported high and low trading prices (in Canadian dollars) and trading volumes of our restricted voting shares on the TSX for each quarter of fiscal 2010 and 2009.

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Toronto Stock Exchange

(Canadian $s)

	High		Low
Fiscal year ended October 31, 2010:
Quarter ended January 31, 2010		2.73		2.11
Quarter ended April 30, 2010		2.70		2.46
Quarter ended July 31, 2010		2.66		2.38
Quarter ended October 31, 2010		2.58		2.19
Fiscal year ended October 31, 2009:
Quarter ended January 31, 2009		2.25		0.75
Quarter ended April 30, 2009		2.65		1.84
Quarter ended July 31, 2009		2.99		2.28
Quarter ended October 31, 2009		3.63		2.45

Shares Subject to Outstanding Options or Convertible Securities

As of February 15, 2011, there were outstanding options or warrants to purchase, or securities convertible into, 7,446,024 of our restricted voting shares.

Also as of February 15, 2011, 54,739,362 shares of our restricted voting shares were eligible for resale under Rule 144 promulgated under the Securities Act. Of these, 49,252,591 shares are held by our affiliates, and thus are subject to certain conditions to resale, including requirements regarding the availability of current public information about us, the manner of sale, limits on the volume of securities sold and notice filings. The number of shares eligible for resale under Rule 144 described in this paragraph excludes 74,428,564 of our restricted voting shares that were issued in public offerings in Canada.

Pursuant to the Investor Agreement with JLL Patheon Holdings described above, we have agreed to register under certain circumstances up to 38,018,538 of our restricted voting shares held by JLL Patheon Holdings under the Securities Act if we are eligible to use Form F-10 to register such shares and if JLL Patheon Holdings requests such registration under the Securities Act. As of the date hereof, we are not eligible to use Form F-10 to register shares under the Securities Act, as we do not meet the definition of “foreign private issuer” as such term is defined in Rule 405 under the Securities Act.

Holders

As of February 15, 2011, there were approximately 547 holders of record of our restricted voting shares. This number does not include beneficial owners for whom shares are held by nominees in street name.

Dividends

We did not pay dividends on our restricted voting shares during fiscal 2009 or 2010. Our current policy is to not pay dividends on our restricted voting shares, as we prefer to reinvest our cash to enhance our growth. We do not intend to pay cash dividends in the foreseeable future.

Our credit facilities include covenants that limit our ability to pay dividends. See “Note 8—Long-Term Debt” to our consolidated financial statements beginning on page F-1 of this registration statement. The Investor Agreement also prevents us from declaring or paying any dividends without the approval of JLL Patheon Holdings for so long as JLL Patheon Holdings holds 13,306,488 restricted voting shares.

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Equity Compensation Plan Information

The following table sets forth aggregate information regarding our equity compensation plans as of October 31, 2010. The only equity compensation plan that we currently maintain is our Incentive Stock Option Plan, pursuant to which we may grant options to purchase our restricted voting shares to eligible persons.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders(1)		8,327,357	$	3.26		1,360,237
Equity compensation plans not approved by security holders		—		—		—
Total		8,327,357	$	3.26		1,360,237

(1) Under our Incentive Stock Option Plan, the maximum number of restricted voting shares that may be issued upon the exercise of options equals 7.5% of our total issued and outstanding shares (on a non-diluted basis).

Exchange Controls

There is no law or governmental decree or regulation in Canada that restricts the export or import of capital or affects the remittance of dividends, interest or other payments to non-resident holders of our common stock, other than withholding tax requirements. See “—Certain Canadian Federal Income Tax Considerations.”

There is no limitation imposed by Canadian law or by our articles of amalgamation on the right of a non-resident to hold or vote restricted voting shares, other than as provided by the “Investment Canada Act,” the “North American Free Trade Agreement Implementation Act (Canada),” the “World Trade Organization Agreement Implementation Act” and the CBCA, which permits our shareholders, by special resolution, to amend our articles of amalgamation to constrain the issue or transfer of any class or series of our securities to persons who are not residents of Canada in certain limited circumstances.

The Investment Canada Act requires notification and, in certain cases, advance review and approval by the Government of Canada of the acquisition by a “non-Canadian” of “control” of a “Canadian business,” all as defined in the Investment Canada Act. Generally, the threshold for review will be higher in monetary terms for a member of the World Trade Organization or North American Free Trade Agreement.

Taxation

Certain U.S. Federal Income Tax Considerations

The information set forth below is a general summary of certain material U.S. federal income tax consequences to a U.S. Holder (as defined below) relating to the acquisition, ownership and disposition of restricted voting shares. This summary provides only general information and does not purport to be a complete analysis or listing of all of the possible U.S. federal income tax consequences that may apply to a U.S. Holder. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences applicable to such U.S. Holder. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder. Each U.S. Holder should consult his, her or its own tax advisor regarding the U.S. federal, state and local, and foreign tax consequences arising from or relating to the acquisition, ownership and disposition of restricted voting shares.

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No ruling from the Internal Revenue Service (“IRS”) has been requested, or is expected to be obtained, regarding the U.S. federal income tax consequences to U.S. Holders of the acquisition, ownership or disposition of our restricted voting shares. Because the authorities on which this summary is based are subject to differing interpretations, the IRS could successfully challenge one or more of the positions taken in this summary.

NOTICE PURSUANT TO IRS CIRCULAR 230: NOTHING CONTAINED IN THIS SUMMARY CONCERNING ANY U.S. FEDERAL TAX ISSUE IS INTENDED OR WRITTEN TO BE USED, OR CAN BE USED, BY A U.S. HOLDER FOR THE PURPOSE OF AVOIDING U.S. FEDERAL TAX PENALTIES UNDER THE CODE. THIS SUMMARY WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED BY THIS DOCUMENT. EACH U.S. HOLDER SHOULD SEEK U.S. FEDERAL TAX ADVICE, BASED ON SUCH U.S. HOLDER’S PARTICULAR CIRCUMSTANCES, FROM AN INDEPENDENT TAX ADVISOR.

Scope of This Summary

Authorities

This summary is based on the Code, its legislative history, U.S. Treasury Regulations promulgated under the Code, published IRS rulings and administrative positions, U.S. judicial decisions, and the Canada-U.S. Tax Convention (1980), as amended by protocols (the “Canada-U.S. Tax Treaty”), in each case, as in effect and available as of the date of this registration statement. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive basis. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation.

U.S. Holders

For purposes of this summary, a “U.S. Holder” is a beneficial owner of restricted voting shares that, for U.S. federal income tax purposes, is (i) an individual who is a citizen or resident of the United States, (ii) a corporation, or other entity classified as a corporation for U.S. federal income tax purposes, that is created or organized in or under the laws of the United States, any state in the United States or the District of Columbia, (iii) an estate if the income of the estate is subject to U.S. federal income tax regardless of the source of such income, or (iv) a trust if (A) the trust has validly elected to be treated as a U.S. person for U.S. federal income tax purposes or (B) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust.

Non-U.S. Holders

For purposes of this summary, a “non-U.S. Holder” is a beneficial owner of restricted voting shares other than a U.S. Holder. This summary does not address the U.S. federal income tax consequences to non-U.S. Holders arising from and relating to the acquisition, ownership and disposition of our restricted voting shares. A non-U.S. Holder should consult his, her or its own tax advisor regarding the U.S. federal, state and local, and foreign tax consequences (including the potential application of and operation of any tax treaties) arising from and relating to the acquisition, ownership and disposition of restricted voting shares.

U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed

This summary does not address the U.S. federal income tax consequences applicable to U.S. Holders that are subject to special provisions under the Code, including the following U.S. Holders: (i) U.S. Holders that are tax-exempt organizations, qualified retirement plans, individual retirement accounts or other tax-deferred accounts; (ii) U.S. Holders that are financial institutions, insurance companies, real estate investment trusts or regulated investment companies; (iii) U.S. Holders that are dealers in securities or currencies or U.S. Holders that are traders in securities that elect to apply a mark-to-market accounting method; (iv) U.S. Holders that have a

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functional currency other than the U.S. dollar; (v) U.S. Holders subject to the alternative minimum tax provisions of the Code; (vi) U.S. Holders that own restricted voting shares as part of a straddle, hedging transaction, conversion transaction, constructive sale or other arrangement involving more than one position; (vii) U.S. Holders that acquired restricted voting shares through the exercise of employee stock options or otherwise as compensation for services; and (viii) U.S. Holders that hold restricted voting shares other than as a capital asset within the meaning of Section 1221 of the Code. A U.S. Holder that is subject to special provisions under the Code, including a U.S. Holder described above, should consult his, her or its own tax advisor regarding the U.S. federal, state and local, and foreign tax consequences arising from and relating to the acquisition, ownership and disposition of restricted voting shares.

If an entity that is classified as a partnership for U.S. federal income tax purposes holds restricted voting shares, the U.S. federal income tax consequences to the partnership and the partners of the partnership generally will depend on the activities of the partnership and the status of its partners. A partner of an entity that is classified as a partnership for U.S. federal income tax purposes should consult his, her or its own tax advisor regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership and disposition of restricted voting shares.

Tax Consequences Other Than U.S. Federal Income Tax Consequences Not Addressed

This summary does not address the U.S. estate, state, local or foreign tax consequences to U.S. Holders of the acquisition, ownership and disposition of restricted voting shares, except as set forth under “—Certain Canadian Federal Income Tax Consequences.” Each U.S. Holder should consult his, her or its own tax advisor regarding the U.S. estate, state, local and foreign tax consequences arising from and relating to the acquisition, ownership and disposition of our restricted voting shares.

U.S. Federal Income Tax Consequences of the Acquisition, Ownership and Disposition of Restricted Voting Shares

Distributions on Restricted Voting Shares

Subject to the possible application of the controlled foreign corporation (“CFC”) rules and the passive foreign investment company (“PFIC”) rules described below, a U.S. Holder that receives a distribution, including a constructive distribution or a taxable stock distribution, with respect to our restricted voting shares generally will be required to include the amount of such distribution in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of our current or accumulated earnings and profits (as computed for U.S. federal income tax purposes). To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits, the distribution will first be treated as a tax-free return of capital, reducing the adjusted basis of our restricted voting shares with regard to which the distribution was made (but not below zero), and, to the extent in excess of such basis, will be treated as gain from the sale or exchange of such restricted voting shares.

Dividends received prior to January 1, 2013 by a U.S. Holder that is an individual, estate or trust from a “qualified foreign corporation” (“qualified dividends”) will generally be taxed at the preferential tax rates applicable to long-term capital gains if certain holding period requirements are met. A “qualified foreign corporation” includes a foreign corporation that is eligible for the benefits of a comprehensive income tax treaty with the United States that the U.S. Treasury Department determines to be satisfactory for these purposes and that includes an exchange of information provision. The U.S. Treasury has determined that the Canada-U.S. Tax Treaty meets these requirements, and we believe that we are eligible for the benefits of the Canada-U.S. Tax Treaty. Dividends received by U.S. investors from a foreign corporation that was a PFIC in either the taxable year of the distribution or the preceding taxable year will not constitute qualified dividends. As discussed in “—Passive Foreign Investment Company Rules,” we believe that we will not be treated as a PFIC for U.S. federal income tax purposes for our current taxable year or in future years. Accordingly, in such event, any dividends paid on our restricted voting shares prior to January 1, 2013 would constitute qualified dividends.

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Whether or not dividends received by a U.S. Holder are U.S. source income may be relevant in calculating the U.S. Holder’s foreign tax credit limitation. Dividends from foreign corporations generally are income from sources outside the United States. However, with respect to any dividend paid by us, if 25% or more of our gross income from all sources during the three-year period ending with the close of our taxable year preceding the declaration of such dividend was effectively connected with the conduct of a trade or business within the United States, then an amount of such dividend which bears the same ratio to the total dividend as our gross income for such period which was effectively connected with the conduct of a trade or business within the United States bears to our gross income for such period from all sources generally will be U.S. source income.

Sale, Exchange or Other Taxable Disposition of Restricted Voting Shares

Subject to the possible application of the CFC and PFIC rules described below, a U.S. Holder will recognize gain or loss on the sale or exchange of restricted voting shares (or any other disposition of restricted voting shares that is treated as a sale or exchange for U.S. federal income tax purposes) equal to the difference, if any, between (i) the U.S. dollar value of the amount realized on such sale or exchange and (ii) such U.S. Holder’s adjusted tax basis in our restricted voting shares. A U.S. Holder’s adjusted tax basis in its restricted voting shares will generally be the cost to the holder of the shares, determined in U.S. dollars. Any such gain or loss generally will be capital gain or loss, which will be long-term capital gain or loss if our restricted voting shares are held for more than one year. Preferential rates apply to net long-term capital gains recognized by a U.S. Holder that is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation. Any capital gain that is not long-term capital gain is short-term capital gain and is taxed at ordinary income rates. Deductions for capital losses are subject to significant limitations under the Code.

Gain or loss recognized by a U.S. Holder on a sale, exchange or other taxable disposition of restricted voting shares will generally be treated as income or loss from sources within the United States, which may be relevant in calculating the U.S. Holder’s foreign tax credit limitation.

In certain circumstances, amounts received by a U.S. Holder upon the redemption of restricted voting shares may be treated as a distribution with respect to restricted voting shares, rather than as a payment in exchange for restricted voting shares that results in the recognition of capital gain or loss, as described above. In these circumstances, the redemption payment would be included in gross income as a dividend to the extent that such payment is made out of our current or accumulated earnings and profits. See “— Distributions on Restricted Voting Shares” for a discussion regarding the U.S. federal income tax treatment of distributions with respect to restricted voting shares. The determination of whether a redemption of restricted voting shares will be treated as a distribution with respect to restricted voting shares rather than as a payment in exchange for restricted voting shares generally will depend upon whether and to what extent the redemption reduces the U.S. Holder’s percentage ownership interest in us. The rules applicable to redemptions are complex, and each U.S. Holder should consult his, her or its own tax advisor to determine whether in the U.S. Holder’s own particular case a redemption of restricted voting shares will be treated as a distribution with respect to restricted voting shares or as a payment in exchange for our restricted voting shares.

Receipt of Foreign Currency

The amount of any distribution paid to a U.S. Holder in foreign currency, and the amount received by a U.S. Holder in foreign currency on the sale, exchange or other taxable disposition of restricted voting shares, generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of whether such foreign currency is converted into U.S. dollars at that time). If the foreign currency received is not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any U.S. Holder who receives payment in foreign currency and engages in a subsequent conversion or other disposition of the foreign currency may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be

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U.S. source income or loss for foreign tax credit purposes. Each U.S. Holder should consult his, her or its own U.S. tax advisor regarding the U.S. federal income tax consequences of receiving, owning and disposing of foreign currency.

Foreign Tax Credit

A U.S. Holder who pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on our restricted voting shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax paid. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for- dollar basis, whereas a deduction will reduce a U.S. Holder’s income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.

Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s worldwide taxable income. In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.” In addition, this limitation is calculated separately with respect to specific categories of income. Any dividends that we pay will generally constitute “foreign source” income and will generally be categorized as “passive category income.” The foreign tax credit rules are complex, and each U.S. Holder should consult his, her or its own tax advisor regarding the foreign tax credit rules.

Controlled Foreign Corporations

We will be considered a CFC for any year in which U.S. Holders that each own (directly, indirectly or by attribution) at least 10% of our voting shares (each a “10% U.S. Holder”) together own more than 50% of the total combined voting power of all classes of our voting shares or more than 50% of the total value of our shares. If we are classified as a CFC, such classification would have many complex results, one of which is that if a person is a 10% U.S. Holder on the last day of our taxable year, such person will be required to recognize as ordinary income his, her or its pro rata share of certain of our income (including both ordinary earnings and capital gains) for the taxable year, whether or not such person receives any distributions on restricted voting shares during that taxable year. In addition, special foreign tax credit rules would apply. The 10% U.S. Holder’s adjusted tax basis in his, her or its restricted voting shares would be increased to reflect any taxed but undistributed earnings and profits. Any distribution of earnings and profits that previously had been taxed would result in a corresponding reduction in the 10% U.S. Holder’s adjusted tax basis in restricted voting shares and would not be taxed again when such person receives such distribution. If a person is a 10% U.S. Holder, any gain from disposition of restricted voting shares will be treated as dividend income to the extent of earnings and profits attributable to such restricted voting shares which were accumulated during the time such person held such restricted voting shares (but generally excluding earnings and profits previously included in such person’s gross income under the rules described above).

If in any given year we are deemed to be both a PFIC and a CFC, if a person is a 10% U.S. Holder, such person would be subject to the CFC rules and not the PFIC rules with respect to his, her or its ownership of restricted voting shares.

A U.S. Holder should consult his, her or its own tax advisor regarding the application of the CFC rules to our restricted voting shares in his, her or its particular circumstances, in the event that we are determined to be a CFC.

Passive Foreign Investment Company Rules

Special, generally unfavorable rules apply to the ownership and disposition of the stock of a PFIC. For U.S. federal income tax purposes, a foreign corporation is classified as a PFIC if (i) at least 75% of its gross income in

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a taxable year is “passive” income, or (ii) at least 50% of the value of its assets in a taxable year (based on an average of the quarterly values of its assets for the taxable year) is attributable to assets that produce passive income or are held for the production of passive income. Passive income generally includes dividends, royalties, rents, annuities, interest, gains from commodities transactions and net gains from the sale or exchange of property that gives rise to dividends, interest, royalties, rents or annuities. In determining whether we are a PFIC, we are required to take into account a pro rata portion of the income and assets of each corporation of which we own, directly or indirectly, at least 25% by value.

Based on our current estimates and projections of the composition of our income and the value of our assets, we believe that we should not be treated as a PFIC for U.S. federal income tax purposes for our current taxable year or in future years. However, this conclusion is a factual determination made annually and thus may be subject to change. Since our PFIC status depends upon the composition of our income and assets and the market value of our assets from time to time and generally cannot be determined until the end of the taxable year, there can be no assurance that we will not be considered a PFIC for the current taxable year. Moreover, we cannot predict whether the composition of our income and assets will cause us to be treated as a PFIC in any future taxable year. Accordingly, no assurance can be given that we are not, or will not become, a PFIC.

Generally, if we are or have been treated as a PFIC for any taxable year during a U.S. Holder’s holding period of restricted voting shares, unless the holder has made a mark-to-market election or a qualified electing fund election (“QEF Election”) (as described below), any “excess distribution” with respect to restricted voting shares would be allocated ratably over the U.S. Holder’s holding period. The amounts allocated to the taxable year of the “excess distribution” and to any year before we became a PFIC would be taxed as ordinary income in the taxable year of the excess distribution. The amount allocated to each other taxable year would be subject to tax in the taxable year of the excess distribution at the highest rate in effect for individuals or corporations in such other taxable year, as appropriate, and an interest charge would be imposed on the amount allocated to that other taxable year. Distributions made in respect of restricted voting shares during a taxable year will be “excess distributions” to the extent they exceed 125% of the average of the annual distributions on restricted voting shares received by the U.S. Holder during the preceding three taxable years or the U.S. Holder’s holding period, whichever is shorter. Special rules apply for calculating the amount of the foreign tax credit with respect to excess distributions by a PFIC.

Generally, if we are treated as a PFIC for any taxable year during which a U.S. Holder owns restricted voting shares, unless the holder made a mark-to-market election or QEF Election (as described below), any gain on the disposition of our restricted voting shares would be treated as an excess distribution and would be allocated ratably over the U.S. Holder’s holding period and subject to taxation and interest charges in the same manner as described in the preceding paragraph.

If we were a PFIC and a U.S. Holder made a mark-to-market election with respect to our restricted voting shares, some of the adverse tax consequences of holding stock in a PFIC described above may be mitigated. A U.S. Holder that holds stock of a PFIC generally may make a mark-to-market election with respect to its stock if the stock constitutes marketable stock. Marketable stock is stock that is regularly traded (other than in de minimis quantities) on a U.S. or non-U.S. exchange or other market that the U.S. Treasury Department determines has trading, listing, financial disclosure and other rules adequate to carry out the purposes of the mark-to-market election. Our restricted voting shares should constitute marketable stock with respect to which a mark-to-market election could be made. In such case, a U.S. Holder would generally include as ordinary U.S. source income or loss the difference between the fair market value of our restricted voting shares at the end of the taxable year and the adjusted tax basis of our restricted voting shares (but loss could only be included to the extent of the net amount of previously included income as a result of the mark-to-market election). If a U.S. Holder made the election, the U.S. Holder’s tax basis in our restricted voting shares would be adjusted to reflect any such income or loss amounts. Any gain recognized on the sale or other disposition of restricted voting shares would be treated as ordinary U.S. source income.

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If we were a PFIC and a U.S. Holder made a QEF Election with respect to our restricted voting shares, some of the adverse tax consequences of holding stock in a PFIC described above may be mitigated. If a U.S. Holder were eligible for and timely made a valid QEF Election, such holder would be required to include in income on a current basis its pro rata share of our ordinary income and net capital gains, but not losses. We do not currently intend to provide U.S. Holders with the information that would be required to make a QEF Election effective.

Each U.S. Holder should consult his, her or its own tax advisor regarding our status as a PFIC, the possible effect of the PFIC rules to such holder and the availability of any election that may be available to such holder to mitigate adverse U.S. federal income tax consequences of holding shares in a PFIC.

Information Reporting; Backup Withholding

Dividend payments with respect to restricted voting shares and proceeds from the sale, exchange or redemption of restricted voting shares may be subject to information reporting to the IRS and possible U.S. backup withholding tax (currently at a 28% rate). Backup withholding will not apply to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification or to a U.S. Holder who is otherwise exempt from backup withholding. Any amounts withheld under the U.S. backup withholding tax rules will generally be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if a U.S. Holder furnishes required information to the IRS in a timely manner. Each U.S. Holder should consult his, her or its own tax advisor regarding the application of the information reporting and backup withholding rules to such holder.

Certain Canadian Federal Income Tax Considerations

The following is a summary of the principal Canadian federal income tax considerations generally applicable to holders of our restricted voting shares who, at all relevant times, for purposes of the Income Tax Act (Canada) (the “Tax Act”) and the Canada-U.S. Tax Treaty (i) are the beneficial owners of such restricted voting shares; (ii) are “qualifying persons” entitled to benefits under the Canada-U.S. Tax Treaty, (iii) are resident in the United States and are neither resident nor deemed to be resident in Canada; (iv) deal at arm’s length with, and are not affiliated with, us; (v) hold their restricted voting shares as capital property; (vi) do not use or hold, and are not deemed to use or hold their restricted voting shares in connection with carrying on business in Canada; and (vii) do not hold or use restricted voting shares in connection with a permanent establishment or fixed base in Canada (each, a “U.S. Resident Holder”). Special rules, which are not discussed in this summary, may apply to a U.S. Resident Holder that is an insurer that carries on an insurance business in Canada and elsewhere.

Our restricted voting shares will generally be considered capital property to a U.S. Resident Holder unless either (i) the U.S. Resident Holder holds our restricted voting shares in the course of carrying on a business of buying and selling securities, or (ii) the U.S. Resident Holder has acquired our restricted voting shares in a transaction or transactions considered to be an adventure in the nature of trade.

Limited liability companies (“LLCs”) that are not taxed as corporations pursuant to the provisions of the Code generally do not qualify as resident in the United States and are not “qualified persons” for purposes of the Canada-U.S. Tax Treaty. Under the Canada-U.S. Tax Treaty, a resident of the United States who is a member of such an LLC and is otherwise a “qualified person” eligible for benefits under the Canada-U.S. Tax Treaty may be entitled to claim benefits under the Canada-U.S. Tax Treaty in respect of income, profits or gains derived through the LLC. A U.S. Resident Holder who is a member of an LLC should consult with his, her or its own tax advisors with respect to eligibility for benefits in respect of any income, profits or gains derived through such LLC.

The Canada-U.S. Tax Treaty includes limitation on benefits rules that restrict the ability of certain persons who are resident in the United States to claim any or all benefits under the Canada-U.S. Tax Treaty. A U.S. Resident Holder should consult his, her or its own tax advisors with respect to his, her or its eligibility for benefits under the Canada-U.S. Tax Treaty, having regard to these rules.

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This summary is based on the current provisions of the Canada-U.S. Tax Treaty and the Tax Act, the regulations thereunder (the “Regulations”) and counsel’s understanding of the current published administrative policies and assessing practices of the Canada Revenue Agency (the “CRA”) made publicly available prior to the date of this registration statement. This summary also takes into account all specific proposals to amend the Tax Act and the Regulations publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”), and assumes that all such Tax Proposals will be enacted in the form proposed. There is no assurance that the Tax Proposals will be enacted in their current form, or at all. This summary does not otherwise take into account or anticipate any changes in the law, whether by legislative, governmental or judicial action, or in the CRA’s administrative policies or assessing practices.

This summary does not address the tax laws of any province or territory of, or any jurisdiction outside, Canada, which might materially differ from the Canadian federal considerations.

This summary is of a general nature only and not intended to be, nor should it be construed to be, legal or tax advice to any particular U.S. Resident Holder, and no representations concerning the tax consequences to any particular U.S. Resident Holder are made. U.S. Resident Holders should consult their own tax advisers regarding the income tax consequences, arising from and relating to the acquisition, ownership and disposition of our restricted voting shares with respect to their own particular circumstances.

Currency Conversion

For purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of our restricted voting shares, including interest, dividends, adjusted cost base and proceeds of disposition, must be converted into Canadian dollars based on the relevant exchange rate applicable on the effective date (as determined in accordance with the Tax Act) of the related acquisition, disposition or recognition of income.

Disposition of Restricted Voting Shares

A U.S. Resident Holder will not be subject to tax under the Tax Act in respect of any capital gain (or entitled to deduct any capital loss) realized on a disposition of restricted voting shares unless our restricted voting shares constitute “taxable Canadian property” (as defined in the Tax Act) of the U.S. Resident Holder at the time of disposition and the U.S. Resident Holder is not entitled to relief under the Canada-U.S. Tax Treaty. So long as our restricted voting shares are then listed on a designated stock exchange (which currently includes the TSX), our restricted voting shares will generally not constitute taxable Canadian property of a U.S. Resident Holder.

A U.S. Resident Holder whose restricted voting shares are, or may be considered to be, taxable Canadian property should consult with his, her or its own tax advisors for advice having regard to such holder’s particular circumstances.

Dividends

Dividends on restricted voting shares paid or credited, or deemed to be paid or credited, to a U.S. Resident Holder will be subject to a non-resident withholding tax under the Tax Act at a rate of 25%, subject to reduction under the provisions of an applicable tax treaty or convention. Pursuant to the Canada-U.S. Tax Treaty, the rate of withholding tax on dividends paid or credited to a U.S. Resident Holder that is the beneficial owner of such dividends generally is reduced to 15% or, if the U.S. Resident Holder is a corporation that is the beneficial owner of at least 10% of our voting stock, to 5%.

The Canada-U.S. Tax Treaty generally exempts from Canadian withholding tax dividends paid or credited to (i) a qualifying religious, scientific, literary, educational or charitable organization or (ii) a qualifying trust, company, organization or arrangement constituted and operated exclusively to administer or provide a pension,

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retirement or employee benefit fund or plan, if such organization or qualifying trust, company or arrangement is a resident of the United States and is exempt from income tax under the laws of the United States.

HOLDERS OF RESTRICTED VOTING SHARES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM, INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS, OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF RESTRICTED VOTING SHARES.

Item 10. Recent Sales of Unregistered Securities.

The following securities were sold by us within the past three years and were not registered under the Securities Act.

In April 2010, we sold the Notes for an aggregate principal amount of $280,000,000. We received net proceeds of $268,500,000 pursuant to this sale. The initial purchasers of the Notes were J.P. Morgan Securities, Inc., UBS Securities LLC and Barclays Capital Inc. The issuance of the Notes to the initial purchasers was made in reliance on Section 4(2) under the Securities Act and the notes were subsequently resold by the initial purchasers pursuant to Rule 144A and Regulation S thereunder.

In July 2009, we issued 38,018,538 restricted voting shares to JLL Patheon Holdings pursuant to its irrevocable election to convert its 150,000 Series C Preferred Shares and its corresponding surrender of its Series C Preferred Share Certificate. The issuance of our restricted voting shares was made in reliance on Section 4(2) under the Securities Act.

In September 2008, we issued 400,000 restricted voting shares to JLL Patheon Holdings in consideration for its agreement to waive the requirement, under the terms of the Series C Preferred Shares held by it, that we redeem such shares for cash on April 27, 2017, if not previously converted, for a redemption price of at least $185,000,000. The issuance of our restricted voting shares was made in reliance on Section 4(2) under the Securities Act.

Since February 24, 2008, we have issued options to purchase 6,394,211 restricted voting shares with an aggregate exercise price of $17,714,451 to our directors, officers, employees and consultants, and we have issued 115,000 restricted voting shares for an aggregate exercise price of $405,950 upon exercise of such options. The grants and issuances of these securities to persons residing outside the United States were made in reliance on Regulation S promulgated under the Securities Act. The grants and issuances of these securities to persons residing in the United States were made in reliance on Rule 701 promulgated under the Securities Act.

Item 11. Description of Registrant’s Securities to be Registered.

Holders of restricted voting shares are entitled to receive notice of and attend all annual and special meetings of our shareholders, other than separate meetings of holders of any other class or series of shares, and to one vote at shareholders’ meetings in respect of the election of some of our directors. Under the CBCA, our shareholders also have the right to appoint our independent auditor and, so long as they comply with certain requirements of the CBCA, submit notice of matters to be raised at such meetings. The CBCA also provides that holders of not less than 5% of our restricted voting shares may requisition our directors to call a shareholder meeting for the purposes stated in the requisition. Holders of our restricted voting shares do not have cumulative voting rights. The holders of the Series D Preferred Shares are entitled to elect up to three of our directors, subject to ownership levels. Holders of our restricted voting shares are entitled to dividends on a pro rata basis if, and as when, declared by our Board. Subject to the rights of the holders of any other class of our shares entitled to receive dividends in priority to or ratably with the holders of restricted voting shares, our Board may declare dividends on our restricted voting shares to the exclusion of any other class of our shares.

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On our liquidation, dissolution or winding-up, holders of our restricted voting shares are entitled to participate ratably in any distribution of our assets after we have paid or provided for payment of all of our debts and liabilities, subject to the rights of the holders of any other class of our shares entitled to receive our assets on such a distribution in priority to or ratably with the holders of restricted voting shares. Holders of our restricted voting shares have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of our restricted voting shares are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which we may designate and issue in the future.

The CBCA provides that our shareholders may, with a two-thirds vote, amend certain provisions of our articles of amalgamation by a special resolution to, among other things, create new classes of shares; add, change or remove any rights, privileges, restrictions and conditions, including rights to accrued dividends, in respect of all or any of our shares, whether issued or unissued; or to add, change or remove restrictions on the issue, transfer or ownership of our shares.

See “Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters—Exchange Controls, Taxation” of this registration statement for a discussion regarding the rights of holders of our restricted voting shares who are not Canadian residents.

Item 12. Indemnification of Directors and Officers.

Our by-laws provide that we will indemnify any of our directors, former directors, officers, former officers and other parties specified by the by-laws against all costs reasonably incurred by them for any civil, criminal or administrative action or proceeding to which they are or may be made a party by reason of having been a director or officer. The indemnity covers amounts paid to settle actions or to satisfy judgments. However, we may only indemnify these persons if they acted honestly and in good faith with a view to our best interests and, in the case of a criminal or administrative action or proceeding, if they have reasonable grounds for believing that their conduct was lawful. The Canada Business Corporations Act provides that court approval is required for the payment of any indemnity in connection with an action brought by or on our behalf.

In addition, we have entered into indemnification agreements with Messrs. Frank, Graydon, Levy, Taylor and Watchorn. Among other things, these agreements generally provide that we will indemnify each of these individuals for expenses incurred in connection with any proceedings in connection with service as our director or officer or as a director or officer of any other entity to the extent that such person is serving in such capacity at our request (“Indemnified Capacity”). Additionally, we have agreed to indemnify these individuals for expenses which they incur solely by reason of their service in an Indemnified Capacity. These indemnification agreements also provide that, upon written request, we will advance expenses within 30 days of such request. Our obligations under these agreements will survive until six years after such individuals cease to serve in an Indemnified Capacity. Pursuant to our employment agreement with Mr. Mullen, we have agreed to indemnify him to the fullest extent permitted by the laws of the State of New York.

Item 13. Financial Statements and Supplementary Data.

See “Index to Consolidated Financial Statements.”

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

There have been no changes in or corresponding disagreements with our independent accountant during the last two fiscal years.

Item 15. Financial Statements and Exhibits.

Financial Statements

Our consolidated financial statements appear at the end of this registration statement. See “Index to Consolidated Financial Statements.”

104

Exhibits

Exhibit No.	Description
3.1	Articles of Amalgamation of Patheon Inc. (“Patheon”).
3.2	Amendment to Articles of Amalgamation of Patheon.
3.3	By-Laws of Patheon dated March 27, 2008.
4.1	Form of Patheon’s Share Certificate.
4.2	Indenture dated April 23, 2010 among Patheon, certain subsidiaries of Patheon as Guarantors, U.S. Bank National Association and Deutsche Bank Trust Company Americas, with respect to the 8.625% Senior Secured Notes due 2017.
4.3	Form of 8.625% Senior Secured Notes due 2017 (included in Exhibit 4.2).
10.1	Amended and Restated Revolving Credit Agreement dated April 23, 2010 among Patheon, certain subsidiaries of Patheon as Guarantors, the lenders party thereto, JPMorgan Chase Bank, N.A., as U.S. Administrative Agent, JPMorgan Chase Bank, N.A., as Canadian Administrative Agent, and Toronto Branch and J.P. Morgan Europe Limited, as European Administrative Agent.
10.2	Purchase Agreement dated March 1, 2007 between Patheon and JLL Partners Fund V, L.P.
10.3	Investor Agreement dated April 27, 2007 between Patheon and JLL Patheon Holdings, LLC.
10.4	Redemption Waiver Agreement dated September 4, 2008 between Patheon and JLL Patheon Holdings, LLC.
10.5	Settlement Agreement dated November 29, 2009 between Patheon and JLL Patheon Holdings, LLC.
10.6	Lease Agreement dated January 15, 1996 between Lansdown Estates Group Limited and Oxford Asymmetry Limited, assigned to Patheon U.K. Limited on May 3, 2006 in respect of the Milton Park Facility.
10.7	Licence to Assign Lease Agreement in respect of the Milton Park Facility dated April 28, 2006 among MEPC Milton Park No. 1 Limited and MEPC Milton Park No. 2 Limited, EVOTEC (UK) Limited and Patheon UK Limited.
10.8	Contract for the Sale of Leasehold Land in respect of the Milton Park Facility dated May 3, 2006 between EVOTEC (UK) Limited and Patheon UK Limited.
10.9	Assignment of Leasehold Property in respect of the Milton Park Facility dated May 3, 2006 between EVOTEC (UK) Limited and Patheon UK Limited.
10.10	Lease Agreement dated December 1, 1993 between Custom Pharmaceuticals and Promix Laboratories, Divisions of Patheon, and The Cadillac Fairview Corporation Limited in respect of the Burlington Facility.
10.11	Lease Renewal Agreement dated April 10, 2004 between Patheon and Klaus Stephan Reeckmann in respect of the Burlington Facility.
10.12	Amended and Restated Incentive Stock Option Plan of Patheon dated September 4, 2008 (the “Incentive Stock Option Plan”).
10.13	Form of Stock Option Agreement under the Incentive Stock Option Plan for certain awards granted on or before March 17, 2010.
10.14	Form of Stock Option Agreement under the Incentive Stock Option Plan for certain awards granted on or after March 17, 2010.

105

Exhibit No.	Description
10.15	Amended and Restated Restricted Share Unit Plan of Patheon dated September 4, 2008 (the “Restricted Share Unit Plan”).
10.16	Performance Share Unit Plan of Patheon dated December 13, 2007 (the “Performance Share Unit Plan”).
10.17	Form of Performance Share Unit Grant Agreement under the Performance Share Unit Plan.
10.18	Directors Deferred Share Unit Plan of Patheon dated February 22, 2008, as amended March 27, 2008.
10.19	Description of Compensation for Non-Employee Directors of Patheon.
10.20	Deferred Compensation Plan of Patheon dated January 1, 2003, as amended December 18, 2008.
10.21	Employment Agreement between Patheon Pharmaceutical Services Inc. and James C. Mullen effective February 7, 2011.
10.22	Employment Agreement between Patheon and Wesley P. Wheeler dated December 3, 2007.
10.23	First Amendment, dated May 5, 2009, to Employment Agreement between Patheon and Wesley P. Wheeler dated December 3, 2007.
10.24	Separation Agreement between Patheon and Wesley P. Wheeler dated November 30, 2010.
10.25	Employment Agreement between Patheon and Peter T. Bigelow dated December 31, 2009.
10.26	Employment Agreement between Patheon and Eric W. Evans effective May 27, 2008.
10.27	Employment Agreement between Patheon Pharmaceutical Services Inc. and Warren A. Horton dated January 22, 2010.
10.28	Summary of Key Terms of the Employment Arrangement between Patheon and Mark J. Kontny dated March 17, 2010.
10.29	Offer Letter from Patheon to Doaa A. Fathallah dated February 20, 2008.
10.30	Employment Agreement between Patheon International GmbH and Doaa A. Fathallah effective May 6, 2008.
10.31	First Amendment, dated June 29, 2010, to Employment Agreement between Patheon International AG, as successor entity to Patheon International GmbH, and Doaa A. Fathallah effective May 6, 2008.
10.32	Addendum, effective December 17, 2009, to Employment Agreement between Patheon International AG (GmbH) and Doaa A. Fathallah effective May 6, 2008.
10.33	Employment Agreement between Patheon and Paul M. Garofolo dated May 12, 2008.
10.34	First Amendment, dated November 23, 2008, to Employment Agreement between Patheon and Paul M. Garofolo dated May 12, 2008.
10.35	Employment Agreement between Patheon and Geoffrey M. Glass dated March 17, 2009.
10.36	Addendum, effective October 1, 2009, to Employment Agreement between Patheon and Geoffrey M. Glass dated March 17, 2009.
10.37	Employment Agreement between Patheon Limited UK and Andrew Kelley effective November 1, 2005.
10.38	Amendment, dated August 16, 2006, to Employment Agreement between Patheon Limited UK and Andrew Kelley effective November 1, 2005.

106

Exhibit No.	Description
10.39	Addendum, dated January 31, 2009, to Employment Agreement between Patheon Limited UK and Andrew Kelley effective November 1, 2005.
10.40	Amendment, dated January 28, 2011, to Employment Agreement between Patheon Limited UK and Andrew Kelley effective November 1, 2005.
10.41	Employment Agreement between Patheon Italia S.p.A. and Antonella Mancuso dated September 3, 2001.
10.42	Form of Indemnification Agreement entered into between Patheon and each of Ramsey A. Frank, Roy T. Graydon, Paul S. Levy, Thomas S. Taylor and Derek J. Watchorn.
21.1	Subsidiaries of Patheon.

107

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

PATHEON INC.
By:	/s/    Eric W. Evans
Eric W. Evans
Chief Financial Officer
February 25, 2011

108

APPENDIX A

RADFORD PEER GROUP

1	AAIPHARMA	51	EV3
2	ABBOTT LABS	52	EXELIXIS
3	ABBOTT MEDICAL OPTICS	53	FAMILY HEALTH INTERNATIONAL
4	AFFYMETRIX	54	FLEXTRONICS INTERNATIONAL
5	AGILENT TECHNOLOGIES	55	FOREST LABORATORIES
6	ALCON LABORATORIES	56	FRED HUTCHINSON CANCER RESEARCH CTR
7	ALKERMES	57	FRESENIUS MEDICAL CARE CANADA
8	AMERICAN RED CROSS	58	GALDERMA LABORATORIES
9	AMGEN	59	GEN-PROBE
10	AMRI	60	GENENCOR A DANISCO DIVISION
11	AMYLIN PHARMACEUTICALS	61	GENENTECH
12	APP PHARMACEUTICALS	62	GENZYME
13	ASTELLAS	63	GILEAD SCIENCES
14	ASTRAZENECA PHARMACEUTICALS	64	GLAXOSMITHKLINE
15	BATTELLE MEMORIAL INSTITUTE	65	H LEE MOFFITT CANCER CENTER
16	BAXTER INTERNATIONAL	66	HAEMONETICS
17	BAYER CANADA	67	HARLAN LABORATORIES
18	BD DIAGNOSTICS GENEOHM	68	HARVARD UNIVERSITY
19	BECKMAN COULTER	69	HOFFMAN LA ROCHE
20	BECTON DICKINSON	70	HOLOGIC
21	BIO-RAD LABORATORIES	71	HOWARD HUGHES MEDICAL
22	BIOGEN IDEC	72	HUMAN GENOME SCIENCES
23	BIOMARIN PHARMACEUTICAL	73	ICON CLINICAL RESEARCH
24	BIOMERIEUX	74	IDEXX LABORATORIES
25	BOEHRINGER INGELHEIM GMBH	75	ILLUMINA
26	BOSTON SCIENTIFIC	76	IMPAX LABORATORIES
27	BRISTOL-MYERS SQUIBB COMPANY	77	INGENIX
28	BROAD INSTITUTE OF MIT & HARVARD	78	INTUITIVE SURGICAL
29	CARDINAL HEALTH	79	INVERNESS MEDICAL INNOVATIONS
30	CELGENE	80	JOHNSON & JOHNSON
31	CEPHALON	81	KENDLE INTERNATIONAL
32	CHARLES RIVER LABORATORIES	82	KING PHARMACEUTICALS
33	CIBA VISION	83	KV PHARMACEUTICAL
34	CINCINNATI CHILDRENS HOSPITAL	84	LIFE TECHNOLOGIES
35	CITY OF HOPE	85	LONZA BIOLOGICS
36	COVANCE	86	LOVELACE RESPIRATORY RESEARCH INST
37	CSL BEHRING	87	LUNDBECK CANADA
38	CUBIST PHARMACEUTICALS	88	MARTEK BIOSCIENCES
39	DAIICHI SANKYO	89	MDS
40	DFB PHARMACEUTICALS	90	MEDICIS PHARMACEUTICAL
41	DIONEX	91	MEDIMMUNE
42	DJO	92	MEDPACE
43	DUKE CLINICAL RESEARCH INSTITUTE	93	MEDTRONIC
44	DUPONT	94	MERCK & CO
45	EDWARDS LIFESCIENCES	95	MERIAL
46	EISAI	96	MILLENNIUM THE TAKEDA ONCOLOGY COMPANY
47	ELAN	97	MILLIPORE
48	EMD CHEMICALS	98	MONSANTO
49	EMD SERONO	99	MYRIAD GENETICS
50	EMERGENT BIOSOLUTIONS	100	NOVARTIS INST/FUNCTIONAL GENOMICS

109

111	NOVARTIS PHARMACEUTICALS
112	NOVARTIS VACCINES & DIAGNOSTICS
113	NOVEN PHARMACEUTICALS
114	PAREXEL INTERNATIONAL
115	PERKIN ELMER
116	PFIZER
117	PHARMACEUTICAL PRODUCT DEVELOPMENT
118	PHARMANET
119	PIONEER HI-BRED INTERNATIONAL
120	PRA INTERNATIONAL
121	PREMIER RESEARCH GROUP
122	PROMEGA
123	PURDUE PHARMA LP
124	QIAGEN SCIENCES
125	QUINTILES
126	R&D SYSTEMS
127	REGENERON PHARMACEUTICAL
128	ROCHE DIAGNOSTICS
129	ROCHE MOLECULAR SYSTEMS
130	RTI INTERNATIONAL
131	SAIC FREDERICK
132	SALK INSTITUTE FOR BIOLOGICAL STUDIES
133	SANOFI PASTEUR
134	SANOFI-AVENTIS
135	SCIELE PHARMA
136	SEPRACOR
137	SHIRE PHARMACEUTICALS
138	SIEMENS HEALTHCARE
139	SPECTRUM HEALTH
140	ST JUDE CHILDRENS RESEARCH HOSPITAL
141	STANFORD UNIVERSITY
142	STANFORD UNIVERSITY MEDICAL CENTER
143	SYNGENTA CROP PROTECTION
144	SYNTHES USA
145	TAKEDA PHARMACEUTICALS NORTH AMERICA
146	TALECRIS BIOTHERAPEUTICS
147	TEVA PHARMACEUTICALS USA
148	THE UNIVERSITY OF CHICAGO
149	THORATEC
150	UNIVERSITY OF MIAMI MILLER SCHOOL OF MEDICINE
151	VENTANA MEDICAL SYSTEMS
152	VERTEX PHARMACEUTICALS
153	WARNER CHILCOTT
154	WATSON PHARMACEUTICALS
155	WYETH PHARMACEUTICALS
156	ZIMMER
157	ZYMOGENETICS

110

EXHIBIT INDEX

Exhibit No.	Description
3.1	Articles of Amalgamation of Patheon Inc. (“Patheon”).
3.2	Amendment to Articles of Amalgamation of Patheon.
3.3	By-Laws of Patheon dated March 27, 2008.
4.1	Form of Patheon’s Share Certificate.
4.2	Indenture dated April 23, 2010 among Patheon, certain subsidiaries of Patheon as Guarantors, U.S. Bank National Association and Deutsche Bank Trust Company Americas, with respect to the 8.625% Senior Secured Notes due 2017.
4.3	Form of 8.625% Senior Secured Notes due 2017 (included in Exhibit 4.2).
10.1	Amended and Restated Revolving Credit Agreement dated April 23, 2010 among Patheon, certain subsidiaries of Patheon as Guarantors, the lenders party thereto, JPMorgan Chase Bank, N.A., as U.S. Administrative Agent, JPMorgan Chase Bank, N.A., as Canadian Administrative Agent, and Toronto Branch and J.P. Morgan Europe Limited, as European Administrative Agent.
10.2	Purchase Agreement dated March 1, 2007 between Patheon and JLL Partners Fund V, L.P.
10.3	Investor Agreement dated April 27, 2007 between Patheon and JLL Patheon Holdings, LLC.
10.4	Redemption Waiver Agreement dated September 4, 2008 between Patheon and JLL Patheon Holdings, LLC.
10.5	Settlement Agreement dated November 29, 2009 between Patheon and JLL Patheon Holdings, LLC.
10.6	Lease Agreement dated January 15, 1996 between Lansdown Estates Group Limited and Oxford Asymmetry Limited, assigned to Patheon U.K. Limited on May 3, 2006 in respect of the Milton Park Facility.
10.7	Licence to Assign Lease Agreement in respect of the Milton Park Facility dated April 28, 2006 among MEPC Milton Park No. 1 Limited and MEPC Milton Park No. 2 Limited, EVOTEC (UK) Limited and Patheon UK Limited.
10.8	Contract for the Sale of Leasehold Land in respect of the Milton Park Facility dated May 3, 2006 between EVOTEC (UK) Limited and Patheon UK Limited.
10.9	Assignment of Leasehold Property in respect of the Milton Park Facility dated May 3, 2006 between EVOTEC (UK) Limited and Patheon UK Limited.
10.10	Lease Agreement dated December 1, 1993 between Custom Pharmaceuticals and Promix Laboratories, Divisions of Patheon, and The Cadillac Fairview Corporation Limited in respect of the Burlington Facility.
10.11	Lease Renewal Agreement dated April 10, 2004 between Patheon and Klaus Stephan Reeckmann in respect of the Burlington Facility.
10.12	Amended and Restated Incentive Stock Option Plan of Patheon dated September 4, 2008 (the “Incentive Stock Option Plan”).
10.13	Form of Stock Option Agreement under the Incentive Stock Option Plan for certain awards granted on or before March 17, 2010.
10.14	Form of Stock Option Agreement under the Incentive Stock Option Plan for certain awards granted on or after March 17, 2010.
10.15	Amended and Restated Restricted Share Unit Plan of Patheon dated September 4, 2008 (the “Restricted Share Unit Plan”).
10.16	Performance Share Unit Plan of Patheon dated December 13, 2007 (the “Performance Share Unit Plan”).
10.17	Form of Performance Share Unit Grant Agreement under the Performance Share Unit Plan.
10.18	Directors Deferred Share Unit Plan of Patheon dated February 22, 2008, as amended March 27, 2008.

111

Exhibit No.	Description
10.19	Description of Compensation for Non-Employee Directors of Patheon.
10.20	Deferred Compensation Plan of Patheon dated January 1, 2003, as amended December 18, 2008.
10.21	Employment Agreement between Patheon Pharmaceutical Services Inc. and James C. Mullen effective February 7, 2011.
10.22	Employment Agreement between Patheon and Wesley P. Wheeler dated December 3, 2007.
10.23	First Amendment, dated May 5, 2009, to Employment Agreement between Patheon and Wesley P. Wheeler dated December 3, 2007.
10.24	Separation Agreement between Patheon and Wesley P. Wheeler dated November 30, 2010.
10.25	Employment Agreement between Patheon and Peter T. Bigelow dated December 31, 2009.
10.26	Employment Agreement between Patheon and Eric W. Evans effective May 27, 2008.
10.27	Employment Agreement between Patheon Pharmaceutical Services Inc. and Warren A. Horton dated January 22, 2010.
10.28	Summary of Key Terms of the Employment Arrangement between Patheon and Mark J. Kontny dated March 17, 2010.
10.29	Offer Letter from Patheon to Doaa A. Fathallah dated February 20, 2008.
10.30	Employment Agreement between Patheon International GmbH and Doaa A. Fathallah effective May 6, 2008.
10.31	First Amendment, dated June 29, 2010, to Employment Agreement between Patheon International AG, as successor entity to Patheon International GmbH, and Doaa A. Fathallah effective May 6, 2008.
10.32	Addendum, effective December 17, 2009, to Employment Agreement between Patheon International AG (GmbH) and Doaa A. Fathallah effective May 6, 2008.
10.33	Employment Agreement between Patheon and Paul M. Garofolo dated May 12, 2008.
10.34	First Amendment, dated November 23, 2008, to Employment Agreement between Patheon and Paul M. Garofolo dated May 12, 2008.
10.35	Employment Agreement between Patheon and Geoffrey M. Glass dated March 17, 2009.
10.36	Addendum, effective October 1, 2009, to Employment Agreement between Patheon and Geoffrey M. Glass dated March 17, 2009.
10.37	Employment Agreement between Patheon Limited UK and Andrew Kelley effective November 1, 2005.
10.38	Amendment, dated August 16, 2006, to Employment Agreement between Patheon Limited UK and Andrew Kelley effective November 1, 2005.
10.39	Addendum, dated January 31, 2009, to Employment Agreement between Patheon Limited UK and Andrew Kelley effective November 1, 2005.
10.40	Amendment, dated January 28, 2011, to Employment Agreement between Patheon Limited UK and Andrew Kelley effective November 1, 2005.
10.41	Employment Agreement between Patheon Italia S.p.A. and Antonella Mancuso dated September 3, 2001.
10.42	Form of Indemnification Agreement entered into between Patheon and each of Ramsey A. Frank, Roy T. Graydon, Paul S. Levy, Thomas S. Taylor and Derek J. Watchorn.
21.1	Subsidiaries of Patheon.

112

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-1
FINANCIAL STATEMENTS
Consolidated Balance Sheets		F-2
Consolidated Statements of Loss		F-3
Consolidated Statements of Changes in Shareholders’ Equity		F-4
Consolidated Statements of Comprehensive (Loss) Income		F-5
Consolidated Statements of Cash Flows		F-6
Notes to Consolidated Financial Statements		F-7

113

AUDITORS’ REPORT

To the Shareholders of Patheon Inc.

We have audited the consolidated balance sheets of Patheon Inc. as of October 31, 2010 and 2009 and the consolidated statements of loss, changes in shareholders’ equity, comprehensive (loss) income and cash flows for each of the three years in the period ended October 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2010 and 2009 and the results of its operations and its cash flows for each of the three years in the period ended October 31, 2010 in accordance with Canadian generally accepted accounting principles.

/s/ Ernst & Young LLP

Certified Public Accountants

Raleigh, North Carolina

December 16, 2010 (except for Note 21 which is as of February 25, 2011)

F-1

Patheon Inc.

CONSOLIDATED BALANCE SHEETS

	As of October 31,
(in millions of U.S. dollars )	2010			2009
	$			$
Assets
Current
Cash and cash equivalents		53.5			22.3
Accounts receivable		139.9			151.5
Inventories		73.3			78.3
Income taxes receivable		5.7			2.6
Prepaid expenses and other		9.5			11.8
Future tax assets—short term		9.0			10.5
Total current assets		290.9			277.0
Capital assets		478.3			490.8
Intangible assets		1.4			3.2
Future tax assets		11.2			11.8
Goodwill		3.4			3.2
Investments		5.3			4.1
Long-term assets held for sale		—			0.7
Other long-term assets		18.4			—
Total assets		808.9			790.8
Liabilities and shareholders’ equity
Current
Short-term borrowings		2.0			14.0
Accounts payable and accrued liabilities		156.7			170.8
Income taxes payable		0.4			1.8
Deferred revenues—short term		26.7			4.6
Future tax liability—short term		—			1.7
Current portion of long-term debt		3.5			15.4
Total current liabilities		189.3			208.3
Long-term debt		274.8			221.1
Deferred revenues		19.2			37.1
Future tax liabilities		29.7			31.5
Other long-term liabilities		22.9			21.5
Total liabilities		535.9			519.5
Shareholders’ equity
Restricted voting shares		553.8			553.8
Contributed surplus		10.0			7.7
Deficit		(330.7	)		(325.7	)
Accumulated other comprehensive income		39.9			35.5
Total shareholders’ equity		273.0			271.3
Total liabilities and shareholders’ equity		808.9			790.8

On behalf of the Board:

/s/ Ramsey A. Frank	/s/ Peter T. Bigelow
RAMSEY A. FRANK	PETER T. BIGELOW
DIRECTOR	INTERIM CHIEF EXECUTIVE OFFICER

see accompanying notes

F-2

Patheon Inc.

CONSOLIDATED STATEMENTS OF LOSS

	Years ended October 31,
(in millions of U.S. dollars, except loss per share)	2010			2009			2008
	$			$			$
Revenues		671.2			655.1			717.3
Cost of goods sold		526.2			511.2			560.2
Gross profit		145.0			143.9			157.1
Selling, general and administrative expenses		110.6			105.5			121.3
Repositioning expenses		6.8			2.1			19.9
Operating income		27.6			36.3			15.9
Interest expense, net		19.5			15.4			30.8
Impairment charge		3.6			—			0.4
Foreign exchange (gain) loss		(1.5	)		7.0			(1.5	)
Gain on extinguishment of debt		—			—			(34.9	)
Loss (gain) on sale of fixed assets		0.2			—			(0.7	)
Refinancing Expenses		12.2			—			—
Other		(0.1	)		0.4			—
(Loss) income from continuing operations before income taxes		(6.3	)		13.5			21.8
Current		6.7			7.7			13.9
Future		(9.7	)		4.8			(12.4	)
(Benefit from) provision for income taxes		(3.0	)		12.5			1.5
(Loss) income before discontinued operations		(3.3	)		1.0			20.3
Loss from discontinued operations		(1.7	)		(7.8	)		(19.5	)
Net (loss) income for the period		(5.0	)		(6.8	)		0.8
Dividends on convertible preferred shares		—			11.1			1.5
Net loss attributable to restricted voting shareholders		(5.0	)		(17.9	)		(0.7	)
Basic and diluted loss per share
From continuing operations	$	(0.026	)	$	(0.100	)	$	0.207
From discontinued operations	$	(0.013	)	$	(0.077	)	$	(0.215	)
	$	(0.039	)	$	(0.177	)	$	(0.008	)
Weighted-average number of shares outstanding during period—basic and diluted (in thousands)		129,168			100,964			90,737

see accompanying notes

F-3

Patheon Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

	Years ended October 31,
(in millions of U.S. dollars)	2010			2009			2008
	$			$			$
Convertible preferred shares—equity component
Balance at beginning of period		—			149.2			15.9
Reclassification from debt component		—			—			131.8
Paid in-kind dividend on shares		—			11.1			1.5
Conversion of convertible preferred shares		—			(160.3	)		—
Balance at end of period		—			—			149.2
Restricted voting shares
Balance at beginning of period		553.8			393.5			392.0
Shares issued during the period, net of issue costs		—			—			1.5
Conversion of convertible preferred shares		—			160.3			—
Balance at end of period		553.8			553.8			393.5
Contributed surplus
Balance at beginning of period		7.7			6.7			4.1
Stock-based compensation		2.3			1.0			2.6
Balance at end of period		10.0			7.7			6.7
Deficit
Balance at beginning of period		(325.7	)		(309.3	)		(293.7	)
Change on deemed redemption of equity component of preferred shares		—			—			(14.9	)
Adjustment related to change in accounting policy		—			1.6			—
Net loss attributable to restricted voting shareholders		(5.0	)		(17.9	)		(0.7	)
Balance at end of period		(330.7	)		(325.7	)		(309.3	)
Accumulated other comprehensive income (loss)
Balance at beginning of period		35.5			(2.9	)		71.5
Other comprehensive income (loss) for the period		4.4			38.4			(74.4	)
Balance at end of period		39.9			35.5			(2.9	)
Total shareholders’ equity at end of period		273.0			271.3			237.2

see accompanying notes

F-4

Patheon Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

	Years ended October 31,
(in millions of U.S. dollars)	2010			2009			2008
	$			$			$
Net loss attributable to restricted voting shareholders		(5.0	)		(17.9	)		(0.7	)
Other comprehensive income (loss), net of income taxes
Change in foreign currency gains (losses) on investments in subsidiaries, net of hedging activities1		1.6			25.5			(57.8	)
Change in value of derivatives designated as foreign currency and interest rate cash flow hedges2		9.0			8.0			(11.5	)
(Losses) gains on foreign currency and interest rate cash flow hedges reclassified to consolidated statement of loss3		(6.2	)		4.9			(5.1	)
Other comprehensive income (loss) for the period		4.4			38.4			(74.4	)
Comprehensive (loss) income attributable to restricted voting shareholders		(0.6	)		20.5			(75.1	)

The amounts disclosed in other comprehensive income have been recorded net of income taxes as follows:

¹ Net of an income tax expense of $0.1 million (2009 and 2008 nil).

² Net of an income tax expense of $1.9 million for the year ended October 31, 2010. (Net of an income tax expense of $1.1 million and a recovery of $0.2 million for the years ended October 31, 2009 and 2008, respectively.)

³ Net of an income tax recovery of $0.8 million for the year ended October 31, 2010 . (Net of an income tax recovery of $0.9 million and $0.3 million for the years ended October 31, 2009 and 2008, respectively.)

see accompanying notes

F-5

Patheon Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years ended October 31,
(in millions of U.S. dollars)	2010			2009			2008
	$			$			$
Operating activities
(Loss) income before discontinued operations		(3.3	)		1.0			20.3
Add (deduct) charges to operations not requiring a current cash payment
Depreciation and amortization		55.8			42.6			45.3
Impairment charge		3.6			—			0.4
Foreign exchange loss on debt		—			—			7.0
Accreted interest on convertible preferred shares		—			—			13.5
Gain on extinguishment of debt		—			—			(34.9	)
Other non-cash interest		2.5			0.6			0.6
Change in other long-term assets and liabilities		(8.6	)		(1.2	)		(3.2	)
Future income taxes		(8.9	)		4.8			(12.4	)
Amortization of deferred revenues		(37.4	)		(1.0	)		(1.9	)
Loss on sale of fixed assets		0.2			—			(0.7	)
Stock-based compensation expense		2.3			1.0			2.6
Other		(0.3	)		0.5			(0.1	)
		5.9			48.3			36.5
Net change in non-cash working capital balances related to continuing operations		(2.6	)		(10.8	)		(3.6	)
Increase in deferred revenues		47.4			10.5			2.6
Cash provided by operating activities of continuing operations		50.7			48.0			35.5
Cash used in operating activities of discontinued operations		(0.7	)		(8.9	)		(9.1	)
Cash provided by operating activities		50.0			39.1			26.4
Investing activities
Additions to capital assets		(48.7	)		(49.1	)		(55.8	)
Proceeds on sale of capital assets		—			0.1			12.2
Net increase in investments		(1.1	)		(0.3	)		(1.3	)
Investment in intangibles		(0.2	)		(0.2	)		—
Cash used in investing activities of continuing operations		(50.0	)		(49.5	)		(44.9	)
Cash provided by investing activities of discontinued operations		—			0.2			10.4
Cash used in investing activities		(50.0	)		(49.3	)		(34.5	)
Financing activities
(Decrease) increase in short-term borrowings		(10.7	)		3.0			3.2
Increase in long-term debt		296.2			50.5			40.3
Increase in deferred financing costs		(7.3	)		—			—
Repayment of long-term debt		(246.6	)		(39.9	)		(38.9	)
Convertible preferred share issue cost—equity component		—			—			(0.2	)
Issue of restricted voting shares		—			—			0.4
Cash provided by financing activities of continuing operations		31.6			13.6			4.8
Cash used in financing activities of discontinued operations		—			—			(0.2	)
Cash provided by financing activities		31.6			13.6			4.6
Effect of exchange rate changes on cash and cash equivalents		(0.4	)		(1.3	)		(6.8	)
Net increase (decrease) in cash and cash equivalents during the period		31.2			2.1			(10.3	)
Cash and cash equivalents, beginning of period		22.3			20.2			30.5
Cash and cash equivalents, end of period		53.5			22.3			20.2
Supplemental cash flow information
Interest paid		21.1			15.1			16.6
Income taxes paid, net of refunds		9.1			10.2			13.0

see accompanying notes

F-6

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

1. NATURE OF BUSINESS

Patheon Inc. (“Patheon” or the “Company”) is a Canadian public company, which trades under the symbol PTI on The Toronto Stock Exchange ("TSX"). The Company is an independent provider of drug development and manufacturing services to global pharmaceutical, biotechnology and specialty pharmaceutical companies.

Patheon’s commercial manufacturing activities relate primarily to products in solid, semi-solid, liquid and sterile dosage forms. The Company manufactures to customer specifications a wide variety of products in many packaging formats. The Company can be responsible for each aspect of the manufacturing and packaging process, from sourcing raw materials and packaging components to delivering the finished product in consumer-ready form to the customer's distribution facilities.

Patheon’s pharmaceutical development services include dosage form development, analytical methods development, pilot batch manufacture of new products for the regulatory drug approval process and the provision of scale-up services designed to demonstrate that a drug can be manufactured in commercial volumes.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements of the Company have been prepared by management in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”). The significant accounting policies followed by the Company are summarized as follows:

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions have been eliminated.

Going concern

The consolidated financial statements have been prepared in accordance with Canadian GAAP using the going-concern assumption, which assumes the Company will be able to realize assets and discharge liabilities in the normal course of operations.

Use of estimates in the preparation of the consolidated financial statements

The preparation of the consolidated financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect: the reported amounts of assets and liabilities; the disclosure of contingent assets and liabilities at the date of the consolidated financial statements; and the reported amounts of revenue and expenses in the reporting period. Management believes that the estimates and assumptions used in preparing its consolidated financial statements are reasonable and prudent; however, actual results could differ from those estimates.

Changes in accounting policy

The Company had no changes in accounting policy from the previously audited consolidated financial statements for the year ended October 31, 2009.

F-7

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

Foreign exchange translation

The Company’s assets and liabilities that are not denominated in U.S. dollars are translated into U.S. dollars as follows: non-monetary assets are translated using the exchange rate in effect at year end, non-monetary assets and liabilities are translated at the exchange rates in effect at the time of acquisition or issue, and revenues and expenses are translated at the average rate during each month. Translation gains and losses related to the carrying value of the Company’s foreign operations are included in accumulated other comprehensive income in shareholders’ equity. Foreign exchange gains and losses on transactions occurring in a currency different than the entity’s functional currency are reflected in income (loss).

Revenue recognition

The Company recognizes revenue for its commercial manufacturing and pharmaceutical development services when services are completed in accordance with specific agreements with its customers and when all costs connected with providing these services have been incurred, the price is fixed or determinable and collectability is reasonably assured. Customer deposits on pharmaceutical development services in progress are included in accounts payable and accrued liabilities.

The Company does not receive any fees on signing of contracts. In the case of pharmaceutical development services, revenue is recognized on the achievement of specific milestones in accordance with the respective development service contracts. In the case of commercial manufacturing services, revenue is recognized when services are complete and the product has met rigorous quality assurance testing.

Deferred revenues

The costs of certain capital assets are reimbursed to the Company by the pharmaceutical companies that are to benefit from the improvements in connection with the manufacturing and packaging agreements in force. These reimbursements are recorded as deferred revenues and are recognized as income over the remaining minimum term of the agreements. In certain instances the Company receives prepayment for future services and these amounts are amortized over the future required service periods.

Financial assets and liabilities

The Company’s financial instruments are classified into one of the following five categories: held-for-trading, held to maturity investments, loans and receivables, available-for-sale financial assets and other financial liabilities. All financial instruments, including derivatives, are included in the consolidated balance sheet and are measured at fair value except for held to maturity investments, loans and receivables and other financial liabilities, which are measured at amortized cost. Held-for-trading financial instruments are recorded at cost as they are initiated and are subsequently measured at fair value and all revaluation gains and losses are included in net income (loss) in the period in which they arise. Available-for-sale financial instruments are also recorded at cost and are subsequently measured at fair value with all revaluation gains and losses included in other comprehensive income. All financial instrument transactions are recorded on the settlement date. Please refer to Note 13—Financial Instruments and Risk Management.

The Company expenses as incurred all transaction costs, including fees paid to advisors and other related costs. Financing costs, including underwriting and arrangement fees paid to lenders are deferred and netted against the carrying value of the related debt and amortized into interest expense using the effective interest rate method.

F-8

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010 and 2009

(Dollar information in tabular form is expressed in millions of U.S. dollars)

Derivatives and hedge accounting

The Company enters into foreign currency forward contracts to reduce its exposure to foreign currency denominated cash flows and the change in the fair value of foreign denominated assets and liabilities. Please refer to Note 13—Financial Instruments and Risk Management. The Company previously entered into interest rate swap contracts to reduce its exposure to variable interest rates.

All derivative instruments are recorded on the consolidated balance sheets at fair value unless exempted from derivative treatment as a normal purchase and sale. All changes in their fair value are recorded in income (loss) unless cash flow hedge accounting is used, in which case the changes in the fair value associated with the effective portions of the hedge are recorded in other comprehensive income.

Prior to the refinancing in the second quarter of fiscal 2010, the Company held foreign currency denominated debt as a hedge against the carrying value of its equity investment in certain foreign currency denominated operations. The foreign exchange translation impact of foreign denominated debt that was designated as an effective hedge of the net investments in foreign operations was recognized in other comprehensive income. The foreign exchange translation impact of foreign denominated debt that was not considered to be an effective hedge was recorded in income (loss) from operations. In the third quarter of fiscal 2010, the Company changed the functional currency of its corporate division in Canada to U.S. dollars, thereby eliminating the need for the Company to designate this U.S. dollar denominated debt as a hedge.

Cash and cash equivalents

Cash and cash equivalents include cash in interest-bearing accounts and term deposits with remaining maturities of less than three months at the date the term deposit was acquired.

Inventories

Inventories consisting of raw materials, packaging components, spare parts and work-in-process are valued at the lower of cost and net realizable value. Cost is principally determined by the standard cost method, which approximates average cost, and includes cost of purchased materials, costs of conversion, namely labor and overhead, and other costs, such as freight in, necessary to bringing the inventories to their present location and condition.

Capital assets

Capital assets are carried at cost less accumulated depreciation. The cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in earnings.

Depreciation is provided on the straight-line basis based on estimated useful lives as follows:

Buildings	30 – 50 years
Building equipment	15 years
Machinery and equipment	5 – 15 years
Office equipment	3 – 10 years
Computer software	2 – 10 years
Furniture and fixtures	7 – 10 years

Repairs and maintenance costs are charged to operations as incurred.

F-9

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010 and 2009

(Dollar information in tabular form is expressed in millions of U.S. dollars)

Intangible assets

Intangible assets represent the values assigned to acquired customer contracts and relationships and certain royalty agreements entered into with customers. They are amortized on a straight-line basis over their estimated economic lives.

Impairment of long-lived depreciable assets

The Company reviews whether there are any indicators of impairment of its capital assets and identifiable intangible assets (“long-lived depreciable assets”). If such indicators are present, the Company assesses the recoverability of the assets or group of assets by determining whether the carrying value of such assets can be recovered through undiscounted future cash flows. If the sum of undiscounted future cash flows is less than the carrying amount, the excess of the carrying amount over the estimated fair value, based on discounted future cash flows, is recorded as a charge to earnings.

Goodwill

Goodwill represents the excess of the purchase price of the Company's interest in subsidiary companies over the fair value of the underlying net identifiable assets arising on acquisitions. Goodwill is not subject to amortization but is subject to an annual review for impairment, or more frequently if events or changes in circumstances indicate that goodwill is impaired. Goodwill impairment is assessed based on a comparison of the fair value of an individual reporting unit to the underlying carrying value of the reporting unit’s net assets including goodwill. When the carrying amount of the reporting unit exceeds its fair value, the fair value of the reporting unit’s goodwill, determined in the same manner as in a business combination, is compared with its carrying amount to measure the amount of the impairment loss, if any.

Employee benefit plans

The Company provides a number of benefit plans to its employees including:

(a) defined benefit pension plans; (b) post-employment benefit plans; (c) defined contribution pension plans; and (d) unfunded termination indemnities.

The cost of defined benefit pension plans and other post-employment benefits, which include health care and dental benefits, related to employees' current service is charged to earnings annually. The cost is computed on an actuarial basis using the projected benefit method pro-rated based on service and management's best estimates of various actuarial factors, including salary escalation, other cost escalation and retirement ages of employees.

The valuation of defined benefit pension plan assets is at current market value, based on an actuarial valuation, for purposes of calculating the expected return on plan assets. Past service costs resulting from plan amendments are deferred and amortized on a straight-line basis over the remaining service life of employees active at the time of amendment.

Actuarial gains and losses arise from the difference between the actual long-term rate of return on plan assets for a period and the expected long-term rate of return on plan assets for that period, or from changes in actuarial assumptions used to determine the accrued benefit obligation. The excess of the net accumulated actuarial gain or loss over 10% of the greater of the benefit obligations and the fair value of plan assets is

F-10

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

amortized over the average remaining service period of active employees. The average remaining service period of the active employees covered by the pension plans and the other retirement benefit plans at the measurement date of October 31, 2010 is 18 years (2009—18 years). When the restructuring of a benefit plan gives rise to both a curtailment and a settlement of obligations, the curtailment is accounted for prior to the settlement.

The cost of defined contribution pension plans is charged to earnings as funds are contributed by the Company.

Unfunded termination indemnities for the employees of the Company’s subsidiary in Italy are accrued based on Italian severance pay statutes. The liability recorded on the consolidated balance sheets is the amount to which the employees would be entitled if the employees’ employment with the Company ceased.

Income taxes

The Company follows the liability method of income tax allocation. Under this method, future tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse.

The Company evaluates, on a quarterly basis, the ability to realize its future tax assets. The factors used to assess the likelihood of realization are the Company’s forecast of future taxable income and available tax planning strategies that could be implemented to realize the future tax assets.

Convertible preferred shares

On July 29, 2009, JLL Patheon Holdings, LLC (“JLL”) converted its 150,000 Series C convertible preferred shares of Patheon into a total of 38,018,538 restricted voting shares of Patheon, in accordance with the convertible preferred share terms. As a result of this conversion, the Company no longer has any Series C preferred shares outstanding.

Stock options

The fair value of stock options granted, modified or settled on or after November 1, 2003 is recognized on a straight-line basis over the applicable stock option vesting period as stock-based compensation expense in the consolidated statements of loss and contributed surplus in the consolidated balance sheets. On the exercise of stock options, consideration received and the accumulated contributed surplus amount is credited to share capital. The Company expenses forfeitures as incurred.

For the purposes of calculating the stock-based compensation expense, the fair value of stock options is estimated at the date of the grant using the Black-Scholes option pricing model and the cost is amortized over the vesting period. This model requires the input of a number of assumptions including dividend yields, expected stock price volatility, expected time until exercise and risk-free interest rates. Although the assumptions used reflect management’s best estimates, they involve assumptions based on market conditions generally outside of the control of the Company.

Loss per share

The calculation of loss per share—from continuing and discontinued operations equals reported net loss attributable to restricted voting shareholders—from continuing and discontinued operations divided by the

F-11

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

weighted-average number of restricted voting shares outstanding during the year. Diluted income per share would reflect the assumed conversion of all dilutive securities using the treasury stock method.

Under the treasury stock method:

• the exercise of options is assumed to be at the beginning of the period (or at the time of issuance, if later);

• options for which the closing fair market value exceeds the option price are the only ones that are assumed to be dilutive;

• the proceeds from the exercise of options, plus future period compensation expense on options granted on or after November 1, 2003, are assumed to be used to purchase restricted voting shares at the average price during the period;

• the number of restricted voting shares assumed to be dilutive, plus the weighted-average number of restricted voting shares outstanding during the year, is used in the denominator of the diluted earnings per share computation; and

• the convertible preferred shares are assumed to have been converted at the beginning of the year (or at time of issuance, if later), and the resulting restricted voting shares are included in the denominator.

Since the Company was in a loss position for the years ended October 31, 2010, 2009 and 2008, there is no dilutive effect.

Government financing

The Company makes periodic applications for financial assistance under available government assistance programs in the various jurisdictions in which it operates. Grants relating to capital expenditures are reflected as a reduction of the cost of the related assets. Grants and tax credits relating to current operating expenditures are generally recorded as a reduction of expenses at the time the eligible expenses are incurred. In the case of certain foreign subsidiaries, the Company receives investment incentive allowances, which are accounted for as a reduction of income tax expense.

Recently issued accounting pronouncements

Business combinations

Canadian Institute of Chartered Accountants (“CICA”) Section 1582, “Business Combinations,” replaces Section 1581, “Business Combinations.” Section 1582 was intended to improve the relevance, reliability and comparability of the information that a reporting entity provides in its financial statements about a business combination and its effects. This section outlines a variety of changes, including, but not limited to the following: an expanded definition of a business, a requirement to measure all business combinations and non-controlling interests at fair value, and a requirement to recognize future income tax assets and liabilities and acquisition and related costs as expenses of the period. The section applies to annual and interim financial statements for fiscal years beginning on or after January 1, 2011, with early adoption permitted. The Company is currently evaluating the effects of adopting these standards.

Consolidations

In January 2009, the CICA issued Handbook Section 1601, “Consolidations” (“CICA 1601”), and Section 1602, “Non-controlling Interests” (“CICA 1602”). CICA 1601 establishes standards for the preparation

F-12

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

of consolidated financial statements. CICA 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. The Company does not believe these standards will have a material impact on the financial statements.

Multiple deliverable revenue arrangements

In December 2009, the Emerging Issues Committee issued EIC-175, “Multiple Deliverable Revenue Arrangements.” This Abstract addresses some aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. Specifically, this Abstract addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting. This standard may be applied prospectively and should be applied to revenue arrangements with multiple deliverables entered into or materially modified in the first annual fiscal period beginning on or after January 1, 2011. The Company does not believe this standard will have a material impact on the financial statements.

Future accounting changes (U.S. GAAP and International Financial Reporting Standards)

In February 2008, the Canadian Accounting Standards Board confirmed that publicly accountable enterprises will be required to adopt International Financial Reporting Standards (“IFRSs”) in place of Canadian GAAP for interim and annual reporting purposes for fiscal years beginning on or after January 1, 2011, unless, as permitted by Canadian securities regulations, registrants adopt U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) on or before this date. The Company expects to register with the United States Securities and Exchange Commission during fiscal 2011 and, as a consequence, will be converting to U.S. GAAP. The Company will report under U.S. GAAP beginning in fiscal 2012 and as a result will not adopt IFRSs on November 1, 2011.

3. DISCONTINUED OPERATIONS, ASSETS HELD FOR SALE, AND PLANT CONSOLIDATIONS

Puerto Rico

The Company announced on December 10, 2009 its plan to consolidate its Puerto Rico operations into its manufacturing site located in Manatí and ultimately close or sell its plant in Caguas with anticipated repositioning costs of $7.0 million. In June 2010, the Company received a letter of intent for the purchase of its Caguas facility for a purchase price of $7.0 million which is currently estimated to close during the first half of 2011, and also announced modifications to the restructuring program related to the closure of this facility. This offer resulted in the Company reassessing the carrying value of the facility and increasing the previous impairment charge related to the value of the land by $2.1 million to $3.6 million, and reducing the time frame in which to accelerate depreciation on the remaining depreciable assets. The modifications to the restructuring program related to increased severance and a retention program that raised the anticipated costs of the program to approximately $9.0 million, of which $6.8 million was booked in the year ended October 31, 2010. The consolidation will take longer than previously expected due to customer regulatory filing time lines. The consolidation will also result in additional accelerated depreciation of Caguas assets of approximately $12.0 million over the life of the project. Because the business in the Caguas facility is being transferred within the existing site network, its results of operations are included in continuing operations.

The Company closed its Carolina facility in Puerto Rico effective January 31, 2009. In the second half of fiscal 2010 the Company received a letter of intent on the property which led management to complete another impairment analysis and completely write down the assets as the fair value less the cost to sell was nil. The results of the Carolina operations have been reported in discontinued operations in fiscal 2010 and 2009.

F-13

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

Canada

In connection with the restructuring of its network of pharmaceutical manufacturing facilities within Canada, the Company closed its York Mills facility and transferred all commercial production and development services undertaken at its York Mills facility to its site in Whitby. The Company exited the York Mills facility in the third quarter of fiscal 2009. Because the business in the York Mills facility was transferred within the existing site network, its results of operations were included in continuing operations.

On January 31, 2008, the Company completed the sale of its Niagara-Burlington commercial manufacturing business to Pharmetics Inc. Pharmetics acquired the assets, including equipment, facilities and land, at the Company’s facilities in Fort Erie and Burlington (Gateway Drive) in Ontario. Pharmetics offered employment to all of the commercial manufacturing employees at the two sites and continued to manufacture and supply all of the products manufactured at these sites. Proceeds from the divestiture, net of transaction costs and including post closing adjustments, were $10.5 million. The Company recorded a loss of $0.6 million on the disposal.

In fiscal 2008, the Company also announced plans to close its York Mills, Toronto facility. In accordance with this plan, on April 15, 2008 the Company completed the sale of the York Mills property for net proceeds of $11.9 million.

The results of the Carolina operations have been segregated and reported as discontinued operations in fiscal 2010, 2009 and 2008, while the Niagara-Burlington operations have been segregated and reported as discontinued operations in fiscal 2008 only.

The results of discontinued operations for Carolina and Niagara-Burlington for the years ended October 31, 2010, 2009 and 2008 are as follows:

	Years ended October 31,
	2010			2009			2008
	$			$			$
Revenues		—			2.6			17.9
Cost of goods sold		—			3.5			25.5
Gross loss		—			(0.9	)		(7.6	)
Selling, general and administrative expenses		0.9			2.8			2.8
Repositioning expenses (Note 18)		—			3.4			0.7
Operating loss		(0.9	)		(7.1	)		(11.1	)
Asset impairment charge		0.8			0.7			7.7
Loss on disposal of discontinued operations		—			—			0.6
Loss before income taxes		(1.7	)		(7.8	)		(19.4	)
Provision for income taxes		—			—			0.1
Net loss for the period		(1.7	)		(7.8	)		(19.5	)

For the years ended October 31, 2010 and 2009, the Company recorded impairment charges of $0.8 million and $0.7 million, respectively, to write down the carrying value of the Carolina operations long-lived assets to their fair value less cost to sell, based on discussions with third parties interested in purchasing the facility. In the third quarter of fiscal 2008, the Company recorded an impairment charge of $7.7 million to write down the carrying value of the Carolina operations long-lived assets to their fair value less estimated disposition costs, based on discussions with third parties interested in purchasing the facility.

F-14

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

As of October 31, 2009, the assets held for sale relate to the Carolina operations. In accordance with Section 3475 of the CICA handbook, long-lived assets held for sale are measured at the lower of their carrying amount or fair value less cost to sell.

Assets held for sale:

	As of October 31,
	2010		2009
	$		$
Long-term assets
Capital assets		—		0.7

4. INVENTORIES

	As of October 31,
	2010		2009
	$		$
Raw materials, packaging components and spare parts		47.3		48.7
Work-in-process		26.0		29.6
Balance, end of the year		73.3		78.3

5. CAPITAL ASSETS

	As of October 31,
	2010						2009
	Cost		Accumulated Depreciation		Net Book Value		Cost		Accumulated Depreciation		Net Book Value
	$		$		$		$		$		$
Land		30.6		—		30.6		33.0		—		33.0
Buildings		283.1		71.2		211.9		269.7		52.8		216.9
Machinery and equipment		430.1		238.8		191.3		406.8		217.8		189.0
Office equipment (including software)		41.4		36.0		5.4		34.5		29.5		5.0
Furniture and fixtures		17.7		12.0		5.7		15.8		8.7		7.1
Construction in progress		33.4		—		33.4		39.8		—		39.8
Balance, end of the year		836.3		358.0		478.3		799.6		308.8		490.8

The amount of open purchase commitments related to authorized capital projects at October 31, 2010 and 2009 was approximately $13.3 million and $8.1 million, respectively. The expenditures are expected to be incurred during the year ending October 31, 2011.

Included in capital assets are assets under capital leases with a cost of $16.0 million and $16.2 million at October 31, 2010 and 2009, respectively. The amount of accumulated depreciation for assets under capital leases is $4.1 million and $2.0 million at October 31, 2010 and 2009, respectively.

F-15

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

6. INTANGIBLE ASSETS

	As of October 31,
	2010			2009
	$			$
Balance, beginning of the year		3.2			4.9
Additions		0.2			0.2
Amortization		(2.0	)		(1.9	)
Balance, end of the year		1.4			3.2

7. SHORT-TERM BORROWINGS

	As of October 31,
	2010		2009
	$		$
Italian short-term operating credit facilities totaling €17.0 million (October 2009—€15.0 million), bearing interest at 3-month Euribor plus spreads between 0.8% and 1.35%. Amount utilized at October 31, 2009 was €8.2 million.		—		12.1
Short-term insurance premium financing		2.0		1.9
Balance, end of the period		2.0		14.0

The Italian short-term operating credit facilities were paid off as part of the refinancing in the second quarter of fiscal 2010.

F-16

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

8. LONG-TERM DEBT

Long-term debt in the accompanying consolidated balance sheets at October 31, 2010 and 2009 consists of the following:

	As of October 31,
	2010			2009
	$			$
8.625% senior secured notes due April 15, 2017		280.0			—
Senior secured term loan maturing April 28, 2014, bearing interest at 2.8% based upon floating LIBOR, US or CAD prime, or federal funds effective rates, plus applicable margins.		—			146.3
$75 million senior secured revolving loan facility maturing April 23, 2014, bearing interest ranging from 4.1% to 6.0% based upon floating LIBOR, US, or CAD prime, or federal funds effective rates, plus applicable margins.		—			37.7
U.S. obligations under capital leases bearing interest at fixed rate of 5.6%, maturing November 2011.		0.6			1.1
U.K. obligations under capital lease bearing interest at 6%, maturing in 2012, payable in Euros.		2.1			6.3
Italian mortgage, bearing interest at 6.3% based upon floating 3-month Euribor, maturing in 2014.		—			18.8
Italian mortgage, bearing interest at 6.5% based upon floating 3-month Euribor, maturing in 2014.		—			25.6
Italian unsecured government loan, bearing interest at 0.9% per annum, maturing in 2012.		1.9			3.1
Total long-term debt outstanding		284.6			238.9
Add call option premium on high yield bonds		0.9			—
Less unamortized transaction costs		(7.2	)		(2.4	)
Less current portion		(3.5	)		(15.4	)
Balance, end of the period		274.8			221.1

In April 2010, the Company issued $280.0 million in aggregate principal amount of 8.625% senior secured notes due April 15, 2017 (“the Notes”) in a private placement. The net proceeds from the Notes were used to repay all of the outstanding indebtedness under the Company’s then-existing senior secured term loan and $75.0 million asset-based revolving credit facility (“ABL”), repay certain other indebtedness and to pay related fees and expenses. The remaining proceeds are available to be used for general corporate purposes.

Patheon also amended and restated its existing $75.0 million ABL. Under the amended terms of the ABL, the maturity date was extended from 2012 to 2014.

Interest on the Notes accrues at the rate of 8.625% per annum and is payable semi-annually in arrears on April 15 and October 15, commencing on October 15, 2010 to the holders of Notes of record on the immediately preceding April 1 and October 1, respectively. Interest on the Notes accrues from the most recent date to which interest has been paid or, if no interest has been paid, from and including the issue date. Interest on the Notes is computed on the basis of a 360-day year comprised of twelve 30-day months.

F-17

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

At any time prior to April 15, 2013 the Company may redeem all or a part of the Notes, at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the greater of 1% or the 2013 redemption price set forth in the table below (expressed as percentages of the principal amount of the Notes to be redeemed), discounted back to the date of redemption (the “Redemption Date”) and all required but unpaid interest due through April 15, 2013 subject to the rights of holders on the relevant record date to receive interest due on the relevant interest payment date.

On and after April 15, 2013, the Company may redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of the principal amount of the Notes to be redeemed) set forth below, plus accrued and unpaid interest thereon, if any, to the applicable redemption date, subject to the rights of holders of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on April 15 of each of the years indicated below:

Year	%
2013		106.469
2014		104.313
2015		102.156
2016 and thereafter		100.000

In addition, until April 15, 2013, the Company may, at its option, redeem up to 35.0% of the aggregate principal amount of the Notes issued by it at a redemption price equal to 108.625% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the applicable redemption date, subject to the right of holders of Notes of record on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds of one or more equity offerings; provided that at least 65.0% of the sum of the aggregate principal amount of the Notes originally issued under the indenture and any additional notes issued under the indenture after the issue date remains outstanding immediately after the occurrence of each such redemption; provided further that each such redemption occurs within 90 days of the date of closing of each such equity offering.

Additionally, at any time prior to April 15, 2013, the Company may redeem a portion of the Notes, at a redemption price equal to 103.000% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the applicable date of redemption, subject to the rights of holders of Notes on the relevant record date to receive interest due on the relevant interest payment date; provided that in no event may the Company redeem more than 10.0% of the original aggregate principal amount of the Notes and any additional notes during any twelve-month period.

The agreements that govern the terms of the Company’s debt, including the indenture that governs the Notes and the credit agreement that governs its ABL, contain covenants that restrict the Company’s ability and the ability of its subsidiaries to, among other things:

• incur additional indebtedness;

• pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments;

• enter into agreements that restrict distributions from restricted subsidiaries or restrict its ability to incur liens on certain of its assets;

F-18

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

• sell or otherwise dispose of assets, including capital stock of restricted subsidiaries;

• enter into transactions with affiliates;

• create or incur liens; and

• merge, consolidate or sell substantially all of the Company’s assets.

Provided that the Company is not in default under the ABL or the indenture governing the Notes and is able to satisfy certain tests related to the Company’s Fixed Charge Coverage Ratio (as defined in the indenture governing the Notes), and will have a required minimum amount of remaining borrowing availability under the ABL after giving effect thereto, the Company is permitted to pay certain limited amounts of dividends or other distributions with respect to its common stock (as more particularly described in the ABL and the indenture governing the Notes, up to $15.0 million plus 50.0% of Excess Cash Flow (as defined in the ABL), plus net proceeds of additional permitted equity offerings under the ABL, or up to 50.0% of Consolidated Net Income (as defined in the indenture governing the Notes) plus net proceeds from additional permitted equity offerings or sales of restricted investments under the Notes).

In addition, under the ABL, if the Company’s borrowing availability falls below the greater of $10.0 million and 13.3% of total commitments under the ABL for any two consecutive days (which is defined under the ABL as a “Liquidity Event”), the Company will be required to satisfy and maintain a fixed charge coverage ratio of not less than 1.10 to 1.00 until the first day thereafter on which its borrowing availability has been greater than the greater of $10.0 million and 13.3% of its total commitments for 30 consecutive days. The Company will also be required to satisfy the required fixed charge coverage ratio in order to borrow on any day when its borrowing availability is below that level but a Liquidity Event has not yet occurred. The Company’s ability to meet the required fixed charge coverage ratio can be affected by events beyond the Company’s control, and the Company may not be able to meet this ratio. A breach of any of these covenants could result in a default under the ABL.

The Notes and the ABL are guaranteed by, and secured by substantially all of the assets of, the Company and its subsidiaries in the United States (including Puerto Rico), Canada, the United Kingdom and the Netherlands. The Notes and the ABL are guaranteed on a limited basis by, and secured by certain assets of, the Company’s subsidiaries in France, Italy and Switzerland.

The notes indenture contains language consistent with the ABL, which contains usual and customary covenants and events of default provisions.

Estimated minimum annual repayments of long-term debt based on current exchange rates for the next five years are:

	$
2011		3.6
2012		1.0
2013		—
2014		—
2015		—
Thereafter		280.0
Total payments		284.6

F-19

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

Included within the above future repayments of long-term debt are obligations under capital leases. Future minimum capital lease payments under capital leases in effect at October 31, 2010 are as follows:

	$
2011		2.6
2012		0.1
2013		—
2014		—
Total payments		2.7
Less capital lease minimum payments representing interest		—
Total payments		2.7

9. OTHER LONG-TERM LIABILITIES

	As of October 31,
	2010		2009
	$		$
Unfunded termination indemnities (2010- €4.6 million; 2009—€5.2 million)		6.5		7.6
Employee future benefits (Note 10)		8.1		8.3
Other long-term liabilities		8.3		5.6
		22.9		21.5

The unfunded termination indemnities relate to the employees of the Company's Italian subsidiary. In accordance with Italian severance pay statutes, an employee benefit is accrued for service to date and is payable when the employee’s employment with the Company ceases. The termination indemnity liability is calculated in accordance with local civil and labor laws based on each employee's length of service, employment category and remuneration. The termination liability is adjusted annually by a cost-of-living index provided by the Italian government. Although there is no vesting period, the Italian government has established private accounts for these benefits and required the Company to contribute $3.3 million in fiscal 2010 and $3.0 million in fiscal 2009 to these accounts, with additional contributions in the future. The liability recorded in the consolidated balance sheets is the amount to which the employees would be entitled if their employment with the Company ceased. The related expenses for the years ended October 31, 2010, 2009 and 2008 amounted to $2.5 million, $2.5 million and $2.8 million, respectively.

Other long-term liabilities at October 31, 2010, include $3.1 million of customer funded capital liabilities, $0.5 million of post employment benefits, $1.9 million for a deferred compensation plan and $0.9 million of deferred rent liability. Other long-term liabilities at October 31, 2009, include $1.7 million of customer funded capital liabilities, $0.8 million of post employment benefits, $2.2 million for a deferred compensation plan and $0.9 million of deferred rent liability.

10. EMPLOYEE FUTURE BENEFITS

The Company has a number of defined benefit pension plans. In addition, it has other benefit plans that provide post-retirement healthcare and dental benefits. The Company measured the accrued benefit obligation and the fair value of plan assets for accounting purposes as of October 31, 2010 for the defined benefit pension and other benefit plans.

F-20

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

Information about the Company's defined benefit pension and other benefit plans, in aggregate, is as follows:

	Defined Benefit Pension Plans 2010			Other Benefit Plans 2010			Defined Benefit Pension Plans 2009			Other Benefit Plans 2009
	$			$			$			$
Change in benefit obligation
Benefit obligation, beginning of the year		77.7			5.3			62.5			4.1
Current service cost		3.1			0.1			3.0			—
Plan amendment		—			—			3.2			—
Interest cost		4.5			0.3			4.1			0.3
Member contributions during the year		0.9			—			0.8			—
Benefits paid		(2.3	)		(0.1	)		(2.5	)		(0.2	)
Actuarial loss		9.5			0.5			2.4			0.5
Curtailment gain		—			—			—			—
Currency translation		0.2			0.3			4.2			0.6
Benefit obligation, end of the year		93.6			6.4			77.7			5.3
Change in plan assets
Market value of plan assets, beginning of year		55.5			—			49.5			—
Actual return on plan assets		6.5			—			—			—
Member contributions during the year		0.9			—			2.6			—
Employer contributions		4.6			0.1			3.3			0.2
Benefits paid		(2.2	)		(0.1	)		(2.5	)		(0.2	)
Currency translation		0.7			—			2.6			—
Market value of plan assets, end of the year		66.0			—			55.5			—
Reconciliation of funded status
Funded status, deficit		(27.6	)		(6.4	)		(22.2	)		(5.3	)
Unamortized net actuarial loss		25.1			—			18.8			—
Unamortized past service costs		—			0.8			0.2			0.2
Accrued benefit liability		(2.5	)		(5.6	)		(3.2	)		(5.1	)

The accrued benefit liability of $8.1 million (2009—$8.3 million) is included in other long-term liabilities. For all of the Company’s plans, the accrued benefit obligations are in excess of plan assets as of October 31, 2010 and 2009. Please refer to Note 9—Other Long-Term Liabilities.

Defined benefit pension plan assets consist of:

	2010		2009
	%		%
Equity securities		76		78
Debt securities		21		19
Other		3		3
Total		100		100

F-21

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

The significant actuarial assumptions adopted in measuring the Company's accrued benefit obligation and benefit plan expense in connection with its defined benefit pension and other benefit plans is as follows (weighted-average assumptions as of October 31, 2010 and 2009):

	Defined Benefit Pension Plans 2010		Other Benefit Plans 2010		Defined Benefit Pension Plans 2009		Other Benefit Plans 2009
	%		%		%		%
Accrued benefit obligation
Discount rate		5.3		5.3		5.9		6.0
Rate of compensation increase		3.9		—		4.0		—
Benefit costs recognized
Discount rate		5.8		5.3		6.0		7.0
Expected long-term rate of return on plan assets		6.9		—		7.3		—
Rate of compensation increase		4.1		—		4.2		—

In connection with the other benefit plans, a 4% to 11% annual rate of increase in the per capita cost of covered health care and dental benefits was assumed for 2010 (4% to 12% 2009). The rate was assumed to decrease gradually over the next five years to 6% and remain at that level thereafter (2009—6% and thereafter). The following table outlines the effects of a one-percentage-point increase and decrease in the assumed health care and dental benefit trend rates:

	Benefit Obligation			Benefit Expense
	$			$
Impact of:
1% increase		0.9			0.1
1% decrease		(0.8	)		(0.1	)

F-22

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

The cost components of the Company's defined benefit pension plan and other benefit plans in aggregate are as follows:

	Defined Benefit Pension Plans 2010			Other Benefit Plans 2010			Defined Benefit Pension Plans 2009			Other Benefit Plans 2009			Defined Benefit Pension Plans 2008			Other Benefit Plans 2008
	$			$			$			$			$			$
Current service cost		3.1			0.1			3.0			—			4.5			0.1
Interest cost		4.5			0.3			4.1			0.3			4.4			0.3
Actual return on plan assets		(6.5	)		—			—			—			8.1			—
Actuarial loss (gain)		9.5			0.5			2.4			0.5			(8.9	)		(0.7	)
Elements of employee future benefit costs before adjustments to recognize the long-term nature of employee future benefits		10.6			0.9			9.5			0.8			8.1			(0.3	)
Adjustments to recognize the long-term nature of employee future benefit costs:
Curtailment gains/settlement		—			—			—			—			—			(1.2	)
Difference between expected return and actual return on plan assets for the year		6.4			—			(4.6	)		—			(12.8	)		—
Difference between amortization of the net actuarial loss for the year and the actual actuarial loss on accrued benefit obligation for the year		(9.5	)		(1.1	)		(2.2	)		(1.1	)		9.2			0.1
Difference between amortization of past service costs for the year and actual plan amendments for the year		—			—			0.3			—			(0.2	)		—
Net benefit cost (benefit) recognized		7.5			(0.2	)		3.0			(0.3	)		4.3			(1.4	)

The Company also provides retirement benefits for the majority of its employees at its Canadian, U.S. and Puerto Rican sites under defined contribution pension plans. The total expense for the plans amounted to $2.8 million, $3.4 million and $5.3 million for the years ended October 31, 2010, 2009 and 2008, respectively.

The net benefit cost recognized for the year ended October 31, 2008, includes a curtailment gain of $1.2 million arising from a decision to conform certain post-employment benefits in the Company’s Canadian operations.

Total cash payments for employee future benefits totaled $7.5 million, $6.9 million and $11.9 million for the years ended October 31, 2010, 2009 and 2008, consisting of cash contributed by the Company to its defined benefit pension plans of $4.6 million, $3.3 million and $6.4 million, cash payments directly to beneficiaries for its other benefit plans of $0.1 million, $0.2 million and $0.2 million and cash contributed to its defined contribution plans of $2.8 million, $3.4 million and $5.3 million, respectively.

F-23

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

11. SHAREHOLDERS’ EQUITY

Share capital

Share capital consists of the following:

	2010		2009
	$		$
Authorized
Unlimited Class I preferred shares—Issuable from time to time in one or more series, each series comprising the number of shares and having the designation, rights, privileges, restrictions and conditions determined by the Company’s board of directors.
Unlimited restricted voting shares.
Issued and outstanding
150,000 Class I preferred shares consisting of 150,000 Series C (“convertible preferred shares”—converted July 29, 2009) and 150,000 Series D (“special voting preferred shares”)		—		—
Restricted voting shares of 129,167,926; (2009—129,167,926)		553.8		553.8

Convertible preferred shares

On July 29, 2009, JLL converted its 150,000 Series C preferred shares into a total of 38,018,538 restricted voting shares of Patheon, in accordance with the convertible preferred share terms. As a result of this conversion, the Company no longer has any Series C preferred shares outstanding.

Upon expiry of JLL’s unsolicited offer to acquire any or all of the outstanding restricted voting shares of Patheon (“JLL Offer) on August 26, 2009, JLL had acquired an aggregate of 33,854,708 restricted voting shares that were validly deposited. The restricted voting shares that JLL purchased pursuant to the JLL Offer represented approximately 38% of the outstanding restricted voting shares of the Company not already owned by JLL or its affiliates and associates. As of October 31, 2010, JLL owned an aggregate of 72,077,781 Patheon restricted voting shares, representing approximately 56% of Patheon’s total restricted voting shares outstanding.

Restricted voting shares

The Company’s articles were amended on April 26, 2007 to re-designate the common shares as restricted voting shares. This occurred in connection with the issuance of the Series D special voting preferred shares. The holders of the Series D special voting preferred shares have the right to elect three of nine members of the Board of Directors. The holders of Patheon’s restricted voting shares have the right to elect the remaining members of the Board of Directors. Under the rules of the TSX, voting equity securities are not to be designated, or called, common shares unless they have a right to vote in all circumstances that is not less, on a per share basis, than the voting rights of each other class of voting securities. Accordingly, the Company amended its articles to re-designate the common shares as restricted voting shares. This re-designation involves only a change in the name of the securities; the number of shares outstanding and the terms and conditions of the outstanding shares are not affected by the change.

Incentive stock option plan

The Company has an incentive stock option plan. Persons eligible to participate in the plan are directors, officers and key employees of the Company and its subsidiaries, as well as any other person engaged to provide

F-24

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

ongoing management or consulting services to Patheon. The plan provides that the maximum number of shares that may be issued under the plan is 7.5% of the sum, at any point in time, of the issued and outstanding restricted voting shares of the Company and the aggregate number of restricted voting shares issuable upon exercise of the conversion rights attached to the issued and outstanding Class I Preferred Shares, Series C of the Company. As of October 31, 2010 and 2009, the total number of restricted voting shares issuable under the plan was 9,687,594 shares, respectively, of which there are stock options outstanding to purchase 8,327,357 shares and 4,699,348 shares, respectively, under the plan. The exercise price of restricted voting shares subject to an option is determined at the time of grant and the price cannot be less than the weighted average market price of the restricted voting shares of Patheon on the TSX during the two trading days immediately preceding the grant date. Options generally expire in no more than 10 years after the grant date and are also subject to early expiry in the event of death, resignation, dismissal or retirement of an optionee. Options have vesting periods of either three years or five years, with either one-third or one-fifth vesting on each anniversary of the grant date, respectively.

A summary of the plan and changes during each of fiscal 2010, 2009 and 2008 are as follows:

	2010					2009					2008
(Dollar amounts in Canadian dollars)	Shares Number			Weighted- Average Exercise Price		Shares Number			Weighted- Average Exercise Price		Shares Number			Weighted- Average Exercise Price
				$					$					$
Outstanding, beginning of the year		4,699,348			5.12		5,987,965			6.22		3,857,916			10.38
Granted		4,741,000			2.59		438,571			2.58		3,880,376			3.30
Exercised		—			—		—			—		(125,000	)		3.45
Forfeited		(1,112,991	)		8.23		(1,727,188	)		8.32		(1,625,327	)		9.32
Outstanding, end of the year		8,327,357			3.26		4,699,348			5.12		5,987,965			6.22
Exercisable, end of the year		2,542,246			4.52		2,451,187			6.88		2,947,093			9.19

The following table summarizes information about options outstanding at October 31, 2010:

(Dollar Amounts in Canadian dollars)	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price		Number Exercisable		Weighted- Average Exercise Price
					$				$
$2.45 – 3.64		7,624,020		7.2 years		2.79		2,022,688		3.16
$4.16 – 7.00		373,837		4.7 years		4.33		190,058		4.50
$9.43 – 13.30		247,500		1.5 years		12.02		247,500		12.02
$14.76 – 15.80		82,000		0.2 years		15.72		82,000		15.72
Total		8,327,357						2,542,246

The Company did not issue any restricted voting shares under the stock option plan during the years ended October 31, 2010 and 2009. During the years ended October 31, 2008, the Company issued 125,000 restricted voting shares under the stock option plan for proceeds of $0.4 million.

F-25

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

For the purposes of calculating the stock-based compensation expense in connection with the Company’s incentive stock option plan, the fair value of stock options is estimated at the date of the grant using the Black-Scholes option pricing model and the cost is amortized over the vesting period.

The fair value of stock options is estimated at the date of the grant. The weighted-average fair value of stock options granted for the years ended October 31, 2010, 2009 and 2008 was $1.39, $1.40 and $1.39, respectively. The fair value of stock options for purposes of determining stock-based compensation is estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions:

	2010			2009			2008
Risk free interest rate		2.7	%		2.8	%		3.6	%
Expected volatility		60	%		62	%		43	%
Expected weighted-average life of options		5 years			5 years			5 years
Expected dividend yield		0	%		0	%		0	%

The Company recorded stock-based compensation expense in the years ended October 31, 2010, 2009 and 2008 of $2.3 million, $1.0 million and $2.6 million, respectively, for options granted on or after November 1, 2003.

12. OTHER INFORMATION

Foreign exchange

During the years ended October 31, 2010, 2009 and 2008, the Company recorded a foreign exchange gain on cash flow hedges and transactions related to operating exposures of $1.5 million, a loss of $7.0 million, and a gain of $1.5 million, respectively.

Net change in non-cash working capital balances related to continuing operations

The net changes in non-cash working capital balances related to continuing operations are as follows:

	2010			2009
	$			$
Accounts receivable		9.4			(0.3	)
Inventories		3.7			(3.7	)
Income taxes receivable		(2.6	)		1.1
Prepaid expenses and other		1.4			(1.9	)
Accounts payable and accrued liabilities		(13.1	)		(1.3	)
Income taxes payable		(1.4	)		(4.7	)
		(2.6	)		(10.8	)

Related party transactions

Revenues for contract manufacturing from a company controlled by Joaquin B. Viso (the “Viso Affiliate”), a director and significant shareholder of the Company, were approximately $0.1 million, $0.8 million and $0.3 million for the years ended October 31, 2010, 2009 and 2008, respectively. These transactions were conducted in

F-26

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

the normal course of business and are recorded at the exchanged amounts. Accounts receivable at October 31, 2010 and 2009 include a balance of $0.1 million and $0.5 million, respectively, resulting from these transactions. In addition, Patheon manufactures a product for a third party for which the product’s intellectual property is owned by the Viso Affiliate. The manufacturing agreement was originally contracted between the third party and the Viso Affiliate, but has been administered directly between Patheon and the third party on normal commercial terms since 2003.

As of October 31, 2010 and 2009, the Company had an investment of $3.3 million and $1.9 million, respectively, representing an 18% interest in two Italian companies (collectively referred to as “BSP Pharmaceuticals”) whose largest investor was an officer of the Company until December 31, 2009. These companies specialize in the manufacture of cytotoxic pharmaceutical products. As a result of the shareholders’ agreement with the other investors in BSP Pharmaceuticals that provides the Company with significant influence over BSP Pharmaceuticals’ operations, the Company accounts for its investment in BSP Pharmaceuticals using the equity method. Accordingly, for the years ended October 31, 2010, 2009 and 2008, the Company recorded investment income of $0.4 million, and losses of $0.4 million and $0.1 million, respectively.

In connection with its investment in BSP Pharmaceuticals, the Company has a management services agreement with BSP Pharmaceuticals that provides on-going sales and marketing services, and provided engineering and operational services during the construction of the BSP facility which was completed in 2008. There were no management fees recorded under this agreement for the years ended October 31, 2010 and 2009. Management services and other fees of $2.5 million were charged to BSP Pharmaceuticals for the year ended October 31, 2008. Accounts receivable at October 31, 2010 and 2009 include a balance of $2.2 million and $1.5 million, respectively, in connection with the management services agreement. These services were conducted in the normal course of business and are recorded at the exchanged amounts.

In connection with certain of BSP Pharmaceuticals’ bank financing, the Company has made commitments that it will not dispose of its interest in BSP Pharmaceuticals prior to January 1, 2011, and if needed, irrevocably inject equity (pro-rata) in order to ensure BSP complies with certain specific bank covenants.

On August 27, 2009, in response to the Company’s legal action, JLL commenced a legal action against each of the then current and former members of the Special Committee in respect of such members’ conduct in connection with the JLL Offer and other related matters. On November 30, 2009, the Special Committee of the Company’s Board of Directors and JLL announced that they entered into a settlement agreement in respect of the pending legal actions between the parties, which was confirmed by the courts on December 4, 2009. As part of this settlement the Company paid JLL $1.5 million and Joaquin B. Viso $0.4 million.

In fiscal 2010, Patheon and JLL entered into a cost sharing arrangement with respect to certain third party consulting fees. The net amount reimbursed to JLL from Patheon for the services provided under the cost sharing arrangement during the year ended October 31, 2010 was $0.1 million. Related to these transactions, there is no outstanding payable to JLL. These transactions were conducted in the normal course of business and are recorded at the exchanged amounts.

13. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Categories of financial assets and liabilities

Under Canadian GAAP financial instruments are classified into one of the following five categories: held-for-trading, held to maturity investments, loans and receivables, available-for-sale financial assets and other

F-27

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

financial liabilities. The Company has also designated certain of its derivatives as effective hedges. The carrying values of the Company’s financial instruments, including those held for sale on the consolidated balance sheets are classified into the following categories:

As of October 31,	2010		2009
	$		$
Held-for-trading1		53.5		22.3
Loans and receivables2		139.9		151.5
Other financial liabilities3		437.0		421.3
Derivatives designated as effective hedges4—gain (loss)		1.3		(3.2	)
Other derivatives5		0.7		—

(1) Includes cash and cash equivalents in bank accounts bearing interest rates up to 3%.

(2) Includes accounts receivable.

(3) Includes bank indebtedness, accounts payable and accrued liabilities and long-term debt.

(4) Includes the Company’s foreign exchange forward contracts and interest rate swaps in 2009, and forward contracts in 2010, both of which are effective hedges.

(5) Includes the embedded call option on the Notes.

The Company has determined the estimated fair values of its financial instruments based on appropriate valuation methodologies; however, considerable judgment is required to develop these estimates. The fair values of the Company’s financial instruments are not materially different from their carrying values.

During fiscal 2009, the Company recorded a capital lease obligation of $8.5 million related to customer financed equipment. The capital lease relates to a customer contract signed for the Swindon site in 2006. The initial lease will be paid down over three years assuming the customer achieves forecasted annual production volumes. The remaining obligation at October 31, 2010 was $2.1 million.

As of October 31, 2010 and 2009, the carrying amount of the financial assets that the Company has pledged as collateral for its long-term debt facilities was $101.5 million and $80.9 million, respectively. Please refer to Note 8—Long Term Debt.

Fair value measurements

In June 2009, the Canadian Accounting Standards Board issued an amendment to CICA Section 3862, “Financial Instruments—Disclosures” in an effort to make Section 3862 consistent with IFRS 7. Section 3862 establishes a framework for measuring fair value in GAAP and requires expanded disclosures about fair value measurements. To make the disclosures an entity must classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy must have the following levels: (a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); (b) inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) (Level 2); and (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

F-28

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

The fair value under the amendment to Section 3862 is principally applied to financial assets and liabilities such as derivative instruments consisting of interest rate swaps and foreign exchange forward contracts. The following table provides a summary of the financial assets and liabilities that are measured at fair value as of October 31, 2010 and 2009:

	Fair value measurement at October 31, 2010 using:								Fair value measurement at October 31, 2009 using:
Assets measured at fair value	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	$		$		$		$		$		$		$		$
Derivatives designated as hedging instruments:
Interest rate swaps		—		—		—		—		—		—		—		—
Foreign exchange forward contracts		—		1.3		—		1.3		—		2.1		—		2.1
Total assets		—		1.3		—		1.3		—		2.1		—		2.1
Derivatives not designated as hedging instruments:
Embedded call option on Notes		—		—		0.7		0.7		—		—		—		—
Total assets		—		—		0.7		0.7		—		—		—		—
	Fair value measurement at October 31, 2010 using:								Fair value measurement at October 31, 2009 using:
Liabilities measured at fair value	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	$		$		$		$		$		$		$		$
Derivatives designated as hedging instruments:
Interest rate swaps		—		—		—		—		—		4.7		—		4.7
Foreign exchange forward contracts		—		—		—		—		—		—		—		—
		—		—		—		—		—		4.7		—		4.7
Derivatives not designated as hedging instruments:
Embedded call option on Notes		—		—		—		—		—		—		—		—
Total liabilities		—		—		—		—		—		—		—		—

Level 1—Based on quoted market prices in active markets.

Level 2—Inputs, other than quoted prices in active markets, that are observable, either directly or indirectly.

Level 3—Unobservable inputs that are not corroborated by market data.

F-29

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of October 31, 2010 and 2009:

	Asset Derivatives as of October 31, 2010				Asset Derivatives as of October 31, 2009
Fair values of derivative instruments	Balance Sheet Location		Fair Value		Balance Sheet Location		Fair Value
			$				$
Derivatives designated as hedging instruments:
Interest rate swaps				—				—
Foreign exchange forward contracts		Prepaid expenses		1.3		Prepaid expenses		2.1
Total designated derivatives				1.3				2.1
Derivatives not designated as hedging instruments:
Embedded call option on Notes		Other long-term assets		0.7				—
Total Non-designated Derivatives				0.7				—
	Liability Derivatives as of October 31, 2010				Liability Derivatives as of October 31, 2009
	Balance Sheet Location		Fair Value		Balance Sheet Location		Fair Value
			$				$
Derivatives designated as hedging instruments:
Interest rate swaps				—		Other accrued liabilities		4.7
Foreign exchange forward contracts				—				—
Total designated derivatives				—				4.7
Derivatives not designated as hedging instruments:
Embedded call option on Notes				—				—
Total Non-designated Derivatives				—				—

The Company has optional pre-payment clauses on the Notes, and is therefore required to account for the value of these optional pre-payment clauses separately as an embedded derivative under Canadian GAAP. The embedded derivative has been bifurcated from the Notes and recorded separately at fair value. In each subsequent period any change in fair value will be recorded as income or expenses in the Company’s consolidated statements of (loss) income.

The Company uses valuations from a third party evaluator to assist in estimating the fair value of the embedded call option on the Notes. These third party valuations are completed on a quarterly basis, and take into consideration current market rates and trends. For the debt instruments with embedded options, evaluators determine the price both with and without the option; the price without the option is the “base price.” In the case of debt instruments with calls, the final evaluation is the lesser of “base price” and “price with call.” The evaluator uses models that use the income approach, which discounts future cash flows to the net present value of the security, as the valuation technique.

F-30

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

The following table presents a reconciliation of the closing balance with respect to the Company’s only Level 3 financial instrument as of October 31, 2010:

Assets measured at fair value based on Level 3

(in millions of USD)	Embedded call option on Notes			Total
	$			$
Opening balance		—			—
Purchases		1.0			1.0
Issues		—			—
Total gains (losses)
In net loss		(0.3	)		(0.3	)
In other comprehensive income		—			—
Settlements		—			—
Transfers out of Level 3		—			—
Closing balance (October 31, 2010)		0.7			0.7

Foreign exchange forward contracts, interest rate swaps and other hedging arrangements

The Company utilizes financial instruments to manage the risk associated with fluctuations in foreign exchange and interest rates. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.

As of October 31, 2010, the Company’s Canadian operations had entered into foreign exchange forward contracts to sell an aggregate amount of $73.4 million. These contracts hedge the Canadian operations’ expected exposure to U.S. dollar denominated cash flows and mature at the latest on January 10, 2012, at an average exchange rate of $1.0424 Canadian. The mark-to-market value of these financial instruments as of October 31, 2010 was an unrealized gain of $1.3 million, with no income tax impact, which has been recorded in accumulated other comprehensive income in shareholders’ equity.

As of October 31, 2010, the Company’s Canadian operations had entered into foreign exchange forward contracts to sell an aggregate amount of €$4.0 million. These contracts hedge the Canadian operations’ expected exposure to Euro denominated cash flows and mature at the latest on October 7, 2011, at an average exchange rate of $1.3946 Canadian. The mark-to-market value of these financial instruments as of October 31, 2010 was an unrealized gain of less than $0.1 million, with no income tax impact, which has been recorded in accumulated other comprehensive income in shareholders’ equity.

Prior to the refinancing, the Company had entered into interest rate swap contracts to convert all of the interest costs on its senior secured term loan from a floating to a fixed rate of interest until June 30, 2010. In April, 2010, the Company completed the private placement of the Notes, with net proceeds of $268.5 million. The net proceeds of the offering were used to repay all of the outstanding indebtedness under the Company’s then-existing senior secured term loan, the ABL and the Company’s mortgages. With the exception of possible future borrowings under the ABL, the Company currently does not have any variable rate debt. The Company cancelled its interest rate swap on June 30, 2010, and at that time paid $1.8 million in hedging losses related to these financial instruments. These losses were recorded as part of the refinancing costs.

F-31

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

Risks arising from financial instruments and risk management

The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange and interest rate), credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance. The Company uses derivative financial instruments to hedge certain risk exposures. The Company does not purchase any derivative financial instruments for speculative purposes.

Risk management is the responsibility of the Company’s corporate finance team. The corporate finance team works with the Company’s operational personnel to identify, evaluate and, where appropriate, hedge financial risks. The Company’s corporate finance team also monitors material risks and discusses them with the audit committee of the board of directors.

Foreign exchange risk

The Company operates in Canada, the United States, Puerto Rico, Italy, France, Switzerland, United Kingdom and Japan. Foreign exchange risk arises because the value of the local currency receivable or payable for transactions denominated in foreign currencies may vary due to changes in exchange rates (“transaction exposures”) and because the non-U.S. dollar denominated financial statements of the Company may vary on consolidation into the reporting currency of U.S. dollars (“translation exposures”).

The Company’s most significant transaction exposures arise in its Canadian operations. Prior to the refinancing in the second quarter of fiscal 2010, the balance sheet of the Company’s Canadian division included U.S. dollar denominated debt which was designated as a hedge against the Company’s investments in subsidiaries in the United States and Puerto Rico. The foreign exchange gains and losses related to the effective portion of this hedge were recorded in other comprehensive income. In the third quarter of fiscal 2010, the Company changed the functional currency of its corporate division in Canada to U.S. dollars, thereby eliminating the need for the Company to designate this U.S. dollar denominated debt as a hedge. In addition, approximately 80% of the revenues of the Canadian operations and approximately 10% of its operating expenses are transacted in U.S. dollars. As a result, the Company may experience transaction exposures because of volatility in the exchange rate between the Canadian and U.S. dollar. Based on the Company’s current U.S. denominated net inflows, as of October 31, 2010, fluctuations of +/-5% would, everything else being equal, have an effect on loss from continuing operations before taxes of approximately +/- $5.6 million, prior to hedging activities.

The objective of the Company’s foreign exchange risk management activities is to minimize transaction exposures and the resulting volatility of the Company’s earnings. The Company manages this risk by entering into foreign exchange forward contracts. As of October 31, 2010, the Company has entered into forward foreign exchange contracts to cover approximately 60% of its Canadian-U.S. dollar cash flow exposures for fiscal 2011. The Company does not currently hedge any translation exposures.

Translation gains and losses related to certain foreign currency denominated intercompany loans are included as part of the net investment in certain foreign subsidiaries, and are included in accumulated other comprehensive income (loss) in shareholders’ equity.

Interest rate risk

Prior to the issuance of the Notes, the Company’s interest rate risk primarily arose from its floating rate debt, in particular its revolving debt, demand lines, senior secured term loan in North America and its Italian

F-32

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

mortgages. The objective of the Company’s interest rate management activities is to minimize the volatility of the Company’s earnings. In order to manage this risk, the Company had entered into interest rate swaps to convert the interest expense on its senior secured term loan, until June 2010, from a floating interest rate to a fixed interest rate. In April 2010, the Company completed the private placement of the Notes. The net proceeds from the Notes were used to repay all of the outstanding indebtedness under the Company’s then-existing senior secured term loan, the ABL and the Company’s mortgages. With the exception of possible future borrowings under the ABL, the Company currently does not have any variable rate debt. The Company cancelled the interest rate swap on June 30, 2010, and paid $1.8 million in related hedging losses. These losses were accrued as part of the refinancing costs.

Credit risk

Credit risk arises from cash and cash equivalents held with banks and financial institutions, derivative financial instruments (foreign exchange forward contracts and interest rate swaps with positive fair values), and credit exposure to customers, including outstanding accounts receivable. The maximum exposure to credit risk is equal to the carrying value of the financial assets.

The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors. Management also monitors the utilization of credit limits regularly. In cases where the credit quality of a customer does not meet the Company’s requirements, a cash deposit is received before any services are provided. As of October 31, 2010 and 2009, the Company held deposits of $14.6 million and $15.7 million, respectively.

The carrying amount of accounts receivable are reduced through the use of an allowance account and the amount of the loss is recognized in the consolidated statements of loss within operating expenses. When a receivable balance is considered uncollectible, it is written off against the allowance for accounts receivable. Subsequent recoveries of amounts previously written off are credited against operating expenses in the consolidated statements of loss.

The following table sets forth details of the age of receivables that are not overdue as well as an analysis of overdue amounts and related allowance for the doubtful accounts:

	As of October 31,
	2010			2009
	$			$
Total accounts receivable		140.8			153.2
Less: Allowance for doubtful accounts		(0.9	)		(1.7	)
		139.9			151.5
Of which:
Not overdue		116.6			141.9
Past due for more than one day but for not more than three months		19.4			9.5
Past due more for than three months but for not more than six months		3.2			1.6
Past due for more than six months but not for more than one year		1.4			0.2
Past due for more than one year		0.2			—
Less: Allowance for doubtful accounts		(0.9	)		(1.7	)
Total accounts receivable, net		139.9			151.5

F-33

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

Liquidity risk

Liquidity risk arises through excess of financial obligations over available financial assets due at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements at all times. The Company mitigates liquidity risk by maintaining cash and cash equivalents on hand and through the availability of funding from credit facilities. As of October 31, 2010, the Company was holding cash and cash equivalents of $53.5 million and had undrawn lines of credit available to it of $87.8 million.

The contractual maturities of the Company’s financial liabilities are presented in Note 8 and reflect the impact of the refinancing in second quarter of fiscal 2010.

14. MANAGEMENT OF CAPITAL

The Company defines the capital that it manages as the aggregate of its shareholders’ equity and interest bearing debt. The Company’s objectives when managing capital are to ensure that the Company has adequate capital to achieve its business plans, so that it can provide products and services to its customers and returns to its shareholders.

In order to maintain or adjust its capital structure, the Company may adjust the type of capital utilized, including purchase versus lease decisions and issuing debt or equity securities, all subject to market conditions and the terms of the underlying third party agreements.

As of October 31, 2010 and 2009, total managed capital was $551.3 million and $521.8 million, respectively, comprised of shareholders’ equity of $273.0 million and $271.3 million, respectively and cash interest-bearing debt of $278.3 million and $250.5 million, respectively.

15. INCOME TAXES

While evaluating the Company’s future tax assets and liabilities during the first half of fiscal 2010, the Company concluded it would be able to utilize certain Investment Tax Credits (“ITCs”) relating to scientific research and development costs. Therefore, the Company recorded a decrease of $7.2 million in the cost of goods sold relating to the utilization of all previous years’ ITCs.

During the second quarter of fiscal 2010 the Company evaluated its valuation reserves. The Company determined that the valuation allowance on its net Canadian future tax assets is no longer required based on its assessment of the future prospects of its Canadian operations. As a result of this determination, the Company released $13.8 million of valuation reserves through the benefit from income taxes in its consolidated statement of loss for fiscal 2010.

Previously the Company recorded the ITCs as future tax assets. Of the $18.4 million on the consolidated balance sheet at October 31, 2010, $8.3 million was reclassified from future tax assets to other long-term assets in fiscal 2010 as the Company is now in a position to utilize current and prior period ITCs.

F-34

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

The following is a reconciliation of the expected income tax (recovery) expense obtained by applying the combined corporate tax rates to the loss from continuing operations before income taxes:

	As of October 31,
	2010			2009			2008
	$			$			$
Expected income tax expense (recovery) using statutory tax rates		(1.8	)		4.5			6.5
Change in valuation allowance		(12.0	)		(0.2	)		(3.0	)
Permanent differences and other:
Foreign		2.5			2.5			(2.1	)
Domestic		(0.1	)		0.4			(4.5	)
Foreign rate differentials		8.4			5.3			4.4
Other		—			—			0.2
Provision for income taxes		(3.0	)		12.5			1.5
Effective tax rate		47.6	%		92.6	%		6.9	%

The tax effects of significant items comprising the Company’s net future income tax liabilities are as follows:

	2010			2009
	$			$
Net operating loss carryforward		26.3			30.0
Accounting provisions not currently deductible for tax purposes		4.3			6.8
Unrealized foreign exchange losses on debt		1.1			0.4
Share issue costs		1.0			1.6
Deferred financing costs		0.9			0.5
Deferred revenue		2.1			—
Unclaimed R&D expenditures		7.4			8.5
Investment tax credits		(4.4	)		11.6
Other		6.4			3.1
Book depreciation in excess of tax depreciation		(48.1	)		(49.0	)
Valuation allowance		(6.5	)		(22.7	)
Ontario harmonization		—			(1.7	)
		(9.5	)		(10.9	)

The short-term and long-term future income tax assets and liabilities are as follows:

	2010			2009
	$			$
Short-term future income tax assets		9.0			10.5
Long-term future income tax assets		11.2			11.8
Short-term future income tax liabilities		—			(1.7	)
Long-term future income tax liabilities		(29.7	)		(31.5	)
		(9.5	)		(10.9	)

F-35

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

The Company has tax-effected net operating losses carried forward of $26.3 million; $14.3 million of the losses have an indefinite life and $12.0 million have expiry dates ranging from October 31, 2011 to October 31, 2030.

16. SEGMENTED INFORMATION

The Company is organized and managed in two business segments: commercial manufacturing and PDS. These segments are organized around the service activities provided to the Company's customers.

	As of and for the year ended October 31, 2010
	Commercial		PDS		Corp. & Other			Total
	$		$		$			$
Revenues		545.3		125.9		—			671.2
Adjusted EBITDA		72.3		46.8		(27.4	)		91.7
Total assets		636.1		81.7		91.1			808.9
Depreciation		49.3		5.9		0.6			55.8
Impairment		3.6		—		—			3.6
Goodwill		3.4		—		—			3.4
Capital expenditures		38.8		8.7		1.2			48.7
	As of and for the year ended October 31, 2009
	Commercial		PDS		Corp. & Other			Total
	$		$		$			$
Revenues		530.0		125.1		—			655.1
Adjusted EBITDA		71.2		32.7		(29.9	)		74.0
Total assets		671.3		61.3		58.2			790.8
Depreciation		37.0		5.1		0.5			42.6
Goodwill		3.2		—		—			3.2
Capital expenditures		39.0		8.2		1.9			49.1
	As of and for the year ended October 31, 2008
	Commercial		PDS		Corp. & Other			Total
	$		$		$			$
Revenues		577.8		139.5		—			717.3
Adjusted EBITDA		77.5		42.1		(37.0	)		82.6
Total assets		608.2		48.2		45.5			701.9
Depreciation		38.1		5.5		1.7			45.3
Impairment		0.4		—		—			0.4
Goodwill		2.9		—		—			2.9
Capital expenditures		47.2		7.5		1.1			55.8

Cash and cash equivalents as well as future tax assets are considered to be part of “Corp. & Other” in the breakout of total assets shown above. Total assets in the commercial segment include $0.7 million as of October 31, 2009 that are classified as held for sale. In fiscal 2010 the Company, following another impairment analysis, completely wrote down the assets held for sale to their fair value less the cost to sell, which was nil.

The Company evaluates the performance of its segments based on segment Adjusted EBITDA, which is defined as income (loss) before discontinued operations before repositioning expenses, interest expense, foreign exchange losses reclassified from other comprehensive loss, refinancing expenses, gains and losses on sale of

F-36

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

fixed assets, gain on extinguishment of debt, income taxes, asset impairment charges, depreciation and amortization, and other non-cash expenses. The Company’s presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

Below is a reconciliation of Adjusted EBITDA to its closest Canadian GAAP measure.

	Year ended October 31,
	2010			2009			2008
	$			$			$
Adjusted EBITDA:
Total Adjusted EBITDA per above		91.7			74.0			82.6
Depreciation and amortization		(55.8	)		(42.6	)		(45.3	)
Repositioning expenses		(6.8	)		(2.1	)		(19.9	)
Interest expense, net		(19.5	)		(15.4	)		(30.8	)
Impairment charge		(3.6	)		—			(0.4	)
(Loss) gain on sale of fixed assets		(0.2	)		—			0.7
Gain on extinguishment of debt		—			—			34.9
Refinancing expenses		(12.2	)		—			—
Benefit from (provision for) income taxes		3.0			(12.5	)		(1.5	)
Other		0.1			(0.4	)		—
(Loss) income before discontinued operations		(3.3	)		1.0			20.3

As illustrated in the table below, revenues are attributed to countries based on the location of the customer's billing address, capital assets are attributed to the country in which they are located and goodwill is attributed to the country in which the entity to which the goodwill pertains is located:

	As of and year ended October 31, 2010
	Canada		U.S.*		Europe		Other		Total
	$		$		$		$		$
Revenues		16.2		319.7		310.7		24.6		671.2
Capital assets		116.4		129.4		230.8		1.7		478.3
Impairment		—		3.6		—		—		3.6
Goodwill		3.4		—		—		—		3.4
	As of and year ended October 31, 2009
	Canada		U.S.*		Europe		Other		Total
	$		$		$		$		$
Revenues		18.1		345.5		262.5		29.0		655.1
Capital assets		117.4		131.4		240.9		1.1		490.8
Goodwill		3.2		—		—		—		3.2
	As of and year ended October 31, 2008
	Canada		US*		Europe		Other		Total
	$		$		$		$		$
Revenues		21.9		346.1		324.9		24.4		717.3
Capital assets		104.8		118.6		205.1		—		428.5
Impairment		—		0.4		—		—		0.4
Goodwill		2.9		—		—		—		2.9

* Includes Puerto Rico

F-37

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

During the years ended October 31, 2010 and 2009, the Company did not have any one customer that accounted for more than 10% of total revenues. During the year ended October 31, 2008, one customer accounted for more than 10% of the Company's total revenues. As a percentage of total revenues, this customer amounted to approximately 10.4%.

17. COMMITMENTS AND CONTINGENCIES

Long-term operating leases

The Company has entered into long-term rental agreements expiring at various dates until 2020. The future rental payments for the next five years and thereafter are estimated as follows:

	$
2011		6.8
2012		5.3
2013		4.3
2014		2.7
2015		1.7
Thereafter		2.7
Total payments		23.5

Other

The Company may be subject to lawsuits, investigations and other claims, including environmental, labor, product, customer disputes and other matters in the normal course of operations and otherwise. The Company believes that adequate provisions have been recorded in the accounts where required. Although it is not possible to estimate the extent of potential costs, if any, the Company believes that the ultimate resolution of such contingencies will not have a material adverse impact on the results of operations, financial position or liquidity.

The Company’s tax filings are subject to audit by taxation authorities. Although the Company believes that it has adequately provided for income taxes based on the information available, the outcome of audits cannot be known with certainty and the potential impact on the financial statements is not determinable.

18. REPOSITIONING EXPENSES

During fiscal 2010, the Company incurred $6.8 million in expenses associated with the shutdown of its Caguas facility. Included in the employee-related expenses within the commercial segment for fiscal 2009 are $3.4 million of repositioning expenses related to the closure of the Company’s Carolina facility and that are presented in discontinued operations. In 2008, the Company incurred $19.9 million of repositioning expenses in connection with changes in senior and executive management, a workforce reduction initiative in Swindon, U.K. and restructuring of the Puerto Rico and Canadian operations.

F-38

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

The following is a summary of these expenses and other charges associated with operational improvements (collectively “repositioning expenses”) as of and for the years ended October 31, 2010, 2009 and 2008:

As of and for the year ended October 31, 2010	Commercial		PDS		Corporate		Total
	$		$		$		$
Total repositioning liabilities at October 31, 2009								2.9
Employee-related expenses		3.7		—		—		3.7
Consulting, professional and project costs		3.1		—		—		3.1
Total expenses		6.8		—		—		6.8
Repositioning expenses paid								(6.4	)
Foreign exchange								(0.1	)
Total repositioning liabilities at October 31, 2010								3.2

As of and for the year ended October 31, 2009	Commercial		PDS		Corporate		Total
	$		$		$		$
Total repositioning liabilities at October 31, 2008								8.0
Employee-related expenses		5.1		—		—		5.1
Consulting, professional and project costs		0.4		—		—		0.4
Contract termination costs		—		—		—		—
Total expenses		5.5		—		—		5.5
Repositioning expenses paid								(10.8	)
Foreign exchange								0.2
Total repositioning liabilities at October 31, 2009								2.9

As of and for the year ended October 31, 2008	Commercial		PDS		Corporate		Total
	$		$		$		$
Total repositioning liabilities at October 31, 2007								6.0
Employee-related expenses		11.1		0.6		4.9		16.6
Consulting, professional and project management costs		2.9		—		0.4		3.3
Total expenses		14.0		0.6		5.3		19.9
Repositioning expenses paid								(17.2	)
Foreign exchange								(0.7	)
Total repositioning liabilities at October 31, 2008								8.0

19. REFINANCING EXPENSES

During fiscal 2010, the Company incurred expenses of $12.2 million in connection with its refinancing activities. These transaction costs relate to expenses associated with obtaining debt financing, including fees paid to advisors and other related costs. Included in the refinancing expenses are $1.8 million in costs related to the previous senior secured term loan that were written off and $1.8 million in losses for the interest rate swaps on the previous debt that expired on June 30, 2010. Financing costs of $7.6 million, including fees paid to lenders, were capitalized and netted against the carrying value of the related debt and amortized to interest expense over the life of the Notes and credit agreement. Please refer to Note 8—Long-Term Debt.

F-39

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

20. SUBSEQUENT EVENTS

On December 1, 2010, Patheon announced that Wesley P. Wheeler, the Chief Executive Officer and President, resigned from the Company. Due to Mr. Wheeler’s employment agreement, the Company will book an accrual of approximately $1.4 million in the first quarter of 2011 for severance and benefits.

In December 2010, Patheon and a major customer amended a manufacturing and supply agreement, in which both parties agree to a contract termination date in February of 2011, approximately two and a half years earlier than was originally planned. The amendment reflects the customer’s decision not to proceed with a product following receipt of a Complete Response letter from the FDA. As part of the amendment, the customer will pay Patheon a reservation fee of €21.6 million, and as a result of the shortened contract life, Patheon will accelerate the related deferred revenue recognition and will be relieved of its obligation to repay certain customer-funded capital related to the original manufacturing and supply agreement. Recognition of revenue from the amendment will be materially comparable during fiscal 2011 to amounts that would have otherwise been payable under the take-or-pay arrangement.

F-40

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

NOTE 21. ADDITIONAL DISCLOSURES REQUIRED UNDER U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The Company’s consolidated financial statements have been prepared in accordance with Canadian GAAP. In the case of the Company, Canadian GAAP conforms in all material respects with U.S. GAAP except for certain matters, the details of which are as follows:

Consolidated Balance Sheets

The application of U.S. GAAP has the following effects on consolidated balance sheet items as reported under Canadian GAAP:

	As of October 31, 2010										As of October 31, 2009
	Canadian GAAP			Increase (Decrease)			Notes	U.S. GAAP			Canadian GAAP			Increase (Decrease)			Notes	U.S. GAAP
	$			$				$			$			$				$
Assets
Current
Cash and cash equivalents		53.5			—				53.5			22.3			—				22.3
Accounts receivable		139.9			—				139.9			151.5			—				151.5
Inventories		73.3			—				73.3			78.3			—				78.3
Income taxes receivable		5.7			—				5.7			2.6			—				2.6
Prepaid expenses and other		9.5			—				9.5			11.8			—				11.8
Future tax assets—short term		9.0			0.8		g		9.8			10.5			—				10.5
Total current assets		290.9			0.8				291.7			277.0			—				277.0
Capital assets		478.3			(0.9	)	e		477.4			490.8			(1.1	)	e		489.7
Intangible assets		1.4			—				1.4			3.2			—				3.2
Deferred financing costs		—			7.2		f		7.2			—			2.4		f		2.4
Future tax assets		11.2			17.7		c		28.9			11.8			2.1		c		13.9
Goodwill		3.4			—				3.4			3.2			—				3.2
Investments		5.3			—				5.3			4.1			—				4.1
Long-term assets held for sale		—			—				—			0.7			—				0.7
Other long-term assets		18.4			(18.4	)	c,d		—			—			—				—
Total assets		808.9			6.4				815.3			790.8			3.4				794.2
Liabilities and shareholders’ equity
Current
Short term borrowings		2.0			—				2.0			14.0			—				14.0
Accounts payable and accrued liabilities		156.7			—				156.7			170.8			—				170.8
Income taxes payable		0.4			—				0.4			1.8			—				1.8
Deferred revenues—short term		26.7			—				26.7			4.6			—				4.6
Future tax liability—short term		—			—				—			1.7			—				1.7
Current portion of long-term debt		3.5			—				3.5			15.4			—				15.4
Total current liabilities		189.3			—				189.3			208.3			—				208.3
Long-term debt		274.8			6.3		d,f		281.1			221.1			2.4		f		223.5
Deferred revenues		19.2			—				19.2			37.1			—				37.1
Future tax liabilities		29.7			(0.3	)	e		29.4			31.5			(0.3	)	e		31.2
Other long-term liabilities		22.9			24.3		b,g		47.2			21.5			28.0		b,g		49.5
Total liabilities		535.9			30.3				566.2			519.5			30.1				549.6
Shareholders’ equity
Restricted voting shares		553.8			18.1		a		571.9			553.8			18.1		a		571.9
Contributed surplus		10.0			—				10.0			7.7			—				7.7
Deficit		(330.7	)		(24.8	)	a,d,e,g		(355.5	)		(325.7	)		(25.2	)	a,e,g		(350.9	)
Accumulated other comprehensive income (loss)		39.9			(17.2	)	a,b,e		22.7			35.5			(19.6	)	a,b,e		15.9
Total shareholders’ equity		273.0			(23.9	)			249.1			271.3			(26.7	)			244.6
Total liabilities and shareholders’ equity		808.9			6.4				815.3			790.8			3.4				794.2

see accompanying notes

F-41

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of

U.S. dollars)

Consolidated Statements of Loss

The application of U.S. GAAP had the following effects on net loss and net loss per share as reported under Canadian GAAP:

	Year Ended October 31, 2010
	Canadian GAAP			Increase (Decrease)			Notes		U.S. GAAP
	$			$					$
Revenues		671.2			—					671.2
Cost of goods sold		526.2			10.6			c,e		536.8
Gross profit		145.0			(10.6	)				134.4
Selling, general and administrative expenses		110.6			—					110.6
Repositioning expenses		6.8			—					6.8
Impairment charge		—			3.6			h		3.6
Loss on sale of fixed assets		—			0.2			h		0.2
Operating income		27.6			(14.4	)				13.2
Interest expense, net		19.5			0.1			d		19.6
Impairment charge		3.6			(3.6	)		h		—
Foreign exchange gain		(1.5	)		—					(1.5	)
Refinancing expenses		12.2			—					12.2
Loss on sale of fixed assets		0.2			(0.2	)		h		—
Other		(0.1	)		(0.3	)		d		(0.4	)
Loss from continuing operations before income taxes		(6.3	)		(10.4	)				(16.7	)
Current		6.7			—					6.7
Future		(9.7	)		(10.8	)		c		(20.5	)
Benefit from income taxes		(3.0	)		(10.8	)				(13.8	)
Loss before discontinued operations		(3.3	)		0.4					(2.9	)
Loss from discontinued operations		(1.7	)		—					(1.7	)
Net loss for the period		(5.0	)		0.4					(4.6	)
Dividends on convertible preferred shares		—			—					—
Net loss attributable to restricted voting shareholders		(5.0	)		0.4					(4.6	)
Basic and diluted loss per share
From continuing operations	$	(0.026	)						$	(0.023	)
From discontinued operations	$	(0.013	)						$	(0.013	)
	$	(0.039	)						$	(0.036	)
Weighted-average number of shares outstanding during period—basic and diluted (in thousands)		129,168								129,168

see accompanying notes

F-42

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of

U.S. dollars)

	Year Ended October 31, 2009
	Canadian GAAP			Increase (Decrease)			Notes	U.S. GAAP
	$			$				$
Revenues		655.1			—				655.1
Cost of goods sold		511.2			(0.2	)	e		511.0
Gross profit		143.9			0.2				144.1
Selling, general and administrative expenses		105.5			—				105.5
Repositioning expenses		2.1			—				2.1
Operating income		36.3			0.2				36.5
Interest expense, net		15.4			—				15.4
Foreign exchange loss		7.0			—				7.0
Other		0.4			—				0.4
Income from continuing operations before income taxes		13.5			0.2				13.7
Current		7.7			—				7.7
Future		4.8			0.1		e		4.9
Provision for income taxes		12.5			0.1				12.6
Income before discontinued operations		1.0			0.1				1.1
Loss from discontinued operations		(7.8	)		—				(7.8	)
Net loss for the period		(6.8	)		0.1				(6.7	)
Dividends on convertible preferred shares		11.1			—				11.1
Net loss attributable to restricted voting shareholders		(17.9	)		0.1				(17.8	)
Basic and diluted loss per share
From continuing operations	$	(0.100	)					$	(0.099	)
From discontinued operations	$	(0.077	)					$	(0.077	)
	$	(0.177	)					$	(0.176	)
Weighted-average number of shares outstanding during period—basic and diluted (in thousands)		100,964							100,964

see accompanying notes

F-43

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of

U.S. dollars)

	Year Ended October 31, 2008
	Canadian GAAP			Increase (Decrease)			Notes		U.S. GAAP
	$			$					$
Revenues		717.3			—					717.3
Cost of goods sold		560.2			(0.3	)		e		559.9
Gross profit		157.1			0.3					157.4
Selling, general and administrative expenses		121.3			—					121.3
Repositioning expenses		19.9			—					19.9
Impairment charge		—			0.4			h		0.4
Gain on sale of fixed assets		—			(0.7	)		h		(0.7	)
Operating income		15.9			0.6					16.5
Interest expense, net		30.7			(13.5	)		a		17.2
Impairment charge		0.4			(0.4	)		h		—
Foreign exchange gain		(1.5	)		(6.4	)		a		(7.9	)
Gain on extinguishment of debt		(34.9	)		34.9			a		—
Gain on sale of fixed assets		(0.7	)		0.7			h		—
Other		0.1			—					0.1
Income from continuing operations before income taxes		21.8			(14.7	)				7.1
Current		13.9			0.6			g		14.5
Future		(12.4	)		0.1			e		(12.3	)
Provision for income taxes		1.5			0.7					2.2
Income before discontinued operations		20.3			(15.4	)				4.9
Loss from discontinued operations		(19.5	)		—					(19.5	)
Net income (loss) for the period		0.8			(15.4	)				(14.6	)
Dividends on convertible preferred shares		1.5			12.2			a		13.7
Gain on exchange of convertible preferred shares		—			(17.1	)		a		(17.1	)
Net loss attributable to restricted voting shareholders		(0.7	)		(10.5	)				(11.2	)
Basic (loss) income per share
From continuing operations	$	0.207							$	0.092
From discontinued operations	$	(0.215	)						$	(0.215	)
	$	(0.008	)						$	(0.123	)
Diluted (loss) income per share
From continuing operations	$	0.207							$	0.012
From discontinued operations	$	(0.215	)						$	(0.158	)
	$	(0.008	)						$	(0.146	)
Weighted-average number of shares outstanding during period— basic (in thousands)		90,737								90,737
Weighted-average number of shares outstanding during period— diluted (in thousands)		90,737								123,634

see accompanying notes

F-44

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

Consolidated Statements of Cash Flows

There would be no material differences between Canadian GAAP and U.S. GAAP in total operating, investing or financing activities for the years ended October 31, 2010, 2009 and 2008. However, there were certain reclassifications within these activities.

Consolidated Statements of Changes to Shareholders’ Equity

The application of U.S. GAAP had the following effects on shareholders’ equity as reported under Canadian GAAP:

	Year ended October 31, 2010										Year ended October 31, 2009
	Canadian GAAP			Increase (Decrease)			Notes	U.S. GAAP			Canadian GAAP			Increase (Decrease)			Notes		U.S. GAAP
	$			$				$			$			$					$
Convertible preferred shares—equity component
Balance at beginning of period		—			—				—			149.2			18.6					167.8
Paid in-kind dividend on shares		—			—				—			11.1			—					11.1
Conversion of convertible preferred shares		—			—				—			(160.3	)		(18.6	)				(178.9	)
Balance at end of period		—			—				—			—			—					—
Restricted voting shares
Balance at beginning of period		553.8			18.1				571.9			393.5			(0.5	)				393.0
Conversion of convertible preferred shares		—			—				—			160.3			18.6					178.9
Balance at end of period		553.8			18.1				571.9			553.8			18.1					571.9
Contributed surplus
Balance at beginning of period		7.7			—				7.7			6.7			—					6.7
Stock-based compensation		2.3			—				2.3			1.0			—					1.0
Balance at end of period		10.0			—				10.0			7.7			—					7.7
Deficit
Balance at beginning of period		(325.7	)		(25.2	)			(350.9	)		(309.3	)		(25.3	)				(334.6	)
Adjustment related to change in accounting policy		—			—				—			1.6			—					1.6
Adjustments for U.S. GAAP differences		—			0.4		d,e		0.4			—			0.1			e		0.1
Net loss attributable to restricted voting shareholders		(5.0	)		—				(5.0	)		(17.9	)		—					(17.9	)
Balance at end of period		(330.7	)		(24.8	)			(355.5	)		(325.7	)		(25.2	)				(350.9	)
Accumulated other comprehensive income (loss)
Balance at beginning of period		35.5			(19.6	)			15.9			(2.9	)		(7.8	)				(10.7	)
Pension adjustment		—			2.4		b		2.4			—			(11.7	)		b		(11.7	)
Adjustments for U.S. GAAP differences		—			—				—			—			(0.1	)		e		(0.1	)
Other comprehensive income for the period		4.4			—				4.4			38.4			—					38.4
Balance at end of period		39.9			(17.2	)			22.7			35.5			(19.6	)				15.9
Total shareholders’ equity at end of period		273.0			(23.9	)			249.1			271.3			(26.7	)				244.6

see accompanying notes

F-45

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

	Year ended October 31, 2008
	Canadian GAAP			Increase (Decrease)			Notes		U.S. GAAP
	$			$					$
Convertible preferred shares—equity component
Balance at beginning of period		15.9			(15.9	)		a		—
Reclassification from debt component		131.8			(131.8	)		a		—
Reclassification from mezzanine equity		—			166.3			a		166.3
Paid in-kind dividend on shares		1.5			—					1.5
Balance at end of period		149.2			18.6					167.8
Restricted voting shares
Balance at beginning of period		392.0			—					392.0
Shares issued during the period, net of issue costs		1.5			—					1.5
Other		—			(0.5	)		a		(0.5	)
Balance at end of period		393.5			(0.5	)				393.0
Contributed surplus
Balance at beginning of period		4.1			—					4.1
Stock-based compensation		2.6			—					2.6
Balance at end of period		6.7			—					6.7
Deficit
Balance at beginning of period		(293.7	)		(12.5	)		a		(306.2	)
Elimination of gain on deemed redemption of preferred shares		(14.9	)		(20.0	)		a		(34.9	)
Foreign exchange on preferred shares		—			6.4			a		6.4
Adjustments for U.S. GAAP differences		—			(0.5	)		e, g		(0.5	)
Dividends over and above accretive interest amounts		—			1.3			a		1.3
Net loss attributable to restricted voting shareholders		(0.7	)		—					(0.7	)
Balance at end of period		(309.3	)		(25.3	)				(334.6	)
Accumulated other comprehensive income (loss)
Balance at beginning of period		71.5			6.0			b, e		77.5
Pension adjustment		—			(7.3	)		b		(7.3	)
Foreign exchange on preferred shares		—			(6.4	)		a		(6.4	)
Other comprehensive loss for the period		(74.4	)		(0.1	)		e		(74.5	)
Balance at end of period		(2.9	)		(7.8	)				(10.7	)
Total shareholders’ equity at end of period		237.2			(15.0	)				222.2

see accompanying notes

F-46

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

(a) Preferred shares

Under Canadian GAAP, the convertible preferred shares held by JLL were classified at inception as having both an equity component and a debt component. Therefore, the Company recognized foreign exchange gains and losses during fiscal 2007 and 2008 on the U.S. dollar denominated debt portion of the preferred shares as they were held by an entity with a Canadian dollar functional currency and marked to market the debt portion at current foreign exchange rates. Under U.S. GAAP, however, the preferred shares would have been deemed to be mezzanine equity at inception. Therefore, the Company would not have recognized any foreign exchange activity under U.S. GAAP.

The Company considered its U.S. dollar denominated debt held by the Canadian entity as a hedge against its U.S. dollar denominated investments . Therefore, under Canadian GAAP, changes in the fair value associated with the effective portions of the hedge were recorded as other comprehensive income, and changes in the ineffective portions of the hedge were recorded as foreign exchange gains and losses on the consolidated statements of loss.

Because JLL’s preferred shares were primarily recorded as debt, under Canadian GAAP, the Company recorded accrued interest on the debt portion of the preferred shares. Under U.S. GAAP Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity” (“ASC 480”), the Company would have recorded accreted dividends on the entire amount.

As discussed above, under U.S. GAAP, the value of the preferred stock would be adjusted from its initial value on the April 27, 2007 issuance date to its redemption value over the period from issuance date to the redemption or conversion date using the method discussed in ASC 480.

In September 2008, the Company entered into an agreement (the “JLL Agreement”) with JLL whereby JLL agreed to waive the mandatory redemption requirement contained in the terms of its preferred shares. The JLL Agreement resulted in a deemed repayment of the debt and equity components of the preferred shares, as well as in a change in the accounting treatment for those shares. Completion of the JLL Agreement resulted in the full carrying value of the preferred shares being classified within shareholders’ equity on the Company’s balance sheets, and no further accretive interest expense was recorded in the consolidated statements of loss. Paid-in-kind dividend equivalents on the preferred shares were reported below net loss to arrive at a loss attributable to the restricted voting shareholders.

Upon settlement of the debt portion of JLL’s preferred shares, the Company recognized a gain on the extinguishment of this debt. The Company reported this gain on its consolidated statement of loss below operating income and before income from continuing operations before income tax. Additionally, upon settlement of the equity portion of JLL’s preferred shares, the Company recognized a loss on the deemed redemption, which increased accumulated deficit. Under U.S. GAAP, there would be no gain or loss recognized since the preferred shares would have been recorded solely as equity from inception.

According to U.S. GAAP ASC 260, “Earnings Per Share,” under the inducement clause, the excess (deficit) of the fair value of all securities and other consideration transferred in the transaction by the registrant to the holders of the convertible preferred stock over (under) (2) the carrying value of securities issuable pursuant to the original conversion terms will be netted against net earnings for the EPS calculation. The impact of this was a net gain for the restricted shareholders of $18.2 million, partially offset by the additional 400,000 restricted shares issued to JLL with a fair value of approximately $1.1 million.

F-47

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

The net impact on loss attributable to restricted voting shareholders was a gain (deemed dividend) of $17.1 million which was included in the net loss per share calculation for fiscal 2008.

On July 29, 2009, JLL converted its 150,000 convertible preferred shares of Patheon into a total of 38,018,538 restricted voting shares of Patheon, in accordance with the convertible preferred share terms. As a result of this conversion, the Company no longer has any Series C preferred shares outstanding.

(b) Pensions and post retirement plans

Under U.S. GAAP ASC 715, “Compensation—Retirement Benefits,” the Company is required to recognize the over or underfunded status of defined benefit pension and other post-retirement plans on its balance sheet. The over or under funded status is measured as the difference between the fair value of the plan assets and the benefit obligation, being the projected obligation for pension plans and the accumulated benefit obligation for other post-retirement plans. In addition, the Company is required to recognize any previously unrecognized actuarial gains and losses and prior service costs and credits that arise during the applicable period in other comprehensive income, net of tax. No similar requirement currently exists under Canadian GAAP. In addition, overfunded plans are reported as non-current assets and underfunded plans are reported as non-current liabilities, with expected benefit payments over the next 12 months reclassified as short-term liabilities from non-current liabilities.

(c) Investment Tax Credits

Under U.S. GAAP ASC 740, “Income Taxes,” (“ASC 740”) the Company’s Investment Tax Credits (“ITCs”) are credited against income tax expense, whereas under Canadian GAAP CICA Section 3805, “Investment Tax Credits,” ITCs are offset against the related operating expense.

Because the Company’s ITCs are related to research and development costs, primarily labor, assets are not typically created as a part of the operations subject to the ITC calculation pool. Therefore, the Company has determined that the “flow-through method” of accounting under U.S. GAAP is appropriate. Under the flow-through method, ITCs are recognized as a reduction of federal income taxes in the year in which they arise instead of being reflected in net income over the productive life of acquired property (the deferral method).

Under U.S. GAAP, the Company has reclassified the credit to cost of goods related to its ITCs to income tax expense and has reclassified the related ITC receivables to deferred tax assets, short-term or long-term, based upon when they are expected to be used. The ITCs will impact current tax expense when used and deferred tax expense when accumulated during the course of a fiscal year.

(d) Embedded derivative on call option premium

Under CICA Section 3855, “Financial Instruments—Recognition and Measurement,” if the economic characteristics of an embedded derivative (in this case the call option on the Notes) are not closely related to the economic characteristics of the host contract (the Notes), then bifurcation of the embedded derivative is required. CICA Section 3855 provides that the economic characteristics of a call option are not closely related to the economic characteristics of the host contract if the call option’s exercise price is not approximately equal, on each exercise date, to the amortized cost of the host contract. In determining whether the exercise price is approximately equal, the amortized cost of the host contract is assumed to be its par value at any given time. Under U.S. GAAP ASC 815, “Derivatives and Hedging,” the bond call provisions were considered clearly and closely related to the host instrument, as such, the embedded derivative is not valued separately from the debt. Therefore, the Canadian GAAP valuations for the call options are reversed for the U.S. GAAP presentation.

F-48

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

(e) Deferred transaction costs

Both U.S. GAAP ASC 805, “Business Combinations,” and its predecessor, Statement of Financial Accounting Standards No. 141, “Business Combinations,” each require deferred transaction costs to be expensed as incurred. Under Canadian GAAP, such costs are capitalized and amortized over 15 years. As such, the effect of the deferred transaction costs has been reversed as of the first period presented and included in opening accumulated deficit.

(f) Deferred financing costs

In accordance with Canadian GAAP, the Company accounts for deferred financing costs, or transaction costs, as a reduction from the related liability and amortizes such costs using the effective interest method. However, for U.S. GAAP purposes, the Company accounts for these costs as an asset and amortizes them over the expected term of the financial liability using the effective interest method.

(g) Reserves for uncertain tax positions

The Company adopted the uncertain tax positions standard of ASC 740 on November 1, 2007. As a result of the implementation of this standard, the Company recognized no material adjustment in the liability for unrecognized income tax benefits or effect on accumulated deficit. As of October 31, 2010 and 2009, unrecognized tax benefits were $1.4 million and $2.7 million, respectively. For fiscal 2008, the consolidated statement of loss was impacted by an uncertain tax position taken during that year.

(h) Long-lived assets classified as held and used

Under U.S. GAAP ASC 360, “Long-Lived Assets Classified as Held and Used” (“ASC 360”), impairments and gains/losses on sale of assets should be reported in operating income.

Additional U.S. GAAP Disclosures

Accounts payable and accrued liabilities

The following is the breakdown of accounts payable and accrued liabilities:

	As of October 31,
	2010		2009
	$		$
Trade payables		89.9		102.1
Accrued salaries and related expenses		44.7		40.3
Customer deposits		14.6		15.7
Other accruals		7.5		12.7
		156.7		170.8

Income taxes

The Company adopted the uncertain tax provisions standard of ASC 740 on November 1, 2007. As a result of the implementation of this standard, the Company recognized no material adjustment in the liability for unrecognized income tax benefits or effect on accumulated deficit. As of October 31, 2010 and 2009, unrecognized tax benefits were $1.4 million and $2.7 million, respectively. At October 31, 2010 and 2009, unrecognized tax benefits of $0.6 million and $0.6 million, respectively, related to permanent income tax differences, will have a favorable effect on the Company’s effective tax rate if recognized; the remaining balance would result in a reclassification on the balance sheet.

F-49

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

The Company classifies interest recognized under ASC 740 as a component of interest expense in the consolidated statements of loss. Penalties, if incurred, are recorded as other operating expenses in the consolidated statements of loss. The Company recorded no material amount of interest expense under ASC 740 for the years ended October 31, 2010 and 2009.

Examinations by tax authorities have been completed through October 31, 2003 in Canada, October 31, 2008 in France, October 31, 2004 in Italy, October 31, 2002 in the United Kingdom, and October 31, 2008 in the United States.

During the year ended October 31, 2010, the Canada Revenue Agency concluded examination of the Company’s transfer pricing position for the years ended October 31, 2005 through 2008 resulting in no adjustment to Canadian taxable income. In the year ended October 31, 2009, the Canada Revenue Agency concluded examination of the Company’s research & development position for the year ended October 31, 2007 resulting in no material adjustment to tax expense.

During the year ended October 31, 2010, the U.S. Internal Revenue Service concluded examination of the Company’s October 31, 2007 and 2008 consolidated U.S. federal income tax returns. The Company acquiesced to the conclusions reached in the examination and the examination is in review by the Joint Committee on Taxation. To allow sufficient time for Joint Committee review, the Company consented to extend the statute of limitations for the years ended October 31, 2006 and 2007 until July 15, 2012. The Company believes the issues addressed by this examination are effectively settled and has, accordingly, reduced the reserve for these uncertain tax benefits.

During the year ended October 31, 2010, the French tax authority concluded examination of the Company’s income tax returns for the years ended October 31, 2007 and 2008. The Company has appealed the assessment related to transfer pricing and believes the appeal will result in a nil or immaterial assessment. The Company anticipates no material change to unrecognized tax benefits resulting from this examination.

During the year ended October 31, 2010, the Hungarian tax authority initiated an examination for the years ended December 31, 2005 through August 12, 2010 as part of the liquidation process. The examination has not been concluded, however, the Company believes the examination will result in a nil or immaterial assessment.

With the exception of the aforementioned, there are no other ongoing income tax examinations.

During the next 12 months, the Company expects no material change in the total amount of unrecognized tax benefits. A reconciliation of the beginning and ending amounts of the tax reserves is as follows:

Balance at November 1, 2007	$	—
Increase based on tax positions taken in the current year		0.6
Balance at November 1, 2008	$	0.6
Increase based on tax positions taken in the current year		2.1
Balance at October 31, 2009	$	2.7
Decrease related to settlements with taxing authorities and changes in law		(1.3	)
Balance at October 31, 2010	$	1.4

F-50

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

Earnings per share

The following computation reconciles the differences between the basic and diluted earnings per share presentations for continuing operations (dollar information in millions of USD, except per share information):

	Year ended October  31, 2008
		$
Diluted:
Net income—basic		4.9
Dividend on convertible preferred shares		13.7
Gain on exchange of convertible preferred shares		(17.1	)
Net income—diluted		1.5
Weighted-average number of restricted voting shares—basic (in thousands)		90,737
Effect of conversion of convertible preferred shares (in thousands)		32,897
Weighted-average number of restricted voting shares—diluted (in thousands)		123,634
Diluted earnings per share	$	0.012

The Company did not include 8,327,357, 4,699,348 and 5,987,965 outstanding options in fiscal 2010, 2009 and 2008, respectively, because they were anti-dilutive in nature.

Pension plan assumptions

The following weighted-average assumptions were used to determine the projected benefit obligation of the Company's defined benefit and other post retirement plans at the end of the respective fiscal year:

	Defined Benefit Plans						Other Benefit Plans
	2010			2009			2010			2009
Discount rate		5.3	%		5.9	%		5.3	%		6.0	%
Rate of future compensation increases		3.9	%		4.0	%		0.0	%		0.0	%

The following weighted-average assumptions were used to determine the net periodic benefit cost of the Company’s defined benefit and other post retirement plans during the respective fiscal year:

	Defined Benefit Plans									Other Benefit Plans
	2010			2009			2008			2010			2009			2008
Discount rate		5.8	%		6.0	%		6.1	%		5.3	%		7.0	%		5.8	%
Expected long-term return on plan assets		6.9	%		7.3	%		7.3	%		0.0	%		0.0	%		0.0	%
Rate of future compensation increases		4.1	%		4.2	%		4.1	%		0.0	%		0.0	%		0.0	%

The 5.3% weighted-average discount rate used to determine the projected benefit obligation of the Company’s plans at the end of fiscal 2010 was derived by reference to appropriate benchmark yields on high quality corporate bonds, with terms which approximate the duration of the benefit payments and the relevant benchmark bond indices considering the individual plan’s characteristics, to select a rate at which the Company believes the pension benefits could have been effectively settled.

F-51

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

The Company selects an expected long-term rate of return on its pension plan assets and, in doing so, considers a number of factors including, without limitation, recent and historical performance of plan assets, asset allocation and other third-party studies and surveys. The Company considered the pension plan portfolios’ asset allocations over a variety of time periods and compared them with third-party studies and reviewed the performance of the capital markets in recent years and other factors and advice from various third parties, such as the pension plans’ advisors, investment managers and actuaries. While the Company considered both the recent performance and the historical performance of pension plan assets, the Company’s assumptions are based primarily on its estimates of long-term, prospective rates of return. Using the aforementioned methodologies, the Company selected the 6.9% long-term rate of return on plan assets assumption used for the pension plans during 2010. Differences between actual and expected asset returns are recognized in the net periodic benefit cost over the remaining service period of the active participating employees.

The rate of future compensation increases is an assumption used by the actuarial consultants for pension accounting and is determined based on the Company’s current expectation for such increases.

Pension plan assets

The following table presents information on the fair value of the defined benefit plans’ assets at October 31, 2010, 2009 and 2008, respectively:

	Defined Benefit Plans
	2010		2009		2008
	$		$		$
Fair value of plan assets		66.0		55.5		49.5

The Pension Committee for the Company’s defined benefit plans (the “Pension Committee”) has adopted (and revises from time to time) an investment policy for the Canadian and U.K. defined benefit plans with the objective of meeting or exceeding, over time, the expected long-term rate of return on plan assets assumption, weighed against a reasonable risk level. In connection with this objective, the Pension Committee retains professional investment managers that invest plan assets in the following asset classes: equity and fixed income securities and cash and other investments, which may include hedge funds and private equity and global balanced strategies.

The Company’s defined benefit plans currently have the following target ranges for these asset classes, which target ranges are intended to be flexible guidelines for allocating the plans’ assets among various classes of assets, and are reviewed periodically and considered for readjustment when an asset class weighting is outside of its target range (recognizing that these are flexible target ranges that may vary from time to time) with the objective of achieving the expected long-term rate of return on plan assets assumption, weighed against a reasonable risk level, as follows:

	Defined Benefit Plans Canada			Defined Benefit Plans U.K.
Asset Category:
Domestic equity securities		15 - 50	%		20	%
Foreign equity securities		0 - 35	%		70	%
Debt securities		30 - 50	%		10	%
Other		0 - 20	%		0	%

F-52

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

The fair value hierarchy must have the following levels: (a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); (b) inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) (Level 2); and (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

The fair values of the defined benefit plans’ assets at October 31, 2010, by asset categories were as follows:

Defined Benefit Plans	Total		Level 1		Level 2		Level 3
	$		$		$		$
Asset Category:
Equity securities		45.3		—		45.3		—
Debt securities		17.3		—		17.3		—
Cash and other investments:		3.4		—		3.4		—
Total pension plan assets at fair value		66.0		—		66.0		—

Within the equity securities asset class, the investment policy adopted by the Pension Committee provides for investments in a broad range of publicly-traded securities ranging from domestic and international stocks and small to large capitalization stocks. Within the debt securities asset class, the investment policy provides for investments in a broad range of publicly-traded debt securities, including domestic and international treasury issues, and corporate debt securities. In the cash and other investments asset class, investments may be in cash and cash equivalents and other investments, which may include hedge funds and private equity not covered in the classes listed above, provided that such investments are approved by the Pension Committee prior to their selection.

The Pension Committee’s investment policy does not allow the use of derivatives for speculative purposes, but such policy does allow its investment managers to use derivatives for the purpose of reducing risk exposures or to replicate exposures of a particular asset class.

Estimated future benefit payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid out of the Company's defined benefit plans and other post-retirement benefit plans:

	Total Defined Benefit Plan Payments		Total Other Benefit Plan Payments
	$		$
2011		1.9		0.2
2012		1.9		0.2
2013		2.3		0.2
2014		2.3		0.3
2015		2.4		0.3
2016 through 2020		17.8		2.0
		28.6		3.2

Lease Expenses

The Company’s total rental expenses related to its operating leases for the years ended October 31, 2010, 2009 and 2008 was $6.0 million, $4.1 million and $3.2 million, respectively.

F-53

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

Stock-Based Compensation

The total fair value of shares that vested during the years ended October 31, 2010, 2009 and 2008 was $1.3 million, $1.6 million and $0.6 million, respectively. As of October 31, 2010, the total unrecognized compensation cost related to the nonvested stock options was $5.2 million.

Impact of new and pending U.S. GAAP accounting standards

In April 2010, the Financial Accounting Standards Board (“FASB”) issued “Accounting Standards Update (“ASU”) 2010-17,” Revenue Recognition Milestone Method (Topic 605): Milestone Method of Revenue Recognition.” The amendments in this ASU provide guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Consideration that is contingent on achievement of a milestone in its entirety may be recognized as revenue in the period in which the milestone is achieved only if the milestone is judged to meet certain criteria to be considered substantive. The amendments in this ASU are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. Vendors may also elect to adopt the amendments in this ASU retrospectively for all prior periods. The Company does not expect this ASU would have a material impact on its consolidated financial statements if prepared under U.S. GAAP.

In April 2010, the FASB issued ASU 2010-13, “Compensation-Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades.” This ASU codifies the consensus reached in Emerging Issues Task Force Issue No. 09-J, “Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades.” The amendments in this ASU clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity shares trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. Early adoption is permitted. The amendments are to be applied by recording a cumulative-effect adjustment to beginning accumulated deficit. The Company does not expect this ASU would have a material impact on its consolidated financial statements if prepared under U.S. GAAP.

In January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.” This guidance requires new disclosures related to recurring and nonrecurring fair value measurements. The guidance requires disclosure of transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy, including the reasons and the timing of the transfers and information on purchases, sales, issuance, and settlements on a gross basis in the reconciliation of the assets and liabilities measured under Level 3 of the fair value measurement hierarchy. The adoption of this guidance is effective for interim and annual reporting periods beginning after December 15, 2009. The Company does not expect this ASU would have a material impact on its consolidated financial statements if prepared under U.S. GAAP.

In October 2009, the FASB issued ASU 2009-13, “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements.” ASU 2009-13 amends the criteria in ASC Subtopic 605-25, “Revenue Recognition Multiple-Element Arrangements,” for separating consideration in multiple-deliverable arrangements. This ASU addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or

F-54

Patheon Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

October 31, 2010, 2009 and 2008

(Dollar information in tabular form is expressed in millions of U.S. dollars)

services (deliverables) separately rather than as a combined unit. ASU 2009-13 modifies the requirements for determining whether a deliverable can be treated as a separate unit of accounting by removing the criteria that verifiable and objective evidence of fair value exists for the undelivered elements. This guidance eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable, which is based on: a) vendor-specific objective evidence; b) third-party evidence; or c) estimates. In addition, this guidance significantly expands required disclosures related to a vendor’s multiple-deliverable revenue arrangements. ASU 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company does not expect this ASU would have a material impact on its consolidated financial statements if prepared under U.S. GAAP.

In June 2009, the FASB issued guidance codified as U.S. GAAP ASC 470-20, “Debt—Debt with Conversion and Other Options,” regarding accounting for own-share lending arrangements in contemplation of convertible debt issuance, which changes the accounting for equity share lending arrangements on an entity’s own shares when executed in contemplation of a convertible debt offering. This guidance requires the share lending arrangement to be measured at fair value and recognized as an issuance cost. These issuance costs should then be amortized as interest expense over the life of the financing arrangement. Shares loaned under these arrangements should be excluded from computation of earnings per share. This guidance is effective for fiscal years beginning after December 15, 2009 and requires retrospective application for all arrangements outstanding as of the beginning of the fiscal year. The Company does not expect this ASU would have a material impact on its consolidated financial statements if prepared under U.S. GAAP.

F-55

EX-3.1

Exhibit 3.1

Industry Canada Industrie Canada

Certificate of Amalgamation	Certificat de fusion
Canada Business	Loi canadienne sur
Corporations Act	les sociétés par actions

PATHEON, INC.	419970-7
Name of corporation-Dénomination de la société	Corporation number-Numéro de la société
I hereby certify that the above-named corporation resulted from an amalgamation, under section 185 of the Canada Business Corporations Act, of the corporations set out in the attached articles of amalgamation.	Je certifie que la société susmentionnée est issue d’une fusion, en vertu de l’article 185 de la Loi canadienne sur les sociétés par actions, des sociétés dont les dénominations apparaissent dans les statuts de fusion ci-joints.
/s/ Richard G. Shaw	November 1, 2003 / le l novembre 2003
Director - Directeur	Date of Amalgamation – Date de fusion

Industry Canada Canada Business Corporations Act	Industrle Canada Loi canadienne sur les sociétés par actions		FORM 9 ARTICLES OF AMALGAMATION (SECTION 185)	FORMULAIRE 9 STATUTS DE FUSION (ARTICLE 185)
1 – Name of the Amalgamation Corporation			Dénomination sociale de la société issue de la fusion
PATHEON, INC.
2 – The province or territory in Canada where the registered office is to be situated			La province ou le territoire au Canada oûu se situera le siége social
Province of Ontario
3 – The classes and any maximum number of shares that the corporation is authorized to issue			Catégories et tout nombre maximal d’actions que la sociétés est autorisée à émettre
See Schedule A attached hereto
4 – Restrictions, if any, on share transfers			Restrictions sur le transfert des actions, s’il y a lieu
None
5 – Number (or minimum and maximum number) of directors			Nombre (ou nombre minimal et maximal) d’ administrateurs
A minimum of 3 directors and a maximum of 12 directors
6 – Restrictions, if any, on business the corporation may carry on			Limites imposées à l’activité commerciale de la société, s’il y a lieu
None
7 – Other provisions, if any			Autres dispositions, s’il y a lieu
None
8 – The amalgamation has been approved pursuant to that section or subsection of the Act which is indicated as follows:			La fusion a été approuvée en accord avec l’article ou le paragraphe de la Loi indiqué ci-aprés
		¨183 x184(1) ¨184(2)

9  – Name of the amalgamating corporations Dénomination sociale des sociétés fushionnantes	Corporation No. No  de la société	Signature	Date	Title Titre	Tel. No. No de tel.
PATHEON, INC.	288624-3	/s/ Riccardo Trecroce	Oct. 27 / 03	Secretary	905-812-6877
PATHEON WHITBY INC.	419834-4	/s/ Riccardo Trecroce	Oct. 27 / 03	Secretary	“
PATHEON YM INC.	419500-1	/s/ Riccardo Trecroce	Oct. 27 / 03	Secretary	“
FOR DEPARTMENTAL USE ONLY – A L’ USAGE DU MINISTERE SEULEMENT

SCHEDULE A

(a) An unlimited number of common shares without par value (the “Common Shares”) which shall have attached thereto the rights, privileges, restrictions and conditions provided by the Canada Business Corporations Act, including those rights, privileges, conditions and restrictions set out in Schedule I annexed hereto, which Schedule I is incorporated in this form;

(b) an unlimited number of preferred shares issuable in series to be designated as Class I Preferred Shares, the said Class I Preferred Shares shall have attached thereto the rights, privileges, restrictions and conditions set out in Schedule II annexed hereto, which Schedule II is incorporated in this form;

(c) the first series of Class I Preferred Shares shall consist of 76,500 Class I Preferred Shares to be designated as Cumulative Redeemable Convertible Class I Preferred Shares, Series A (the “Series A Preferred Shares”), and which, in addition to the rights, privileges, restrictions and conditions attaching to the Class I Preferred Shares as a class, shall have attached thereto the rights, privileges, restrictions and conditions set out in Schedule III annexed hereto, which Schedule III is incorporated in this form; and

(d) the second series of Class I Preferred Shares shall consist of 9,175 Class I Preferred Shares to be designated as Cumulative Redeemable Convertible Retractable Class I Preferred Shares, Series B (the “Series B Preferred Shares”), and which, in addition to the rights, privileges, restrictions and conditions attaching to the Class I Preferred Shares as a class, shall have attached thereto the rights, privileges, restrictions and conditions set out in Schedule IV annexed hereto, which Schedule IV is incorporated in this form.

SCHEDULE I

The common shares shall have attached thereto the following rights, privileges, restrictions and conditions in addition to those rights, privileges, restrictions and conditions which are already attached to the common shares of the Corporation by virtue of the provisions of the Canada Business Corporations Act:

1. Dividends

Subject to the prior rights of the holders of any shares ranking senior to the Common Shares with respect to priority in the payment of dividends, the holders of Common Shares shall be entitled to receive dividends and the Corporation shall pay dividends thereon, as and when declared by the board of directors of the Corporation out of monies properly applicable to the payment of dividends, in such amount and in such form as the board of directors may from time to time determine, and all dividends which the directors may declare on the Common Shares shall be declared and paid in equal amounts per share on all Common Shares at the time outstanding.

2. Dissolution

In the event of liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of assets of the Corporation among its shareholders for the purpose of winding-up its affairs, subject to the prior rights of any shares ranking senior to the Common Shares with respect to priority in the distribution of assets upon liquidation, dissolution or winding-up, the holders of the Common Shares shall be entitled to receive the remaining property and assets of the Corporation.

3. Voting Rights

Except for meetings at which only holders of another specified class or series of shares of the Corporation are entitled to vote separately as a class or series, the holders of the Common Shares shall be entitled to receive notice of and to attend all meetings of the shareholders of the Corporation and shall have one vote for each Common Share held at all meetings of the shareholders of the Corporation.

SCHEDULE II

The Class I Preferred Shares as a class shall have attached thereto the following rights, privileges, restrictions and conditions:

(a) the directors of the Corporation may, at any time and from time to time, issue the Class I Preferred Shares in one or more series, each series to consist of such number of shares as may before issuance thereof be determined by the directors;

(b) the directors of the Corporation may (subject as hereinafter provided) from time to time fix before issuance the designation, rights, privileges, restrictions and conditions to attach to the Class I Preferred Shares of each series including, without limiting the generality of the foregoing, the rate, amount or method of calculation of preferential dividends, whether cumulative or non-cumulative or partially cumulative, and whether such rate, amount or method of calculation shall be subject to change or adjustment in the future, the currency or currencies of payment, the date or dates and place or places of payment thereof and the date or dates from which such preferential dividends shall accrue, the redemption price and terms and conditions of redemption, the rights of retraction, if any., vested in the holders of Class I Preferred Shares of such series, and the prices and the other terms and conditions of any rights of retraction and whether any additional rights of retraction may be vested in such holders in the future voting rights and conversion rights (if any) and any sinking fund, purchase fund or other provisions attaching to the Class I Preferred Shares of such series, the whole subject to the issue by the Director, Corporations Branch, Department of Consumer and Corporate Affairs, of a Certificate of Amendment in respect of Articles of Amendment in prescribed form to designate a series of shares;

(c) when any fixed cumulative dividends or amounts payable on a return of capital are not paid in full, the Class I Preferred Shares of all series shall participate rateably in respect of such dividends including accumulations, if any, in accordance with the amounts which would be payable on the Class I Preferred Shares if all such dividends were declared and paid in full, and on any return of capital in accordance with the sums which would be payable on such return of capital if all amounts so payable were paid in full;

(d) the Class I Preferred Shares shall be entitled to preference over the Common Shares of the Corporation and any other shares of the Corporation ranking junior the Class I Preferred Shares with respect to the payment of dividends and may also be given other preferences over the Common Shares and any other shares of the Corporation ranking junior to the Class I Preferred Shares as may be fixed by the directors of the Corporation as to the respective series authorized to be issued;

(e) the Class I Preferred Shares of each series shall rank on a parity with the Class I Preferred Shares of every other series with respect to priority in payment of dividends and in the distribution of assets in the event of liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary;

(f) in the event of the liquidation, dissolution or winding-up of the Corporation or other distribution of assets of the Corporation among shareholders for the purpose of winding-up its affairs, the holders of the Class I Preferred Shares shall, before any amount shall be paid to’ or any property or assets of the Corporation distributed among the holders of the Common Shares or any other shares of the Corporation ranking junior to the Class I Preferred Shares, be entitled to receive (i) an amount equal to the amount paid up on such shares, together with, in the case of cumulative Class I Preferred Shares, all unpaid cumulative dividends (which for such purpose shall be calculated as if such cumulative dividends were accruing from day to day for the period from the expiration of the last period for which cumulative dividends have been paid up to and including the date of distribution) and in the case of non-cumulative Class I Preferred Shares, all declared and unpaid non-cumulative dividends, and (ii) if such liquidation, dissolution, winding-up or distribution shall be voluntary, an additional amount equal to the premium, if any, which would have been payable on the redemption of the said Class I Preferred Shares respectively if they had been called for redemption by the Corporation on the date of distribution and, if said Class I Preferred Shares could not be redeemed on such date, then an additional amount equal to the greatest premium, if any, which would have been payable on the redemption of said Class I Preferred Shares respectively;

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(g) no dividends shall at any time be declared or paid on or set apart for payment on the Common Shares or any other shares of the Corporation ranking junior to the Class I Preferred Shares unless all dividends up to and including the dividend payable for the last completed period for which such dividends shall be payable on each series of Class I Preferred Shares then issued and outstanding shall have been declared and paid or set apart for payment at the date of such declaration or payment or setting apart for payment on the Common Shares or such other shares of the Corporation ranking junior to the Class I Preferred Shares nor shall the Corporation call for redemption or redeem or purchase for cancellation or reduce or otherwise pay off any of the Class I Preferred Shares (less than the total amount then outstanding) or any Common Shares or any other shares of the Corporation ranking junior to the Class I Preferred Shares unless all dividends up to and including the dividend payable for the last completed period for which such dividends shall be payable on each series of the Class I Preferred Shares then issued and outstanding shall have been declared and paid or set apart for payment at the date of such call for redemption, purchase, reduction or other payment;

(h) the Class I Preferred Shares of any series may be purchased for cancellation or made subject to redemption by the Corporation at such times and at such prices and upon such other terms and conditions as may be specified in the rights, privileges, restrictions and conditions attaching to the Class I Preferred Shares of such series as set forth in the resolution of the board of directors of the Corporation and Certificate of Amendment relating to such series;

(i) the approval of the holders of the Class I Preferred Shares, given in the manner described in paragraph (j) below, shall be required (A) for the creation of any new shares ranking prior to or on a parity with the Class I Preferred Shares and (S) if, but only so long as, any dividends are in arrears on any outstanding series of Class I Preferred Shares, for the issuance of any additional series of Class I Preferred Shares or of any shares ranking prior to or on a parity with the Class I Preferred Shares; and

(j) the provisions of paragraphs (a) to (i), inclusive, and of this paragraph (j) may be deleted, amended, modified or varied in whole or in part by a

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Certificate of Amendment, but only with the prior approval of the holders of the Class I Preferred Shares given as hereinafter specified in addition to any other approval required by the Canada Business Corporations Act or any other statutory provision of like or similar effect, from time to time in force. The approval of the holders of the Class I Preferred Shares with respect to any and all matters hereinbefore referred to may be given by at least two-thirds of the votes cast at a meeting of the holders of the Class I Preferred Shares duly called for that purpose and held upon at least 21 days’ notice at which the holders of a majority of the outstanding Class I Preferred Shares are present or represented by proxy. If at any such meeting the holders of a majority of the outstanding Class I Preferred Shares are not present or represented by proxy within one-half an hour after the time appointed for such meeting, then the meeting shall be adjourned to such date being not less than 30 days later and to such time and place as may be appointed by the chairman and not less than 21 days’ notice shall be given of such adjourned meeting but it shall not be necessary in such notice to specify the purpose for which the meeting was originally called. At such adjourned meeting the holders of the Class I Preferred Shares present or represented by proxy may transact the business for which the meeting was originally called and a resolution passed thereat by not less than two-thirds of the votes cast at such adjourned meeting and the conduct thereof shall be from time to time prescribed by the by-laws of the Corporation with respect to meetings of shareholders. On every poll taken at every such meeting or adjourned meeting every holder of Class I Preferred Shares shall be entitled to one vote in respect of each Class I Preferred Share held.

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SCHEDULE III

The Series A Preferred Shares shall have attached thereto the following rights, privileges, restrictions and conditions (collectively the “Series A Provisions”) in addition to the rights, privileges, restrictions and conditions attaching to the Class I Preferred Shares as a class:

1. Interpretation

1.1 Definitions

Where used in these Series A Provisions, the following words and phrases shall, unless there is something in the context otherwise inconsistent therewith, have the following meanings, respectively:

(a) “business day” means a day other than a Saturday, Sunday or any other day treated as a holiday in the municipality in Canada in which the Corporation’s registered office is situated;

(b) “cash dividends paid in the ordinary course” means such cash dividends declared payable on the Common Shares in any fiscal year of the Corporation to the extent that such dividends do not exceed 100% of the consolidated net income of the Corporation, before extraordinary items, for the immediately preceding fiscal year of the Corporation, as determined by the auditors of the Corporation in accordance with generally accepted accounting principles;

(c) “close of business” means the normal closing hour of the principal office in the City of Toronto of the transfer agent;

(d) “Common Shares” means common shares without par value in the capital of the Corporation;

(e) “Conversion Basis” at any time means the number of Common Shares into which one Series A Preferred Share may be converted at such time in accordance with Section 3;

(f) “director” means a director of the Corporation for the time being and “directors” or “board of directors” means the board of directors of the

Corporation or, if duly constituted and empowered, the executive committee of the board of directors of the Corporation for the time being, and reference, without further elaboration, to action by the directors means action by the directors of the Corporation as a board or action taken by the said executive committee as such committee;

(g) “Exercise Date” means October 31, 1990;

(h) “Expiry Time” means 3:00 o’clock in the afternoon (Toronto time) on the Exercise Date;

(i) “herein”, “hereto”, “hereunder”, “hereof”, “hereby”, and similar expressions mean or refer to these share provisions and not to any particular Section, clause, subclause, subdivision or portion hereof, and the expressions “Section”, “clause” and “subclause” followed by a number or a letter mean and refer to the specified Section, clause or subclause hereof;

(j) “Junior Shares” means any shares in the capital of the Corporation ranking after or subordinated to the Series A Preferred Shares as to the payment of dividends or the return of capital, including, without limiting the generality of the foregoing, the Common Shares;

(k) “Market Price” of the Common Shares at any date means the weighted average of the closing board lot trading prices per share of the Common Shares on The Toronto Stock Exchange or, if the Common Shares are not listed on The Toronto Stock Exchange, on such stock exchange on which the Common Shares are listed as may be selected by the directors of the Corporation, on the 20 most recent trading days on which there have been board lot trades of such shares immediately prior to the fourth day preceding such date. In the event that the Common Shares are not listed on any stock exchange, the Market Price of the Common Shares shall be determined by the directors;

(1) “Redemption Date” means, in reference to any Series A Preferred Shares, the date fixed by the

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directors for redemption of such shares as specified in a Redemption Notice;

(m) “Redemption Notice” means the notice of redemption mailed, in accordance with clause 4.4, to holders of Series A Preferred Shares whose shares are to be redeemed;

(n) “transfer agent” means the person or persons from time to time appointed by the directors as the transfer agent for the Series A Preferred Shares; and

(o) “Series A Holder” means the registered holder of any Series A Preferred Shares.

1.2 Gender, etc.

Words importing the singular number only include the plural and vice versa, and words importing any gender include all genders.

1.3 Currency

All dollar amounts referred to herein shall be in lawful money of Canada.

1.4 Headings

The divisions of these provisions into Sections, clauses, subclauses or other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof.

1.5 Business Day

In the event that any date upon which any dividends on the Series A Preferred Shares are payable by the Corporation or upon or by which any other action is required to be taken by the Corporation hereunder is not a business day, then such dividend shall be payable, or such other action shall be required to be taken, on or by the next succeeding day which is a business day.

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2. Dividends

2.1 Dividend Preference

The Series A Preferred Shares shall be entitled to preference in the payment of dividends over the Common Shares and any other shares in the capital of the Corporation ranking junior to the Series A Preferred Shares with respect to the payment of dividends.

2.2 Declaration and Payment of Dividends

The holders of Series A Preferred Shares shall be entitled to receive and the Corporation shall pay thereon, as and when declared by the board of directors out of the monies of the Corporation properly applicable to the payment of dividends, preferential cumulative cash dividends, at the rate hereinafter set out, which shall accrue from and after October 31, 1992 and shall be payable annually in arrears on the 31st day of October in each year, with the first such annual dividend to be paid on October 31, 1993.

2.3 Dividend Rate

The rate of the dividend on the Series A Preferred Shares shall be $6.00 per share per annum.

2.4 Cumulation of Dividends

If on any dividend payment date the dividend payable on such date is not paid in full on the Series A Preferred Shares then issued and outstanding, such dividends or the unpaid part thereof shall be paid on a subsequent date or dates, determined by the board of directors, on which the Corporation shall have sufficient monies properly applicable to the payment of same. The Series A Holders shall not be entitled to any dividends other than or in excess of cash dividends provided for in this Section 2.

2.5 Method of Payment

Any dividends declared on the Series A Preferred Shares shall (except in the case of redemption, in which case payment of dividends will be made upon surrender of the certificates representing the Series A Preferred Shares to be redeemed) be paid by forwarding by pre-paid mail, addressed to each Series A Holder at his address as it

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appears on the books of the Corporation or, in the case of joint holders whose name stands first in the books of the Corporation, a cheque for such dividends (less the amount of any tax required to be deducted) payable to the order of such holder or, in the case of joint holders, to the order of all such holders failing written instructions from them to the contrary. Notwithstanding the foregoing, any dividend cheque may be delivered to a Series A Holder at his address as aforesaid. The forwarding or delivery of such cheque shall satisfy such dividends to the extent of the sum represented thereby (plus the amount of any tax required to be deducted as aforesaid) unless such cheque is not paid on presentation. Each dividend on the Series A Preferred Shares shall be paid to the Series A Holders on such day (which shall not be more than 15 days preceding the date fixed for payment of such dividend) as may be determined in advance from time to time by the directors.

3. Conversion

3.1 Right to Convert

The Series A Holders shall have the right at any time and from time to time, up to the close of business on the earlier of the Exercise Date and the date which is the business day prior to the Redemption Date (subject as hereinafter provided) to convert any or all of their Series A Preferred Shares into Common Shares, on the basis of 33-1/3 Common Shares for each Series A Preferred Share converted prior to the Exercise Date or the date which is the business day prior to the Redemption Date, as the case may be, until such time as the Conversion Basis shall be adjusted as provided in this Section 3 and, thereafter, on the adjusted Conversion Basis.

3.2 Conversion Procedure

The conversion right herein provided for may be exercised by notice in writing given to the transfer agent for the Series A Preferred Shares at its principal office in the City of Toronto or to such other transfer agent at such other city or cities as the Corporation may from time to time appoint, accompanied by the certificate or certificates representing Series A Preferred Shares in respect of which the holder thereof desires to exercise such right of conversion. Such notice shall be signed by such holder or his duly authorized attorney and shall specify the number of

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Series A Preferred Shares which the holder desires to have converted. The transfer form on the certificate or certificates in question need not be endorsed, except in the circumstances contemplated by clause 3.3. If less than all the Series A Preferred Shares represented by a certificate or certificates accompanying any such notice are to be converted, the holder shall be entitled to receive, at.-the expense of the Corporation, a new certificate representing the Series A Preferred Shares comprised in the certificate or certificates surrendered as aforesaid which are not to be converted.

3.3 Person to Whom Common Shares Will be Issued

On any conversion of Series A Preferred Shares, the share certificate representing the Common Shares resulting from such conversion shall be issued in the name of the person who was the registered holder of the converted Series A Preferred Shares or in such name or names as such person may direct in writing, provided that such person shall pay any applicable security transfer taxes. Whenever the Common Shares are to be issued in the name of a person other than the registered holder of the Series A Preferred Shares to be converted, the transfer form on the back of the certificates in question shall be endorsed by the registered holder of the Series A Preferred Shares or his duly authorized attorney, with signature guaranteed in a manner satisfactory to the transfer agent.

3.4 Effective Date of Conversion

Subject to the provisions of clause 3.8, the right of a Series A Holder to convert his Series A Preferred Shares into Common Shares shall be deemed to have been exercised, and the Series A Holder whose shares are to be converted (or any person or persons in whose name or names such Series A Holder shall have directed certificates representing Common Shares to be issued, as provided in clause 3.3) shall be deemed to have become the holder of record of Common Shares for all purposes on the date of surrender of certificates representing the Series A Preferred Shares to be converted accompanied by notice in writing as provided in clause 3.2, notwithstanding any delay in the delivery of certificates representing the Common Shares into which such Series A Preferred Shares have been converted.

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3.5 Effect of Redemption

In the case of any Series A Preferred Shares which may be called for redemption, the right of conversion thereof shall, notwithstanding anything herein contained, cease and terminate at the close of business on the business day next preceding the Redemption Date; provided, however, that if the Corporation should fail to redeem such Series A Preferred Shares in accordance with the Redemption Notice, the right of conversion shall thereupon be revived and continued as if such shares had not been called for redemption.

3.6 Adjustment of Conversion Basis

(a) If and whenever at any time prior to the Expiry Time, the Corporation shall (i) subdivide, redivide or change its then outstanding Common Shares into a greater number of shares, (ii) reduce, combine or consolidate its then outstanding Common Shares into a lesser number of shares or (iii) issue Common Shares to the holders of all or substantially all of its then outstanding Common Shares by way of a stock dividend (other than a stock dividend which the holder of the Common Shares has elected to receive in lieu of a cash dividend paid in the ordinary course), the Conversion Basis then in effect shall be appropriately adjusted and any Series A Holder who has not exercised his right of conversion prior to the effective date of such subdivision, redivision, change, reduction, combination or consolidation or by the record date for the issue of such Common Shares by way of stock dividend, shall be entitled to receive and shall accept, upon the exercise of such right whether on the effective date or record date, as the case may be, or thereafter, in lieu of the number of Common Shares to which he was theretofore entitled upon conversion, the aggregate number of Common Shares that such Series A Holder would have been entitled to receive as a result of such subdivision, redivision, change, reduction, combination or consolidation, if on the effective date thereof, or as a result of such issue of Common Shares, if, on the record date therefor, he had been the registered holder of the number of Common Shares

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to which he was theretofore entitled upon conversion.

(b) If and whenever at any time prior to the Expiry Time the Corporation shall fix a record date for the issuance to all or substantially all the holders of its outstanding Common Shares of rights, options or warrants entitling such holders, for a period expiring not more than 45 days after such record date, to subscribe for or purchase Common Shares (or securities of the Corporation convertible into Common Shares) at a price per share (or having a conversion or exchange price per share) less than 90% of the Market Price for a Common Share on such record date (any such event being herein referred to as a “Rights Offering”), then the Conversion Basis then in effect shall be adjusted immediately after such record date by dividing such Conversion Basis by the quotient obtained when:

(i) the sum of the number of Common Shares outstanding on such record date and a number determined by dividing the aggregate price of the total number of additional Common Shares offered for subscription or purchase under the Rights Offering (or the aggregate conversion or exchange price of the convertible securities so offered) by the Market Price for a Common Share on such record date;

is divided by

(ii) the sum of the number of Common Shares outstanding on such record date and the number of additional Common Shares offered for subscription or purchase under the Rights Offering (or the number of Common Shares into which the securities so offered are convertible).

The resulting quotient, adjusted to the nearest 1/100th, shall thereafter be the Conversion Basis until further adjusted as provided in this clause 3.6. If at the date of expiry of the rights, options or warrants subject to the Rights

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Offering less than all the rights, options or warrants have been exercised, then the Conversion Basis shall be readjusted immediately after the date of expiry to the Conversion Basis which would have been in effect on the date of expiry had the only rights, options or warrants issued been those that were exercised.

(c) If and whenever at any time prior to the Expiry Time the Corporation shall fix a record date for the making of a distribution to all or substantially all the holders of its outstanding Common Shares of (i) shares of the Corporation of any class other than Common Shares, (ii) rights, options or warrants (excluding a Rights Offering referred to in subclause 3.6(b)), (iii) evidences of its indebtedness or (iv) assets, excluding cash dividends paid in the ordinary course (any such event being herein referred to as a “Special Distribution”) then, in each such case, the Conversion Basis then in effect shall be adjusted immediately after such record date at which the holders of Common Shares are determined for the ‘ purposes of the Special Distribution by dividing such Conversion Basis by the quotient obtained when

(i) the difference obtained when the amount by which the aggregate fair market value, as determined by the directors, of the shares, rights, options, warrants, evidences of indebtedness or assets, as the case may be, distributed in the Special Distribution exceeds the fair market value of the consideration, if any, received therefor by the Corporation is subtracted from the product obtained when the number of Common Shares outstanding on the record date is multiplied by the Market Price for a Common Share on such date;

is divided by

(ii) the product obtained when the number of Common Shares outstanding on the record date is multiplied by the Market Price for a Common Share on such date;

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provided that no such adjustment shall be made if the result of such adjustment would be to decrease the Conversion Basis in effect immediately before such record date. The resulting quotient, adjusted to the nearest 1/100th, shall thereafter be the Conversion Basis until further adjusted as provided in this clause 3.6.

3.7 Rules for Adjustment of the Conversion Basis

The following rules and procedures apply to adjustments of the Conversion Basis made pursuant to clause 3.6:

(a) any Common Shares owned or held by or for the account of the Corporation shall be deemed not be outstanding except that, for the purposes of this subclause 3.7(a), any Common Shares owned by a pension plan or profit sharing plan for employees of the Corporation or any of its subsidiaries shall not be considered to be owned or held by or for the account of the Corporation;

(b) if the purchase price provided for in any Rights Offering (the “Rights Offering Price”) referred to in subclause 3.6(b) is decreased, the Conversion Basis shall forthwith be changed so as to increase the Conversion Basis to such Conversion Basis as would have been obtained had the adjustment to the Conversion Basis made pursuant to subclause 3.6(b) upon the issuance of such Rights Offering been made upon the basis of the Rights Offering Price as so decreased; provided that the provisions of this subclause 3.7(b) shall not apply to any decrease in the Rights Offering Price resulting from provisions in any such Rights Offering designed to prevent dilution if the resulting increase in the Conversion Basis under this subclause 3.7(b) shall not have been proportionately greater than the increase, if any, in the Conversion Basis to be made at the same time pursuant to the provisions of this Section 3 by virtue of the occurrence of the event giving rise to such decrease in the Rights Offering Price;

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(c) no adjustment in the Conversion Basis shall be required unless such adjustment would require an increase or a decrease of at least one per cent of the prevailing Conversion Basis would result; provided, however, that any adjustment which, except for the provisions of this subclause 3.7(c), would otherwise have been required to be made shall be carried forward and taken into account in any subsequent adjustment;

(d) in the absence of a resolution of the directors fixing a record date for a Special Distribution or a Rights Offering, the Corporation shall be deemed to have fixed as the record date therefor the date on which the Special Distribution or Rights Offering is effected;

(e) if any question shall at any time arise with respect to adjustments in the Conversion Basis, such question shall be conclusively determined by the auditors of the Corporation and any such determination shall be binding upon the Corporation and all transfer agents and all shareholders of the Corporation; and

(f) forthwith after any adjustment in the Conversion Basis pursuant to clause 3.6, the Corporation shall file with the transfer agent of the Corporation for the Series A Preferred Shares, a certificate of two senior officers of the Corporation certifying as to the amount of such adjustment and, in reasonable detail, the event requiring and the manner of computing such adjustment, the Corporation shall also give written notice to the Series A Holders of the adjustment in the Conversion Basis.

3.8 Entitlement to Dividends

Each Series A Holder on the record date for any dividend declared payable on the Series A Preferred Shares shall be entitled to such dividend notwithstanding that any Series A Preferred Share owned by him is converted after such record date and before the payment date of such dividend. The registered holder of Common Shares resulting from any conversion effected pursuant to this Section 3 shall be entitled to rank equally with the registered

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holders of all other Common Shares in respect of all dividends declared payable to holders of Common Shares of record on or after the effective date of conversion. Except as aforesaid, no payment or adjustment will be made on account of any dividend declared or accrued prior to the effective date of conversion on the Series A Preferred Shares converted or the Common Shares resulting from any conversion.

3.9 Notice of Certain Events

If the Corporation intends to fix a record date for any Rights Offering or Special Distribution, the Corporation shall, not less than 14 days prior to such record date, notify each Series A Holder of such intention by written notice setting forth the particulars of such Rights Offering or Special Distribution in reasonable detail to the extent that such particulars have been determined at the time of giving the notice.

3.10 Avoidance of Fractional Shares

In any case where a fraction of a Common Share would otherwise be issuable on conversion of one or more Series A Preferred Shares, the Corporation shall adjust such fractional interest by the payment by cheque of an amount equal to the then current market value of such fractional interest computed on the basis of the closing board lot trading price (or the last bid price whenever there has been no board lot trade) for the Common Shares on The Toronto Stock Exchange (or, if the Common Shares are not listed on The Toronto Stock Exchange, on such stock exchange on which the Common Shares are listed as may be selected for such purpose by the directors) next preceding the date of such surrender. In the event that the Common Shares are not listed on any stock exchange, the current market value of such fractional interest shall be determined by the directors.

3.11 Postponement of Issuance of Shares upon Conversion

In any case where the application of the foregoing provisions of this Section 3 results in an increase of the Conversion Basis taking effect immediately after the record date for a specific event referred to in clause 3.6, if any Series A Preferred Shares are converted after that record date and prior to completion of the event, the Corporation

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may postpone the issuance to the Series A Holder of the additional Common Shares to which he is entitled by reason of the increase of the Conversion Basis, but such additional Common Shares shall be so issued and delivered to the Series A Holder upon completion of the event and the Corporation shall deliver to the Series A Holder an appropriate instrument evidencing his right to receive such additional Common Shares.

3.12 Reservation of Common Shares

The Corporation covenants and agrees that, so long as any of the Series A Preferred Shares are outstanding and entitled to the right of conversion herein provided, it will at all times reserve and hold out of its unissued Common Shares a sufficient number of unissued Common Shares to enable all of the Series A Preferred Shares outstanding to be converted upon the basis and upon the terms and conditions herein provided in this Section 3; provided that nothing herein contained shall affect or restrict the right of the Corporation to increase the number of its Common Shares in accordance with the Canada Business Corporations Act (the “Act”) or to issue such Common Shares from time to time.

4. Redemption

4.1 Right to Redeem

Subject to clause 4.2 and Section 6 and to any applicable restrictions imposed by law, the Corporation may, upon giving notice as hereinafter provided, redeem at any time the whole or from time to time any part of the then outstanding Series A Preferred Shares on payment for each share to be redeemed of $100 together with all accrued and unpaid dividends thereon, calculated as if such dividends were accruing from day to day for the period from the expiration of the last period for which cumulative dividends have been paid up to but excluding the Redemption Date.

4.2 Partial Redemption

The Corporation shall not redeem less than all of the Series A Preferred Shares unless all cumulative dividends then payable on such shares or any shares ranking on a parity therewith have been declared and paid. Subject to clause 4.3, if less than all of the Series A Preferred

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Shares are to be redeemed pursuant to the provisions of clause 4.1, the Corporation shall select those shares which are to be redeemed by lot, on a pro rata basis or in such other manner as the directors may deem equitable.

4.3 Mandatory Redemption

Subject to Section 6 and to any applicable restrictions imposed by law, and notwithstanding subclause 6(c), the Corporation, after giving notice in accordance with clause 4.4, shall redeem on the 31^st day of October in each year, commencing the year ended October 31, 1993, up to and including October 31, 2007, 1,331 of the then issued and outstanding Series A Preferred Shares. In each such year, any Series A Preferred Shares redeemed by the Corporation pursuant to clause 4.1 or purchased for cancellation by the Corporation pursuant to Section 5 shall be taken into account in determining the extent of the Corporation’s redemption obligation, pursuant to this clause 4.3, in such year. If in the year ended October 31, 1993 or in any subsequent year the Corporation should redeem, pursuant to clause 4.1 or this clause 4.3, or should purchase for cancellation, pursuant to Section 5, in the aggregate greater than 1,331 of the Series A Preferred Shares outstanding on the date for mandatory redemption in that year, such shares so redeemed or purchased over and above the Series A Preferred Shares on such date shall be taken into account in determining the extent of the Corporation’s redemption obligation pursuant to this clause 4.3 in subsequent years. Any redemption made pursuant to this clause 4.3 shall be made on a pro rata basis, disregarding fractions. The redemption price payable in respect of each Series A Preferred Share redeemed pursuant to this clause 4.3 shall be $100 together with all accrued and unpaid dividends thereon, calculated as if such dividends were accruing from day to day for the period from the expiration of the last period for which cumulative dividends have been paid up to the Redemption Date.

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4.4 Notice of and Procedure for Redemption

In the case of redemption of Series A Preferred Shares under the provisions of this Section 4, the Corporation shall, at least 30 days before the date specified for redemption mail to each person who at the date of mailing is a registered holder of Series A Preferred Shares which are to be redeemed a notice in writing of the intention of the Corporation to redeem such shares (the “Redemption Notice”). The Redemption Notice shall set out the price at which the shares are to be redeemed (the “Redemption Price”) and the date upon which the redemption is to take place (the “Redemption Date”) and, if part only of the Series A Preferred Shares held by the person to whom it is addressed are to be redeemed, the number thereof so to be redeemed. On or after the Redemption Date, the Corporation shall pay or cause to be paid to or to the order of the registered holders of the Series A Preferred Shares to be redeemed the Redemption Price thereof upon presentation and surrender of the certificates representing the shares called for redemption at the registered office of the Corporation or any other place designated in the Redemption Notice. If a part only of the shares represented by any certificate are redeemed, a new certificate for the balance shall be issued at the expense of the Corporation.

From and after the Redemption Date referred to in the Redemption Notice, the Series A Preferred Shares called for redemption shall cease to be entitled to dividends and the holders thereof shall not be entitled to exercise any of the rights of shareholders in respect thereof unless payment of the Redemption Price shall not be made upon presentation of certificates in accordance with the foregoing provisions, in which case the rights of the shareholders shall remain unaffected.

The Corporation shall have the right at any time after the mailing of the Redemption Notice to deposit the Redemption Price of the shares so called for redemption or of such of the said shares represented by certificates as have not at the date of such deposit been surrendered by the Series A Holders in connection with such redemption to a special account in a specified chartered bank or trust company in Canada named in the Redemption Notice, to be paid without interest to or to the order of the respective holders of such Series A Preferred Shares called for redemption upon presentation and surrender to such bank or

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trust company of the certificates representing the same. Upon such deposit being made or upon the date specified for redemption in the Redemption Notice, whichever is the later, the Series A Preferred Shares in respect whereof such deposit shall have been made shall be redeemed and the rights of the Series A Holders in respect thereof after such deposit or the Redemption Date, as the case may be, shall be limited to receiving, without interest, their proportionate part of the total Redemption Price so deposited against presentation and surrender of the said certificates held by them respectively.

5. Purchase

To the extent permitted by applicable law and subject to the provisions of Section 6, the Corporation may at any time or from time to time purchase (if obtainable) for cancellation all or any part of the outstanding Series A Preferred Shares at the lowest price at which, in the opinion of the directors, such shares are obtainable. Except where the purchase for cancellation is made on the open market or where 66-2/3 per cent of the holders of the, outstanding Series A Preferred Shares consent to the purchase, the Corporation may purchase such shares only pursuant to tenders received by the Corporation upon request for tenders addressed to all the Series A Holders and the Corporation shall accept only the lowest tenders. Where, in response to the invitation for tenders, two or more Series A Holders submit tenders at the same price and the tenders are accepted by the Corporation as to part only of the Series A Preferred Shares offered, the Corporation shall accept part of the Series A Preferred Shares offered in each tender in proportion as nearly as may be to the total number of Series A Preferred Shares offered in each tender (disregarding fractions).

6. Restriction on Dividends, Retirement and Issue of Shares

So long as any of the Series A Preferred Shares are outstanding, the Corporation shall not at any time, without, in addition to any approval that may then be prescribed by applicable law, the approval of the registered holders of the outstanding Series A Preferred Shares, as set forth under “Modification”:

(a) declare, pay or set apart for payment any dividend on the Common Shares or any other shares of the

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Corporation ranking junior to the Series A Preferred Shares (other than a stock dividend payable in shares of the Corporation ranking junior to the Series A Preferred Shares); or

(b) redeem, purchase or otherwise retire or make any capital distribution on or in respect of any. Common Shares or any other shares of the Corporation ranking junior to the Series A Preferred Shares (except out of the net cash proceeds of a substantially concurrent issue of shares of the Corporation ranking junior to the Series A Preferred Shares); or

(c) redeem, purchase or otherwise retire less than all the Series A Preferred Shares then outstanding; or

(d) except in connection with the exercise of a retraction privilege attaching thereto, redeem, purchase or otherwise retire any other shares of the Corporation ranking on a parity with the Series A Preferred Shares; or

(e) issue any additional Class I Preferred Shares, or any shares ranking prior to or on a parity with the Class I Preferred Shares with respect to the payment of dividends or the distribution of assets in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or in the event of any other distribution of assets of the Corporation among its shareholders for the purpose of winding-up its affairs;

unless all dividends up to and including the dividend payment date for the last completed period for which dividends shall be payable shall have been declared and paid or set apart for payment in respect of each series of cumulative Class I Preferred Shares and all other cumulative shares of the Corporation ranking prior to or on a parity with the Class I Preferred Shares in respect of the payment of the dividends then issued and outstanding and there shall have been paid or set apart for payment all declared and unpaid non-cumulative dividends in respect of each series of non-cumulative Class I Preferred Shares and all other non-cumulative shares of the Corporation ranking prior to or on

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a parity with the Class I Preferred Shares in respect of the payment of the dividends then issued and outstanding.

7. Liquidation, Dissolution or Winding-Up

In the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or in the event of any other distribution of assets of the Corporation among its shareholders for the purpose of winding-up its affairs, the Series A Holders shall be entitled to receive, for each Series A Preferred Share held, an amount equal to $100, together with all accrued and unpaid dividends thereon (which for such purpose shall be calculated as if such cumulative dividends were accruing from day to day for the period from the expiration of the last period for which cumulative dividends have been paid up to the date of distribution) before any payment or distribution is made to the holders of Common Shares or any other shares ranking junior to the Series A Preferred Shares. After payment to the Series A Holders of the amount so payable to them, they shall not be entitled to share in any further distribution of the assets of the Corporation.

8. Modification

The provisions attaching to the Series A Preferred Shares as a series may be repealed, altered, modified or amended with such approval as may then be required by the Act currently being at least two-thirds of the votes cast at a meeting or adjourned meeting of the holders of such shares duly called for the purpose at which a quorum is present.

9. Voting Rights

Except as required by applicable law or as provided in this Section 9, the Series A Holders shall not be entitled to receive notice of, or to attend any meeting of the shareholders of the Corporation and shall not be entitled to vote at any such meeting.

The Series A Holders shall be entitled to receive notice of and to attend any meeting of the shareholders of the Corporation at which directors are to be elected and shall be entitled, voting separately as a class along with all other series of Class I Preferred Shares which provide for or permit the sharing of such rights with the Series A Preferred Shares, to elect one director of the Corporation

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so long as there are at least 25,000 Class I Preferred Shares outstanding with such a right as at the date of such meeting; provided that nothing contained herein shall be deemed to restrict the right or ability of the Corporation to increase or decrease the number of its directors from time to time. In the case where one or more subsequently created series of Class I Preferred Shares provide for or permit the sharing of such right with the Series A Preferred Shares, the voting for the election of a director as aforesaid shall be done together with the voting by the holders of such other one or more series, so that such director shall be elected at a combined meeting of the Series A Holders and of the holders of such one or more subsequently created series of Class I Preferred Shares. Notwithstanding Section 11, the approval of a majority of the holders of Series A Preferred Shares and of such one or more subsequently created series present at a combined meeting called for the purpose of electing directors of the Corporation and held on at least 21 days’ notice shall be sufficient for the purpose of electing such director.

10. Amendments to the Series A Provisions

The Series A Provisions may be repealed, altered, modified, amended or varied only with the sanction of the holders of the Series A Preferred Shares given in the manner provided in Section 11 in addition to any other approval required by the Act or any other statutory provision of like or similar effect, from time to time in force.

11. Approvals by Series A Holders

Subject to Section 9, the approval of the Series A Holders with respect to any and all matters hereinbefore referred to may be given by at least two-thirds of the votes cast at a meeting of the Series A Holders duly called for that purpose and held upon at least 21 days’ notice, at which the holders of 25 per cent of the outstanding Series A Preferred Shares are present or represented by proxy. If at any such meeting the holders of 25 per cent of the outstanding Series A Preferred Shares are not present or represented by proxy within one-half an hour after the time appointed for such meeting, then the meeting shall be adjourned to such date being not less than 30 days later and to such time and place as may be appointed by the chairman of the meeting and not less than 21 days’ notice shall be given of such adjourned meeting, but it shall not be

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necessary in such notice to specify the purpose for which the meeting was originally called. At such adjourned meeting, the Series A Holders present or represented by proxy may transact the business for which the meeting was originally called and the consent or approval of the Series A Holders may be given by a resolution passed thereat by not less than two-thirds of the votes cast at such adjourned meeting. The formalities to be observed with respect to the giving of notice of any such meeting and the conduct thereof shall from time to time be prescribed by the by-laws of the Corporation with respect to meetings of shareholders. On every poll taken at every such meeting or adjourned meeting, every Series A Holder shall be entitled to one vote in respect of each Series A Preferred Share held by him.

12. Notices

Any notice required or permitted to be given to a Series A Holder shall be mailed by letter, postage prepaid, or delivered to such Series A Holder at his address as it appears on the records of the Corporation or, in the event of the address of any such Series A Holder not so appearing, at the last known address of such Series A Holder. The accidental failure to give notice to one or more of such Series A Holders shall not affect the validity of any action requiring the giving of notice by the Corporation. Any notice given as aforesaid shall be deemed to be given on the date upon which it is mailed or delivered.

13. Priority

The Series A Preferred Shares shall rank on a parity with all outstanding series of Class I Preferred Shares that may be issued in the future with respect to the payment of dividends and in the event of the liquidation, dissolution or winding-up of the Corporation or other distribution of assets of the Corporation among shareholders for the purpose of winding-up its affairs.

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SCHEDULE IV

The Series B Preferred Shares shall have attached thereto the following rights, privileges, restrictions and conditions (collectively the “Series B Provisions”) in addition to the rights, privileges, restrictions and conditions attached to the Class I Preferred Shares as a class:

1. Interpretation

1.1 Definitions

Where used in these Series B Provisions, the following words and phrases shall, unless there is something in the context otherwise inconsistent therewith, have the following meanings, respectively:

(a) “business day” means a day other than a Saturday, Sunday or any other day treated as a holiday in the municipality in Canada in which the Corporation’s registered office is situated;

(b) “cash dividends paid in the ordinary course” means such cash dividends declared payable on the Common Shares in any fiscal year of the Corporation to the extent that such dividends do not exceed 100% of the consolidated net income of the Corporation, before extraordinary items, for the immediately preceding fiscal year of the Corporation, as determined by the auditors of the Corporation in accordance with generally accepted accounting principles;

(c) “close of business” means the normal closing hour of the principal office in the City of Toronto of the transfer agent;

(d) “Common Shares” means common shares without par value in the capital of the Corporation;

(e) “Conversion Basis” at any time means the number of Common Shares into which one Series B Preferred Share may be converted at such time in accordance with Section 3;

(f) “director” means a director of the Corporation for the time being and “directors” or “board of

directors” means the board of directors of the Corporation or, if duly constituted and empowered, the executive committee of the board of directors of the Corporation for the time being, and reference, without further elaboration, to action by the directors means action by the directors of the Corporation as a board or action taken by the said executive committee as such committee;

(g) “Exercise Date” means October 31, 1990;

(h) “Expiry Time” means 3:00 o’clock in the afternoon (Toronto time) on the Exercise Date;

(i) “herein”, “hereto”, “hereunder”, “hereof”, “hereby”, and similar expressions mean or refer to these share provisions and not to any particular Section, clause, subclause, subdivision or portion hereof, and the expressions “Section”, “clause” and “subclause” followed by a number or a letter mean and refer to the specified Section, clause or subclause hereof;

(j) “Junior Shares” means any shares in the capital of the Corporation ranking after or subordinated to the Series B Preferred Shares as to the payment of dividends or the return of capital, including, without limiting the generality of the foregoing, the Common Shares;

(k) “Market Price” of the Common Shares at any date means the weighted average of the closing board lot trading prices per share of the Common Shares on The Toronto Stock Exchange or, if the Common Shares are not listed on The Toronto Stock Exchange, on such stock exchange on which the Common Shares are listed as may be selected by the directors of the Corporation, on the 20 most recent trading days on which there have been board lot trades of such shares immediately prior to the fourth day preceding such date. In the event that the Common Shares are not listed on any stock exchange, the Market Price of the Common Shares shall be determined by the directors;

(1) “Redemption Date” means, in reference to any Series B Preferred Shares, the date fixed by the

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directors for redemption of such shares as specified in a Redemption Notice;

(m) “Redemption Notice” means the notice of redemption mailed, in accordance with clause 4.4, to holders of Series B Preferred Shares whose shares are to be redeemed;

(n) “Retraction Notice” means the notice of redemption mailed, in accordance with clause 6.3, to the Corporation by a holder of Series B Preferred Shares requiring the Corporation to redeem such shares;

(o) “transfer agent” means the person or persons from time to time appointed by the directors as the transfer, agent for the Series B Preferred Shares; and

(p) “Series B Holder” means the registered holder of any Series B Preferred Shares.

1.2 Gender, etc.

Words importing the singular number only include the plural and vice versa, and words importing any gender include all genders.

1.3 Currency

All dollar amounts referred to herein shall be in lawful money of Canada.

1.4 Headings

The divisions of these provisions into Sections, clauses, subclauses or other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof.

1.5 Business Day

In the event that any date upon which any dividends on the Series B Preferred Shares are payable by the Corporation or upon or by which any other action is required to be taken by the Corporation hereunder is not a business day, then such dividend shall be payable, or such

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other action shall be required to be taken, on or by the next succeeding day which is a business day.

2. Dividends

2.1 Dividend Preference

The Series B Preferred Shares shall be entitled to preference in the payment of dividends over the Common Shares and any other shares in the capital of the Corporation ranking junior to the Series B Preferred Shares with respect to the payment of dividends.

2.2 Declaration and Payment of Dividends

The holders of Series B Preferred Shares shall be entitled to receive and the Corporation shall pay thereon, as and when declared by the board of directors out of the monies of the Corporation properly applicable to the payment of dividends, preferential cumulative cash dividends, at the rate hereinafter set out, which shall accrue from and after October 31, 1992 and shall be payable annually in arrears on the 31st day of October in each year, with the first such annual dividend to be paid on October 31, 1993.

2.3 Dividend Rate

The rate of the dividend on the Series B Preferred Shares shall be $24.00 per share per annum.

2.4 Cumulation of Dividends

If on any dividend payment date the dividend payable on such date is not paid in full on the Series B Preferred Shares then issued and outstanding, such dividends or the unpaid part thereof shall be paid on a subsequent date or dates, determined by the board of directors, on which the Corporation shall have sufficient monies properly applicable to the payment of same. The Series B Holders shall not be entitled to any dividends other than or in excess of cash dividends provided for in this Section 2.

2.5 Method of Payment

Any dividends declared on the Series B Preferred Shares shall (except in the case of redemption or retraction, as the case may be, in which case payment of

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dividends will be made upon surrender of the certificates representing the Series B Preferred Shares to be redeemed or retracted) be paid by forwarding by pre-paid mail, addressed to each Series B Holder at his address as it appears on the books of the Corporation or, in the case of joint holders whose name stands first in the books of the Corporation, a cheque for such dividends (less the amount of any tax required to be deducted) payable to the order of such holder or, in the case of joint holders, to the order of all such holders failing written instructions from them to the contrary. Notwithstanding the foregoing, any dividend cheque may be delivered to a Series B Holder at his address as aforesaid. The forwarding or delivery of such cheque shall satisfy such dividends to the extent of the sum represented thereby (plus the amount of any tax required to be deducted as aforesaid) unless such cheque is not paid on presentation. Each dividend on the Series B Preferred Shares shall be paid to the Series B Holders on such day (which shall not be more than 15 days preceding the date fixed for payment of such dividend) as may be determined in advance from time to time by the directors.

3. Conversion

3.1 Right to Convert

The Series B Holders shall have the right at any time and from time to time, up to the close of business on the earlier of the Exercise Date and the date which is the business day prior, to the Redemption Date (subject as hereinafter provided) to convert any or all of their series B Preferred Shares into Common Shares on the basis of 212 Common Shares for each Series B Preferred Share converted prior to the Exercise Date or the date which is the business day prior to the Redemption Date, as the case may be, until such time as the Conversion Basis shall be adjusted as provided in this Section 3 and, thereafter, on the adjusted Conversion Basis.

3.2 Conversion Procedure

The conversion right herein provided for may be exercised by notice in writing given to the transfer agent for the Series B Preferred Shares at its principal office in the City of Toronto or to such other transfer agent at such other city or cities as the Corporation may from time to time appoint, accompanied by the certificate or certificates

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representing Series B Preferred Shares in respect of which the holder thereof desires to exercise such right of conversion. Such notice shall be signed by such holder or his duly authorized attorney and shall specify the number of Series B Preferred Shares which the holder desires to have converted. The transfer form on the certificate or certificates in question need not be endorsed, except in the circumstances contemplated by clause 3.3. If less than all the Series B Preferred Shares represented by a certificate or certificates accompanying any such notice are to be converted, the holder shall be entitled to receive, at the expense of the Corporation, a new certificate representing the Series B Preferred Shares comprised in the certificate or certificates surrendered as aforesaid which are not to be converted.

3.3 Person to Whom Common Shares Will be Issued

On any conversion of Series B Preferred Shares, the share certificate representing the Common Shares resulting from such conversion shall be issued in the name of the person who was the registered holder of the converted Series B Preferred Shares or in such name or names as such person may direct in writing, provided that such person shall pay any applicable security transfer taxes. Whenever the Common Shares are to be issued in the name of a person other than the registered holder of the Series B Preferred Shared’ to be converted, the transfer form on the back of the certificates in question shall be endorsed by the registered holder of the Series B Preferred Shares or his duly authorized attorney, with signature guaranteed in a manner satisfactory to the transfer agent.

3.4 Effective Date of Conversion

Subject to the provisions of clause 3.8, the right of a Series B Holder to convert his Series B Preferred Shares into Common Shares shall be deemed to have been exercised, and the Series B Holder whose shares are to be converted (or any person or persons in whose name or names such Series B Holder shall have directed certificates representing Common Shares to be issued, as provided in clause 3.3) shall be deemed to have become the holder of record of Common Shares for all purposes on the date of surrender of certificates representing the Series B Preferred Shares to be converted accompanied by notice in writing as provided in clause 3.2, notwithstanding any delay

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in the delivery of certificates representing the Common Shares into which such Series B Preferred Shares have been converted.

3.5 Effect of Redemption

In the case of any Series B Preferred Shares which may be called for redemption, the right of conversion thereof shall, notwithstanding anything herein contained, cease and terminate at the close of business on the business day next preceding the Redemption Date; provided, however, that if the Corporation should fail to redeem such Series B Preferred Shares in accordance with the Redemption Notice, the right of conversion shall thereupon be revived and continued as if such shares had not been called for redemption.

3.6 Adjustment of Conversion Basis

(a) If and whenever at any time prior to the Expiry Time, the Corporation shall (i) subdivide, redivide or change its then outstanding Common Shares into a greater number of shares, (ii) reduce, combine or consolidate its then outstanding Common Shares into a lesser number of shares or (iii) issue Common Shares to the holders of all or substantially all of its then outstanding Common Shares by way of a stock dividend (other than a stock dividend which the holder of the Common Shares has elected to receive in lieu of a cash dividend paid in the ordinary course), the Conversion Basis then in effect shall be appropriately adjusted and any Series B Holder who has not exercised his right of conversion prior to the effective date of such subdivision, redivision, change, reduction, combination on consolidation or by the record date for the issue of such Common Shares by way of stock dividend, shall be entitled to receive and shall accept, upon the exercise of such right whether on the effective date or record date, as the case may be, or thereafter, in lieu of the number of Common Shares to which he was theretofore entitled upon conversion, the aggregate number of Common Shares that such Series B Holder would have been entitled to receive as a result of such subdivision, redivision, change, reduction, combination or

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consolidation, if on the effective date thereof, or as a result of such issue of Common Shares, if, on the record date therefor, he had been the registered holder of the number of Common Shares to which he was theretofore entitled upon conversion.

(b) If and whenever at any time prior to the Expiry Time the Corporation shall fix a record date for the issuance to all or substantially all the holders of its outstanding Common Shares of rights, options or warrants entitling such holders, for a period expiring not more than 45 days after such record date, to subscribe for or purchase Common Shares (or securities of the Corporation convertible into Common Shares) at a price per share (or having a conversion or exchange price per share) less than 90% of the Market Price for a Common Share on such record date (any such event being herein referred to as a “Rights Offering”), then the Conversion Basis then in effect shall be adjusted immediately after such record date by dividing such Conversion Basis by the quotient obtained when:

(i) the sum of the number of Common Shares outstanding on such record date and a number determined by dividing the aggregate price of the total number of additional Common Shares offered for subscription or purchase under the Rights Offering (or the aggregate conversion or exchange price of the convertible securities so offered) by the Market Price for a Common Share on such record date;

is divided by

(ii) the sum of the number of Common Shares outstanding on such record date and the number of additional Common Shares offered for subscription or purchase under the Rights Offering (or the number of Common Shares into which the securities so offered are convertible).

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The resulting quotient, adjusted to the nearest 1/100th, shall thereafter be the Conversion Basis until further adjusted as provided in this clause 3.6. If at the date of expiry of the rights, options or warrants subject to the Rights Offering less than all the rights, options or warrants have been exercised, then the Conversion Basis shall be readjusted immediately after the date of expiry to the Conversion Basis which would have been in effect on the date of expiry had the only rights, options or warrants issued been those that were exercised.

(c) If and whenever at any time prior to the Expiry Time the Corporation shall fix a record date for the making of a distribution to all or substantially all the holders of its outstanding Common Shares of (i) shares of the Corporation of any class other than Common Shares, (ii) rights, options or warrants (excluding a Rights Offering referred to in subclause 3.6(b)), (iii) evidences of its indebtedness or (iv) assets, excluding cash dividends paid in the ordinary course (any such event being herein referred to as a “Special Distribution”) then, in each such case, the Conversion Basis then in effect shall be adjusted immediately after such record date at which the holders of Common Shares are determined for the purposes of the Special Distribution by dividing such Conversion Basis by the quotient obtained when

(i) the difference obtained when the amount by which the aggregate fair market value, as determined by the directors, of the shares, rights, options, warrants, evidences of indebtedness or assets, as the case may be, distributed in the Special Distribution exceeds the fair market value of the consideration, if any, received therefor by the Corporation is subtracted from the product obtained when the number of Common Shares outstanding on the record date is multiplied by the Market Price for a Common Share on such date;

is divided by

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(ii) the product obtained when the number of Common Shares outstanding on the record date is multiplied by the Market Price for a Common Share on such date;

provided that no such adjustment shall be made if the result of such adjustment would be to decrease the Conversion Basis in effect immediately before such record date. The resulting quotient, adjusted to the nearest 1/100th, shall thereafter be the Conversion Basis until further adjusted as provided in this clause 3.6.

3.7 Rules for Adjustment of the Conversion Basis

The following rules and procedures apply to adjustments of the Conversion Basis made pursuant to clause 3.6:

(a) any Common Shares owned or held by or for the account of the Corporation shall be deemed not be outstanding except that, for the purposes of this subclause 3.7(a), any Common Shares owned by a pension plan or profit sharing plan for employees of the Corporation or any of its subsidiaries shall not be considered to be owned or held by or for the account of the Corporation;

(b) if the purchase price provided for in any Rights Offering (the “Rights Offering Price”) referred to in subclause 3.6(b) is decreased, the Conversion Basis shall forthwith be changed so as to increase the Conversion Basis to such Conversion Basis as would have been obtained had the adjustment to the Conversion Basis made pursuant to subclause 3.6(b) upon the issuance of such Rights Offering been made upon the basis of the Rights Offering Price as so decreased; provided that the provisions of this subclause 3.7(b) shall not apply to any decrease in the Rights Offering Price resulting from provisions in any such Rights Offering designed to prevent dilution if the resulting increase in the Conversion Basis under this subclause 3.7(b) shall not have been proportionately greater than the increase, if any, in the Conversion Basis to be made at the same time pursuant to the provisions of this Section 3

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by virtue of the occurrence of the event giving rise to such decrease in the Rights Offering Price;

(c) no adjustment in the Conversion Basis shall be required unless such adjustment would require an increase or a decrease of at least one per cent of the prevailing Conversion Basis would result; provided, however, that any adjustment which, except for the provisions of this subclause 3.7(c), would otherwise have been required to be made shall be carried forward and taken into account in any subsequent adjustment;

(d) in the absence of a resolution of the directors fixing a record date for a Special Distribution or a Rights Offering, the Corporation shall be deemed to have fixed as the record date therefor the date on which the Special Distribution or Rights Offering is effected;

(e) if any question shall at any time arise with respect to adjustments in the Conversion Basis, such question shall be conclusively determined by the auditors of the Corporation and any such determination shall be binding upon the Corporation and all transfer agents and all shareholders of the Corporation; and

(f) forthwith after any adjustment in the Conversion Basis pursuant to clause 3.6, the Corporation shall file with the transfer agent of the Corporation for the Series B Preferred Shares, a certificate of two senior officers of the Corporation certifying as to the amount of such adjustment and, in reasonable detail, the event requiring and the manner of computing such adjustment, the Corporation shall also give written notice to the Series B Holders of the adjustment in the Conversion Basis.

3.8 Entitlement to Dividends

Each Series B Holder on the record date for any dividend declared payable on the Series B Preferred Shares shall be entitled to such dividend notwithstanding that any Series B Preferred Share owned by him is converted after

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such record date and before the payment date of such dividend. The registered holder of Common Shares resulting from any conversion effected pursuant to this Section 3 shall be entitled to rank equally with the registered holders of all other Common Shares in respect of all dividends declared payable to holders of Common Shares of record on or after the effective date of conversion. Except as aforesaid, no payment or adjustment will be made on account of any dividend declared or accrued prior to the effective date of conversion on the Series B Preferred Shares converted or the Common Shares resulting from any conversion.

3.9 Notice of Certain Events

If the Corporation intends to fix a record date for any Rights Offering or Special Distribution, the Corporation shall, not less than 14 days prior to such record date, notify each Series B Holder of such intention by written notice setting forth the particulars of such Rights Offering or Special Distribution in reasonable detail to the extent that such particulars have been determined at the time of giving the notice.

3.10 Avoidance of Fractional Shares

In any case where a fraction of a Common Share would ‘Otherwise be issuable on conversion of one or more Series B Preferred Shares, the Corporation shall adjust such fractional interest by the payment by cheque of an amount equal to the then current market value of such fractional interest computed on the basis of the closing board lot trading price (or the last bid price whenever there has been no board lot trade) for the Common Shares on The Toronto Stock Exchange (or, if the Common Shares are not listed on The Toronto Stock Exchange, on such stock exchange on which the Common Shares are listed as may be selected for such purpose by the directors) next preceding the date of such surrender. In the event that the Common Shares are not listed on any stock exchange, the current market value of such fractional interest shall be determined by the directors.

3.11 Postponement of Issuance of Shares upon Conversion

In any case where the application of the foregoing provisions of this Section 3 results in an increase of the

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Conversion Basis taking effect immediately after the record date for a specific event referred to in clause 3.6, if any Series B Preferred Shares are converted after that record date and prior to completion of the event, the Corporation may postpone the issuance to the Series B Holder of the additional Common Shares to which he is entitled by reason of the increase of the Conversion Basis, but such additional Common Shares shall be so issued and delivered to the Series B Holder upon completion of the event and the Corporation shall deliver to the Series B Holder an appropriate instrument evidencing his right to receive such additional Common Shares.

3.12 Reservation of Common Shares

The Corporation covenants and agrees that, so long as any of the Series B Preferred Shares are outstanding and entitled to the right of conversion herein provided, it will at all times reserve and hold out of its unissued Common Shares a sufficient number of unissued Common Shares to enable all of the Series B Preferred Shares outstanding to be converted upon the basis and upon the terms and conditions herein provided in this Section 3; provided that nothing herein contained shall affect or restrict the right of the Corporation to increase the number of its Common Shares in accordance with the Canada Business Corporations Act (the “Act”) or to issue such Common Shares from time to time.

4. Redemption

4.1 Right to Redeem

Subject to clause 4.2 and Section 6 and to any applicable restrictions imposed by law, the Corporation may, upon giving notice as hereinafter provided, redeem at any time the whole or from time to time any part of the then outstanding Series B Preferred Shares on payment for each share to be redeemed of $100 together with all accrued and unpaid dividends thereon, calculated as if such dividends were accruing from day to day for the period from the expiration of the last period for which cumulative dividends have been paid up to but excluding the Redemption Date.

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4.2 Partial Redemption

The Corporation shall not redeem less than all of the Series B Preferred Shares unless all cumulative dividends then payable on such shares or any shares ranking on a parity therewith have been declared and paid. Subject to clause 4.3, if less than all of the Series B Preferred Shares are to be redeemed pursuant to the provisions of clause 4.1, the Corporation shall select those shares which are to be redeemed by lot, on a pro rata basis or in such other manner as the directors may deem equitable.

4.3 Mandatory Redemption

Subject to Section 6 and to any applicable restrictions imposed by law, and notwithstanding subclause 6(c), the Corporation, after giving notice in accordance with clause 4.4, shall redeem on the 31st day of October in each year, commencing the year ended October 31, 1993, up to and including October 31, 1997, 1,835 of the then issued and outstanding Series B Preferred Shares. In each such year, any Series B Preferred Shares redeemed by the Corporation pursuant to clause 4.1 or clause 6.1 or purchased for cancellation by the Corporation pursuant to Section 5 shall be taken into account in determining the extent of the Corporation’s redemption obligation, pursuant to this clause 4.3, in such year. If in any year prior to the year ended October 31, 1993 the Corporation should redeem, pursuant to clause 4.1 or clause 6.1, or should purchase, pursuant to Section 5, any Series B Preferred Shares, such shares shall be taken into account in determining the extent of the Corporation’s redemption obligation pursuant to this clause 4.3 in subsequent years. If in the year ended October 31, 1993 or in any subsequent year the Corporation should redeem, pursuant to clause 4.1 or this clause 4.3 or clause 6.1, or should purchase for cancellation, pursuant to Section 5, in the aggregate greater than 1,835 of the Series B Preferred Shares outstanding on the date for mandatory redemption in that year, such shares so redeemed or purchased over and above the Series B Preferred Shares on such date shall be taken into account in determining the extent of the Corporation’s redemption obligation pursuant to this clause 4.3 in subsequent years. Any redemption made pursuant to this clause 4.3 shall be made on a pro rata basis, disregarding fractions. The redemption price payable in respect of each Series B Preferred Share redeemed pursuant to this clause 4.3 shall be $100 together with all

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accrued and unpaid dividends thereon, calculated as if such dividends were accruing from day to day for the period from the expiration of the last period for which cumulative dividends have been paid up to the Redemption Date.

4.4 Notice of and Procedure for Redemption

In the case of redemption of Series B Preferred Shares under the provisions of this Section 4, the Corporation shall, at least 30 days before the date specified for redemption mail to each person who at the date of mailing is a registered holder of Series B Preferred Shares which are to be redeemed a notice in writing of the intention of the Corporation to redeem such shares (the “Redemption Notice”). The Redemption Notice shall set out the price at which the shares are to be redeemed (the “Redemption Price”) and the date upon which the redemption is to take place (the “Redemption Date”) and, if part only of the Series B Preferred Shares held by the person to whom it is addressed are to be redeemed, the number thereof so to be redeemed. On or after the Redemption Date, the Corporation shall pay or cause to be paid to or to the order of the registered holders of the Series B Preferred Shares to be redeemed the Redemption Price thereof upon presentation and surrender of the certificates representing the shares called for redemption at the registered office of the Corporation or any other place designated in the Redemption Notice. If a part only of the shares represented by any certificate are redeemed, a new certificate for the balance shall be issued at the expense of the Corporation.

From and after the Redemption Date referred to in the Redemption Notice, the Series B Preferred Shares called for redemption shall cease to be entitled to dividends and the holders thereof shall not be entitled to exercise any of the rights of shareholders in respect thereof unless payment of the Redemption Price shall not be made upon presentation of certificates in accordance with the foregoing provisions, in which case the rights of the shareholders shall remain unaffected.

The Corporation shall have the right at any time after the mailing of the Redemption Notice to deposit the Redemption Price of the shares so called for redemption or of such of the said shares represented by certificates as have not at the date of such deposit been surrendered by the Series B Holders in connection with such redemption to a

- 15 -

special account in a specified chartered bank or trust company in Canada named in the Redemption Notice, to be paid without interest to or to the order of the respective holders of such Series B Preferred Shares called for redemption upon presentation and surrender to such bank or trust company of the certificates representing the same. Upon such deposit being made or upon the date specified for redemption in the Redemption Notice, whichever is the later, the Series B Preferred Shares in respect whereof such deposit shall have been made shall be redeemed and the rights of the Series B Holders in respect thereof after such deposit or the Redemption Date, as the case may be, shall be limited to receiving, without interest, their proportionate part of the total Redemption Price so deposited against presentation and surrender of the said certificates held by them respectively.

5. Purchase

To the extent permitted by applicable law and subject to the provisions of Section 6, the Corporation may at any time or from time to time purchase (if obtainable) for cancellation all or any part of the outstanding Series B Preferred Shares at the lowest price at which, in the opinion of the directors, such shares are obtainable. Except where the purchase for cancellation is made on the open market or where 66-2/3 per cent of the holders of the outstanding Series B Preferred Shares consent to the purchase, the Corporation may purchase such shares only pursuant to tenders received by the Corporation upon request for tenders addressed to all the Series B Holders and the Corporation shall accept only the lowest tenders. Where, in response to the invitation for tenders, two or more Series B Holders submit tenders at the same price and the tenders are accepted by the Corporation as to part only of the Series B Preferred Shares offered, the Corporation shall accept part of the Series B Preferred Shares offered in each tender in proportion as nearly as may be to the total number of Series B Preferred Shares offered in each tender (disregarding fractions).

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6. Redemption at the Option of the

Holders of the Series B Preferred Shares

6.1 Right to Retraction

Subject to the provisions of subsection 34(2) of the Act, as now enacted or as the same may from time to time be amended, reenacted or replaced (and in the case of such amendment, reenactment or replacement, any references herein shall be read as referring to such amended, reenacted or replaced provisions), the registered holders of Series B Preferred Shares may, at their option and in the manner hereinafter provided, require the Corporation to redeem on October 31, 1993 and thereafter on October 31 in any year up to 1997 inclusive, up to 1,835 Series B Preferred Shares in the aggregate held by such holders upon payment for each share to be redeemed of a sum of $100 together with all accrued and unpaid preferential cumulative cash dividends thereon (which for such purpose shall be calculated as if such cumulative dividends were accruing from day to day for the period from the expiration of the last period for which cumulative dividends have been paid up to but excluding the date of redemption).

6.2 Partial Retraction

If less than all of the Series B Preferred Shares tendered are to be redeemed pursuant to the provisions of clause 6.1, the Corporation shall select those shares which are to be redeemed by lot, on a pro rata basis, among the holders thereof.

6.3 Notice of and Procedure for Retraction

In the case of the redemption of Series B Preferred Shares under the provisions of clause 6.1 hereof, the holder thereof shall on the 31st day of October in each year, commencing with the year ended October 31, 1993, deliver at the registered office of the Corporation a notice in writing (hereinafter called a “Retraction Notice”) signed by such holder requiring the Corporation to redeem such number of Series B Preferred Shares as indicated in said notice accompanied by the certificate or certificates representing the Series B Preferred Shares which such holder requires to be redeemed. As soon as practicable following receipt of a Retraction Notice, the Corporation shall pay or

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cause to be paid to or to the order of the registered holder of the Series B Preferred Shares to be redeemed the redemption price thereof. If a part only of the shares represented by any certificate be redeemed pursuant to the provisions of clause 6.1 hereof a new certificate for the balance shall be issued at the expense of the Corporation.

7. Restriction on Dividends, Retirement and Issue of Shares

So long as any of the Series B Preferred Shares are outstanding, the Corporation shall not at any time, without, in addition to any approval that may then be prescribed by applicable law, the approval of the registered holders of the outstanding Series B Preferred Shares, as set forth under “Modification”:

(a) declare, pay or set apart for payment any dividend on the Common Shares or any other shares of the Corporation ranking junior to the Series B Preferred Shares (other than a stock dividend payable in shares of the Corporation ranking junior to the Series B Preferred Shares); or

(b) redeem, purchase or otherwise retire or make any capital distribution on or in respect of any Common Shares or any other shares of the Corporation ranking junior to the Series B Preferred Shares (except out of the net cash proceeds of a substantially concurrent issue of shares of the Corporation ranking junior to the Series B Preferred Shares); or

(c) except in connection with the exercise of the retraction privilege attaching thereto, redeem, purchase or otherwise retire less than all the Series B Preferred Shares then outstanding; or

(d) except in connection with the exercise of a retraction privilege attaching thereto, redeem, purchase or otherwise retire any other shares of the Corporation ranking on a parity with the Series B Preferred Shares; or

(e) issue any additional Class I Preferred Shares, or any shares ranking prior to or on a parity with the Class I Preferred Shares with respect to the payment of dividends or the distribution of assets

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in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or in the event of any other distribution of assets of the Corporation among its shareholders for the purpose of winding-up its affairs;

unless all dividends up to and including the dividend payment date for the last completed period for which dividends shall be payable shall have been declared and paid or set apart for payment in respect of each series of cumulative Class I Preferred Shares and all other cumulative shares of the Corporation ranking prior to or on a parity with the Class I Preferred Shares in respect of the payment of the dividends then issued and outstanding and there shall have been paid or set apart for payment all declared and unpaid non-cumulative dividends in respect of each series of non-cumulative Class I Preferred Shares and all other non-cumulative shares of the Corporation ranking prior to or on a parity with the Class I Preferred Shares in respect of the payment of the dividends then issued and outstanding.

8. Liquidation, Dissolution or Winding-Up

In the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or in the event of any other distribution of assets of the Corporation among its shareholders for the purpose of winding-up its affairs, the Series B Holders shall be entitled to receive, for each Series B Preferred Share held, an amount equal to $100, together with all accrued and unpaid dividends thereon (which for such purpose shall be calculated as if such cumulative dividends were accruing from day to day for the period from the expiration of the last period for which cumulative dividends have been paid up to the date of distribution) before any payment or distribution is made to the holders of Common Shares or any other shares ranking junior to the Series B Preferred Shares. After payment to the Series B Holders of the amount so payable to them, they shall not be entitled to share in any further distribution of the assets of the Corporation.

9. Modification

The provisions attaching to the Series B Preferred Shares as a series may be repealed, altered, modified or amended with such approval as may then be required by the

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Act currently being at least two-thirds of the votes cast at a meeting or adjourned meeting of the holders of such shares duly called for the purpose at which a quorum is present.

10. Voting Rights

Except as required by applicable law or as provided in this Section 10, the Series B Holders shall not be entitled to receive notice of, or to attend any meeting of the shareholders of the Corporation and shall not be entitled to vote at any such meeting.

The Series B Holders shall be entitled to receive notice of and to attend any meeting of the shareholders of the Corporation at which directors are to be elected and shall be entitled., voting separately as a class along with the Series A Preferred Shares and all other series of Class I Preferred Shares which provide for or permit the sharing of such rights with the Series B Preferred Shares, to elect one director of the Corporation so long as there are at least 25,000 Class I Preferred Shares outstanding with such a right as at the date of such meeting; provided that nothing contained herein shall be deemed to restrict the right or ability of the Corporation to increase or decrease the number of its directors from time to time. In-the case where one or more subsequently created series of Class I Preferred Shares provide for or permit the sharing of such right with the Series A Preferred Shares and the Series B Preferred Shares, the voting for the election of a director as aforesaid shall be done together with the voting by the holders of such other one or more series, so that such director shall be elected at a combined meeting of the Series A Holders and Series B Holders and of the holders of such one or more subsequently created series of Class I Preferred Shares. Notwithstanding Section 12, the approval of a majority of the holders of Series A Preferred Shares and Series B Preferred Shares and of such one or more subsequently created series present at a combined meeting called for the purpose of electing directors of the Corporation and held on at least 21 days’ notice shall be sufficient for the purpose of electing such director.

11. Amendments to the Series B Provisions

The Series B Provisions may be repealed, altered, modified, amended or varied only with the sanction of the holders of the Series B Preferred Shares given in the manner

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provided in Section 12 in addition to any other approval required by the Act or any other statutory provision of like or similar effect, from time to time in force.

12. Approvals by Series B Holders

The approval of the Series B Holders with respect to any and all matters hereinbefore referred to may be given by at least two-thirds of the votes cast at a meeting of the Series B Holders duly called for that purpose and held upon at least 21 days’ notice, at which the holders of 25 per cent of the outstanding Series B Preferred Shares are present or represented by proxy. If at any such meeting the holders of 25 per cent of the outstanding Series B Preferred Shares are not present or represented by proxy within one-half an hour after the time appointed for such meeting, then the meeting shall be adjourned to such date being not less than 30 days later and to such time and place as may be appointed by the chairman of the meeting and not less than 21 days’ notice shall be given of such adjourned meeting, but it shall not be necessary in such notice to specify the purpose for which the meeting was originally called. At such adjourned meeting, the Series B Holders present or represented by proxy may transact the business for which the meeting was originally called and the consent or approval of the Series B Holders may be given by a resolution passed thereat by not less than two-thirds of the votes cast at such adjourned meeting. The formalities to be observed with respect to the giving of notice of any such meeting and the conduct thereof shall from time to time be prescribed by the by-laws of the Corporation with respect to meetings of shareholders. On every poll taken at every such meeting or adjourned meeting, every Series B Holder shall be entitled to one vote in respect of each Series B Preferred Share held by him.

13. Notices

Any notice required or permitted to be given to a Series B Holder shall be mailed by letter, postage prepaid, or delivered to such Series B Holder at his address as it appears on the records of the Corporation or, in the event of the address of any such Series B Holder not so appearing, at the last known address of such Series B Holder. The accidental failure to give notice to one or more of such Series B Holders shall not affect the validity of any action requiring the giving of notice by the Corporation. Any

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notice given as aforesaid shall be deemed to be given on the date upon which it is mailed or delivered.

14. Priority

The Series B Preferred Shares shall rank on a parity with all outstanding series of Class I Preferred Shares and with any other series of Class I Preferred Shares that may be issued in the future with respect to the payment of dividends and in the event of the liquidation, dissolution or winding-up of the Corporation or other distribution of assets of the Corporation among shareholders for the purpose of winding-up its affairs.

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Industry Canada   Canada Business Corporations Act Industrle Canada   Lol canadienne sur les sociétés par actions

FORM 3 NOTICE OF REGISTERED OFFICE OR NOTICE OF CHANGE OF ADDRESS OF REGISTERED OFFICE (SECTION 19) FORMULAIRE 3 AVIS DE DÉSIGNATION OU DE CHANGEMENT D’ADRESSE DU SIÉGE SOCIAL (ARTICLE 19)

1 – Name of the Corporation – Dénomination sociale de la société		2 – Corporation No. – No de la société
	PATHEON, INC.	419970-7
3 – Street address of Registered Office – adresse civique du siége social
	Suite 350 7070 Mississauga Road Mississauga, Ontario L5N 7J8 (and mailing address, if different from that of registered office) - (si l’adresse postale différe de celle du siége social)
CAUTION:	Address of registered office must be within the province or territory that Is described In the Articles at Item 2; otherwise an amendment to the Articles Is required, using Form 4, In addition to this form (see paragraph 173(1) b) of the Act).
AVIS :	L adresse du siége social dolt se situer dans les IlmItes de la province ou du terrItolre Indlqué dans les statuts à la rubrlque 2. Sinon, II taut modifier les statuts en déposant le formulalre 4, en plus du présent formulalre (voir l’allnéa 173(1) b) de la Loi).
4 – Effective Date of Change – Date de prise d’effet
	Effective date of amalgamation
5 – Previous Address of Registered Office – adresse précédente du siége social
	Not applicable

Signature	Printed Name – Nom en lettres moulées	6 – Capacity of – En qualité de	7 – Tel. No. – No de tel.
/s/ Riccardo Trecroce	Riccardo Trecroce	Secretary	905-812-6877
FOR DEPARTMENTAL USE USE ONLY – A L‘USAGE DU MINISTERE SEULEMENT

Industry Canada   Canada Business Corporations Act Industrle Canada   Loi canadienne sur les sociétés par actions FORM 6
NOTICE OF DIRECTORS, NOTICE OF CHANGE OF DIRECTORS OR NOTICE OF CHANGE OF ADDRESS OF A PRESENT DIRECTOR [SECTIONS 106 AND 113(1)] FORMULAIRE 6 LIS TE DES ADMINISTRATEURS, AVIS DE CHANGEMENT DES ADMINISTRATEURS OU AVIS DE CHANGEMENT D’ADDRESSE D’UN ADMINISTRATEUR ACTUEL [ARTICLES 106 ET 113(1)]

1 – Name of the Corporation – Dénomination sociale de la société	2 – Corporation No. – No de la société
PATHEON, INC.	419970-7

3 – The following persons have became directors of this corporation – Les personnes sulvantes sont devenues administrateurs de la présente société
Name – Nom	Effective Date Date d’entrée en vigueur	Residential Address – Adresse domicillaire		Resident Canadian – Y/N Résident canadien – O/N
See attached Schedule A
4 – The following persons ceased to be directors of this corporation – Les personnes suivantes ont cessé d’étre administrateurs de la présente société
Name – Nom	Effective Date Date d’entrée en vigueur	Residential Address – Adresse domicillaire
Not applicable
5 – The directors of this corporation now are – Les administrateurs de la présente société sont maintenant
Name – Nom	Residential Address – Adresse domicillaire			Resident Canadian – Y/N Résident canadien – O/N
See attached Schedule B
6 – Change of address of a present director – Changement d’adresse d’un administrateur actuel
Name – Nom	Effective Date Date d’entrée en vigueur	Former Residential Address Adresse domicillaire précédente	New Residential Address Nouvelle adresse résidentielle

Signature	Printed Name – Nom an lettres moulées	7 – Capacity of – En qualité de	8 – Tel. No. – No de tel.
/s/ Riccardo Trecroce	Riccardo Trecroce	Secretary	905-812-6877
FOR DEPARTMENTAL USE USE ONLY – A L’USAGE DU MINISTERE SEULEMENT

Schedule A

to Form 6, Notice of Directors,

Notice of Change of Directors or

Notice of Change of address of a Present Director

Name	Effective Date	Residential Address	Resident Canadian – Y/N
James E. Arnett	Effective date of amalgamation	500 Avenue Road, Suite 1102 Toronto, ON M4V 2J6	Y
Nick A. DiPietro	Effective date of amalgamation	12 Nadine Cres. St. Catharines, ON L2W 1C1	Y
Bryce W. Douglas	Effective date of amalgamation	140 Glen Road Toronto, ON M4W 2W3	Y
Peter A.W. Green	Effective date of amalgamation	Frog Hollow 13215 Guelph Line Campbellville, ON L0P 1B0	Yes
The Hon. Roy MacLaren	Effective date of amalgamation	425 Russell Hill Toronto, ON M5P 2S4	Yes
George L. Ploder	Effective date of amalgamation	2373 Doulton Drive Mississauga, ON L5H 3M4	Yes
Robert C. Tedford	Effective date of amalgamation	54 Cluny Drive Toronto, ON M4W 2R2	Yes
Derek J. Watchorn	Effective date of amalgamation	16530 Concession 8 RR#1 Schomberg, ON LOG 1TO	Yes
Gregory C. Wilkins	Effective date of amalgamation	19 Highland Avenue Toronto, ON M4W 2A2	Yes

Schedule B

to Form 6, Notice of Directors,

Notice of Change of Directors or

Notice of Change of address of a Present Director

Name	Residential Address	Resident Canadian – Y/N
James E. Arnett	500 Avenue Road, Suite 1102 Toronto, ON M4V 2J6	Y
Nick A. DiPietro	12 Nadine Cres. St. Catharines, ON L2W 1C1	Y
Bryce W. Douglas	140 Glen Road Toronto, ON M4W 2W3	Y
Peter A.W. Green	Frog Hollow 13215 Guelph Line Campbellville, ON L0P 1B0	Yes
The Hon. Roy MacLaren	425 Russell Hill Toronto, ON M5P 2S4	Yes
George L. Ploder	2373 Doulton Drive Mississauga, ON L5H 3M4	Yes
Robert C. Tedford	54 Cluny Drive Toronto, ON M4W 2R2	Yes
Derek J. Watchorn	16530 Concession 8 RR#1 Schomberg, ON LOG 1TO	Yes
Gregory C. Wilkins	19 Highland Avenue Toronto, ON M4W 2A2	Yes

Industry Canada	Industrie Canada
Certificate of Amendment		Certificat de modification
Canada Business Corporations Act		Loi canadienne sur les sociétés par actions

PATHEON, INC.		419970-7
Name of corporation-Dénomination de la société		Corporation number-Numéro de la société
I hereby certify that the articles of the above-named corporation were amended:		Je certifie que les statuts de la société susmentionnée ont été modifiés:
a)       under section 13 of the Canada Business Corporations Act in accordance with the attached notice;	¨	a)       en vertu de l’article 13 de la Loi canadienne sur les sociétés par actions, conformément à l'avis ci-joint;
b)       under section 27 of the Canada Business Corporations Act as set out in the attached articles of amendment designating a series of shares;	þ	b)       en vertu de l'article 27 de la Loi canadienne sur les sociétés par actions, tel qu'il est indiqué dans les clauses modificatrices ci-jointes désignant une série d'actions;
c)       under section 179 of the Canada Business Corporations Act as set out in the attached articles of amendment;	¨	c)       en vertu de l’article 179 de la Loi canadienne sur les sociétés par actions, tel qu'il est indiqué dans les clauses modificatrices ci-jointes;
d)       under section 191 of the Canada Business Corporations Act as set out in the attached articles of reorganization;	¨	d)       en vertu de l’article 191 de la Loi canadienne sur les sociétés par actions, tel qu'il est indiqué dans les clauses de réorganisation ci-jointes;
/s/ Richard G. Shaw		April 26, 2007 / le 26 avril 2007
Richard G. Shaw Director - Directeur		Date of Amendment – Date de modification

Industry Canada Canada Business Corporations Act	Industrle-Canada Loi canadienne sur les sociétés par actions	FORM 4 ARTICLES OF AMENDMENT (SECTIONS 27 OR 1 77)	FORMULAIRE 4 CLAUSES MODIFICATRICES (ARTICLES 27 OU 177)
1 – Name of the Corporation – Dénomination sociale de la sociétés			2 – Corporation No. – No de la sociétés
PATHEON, INC.			4199707
3 – The articles of the above-named corporation are amended as follows: Les statute de la sociétés susmentionnée ci-dessus sont modifiés de la              sulvanta:

The authorized share capital of the Corporation is amended by:

(a) redesignating the issued and unissued common shares of the Corporation as restricted voting shares and substituting “restricted voting shares’ or “restricted voting share” for each reference in the articles of the Corporation to ‘common shares’ or “common share”, respectively;

(b) increasing the authorized capital of the Corporation by creating 150,000 Class I Preferred Shares, Series C shares; and

(c) increasing the authorized capita) of the Corporation by creating 150,000 Class I Preferred Shares, Series D shares.

The rights, privileges, restrictions and conditions attaching to the Class I Preferred Shares, Series C shares ere set out on Schedule A annexed hereto and the rights, privileges, restrictions and conditions attaching to the Class I Preferred Shares, Series D shares are set out on Schedule B annexed hereto.

Signature /s/ Gregory Shepard Printed Name –Nom an lettres moulées Gregory Shepard 4 – Capacity of – En qualité de Corporate Secretary 5 – Tel. No. – N^o de tel. 905 812 2125

SCHEDULE A

The Class I Preferred Shares, Series C (the “Series C Preferred Shares”) shall have the following rights, privileges, restrictions and conditions (the “Series C Provisions”) in addition to the rights, privileges, restrictions and conditions attaching to the Class I Preferred Shares as a class:

1. Interpretation

1.1 Definitions

Where used in these Series C Provisions, the following terms shall, unless -there is something in the context otherwise inconsistent therewith, have the meanings set out below and grammatical variations of such terms shall have corresponding meanings:

“Act” means the Canada Business Corporations Act;

“Adjustment Election” has the meaning set out in Section 4.2;

“affiliate” has the meaning given to that term in NI 45-106;

“associate” has the meaning given to that term in NI 45-106;

“business day” means a day other than a Saturday, Sunday or any other statutory holiday in the City of Toronto, Ontario or New York, New York;

“Capital Reorganization” has the meaning given to that term in Section 5.3(b);

“Change of Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any person or group (within the meaning of the Securities Act (Ontario)) other than the Purchaser and its affiliates, of capital stock of the Company representing more than a majority of the aggregate ordinary voting power represented by the issued and outstanding voting securities of the Company; (b) if, during any period of up to 12 consecutive months, commencing on the Original Issue Date, individuals who at the beginning of such period (together with any new directors whose election or whose nomination for election by the stockholders was approved by a vote of 66-2/3% of the directors then still in office who were either, directors at the beginning of such period or whose election or nomination was previously so approved or was otherwise consented to by the directors elected by holders of Series D Preferred Shares) were directors of the Company shall cease for any reason (other than the death, disability or retirement of an officer of the Company that is serving as a director at such time so long as another officer of the Company replaces such person as a director or the replacement of designees of the Series C Holders pursuant to the terms hereof) to constitute a majority of the Board of Directors of the Company; or (c) the consummation of any merger, consolidation, amalgamation or similar scheme or arrangement pursuant to which the Company is not the surviving or resulting corporation and as a result of which the stockholders of the Company immediately prior to such transaction cease to own, directly or indirectly,

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beneficially or of record, at least a majority of the voting power of the outstanding shares of capital stock of the surviving or resulting corporation in such transaction;

“Conversion Notice” has the meaning given to that term in Section 5.1(b);

“Conversion Rate” at any time means the number of Restricted Voting Shares obtained when the Issue Price is divided by the Reference Price, subject to the cumulative effect of all adjustments contemplated by Section 4 and Section 5;

“Convertible Security” means any evidence of indebtedness, share or other security convertible into or exchangeable for Restricted Voting Shares;

“Current Market Price” of the Restricted Voting Shares on any date means the volume weighted average trading price per share at which the Restricted Voting Shares have traded in board lots on the TSX or, if the Restricted Voting Shares are not then listed on the TSX, on such stock exchange or automated quotation system on which such shares are listed or quoted as may be selected by the board of directors for such purpose or, if not listed on any stock exchange, in the over-the-counter market, in each case, as of the last full trading day prior to the date of determination;

“director” means a director of the Corporation for the time being and “directors” or “board of directors” means the board of directors of the Corporation and reference, without further elaboration, to any action by the directors means action by the directors of the Corporation as a board;

“Dividend Payment Date” has the meaning given to that term in Section 3.1(a);

“Fiscal Year” means, in respect of the Corporation, the twelve-month period ending October 31 in each year;

“herein”, “hereto”, “hereunder”, “hereof”, “hereby” and similar expressions mean or refer to these Series C Provisions and not to any particular section, paragraph, clause, subclause, subdivision or portion hereof and the expression “Section” followed by a number or a letter means and refers to the specified section of these Series C Provisions;

“Initial Adjustment Period” has the meaning set out in Section 4.1;

“Issue Price” means US$1,000 per Series C Preferred Share;

“Junior Shares” means any shares in the capital of the Corporation ranking after or subordinate to the Series C Preferred Shares as to the payment of dividends or the return of capital, including, without limiting the generality of the foregoing, the Restricted Voting Shares;

“Mandatory Conversion Date” has the meaning given to that term in Section 5.2(b);

“Mandatory Conversion Notice” has the meaning given to that term in Section 5.2(b);

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“NI 45-106” means National Instrument 45-106 of the Canadian Securities Administrators;

“Maturity Date” means the tenth anniversary of the Original Issue Date;

“Option” means any right, option, warrant or other security carrying, or agreement pursuant to which any person has, a contingent or vested right to acquire Restricted Voting Shares or Convertible Securities;

“Original Issue Date” means the first date of issuance of Series C Preferred Shares, which is expected to be April 27, 2007;

“person” includes any individual, firm, partnership, joint venture, venture capital fund, association, trust, trustee, executive, administrator, legal personal representative, estate group, corporation, unincorporated association organization, governmental authority, syndicate, or other entity, whether or not having legal status;

“Purchaser” means JLL Partners Fund V, L.P.;

“Reference Price” means US$4.77 (representing the approximate U.S. dollar equivalent of C$5.55 as at March 1, 2007), subject to adjustment in accordance with Section 5;

“Restricted Voting Share Reorganization” has the meaning given to that term in Section 5.3(a);

“Restricted Voting Shares” means the restricted voting shares without par value in the capital of the Corporation;

“Series C Holder” means a person recorded on the securities register of the Corporation as being the registered holder of one or more Series C Preferred Shares;

“Series C Liquidation Preference” as of any date, means the Issue Price per Series C Preferred Share subject to adjustment in accordance with Section 4, plus all accrued and unpaid dividends per Series C Preferred Share as of such date, calculated pursuant to Section 3.1(a);

“Series D Preferred Shares” means the Class I Preferred Shares, Series D in the capital of the Corporation;

“Stub Period Fraction” shall mean a fraction, (x) the denominator of which is equal to the number of days between the last Dividend Payment Date prior to the date of the conversion or Liquidation, as the case may be, and the next Dividend Payment Date after the date of the conversion or Liquidation, and (y) the numerator of which is equal to the number days elapsed from the last Dividend Payment Date to the date of such conversion or Liquidation; and

“TSX” means the Toronto Stock Exchange.

- 3 -

1.2 Gender, etc.

Words importing only the singular number include the plural and vice versa and words importing any gender include all genders.

1.3 Currency

Unless otherwise indicated, all monetary amounts referred to herein shall be in lawful money of Canada.

1.4 Headings

The division of these Series C Provisions into sections, paragraphs or other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof.

1.5 Business Day

In the event that any date upon which any dividends on the Series C Preferred Shares are payable by the Corporation, or upon or by which any other action is required to be taken by the Corporation or any Series C Holder hereunder, is not a business day, then such dividend shall be payable or such other action shall be required to be taken on or by the next succeeding day which is a business day.

2. Voting Rights

The Series C Holders shall be entitled to receive notice of and to attend all meetings of the shareholders of the Corporation which the holders of the Restricted Voting Shares are entitled to attend and shall have one vote at all such meetings of the shareholders of the Corporation for each Restricted Voting Share into which a Series C Preferred Share held is then convertible in respect of all matters to be voted on by the holders of Restricted Voting Shares, except for the election of directors. Except as set out in these Series C Provisions or as otherwise required by law, the Series C Preferred Shares and Restricted Voting Shares hall vote together as a single class. Fractional votes shall not be permitted and any fractional voting rights resulting from the above formula (after aggregating all Restricted Voting Shares into which Series C Preferred Shares held by each holder could then be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).

3. Dividends

3.1 Cash Dividend Entitlement

(a) After the Initial Adjustment Period, subject to Section 4.2, the Series C Holders, in priority to the holders of Restricted Voting Shares and any other Junior Shares, shall be entitled to receive and, subject to the Act, the Corporation shall pay, as and when declared by the board of directors out of monies properly applicable to the payment of dividends, cumulative preferential dividends, from October 28, 2009 through and including the date on which such

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dividends are paid at the annual rate of 8.50% of the applicable Series C Liquidation Preference per Series C Preferred Share, payable in arrears on the 27th day of each of July, October, January and April (the “Dividend Payment Date”), commencing on January 27, 2010; provided that accumulated and unpaid dividends for any prior quarterly period may be paid at any time. Subject to Section 4.2, such dividends shall be deemed to accrue on the Series C Preferred Shares from October 28, 2009 and be cumulative whether or not earned or declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends.

(b) From and after the conversion of any Series C Preferred Share into Restricted Voting Shares, (i) the Series C Holder of such Series C Preferred Share shall not be entitled to the payment of any accrued and unpaid cumulative dividends on such Series C Preferred Share referred to in Section 3.1(a) above, whether or not theretofore declared by the board of directors, and (ii) such Series C Holder shall be deemed to have waived its entitlement to receive any such dividends on such Series C Preferred Share but shall be entitled to all dividends declared and paid on the Restricted Voting Shares on or after such conversion.

3.2 Restriction on Dividends on Junior Shares

Commencing with the Fiscal Year ending October 31, 2010, no dividends or distributions shall be paid on the Junior Shares, and no Junior Shares shall redeemed, repurchased or otherwise acquired for value by the Company, in any Fiscal Year until dividends on the Series C Preferred Shares in the full preferential amount specified in. Section 3.1(a), less the amount of any such dividends otherwise payable on a Dividend Payment Date in respect of which the Corporation has made the Adjustment Election pursuant to Section 4.2 (or such Adjustment Election has been to deemed to have been made as provided below), have been declared and paid during such Fiscal Year.

4. Periodic Adjustments

4.1 Initial Adjustment Period

During the period from the Original Issue Date to and including October 27, 2009 (the “Initial Adjustment Period”), on the 27th day of each of July, October, January and April no dividends shall be payable on the Series C Preferred Shares, but each of the Series C Liquidation Preference and the Conversion Rate shall be automatically adjusted by multiplying each of the Series C Liquidation Preference and the Conversion Rate in effect immediately prior to such date by 1.02125. Accordingly, on the dates set out below, for illustrative purposes, the Series C Liquidation Preference per Series C Preferred Share and the Conversion Rate, assuming that no other adjustment to the Reference Price is required pursuant to Section 5, will be as follows:

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Date	Series C Liquidation Preference	Conversion Rate
July 27, 2007	$1,021.25	214.1644
October 27, 2007	$1,042.95	218.7154
January 27, 2008	$1,065.11	223.3631
April 27, 2008	$1,087.74	228.1096
July 27, 2008	$1,110.85	232.9569
October 27, 2008	$1,134.46	237.9072
January 27, 2009	$1,158.57	242.9628
April 27, 2009	$1,183.19	248.1257
July 27, 2009	$1,208.33	253.3984
October 27, 2009	$1,234.01	258.7831

4.2 Adjustment Election

(a) Notwithstanding Section 3.1(a), after the Initial Adjustment Period, in lieu of payment or accumulation of dividends to which the Series C Holders would otherwise be entitled on any Dividend Payment Date pursuant to Section 3.1(a), the Corporation may elect (the “Adjustment Election”) to instead adjust each of the Series C Liquidation Preference and the Conversion Rate on such Dividend Payment Date by multiplying each of the Series C Liquidation Preference and the Conversion Rate in effect immediately prior to such Dividend Payment Date by 1.02125.

(b) If the Corporation determines to make the Adjustment Election in respect of a Dividend Payment Date, it shall deliver or cause to be delivered, in accordance with Section 9, a notice of such election (the “Adjustment Election Notice”) at least 10 days before such Dividend Payment Date to the Series C Holders at their last addresses as the same appear on the books of the Corporation. The Adjustment Election Notice, if delivered in the manner herein provided, shall be conclusively deemed to have been duly given, whether or not the Series C Holders receive such notice. Each such Adjustment Election Notice shall specify the Dividend Payment Date in respect of which such election is made and shall set out the Series C Liquidation Preference and the Conversion Rate immediately before and after giving effect to the adjustment thereof pursuant to Section 4.2(a).

(c) In the event that the Company fails to give the notice required by Section 4.2(b) and fails to make payment of the required dividend in cash, the Conversion Rate shall be adjusted as provided in Section 4.2(b) as though the Company had given an Adjustment Election Notice with respect to such Dividend Payment Date.

4.3 Adjustments Cumulative; Pro Rata Adjustment for Partial Periods

(a) For the avoidance of doubt, all adjustments to the Conversion Rate contemplated by this Section 4 shall be cumulative in effect and each adjustment shall be applied to the

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Conversion Rate as adjusted on the immediately prior Dividend Payment Date, subject to adjustment of the Reference Price pursuant to Section 5 hereof. In the event of any adjustment to the Reference Price pursuant to Section 5 hereof, the Conversion Rate shall be calculated to give effect to all prior adjustments contemplated by this Section 4 as though the Reference Price as adjusted pursuant to Section 5 were the Reference Price from the Original Issue Date, and all adjustments to the Conversion Rate pursuant to this Section 4 were then applied.

(b) In the event of any conversion of the Series C Preferred Shares pursuant to Section 5 hereof at a time between Dividend Payment Dates, either (i) if the conversion occurs during the Initial Adjustment Period or if the conversion occurs after the Initial Adjustment Period and the Corporation so elects, the Conversion Rate then in effect shall be multiplied by the sum of (A) one (1) plus (B) (x) 0.02125 multiplied by (y) the Stub Period Fraction, or (ii) if the conversion occurs after the Initial Adjustment Period and the Corporation elects not to make the adjustment described in (i) above, the Corporation shall pay to the holder of such shares an amount equal to the product of (A) 0.02125 and (B) the Stub Period Fraction.

5. Conversion

5.1 Optional Conversion

(a) Upon and subject to the terms and conditions set out in this Section 5.1, the Series C Holders shall have the right, at any time and from time to time, to convert all or any part of their Series C Preferred Shares into that number of fully paid and non-assessable Restricted Voting Shares that is equal to the number of Series C Preferred Shares to be converted multiplied by the Conversion Rate in effect on the date of conversion.

(b) The conversion right provided for in Section 5.1(a) may be exercised by any Series C Holder by delivery of a notice in writing (the “Conversion Notice”), together with the certificate or certificates representing the Series C Preferred Shares in respect of which the Series C Holder wishes to exercise its right of conversion and delivering such certificate or certificates to the Secretary of the Corporation at the Corporation’s registered office. The Conversion Notice shall be signed by such holder or by its duly authorized attorney or agent and shall specify the number of Series C Preferred Shares which the Series C Holder desires to have converted. If less than all the Series C Preferred Shares represented by a certificate or certificates are to be converted, the Series C Holder shall be entitled to receive, at the expense of the Corporation, a new certificate representing the Series C Preferred Shares represented by the surrendered certificate or certificates that are not to be converted.

(c) The share certificates representing any Restricted Voting Shares issued upon the conversion of Series C Preferred Shares shall be issued at the expense of the Corporation in the name of the registered holder of the Series C Preferred Shares converted or in such name or names as the registered holder may direct in writing. In any case where the Restricted Voting Shares are to be issued in the name of a person other than the holder of the converted Series C Preferred Shares, the transfer form on the back of the certificates in question shall be endorsed by the registered holder of the Series C Preferred Shares or its duly authorized attorney or agent.

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(d) Each Series C Holder who elects to convert its Series C Preferred Shares, in whole or in part (or any other person or persons in whose name or names any certificates representing Restricted Voting Shares are issued as provided in Section 5.1(c)), shall be deemed to have become the holder of record of the Restricted Voting Shares into which such Series C Preferred Shares are converted, for all purposes, on the date of receipt by the Corporation of a duly completed Conversion Notice and the certificate or certificates representing the Series C Preferred Shares to be converted as provided in Section 5.1(b) and, effective as of such date, the Series C Holder shall cease to be registered as the holder of record of the Series C Preferred Shares so converted.

5.2 Mandatory Conversion

(a) Upon and subject to the terms and conditions set out in this Section 5.2, at any time after the Initial Adjustment Period, if the Current Market Price exceeds 165% of the then applicable Reference Price during any sixty (60) consecutive trading days on the TSX, the Corporation shall have the right to require the Series C Holders to convert all, but not less than all, of their Series C Preferred Shares into that number of fully paid and non-assessable Restricted Voting Shares that is equal to the number of Series C Preferred Shares to be converted multiplied by the Conversion Rate in effect on the date of conversion (as adjusted pursuant to Section 4.3(b)).

(b) If the Corporation determines to require that all of the outstanding Series C Preferred Shares be converted into Restricted Voting Shares pursuant to Section 5.2(a), it shall fix a date for conversion (the “Mandatory Conversion Date”) and it shall deliver or cause to be delivered, in accordance with Section 9, a notice of such conversion (the “Mandatory Conversion Notice”) at least 10 days prior to the Mandatory Conversion Date to the Series C Holders at their last addresses as the same appear on the books of the Corporation. The Mandatory Conversion Notice, if delivered in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not the Series C Holders receive such notice. The Mandatory Conversion Notice shall specify the Mandatory Conversion Date, the number of Restricted Voting Shares into which each Series C Preferred Share is to be converted, the place or places for surrender of certificates representing such Series C Preferred Shares and that such Restricted Voting Shares will be delivered upon presentation and surrender of certificates representing such Series C Preferred Shares. The Mandatory Conversion Notice shall be accompanied by a certificate of an officer of the Corporation certifying that the Current Market Price has exceeded 165% of the then applicable Reference Price during any sixty (60) consecutive trading days on the TSX.

(c) As promptly as practicable upon receipt of a Mandatory Conversion Notice, but in any event within 5 business days after receipt thereof, each Series C Holder shall surrender the certificate or certificates for such Series C Preferred Shares, duly endorsed, at a place designated for such surrender. The share certificates representing any Restricted Voting Shares issued upon the conversion of Series C Preferred Shares shall be issued at the expense of the Corporation in the name of the registered holder of the Series C Preferred Shares converted or in such name or names as the registered holder may direct in writing. In any case where the Restricted Voting Shares are to be issued in the name of a person other than the holder of the converted Series C Preferred Shares, the transfer form on the back of the certificates in question shall be endorsed by the registered holder of the Series C Preferred Shares or its duly authorized attorney or agent.

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(d) As promptly as practicable after the later of the Mandatory Conversion Date and the satisfaction of the requirements for surrender set forth in Section 5.2(c), but in any event within 5 business days after receipt thereof, the Corporation shall issue and deliver to such Series C Holder at the address designated in such instructions a certificate or certificates for the number of Restricted Voting Shares specified in the Mandatory Conversion Notice in accordance with this Section 5.2.

(e) Each Series C Holder (or any other person or persons in whose name or names any certificates representing Restricted Voting Shares are issued as provided in Section 52(c)), shall be deemed to have become the holder of record of the Restricted Voting Shares into which such Series C Preferred Shares are converted, for all purposes, on the Mandatory Conversion Date and, effective as of such date, the Series C Holder shall cease to be registered as the holder of record of the Series C Preferred Shares so converted.

5.3 Anti-Dilution Adjustments

(a) If and whenever at any time and from time to time the Corporation shall: (i) subdivide, redivide or change its then outstanding Restricted Voting Shares into a greater number of Restricted Voting Shares; (ii) reduce, combine or consolidate or change its then outstanding Restricted Voting Shares into a lesser number of Restricted Voting Shares; or (iii) issue Restricted Voting Shares or Convertible Securities to the holders of all or substantially all of its then outstanding Restricted Voting Shares by way of stock dividend or other distribution (any of such events being herein called a “Restricted Voting Share Reorganization”), the Conversion Rate shall be adjusted effective immediately after the record date at which the holders of Restricted Voting Shares are determined for the purpose of the Restricted Voting Share Reorganization by adjusting the Reference Price to a Reference Price that is the product of (i) the Reference Price in effect on the record date, and (ii) a fraction:

(i) the numerator of which shall be the number of Restricted Voting Shares outstanding on the record date before giving effect to the Restricted Voting Share Reorganization; and

(ii) the denominator of which shall be the number of Restricted Voting Shares outstanding after the completion of such Restricted Voting Share Reorganization (but before giving effect to the issue of any Restricted Voting Shares issued after such record date otherwise than as part of such Restricted Voting Share Reorganization), including, in the case where securities exchangeable or convertible into Restricted Voting Shares are distributed, the number of Restricted Voting Shares that would have been outstanding had such securities been exchanged for or converted into Restricted Voting Shares on such record date.

(b) If and whenever there is a capital reorganization of the Corporation not otherwise provided for in this Section 5.3 or a consolidation, merger, arrangement or amalgamation (statutory or otherwise) of the Corporation with or into another body corporate (any such event being called a “Capital Reorganization”), any Series C Holder who has not exercised its right of conversion prior to the record date for such Capital Reorganization shall be entitled to receive

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and shall accept, upon the exercise of such right at any time after the record date for such Capital Reorganization, in lieu of the number of Restricted Voting Shares to which it was theretofore entitled upon conversion, the amount of cash or other property or the aggregate number of shares or other securities of the Corporation or of the corporation or body corporate resulting, surviving or continuing from the Capital Reorganization that such holder would have been entitled to receive as a result of such Capital Reorganization if, on the record date, such holder had been the registered holder of the number of Restricted Voting Shares to which it was theretofore entitled upon conversion, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in Section 5.3(a). No such Capital Reorganization shall be carried into effect unless all necessary steps shall have been taken so that the Series C Holders shall thereafter be entitled to receive such cash or other property, or the number of shares or other securities of the Corporation or of the corporation or body corporate resulting, surviving or continuing from the Capital Reorganization.

5.4 Rules for Adjustment of Reference Price

The following rules and procedures shall be applicable to adjustments of the. Reference Price made pursuant to Section 5.3:

(a) forthwith after any adjustment in the Reference Price, the Corporation shall deliver to each of the Series C Holders a certificate setting out the amount of such adjustment and, in reasonable detail, the event requiring and the manner of computing such adjustment; and

(b) any question or issue that at any time or from time to time arises with respect to the Reference Price or any adjustment in the amount of the Reference Price shall be conclusively determined by the auditors from time to time of the Corporation and shall be binding upon the Corporation and all holders of the Series C Preferred Shares and Restricted Voting Shares.

5.5 Notice of Certain Events

If the Corporation intends to fix a record date for any Restricted Voting Share Reorganization (other than a subdivision, consolidation or reclassification) or Capital Reorganization, the Corporation shall, not less than 10 days prior to such record date, notify each Series C Holder of such intention by written notice setting forth the particulars of such Restricted Voting Share Reorganization or Capital Reorganization in reasonable detail. The Series C .Holders may waive the giving of any such notice in the manner provided for the giving of consents and approvals of the Series C Holders contained in Section 9.

5.6 No Fractional Shares

No fractional Restricted Voting Shares shall be issuable on the conversion of Series C Preferred Shares. In any case where a fraction of a Restricted Voting Share would otherwise be issuable on conversion of one or more Series C Preferred Shares, the aggregate number of Restricted Voting Shares to be issued upon such conversion shall be rounded to the nearest whole number, with one-half being rounded up.

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5.7 Reservation of Restricted Voting Shares

So long as any of the Series C Preferred Shares are outstanding and entitled to the right of conversion herein provided, the Corporation shall at all times reserve and hold out of its unissued Restricted Voting Shares a sufficient number of unissued Restricted Voting Shares to enable all of the Series C Preferred Shares outstanding to be converted upon the basis and upon the terms and conditions herein provided in this Section 5.

6. Liquidation Entitlement

(a) In the event of a liquidation, dissolution or winding up of the Corporation, or other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs (a “Liquidation”), there will be paid to each Series C Holder, in respect of each Series C Preferred Share held by such holder, in preference to and priority over any distribution or payment on any other share in the capital of the Corporation, the greater of (i) the Series C Liquidation Preference and (ii) (x) the amount per Restricted Voting Share that would be paid to the holder of a Restricted Voting Share in the Liquidation of the Company multiplied by (y) the Conversion Rate then in effect, and after such payment such Series C Holder shall not be entitled to participate in any further distribution of property or assets of the Corporation.

(b) In the event of any Liquidation that takes place at a time between Dividend Payment Dates, the Series C Liquidation Preference then in effect shall be multiplied by the sum of (i) one (1) plus (ii) (x) 0.02125 multiplied by (y) the Stub Period Fraction.

7. Redemption

7.1 Mandatory Redemption

(a) The Corporation shall not be entitled to redeem any Series C Preferred Shares, except in accordance with this Section 7.1.

(b) Subject to the Act, on the Maturity Date, the Corporation shall redeem all, but not less than all, of the then outstanding Series C Preferred Shares for cash at a redemption price per Series C Preferred Share equal to the Series C Liquidation Preference as of such date.

(c) Subject to the Act, upon the occurrence of a Change of Control, the Corporation shall redeem all, but not less than all, of the then outstanding Series C Preferred Shares for cash at a redemption price per Series C Preferred Share equal to the greater of (a) the Series C Liquidation Preference and (b) the product of (i) the cash consideration per Restricted Voting Share, if any, to be received by the holders thereof pursuant to the Change of Control transaction and (ii) the Conversion Rate then in effect.

7.2 Rules and Procedures for Redemption

All redemptions of Series C Preferred Shares shall be in accordance with the following rules and procedures:

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(i) subject as provided in paragraph (ii), on any redemption the Corporation shall, at least 30 days and not more than 60 days before the redemption is to take place, give notice of redemption to each Series C Holder who at the date the notice is given is the registered holder of a Series C Preferred Share to be redeemed, but accidental failure to give any such notice to one or more such holders shall not affect the validity of the redemption;

(ii) a Series C Holder may waive notice of redemption or consent to the abridgement of the time for giving such notice, and if the notice is waived the Corporation shall be deemed to have given a notice specifying as the date for redemption the date the redemption actually occurs;

(iii) a notice of redemption will set out the date on which redemption is to take place, the applicable redemption price, the number of Series C Preferred Shares to be redeemed, the place or places for surrender of certificates representing such Series C Preferred Shares and that the applicable redemption price will be delivered upon presentation and surrender of certificates representing such Series C Preferred Shares;

(iv) on or after the date specified for redemption in such notice the Corporation will, on presentation and surrender at a place designated for such surrender of the certificate or certificates for the Series C Preferred Shares to be redeemed, pay or cause to be paid, to or to the order of the Series C Holder, the applicable redemption price therefor;

(v) a Series C Preferred Share in respect of which the applicable redemption price is paid as provided herein shall thereupon be and be deemed to be redeemed and the certificate or certificates representing such Series C Preferred Shares shall be cancelled;

(vi) after the date for redemption specified in a notice of redemption, the holder of a Series C Preferred Share called for redemption shall not be entitled to exercise any of the rights of a holder thereof unless payment of the applicable redemption price is not made on presentation of the certificate or certificates therefor in accordance with the provisions hereof, in which case the rights of the holder will thereupon be restored;

(vii) if a Series C Holder fails to present and surrender the certificate or certificates evidencing the. Series C Preferred Shares before the expiration of 15 days after the date specified for redemption, the Corporation may deposit the applicable redemption price for the Series C Preferred Shares to be redeemed in a special account in any chartered bank or trust company in Ontario to be paid without interest to or to the order of the holder upon presentation and surrender to such bank or trust company of the certificate or certificates, and upon the making of such deposit every Series C Preferred Share in respect of which the deposit is made will and will be deemed to be redeemed and the rights of the holder thereof after

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such deposit will be limited to receiving without interest the applicable redemption price therefor so deposited against presentation and surrender of the certificate or certificates; and

(viii) where notice of redemption has been given by the. Corporation, no transfer of any Series C Preferred Shares may be made by a Series C Holder to whom the particular notice was directed.

8. Certain Transfers

(a) The Series C Preferred Shares shall not be transferable, except for: (i) a transfer to any affiliate of the Purchaser, (ii) a transfer of 100% of the outstanding Series C Preferred Shares to a purchaser who has offered to purchase all of the outstanding Restricted Voting Shares for a per share consideration equivalent to the quotient of the consideration paid per Series C Preferred Share and the Conversion Rate in effect on the date of the transfer and take up of all deposited shares under the offer and otherwise on the same terms as for the purchase of the Series C Preferred Shares; or (iii) any transfer of Series C Preferred Shares alone or together with Restricted Voting Shares pursuant to a transaction under circumstances, including an exempt take-over bid, in which no applicable Canadian securities legislation would have required that the same offer or a follow-up offer be made to the holders of Restricted Voting Shares if the sale had been a sale of Restricted Voting Shares rather than Series C Preferred Shares alone or Series C Preferred Shares together with Restricted Voting Shares (provided that, for this purpose, (A) the number of Series C Preferred Shares purchased under the transaction and the number of Series C Preferred Shares held by the transferee, if any, shall be deemed to be the product of the number of such Series C Preferred Shares and the Conversion Rate in effect on the date of the transfer, (B) such Series C Preferred Shares shall be deemed to be outstanding Restricted Voting Shares and (C) the per share consideration paid shall be deemed to be the quotient of the consideration paid per Series C Preferred Share sold and the Conversion Rate in effect on the date of the transfer).

(b) If any Series C Preferred Shares are transferred to an affiliate of the Purchaser pursuant to Section 8(a)(i) and such transferee subsequently ceases to be an affiliate of the Purchaser, all Series C Preferred Shares held by such transferee shall be deemed to be transferred for the purposes of Section 8(a) as of the date on which such transferee ceases to be an affiliate of the Purchaser.

9. Notices

Any notice required or permitted to be ‘given to any Series C Holder shall be delivered by courier or by mail to such holder at its address as it appears on the records of the Corporation. Any such notice shall be deemed to be received on the earlier of (i) the date of actual receipt and (ii) two business days following the date on which the notice is sent.

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SCHEDULE B

The Class I Preferred Shares, Series D (the “Series D Preferred Shares”) shall have the following rights, privileges, restrictions and conditions (the “Series D Provisions”) in addition to the rights, privileges, restrictions and conditions attaching to the Class ‘I Preferred Shares as a class:

1. Interpretation

1.1 Definitions

Where used in these Series D Provisions, the following terms shall, unless there is something in the context otherwise inconsistent therewith, have the meanings set out below and grammatical variations of such terms shall have corresponding meanings:

“Act” means the Canada Business Corporations Act;

“business day” means a day other than a Saturday, Sunday or any other statutory holiday in the City of Toronto, Ontario or New York New York;

“director” means a director of the Corporation for the time being and “directors” or “board of directors” means the board of directors of the Corporation and reference, without further elaboration, to any action by the directors means action by the directors of the Corporation as a board;

“herein”, “hereto”, “hereunder”, “hereof”, “hereby” and similar expressions mean or refer to these Series D Provisions and not to any particular section, paragraph, clause, subclause, subdivision or portion hereof, and the expression “Section” followed by a number or a letter means and refers to the specified section of these Series D Provisions;

“JLL” means JLL Patheon Holdings, LLC;

“JLL Representative Number” means:

(a) if JLL holds at least 90,000 Series C Preferred Shares (or the corresponding number of Restricted Voting Shares issued upon the exercise of conversion rights attaching to the Series C Preferred Shares), then the JLL Representative Number shall be three (3);

(b) if JLL holds at least 45,000, but fewer than 90,000, Series C Preferred Shares (or the corresponding number of Restricted Voting Shares issued upon the exercise of conversion rights attaching to the Series C Preferred Shares), then the JLL Representative Number shall be two (2);

(c) if JLL holds at least 22,500, but fewer than 45,000, Series C Preferred Shares (or the corresponding number of Restricted Voting Shares issued upon the exercise of conversion rights -attaching to the Series C Preferred Shares), then the JLL Representative Number shall be one (1).

“Restricted Voting Shares” means the restricted voting shares without par value in the capital of the Corporation;

“Series C Holder” means a person recorded on the securities register of the Corporation as being the registered holder of one of more Series C Preferred Shares;

“Series C Preferred Shares” means the Class I Preferred Shares, Series C in the capital of the Corporation; and

“Series D Holder” means a person recorded on the securities register of the Corporation as being the registered holder of one or more Series D Preferred Shares.

1.2 Gender etc.

Words importing only the singular number include the plural and vice versa and words importing any gender include all genders.

1.3 Currency

Unless otherwise indicated, all monetary amounts referred to herein shall be in lawful money of Canada.

1.4 Headings

The division of these Series D Provisions into sections, paragraphs or other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof.

1.5 Business Day

In the event that any date upon which any action is required to be taken by the Corporation or any Series D Holder hereunder, is not a business day, then such dividend shall be payable or such other action shall be required to be taken on or by the next succeeding day which is a business day.

2. Voting Rights

The Series D Holders shall be entitled to receive notice of and to attend all meetings of the shareholders of the Corporation which the holders of the Restricted Voting Shares and the Series C Holders are entitled to attend. The Series D Holders, voting separately as a class, shall have the right to elect the JLL Representative Number of directors of the Corporation from time to time and shall not be entitled, as such, to vote in the election of the remaining directors of the Corporation. Except as provided in the immediately preceding sentence or as otherwise required by the Act, the Series D Holders shall not be entitled, as such, to vote at any meeting of the shareholders of the Corporation. The Series D Holders may exercise their right to elect the JLL Representative Number of directors pursuant to this Section 2 by one or more instruments in writing signed by holders of a majority of the Series D Preferred

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Shares then outstanding or by a resolution passed by a majority of the votes cast at a meeting of the. Series D Holders duly called and held for that purpose.

3. Dividends

The Class D Holders shall not be entitled, as such, to receive any dividends.

4. Liquidation Entitlement

In the event of a liquidation, dissolution or winding up of the Corporation, or other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, subject to the prior rights of the Series C Holders, there will be paid to each Series D Holder, in respect of each Series D Preferred Share held by such holder, in preference to and priority over any distribution or payment on any other share in the capital of the Corporation other than the Series C Preferred Shares, the amount of $0.0001, and after such payment such Series D Holder shall not be entitled to participate in any further distribution of property or assets of the Corporation.

5. Automatic Cancellation

The Series D Preferred Shares shall automatically be cancelled, without any further action on the part of the Corporation, if JLL at any time ceases to hold at least 22,500 Series C Preferred Shares (or the corresponding number of Restricted Voting Shares issued upon the exercise of conversion rights attaching to the Series C Preferred Shares).

6. Notices

Any notice required or permitted to be given to any Series D Holder shall be delivered by courier or by mail to such holder at its address as it appears on the records of the Corporation. Any such notice shall be deemed to be received on the earlier of (i) the date of actual receipt and (ii) two business days following the date on which the notice is sent.

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EX-3.2

Exhibit 3.2

Industry Canada		Industrie Canada
Certificate			Certificat
of Amendment			de modification
Canada Business			Loi canadienne sur
Corporations Act			les sociétés par actions
PATHEON, INC.				419970-7
Name of corporation-Dénomination de la société				Corporation number-Numéro de la société
I hereby certify that the articles of the above-named corporation were amended:				Je certifie que les statuts de la societe susmentionnée ont été modifies:
a)	under section 13 of the Canada Business Corporations Act in accordance with the attached notice;		¨	a)	en vertu de l’article 13 de la Loi canadienne sur les sociétés par actions, conformément à l’avis ci-joint;
b)	under section 27 of the Canada Business Corporations Act as set out in the attached articles of amendment designating a series of shares;		x	b)	en vertu de l’article 27 de la Loi canadienne sur les sociétés par actions, tel qu’il est indiqué dans les clauses modificatrices ci-jointes désignant une série d’actions;
c)	under section 179 of the Canada Business Corporations Act as set out in the attached articles of amendment;		¨	c)	en vertu de l’article 179 de la Loi canadienne sur les sociétés par actions, tel qu’il est indiqué dans les clauses modificatrices ci-jointes;
d)	under section 191 of the Canada Business Corporations Act as set out in the attached articles of reorganization;		¨	d)	en vertu de l’article 191 de la Loi canadienne sur les sociétés par actions, tel qu’il est indiqué dans les clauses de réorganisation ci-jointes;
/s/ Richard G. Shaw				April 26, 2007 / le 26 avril 2007
Richard G. Shaw Director - Directeur				Date of Amendment – Date de modification

Industry Canada   Canada Business Corporations Act Industrle-Canada   Lol canadienne sur les sociétés par actions FORM 4 ARTICLES OF AMENDMENT (SECTIONS 27 OR 177) FORMULAIRE 4 CLAUSES MODIFICATRICES (ARTICLES 27 OU 177)

1 – Name of the Corporation – Denomination sociale de la société   PATHEON, INC. 2 – Corporation No. – N^o de la société   4199707

3 – The articles of the above-named corporation are amended as follows: Les statuts de la société mentionnée ci-dessus sont modifiés de la façon sulvaate:

The authorized share capital of the Corporation is amended by:

(a) redesignating the issued and unissued common shares of the Corporation as restricted voting shares and substituting “restricted voting shares’ or “restricted voting share” for each reference in the articles of the Corporation to “common shares” or “common share”, respectively;

(b) increasing the authorized capital of the Corporation by creating 150,000 Class I Preferred Shares, Series C shares; and

(c) increasing the authorized capital of the Corporation by creating 150,000 Class I Preferred Shares, Series D shares.

The rights, privileges, restrictions and conditions attaching to the Class I Preferred Shares, Series C shares are set out on Schedule A annexed hereto and the rights, privileges, restrictions and conditions attaching to the Class I Preferred Shares, Series D shares are set out on Schedule B annexed hereto.

Signature /s/ Gregory Shepherd	Printed Name - Nom en lettres moulees Gregory Shepherd	4 – Capacity of – En qualité de Corporate Secretary	5 – Tel. No. – No de tél. 905 812 2125
FOR DEPARTMENTAL USE ONLY – A L USAGE DU MINISTERE SEULEMENT
[Canada]

SCHEDULE A

The Class I Preferred Shares, Series C (the “Series C Preferred Shares”) shall have the following rights, privileges, restrictions and conditions (the “Series C Provisions”) in addition to the rights, privileges, restrictions and conditions attaching to the Class I Preferred Shares as a class:

1. Interpretation

1.1 Definitions

Where used in these Series C Provisions, the following terms shall, unless there is something in the context otherwise inconsistent therewith, have the meanings set out below and grammatical variations of such terms shall have corresponding meanings:

“Act” means the Canada Business Corporations Act;

“Adjustment Election” has the meaning set out in Section 4.2;

“affiliate” has the meaning given to that term in NI 45-106;

“associate” has the meaning given to that term in NI 45-106;

“business day” means a day other than a Saturday, Sunday or any other statutory holiday in the City of Toronto, Ontario or New York, New York;

“Capital Reorganization” has the meaning given to that term in Section 5.3(b);

“Change of Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any person or group (within the meaning of the Securities Act (Ontario)) other than the Purchaser and its affiliates, of capital stock of the Company representing more than a majority of the aggregate ordinary voting power represented by the issued and outstanding voting securities of the Company; (b) if, during any period of up to 12 consecutive months, commencing on the Original Issue Date, individuals who at the beginning of such period (together with any new directors whose election or whose nomination for election by the stockholders was approved by a vote of 66 ²/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination was previously so approved or was otherwise consented to by the directors elected by holders of Series D Preferred Shares) were directors of the Company shall cease for any reason (other than the death, disability or retirement of an officer of the Company that is serving as a director at such time so long as another officer of the Company replaces such person as a director or the replacement of designees of the Series C Holders pursuant to the terms hereof) to constitute a majority of the Board of Directors of the Company; or (c) the consummation of any merger, consolidation, amalgamation or similar scheme or arrangement pursuant to which the Company is not the surviving or resulting corporation and as a result of which the stockholders of the Company immediately prior to such transaction cease to own, directly or indirectly,

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beneficially or of record, at least a majority of the voting power of the outstanding shares of capital stock of the surviving or resulting corporation in such transaction;

“Conversion Notice” has the meaning given to that term in Section 5.1(b);

“Conversion Rate” at any time means the number of Restricted Voting Shares obtained when the Issue Price is divided by the Reference Price, subject to the cumulative effect of all adjustments contemplated by Section 4 and Section 5;

“Convertible Security” means any evidence of indebtedness, share or other security convertible into or exchangeable for Restricted Voting Shares;

“Current Market Price” of the Restricted Voting Shares on any date means the volume weighted average trading price per share at which the Restricted Voting Shares have traded in board lots on the TSX or, if the Restricted Voting Shares are not then listed on the TSX, on such stock exchange or automated quotation system on which such shares are listed or quoted as may be selected by the board of directors for such purpose or, if not listed on any stock exchange, in the over-the-counter market, in each case, as of the last full trading day prior to the date of determination;

“director” means a director of the Corporation for the time being and “directors” or “board of directors” means the board of directors of the Corporation and reference, without further elaboration, to any action by the directors means action by the directors of the Corporation as a board;

“Dividend Payment Date” has the meaning given to that term in Section 3.1(a);

“Fiscal Year” means, in respect of the Corporation, the twelve-month period ending October 31 in each year;

“herein”, “hereto”, “hereunder”, “hereof”, “hereby” and similar expressions mean or refer to these Series C Provisions and not to any particular section, paragraph, clause, subclause, subdivision or portion hereof and the expression “Section” followed by a number or a letter means and refers to the specified section of these Series C Provisions;

“Initial Adjustment Period” has the meaning set out in Section 4.1;

“Issue Price” means US$1,000 per Series C Preferred Share;

“Junior Shares” means any shares in the capital of the Corporation ranking after or subordinate to the Series C Preferred Shares as to the payment of dividends or the return of capital, including, without limiting the generality of the foregoing, the Restricted Voting Shares;

“Mandatory Conversion Date” has the meaning given to that term in Section 5.2(b);

“Mandatory Conversion Notice” has the meaning given to that term in Section 5.2(b);

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“NI 45-106” means National Instrument 45-106 of the Canadian Securities Administrators;

“Maturity Date” means the tenth anniversary of the Original Issue Date;

“Option” means any right, option, warrant or other security carrying, or agreement pursuant to which any person has, a contingent or vested right to acquire Restricted Voting Shares or Convertible Securities;

“Original Issue Date” means the first date of issuance of Series C Preferred Shares, which is expected to be April 27, 2007;

“person” includes any individual, firm, partnership, joint venture, venture capital fund, association, trust, trustee, executive, administrator, legal personal representative, estate group, corporation, unincorporated association organization, governmental authority, syndicate, or other entity, whether or not having legal status;

“Purchaser” means JLL Partners Fund V, L.P.;

“Reference Price” means US$4.77 (representing the approximate U.S. dollar equivalent of C$5.55 as at March 1, 2007), subject to adjustment in accordance with Section 5;

“Restricted Voting Share Reorganization” has the meaning given to that term in Section 5.3(a);

“Restricted Voting Shares” means the restricted voting shares without par value in the capital of the Corporation;

“Series C Holder” means a person recorded on the securities register of the Corporation as being the registered holder of one or more Series C Preferred Shares;

“Series C Liquidation Preference” as of any date, means the Issue Price per Series C Preferred Share subject to adjustment in accordance with Section 4, plus all accrued and unpaid dividends per Series C Preferred Share as of such date, calculated pursuant to Section 3.1(a);

“Series D Preferred Shares” means the Class I Preferred Shares, Series D in the capital of the Corporation;

“Stub Period Fraction” shall mean a fraction, (x) the denominator of which is equal to the number of days between the last Dividend Payment Date prior to the date of the conversion or Liquidation, as the case may be, and the next Dividend Payment Date after the date of the conversion or Liquidation, and (y) the numerator of which is equal to the number days elapsed from the last Dividend Payment Date to the date of such conversion or Liquidation; and

“TSX” means the Toronto Stock Exchange.

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1.2 Gender, etc.

Words importing only the singular number include the plural and vice versa and words importing any gender include all genders.

1.3 Currency

Unless otherwise indicated, all monetary amounts referred to herein shall be in lawful money of Canada.

1.4 Headings

The division of these Series C Provisions into sections, paragraphs or other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof.

1.5 Business Day

In the event that any date upon which any dividends on the Series C Preferred Shares are payable by the Corporation, or upon or by which any other action is required to be taken by the Corporation or any Series C Holder hereunder, is not a business day, then such dividend shall be payable or such other action shall be required to be taken on or by the next succeeding day which is a business day.

2. Voting Rights

The Series C Holders shall be entitled to receive notice of and to attend all meetings of the shareholders of the Corporation which the holders of the Restricted Voting Shares are entitled to attend and shall have one vote at all such meetings of the shareholders of the Corporation for each Restricted Voting Share into which a Series C Preferred Share held is then convertible in respect of all matters to be voted on by the holders of Restricted Voting Shares, except for the election of directors. Except as set out in these Series C Provisions or as otherwise required by law, the Series C Preferred Shares and Restricted Voting Shares shall vote together as a single class. Fractional votes shall not be permitted and any fractional voting rights resulting from the above formula (after aggregating all Restricted Voting Shares into which Series C Preferred Shares held by each holder could then be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).

3. Dividends

3.1 Cash Dividend Entitlement

(a) After the Initial Adjustment Period, subject to Section 4.2, the Series C Holders, in priority to the holders of Restricted Voting Shares and any other Junior Shares, shall be entitled to receive and, subject to the Act, the Corporation shall pay, as and when declared by the board of directors out of monies properly applicable to the payment of dividends, cumulative preferential dividends, from October 28, 2009 through and including the date on which such

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dividends are paid at the annual rate of 8.50% of the applicable Series C Liquidation Preference per Series C Preferred Share, payable in arrears on the 27th day of each of July, October, January and April (the “Dividend Payment Date”), commencing on January 27, 2010; provided that accumulated and unpaid dividends for any prior quarterly period may be paid at any time. Subject to Section 4.2, such dividends shall be deemed to accrue on the Series C Preferred Shares from October 28, 2009 and be cumulative whether or not earned or declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends.

(b) From and after the conversion of any Series C Preferred Share into Restricted Voting Shares, (i) the Series C Holder of such Series C Preferred Share shall not be entitled to the payment of any accrued and unpaid cumulative dividends on such Series C Preferred Share referred to in Section 3.1(a) above, whether or not theretofore declared by the board of directors, and (ii) such Series C Holder shall be deemed to have waived its entitlement to receive any such dividends on such Series C Preferred Share but shall be entitled to all dividends declared and paid on the Restricted Voting Shares on or after such conversion.

3.2 Restriction on Dividends on Junior Shares

Commencing with the Fiscal Year ending October 31, 2010, no dividends or distributions shall be paid on the Junior Shares, and no Junior Shares shall redeemed, repurchased or otherwise acquired for value by the Company, in any Fiscal Year until dividends on the Series C Preferred Shares in the full preferential amount specified in. Section 3.1(a), less the amount of any such dividends otherwise payable on a Dividend Payment Date in respect of which the Corporation has made the Adjustment Election pursuant to Section 4.2 (or such Adjustment Election has been to deemed to have been made as provided below), have been declared and paid during such Fiscal Year.

4. Periodic Adjustments

4.1 Initial Adjustment Period

During the period from the Original Issue Date to and including October 27, 2009 (the “Initial Adjustment Period”), on the 27th day of each of July, October, January and April no dividends shall be payable on the Series C Preferred Shares, but each of the Series C Liquidation Preference and the Conversion Rate shall be automatically adjusted by multiplying each of the Series C Liquidation Preference and the Conversion Rate in effect immediately prior to such date by 1.02125. Accordingly, on the dates set out below, for illustrative purposes, the Series C Liquidation Preference per Series C Preferred Share and the Conversion Rate, assuming that no other adjustment to the Reference Price is required pursuant to Section 5, will be as follows:

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Date	Series C Liquidation Preference		Conversion Rate
July 27, 2007	$	1,021.25		214.1644
October 27, 2007	$	1,042.95		218.7154
January 27, 2008	$	1,065.11		223.3631
April 27, 2008	$	1,087.74		228.1096
July 27, 2008	$	1,110.85		232.9569
October 27, 2008	$	1,134.46		237.9072
January 27, 2009	$	1,158.57		242.9628
April 27, 2009	$	1,183.19		248.1257
July 27, 2009	$	1,208.33		253.3984
October 27, 2009	$	1,234.01		258.7831

4.2 Adjustment Election

(a) Notwithstanding Section 3.1(a), after the Initial Adjustment Period, in lieu of payment or accumulation of dividends to which the Series C Holders would otherwise be entitled on any Dividend Payment Date pursuant to Section 3.1(a), the Corporation may elect (the “Adjustment Election”) to instead adjust each of the Series C Liquidation Preference and the Conversion Rate on such Dividend Payment Date by multiplying each of the Series C Liquidation Preference and the Conversion Rate in effect immediately prior to such Dividend Payment Date by 1.02125.

(b) If the Corporation determines to make the Adjustment Election in respect of a Dividend Payment Date, it shall deliver or cause to be delivered, in accordance with Section 9, a notice of such election (the “Adjustment Election Notice”) at least 10 days before such Dividend Payment Date to the Series C Holders at their last addresses as the same appear on the books of the Corporation. The Adjustment Election Notice, if delivered in the manner herein provided, shall be conclusively deemed to have been duly given, whether or not the Series C Holders receive such notice. Each such Adjustment Election Notice shall specify the Dividend Payment Date in respect of which such election is made and shall set out the Series C Liquidation Preference and the Conversion Rate immediately before and after giving effect to the adjustment thereof pursuant to Section 4.2(a).

(c) In the event that the Company fails to give the notice required by Section 4.2(b) and fails to make payment of the required dividend in cash, the Conversion Rate shall be adjusted as provided in Section 4.2(b) as though the Company had given an Adjustment Election Notice with respect to such Dividend Payment Date.

4.3 Adjustments Cumulative; Pro Rata Adjustment for Partial Periods

(a) For the avoidance of doubt, all adjustments to the Conversion Rate contemplated by this Section 4 shall be cumulative in effect and each adjustment shall be applied to the

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Conversion Rate as adjusted on the immediately prior Dividend Payment Date, subject to adjustment of the Reference Price pursuant to Section 5 hereof. In the event of any adjustment to the Reference Price pursuant to Section 5 hereof, the Conversion Rate shall be calculated to give effect to all prior adjustments contemplated by this Section 4 as though the Reference Price as adjusted pursuant to Section 5 were the Reference Price from the Original Issue Date, and all adjustments to the Conversion Rate pursuant to this Section 4 were then applied.

(b) In the event of any conversion of the Series C Preferred Shares pursuant to Section 5 hereof at a time between Dividend Payment Dates, either (i) if the conversion occurs during the Initial Adjustment Period or if the conversion occurs after the Initial Adjustment Period and the Corporation so elects, the Conversion Rate then in effect shall be multiplied by the sum of (A) one (1) plus (B) (x) 0.02125 multiplied by (y) the Stub Period Fraction, or (ii) if the conversion occurs after the Initial Adjustment Period and the Corporation elects not to make the adjustment described in (i) above, the Corporation shall pay to the holder of such shares an amount equal to the product of (A) 0.02125 and (B) the Stub Period Fraction.

5. Conversion

5.1 Optional Conversion

(a) Upon and subject to the terms and conditions set out in this Section 5.1, the Series C Holders shall have the right, at any time and from time to time, to convert all or any part of their Series C Preferred Shares into that number of fully paid and non-assessable Restricted Voting Shares that is equal to the number of Series C Preferred Shares to be converted multiplied by the Conversion Rate in effect on the date of conversion.

(b) The conversion right provided for in Section 5.1(a) may be exercised by any Series C Holder by delivery of a notice in writing (the “Conversion Notice”), together with the certificate or certificates representing the Series C Preferred Shares in respect of which the Series C Holder wishes to exercise its right of conversion and delivering such certificate or certificates to the Secretary of the Corporation at the Corporation’s registered office. The Conversion Notice shall be signed by such holder or by its duly authorized attorney or agent and shall specify the number of Series C Preferred Shares which the Series C Holder desires to have converted. If less than all the Series C Preferred Shares represented by a certificate or certificates are to be converted, the Series C Holder shall be entitled to receive, at the expense of the Corporation, a new certificate representing the Series C Preferred Shares represented by the surrendered certificate or certificates that are not to be converted.

(c) The share certificates representing any Restricted Voting Shares issued upon the conversion of Series C Preferred Shares shall be issued at the expense of the Corporation in the name of the registered holder of the Series C Preferred Shares converted or in such name or names as the registered holder may direct in writing. In any case where the Restricted Voting Shares are to be issued in the name of a person other than the holder of the converted Series C Preferred Shares, the transfer form on the back of the certificates in question shall be endorsed by the registered holder of the Series C Preferred Shares or its duly authorized attorney or agent.

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(d) Each Series C Holder who elects to convert its Series C Preferred Shares, in whole or in part (or any other person or persons in whose name or names any certificates representing Restricted Voting Shares are issued as provided in Section 5.1(c)), shall be deemed to have become the holder of record of the Restricted Voting Shares into which such Series C Preferred Shares are converted, for all purposes, on the date of receipt by the Corporation of a duly completed Conversion Notice and the certificate or certificates representing the Series C Preferred Shares to be converted as provided in Section 5.1(b) and, effective as of such date, the Series C Holder shall cease to be registered as the holder of record of the Series C Preferred Shares so converted.

5.2 Mandatory Conversion

(a) Upon and subject to the terms and conditions set out in this Section 5.2, at any time after the Initial Adjustment Period, if the Current Market Price exceeds 165% of the then applicable Reference Price during any sixty (60) consecutive trading days on the TSX, the Corporation shall have the right to require the Series C Holders to convert all, but not less than all, of their Series C Preferred Shares into that number of fully paid and non-assessable Restricted Voting Shares that is equal to the number of Series C Preferred Shares to be converted multiplied by the Conversion Rate in effect on the date of conversion (as adjusted pursuant to Section 4.3(b)).

(b) If the Corporation determines to require that all of the outstanding Series C Preferred Shares be converted into Restricted Voting Shares pursuant to Section 5.2(a), it shall fix a date for conversion (the “Mandatory Conversion Date”) and it shall deliver or cause to be delivered, in accordance with Section 9, a notice of such conversion (the “Mandatory Conversion Notice”) at least 10 days prior to the Mandatory Conversion Date to the Series C Holders at their last addresses as the same appear on the books of the Corporation. The Mandatory Conversion Notice, if delivered in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not the Series C Holders receive such notice. The Mandatory Conversion Notice shall specify the Mandatory Conversion Date, the number of Restricted Voting Shares into which each Series C Preferred Share is to be converted, the place or places for surrender of certificates representing such Series C Preferred Shares and that such Restricted Voting Shares will be delivered upon presentation and surrender of certificates representing such Series C Preferred Shares. The Mandatory Conversion Notice shall be accompanied by a certificate of an officer of the Corporation certifying that the Current Market Price has exceeded 165% of the then applicable Reference Price during any sixty (60) consecutive trading days on the TSX.

(c) As promptly as practicable upon receipt of a Mandatory Conversion Notice, but in any event within 5 business days after receipt thereof, each Series C Holder shall surrender the certificate or certificates for such Series C Preferred Shares, duly endorsed, at a place designated for such surrender. The share certificates representing any Restricted Voting Shares issued upon the conversion of Series C Preferred Shares shall be issued at the expense of the Corporation in the name of the registered holder of the Series C Preferred Shares converted or in such name or names as the registered holder may direct in writing. In any case where the Restricted Voting Shares are to be issued in the name of a person other than the holder of the converted Series C Preferred Shares, the transfer form on the back of the certificates in question shall be endorsed by the registered holder of the Series C Preferred Shares or its duly authorized attorney or agent.

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(d) As promptly as practicable after the later of the Mandatory Conversion Date and the satisfaction of the requirements for surrender set forth in Section 5.2(c), but in any event within 5 business days after receipt thereof, the Corporation shall issue and deliver to such Series C Holder at the address designated in such instructions a certificate or certificates for the number of Restricted Voting Shares specified in the Mandatory Conversion Notice in accordance with this Section 5.2.

(e) Each Series C Holder (or any other person or persons in whose name or names any certificates representing Restricted Voting Shares are issued as provided in Section 52(c)), shall be deemed to have become the holder of record of the Restricted Voting Shares into which such Series C Preferred Shares are converted, for all purposes, on the Mandatory Conversion Date and, effective as of such date, the Series C Holder shall cease to be registered as the holder of record of the Series C Preferred Shares so converted.

5.3 Anti-Dilution Adjustments

(a) If and whenever at any time and from time to time the Corporation shall: (i) subdivide, redivide or change its then outstanding Restricted Voting Shares into a greater number of Restricted Voting Shares; (ii) reduce, combine or consolidate or change its then outstanding Restricted Voting Shares into a lesser number of Restricted Voting Shares; or (iii) issue Restricted Voting Shares or Convertible Securities to the holders of all or substantially all of its then outstanding Restricted Voting Shares by way of stock dividend or other distribution (any of such events being herein called a “Restricted Voting Share Reorganization”), the Conversion Rate shall be adjusted effective immediately after the record date at which the holders of Restricted Voting Shares are determined for the purpose of the Restricted Voting Share Reorganization by adjusting the Reference Price to a Reference Price that is the product of (i) the Reference Price in effect on the record date, and (ii) a fraction:

(i) the numerator of which shall be the number of Restricted Voting Shares outstanding on the record date before giving effect to the Restricted Voting Share Reorganization; and

(ii) the denominator of which shall be the number of Restricted Voting Shares outstanding after the completion of such Restricted Voting Share Reorganization (but before giving effect to the issue of any Restricted Voting Shares issued after such record date otherwise than as part of such Restricted Voting Share Reorganization), including, in the case where securities exchangeable or convertible into Restricted Voting Shares are distributed, the number of Restricted Voting Shares that would have been outstanding had such securities been exchanged for or converted into Restricted Voting Shares on such record date.

(b) If and whenever there is a capital reorganization of the Corporation not otherwise provided for in this Section 5.3 or a consolidation, merger, arrangement or amalgamation (statutory or otherwise) of the Corporation with or into another body corporate (any such event being called a “Capital Reorganization”), any Series C Holder who has not exercised its right of conversion prior to the record date for such Capital Reorganization shall be entitled to receive

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and shall accept, upon the exercise of such right at any time after the record date for such Capital Reorganization, in lieu of the number of Restricted Voting Shares to which it was theretofore entitled upon conversion, the amount of cash or other property or the aggregate number of shares or other securities of the Corporation or of the corporation or body corporate resulting, surviving or continuing from the Capital Reorganization that such holder would have been entitled to receive as a result of such Capital Reorganization if, on the record date, such holder had been the registered holder of the number of Restricted Voting Shares to which it was theretofore entitled upon conversion, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in Section 5.3(a). No such Capital Reorganization shall be carried into effect unless all necessary steps shall have been taken so that the Series C Holders shall thereafter be entitled to receive such cash or other property, or the number of shares or other securities of the Corporation or of the corporation or body corporate resulting, surviving or continuing from the Capital Reorganization.

5.4 Rules for Adjustment of Reference Price

The following rules and procedures shall be applicable to adjustments of the Reference Price made pursuant to Section 5.3:

(a) forthwith after any adjustment in the Reference Price, the Corporation shall deliver to each of the Series C Holders a certificate setting out the amount of such adjustment and, in reasonable detail, the event requiring and the manner of computing such adjustment; and

(b) any question or issue that at any time or from time to time arises with respect to the Reference Price or any adjustment in the amount of the Reference Price shall be conclusively determined by the auditors from time to time of the Corporation and shall be binding upon the Corporation and all holders of the Series C Preferred Shares and Restricted Voting Shares.

5.5 Notice of Certain Events

If the Corporation intends to fix a record date for any Restricted Voting Share Reorganization (other than a subdivision, consolidation or reclassification) or Capital Reorganization, the Corporation shall, not less than 10 days prior to such record date, notify each Series C Holder of such intention by written notice setting forth the particulars of such Restricted Voting Share Reorganization or Capital Reorganization in reasonable detail. The Series C Holders may waive the giving of any such notice in the manner provided for the giving of consents and approvals of the Series C Holders contained in Section 9.

5.6 No Fractional Shares

No fractional Restricted Voting Shares shall be issuable on the conversion of Series C Preferred Shares. In any case where a fraction of a Restricted Voting Share would otherwise be issuable on conversion of one or more Series C Preferred Shares, the aggregate number of Restricted Voting Shares to be issued upon such conversion shall be rounded to the nearest whole number, with one-half being rounded up.

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5.7 Reservation of Restricted Voting Shares

So long as any of the Series C Preferred Shares are outstanding and entitled to the right of conversion herein provided, the Corporation shall at all times reserve and hold out of its unissued Restricted Voting Shares a sufficient number of unissued Restricted Voting Shares to enable all of the Series C Preferred Shares outstanding to be converted upon the basis and upon the terms and conditions herein provided in this Section 5.

6. Liquidation Entitlement

(a) In the event of a liquidation, dissolution or winding up of the Corporation, or other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs (a “Liquidation”), there will be paid to each Series C Holder, in respect of each Series C Preferred Share held by such holder, in preference to and priority over any distribution or payment on any other share in the capital of the Corporation, the greater of (i) the Series C Liquidation Preference and (ii) (x) the amount per Restricted Voting Share that would be paid to the holder of a Restricted Voting Share in the Liquidation of the Company multiplied by (y) the Conversion Rate then in effect, and after such payment such Series C Holder shall not be entitled to participate in any further distribution of property or assets of the Corporation.

(b) In the event of any Liquidation that takes place at a time between Dividend Payment Dates, the Series C Liquidation Preference then in effect shall be multiplied by the sum of (i) one (1) plus (ii) (x) 0.02125 multiplied by (y) the Stub Period Fraction.

7. Redemption

7.1 Mandatory Redemption

(a) The Corporation shall not be entitled to redeem any Series C Preferred Shares, except in accordance with this Section 7.1.

(b) Subject to the Act, on the Maturity Date, the Corporation shall redeem all, but not less than all, of the then outstanding Series C Preferred Shares for cash at a redemption price per Series C Preferred Share equal to the Series C Liquidation Preference as of such date.

(c) Subject to the Act, upon the occurrence of a Change of Control, the Corporation shall redeem all, but not less than all, of the then outstanding Series C Preferred Shares for cash at a redemption price per Series C Preferred Share equal to the greater of (a) the Series C Liquidation Preference and (b) the product of (i) the cash consideration per Restricted Voting Share, if any, to be received by the holders thereof pursuant to the Change of Control transaction and (ii) the Conversion Rate then in effect.

7.2 Rules and Procedures for Redemption

All redemptions of Series C Preferred Shares shall be in accordance with the following rules and procedures:

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(i) subject as provided in paragraph (ii), on any redemption the Corporation shall, at least 30 days and not more than 60 days before the redemption is to take place, give notice of redemption to each Series C Holder who at the date the notice is given is the registered holder of a Series C Preferred Share to be redeemed, but accidental failure to give any such notice to one or more such holders shall not affect the validity of the redemption;

(ii) a Series C Holder may waive notice of redemption or consent to the abridgement of the time for giving such notice, and if the notice is waived the Corporation shall be deemed to have given a notice specifying as the date for redemption the date the redemption actually occurs;

(iii) a notice of redemption will set out the date on which redemption is to take place, the applicable redemption price, the number of Series C Preferred Shares to be redeemed, the place or places for surrender of certificates representing such Series C Preferred Shares and that the applicable redemption price will be delivered upon presentation and surrender of certificates representing such Series C Preferred Shares;

(iv) on or after the date specified for redemption in such notice the Corporation will, on presentation and surrender at a place designated for such surrender of the certificate or certificates for the Series C Preferred Shares to be redeemed, pay or cause to be paid, to or to the order of the Series C Holder, the applicable redemption price therefor;

(v) a Series C Preferred Share in respect of which the applicable redemption price is paid as provided herein shall thereupon be and be deemed to be redeemed and the certificate or certificates representing such Series C Preferred Shares shall be cancelled;

(vi) after the date for redemption specified in a notice of redemption, the holder of a Series C Preferred Share called for redemption shall not be entitled to exercise any of the rights of a holder thereof unless payment of the applicable redemption price is not made on presentation of the certificate or certificates therefor in accordance with the provisions hereof, in which case the rights of the holder will thereupon be restored;

(vii) if a Series C Holder fails to present and surrender the certificate or certificates evidencing the Series C Preferred Shares before the expiration of 15 days after the date specified for redemption, the Corporation may deposit the applicable redemption price for the Series C Preferred Shares to be redeemed in a special account in any chartered bank or trust company in Ontario to be paid without interest to or to the order of the holder upon presentation and surrender to such bank or trust company of the certificate or certificates, and upon the malting of such deposit every Series C Preferred Share in respect of which the deposit is made will and will be deemed to be redeemed and the rights of the holder thereof after

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such deposit will be limited to receiving without interest the applicable redemption price therefor so deposited against presentation and surrender of the certificate or certificates; and

(viii) where notice of redemption has been given by the Corporation, no transfer of any Series C Preferred Shares may be made by a Series C Holder to whom the particular notice was directed.

8. Certain Transfers

(a) The Series C Preferred Shares shall not be transferable, except for: (i) a transfer to any affiliate of the Purchaser, (ii) a transfer of 100% of the outstanding Series C Preferred Shares to a purchaser who has offered to purchase all of the outstanding Restricted Voting Shares for a per share consideration equivalent to the quotient of the consideration paid per Series C Preferred Share and the Conversion Rate in effect on the date of the transfer and take up of all deposited shares under the offer and otherwise on the same terms as for the purchase of the Series C Preferred Shares; or (iii) any transfer of Series C Preferred Shares alone or together with Restricted Voting Shares pursuant to a transaction under circumstances, including an exempt take-over bid, in which no applicable Canadian securities legislation would have required that the same offer or a follow-up offer be made to the holders of Restricted Voting Shares if the sale had been a sale of Restricted Voting Shares rather than Series C Preferred Shares alone or Series C Preferred Shares together with Restricted Voting Shares (provided that, for this purpose, (A) the number of Series C Preferred Shares purchased under the transaction and the number of Series C Preferred Shares held by the transferee, if any, shall be deemed to be the product of the number of such Series C Preferred Shares and the Conversion Rate in effect on the date of the transfer, (B) such Series C Preferred Shares shall be deemed to be outstanding Restricted Voting Shares and (C) the per share consideration paid shall be deemed to be the quotient of the consideration paid per Series C Preferred Share sold and the Conversion Rate in effect on the date of the transfer).

(b) If any Series C Preferred Shares are transferred to an affiliate of the Purchaser pursuant to Section 8(a)(i) and such transferee subsequently ceases to be an affiliate of the Purchaser, all Series C Preferred Shares held by such transferee shall be deemed to be transferred for the purposes of Section 8(a) as of the date on which such transferee ceases to be an affiliate of the Purchaser.

9. Notices

Any notice required or permitted to be given to any Series C Holder shall be delivered by courier or by mail to such holder at its address as it appears on the records of the Corporation. Any such notice shall be deemed to be received on the earlier of (i) the date of actual receipt and (ii) two business days following the date on which the notice is sent.

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SCHEDULE B

The Class I Preferred Shares, Series D (the “Series D Preferred Shares”) shall have the following rights, privileges, restrictions and conditions (the “Series D Provisions”) in addition to the rights, privileges, restrictions and conditions attaching to the Class I Preferred Shares as a class:

1. Interpretation

1.1 Definitions

Where used in these Series D Provisions, the following terms shall, unless there is something in the context otherwise inconsistent therewith, have the meanings set out below and grammatical variations of such terms shall have corresponding meanings:

“Act” means the Canada Business Corporations Act;

“business day” means a day other than a Saturday, Sunday or any other statutory holiday in the City of Toronto, Ontario or New York, New York;

“director” means a director of the Corporation for the time being and “directors” or “board of directors” means the board of directors of the Corporation and reference, without further elaboration, to any action by the directors means action by the directors of the Corporation as a board;

“herein”, “hereto”, “hereunder”, “hereof”, “hereby” and similar expressions mean or refer to these Series D Provisions and not to any particular section, paragraph, clause, subclause, subdivision or portion hereof, and the expression “Section” followed by a number or a letter means and refers to the specified section of these Series D Provisions;

“JLL” means JLL Patheon Holdings, LLC;

“JLL Representative Number” means:

(a) if JLL holds at least 90,000 Series C Preferred Shares (or the corresponding number of Restricted Voting Shares issued upon the exercise of conversion rights attaching to the Series C Preferred Shares), then the JLL Representative Number shall be three (3);

(b) if JLL holds at least 45,000, but fewer than 90,000, Series C Preferred Shares (or the corresponding number of Restricted Voting Shares issued upon the exercise of conversion rights attaching to the Series C Preferred Shares), then the JLL Representative Number shall be two (2);

(c) if JLL holds at least 22,500, but fewer than 45,000, Series C Preferred Shares (or the corresponding number of Restricted Voting Shares issued upon the exercise of conversion rights attaching to the Series C Preferred Shares), then the JLL Representative Number shall be one (1).

“Restricted Voting Shares” means the restricted voting shares without par value in the capital of the Corporation;

“Series C Holder” means a person recorded on the securities register of the Corporation as being the registered holder of one of more Series C Preferred Shares;

“Series C Preferred Shares” means the Class I Preferred Shares, Series C in the capital of the Corporation; and

“Series D Holder” means a person recorded on the securities register of the Corporation as being the registered holder of one or more Series D Preferred Shares.

1.2 Gender etc.

Words importing only the singular number include the plural and vice versa and words importing any gender include all genders.

1.3 Currency

Unless otherwise indicated, all monetary amounts referred to herein shall be in lawful money of Canada.

1.4 Headings

The division of these Series D Provisions into sections, paragraphs or other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof.

1.5 Business Day

In the event that any date upon which any action is required to be taken by the Corporation or any Series D Holder hereunder, is not a business day, then such dividend shall be payable or such other action shall be required to be taken on or by the next succeeding day which is a business day.

2. Voting Rights

The Series D Holders shall be entitled to receive notice of and to attend all meetings of the shareholders of the Corporation which the holders of the Restricted Voting Shares and the Series C Holders are entitled to attend. The Series D Holders, voting separately as a class, shall have the right to elect the JLL Representative Number of directors of the Corporation from time to time and shall not be entitled, as such, to vote in the election of the remaining directors of the Corporation. Except as provided in the immediately preceding sentence or as otherwise required by the Act, the Series D Holders shall not be entitled, as such, to vote at any meeting of the shareholders of the Corporation. The Series D Holders may exercise their right to elect the JLL Representative Number of directors pursuant to this Section 2 by one or more instruments in writing signed by holders of a majority of the Series D Preferred

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Shares then outstanding or by a resolution passed by a majority of the votes cast at a meeting of the Series D Holders duly called and held for that purpose.

3. Dividends

The Class D Holders shall not be entitled, as such, to receive any dividends.

4. Liquidation Entitlement

In the event of a liquidation, dissolution or winding up of the Corporation, or other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, subject to the prior rights of the Series C Holders, there will be paid to each Series D Holder, in respect of each Series D Preferred Share held by such holder, in preference to and priority over any distribution or payment on any other share in the capital of the Corporation other than the Series C Preferred Shares, the amount of $0.0001, and after such payment such Series D Holder shall not be entitled to participate in any further distribution of property or assets of the Corporation.

5. Automatic Cancellation

The Series D Preferred Shares shall automatically be cancelled, without any further action on the part of the Corporation, if JLL at any time ceases to hold at least 22,500 Series C Preferred Shares (or the corresponding number of Restricted Voting Shares issued upon the exercise of conversion rights attaching to the Series C Preferred Shares).

6. Notices

Any notice required or permitted to be given to any Series D Holder shall be delivered by courier or by mail to such holder at its address as it appears on the records of the Corporation. Any such notice shall be deemed to be received on the earlier of (i) the date of actual receipt and (ii) two business days following the date on which the notice is sent.

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EX-3.3

Exhibit 3.3

PATHEON INC. BY-LAW NO. 1 (2008)

A by-law relating generally to the conduct of the affairs of Patheon Inc.

BE IT ENACTED AND IT IS HEREBY ENACTED as a by-law of Patheon Inc. (the “Corporation”) as follows:

DEFINITIONS

1. In this by-law and all other by-laws of the Corporation, unless the context otherwise specifies or requires:

(a) “Act” means the Canada Business Corporations Act, Statutes of Canada, R.S.C. 1985, c. C-44 and the regulations thereunder, as from time to time amended, and every statute or regulation that may be substituted therefor and, in the case of such amendment or substitution, any reference in the by-laws of the Corporation shall be read as referring to the amended or substituted provisions;

(b) “by-law” means any by-law of the Corporation from time to time in force and effect;

(c) all terms contained in the by-laws which are defined in the Act shall have the meanings given to such terms in the Act;

(d) words importing the singular number only shall include the plural and vice versa; words importing any gender shall include all genders; words importing persons shall include syndicates, trusts and any number or aggregate of persons; and

(e) the headings used in the by-laws are inserted for reference purposes only and are not to be considered or taken into account in construing the terms or provisions thereof or to be deemed in any way to clarify, modify or explain the effect of any such terms or provisions.

REGISTERED OFFICE

2. The Corporation may from time to time (i) by resolution of the directors change the address of the registered office of the Corporation within the Province in Canada specified in its articles, and (ii) by an amendment to its articles, change the Province within Canada in which its registered office is situated.

SEAL

3. The Corporation may, but need not, have a corporate seal. An instrument or agreement executed on behalf of the Corporation by a director, an officer or an agent of the Corporation is not invalid merely because the corporate seal, if any, is not affixed thereto.

DIRECTORS

4. Number and powers. The number of directors, or the minimum and maximum number of directors of the Corporation, is set out in the articles of the Corporation. If a minimum and maximum number of directors is set out in the articles of the Corporation, then the number of directors of the Corporation shall be the number of directors within such minimum and maximum number who are elected by the shareholders of the Corporation at the most recent

meeting of shareholders which the holders of restricted voting shares of the Corporation are entitled to attend and who are elected from time to time by the holders of Class I Preferred Shares, Series D of the Corporation (“Series D Preferred Shares”). At least twenty-five per cent of the directors (or one director, if the Corporation has less than four directors) shall be resident Canadians. If the Corporation is a distributing corporation and any of its outstanding securities are held by more than one person, it shall have at least three directors, at least two of whom are not officers or employees of the Corporation or its affiliates.

Subject to any unanimous shareholder agreement, the directors shall manage, or supervise the management of, the business and affairs of the Corporation and may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation and are not by the Act, the articles, the by-laws, any special resolution of the Corporation, a unanimous shareholder agreement or by statute expressly directed or required to be done in some other manner.

5. Duties. Every director and officer of the Corporation in exercising their powers and discharging their duties shall:

(a) act honestly and in good faith with a view to the best interests of the Corporation; and

(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

Every director and officer of the Corporation shall comply with the Act, the regulations thereunder, the Corporation’s articles and by-laws and any unanimous shareholder agreement.

6. Qualification. Every director shall be an individual 18 or more years of age and no one who is of unsound mind and has been so found by a court in Canada or elsewhere or who has the status of a bankrupt shall be a director.

7. Election of directors. Directors elected at a meeting of shareholders which the holders of restricted voting shares of the Corporation are entitled to attend shall be elected by the shareholders of the Corporation by ordinary resolution. If at any election of directors of the Corporation held at a meeting of shareholders which the holders of restricted voting shares of the Corporation are entitled to attend the number or the minimum number of directors required by the articles is not elected by reason of the lack of consent, disqualification, incapacity or death of any candidates, then the directors elected at that meeting may exercise all the powers of the directors if the number of directors so elected constitutes a quorum, but such quorum of directors may not fill the resulting vacancy or vacancies.

8. Term of office. A director, who is elected by the holders of restricted voting shares of the Corporation or by the holders of the Series D Preferred Shares, as the case may be, shall have a term of office (subject to the Corporation’s articles and paragraph 11 below), unless such director was elected for an expressly stated term, from the date of the meeting at which such director is elected or appointed until the close of the annual meeting of shareholders next following such director’s election or appointment or until such director’s successor is elected or appointed.

If qualified, a director whose term of office has expired is eligible for re-election as a director.

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9. Vacation of office. The office of a director shall be vacated if such director:

(a) dies or sends to the Corporation a written resignation and such resignation, if not effective upon receipt by the Corporation, becomes effective in accordance with its terms;

(b) is removed from office;

(c) becomes bankrupt; or

(d) is found by a court in Canada or elsewhere to be of unsound mind.

10. Vacancies. Notwithstanding any vacancy among the directors, the remaining directors may exercise all the powers of the directors so long as a quorum of the number of directors remains in office. Subject to subsections 111(1) and (3) of the Act and to the Corporation’s articles, where there is a quorum of directors in office and a vacancy occurs, such quorum of directors may appoint a qualified person to fill such vacancy for the unexpired term of such appointee’s predecessor.

11. Removal of directors. Subject to subsection 109(2) of the Act and unless the articles of the Corporation provide for cumulative voting, the shareholders of the Corporation may, by ordinary resolution at a special meeting, remove any director who was elected by the shareholders of the Corporation at a meeting of the shareholders of the Corporation which the holders of restricted voting shares of the Corporation were entitled to attend before the expiration of such director’s term of office and may, by a majority of the votes cast at the meeting, elect any person in such director’s stead for the remainder of such director’s term.

If the number of directors that the holders of Series D Preferred Shares are entitled to elect pursuant to the articles is decreased, the holders of Series D Preferred Shares shall be required to remove, by written resolution signed by holders of a majority of the Series D Preferred Shares then outstanding or by resolution passed by a majority of the votes cast at a meeting of the holders of Series D Preferred Shares duly called and held for that purpose, that number of directors such that the number of directors elected by the holders of Series D Preferred Shares is equal to the number permitted by the articles. If the number of directors that the holders of Series D Preferred Shares are entitled to elect pursuant to the articles is decreased to zero, any director appointed by holders of Series D Preferred Shares shall immediately be removed from office as a director and such director shall vacate office forthwith.

If a meeting of shareholders was called for the purpose of removing a director from office as a director, then the director so removed shall vacate office forthwith upon the passing of the resolution for such director’s removal.

12. Validity of acts. An act of a director or officer is valid notwithstanding an irregularity in their election or appointment or a defect in their qualification.

MEETINGS OF DIRECTORS

13. Place of meeting. Meetings of directors and of any committee of directors may be held at any place. A meeting of directors may be convened by the Chair of the Board (if any), the Chief Executive Officer or any director at any time and the Secretary shall upon direction of any of the foregoing convene a meeting of directors.

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14. Notice. Notice of the time and place for the holding of any such meeting shall be sent to each director not less than two days (exclusive of the day on which the notice is sent but inclusive of the day for which notice is given) before the date of the meeting; provided that meetings of the directors or of any committee of directors may be held at any time without formal notice if all the directors are present (except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called) or if all the absent directors have waived notice. The notice shall specify any matter referred to in subsection 115(3) of the Act that is to be dealt with at the meeting.

For the first meeting of directors to be held following the election of directors at an annual or special meeting of the shareholders or for a meeting of directors at which a director is appointed to fill a vacancy in the board, no notice of such meeting need be given to the newly elected or appointed director or directors in order for the meeting to be duly constituted, provided a quorum of the directors is present.

15. Waiver of notice. Notice of any meeting of directors or of any committee of directors or any irregularity in any meeting or in the notice thereof may be waived in any manner by any director, and such waiver may be validly given either before or after the meeting to which such waiver relates. Attendance of a director at a meeting of directors is a waiver of notice of the meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

16. Electronic participation. Where all the directors of the Corporation consent thereto (either before or after the meeting), a director may participate in a meeting of directors or of any committee of directors by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting, and a director participating in a meeting by such means shall be deemed for the purposes of the Act and the by-laws to be present at that meeting.

17. Quorum and voting. A majority of the number of directors of the Corporation shall constitute a quorum for the transaction of business. Subject to subsections 111(1), 114(4) and 117(1) of the Act, no business shall be transacted by the directors except at a meeting of directors at which a quorum is present and at which at least twenty-five per cent of the directors present are resident Canadians or, if the Corporation has less than four directors, at least one of the directors present is a resident Canadian. Questions arising at any meeting of directors shall be decided by a majority of votes. In case of an equality of votes, the chair of the meeting shall not have a second or casting vote in addition to the chair’s original vote as a director.

18. Adjournment. Any meeting of directors or of any committee of directors may be adjourned from time to time by the chair of the meeting, with the consent of the meeting, to a fixed time and place. No notice of the time and place for the holding of the adjourned meeting need be given to any director if the time and place of the adjourned meeting is announced at the original meeting. Any adjourned meeting shall be duly constituted if held in accordance with the terms of the adjournment and a quorum is present thereat. The directors who form the quorum at the adjourned meeting need not be the same directors who formed the quorum at the original meeting. If there is no quorum present at the adjourned meeting, the original meeting shall be deemed to have terminated forthwith after its adjournment.

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19. Resolutions in writing. A resolution in writing, signed by all the directors entitled to vote on that resolution at a meeting of directors or committee of directors, is as valid as if it had been passed at a meeting of directors or committee of directors.

COMMITTEES OF DIRECTORS

20. General. The directors may from time to time appoint from their number one or more committees of directors. The directors may delegate to each such committee any of the powers of the directors, except that no such committee shall have the authority to:

(a) submit to the shareholders any question or matter requiring the approval of the shareholders;

(b) fill a vacancy among the directors or in the office of auditor, or appoint additional directors;

(c) subject to subsection 189(2) of the Act, issue securities except as authorized by the directors;

(d) issue shares of a series under section 27 of the Act except as authorized by the directors;

(e) declare dividends;

(f) purchase, redeem or otherwise acquire shares issued by the Corporation;

(g) pay any commission referred to in section 41 of the Act, except as authorized by the directors;

(h) approve a management proxy circular;

(i) approve a take-over bid circular or directors’ circular;

(j) approve any annual financial statements to be placed before the shareholders of the Corporation; or

(k) adopt, amend or repeal by-laws of the Corporation.

21. Audit Committee. If the Corporation is a distributing corporation and any of its outstanding securities are held by more than one person, the board of directors shall elect annually from among their number an audit committee to be composed of not fewer than three directors, a majority of whom are not officers or employees of the Corporation or any of its affiliates.

Each member of the audit committee shall serve during the pleasure of the board of directors and, in any event, only so long as such member shall be a director. The directors may fill vacancies in the audit committee by election from among their number.

The audit committee shall have power to fix its quorum at not less than a majority of its members and to determine its own rules of procedure subject to any regulations imposed by the board of directors from time to time and to the following paragraph.

The auditor of the Corporation is entitled to receive notice of every meeting of the audit committee and, at the expense of the Corporation, to attend and be heard thereat; and, if so requested by a member of the audit committee, shall attend every meeting of the committee held

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during the term of office of the auditor. The auditor of the Corporation or any member of the audit committee may call a meeting of the committee.

The audit committee shall review the financial statements of the Corporation prior to approval thereof by the board of directors and shall have such other powers and duties as may from time to time by resolution be assigned to it by the board.

REMUNERATION OF DIRECTORS, OFFICERS AND EMPLOYEES

22. The remuneration to be paid to the directors of the Corporation shall be such as the directors shall from time to time by resolution determine and such remuneration may be in addition to the salary paid to any officer or employee of the Corporation who is also a director. The directors may also by resolution award special remuneration to any director in undertaking any special services on the Corporation’s behalf other than the normal work ordinarily required of a director of a corporation. The confirmation of any such resolution or resolutions by the shareholders shall not be required. The directors may fix the remuneration of the officers and employees of the Corporation. The directors, officers and employees shall also be entitled to be paid their travelling and other expenses properly incurred by them in connection with the affairs of the Corporation.

SUBMISSION OF CONTRACTS OR

TRANSACTIONS TO SHAREHOLDERS FOR APPROVAL

23. The directors in their discretion may submit any contract, act or transaction for approval, ratification or confirmation at any meeting of the shareholders called for the purpose of considering the same and any contract, act or transaction that shall be approved, ratified or confirmed by resolution passed by a majority of the votes cast at any such meeting (unless any different or additional requirement is imposed by the Act or by the Corporation’s articles or by-laws) shall be as valid and as binding upon the Corporation and upon all the shareholders as though it had been approved, ratified and/or confirmed by every shareholder of the Corporation.

INDEMNITIES TO DIRECTORS AND OTHERS

24. Subject to the provisions hereof and subsections 124(3) and (4) of the Act, the Corporation shall indemnify a director or officer of the Corporation, a former director or officer of the Corporation or another individual who acts or acted at the Corporation’s request as a director or officer, or an individual acting in a similar capacity, of another entity, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the Corporation or other entity.

The Corporation may not indemnify an individual pursuant hereto unless the individual:

(a) acted honestly and in good faith with a view to the best interests of the Corporation or, as the case may be, to the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at the Corporation’s request; and

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(b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the individual had reasonable grounds for believing that the individual’s conduct was lawful.

The Corporation is hereby authorized to execute agreements evidencing its indemnity in favour of the foregoing persons to the full extent permitted by law.

OFFICERS

25. Appointment of officers. The directors may annually or as often as may be required appoint such officers as they shall deem necessary. Officers shall have such authority and shall perform such functions and duties as may from time to time be prescribed by resolution of the directors, delegated by the directors or by other officers or properly incidental to their offices or other duties, provided that no officer shall be delegated the power to do anything referred to in paragraph 20 above. Such officers may include, without limitation, any of a Chair of the Board, a Chief Executive Officer, a President, one or more Vice-Presidents, a Chief Financial Officer, a Controller, a Secretary, a Treasurer and one or more Assistant Secretaries and/or one or more Assistant Treasurers. None of such officers (except the Chair of the Board) need be a director of the Corporation. A director may be appointed to any office of the Corporation. Two or more of such offices may be held by the same person.

26. Removal of officers. All officers shall be subject to removal by resolution of the directors at any time, with or without cause, and the directors may fill at any time any vacancy resulting from the removal of any officer or from any other cause.

27. Duties of officers may be delegated. In case of the absence or inability or refusal to act of any officer of the Corporation or for any other reason that the directors may deem sufficient, the directors may delegate all or any of the powers of such officer to any other officer or to any director for the time being.

SHAREHOLDERS’ MEETINGS

28. Annual meeting. Subject to subsection 132(2) of the Act, the annual meeting of the shareholders shall be held at the registered office of the Corporation or at a place elsewhere within Canada determined by the directors and, subject to section 133 of the Act, on such day in each year and at such time as the directors may agree upon.

29. Special meetings. A special meeting of the shareholders may be convened by the directors at any date and time and, subject to subsection 132(2) of the Act, at any place within Canada that the directors determine.

30. Record dates. Subject to section 134 of the Act, the directors may fix in advance a date as the record date for the purpose of determining shareholders entitled to receive notice of a meeting of shareholders and/or entitled to vote at a meeting of shareholders, but such record date shall not precede by more than 60 days or by less than 21 days the date on which the meeting is to be held.

If no record date is fixed, the record date for the determination of the shareholders entitled to receive notice of a meeting of the shareholders and to vote shall be:

(a) at the close of business on the day immediately preceding the day on which the notice is given; or

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(b) if no notice is given, the day on which the meeting is held.

31. Shareholder List. The Corporation shall prepare an alphabetical list of the shareholders entitled to receive notice of a meeting and vote at the meeting, showing the number of shares held by each shareholder,

(a) if a record date for determining the shareholder entitled to receive notice of the meeting and/or entitled to vote at the meeting has been fixed, not later than 10 days after that date; or

(b) if no record date has been fixed, on the record date established in paragraph 38 hereof.

A shareholder whose name appears on such list is entitled to vote the shares shown opposite such shareholder’s name at the meeting to which the list relates.

32. Notice. A notice stating the day, hour and place of meeting and, if special business is to be transacted thereat, stating (i) the nature of that business in sufficient detail to permit the shareholder to form a reasoned judgment thereon, and (ii) the text of any special resolution to be submitted to the meeting, shall be sent to each shareholder entitled to vote at the meeting, to each director of the Corporation and to the auditor (if any) of the Corporation. Such notice shall be personally delivered or sent by prepaid mail, if the Corporation is a distributing corporation, not less than 21 days (or, if the Corporation is not a distributing corporation, not less than such number of days as may be fixed by the directors) and not more than 60 days (exclusive of the day of mailing and of the day for which notice is given) before the date of every meeting, and shall be addressed to the latest address of each such person as shown in the records of the Corporation or its transfer agent, or if no address is shown therein, then to the last address of each such person known to the Secretary. Notwithstanding the foregoing, a meeting of shareholders may be held for any purpose at any date and time and, subject to subsection 132(2) of the Act, at any place without notice if all the shareholders and other persons entitled to notice of such meeting are present in person or represented by proxy at the meeting (except where the shareholder or such other persons attend the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called) or if all the shareholders and other persons entitled to notice of such meeting and not present in person nor represented by proxy thereat waive notice of the meeting. Notice of any meeting of shareholders or the time for the giving of any such notice or any irregularity in any such meeting or in the notice thereof may be waived in any manner by any shareholder, the duly appointed proxy of any shareholder, any director or the auditor of the Corporation and any other person entitled to attend a meeting of shareholders, and any such waiver may be validly given either before or after the meeting to which such waiver relates.

The auditor (if any) of the Corporation is entitled to receive notice of every meeting of shareholders of the Corporation and, at the expense of the Corporation, to attend and be heard thereat on matters relating to the auditor’s duties.

33. Omission of notice. The accidental omission to give notice of any meeting to or the non-receipt of any notice by any person shall not invalidate any resolution passed or any proceeding taken at any meeting of shareholders.

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34. Votes. Every question submitted to any meeting of shareholders shall be decided in the first instance on a show of hands and in case of an equality of votes the chair of the meeting shall either on a show of hands or on a ballot have a second or casting vote in addition to the vote or votes to which the chair may be entitled as a shareholder or proxy nominee.

At any meeting, unless a ballot is demanded by a shareholder or proxyholder entitled to vote at the meeting, either before or after any vote by a show of hands, a declaration by the chair of the meeting that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority shall be evidence of the fact without proof of the number or proportion of votes recorded in favour of or against the motion.

In the absence of the Chair of the Board (if any), the Chief Executive Officer, President and any Vice-President who is a director, the shareholders present entitled to vote shall choose another director as chair of the meeting and if no director is present or if all the directors present decline to take the chair then the shareholders present shall choose one of their number to be chair.

If at any meeting a ballot is demanded on the election of a chair or on the question of adjournment or termination, then the ballot shall be taken forthwith without adjournment. If a ballot is demanded on any other question or as to the election of directors, then the ballot shall be taken in such manner and either at once or later at the meeting or after adjournment as the chair of the meeting directs. The result of a ballot shall be deemed to be the resolution of the meeting at which the ballot was demanded. A demand for a ballot may be made either before or after any vote by show of hands and may be withdrawn.

Where two or more persons hold the same share or shares jointly, any one of such persons present at a meeting of shareholders has the right, in the absence of the other or others, to vote such share or shares, but if more than one of such persons are present or represented by proxy and vote, they shall vote together as one on the share or shares jointly held by them.

35. Proxies. Votes at meetings of the shareholders may be cast either personally or by proxy. At every meeting at which a shareholder or proxyholder is entitled to vote, such shareholder (if present in person) or proxyholder shall have one vote on a show of hands. Upon a ballot on which a shareholder is entitled to vote, such shareholder (if present in person or by proxy) shall (subject to the provisions, if any, of the Corporation’s articles) have one vote for every share registered in such shareholder’s name.

Every shareholder entitled to vote at a meeting of shareholders may by means of a proxy appoint a proxyholder or proxyholders or one or more alternate proxyholders, who need not be a shareholder, to attend and act at the meeting in the manner and to the extent authorized by the proxy and with the authority conferred by the proxy.

An instrument appointing a proxyholder shall be in writing and executed by the shareholder or such shareholder’s attorney authorized in writing, or may be an electronic document that satisfies the requirements of Part XX.1 of the Act, and is valid only at the meeting in respect of which it is given or at any adjournment thereof.

An instrument appointing a proxyholder may be in the following form or in any other form which complies with the requirements of the Act:

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“The undersigned shareholder of Patheon Inc. hereby appoints                      of                      , whom failing,                      of                      as the nominee of the undersigned to attend and act for and on behalf of the undersigned at the meeting of the shareholders of the said Corporation to be held on the      day of         ,          and at any adjournment thereof in the same manner, to the same extent and with the same power as if the undersigned were present, whether personally or by telephonic, electronic or other means, at the said meeting or such adjournment thereof.

Dated

Signature of Shareholder

This form of proxy must be signed by a shareholder or such shareholder’s attorney authorized in writing.”

The directors may from time to time pass regulations regarding the lodging of instruments appointing a proxyholder at some place or places other than the place at which a meeting or adjourned meeting of shareholders is to be held and for particulars of such instruments to be sent in writing, faxed or otherwise communicated by electronic means that produces a written copy before the meeting or adjourned meeting to the Corporation or any agent of the Corporation appointed for the purpose of receiving such particulars and providing that instruments appointing a proxyholder so lodged may be voted upon as though the instruments themselves were produced at the meeting or adjourned meeting and votes given in accordance with such regulations shall be valid and shall be counted. The chair of the meeting of shareholders may, subject to any regulations made as aforesaid, in the chair’s discretion, accept written or faxed communication, or electronic communication that produces a written copy, as to the authority of anyone claiming to vote on behalf of and to represent a shareholder notwithstanding that no instrument of proxy conferring such authority has been lodged with the Corporation, and any votes given in accordance with such written, faxed or electronic communication accepted by the chair of the meeting shall be valid and shall be counted.

36. Adjournment. The chair of the meeting may with the consent of the meeting adjourn any meeting of shareholders from time to time to a fixed time and place. If the meeting is adjourned for less than 30 days, no notice of the time and place for the holding of the adjourned meeting need be given to any shareholder, other than by announcement at the earliest meeting that is adjourned. If a meeting of shareholders is adjourned by one or more adjournments for an aggregate of 30 days or more, notice of the adjourned meeting shall be given as for an original meeting but, unless the meeting is adjourned by one or more adjournments for an aggregate of more than 90 days, subsection 149(1) of the Act does not apply. Any adjourned meeting shall be duly constituted if held in accordance with the terms of the adjournment and a quorum is present thereat. The persons who formed a quorum at the original meeting are not required to form the quorum at the adjourned meeting. If there is no quorum present at the adjourned meeting, the original meeting shall be deemed to have terminated forthwith after its adjournment. Any business may be brought before or dealt with at

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any adjourned meeting which might have been brought before or dealt with at the original meeting in accordance with the notice calling the same.

37. Quorum. Two persons present and each holding or representing by proxy at least one issued share of the Corporation shall be a quorum of any meeting of shareholders for the choice of a chair of the meeting and for the adjournment of the meeting to a fixed time and place but may not transact any other business; for all other purposes a quorum for any meeting shall be persons present not being less than two in number and holding or representing by proxy not less than ten percent of the total number of the issued shares of the Corporation for the time being enjoying voting rights at such meeting. If a quorum is present at the opening of a meeting of shareholders, the shareholders present may proceed with the business of the meeting, notwithstanding that a quorum is not present throughout the meeting.

Notwithstanding the foregoing, if the Corporation has only one shareholder, or only one shareholder of any class or series of shares, the shareholder present in person or by proxy constitutes a meeting and a quorum for such meeting.

38. Electronic participation and voting. Subject to the Act, any person entitled to attend a meeting of shareholders may participate in the meeting by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting, if the Corporation makes available such a communication facility. A person participating in a meeting by such means is deemed for all purposes of the Act and the by-laws to be present at the meeting. Subject to the Act, if the directors or the shareholders of the Corporation call a meeting of shareholders pursuant to the Act, those directors or shareholders, as the case may be, may determine that the meeting shall be held entirely by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting. Subject to the Act, any vote at a meeting of shareholders may be held entirely by means of a telephonic, electronic or other communication facility, if the Corporation makes available such a communication facility, and any person participating in a meeting of shareholders by means of such facility and entitled to vote at that meeting may vote by means of such facility, provided that any such facility made available by the Corporation shall enable the votes to be gathered in a manner that permits their subsequent verification and permit the tallied votes to be presented to the Corporation without it being possible for the Corporation to identify how each shareholder or group of shareholders voted.

39. Resolutions in writing. Subject to subsection 142(1)of the Act,

(a) a resolution in writing signed by all the shareholders entitled to vote on that resolution at a meeting of shareholders is as valid as if it had been passed at a meeting of the shareholders; and

(b) a resolution in writing dealing with all matters required by the Act to be dealt with at a meeting of shareholders, and signed by all the shareholders entitled to vote at that meeting, satisfies all the requirements of the Act relating to meetings of shareholders.

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SHARES AND TRANSFERS

40. Issuance. Subject to the articles of the Corporation and any unanimous shareholder agreement, shares in the Corporation may be issued at such time and issued to such persons and for such consideration as the directors may determine.

41. Security certificates. The shares of the Corporation may be certificated or uncertificated and shall be recorded in the securities register of the Corporation as they are issued. Any security certificates (and the form of transfer power on the reverse side thereof) shall (subject to compliance with section 49 of the Act) be in such form as the directors may from time to time by resolution approve and such certificates shall be signed by a director or officer of the Corporation, or by a registrar, transfer agent or branch transfer agent of the Corporation, or an individual on their behalf, or by a trustee who certifies it in accordance with a trust indenture, or the signature shall be printed or otherwise mechanically reproduced on the certificate. If a security certificate contains a printed or mechanically reproduced signature of a person, the Corporation may issue the security certificate, notwithstanding that the person has ceased to be a director or an officer of the Corporation, and the security certificate is as valid as if the person were a director or an officer at the date of its issue. Upon written request, the Corporation shall issue to the holder of uncertificated shares a security certificate representing such shares.

42. Agent. The directors may from time to time by resolution appoint or remove an agent to maintain a central securities register and branch securities registers for the Corporation.

43. Surrender of security certificates. Subject to the Act, no transfer of a security issued by the Corporation shall be recorded or registered unless or until the security certificate representing the security to be transferred has been surrendered and cancelled or, in the case of uncertificated shares, unless or until proper transfer instructions from the registered holder of the shares or by such person’s attorney lawfully constituted in writing has been received.

44. Defaced, destroyed, stolen or lost security certificates. In case of the defacement, destruction, theft or loss of a security certificate, the fact of such defacement, destruction, theft or loss shall be reported by the owner to the Corporation or to a trustee, registrar, transfer agent or other agent of the Corporation (if any) acting on behalf of the Corporation, with a statement verified by oath or statutory declaration as to the defacement, destruction, theft or loss and the circumstances concerning the same and with a request for the issuance of: (i) a new security certificate to replace the one so defaced, destroyed, stolen or lost or (ii) uncertificated shares in lieu of the issuance of a replacement security certificate. Upon the giving to the Corporation (or, if there is such an agent, then to the Corporation and to such agent) of an indemnity bond of a surety company in such form as is approved by any authorized officer of the Corporation, indemnifying the Corporation (and such agent, if any) against all loss, damage and expense, which the Corporation and/or such agent may suffer or be liable for by reason of the issuance of a new security certificate or uncertificated shares to such shareholder, and provided the Corporation or such agent does not have notice that the security has been acquired by a bona fide purchaser, a new security certificate may be issued in replacement of the one defaced, destroyed, stolen or lost or uncertificated shares may be issued in lieu of the issuance of a new security certificate, if such issuance is ordered and authorized by any authorized officer of the Corporation or by resolution of the directors.

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DIVIDENDS

45. The directors may from time to time by resolution declare and the Corporation may pay dividends on its issued shares, subject to the Corporation’s articles.

The directors shall not declare and the Corporation shall not pay a dividend if there are reasonable grounds for believing that:

(a) the Corporation is, or would after the payment be, unable to pay its liabilities as they become due; or

(b) the realizable value of the Corporation’s assets would thereby be less than the aggregate of its liabilities and stated capital of all classes.

The Corporation may pay a dividend by issuing fully paid shares of the Corporation and, subject to section 42 of the Act, the Corporation may pay a dividend in money or property.

46. In case several persons are registered as the joint holders of any securities of the Corporation, any one of such persons may give effectual receipts for all dividends and payments on account of dividends, principal, interest and/or redemption payments on redemption of securities (if any) subject to redemption in respect of such securities.

RECORD DATES

47. Shareholders’ meetings. Subject to section 134 of the Act, the directors may fix in advance a date as the record date for the purpose of determining shareholders entitled to receive notice of a meeting of shareholders and/or entitled to vote at a meeting of shareholders, but such record date shall not precede by more than 60 days or by less than 21 days the date on which the meeting is to be held.

If no record date is fixed, the record date for the determination of the shareholders entitled to receive notice of a meeting of the shareholders and to vote shall be:

(a) at the close of business on the day immediately preceding the day on which the notice is given; or

(b) if no notice is given, the day on which the meeting is held.

48. Dividends, distributions or other purposes. Subject to section 134 of the Act, the directors may fix in advance a date as the record date for the determination of shareholders (i) entitled to receive payment of a dividend, (ii) entitled to participate in a liquidation or distribution, (iii) for any other purpose (other than to establish a shareholder’s right to receive notice of a meeting or to vote), but such record date shall not precede by more than 60 days the particular action to be taken.

If no record date is fixed, the record date for the determination of shareholders for any purpose other than to establish a shareholder’s right to receive notice of a meeting or to vote shall be at the close of business on the day on which the directors pass the resolution relating thereto.

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VOTING SECURITIES IN OTHER ISSUERS

49. All securities of any other body corporate or issuer of securities carrying voting rights held from time to time by the Corporation may be voted at all meetings of shareholders, bondholders, debenture holders or holders of such securities, as the case may be, of such other body corporate or issuer and in such manner and by such person or persons as the directors of the Corporation shall from time to time determine and authorize by resolution. The duly authorized signing officers of the Corporation may also from time to time execute and deliver for and on behalf of the Corporation proxies and/or arrange for the issuance of voting certificates and/or other evidence of the right to vote in such names as they may determine without the necessity of a resolution or other action by the directors.

NOTICES, ETC.

50. Service. Any notice or other document required to be given or sent by the Corporation to any shareholder, director or auditor of the Corporation shall be delivered personally or sent by prepaid mail or by telecopy or other electronic means capable of producing a written copy addressed to:

(a) the shareholder at the shareholder’s latest address as shown on the records of the Corporation or its transfer agent;

(b) the director at the director’s latest address as shown in the records of the Corporation or in the last notice filed under section 106 or 113 of the Act; and

(c) the auditor of the Corporation at the auditor’s latest address known to the Corporation.

With respect to every notice or other document sent by prepaid mail, it shall be sufficient to prove that the envelope or wrapper containing the notice or other document was properly addressed and put into a post office or into a post office letter box.

51. If the Corporation sends a notice or document to a shareholder and the notice or document is returned on two consecutive occasions because the shareholder cannot be found, the Corporation is not required to send any further notices or documents to the shareholder until the shareholder informs the Corporation in writing of the shareholder’s new address.

52. Shares registered in more than one name. All notices or other documents shall, with respect to any shares in the capital of the Corporation registered in more than one name, be given to whichever of such persons is named first in the records of the Corporation and any notice or other document so given shall be sufficient notice or delivery of such document to all the holders of such shares.

53. Persons becoming entitled by operation of law. Every person who by operation of law, transfer or by any other means whatsoever shall become entitled to any shares in the capital of the Corporation shall be bound by every notice or other document in respect of such shares which prior to such person’s name and address being entered on the records of the Corporation shall have been duly given to the person or persons from whom such person derives title to such shares.

54. Deceased shareholder. Any notice or other document delivered or sent by post or left at the address of any shareholder as the same appears in the records of the Corporation shall,

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notwithstanding that such shareholder be then deceased and whether or not the Corporation has notice of such shareholder’s decease, be deemed to have been duly served in respect of the shares held by such shareholder (whether held solely or with other persons) until some other person be entered in such shareholder’s stead in the records of the Corporation as the holder or one of the holders thereof and such service shall for all purposes be deemed a sufficient service of such notice or other document on such shareholder’s heirs, executors or administrators and all persons (if any) interested with such shareholder in such shares.

55. Signatures to notices. The signature of any director or officer of the Corporation to any notice may be written, printed or otherwise mechanically reproduced.

56. Computation of time. Where a given number of days’ notice or notice extending over any period is required to be given under any provisions of the articles or by-laws of the Corporation, the day of service, posting or other communication of the notice shall, unless it is otherwise provided, be counted in such number of days or other period and such notice shall be deemed to have been given or sent on the day of service, posting or other communication.

57. Proof of service. A certificate of any officer of the Corporation in office at the time of the making of the certificate or of an agent of the Corporation as to facts in relation to the mailing or delivery or service or other communication of any notice or other documents to any shareholder, director, officer or auditor or as to the publication of any notice or other document shall be conclusive evidence thereof and shall be binding on every shareholder, director, officer or auditor of the Corporation, as the case may be.

CHEQUES, DRAFTS, NOTES, ETC.

58. All cheques, drafts or orders for the payment of money and all notes, acceptances and bills of exchange shall be signed by such officer or officers or other person or persons, whether or not officers of the Corporation, and in such manner as the directors may from time to time designate by resolution.

CUSTODY OF SECURITIES

59. All securities (including warrants) owned by the Corporation shall be lodged (in the name of the Corporation) with a chartered bank or a trust company or in a safety deposit box or, if so authorized by resolution of the directors, with such other depositaries or in such other manner as may be determined from time to time by the directors.

All securities (including warrants) belonging to the Corporation may be issued and held in the name of a nominee or nominees of the Corporation (and if issued or held in the names of more than one nominee shall be held in the names of the nominees jointly with right of survivorship) and shall be endorsed in blank with endorsement guaranteed in order to enable transfer thereof to be completed and registration thereof to be effected.

EXECUTION OF CONTRACTS, ETC.

60. Contracts, documents or instruments in writing requiring the signature of the Corporation may be signed by any one director, officer or other authorized person and all contracts, documents or instruments in writing so signed shall be binding upon the Corporation without any further authorization or formality. The directors are authorized from time to time by resolution to appoint any officer or officers or any other person or persons on behalf of the

- 15 -

Corporation either to sign contracts, documents or instruments in writing generally or to sign specific contracts, documents or instruments in writing.

The corporate seal, if any, of the Corporation may, when required, be affixed to contracts, documents or instruments in writing signed as aforesaid or by an officer or officers, person or persons appointed as aforesaid by resolution of the board of directors.

The term “contracts, documents or instruments in writing” as used in this by-law shall include deeds, mortgages, hypothecs, charges, conveyances, transfers and assignments of property, real or personal, immovable or movable, powers of attorney, agreements, releases, receipts and discharges for the payment of money or other obligations, conveyances, transfers and assignments of securities and all paper writings.

In particular, without limiting the generality of the foregoing, any one director, officer or other authorized person is authorized to sell, assign, transfer, exchange, convert or convey all securities owned by or registered in the name of the Corporation and to sign and execute (under the seal of the Corporation or otherwise) all assignments, transfers, conveyances, powers of attorney and other instruments that may be necessary for the purpose of selling, assigning, transferring, exchanging, converting or conveying any such securities.

The signature or signatures of any officer or director of the Corporation and/or of any other officer or officers, person or persons appointed as aforesaid by resolution of the directors may, if specifically authorized by resolution of the directors, be printed, engraved, lithographed or otherwise mechanically reproduced upon all contracts, documents or instruments in writing or bonds, debentures or other securities of the Corporation executed or issued by or on behalf of the Corporation and all contracts, documents or instruments in writing or securities of the Corporation on which the signature or signatures of any of the foregoing officers, directors or persons shall be so reproduced, by authorization by resolution of the directors, shall be deemed to have been manually signed by such officers, directors or persons whose signature or signatures is or are so reproduced and shall be as valid to all intents and purposes as if they had been signed manually and notwithstanding that the officers, directors or persons whose signature or signatures is or are so reproduced may have ceased to hold office at the date of delivery or issue of such contracts, documents or instruments in writing or securities of the Corporation.

FINANCIAL YEAR

61. The financial year of the Corporation shall terminate on such day in each year as the board of directors may from time to time by resolution determine.

PASSED by the directors of the Corporation on February 22, 2008.

CONFIRMED by the shareholders of the Corporation on March 27, 2008.

/s/ Peter A. W. Green		/s/ Jacqueline H.R. Le Saux
Peter A. W. Green		Jacqueline H.R. Le Saux
	Chairman	Secretary

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EX-4.1

Exhibit 4.1

The shares represented by this certificate have rights, privileges, restrictions and conditions attached thereto and the Company will furnish to a shareholder, on demand and without charge, a full copy of the text of: (a) the rights, privileges, restrictions and conditions attached to each class authorized to be issued and to each series in so far as the same have been fixed by the directors; and (b) the authority of the directors to fix the rights, privileges, restrictions and conditions of subsequent series.

The following abbreviations shall be construed as though the words set forth below opposite each abbreviation were written out in full where such abbreviation appears:

TEN COM	-	as tenants in common
TEN ENT	-	as tenants by the entireties
JT TEN	-	as joint tenants with rights of survivorship and not as
		tenants in common
(Name) CUST (Name) UNIF	-	(Name) as Custodian for (Name) under the
GIFT MIN ACT (State)		(State) Uniform Gifts to Minors Act

Additional abbreviation may also be used though not in the above list.

*  Please insert Social Insurance, Tax Identification, or other identifying number of transferee.

For value received the undersigned hereby sells, assigns and transfers unto

Insert name and address or transferee

shares

represented by this certificate and does hereby irrevocably constitute and appoint

the attorney

of the undersigned to transfer the said shares on the books of the Company with full power of substitution in the premises.

DATED:
	Signature of Shareholder	Signature of Guarantor

Signature Guarantee:

The signature on this assignment must correspond with the name as written upon the face of the certificate(s), in every particular, without alteration or enlargement, or any change whatsoever and must be guaranteed by a major Canadian Schedule I chartered bank or a member of an acceptable Medallion Signature Guarantee Program (STAMP, SEMP, MSP). The Guarantor must affix a stamp bearing the actual words “Signature Guaranteed”.

In the USA, signature guarantees must be done by members of a “Medallion Signature Guarantee Program” only.

Signature guarantees are not accepted from Treasury Branches, Credit Unions or Caisses Populaires unless they are members of the Stamp Medallion Program.

Computershare’s Privacy Notice:

In the course of providing services to you and our corporate clients, Computershare receives non-public personal information about you - your name, address, social insurance number, securities holdings, transactions, etc. We use this to administer your account, to better serve your and our clients’ needs and for other lawful purposes. We have prepared a Privacy Code to tell you more about our information practices and how your privacy is protected. It is available at our website, computershare.com, or by writing us at 100 University Avenue, Toronto, Ontario, M5J 2Y1. *You are required to provide your SIN if you will receive income on these securities. We will use this number for income reporting. Computershare may also ask for your SIN as an identification-security measure if you call or write to request service on your account; however you may decline this usage.

00GBKA            

EX-4.2

Exhibit 4.2

EXECUTION COPY

INDENTURE

Dated as of April 23, 2010

among

PATHEON INC.,

THE GUARANTORS NAMED ON THE SIGNATURE PAGES HERETO,

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

and

DEUTSCHE BANK TRUST COMPANY AMERICAS,

as Notes Collateral Agent

8.625% SENIOR SECURED NOTES DUE 2017

TABLE OF CONTENTS

		Page
	ARTICLE I
	DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01.	Definitions		1
Section 1.02.	Other Definitions		42
Section 1.03.	Rules of Construction		43
Section 1.04.	Acts of Holders		43
	ARTICLE II
	THE NOTES
Section 2.01.	Form and Dating; Terms		45
Section 2.02.	Execution and Authentication		46
Section 2.03.	Registrar and Paying Agent		47
Section 2.04.	Paying Agent to Hold Money in Trust		47
Section 2.05.	Holder Lists		47
Section 2.06.	Transfer and Exchange		48
Section 2.07.	Replacement Notes		60
Section 2.08.	Outstanding Notes		60
Section 2.09.	Treasury Notes		61
Section 2.10.	Temporary Notes		61
Section 2.11.	Cancellation		61
Section 2.12.	Defaulted Interest		62
Section 2.13.	CUSIP and ISIN Numbers		62
	ARTICLE III
	REDEMPTION
Section 3.01.	Notices to Trustee		62
Section 3.02.	Selection of Notes to Be Redeemed or Purchased		63
Section 3.03.	Notice of Redemption		63
Section 3.04.	Effect of Notice of Redemption		64
Section 3.05.	Deposit of Redemption or Purchase Price		64
Section 3.06.	Notes Redeemed or Purchased in Part		65
Section 3.07.	Optional Redemption		65
Section 3.08.	Mandatory Redemption		67
Section 3.09.	Offers to Repurchase by Application of Excess Proceeds		67

		Page
	ARTICLE IV
	COVENANTS
Section 4.01.	Payment of Notes	69
Section 4.02.	Maintenance of Office or Agency		69
Section 4.03.	Reports and Other Information		70
Section 4.04.	Compliance Certificate		72
Section 4.05.	Taxes		72
Section 4.06.	Stay, Extension and Usury Laws		73
Section 4.07.	Limitation on Restricted Payments		73
Section 4.08.	Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries		80
Section 4.09.	Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock		81
Section 4.10.	Asset Sales		87
Section 4.11.	Transactions with Affiliates		90
Section 4.12.	Liens		92
Section 4.13.	Corporate Existence		93
Section 4.14.	Offer to Repurchase Upon Change of Control		93
Section 4.15.	Certain Proceeds		95
Section 4.16.	Further Assurances and After-Acquired Property		95
Section 4.17.	Information Regarding Collateral		96
Section 4.18.	Impairment of Security Interest		96
Section 4.19.	Withholding Taxes and Other Taxes		97
Section 4.20.	Future Guarantors and Security		98
Section 4.21.	Post-Closing Internal Reorganization		99
Section 4.22.	Covenant Suspension		99
	ARTICLE V
	SUCCESSORS
Section 5.01.	Merger, Consolidation or Sale of All or Substantially All Assets.		100
Section 5.02.	Successor Corporation Substituted		103
	ARTICLE VI
	DEFAULTS AND REMEDIES
Section 6.01.	Events of Default		103
Section 6.02.	Acceleration		106
Section 6.03.	Other Remedies		107
Section 6.04.	Waiver of Past Defaults		107
Section 6.05.	Control by Majority		107
Section 6.06.	Limitation on Suits		108
Section 6.07.	Rights of Holders of Notes to Receive Payment		108
Section 6.08.	Collection Suit by Trustee		108

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		Page
Section 6.09.	Restoration of Rights and Remedies		108
Section 6.10.	Rights and Remedies Cumulative		109
Section 6.11.	Delay or Omission Not Waiver		109
Section 6.12.	Trustee May File Proofs of Claim		109
Section 6.13.	Priorities		110
Section 6.14.	Undertaking for Costs		110
	ARTICLE VII
	TRUSTEE
Section 7.01.	Duties of Trustee		111
Section 7.02.	Rights of Trustee		112
Section 7.03.	Individual Rights of Trustee		113
Section 7.04.	Trustee’s Disclaimer		113
Section 7.05.	Notice of Defaults		113
Section 7.06.	Compensation and Indemnity		114
Section 7.07.	Replacement of Trustee		115
Section 7.08.	Successor Trustee by Merger, etc.		116
Section 7.09.	Eligibility; Disqualification		116
	ARTICLE VIII
	LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01.	Option to Effect Legal Defeasance or Covenant Defeasance		116
Section 8.02.	Legal Defeasance and Discharge		116
Section 8.03.	Covenant Defeasance		117
Section 8.04.	Conditions to Legal or Covenant Defeasance		118
Section 8.05.	Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions		119
Section 8.06.	Repayment to Issuer		120
Section 8.07.	Reinstatement		120
	ARTICLE IX
	AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01.	Without Consent of Holders of Notes		120
Section 9.02.	With Consent of Holders of Notes		122
Section 9.03.	Revocation and Effect of Consents		124
Section 9.04.	Notation on or Exchange of Notes		124
Section 9.05.	Trustee and Notes Collateral Agent to Sign Amendments, etc.		125
Section 9.06.	Payment for Consent		125

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		Page
	ARTICLE X
	GUARANTEES
Section 10.01.	Guarantee		125
Section 10.02.	Limitation on Guarantor Liability		127
Section 10.03.	[Reserved]		129
Section 10.04.	Subrogation		129
Section 10.05.	Benefits Acknowledged		129
Section 10.06.	Release of Guarantees		129
	ARTICLE XI
	SATISFACTION AND DISCHARGE
Section 11.01.	Satisfaction and Discharge		130
Section 11.02.	Application of Trust Money		131
	ARTICLE XII
	SECURITY
Section 12.01.	Notes Collateral and Security Documents		131
Section 12.02.	Release of Collateral		132
Section 12.03.	Suits to Protect the Collateral		133
Section 12.04.	Authorization of Receipt of Funds by the Trustee Under the Security Documents		134
Section 12.05.	Purchaser Protected		134
Section 12.06.	Powers Exercisable by Receiver or Trustee		134
Section 12.07.	Release Upon Termination of the Issuer’s Obligations		134
Section 12.08.	Notes Collateral Agent		135
Section 12.09.	Compensation, Indemnification and Expenses		140
Section 12.10.	Intercreditor Agreement and Other Security Documents		141
Section 12.11.	Collateral Representations, Warranties and Covenants		141
	ARTICLE XIII
	RANKING OF NOTE LIENS
Section 13.01.	Relative Rights		142
	ARTICLE XIV
	MISCELLANEOUS
Section 14.01.	Notices		143
Section 14.02.	Certificate and Opinion as to Conditions Precedent		144
Section 14.03.	Statements Required in Certificate or Opinion		145

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		Page
Section 14.04.	Rules by Trustee and Agents	145
Section 14.05.	No Personal Liability of Directors, Members, Officers, Employees and Stockholders	145
Section 14.06.	Governing Law	146
Section 14.07.	Consent to Jurisdiction and Service	146
Section 14.08.	Waiver of Jury Trial	147
Section 14.09.	Currency Indemnity and Calculations	147
Section 14.10.	Force Majeure	148
Section 14.11.	No Adverse Interpretation of Other Agreements	148
Section 14.12.	Successors	148
Section 14.13.	Severability	148
Section 14.14.	Counterpart Originals	148
Section 14.15.	Table of Contents, Headings, etc.	149
Section 14.16.	Interest Act (Canada)	149
Section 14.17.	USA PATRIOT Act	149
Section 14.18.	Intercreditor Agreement	149

SCHEDULE
Schedule 1	Collateral Representations, Warranties and Covenants
EXHIBITS
Exhibit A	Form of Note
Exhibit B	Form of Certificate of Transfer
Exhibit C	Form of Certificate of Exchange
Exhibit D	Form of Supplemental Indenture to Be Delivered by Future Guarantors
Exhibit E	Form of Transferee Letter of Representation

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INDENTURE, dated as of April 23, 2010, among Patheon Inc., a corporation existing under the Canada Business Corporations Act (the “Issuer”), the Guarantors (as defined herein) listed on the signature pages hereto, U.S. Bank National Association, a national banking association, as Trustee, and Deutsche Bank Trust Company Americas, a New York banking corporation, as Notes Collateral Agent.

W I T N E S S E T H

WHEREAS, the Issuer has duly authorized the creation of an issue of $280,000,000 aggregate principal amount of 8.625% Senior Secured Notes due 2017 (the ”Initial Notes”); and

WHEREAS, the Issuer and each of the Guarantors have duly authorized the execution and delivery of this Indenture.

NOW, THEREFORE, the Issuer, the Guarantors, the Trustee and the Notes Collateral Agent agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Notes.

ARTICLE I

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01. Definitions.

“144A Global Note” means a Global Note substantially in the form of Exhibit A hereto, bearing the Global Note Legend, the Private Placement Legend and the Canadian Private Placement Legend (if and for so long as required by Section 2.06(f) hereof) and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.

“ABL Collateral” means any and all of the following assets and properties (other than Excluded Assets) now owned or at any time hereafter acquired by the Issuer or any Guarantor:

(a) Accounts;

(b) Chattel Paper representing Accounts;

(c) (i) Deposit Accounts and all cash, checks, other negotiable instruments, funds and other evidences of payment held therein and (ii) Securities, Security Entitlements and Securities Accounts, in each case, to the extent constituting cash or cash equivalents or representing a claim to cash equivalents, except, in each case, for any Deposit Accounts and any cash, checks, other negotiable instruments, funds or evidences of payment held therein or any Securities, Security Entitlements, Securities Accounts and all cash and cash equivalents held therein, in each case, that constitute identifiable proceeds of Notes Collateral and all deposits and other funds held therein;

(d) Inventory;

(e) Letter-of-Credit Rights relating to Accounts or Inventory;

(f) to the extent involving or governing any of the items referred to in the preceding clauses (a) through (e), all Documents, General Intangibles and Instruments;

(g) to the extent supporting any of the items referred to in clauses (a) through (e), all Supporting Obligations;

(h) all books and records relating to the foregoing; and

(i) all proceeds of any of the foregoing (including proceeds of insurance with respect to any or all of the foregoing clauses (a) through (h) and all collateral security and guarantees given by any Person with respect to any of the foregoing.

All capitalized terms used in this definition and not defined elsewhere herein have the meanings given to such terms in the New York UCC; provided that the term “Instrument” has the meaning given to such term in Article 9 of the New York UCC.

“ABL Secured Parties” means the Senior Credit Facilities Collateral Agent and holders of, or creditors in respect of, any Senior Credit Facilities Debt, collectively.

“Acquired Indebtedness” means, with respect to any specified Person,

(1) Indebtedness of any other Person existing at the time such other Person is merged or amalgamated with or into or became a Restricted Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such other Person merging or amalgamating with or into or becoming a Restricted Subsidiary of such specified Person, and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Additional Notes” means additional Notes (other than the Initial Notes) issued from time to time under this Indenture in accordance with Sections 2.01 and 4.09 hereof.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

“After-Acquired Property” means any property of the Issuer or any Guarantor acquired after the Issue Date that constitutes Collateral, excluding, for the avoidance of doubt, Excluded Assets, but including any asset or property of the Issuer or any Guarantor that becomes

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Collateral subsequent to the Issue Date as a result of such asset or property ceasing to be an Excluded Asset.

“Agent” means any Registrar or Paying Agent.

“Applicable Percentage” means, with respect to an acquisition, amalgamation or merger, 10% during the quarter in which such transaction is consummated and the first quarter immediately following the consummation of such transaction, 7.5% during the second quarter immediately following the consummation of such transaction, 5% during the third quarter immediately following the consummation of such transaction, 2.5% during the fourth quarter immediately following the consummation of such transaction and zero thereafter.

“Applicable Premium” means, with respect to any Note on any Redemption Date, the greater of:

(1) 1.0% of the principal amount of such Note; and

(2) the excess, if any, of (a) the present value at such Redemption Date of (i) the redemption price of such Note at April 15, 2013 (such redemption price being set forth in Section 3.07 hereof), plus (ii) all required interest payments due on such Note through April 15, 2013 (excluding accrued but unpaid interest to the Redemption Date), computed using a discount rate equal to the Treasury Rate as of such Redemption Date plus 50 basis points; over (b) the principal amount of such Note.

“Applicable Procedures” means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and/or Clearstream that apply to such transfer or exchange.

“Asset Sale” means:

(1) the sale, conveyance, transfer or other disposition, whether in a single transaction or a series of related transactions, of property or assets of the Issuer or any of its Restricted Subsidiaries including by way of a Sale and Lease-Back Transaction or any disposition by means of a merger, consolidation, amalgamation or similar transaction or as a result of any event which results in the receipt of cash proceeds from insurance (other than business interruption insurance) with respect to an asset (each referred to in this definition as a “disposition”); or

(2) the issuance or sale of Equity Interests of any Restricted Subsidiary, whether in a single transaction or a series of related transactions;

in each case, other than:

(a) any disposition of Cash Equivalents or Investment Grade Securities or obsolete or worn out equipment in the ordinary course of business or any disposition of inventory or goods (or other assets) held for sale in the ordinary course of business;

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(b) the disposition of all or substantially all of the assets of the Issuer in a manner permitted pursuant to the provisions described under Section 5.01 hereof or any disposition that constitutes a Change of Control pursuant to this Indenture;

(c) the making of any Restricted Payment or Permitted Investment that is permitted to be made, and is made, under Section 4.07 hereof;

(d) any disposition of assets or issuance or sale of Equity Interests of any Restricted Subsidiary in any transaction or series of transactions with an aggregate Fair Market Value of less than $7.5 million;

(e) any disposition of property or assets or issuance of securities by a Restricted Subsidiary of the Issuer to the Issuer or by the Issuer or a Restricted Subsidiary of the Issuer to another Restricted Subsidiary of the Issuer;

(f) the lease, assignment or sub-lease of any real or personal property in the ordinary course of business;

(g) any issuance or sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary;

(h) foreclosures on assets; and

(i) any financing transaction with respect to property built or acquired by the Issuer or any Restricted Subsidiary after the Issue Date, including Sale and Lease-Back Transactions and asset securitizations permitted by this Indenture.

“Attributable Debt” in respect of a Sale and Lease-Back Transaction means, as at the time of determination, the present value (discounted at the interest rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP; provided that if such interest rate cannot be determined in accordance with GAAP, the present value shall be discounted at the interest rate borne by the Notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Lease-Back Transaction (including any period for which such lease has been extended); provided, however, that if such Sale and Lease-Back Transaction results in a Capitalized Lease Obligation, the amount of Indebtedness represented thereby shall be determined in accordance with the definition of “Capitalized Lease Obligation.”

“Bank Product Obligations” means, with respect to any Person, the obligations of such Person under (a) credit card programs, (b) credit card processing services, (c) debit card programs, (d) stored value card programs, (e) purchase card programs (including so-called “procurement cards” or “P-cards”) or (f) cash management or related services.

“Bankruptcy Law” means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.

“beneficial ownership” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any

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particular “person” (as such term is used in Section 13(d)(3) of the Exchange Act), such “person” shall be deemed to have beneficial ownership of all securities that such “person” has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition.

“Borrowing Base” means, as of any date, an amount equal to the sum of (x) 75% of the book value of the accounts receivable plus (y) 50% of the book value of the inventory, in each case of the Issuer and the Restricted Subsidiaries on a consolidated basis and in accordance with GAAP as of the end of the most recently completed fiscal quarter preceding such date for which internal financial statements are available.

“Business Day” means each day which is not a Legal Holiday.

“Canadian Private Placement Legend” means the legend set forth in Section 2.06(f)(i)(B) hereof to be placed on all Notes issued under this Indenture, except where otherwise permitted by the provisions of this Indenture.

“Capital Stock” means:

(1) in the case of a corporation, corporate stock;

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

“Capitalized Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) in accordance with GAAP.

“Cash Equivalents” means:

(1)(a) United States dollars; or

     (b) Canadian dollars;

(2)(a) euro, or any national currency of any participating member state of the EMU; or

     (b) local currencies held from time to time in the ordinary course of business by any Subsidiary of the Issuer that is not organized or existing under the

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laws of Canada, any province, territory or subdivision thereof, or the United States, any state thereof, the District of Columbia, or any territory thereof;

(3) securities issued or directly and fully and unconditionally guaranteed or insured by the federal governments of the United States or Canada or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full faith and credit obligation of such government with maturities of 24 months or less from the date of acquisition;

(4) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any commercial bank having capital and surplus of not less than $500.0 million in the case of U.S. banks and $100.0 million (or the U.S. dollar equivalent as of the date of determination) in the case of non-U.S. banks;

(5) repurchase obligations for underlying securities of the types described in clauses (3) and (4) entered into with any financial institution meeting the qualifications specified in clause (4) above;

(6) commercial paper rated at least P-1 by Moody’s or at least A-1 by S&P and in each case maturing within 12 months after the date of creation thereof;

(7) marketable short-term money market and similar securities having a rating of at least P-2 or A-2 from either Moody’s or S&P, respectively (or, if at any time neither Moody’s nor S&P shall be rating such obligations, an equivalent rating from another Rating Agency) and in each case maturing within 12 months after the date of creation thereof;

(8) investment funds investing 95% of their assets in securities of the types described in clauses (1) through (7) above and (9) through (11) below;

(9) readily marketable direct obligations issued by any state, province, commonwealth or territory of the United States or Canada, or any political subdivision or taxing authority thereof, having a rating of at least “A” from S&P or at least “A2” from Moody’s with maturities of 24 months or less from the date of acquisition;

(10) Indebtedness or Preferred Stock issued by Persons (other than the Issuer or its Affiliates) with a rating of “A” or higher from S&P or “A2” or higher from Moody’s with maturities of 24 months or less from the date of acquisition; and

(11) Investments with average maturities of 12 months or less from the date of acquisition in money market funds rated AAA (or the equivalent thereof) or better by S&P or Aaa (or the equivalent thereof) or better by Moody’s.

Notwithstanding the foregoing, Cash Equivalents shall include amounts denominated in currencies other than those set forth in clauses (1) and (2) above, provided that

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such amounts are converted into any currency listed in clauses (1) and (2) as promptly as practicable and in any event within ten Business Days following the receipt of such amounts.

“Cash Management Arrangement” means any arrangement pursuant to which any financial institution provides the Issuer or any guarantor of the Senior Credit Facilities with treasury, depositary or cash management services, commercial card or purchasing card services, automated clearinghouse transfers of funds or credit card services.

“Change of Control” means the occurrence of any of the following:

(1) the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the assets of the Issuer and its Subsidiaries, taken as a whole, to any Person other than a transaction in which the transferee is a Permitted Holder or a Person that is controlled by the Permitted Holder;

(2) the adoption of a plan relating to the liquidation or dissolution of the Issuer; or

(3) the Issuer becomes aware of (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, Canadian securities laws, proxy, vote, written notice or otherwise) the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than the Permitted Holder, in a single transaction or in a related series of transactions, by way of merger, consolidation, amalgamation or other business combination or purchase of “beneficial ownership” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, or any successor provision), directly or indirectly, of 50% or more of (i) the total voting power of the Voting Stock of the Issuer or (ii) any of its direct or indirect parent companies holding directly or indirectly a majority of the total voting power of the Voting Stock of the Issuer.

“Clearstream” means Clearstream Banking, Société Anonyme.

“Code” means the Internal Revenue Code of 1986, as amended.

“Collateral” means the Notes Collateral and the ABL Collateral.

“Collateral Account” means any segregated account under the sole control of the Trustee or the Notes Collateral Agent and includes all cash and Cash Equivalents received by the Trustee or the Notes Collateral Agent from Asset Sales of Notes Collateral, Permitted Asset Swaps involving the transfer of Notes Collateral or any other awards or proceeds pursuant to the Security Documents, including earnings, revenues, rents, issues, profits and income from the Notes Collateral received pursuant to the Security Documents, and interest earned thereon.

“consolidated” means, with respect to any Person, such Person consolidated with its Restricted Subsidiaries, excluding from such consolidation any Unrestricted Subsidiary as if

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such Unrestricted Subsidiary were not an Affiliate of such Person, unless otherwise specifically indicated.

“Consolidated Depreciation and Amortization Expense” means with respect to any Person for any period, the total amount of depreciation and amortization expense, including the amortization of deferred financing fees of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.

“Consolidated Interest Expense” means, with respect to any Person for any period, without duplication, the sum of:

(1) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including (a) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (b) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers acceptances, (c) non-cash interest payments (but excluding any non-cash interest expense attributable to the movement in the mark to market valuation of Hedging Obligations or other derivative instruments pursuant to GAAP), (d) the interest component of Capitalized Lease Obligations and (e) net payments, if any, made (less net payments, if any, received) pursuant to interest rate Hedging Obligations with respect to Indebtedness, but excluding (y) amortization of deferred financing fees, debt issuance costs, commissions, fees and expenses and (z) any expensing of bridge, commitment and other financing fees); plus

(2) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued; less

(3) interest income for such period.

For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.

“Consolidated Net Income” means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided, however, that, without duplication,

(1) any after-tax effect of extraordinary gains or losses shall be excluded,

(2) the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period,

(3) any after-tax effect of gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions other than in the ordinary course of business, as determined in good faith by the Issuer, shall be excluded,

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(4) any after-tax effect of income (loss) from disposed or discontinued operations and any net after-tax gains or losses on disposal of disposed, abandoned or discontinued operations shall be excluded,

(5) the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Issuer shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period,

(6) solely for the purpose of determining the amount available for Restricted Payments under clause (3)(a) of Section 4.07(a) hereof, the Net Income for such period of any Restricted Subsidiary (other than any Guarantor) shall be excluded if the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination wholly permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived; provided that Consolidated Net Income of the Issuer shall be increased by the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash) to the Issuer or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein,

(7) any impairment charge or asset write-off or write-down, including impairment charges or asset write-offs or write-downs related to intangible assets, long-lived assets, investments in debt and equity securities or as a result of a change in law or regulation, in each case, pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP shall be excluded,

(8) any after-tax effect of income (loss) from the early extinguishment of Indebtedness or Hedging Obligations or other derivative instruments shall be excluded,

(9) any non-cash compensation expense recorded from grants of stock appreciation or similar rights, stock options, restricted stock or other rights shall be excluded, and

(10) any net unrealized gain or loss (after any offset) resulting in such period from currency translation gains or losses including those (i) related to currency remeasurements of Indebtedness and (ii) resulting from hedge agreements for currency exchange risk shall be excluded.

Notwithstanding the foregoing, for the purpose of Section 4.07 hereof only (other than clause (3)(d) of Section 4.07(a) hereof), there shall be excluded from Consolidated Net Income any income arising from any sale or other disposition of Restricted Investments made by

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the Issuer and its Restricted Subsidiaries, any repurchases and redemptions of Restricted Investments from the Issuer and its Restricted Subsidiaries, any repayments of loans and advances which constitute Restricted Investments by the Issuer or any of its Restricted Subsidiaries, any sale of the stock of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted Subsidiary, in each case only to the extent such amounts increase the amount of Restricted Payments permitted under clause (3)(d) of Section 4.07(a) hereof.

“Consolidated Secured Debt Ratio” as of any date of determination (the “Determination Date”) means the ratio of (a) the aggregate amount of Secured Indebtedness of the Issuer and its Restricted Subsidiaries on the Determination Date (excluding any Hedging Obligations) to (b) EBITDA for the most recently ended four consecutive fiscal quarters for which internal financial statements are available prior to the Determination Date (the “Reference Period”).

For purposes of making the computation referred to above, the Consolidated Secured Debt Ratio shall be calculated, if applicable, on a pro forma basis in respect of clauses (a) and (b) thereof as is appropriate and consistent with the pro forma adjustments set forth in the definition of Fixed Charge Coverage Ratio.

“Contingent Obligations” means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent,

(1) to purchase any such primary obligation or any property constituting direct or indirect security therefor,

(2) to advance or supply funds

(a) for the purchase or payment of any such primary obligation, or

(b) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, or

(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.

“Corporate Trust Office of the Trustee” shall be at the address of the Trustee specified in Section 14.01 hereof or such other address as to which the Trustee may give notice to the Holders and the Issuer.

“Credit Facilities” means, with respect to the Issuer or any of its Restricted Subsidiaries, one or more debt facilities, including the Senior Credit Facilities, or other financing arrangements (including, without limitation, commercial paper facilities or indentures) providing for revolving credit loans, term loans, letters of credit or other long-term indebtedness, including any notes, mortgages, guarantees, collateral documents, instruments and agreements executed in

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connection therewith, and any amendments, supplements, modifications, extensions, renewals, restatements or refundings thereof and any indentures or credit facilities or commercial paper facilities that replace, refund or refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount permitted to be borrowed thereunder or alters the maturity therefor (provided that such increase in borrowings is permitted under Section 4.09 hereof) or adds Restricted Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, lender or group of lenders.

“Custodian” means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto.

“Customer Financed Equipment” means Indebtedness of the Issuer or any Restricted Subsidiary incurred to a customer of the Issuer or such Restricted Subsidiary to finance the acquisition by the Issuer or such Restricted Subsidiary of any equipment necessary to perform services for such customer.

“Cypriot Reorganization” means the distribution by Patheon Holdings Cyprus Ltd. of the Capital Stock of Patheon B.V. and all of the other assets and liabilities of Patheon Holdings Cyprus Ltd. to Patheon U.S. Holdings LLC and the subsequent dissolution of Patheon Holdings Cyprus Ltd.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Definitive Note” means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06(c) hereof, substantially in the form of Exhibit A hereto, except that such Note shall not bear the Global Note Legend and shall not have the “Schedule of Exchanges of Interests in the Global Note” attached thereto.

“Depositary” means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as Depositary hereunder and having become such pursuant to the applicable provision of this Indenture.

“Designated Non-cash Consideration” means the Fair Market Value of non-cash consideration received by the Issuer or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to an Officer’s Certificate, setting forth the basis of such valuation, executed by the principal financial officer of the Issuer, less the amount of cash or Cash Equivalents received in connection with a subsequent sale of or collection on such Designated Non-cash Consideration.

“Designated Preferred Stock” means Preferred Stock of the Issuer or any parent corporation thereof (in each case other than Disqualified Stock) that is issued for cash (other than to a Restricted Subsidiary or an employee stock ownership plan or trust established by the Issuer or any of its Subsidiaries) and is so designated as Designated Preferred Stock pursuant to an Officer’s Certificate executed by the principal financial officer of the Issuer or the applicable

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parent corporation thereof, as the case may be, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (3) of Section 4.07(a) hereof.

“Discharge of Senior Credit Facilities Debt” means the first date on which (a) the Obligations in respect of the Senior Credit Facilities Debt (other than those that constitute Senior Credit Facilities Other Obligations or unasserted contingent Obligations) have been indefeasibly paid in cash in full (or cash collateralized or defeased in accordance with the terms of the applicable agreements), (b) all commitments to extend credit under the Senior Credit Facilities have been terminated, (c) there are no outstanding letters of credit, banker’s acceptances or similar instruments issued under the Senior Credit Facilities (other than such as have been cash collateralized or defeased in accordance with the terms of the applicable agreements), (d) any other conditions to the release of the Liens securing the Obligations in respect of the Senior Credit Facilities Debt have been satisfied or waived in accordance with the applicable agreements and (e) the Senior Credit Facilities Collateral Agent has delivered a written notice to the Notes Collateral Agent stating that the events described in clauses (a), (b), (c) and (d) have occurred to the satisfaction of the ABL Secured Parties; provided that if, at least two Business Days prior to the time all such events described in clauses (a), (b), (c) and (d) have occurred, the Senior Credit Facilities Collateral Agent shall have received written notice that any Senior Credit Facilities Other Obligations are then due and payable but have not been paid, then the Discharge of Senior Credit Facilities Debt shall not occur until all such Senior Credit Facilities Other Obligations that are then due and payable have been paid in full.

“Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable (other than solely as a result of a change of control or asset sale) pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof (other than solely as a result of a change of control or asset sale), in whole or in part, in each case prior to the date 91 days after the earlier of the maturity date of the Notes or the date the Notes are no longer outstanding; provided, however, that if such Capital Stock is issued to any plan for the benefit of employees of the Issuer or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Issuer or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations.

“EBITDA” means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period

(1) increased (without duplication) by:

(a) provision for taxes based on income or profits or capital, including, without limitation, state, provincial or territorial, franchise and similar taxes and foreign withholding taxes of such Person accrued during such period deducted (and not added back) in calculating Consolidated Net Income; plus

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(b) Fixed Charges of such Person for such period to the extent the same was deducted (and not added back) in calculating such Consolidated Net Income; plus

(c) Consolidated Depreciation and Amortization Expense of such Person for such period to the extent the same were deducted (and not added back) in computing Consolidated Net Income; plus

(d) any expenses or charges (other than depreciation or amortization expense) related to any Equity Offering, Permitted Investment, acquisition, disposition, recapitalization or the incurrence of Indebtedness permitted to be incurred by this Indenture (including a refinancing thereof) (whether or not successful), including (i) such fees, expenses or charges related to the Refinancing Transactions and (ii) any amendment or other modification of the Notes and the Credit Facilities, and, in each case, to the extent deducted (and not added back) in calculating Consolidated Net Income; plus

(e) the amount of any restructuring charge or reserve, integration costs or other business optimization expenses, costs associated with establishing new facilities or other plant closure cost deducted (and not added back) in such period in computing Consolidated Net Income, including any one-time costs incurred in connection with acquisitions after the Issue Date and costs related to the closure and/or consolidation of facilities (“Optimization Costs”) in each case to the extent deducted in calculating Consolidated Net Income not to exceed an amount equal to the greater of (i) $10.0 million and (ii) 10% of EBITDA for such period (determined before excluding such Optimization Costs pursuant to this clause (e)); provided that if such Optimization Costs exceed $2.0 million in any period, such Optimization Costs shall be set forth in an Officer’s Certificate executed by the chief financial officer of the Issuer which states (y) the amount of such Optimization Costs and (z) that such Optimization Costs are based on the good faith belief of the chief financial officer; plus

(f) any other non-cash charges, including any write-offs or write-downs, reducing Consolidated Net Income for such period (excluding any such non-cash charges to the extent that it represents an accrual or reserve for potential cash items in any future period, and excluding amortization of a prepaid cash item that was paid in a prior period); plus

(g) any non-recurring or unusual gains or losses (less all fees and expenses related thereto) included in Consolidated Net Income for such period; plus

(h) the amount of management, monitoring, consulting and advisory fees and related expenses accrued in such period to the Investor to the extent otherwise permitted under Section 4.11 hereof in each case to the extent deducted in calculating Consolidated Net Income; plus

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(i) the amount of net cost savings projected by the Issuer in good faith to be realized as a result of specified actions taken or initiated (calculated on a pro forma basis as though such cost savings had been realized on the first day of such period), net of the amount of actual benefits realized during such period from such actions; provided that (x) such cost savings are reasonably identifiable and factually supportable, (y) such actions are taken no later than 12 months after the Issue Date and (z) the aggregate amount of cost savings added pursuant to this clause (i) shall not exceed $5.0 million for any four consecutive quarter period (which adjustments may be incremental to pro forma cost savings adjustments made pursuant to the definition of “Fixed Charge Coverage Ratio”); provided further that such cost savings shall be set forth in an Officer’s Certificate executed by the chief financial officer of the Issuer which states (y) the amount of such cost savings and (z) that such cost savings are based on the good faith belief of the chief financial officer;

(2) decreased by (without duplication) non-cash gains increasing Consolidated Net Income of such Person for such period, excluding any non-cash gains to the extent they represent the reversal of an accrual or reserve for a potential cash item that reduced EBITDA in any prior period, and

(3) increased or decreased by (without duplication):

(a) any net gain or loss resulting in such period from Hedging Obligations and the application of Canadian Institute of Chartered Accountants Handbook Section 3865; plus or minus, as applicable, and

(b) any net gain or loss resulting in such period from currency translation gains or losses related to non-operating currency transactions (including any net loss or gain resulting from hedge agreements for currency exchange risk), plus or minus, as applicable.

“EMU” means economic and monetary union as contemplated in the Treaty on European Union.

“Environmental Claim” means any judicial or administrative complaint, summons, citation, directive, order, litigation, notice of violation, information request, proceeding or judgment from any governmental authority or Person arising out of or related to (a) violations or alleged violations of or liability under any Environmental Laws or (b) the presence, release or threatened release of any Hazardous Materials.

“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any governmental authority, relating in any way to the environment, the protection of human health as it relates to exposure to Hazardous Materials, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to occupational health and safety matters.

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“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.

“Equity Offering” means any public or private sale of common stock or Preferred Stock of the Issuer or any of its direct or indirect parent companies (excluding Disqualified Stock), other than:

(1) public offerings with respect to the Issuer’s or any direct or indirect parent company’s common stock registered on Form S-8;

(2) issuances to any Subsidiary of the Issuer;

(3) any such public or private sale that constitutes an Excluded Contribution; and

(4) any sale of Designated Preferred Stock.

“euro” means the single currency of participating member states of the EMU.

“Euroclear” means Euroclear S.A./N.V., as operator of the Euroclear system.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Excluded Assets” means the collective reference to (a) any asset or property of any Limited Guarantor organized in France or Italy, other than any Equity Interest (and, in the case of any Equity Interest in a Subsidiary of such Limited Guarantor organized in France, any special bank account customarily pledged in connection therewith) in any Subsidiary of such Limited Guarantor owned by such Limited Guarantor (excluding, on or prior to August 15, 2010, the 292 class A shares of Patheon Holdings S.A.S. owned by Patheon Italia S.p.A.); (b) any asset or property of any Limited Guarantor organized in Switzerland, other than (i) any Equity Interest in any Subsidiary of such Limited Guarantor owned by such Limited Guarantor and (ii) any accounts receivable and deposit accounts of such Limited Guarantor; (c) any fee interest in real property if the fair market value of such property is less than $2.5 million; (d) any leasehold interest in real property, other than (i) the leasehold interest of Patheon UK Limited in the real property located in Swindon, England that is leased by Patheon UK Limited on the Issue Date and (ii) any leasehold interest arising under a lease under which annual rent payments exceed $500,000; (e) any license, contract or agreement to which the Issuer or a Guarantor is a party and all of the Issuer’s or such Guarantor’s rights or interests thereunder to the extent and for so long as the grant of a security interest in such license, contract or agreement or such right or interest shall (i) constitute or result in (A) the unenforceability of any right of the Issuer or such Guarantor therein or (B) a breach or termination pursuant to the terms of, or a default under, such license, contract or agreement or (ii) require any consent under the terms of such license, contract or agreement that has not been obtained (after commercially reasonable efforts to obtain such consent with respect to any license acquired or any contract or agreement entered into after the Issue Date) (in the case of each of clauses (i) and (ii), other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the

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New York UCC or any other applicable law or principles of equity); provided, however, that such license, contract or agreement and the Issuer’s or such Guarantor’s rights and interests therein shall cease to be Excluded Assets at such time as the condition causing the consequences specified in clauses (i) and (ii) shall be remedied and, to the extent severable, any portion of such license, contract or agreement that does not result in any of the consequences specified in (i) or (ii) including, without limitation, any proceeds of such license, contract or agreement, shall not be an Excluded Asset; (f) any property or asset only to the extent and for so long as the grant of a security interest in such property or asset is prohibited by any applicable law or requires a consent not obtained (after commercially reasonable efforts by the Issuer to obtain such consent if such consent either (i) is not required on the Issue Date or (ii) relates to any property or asset acquired after the Issue Date) of any governmental authority pursuant to applicable law; (g) Capital Stock of a Person that constitutes a Subsidiary (other than a Wholly-Owned Subsidiary) the pledge of which would violate a contractual obligation to the owners of the other Capital Stock of such Person (other than any such owners that are Affiliates of the Issuer or JLL Partners, Inc.) that is binding on or relating to such Capital Stock; (h) any equipment or real property (and proceeds thereof) of the Issuer or any Guarantor that is subject to a purchase money Lien or Capital Lease Obligation permitted under the Indenture to the extent the documents relating to such purchase money Lien or Capital Lease Obligation would not permit such equipment or real property (and proceeds thereof) to be subject to the Liens created under the Security Documents; provided, that immediately upon the ineffectiveness, lapse or termination of any such restriction, such equipment or real property shall cease to be an “Excluded Asset”; (i) any asset or property acquired by the Issuer or any Guarantor after the Issue Date that is subject to Permitted Liens described in clause (8) or (9) of the definition of Permitted Liens so long as the documents governing such Permitted Liens do not permit any other Liens on such asset or property; provided, that immediately upon the ineffectiveness, lapse or termination of any such restriction, such asset or property shall cease to be an “Excluded Asset”; (j) the Equity Interests in Patheon UK Pension Trustees Limited; (k) any Equity Interests owned by the Issuer or any Guarantor in any Subsidiary organized in Japan or India that is not a Guarantor; (l) the Equity Interests in Patheon Holdings Cyprus Ltd. on or prior to August 15, 2010; (m) the Equity Interests in Patheon Europe Zrt. on or prior to August 15, 2010; (n) any deposit accounts used exclusively for payroll purposes; (o) any deposit accounts of the Subsidiary of the Issuer organized in the Netherlands until such time as the deposit accounts of such Subsidiary contain more than $100,000 in the aggregate; (p) any rights of the Issuer or any Guarantor under any letter of credit issued in its favor, except for any letter of credit received outside the ordinary course of business or that exceeds $1,000,000; (q) any commercial tort claim, except for any commercial tort claim reasonably estimated to exceed $5,000,000; and (r) Equity Interests of a Subsidiary that is not a Guarantor if such Subsidiary has only nominal assets and conducts no business or operations; provided, however, that Excluded Assets shall not include (x) any proceeds, substitutions or replacements of any Excluded Assets referred to above (unless such proceeds, substitutions or replacements would constitute Excluded Assets) or (y) any asset or property which secures Senior Credit Facilities Debt (other than accounts receivable and inventory of any Limited Guarantor organized in France).

“Excluded Contribution” means net cash proceeds, marketable securities or Qualified Proceeds received by the Issuer from

(1) contributions to its common equity capital, and

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(2) the sale (other than to a Subsidiary of the Issuer or to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of the Issuer) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Issuer,

in each case designated as Excluded Contributions pursuant to an officer’s certificate executed by the principal financial officer of the Issuer on the date such capital contributions are made or the date such Equity Interests are sold, as the case may be, which are excluded from the calculation set forth in clause (3) of Section 4.07(a) hereof.

“Existing ABL Revolver” means the credit facilities under the Revolving Credit Agreement dated as of April 27, 2007 among the Issuer, the Subsidiaries of the Issuer named therein, the lenders party thereto and JPMorgan Chase Bank, N.A., as US administrative agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian administrative agent, and J.P. Morgan Europe Limited, as UK administrative agent.

“Existing Term Loan Facility” means the credit facilities under the Term Loan Credit Agreement dated as of April 27, 2007 among the Issuer, Patheon Pharmaceuticals Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent.

“Fair Market Value” means, with respect to any asset or property, the price which could be negotiated in an arm’s length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value shall be determined in good faith by the board of directors, whose determination shall be conclusive and evidenced by a resolution of such board of directors.

“Fixed Charge Coverage Ratio” means, with respect to any Person for any period, the ratio of EBITDA of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Issuer or any Restricted Subsidiary incurs, assumes, guarantees, redeems, retires or extinguishes any Indebtedness (other than Indebtedness incurred under any revolving Credit Facilities unless such Indebtedness has been permanently repaid and has not been replaced) or issues or redeems Disqualified Stock or Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to or simultaneously with the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Fixed Charge Coverage Ratio Calculation Date”), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, redemption, retirement or extinguishment of Indebtedness, or such issuance or redemption of Disqualified Stock or Preferred Stock, as if the same had occurred on the first day of the applicable Reference Period.

For purposes of making the computation referred to above, the Fixed Charge Coverage Ratio shall be calculated, if applicable, on a pro forma basis assuming that all Investments, acquisitions, dispositions, mergers, consolidations, amalgamations and disposed operations (and the change in any associated fixed charge obligations and the change in EBITDA resulting therefrom) (as determined in accordance with GAAP) that have been made by the Issuer or any of its Restricted Subsidiaries during the Reference Period or subsequent to such

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Reference Period and prior to or simultaneously with the Fixed Charge Coverage Ratio Calculation Date had occurred on the first day of the applicable Reference Period. If since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Issuer or any of its Restricted Subsidiaries since the beginning of such period shall have made any Investment, acquisition, disposition, merger, consolidation, amalgamation or disposed operation that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, merger, consolidation, amalgamation or disposed operation had occurred on the first day of the applicable Reference Period.

For purposes of this definition, whenever pro forma effect is to be given to a transaction, the pro forma calculations shall be made in good faith by the chief financial officer of the Issuer. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Fixed Charge Coverage Ratio Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Issuer to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. For purposes of making the computation referred to above, interest on any Indebtedness under revolving Credit Facilities computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable Reference Period except as set forth in the first paragraph of this definition. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Issuer may designate. Any such pro forma calculation may include adjustments appropriate in the reasonable determination of a responsible financial or accounting officer of the Issuer, to reflect operating expense reductions and other operating improvements or synergies reasonably expected to result from any acquisition, amalgamation or merger; provided, that (x) such operating expense reductions and other operating improvements or synergies are reasonably identifiable and factually supportable, (y) such actions have been taken or are to be taken no later than 12 months after the consummation of the applicable transaction and (z) such adjustments to reflect operating expense reductions and other operating improvements or synergies shall not exceed the Applicable Percentage of Adjusted FCCR EBITDA. “Adjusted FCCR EBITDA,” as used in this definition, means EBITDA, as adjusted in accordance with this definition of Fixed Charge Coverage Ratio on the Fixed Charge Coverage Ratio Calculation Date.

“Fixed Charges” means, with respect to any Person for any period, the sum of:

(1) Consolidated Interest Expense of such Person for such period;

(2) all cash dividends or other distributions accrued (excluding dividends payable solely in Capital Stock (other than Disqualified Stock) of the Issuer) on any series of Preferred Stock of each Person and its Restricted Subsidiaries during such period; and

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(3) all cash dividends or other distributions accrued (excluding dividends payable solely in Capital Stock (other than Disqualified Stock) of the Issuer) on any series of Disqualified Stock of each Person and its Restricted Subsidiaries during such period.

“Free Capital” means, with respect to Patheon International AG at any time, the maximum amount of the profits and reserves of Patheon International AG available at such time for distribution to its shareholder(s) under applicable Swiss law.

“French Intercompany Loan” means the intercompany loan made from Patheon B.V. to Patheon France S.A.S. on the Issue Date and evidenced by an intercompany note in the amount of $10 million.

“French Reorganization” means the redemption of all of the Class A shares of Patheon Holdings S.A.S. owned by Patheon Italia S.p.A.

“Full Guarantors” means each Guarantor other than any Limited Guarantor.

“GAAP” means generally accepted accounting principles in Canada which are in effect on the Issue Date (“Canadian GAAP”). At any time after the Issue Date, the Issuer may elect to apply for all purposes of this Indenture, in lieu of Canadian GAAP, International Financial Reporting Standards (“IFRS”) or generally accepted accounting principles in the United States (“U.S. GAAP”) and, upon any such election, references herein to GAAP shall be construed to mean IFRS or U.S. GAAP, as the case may be, as in effect on the date of such election (the “Election Date”); provided that (1) any such election once made shall be irrevocable (and shall only be made once), (2) all financial statements and reports required to be provided after such election pursuant to this Indenture shall be prepared on the basis of IFRS or U.S. GAAP, as the case may be, and (3) from and after the Election Date, all ratios, computations and other determinations contained in this Indenture shall be computed in conformity with IFRS or U.S. GAAP, as the case may be. Notwithstanding anything to the contrary in this definition, all numerical calculations in respect of amounts relating to any period of time prior to the Election Date shall be calculated under Canadian GAAP and all numerical calculations relating to any period of time on or after the Election Date shall be calculated under IFRS or U.S. GAAP, as the case may be.

“Global Note Legend” means the legend set forth in Section 2.06(f)(ii) hereof, which is required to be placed on all Global Notes issued under this Indenture.

“Global Notes” means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A hereto, issued in accordance with Section 2.01, 2.06(b) or 2.06(d) hereof.

“Government Securities” means securities that are:

(1) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or

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(2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America,

which, in either case, are not callable or redeemable at the option of the issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt.

“Grantors” means, collectively, the Issuer and each Guarantor that has granted a security interest over any Collateral as security for all or any part of the Notes Obligations.

“guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations.

“Guarantee” means each guarantee of Obligations with respect to the Notes by any Person pursuant to the terms of this Indenture.

“Guarantor” means each Subsidiary of the Issuer that executes this Indenture as a Guarantor on the Issue Date and each other Subsidiary of the Issuer that thereafter guarantees the Notes pursuant to the terms of this Indenture.

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

“Hedging Obligations” means, with respect to any Person, the obligations of such Person under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, commodity swap agreement, commodity cap agreement, commodity collar agreement, foreign exchange contract, currency swap agreement or similar agreement providing for the transfer or mitigation of interest rate or currency risks either generally or under specific contingencies.

“Holder” means the Person in whose name a Note is registered on the Registrar’s books.

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“Hungarian Reorganization” means the distribution of all of the assets and liabilities of Patheon Europe Zrt. to Patheon B.V. and the subsequent dissolution of Patheon Europe Zrt.

“IAI” means an institutional “accredited investor” as described in Rule 501(a)(1), (2), (3) or (7).

“IAI Global Note” means a Global Note substantially in the form of Exhibit A hereto, bearing the Global Note Legend, the Private Placement Legend and the Canadian Private Placement Legend (if and for so long as required by Section 2.06(f) hereof) and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee to accommodate transfers of beneficial interests in the Notes to IAIs subsequent to the initial distribution of the Notes.

“Indebtedness” means, with respect to any Person, without duplication:

(1) any indebtedness (including principal and premium) of such Person, whether or not contingent:

(a) in respect of borrowed money;

(b) evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers’ acceptances or similar credit transactions (or, without duplication, reimbursement agreements in respect thereof);

(c) representing the balance deferred and unpaid of the purchase price of any property, all conditional sale obligations and all obligations under any title retention agreement, except, in each case, any such balance that constitutes a trade payable or similar obligation to a trade or similar creditor, in each case accrued in the ordinary course of business, and any earn-out obligations until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP; or

(d) representing any Hedging Obligations;

if and to the extent that any of the foregoing Indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP;

(2) all Capitalized Lease Obligations of such Person and all Attributable Debt in respect of Sale and Lease-Back Transactions entered into by such Person;

(3) to the extent not otherwise included, any obligation by such Person to be liable for, or to pay, as obligor, guarantor or otherwise (including by means of any guarantee), on the obligations of the type referred to in clause (1) of a third Person, other than by endorsement of negotiable instruments for collection in the ordinary course of business; and

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(4) to the extent not otherwise included, the obligations of the type referred to in clauses (1) and (2) of a third Person secured by a Lien on any asset owned by such first Person, whether or not such Indebtedness is assumed by such first Person;

provided, however, that notwithstanding the foregoing, Indebtedness shall be deemed not to include Contingent Obligations incurred in the ordinary course of business.

“Indenture” means this Indenture, as amended or supplemented from time to time.

“Independent Financial Advisor” means an accounting, appraisal, investment banking firm or consultant to Persons engaged in Similar Businesses of nationally recognized standing in Canada or the United States that is, in the good faith judgment of the Issuer, qualified to perform the task for which it has been engaged; provided that such advisor is not an Affiliate of the Issuer or the Investor.

“Indirect Participant” means a Person who holds a beneficial interest in a Global Note through a Participant.

“Initial Notes” has the meaning given to such term in the recitals hereto.

“Initial Purchasers” means J.P. Morgan Securities Inc., UBS Securities LLC and Barclays Capital Inc.

“Intercreditor Agreement” means the intercreditor agreement dated as of the Issue Date among the Issuer, the Guarantors, the Notes Collateral Agent and the Senior Credit Facilities Collateral Agent, as it may be amended from time to time in accordance with this Indenture.

“Interest Payment Date” means April 15 and October 15 of each year to Stated Maturity of the Notes.

“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P, or an equivalent rating by any other Rating Agency.

“Investment Grade Securities” means:

(1) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (other than Cash Equivalents);

(2) debt securities or debt instruments with an Investment Grade Rating, but excluding any debt securities or instruments constituting loans or advances among the Issuer and its Subsidiaries;

(3) investments in any fund that invests exclusively in investments of the type described in clauses (1) and (2) which fund may also hold immaterial amounts of cash pending investment or distribution; and

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(4) corresponding instruments in countries other than the United States customarily utilized for high quality investments.

“Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances (other than accounts receivable, trade credit, advances to customers, and commission, travel and similar advances to officers and employees, in each case made in the ordinary course of business), or other extensions of credit or capital contributions (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other similar instruments issued by any other Person and investments that are required by GAAP to be classified on the balance sheet (excluding the footnotes) of the Issuer in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property. Except as otherwise provided for herein, the amount of an Investment shall be its Fair Market Value at the time the Investment is made and without giving effect to subsequent changes in value.

For purposes of the definition of “Unrestricted Subsidiary” and Section 4.07 hereof:

(1) “Investments” shall include the portion (proportionate to the Issuer’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of a Subsidiary of the Issuer at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Issuer shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to:

(a) the Issuer’s “Investment” in such Subsidiary at the time of such redesignation; less

(b) the portion (proportionate to the Issuer’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time of such redesignation; and

(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer, in each case as determined in good faith by the Issuer.

“Investor” means, collectively, JLL Partners, its general partner and their respective Affiliates, and any other investment fund managed by JLL Partners, Inc. or any of its Affiliates but does not include any portfolio company controlled by any of the foregoing.

“Issue Date” means April 23, 2010.

“Issuer” has the meaning set forth in the caption of this Indenture.

“Issuer Order” means a written order from the Issuer to the Trustee requesting it to authenticate the Notes issued under this Indenture and signed on behalf of the Issuer by an

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authorized Officer of the Issuer, who must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Issuer, and delivered to the Trustee.

“Italian Intercompany Loan” means the intercompany loan made from Patheon B.V. to Patheon Italia S.p.A. on the Issue Date, and evidenced by an intercompany note in the amount of $73 million.

“Italian Subsidiary Debt” means the Indebtedness of Patheon Italia S.p.A. outstanding on the Issue Date, other than a loan made to Patheon Italia S.p.A. by the Italian government.

“JLL Partners” means JLL Partners Fund V, L.P., a Delaware limited partnership, and any Affiliate thereof (including JLL Patheon Holdings LLC, a Delaware limited liability company) to which JLL Partners Fund V, L.P. assigns all or a portion of its rights under the purchase agreement dated March 1, 2007 between the Issuer and JLL Partners Fund V, L.P., as amended, but, in each case, does not include any portfolio company controlled by any of the foregoing.

“Junior Lien Indebtedness” means any Indebtedness that is secured by the Collateral with Junior Lien Priority relative to both the Notes and the Guarantees and any Senior Credit Facilities Debt or is secured by some of the Collateral with Junior Lien Priority relative to the Notes and the Guarantees and any Senior Credit Facilities Debt and is not secured by the balance of the Collateral and with respect to which the holders of such Indebtedness (or a trustee or agent on behalf of such holders) shall have executed a supplement to the Intercreditor Agreement agreeing to be bound thereby on the terms applicable to Indebtedness with Junior Lien Priority.

“Junior Lien Indebtedness Secured Parties” means each holder of Junior Lien Indebtedness and each other holder of, or obligee in respect of, any obligations in respect of Junior Lien Indebtedness outstanding at such time.

“Junior Lien Priority” means, relative to specified Indebtedness, having junior Lien priority on specified Collateral and either subject to the Intercreditor Agreement on a substantially identical (or junior) basis (relative to such specified Collateral) as the holders of other Indebtedness having junior Lien priority on such specified Collateral or subject to intercreditor agreements providing holders of the Indebtedness intended to have Junior Lien Priority with substantially the same rights and obligations (or lesser rights and greater obligations) and substantially identical (or junior) Lien priority (in each case, relative to such specified Collateral) that the holders of other Indebtedness having Junior Lien Priority on such specified Collateral have pursuant to the Intercreditor Agreement.

“Legal Holiday” means a Saturday, a Sunday or a day on which commercial banking institutions are not required to be open in the State of New York or Toronto, Canada.

“Lien” means, with respect to any asset, any mortgage, lien (statutory or otherwise), pledge, hypothecation, charge, security interest, preference, priority or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under

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applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction; provided that in no event shall an operating lease be deemed to constitute a Lien.

“Limited Guarantees” means the Guarantees of the Limited Guarantors, subject to the limitations described in Section 10.02(b) hereof.

“Limited Guarantors” means each Guarantor organized in France, Italy or Switzerland, or any political subdivision of any of the foregoing, and each Guarantor organized in any other jurisdiction (excluding Canada, the United States, the United Kingdom and the Netherlands, and any political subdivision thereof) the Guarantee of which has been limited pursuant to Section 4.20 hereof.

“Moody’s” means Moody’s Investors Service, Inc. and any successor to its rating agency business.

“Net Income” means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends.

“Net Proceeds” means the aggregate cash proceeds received by the Issuer or any of its Restricted Subsidiaries in respect of any Asset Sale, including any cash received upon the sale or other disposition of any Designated Non-cash Consideration received in any Asset Sale, net of the direct costs relating to such Asset Sale and the sale or disposition of such Designated Non-cash Consideration, including legal, accounting and investment banking fees, and brokerage and sales commissions, any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of principal, premium, if any, and interest on Indebtedness secured by a Lien on the assets subject to the Asset Sale, which Indebtedness is required (other than required by clause (1) of Section 4.10(c) hereof) to be paid as a result of such transaction, all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Sale and any deduction of appropriate amounts to be provided by the Issuer or any of its Restricted Subsidiaries as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Issuer or any of its Restricted Subsidiaries after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction.

“New York UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York.

“Non-Guarantor Subsidiary” means any Restricted Subsidiary that is not a Guarantor in accordance with the terms of the Indenture.

“Non-U.S. Person” means a Person who is not a U.S. Person.

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“Noteholder Secured Parties” means the Trustee, the Notes Collateral Agent, each Holder and each other holder of, or creditor in respect of, any Notes Obligations.

“Notes” means the Initial Notes and more particularly means any Note authenticated and delivered under this Indenture. For all purposes of this Indenture, the term “Notes” shall also include any Additional Notes that may be issued under a supplemental indenture. For purposes of this Indenture, all references to Notes to be issued or authenticated upon transfer, replacement or exchange shall be deemed to refer to Notes of the applicable series.

“Notes Collateral” means any and all of the tangible and intangible assets and properties now owned or at any time hereafter acquired by the Issuer or any Guarantor, other than (i) the ABL Collateral, (ii) Excluded Assets and (iii) those assets as to which the Notes Collateral Agent reasonably determines that the costs of obtaining a security interest as security for the Notes Obligations are excessive in relation to the value of the security to be afforded thereby.

“Notes Collateral Agent” means Deutsche Bank Trust Company Americas, in its capacity as collateral agent under this Indenture and the Security Documents, any successor thereto in such capacity and any other Person appointed as collateral agent pursuant to the terms of this Indenture.

“Notes Obligations” means the Obligations of the Issuer and the Guarantors under the Notes, the Indenture, the Guarantees, the Security Documents and the Intercreditor Agreement.

“Obligations” means any principal of and interest (including any interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on any loan or other indebtedness and all other monetary obligations, including fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), and all other obligations.

“Offering Memorandum” means the offering memorandum, dated April 9, 2010, relating to the sale of the Initial Notes.

“Officer” means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer, the Controller or the Secretary of the Issuer or of any other Person, as the case may be.

“Officer’s Certificate” means a certificate signed on behalf of the Issuer by an Officer of the Issuer, or on behalf of any other Person, as the case may be, who must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Issuer or such other Person, that meets the requirements set forth in this Indenture.

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“Opinion of Counsel” means a written opinion, subject to customary assumptions and qualifications, from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Issuer or the Trustee.

“Other Pari Passu Lien Obligations” means (a) any Additional Notes, (b) any other Indebtedness (“Collateral Sharing Indebtedness”) having (i) Pari Passu Lien Priority relative to the Notes with respect to the Notes Collateral, (ii) either Pari Passu Lien Priority, Junior Lien Priority or no Lien with respect to the ABL Collateral and (iii) substantially identical terms as the Notes (other than issue price, interest rate, yield and redemption terms) (the terms described in this clause (iii), “Identical Terms”) and (c) any Indebtedness (“Refinancing Pari Passu Indebtedness”) that refinances or refunds (or successive refinancings and refundings) any Notes, Additional Notes or Collateral Sharing Indebtedness and all obligations with respect to such Indebtedness; provided, that such Refinancing Pari Passu indebtedness shall (i) have Pari Passu Lien Priority relative to the Notes with respect to the Notes Collateral and either Pari Passu Lien Priority, Junior Lien Priority or no Lien with respect to the ABL Collateral, (ii) have a Stated Maturity that is the same as or later than the earlier of the (1) the Notes and (2) the Indebtedness being refinanced or refunded and (iii) either (y) contain terms and covenants that are, in the reasonable opinion of the Issuer, no more restrictive in any material respect to the Issuer and the Restricted Subsidiaries than the terms and covenants under the Notes or (z) contain terms and covenants that are more restrictive to the Issuer and its Restricted Subsidiaries than the terms and covenants under the Notes so long as prior to or substantially simultaneously with the issuance of any such Refinancing Pari Passu Indebtedness, the Notes and the Indenture are amended to contain any such more restrictive terms and covenants (the terms described in clause (y) above and this clause (z), “Restrictive Terms”). Notwithstanding the foregoing, up to an aggregate principal amount of $75.0 million of Collateral Sharing Indebtedness and Refinancing Pari Passu Indebtedness shall not be required to have Identical Terms or Restrictive Terms.

“Pari Passu Lien Priority” means, relative to specified Indebtedness, having equal Lien priority on specified Collateral and either subject to the Intercreditor Agreement on a substantially identical basis as the holders of such specified Indebtedness or subject to intercreditor agreements providing holders of the Indebtedness intended to have Pari Passu Lien Priority with substantially the same rights and obligations and Lien priority that the holders of such specified Indebtedness have pursuant to the Intercreditor Agreement as to the specified Collateral.

“Participant” means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream).

“Perfection Certificate” means the Perfection Certificate executed by an Officer of the Issuer and delivered to the Initial Purchasers on the Issue Date, with a copy delivered to the Notes Collateral Agent.

“Permitted Asset Swap” means the concurrent purchase and sale or exchange of Related Business Assets or a combination of Related Business Assets and cash or Cash Equivalents between the Issuer or any of its Restricted Subsidiaries and another Person;

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provided, that any cash or Cash Equivalents received must be applied in accordance with Section 4.10 hereof.

“Permitted Holder” means the Investor.

“Permitted Investments” means:

(1) any Investment in the Issuer or any of its Restricted Subsidiaries;

(2) any Investment in cash and Cash Equivalents or Investment Grade Securities;

(3) any Investment by the Issuer or any of its Restricted Subsidiaries in a Person that is engaged in a Similar Business if as a result of such Investment:

(a) such Person becomes a Restricted Subsidiary; or

(b) such Person, in one transaction or a series of related transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Issuer or a Restricted Subsidiary,

and, in each case, any Investment held by such Person; provided, that such Investment was not acquired by such Person in contemplation of such acquisition, merger, consolidation, amalgamation or transfer;

(4) any Investment in securities or other assets not constituting cash, Cash Equivalents or Investment Grade Securities and received in connection with an Asset Sale made pursuant to the provisions of Section 4.10 hereof or any other disposition of assets not constituting an Asset Sale;

(5) any Investment existing on, or made pursuant to binding commitments existing on, the Issue Date, and any Investment consisting of an extension, modification or renewal of any Investment existing on, or made pursuant to a binding commitment existing on, the Issue Date; provided that the amount of any such Investment may only be increased as required by the terms of such Investment as in existence on the Issue Date;

(6) any Investment acquired by the Issuer or any of its Restricted Subsidiaries:

(a) in exchange for any other Investment or accounts receivable held by the Issuer or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable; or

(b) as a result of a foreclosure by the Issuer or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;

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(7) Hedging Obligations permitted under clause (10) of Section 4.09(b) hereof;

(8) any Investment in a Similar Business having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (8) that are at that time outstanding, not to exceed the greater of (x) $40.0 million and (y) 5% of Total Assets at the time of such Investment (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

(9) Investments the payment for which consists of Equity Interests (exclusive of Disqualified Stock) of the Issuer, or any of its direct or indirect parent companies; provided, however, that such Equity Interests shall not increase the amount available for Restricted Payments under clause (3) of Section 4.07(a) hereof;

(10) guarantees of Indebtedness permitted under Section 4.09 hereof;

(11) Investments consisting of purchases and acquisitions of inventory, supplies, material or equipment;

(12) additional Investments having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (12) that are at that time outstanding (without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of cash or marketable securities), not to exceed the greater of (x) $20.0 million and (y) 2.5% of Total Assets at the time of such Investment (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

(13) advances to, or guarantees of Indebtedness of, employees not in excess of $10.0 million outstanding at any one time, in the aggregate;

(14) loans and advances to officers, directors and employees for business-related travel expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business or consistent with past practices or to fund such Person’s purchase of Equity Interests of the Issuer or any direct or indirect parent company thereof; and

(15) additional Investments by the Issuer in BSP Pharmaceuticals S.r.L. not to exceed $7.5 million in the aggregate.

“Permitted Liens” means, with respect to any Person:

(1) pledges or deposits by such Person under workmen’s compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness), leases or other obligations of a like nature to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or Canadian or U.S. government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as

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security for contested taxes or import duties or for the payment of rent, in each case incurred in the ordinary course of business;

(2) Liens imposed by law or regulation relating to the construction or renovation of any property, such as carriers’, warehousemen’s, mechanics’, materialmen’s and repairmen’s Liens, contractors’, supplier of materials, architects’, and other like Liens in each case for sums not yet overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;

(3) Liens for taxes, assessments or other governmental charges not yet overdue for a period of more than 30 days or payable or subject to penalties for nonpayment or which are being contested in good faith by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;

(4) Liens in favor of issuers of performance and surety bonds or bid bonds or with respect to other regulatory requirements or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business;

(5) survey exceptions, encumbrances, easements, servitudes or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other similar restrictions imposed by law or arising in the ordinary course of business (including those expressed in any original grant from the Crown) as to the use of real properties or Liens incidental, to the conduct of the business of such Person or to the ownership of its properties which were not incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;

(6) Liens securing Indebtedness permitted to be incurred pursuant to clause (4), (18) or (23) of Section 4.09(b) hereof;

(7) Liens existing on the Issue Date (other than Liens securing the Senior Credit Facilities Debt);

(8) Liens on property, assets or shares of stock (or the proceeds thereof) of a Person at the time such Person becomes a Subsidiary; provided, however, such Liens are not created or incurred in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided, further, however, that such Liens may not extend to any other property owned by the Issuer or any of its Restricted Subsidiaries;

(9) Liens on property or assets (or proceeds thereof) at the time of the acquisition thereof by the Issuer or a Restricted Subsidiary, including any acquisition by means of a merger, consolidation or amalgamation with or into the Issuer or any of its

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Restricted Subsidiaries; provided, however, that such Liens are not created or incurred in connection with, or in contemplation of, such acquisition; provided, further, however, that the Liens may not extend to any other property owned by the Issuer or any of its Restricted Subsidiaries;

(10) other than with respect to Notes Collateral, Liens securing Indebtedness or other obligations of a Restricted Subsidiary owing to the Issuer or another Restricted Subsidiary permitted to be incurred in accordance with Section 4.09 hereof;

(11) Liens securing Hedging Obligations (excluding Hedging Obligations entered into for speculative purposes) so long as related Indebtedness (if any) is, and is permitted to be under this Indenture, secured by a Lien on the same property securing such Hedging Obligations and Liens securing Bank Product Obligations;

(12) Liens on specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(13) leases, subleases, licenses or sublicenses granted to others in the ordinary course of business which do not materially interfere with the ordinary conduct of the business of the Issuer or any of its Restricted Subsidiaries and do not secure any Indebtedness;

(14) Liens arising from Uniform Commercial Code or Personal Property Security Act financing statement filings regarding operating leases entered into by the Issuer and its Restricted Subsidiaries in the ordinary course of business;

(15) other than with respect to Notes Collateral, Liens in favor of the Issuer or any Guarantor;

(16) Liens on vehicles or equipment of the Issuer or any of its Restricted Subsidiaries granted in the ordinary course of business;

(17) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancing, refunding, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (6), (7), (8) and (9); provided, however, that (a) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property), and (b) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (i) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (6), (7), (8) and (9) at the time the original Lien became a Permitted Lien under this Indenture, and (ii) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement;

(18) deposits made in the ordinary course of business to secure liability to insurance carriers;

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(19) Liens securing obligations which do not exceed $50.0 million at any one time outstanding; provided that any such obligations have Pari Passu Lien Priority or Junior Lien Priority relative to the Notes;

(20) Liens securing judgments for the payment of money not constituting an Event of Default under clause (6) under Section 6.01(a) hereof so long as such Liens are adequately bonded and any appropriate legal proceedings that may have been duly initiated for the review of such judgment have not been finally terminated or the period within which such proceedings may be initiated has not expired;

(21) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

(22) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (ii) attaching to commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business, and (iii) in favor of banking institutions arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;

(23) Liens deemed to exist in connection with Investments in repurchase agreements permitted under Section 4.09 hereof; provided that such Liens do not extend to any assets other than those that are the subject of such repurchase agreement;

(24) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;

(25) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Issuer or any of its Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Issuer and its Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;

(26) Liens securing Senior Indebtedness permitted to be incurred pursuant to Section 4.09(a); provided that any such Indebtedness has Pari Passu Lien Priority or Junior Lien Priority relative to the Notes; and provided further that at the time of incurrence and after giving pro forma effect thereto, the Consolidated Secured Debt Ratio would be no greater than 3.5 to 1.0;

(27) Liens securing Indebtedness incurred pursuant to clause (1) of Section 4.09(b); provided that (1) any such Liens on Notes Collateral shall rank junior in priority to the Liens on the Notes Collateral securing the Notes and related Guarantees and (2) the holder of such Lien either (x) is subject to an intercreditor agreement consistent with the Intercreditor Agreement on the same basis as the ABL Secured Parties

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or (y) is or agrees to become bound by the terms of the Intercreditor Agreement on the same basis as the ABL Secured Parties;

(28) Liens securing the Notes and the Guarantees outstanding on the Issue Date, Refinancing Indebtedness with respect to such Notes, and the Guarantees relating thereto and any Obligations with respect to such Notes, Refinancing Indebtedness, and Guarantees;

(29) Liens on the Notes Collateral in favor of any collateral agent relating to such collateral agent’s administrative expenses with respect to the Notes Collateral;

(30) Liens securing Priority Obligations;

(31) undetermined or inchoate Liens, rights of distress and charges incidental to current operations which have not at such time been filed or exercised, or which relate to obligations not due or payable or if due, the validity of which is being contested diligently and in good faith by appropriate proceedings by the Issuer or any of its Restricted Subsidiaries;

(32) title defects, encroachments or irregularities affecting real property which are of a minor nature and which in the aggregate do not materially impair the use of the affected property for the purpose for which it is used by the Issuer or any of its Restricted Subsidiaries or do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Issuer or any of its Restricted Subsidiaries;

(33) the right reserved to or vested in any governmental authority by the terms of any lease, license, franchise, grant or permit acquired by the Issuer or any of its Restricted Subsidiaries or by any statutory provision to terminate any such lease, license, franchise, grant or permit, or to require annual or other payments as a condition to the continuance thereof;

(34) Liens given to a public utility or any governmental authority when required by such utility or governmental authority in connection with the operations of the Issuer or any of its Restricted Subsidiaries in the ordinary course of its business;

(35) subdivision agreements, site plan control agreements, development agreements, facilities sharing agreements, cost sharing agreements and other similar agreements, in each case with respect to real property and which in the aggregate do not interfere with the ordinary conduct of business of the Issuer or any of its Restricted Subsidiaries;

(36) the rights of any tenant, occupant or licensee under any lease, occupancy agreement or license, in each case with respect to real property and which in the aggregate do not interfere with the ordinary conduct of business of the Issuer or any of its Restricted Subsidiaries;

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(37) Liens or covenants restricting or prohibiting access to or from lands abutting on controlled access highways or covenants affecting the use to which lands may be put; provided, that such Liens or covenants do not interfere with the ordinary conduct of business of the Issuer or any of its Restricted Subsidiaries;

(38) statutory Liens incurred or pledges or deposits made, in each case in the ordinary course of business, in favor of a governmental authority to secure the performance of obligations of the Issuer or any of its Restricted Subsidiaries under Environmental Laws to which any such Person is subject; provided that no Event of Default shall have occurred and be continuing;

(39) Liens created pursuant to the general banking conditions (algemene bankvoorwaarden) of a banking institution operating in the Netherlands; and

(40) Liens arising from the right of distraint enjoyed by landlords in applicable jurisdictions to secure the payment of arrears of rent in respect of leased properties in such jurisdictions or a Lien granted by the Issuer or any of its Restricted Subsidiaries to a landlord to secure the payment of arrears of rent in respect of leased properties in the Province of Quebec leased from such landlord, provided that such Liens are limited to the assets located at or about such leased properties; provided that a reserve shall be taken in the applicable Borrowing Base for such amount.

For purposes of determining compliance with this definition, (A) Permitted Liens need not be incurred solely by reference to one category of Permitted Liens described above but are permitted to be incurred in part under any combination thereof and (B) in the event that a Lien (or any portion thereof) meets the criteria of one or more of the categories of Permitted Liens described above, the Issuer shall, in its sole discretion, classify (but not reclassify) such item of Permitted Liens (or any portion thereof) in any manner that complies with this definition and shall only be required to include the amount and type of such item of Permitted Liens in one of the above clauses and such Lien shall be treated as having been incurred pursuant to only one of such clauses.

For purposes of this definition, the term “Indebtedness” shall be deemed to include interest on such Indebtedness.

“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

“Post-Closing Internal Reorganization” means, collectively, the Cypriot Reorganization, the Hungarian Reorganization and the French Reorganization.

“Preferred Stock” means any Equity Interest with preferential rights as to the payment of dividends or distributions or as to the distribution of assets upon liquidation, dissolution or winding up.

“Priority Obligation” means any obligation that is secured by a Lien on any assets, including Collateral, in favor of a governmental authority, which Lien ranks or is capable

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of ranking prior to or pari passu with the Liens thereon created by the applicable Security Documents, including any such Lien securing amounts owing for wages, vacation pay, severance pay, employee deductions, sales tax, excise tax, other taxes, workers compensation, government royalties and stumpage or pension fund obligations.

“Private Placement Legend” means the legend set forth in Section 2.06(f)(i)(A) hereof to be placed on all Notes issued under this Indenture, except where otherwise permitted by the provisions of this Indenture.

“Qualified Proceeds” means assets that are used or useful in, or Capital Stock of any Person engaged in, a Similar Business; provided that the Fair Market Value of any such assets or Capital Stock shall be determined by the Issuer in good faith.

“Rating Agencies” means Moody’s and S&P or if Moody’s or S&P or both shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Issuer which shall be substituted for Moody’s or S&P or both, as the case may be.

“Record Date” for the interest payable on any applicable Interest Payment Date means April 1 or October 1 (whether or not a Business Day) next preceding such Interest Payment Date.

“Refinancing Transactions” means, collectively, (a) the issuance and sale of the Initial Notes; (b) the repayment of all outstanding borrowings under the Existing Term Loan Facility and the Existing ABL Revolver on the Issue Date and the termination of the Existing Term Loan Facility; (c) the repayment of all outstanding Italian Subsidiary Debt; and (d) the amendment and restatement of the Existing ABL Revolver in the form of the Senior Credit Facilities, each as described in the Offering Memorandum.

“Regulation S” means Regulation S promulgated under the Securities Act.

“Regulation S Global Note” means a Global Note in the form of Exhibit A hereto, bearing the Global Note Legend, the Private Placement Legend and the Canadian Private Placement Legend (if and for so long as required by Section 2.06(f) hereof) and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Regulation S.

“Related Business Assets” means assets (other than cash or Cash Equivalents) used or useful in a Similar Business, provided that any assets received by the Issuer or a Restricted Subsidiary in exchange for assets transferred by the Issuer or a Restricted Subsidiary shall not be deemed to be Related Business Assets if they consist of securities of a Person, unless upon receipt of the securities of such Person, such Person would become a Restricted Subsidiary.

“Responsible Officer” means, when used with respect to the Trustee or the Notes Collateral Agent, as the case may be, any officer within the corporate trust department of the Trustee or the Notes Collateral Agent, as the case may be, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the

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Trustee or the Notes Collateral Agent, as the case may be, who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such Person’s knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

“Restricted Definitive Note” means a Definitive Note bearing the Private Placement Legend and/or the Canadian Private Placement Legend.

“Restricted Global Note” means a Global Note bearing the Private Placement Legend and/or the Canadian Private Placement Legend.

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Period” means the 40-day distribution compliance period as defined in Regulation S.

“Restricted Subsidiary” means, at any time, any direct or indirect Subsidiary of the Issuer that is not then an Unrestricted Subsidiary; provided, however, that upon the occurrence of an Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of “Restricted Subsidiary.”

“Rule 144” means Rule 144 promulgated under the Securities Act.

“Rule 144A” means Rule 144A promulgated under the Securities Act.

“Rule 501” means Rule 501 promulgated under the Securities Act.

“Rule 903” means Rule 903 promulgated under the Securities Act.

“Rule 904” means Rule 904 promulgated under the Securities Act.

“S&P” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., and any successor to its rating agency business.

“Sale and Lease-Back Transaction” means any arrangement providing for the leasing by the Issuer or any of its Restricted Subsidiaries of any real or tangible personal property, which property has been or is to be sold or transferred by the Issuer or such Restricted Subsidiary to a third Person in contemplation of such leasing.

“SEC” means the U.S. Securities and Exchange Commission.

“Secured Indebtedness” means any Indebtedness of the Issuer or any of its Restricted Subsidiaries secured by a Lien.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

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“Security Documents” means the security agreements, pledge agreements, mortgages, deeds of trust, deeds to secure debt, collateral assignments, control agreements and related agreements (including, without limitation, financing statements under the Uniform Commercial Code (or the equivalent legislation) of the relevant jurisdictions), as amended, supplemented, restated, renewed, refunded, replaced, restructured, repaid, refinanced or otherwise modified from time to time, creating the security interests in the Collateral as contemplated by this Indenture.

“Senior Credit Facilities” means the credit facilities under the Amended and Restated Revolving Credit Agreement dated as of the Issue Date by and among the Issuer, the subsidiaries of the Issuer named therein, the lenders party thereto and JPMorgan Chase Bank, N.A., as US administrative agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian administrative agent, and J.P. Morgan Europe Limited, as European administrative agent, including any notes, mortgages, guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, renewals, restatements, refundings or refinancings thereof and any indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that replace, refund or refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under Section 4.09 hereof).

“Senior Credit Facilities Collateral Agent” means JPMorgan Chase Bank, N.A., in its capacity as collateral agent under the Senior Credit Facilities and on behalf of any of its Affiliates designated by it to serve as collateral agent for purposes of any particular security agreement in connection with the Senior Credit Facilities or any particular asset or property serving as collateral therefor, and any successor or other agent under the Senior Credit Facilities from time to time.

“Senior Credit Facilities Debt” means (a) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the loans under the Senior Credit Facilities, (b) each payment required to be made by any borrower under the Senior Credit Facilities in respect of any letter of credit issued pursuant thereto, (c) each payment required to be made by the Issuer under the Senior Credit Facilities in respect of any banker’s acceptances, (d) all other monetary obligations of any borrower under the Senior Credit Facilities and the related guarantee and security documents, (e) all other obligations of any of the borrowers or guarantors under or pursuant to the Senior Credit Facilities and the related guarantee and security documents, (f) any Indebtedness the holders of which have a first-priority security interest in the ABL Collateral (subject to Permitted Liens) pursuant to the Intercreditor Agreement and (g) the Senior Credit Facilities Other Obligations.

“Senior Credit Facilities Lenders” means the lenders or holders of Indebtedness incurred under the Senior Credit Facilities.

“Senior Credit Facilities Other Obligations” means all obligations of the Issuer and each guarantor of the Senior Credit Facilities under Swap Agreements and Cash

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Management Arrangements with or arranged by Senior Credit Facilities Lenders and their affiliates.

“Senior Indebtedness” means:

(1) all Indebtedness of the Issuer or any Guarantor outstanding under the Senior Credit Facilities and related guarantees (including interest accruing on or after the filing of any petition in bankruptcy or similar proceeding or for reorganization of the Issuer or any Guarantor (at the rate provided for in the documentation with respect thereto, regardless of whether or not a claim for post-filing interest is allowed in such proceedings)), and any and all other fees, expense reimbursement obligations, indemnification amounts, penalties, and other amounts (whether existing on the Issue Date or thereafter created or incurred) and all obligations of the Issuer or any Guarantor to reimburse any bank or other Person in respect of amounts paid under letters of credit, acceptances or other similar instruments;

(2) all Hedging Obligations (and guarantees thereof) owing to a Lender (as defined in the Senior Credit Facilities) or any Affiliate of such Lender (or any Person that was a Lender or an Affiliate of such Lender at the time the applicable agreement giving rise to such Hedging Obligation was entered into), provided that such Hedging Obligations are permitted to be incurred under the terms of this Indenture;

(3) any other Indebtedness of the Issuer or any Guarantor permitted to be incurred under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Notes or any related Guarantee; and

(4) all Obligations with respect to the items listed in the preceding clauses (1), (2) and (3);

provided, however, that Senior Indebtedness shall not include:

(a) any obligation of such Person to the Issuer or any of its Subsidiaries;

(b) any liability for federal, state, local or other taxes owed or owing by such Person;

(c) any accounts payable or other liability to trade creditors arising in the ordinary course of business;

(d) any Indebtedness or other Obligation of such Person which is subordinate or junior in any respect to any other Indebtedness or other Obligation of such Person; or

(e) that portion of any Indebtedness which at the time of incurrence is incurred in violation of this Indenture.

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“Significant Subsidiary” means any Restricted Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such regulation is in effect on the Issue Date.

“Similar Business” means any business conducted or proposed to be conducted by the Issuer and its Restricted Subsidiaries on the Issue Date or any business that is similar, reasonably related, incidental or ancillary thereto.

“Stated Maturity” means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency).

“Subordinated Indebtedness” means, with respect to the Notes and the Guarantees,

(1) any Indebtedness of the Issuer which is by its terms subordinated in right of payment to the Notes, and

(2) any Indebtedness of any Guarantor which is by its terms subordinated in right of payment to the Guarantee of such entity of the Notes

“Subsidiary” means, with respect to any Person:

(1) any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof or is consolidated under GAAP with such Person at such time; and

(2) any partnership, joint venture, limited liability company or similar entity of which

(x) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and

(y) such Person or any Restricted Subsidiary of such Person is a controlling general partner or otherwise controls such entity.

“Swap Agreements” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference

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to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Issuer or its Subsidiaries shall be a Swap Agreement.

“Total Assets” means the total assets of the Issuer and its Restricted Subsidiaries on a consolidated basis, as shown on the most recent balance sheet of the Issuer or such other Person as may be expressly stated.

“Treasury Rate” means, as of any Redemption Date, the yield to maturity as of such Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to April 15, 2013; provided, however, that if the period from the Redemption Date to April 15, 2013 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

“Trustee” means U.S. Bank National Association, as trustee, until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.

“Unrestricted Definitive Note” means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend or the Canadian Private Placement Legend.

“Unrestricted Global Note” means a permanent Global Note, substantially in the form of Exhibit A attached hereto, that bears the Global Note Legend and that has the “Schedule of Exchanges of Interests in the Global Note” attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing Notes that do not bear the Private Placement Legend or the Canadian Private Placement Legend.

“Unrestricted Subsidiary” means:

(1) any Subsidiary of the Issuer which at the time of determination is an Unrestricted Subsidiary (as designated by the Issuer, as provided below); and

(2) any Subsidiary of an Unrestricted Subsidiary.

The Issuer may designate any Subsidiary of the Issuer (including any existing Subsidiary and any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on, any property of, the Issuer or any Subsidiary of the Issuer (other than solely any Subsidiary of the Subsidiary to be so designated); provided that

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(1) any Unrestricted Subsidiary must be an entity of which the Equity Interests entitled to cast at least a majority of the votes that may be cast by all Equity Interests having ordinary voting power for the election of directors or Persons performing a similar function are owned, directly or indirectly, by the Issuer;

(2) such designation complies with Section 4.07 hereof; and

(3) each of:

(a) the Subsidiary to be so designated; and

(b) its Subsidiaries

has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Issuer or any Restricted Subsidiary.

The Issuer may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that, immediately after giving effect to such designation, no Default shall have occurred and be continuing and either:

(1) the Issuer could incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test described in Section 4.09(a) hereof; or

(2) the Fixed Charge Coverage Ratio for the Issuer and its Restricted Subsidiaries would be greater than such ratio for the Issuer and its Restricted Subsidiaries immediately prior to such designation,

in each case on a pro forma basis taking into account such designation.

Any such designation by the Issuer shall be notified by the Issuer to the Trustee by promptly filing with the Trustee a copy of the resolution of the board of directors of the Issuer or any committee thereof giving effect to such designation and an Officer’s Certificate certifying that such designation complied with the foregoing provisions.

“U.S. Person” means a U.S. person as defined in Rule 902(k) under the Securities Act.

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, at any date, the quotient obtained by dividing:

(1) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such

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Indebtedness or redemption or similar payment with respect to such Disqualified Stock or Preferred Stock multiplied by the amount of such payment; by

(2) the sum of all such payments.

“Wholly-Owned Subsidiary” of any Person means a Subsidiary of such Person, 100% of the outstanding Equity Interests of which (other than directors’ qualifying shares) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person.

Section 1.02. Other Definitions.

Term	Defined in Section
“Acceptable Commitment”	4.10
“Additional Amounts”	4.19
“Affiliate Transaction”	4.11
“Application Period”	4.10
“Asset Sale Offer”	4.10
“Authentication Order”	2.02
“Canadian Commissions”	4.03
“Change of Control Offer”	4.14
“Change of Control Payment”	4.14
“Change of Control Payment Date”	4.14
“Covenant Defeasance”	8.03
“Deductible Amount”	12.12
“DTC”	2.03
“Event of Default”	6.01
“Excess Proceeds”	4.10
“Financial Reports”	4.03
“incur”	4.09
“incurrence”	4.09
“Indemnitee”	12.09
“Initial Lien”	4.12
“Legal Defeasance”	8.02
“Note Register”	2.03
“Offer Amount”	3.09
“Offer Period”	3.09
“Parallel Debt”	12.12
“Parallel Obligor”	12.12
“Paying Agent”	2.03
“Purchase Date”	3.09
“Received Amount”	12.12
“Redemption Date”	3.07
“Refinancing Indebtedness”	4.09

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“Registrar”	2.03
“Relevant Taxing Jurisdiction”	4.19
“Reversion Date”	4.22
“Restricted Payments”	4.07
“Second Commitment”	4.10
“Successor Company”	5.01
“Successor Person”	5.01
“Suspended Covenants”	4.22
“Suspension Date”	4.22
“Suspension Period”	4.22
“Taxes”	4.19

Section 1.03. Rules of Construction.

Unless the context otherwise requires:

(a) a term has the meaning assigned to it;

(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(c) “$” or “dollars” means U.S. dollars;

(d) “or” is not exclusive;

(e) words in the singular include the plural, and in the plural include the singular;

(f) “will” shall be interpreted to express a command;

(g) provisions apply to successive events and transactions;

(h) references to sections of, or rules under, the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time;

(i) unless the context otherwise requires, any reference to an “Article,” “Section” or “clause” refers to an Article, Section or clause, as the case may be, of this Indenture; and

(j) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not any particular Article, Section, clause or other subdivision.

Section 1.04. Acts of Holders.

(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and

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evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Issuer. Proof of execution of any such instrument or of a writing appointing any such agent, or the holding by any Person of a Note, shall be sufficient for any purpose of this Indenture and (subject to Section 7.01) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Section 1.04.

(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by or on behalf of any legal entity other than an individual, such certificate or affidavit shall also constitute proof of the authority of the Person executing the same. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient.

(c) The ownership of Notes shall be proved by the Note Register.

(d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of any action taken, suffered or omitted by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note.

(e) The Issuer may set a record date for purposes of determining the identity of Holders entitled to give any request, demand, authorization, direction, notice, consent, waiver or take any other act, or to vote or consent to any action by vote or consent authorized or permitted to be given or taken by Holders. Unless otherwise specified, if not set by the Issuer prior to the first solicitation of a Holder made by any Person in respect of any such action, or in the case of any such vote, prior to such vote, any such record date shall be the later of 30 days prior to the first solicitation of such consent or the date of the most recent list of Holders furnished to the Trustee prior to such solicitation.

(f) Without limiting the foregoing, a Holder entitled to take any action hereunder with regard to any particular Note may do so with regard to all or any part of the principal amount of such Note or by one or more duly appointed agents, each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. Any notice given or action taken by a Holder or its agents with regard to different parts of such principal amount pursuant to this paragraph shall have the same effect as if given or taken by separate Holders of each such different part.

(g) Without limiting the generality of the foregoing, a Holder, including DTC, that is the Holder of a Global Note may make, give or take, by a proxy or proxies duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action

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provided in this Indenture to be made, given or taken by Holders, and a Holder, including DTC, that is the Holder of a Global Note may provide its proxy or proxies to the beneficial owners of interests in any such Global Note through such depositary’s standing instructions and customary practices.

(h) The Issuer may fix a record date for the purpose of determining the Persons who are beneficial owners of interests in any Global Note held by DTC entitled under the procedures of such depositary to make, give or take, by a proxy or proxies duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders. If such a record date is fixed, the Holders on such record date or their duly appointed proxy or proxies, and only such Persons, shall be entitled to make, give or take such request, demand, authorization, direction, notice, consent, waiver or other action, whether or not such Holders remain Holders after such record date. No such request, demand, authorization, direction, notice, consent, waiver or other action shall be valid or effective if made, given or taken more than 90 days after such record date.

ARTICLE II

THE NOTES

Section 2.01. Form and Dating; Terms.

(a) General. The Notes and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rules or usage. Each Note shall be dated the date of its authentication. The Notes shall be in minimum denominations of $2,000 and any integral multiple of $1,000 in excess thereof.

(b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof.

(c) Terms. The aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is unlimited.

The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Issuer, the Guarantors and the Trustee, by their

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execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

Additional Notes ranking pari passu with the Initial Notes may be created and issued from time to time by the Issuer without notice to or consent of the Holders and shall be consolidated with and form a single class with the Initial Notes and shall have the same terms as to status, waivers, amendments, offers to repurchase, redemption or otherwise as the Initial Notes; provided that (i) the Issuer shall be permitted to issue Additional Notes only if such issuance is permitted under Section 4.09 hereof and, at the time of such issuance, the Issuer is in compliance with the covenants contained herein and (ii) any Additional Notes shall have identical terms and conditions as the Initial Notes other than issue date, issue price and the first interest payment date; provided, however, that any Additional Notes which are not fungible for U.S. federal income tax purposes with the Initial Notes shall be issued under separate CUSIP numbers. Any Additional Notes shall be issued with the benefit of an indenture supplemental to this Indenture.

(d) Euroclear and Clearstream Procedures Applicable. The provisions of the “Operating Procedures of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear” and the “General Terms and Conditions of Clearstream Banking” and “Customer Handbook” of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Global Note that are held by Participants through Euroclear or Clearstream.

Section 2.02. Execution and Authentication.

At least one Officer shall execute the Notes on behalf of the Issuer by manual or facsimile signature.

If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid.

A Note shall not be entitled to any benefit under this Indenture or be valid or obligatory for any purpose until authenticated substantially in the form of Exhibit A attached hereto, as the case may be, by the manual signature of an authorized signatory of the Trustee. The signature shall be conclusive evidence that the Note has been duly authenticated and delivered under this Indenture.

On the Issue Date, the Trustee shall, upon receipt of an Issuer Order (an “Authentication Order”), authenticate and deliver the Initial Notes. In addition, at any time and from time to time, the Trustee shall upon receipt of an Authentication Order authenticate and deliver any Additional Notes for an aggregate principal amount specified in such Authentication Order for such Additional Notes issued hereunder. Such Authentication Order shall specify the amount of the Notes to be authenticated and, in case of any issuance of Additional Notes pursuant to Section 2.01 hereof, shall certify that such issuance is in compliance with Section 2.01 and Section 4.09 hereof.

The Trustee may appoint an authenticating agent acceptable to the Issuer to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may

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do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Issuer.

Section 2.03. Registrar and Paying Agent.

The Issuer shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (“Registrar”) and an office or agency where Notes may be presented for payment (“Paying Agent”), in each case in the Borough of Manhattan, City of New York. The Registrar shall maintain a register (“Note Register”) reflecting ownership of the Notes outstanding from time to time and shall make payments on and facilitate transfer of Notes on behalf of the Issuer. The Issuer may appoint one or more co-registrars and one or more additional paying agents. The term “Registrar” includes any co-registrar and the term “Paying Agent” includes any additional paying agent. The Issuer may change any Paying Agent or Registrar without prior notice to any Holder. The Issuer shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Issuer fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Issuer or any of its Subsidiaries may act as Paying Agent or Registrar.

The Issuer initially appoints The Depository Trust Company (“DTC”) to act as Depositary with respect to the Global Notes.

The Issuer initially appoints the Trustee to act as the Paying Agent and Registrar for the Notes and to act as Custodian with respect to the Global Notes.

Section 2.04. Paying Agent to Hold Money in Trust.

The Issuer shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, or interest on the Notes, and shall notify the Trustee of any default by the Issuer in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Issuer at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Issuer or a Subsidiary) shall have no further liability for the money. If the Issuer or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Issuer, the Trustee shall serve as Paying Agent for the Notes.

Section 2.05. Holder Lists.

The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders. If the Trustee is not the Registrar, the Issuer shall furnish to the Trustee at least two Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes.

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Section 2.06. Transfer and Exchange.

(a) Transfer and Exchange of Global Notes. Except as otherwise set forth in this Section 2.06, a Global Note may be transferred, in whole and not in part, only to another nominee of the Depositary or to a successor Depositary or a nominee of such successor Depositary. A beneficial interest in a Global Note may not be exchanged for a Definitive Note unless (i) the Depositary (x) notifies the Issuer that it is unwilling or unable to continue as Depositary for such Global Note or (y) has ceased to be a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Issuer within 90 days, (ii) subject to the procedures of the Depositary, the Issuer, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Definitive Notes, or (iii) there shall have occurred and be continuing a Default with respect to the Notes. Upon the occurrence of any of the preceding events in (i), (ii) or (iii) above, Definitive Notes delivered in exchange for any Global Note or beneficial interests therein shall be registered in the names, and issued in any approved denominations, requested by or on behalf of the Depositary (in accordance with its customary procedures). Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note, except for Definitive Notes issued subsequent to any of the preceding events in (i), (ii) or (iii) above and pursuant to Section 2.06(c) hereof. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a); provided, however, that beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b) or (c) hereof.

(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to the restrictions on transfer set forth herein to the extent required by the Securities Act or applicable Canadian securities law. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:

(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend and, if applicable, the Canadian Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i).

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(ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) hereof, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) upon the occurrence of any of the events in clauses (i), (ii) or (iii) of Section 2.06(a) hereof, (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(g) hereof.

(iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) hereof and the Registrar receives the following:

(A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;

(B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; or

(C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (3) thereof, and a letter of representation from the transferee in the form of Exhibit E hereto.

(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer

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complies with the requirements of Section 2.06(b)(ii) hereof and the Registrar receives the following:

(A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or

(B) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (5) thereof;

and, in each such case, if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act; provided that no Note shall be issued prior to August 24, 2010 without the Canadian Private Placement Legend.

If any such transfer or exchange is effected pursuant to this subparagraph (iv) at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred or exchanged pursuant to this subparagraph (iv).

Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note.

(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.

(i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon the occurrence of any of the events in clauses (i), (ii) or (iii) of Section 2.06(a) hereof and receipt by the Registrar of the following documentation:

(A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder substantially in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;

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(B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (1) thereof;

(C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (2) thereof;

(D) if such beneficial interest is being transferred to an IAI, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3) thereof;

(E) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (4)(a) thereof;

(F) if such beneficial interest is being transferred to the Issuer or any of its Restricted Subsidiaries, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (4)(b) thereof; or

(G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (4)(c) thereof,

the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(g) hereof, and the Issuer shall execute and the Trustee shall authenticate and mail to the Person designated in the instructions a Definitive Note in the applicable principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall mail such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and, if issued prior to August 24, 2010, the Canadian Private Placement Legend and shall be subject to all restrictions on transfer contained therein.

(ii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only upon the occurrence of any of the events in clauses (i), (ii) or (iii) of Section 2.06(a) hereof and if the Registrar receives the following:

(A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note,

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a certificate from such holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or

(B) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder substantially in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (ii), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act; provided that no Note shall be issued prior to August 24, 2010 without the Canadian Private Placement Legend.

(iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon the occurrence of any of the events in clauses (i), (ii) or (iii) of Section 2.06(a) hereof and satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(g) hereof, and the Issuer shall execute and the Trustee shall authenticate and mail to the Person designated in the instructions a Definitive Note in the applicable principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from or through the Depositary and the Participant or Indirect Participant. The Trustee shall mail such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement Legend or the Canadian Private Placement Legend.

(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.

(i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:

(A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a

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certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;

(B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (1) thereof;

(C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (2) thereof;

(D) if such Restricted Definitive Note is being transferred to an IAI, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3) thereof;

(E) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (4)(a) thereof;

(F) if such Restricted Definitive Note is being transferred to the Issuer or any of its Restricted Subsidiaries, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (4)(b) thereof; or

(G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (4)(c) thereof,

the Trustee shall cancel the Restricted Definitive Note and increase or cause to be increased the aggregate principal amount of the applicable Restricted Global Note.

(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if the Registrar receives the following:

(A) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or

(B) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder

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substantially in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (ii), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act; provided that no Note shall be issued prior to August 24, 2010 without the Canadian Private Placement Legend.

Upon satisfaction of the conditions of this subparagraph (ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.

(iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.

If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraph (ii) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so exchanged or transferred.

(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder’s compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e):

(i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:

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(A) if the transfer will be made to a QIB in accordance with Rule 144A, then the transferor must deliver a certificate substantially in the form of Exhibit B hereto, including the certifications in item (1) thereof;

(B) if the transfer will be made pursuant to Rule 903 or Rule 904 then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof;

(C) if the transfer will be made to an IAI, then the transferor must deliver a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3) thereof; or

(D) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications required by item (4) thereof, if applicable.

(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if the Registrar receives the following:

(A) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or

(B) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder substantially in the form of Exhibit B hereto, including the certifications in item (5) thereof;

and, in each such case set forth in this subparagraph (ii), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act; provided that no Note shall be issued prior to August 24, 2010 without the Canadian Private Placement Legend.

(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.

(f) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture:

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(i) Private Placement Legend.

(A) Except as permitted by subparagraph (C) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear a legend in substantially the following form:

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION DATE”) THAT IS [IN THE CASE OF RULE 144A NOTES: ONE YEAR] [IN THE CASE OF REGULATION S NOTES: 40 DAYS] AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING

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THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND SHALL BE REMOVED WITHOUT FURTHER ACTION OF THE ISSUER, THE TRUSTEE OR ANY HOLDER AT SUCH TIME AS THE ISSUER INSTRUCTS THE TRUSTEE IN WRITING TO REMOVE SUCH LEGEND IN ACCORDANCE WITH THE INDENTURE.

[IN THE CASE OF REGULATION S NOTES:] BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.”

(B) Except as permitted by subparagraph (C) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear a legend in substantially the following form until August 24, 2010:

UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY IN CANADA BEFORE AUGUST 24, 2010.

(C) Notwithstanding the foregoing subparagraphs (A) and (B), any Global Note or Definitive Note issued pursuant to subparagraph (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii) or (e)(iii) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend and any Global Note or Definitive Note issued on or after August 24, 2010 shall not bear the Canadian Private Placement Legend.

(ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form:

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“THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06(g) OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUER. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.”

(g) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note,

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such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.

(h) General Provisions Relating to Transfers and Exchanges.

(i) To permit registrations of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 hereof or at the Registrar’s request.

(ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.07, 2.10, 3.06, 3.09, 4.10, 4.14 and 9.04 hereof).

(iii) Neither the Registrar nor the Issuer shall be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.

(iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.

(v) The Issuer shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a Record Date and the next succeeding Interest Payment Date.

(vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Issuer may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of (and premium, if any) and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Issuer shall be affected by notice to the contrary.

(vii) Upon surrender for registration of transfer of any Note at the office or agency of the Issuer designated pursuant to Section 4.02 hereof, the Issuer shall execute, and the Trustee shall authenticate and mail, in the name of the designated transferee or transferees, one or more replacement Notes of any authorized denomination or denominations of a like aggregate principal amount.

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(viii) At the option of the Holder, Notes may be exchanged for other Notes of any authorized denomination or denominations of a like aggregate principal amount upon surrender of the Notes to be exchanged at such office or agency. Whenever any Global Notes or Definitive Notes are so surrendered for exchange, the Issuer shall execute, and the Trustee shall authenticate and mail, the replacement Global Notes and Definitive Notes which the Holder making the exchange is entitled to in accordance with the provisions of Section 2.02 hereof.

(ix) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile.

(x) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depositary participants or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

Section 2.07. Replacement Notes.

If any mutilated Note is surrendered to the Trustee, the Registrar or the Issuer, or if a Holder claims that its Note has been lost, destroyed or wrongfully taken and the Trustee receives evidence to its satisfaction of the ownership and destruction, loss or theft of such Note, the Issuer shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee’s requirements are met. An indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Issuer to protect the Issuer, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Issuer and the Trustee may charge for their expenses in replacing a Note.

Every replacement Note is a contractual obligation of the Issuer and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Notwithstanding the foregoing provisions of this Section 2.07, in case any mutilated, destroyed, lost or wrongfully taken Note has become due and payable, the Issuer in its discretion may, instead of issuing a new Note, pay such Note.

Section 2.08. Outstanding Notes.

The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those paid pursuant to Section 2.07 hereof, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Issuer or an Affiliate of the Issuer holds the Note.

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If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser.

If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.

If the Paying Agent (other than the Issuer, a Subsidiary or an Affiliate of any thereof) holds, on a Redemption Date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest.

Section 2.09. Treasury Notes.

In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuer, or by any Affiliate of the Issuer, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Notes so owned which have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right to deliver any such direction, waiver or consent with respect to the Notes and that the pledgee is not the Issuer or any obligor upon the Notes or any Affiliate of the Issuer or of such other obligor.

Section 2.10. Temporary Notes.

Until certificates representing Notes are ready for delivery, the Issuer may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Issuer considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Issuer shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes.

Holders and beneficial holders, as the case may be, of temporary Notes shall be entitled to all of the benefits accorded to Holders, or beneficial holders, respectively, of Notes under this Indenture.

Section 2.11. Cancellation.

The Issuer at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee or, at the direction of the Trustee, the Registrar or the Paying Agent and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of such cancelled Notes in accordance with its customary procedures (subject to the record retention requirement of the Exchange Act). The Issuer may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.

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Section 2.12. Defaulted Interest.

If the Issuer defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Issuer shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Issuer shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such defaulted interest as provided in this Section 2.12. The Trustee shall fix or cause to be fixed each such special record date and payment date; provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. The Trustee shall promptly notify the Issuer of such special record date. At least 15 days before the special record date, the Issuer (or, upon the written request of the Issuer, the Trustee in the name and at the expense of the Issuer) shall mail or cause to be mailed, first-class postage prepaid, to each Holder a notice at his or her address as it appears in the Note Register that states the special record date, the related payment date and the amount of such interest to be paid.

Subject to the foregoing provisions of this Section 2.12 and for greater certainty, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue interest, which were carried by such other Note.

Section 2.13. CUSIP and ISIN Numbers

The Issuer in issuing the Notes may use CUSIP numbers and/or ISIN numbers (if then generally in use) and, if so, the Trustee shall use CUSIP numbers and/or ISIN numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer shall as promptly as practicable notify the Trustee in writing of any change in the CUSIP number and ISIN numbers.

ARTICLE III

REDEMPTION

Section 3.01. Notices to Trustee.

If the Issuer elects to redeem Notes pursuant to Section 3.07 hereof, it shall furnish to the Trustee, at least 15 days (or such shorter period as the Trustee shall agree in its sole discretion) before notice of redemption is required to be mailed or caused to be mailed to Holders pursuant to Section 3.03 hereof but not more than 60 days before a Redemption Date, an

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Officer’s Certificate setting forth (i) the paragraph or subparagraph of such Note and/or Section of this Indenture pursuant to which the redemption shall occur, (ii) the Redemption Date, (iii) the principal amount of the Notes to be redeemed and (iv) the redemption price.

Section 3.02. Selection of Notes to Be Redeemed or Purchased.

If less than all of the Notes are to be redeemed pursuant to Section 3.07 hereof or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased (a) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed or (b) on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate. In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or purchased shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the Redemption Date by the Trustee from the then outstanding Notes not previously called for redemption or purchase.

The Trustee shall promptly notify the Issuer in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected shall be in amounts of $2,000 or whole multiples of $1,000 in excess of $2,000; no Notes of $2,000 or less shall be redeemed in part, except that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder, even if not $2,000 or a multiple of $1,000 in excess thereof, shall be redeemed or purchased. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase.

Section 3.03. Notice of Redemption.

Subject to Section 3.09 hereof, the Issuer shall mail or cause to be mailed by first-class mail, postage prepaid, notices of redemption at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at such Holder’s registered address, except that redemption notices may be mailed more than 60 days prior to a Redemption Date if the notice is issued in connection with Article VIII or Article XI hereof. Except as set forth in Section 3.07(b) hereof, notices of redemption may not be conditional.

The notice shall identify the Notes (including CUSIP numbers) to be redeemed and shall state:

(a) the Redemption Date;

(b) the redemption price;

(c) if any Note is to be redeemed in part only, the portion of the principal amount of that Note that is to be redeemed and that, after the Redemption Date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion of the original Note representing the same indebtedness to the extent not redeemed will be issued in the name of the Holder of the Notes upon cancellation of the original Note;

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(d) the name and address of the Paying Agent;

(e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;

(f) that, unless the Issuer defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date;

(g) the paragraph or subparagraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed;

(h) that no representation is made as to the correctness or accuracy of the CUSIP number and/or ISIN number, if any, listed in such notice or printed on the Notes; and

(i) if in connection with a redemption pursuant to Section 3.07(b) hereof, any condition to such redemption.

At the Issuer’s written request, the Trustee shall give the notice of redemption in the Issuer’s name and at its expense; provided that the Issuer shall have delivered to the Trustee, at least 15 days (or such shorter period as the Trustee shall agree in its sole discretion) before notice of redemption is required to be mailed or caused to be mailed to Holders pursuant to this Section 3.03 (unless a shorter notice shall be agreed to by the Trustee), an Officer’s Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.

Section 3.04. Effect of Notice of Redemption.

Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the Redemption Date at the redemption price (except as provided for in Section 3.07(b) hereof). The notice, if mailed in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note designated for redemption in whole or in part shall not affect the validity of the proceedings for the redemption of any other Note. Subject to Section 3.05 hereof, on and after the Redemption Date, interest ceases to accrue on Notes or portions of Notes called for redemption.

Section 3.05. Deposit of Redemption or Purchase Price.

Prior to 10:00 a.m. (New York City time) on the redemption or purchase date, the Issuer shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued and unpaid interest on all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent shall promptly return to the Issuer upon written request any money deposited with the Trustee or the Paying Agent by the Issuer in excess of the amounts necessary to pay the redemption or purchase price of, and accrued and unpaid interest on, all Notes to be redeemed or purchased.

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If the Issuer complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption or purchase. If a Note is redeemed or purchased on or after a Record Date but on or prior to the related Interest Payment Date, then any accrued and unpaid interest to the redemption or purchase date shall be paid to the Person in whose name such Note was registered at the close of business on such Record Date. If any Note called for redemption or purchase shall not be so paid upon surrender for redemption or purchase because of the failure of the Issuer to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest accrued to the redemption or purchase date not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.

Section 3.06. Notes Redeemed or Purchased in Part.

Upon surrender of a Note that is redeemed or purchased in part, the Issuer shall issue and the Trustee shall authenticate for the Holder at the expense of the Issuer a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered representing the same indebtedness to the extent not redeemed or purchased; provided that each new Note shall be in a principal amount of $2,000 or an integral multiple of $1,000 in excess of $2,000. It is understood that, notwithstanding anything in this Indenture to the contrary, only an Authentication Order and not an Opinion of Counsel or Officer’s Certificate is required for the Trustee to authenticate such new Note.

Section 3.07. Optional Redemption.

(a) At any time prior to April 15, 2013, the Issuer may redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to the registered address of each Holder, at a redemption price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, to the date of redemption (the “Redemption Date”), subject to the rights of Holders on the relevant Record Date to receive interest due on the relevant Interest Payment Date.

(b) Until April 15, 2013, the Issuer may, at its option, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to the registered address of each Holder, redeem up to 35% of the aggregate principal amount of Notes issued by it at a redemption price equal to 108.625% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, subject to the right of Holders of Notes of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the sum of the aggregate principal amount of Notes originally issued under this Indenture and any Additional Notes issued under this Indenture after the Issue Date remains outstanding immediately after the occurrence of each such redemption; provided further that each such redemption occurs within 90 days of the date of closing of each such Equity Offering. Notice of any redemption upon any Equity Offering may be given prior to the redemption thereof, and any such redemption or notice may, at the Issuer’s discretion, be subject to one or more conditions precedent, including, but not limited to, completion of the related Equity Offering.

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(c) At any time prior to April 15, 2013, the Issuer may redeem a portion of the Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to the registered address of each Holder, at a redemption price equal to 103.000% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, subject to the rights of Holders of Notes on the relevant Record Date to receive interest due on the relevant Interest Payment Date; provided that in no event may the Issuer redeem more than 10% of the original aggregate principal amount of the Notes and any Additional Notes during any twelve-month period.

(d) Except pursuant to paragraph (a), (b), (c) or (f) of this Section 3.07, the Notes shall not be redeemable at the Issuer’s option prior to April 15, 2013.

(e) On and after April 15, 2013, the Issuer may redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail, postage prepaid, with a copy to the Trustee, to the registered address of each Holder, at the redemption prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date, if redeemed during the twelve-month period beginning on April 15 of each of the years indicated below:

Year	Percentage
2013		106.469	%
2014		104.313	%
2015		102.156	%
2016 and thereafter		100.000	%

(f) The Issuer is entitled to redeem the Notes, at its option, at any time as a whole but not in part, upon not less than 30 nor more than 60 days’ notice mailed by first-class mail to the registered address of each Holder, at 100% of the principal amount thereof, plus accrued and unpaid interest (if any) to the Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date), in the event the Issuer has become or would become obligated to pay, on the next date on which any amount would be payable with respect to the Notes, any Additional Amounts pursuant to Section 4.19 hereof as a result of:

(i) a change in or an amendment to the laws (including any regulations promulgated thereunder) of any Relevant Taxing Jurisdiction; or

(ii) any change in or amendment to any official position of a taxing authority in any Relevant Taxing Jurisdiction regarding the application or interpretation of such laws or regulations (including a holding by a court of competent jurisdiction),

which change or amendment is announced or becomes effective on or after April 9, 2010. Before the Issuer publishes or mails notice of redemption of the Notes as described above in this paragraph (f), the Issuer shall deliver to the Trustee an Officer’s Certificate to the effect that it

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cannot avoid its obligation to pay Additional Amounts by taking reasonable measures available to it. The Issuer shall also deliver an opinion of independent legal counsel of recognized standing stating that the Issuer would be obligated to pay Additional Amounts as a result of a change in tax laws or regulations or the application or interpretation of such laws or regulations by the Relevant Taxing Jurisdiction.

(g) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.

Section 3.08. Mandatory Redemption.

The Issuer shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.

Section 3.09. Offers to Repurchase by Application of Excess Proceeds.

(a) In the event that, pursuant to Section 4.10 hereof, the Issuer shall be required to commence an Asset Sale Offer, it shall follow the procedures specified below.

(b) The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the “Offer Period”). No later than five Business Days after the termination of the Offer Period (the “Purchase Date”), the Issuer shall apply all Excess Proceeds (the “Offer Amount”) to the purchase of Notes and, if required, Other Pari Passu Lien Obligations (on a pro rata basis, if applicable, as provided in Section 4.10 hereof), or, if less than the Offer Amount has been tendered, all Notes and Other Pari Passu Lien Obligations validly tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made.

(c) If the Purchase Date is on or after a Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest, if any, up to but excluding the Purchase Date, shall be paid to the Person in whose name a Note is registered at the close of business on such Record Date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer.

(d) Upon the commencement of an Asset Sale Offer, the Issuer shall send, by first-class mail, a notice to each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders and, if required by the terms of any Other Pari Passu Lien Obligations, to the holders of such Other Pari Passu Lien Obligations. The notice, which shall govern the terms of the Asset Sale Offer, shall state:

(i) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open;

(ii) the Offer Amount, the purchase price and the Purchase Date;

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(iii) that any Note not tendered or accepted for payment shall continue to accrue interest;

(iv) that, unless the Issuer defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date;

(v) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in a minimum denomination of $2,000 or an integral multiple of $1,000 in excess of $2,000;

(vi) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” attached to the Note completed, or transfer by book-entry transfer, to the Issuer, the Depositary, if appointed by the Issuer, or a Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Purchase Date;

(vii) that Holders shall be entitled to withdraw their election if the Issuer, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;

(viii) that, if the aggregate principal amount of Notes and Other Pari Passu Lien Obligations surrendered by the holders thereof exceeds the Offer Amount, the Trustee shall select the Notes and such Other Pari Passu Lien Obligations to be purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Other Pari Passu Lien Obligations tendered (with such adjustments as may be deemed appropriate by the Trustee so that only Notes in minimum denominations of $2,000, or integral multiples of $1,000 in excess of $2,000, shall be purchased); and

(ix) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer) representing the same indebtedness to the extent not repurchased.

(e) On or before the Purchase Date, the Issuer shall, to the extent lawful, (1) accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes and, if required, Other Pari Passu Lien Obligations or portions thereof validly tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes and Other Pari Passu Lien Obligations tendered and (2) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer’s Certificate stating the aggregate principal amount of Notes or portions thereof so tendered.

(f) The Issuer, the Depositary or the Paying Agent, as the case may be, shall promptly mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes properly tendered by such Holder and accepted by the Issuer for purchase, and the Issuer

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shall promptly issue a new Note, and the Trustee, upon receipt of an Authentication Order, shall authenticate and mail or deliver (or cause to be transferred by book-entry) such new Note to such Holder (it being understood that, notwithstanding anything in this Indenture to the contrary, no Opinion of Counsel or Officer’s Certificate is required for the Trustee to authenticate and mail or deliver such new Note) in a principal amount equal to any unpurchased portion of the Note surrendered representing the same indebtedness to the extent not repurchased; provided, that each such new Note shall be in a minimum principal amount of $2,000 or an integral multiple of $1,000 in excess of $2,000. Any Note not so accepted shall be promptly mailed or delivered by the Issuer to the Holder thereof. The Issuer shall publicly announce the results of the Asset Sale Offer on or as soon as practicable after the Purchase Date.

Other than as specifically provided in this Section 3.09 or Section 4.10 hereof, any purchase pursuant to this Section 3.09 shall be made pursuant to the applicable provisions of Sections 3.01 through 3.06 hereof.

ARTICLE IV

COVENANTS

Section 4.01. Payment of Notes.

The Issuer shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Issuer or a Subsidiary, holds as of 10:00 a.m., New York City time, on the due date money deposited by the Issuer in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due.

The Issuer shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful.

Section 4.02. Maintenance of Office or Agency.

The Issuer shall maintain in the Borough of Manhattan in the City of New York an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may

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from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Issuer of its obligation to maintain an office or agency in the Borough of Manhattan in the City of New York for such purposes. The Issuer shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

The Issuer hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Issuer in accordance with Section 2.03 hereof.

Section 4.03. Reports and Other Information.

(a) For so long as any Notes are outstanding:

(i) if the Issuer is subject to the reporting requirements of the securities laws of Canada and is required to file information with one or more securities commissions in Canada (“Canadian Commissions”) pursuant to such laws, the Issuer shall furnish to the Trustee (and the Holders of the Notes and beneficial owners of the Notes, to the extent not otherwise available on the Canadian System for Electronic Document Analysis and Retrieval or the Issuer’s website), as promptly as is reasonably practicable after such information has been filed (which filing shall be made within 15 days after the time periods specified in the Canadian Commissions’ rules and regulations), including the following:

(A) all quarterly and annual financial information that the Issuer is required to file pursuant to the securities laws of Canada with the Canadian Commissions, including in each case a “Management’s discussion and analysis of financial condition and results of operations,” annual or interim financial statements, as the case may be, and, with respect to the annual information only, an auditor’s report on the annual financial statements by the Issuer’s independent chartered accountants; and

(B) all non-confidential material change reports, business acquisition reports, other current reports, financial statements, forms and circulars that the Issuer is required to file with the Canadian Commissions;

(ii) if the Issuer is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Issuer shall furnish to the Trustee (and the Holders of the Notes and beneficial owners of the Notes, to the extent not otherwise available on the SEC’s Electronic Data Gathering, Analysis and Retrieval system or the Issuer’s website), as promptly as is reasonably practicable after such information has been filed (which filing shall be made within 15 days after the time periods specified in the SEC’s rules and regulations), including the following:

(A) annual reports of the Issuer containing the information that is required to be contained in an Annual Report on Form 10-K under the Exchange Act, including (1) “Management’s discussion and analysis of financial condition and results of operations,” (2) audited financial statements and (3) a report on the annual financial statements by the Issuer’s independent chartered accountants;

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(B) quarterly reports of the Issuer containing the information that is required to be contained in a Quarterly Report on Form 10-Q under the Exchange Act, including (1) “Management’s discussion and analysis of financial condition and results of operations” and (2) unaudited quarterly financial statements reviewed pursuant to Statement on Auditing Standards No. 100 (or any successor provision); and

(C) all current reports that are required to be filed with the SEC on Form 8-K; and

(iii) if the Issuer is neither (a) subject to the securities laws of Canada and is not required to file information with a Canadian Commission nor (b) subject to Section 13 or 15(d) of the Exchange Act, then the Issuer, at its election, shall furnish to the Trustee and Holders all of the financial information and reports referred to in either clause (i) or clause (ii) above (the “Financial Reports”) at the times specified in the applicable clause; provided that any such election once made shall be irrevocable (and shall only be made once).

(b) For the avoidance of doubt, the Issuer may satisfy its obligations under this Section 4.03 by providing reports pursuant to any of clauses (a)(i), (a)(ii) or (a)(iii), to the extent that the conditions set forth in the applicable clause are satisfied.

(c) Notwithstanding anything to the contrary herein, nothing herein shall be construed to require the Issuer to include in any Financial Reports delivered under clause (a)(iii) above any information required by Rule 3-10 or Rule 3-16 of Regulation S-X of the Exchange Act.

(d) The Issuer and the Guarantors shall make available to the Holders and to prospective investors, upon the request of such Holders, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Notes are not freely transferable under the Securities Act.

(e) In the event that any direct or indirect parent company of the Issuer is or becomes a Guarantor of the Notes, the Issuer may satisfy its obligations under this Section 4.03 with respect to financial information relating to the Issuer by furnishing financial information relating to such parent; provided that the same is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such parent, on the one hand, and the information relating to the Issuer and its Restricted Subsidiaries on a standalone basis, on the other hand.

(f) The Issuer shall hold a quarterly conference call for the Holders of Notes to discuss financial information for the previous quarter. Such conference call shall take place following the last day of each fiscal quarter of the Issuer and not later than 10 Business Days from the time that the Issuer distributes the financial information as set forth in Section 4.03(a) hereof. Prior to such conference call, the Issuer shall issue a press release to the Dow Jones Newswires or another internationally recognized wire service announcing the time and date of such conference call and shall provide instructions for Holders of Notes, securities analysts and

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prospective investors to obtain access to such call. For the avoidance of doubt, the Issuer may satisfy the requirements of this Section 4.03(f) by holding such conference call within the time period required as part of any earnings call of the Issuer in accordance with past practice.

(g) Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of the same shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer’s Certificates).

(h) The Trustee shall have no obligation whatsoever to determine whether or not the Issuer has made available any information on the Canadian System for Electronic Documents Analysis and Retrieval or the SEC’s Electronic Data Gathering, Analysis and Retrieval system.

Section 4.04. Compliance Certificate.

(a) The Issuer shall deliver to the Trustee, within 120 days after the end of each fiscal year ending after the Issue Date, a certificate from the principal executive officer, principal financial officer or principal accounting officer stating that a review of the activities of the Issuer and its Restricted Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officer with a view to determining whether the Issuer has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to such Officer signing such certificate, that to the best of his or her knowledge the Issuer has kept, observed, performed and fulfilled each and every condition and covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions, covenants and conditions of this Indenture (or, if a Default shall have occurred, describing all such Defaults of which he or she may have knowledge and what action the Issuer is taking or proposes to take with respect thereto).

(b) When any Default has occurred and is continuing under this Indenture, or if the Trustee or the holder of any other evidence of Indebtedness of the Issuer or any Restricted Subsidiary gives any notice or takes any other action with respect to a claimed Default, the Issuer shall promptly (which shall be no more than 30 days thereafter) deliver to the Trustee by registered or certified mail or by facsimile transmission an Officer’s Certificate specifying such event and what action the Issuer proposes to take with respect thereto.

Section 4.05. Taxes.

The Issuer shall pay, and shall cause each of its Restricted Subsidiaries to pay, prior to delinquency, all taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate negotiations or proceedings and for which adequate reserves have been maintained or where the failure to effect such payment would not reasonably be expected to be adverse in any material respect to the Holders of the Notes.

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Section 4.06. Stay, Extension and Usury Laws.

The Issuer and each of the Guarantors covenant (to the extent that they may lawfully do so) that they shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer and each of the Guarantors (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant that they shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted.

Section 4.07. Limitation on Restricted Payments.

(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly:

(I) declare or pay any dividend or make any payment or distribution on account of the Issuer’s, or any of its Restricted Subsidiaries’ Equity Interests, including any dividend or distribution payable in connection with any merger, consolidation or amalgamation other than:

(A) dividends or distributions by the Issuer payable solely in Equity Interests (other than Disqualified Stock) of the Issuer; or

(B) dividends or distributions by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary other than a Wholly-Owned Subsidiary, the Issuer or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities;

(II) purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests of the Issuer or any direct or indirect parent of the Issuer, including in connection with any merger, consolidation or amalgamation;

(III) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value in each case, prior to any scheduled repayment, sinking fund payment or maturity, any Subordinated Indebtedness, other than:

(A) Indebtedness permitted under clauses (7) and (8) of Section 4.09(b) hereof; or

(B) the purchase, repurchase or other acquisition of Subordinated Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition; or

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(IV) make any Restricted Investment,

(all such payments and other actions set forth in clauses (I) through (IV) above being collectively referred to as “Restricted Payments”), unless, at the time of such Restricted Payment:

(1) no Default shall have occurred and be continuing or would occur as a consequence thereof;

(2) immediately after giving effect to such transaction on a pro forma basis, the Issuer could incur $1.00 of additional Indebtedness under Section 4.09(a) hereof; and

(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuer and its Restricted Subsidiaries after the Issue Date (including Restricted Payments permitted by clauses (1), (4) and (11) and 50% of Restricted Payments permitted by clause (12) of Section 4.07(b) hereof, but excluding all other Restricted Payments permitted by Section 4.07(b) hereof), is less than the sum of (without duplication):

(a) 50% of the Consolidated Net Income of the Issuer for the period (taken as one accounting period) from the beginning of the first day of the month in which the Notes are initially issued, to the end of the Issuer’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, or, in the case such Consolidated Net Income for such period is a deficit, minus 100% of such deficit; plus

(b) 100% of the aggregate net cash proceeds and the Fair Market Value of marketable securities or other property received by the Issuer since immediately after the Issue Date (other than net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness, Disqualified Stock or Preferred Stock pursuant to clause (12)(a) of Section 4.09(b) hereof) from the issue or sale of:

(i) (A) Equity Interests of the Issuer, excluding cash proceeds and the Fair Market Value of marketable securities or other property received from the sale of:

(x) Equity Interests to members of management, directors or consultants of the Issuer, any direct or indirect parent company of the Issuer and the Issuer’s Subsidiaries after the Issue Date to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of Section 4.07(b) hereof; and

(y) Designated Preferred Stock

and (B) to the extent such net cash proceeds are actually contributed to the Issuer, Equity Interests of the Issuer’s direct or indirect parent

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companies (excluding contributions of the proceeds from the sale of Designated Preferred Stock of such companies or contributions to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of Section 4.07(b) hereof); or

(ii) debt securities of the Issuer that have been converted into or exchanged for such Equity Interests of the Issuer;

provided that this clause (b) shall not include the proceeds from (X) Equity Interests or convertible debt securities of the Issuer sold to a Restricted Subsidiary, as the case may be, (Y) Disqualified Stock or debt securities that have been converted into Disqualified Stock or (Z) Excluded Contributions; plus

(c) 100% of the aggregate amount of cash and the Fair Market Value of marketable securities or other property contributed to the capital of the Issuer following the Issue Date (other than net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness, Disqualified Stock or Preferred Stock pursuant to clause (12)(a) of Section 4.09(b) hereof) (other than by a Restricted Subsidiary and other than by any Excluded Contributions); plus

(d) 100% of the aggregate amount received in cash and the Fair Market Value of marketable securities or other property received by means of:

(i) the sale or other disposition (other than to the Issuer or a Restricted Subsidiary) of Restricted Investments made by the Issuer or its Restricted Subsidiaries and repurchases and redemptions of such Restricted Investments from the Issuer or its Restricted Subsidiaries and repayments of loans or advances, and releases of guarantees, which constitute Restricted Investments by the Issuer or its Restricted Subsidiaries, in each case after the Issue Date; or

(ii) the sale (other than to the Issuer or a Restricted Subsidiary) of the stock of an Unrestricted Subsidiary or a distribution from an Unrestricted Subsidiary (other than in each case to the extent such Investment constituted a Permitted Investment) or a dividend from an Unrestricted Subsidiary after the Issue Date; plus

(e) in the case of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary after the Issue Date, the Fair Market Value of the Investment in such Unrestricted Subsidiary at the time of redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary (other than an Unrestricted Subsidiary to the extent the Investment in such Unrestricted Subsidiary constituted a Permitted Investment).

(b) The foregoing provisions of Section 4.07(a) hereof shall not prohibit:

(1) the payment of any dividend or distribution or the consummation of any irrevocable redemption within 60 days after the date of declaration thereof or the giving

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of such irrevocable notice, as applicable, if at the date of declaration or notice of such payment would have complied with the provisions of this Indenture;

(2)(a) the redemption, repurchase, retirement or other acquisition of any Equity Interests or Subordinated Indebtedness of the Issuer or any Equity Interests of any direct or indirect parent company of the Issuer, in exchange for, or out of the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary) of, Equity Interests of the Issuer or any direct or indirect parent company of the Issuer to the extent contributed to the Issuer (in each case, other than any Disqualified Stock);

(3) the redemption, repurchase or other acquisition or retirement of Subordinated Indebtedness of the Issuer or a Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, new Indebtedness of the Issuer or a Guarantor, as the case may be, which is incurred in compliance with Section 4.09 hereof so long as:

(a) the principal amount of such new Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus any accrued and unpaid interest on, the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired for value, plus the amount of any reasonable premium required to be paid under the terms of the instrument governing the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired and any reasonable fees and expenses incurred in connection with the issuance of such new Indebtedness;

(b) such new Indebtedness is subordinated to the Notes or the applicable Guarantee at least to the same extent as such Subordinated Indebtedness so purchased, exchanged, redeemed, repurchased, acquired or retired for value;

(c) such new Indebtedness has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired; and

(d) such new Indebtedness has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired;

(4) a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value of Equity Interests (other than Disqualified Stock) of the Issuer or any of its direct or indirect parent companies held by any future, present or former employee, director or consultant of the Issuer, any of its Subsidiaries or any of its direct or indirect parent companies pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement; provided, however, that the aggregate Restricted Payments made under this clause (4) do not exceed in any calendar year $7.5 million (with unused amounts in any calendar year

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being carried over to succeeding calendar years subject to a maximum (without giving effect to the following proviso) of $15.0 million in any calendar year); provided further that such amount in any calendar year may be increased by an amount not to exceed:

(a) the cash proceeds from the sale of Equity Interests (other than Disqualified Stock) of the Issuer and, to the extent contributed to the Issuer, Equity Interests of any of the Issuer’s direct or indirect parent companies, in each case to employees, directors or consultants of the Issuer, any of its Subsidiaries or any of its direct or indirect parent companies that occurs after the Issue Date, to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (3) of Section 4.07(a) hereof; plus

(b) the cash proceeds of key man life insurance policies received by the Issuer or its Restricted Subsidiaries after the Issue Date; less

(c) the amount of any Restricted Payments previously made with the cash proceeds described in clauses (a) and (b) of this clause (4);

provided, however, in the case of this clause (4), that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of such Restricted Payment, the Issuer and its Restricted Subsidiaries on a consolidated basis would have had a Fixed Charge Coverage Ratio of at least 2.00 to 1.00; and provided further that the aggregate amount of Restricted Payments made pursuant to this Section 4.07(b)(4) shall not exceed $25.0 million;

(5) the declaration and payment of dividends on Disqualified Stock of the Issuer or any of its Restricted Subsidiaries issued in accordance with Section 4.09 hereof to the extent such dividends are included in the definition of “Fixed Charges”;

(6)(a) the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by the Issuer after the Issue Date; provided that the amount of dividends paid pursuant to this clause (a) shall not exceed the aggregate amount of cash actually received by the Issuer from the sale of such Designated Preferred Stock; or

(b) the declaration and payment of dividends to a direct or indirect parent company of the Issuer, the proceeds of which will be used to fund the payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of such parent corporation issued after the Issue Date, provided that the amount of dividends paid pursuant to this clause (b) shall not exceed the aggregate amount of cash actually contributed to the Issuer from the sale of such Designated Preferred Stock;

provided, however, in the case of each of (a) and (b) of this clause (6), that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock, after giving effect to such issuance or declaration on a pro forma basis, the Issuer and its

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Restricted Subsidiaries on a consolidated basis would have had a Fixed Charge Coverage Ratio of at least 2.00 to 1.00;

(7) repurchases of Equity Interests deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants;

(8) Restricted Payments that are made with Excluded Contributions;

(9) other Restricted Payments in an aggregate amount taken together with all other Restricted Payments made pursuant to this clause (9) not to exceed $25.0 million; provided, however, that no Restricted Payments of the types described in clause (I) and clause (II) of the first paragraph of Section 4.07(a) hereof shall be made pursuant to this clause (9) unless, immediately prior to and after giving pro forma effect to such Restricted Payment, the Issuer’s Consolidated Secured Debt Ratio is less than 3.50 to 1.00;

(10) any Restricted Payment used to fund the Refinancing Transactions and the fees and expenses related thereto or owed to Affiliates, in each case to the extent permitted by Section 4.11 hereof;

(11) the repurchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Indebtedness pursuant to the provisions similar to those described:

(a) under Section 4.14 hereof, at a purchase price not greater than 101% of the principal amount of such Subordinated Indebtedness, plus any accrued and unpaid interest thereon; provided that all Notes tendered by Holders in connection with a Change of Control Offer have been repurchased, redeemed or acquired for value; and

(b) under Section 4.10 hereof, at a purchase price not greater than 100% of the principal amount of such Subordinated Indebtedness; provided that all Notes tendered by Holders in connection with an Asset Sale Offer have been repurchased, redeemed or acquired for value;

(12) the declaration and payment of dividends by the Issuer to, or the making of loans to, any direct or indirect parent in amounts required for any direct or indirect parent companies to pay, in each case without duplication,

(a) franchise taxes and other fees, taxes and expenses required to maintain their corporate existence;

(b) foreign, federal, state and local income taxes, to the extent such income taxes are attributable to the income of the Issuer and its Restricted Subsidiaries and, to the extent of the amount actually received from its Unrestricted Subsidiaries, in amounts required to pay such taxes to the extent attributable to the income of such Unrestricted Subsidiaries; provided that in each

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case the amount of such payments in any fiscal year does not exceed the amount that the Issuer and its Restricted Subsidiaries would be required to pay in respect of federal, state and local taxes for such fiscal year were the Issuer, its Restricted Subsidiaries and its Unrestricted Subsidiaries (to the extent described above) to pay such taxes separately from any such parent entity;

(c) customary salary, bonus and other benefits payable to officers, directors and employees of any direct or indirect parent company of the Issuer to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries, including the Issuer’s proportionate share of such amounts relating to such parent entity being a public company;

(d) general corporate operating and overhead costs and expenses of any direct or indirect parent company of the Issuer to the extent such costs and expenses are attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries, including the Issuer’s proportionate share of such amounts relating to such parent entity being a public company; and

(e) fees and expenses other than to Affiliates of the Issuer related to any unsuccessful equity or debt offering of such parent entity;

(13) the distribution, by dividend or otherwise, of shares of Capital Stock of, or Indebtedness owed to the Issuer or a Restricted Subsidiary by, Unrestricted Subsidiaries (other than Unrestricted Subsidiaries, the primary assets of which are cash and/or Cash Equivalents); and

(14) the repurchase, redemption, or other acquisition for value of Equity Interests of the Issuer deemed to occur in connection with paying cash in lieu of fractional shares of such Equity Interests in connection with a share dividend, distribution, share split, reverse share split, merger, consolidation, amalgamation or other business combination of the Issuer, in each case, permitted under this Indenture;

provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (4), (9), (12) and (13) of this Section 4.07(b), no Default shall have occurred and be continuing or would occur as a consequence thereof.

(c) The Issuer shall not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the last sentence of the definition of “Unrestricted Subsidiary.” For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by the Issuer and its Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated shall be deemed to be Restricted Payments in an amount determined as set forth in the last sentence of the definition of “Investments.” Such designation shall be permitted only if a Restricted Payment in such amount would be permitted at such time (or such designation would not constitute a Restricted Payment) and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.

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Section 4.08. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.

The Issuer shall not, and shall not permit any of its Restricted Subsidiaries that are not Guarantors to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any such Restricted Subsidiary to:

(1)    (A) pay dividends or make any other distributions to the Issuer or any of its Restricted Subsidiaries on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, or

(B) pay any Indebtedness owed to the Issuer or any of its Restricted Subsidiaries;

(2) make loans or advances to the Issuer or any of its Restricted Subsidiaries; or

(3) sell, lease or transfer any of its properties or assets to the Issuer or any of its Restricted Subsidiaries,

except (in each case) for such encumbrances or restrictions existing under or by reason of:

(a) contractual encumbrances or restrictions in effect on the Issue Date, including pursuant to the Senior Credit Facilities and the related documentation;

(b) this Indenture and the Notes;

(c) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature discussed in clause (3) of this Section 4.08 on the property so acquired;

(d) applicable law or any applicable rule, regulation or order;

(e) any agreement or other instrument of a Person acquired by the Issuer or any of its Restricted Subsidiaries in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person and its Subsidiaries, or the property or assets of the Person and its Subsidiaries, so acquired;

(f) contracts for the sale of assets, including customary restrictions with respect to a Subsidiary of the Issuer pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary;

(g) Secured Indebtedness otherwise permitted to be incurred pursuant to Section 4.09 hereof and Section 4.12 hereof that limit the right of the debtor to dispose of the assets securing such Indebtedness;

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(h) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;

(i) other Indebtedness, Disqualified Stock or Preferred Stock of Non-Guarantor Subsidiaries permitted to be incurred subsequent to the Issue Date pursuant to the provisions of Section 4.09 hereof;

(j) customary provisions in joint venture agreements and other similar agreements relating solely to such joint venture;

(k) customary provisions contained in leases or licenses of intellectual property and other agreements, in each case, entered into in the ordinary course of business; and

(l) any encumbrances or restrictions of the type referred to in clauses (1), (2) and (3) of this Section 4.08 imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (a) through (k) of this Section 4.08; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Issuer, not materially more restrictive with respect to such encumbrance and other restrictions taken as a whole than those prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.

Section 4.09. Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.

(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise (collectively, “incur” and collectively, an “incurrence”) with respect to any Indebtedness (including Acquired Indebtedness) and the Issuer shall not, and shall not permit any Restricted Subsidiary that is a Guarantor to, issue any shares of Disqualified Stock and shall not permit any Restricted Subsidiary that is not a Guarantor to issue any shares of Disqualified Stock or Preferred Stock; provided, however, that the Issuer and any Restricted Subsidiary that is a Guarantor may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock, and any of its Restricted Subsidiaries that are not Guarantors may incur Indebtedness (including Acquired Indebtedness), issue shares of Disqualified Stock and issue shares of Preferred Stock, if the Fixed Charge Coverage Ratio on a consolidated basis for the Issuer and its Restricted Subsidiaries’ most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or Preferred Stock is issued would have been at least 2.00 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or Preferred Stock had been issued, as the case may be, and the application of proceeds therefrom had occurred at the beginning of such four-quarter period; provided, however, that Restricted Subsidiaries that are not Guarantors may not incur Indebtedness or issue Disqualified Stock or Preferred Stock if, after giving pro forma effect to

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such incurrence or issuance (including a pro forma application of the net proceeds therefrom), more than an aggregate of $25.0 million of Indebtedness or Disqualified Stock or Preferred Stock of Restricted Subsidiaries that are not Guarantors is outstanding pursuant to this Section 4.09(a) at such time.

(b) The provisions of Section 4.09(a) hereof shall not apply to:

(1) the incurrence of Indebtedness under Senior Credit Facilities by the Issuer or any of the Guarantors and the issuance or creation of letters of credit and bankers’ acceptances thereunder or in connection therewith (with letters of credit and bankers’ acceptances being deemed to have a principal amount equal to the face amount thereof), in an aggregate principal amount of up to the greater of (x) $115.0 million and (y) the Borrowing Base as of the date of such incurrence of Indebtedness;

(2) the incurrence by the Issuer and any Guarantor of Indebtedness represented by the Notes (including any Guarantee) (other than any Additional Notes);

(3) Indebtedness of the Issuer and its Restricted Subsidiaries in existence on the Issue Date (other than Indebtedness described in clauses (1) and (2) of this Section 4.09(b));

(4) Indebtedness (including Capitalized Lease Obligations), Disqualified Stock and Preferred Stock incurred by the Issuer or any of its Restricted Subsidiaries, to finance the purchase, lease, construction, installation or improvement of property (real or personal) or equipment that is used or useful in a Similar Business, whether through the direct purchase of assets or the Capital Stock of any Person owning such assets up to an aggregate amount which, when aggregated with the principal amount of all other Indebtedness, Disqualified Stock and Preferred Stock then outstanding and incurred pursuant to this clause (4) and including all Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness, Disqualified Stock and Preferred Stock incurred pursuant to this clause (4), does not exceed the greater of (x) $40.0 million and (y) 5% of Total Assets;

(5) Indebtedness incurred by the Issuer or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including letters of credit in respect of workers’ compensation claims, self-insurance obligations, performance or surety bonds or other Indebtedness with respect to reimbursement type obligations regarding workers’ compensation claims, self-insurance obligations or performance or surety bonds; provided, however, that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence;

(6) Indebtedness arising from agreements of the Issuer or any of its Restricted Subsidiaries providing for indemnification, adjustment of purchase price, earnout or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by

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any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided, however, that

(A) such Indebtedness is not reflected on the balance sheet of the Issuer, or any of its Restricted Subsidiaries (Contingent Obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (6)(A)); and

(B) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including non-cash proceeds (the Fair Market Value of such non-cash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Issuer and any of its Restricted Subsidiaries in connection with such disposition;

(7) Indebtedness of the Issuer to a Restricted Subsidiary; provided that any such Indebtedness owing to a Restricted Subsidiary that is not a Guarantor is expressly subordinated in right of payment to the Notes; provided further that any subsequent issuance or transfer of any Capital Stock or any other event which results in any Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary) shall be deemed, in each case, to be an incurrence of such Indebtedness;

(8) Indebtedness of a Restricted Subsidiary to the Issuer or another Restricted Subsidiary; provided that if a Guarantor incurs such Indebtedness to a Restricted Subsidiary that is not a Guarantor, such Indebtedness is expressly subordinated in right of payment to the Guarantee of the Notes of such Guarantor; provided further that any subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary) shall be deemed, in each case, to be an incurrence of such Indebtedness;

(9) shares of Preferred Stock of a Restricted Subsidiary issued to the Issuer or another Restricted Subsidiary; provided that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such shares of Preferred Stock (except to the Issuer or another of its Restricted Subsidiaries) shall be deemed in each case to be an issuance of such shares of Preferred Stock;

(10) Hedging Obligations (excluding Hedging Obligations entered into for speculative purposes) for the purpose of limiting interest rate risk with respect to any Indebtedness permitted to be incurred pursuant to this Section 4.09, exchange rate risk or commodity pricing risk and Bank Product Obligations;

(11) obligations in respect of performance, bid, appeal and surety bonds and completion guarantees provided by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;

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(12)(a) Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or any Restricted Subsidiary equal to 100.0% of the net cash proceeds received by the Issuer since immediately after the Issue Date from the issue or sale of Equity Interests of the Issuer or cash contributed to the capital of the Issuer (in each case, other than proceeds of Disqualified Stock, or sales of Equity Interests to the Issuer or any of its Subsidiaries, Excluded Contributions and Designated Preferred Stock) as determined in accordance with clauses (3)(b) and (3)(c) of Section 4.07(a) hereof to the extent such net cash proceeds or cash have not been applied pursuant to such clauses to make Restricted Payments or to make other Investments, payments or exchanges pursuant to Section 4.07(b) hereof or to make Permitted Investments (other than Permitted Investments specified in clauses (1) and (3) of the definition thereof) and (b) Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or any Restricted Subsidiary not otherwise permitted hereunder in an aggregate principal amount or liquidation preference, which when aggregated with the principal amount and liquidation preference of all other Indebtedness, Disqualified Stock and Preferred Stock then outstanding and incurred pursuant to this clause (12)(b), does not at any one time outstanding exceed $50.0 million; provided that the aggregate amount of Indebtedness, Disqualified Stock and Preferred Stock incurred by Non-Guarantor Subsidiaries pursuant to this clause (12) shall not exceed $25.0 million outstanding at any one time;

(13) the incurrence by the Issuer or any Restricted Subsidiary of Indebtedness, Disqualified Stock or Preferred Stock which serves to refund or refinance any Indebtedness, Disqualified Stock or Preferred Stock incurred as permitted under Section 4.09(a) hereof and clauses (2), (3) and (12)(a) of this Section 4.09(b), this clause (13), clauses (14) and (18) of this Section 4.09(b) or any Indebtedness, Disqualified Stock or Preferred Stock issued to so refund or refinance such Indebtedness, Disqualified Stock or Preferred Stock including additional Indebtedness, Disqualified Stock or Preferred Stock incurred to pay premiums (including reasonable tender premiums), defeasance costs and fees and expenses in connection therewith (the “Refinancing Indebtedness”) prior to its respective maturity; provided, however, that such Refinancing Indebtedness:

(A) has a Stated Maturity equal to or later than the Stated Maturity, and a Weighted Average Life to Maturity which is equal to or greater than the remaining Weighted Average Life to Maturity, of the Indebtedness, Disqualified Stock or Preferred Stock being refunded or refinanced,

(B) to the extent such Refinancing Indebtedness refinances (i) Indebtedness subordinated or pari passu to the Notes or any Guarantee thereof, such Refinancing Indebtedness is subordinated or pari passu to the Notes or the Guarantee at least to the same extent as the Indebtedness being refinanced or refunded or (ii) Disqualified Stock or Preferred Stock, such Refinancing Indebtedness must be Disqualified Stock or Preferred Stock, respectively, and

(C) shall not include:

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(i) Indebtedness, Disqualified Stock or Preferred Stock of a Non-Guarantor Subsidiary that refinances Indebtedness, Disqualified Stock or Preferred Stock of the Issuer;

(ii) Indebtedness, Disqualified Stock or Preferred Stock of a Non-Guarantor Subsidiary that refinances Indebtedness, Disqualified Stock or Preferred Stock of a Guarantor; or

(iii) Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or a Restricted Subsidiary that refinances Indebtedness, Disqualified Stock or Preferred Stock of an Unrestricted Subsidiary;

(14) Indebtedness, Disqualified Stock or Preferred Stock of Persons that are acquired by the Issuer or any Restricted Subsidiary or merged into the Issuer or a Restricted Subsidiary in accordance with the terms of this Indenture; provided that after giving effect to such acquisition or merger, either:

(a) the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a) hereof, or

(b) the Fixed Charge Coverage Ratio of the Issuer and the Restricted Subsidiaries is greater than (i) immediately prior to such acquisition or merger and (ii) 1.50 to 1.00;

(15) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within two Business Days of its incurrence;

(16)(a) any guarantee by the Issuer or a Restricted Subsidiary of Indebtedness or other obligations of any Restricted Subsidiary so long as the incurrence of such Indebtedness incurred by such Restricted Subsidiary is permitted under the terms of this Indenture, or

(b) any guarantee by a Restricted Subsidiary of Indebtedness of the Issuer provided that such guarantee is incurred in accordance with Section 4.20 hereof;

(17) unsecured Indebtedness of the Issuer or any Restricted Subsidiary not to exceed at any one time outstanding, and together with any other Indebtedness incurred under this clause (17), $25.0 million;

(18) Indebtedness, Disqualified Stock or Preferred Stock of a Restricted Subsidiary incurred to finance or assumed in connection with an acquisition in a principal amount not to exceed $5.0 million in the aggregate at any one time outstanding together with all other Indebtedness, Disqualified Stock and/or Preferred Stock issued under this clause (18);

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(19) Indebtedness of the Issuer or any of its Restricted Subsidiaries consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements in each case, incurred in the ordinary course of business;

(20) customer deposits and advance payments received in the ordinary course of business from customers for goods purchased in the ordinary course of business;

(21) Indebtedness owed on a short-term basis of no longer than 30 days to banks and other financial institutions incurred in the ordinary course of business of the Issuer and its Restricted Subsidiaries with such banks or financial institutions that arises in connection with ordinary banking arrangements to manage cash balances of the Issuer and its Restricted Subsidiaries;

(22) Indebtedness of the Issuer or any of its Restricted Subsidiaries consisting of loans made, sponsored or guaranteed by any governmental authority or any agency or subdivision thereof in a principal amount not to exceed $25.0 million; and

(23) Indebtedness of the Issuer or any of its Restricted Subsidiaries with respect to Customer Financed Equipment in an amount not to exceed at any one time outstanding $15.0 million.

(c) For purposes of determining compliance with this Section 4.09:

(1) in the event that an item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) meets the criteria of more than one of the categories of permitted Indebtedness, Disqualified Stock or Preferred Stock described in clauses (1) through (23) of Section 4.09(b) hereof or is entitled to be incurred pursuant to Section 4.09(a) hereof, the Issuer, in its sole discretion, shall classify or reclassify such item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) and shall only be required to include the amount and type of such Indebtedness, Disqualified Stock or Preferred Stock in one of the above clauses; provided that all Indebtedness outstanding under the Senior Credit Facilities on the Issue Date shall be treated as incurred on the Issue Date under clause (1) of Section 4.09(b) hereof; and

(2) at the time of incurrence, the Issuer shall be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described in Sections 4.09(a) and 4.09(b) hereof.

Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness, Disqualified Stock or Preferred Stock shall not be deemed to be an incurrence of Indebtedness, Disqualified Stock or Preferred Stock for purposes of this Section 4.09.

For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt; provided that if such Indebtedness is

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incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced.

The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such refinancing.

This Indenture shall not treat (1) unsecured Indebtedness as subordinated or junior to Secured Indebtedness merely because it is unsecured or (2) Senior Indebtedness as subordinated or junior to any other Senior Indebtedness merely because it has a junior priority with respect to the same collateral.

Section 4.10. Asset Sales.

(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, cause, make or suffer to exist an Asset Sale, unless:

(1) the Issuer or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value (such Fair Market Value to be determined at the time of contractually agreeing to such Asset Sale) of the assets sold or otherwise disposed of;

(2) except in the case of a Permitted Asset Swap, at least 75% of the consideration therefor received by the Issuer or such Restricted Subsidiary, as the case may be, is in the form of cash or Cash Equivalents;

(3) to the extent that any consideration received by the Issuer or a Restricted Subsidiary in such Asset Sale, including any Permitted Asset Swap, constitute securities or other assets that constitute Collateral, such securities or other assets, including the assets of any Person that becomes a Guarantor as a result of such transaction, are concurrently with their acquisition added to the Collateral securing the Notes, other than Excluded Assets;

(4) the Net Proceeds from any such Asset Sale of Notes Collateral is paid directly by the purchaser thereof to the Notes Collateral Agent to be held in trust in a Collateral Account for application in accordance with this covenant;

and provided that the amount of:

(A) any liabilities (as shown on the Issuer’s or such Restricted Subsidiary’s most recent balance sheet or in the footnotes thereto) of the Issuer or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the Notes, that are assumed by the transferee of any such assets

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and for which the Issuer and all of its Restricted Subsidiaries have been validly released by all creditors in writing,

(B) any securities received by the Issuer or such Restricted Subsidiary from such transferee that are converted by the Issuer or such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash received) within 180 days following the closing of such Asset Sale, and

(C) any Designated Non-cash Consideration received by the Issuer or such Restricted Subsidiary in such Asset Sale having an aggregate Fair Market Value, taken together with all other Designated Non-cash Consideration received pursuant to this clause (C) that is at that time outstanding, not to exceed 2.5% of Total Assets at the time of the receipt of such Designated Non-cash Consideration, with the Fair Market Value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value,

shall be deemed to be cash for purposes of this provision and for no other purpose.

(b) Notwithstanding Section 4.10(a), the Issuer and the Restricted Subsidiaries shall not be required to cause any Net Proceeds to be held in a Collateral Account in accordance with clause (4) of Section 4.10(a) except to the extent the aggregate Net Proceeds from all Asset Sales of Notes Collateral which are not held in a Collateral Account, or have not been previously applied in accordance with the provisions of the following paragraphs relating to the application of Net Proceeds from Asset Sales of Notes Collateral, exceeds $7.5 million.

(c) Within 365 days after the receipt of any Net Proceeds of any Asset Sale (the “Application Period”), the Issuer or such Restricted Subsidiary, at its option, may apply the Net Proceeds from such Asset Sale,

(1) to permanently reduce:

(A) in the case of an Asset Sale of ABL Collateral, (x) Obligations under the Senior Credit Facilities or any Indebtedness of the Issuer or a Guarantor that, in each case, is secured by a Lien on the ABL Collateral that is prior to the Lien on the ABL Collateral in favor of Holders of Notes, or (y) any Indebtedness of a Restricted Subsidiary that is not a Guarantor and, in the case of (x) and revolving obligations under (y), to correspondingly reduce commitments with respect thereto,

(B) in the case of an Asset Sale of Notes Collateral, Obligations under the Notes and, at the option of the Issuer, Other Pari Passu Lien Obligations (and to correspondingly reduce commitments with respect thereto, if any); provided that if the Issuer or such Restricted Subsidiary reduces any Other Pari Passu Lien Obligations, the Issuer shall equally and ratably reduce Obligations under the Notes (i) by redeeming the Notes in accordance with the procedures provided under Section 3.07 hereof, (ii) through open-market purchases (to the extent such purchases are at or above 100% of the principal amount thereof) or (iii) by

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making an offer (in accordance with the procedures set forth under Sections 4.10(d) and 3.09 hereof) to all Holders of Notes to purchase their Notes at 100% of the principal amount thereof, plus the amount of accrued but unpaid interest, if any, on the amount of Notes that would otherwise be prepaid, or

(C) in the case of an Asset Sale of assets that do not constitute Collateral, Indebtedness of a Restricted Subsidiary that is not a Guarantor, other than Indebtedness owed to the Issuer or another Restricted Subsidiary;

(2) to make (A) an Investment in any one or more businesses, provided that such Investment in any business is in the form of the acquisition of Capital Stock and results in the Issuer or another of its Restricted Subsidiaries, as the case may be, owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (B) capital expenditures or (C) acquisitions of other assets, in each of (A), (B) and (C), used or useful in a Similar Business; provided that any such Investment, capital expenditure or other acquisition made with the Net Proceeds of Notes Collateral is concurrently added to the Notes Collateral, and any such Investment, capital expenditure or other acquisition made with the Net Proceeds of ABL Collateral is concurrently added to the Collateral; or

(3) to make an Investment in (A) any one or more businesses, provided that such Investment in any business is in the form of the acquisition of Capital Stock and results in the Issuer or another of its Restricted Subsidiaries, as the case may be, owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (B) properties or (C) acquisitions of other assets that, in each of (A), (B) and (C), replace the businesses, properties and/or assets that are the subject of such Asset Sale; provided that any such investment made with the Net Proceeds of Notes Collateral is concurrently added to the Notes Collateral, and any such investment made with the Net Proceeds of ABL Collateral is concurrently added to the Collateral;

provided that, in the case of clauses (2) and (3) above, a binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment so long as the Issuer, or such other Restricted Subsidiary, enters into such commitment with the good faith expectation that such Net Proceeds shall be applied to satisfy such commitment within 180 days of such commitment or, in the case of Net Proceeds consisting of cash proceeds from insurance (other than business interruption insurance), within 360 days of such commitment (each, an “Acceptable Commitment”) and, in the event any Acceptable Commitment is later cancelled or terminated for any reason before the Net Proceeds are applied in connection therewith, the Issuer or such Restricted Subsidiary enters into another Acceptable Commitment (a “Second Commitment”) within 180 days of entering into the first such Acceptable Commitment; provided further that if any Second Commitment is later cancelled or terminated for any reason before such Net Proceeds are applied, then such Net Proceeds shall constitute Excess Proceeds.

(d) Any Net Proceeds from the Asset Sale that are not invested or applied as provided and within the time period set forth in Section 4.10(c) shall be deemed to constitute “Excess Proceeds.” When the aggregate amount of Excess Proceeds exceeds $20.0 million, the Issuer shall make an offer to all Holders of the Notes and, if required by the terms of any Other

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Pari Passu Lien Obligations, to the holders of such Other Pari Passu Lien Obligations (an “Asset Sale Offer”), to purchase the maximum aggregate principal amount of the Notes and such Other Pari Passu Lien Obligations that is in the case of the Notes $2,000 or an integral multiple of $1,000 in excess of $2,000 that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in Section 3.09 hereof. The Issuer shall commence an Asset Sale Offer with respect to Excess Proceeds within 10 Business Days after the date that Excess Proceeds exceed $20.0 million by mailing the notice required pursuant to the terms of this Indenture, with a copy to the Trustee. The Issuer may satisfy the foregoing obligations with respect to such Net Proceeds from an Asset Sale by making an Asset Sale Offer with respect to such Net Proceeds prior to the expiration of the Application Period.

To the extent that the aggregate amount of Notes and such Other Pari Passu Lien Obligations tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for general corporate purposes, subject to compliance with the other covenants contained in this Indenture. If the aggregate principal amount of Notes or the Other Pari Passu Lien Obligations surrendered by such holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such Other Pari Passu Lien Obligations to be purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Other Pari Passu Lien Obligations tendered. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.

(e) For the purposes of this Section 4.10, any sale of the Capital Stock of the Issuer or a Restricted Subsidiary that owns assets constituting Notes Collateral or ABL Collateral shall be deemed to be sale of such Notes Collateral or ABL Collateral (or, in the event of a Restricted Subsidiary that owns assets that include any combination of Notes Collateral and ABL Collateral a separate sale of each of such Notes Collateral and ABL Collateral). In the event of any such sale (or a sale of assets that includes any combination of Notes Collateral and ABL Collateral), the proceeds received by the Issuer and the Restricted Subsidiaries in respect of such sale shall be allocated to the Notes Collateral and ABL Collateral in accordance with their respective book values.

(f) The Issuer shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder, and similar laws and regulations of other jurisdictions, to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof.

Section 4.11. Transactions with Affiliates.

(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the

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benefit of, any Affiliate of the Issuer (each of the foregoing, an “Affiliate Transaction”) involving aggregate payments or consideration in excess of $2.5 million, unless:

(1) such Affiliate Transaction is on terms that are not materially less favorable to the Issuer or its relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person on an arm’s-length basis; and

(2) the Issuer delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate payments or consideration in excess of $10.0 million, a resolution adopted by the majority of the non-employee directors of the Issuer approving such Affiliate Transaction and set forth in an Officer’s Certificate certifying that such Affiliate Transaction complies with clause (1) of this Section 4.11(a).

(b) The provisions of Section 4.11(a) hereof shall not apply to the following:

(1) transactions between or among the Issuer or any of its Restricted Subsidiaries;

(2) Restricted Payments permitted by Section 4.07 hereof and the definition of “Permitted Investments”;

(3) the payment of management, consulting, monitoring and advisory fees to the Investor in an amount not to exceed $3.0 million in any fiscal year, plus any related reasonable expenses;

(4) the payment of reasonable and customary fees paid to, and indemnities provided on behalf of, officers, directors, employees or consultants of the Issuer, any of its direct or indirect parent companies or any of its Restricted Subsidiaries;

(5) transactions in which the Issuer or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to the Issuer or such Restricted Subsidiary from a financial point of view or stating that the terms are not materially less favorable to the Issuer or its relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person on an arm’s-length basis;

(6) any agreement as in effect as of the Issue Date or any amendment thereto (so long as any such amendment is not disadvantageous in any material respect to the Holders when taken as a whole as compared to the applicable agreement as in effect on the Issue Date);

(7) the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter;

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provided, however, that the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (7) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous in any material respect to the Holders when taken as a whole;

(8) the Refinancing Transactions and the payment of all fees and expenses related to the Refinancing Transactions, in each case as disclosed in the Offering Memorandum;

(9) transactions with customers, clients, suppliers, or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture which are fair to the Issuer and its Restricted Subsidiaries, in the reasonable determination of the board of directors of the Issuer or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party;

(10) the issuance of Equity Interests (other than Disqualified Stock) of the Issuer to any Permitted Holder or to any director, officer, employee or consultant and the granting and performance of reasonable and customary registration rights;

(11) payments by the Issuer or any of its Restricted Subsidiaries to the Investor made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures which payments are approved by a majority of the board of directors of the Issuer in good faith and shall not exceed $2.0 million in any fiscal year;

(12) payments or loans (or cancellation of loans) to employees or consultants of the Issuer, any of its direct or indirect parent companies or any of its Restricted Subsidiaries and employment agreements, stock option plans and other similar arrangements with such employees or consultants which, in each case, are approved by the Issuer in good faith; and

(13) investments by the Investor in securities of the Issuer or any of its Restricted Subsidiaries so long as (i) the investment is being offered generally to other investors on the same or more favorable terms and (ii) the investment constitutes less than 5% of the proposed or outstanding issue amount of such class of securities.

Section 4.12. Liens.

(a) The Issuer shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien that secures obligations under any Indebtedness (except Permitted Liens) (the “Initial Lien”) on any asset or property of the Issuer or any Restricted Subsidiary, now owned or hereafter acquired, or any income or profits therefrom, or assign or convey any right to receive income therefrom, except:

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(1) in the case of Initial Liens on any Notes Collateral, any Initial Lien securing Indebtedness, if such Initial Lien expressly has Junior Lien Priority on the Notes Collateral relative to the Notes and related Guarantees;

(2) in the case of Initial Liens on any ABL Collateral, any Initial Lien securing Indebtedness, if such Initial Lien expressly has Pari Passu Lien Priority on the ABL Collateral relative to the Notes and related Guarantees; or

(3) in the case of Liens on any other asset or property, any Initial Lien if the Notes or the Guarantees are equally and ratably secured with (or on a senior basis to, in the case such Initial Lien secures any Subordinated Indebtedness) the Obligations secured by such Initial Lien.

(b) Any Lien created for the benefit of the Holders of the Notes pursuant to clause (2) or (3) of Section 4.12(a) shall provide by its terms that such Lien shall be automatically and unconditionally released and discharged upon the release and discharge of the Initial Lien which release and discharge in the case of any sale of any such asset or property shall not affect any Lien that any Notes Collateral Agent may have on the proceeds from such sale. Any reference to a “Permitted Lien” is not intended to subordinate or postpone, and shall not be interpreted as subordinating or postponing, or as any agreement to subordinate or postpone, any Lien in favor of any Notes Collateral Agent in respect of the Notes Collateral or the ABL Collateral.

Section 4.13. Corporate Existence.

Subject to Article V hereof, the Issuer shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Issuer or any such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Issuer and its Restricted Subsidiaries; provided that the Issuer shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Restricted Subsidiaries, if the Issuer in good faith shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuer and its Restricted Subsidiaries, taken as a whole.

Section 4.14. Offer to Repurchase Upon Change of Control.

(a) If a Change of Control occurs, unless the Issuer has previously or concurrently mailed a redemption notice with respect to all the outstanding Notes as described under Section 3.07 hereof, the Issuer shall make an offer to purchase all of the Notes pursuant to the offer described below (the “Change of Control Offer”) at a price in cash (the “Change of Control Payment”) equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase, subject to the right of Holders of the Notes of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date. Within 30 days following any Change of Control, the Issuer shall send notice of such Change of Control Offer by first-class mail, with a copy to the Trustee, to each Holder of Notes to the

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address of such Holder appearing in the security register with a copy to the Trustee, with the following information:

(1) that a Change of Control Offer is being made pursuant to this Section 4.14 and that all Notes properly tendered pursuant to such Change of Control Offer will be accepted for payment by the Issuer;

(2) the purchase price and the purchase date, which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed (the “Change of Control Payment Date”);

(3) that any Note not properly tendered will remain outstanding and continue to accrue interest;

(4) that unless the Issuer defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control Payment Date;

(5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender such Notes, with the form entitled “Option of Holder to Elect Purchase” on the reverse of such Notes completed, to the paying agent specified in the notice at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

(6) that Holders shall be entitled to withdraw their tendered Notes and their election to require the Issuer to purchase such Notes, provided that the paying agent receives, not later than the close of business on the 20th Business Day following the date of the Change of Control notice, a facsimile transmission or letter setting forth the name of the Holder of the Notes, the principal amount of Notes tendered for purchase, and a statement that such Holder is withdrawing its tendered Notes and its election to have such Notes purchased;

(7) that if less than all of such Holder’s Notes are tendered for purchase, such Holder will be issued new Notes and such new Notes will be equal in principal amount to the unpurchased portion of the Notes surrendered. The unpurchased portion of the Notes must be equal to $2,000 or an integral multiple of $1,000 in excess of $2,000; and

(8) the other instructions, as determined by the Issuer, consistent with this Section 4.14, that a Holder must follow.

The notice, if mailed in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. If (a) the notice is mailed in a manner herein provided and (b) any Holder fails to receive such notice or a Holder receives such notice but it is defective, such Holder’s failure to receive such notice or such defect shall not affect the validity of the proceedings for the purchase of the Notes as to all other Holders that properly received such notice without defect. The Issuer shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder, and similar laws and regulations of other jurisdictions, to the extent such laws or regulations are

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applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.14, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.14 by virtue thereof.

(b) On the Change of Control Payment Date, the Issuer shall, to the extent permitted by law,

(1) accept for payment all Notes issued by it or portions thereof properly tendered pursuant to the Change of Control Offer,

(2) deposit with the Paying Agent an amount equal to the aggregate Change of Control Payment in respect of all Notes or portions thereof so tendered, and

(3) deliver, or cause to be delivered, to the Trustee for cancellation the Notes so accepted together with an Officer’s Certificate to the Trustee stating that such Notes or portions thereof have been tendered to and purchased by the Issuer.

(c) The Issuer shall not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.14 applicable to a Change of Control Offer made by the Issuer and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. Notwithstanding anything to the contrary herein, a Change of Control Offer may be made in advance of a Change of Control, conditional upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.

(d) Other than as specifically provided in this Section 4.14, any purchase pursuant to this Section 4.14 shall be made pursuant to the provisions of Sections 3.02, 3.05 and 3.06 hereof.

Section 4.15. Certain Proceeds.

Proceeds from the condemnation or destruction of the Notes Collateral or from eminent domain or expropriation proceedings with respect to Notes Collateral shall be deposited into the Collateral Account and otherwise applied in the manner set forth for the Net Proceeds of Asset Sales in Section 4.10 hereof.

Section 4.16. Further Assurances and After-Acquired Property.

(a) The Issuer and the Guarantors shall execute any and all further documents, financing statements, agreements and instruments, and take all further action that may be required under applicable law, or that the Notes Collateral Agent may reasonably request, in order to grant, preserve, protect and perfect the validity and priority of the security interests and Liens created or intended to be created by the Security Documents in the Collateral. In addition, from time to time, the Issuer shall reasonably promptly secure the Notes Obligations by pledging or creating, or causing to be pledged or created, perfected security interests and Liens with respect to the Collateral. Such security interests and Liens shall be created under the Security

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Documents and other security agreements, mortgages, deeds of trust, debentures, deeds of hypothec and other instruments and documents in form and substance reasonably satisfactory to the Trustee, and the Issuer shall deliver or cause to be delivered to the Trustee all such instruments and documents (including certificates, legal opinions, title insurance policies and lien searches) as the Trustee shall reasonably request to evidence compliance with this covenant. The Issuer shall provide such evidence as the Trustee shall reasonably request as to the perfection and priority status of each such security interest and Lien.

(b) Promptly, but in no event later than 90 days, following the acquisition by the Issuer or any Guarantor of any After-Acquired Property (which, for the avoidance of doubt, does not include any Excluded Assets but includes any asset or property of the Issuer or any Guarantor that becomes Collateral subsequent to the Issue Date as a result of such asset or property ceasing to be an Excluded Asset (which shall be treated as an “acquisition” of such asset or property for purposes of this sentence)), the Issuer or such Guarantor shall execute and deliver such mortgages, deeds of trust, security instruments, debentures, deeds of hypothec, financing statements and certificates and opinions of counsel as shall be reasonably necessary to vest in the Notes Collateral Agent a perfected security interest in such After-Acquired Property and to have such After-Acquired Property added to the Notes Collateral or the ABL Collateral, as applicable, and thereupon all provisions of this Indenture and the Security Documents relating to the Notes Collateral or the ABL Collateral, as applicable, shall be deemed to relate to such After-Acquired Property to the same extent and with the same force and effect.

Section 4.17. Information Regarding Collateral.

(a) The Issuer shall furnish to the Notes Collateral Agent, with respect to the Issuer or any Guarantor, prompt written notice of any change in such Person’s (i) legal name (including any foreign language form of name), (ii) jurisdiction of organization or formation, (iii) identity or corporate structure or (iv) organizational identification number. The Issuer and the Guarantors shall not effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Notes Collateral Agent to continue, at all times following such change, to have a valid, legal and perfected security interest in all the Collateral. The Issuer shall promptly notify the Notes Collateral Agent in writing if any material portion of the Collateral is damaged, destroyed or condemned.

(b) Each year, at the time of delivery of the annual financial statements with respect to the preceding fiscal year, the Issuer shall deliver to the Trustee a certificate of a financial officer setting forth the information required pursuant to the schedules required by the Security Documents or confirming that there has been no change in such information since the date of the prior annual financial statements.

Section 4.18. Impairment of Security Interest.

Subject to the rights of the holders of Permitted Liens, the Issuer shall not, and shall not permit any of the Restricted Subsidiaries to, take or knowingly or negligently omit to take any action or omission which would reasonably be expected to have the result of materially impairing the security interest with respect to the Collateral for the benefit of the Noteholder

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Secured Parties, except as expressly permitted by the terms of this Indenture or the Security Documents. The Issuer and the Guarantors shall not amend, modify or supplement, or permit or consent to any amendment, modification or supplement of, the Security Documents in any way that would be adverse to the Holders in any material respect, except as permitted by Article IX or XII hereof, the Security Documents and the Intercreditor Agreement.

Section 4.19. Withholding Taxes and Other Taxes.

(a) The Issuer shall make all payments under or with respect to the Notes free and clear of and without withholding or deduction for or on account of any present or future tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and other liabilities related thereto) (hereinafter “Taxes”) imposed or levied by or on behalf of the government of Canada or any political subdivision or any authority or agency therein or thereof having power to tax, or any other jurisdiction in which the Issuer or any Guarantor is organized or is otherwise resident for tax purposes, or any jurisdiction from or through which payment is made (each a “Relevant Taxing Jurisdiction”), unless the Issuer is required to withhold or deduct Taxes by law or by the interpretation or administration thereof.

(b) If the Issuer is so required to withhold or deduct any amount for or on account of Taxes imposed by a Relevant Taxing Jurisdiction from any payment made under or with respect to the Notes, the Issuer shall pay such additional amounts (“Additional Amounts”) as may be necessary so that the net amount received by a Holder (including Additional Amounts) after such withholding or deduction will not be less than the amount such Holder would have received if such Taxes had not been withheld or deducted; provided, however, that the foregoing obligation to pay Additional Amounts shall not apply to (1) any Taxes that would not have been so imposed but for the existence of any present or former connection between the relevant Holder or beneficial owner (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of power over, the relevant Holder or beneficial owner, if the relevant Holder or beneficial owner is an estate, nominee, trust or corporation) and the Relevant Taxing Jurisdiction (other than the mere receipt of such payment or the ownership or holding outside of Canada of such Note); (2) any estate, inheritance, gift, sales, excise, transfer, personal property tax or similar tax, assessment or governmental charge; (3) any Taxes payable otherwise than by deduction or withholding from payments on the Notes; or (4) any Taxes imposed because the relevant Holder or beneficial owner of the Note fails to complete, execute and deliver to the Issuer any form or document to the extent applicable to such Holder or beneficial owner that may be required by law or by reason of administration of such law and which is reasonably requested in writing to be delivered to the Issuer in order to enable the Issuer to make payments on the Notes without deduction or withholding for Taxes, or with deduction or withholding of a lesser amount, which form or document shall be delivered within 60 days of a written request therefor by the Issuer; nor shall the Issuer be required to pay Additional Amounts (a) if the payment could have been made without such deduction or withholding if the beneficiary of the payment had presented the Note for payment within 30 days after the date on which such payment or such Note became due and payable or the date on which payment thereof is duly provided for, whichever is later (except to the extent that the Holder would have been entitled to Additional Amounts had the Note been presented on the last day of such 30-day period); (b) to any Holder or beneficial owner of the Notes with which the Issuer does not deal at arm’s length (within the meaning of the Income Tax Act (Canada)) at the time of making such payments; or (c) with

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respect to any payment of principal of (or premium, if any, on) or interest on such Note to any Holder who is a fiduciary or partnership or any person other than the sole beneficial owner of such payment, to the extent that a beneficiary or settlor with respect to such fiduciary, a member of such a partnership or the beneficial owner of such payment would not have been entitled to the Additional Amounts had such beneficiary, settlor, member or beneficial owner been the actual Holder of such Note.

(c) The Issuer shall pay the amount withheld or deducted pursuant to the foregoing paragraphs of this Section 4.19 to the relevant governmental authority on a timely basis in accordance with applicable law. As soon as practicable, the Issuer shall provide the Trustee with official receipts or other documentation satisfactory to the Trustee evidencing the payment of the Taxes with respect to which Additional Amounts are paid.

(d) Whenever in this Indenture there is mentioned, in any context, (i) the payment of principal; (ii) purchase prices in connection with a purchase of Notes; (iii) interest; or (iv) any other amount payable on or with respect to any of the Notes, in each case, such reference shall be deemed to include payment of Additional Amounts as described in this Section 4.19 to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

(e) The Issuer shall indemnify a Holder, within 10 Business Days after written demand therefor, for the full amount of any Taxes paid by such Holder to a governmental authority of a Relevant Taxing Jurisdiction, on or with respect to any payment by on or account of any obligation of the Issuer to withhold or deduct an amount on account of Taxes for which the Issuer would have been obligated to pay any Additional Amount hereunder and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant governmental authority. A certificate as to the amount of such payment or liability delivered to the Issuer by such Holder shall be conclusive absent manifest error.

(f) The Issuer shall pay any present or future stamp, court or documentary taxes or any other excise or property taxes, charges or similar levies that arise in any Relevant Taxing Jurisdiction from the execution, delivery, enforcement or registration of the Notes, this Indenture or any other document or instrument in relation thereof or hereof, or the receipt of any payments with respect to the Notes, and the Issuer shall indemnify the Holders for any such taxes paid by such Holders.

(g) The obligations described in this Section 4.19 shall survive any termination, defeasance or discharge of this Indenture and shall apply mutatis mutandis to any jurisdiction in which any successor Person to the Issuer is organized or any political subdivision or taxing authority or agency thereof or therein.

Section 4.20. Future Guarantors and Security.

(a) The Issuer shall cause (i) at any time that any Indebtedness or commitments to lend under the Senior Credit Facilities are outstanding, each Restricted Subsidiary that Incurs or guarantees any Obligations under the Senior Credit Facilities and (ii)

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each Restricted Subsidiary that is a Wholly-Owned Subsidiary and that guarantees any Indebtedness of the Issuer or any Guarantor, to, in each case, at the same time, execute and deliver to the Trustee a supplemental indenture, Security Documents and the Intercreditor Agreement pursuant to which such Restricted Subsidiary shall (A) guarantee payment of the Notes and the other Notes Obligations on the same terms and conditions as those set forth in this Indenture for Full Guarantors, subject to the limitations set forth in Section 4.20(b), (B) grant a security interest in and Lien on such of its assets as constitute Collateral in favor of the Notes Collateral Agent for the benefit of the Noteholder Secured Parties as security for the Notes Obligations on terms and conditions similar to those set forth in the other Security Documents then existing and (C) become party to the Intercreditor Agreement.

(b) Any Guarantees provided after the Issue Date by Subsidiaries of the Issuer organized in France, Italy and Switzerland may be Limited Guarantees that are limited on a basis consistent with the Limited Guarantees provided by the Limited Guarantors organized in such jurisdictions on the Issue Date. Any Guarantees provided after the Issue Date by Subsidiaries of the Issuer organized in jurisdictions other than the United States, Canada, the United Kingdom, the Netherlands, France, Italy and Switzerland may be limited Guarantees if the board of directors of the Issuer or the senior management thereof, in consultation with local counsel, makes a reasonable determination that such limitations are required due to legal requirements within such jurisdiction.

Section 4.21. Post-Closing Internal Reorganization.

(a) The Issuer shall use commercially reasonable efforts to effect the Post-Closing Internal Reorganization as soon as practicable after the Issue Date.

(b) If the Cypriot Reorganization has not been completed on or prior to August 15, 2010, the Issuer shall cause Patheon Holdings Cyprus Ltd. to, and Patheon Holdings Cyprus Ltd. shall, guarantee the Notes on the same terms as the Guarantees of the Full Guarantors under this Indenture and shall grant a security interest in and a Lien on such of its assets as constitute Collateral as security for the Notes Obligations, to the extent permitted by law.

(c) If the Hungarian Reorganization has not been completed on or prior to August 15, 2010, the Issuer shall cause Patheon Europe Zrt. to, and Patheon Europe Zrt. shall, guarantee the Notes on the same terms as the Guarantees of the Full Guarantors under this Indenture and shall grant a security interest in and a Lien on such of its assets as constitute Collateral as security for the Notes Obligations, to the extent permitted by law.

(d) If the French Reorganization has not been completed on or prior to August 15, 2010, the Issuer shall cause Patheon Italia S.p.A. to, and Patheon Italia S.p.A. shall, grant a security interest in and a Lien on the Capital Stock of Patheon Holdings S.A.S. owned by it at such time as security for its Limited Guarantee.

Section 4.22. Covenant Suspension.

(a) Following the first day (the “Suspension Date”) on which (i) the Notes have an Investment Grade Rating from both of the Rating Agencies and (ii) no Default has

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occurred and is continuing under this Indenture, the Issuer and its Restricted Subsidiaries shall not be subject to the provisions of Sections 4.07, 4.08, 4.09, 4.10 (to the extent relating to properties or assets of the Issuer or any Restricted Subsidiary that do not constitute Collateral) or 4.11 hereof or clause (4) of Section 5.01(a) hereof (collectively, the “Suspended Covenants”).

(b) In the event that the Issuer and its Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of Section 4.22(a), and on any subsequent date (the “Reversion Date”) one or both of the Rating Agencies withdraws its Investment Grade Rating or downgrades the rating assigned to the Notes below an Investment Grade Rating, then the Issuer and the Restricted Subsidiaries shall thereafter again be subject to the Suspended Covenants with respect to future events. The period of time between the Suspension Date and the Reversion Date is referred to as the “Suspension Period”. Notwithstanding that the Suspended Covenants may be reinstated, no default shall be deemed to have occurred as a result of a failure to comply with the Suspended Covenants during the Suspension Period.

(c) On the Reversion Date, all Indebtedness Incurred during the Suspension Period shall be classified to have been Incurred pursuant to clause (3) of Section 4.09(b) hereof. Calculations made after the Reversion Date of the amount available to be made as Restricted Payments under Section 4.07 hereof shall be made as though the provisions of Section 4.07 hereof had been in effect prior to, but not during, the Suspension Period.

ARTICLE V

SUCCESSORS

Section 5.01. Merger, Consolidation or Sale of All or Substantially All Assets.

(a) The Issuer shall not consolidate, amalgamate or merge with or into or wind up into (whether or not the Issuer is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:

(1) the Issuer is the surviving corporation or the Person formed by or surviving any such consolidation, amalgamation or merger (if other than the Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation organized or existing under the laws of Canada or any province or territory thereof, or the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Person, as the case may be, being herein called the “Successor Company”);

(2) the Successor Company, if other than the Issuer, expressly assumes all the obligations of the Issuer under the Notes and the Security Documents pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;

(3) immediately after such transaction, no Default exists;

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(4) immediately after giving pro forma effect to such transaction and any related financing transactions, as if such transactions had occurred at the beginning of the applicable four-quarter period,

(A) the Successor Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a) hereof, or

(B) the Fixed Charge Coverage Ratio for the Successor Company, the Issuer and its Restricted Subsidiaries would be greater than such Fixed Charge Coverage Ratio for the Issuer and its Restricted Subsidiaries immediately prior to such transaction;

(5) each Guarantor, unless it is the other party to the transactions described above, in which case Section 5.01(c)(1)(B) hereof shall apply, shall have by supplemental indenture confirmed that its Guarantee shall apply to such Person’s obligations under this Indenture and the Notes;

(6) the Issuer shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such consolidation, merger, amalgamation or transfer and such supplemental indentures, if any, comply with this Indenture;

(7) the Issuer shall have delivered an Opinion of Counsel in the jurisdiction of organization of the Issuer to the effect that the Holders of the Notes will not recognize income, gain or loss for income tax purposes of such jurisdiction as a result of such transaction and will be subject to income tax in such jurisdiction on the same amounts, in the same manner and at the same times as would have been the case if such transaction had not occurred;

(8) any Collateral owned by or transferred to the Successor Company shall (a) continue to constitute Collateral under this Indenture and the Security Documents, (b) be subject to the Lien in favor of the Notes Collateral Agent for the benefit of the Trustee and the Holders of the Notes, and (c) not be subject to any Lien other than Permitted Liens and other Liens permitted under Section 4.12 hereof; and

(9) to the extent any assets of the Person which is merged, amalgamated or consolidated with or into the Successor Company are assets of the type which would constitute Collateral under the Security Documents, the Successor Company shall take such action as may be reasonably necessary to cause such property and assets to be made subject to the Lien of the Security Documents in the manner and to the extent required in this Indenture or any of the Security Documents and shall take all reasonably necessary action so that such Lien is perfected to the extent required by this Indenture or any of the Security Documents.

(b) The Successor Company shall succeed to, and be substituted for the Issuer, as the case may be, under this Indenture, the Guarantees and the Notes, as applicable. Notwithstanding clauses (3) and (4) of Section 5.01(a) hereof,

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(x) any Restricted Subsidiary may consolidate or amalgamate with or merge into or transfer all or part of its properties and assets to the Issuer, and

(y) the Issuer may consolidate, amalgamate or merge with an Affiliate of the Issuer, as the case may be, solely for the purpose of reincorporating the Issuer in Canada or any province or territory thereof, or the United States, any state thereof, the District of Columbia, or any territory thereof, so long as the amount of Indebtedness of the Issuer and its Restricted Subsidiaries is not increased thereby.

(c) Subject to certain limitations described in this Indenture governing release of a Guarantee upon the sale, disposition or transfer of a Guarantor, no Guarantor shall, and the Issuer shall not permit any Guarantor to, consolidate, amalgamate or merge with or into or wind up into (whether or not the Issuer or Guarantor is the surviving company), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:

(1) (A) such Guarantor is the surviving company or the Person formed by or surviving any such consolidation, amalgamation or merger (if other than such Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a company organized or existing under the laws of the jurisdiction of organization of such Guarantor or any subdivision thereof, as the case may be, or Canada or any province or territory thereof, the United States, any state thereof, the District of Columbia, or any territory thereof (such Guarantor or such Person, as the case may be, being herein called the “Successor Person”);

(B) the Successor Person, if other than such Guarantor, expressly assumes all the obligations of such Guarantor under this Indenture, the Security Documents and such Guarantor’s related Guarantee pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;

(C) immediately after such transaction, no Default exists;

(D) the Issuer shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such consolidation, amalgamation, merger or transfer and such supplemental indentures, if any, comply with this Indenture;

(E) any Collateral owned by or transferred to the Successor Person shall (i) continue to constitute Collateral under this Indenture and the Security Documents, (ii) be subject to the Lien in favor of the Notes Collateral Agent for the benefit of the Trustee and the Holders of the Notes, and (iii) not be subject to any Lien other than Permitted Liens and other Liens permitted under Section 4.12 hereof; and

(F) to the extent any assets of the Person which is merged, amalgamated or consolidated with or into the Successor Company are assets of the type which would constitute Collateral under the Security Documents, the Successor Company shall take such action as may be reasonably necessary to cause such property and assets to be made subject to the Lien of the Security Documents in the manner and to the extent required in

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this Indenture or any of the Security Documents and shall take all reasonably necessary action so that such Lien is perfected to the extent required by the Security Documents; or

(2) the transaction is made in compliance with Section 4.10 hereof.

(d) Subject to certain limitations described in this Indenture, the Successor Person shall succeed to, and be substituted for, such Guarantor under this Indenture and such Guarantor’s Guarantee. Notwithstanding the foregoing, any Guarantor may merge into or transfer all or part of its properties and assets to another Guarantor or the Issuer.

Section 5.02. Successor Corporation Substituted.

Upon any consolidation, amalgamation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Issuer in accordance with Section 5.01 hereof, the Successor Company formed by such consolidation or amalgamation or into or with which the Issuer is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, amalgamation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the Issuer shall refer instead to the Successor Company and not to the Issuer), and may exercise every right and power of the Issuer under this Indenture with the same effect as if such Successor Company had been named as the Issuer herein; provided that the predecessor Issuer shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale, assignment, transfer, conveyance or other disposition of all of the Issuer’s assets that meets the requirements of Section 5.01 hereof.

ARTICLE VI

DEFAULTS AND REMEDIES

Section 6.01. Events of Default.

(a) An “Event of Default” wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(1) default in payment when due and payable, upon redemption, acceleration or otherwise, of principal of, or premium, if any, on the Notes;

(2) default for 30 days or more in the payment when due of interest on or with respect to the Notes;

(3) the failure by the Issuer to comply with its obligations under Section 5.01 hereof;

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(4) the failure by the Issuer for 60 days after receipt of written notice given by the Trustee or Holders of not less than 25% in principal amount of the Notes then outstanding to comply with any of its obligations, covenants or agreements (other than a default referred to in clauses (1) through (3) above) contained in this Indenture, the Security Documents or the Intercreditor Agreement;

(5) default under any mortgage, indenture or instrument under which there is issued or by which there is secured or evidenced any Indebtedness for money borrowed by the Issuer or any of its Restricted Subsidiaries or the payment of which is guaranteed by the Issuer or any of its Restricted Subsidiaries, whether such Indebtedness or guarantee now exists or is created after the issuance of the Notes, if both:

(a) such default either results from the failure to pay any principal of such Indebtedness at its Stated Maturity (after giving effect to any applicable grace periods) or relates to an obligation other than the obligation to pay principal of any such Indebtedness at its Stated Maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its Stated Maturity; and

(b) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at stated final maturity (after giving effect to any applicable grace periods), or the maturity of which has been so accelerated, aggregate $20.0 million or more at any one time outstanding;

(6) failure by the Issuer or any Significant Subsidiary to pay final judgments aggregating in excess of $20.0 million, which final judgments remain unpaid, undischarged and unstayed for a period of more than 60 days after such judgment becomes final, and in the event such judgment is covered by insurance, an enforcement proceeding has been commenced by any creditor upon such judgment or decree which is not promptly stayed;

(7) the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, pursuant to or within the meaning of any Bankruptcy Law:

(i) commences proceedings to be adjudicated bankrupt or insolvent;

(ii) consents to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under applicable Bankruptcy law;

(iii) consents to the appointment of a receiver, liquidator, assignee, trustee, sequestrator or other similar official of it or for all or substantially all of its property;

(iv) makes a general assignment for the benefit of its creditors; or

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(v) generally is not paying its debts as they become due;

(8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(i) is for relief against the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, in a proceeding in which the Issuer or any such Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary is or are to be adjudicated bankrupt or insolvent;

(ii) appoints a receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, or for all or substantially all of the property of the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary; or

(iii) orders the liquidation of the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary;

and the order or decree remains unstayed and in effect for 60 consecutive days;

(9) the Guarantee of any Significant Subsidiary shall for any reason cease to be in full force and effect or be declared null and void or any responsible officer of any Guarantor that is a Significant Subsidiary, as the case may be, denies that it has any further liability under its Guarantee or gives notice to such effect, other than by reason of the termination of this Indenture or the release of any such Guarantee in accordance with this Indenture; or

(10) with respect to any Collateral having a Fair Market Value in excess of $25.0 million, individually or in the aggregate, (a) the security interest under the Security Documents, at any time, ceases to be in full force and effect with the priority contemplated thereby for any reason other than in accordance with the terms of this Indenture, the Security Documents and the Intercreditor Agreement for a period of five Business Days after notice, (b) any security interest created thereunder or under this Indenture is declared invalid or unenforceable by a court of competent jurisdiction or (c) the Issuer or any Guarantor asserts, in any pleading in any court of competent jurisdiction, that any such security interest is invalid or unenforceable other than in accordance with the terms of this Indenture, the Security Documents and the Intercreditor Agreement, except to the extent that any such loss of perfection or priority results from the failure of the Trustee or the Notes Collateral Agent to make filings, renewals and continuations (or other equivalent filings) which the Issuer has indicated in the Perfection Certificate are required to be made or the failure of the Trustee or the Notes Collateral

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Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Security Documents.

(b) In the event of a declaration of acceleration of the Notes because an Event of Default has occurred and is continuing as a result of the acceleration of any Indebtedness described in clause (5) of Section 6.01(a) hereof (excluding any resulting payment default under this Indenture or the Notes), the declaration of acceleration of the Notes shall be automatically annulled if the holders of all Indebtedness described in such clause (5) have rescinded the declaration of acceleration in respect of such Indebtedness within 20 days of the date of such declaration, and if the annulment of the acceleration of the Notes would not conflict with any judgment or decree of a court of competent jurisdiction, and all existing Events of Default, except nonpayment of principal or interest on the Notes that became due solely because of the acceleration of such series of the Notes, have been cured or waived.

Section 6.02. Acceleration.

(a) If any Event of Default (other than an Event of Default specified in clause (7) or (8) of Section 6.01(a) hereof) occurs and is continuing under this Indenture, the Trustee or the Holders of at least 25% in principal amount of the then total outstanding Notes may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately.

Upon the effectiveness of such declaration, such principal and interest shall be due and payable immediately. The Trustee shall have no obligation to accelerate the Notes if and for so long as a committee of its Responsible Officers in good faith determines acceleration is not in the best interest of the Holders of the Notes.

Notwithstanding the foregoing, in the case of an Event of Default arising under clause (7) or (8) of Section 6.01(a) hereof, all outstanding Notes shall be due and payable immediately without further action or notice.

The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium, if any, that has become due solely because of the acceleration) have been cured or waived.

(b) Notwithstanding anything to the contrary herein, for the first 180 days following an Event of Default relating to the failure to comply with Section 4.03 hereof, the sole remedy for such Event of Default shall be that the Issuer shall be obligated to pay additional interest on the Notes at an annual rate equal to 0.25% of the principal amount of the Notes. This additional interest shall be payable in the same manner and on the same dates as the stated interest payable on the Notes. The additional interest shall accrue on all outstanding Notes from and including the date on which such Event of Default first occurs to but not including the 180th calendar day thereafter (or such earlier date on which such Event of Default shall have been cured or waived). On such 180th calendar day (or earlier, if such Event of Default is cured or waived prior to such 180th calendar day), such additional interest shall cease to accrue and on

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such 180th calendar day the Notes shall be subject to acceleration as provided in Section 6.02(a) hereof if the Event of Default is continuing. The provisions of this Section 6.02(b) shall not affect the rights of Holders of Notes in the event of the occurrence of any other Event of Default. For the avoidance of doubt, the additional interest shall not begin accruing until the Issuer fails to perform under Section 4.03 hereof for a period of 60 days after written notice of such failure is given to the Issuer by the Trustee or to the Issuer and the Trustee by the holders of at least 25% in aggregate principal amount of Notes then outstanding.

Section 6.03. Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.

Section 6.04. Waiver of Past Defaults.

Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default and its consequences hereunder, except a continuing Default in the payment of the principal of, premium, if any, or interest on, any Note held by a non-consenting Holder (including in connection with an Asset Sale Offer or a Change of Control Offer); provided, subject to Section 6.02 hereof, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

Section 6.05. Control by Majority.

Holders of a majority in principal amount of the total outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of any other Holder of a Note or that would involve the Trustee in personal liability.

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Section 6.06. Limitation on Suits.

Subject to Section 6.07 hereof, no Holder of a Note may pursue any remedy with respect to this Indenture or the Notes unless:

(1) such Holder has previously given the Trustee notice that an Event of Default is continuing;

(2) Holders of at least 25% in principal amount of the total outstanding Notes have requested the Trustee to pursue the remedy;

(3) Holders of the Notes have offered the Trustee security or indemnity satisfactory to it against any loss, liability or expense;

(4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and

(5) Holders of a majority in principal amount of the total outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period.

A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note (it being understood that the Trustee does not have an affirmative duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders).

Section 6.07. Rights of Holders of Notes to Receive Payment.

Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, and interest on its Note, on or after the respective due dates expressed in such Note (including in connection with an Asset Sale Offer or a Change of Control Offer), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

Section 6.08. Collection Suit by Trustee.

If an Event of Default specified in Section 6.01(a)(1) or (2) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Issuer for the whole amount of principal of, premium, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

Section 6.09. Restoration of Rights and Remedies.

If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any

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reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceedings, the Issuer, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding has been instituted.

Section 6.10. Rights and Remedies Cumulative.

Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in Section 2.07 hereof, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 6.11. Delay or Omission Not Waiver.

No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

Section 6.12. Trustee May File Proofs of Claim.

The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Issuer (or any other obligor upon the Notes including the Guarantors), its creditors or its property and shall be entitled and empowered to participate as a member in any official committee of creditors appointed in such matter and to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.06 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.06 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to

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authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.13. Priorities.

If either the Trustee or the Notes Collateral Agent collects any money pursuant to this Article VI or Article XII, as applicable, or if proceeds are received by the Notes Collateral Agent if any Collateral is sold or otherwise realized upon by the Notes Collateral Agent in connection with any foreclosure, collection or other enforcement of Liens granted to the Notes Collateral Agent in the Security Documents, in any such case, it shall pay out the money in the following order:

(i) ratably to the Trustee, the Notes Collateral Agent and their respective agents and attorneys for amounts due under Sections 7.06 and 12.09 hereof, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee and Notes Collateral Agent and the costs and expenses of collection;

(ii) to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and interest, respectively; and

(iii) to the Issuer or to such party as a court of competent jurisdiction shall direct including a Guarantor, if applicable.

The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.13.

Section 6.14. Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in such suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.14 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes.

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ARTICLE VII

TRUSTEE

Section 7.01. Duties of Trustee.

(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(b) Except during the continuance of an Event of Default:

(i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

(c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i) this paragraph does not limit the effect of paragraph (b) of this Section 7.01;

(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved in a court of competent jurisdiction that the Trustee was negligent in ascertaining the pertinent facts; and

(iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.

(d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.

(e) The Trustee shall be under no obligation to exercise any of its rights or powers under this Indenture at the request or direction of any of the Holders of the Notes unless

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the Holders have offered to the Trustee indemnity or security satisfactory to it against any loss, liability or expense.

(f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

Section 7.02. Rights of Trustee.

(a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine in good faith to make such further inquiry or investigation, it shall be entitled upon reasonable notice, during normal business hours, to examine the books, records and premises of the Issuer, personally or by agent or attorney at the sole cost of the Issuer and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

(b) Before the Trustee acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel or both, subject to the other provisions of this Indenture. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer’s Certificate or Opinion of Counsel. The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

(c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care.

(d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture.

(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Issuer or a Guarantor shall be sufficient if signed by an Officer of the Issuer.

(f) None of the provisions of this Indenture shall require the Trustee to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or indemnity satisfactory to it against such risk or liability is not assured to it.

(g) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture.

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(h) In no event shall the Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(i) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

(j) The Trustee may request that the Issuer and any Guarantor deliver an Officer’s Certificate setting forth the names of individuals and/or titles of officers (with specimen signatures) authorized at such times to take specific actions pursuant to this Indenture, which Officer’s Certificate may be signed by any person specified as so authorized in any such certificate previously delivered and not superseded.

(k) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.

Section 7.03. Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or any Affiliate of the Issuer with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.09 and 7.10 hereof.

Section 7.04. Trustee’s Disclaimer.

The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuer’s use of the proceeds from the Notes or any money paid to the Issuer or upon the Issuer’s direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.

Section 7.05. Notice of Defaults.

If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall notify the Notes Collateral Agent thereof and shall mail to each of the Holders of Notes a notice of the Default within 90 days after it occurs. Except in the case of a Default relating to the payment of principal, premium, if any, or interest on any Note, the Trustee may withhold from the Holders notice of any continuing Default if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is not opposed to the interests of the Holders of the Notes. The Trustee shall not be deemed to know of any Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any

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event which is such a Default is received by the Trustee at the Corporate Trust Office of the Trustee.

Section 7.06. Compensation and Indemnity.

The Issuer shall pay to the Trustee from time to time such compensation for its acceptance of this Indenture and services hereunder as the parties shall agree in writing from time to time. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee’s agents and counsel.

The Issuer and the Guarantors, jointly and severally, shall indemnify the Trustee for, and hold the Trustee harmless against, any and all loss, damage, claims, liability or expense (including reasonable attorneys’ fees and expenses) incurred by it in connection with the acceptance or administration of this trust and the performance of its duties hereunder (including the costs and expenses of enforcing this Indenture against the Issuer or any of the Guarantors (including this Section 7.06) or defending itself against any claim whether asserted by any Holder, the Issuer or any Guarantor, or liability in connection with the acceptance, exercise or performance of any of its powers or duties hereunder). Subject to and without limiting the generality of the foregoing sentence, the Issuer and the Guarantors shall indemnify the Trustee against, and hold the Trustee harmless from, any and all loss, damage, claims, liability or expense (including attorneys’ fees and expenses or consultant fees, charges and disbursements), incurred by or asserted against the Trustee or arising out of, in any way connected with or as a result of (i) any violation or alleged violation of any Environmental Law, (ii) any Environmental Claim or (iii) any actual or alleged presence, release or threatened release of Hazardous Materials at, under, on or from any property owned, leased or operated by the Issuer or any of its Subsidiaries or any predecessor of the Issuer or any of its Subsidiaries, or, to the extent related in any way to the Issuer or any of its Subsidiaries, any property at which the Issuer or any of its Subsidiaries has sent Hazardous Materials for treatment, storage or disposal. The Trustee shall notify the Issuer promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Issuer shall not relieve the Issuer of its obligations hereunder. The Issuer shall defend the claim and the Trustee may have separate counsel and the Issuer shall pay the reasonable fees and expenses of such counsel. The Issuer need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee’s own willful misconduct, gross negligence or bad faith.

The obligations of the Issuer under this Section 7.06 shall survive the satisfaction and discharge of this Indenture or the earlier resignation or removal of the Trustee.

Notwithstanding the provisions of Section 4.12 hereof, to secure the payment obligations of the Issuer and the Guarantors in this Section 7.06, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture.

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When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(a)(7) or (8) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

Section 7.07. Replacement of Trustee.

A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section 7.07. The Trustee may resign in writing at any time by giving 30 days prior notice of such resignation to the Issuer and be discharged from the trust hereby created by so notifying the Issuer. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Issuer in writing. The Issuer may remove the Trustee if:

(a) the Trustee fails to comply with Section 7.09 hereof;

(b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

(c) a receiver, a custodian or public officer takes charge of the Trustee or its property; or

(d) the Trustee becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Issuer shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuer.

If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee (at the Issuer’s expense), the Issuer or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.09 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided that all sums owing to the Trustee hereunder have been paid and such transfer shall be subject to the Lien provided for in Section 7.06 hereof. Notwithstanding

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replacement of the Trustee pursuant to this Section 7.07, the Issuer’s obligations under Section 7.06 hereof shall continue for the benefit of the retiring Trustee.

Section 7.08. Successor Trustee by Merger, etc.

If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the successor corporation or national banking association without any further act shall be the successor Trustee, subject to Section 7.09 hereof.

Section 7.09. Eligibility; Disqualification.

There shall at all times be a Trustee hereunder that is a corporation or national banking association organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition.

ARTICLE VIII

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.

The Issuer may, at its option and at any time, elect to have either Section 8.02 or 8.03 hereof applied to all outstanding Notes upon compliance with the conditions set forth below in this Article VIII.

Section 8.02. Legal Defeasance and Discharge.

Upon the Issuer’s exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Issuer and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to the Security Documents, the Intercreditor Agreement and all outstanding Notes and Guarantees on the date the conditions set forth below are satisfied (“Legal Defeasance”). For this purpose, Legal Defeasance means that the Issuer shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be “outstanding” only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes, this Indenture including that of the Guarantors (and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging the same), the Security Documents and the Intercreditor Agreement, except for the following provisions which shall survive until otherwise terminated or discharged hereunder:

(a) the rights of Holders of Notes to receive payments in respect of the principal of, premium, if any, and interest on the Notes when such payments are due solely out of the trust created pursuant to this Indenture referred to in Section 8.04 hereof;

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(b) the Issuer’s obligations with respect to Notes concerning issuing temporary Notes, registration of such Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust;

(c) the rights, powers, trusts, duties and immunities of the Trustee, and the Issuer’s obligations in connection therewith; and

(d) this Section 8.02.

Subject to compliance with this Article VIII, the Issuer may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.

Section 8.03. Covenant Defeasance.

Upon the Issuer’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Issuer and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from their obligations under the covenants contained in Sections 4.03, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13 (solely with respect to Restricted Subsidiaries), 4.14, 4.15, 4.16, 4.17, 4.18, 4.20 and 4.21 hereof and clause (4) of Section 5.01(a) hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (“Covenant Defeasance”), and the Notes shall thereafter be deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed “outstanding” for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Issuer may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Issuer’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(5), 6.01(6), 6.01(7) (solely with respect to Restricted Subsidiaries that constitute Significant Subsidiaries), 6.01(8) (solely with respect to Restricted Subsidiaries that constitute Significant Subsidiaries), 6.01(9) and 6.01(10) hereof shall not constitute Events of Default.

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Section 8.04. Conditions to Legal or Covenant Defeasance.

The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes:

In order to exercise either Legal Defeasance or Covenant Defeasance with respect to the Notes:

(1) the Issuer or any Guarantor must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants in the United States or Canada, to pay the principal of, premium, if any, and interest due on the Notes on the stated maturity date or on the Redemption Date, as the case may be, of such principal, premium, if any, or interest on such Notes and the Issuer must specify whether such Notes are being defeased to maturity or to a particular Redemption Date;

(2) in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions,

(a) the Issuer has received from, or there has been published by, the United States Internal Revenue Service a ruling, or

(b) since the issuance of the Notes, there has been a change in the applicable U.S. federal income tax law,

in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, subject to customary assumptions and exclusions, the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes, as applicable, as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3) in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to such tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4) in the case of Legal Defeasance or Covenant Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee and qualified to practice in Canada or a ruling from Canada Revenue Agency to the effect that Holders of the outstanding Notes who are not resident in Canada will not recognize income, gain or loss for Canadian federal, provincial or territorial income tax or other tax purposes as a result of such Legal Defeasance or Covenant Defeasance, as applicable,

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and will only be subject to Canadian federal, provincial income tax and other taxes on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance or Covenant Defeasance, as applicable, had not occurred;

(5) no Default (other than that resulting from borrowing funds to be applied to make such deposit and the granting of Liens in connection therewith) shall have occurred and be continuing on the date of such deposit;

(6) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Senior Credit Facilities or any other material agreement or instrument (other than this Indenture) to which the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound;

(7) the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that, as of the date of such opinion and subject to customary assumptions and exclusions following the deposit, the trust funds will not be subject to the effect of Section 547 of Title 11 of the United States Code;

(8) the Issuer shall have delivered to the Trustee an Officer’s Certificate stating that the deposit was not made by the Issuer with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuer or any Guarantor or others; and

(9) the Issuer shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions) each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with.

Section 8.05. Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions.

Subject to Section 8.06 hereof, all money and Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the “Trustee”) pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer or a Guarantor acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.

The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.

Anything in this Article VIII to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from time to time upon the request of the Issuer any money or

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Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

Section 8.06. Repayment to Issuer.

Any money deposited with the Trustee or any Paying Agent, or then held by the Issuer, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, premium, if any, or interest has become due and payable shall be paid to the Issuer on its request or (if then held by the Issuer) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Issuer for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuer as trustee thereof, shall thereupon cease.

Section 8.07. Reinstatement.

If the Trustee or Paying Agent is unable to apply any United States dollars or Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuer’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided that, if the Issuer makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.

ARTICLE IX

AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01. Without Consent of Holders of Notes.

Notwithstanding Section 9.02 hereof, the Issuer, any Guarantor, the Trustee and the Notes Collateral Agent (in each case, to the extent such Person is a party to the agreement or instrument to be amended or supplemented) may amend or supplement this Indenture, any Security Document and any Guarantee or Notes or the Intercreditor Agreement without the consent of any Holder (but subject to the consent of the Senior Credit Facilities Collateral Agent in the case of any amendment of the Intercreditor Agreement, if required):

(1) to cure any ambiguity, omission, mistake, defect or inconsistency;

(2) to provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code);

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(3) to provide for the assumption by a Successor Company or Successor Person of the Issuer’s or any Guarantor’s obligations to the Holders, as applicable;

(4) to make any change that would provide any additional rights or benefits to the Holders or does not adversely affect the legal rights under this Indenture of any such Holder;

(5) to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Issuer or any Guarantor;

(6) to evidence and provide for the acceptance and appointment under this Indenture of a successor Trustee or successor Notes Collateral Agent; provided that such successor Trustee or successor Notes Collateral Agent is otherwise qualified and eligible to act as such under the terms of this Indenture;

(7) to add a Guarantor under this Indenture or to add additional assets as Collateral;

(8) to conform the text of this Indenture, the Guarantees, the Notes, any Security Document or the Intercreditor Agreement to any provision of the “Description of notes” section of the Offering Memorandum to the extent that such provision in such “Description of notes” section was intended to be a verbatim recitation of a provision of this Indenture, such Guarantee, the Notes, such Security Document or the Intercreditor Agreement;

(9) making any amendment to the provisions of this Indenture relating to the transfer and legending of Notes as permitted by this Indenture; provided, however, that (i) compliance with this Indenture as so amended would not result in Notes being transferred in violation of the Securities Act or any applicable securities law and (ii) such amendment does not materially and adversely affect the rights of Holders to transfer Notes;

(10) to mortgage, pledge, hypothecate or grant any other Lien in favor of the Notes Collateral Agent for the benefit of the Trustee and the Holders of the Notes, as additional security for the payment and performance of all or any portion of the Notes Obligations, in any property or assets, including any which are required to be mortgaged, pledged or hypothecated, or in which a Lien is required to be granted to or for the benefit of the Trustee or the Notes Collateral Agent pursuant to this Indenture, any of the Security Documents or otherwise;

(11) to release Collateral from the Lien of this Indenture and the Security Documents when permitted or required by the Security Documents or this Indenture or the Intercreditor Agreement; or

(12) in the case of the Intercreditor Agreement, in order to subject the security interests in the Collateral in respect of any Other Pari Passu Lien Obligations and Senior Credit Facilities Debt to the terms of the Intercreditor Agreement, in each case to the

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extent the Incurrence of such Indebtedness, and the grant of all Liens on the Collateral held for the benefit of such Indebtedness were permitted hereunder.

Upon the request of the Issuer accompanied by a resolution of its board of directors authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 9.05 hereof, the Trustee shall join and direct the Notes Collateral Agent to join with the Issuer and the Guarantors in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and make any further appropriate agreements and stipulations that may be therein contained. Notwithstanding the foregoing, neither the Trustee nor the Notes Collateral Agent shall be obligated to enter into an amended or supplemental indenture that affects its respective rights, duties or immunities under this Indenture or otherwise, in which case each of the Trustee and the Notes Collateral Agent may in its sole discretion enter into such amended or supplemental indenture. Notwithstanding the foregoing, no Opinion of Counsel shall be required in connection with the addition of a Guarantor under this Indenture upon execution and delivery by such Guarantor and the Trustee of a supplemental indenture to this Indenture, the form of which is attached as Exhibit D hereto, and delivery of an Officer’s Certificate.

Section 9.02. With Consent of Holders of Notes.

Except as provided below in this Section 9.02, the Issuer, the Trustee and the Notes Collateral Agent may amend or supplement this Indenture, the Intercreditor Agreement, any Security Document, the Notes and the Guarantees with the consent of the Holders of at least a majority in principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Intercreditor Agreement, any Security Document, the Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08 hereof and Section 2.09 hereof shall determine which Notes are considered to be “outstanding” for the purposes of this Section 9.02.

Upon the request of the Issuer accompanied by a resolution of its board of directors authorizing the execution of any such amended or supplemental indenture, and upon the filing with the Trustee and the Notes Collateral Agent of evidence of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee and the Notes Collateral Agent of the documents described in Section 9.05 hereof, the Trustee shall join and direct the Notes Collateral Agent to join with the Issuer in the execution of such amended or supplemental indenture. Notwithstanding the foregoing, neither the Trustee nor the Notes Collateral Agent shall be obligated to enter into an amended or supplemental indenture that affects the Trustee’s or the Notes Collateral Agent’s respective rights, duties or immunities under this Indenture or otherwise, in which case the Trustee or the Notes Collateral Agent, as the case may be, may in its sole discretion enter into such amended or supplemental indenture.

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It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.

After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Issuer shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental indenture or waiver.

Without the consent of each affected Holder of Notes, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder):

(1) reduce the principal amount of such Notes whose Holders must consent to an amendment, supplement or waiver;

(2) reduce the principal of or change the fixed final maturity of any such Note or alter or waive the provisions with respect to the redemption of such Notes (other than provisions relating to Section 3.09, Section 4.10 and Section 4.14 hereof to the extent that any such amendment or waiver does not have the effect of reducing the principal of or changing the fixed final maturity of any such Note or altering or waiving the provisions with respect to the redemption of such Notes);

(3) reduce the rate of or change the time for payment of interest on any Note;

(4) waive a Default in the payment of principal of or premium, if any, or interest on the Notes, except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration, or in respect of a covenant or provision contained in this Indenture or any Guarantee which cannot be amended or modified without the consent of all Holders;

(5) make any Note payable in money other than that stated therein;

(6) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of or premium, if any, or interest on the Notes;

(7) make any change in these amendment and waiver provisions;

(8) impair the right of any Holder to receive payment of principal of, or interest on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes;

(9) make any change to or modify the ranking or priority of the Notes that would adversely affect the Holders; or

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(10) except as expressly permitted by this Indenture, modify or release any of the Guarantees of any Significant Subsidiary (or a group of Subsidiaries that together would constitute a Significant Subsidiary) in any manner adverse to the Holders of the Notes.

Without the consent of Holders of 95% in aggregate principal amount of the Notes, an amendment, supplement or waiver may not make any change in any Security Document, the Intercreditor Agreement or the provisions in this Indenture dealing with the Collateral or the Security Documents that would release all or substantially all of the Collateral from the Liens of the Security Documents (except as permitted by the terms of this Indenture, the Security Documents and the Intercreditor Agreement) or change or alter the priority of the security interests in the Collateral.

Without the consent of Holders of 75% in aggregate principal amount of the Notes, an amendment, supplement or waiver may not (a) make any change in any Security Document, any Intercreditor Agreement or the provisions in this Indenture dealing with the Collateral or the Security Documents or the application of trust proceeds of the Collateral that would adversely affect the Holders in any material respect or (b) modify the Intercreditor Agreement in any manner adverse to the Holders in any material respect other than in accordance with the terms of this Indenture, the Security Documents and the Intercreditor Agreement.

Section 9.03. Revocation and Effect of Consents.

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement, or waiver. If a record date is fixed, then, notwithstanding the preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only such Persons, shall be entitled to consent to such amendment, supplement, or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date unless the consent of the requisite number of Holders has been obtained.

Section 9.04. Notation on or Exchange of Notes.

The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Issuer in exchange for all Notes may issue

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and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.

Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.

Section 9.05. Trustee and Notes Collateral Agent to Sign Amendments, etc.

The Trustee and the Notes Collateral Agent shall sign any amendment, supplement or waiver authorized pursuant to this Article IX if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee or the Notes Collateral Agent. The Issuer may not sign an amendment, supplement or waiver until the board of directors of the Issuer approves it. In executing any amendment, supplement or waiver, the Trustee and the Notes Collateral Agent shall receive and (subject to Section 7.01 hereof) shall be fully protected in conclusively relying upon, in addition to the documents required by Section 14.02 hereof, an Officer’s Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture and that such amendment, supplement or waiver is the legal, valid and binding obligation of the Issuer and any Guarantors party thereto, enforceable against them in accordance with its terms, subject to customary exceptions, and complies with the provisions hereof. Notwithstanding the foregoing, no Opinion of Counsel will be required for the Trustee and the Notes Collateral Agent to execute any amendment or supplement adding a new Guarantor under this Indenture.

Section 9.06. Payment for Consent.

Neither the Issuer nor any Affiliate of the Issuer shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to all Holders and is paid to all Holders that so consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

ARTICLE X

GUARANTEES

Section 10.01. Guarantee.

Subject to this Article X, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Noteholder Secured Party and their respective successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes, the Security Documents, the Intercreditor Agreement or the Obligations of the Issuer hereunder or thereunder, that the Notes Obligations shall be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and performed on or prior to the date specified for such performance hereunder (as such date may be extended pursuant to an amendment or supplement to this Indenture pursuant to Article IX hereof). Subject to Section 10.02(b) hereof, failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever

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reason, the Guarantors shall be jointly and severally obligated to pay or perform the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.

Subject to this Article X, the Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of this Indenture, the Notes, the Security Documents, the Intercreditor Agreement or the obligations of the Issuer hereunder or thereunder, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all demands whatsoever and, subject to Section 10.02(b) hereof, covenants that this Guarantee shall not be discharged except by complete payment and performance of the Notes Obligations.

Subject to this Article X, each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys’ fees and expenses) incurred by the Trustee, the Notes Collateral Agent or any Holder in enforcing any rights under this Section 10.01.

Subject to this Article X, if any Noteholder Secured Party is required by any court or otherwise to return to the Issuer, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to the Issuer or the Guarantors, any amount paid to such Noteholder Secured Party, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.

Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Notes Obligations until payment in full of all Notes Obligations; provided that (i) Patheon Italia S.p.A. shall have the right to set off any payment made by it under its Limited Guarantee against its obligations under the Italian Intercompany Loan at any time after such payment under its Limited Guarantee is made and (ii) Patheon France S.A.S. shall have the right to set off any payment made by it under its Limited Guarantee against its obligations under the French Intercompany Loan at any time after such payment under its Limited Guarantee is made. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Noteholder Secured Parties, on the other hand, (x) the maturity of the Notes Obligations may be accelerated as provided in Article VI hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Notes Obligations, and (y) in the event of any declaration of acceleration of such obligations as provided in Article VI hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. Subject to Section 10.02(b) hereof, the Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Noteholder Secured Parties under the Guarantees.

Each Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Issuer for liquidation or reorganization, should the

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Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Issuer’s assets, and shall, to the fullest extent permitted by law (subject to this Article X), continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes Obligations are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any Noteholder Secured Party, whether as a “voidable preference,” “fraudulent transfer” or otherwise, all as though such payment or performance had not been made. In the event that any payment or any part thereof, is rescinded, reduced, restored or returned, the Notes Obligations shall, to the fullest extent permitted by law (subject to this Article X), be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

In case any provision of any Guarantee shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Subject to Section 10.02(b) and to the proviso to the first sentence of the third preceding paragraph, each payment to be made by a Guarantor in respect of its Guarantee shall be made without set-off, counterclaim, reduction or diminution of any kind or nature.

Section 10.02. Limitation on Guarantor Liability.

(a) Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance (or similar concept under applicable law) for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law, or the similar laws of any other jurisdiction, in each case to the extent applicable to any Guarantee, or otherwise violate applicable law. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that (in addition to any other limitations in this Article X) the obligations of each Guarantor shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article X, result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent conveyance or fraudulent transfer under or otherwise violating applicable law. Each Guarantor that makes a payment under its Guarantee shall be entitled upon payment in full of all Notes Obligations to a contribution from each other Guarantor in an amount equal to such other Guarantor’s pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP; provided that (i) the amount of such contributions made by any Limited Guarantor shall be limited to the maximum amount that, taken together with the amount of any payment made by such Limited Guarantor under its Limited Guarantee, does not cause the limits set forth for such Limited Guarantor in Section 10.02(b) hereof to be exceeded and (ii) any resulting shortfall in contributions shall be allocated among the Guarantors whose contributions are not so limited on the same basis (excluding the Limited Guarantors whose contributions are so limited from such calculation).

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(b) (i) The obligations of Patheon France S.A.S. under this Indenture, the Security Documents and the Intercreditor Agreement shall be limited at all times to a maximum principal amount of $10 million. Patheon France S.A.S. hereby acknowledges that it will receive substantial direct or indirect benefit from the issuance of the Notes. For the avoidance of doubt, the obligations of Patheon France S.A.S. under this Article X shall not extend beyond a point where they would infringe Article L. 225-216 of the French commercial code.

(ii) The obligations of Patheon Holdings S.A.S. under this Article X shall consist solely of a Guarantee of the Obligations of Patheon France S.A.S. under this Article X.

(iii) The obligations of Patheon Italia S.p.A. under this Indenture, the Security Documents and the Intercreditor Agreement shall be limited to a maximum amount of $73 million.

(iv) The obligations of Patheon International AG under this Article X at any time shall be limited to the amount of Free Capital of Patheon International AG at such time. Immediately after being requested to perform its obligations under this Article X, Patheon International AG shall provide the Trustee as soon as reasonably practicable with:

(A) an interim balance sheet audited by its statutory auditors (if any);

(B) the determination by such statutory auditors (if any) of such Free Capital amount based on such interim audited balance sheet (such Free Capital amount to reflect, as the case may be, the conversion of restricted reserves into distributable reserves);

(C) a confirmation from such statutory auditors (if any) that the Free Capital amount complies with the terms of this Section 10.02(b)(iv) and with the provisions of Swiss corporate law which are aimed at protecting the share capital and legal reserves; and

(D) approval by a shareholders’ meeting of Patheon International AG of the (resulting) profit distribution;

and shall promptly implement all such other measures necessary or useful to allow Patheon International AG to make the payments agreed hereunder with a minimum of limitations.

The Issuer shall cause Patheon International AG to, and Patheon International AG shall, take and cause to be taken any and all action as shall be required as a matter of Swiss law in force at the time to make a payment or perform other Obligations with a minimum of limitations.

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The limitations contained herein shall not release Patheon International AG from the payment and performance of any Obligations beyond these limitations, but merely postpone the payment date until such times as payment is again permitted notwithstanding such limitation (unless all such Obligations have been discharged).

Section 10.03. [Reserved].

Section 10.04. Subrogation.

Each Guarantor shall be subrogated to all rights of Holders of Notes against the Issuer in respect of any amounts paid by any Guarantor pursuant to the provisions of Section 10.01 hereof; provided that, if an Event of Default has occurred and is continuing, no Guarantor shall be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Issuer under this Indenture or the Notes shall have been paid in full; provided, further, that (i) Patheon Italia S.p.A. shall have the right to set off any payment made by it under its Limited Guarantee against its obligations under the Italian Intercompany Loan at any time after such payment under its Limited Guarantee is made and (ii) Patheon France S.A.S. shall have the right to set off any payment made by it under its Limited Guarantee against its obligations under the French Intercompany Loan at any time after such payment under its Limited Guarantee is made.

Section 10.05. Benefits Acknowledged.

Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the guarantee and waivers made by it pursuant to its Guarantee are knowingly made in contemplation of such benefits.

Section 10.06. Release of Guarantees.

A Guarantee by a Guarantor shall be automatically and unconditionally released and discharged, and no further action by such Guarantor, the Issuer or the Trustee is required for the release of such Guarantor’s Guarantee, upon:

(1)    (A) any sale, exchange or transfer (by merger, amalgamation or otherwise) of (I) the Capital Stock of such Guarantor (including any sale, exchange or transfer), after which the applicable Guarantor is no longer a Restricted Subsidiary or (II) all or substantially all of the assets of such Guarantor, in each case, which sale, exchange or transfer is made in compliance with the applicable provisions of this Indenture;

(B) the release or discharge of such Guarantor from its guarantee of Indebtedness or the retirement or repayment of the Indebtedness, Disqualified Stock or Preferred Stock, in each case, that resulted in the obligation of such Guarantor to guarantee the Notes, if such Guarantor would not then otherwise be required to guarantee the Notes pursuant to the covenant described under Section 4.20 hereof;

(C) the proper designation of any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary; or

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(D) the Issuer exercising its Legal Defeasance option or Covenant Defeasance option in accordance with Article VIII hereof or the Notes Obligations being discharged in accordance with the terms of this Indenture; and

(2) such Guarantor delivering to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in this Indenture relating to such transaction have been complied with.

ARTICLE XI

SATISFACTION AND DISCHARGE

Section 11.01. Satisfaction and Discharge.

This Indenture shall be discharged and shall cease to be of further effect as to all Notes, when either:

(1) all Notes theretofore authenticated and delivered, except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust, have been delivered to the Trustee for cancellation; or

(2) (A) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise, shall become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer and the Issuer or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders of the Notes, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest to pay and discharge the entire indebtedness on the Notes not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption;

(B) no Default (other than that resulting from borrowing funds to be applied to make such deposit or the grant of any Lien securing such borrowing) with respect to this Indenture or the Notes shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under the Senior Credit Facilities or any other material agreement or instrument (other than this Indenture) to which the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound;

(C) the Issuer has paid or caused to be paid all sums payable by it under this Indenture; and

(D) the Issuer has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or the Redemption Date, as the case may be.

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In addition, the Issuer must deliver an Officer’s Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

Notwithstanding the satisfaction and discharge of this Indenture, if money shall have been deposited with the Trustee pursuant to subclause (A) of clause (2) of this Section 11.01, the provisions of Section 7.06, Section 8.06 and Section 11.02 hereof shall survive.

Section 11.02. Application of Trust Money.

Subject to the provisions of Section 8.06 hereof, all money deposited with the Trustee pursuant to Section 11.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.

If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 11.01 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuer’s and any Guarantor’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 11.01 hereof; provided that if the Issuer has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent.

ARTICLE XII

SECURITY

Section 12.01. Notes Collateral and Security Documents.

The Notes Obligations shall be secured as provided in the Security Documents, which define the terms of the Liens that secure the Notes Obligations, subject to the terms of the Intercreditor Agreement. The Trustee, the Issuer and the Guarantors hereby acknowledge and agree that the Notes Collateral Agent holds security interests in and Liens on the Collateral in trust for the benefit of the Noteholder Secured Parties pursuant to the terms of the Security Documents and the Intercreditor Agreement. Each Holder, by accepting a Note, consents and agrees to the terms of the Security Documents (including the provisions providing for the possession, use, release and foreclosure of Collateral) and the Intercreditor Agreement as the same may be in effect or may be amended from time to time in accordance with their terms and this Indenture and the Intercreditor Agreement, and authorizes and directs the Notes Collateral Agent to enter into the Security Documents and the Intercreditor Agreement and to perform its obligations and exercise its rights thereunder in accordance therewith. The Issuer shall deliver to

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the Notes Collateral Agent copies of all documents pursuant to the Security Documents, and shall do or cause to be done all such acts and things as may be reasonably required by the next sentence of this Section 12.01, to assure and confirm to the Notes Collateral Agent the security interest in the Collateral contemplated hereby, by the Security Documents or any part thereof, as from time to time constituted, so as to render the same available for the security and benefit of the Notes Obligations secured thereby, according to the intent and purposes herein expressed. The Issuer shall, and shall cause the Guarantors to, and each Guarantor shall, use their commercially reasonable efforts to take any and all actions reasonably required to cause the Security Documents to create and maintain, as security for the Notes Obligations, a valid and enforceable perfected Lien and security interest in and on all of the Collateral (subject to the terms of the Intercreditor Agreement), in favor of the Notes Collateral Agent for the benefit of the Noteholder Secured Parties; provided that (i) the Liens and security interests granted by any Limited Guarantor shall only be required to secure such Limited Guarantor’s Obligations under its Limited Guarantee, (ii) the Security Documents governed by Swiss law may provide that the Liens and security interests securing the Obligations of Patheon International AG under its Limited Guarantee are granted in favor of the Senior Credit Facilities Collateral Agent for the benefit of the Noteholder Secured Parties, (iii) the Security Documents governed by Dutch law may provide that the Liens and security interests granted thereunder in favor of the Notes Collateral Agent secure the Parallel Debt rather than the Notes Obligations and (iv) the Security Documents governed by English law may create a trust which is subject to English law. The Issuer shall, and shall cause the Guarantors to, and each Guarantor shall, make all filings (including filings of continuation statements and amendments to financing statements that may be necessary to continue the effectiveness of such financing statements) and take all other actions as are necessary or required by the Security Documents to maintain (at the sole cost and expense of the Issuer and its Subsidiaries) the security interest created by the Security Documents in the Collateral (other than with respect to any Collateral the security interest in which is expressly permitted not to be perfected under the Security Documents) as a perfected security interest with the priority set forth in the Intercreditor Agreement and subject only to Permitted Liens. The Issuer shall, and shall cause the Guarantors to, and each Guarantor shall, use commercially reasonable efforts to make all such filings and take all such other actions that have not been made or taken on or prior to the Issue Date as soon as practicable after the Issue Date. Notwithstanding the foregoing, control agreements with respect to deposit accounts and securities accounts that constitute Collateral may not be in place for up to 60 days after the Issue Date; provided, however, that the Issuer shall, and shall cause the Guarantors to, and each Guarantor shall, use commercially reasonable efforts to obtain control agreements with respect to such deposit accounts and securities accounts as soon as practicable after the Issue Date and, in any event, such control agreements shall be entered into no later than the earlier of (a) 60 days after the Issue Date and (b) the time any control agreements are entered into with respect to such deposit accounts or securities accounts by the Senior Credit Facilities Collateral Agent.

Section 12.02. Release of Collateral.

(a) Subject to the terms and provisions set forth herein, Collateral may be released from the Lien and security interest created by the Security Documents at any time or from time to time in accordance with the provisions of the Security Documents, the Intercreditor Agreement or as provided hereby. The Issuer and the Guarantors shall be entitled to a release of property and other assets included in the Collateral from the

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Liens securing the Notes Obligations, and the Trustee (subject to its receipt of an Officer’s Certificate and Opinion of Counsel as provided below) shall instruct the Notes Collateral Agent to release, as applicable, the same from such Liens at the Issuer’s sole cost and expense, under one or more of the following circumstances:

(1) to enable the Issuer or any Guarantor to sell, exchange or otherwise dispose of any of the Collateral to the extent not prohibited by Section 4.10 hereof;

(2) in the case of a Guarantor that is released from its Guarantee, the release of the property and assets of such Guarantor;

(3) pursuant to an amendment or waiver in accordance with Article IX of this Indenture;

(4) if the Notes have been discharged or defeased pursuant to Article VIII or XI of this Indenture; or

(5) as provided in the Intercreditor Agreement.

(b) Upon receipt of an Officer’s Certificate and an Opinion of Counsel certifying that all conditions precedent under this Indenture and the Security Documents, if any, to such release have been met and any necessary or proper instruments of termination, satisfaction or release have been prepared by the Issuer, the Trustee shall instruct the Notes Collateral Agent to execute, deliver or acknowledge (at the Issuer’s expense) such instruments or releases to evidence the release of any Collateral permitted to be released pursuant to this Indenture, the Security Documents and the Intercreditor Agreement. Neither the Trustee nor the Notes Collateral Agent shall be liable for any such release undertaken in good faith in reliance upon any such Officer’s Certificate or Opinion of Counsel, and notwithstanding any term hereof or in any Security Document to the contrary, the Trustee and Notes Collateral Agent shall not be under any obligation to release any such Lien and security interest, or execute and deliver any such instrument of release, satisfaction or termination, unless and until it receives such Officer’s Certificate and Opinion of Counsel.

Section 12.03. Suits to Protect the Collateral.

Subject to the provisions of Article VII hereof and the Intercreditor Agreement, the Trustee in its sole discretion and without the consent of the Holders, on behalf of the Holders, may, or may direct the Notes Collateral Agent to, take all actions it deems necessary or appropriate in order to:

(1) enforce any of the terms of the Security Documents; and

(2) collect and receive any and all amounts payable in respect of the Notes Obligations hereunder.

Subject to the provisions of the Security Documents and the Intercreditor Agreement, the Trustee shall have power to institute and to maintain such suits and proceedings

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as it may deem expedient to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of any of the Security Documents or this Indenture, and such suits and proceedings as the Trustee, in its sole discretion, may deem expedient to preserve or protect its interests and the interests of the Holders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the Lien on the Collateral or be prejudicial to the interests of the Holders or the Trustee). Nothing in this Section 12.03 shall be considered to impose any such duty or obligation to act on the part of the Trustee.

Section 12.04. Authorization of Receipt of Funds by the Trustee Under the Security Documents.

Subject to the provisions of the Intercreditor Agreement, the Trustee is authorized to receive any funds for the benefit of the Holders distributed under the Security Documents, and to make further distributions of such funds to the Holders according to the provisions of this Indenture.

Section 12.05. Purchaser Protected.

In no event shall any purchaser in good faith of any property purported to be released hereunder be bound to ascertain the authority of the Notes Collateral Agent or the Trustee to execute the release or to inquire as to the satisfaction of any conditions required by the provisions hereof for the exercise of such authority or to see to the application of any consideration given by such purchaser or other transferee; nor shall any purchaser or other transferee of any property or rights permitted by this Article XII to be sold be under any obligation to ascertain or inquire into the authority of the Issuer or the applicable Guarantor to make any such sale or other transfer.

Section 12.06. Powers Exercisable by Receiver or Trustee.

In case the Collateral shall be in the possession of a receiver or trustee, lawfully appointed, the powers conferred in this Article XII upon the Issuer or a Guarantor with respect to the release, sale or other disposition of such property may be exercised by such receiver or trustee, and an instrument signed by such receiver or trustee shall be deemed the equivalent of any similar instrument of the Issuer or a Guarantor or of any officer or officers thereof required by the provisions of this Article XII; and if the Trustee shall be in the possession of the Collateral under any provision of this Indenture, then such powers may be exercised by the Trustee.

Section 12.07. Release Upon Termination of the Issuer’s Obligations.

In the event that the Issuer delivers to the Trustee, in form and substance reasonably acceptable to it, an Officer’s Certificate certifying that (i) payment in full of the principal of, together with accrued and unpaid interest on, the Notes Obligations that are due and payable at or prior to the time such principal, together with accrued and unpaid interest, if any ,is paid or (ii) the Issuer shall have exercised its Legal Defeasance option or its Covenant Defeasance option, in each case in compliance with the provisions of Article VIII, the Trustee shall deliver to the Issuer and the Notes Collateral Agent a notice stating that the Trustee, on

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behalf of the Holders, disclaims and gives up any and all rights it has in or to the Collateral (other than with respect to funds held by the Trustee pursuant to Article VIII), and any rights it has under the Security Documents, and upon receipt by the Notes Collateral Agent of such notice, the Notes Collateral Agent shall be deemed not to hold a Lien in the Collateral on behalf of the Trustee and shall do or cause to be done all acts reasonably necessary to release such Lien as soon as is reasonably practicable at the written request of the Issuer.

Section 12.08. Notes Collateral Agent.

(a) The Trustee and each of the Holders by acceptance of the Notes hereby designates and appoints Deutsche Bank Trust Company Americas as its agent under this Indenture, the Security Documents and the Intercreditor Agreement and the Trustee and each of the Holders by acceptance of the Notes hereby irrevocably authorizes Deutsche Bank Trust Company Americas to take such action on its behalf under the provisions of this Indenture, the Security Documents and the Intercreditor Agreement and to exercise such powers and perform such duties as are expressly delegated to the Notes Collateral Agent by the terms of this Indenture, the Security Documents and the Intercreditor Agreement, together with such powers as are reasonably incidental thereto. The Notes Collateral Agent agrees to act as such on the express conditions contained in this Section 12.08. The provisions of this Section 12.08 are solely for the benefit of the Notes Collateral Agent and none of the Trustee, any of the Holders nor the Issuer or any of the Guarantors shall have any rights as a third party beneficiary of any of the provisions contained herein other than as expressly provided in Section 12.02 hereof. Notwithstanding any provision to the contrary contained elsewhere in this Indenture, the Security Documents and the Intercreditor Agreement, the Notes Collateral Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Notes Collateral Agent have or be deemed to have any fiduciary relationship with the Trustee, any Holder or the Issuer or any Guarantor, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Indenture, the Security Documents and the Intercreditor Agreement or otherwise exist against the Notes Collateral Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” in this Indenture with reference to the Notes Collateral Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. Except as expressly otherwise provided in this Indenture, the Notes Collateral Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions which the Notes Collateral Agent is expressly entitled to take or assert under this Indenture, the Security Documents and the Intercreditor Agreement, including the exercise of remedies pursuant to Article VI, and any action so taken or not taken shall be deemed consented to by the Trustee and the Holders.

(b) The Notes Collateral Agent may execute any of its duties under this Indenture, the Security Documents or the Intercreditor Agreement by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel of its selection concerning all matters pertaining to such duties. Without limiting the generality of the foregoing, the Senior Credit Facilities Collateral Agent may act as agent of the Notes Collateral Agent for purposes of the creation, perfection and enforcement of, and other matters in

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connection with, the Liens and security interests created by the Security Documents governing the accounts receivable and bank accounts of Patheon International AG. The Notes Collateral Agent shall not be responsible for the negligence or misconduct of any agent, employee or attorney-in-fact that it selects as long as such selection was made without negligence or willful misconduct.

(c) None of the Notes Collateral Agent or any of its agents or employees shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Indenture or the transactions contemplated hereby (except for its own gross negligence or willful misconduct) or under or in connection with any Security Document or the Intercreditor Agreement or the transactions contemplated thereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to the Trustee or any Holder for any recital, statement, representation, warranty, covenant or agreement made by the Issuer or any Guarantor, contained in this or any Indenture, or in any certificate, report, statement or other document referred to or provided for in, or received by the Notes Collateral Agent under or in connection with, this or any other Indenture, the Security Documents or the Intercreditor Agreement, or the validity, effectiveness, genuineness, enforceability or sufficiency of this or any other Indenture, the Security Documents or the Intercreditor Agreement, or for any failure of the Issuer or any Guarantor or any other party to this Indenture, the Security Documents or the Intercreditor Agreement to perform its obligations hereunder or thereunder. None of the Notes Collateral Agent or any of its agents or employees shall be under any obligation to the Trustee or any Holder to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this or any other Indenture, the Security Documents or the Intercreditor Agreement or to inspect the properties, books or records of the Issuer or any Guarantor.

(d) The Notes Collateral Agent shall be entitled to conclusively rely, and shall be fully protected in conclusively relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including, without limitation, counsel to the Issuer or any Guarantor), independent accountants and other experts and advisors selected by the Notes Collateral Agent.

(e) Notwithstanding anything else to the contrary herein, whenever reference is made in this Indenture, the Security Documents or the Intercreditor Agreement to any discretionary action by, consent, designation, specification, requirement of approval of, notice, request or other communication from, or other discretionary direction given or discretionary action to be undertaken or to be (or not to be) suffered or omitted by the Notes Collateral Agent or to any election, decision, opinion, acceptance, use of judgment, expression of satisfaction or other exercise of discretion, rights or remedies to be made (or not to be made) by the Notes Collateral Agent, it is understood that in all cases the Notes Collateral Agent shall be fully justified in failing or refusing to take any such action under this Indenture, the Security Documents or the Intercreditor Agreement if either (i) it shall not have received such written instruction, advice or concurrence of the Trustee (acting in accordance with this Indenture, the applicable Security Documents and the Intercreditor Agreement) or, if required by the Intercreditor Agreement, the Senior Credit Facilities Collateral Agent, as it deems appropriate, or

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(ii) if it so requests, the Holders shall not have provided full indemnification and adequate security for such indemnification obligation to the satisfaction of the Notes Collateral Agent against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action, including, but not limited to, any and all potential liability or expense arising under or related to Environmental Laws, Environmental Claims or Hazardous Materials.

(f) The Notes Collateral Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, unless the Notes Collateral Agent shall have received written notice from the Trustee or the Issuer referring to this Indenture, describing such Default or Event of Default and stating that such notice is a “notice of default.” The Notes Collateral Agent shall take such action with respect to such Default or Event of Default as may be requested by the Trustee in accordance with Article VI (subject to this Section 12.08); provided, however, that unless and until the Notes Collateral Agent has received any such request, the Notes Collateral Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable.

(g) Deutsche Bank Trust Company Americas and its Affiliates (and any successor Notes Collateral Agent and its Affiliates) may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting, or other business with the Issuer and the Guarantors as though it was not the Notes Collateral Agent hereunder and without notice to or consent of the Trustee. The Trustee and the Holders acknowledge that, pursuant to such activities, Deutsche Bank Trust Company Americas or its Affiliates (and any successor Notes Collateral Agent and its Affiliates) may receive information regarding the Issuer and the Guarantors (including information that may be subject to confidentiality obligations in favor of the Issuer and the Guarantors) and acknowledge that the Notes Collateral Agent shall not be under any obligation to provide such information to the Trustee or the Holders. Nothing herein shall impose or imply any obligation on the part of Deutsche Bank Trust Company Americas (or any successor Notes Collateral Agent) to advance funds.

(h) The Notes Collateral Agent may resign at any time upon thirty (30) days prior written notice to the Trustee and the Issuer, such resignation to be effective upon the acceptance of a successor agent to its appointment as Notes Collateral Agent. If the Notes Collateral Agent resigns under this Indenture, the Issuer shall appoint a successor Notes Collateral Agent. If no successor Notes Collateral Agent is appointed prior to the intended effective date of the resignation of the Notes Collateral Agent (as stated in the notice of resignation), the Notes Collateral Agent may appoint a successor Notes Collateral Agent. If no successor Notes Collateral Agent is appointed and consented to by the Issuer pursuant to the preceding sentence within thirty (30) days after the intended effective date of resignation (as stated in the notice of resignation) the Notes Collateral Agent shall be entitled to petition at the expense of the Issuer a court of competent jurisdiction to appoint a successor. Upon the acceptance of its appointment as successor Notes Collateral Agent hereunder, such successor Notes Collateral Agent shall succeed to all the rights, powers and duties of the retiring Notes Collateral Agent, and the term “Notes Collateral Agent” shall mean such successor Notes Collateral Agent, and the retiring Notes Collateral Agent’s appointment, powers and duties as the

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Notes Collateral Agent shall be terminated. After the retiring Notes Collateral Agent’s resignation hereunder, the provisions of this Section 12.08 (and Section 12.09) shall continue to inure to its benefit and the retiring Notes Collateral Agent shall not by reason of such resignation be deemed to be released from liability as to any actions taken or omitted to be taken by it while it was the Notes Collateral Agent under this Indenture.

(i) Deutsche Bank Trust Company Americas shall initially act as Notes Collateral Agent. The Issuer shall be authorized to appoint other Notes Collateral Agents as necessary in its sole discretion. Except as otherwise explicitly provided herein or in the Security Documents or the Intercreditor Agreement, neither the Notes Collateral Agent nor any of its officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The Notes Collateral Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither the Notes Collateral Agent nor any of its officers, directors, employees or agents shall be responsible for any act or failure to act hereunder, except for its own willful misconduct, gross negligence or bad faith.

(j) The Notes Collateral Agent, as such, is authorized and directed by the Holders and the Trustee to (i) enter into the Security Documents, (ii) enter into the Intercreditor Agreement, (iii) bind the Holders and the Trustee on the terms as set forth in the Security Documents and the Intercreditor Agreement and (iv) perform and observe its obligations under the Security Documents and the Intercreditor Agreement.

(k) The Trustee agrees that it shall not (and shall not be obliged to), and shall not instruct the Notes Collateral Agent to, unless specifically requested to do so by a majority of the Holders, take or cause to be taken any action to enforce its rights under this Indenture or against the Issuer and the Guarantors, including the commencement of any legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce any security interest in, any of the Collateral.

If at any time or times the Trustee shall receive (i) by payment, foreclosure, set-off or otherwise, any proceeds of Notes Collateral or any payments with respect to the Notes Obligations, except for any such proceeds or payments received by the Trustee from the Notes Collateral Agent pursuant to the terms of this Indenture, or (ii) payments from the Notes Collateral Agent in excess of the amount required to be paid to the Trustee pursuant to Article VI, the Trustee shall promptly turn the same over to the Notes Collateral Agent, in kind, and with such endorsements as may be required to negotiate the same to the Notes Collateral Agent.

(l) Subject to the Intercreditor Agreement, the Trustee and the Notes Collateral Agent are each Holder’s agents for the purpose of perfecting the Holders’ security interest in assets which, in accordance with Article IX of the Uniform Commercial Code or any other applicable law, can be perfected only by possession. Should the Trustee obtain possession of any Collateral, the Trustee shall notify the Notes Collateral Agent thereof and shall deliver such Collateral to the Notes Collateral Agent or otherwise deal with such Collateral in accordance with the Notes Collateral Agent’s instructions.

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(m) The Notes Collateral Agent shall have no obligation whatsoever to the Trustee or any of the Holders to assure that the Collateral exists or is owned by the Issuer and the Guarantors or is cared for, protected or insured or has been encumbered, or that the Notes Collateral Agent’s Liens have been properly or sufficiently or lawfully created, perfected, protected, maintained or enforced or are entitled to any particular priority, or to determine whether all of the Grantor’s property constituting Collateral intended to be subject to the Lien and security interest of the Security Documents has been properly and completely listed or delivered, as the case may be, or the genuineness, validity, marketability or sufficiency thereof or title thereto, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to the Notes Collateral Agent pursuant to this Indenture, any Security Document or the Intercreditor Agreement.

(n) If the Issuer (i) incurs any obligations in respect of Secured Credit Facilities Debt at any time when no intercreditor agreement is in effect or at any time when Indebtedness constituting Senior Credit Facilities Debt entitled to the benefit of an existing Intercreditor Agreement is concurrently retired, and (ii) delivers to the Notes Collateral Agent an Officer’s Certificate so stating and requesting the Notes Collateral Agent to enter into an intercreditor agreement (on substantially the same terms as the Intercreditor Agreement) in favor of a designated agent or representative for the holders of the Secured Credit Facilities Debt so incurred, the Notes Collateral Agent shall (and is hereby authorized and directed to) enter into such intercreditor agreement (at the sole expense and cost of the Issuer, including legal fees and expenses of the Notes Collateral Agent), bind the Holders on the terms set forth therein and perform and observe its obligations thereunder.

(o) No provision of this Indenture, the Intercreditor Agreement or any Security Document shall require the Notes Collateral Agent (or the Trustee) to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or thereunder or to take or omit to take any action hereunder or thereunder or take any action at the request or direction of Holders (or the Trustee in the case of the Notes Collateral Agent) if it shall have reasonable grounds for believing that repayment of such funds is not assured to it.

(p) The Notes Collateral Agent (i) shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers, or for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Notes Collateral Agent was grossly negligent in ascertaining the pertinent facts, (ii) shall not be liable for interest on any money received by it except as the Notes Collateral Agent may agree in writing with the Issuer (and money held in trust by the Notes Collateral Agent need not be segregated from other funds except to the extent required by law), and (iii) may consult with counsel of its selection and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it in good faith and in accordance with the advice or opinion of such counsel. The grant of permissive rights or powers to the Notes Collateral Agent shall not be construed to impose duties to act.

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(q) Each of the Noteholder Secured Parties hereby appoints the Notes Collateral Agent as “mandatario con rappresentanza” pursuant to Articles 1703, 1704 et seq. of the Italian Civil Code to act as their collateral agent under and in connection with the Security Documents governed by Italian law and the Intercreditor Agreement in order to perfect and hold (including to exercise all rights, remedies and/or powers of the Noteholder Secured Parties thereunder) the security interests governed by Italian law granted by any Grantor to secure the Notes Obligations or any Obligations hereunder. Each assignee of a Noteholder Secured Party shall be deemed to have confirmed and ratified the aforesaid constitution of the Notes Collateral Agent under Italian law.

(r) The Trustee and each Holder hereby appoint Deutsche Bank Trust Company Americas to create, register, manage and enforce any Liens on Collateral granted by the Security Documents governed by French law in accordance with Article 2328-1 of the French Civil Code.

(s) In no event shall the Notes Collateral Agent be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Notes Collateral Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.

(t) The rights, privileges, protections, immunities and benefits given to the Notes Collateral Agent, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Notes Collateral Agent in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

(u) The Notes Collateral Agent shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.

Section 12.09. Compensation, Indemnification and Expenses.

(a) The Notes Collateral Agent shall be entitled to the compensation, expense reimbursement, indemnification and other rights and benefits set forth in Section 7.06 hereof (with the references to the Trustee therein being deemed to refer to the Notes Collateral Agent and references to this Indenture being deemed to include the Security Documents).

(b) Without limiting the generality of the foregoing, the Issuer and the Guarantors jointly and severally agree to pay upon demand to the Notes Collateral Agent the amount of any and all reasonable expenses, including, without limitation, the reasonable fees and expenses of its counsel and of any experts and agents, that the Notes Collateral Agent may incur in connection with (i) the administration of this Indenture or any Security Document, (ii) the custody, preservation, use or operation of, or the sale of, collection from or other realization upon, any of the property or assets of the Issuer or any Guarantor that secure any Notes Obligations, (iii) the exercise or enforcement of any of the rights of the Notes Collateral Agent or the other Noteholder Secured Parties hereunder or under any Security Document or (iv) the failure by the Issuer or any Guarantor to perform or observe any of the provisions hereof or of any Security Document to which it is a party. All expenses of protecting, storing, warehousing, insuring, handling, maintaining and shipping any property or assets of the Issuer or any

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Guarantor that secure any Notes Obligations, all taxes payable with respect to any such property or assets (including with respect to any sale thereof) and all other payments required to be made by the Notes Collateral Agent to any Person to realize upon any such property or assets, shall be borne and paid by the Issuer and the Guarantors, jointly and severally. The Notes Collateral Agent shall not be liable or responsible in any way for the safekeeping of any such property or assets, for any loss or damage thereto (except for reasonable care in its custody while any such property or assets are in the Notes Collateral Agent’s actual possession), for any diminution in the value thereof, or for any act or default of any warehouseman, carrier, forwarding agency or other Person whatsoever, but the same shall be at the Issuer and the Guarantors’ sole risk.

(c) Without limitation of any other indemnification obligations hereunder and in any Security Document, the Issuer and the Guarantors jointly and severally agree to indemnify the Notes Collateral Agent and its Affiliates and their respective directors, officers, employees, agents and advisors (each an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of, the execution, delivery or performance of any Security Document or any instrument contemplated thereby or any claim, litigation, investigation or proceeding relating to any of the foregoing or to the Collateral, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the bad faith, gross negligence or wilful misconduct of such Indemnitee.

Section 12.10. Intercreditor Agreement and Other Security Documents.

The Trustee and Notes Collateral Agent is each hereby directed and authorized to execute and deliver the Intercreditor Agreement and any Security Documents in which it is named as a party. It is hereby expressly acknowledged and agreed that, in doing so, the Trustee and the Notes Collateral Agent are not responsible for the terms or contents of such agreements, or for the validity or enforceability thereof, or the sufficiency thereof for any purpose. Whether or not so expressly stated therein, in entering into, or taking (or forbearing from) any action under or pursuant to, the Intercreditor Agreement or any Security Documents, the Trustee and Notes Collateral Agent each shall have all of the rights, immunities, indemnities and other protections granted to it under this Indenture (in addition to those that may be granted to it under the terms of such other agreement or agreements).

Section 12.11. Collateral Representations, Warranties and Covenants.

The Grantors each make the representations and warranties and covenants set forth on Schedule 1 hereto.

Section 12.12. Parallel Debt.

(a) Each of Patheon B.V. and Patheon U.S. Holdings LLC (the “Parallel Obligors”) hereby irrevocably and unconditionally undertakes to pay to the Notes Collateral

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Agent an amount equal to the aggregate amount payable (verschuldigd) by such Parallel Obligor in respect of its Notes Obligations as they may exist from time to time. The payment undertaking of each Parallel Obligor to the Notes Collateral Agent under this paragraph (a) is hereinafter to be referred to as a “Parallel Debt”. Each Parallel Debt will be payable in U.S. dollars.

(b) Each Parallel Debt will become due and payable (opeisbaar) as and when one or more of the Notes Obligations become due and payable.

(c) Each of the parties to this Indenture hereby acknowledges that:

(i) each Parallel Debt constitutes an undertaking, obligation and liability of the relevant Parallel Obligor to the Notes Collateral Agent which is separate and independent from, and without prejudice to, the Notes Obligations; and

(ii) each Parallel Debt represents the Notes Collateral Agent’s own separate and independent claim (eigen en zelfstandige vordering) to receive payment of such Parallel Debt from the relevant Parallel Obligor.

(d) To the extent the Notes Collateral Agent irrevocably (onaantastbaar) receives any amount in payment of the Parallel Debt of a Parallel Obligor, the Notes Collateral Agent shall distribute such amount among the Noteholder Secured Parties in accordance with Section 6.13 hereof. Upon irrevocable (onaantastbaar) receipt by a Noteholder Secured Party of any amount so distributed to it (the “Received Amount”), the Notes Obligations of such Parallel Obligor to the relevant Noteholder Secured Party shall be reduced by amounts totaling an amount (the “Deductible Amount”) equal to the Received Amount in the manner as if the Deductible Amount were received as a payment of the Notes Obligations on the date of receipt by such Noteholder Secured Party of the Received Amount.

ARTICLE XIII

RANKING OF NOTE LIENS

Section 13.01. Relative Rights.

The Intercreditor Agreement defines the relative rights, as lienholders, of the ABL Secured Parties and the Noteholder Secured Parties (and of any Junior Lien Indebtedness Secured Parties and any holders of Other Pari Passu Lien Obligations and other Indebtedness that become party to the Intercreditor Agreement pursuant to the terms thereof). Nothing in this Indenture or the Intercreditor Agreement shall:

(a) impair, as between the Issuer and Holders, the obligation of the Issuer, which is absolute and unconditional, to pay principal of, premium, if any, and interest on such Notes in accordance with their terms or to perform any other obligation of the Issuer or any Guarantor under this Indenture, the Notes, the Guarantees and any Security Documents;

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(b) restrict the right of any Holder to sue for payments that are then due and owing, in a manner not inconsistent with the provisions of the Intercreditor Agreement; or

(c) prevent the Trustee or any Holder from exercising against the Issuer or any Guarantor any of its other available remedies upon a Default or Event of Default (other than its rights as a secured party, which are subject to the Intercreditor Agreement).

ARTICLE XIV

MISCELLANEOUS

Section 14.01. Notices.

Any notice or communication by the Issuer, any Guarantor, the Trustee or the Notes Collateral Agent to the others is duly given if in writing and delivered in person or mailed by first-class mail (registered or certified, return receipt requested), fax or overnight air courier guaranteeing next day delivery, to the others’ address:

If to the Issuer and/or any Guarantor:

c/o Patheon Inc.

2100 Syntex Court

Mississauga, Ontario, L5N 7K9

Fax No.: (905) 812-6705

Attention: Chief Financial Officer

with a copy to:

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Fax No.: (212) 455-2502

Attention: Kenneth B. Wallach, Esq.

If to the Trustee:

U.S. Bank National Association

100 Wall Street, Suite 1600

New York, New York 10005

Fax No.: (212) 809-5459

Attention: Corporate Trust Services

If to the Notes Collateral Agent:

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Deutsche Bank Trust Company Americas

Trust & Securities Services

60 Wall Street, MS NYC60-2710

New York, New York 10005

Fax No.: (732) 578-4636

Attention: Project Finance Deal Manager – Patheon

The Issuer, any Guarantor, the Trustee or the Notes Collateral Agent, by notice to the others, may designate additional or different addresses for subsequent notices or communications.

All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five calendar days after being deposited in the mail, postage prepaid, if mailed by first-class mail; when receipt acknowledged, if faxed or sent by electronic transmission in PDF format (other than to the Notes Collateral Agent in respect of PDF notices and communications); the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery; on the first date on which publication is made, if given by publication; provided that any notice or communication delivered to the Trustee or the Notes Collateral Agent shall be deemed effective upon only actual receipt thereof.

Any notice or communication to a Holder shall be mailed by first-class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders.

Where this Indenture provides for notice in any manner, such notice may be waived by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of notice.

If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it; provided that any notices or communications to the Trustee shall be deemed effective only upon actual receipt thereof.

If the Issuer mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time.

Section 14.02. Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Issuer or any of the Guarantors to the Trustee to take any action under this Indenture, the Issuer or such Guarantor, as the case may be, shall furnish to the Trustee:

(a) An Officer’s Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 14.03 hereof) stating

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that, in the opinion of the signer, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and

(b) An Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 14.03 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied; provided that (x) subject to Section 5.01 hereof, no Opinion of Counsel shall be required in connection with the addition of a Guarantor under this Indenture upon execution and delivery by such Guarantor and the Trustee of a supplemental indenture to this Indenture in form which is attached as Exhibit D hereto and (y) no Opinion of Counsel pursuant to this Section shall be required in connection with the issuance of Notes on the Issue Date.

Section 14.03. Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to Section 4.04 hereof) shall include:

(a) a statement that the Person making such certificate or opinion has read such covenant or condition;

(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with (and, in the case of an Opinion of Counsel, may be limited to reliance on an Officer’s Certificate as to matters of fact); and

(d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with.

Section 14.04. Rules by Trustee and Agents.

The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.

Section 14.05. No Personal Liability of Directors, Members, Officers, Employees and Stockholders.

No director, member, officer, employee, incorporator or stockholder of the Issuer or any Guarantor or any of their parent companies shall have any liability for any obligations of the Issuer or the Guarantors under the Notes, the Guarantees or this Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder by

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accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

Section 14.06. Governing Law.

THIS INDENTURE, THE NOTES AND EACH GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Section 14.07. Consent to Jurisdiction and Service.

(a) Each of the Issuer and each Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any suit, action or proceeding arising out of or relating to this Indenture, the Notes, the Guarantees or the transactions contemplated hereby or for recognition or enforcement of any judgment, and each of the Issuer and each Guarantor hereby irrevocably and unconditionally agrees that all claims in respect of any such suit, action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such federal court. Each of the Issuer and each Guarantor agrees that a final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Indenture, the Notes, the Guarantees, the Security Documents or the Intercreditor Agreement shall affect any right that the Trustee, the Notes Collateral Agent or any Holder may otherwise have to bring any suit, action or proceeding relating to this Indenture, the Notes, the Guarantees or the transactions contemplated hereby against the Issuer or any Guarantor or its properties in the courts of any jurisdiction.

(b) Each of the Issuer and each Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Indenture, the Notes, the Guarantees or the transactions contemplated hereby in any court referred to in paragraph (a) of this Section 14.07. Each of the Issuer and each Guarantor hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such suit, action or proceeding in any such court.

(c) Each of the Issuer and each Guarantor not organized in a state of the United States hereby irrevocably appoints Patheon Pharmaceuticals Inc., c/o Patheon Inc., 4721 Emperor Boulevard, Suite 200, Durham, NC, 27703, Attn: Legal Department (or a permitted alternative), as its authorized agent for service of process in any suit, action or proceeding with respect to this Indenture, the Notes, the Guarantees or the transactions contemplated hereby and for actions brought under the federal or state securities laws brought in any federal or state court located in the Borough of Manhattan in the City of New York, and agrees that service of process upon such agent, and written notice of said service to the Issuer or such Guarantor, as the case may be, by the Person serving the same in the manner provided for notices in Section 14.01 hereof, shall be deemed in every respect effective service of process upon the Issuer or such

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Guarantor, as the case may be, in any such suit, action or proceeding. Each of the Issuer and each Guarantor not organized in a state of the United States further agrees to take any and all action as may be necessary to maintain such designation and appointment of such agent in full force and effect from the date of this Indenture until the final satisfaction and discharge of this Indenture. Each other party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 14.01 hereof. Nothing in this Indenture shall affect the right of any party to this Indenture to serve process in any other manner permitted by law.

Section 14.08. Waiver of Jury Trial.

EACH OF THE ISSUER, THE GUARANTORS, THE TRUSTEE AND THE NOTES COLLATERAL AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 14.09. Currency Indemnity and Calculations.

(a) The U.S. dollar shall be the sole currency of account and payment for all sums payable by the Issuer and the Guarantors under or in connection with the Notes and the Guarantees, including damages. If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in U.S. dollars into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction U.S. dollars could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given. Any amount received or recovered in a currency other than U.S. dollars, whether as a result of, or the enforcement of, a judgment or order of a court of any jurisdiction, in the winding-up or dissolution of the Issuer, any Guarantor or otherwise, by any Holder, the Trustee or the Notes Collateral Agent, as the case may be, in respect of any sum expressed to be due to it from the Issuer or a Guarantor shall only constitute a discharge to the Issuer or the Guarantor, as applicable, to the extent of the U.S. dollar amount which the recipient is able to purchase with the amount so received or recovered in such other currency on the date of that receipt or recovery (or, if it is not practicable to make such purchase on such date, on the first date on which it is practicable to do so).

(b) If the U.S. dollar amount so purchased is less than the U.S. dollar amount expressed to be due to the recipient under any Note or any Guarantee or to the Trustee or the Notes Collateral Agent, the Issuer and the Guarantors shall indemnify them on a joint and several basis against any loss sustained by such recipient, the Trustee or the Notes Collateral Agent as a result. In any event, the Issuer and the Guarantors shall indemnify such recipient, the Trustee or the Notes Collateral Agent, as the case may be, on a joint and several basis against the cost of making any such purchase. For the purposes of this Section 14.09(b), it shall be sufficient for the Holder of a Note, the Trustee or the Notes Collateral Agent, as the case may be, to certify in a satisfactory manner (indicating the sources of information used) that it would have suffered a loss had an actual purchase of U.S. dollars been made with the amount so received in such other currency on the date of receipt or recovery (or, if a purchase of U.S. dollars on such date had not been practicable, on the first date on which it would have been practicable, it being required that

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the need for a change of date be included in such certification). The indemnities set forth in this Section 14.09(b) constitute separate and independent obligations from the Issuer’s and the Guarantors’ other obligations, shall give rise to separate and independent causes of action, shall apply irrespective of any waiver granted by any Holder of a Note, the Trustee or the Notes Collateral Agent (other than a waiver of the indemnities set out herein) and shall continue in full force and effect despite any other judgment, order, claim or proof for a liquidated amount in respect of any sum due under any Note, any Guarantee or to the Trustee.

(c) Except as otherwise specifically set forth herein, for purposes of determining compliance with any U.S. dollar-denominated restriction herein, the U.S. dollar-equivalent amount for purposes hereof that is denominated in a non-U.S. dollar currency shall be calculated based on the relevant currency exchange rate in effect on the date such non-U.S. dollar amount is incurred or made, as the case may be.

Section 14.10. Force Majeure.

In no event shall either the Trustee or the Notes Collateral Agent be responsible or liable for any failure or delay in the performance of its obligations under this Indenture arising out of or caused by, directly or indirectly, forces beyond its reasonable control, including without limitation strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software or hardware) services.

Section 14.11. No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Issuer or its Restricted Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

Section 14.12. Successors.

All agreements of the Issuer in this Indenture and the Notes shall bind its successors. All agreements of the Trustee and the Notes Collateral Agent in this Indenture shall bind their respective successors. All agreements of each Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 10.05 hereof.

Section 14.13. Severability.

In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 14.14. Counterpart Originals.

The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. The exchange of copies of this Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu

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of the original Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.

Section 14.15. Table of Contents, Headings, etc.

The Table of Contents and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

Section 14.16. Interest Act (Canada).

Solely for the purposes of disclosure pursuant to the Interest Act (Canada) and without affecting any calculation of interest required by this Indenture or the Notes, whenever any interest payable under this Indenture or the Notes is calculated using a rate based on a year of 360 days, such rate, when expressed as an annual rate, is equivalent to such rate multiplied by the number of days in the calendar year in which interest is paid divided by 360.

Section 14.17. USA PATRIOT Act.

The parties hereto acknowledge that in accordance with Section 326 of the USA PATRIOT Act, the Trustee and the Notes Collateral Agent, like all financial institutions, are required to obtain, verify and record information that identifies each person or legal entity that establishes a relationship or opens an account with it. The parties to this Indenture agree that they will provide the Trustee and the Notes Collateral Agent with such information as they may request in order for the Trustee and the Notes Collateral Agent to satisfy the requirements of the USA PATRIOT Act.

Section 14.18. Intercreditor Agreement.

Notwithstanding any other provision contained herein, this Indenture is subject to the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of this Indenture and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control. If any Person at any time acts as Notes Collateral Agent hereunder or under any Security Document, such Person shall become a party to the Intercreditor Agreement on the terms applicable to the “Notes Agent” thereunder.

[Signatures on following page]

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IN WITNESS WHEREOF, the parties hereto have duly executed this Indenture as of the day and year first above written.

PATHEON INC.,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:

PATHEON PHARMACEUTICALS INC.,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:

PATHEON PUERTO RICO, INC.,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:

PATHEON INTERNATIONAL INC.,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:

PATHEON PHARMACEUTICALS SERVICES INC.,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:

[Signature Page to Senior Secured Indenture]

PATHEON U.S. HOLDINGS INC.,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:

PATHEON P.R. LLC,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:

PATHEON U.S. HOLDINGS LLC,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:

PATHEON ITALIA S.P.A.,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:

PATHEON HOLDINGS S.A.S.,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:

[Signature Page to Senior Secured Indenture]

PATHEON FRANCE S.A.S.,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:

PATHEON INTERNATIONAL AG,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:

PATHEON FINANCE LLC,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:

PATHEON PUERTO RICO ACQUISITIONS CORPORATION,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:

CEPH INTERNATIONAL CORPORATION,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:

[Signature Page to Senior Secured Indenture]

PATHEON B.V.,
	By	(signed) Wesley P. Wheeler
		Name:
		Title:
	By	(signed) Doaa A. Fathallah
		Name:
		Title:

[Signature Page to Senior Secured Indenture]

EXECUTED AS A DEED by                                  )

PATHEON UK LIMITED                                    )

acting by         (signed) Ian Jones                            )

Director

In the presence of:

Name:	(signed) Rachel Garratt
Address:
Occupation:

[Signature Page to Senior Secured Indenture]

U.S. BANK NATIONAL ASSOCIATION, as Trustee
by	(signed) Thomas E. Tabor
	Name:
	Title:

[Signature Page to Senior Secured Indenture]

DEUTSCHE BANK TRUST COMPANY AMERICAS, as Notes Collateral Agent
	By	(signed) Handy Kahn
		Name:
		Title:
	By	(signed) Wanda Camacho
		Name:
		Title:

[Signature Page to Senior Secured Indenture]

SCHEDULE 1

COLLATERAL REPRESENTATIONS, WARRANTIES AND COVENANTS

1. Defined Terms. As used in this Schedule 1, the following capitalized terms have the meanings set forth below:

(a) “ABL Security Documents” means the security agreements, pledge agreements, mortgages, deeds of trust, deeds to secure debt, collateral assignments, control agreements and related agreements creating security interests that secure Obligations under the Senior Credit Facilities.

(b) “Accounts” has the meaning assigned to such term in the New York UCC.

(c) “Account Debtors” has the meaning assigned to such term in the New York UCC.

(d) “Chattel Paper” has the meaning assigned to such term in the New York UCC.

(e) “Copyright License” means any written agreement, now or hereafter in effect, granting any right to any third party under any copyright now or hereafter owned by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any copyright now or hereafter owned by any third party, and all rights of such Grantor under any such agreement.

(f) “Copyrights” means all of the following now owned or hereafter acquired by any Grantor: (i) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise, and (ii) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office.

(g) “Equipment” has the meaning assigned to such term in the New York UCC.

(h) “Financial Assets” has the meaning assigned to such term in the New York UCC.

(i) “Instrument” has the meaning assigned to such term in Article 9 of the New York UCC.

(j) “Inventory” has the meaning assigned to such term in the New York UCC.

(k) “Investment Property” has the meaning assigned to such term in the New York UCC.

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(l) “Material Fixtures” means any fixtures owned by any of the Grantors that (i) are not part of a Mortgaged Property and (ii) are integral to the operations of any of the Grantors or are otherwise material.

(m) “Material Patents, Trademarks or Copyrights” means any Patents, Trademarks or Copyrights owned by any of the Grantors that are integral to the operations of any of the Grantors, or are material to the collateral value of any of the Collateral, or are otherwise material.

(n) “Mortgaged Property” means each parcel of real property and the improvements thereto constituting Collateral and over which a valid and enforceable mortgage, deed of trust, hypothec, assignment of leases and rents, leasehold mortgage, debenture, legal charge or other security document granting a Lien on such property securing the Notes Obligations is effective.

(o) “Notes Documents” means this Indenture, the Notes, the Guarantees, the Security Documents and the Intercreditor Agreement.

(p) “Patent License” means any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a patent, now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement.

(q) “Patents” means all of the following now owned or hereafter acquired by any Grantor: (i) all letters patent of the United States or the equivalent thereof in any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or the equivalent thereof in any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office or any similar offices in any other country, and (ii) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

(r) “Personal Property Collateral” means any Collateral other than Pledged Collateral or Mortgaged Property.

(s) “Pledged Collateral” means all of the following: (i) the Pledged Stock; (ii) the Pledged Debt Securities; (iii) all other property that may be delivered to and held by the Notes Collateral Agent (or to or by any other Person pursuant to the Intercreditor Agreement, in each case acting as gratuitous bailee for the Notes Collateral Agent) pursuant to any Security Document in order to secure the Notes Obligations; (iv) subject to the terms of the Security Documents, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clauses (i) and (ii) above; (v) subject to the terms of the Security Documents, all rights and

Sch. 1-2

privileges of each Grantor with respect to the securities and other property referred to in clauses (i), (ii), (iii) and (iv) above; and (vi) all Proceeds of any of the foregoing.

(t) “Pledged Debt Securities” means (i) all debt securities issued to or otherwise owned by any Grantor that are pledged (or required to be pledged) to secure the Notes Obligations pursuant to any Security Document and (ii) the promissory notes and any other instruments evidencing such debt securities.

(u) “Pledged Securities” means any promissory notes, stock certificates or other securities now or hereafter included in the Pledged Collateral, including all certificates, security certificates, instruments or other documents representing or evidencing any Pledged Collateral.

(v) “Pledged Stock” means (i) all shares of Capital Stock and other Equity Interests issued to or otherwise owned by any Grantor that are pledged (or required to be pledged) to secure the Notes Obligations pursuant to any Security Document and (ii) the certificates representing all such Equity Interests.

(w) “Proceeds” has the meaning given to such term in the New York UCC.

(x) “Security Interests” means all security interests or other Liens assigned, pledged or granted to the Notes Collateral Agent under any of the Security Documents in respect of any Collateral (other than Pledged Collateral or Mortgaged Properties).

(y) “Trademark License” means any written agreement, now or hereafter in effect, granting to any third party any right to use any trademark now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement.

(z) “Trademarks” means all of the following now owned or hereafter acquired by any Grantor: (i) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office or any similar offices in any State of the United States or any other country or any political subdivision thereof, and all extensions or renewals thereof, (ii) all goodwill associated therewith or symbolized thereby and (iii) all other assets, rights and interests that uniquely reflect or embody such goodwill.

2. Representations, Warranties and Covenants Relating to the Pledged Collateral. The Grantors jointly and severally represent, warrant and covenant to and with the Notes Collateral Agent, for the benefit of the Noteholder Secured Parties, that:

(a) The applicable schedule (if any) to each Security Document correctly sets forth, with respect to each Grantor party thereto, the percentage of the issued and outstanding units of each class of the Equity Interests of the issuer thereof represented by the Pledged Stock

Sch. 1-3

issued to or owned by such Grantor and includes all Equity Interests, debt securities and promissory notes constituting Collateral.

(b) The Pledged Stock and Pledged Debt Securities have been duly and validly authorized and issued by the issuers thereof and (i) in the case of Pledged Stock, are fully paid and nonassessable and (ii) in the case of Pledged Debt Securities, are legal, valid and binding obligations of the issuers thereof.

(c) Except for the security interests granted under the Security Documents and under the ABL Security Documents, each of the Grantors (i) is and, subject to any transfers made in compliance with this Indenture, will continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on the applicable schedule (if any) to the applicable Security Document as owned by such Grantor, (ii) holds the same free and clear of all Liens, other than Liens permitted under the Indenture (excluding Liens that constitute “Permitted Liens” solely by reason of clause (7) of the definition of Permitted Liens), and (iii) will defend its title or interest thereto or therein against any and all Liens (other than Liens expressly permitted under Section 4.12 of this Indenture), however arising, of all Persons whomsoever.

(d) Except for restrictions and limitations imposed or permitted by the Notes Documents, or imposed by the Senior Credit Facilities, the ABL Security Documents, securities laws generally, the legal uncertainty regarding the power of a board of directors to irrevocably bind a future board to the approval of any future transfer of the shares of Patheon International Inc., transfer restrictions applicable to Patheon B.V. by statute, pursuant to the blocking clause in its articles of association or otherwise under the laws of the Netherlands or transfer restrictions applicable to Patheon International AG by statute under the laws of Switzerland, the Pledged Collateral is and will continue to be freely transferable and assignable, and none of the Pledged Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledges of such Pledged Collateral under the Security Documents, the sale or disposition thereof pursuant to the Security Documents or the exercise by the Notes Collateral Agent of rights and remedies thereunder.

(e) Each of the Grantors has the power and authority to pledge the Pledged Collateral pledged by it under the Security Documents in the manner thereby done or contemplated.

(f) No consent or approval of any governmental authority, any securities exchange or any other Person was or is necessary to the validity of the pledges effected by the Security Documents (other than such as have been obtained and are in full force and effect).

(g) By virtue of the execution and delivery by the Grantors of the Security Documents and the Lien priorities set forth in the Intercreditor Agreement, when any Pledged Securities are delivered to the Notes Collateral Agent (or to any other Person pursuant to the Intercreditor Agreement, in each case acting as gratuitous bailee for the Notes Collateral Agent) in accordance with the Security Documents, the Notes Collateral Agent will obtain a legal, valid and perfected Lien upon and security interest in such Pledged Securities as security for the payment and performance of the Notes Obligations prior to any other Lien on any of the Pledged

Sch. 1-4

Securities other than (i) Liens granted under the ABL Security Documents to the extent such Liens have priority in accordance with the Intercreditor Agreement and (ii) any other Liens permitted under the Indenture that have priority as a matter of law.

(h) The pledges effected by the Security Documents are effective to vest in the Notes Collateral Agent, for the benefit of the Noteholder Secured Parties, the rights of the Notes Collateral Agent in the Pledged Collateral as set forth in the Security Documents.

(i) Each Grantor will cause any Indebtedness for borrowed money owed to such Grantor by any Person that is evidenced by a promissory note or other instrument (and will cause such Indebtedness to be evidenced by a promissory note or other instrument if necessary in order to perfect a security interest therein under the laws of any applicable jurisdiction) to be pledged as a Pledged Security pursuant to the applicable Security Document if the same constitutes Collateral.

3. Representations and Warranties Relating to the Personal Property Collateral. The Grantors jointly and severally represent and warrant to the Notes Collateral Agent, for the benefit of the Noteholder Secured Parties, that:

(a) Each Grantor has good and valid rights in and title to the Personal Property Collateral with respect to which it has purported to grant a Security Interest under any of the Security Documents and has full power and authority to grant to the Notes Collateral Agent the Security Interest in such Personal Property Collateral pursuant thereto and to execute, deliver and perform its obligations in accordance with the terms of the Security Documents, without the consent or approval of any other Person other than any consent or approval that has been obtained.

(b) The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein, including the exact legal name of each Grantor, is correct and complete as of the Issue Date. The Uniform Commercial Code financing statements or other appropriate filings, recordings or registrations are based upon the information provided in the Perfection Certificate for filing in each governmental, municipal or other office specified in Schedule 3 to the Perfection Certificate, are all the filings, recordings and registrations (other than fixture filings and filings required to be made in the United States Patent and Trademark Office, the United States Copyright Office and the Canadian Intellectual Property Office in order to perfect the Security Interest in Personal Property Collateral consisting of Patents, Trademarks and Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Notes Collateral Agent (for the benefit of the Noteholder Secured Parties) in respect of all Personal Property Collateral in which the Security Interest may be perfected by filing, recording or registration, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any jurisdiction, except as provided under applicable law with respect to the filing of continuation statements.

(c) The Security Interests granted under the Security Documents constitute (i) legal and valid security interests in all the Personal Property Collateral securing the payment and performance of the Notes Obligations and (ii) subject to the filings described in Section 3(b)

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above, perfected security interests in all Personal Property Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document pursuant to the Uniform Commercial Code or other applicable law. The Security Interests granted under the Security Documents are and shall be prior to any other Lien on any of the Personal Property Collateral, other than (i) Liens granted under the ABL Security Documents to the extent such Liens have priority in accordance with the Intercreditor Agreement and (ii) any Liens permitted under the Indenture that have priority as a matter of law.

(d) The Personal Property Collateral is owned by the Grantors free and clear of any Lien, except for Liens permitted under the Indenture (excluding any Liens that constitute “Permitted Liens” solely by reason of clause (7) of the definition of Permitted Liens) and transfers made in compliance with this Indenture. None of the Grantors has filed or consented to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Personal Property Collateral, (ii) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Personal Property Collateral with the United States Patent and Trademark Office, the United States Copyright Office or the Canadian Intellectual Property Office or (iii) any assignment in which any Grantor assigns any Personal Property Collateral or any security agreement or similar instrument covering any Personal Property Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens permitted under the Indenture (excluding any Liens that constitute “Permitted Liens” solely by reason of clause (7) of the definition of Permitted Liens).

(e) As of the Issue Date, there are not any Material Fixtures or Material Patents, Trademarks or Copyrights.

4. Covenants Relating to the Personal Property Collateral.

(a) Each Grantor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Personal Property Collateral owned by it as is consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any part of the Personal Property Collateral.

(b) Each Grantor shall, at its own expense, take any and all actions necessary to defend title to the Personal Property Collateral against all Persons and to defend the Security Interests of the Notes Collateral Agent in the Personal Property Collateral and the priority thereof against any Lien that is not expressly permitted under Section 4.12 of this Indenture.

(c) Each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as necessary or advisable to better assure, preserve, protect and perfect the Security Interests and the rights and remedies created by the Security Documents, including the payment of any fees and taxes required in connection with the execution and delivery of this Indenture and the Security Documents, the granting of the Security Interests and the filing of any financing

Sch. 1-6

statements or other documents (other than fixture filings or filings in respect of Patents, Trademarks or Copyrights) in connection herewith or therewith. If any amount payable under or in connection with any of the Personal Property Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged and delivered to the Notes Collateral Agent, duly endorsed, if necessary in order to obtain a perfected security interest therein under applicable law.

(d) If an Event of Default has occurred and is continuing, the Notes Collateral Agent and such Persons as the Notes Collateral Agent may reasonably designate shall have the right, at the Grantors’ own cost and expense, to inspect the Personal Property Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Personal Property Collateral is located, to discuss the Grantors’ affairs with the officers of the Grantors and their independent accountants and to verify under reasonable procedures, and at times and in a manner that minimizes, to the extent reasonably possible, any disruption to the Grantors’ business, the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Personal Property Collateral, including, in the case of Accounts or Personal Property Collateral in the possession of any third person, by contacting Account Debtors or the third person possessing such Personal Property Collateral for the purpose of making such a verification.

(e) At its option, the Notes Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Collateral and not permitted pursuant to Section 4.12 of this Indenture, and may pay for the maintenance and preservation of the Personal Property Collateral to the extent any Grantor fails to do so as required by this Indenture or any Security Document (in each case upon reasonable prior notice to the Issuer and then only if such amounts are not promptly paid by the applicable Grantors, unless an Event of Default has occurred and is continuing), and each Grantor jointly and severally agrees to reimburse the Notes Collateral Agent on demand for any payment made or any expense incurred by the Notes Collateral Agent pursuant to the foregoing authorization; provided that nothing in this paragraph shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Notes Collateral Agent or any Noteholder Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth in this Indenture or in the Security Documents.

(f) If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other Person to secure payment and performance of an Account, such Grantor shall promptly assign such security interest to the Notes Collateral Agent. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other Person granting the security interest.

(g) Each Grantor shall remain liable to observe and perform, in all material respects, all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Personal Property Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify

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and hold harmless the Notes Collateral Agent and the other Noteholder Secured Parties from and against any and all liability for such performance.

(h) None of the Grantors shall make or permit to be made any transfer of the Personal Property Collateral and each Grantor shall remain at all times in possession of the Personal Property Collateral owned by it, except that unless and until the Trustee shall notify the Issuer that an Event of Default shall have occurred and be continuing and that during the continuance thereof the Grantors shall not sell, convey, lease, assign, transfer or otherwise dispose of any Personal Property Collateral (which notice may be given by telephone if promptly confirmed in writing), the Grantors may use and dispose of the Personal Property Collateral in any lawful manner not inconsistent with the provisions of the Notes Documents.

(i) The Grantors, at their own expense, shall maintain or cause to be maintained insurance covering physical loss or damage to the Inventory and Equipment (to the extent such Inventory or Equipment constitutes Collateral) in accordance with the requirements set forth in Section 7 below. Each Grantor irrevocably makes, constitutes and appoints the Notes Collateral Agent (and all officers, employees or agents designated by the Notes Collateral Agent) as such Grantor’s true and lawful agent (and attorney-in-fact) for the purpose, subject to the provisions of the Intercreditor Agreement, during the continuance of an Event of Default, of making, settling and adjusting claims in respect of Personal Property Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or to pay any premium in whole or part relating thereto, the Trustee may direct the Notes Collateral Agent, without waiving or releasing any obligation or liability of the Grantors hereunder or any Event of Default (but on written notice to the Issuer and only if the applicable Grantors do not promptly thereafter effect the required insurance, unless an Event of Default has occurred and is continuing), to obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Trustee deems advisable. All sums disbursed by the Notes Collateral Agent in connection with this paragraph, including reasonable attorneys’ fees and expenses, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Notes Collateral Agent and the Notes Collateral Agent shall have a Lien prior to the Notes on all money or property held or collected by the Notes Collateral Agent, except that held in trust to pay principal on particular Notes. Such Liens shall survive satisfaction and discharge of the Indenture.

(j) Each Grantor shall maintain, in form and manner reasonably satisfactory to the Notes Collateral Agent, records of its Chattel Paper and its books, records and documents evidencing or pertaining thereto.

(k) If at any time any Grantor shall own or acquire any Material Fixtures or any Material Patents, Trademarks or Copyrights, then such Grantor shall notify the Notes Collateral Agent thereof and shall make such fixture filings or filings and recordings with the applicable governmental authority as are necessary or advisable in order to grant and perfect security interests securing the Notes Obligations on such Material Fixtures or Material Patents, Trademarks or Copyrights, as the case may be.

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5. Other Actions Relating to Personal Property Collateral. In order to further insure the attachment, perfection and priority of, and the ability of the Notes Collateral Agent to enforce, the Security Interests, each Grantor agrees, in each case at such Grantor’s own expense, to take the following actions with respect to the following, to the extent constituting Personal Property Collateral:

(a) Instruments. If any Grantor shall at any time hold or acquire any Instruments constituting Collateral, such Grantor shall forthwith endorse, assign and deliver the same to the Notes Collateral Agent (or to any other Person pursuant to the Intercreditor Agreement, in each case acting as gratuitous bailee for the Notes Collateral Agent), accompanied by appropriate instruments of transfer or assignment duly executed in blank, to the extent required in order to obtain a valid and perfected security interest therein.

(b) Deposit Accounts. For each deposit account that any Grantor at any time opens or maintains that constitutes Collateral, such Grantor shall use commercially reasonable efforts to cause the depositary bank to agree to comply with instructions from the Notes Collateral Agent to such depositary bank directing the disposition of funds from time to time credited to such deposit account, without further consent of such Grantor or any other Person, pursuant to an agreement satisfactory to the Notes Collateral Agent, with the Grantor being permitted, only with the consent of the Notes Collateral Agent, to exercise rights to withdraw funds from such deposit account. The Notes Collateral Agent agrees with each Grantor that the Notes Collateral Agent shall not give any such instructions or withhold any withdrawal rights from any Grantor unless an Event of Default has occurred and is continuing, or, after giving effect to any withdrawal, would occur. The provisions of this paragraph shall not apply to (A) any deposit account for which any Grantor, the depositary bank and the Notes Collateral Agent have entered into a cash collateral agreement specially negotiated among such Grantor, the depositary bank and the Notes Collateral Agent for the specific purpose set forth therein or (B) deposit accounts for which the Notes Collateral Agent is the depositary.

(c) Investment Property. Except to the extent otherwise provided in this Schedule 1 or in the Security Documents, if any Grantor shall at any time hold or acquire any certificated securities or security certificates representing, evidencing or constituting Collateral, such Grantor shall forthwith endorse, assign and deliver the same to the Notes Collateral Agent (or to any other Person pursuant to the Intercreditor Agreement, in each case acting as gratuitous bailee for the Notes Collateral Agent) pursuant to the applicable Security Documents, accompanied by appropriate instruments of transfer or assignment duly executed in blank. If any securities now owned or hereafter acquired by any Grantor that constitute Collateral are uncertificated and are issued to such Grantor or its nominee directly by the issuer thereof, such Grantor shall immediately notify the Notes Collateral Agent thereof and, and subject to the terms of the Intercreditor Agreement, cause the issuer to agree to comply with instructions from the Notes Collateral Agent as to such securities, without further consent of any Grantor or such nominee. If any securities, whether certificated or uncertificated, or other investment property constituting Collateral now or hereafter acquired by any Grantor are held by such Grantor or its nominee through a securities intermediary or commodity intermediary, such Grantor shall immediately notify the Notes Collateral Agent thereof and, and subject to the terms of the Intercreditor Agreement, either (i) cause such securities intermediary or (as the case may be) commodity intermediary to agree to comply with entitlement orders or other instructions from

Sch. 1-9

the Notes Collateral Agent to such securities intermediary as to such security entitlements, or (as the case may be) to apply any value distributed on account of any commodity contract as directed by the Notes Collateral Agent to such commodity intermediary, in each case without further consent of any Grantor or such nominee, or (ii) in the case of Financial Assets or other Investment Property held through a securities intermediary, arrange for the Notes Collateral Agent to become the entitlement holder with respect to such investment property, with the Grantor being permitted, only with the consent of the Notes Collateral Agent, to exercise rights to withdraw or otherwise deal with such investment property. The Notes Collateral Agent agrees with each of the Grantors that the Notes Collateral Agent shall not give any such entitlement orders or instructions or directions to any such issuer, securities intermediary or commodity intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by any Grantor, unless an Event of Default has occurred and is continuing, or, after giving effect to any such investment and withdrawal rights would occur. The provisions of this paragraph shall not apply to any financial assets credited to a securities account for which the Notes Collateral Agent is the securities intermediary.

Without limitation of the foregoing, (x) within 30 days after the Issue Date, Patheon B.V. shall deliver to the Notes Collateral Agent (A) both share certificates in respect of its holding in the preference and ordinary shares of Patheon UK Limited, (B) blank and signed stock transfer forms in respect of the preference and ordinary shares of Patheon UK Limited and (C) a shareholder resolution in respect of the transactions contemplated by the Indenture and the Security Documents and (y) within 20 Business Days after the Issue Date, Patheon UK Limited shall deliver to the Notes Collateral Agent a certified copy of its register of members evidencing Patheon B.V. as its registered shareholder.

(d) Electronic Chattel Paper and Transferable Records. If any Grantor at any time holds or acquires an interest in any electronic chattel paper or any “transferable record,” as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, that constitutes Collateral, such Grantor shall promptly notify the Notes Collateral Agent thereof and, subject to the terms of the Intercreditor Agreement, shall take such action as may be necessary or advisable to vest in the Notes Collateral Agent control under New York UCC Section 9-105 of such electronic chattel paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record, to the extent such statutes are applicable. The Notes Collateral Agent agrees with such Grantor that the Notes Collateral Agent will arrange, pursuant to procedures reasonably satisfactory to the Notes Collateral Agent and so long as such procedures will not result in the Notes Collateral Agent’s loss of control, for the Grantor to make alterations to the electronic chattel paper or transferable record permitted under UCC Section 9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such electronic chattel paper or transferable record.

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(e) Letter-of-Credit Rights. If any Grantor is at any time a beneficiary under a letter of credit now or hereafter issued in favor of such Grantor that constitutes Collateral and that is received outside of the ordinary course of business or that exceeds US$1,000,000, such Grantor shall promptly notify the Notes Collateral Agent thereof and, subject to the terms of the Intercreditor Agreement, such Grantor shall either (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Notes Collateral Agent of the proceeds of any drawing under the letter of credit or (ii) arrange for the Notes Collateral Agent to become the transferee beneficiary of the letter of credit, with the Notes Collateral Agent agreeing, in each case, that the proceeds of any drawing under the letter of credit are to be paid to the applicable Grantor unless an Event of Default has occurred or is continuing.

(f) Commercial Tort Claims. Subject to the terms of the Intercreditor Agreement, if any Grantor shall at any time hold or acquire a commercial tort claim constituting Collateral in an amount reasonably estimated to exceed US$5,000,000, the Grantor shall promptly notify the Notes Collateral Agent thereof in a writing signed by such Grantor including a summary description of such claim and grant to the Notes Collateral Agent in such writing a security interest therein and in the proceeds thereof, all upon the terms of the Security Documents, with such writing to be in form and substance reasonably satisfactory to the Notes Collateral Agent.

6. Covenants Regarding Patent, Trademark and Copyright Collateral. (a) Each Grantor agrees that it will not do any act or omit to do any act (and will exercise commercially reasonable efforts to prevent its licensees from doing any act as omitting to do any act) whereby any Patent that is material to the conduct of such Grantor’s business may become invalidated or dedicated to the public, and agrees that it shall continue to mark any products covered by a Patent with the relevant patent number as necessary and sufficient to establish and preserve its maximum rights under applicable patent laws.

(b) Each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of such Grantor’s business, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for non-use, (ii) maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of federal or foreign registration to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any third party rights.

(c) Each Grantor (either itself or through its licensees or sublicensees) will, for each work covered by a material Copyright, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve its maximum rights under applicable copyright laws.

(d) Each Grantor shall notify the Notes Collateral Agent promptly if it knows or has reason to know that any Material Patent, Trademark or Copyright may become abandoned, lost or dedicated to the public, or of any materially adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, United States Copyright Office, Canadian Intellectual Property Office or any court or similar office of any country) regarding

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such Grantor’s ownership of any Patent, Trademark or Copyright, its right to register the same, or its right to keep and maintain the same.

(e) In no event shall any Grantor, either itself or through any agent, employee, licensee or designee, file an application or registration, as the case may be, for any Material Patent, Trademark or Copyright with the United States Patent and Trademark Office, United States Copyright Office, Canadian Intellectual Property Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, unless it promptly informs the Notes Collateral Agent, and executes and delivers any and all agreements, instruments, documents and papers as may be necessary or advisable to evidence the Notes Collateral Agent’s security interest in such Material Patent, Trademark or Copyright, and each Grantor hereby appoints the Notes Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable.

(f) Each Grantor will take all necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office, Canadian Intellectual Property Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, to maintain and pursue each material application relating to the Material Patents, Trademarks or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of any Grantor’s business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if consistent with good business judgment, to initiate opposition, interference and cancelation proceedings against third parties.

(g) In the event that any Grantor has reason to believe that any Personal Property Collateral consisting of a Material Patent, Trademark or Copyright has been or is about to be infringed, misappropriated or diluted by a third party, such Grantor promptly shall notify the Notes Collateral Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as are appropriate under the circumstances to protect such Personal Property Collateral.

(h) Upon and during the continuance of an Event of Default, each Grantor shall use its best efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License to effect the assignment of all such Grantor’s right, title and interest thereunder to the Notes Collateral Agent or its designee.

7. Insurance Requirements.

(a) The Issuer shall, and shall cause each Grantor to, maintain (or cause to be maintained on its behalf), with financially sound and reputable insurance companies:

(i) fire, boiler and machinery, and extended coverage insurance, on a replacement cost basis, with respect to all personal property and improvements to real property (in

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each case constituting Collateral), in such amounts as are customarily maintained by companies in the same or similar business operating in the same or similar locations;

(ii) commercial general liability insurance against claims for bodily injury, death or property damage occurring upon, about or in connection with the use of any properties owned, occupied or controlled by it, providing coverage on either an occurrence or claims-made basis. Coverage also includes bodily injury or property damage included within the products-completed operations hazard on either occurrence or claims-made basis;

(iii) business interruption insurance, insuring against either (A) loss of gross earnings or (B) loss of gross profits or (C) providing coverage on a stated amount basis for a period of not less than 12 months arising from any risks or occurrences required to be covered by insurance pursuant to clause (i) above; and

(iv) such other insurance as may be required by law.

(b) Any property, fire, boiler and machinery and extended coverage policies maintained with respect to any Collateral shall be endorsed or otherwise amended to include (i) a lenders’ loss payable clause in favor of the Notes Collateral Agent and providing for losses thereunder to be payable to the Notes Collateral Agent or its designee, (ii) a provision to the effect that no Noteholder Secured Party nor any other party shall be a coinsurer and (iii) such other provisions as may be necessary or advisable to protect the interests of the Noteholder Secured Parties. Commercial general liability policies shall be endorsed to name the Notes Collateral Agent as an additional insured. Business interruption policies shall name the Notes Collateral Agent as loss payee. Each such policy referred to in this paragraph also shall provide that it shall not be canceled, modified or not renewed (i) by reason of nonpayment of premium except upon not less than 10 days’ prior written notice thereof by the insurer to the Notes Collateral Agent (giving the Notes Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for any other reason except upon not less than 30 days’ prior written notice thereof by the insurer to the Notes Collateral Agent. The Issuer shall deliver to the Notes Collateral Agent, prior to the cancellation, modification or nonrenewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Notes Collateral Agent) together with evidence of payment of the premium therefor.

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EXHIBIT A

[Face of Note]

[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]

[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]

[Insert the Canadian Private Placement Legend, if applicable pursuant to the provisions of the Indenture]

A-1

CUSIP [            ]

ISIN [            ]

[[RULE 144A][REGULATION S][IAI] [GLOBAL]

NOTE 8.625% Senior Secured Notes due 2017

No.      [$        ]

PATHEON INC.

promises to pay to CEDE & CO., or registered assigns, the principal sum of                      United States Dollars on April 15, 2017.

Interest Payment Dates: April 15 and October 15

Record Dates: April 1 and October 1

A-2

IN WITNESS HEREOF, the Issuer has caused this instrument to be duly executed.

Dated: [                     ]

PATHEON INC.
By:
	Name:
	Title:

A-3

This is one of the Notes referred to in the within-mentioned Indenture:

Dated: [                    ]

U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:
	Authorized Signatory

A-4

[Back of Note]

8.625% Senior Secured Notes due 2017

Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

1. INTEREST. Patheon Inc., a corporation existing under the Canada Business Corporations Act (the “Issuer”), promises to pay interest on the principal amount of this Note at 8.625% per annum from April 23, 2010¹ until maturity. The Issuer shall pay interest semi-annually in arrears on April 15 and October 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an “Interest Payment Date”). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that the first Interest Payment Date shall be October 15, 2010². The Issuer shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the interest rate on the Notes; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the interest rate on the Notes. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

2. METHOD OF PAYMENT. The Issuer shall pay interest on the Notes to the Persons who are registered Holders of Notes at the close of business on the April 1 or October 1 (whether or not a Business Day), as the case may be, next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. Payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders, provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest and premium, if any, on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Issuer or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

3. PAYING AGENT AND REGISTRAR. Initially, U.S. Bank National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Issuer may change any Paying Agent or Registrar without notice to the Holders. The Issuer or any of its Subsidiaries may act in any such capacity.

4. INDENTURE. The Issuer issued the Notes under an Indenture, dated as of April 23, 2010 (the “Indenture”), among Patheon Inc., the Guarantors named therein, the

¹ With respect to the Initial Notes.

A-5

Trustee and the Notes Collateral Agent. This Note is one of a duly authorized issue of notes of the Issuer designated as its 8.625% Senior Secured Notes due 2017. The Issuer shall be entitled to issue Additional Notes pursuant to Sections 2.01 and 4.09 of the Indenture. The terms of the Notes include those stated in the Indenture. The Notes are subject to all the terms, and Holders are referred to the Indenture for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.

5. OPTIONAL REDEMPTION.

(a) Except as described below under paragraphs 5(b), 5(c), 5(d) and 5(f) hereof, the Notes will not be redeemable at the Issuer’s option before April 15, 2013.

(b) At any time prior to April 15, 2013, the Issuer may redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to the registered address of each Holder, at a redemption price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, to the date of redemption (the “Redemption Date”), subject to the rights of Holders on the relevant Record Date to receive interest due on the relevant Interest Payment Date.

(c) Until April 15, 2013, the Issuer may, at its option, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to the registered address of each Holder, redeem up to 35% of the aggregate principal amount of Notes issued by it at a redemption price equal to 108.625% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, subject to the right of Holders of Notes of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the sum of the aggregate principal amount of Notes originally issued under this Indenture and any Additional Notes issued under this Indenture after the Issue Date remains outstanding immediately after the occurrence of each such redemption; provided further that each such redemption occurs within 90 days of the date of closing of each such Equity Offering. Notice of any redemption upon any Equity Offering may be given prior to the redemption thereof, and any such redemption or notice may, at the Issuer’s discretion, be subject to one or more conditions precedent, including, but not limited to, completion of the related Equity Offering.

(d) At any time prior to April 15, 2013, the Issuer may redeem a portion of the Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to the registered address of each Holder, at a redemption price equal to 103.000% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, subject to the rights of Holders of Notes on the relevant Record Date to receive interest due on the relevant Interest Payment Date; provided that in no event may the Issuer redeem more than 10% of the original aggregate principal amount of the Notes and any Additional Notes during any twelve-month period.

(e) On and after April 15, 2013, the Issuer may redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail, postage prepaid, with a copy to the Trustee, to the registered address of each Holder, at the

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redemption prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, plus accrued and unpaid interest thereon, if any, to the applicable Redemption Date, subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date, if redeemed during the twelve-month period beginning on April 15 of each of the years indicated below:

Year	Percentage
2013		106.469	%
2014		104.313	%
2015		102.156	%
2016 and thereafter		100.000	%

(f) The Issuer is entitled to redeem the Notes, at its option, at any time as a whole but not in part, upon not less than 30 nor more than 60 days’ notice mailed by first-class mail to the registered address of each Holder, at 100% of the principal amount thereof, plus accrued and unpaid interest (if any) to the Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date), in the event the Issuer has become or would become obligated to pay, on the next date on which any amount would be payable with respect to the Notes, any Additional Amounts as a result of:

(i) a change in or an amendment to the laws (including any regulations promulgated thereunder) of any Relevant Taxing Jurisdiction; or

(ii) any change in or amendment to any official position of a taxing authority in any Relevant Taxing Jurisdiction regarding the application or interpretation of such laws or regulations (including a holding by a court of competent jurisdiction),

which change or amendment is announced or becomes effective on or after April 9, 2010.

(g) Any redemption pursuant to this paragraph 5 shall be made pursuant to the provisions of Sections 3.01 through 3.06 of the Indenture.

6. MANDATORY REDEMPTION. The Issuer shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.

7. NOTICE OF REDEMPTION. Subject to Section 3.03 of the Indenture, notice of redemption will be mailed by first-class mail, postage prepaid, at least 30 days but not more than 60 days before the Redemption Date (except that redemption notices may be mailed more than 60 days prior to a Redemption Date if the notice is issued in connection with Article VIII of the Indenture) to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $2,000 may be redeemed in part but only in whole multiples of $1,000 in excess of $2,000, unless all of the Notes held by a Holder are to be redeemed. On and after the Redemption Date interest ceases to accrue on Notes or portions thereof called for redemption.

8. OFFERS TO REPURCHASE.

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(a) Upon the occurrence of a Change of Control, the Issuer shall make an offer (a “Change of Control Offer”) to each Holder to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess of $2,000) of each Holder’s Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of purchase (the “Change of Control Payment”). The Change of Control Offer shall be made in accordance with Section 4.14 of the Indenture.

(b) If the Issuer or any of its Restricted Subsidiaries consummates an Asset Sale, within 10 Business Days after each date that Excess Proceeds exceed $20.0 million, the Issuer shall commence an offer to all Holders of the Notes and, if required by the terms of any Other Pari Passu Lien Obligations, to the holders of such Other Pari Passu Lien Obligations (an “Asset Sale Offer”), to purchase the maximum principal amount of Notes (including any Additional Notes) and such Other Pari Passu Lien Obligations that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes (including any Additional Notes) and such Other Pari Passu Lien Obligations tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for general corporate purposes, subject to other covenants contained in the Indenture. If the aggregate principal amount of Notes (including any Additional Notes) or the Other Pari Passu Lien Obligations surrendered by such holders thereof exceeds the amount of Excess Proceeds, the Notes (including any Additional Notes) and such Other Pari Passu Lien Obligations will be purchased on a pro rata basis based on the accreted value or principal amount of the Notes (including any Additional Notes) or such Other Pari Passu Lien Obligations tendered. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Issuer prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled “Option of Holder to Elect Purchase” attached to the Notes or by complying with instructions for book-entry transfer set forth in the Asset Sale Offer.

9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $2,000 and integral multiples of $1,000 in excess of $2,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuer may require a Holder to pay any taxes and fees required by the Indenture. The Issuer need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Issuer need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed.

10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes.

11. AMENDMENT, SUPPLEMENT AND WAIVER. The Indenture, the Guarantees or the Notes may be amended or supplemented as provided in the Indenture.

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12. DEFAULTS AND REMEDIES. The Events of Default relating to the Notes are defined in Section 6.01 of the Indenture. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Notes then outstanding may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable immediately without further action or notice. Holders may not enforce the Indenture, the Notes or the Guarantees except as provided in the Indenture. Subject to certain limitations, Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default (except a Default relating to the payment of principal, premium, if any, or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default and its consequences under the Indenture except a continuing Default in payment of the principal of, premium, if any, or interest on, any of the Notes held by a non-consenting Holder. The Issuer is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuer is required within 30 days after the occurrence of any Default, to deliver to the Trustee a statement specifying such Default and what action the Issuer proposes to take with respect thereto.

13. AUTHENTICATION. This Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until authenticated by the manual signature of the Trustee or an authenticating agent.

14. GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE GUARANTEES.

15. CUSIP AND ISIN NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers and ISIN numbers to be printed on the Notes and the Trustee may use CUSIP numbers and ISIN numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

16. GUARANTEE. The Issuer’s obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, by the Full Guarantors. The Issuer’s obligations under the Notes are guaranteed, subject to certain limitations as to amount, by the Limited Guarantors.

17. COLLATERAL. The Notes and the Guarantees are secured by certain security interests in the Collateral.

The Issuer will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to the Issuer at the following address:

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2100 Syntex Court

Mississauga, Ontario, L5N 7K9

Fax No.: (905) 812-6705

Attention: Chief Financial Officer

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ASSIGNMENT FORM

To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to:

(Insert assignee’s legal name)

(Insert assignee’s soc. sec. or tax I.D. no.)

(Print or type assignee’s name, address and zip code)

and irrevocably appoint

to transfer this Note on the books of the Issuer. The agent may substitute another to act for him.

Date:                     

Your Signature:
	(Sign exactly as your name appears on the face of this Note)

Signature Guarantee*:

* Participant in a recognized Signature Guarantee Medallion Program

(or other signature guarantor acceptable to the Trustee).

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OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Issuer pursuant to Section 4.10 or Section 4.14 of the Indenture, check the appropriate box below:

[    ] Section 4.10             [    ] Section 4.14

If you want to elect to have only part of this Note purchased by the Issuer pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased:

$             (integral multiples of $1,000; provided that the unpurchased portion must be in a minimum principal amount of $2,000)

Date:                    

Your Signature:
	(Sign exactly as your name appears on the face of this Note)

Tax Identification No.:

Signature Guarantee*:                                                                                          

* Participant in a recognized Signature Guarantee Medallion Program

(or other signature guarantor acceptable to the Trustee).

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SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*

The initial outstanding principal amount of this Global Note is $        . The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global or Definitive Note for an interest in this Global Note, have been made:

Date of Exchange Amount of decrease
in Principal
Amount Amount of increase
in Principal
Amount of this
Global Note Principal Amount
of
this Global Note
following such
decrease or
increase Signature of
authorized
signatory
of Trustee or
Note Custodian

* This schedule should be included only if the Note is issued in global form.

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EXHIBIT B

FORM OF CERTIFICATE OF TRANSFER

Patheon Inc.

2100 Syntex Court

Mississauga, Ontario, L5N 7K9

Attention: Chief Financial Officer

U.S. Bank National Association

100 Wall Street, Suite 1600

New York, New York 10005

Attention: Corporate Trust Services

Re: 8.625% Senior Secured Notes due 2017

Reference is hereby made to the Indenture, dated as of April 23, 2010 (the “Indenture”), among Patheon Inc., the Guarantors named therein, U.S. Bank National Association, as Trustee, and Deutsche Bank Trust Company Americas, as Notes Collateral Agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                     (the “Transferor”) owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $          in such Note[s] or interests (the “Transfer”), to                      (the “Transferee”), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:

[CHECK ALL THAT APPLY]

1. [    ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States.

2. [    ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in

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accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Indenture and the Securities Act.

3. [    ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE. The Transfer is being effected to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that has furnished to the Trustee a signed letter substantially in the form of Exhibit E to the Indenture pursuant to an exemption from the registration requirements of the Securities Act. The Transferor hereby further certifies that such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States.

4. [    ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN A RESTRICTED DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A, OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one):

(a) [    ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;

or

(b) [    ] such Transfer is being effected to the Issuer or a subsidiary thereof;

or

(c) [    ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act;

or

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(d) [    ] such Transfer is being effected to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that has furnished to the Trustee a signed letter substantially in the form of Exhibit E to the Indenture.

5. [    ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.

(a) [    ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

(b) [    ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

(c) [    ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture.

The Transferor further certifies, in connection with each of the foregoing certifications, that if the transfer is being made prior to August 24, 2010, the Transferee is not a person resident in any province or territory of Canada unless the Transferee is eligible to acquire the Notes under an exemption from the applicable Canadian securities laws and such transfer is

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in compliance with, or pursuant to, such exemption.

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This certificate and the statements contained herein are made for the benefit of the Trustee and the Issuer.

[Insert Name of Transferor]
By:
	Name:
	Title:

Dated:                     

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ANNEX A TO CERTIFICATE OF TRANSFER

1. The Transferor owns and proposes to transfer the following:

[CHECK ONE OF (a) OR (b)]

(a) [    ] a beneficial interest in the:

(i) [    ] 144A Global Note (CUSIP 70319WAA6), or

(ii) [    ] Regulation S Global Note (CUSIP C7197EAA2), or

(iii) [    ] IAI Global Note (CUSIP [    ]), or

(b) [    ] a Restricted Definitive Note.

2. After the Transfer the Transferee will hold:

[CHECK ONE]

(a) [    ] a beneficial interest in the:

(i) [    ] 144A Global Note (CUSIP 70319WAA6), or

(ii) [    ] Regulation S Global Note (CUSIP C7197EAA2), or

(iii) [    ] IAI Global Note (CUSIP [    ]), or

(iii) [    ] Unrestricted Global Note (CUSIP [    ]), or

(b) [    ] a Restricted Definitive Note, or

(c) [    ] an Unrestricted Definitive Note,

in accordance with the terms of the Indenture.

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EXHIBIT C

FORM OF CERTIFICATE OF EXCHANGE

Patheon Inc.

2100 Syntex Court

Mississauga, Ontario, L5N 7K9

Attention: Chief Financial Officer

U.S. Bank National Association

100 Wall Street, Suite 1600

New York, New York 10005

Attention: Corporate Trust Services

Re: 8.625% Senior Secured Notes due 2017

Reference is hereby made to the Indenture, dated as of April 23, 2010 (the “Indenture”), among Patheon Inc., the Guarantors named therein, U.S. Bank National Association, as Trustee, and Deutsche Bank Trust Company Americas, as Notes Collateral Agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                     (the “Owner”) owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $         in such Note[s] or interests (the “Exchange”). In connection with the Exchange, the Owner hereby certifies that:

1) EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE

a) [    ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies that (i) the beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the “Securities Act”), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

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b) [    ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

c) [    ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner’s Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

d) [    ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner’s Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

2) EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES

a) [    ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the

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Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner’s own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend and/or Canadian Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.

b) [    ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner’s Restricted Definitive Note for a beneficial interest in the [CHECK ONE] [    ] 144A Global Note [    ] Regulation S Global Note [    ] IAI Global Note, with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend and/or Canadian Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.

This certificate and the statements contained herein are made for the benefit of the Trustee and the Issuer.

[Insert Name of Owner]
By:
	Name:
	Title:

Dated:                     

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EXHIBIT D

[FORM OF SUPPLEMENTAL INDENTURE

TO BE DELIVERED BY FUTURE GUARANTORS]

Supplemental Indenture (this “Supplemental Indenture”), dated as of                     , among                      (the “Guaranteeing Subsidiary”), a subsidiary of Patheon Inc., a corporation existing under the Canada Business Corporations Act (the “Issuer”), and U.S. Bank National Association, as trustee (the “Trustee”).

W I T N E S S E T H

WHEREAS, the Issuer and each of the Guarantors (as defined in the Indenture referred to below) have heretofore executed and delivered to the Trustee an indenture (the “Indenture”), dated as of April 23, 2010, providing for the issuance of 8.625% Senior Secured Notes due 2017 (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall guarantee Obligations with respect to the Notes on the terms and conditions set forth herein and under the Indenture (the “Guarantee”); and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

(1) Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

(2) Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees as follows:

(a) [Subject to Section 2(i) below,]² [A]long with all Guarantors named in the Indenture, the Guaranteeing Subsidiary hereby, jointly and severally, unconditionally guarantees to each Noteholder Secured Party and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes, the Guarantees, the Security Documents or the Intercreditor Agreement or the obligations of the Issuer thereunder, that the Notes Obligations shall be promptly paid in full when due, whether at maturity, by acceleration,

² Insert if the Guarantee is limited under Section 4.20(b) of the Indenture.

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redemption or otherwise, and performed on or prior to the date specified for such performance hereunder. [Subject to Section 2(i) below, failing]³ [Failing] payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors and the Guaranteeing Subsidiary shall be jointly and severally obligated to pay and perform the same immediately. This is a guarantee of payment and not a guarantee of collection.

(b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Indenture, the Notes, the Guarantees, the Security Documents or the Intercreditor Agreement or the obligations of the Issuer thereunder, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions thereof, the recovery of any judgment against the Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor.

(c) The following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all demands whatsoever.

(d) [Subject to Section 2(i) below,]⁴ [T]his Guarantee shall not be discharged except by complete performance of the Notes Obligations, and the Guaranteeing Subsidiary accepts all obligations of a Guarantor under the Indenture.

(e) [Subject to Section 2(i) below, if]⁵ [If] any Noteholder Secured Party is required by any court or otherwise to return to the Issuer, the Guarantors (including the Guaranteeing Subsidiary), or any custodian, trustee, liquidator or other similar official acting in relation to the Issuer or the Guarantors, any amount paid to such Noteholder Secured Party, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.

(f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any Notes Obligations until payment in full of the Notes Obligations.

(g) As between the Guaranteeing Subsidiary, on the one hand, and the Noteholder Secured Parties, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article VI of the Indenture for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Notes Obligations, and (y) in the event of

³ Insert if the Guarantee is limited under Section 4.20(b) of the Indenture.

⁴ Insert if the Guarantee is limited under Section 4.20(b) of the Indenture.

⁵ Insert if the Guarantee is limited under Section 4.20(b) of the Indenture.

D-2

any declaration of acceleration of such Notes Obligations as provided in Article VI of the Indenture, such Notes Obligations (whether or not due and payable) shall forthwith become due and payable by the Guaranteeing Subsidiary for the purpose of this Guarantee.

(h) Subject to Section 10.01 of the Indenture, the Guaranteeing Subsidiary shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Noteholder Secured Parties under this Guarantee.

(i) Pursuant to Section 10.02 of the Indenture, after giving effect to all other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article X of the Indenture, this new Guarantee shall be limited to the maximum amount permissible such that the obligations of such Guaranteeing Subsidiary under this Guarantee will not constitute a fraudulent transfer or conveyance or otherwise violate applicable law. [If applicable, describe any limitations placed on the Guarantee pursuant to Section 4.20(b) of the Indenture.]

(j) This Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Issuer for liquidation or reorganization, should the Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Issuer’s assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes Obligations are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Notes Obligations, whether as a “voidable preference”, “fraudulent transfer” or otherwise, all as though such payment or performance had not been made. In the event that any payment or any part thereof, is rescinded, reduced, restored or returned, the Note shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

(k) In case any provision of this Guarantee shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

(l) This Guarantee shall be a general senior subordinated obligation of such Guaranteeing Subsidiary, ranking pari passu with any other future Senior Indebtedness of the Guaranteeing Subsidiary, if any, and shall be secured by the Collateral of the Issuer, the other Guarantors (if any) and the Guaranteeing Subsidiary (if any).

(m) Subject to Section 10.02(b) of the Indenture, each payment to be made by the Guaranteeing Subsidiary in respect of this Guarantee shall be made without set-off, counterclaim, reduction or diminution of any kind or nature.

D-3

(3) Merger, Consolidation or Sale of All or Substantially All Assets.

(a) Except as otherwise provided in Section 5.01(c) of the Indenture, the Guaranteeing Subsidiary may not consolidate, amalgamate or merge with or into or wind up into (whether or not the Issuer or Guaranteeing Subsidiary is the surviving company), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:

(i)(A) the Guaranteeing Subsidiary is the surviving company or the Person formed by or surviving any such consolidation, amalgamation or merger (if other than the Guaranteeing Subsidiary) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a company organized or existing under the laws of the jurisdiction of organization of the Guaranteeing Subsidiary or any subdivision thereof, as the case may be, or Canada or any province or territory thereof, or the United States, any state thereof, the District of Columbia, or any territory thereof (the Guaranteeing Subsidiary or such Person, as the case may be, being herein called the “Successor Person”);

(B) the Successor Person, if other than the Guaranteeing Subsidiary, expressly assumes all the obligations of the Guaranteeing Subsidiary under the Indenture, the Security Documents and the Guaranteeing Subsidiary’s related Guarantee pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;

(C) immediately after such transaction, no Default exists;

(D) the Issuer shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such consolidation, amalgamation, merger or transfer and such supplemental indentures, if any, comply with the Indenture;

(E) any Collateral owned by or transferred to the Successor Person shall (i) continue to constitute Collateral under the Indenture and the Security Documents, (ii) be subject to the Lien in favor of the Notes Collateral Agent for the benefit of the Trustee and the Holders of the Notes, and (iii) not be subject to any Lien other than Permitted Liens and other Liens permitted under Section 4.12 of the Indenture; and

(F) to the extent any assets of the Person which is merged, amalgamated or consolidated with or into the Successor Company are assets of the type which would constitute Collateral under the Securities Documents, the Successor Company will take such action as may be reasonably necessary to cause such property and assets to be made subject to the Lien of the Security Documents in the manner and to the extent required in the Indenture or any of the Security Documents and shall take all reasonably necessary action so that such Lien is perfected to the extent required by the Security Documents; or

(ii) the transaction is made in compliance with Section 4.10 of the Indenture;

(b) Subject to certain limitations described in the Indenture, the Successor Person will succeed to, and be substituted for, the Guaranteeing Subsidiary under the Indenture

D-4

and the Guaranteeing Subsidiary’s Guarantee. Notwithstanding the foregoing, the Guaranteeing Subsidiary may merge into or transfer all or part of its properties and assets to another Guarantor or the Issuer.

(4) Releases.

The Guarantee of the Guaranteeing Subsidiary shall be automatically and unconditionally released and discharged, and no further action by the Guaranteeing Subsidiary, the Issuer or the Trustee is required for the release of the Guaranteeing Subsidiary’s Guarantee, upon:

(1)(A) any sale, exchange or transfer (by merger, amalgamation or otherwise) of (I) the Capital Stock of the Guaranteeing Subsidiary (including any sale, exchange or transfer), after which the Guaranteeing Subsidiary is no longer a Restricted Subsidiary or (II) all or substantially all the assets of the Guaranteeing Subsidiary, in each case, which sale, exchange or transfer is made in compliance with the applicable provisions of the Indenture;

(B) the release or discharge of such Guarantor from its guarantee of Indebtedness or the retirement or repayment of the Indebtedness, Disqualified Stock or Preferred Stock, in each case, that resulted in the obligation of such Guaranteeing Subsidiary to guarantee the Notes, if such Guarantor would not then otherwise be required to guarantee the Notes pursuant to Section 4.20 of the Indenture;

(C) the proper designation of the Guaranteeing Subsidiary as an Unrestricted Subsidiary;

(D) the Issuer exercising its Legal Defeasance option or Covenant Defeasance option in accordance with Article VIII of the Indenture or the Issuer’s obligations under the Indenture being discharged in accordance with the terms of the Indenture; and

(2) the Guaranteeing Subsidiary delivering to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in the Indenture relating to such transaction have been complied with.

(6) No Recourse Against Others. No director, officer, employee, incorporator or stockholder of the Guaranteeing Subsidiary shall have any liability for any obligations of the Issuer or the Guarantors (including the Guaranteeing Subsidiary) under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

(7) Governing Law. THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

D-5

(8) Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

(9) Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.

(10) The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary.

(11) Subrogation. The Guaranteeing Subsidiary shall be subrogated to all rights of Holders of Notes against the Issuer in respect of any amounts paid by the Guaranteeing Subsidiary pursuant to the provisions of Section 2 hereof and Section 10.01 of the Indenture; provided that, if an Event of Default has occurred and is continuing, the Guaranteeing Subsidiary shall not be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Issuer under the Indenture or the Notes shall have been paid in full.⁶

(12) Benefits Acknowledged. The Guaranteeing Subsidiary’s Guarantee is subject to the terms and conditions set forth in the Indenture. The Guaranteeing Subsidiary acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Indenture and this Supplemental Indenture and that the guarantee and waivers made by it pursuant to this Guarantee are knowingly made in contemplation of such benefits.

(13) Successors. All agreements of the Guaranteeing Subsidiary in this Supplemental Indenture shall bind its Successors, except as otherwise provided in Section 2(k) hereof or elsewhere in this Supplemental Indenture. All agreements of the Trustee in this Supplemental Indenture shall bind its successors.

⁶ Additional limitations may be added to reflect limited nature of Guaranteeing Subsidiary’s Guarantee, if applicable.

D-6

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.

[GUARANTEEING SUBSIDIARY]
By:
	Name:
	Title:
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:
	Name:
	Title:

D-7

EXHIBIT E

Form of

Transferee Letter of Representation

Patheon Inc.

2100 Syntex Court

Mississauga, Ontario, L5N 7K9

Attention: Chief Financial Officer

U.S. Bank National Association

100 Wall Street, Suite 1600

New York, New York 10005

Attention: Corporate Trust Services

Ladies and Gentlemen:

This certificate is delivered to request a transfer of $[        ] principal amount of the 8.625% Senior Secured Notes due 2017 (the “Securities”) of Patheon Inc. (the “Company”).

Upon transfer, the Securities would be registered in the name of the new beneficial owner as follows:

Name:

Address:

Taxpayer ID Number:

The undersigned represents and warrants to you that:

1. We are an institutional “accredited investor” (as defined in Rule 501(a)(l), (2), (3) or (7) under the Securities Act of 1933, as amended (the “Securities Act”)), purchasing for our own account or for the account of such an institutional “accredited investor” at least $250,000 principal amount of the Securities, and we are acquiring the Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we invest in or purchase securities similar to the Securities in the normal course of our business. We, and any accounts for which we are acting, are each able to bear the economic risk of our or its investment.

2. We understand that the Securities have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing

E-1

Securities to offer, sell or otherwise transfer such Securities prior to the date that is one year after the later of the date of original issue of the Securities and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the “Resale Restriction Termination Date”) only (a) to the Company, (b) pursuant to a registration statement that has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act (“Rule 144A”), to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a “QIB”) that is purchasing for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act, (e) to an institutional “accredited investor” within the meaning of Rule 501(a)(l), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional “accredited investor,” in each case in a minimum principal amount of Securities of $250,000, for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, in each case in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional “accredited investor” within the meaning of Rule 501(a)(l), (2), (3) or (7) under the Securities Act and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the Securities pursuant to clause (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Company and the Trustee.

[TRANSFEREE]

by:

Name:

Title:

E-2

EX-10.1

Exhibit 10.1

EXECUTION VERSION

AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT

dated as of

April 23, 2010

among

PATHEON INC.,

THE SUBSIDIARIES OF PATHEON INC.

NAMED HEREIN,

The Lenders Party Hereto

and

JPMORGAN CHASE BANK, N.A., as US Administrative Agent,

JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as Canadian

Administrative Agent, and

J.P. MORGAN EUROPE LIMITED, as European Administrative Agent

J.P. MORGAN SECURITIES INC.,

UBS SECURITIES LLC,

as Joint Bookrunners and Joint Lead Arrangers             

UBS SECURITIES LLC,

GENERAL ELECTRIC CAPITAL CORPORATION

as Co-Syndication Agents

TABLE OF CONTENTS

		Page
ARTICLE I
Definitions
SECTION 1.01.	Defined Terms		1
SECTION 1.02.	Classification of Loans and Borrowings		58
SECTION 1.03.	Terms Generally		58
SECTION 1.04.	Accounting Terms; GAAP		58
SECTION 1.05.	Exchange Rate Calculations		59
SECTION 1.06.	Permitted Encumbrances		59
ARTICLE II
The Credits
SECTION 2.01.	Commitments		60
SECTION 2.02.	Loans and Borrowings		60
SECTION 2.03.	Requests for Revolving Borrowings		62
SECTION 2.04.	Swingline Loans		63
SECTION 2.05.	Letters of Credit		64
SECTION 2.06	. Funding of Borrowings and B/A Drawings		70
SECTION 2.07.	Bankers’ Acceptances		71
SECTION 2.08.	Interest Elections and Contract Periods		75
SECTION 2.09.	Termination and Reduction of Commitments		77
SECTION 2.10.	Repayment of Loans and B/As; Evidence of Debt		78
SECTION 2.11.	Prepayment of Loans		79
SECTION 2.12.	Fees		80
SECTION 2.13.	Interest		82
SECTION 2.14.	Alternate Rate of Interest		84
SECTION 2.15.	Increased Costs		84
SECTION 2.16.	Break Funding Payments		86
SECTION 2.17.	Taxes		86
SECTION 2.18.	Payments Generally; Pro Rata Treatment; Sharing of Set-offs		90
SECTION 2.19.	Mitigation Obligations; Replacement of Lenders		92
SECTION 2.20.	Increase in Commitments		93
SECTION 2.21.	Additional Reserve Costs		94
SECTION 2.22.	Defaulting Lenders		95
SECTION 2.23.	UK Overdraft Facility		99

i

		Page
ARTICLE III
Representations and Warranties
SECTION 3.01.	Organization; Powers		100
SECTION 3.02.	Authorization; Enforceability		100
SECTION 3.03.	Governmental Approvals; No Conflicts		101
SECTION 3.04.	Financial Condition; No Material Adverse Change		101
SECTION 3.05.	Properties		102
SECTION 3.06.	Litigation and Environmental Matters		102
SECTION 3.07.	Compliance with Laws and Agreements		103
SECTION 3.08.	Investment Company Status		103
SECTION 3.09.	Taxes		103
SECTION 3.10.	ERISA, Other Pension Plans		103
SECTION 3.11.	Disclosure		104
SECTION 3.12.	Subsidiaries		105
SECTION 3.13.	Insurance		105
SECTION 3.14.	Labor Matters		105
SECTION 3.15.	Solvency		105
ARTICLE IV
Conditions
SECTION 4.01.	Effective Date		107
SECTION 4.02.	Each Credit Event		110
ARTICLE V
Affirmative Covenants
SECTION 5.01.	Financial Statements; Ratings Change and Other Information		111
SECTION 5.02.	Notices of Material Events		113
SECTION 5.03.	Information Regarding Collateral		114
SECTION 5.04.	Existence; Conduct of Business		114
SECTION 5.05.	Payment of Obligations		114
SECTION 5.06.	Maintenance of Properties		115
SECTION 5.07.	Insurance		115
SECTION 5.08.	Casualty and Condemnation		115
SECTION 5.09.	Books and Records; Inspection and Audit Rights		115
SECTION 5.10.	Compliance with Laws		116
SECTION 5.11.	Use of Proceeds and Letters of Credit		116
SECTION 5.12.	Additional Subsidiaries		116
SECTION 5.13.	Further Assurances		116

ii

		Page
SECTION 5.14.	Post-Closing Requirements		117
SECTION 5.15.	Compliance with Swiss Twenty Non-Bank Rule		117
ARTICLE VI
Negative Covenants
SECTION 6.01.	Indebtedness; Certain Equity Securities		117
SECTION 6.02.	Liens		119
SECTION 6.03.	Fundamental Changes		122
SECTION 6.04.	Investments, Loans, Advances, Guarantees and Acquisitions		123
SECTION 6.05.	Asset Sales		125
SECTION 6.06.	Sale and Leaseback Transactions		126
SECTION 6.07.	Swap Agreements		126
SECTION 6.08.	Restricted Payments; Certain Payments of Indebtedness		126
SECTION 6.09.	Transactions with Affiliates		127
SECTION 6.10.	Restrictive Agreements		128
SECTION 6.11.	Amendment of Material Documents		128
SECTION 6.12.	Capital Expenditures		128
SECTION 6.13.	Fixed Charge Coverage Ratio		129
SECTION 6.14.	UK Pension Scheme		129
ARTICLE VII
Events of Default
SECTION 7.01.	Events of Default		129
SECTION 7.02.	CAM Exchange		132
SECTION 7.03.	Letters of Credit		133
SECTION 7.04.	Defaulting Lenders		135
ARTICLE VIII
The Agents
ARTICLE IX
Miscellaneous
SECTION 9.01.	Notices		137
SECTION 9.02.	Waivers; Amendments		138
SECTION 9.03.	Expenses; Indemnity; Damage Waiver		140
SECTION 9.04.	Successors and Assigns		141

iii

		Page
SECTION 9.05.	Survival		145
SECTION 9.06.	Counterparts; Integration; Effectiveness		145
SECTION 9.07.	Severability		146
SECTION 9.08.	Right of Setoff		146
SECTION 9.09.	Governing Law; Jurisdiction; Consent to Service of Process		146
SECTION 9.10.	WAIVER OF JURY TRIAL		147
SECTION 9.11.	Headings		147
SECTION 9.12.	Confidentiality		147
SECTION 9.13.	Interest Rate Limitation		148
SECTION 9.14.	Conversion of Currencies		149
SECTION 9.15.	USA Patriot Act		149
SECTION 9.16.	Authorization of Collateral Agent		149
SECTION 9.17.	Intercreditor Agreement		150
SECTION 9.18.	Notice of Other Obligations		151
SECTION 9.19.	Restatement of Existing Credit Agreement		151

SCHEDULES:

Schedule 1.01(a) — Specified Account Debtor

Schedule 1.01(b) — Mortgaged Properties

Schedule 2.01 — Commitments

Schedule 2.21 — Mandatory Costs Rate

Schedule 3.05 — Real Property

Schedule 3.06 — Disclosed Matters

Schedule 3.12 — Subsidiaries

Schedule 5.01 — Additional Reporting

Schedule 5.14 — Post-Closing Requirements

Schedule 6.01 — Existing Indebtedness

Schedule 6.02 — Existing Liens

Schedule 6.04 — Existing Investments

Schedule 6.05 — Sales, Transfers, Leases or Other Dispositions

Schedule 6.06 — Sale – Leaseback Transactions

Schedule 6.10 — Existing Restrictions

EXHIBITS:

Exhibit A — Form of Assignment and Assumption

Exhibit B — Form of Borrowing Base Certificate

Exhibit C — Form of Canadian Collateral Agreement

Exhibit D — Form of Guarantor Agreement

Exhibit E — Form of Intercreditor Agreement

Exhibit F — Form of Perfection Certificate

Exhibit G — Form of PR Collateral Agreement

Exhibit H — Form of UK Debenture

Exhibit I — Form of UK Security Trust Deed

iv

	Page
Exhibit J — Form of UK Share Charge
Exhibit K — Form of US Collateral Agreement
Exhibit L — Forms of Opinions of Counsel
Exhibit M — Form of U.S. Tax Certificate
Exhibit N — Form of French Master Receivables Assignment Agreement
Exhibit O — Form of French Bank Account Pledge Agreement
Exhibit P — Form of Italian Assignment of Account Debtor Receivables
Exhibit Q — Form of Italian Pledge Over Bank Accounts

v

AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated as of April 23, 2010, among PATHEON INC., the SUBSIDIARIES of PATHEON INC. named herein, the LENDERS party hereto, JPMORGAN CHASE BANK, N.A., as US Administrative Agent, JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as Canadian Administrative Agent, and J.P. MORGAN EUROPE LIMITED, as European Administrative Agent.

Reference is made to the Revolving Credit Agreement dated as of April 27, 2007 (as amended and in effect prior to giving effect to the amendment and restatement thereof pursuant to this Agreement, the “Existing Credit Agreement”), among Patheon Inc., its subsidiaries named therein, the lenders party thereto, the US Agent, the Canadian Agent and the European Agent. The parties hereto are entering into this Agreement in order to amend and restate the Existing Credit Agreement in its entirety, subject to the terms and conditions set forth herein. Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

“Account” has the meaning assigned to such term in the applicable Security Documents.

“Account Debtor” means any Person obligated on an Account.

“Additional Equity Amount” means, at any time, an amount equal to the Net Proceeds of any Equity Interests issued by the Parent Borrower after the Effective Date and prior to the date of determination. It is understood that, if any Restricted Payment, investment, Capital Expenditure or other action is made or taken hereunder in reliance on the Additional Equity Amount, then, to the extent thereof, the Additional Equity Amount shall be considered used and may not be used and reduced, and may not be used for any other Restricted Payment, investment, Capital Expenditure or other action.

“Adjusted Applicable Percentage” means, with respect to any Lender and its Commitment of any Class, the percentage of the total Commitments of such Class (excluding the Commitment of any Defaulting Lender) represented by such Lender’s Commitment of such Class. If the Commitments of any Class have terminated or expired, the Adjusted Applicable Percentages with respect to such Class shall be

determined based upon the Commitments of such Class most recently in effect, giving effect to any assignments.

“Adjusted LIBO Rate” means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Applicable Agent.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Agents” means the Canadian Agent, the European Agent, the US Agent and the Collateral Agent.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day, (or, in the case of Loans or Borrowings denominated in US Dollars made by the Canadian Lenders pursuant to the Canadian Commitments, the rate per annum announced from time to time by the Canadian Agent as its US base rate for commercial loans in effect at its office in Toronto), (b) the Federal Funds Effective Rate in effect on such day plus  ¹/2 of 1% per annum and (c) the Adjusted LIBO Rate for a one-month Interest Period on such day (or, if such day is not a Business Day, the immediately preceding Business Day); provided that, for the avoidance of doubt, the Adjusted LIBO Rate for any day shall be based on the one-month rate appearing on the Reuters Screen LIBOR01 page (or any successor or substitute page) at approximately 11:00 a.m. London time on such day (without any rounding). Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, respectively.

“Applicable Agent” means (a) with respect to any Class of Commitments, extensions of credit thereunder, payments in respect thereof and other matters pertaining thereto, the Agent in respect of such Class and (b) with respect to any action or determination under any Security Document or Collateral thereunder, the Collateral Agent to which a security interest is granted under such Security Document; provided that the US Agent shall be the Applicable Agent for all purposes not involving a particular Class of Commitments, extensions of credit thereunder, payments thereunder or other matters pertaining thereto, or actions or determinations under a particular Security Document.

2

“Applicable French/Italian Borrowing Base Conditions” means, with respect to the French Borrowing Base or the Italian Borrowing Base, as applicable:

(a) a customary field examination with respect to such Borrowing Base (and the assets included therein) has been completed with results satisfactory to the US Agent, and the US Agent has received a completed Borrowing Base Certificate calculating such Borrowing Base after such field examination has been approved by the US Agent;

(b) execution and delivery of the French Security Documents or the Italian Security Documents, as applicable, perfection of the Liens on Collateral granted thereby and satisfaction of the Collateral and Guarantee Requirement with respect thereto; and

(c) receipt of legal opinions in form and substance reasonably satisfactory to the US Agent with respect to the due authorization, legality, validity and enforceability of the French Security Documents or the Italian Security Documents, as applicable, the perfection of the Liens on Collateral granted thereby and the satisfaction of the Collateral and Guarantee Requirement with respect thereto and covering such other matters relating to the French Borrower and the French Security Documents or the Italian Borrower and the Italian Security Documents, as applicable, and the Liens on the Collateral granted thereby, as the US Agent shall reasonably request.

“Applicable Percentage” means, with respect to any Lender and its Commitment of any Class, the percentage of the total Commitments of such Class represented by such Lender’s Commitment of such Class. If the Commitments of any Class have terminated or expired, the Applicable Percentages with respect to such Class shall be determined based upon the Commitments of such Class most recently in effect, giving effect to any assignments.

“Applicable Rate” means, for any day, with respect to any ABR Loan, Eurocurrency Loan, BA Drawing, Canadian Prime Rate Loan or UK Base Rate Loan, as the case may be, the applicable rate per annum set forth below under the caption “ABR Spread”, “Eurocurrency Spread”, “B/A Spread”, “Canadian Prime Rate Spread” or “UK Base Rate Spread”, as the case may be, based upon the Leverage Ratio as of the most recent determination date, provided that until the delivery to the US Agent, pursuant to Section 5.01, of the Parent Borrower’s financial statements with respect to the Parent Borrower’s second fiscal quarter commencing after the Effective Date, the “Applicable Rate” shall be the applicable rate per annum set forth below in Category 2 (unless an Event of Default has occurred and is continuing, in which case Category 1 shall apply):

Leverage Ratio	ABR Spread			Eurocurrency Spread			B/A Spread			Canadian Prime Rate Spread			UK Base Rate Spread
Category 1 ³ 4.0 to 1.0		2.75	%		3.75	%		3.75	%		2.75	%		3.75	%

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Leverage Ratio	ABR Spread			Eurocurrency Spread			B/A Spread			Canadian Prime Rate Spread			UK Base Rate Spread
Category 2 < 4.0 to 1.0 and ³ 3.25 to 1.0		2.50	%		3.50	%		3.50	%		2.50	%		3.50	%
Category 3 < 3.25 to 1.0 and ³ 2.5 to 1.0		2.25	%		3.25	%		3.25	%		2.25	%		3.25	%
Category 4 < 2.5 to 1.0		2.00	%		3.00	%		3.00	%		2.00	%		3.00	%

For purposes of the foregoing, (i) the Leverage Ratio shall be determined as of the end of each fiscal quarter of the Parent Borrower’s fiscal year and (ii) each change in the Applicable Rate resulting from a change in the Leverage Ratio shall be effective during the period commencing on and including the date of delivery to the US Agent of the Parent Borrower’s consolidated financial statements with respect to the fiscal period last ended and ending on the date immediately preceding the effective date of the next such change; provided that the Leverage Ratio shall be deemed to be in Category 1 (A) at any time that an Event of Default has occurred and is continuing or (B) at the option of the US Agent or at the request of the Required Lenders if the Parent Borrower fails to deliver the consolidated financial statements required to be delivered by it pursuant to Section 5.01(a) or (b), during the period from the expiration of the time for delivery thereof until such consolidated financial statements are delivered.

“Applicable Security Document” means, in respect of any Loan Party, the Security Document or Security Documents appropriate for such Loan Party based upon its jurisdiction of organization and the type of Collateral, as determined by the Collateral Agent or the US Agent, including, in the case of each Loan Party, the Intercreditor Agreement.

“Approved Fund” has the meaning assigned to such term in Section 9.04.

“Arrangers” means JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc. and UBS Securities LLC, in their respective capacities indicated on the cover page of this Agreement.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Applicable Agent, in the form of Exhibit A or any other form approved by the Applicable Agent.

“Augmenting Lender” has the meaning assigned to such term in Section 2.20(a).

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“Availability Period” means, with respect to any Class of Commitments, the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments of such Class.

“Availability Trigger Event” means an Event of Default or a Liquidity Event.

“Available Amount” means, at any time, the excess, if any, of (a) the maximum amount of total Revolving Exposures permitted to be outstanding (regardless of whether such amount is actually outstanding) at such time in compliance with this Agreement (including the Borrowing Base limitations herein) over (b) the total Revolving Exposures at such time.

“Average Available Amount” means, as of the last day of any fiscal quarter of the Parent Borrower, the average daily amount of the Available Amount during such fiscal quarter.

“B/A” or “Banker’s Acceptances” means a bill of exchange within the meaning of the Bills of Exchange Act (Canada) or a depository bill within the meaning of the Depository Bills and Notes Act (Canada), denominated in Canadian Dollars, drawn by the Parent Borrower and accepted by a Canadian Lender in accordance with the terms of this Agreement.

“B/A Drawing” means B/As accepted and purchased on the same date and as to which a single Contract Period is in effect including any B/A Equivalent Loans made on the same date and as to which a single Contract Period is in effect. For greater certainty, all provisions of this Agreement which are applicable to B/As are also applicable, mutatis mutandis, to B/A Equivalent Loans.

“B/A Equivalent Loan” has the meaning assigned to such term in Section 2.07(k).

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Borrower Group” means the Canadian Borrower Group, the UK Borrower Group, the US Borrower Group, the Swiss Borrower, the Italian Borrower or the French Borrower.

“Borrowers” means the Parent Borrower, the US Borrower, the PR Borrower, the UK Borrower, the Swiss Borrower, the Italian Borrower and the French Borrower and “Borrower” means any of them.

“Borrowing” means (a) Revolving Loans of the same Class and Type, made, converted or continued on the same date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect, (b) where the content requires, a B/A Drawing or (c) a Swingline Loan.

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“Borrowing Base” means the Canadian Borrowing Base, the UK Borrowing Base, the US Borrowing Base, the Swiss Borrowing Base, the Italian Borrowing Base, the French Borrowing Base or the Total Shared Borrowing Base, as the context requires.

“Borrowing Base Certificate” means a certificate, signed and certified as accurate and complete by a Financial Officer of the Parent Borrower, in substantially the form of Exhibit B or another form which is acceptable to the US Agent in its sole discretion.

“Borrowing Minimum” means (a) in the case of a Borrowing denominated in US Dollars, US$1,000,000, (b) in the case of a Borrowing denominated in Canadian Dollars, Cdn.$1,000,000, (c) in the case of a Borrowing denominated in Euros, €1,000,000, and (d) in the case of a Borrowing denominated in Sterling, £500,000.

“Borrowing Multiple” means (a) in the case of a Borrowing denominated in US Dollars, US$1,000,000, (b) in the case of a Borrowing denominated in Canadian Dollars, Cdn.$1,000,000, (c) in the case of a Borrowing denominated in Euros, €1,000,000, and (d) in the case of a Borrowing denominated in Sterling, £500,000.

“Borrowing Request” means a request by a Borrower for a Revolving Borrowing in accordance with Section 2.03 or 2.07(c).

“Bulk Receivables/Inventory Sale” means any sale, transfer or other disposition (other than by a member of a Borrower Group to another member of the same Borrower Group) of (a) any Equity Interests of any Subsidiary, (b) any assets constituting a division or business unit or (c) any other assets outside the ordinary course of business, in each case that includes, directly or indirectly, any Account or Inventory that constitutes Collateral owned by a member of a Borrower Group.

“Bulk Sale Prepayment Amount” means, with respect to any Bulk Receivables/Inventory Sale, an amount equal to the book value of the Accounts and Inventory that both (a) are included, directly or indirectly, in such Bulk Receivables/Inventory Sale and (b) constitute Collateral owned by a member of a Borrower Group. The Bulk Sale Prepayment Amount shall be allocated to (i) the Parent Borrower, to the extent that any such Accounts or Inventory are owned by any member of the Canadian Borrower Group, (ii) the UK Borrower, to the extent that any such Accounts or Inventory are owned by any member of the UK Borrower Group, (iii) to the US Borrower and the PR Borrower, to the extent that any such Accounts or Inventory are owned by a member of the US Borrower Group, (iv) the Swiss Borrower, to the extent that any such Accounts are owned by the Swiss Borrower, (v) the Italian Borrower, to the extent that any such Accounts are owned by the Italian Borrower, or (vi) to the French Borrower, to the extent that any such Accounts are owned by the French Borrower.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City or Toronto are authorized or required by law to remain closed; provided that, (a) when used in connection with a Eurocurrency

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Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in US Dollar deposits in the London interbank market, (b) when used in connection with a Borrowing denominated in Canadian Dollars, the term “Business Day” shall also exclude any day on which banks are not open for business in Toronto and (c) when used in connection with a Borrowing denominated in Sterling or Euros, the term “Business Day” shall also exclude any day on which banks are not open for business in London.

“Calculation Date” means the last Business Day of each calendar quarter and the date of each Borrowing Request, Interest Election Request, or request for B/A or for a Letter of Credit.

“CAM” means the mechanism for the allocation and exchange of interests in Loans and other extensions of credit hereunder and collections in respect thereof established in Section 7.02.

“CAM Exchange” means the exchange of the Lenders’ interests provided for in Section 7.02.

“CAM Exchange Date” means the date on which any event referred to in paragraph (h) or (i) of Section 7.01 shall occur in respect of any Borrower.

“CAM Percentage” means, as to each Lender, a fraction, expressed as a decimal, of which (a) the numerator shall be the aggregate US Dollar Equivalent (determined on the basis of Exchange Rates prevailing on the CAM Exchange Date) of the Specified Obligations owed to such Lender (whether or not at the time due and payable) and such Lender’s participations in undrawn amounts of Letters of Credit immediately prior to the CAM Exchange Date and (b) the denominator shall be the aggregate US Dollar Equivalent (as so determined) of the Specified Obligations owed to all the Lenders (whether or not at the time due and payable) and the aggregate undrawn amount of all Letters of Credit immediately prior to the CAM Exchange Date.

“Canadian Agent” means JPMorgan Chase Bank, N.A., Toronto Branch, in its capacity as Canadian administrative agent and collateral agent for the Lenders hereunder.

“Canadian Borrower Group” means the Parent Borrower and each Subsidiary organized in Canada or any province or territory thereof that is a Subsidiary Loan Party.

“Canadian Borrowing Base” means at any time, an amount (expressed in US Dollars, based on Exchange Rates prevailing at the time the applicable Borrowing Base Certificate is prepared, where applicable) equal to the sum, without duplication, of (a) 85% of Eligible Accounts of the Canadian Borrower Group at such time, plus (b) the lesser of (i) 50% of Eligible Inventory of the Canadian Borrower Group, valued at the lower of original cost or market value, determined on a first-in-first-out basis, at such time and (ii) the product of 85% multiplied by the Net Orderly Liquidation Value percentage identified in the most recent inventory appraisal ordered by or delivered to the

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US Agent multiplied by Eligible Inventory of the Canadian Borrower Group, valued at the lower of original cost or market value, determined on a first-in-first-out basis, at such time, minus (c) all Reserves in effect at such time in respect of such Borrowing Base minus (d) Priority Obligations. The Canadian Borrowing Base at any time shall be determined by reference to the most recent Borrowing Base Certificate delivered to the US Agent pursuant to this Agreement, but giving effect to any Reserves in effect at such time that were established after preparation of such Borrowing Base Certificate.

“Canadian Collateral Agreement” means the Canadian Revolving Pledge and Security Agreement among the members of the Canadian Borrower Group and the Collateral Agent, substantially in the form of Exhibit C.

“Canadian Commitment” means, with respect to each Lender, the commitment of such Lender to make Canadian Revolving Loans hereunder, to accept and purchase or arrange for the purchase of B/As hereunder, and to acquire participations in Canadian Letters of Credit and Canadian Swingline Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s Canadian Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09, (b) increased from time to time pursuant to Section 2.20 and (c) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Canadian Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Canadian Commitment, as applicable. The initial aggregate amount of the Canadian Commitments is US$20,000,000.

“Canadian Debenture” means one or more debentures entered into by the members of the Canadian Borrower Group satisfactory in form and substance to the Collateral Agent.

“Canadian Dollars” or “Cdn.$” refers to lawful money of Canada.

“Canadian GAAP” means generally accepted accounting principles in Canada, applied in accordance with the consistency requirements thereof.

“Canadian LC Exposure” means, at any time, the LC Exposure in respect of Canadian Letters of Credit (and LC Disbursements thereunder) at such time. The Canadian LC Exposure of any Canadian Lender at any time shall be its Applicable Percentage of the total Canadian LC Exposure at such time.

“Canadian Lender” means a Lender with a Canadian Commitment or Canadian Revolving Exposure.

“Canadian Letter of Credit” means a Letter of Credit issued for the account of the Parent Borrower.

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“Canadian Pension Plan” means any registered pension plan within the meaning of the Pension Benefits Act (Ontario) in which employees of the Canadian Borrower Group participate, but excluding a multi-employer pension plan.

“Canadian Prime Rate” means, for any day, a rate per annum equal to the greater of (a) the interest rate per annum publicly announced from time to time by the Canadian Agent as its reference rate in effect on such day at its principal office in Toronto for determining interest rates applicable to commercial loans denominated in Canadian Dollars in Canada (each change in such reference rate being effective from and including the date such change is publicly announced as being effective) and (b) the interest rate per annum equal to the CDOR Rate on such day (or, if such rate is not so reported on the Reuters Screen CDOR Page, the average of the rate quotes for bankers’ acceptances denominated in Canadian Dollars with a term of 30 days received by the Canadian Agent at approximately 10:00 a.m., Toronto time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) from one or more banks of recognized standing selected by it) plus 1.00% per annum.

“Canadian Prime Rate Loan” means a Loan bearing interest at a rate determined by reference to the Canadian Prime Rate.

“Canadian Resident” means, at any time, a Person who at that time (a) is not a non-resident of Canada for purposes of the Canadian Tax Act, (b) is an authorized foreign bank deemed to be resident in Canada for purposes of Part XIII of the Canadian Tax Act or (c) is exempt from, or otherwise not subject to, tax under Part XIII of the Canadian Tax Act on any amounts paid to it under this Agreement by virtue of an applicable tax treaty or otherwise.

“Canadian Revolving Exposure” means, with respect to any Lender at any time, the sum of (a) the aggregate principal amount of such Lender’s Canadian Revolving Loans denominated in US Dollars outstanding at such time, (b) the US Dollar Equivalent of the aggregate principal amount of such Lender’s Canadian Revolving Loans denominated in Canadian Dollars outstanding at such time, (c) the US Dollar Equivalent of the aggregate face amount of B/As accepted by such Lender and outstanding at such time and (d) such Lender’s Canadian LC Exposure and Canadian Swingline Exposure at such time.

“Canadian Revolving Loan” means a Loan made to the Parent Borrower pursuant to Section 2.01(a).

“Canadian Security Documents” means the Canadian Collateral Agreement, the Canadian Debenture and each Mortgage with respect to a Mortgaged Property located in Canada or any jurisdiction therein.

“Canadian Swingline Exposure” means, at any time, the aggregate principal amount of all Canadian Swingline Loans outstanding at such time (determined based on the US Dollar Equivalent, in the case of Canadian Swingline Loans denominated in Canadian Dollars). The Canadian Swingline Exposure of any Canadian

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Lender at any time shall be its Applicable Percentage of the total Canadian Swingline Exposure at such time.

“Canadian Swingline Loan” means a Swingline Loan made to the Parent Borrower.

“Canadian Tax Act” means the Income Tax Act (Canada), as amended from time to time.

“Capital Expenditures” means, for any period, (a) the additions to property, plant and equipment and other capital expenditures of the Parent Borrower and its consolidated Subsidiaries that are (or would be) set forth in a consolidated statement of cash flows of the Parent Borrower for such period prepared in accordance with GAAP and (b) Capital Lease Obligations incurred by the Parent Borrower and its consolidated Subsidiaries during such period.

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Cash Collection Account” has the meaning assigned to such term in the US Collateral Agreement and also includes the New European Collection Accounts, the PR Collection Accounts, the PR Deposit Accounts and each other account established for a similar purpose (whether or not defined as a Cash Collection Account) under any other Security Document or for purposes of any Cash Collection System.

“Cash Collection System” means a system for collecting the proceeds of Accounts of a Borrower Group into a Cash Collection Account under the control of (or, in the case of the New European Collection Accounts and the PR Collection Accounts, maintained with) the Collateral Agent, or into lockboxes and/or deposit accounts subject to Deposit Account Control Agreements and, to the extent required by any applicable Security Document, concentrating such proceeds into a Cash Collection Account under the control of (or, in the case of the New European Collection Accounts and PR Collection Accounts, maintained with) the Collateral Agent, in each case established under one or more Security Documents in a manner satisfactory to the Applicable Agent.

“CDOR Rate” means, on any date, an interest rate per annum equal to the average discount rate applicable to bankers’ acceptances denominated in Canadian Dollars with a term of 30 days (for purposes of the definition of “Canadian Prime Rate”) or with a term equal to the Contract Period of the relevant B/As (for purposes of the definition of “Discount Rate”) appearing on the Reuters Screen CDOR Page (or on any successor or substitute page of such Screen, or any successor to or substitute for such Screen, providing rate quotations comparable to those currently provided on such page of such Screen, as determined by the Canadian Agent from time to time) at approximately

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10:00 a.m., Toronto time, on such date (or, if such date is not a Business Day, on the next preceding Business Day).

“Centre of Main Interests” means, with respect to any Person, the “centre of main interests” of such Person for the purposes of Council Regulation (EC) No 1346/2000 of May 29, 2000.

“Change in Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) other than Permitted Holders, of Equity Interests representing more than 40% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Parent Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Parent Borrower by Persons who were not directors at the date of this Agreement and were neither (i) nominated by the board of directors of the Parent Borrower nor (ii) appointed by directors so nominated; or (c) any of the Borrowers (other than the Parent Borrower) ceasing to be a wholly owned Subsidiary of the Parent Borrower.

“Change in Law” means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

“Class”, when used in reference to (a) any Loan, Borrowing or Revolving Exposure (or any component thereof), refers to whether such Loan, or the Loans comprising such Borrowing, are Canadian Revolving Loans, US Revolving Loans, UK Revolving Loans, Swiss Revolving Loans, Italian Revolving Loans, French Revolving Loans, European Revolving Loans or Swingline Loans, or, in the case of Revolving Exposure (or any component thereof), whether such Revolving Exposure is Canadian Revolving Exposure, US Revolving Exposure, UK Revolving Exposure, Swiss Revolving Exposure, Italian Revolving Exposure, French Revolving Exposure or European Revolving Exposure (or, in each case, the applicable component thereof), (b) any Commitment, refers to whether such Commitment is a Canadian Commitment, a US Commitment, a UK Commitment or a European Commitment, (c) any Lender, refers to whether such Lender is a Canadian Lender, a US Lender, a UK Lender or a European Lender or (d) any Borrowing Base, refers to whether such Borrowing Base is the Canadian Borrowing Base, the US Borrowing Base, the UK Borrowing Base, the Swiss Borrowing Base, the Italian Borrowing Base or the French Borrowing Base. The term “Class” shall have a correlative meaning when used in reference to any other defined term.

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“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” means any and all assets on which a Lien is granted pursuant to any Security Document to secure the Obligations.

“Collateral Access Agreement” has the meaning assigned to such term in any applicable Security Document.

“Collateral Agent” means (a) JPMorgan Chase Bank, N.A., in its capacity as collateral agent for the Lenders under the Loan Documents or (b) any Affiliate of JPMorgan Chase Bank, N.A., designated by it to serve in such capacity for purposes of any particular Security Document or Collateral (including JPMorgan Europe Limited and JPMorgan Chase Bank, N.A., Milan Branch, acting under any Security Document to which they are a party).

“Collateral and Guarantee Requirement” means the requirement that:

(a) the Collateral Agent shall have received from each Loan Party either (i) a counterpart of the Guarantor Agreement and each Applicable Security Document duly executed and delivered on behalf of such Loan Party or (ii) in the case of any Person that becomes a Loan Party after the Effective Date, a supplement to the Guarantor Agreement and each Applicable Security Document (or a supplement thereto), in each case in the form specified therein, duly executed and delivered on behalf of such Loan Party;

(b) all outstanding Equity Interests of each Subsidiary owned by or on behalf of any Loan Party shall have been pledged pursuant to a Security Document and the Collateral Agent shall have received certificates or other instruments representing all such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank to the extent such Equity Interests are certificated; provided that (i) such Equity Interests shall be required to be certificated and so pledged only if necessary under the laws of the applicable jurisdiction in order to obtain a valid and perfected security interest therein; and (ii) the Equity Interests of a Subsidiary that is not a Loan Party shall not be required to be so pledged so long as such Subsidiary has only nominal assets and conducts no business or operations;

(c) if necessary under the laws of the applicable jurisdiction in order to obtain a valid and perfected security interest therein, the Indebtedness of the Parent Borrower and each Subsidiary that is owing to any Loan Party shall be evidenced by a promissory note and shall have been pledged pursuant to a Security Document and the Applicable Agent shall have received all such promissory notes, together with instruments of transfer with respect thereto endorsed in blank;

(d) all documents and instruments, including Uniform Commercial Code financing statements or other registrations, recordings or filings, required by law or reasonably requested by the any Agent to be filed, registered or recorded to create the Liens intended to be created by the Security Documents and perfect such Liens to the

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extent required by, and with the priority required by, such Security Documents, shall have been filed, registered or recorded or delivered to the Collateral Agent for filing, registration or recording;

(e) the Collateral Agent shall have received (i) counterparts of a Mortgage with respect to each Mortgaged Property duly executed and delivered by the record owner of such Mortgaged Property, (ii) either (A) a policy or policies of title insurance (or irrevocable commitments to issue same) issued by a nationally recognized title insurance company insuring the Lien of each such Mortgage as a valid second Lien (subject to the Intercreditor Agreement) on the Mortgaged Property described therein, free of any other Liens except as expressly permitted by Section 6.02, together with such endorsements, coinsurance and reinsurance as the Collateral Agent or the Required Lenders may reasonably request or (B) an acceptable title opinion, and (iii) such surveys, abstracts, appraisals, legal opinions and other documents as the Collateral Agent or the Required Lenders may reasonably request with respect to any such Mortgage or Mortgaged Property; provided that (1) in the case of real property located in Puerto Rico, the Collateral Agent shall have received (x) an original of the PR Mortgage Notes secured by the PR Mortgages constituted over the PR Owned Real Property, duly executed and delivered by the record owner of such PR Owned Real Property, and (y) a policy or policy of title insurance (or irrevocable commitments to issue the same), issued by a nationally recognized title insurance company insuring the Lien of each such PR Mortgage as a valid Lien in the agreed priority (subject to the Intercreditor Agreement) on the PR Owned Real Property described therein, free of any other Liens except as permitted by Section 6.02, together with such endorsements, coinsurance and reinsurance as the US Agent or the Required Lenders may reasonably request with respect to any such PR Mortgage and (2) in the case of real property located in the United Kingdom, the Collateral Agent shall have received such documents and certificates as the Applicable Agent or its counsel may reasonably request with respect to any such Mortgage or Mortgaged Property;

(f) a Cash Collection System shall be in effect for each Borrower Group, except that the establishment of New European Collection Accounts shall not be required unless until required by clause (g) below;

(g) within 30 days (or such longer period of time as the Collateral Agent shall agree in its sole discretion) after the first date on which (i) an Event of Default occurs or (ii) the Available Amount is less than (A) US$15,000,000, or (B) if the total Commitments are increased pursuant to the terms of Section 2.20, the greater of US$15,000,000 and 20% of the total Commitments, each of the French Borrower, the Italian Borrower and the Swiss Borrower shall have established, and thereafter shall maintain in effect, the New European Collection Accounts; and, if an Availability Trigger Event occurs, each of the French Borrower, the Italian Borrower and the Swiss Borrower shall instruct, within 15 days (or such longer period of time as the Collateral Agent shall agree in its sole discretion) after the occurrence of such Availability Trigger Event, and thereafter continue to instruct, in each case in a manner satisfactory to the Collateral Agent, each of their respective Account Debtors to direct all payments on their respective Accounts, into their respective New European Collection Account, provided that (A) the

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Collateral Agent shall have the right to give such instructions if the applicable Security Documents so provide and (B) in any event, if any of the French Borrower, the Italian Borrower or the Swiss Borrower fail to give such instructions, each of them hereby authorizes the Collateral Agent to give such instructions on their behalf to the applicable Account Debtors;

(h) each Loan Party shall have obtained all consents and approvals required to be obtained by it in connection with the execution and delivery of all Security Documents to which it is a party, the performance of its obligations thereunder and the granting by it of the Liens thereunder;

(i) the Collateral Agent shall have received each Collateral Access Agreement and Deposit Account Control Agreement required to be provided pursuant to any Security Document; and

(j) the Security Documents shall contain provisions for the notification of Account Debtors of the security interest in their Accounts at the times and in the manner determined to be necessary or reasonably advisable by the Collateral Agent, in its Permitted Discretion, for the validity and enforceability of such security interest (it being understood that Exhibits N and P contain notification provisions satisfying this requirement, as of the date hereof).

Notwithstanding the foregoing, (A) the Loan Parties shall not be required to grant Liens on the Excluded Assets and any assets or property as to which the applicable Notes Collateral Agent (as defined in the Indenture) reasonably determines that the costs of obtaining a security interest over such assets or properties are excessive in relation to the value of the security to be afforded thereby (other than the ABL Priority Collateral (as defined in the Intercreditor Agreement)) and (B) the French Borrower and the Italian Borrower shall be required to execute and deliver the French Security Documents or the Italian Security Documents, as applicable, and to satisfy the other Collateral and Guarantee Requirements with respect to the Liens on Collateral created thereby, only at such time, if any, as the Applicable French/Italian Borrowing Base Conditions shall be satisfied with respect to the French Borrowing Base or the Italian Borrowing Base, as the case may be, provided that each of the second ranking French Securities Account Pledge Agreement and the pledge over shares of the Italian Borrower shall be executed and delivered on or prior to the Effective Date.

“Commitment” means a Canadian Commitment, a US Commitment, a UK Commitment or a European Commitment.

“Commitment Fee Rate” means, in respect of a Lender’s Commitment of any Class, a rate equal to (a) 0.75% per annum for any day on which such Lender’s Revolving Exposure of such Class is less than 33-1/3% of the amount of such Commitment and (b) 0.50% per annum for any other day.

“Consolidated Cash Interest Expense” means, for any period, the excess of (a) the sum of (i) the interest expense (including imputed interest expense in respect of

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Capital Lease Obligations) of the Parent Borrower and the Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, (ii) any interest accrued during such period in respect of Indebtedness of the Parent Borrower or any Subsidiary that is required to be capitalized rather than included in consolidated interest expense for such period in accordance with GAAP, plus (iii) any cash payments made during such period in respect of obligations referred to in clause (b)(iii) below that were amortized or accrued in a previous period, minus (b) the sum of (i) interest income of the Parent Borrower and the Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, (ii) to the extent included in such consolidated interest expense for such period, non cash amounts attributable to amortization of financing costs paid in a previous period, plus (iii) to the extent included in such consolidated interest expense for such period, non cash amounts attributable to amortization of debt discounts or accrued interest payable in kind for such period; provided for greater certainty that, for the purposes of determining Consolidated Cash Interest Expense, all dividends paid or accrued with respect to the JLL Preferred Equity shall be treated as equity dividends and not as interest expense.

“Consolidated EBITDA” means, for any period, Consolidated Net Income for such period (adjusted to exclude non-cash gains and losses attributable to currency translations) plus (a) without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of (i) consolidated interest expense for such period, (ii) consolidated income tax expense for such period, (iii) all amounts attributable to depreciation and amortization for such period, (iv) non-recurring expenses (including Repositioning Expenses) not exceeding an amount equal to 10% of Consolidated EBITDA for such period (determined after giving effect to such non-recurring expenses), (v) other non-recurring expenses not exceeding US$5,000,000 in the aggregate for all periods, (vi) any non-recurring losses attributable to the sale or disposition of assets outside of the ordinary course of business and any extraordinary charges, (vii) non-recurring costs and expenses incurred in connection with the Transactions, (viii) non-recurring charges, costs and expenses, not exceeding US$7,000,000 in the aggregate, incurred during the fiscal years ending October 31, 2010, and October 31, 2011, in respect of the closure of the PR Borrower’s Caguas manufacturing facility and consolidation of such operations with its Manati manufacturing facility, (ix) non-recurring costs and expenses not exceeding US$12,000,00 in the aggregate incurred during the fiscal years ended October 31, 2009, and October 31, 2010, in connection with the offer by JLL Partners to purchase all the outstanding Equity Interests of the Parent Borrower not already owned by JLL Partners, including non-recurring costs and expenses incurred on behalf of the special committee of the Board of Directors of the Parent Borrower, and (x) all non-cash charges (it being understood that any write-down or write-off of a current asset and any charge that represents an accrual of or reserve for a cash payment to be made in a future period shall, in each case, not constitute a non-cash charge), and minus (b) without duplication and to the extent included in determining such Consolidated Net Income, the sum of (i) any non-recurring gains attributable to the sale or disposition of assets outside the ordinary course of business and any extraordinary gains for such period, plus (ii) all non-cash gains, all determined on a consolidated basis in accordance with GAAP.

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“Consolidated Fixed Charges” means, for any period, the sum of (a) Consolidated Cash Interest Expense for such period, (b) the aggregate amount of scheduled principal payments made during such period in respect of Long-Term Indebtedness of the Parent Borrower and the Subsidiaries (other than payments made by the Parent Borrower or any Subsidiary to the Parent Borrower or a Subsidiary), (c) the aggregate amount of principal payments (other than scheduled principal payments) made during such period in respect of Long-Term Indebtedness of the Parent Borrower and the Subsidiaries, to the extent that such payments reduced any scheduled principal payments that would have become due within one year after the date of the applicable payment, (d) Capital Expenditures for such period (to the extent not financed with Qualifying CRE Indebtedness or Long-Term Indebtedness incurred pursuant to clause (v) of Section 6.01(a) and (e) the aggregate amount of Taxes paid in cash by the Parent Borrower and the Subsidiaries during such period; provided for greater certainty that, for the purposes of determining Consolidated Fixed Charges, the JLL Preferred Equity shall be treated as equity and not as Indebtedness.

“Consolidated Net Income” means, for any period, the net income or loss of the Parent Borrower and the Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income or loss of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Parent Borrower or any Subsidiary or the date that such Person’s assets are acquired by the Parent Borrower or any Subsidiary, (b) any net income of any Person (other than the Parent Borrower) if such Person is not a Subsidiary, except that the Parent Borrower’s equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Parent Borrower or a Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Subsidiary, to the limitations contained in clause (c) below); and (c) any net income of any Subsidiary that is not a Subsidiary Loan Party if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Subsidiary, directly or indirectly, to the Parent Borrower, except that (i) the Parent Borrower’s equity in the net income of any such Subsidiary for such period shall be included in such Consolidated Net Income to the extent that the net income of such Subsidiary would be permitted at the date of determination to be dividended to the Parent Borrower without any prior approval or waiver (that has not been obtained) pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules or governmental regulations applicable to that Subsidiary or its stockholders (subject, in the case of a dividend or other distribution paid to another Subsidiary, to the limitation contained in this clause (i)) and (ii) the Parent Borrower’s equity in a net loss of any such Subsidiary for such period shall be included in determining such Consolidated Net Income; provided for greater certainty that, for the purposes of determining Consolidated Net Income, all dividends paid or accrued with respect to the JLL Preferred Equity shall be treated as equity dividends and not as interest expense.

“Contract Period” means, with respect to any B/A, the period commencing on the date such B/A is issued and accepted and ending on the date 30, 60, 90 or 180 days

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thereafter, as the Parent Borrower may elect; provided that if such Contract Period would end on a day other than a Business Day, such Contract Period shall be extended to the next succeeding Business Day.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Coverage Ratio Condition” means, as of any date of determination, (a) the condition under the Senior Notes Indenture to the incurrence of Indebtedness that the Fixed Charge Coverage Ratio (as defined in the Senior Notes Indenture) on a consolidated basis for the most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date on which such Indebtedness is incurred would have been at least 2.00 to 1.00, determined on a pro forma basis as provided in the Senior Notes Indenture, and (b) the condition under the Senior Notes Indenture to the incurrence of Liens securing Senior Indebtedness (as defined in the Senior Notes Indenture) that, at the time of incurrence and after giving pro forma effect thereto, the Consolidated Secured Debt Ratio (as defined in the Senior Notes Indenture) would be no greater than 3.5 to 1.0, in the case of each of clauses (a) and (b) determined in accordance with the Senior Notes Indenture as in effect on the Effective Date, without giving effect to the termination of the Senior Notes Indenture or to any amendment, modification or waiver thereof unless approved by the Required Lenders.

“Customer Requested Equipment” has the meaning assigned to such term in Section 6.01(a).

“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“Defaulting Lender” means any Lender, as determined by the US Agent, that (a) shall have failed to fund any Loan for three or more Business Days after the date that the Borrowing of which such Loan is to be a part of is funded by any other Lenders (unless (i) such Lender and at least one other Lender shall have notified the US Agent or the Applicable Agent and the applicable Borrower in writing of its determination that a condition to its obligation to make a Loan as part of such Borrowing shall not have been satisfied and (ii) Lenders representing a majority in interest of the aggregate Commitments of the applicable Class shall not have advised the US Agent or the Applicable Agent in writing of their determination that such condition has been satisfied), (b) shall have failed to fund any portion of its participation in any LC Disbursement or Swingline Loan for three or more Business Days after the date on which such funding is to occur hereunder, (c) shall have notified the US Agent or the Applicable Agent (or shall have notified the applicable Borrower, the Swingline Lender or the Issuing Bank, which shall in turn have notified the US Agent or the Applicable Agent) in writing that it does not intend or is unable to comply with its funding obligations under this Agreement, or shall have made a public statement to the effect that it does not intend or is unable to

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comply with such funding obligations or its funding obligations generally under other credit or similar agreements to which it is a party, (d) shall have failed (but not for fewer than three Business Days) after a request by the US Agent or the Applicable Agent to confirm that it will comply with its obligations to make Loans and fund participations in LC Disbursements and Swingline Loans hereunder or (e) shall have become the subject of a bankruptcy, liquidation, administration or insolvency proceeding, or shall have had a receiver, administrator, administrative receiver, liquidator, conservator, trustee or custodian appointed for it, or shall have taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or shall have a parent company that has become the subject of a bankruptcy, liquidation, administration or insolvency proceeding, or has had a receiver, administrator, administrative receiver, liquidator, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment.

“Deposit Account Control Agreement” has the meaning assigned to such term in the US Collateral Agreement and also includes each agreement required for a similar purpose (whether or not defined as a Deposit Account Control Agreement) under any other Security Document.

“Disclosed Matters” means the actions, suits and proceedings and the environmental matters disclosed in Schedule 3.06.

“Discount Proceeds” means, with respect to any B/A, an amount (rounded upward, if necessary, to the nearest Cdn.$.01) calculated by multiplying (a) the face amount of such B/A by (b) the quotient obtained by dividing (i) one by (ii) the sum of (A) one and (B) the product of (x) the Discount Rate (expressed as a decimal) applicable to such B/A and (y) a fraction of which the numerator is the Contract Period applicable to such B/A and the denominator is 365 (or 366 in the case of B/A maturing in a leap year), with such quotient being rounded upward or downward to the fifth decimal place and .000005 being rounded upward.

“Discount Rate” means, with respect to a B/A being accepted and purchased on any day, (a) for a Canadian Lender which is a Schedule I Lender, (i) the CDOR Rate applicable to such B/A or (ii) if the discount rate for a particular Contract Period is not quoted on the Reuters Screen CDOR Page, the discount rate (expressed as a decimal and rounded upward, if necessary, to the nearest 1/100 of 1%) quoted to the Canadian Agent by the Schedule I Reference Lender as the percentage discount rate at which such bank would, in accordance with its normal practices, at approximately 10:00 a.m., Toronto time, on such day, be prepared to purchase bankers’ acceptances accepted by such bank having a face amount and term comparable to the face amount and Contract Period of such B/A, and (b) for a Canadian Lender which is not a Schedule I Lender, (i) the CDOR Rate applicable to such B/A plus 0.10% or (ii) if the discount rate for a particular Contract Period is not quoted on the Reuters Screen CDOR Page, the discount rate (expressed as a decimal and rounded upward, if necessary, to the nearest 1/100 of 1%) quoted to the Canadian Agent by the Non-Schedule I Reference Lender as the percentage discount rate at which such bank would, in accordance with its normal

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practices, at approximately 10:00 a.m., Toronto time, on such day, be prepared to purchase bankers’ acceptances accepted by such bank having a face amount and term comparable to the face amount and Contract Period of such B/A.

“Document” has the meaning assigned to such term in the US Collateral Agreement.

“ECF Amount” means, at any time, an amount equal to 50% of Excess Cash Flow for each fiscal year ended on or after October 31, 2010, and prior to the date of determination; provided that the ECF Amount shall not be increased in respect of Excess Cash Flow for any fiscal year until the financial statements for such fiscal year have been delivered pursuant to Section 5.01(a). It is understood that, if any Restricted Payment, investment or other action is made or taken hereunder in reliance on the ECF Amount, then, to the extent thereof, the ECF Amount shall be considered used and reduced and may not be used for any other Restricted Payment, investment or other action.

“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).

“Eligible Accounts” means, at any time, the Accounts of the relevant Borrower Group, provided that Eligible Accounts shall not include any Account:

(a) which is not subject to a first priority (subject to Liens securing Priority Obligations) perfected security interest in favor of the Collateral Agent;

(b) which is subject to any Lien other than (i) a Lien in favor of the Collateral Agent, (ii) a Permitted Encumbrance which does not have priority over the Lien in favor of the Collateral Agent and (iii) Liens securing Priority Obligations;

(c) which is unpaid more than 90 days after the date of the original invoice therefor or more than 60 days after the original due date, or which has been written off the books of the Parent Borrower (or applicable Subsidiary) or otherwise designated as uncollectible;

(d) which is owing by an Account Debtor for which more than 50% of the Accounts owing from such Account Debtor and its Affiliates are ineligible pursuant to clause (c) above (it being understood that the US Agent may approve exceptions to this clause in its Permitted Discretion based on Account Debtor credit quality and ratings);

(e) which is owing by an Account Debtor to the extent the aggregate amount of Accounts owing from such Account Debtor and its Affiliates to any and all members of the Borrower Groups exceeds 30% (in the case of Account Debtors or their parent companies rated not less than A- by S&P or A3 by Moody’s), to the extent the aggregate amount of Accounts owing from such Account Debtor and its Affiliates to any and all members of the Borrower Groups

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exceeds 20% (in the case of Account Debtors or their parent companies rated BBB- (with stable outlook) or better by S&P and Baa3 (with stable outlook) or better by Moody’s) or 10% (in the case of all other Account Debtors) of the aggregate amount of Eligible Accounts of all members of the Borrower Groups; provided that for greater clarity only the amount in excess of such 30%, 20% or 10% amount shall be so excluded;

(f) with respect to which any covenant, representation, or warranty contained in any Loan Document has been breached or is not true;

(g) which (i) does not arise from the sale of goods or performance of services in the ordinary course of business, (ii) is not evidenced by an invoice, or other documentation satisfactory to the US Agent which has been sent to the Account Debtor, (iii) represents a progress billing other than a milestone payment allowable under clause (q), (iv) is contingent upon a Loan Party’s completion of any further performance, (v) represents a sale on a bill-and-hold basis (unless, in the case of the Accounts of the French Borrower, the Italian Borrower or the Swiss Borrower, the European Agent in its Permitted Discretion is satisfied that (x) title has been transferred to the Account Debtor, (y) certain arrangements, such as the segregation of inventory, have been put in place and (z) any appropriate Reserves have been established so that such Accounts can be considered Eligible Accounts), or a guaranteed sale, sale-and-return, sale on approval, consignment, cash-on-delivery or any other repurchase or return basis or (vi) relates to payments of interest;

(h) for which the goods giving rise to such Account have not been shipped, in accordance with the agreed shipping terms, to the Account Debtor or for which the services giving rise to such Account have not been performed by a member of the applicable Borrower Group or if such Account was invoiced more than once;

(i) with respect to which, to the knowledge of any Borrower, any check or other instrument of payment has been returned uncollected for any reason;

(j) which is owed by an Account Debtor which has (i) applied for, suffered, or consented to the appointment of any receiver, administrator, administrative receiver, custodian, trustee, liquidator or similar official for it of its assets, (ii) has had possession of all or a material part of its property taken by any receiver, administrator, administrative receiver, custodian, trustee, liquidator or other similar official, (iii) filed, or had filed against it, any request, petition, proposal or plan for liquidation, reorganization, arrangement, adjustment of debts, adjudication as bankruptcy, winding-up, a moratorium or voluntary or involuntary case under any applicable bankruptcy or insolvency laws (other than post-petition accounts payable of an Account Debtor that is debtor-in-possession under the United States Bankruptcy Code and reasonably acceptable to the US Agent), (iv) has admitted in writing its inability, or is generally unable to, pay its

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debts as they become due, (v) become insolvent, or (vi) ceased operation of its business;

(k) which is owed by any Account Debtor which, to the knowledge of any Borrower, has sold all or substantially all of its assets;

(l) except for an Account Debtor identified on Schedule 1.01(a), as updated from time to time by the Administrative Agent in its Permitted Discretion, which is owed by an Account Debtor which (i) does not maintain its chief executive office in Canada, Puerto Rico, the United Kingdom or the United States or, solely for purposes of the Borrowing Base relating to the Borrower organized in such jurisdiction, France, Italy or Switzerland (or an Account Debtor approved by the US Agent in any other jurisdiction) or (ii) is not organized under applicable law of Canada, Puerto Rico, the United Kingdom or the United States or, solely for purposes of the Borrowing Base relating to the Borrower organized in such jurisdiction, France, Italy or Switzerland (or an Account Debtor approved by the US Agent in any other jurisdiction approved by the US Agent) unless, in either case, (A) such Account is backed by a letter of credit acceptable to the US Agent, in its Permitted Discretion, which is in the possession of, has been assigned to and is directly drawable by the Collateral Agent, (B) such Account is unconditionally Guaranteed in writing by an Affiliate of the Account Debtor that satisfies the requirements of clause (i) or (ii) above and such Affiliate and its Guarantee would not be disqualified under any other clause of this definition if treated as an Account Debtor and an Account, respectively or (C) solely for purposes of the UK Borrowing Base, the French Borrowing Base, the Italian Borrowing Base and the Swiss Borrowing Base, such Account Debtor is located in the European Union (as constituted) pre May 2004 (including Norway and Switzerland), respectively;

(m) which is owed in any currency other than Canadian Dollars, Euros, Sterling, Swiss Francs or US Dollars;

(n) which is owed by (i) the government (or any department, agency, public corporation, or instrumentality thereof) of any country other than the United States or Canada unless such Account is backed by a letter of credit acceptable to the US Agent which is in the possession of the Collateral Agent, or (ii) the government of the United States or Canada, or any department, agency, public corporation, or instrumentality thereof, unless the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. § 3727 et seq. and 41 U.S.C. § 15 et seq.), the Financial Administration Act (Canada) or similar provincial or territorial legislation, and any other steps necessary to perfect the Lien of the Collateral Agent in such Account have been complied with to the US Agent’s satisfaction in its Permitted Discretion;

(o) which is owed by any Affiliate, employee, officer, director or agent of any Loan Party;

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(p) which, for any Account Debtor, exceeds a credit limit determined by the US Agent in its Permitted Discretion, to the extent of such excess; provided that any such determination shall not be effective until three Business Days after notice of such determination from the US Agent to the Parent Borrower;

(q) which is owed by an Account Debtor or any Affiliate of such Account Debtor to which any Loan Party is indebted, but only to the extent of such indebtedness or is subject to any security, deposit, progress payment (which for certainty shall not include milestone payments related to PDS services performed and billed), retainage or other similar advance made by or for the benefit of an Account Debtor, in each case to the extent thereof;

(r) which is subject to any counterclaim, deduction, defense, setoff or dispute but only to the extent of any such counterclaim, deduction, defense, setoff or dispute;

(s) which is evidenced by any promissory note, chattel paper, bill of exchange, or other instrument;

(t) with respect to which any Loan Party has made any agreement with the Account Debtor for any reduction thereof, other than discounts and adjustments given in the ordinary course of business, or any Account which was partially paid and any Loan Party created a new receivable for the unpaid portion of such Account;

(u) which does not comply in all material respects with the requirements of all applicable laws and regulations;

(v) which is for goods that have been sold under a purchase order or pursuant to the terms of a contract or other agreement or understanding (written or oral) that indicates or purports that any Person other than a member of the applicable Borrower Group has or has had an ownership interest in such goods (except with respect to such interest arising from and limited to active ingredients or other components provided by the applicable Borrower Group’s client for processing into finished products), or which indicates any party other than a member of the applicable Borrower Group as payee or remittance party;

(w) which arose from a Permitted Acquisition, unless the US Agent has completed the field exam and appraisal work in its Permitted Discretion and has approved the relevant Accounts for inclusion in the respective Borrower’s Borrowing Base calculation;

(x) which are Accounts of the French Borrower or the Italian Borrower for which the Account Debtor does not have a long-term debt rating of at least BBB- by S&P or the equivalent by Moody’s, except as otherwise approved by the European Agent in its Permitted Discretion (it being understood that the European Agent has so approved the Bracco Group and that any such approval may be withdrawn in the European Agent’s Permitted Discretion); or

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(y) which the US Agent determines, in its Permitted Discretion, may not be paid by reason of the Account Debtor’s inability to pay or which the US Agent otherwise determines, in its Permitted Discretion, is unacceptable for any reason whatsoever; provided that any such determination shall not be effective until three Business Days after notice of such determination from the US Agent to the Parent Borrower.

In determining the amount of an Eligible Account, the face amount of an Account may, in the US Agent’s Permitted Discretion, be reduced by, without duplication, to the extent not reflected in such face amount, (i) the amount of all accrued and actual discounts, claims, credits or credits pending, promotional program allowances, price adjustments, finance charges or other allowances (including any amount that any Loan Party may be obligated to rebate to an Account Debtor pursuant to the terms of any agreement or understanding (written or oral)), (ii) the aggregate amount of all cash received in respect of such Account but not yet applied by the applicable Loan Party to reduce the amount of such Account and (iii) the amount of all goods and services taxes, harmonized taxes and sales taxes.

“Eligible Inventory” means, at any time, the Inventory of the relevant Borrower Group, provided that Eligible Inventory shall not include any Inventory:

(a) which is not subject to a first priority (subject to Liens securing Priority Obligations) perfected Lien in favor of the Collateral Agent;

(b) which is subject to any Lien other than (i) a Lien in favor of the Collateral Agent, (ii) a Permitted Encumbrance which does not have priority over the Lien in favor of the Collateral Agent and (iii) Liens securing Priority Obligations;

(c) which is, as determined by the US Agent in its Permitted Discretion, slow moving, obsolete, unmerchantable, defective, used, unfit for sale, not salable at prices approximating at least the cost of such Inventory in the ordinary course of business or unacceptable due to age, type, category and/or quantity;

(d) with respect to which any covenant, representation, or warranty contained in any Loan Document has been breached or is not true and which does not conform to all standards imposed by any Governmental Authority;

(e) in which any Person other than a member of the applicable Borrower Group shall (i) have any direct or indirect ownership, interest or title to such Inventory, except with respect to such interest arising from and limited to active ingredients or other components provided by the applicable Borrower Group’s client for processing into finished products or (ii) be indicated on any purchase order or invoice with respect to such Inventory as having or purporting to have an interest therein;

(f) which constitutes spare or replacement parts, subassemblies, manufacturing supplies, samples, prototypes, displays or display items, bill-and-

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hold goods, goods that are returned or marked for return, repossessed goods, defective or damaged goods, goods held on consignment, or goods which are not of a type held for sale in the ordinary course of business;

(g) which is not located in Canada, Puerto Rico, the United Kingdom or the United States (or any other jurisdiction approved by the US Agent) or is in transit from vendors and suppliers;

(h) which is located in any location leased by the Parent Borrower or any Subsidiary unless (i) the lessor has delivered to the Applicable Agent a Collateral Access Agreement, (ii) the lessor (and owner of the location) is the Parent Borrower or a Subsidiary Loan Party or (iii) a Reserve for rent, charges, and other amounts due or to become due with respect to such facility has been established by the US Agent in its Permitted Discretion (provided that any such Reserve shall be reversed upon the delivery of a Collateral Access Agreement from the relevant lessor);

(i) which is located in any third party warehouse or is in the possession of a bailee (other than a third party processor) and is not evidenced by a Document unless (i) such warehouseman or bailee has delivered to the Applicable Agent a Collateral Access Agreement and such other documentation as the Applicable Agent may require or (ii) an appropriate Reserve has been established by the US Agent in its Permitted Discretion (provided that any such Reserve shall be reversed upon the delivery of the Collateral Access Agreement from the relevant warehouseman or bailee);

(j) which is being processed offsite at a third party location or outside processor, or is in-transit to or from said third party location or outside processor;

(k) which is a discontinued product or component thereof;

(l) which is the subject of a consignment by any Loan Party as consignor;

(m) which (i) contains or bears any intellectual property rights licensed to the Parent Borrower or any Subsidiary unless the US Agent is satisfied, in its Permitted Discretion, that the Applicable Agent may sell or otherwise dispose of such Inventory without infringing the rights of such licensor, violating any contract with such licensor, or incurring any liability with respect to payment of royalties other than royalties incurred pursuant to sale of such Inventory under the current licensing agreement or (ii) which contains or bears any intellectual property rights licensed to a third party unless the US Agent is satisfied that the Applicable Agent may sell or otherwise dispose of such Inventory to the Licensor who owns the intellectual property rights thereto; provided that, in the case of Inventory manufactured for a particular customer containing or bearing intellectual property rights licensed from such customer or its Affiliates, this clause shall not apply to such intellectual property rights and Inventory if the US Agent is satisfied, in its Permitted Discretion, that the Applicable Agent may sell

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or otherwise dispose of such Inventory to such customer or its Affiliates in compliance with this clause;

(n) which is not reflected in a current perpetual inventory report of the members of the applicable Borrower Group;

(o) for which reclamation rights have been asserted by the seller;

(p) which arose from a Permitted Acquisition, unless the US Agent has completed the field exam and appraisal work in its Permitted Discretion and has approved the collateral for inclusion in the respective Borrower’s Borrowing Base calculation;

(q) which is subject to repossession on account of the “30 day goods” rule under Section 81.1 of the Bankruptcy and Insolvency Act (Canada);

(r) (i) for which any contract relating to such Inventory expressly includes retention of title in favor of the vendor or supplier thereof or (ii) for which any contract relating to such Inventory does not address retention of title and the relevant Loan Party has not represented to the US Agent that there is no retention of title in favor of the vendor or supplier thereof; or

(s) which the US Agent determines, in its Permitted Discretion, is unacceptable for any reason whatsoever; provided that any such determination shall not be effective until three Business Days after written notice of such determination from the US Agent to the Parent Borrower.

In the event that Inventory which was previously Eligible Inventory ceases to be Eligible Inventory hereunder, the Parent Borrower shall notify the US Agent thereof on and at the time of submission to the US Agent of the next Borrowing Base Certificate.

“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to occupational health and safety matters.

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials anywhere in the indoor or outdoor environment or workplace, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

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“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Parent Borrower (or any of its Subsidiaries organized in any jurisdiction in the United States), is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30 day notice period is waived); (b) a failure by any Plan to satisfy the minimum funding standards (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) a determination that any Plan is, or is expected to be, in “at risk” status (as defined in Section 430(i)(4) of the Code or Section 303(i)(4) of ERISA; (e) the incurrence by the Parent Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (f) the receipt by the Parent Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (g) the incurrence by the Parent Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (h) the receipt by the Parent Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Parent Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA, or in “endangered” or “critical” status, within the meaning of Section 432 of the Code or Section 305 of ERISA.

“Establishment” means any place of operations where any Loan Party organized under the laws of the United Kingdom, Netherlands, Switzerland, Italy or France carries out non-transitory economic activity with human means and goods or services.

“Eurocurrency”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

“European Agent” means J.P. Morgan Europe Limited, as European administrative agent and collateral agent for the Lenders hereunder.

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“European Commitment” means, with respect to each Lender, the commitment of such Lender to make European Revolving Loans hereunder, and to acquire participations in European Letters of Credit and European Swingline Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s European Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09, (b) increased from time to time pursuant to Section 2.20 and (c) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s European Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption pursuant to which such Lender shall have assumed its European Commitment, as applicable. The initial aggregate amount of the European Commitments is US$10,000,000.

“European LC Exposure” means, at any time, the LC Exposure in respect of European Letters of Credit (and LC Disbursements thereunder) at such time. The European LC Exposure of any European Lender at any time shall be its Applicable Percentage of the total European LC Exposure at such time.

“European Lender” means a Lender with a European Commitment or European Revolving Exposure. Each Lender making Loans to the French Borrower must be a French Qualifying Lender, each Lender making Loans to the Italian Borrower must be an Italian Qualifying Lender and each Lender making Loans to the Swiss Borrower must be a Qualifying Bank (or, in each case, must make its Loans through a branch or an affiliate that is a French Qualifying Lender (provided that the Lender of record is such branch or affiliate), an Italian Qualifying Lender or a Qualifying Bank, as applicable).

“European Letter of Credit” means an Italian Letter of Credit or a Swiss Letter of Credit.

“European Revolving Exposure” means, with respect to any Lender at any time, the total amount of such Lender’s French Revolving Exposure, Italian Revolving Exposure and Swiss Revolving Exposure at such time.

“European Revolving Loan” means a French Revolving Loan, an Italian Revolving Loan or a Swiss Revolving Loan.

“European Swingline Exposure” means, at any time, the French Swingline Exposure, Italian Swingline Exposure and Swiss Swingline Exposure at such time. The European Swingline Exposure of any European Lender at any time shall be its Applicable Percentage of the total European Swingline Exposure at such time.

“European Swingline Loan” means a French Swingline Loan, an Italian Swingline Loan or a Swiss Swingline Loan.

“Euros” or “€” refers to the single currency of the Participating Member States.

“Event of Default” has the meaning assigned to such term in Section 7.01.

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“Excess Cash Flow” means, for any fiscal year, the sum (without duplication) of:

(a) the consolidated net income (or loss) of the Parent Borrower and its consolidated Subsidiaries for such fiscal year, adjusted to exclude any gains or losses attributable to the sale or disposition of assets outside the ordinary course of business; plus

(b) depreciation, amortization and other non cash charges or losses deducted in determining such consolidated net income (or loss) for such fiscal year; plus

(c) the sum of (i) the amount, if any, by which Net Working Capital decreased during such fiscal year plus (ii) the net amount, if any, by which the consolidated deferred revenues of the Parent Borrower and its consolidated Subsidiaries increased during such fiscal year; minus

(d) the sum of (i) any non-cash gains included in determining such consolidated net income (or loss) for such fiscal year plus (ii) the amount, if any, by which Net Working Capital increased during such fiscal year plus (iii) the net amount, if any, by which the consolidated deferred revenues of the Parent Borrower and its consolidated Subsidiaries decreased during such fiscal year; minus

(e) Capital Expenditures for such fiscal year, except to the extent attributable to (i) the incurrence of Capital Lease Obligations or otherwise financed by incurring Qualifying CRE Indebtedness or Long-Term Indebtedness or (ii) the reinvestment of Net Proceeds received in respect of any sale or disposition of assets outside of the ordinary course of business or any issuance by the Parent Borrower of Equity Interests; minus

(f) the aggregate principal amount of Long-Term Indebtedness repaid or prepaid by the Parent Borrower and its consolidated Subsidiaries during such fiscal year, excluding (i) Indebtedness in respect of Revolving Loans, Swingline Loans, B/As and LC Exposure, (ii) redemptions or repayments of Indebtedness (including Senior Notes or Notes Refinancing Indebtedness) pursuant to any mandatory redemption or repayment or mandatory offer to redeem or repay such Indebtedness attributable to a sale, transfer or disposition of assets, and (iii) repayments or prepayments of Long-Term Indebtedness financed by incurring other Long-Term Indebtedness.

“Exchange Rate” means on any day, with respect to any currency other than US Dollars, the rate at which such currency other than US Dollars may be exchanged into US Dollars, as set forth at approximately 11:00 a.m., London time, on such day on the Bloomberg Market Data Currencies Page for such currency other than US Dollars. In the event that such rate does not appear on any Bloomberg Market Data Currencies Page, the Exchange Rate shall be determined by reference to such other

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publicly available service for displaying exchange rates as may be agreed upon by the US Agent and the Parent Borrower, or, in the absence of such agreement, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the US Agent in the market where its foreign currency exchange operations in respect of such currency other than US Dollars are then being conducted, at or about 10:00 a.m., local time, on such date for the purchase of US Dollars for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the US Agent, after consultation with the Parent Borrower, may use any reasonable method it deems appropriate to determine such rate, and such determination shall be conclusive absent manifest error.

“Excluded Assets” means, collectively, (a) any asset or property of any Loan Party organized in France or Italy, other than (i) any Equity Interest in any Subsidiary of such Loan Party owned by such Loan Party and (ii) any asset or property required to be subjected to Liens in order to satisfy the Applicable French/Italian Borrowing Base Conditions when and if satisfied; (b) any asset or property of any Loan Party organized in Switzerland, other than (i) any Equity Interest in any Subsidiary of such Loan Party owned by such Loan Party and (ii) any accounts receivable, deposit accounts of such Loan Party; (c) any fee interest in real property if the fair market value of such property is less than US$2,500,000; (d) any leasehold interest in real property, other than (i) the leasehold interest of Patheon UK Limited in the real property located in Swindon, England that is leased by Patheon UK Limited on the Effective Date and (ii) any leasehold interest arising under a lease under which annual rent payments exceed US$500,000; (e) any license, contract or agreement to which a Loan Party is a party and all of such Loan Party’s rights or interests thereunder to the extent and for so long as the grant of a security interest in such license, contract or agreement or such right or interest shall (i) constitute or result in (A) the unenforceability of any right of such Loan Party therein or (B) a breach or termination pursuant to the terms of, or a default under, any such license, contract or agreement or (ii) require any consent under the terms of such license, contract or agreement that has not been obtained (after commercially reasonable efforts to obtain such consent with respect to any license acquired or any contract or agreement entered into after the Effective Date) (in the case of each of clauses (i) and (ii), other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the New York Uniform Commercial Code or any other applicable law or principles of equity); provided, that such license, contract or agreement and such Loan Party’s rights and interests therein shall cease to be “Excluded Assets” at such time as the condition causing the consequences specified in clauses (i) and (ii) shall be remedied and, to the extent severable, any portion of such license, contract or agreement that does not result in any of the consequences specified in (i) or (ii) including, without limitation, any proceeds of such license, contract or agreement, shall not be an “Excluded Asset”; (f) any property or asset only to the extent and for so long as the grant of a security interest in such property or asset is prohibited by any applicable law or requires a consent not obtained (after commercially reasonable efforts by the applicable Loan Party to obtain such consent if such consent either (i) is not required on the Effective Date or (ii) relates to any property or asset acquired after the Effective Date) of any governmental authority pursuant to applicable law; (g) Equity Interests of a Person that constitutes a Subsidiary (other than a wholly owned Subsidiary)

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the pledge of which would violate a contractual obligation to the owners of the other Equity Interests of such Person (other than any such owners that are Affiliates of the Parent Borrower or JLL Partners, Inc.) that is binding on or relating to such Equity Interests; (h) any equipment or real property (and proceeds thereof) of any Loan Party that is subject to a Lien permitted under Section 6.02(e) to the extent the documents relating to such Lien would not permit such equipment or real property (and proceeds thereof) to be subject to the Liens created under the Security Documents; provided, that immediately upon the ineffectiveness, lapse or termination of any such restriction, such equipment or real property shall cease to be an “Excluded Asset”; (i) any asset or property acquired by any Loan Party after the Effective Date that is subject to Liens permitted by Section 6.02(d) so long as the documents governing such Liens do not permit any other Liens on such asset or property; provided, that immediately upon the ineffectiveness, lapse or termination of any such restriction, such asset or property shall cease to be an “Excluded Asset”; (j) the Equity Interests in Patheon UK Pension Trustees Limited; (k) any Equity Interests owned by any Loan Party in any Subsidiary organized in Japan or India that is not a Subsidiary Loan Party; (l) any deposit accounts used exclusively for payroll purposes; (m) any deposit accounts of the Subsidiary organized in the Netherlands until such time as the deposit accounts of such Subsidiary contain more than US$100,000 in the aggregate; (n) any rights of any Loan Party under any letter of credit issued in its favor, except for (i) any letter of credit received outside the ordinary course of business or that exceeds US$1,000,000 or (ii) any letter of credit upon which a Lien is granted to satisfy applicable eligibility criteria in the definition of Eligible Accounts; and (o) any commercial tort claim, except for any commercial tort claim reasonably estimated to exceed US$5,000,000; provided, that “Excluded Assets” will not include any proceeds, substitutions or replacements of any assets or property referred to in clauses (a) through (o) above unless such proceeds, substitutions or replacements would themselves constitute “Excluded Assets”.

“Excluded Taxes” means, with respect to any Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of a Borrower hereunder, (a) income, capital or franchise Taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits Taxes imposed by the United States of America or any similar Tax imposed by any other jurisdiction in which such recipient is located, (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by a Borrower under Section 2.19(b), any withholding Tax (or other similar Tax) that is imposed or payable on or in respect of amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement including by way of assignment (or designates a new lending office) (other than any withholding Tax attributable to the operation of the CAM), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from a Borrower with respect to such withholding Tax pursuant to Section 2.17(a); provided that, for purposes of clause (c) above, a Lender shall be deemed not to be a Foreign Lender with respect to any payments to be made to it that are attributable to any Commitment or other interests assigned to it if, at the time such

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assignment was made to it, an Event of Default had occurred and was continuing, (d) withholding Taxes that are attributable to a Foreign Lender’s failure to comply with Section 2.17(f) and (e) any U.S. Federal withholding Taxes imposed by FATCA.

“Existing Credit Agreement” has the meaning assigned to such term in the preamble of this Agreement.

“FATCA” means Sections 1471 through 1474 of the Code and any regulations or official interpretations thereof.

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the US Agent from three Federal funds brokers of recognized standing selected by it.

“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Parent Borrower.

“Foreign Currency Letter of Credit” means a Letter of Credit issued for the account of a Borrower denominated in a currency other than a currency permitted for Revolving Loans to such Borrower as provided in Section 2.01.

“Foreign Lender” means, with respect to any Borrower, any Lender that is organized under the laws of a jurisdiction other than that in which such Borrower is located. For purposes of this definition, (a) the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction and (b) with respect to the Parent Borrower, a Lender shall not be a Foreign Lender if such Lender is Canadian Resident.

“French Borrower” means Patheon France S.A.S., a company incorporated under the laws of France as a société par actions simplifiée, whose registered office is at 40, boulevard de Champaret, 38300 Bourgoin-Jallieu, France, registered with the Trade and Companies Registry (Registre du Commerce et des Sociétés) of Vienne under number 407 634 542 RCS Vienne.

“French Borrowing Base” means, at any time, an amount (expressed in US Dollars, based on Exchange Rates prevailing at the time the applicable Borrowing Base Certificate is prepared, where applicable) equal to (a) 85% of Eligible Accounts of the French Borrower at such time, minus (b) all Reserves in effect at such time in respect of such Borrowing Base minus (c) Priority Obligations. The French Borrowing Base at any time shall be determined by reference to the most recent Borrowing Base Certificate delivered to the US Agent pursuant to this Agreement, but giving effect to any Reserves in effect at such time that were established after preparation of such Borrowing Base Certificate. Notwithstanding the foregoing or any other provision of this Agreement, the

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French Borrowing Base shall be deemed to be US$0.00 unless and until the Applicable French/Italian Borrowing Base Conditions have been satisfied.

“French Qualifying Lender” means any credit institution (établissment de credit) licensed to carry out credit transactions (operations de credit) in France (either pursuant to a license granted by the French banking authorities or, provided that the relevant formalities have been duly complied with, pursuant to the provisions of Directive 2006/48/EC of the European Parliament and Council of June 2006 relating to the taking up and pursuit of the business of credit institutions).

“French Revolving Exposure” means, with respect to any European Lender at any time, the sum of (a) the US Dollar Equivalent of the aggregate principal amount of such Lender’s French Revolving Loans outstanding at such time and (b) such Lender’s French Swingline Exposure at such time.

“French Revolving Loan” means a Loan made to the French Borrower pursuant to Section 2.01(d).

“French Securities Account Pledge Agreements” means (i) the second ranking French Securities Account Pledge Agreement relating to the shares of the French Borrower between Patheon Holdings SAS and the Collateral Agent and (ii) the second ranking French Securities Account Pledge Agreement relating to the shares of Patheon Holdings SAS between Patheon BV and the Collateral Agent, each in form and substance satisfactory to the Collateral Agent.

“French Security Documents” means (i) the French Securities Account Pledge Agreements, (ii) the French Master Receivables Assignment Agreement (including the assignment schedules relating thereto) substantially in the form of Exhibit O and (iii) the first ranking French Bank Account Pledge Agreement substantially in the form of Exhibit P.

“French Swingline Exposure” means, at any time, the US Dollar Equivalent of the aggregate principal amount of all French Swingline Loans outstanding at such time. The French Swingline Exposure of any European Lender at any time shall be its Applicable Percentage of the total French Swingline Exposure at such time.

“French Swingline Loan” means a Swingline Loan made to the French Borrower.

“GAAP” means, initially, Canadian GAAP ; provided that from and after the effectiveness of any change in the accounting principles used for financial reporting by the Parent Borrower in accordance with Section 1.04(b) until the effective time of any subsequent change in such accounting principles in accordance with Section 1.04(b), “GAAP” will mean the accounting principles used for financial reporting by the Parent Borrower at the effective time of such change, subject to Section 1.04(a).

“Governmental Authority” means the government of Canada, the United States of America, the United Kingdom, Puerto Rico, France, Italy, Switzerland, any

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other nation or any political subdivision thereof, whether state, provincial, territorial or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.

“Guarantor” has the meaning assigned to such term in the Guarantor Agreement.

“Guarantor Agreement” means the Revolving Guarantor Agreement among the Loan Parties and Agents, substantially in the form of Exhibit D.

“Guidelines” means, together, the guideline “Interbank Loans” of 22 September 1986 CS-2.123) (Merkblatt “Verrechnungssteuer auf Zinsen von Bankguthaben, deren Glaubiger Banken sind Onterbankguthaben)” vom 22. September 1986); the guideline “Syndicated Loans” of January 2000 CS-02.128) (Merkblatt “Steuerliche Behandlung von Konsortialdarlehen, Schuldscheindarlehen, Wechseln und Unterbeteiligungen” vom Januar 2000); the guideline “Bonds” of April 1999 CS-02.122.1) (Merkblatt “Obligationen” vom April 1999); the guideline “Client Credit Balances” of April 1999 CS-02.122.2) (Merkblatt Kundenguthaben vom April 1999); and the circular letter No. 15 (l-015-DVS-2007) of 7 February 2007 in relation to bonds and derivative financial instruments as subject matter of Swiss federal income tax, Swiss federal withholding tax and Swiss federal stamp taxes (Kreisschreiben Nr. 15 “Obligationen und derivative Finanzinstrumente als Gegenstand der direkten Bundessteuer, der Verrechnungssteuer und der Stempelabgaben” vom 7. February 2007), each as issued, and as amended from time to time, by the Swiss federal tax administration.

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

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“IFRS” means International Financial Reporting Standards issued by the International Accounting Standards Board, applied in accordance with the consistency requirements thereof.

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all 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 Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. For greater certainty, notwithstanding any other provision of this Agreement or any other Loan Document, the JLL Preferred Equity shall not constitute or be treated as Indebtedness.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Information Memorandum” means the Confidential Information Memorandum dated March 2, 2010 relating to the Borrowers and the Transactions.

“Intercreditor Agreement” means an intercreditor agreement, substantially in the form of Exhibit E, among the Loan Parties, the Collateral Agent and the collateral agent on behalf of the holders of the Senior Notes.

“Interest Election Request” means a request by a Borrower to convert or continue a Revolving Borrowing or a B/A Drawing in accordance with Section 2.08.

“Interest Payment Date” means (a) with respect to any ABR Loan, Canadian Prime Rate Loan, UK Base Rate Loan or Sterling/Euro Alternate Rate Loan (in each case, other than a Swingline Loan), the last day of each March, June, September and December, (b) with respect to any Eurocurrency Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three

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months’ duration after the first day of such Interest Period, and (c) with respect to any Swingline Loan, the day that such Loan is required to be repaid.

“Interest Period” means, with respect to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the applicable Borrower may elect; provided that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Eurocurrency Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

“Inventory” has the meaning assigned to such term in the applicable Security Documents.

“Issuing Bank” means (a) with respect to Letters of Credit issued for the account of the US Borrower or the PR Borrower, JPMorgan Chase Bank, N.A., in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i), (b) with respect to Letters of Credit issued for the account of the Parent Borrower, JPMorgan Chase Bank, N.A. Toronto Branch, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i), (c) with respect to the Letters of Credit issued for the account of the UK Borrower, J.P. Morgan Europe Limited, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i), (d) with respect to the Letters of Credit issued for the account of the Swiss Borrower, J.P. Morgan Europe Limited, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i), (e) with respect to the Letters of Credit issued for the account of the Italian Borrower, JPMorgan Chase Bank, N.A., Milan Branch, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i) and (f) any other Lender (or Affiliate of a Lender) that agrees to act as an Issuing Bank and is approved by the Parent Borrower and the US Agent. An Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

“Italian Borrower” means Patheon Italia S.p.A., an Italian company limited by shares existing under the laws of Italy, with registered offices at Monza (MB), viale G. B. Stucchi 110, Fiscal Code 01924610346.

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“Italian Borrowing Base” means, at any time, an amount (expressed in US Dollars, based on Exchange Rates prevailing at the time the applicable Borrowing Base Certificate is prepared, where applicable) equal to (a) 85% of Eligible Accounts of the Italian Borrower at such time, minus (b) all Reserves in effect at such time in respect of such Borrowing Base minus (c) Priority Obligations. The Italian Borrowing Base at any time shall be determined by reference to the most recent Borrowing Base Certificate delivered to the US Agent pursuant to this Agreement, but giving effect to any Reserves in effect at such time that were established after preparation of such Borrowing Base Certificate. Notwithstanding the foregoing or any other provision of this Agreement, the Italian Borrowing Base shall be deemed to be US$0.00 unless and until the Applicable French/Italian Borrowing Base Conditions have been satisfied.

“Italian LC Exposure” means, at any time, the LC Exposure in respect of Italian Letters of Credit (and LC Disbursements thereunder) at such time. The Italian LC Exposure of any European Lender at any time shall be its Applicable Percentage of the total Italian LC Exposure at such time.

“Italian Letter of Credit” means a Letter of Credit issued for the account of the Italian Borrower.

“Italian Qualifying Lender” means a Lender that is:

(i) a bank or other financial institution authorized to carry out banking activity in Italy that is a resident of Italy for Italian tax purposes and not acting for the purposes of a Loan to the Italian Borrower through a permanent establishment (stabile organizzazione) located outside of the Republic of Italy; or

(ii) a permanent establishment (stabile organizzazione) in Italy of a bank or another financial institution authorized to carry out banking activity in Italy for which any payment under a Loan to the Italian Borrower is business income (reddito d’impresa) pursuant to articles 81 and 152 of Italian Presidential Decree No. 917 of 22 December 1986; or

(iii) a bank or other financial institution authorized to carry out banking activity in Italy and entitled under the provisions of a double taxation treaty with the Republic of Italy to receive payments of interest from a Person who is a resident in Italy without a withholding Tax.

“Italian Revolving Exposure” means, with respect to any European Lender at any time, the sum of (a) the US Dollar Equivalent of the aggregate principal amount of such Lender’s Italian Revolving Loans outstanding at such time and (b) such Lender’s Italian LC Exposure and Italian Swingline Exposure at such time.

“Italian Revolving Loan” means a Loan made to the Italian Borrower pursuant to Section 2.01(d).

“Italian Security Documents” means the assignment of receivables governed by Italian law substantially in the form of Exhibit Q, the pledge over bank

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accounts of the Italian Borrower substantially in the form of Exhibit R and the pledge over shares of the Italian Borrower in form and substance satisfactory the Collateral Agent.

“Italian Swingline Exposure” means, at any time, the US Dollar Equivalent of the aggregate principal amount of all Italian Swingline Loans outstanding at such time. The Italian Swingline Exposure of any European Lender at any time shall be its Applicable Percentage of the total Italian Swingline Exposure at such time.

“Italian Swingline Loan” means a Swingline Loan made to the Italian Borrower.

“JLL Equity Financing” means the issuance by the Parent Borrower to JLL Partners of the JLL Preferred Equity on April 27, 2007.

“JLL Partners” means JLL Partners Fund V, L.P., a Delaware limited partnership, and any Affiliate thereof (including JLL Patheon Holdings LLC, a Delaware limited liability company), to which JLL Partners Fund V, L.P. assigns all or a portion of its rights under the purchase agreement dated March 1, 2007 between Parent Borrower and JLL Partners Fund V, L.P., as amended.

“JLL Preferred Equity” means the Class I, Series C, convertible preferred shares and Class I, Series D, special voting preferred shares of the Parent Borrower issued and sold by the Parent Borrower to JLL Partners pursuant to the JLL Equity Financing, including any additional Class I, Series C, convertible preferred shares and/or Class I, Series D, special voting preferred shares of the Parent Borrower issued to JLL Partners as payment in kind dividends on such convertible preferred shares, and including securities issuable to JLL Partners upon conversion of such convertible preferred shares.

“LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter of Credit.

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all Letters of Credit denominated in US Dollars outstanding at such time plus (b) the aggregate amount of all LC Disbursements denominated in US Dollars outstanding that have not yet been reimbursed by or on behalf of a Borrower at such time plus (c) the US Dollar Equivalent of the aggregate undrawn amount of all Letters of Credit denominated in currencies other than US Dollars outstanding at such time plus (d) the US Dollar Equivalent of the aggregate amount of all LC Disbursements denominated in currencies other than US Dollars that have not yet been reimbursed by or on behalf of a Borrower at such time.

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. Unless the context otherwise requires, the term “Lenders” includes the Swingline Lender.

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“Letter of Credit” means any letter of credit issued pursuant to this Agreement, including those issued under the Existing Credit Agreement prior to the Effective Date.

“Leverage Ratio” means, on any date, the ratio of (a) Total Indebtedness as of such date to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters of the Parent Borrower ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter of the Parent Borrower most recently ended prior to such date). For purposes of determining the Leverage Ratio, if any Permitted Acquisition or any sale or disposition of assets outside of the ordinary course of business shall have been consummated after the beginning of the period for which Consolidated EBITDA is being calculated and on or prior to the end of such period, then Consolidated EBITDA for the relevant period shall be calculated after giving pro forma effect to each such Permitted Acquisition or sale or disposition as though it occurred on the first day of such period.

“LIBO Rate” means (a) with respect to any Eurocurrency Borrowing denominated in US Dollars, for any Interest Period, the rate appearing on the Reuters Screen LIBOR01 page (or on any successor or substitute page provided by Reuters, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page, as determined by the Applicable Agent from time to time for purposes of providing quotations of interest rates applicable to US Dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for US Dollar deposits with a maturity comparable to such Interest Period or (b) with respect to any Eurocurrency Borrowings denominated in a currency other than US Dollars, for any Interest Period, the rate determined by reference to the British Bankers’ Association Interest Settlement Rates (as reflected on the applicable Telerate screen) at approximately 11:00 a.m., London time, on the Quotation Day for such Interest Period, as the rate for deposits in such currency other than US Dollars with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the “LIBO Rate” with respect to such Eurocurrency Borrowing for such Interest Period shall be the rate at which deposits in US Dollars of, or deposits in the applicable currency other than US Dollars for the approximate equivalent in such currency (as determined by the Applicable Agent) of, US$5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Applicable Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, on the Quotation Day for such Interest Period.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge, security interest or assignment by way of security in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

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“Liquidity Event” means that the Available Amount is less than the greater of US$10,000,000 and 13.3% of the total Commitments for two consecutive days; provided that, once a Liquidity Event occurs, it shall be deemed to be continuing on each day thereafter until 30 consecutive days shall have elapsed during which the Available Amount on each such day exceeded the greater of US$10,000,000 and 13.3% of the total Commitments.

“Loan Documents” means this Agreement, the Guarantor Agreement and the other Security Documents.

“Loan Parties” means the Borrowers and the Subsidiary Loan Parties.

“Loan” means a loan made by a Lender to a Borrower pursuant to this Agreement.

“Local Time” means (a) with respect to a Loan or Borrowing denominated in U.S. Dollars, New York City time, (b) with respect to a Loan or Borrowing denominated in Canadian Dollars, or a B/A, Toronto time and (c) with respect to a Loan or Borrowing denominated in Euros or Sterling, London time.

“Long-Term Indebtedness” means any Indebtedness that, in accordance with GAAP, constitutes (or, when incurred, constituted) a long-term liability.

“Mandatory Costs Rate” has the meaning set forth in Schedule 2.21.

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations or condition, financial or otherwise, of the Parent Borrower and the Subsidiaries taken as a whole, (b) the ability of the Loan Parties to perform any of their material obligations under the Loan Documents or (c) the rights of or benefits available to the Lenders under the Loan Documents.

“Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, of any one or more of the Parent Borrower and its Subsidiaries in an aggregate principal amount exceeding US$7,500,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Parent Borrower or any Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Parent Borrower or such Subsidiary would be required to pay if such Swap Agreement were terminated at such time.

“Maturity Date” means the fourth anniversary of the Effective Date, or, if such date is not a Business Day, the first Business Day thereafter.

“Moody’s” means Moody’s Investors Service, Inc.

“Mortgage” means a mortgage, deed of trust, hypothec, assignment of leases and rents, leasehold mortgage, debenture, legal charge or other security document

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granting a Lien on any Mortgaged Property to secure the Obligations. Each Mortgage shall be reasonably satisfactory in form and substance to the Collateral Agent.

“Mortgaged Property” means, initially, each parcel of real property and the improvements thereto owned by a Loan Party and identified on Schedule 1.01(b), and includes each other parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 5.13. or 5.14.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Net Investment Amount” means, as of any date, (a) the sum, without duplication, of (i) the aggregate amount of all investments by Loan Parties in, and loans and advances by Loan Parties to, Subsidiaries that are not Loan Parties, in each case made during the period from and including the Effective Date to and including such date, plus (ii) the aggregate amount of obligations as of such date of Subsidiaries that are not Loan Parties that is Guaranteed by Loan Parties (excluding the amount of any such obligations that are so Guaranteed as of the Effective Date but including any increase on or after the Effective Date in the amount of such obligations so Guaranteed prior to the Effective Date) plus, without duplication, (iii) the aggregate amount of all investments made during the period from and including the Effective Date to such date pursuant to clause (i) of Section 6.04, minus (b) the sum, without duplication, of (i) all dividends and distributions paid to Loan Parties during the period from the Effective Date to such date by Subsidiaries that are not Loan Parties or in respect of investments made pursuant to clause (i) of Section 6.04, plus (ii) all repayments to Loan Parties during the period from the Effective Date to such date by Subsidiaries that are not Loan Parties of loans or advances owing to Loan Parties or in respect of loans or advances made pursuant to clause (i) of Section 6.04, plus (iii) the portion of the Net Investment Amount attributable to any Subsidiary that is not a Subsidiary Loan Party at the time that such Subsidiary becomes a Subsidiary Loan Party or is merged with or into or amalgamated with a Loan Party, net of the portion of the Net Investment Amount attributable to Subsidiaries of or other investments held by such Subsidiary that do not become Loan Parties at such time (determined as though such Subsidiary that has become a Subsidiary Loan Party had been a Subsidiary Loan Party since the Effective Date or, if later, the date it became a Subsidiary). Any investment, loan or advance or dividend, distribution or repayment that is made in property other than cash shall be valued based on the fair market value thereof at the time of such investment, loan, advance, dividend, distribution or repayment; provided that (A) any such dividend, distribution or repayment of property that was invested on or after the Effective Date shall not decrease the Net Investment Amount by an amount in excess of the amount by which it increased the Net Investment Amount when so invested, except to the extent of actual cash investments in such property subsequent to the date of the original investment and (B) any investment, loan or advance made or dividend, distribution or repayment received in the form of property consisting of Equity Interests of or other investments in a Subsidiary or other Person that is not a Loan Party shall not affect the Net Investment Amount. The Net Investment Amount as of any date shall be determined without regard to any write-down or write-off of any investment. For purposes of determining the Net Investment Amount, any payment by a

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Loan Party pursuant to a Guarantee of an obligation of a Subsidiary or other Person that is not a Loan Party shall be treated as an investment in such Subsidiary or other Person. If any Subsidiary or other Person that is not a Loan Party is sold or otherwise disposed of by a Loan Party, then (without duplication of other increases or decreases to the Net Investment Amount) the Net Investment Amount shall be decreased by the amount of Net Proceeds received by the Loan Parties in respect of such sale or disposition. Any sale, transfer or disposition by a Loan Party to another Loan Party of any investment in or loan or advance to a Subsidiary or other Person that is not a Loan Party shall not affect the Net Investment Amount. Investments identified on Schedule 6.04 or otherwise existing or made on the Effective Date or that are made pursuant to clause (h) of Section 6.04 (and any dividends, distributions or other receipts in respect thereof) shall not affect the Net Investment Amount.

“Net Orderly Liquidation Value” means, with respect to Inventory of any Person, the orderly liquidation value thereof as determined in a manner acceptable to the US Agent by an appraiser acceptable to the US Agent, net of all costs of liquidation thereof.

“Net Proceeds” means, with respect to any event (a) the cash proceeds received in respect of such event including (i) any cash received in respect of any non-cash proceeds, but only as and when received, (ii) in the case of a casualty, insurance proceeds, and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, net of (b) the sum of (i) all reasonable fees and out-of-pocket expenses (including, in the case of a sale or disposition of assets, costs associated with severance payments and the relocation of products, Inventory and equipment) paid by the Parent Borrower and the Subsidiaries to third parties (other than Affiliates) in connection with such event, (ii) in the case of a sale, transfer or other disposition of an asset (including pursuant to a sale and leaseback transaction or a casualty or a condemnation or similar proceeding), the amount of all payments required to be made by the Parent Borrower and the Subsidiaries as a result of such event to repay Indebtedness (other than Loans) secured by such asset or otherwise subject to mandatory prepayment as a result of such event, and (iii) the amount of all Taxes paid (or reasonably estimated to be payable) by the Parent Borrower and/or the Subsidiaries, and the amount of any reserves established by the Parent Borrower and the Subsidiaries to fund contingent liabilities reasonably estimated to be payable, in each case during the year that such event occurred or the next succeeding year and that are directly attributable to such event (as determined reasonably and in good faith by the Parent Borrower).

“Net Working Capital” means, at any date, (a) the consolidated current assets of the Parent Borrower and its consolidated Subsidiaries as of such date (excluding cash and Permitted Investments) minus (b) the consolidated current liabilities of the Parent Borrower and its consolidated Subsidiaries as of such date (excluding current liabilities in respect of Indebtedness and deferred revenues). Net Working Capital at any date may be a positive or negative number. Net Working Capital increases when it becomes more positive or less negative and decreases when it becomes less positive or more negative.

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“New European Collection Accounts” means the Cash Collection Accounts established by each of the French Borrower, the Italian Borrower and the Swiss Borrower with the European Agent, which Cash Collection Accounts shall be maintained, as determined by the European Agent in its sole discretion, either in the name of each of the French Borrower, the Italian Borrower and the Swiss Borrower, respectively, or in the name of the European Agent.

“Non-Defaulting Lender” means, at any time, any Lender that is not a Defaulting Lender at such time.

“Non-Schedule I Reference Lender” means Schedule II and Schedule III Lenders as are mutually agreed upon by the US Administrative Agent and the Borrowers.

“Notes Refinancing Indebtedness” has the meaning given to such term in the definition of the term “Permitted Refinancing”.

“Non-U.S. Lender” means a Lender that is not a U.S. Person.

“Notice of Exclusive Control” has the meaning given to such term in the US Collateral Agreement.

“Obligations” has the meaning assigned to such term in the Guarantor Agreement.

“Other Obligations” has the meaning assigned to such term in the Guarantor Agreement.

“Other Security Documents” means, with respect to any Loan Party organized under the laws of a jurisdiction other than Canada, France, Italy, Puerto Rico, Switzerland, the United Kingdom or the United States of America (or any jurisdiction therein), such agreements as shall be necessary or appropriate to create valid and perfected Liens securing the Obligations on the assets of such Loan Party in accordance with applicable laws, satisfactory in form and substance to the Collateral Agent.

“Other Taxes” means any and all present or future recording, stamp, documentary, excise, transfer, sales, property or similar Taxes, charges or levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document but does not include Excluded Taxes.

“Parent Borrower” means Patheon Inc., a corporation existing under the laws of Canada.

“Participant” has the meaning set forth in Section 9.04.

“Participant Register” has the meaning specified in Section 9.04(c)(i).

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“Participating Member State” means a member State of the European Communities that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Community for Economic and Monetary Union.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“PDS” means Pharmaceutical Development Services.

“Perfection Certificate” means a certificate in the form of Exhibit F or any other form approved by the US Agent.

“Permitted Acquisition” means any acquisition by the Parent Borrower or any Subsidiary of all or substantially all the assets of, or all of the Equity Interests in, a Person or division or line of business of a Person if, immediately after giving effect thereto, (a) no Default has occurred and is continuing or would result therefrom, (b) any such business shall comply with the permitted businesses of the Parent Borrower and the Subsidiaries as provided in Section 6.03(b), (c) if any Subsidiary formed for the purpose of or resulting from such acquisition shall be a Subsidiary Loan Party, all actions required to be taken with respect to each such acquired or newly formed Subsidiary under Sections 5.13 and 5.14 have been taken, (d) the portion of the fair market value of the consideration for such acquisition (excluding Equity Interests of the Parent Borrower) that is attributable to investments in Persons (whether or not Subsidiaries) that do not become Subsidiary Loan Parties as a result of such acquisition but in which the Parent Borrower or any Subsidiary shall own, directly or indirectly, any investment as a result of such acquisition (including the investment in the Person acquired, if it is not a Subsidiary Loan Party) are treated, at the time of such acquisition, as investments in such Person pursuant to Section 6.04 and are permitted to be made thereunder at such time (other than pursuant to clause (g) thereof), (e) clause (a) of the Coverage Ratio Condition is satisfied, (f) the Available Amount shall not be less than the greater of US$16,875,000 and 22.5% of the aggregate Commitments and (g) the Parent Borrower has delivered to the US Agent an officers’ certificate to the effect set forth in clauses (a), (b), (c), (d), (e) and (f) above, together with all relevant financial information for the Person or assets to be acquired and reasonably detailed calculations demonstrating satisfaction of the requirement set forth in clause (e) above.

“Permitted Discretion” means a determination made in good faith and in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment.

“Permitted Encumbrances” means, without duplication:

(a) Liens imposed by law for Taxes that are not yet due or are being contested in compliance with Section 5.05;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law or regulation, arising in the ordinary course

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of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.05;

(c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, employment insurance and other social security laws or regulations;

(d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

(e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Section 7.01; and

(f) licenses, permits, reservations, servitudes, easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law (including those expressed in any original grant from the Crown) or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Parent Borrower or any Subsidiary; and

(g) Liens securing Priority Obligations;

provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.

“Permitted Holders” means, collectively, JLL Partners, its general partner JLL Partners, Inc. and their respective Affiliates, and any other fund managed by JLL Partners, Inc. or any of its Affiliates but does not include any portfolio company controlled by any of the foregoing.

“Permitted Investments” means:

(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America or any US state or territory (or by any agency thereof or other obligations which are “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940), in each case maturing within one year from the date of acquisition thereof;

(b) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the Government of Canada or of any Canadian province (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the Government of Canada or of such Canadian province), in each case maturing within one year from the date of acquisition thereof;

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(c) investments in certificates of deposit, banker’s acceptances, commercial paper and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of Canada or of any Canadian province, or of the United States or any state or territory thereof or of the United Kingdom, any Member State of the European Economic Area or any Participating Member State, in each case having, at such date of acquisition, a credit rating on its long-term unsecured debt of at least “A-” by S&P;

(d) any investment in marketable debt obligations issued or guaranteed by the government of the United Kingdom, any member state of the European Economic Area or any Participating Member State or by an instrumentality or agency of any of them having an equivalent credit rating, in each case maturing within one year from the date of acquisition thereof;

(e) Sterling bills of exchange eligible for rediscount at the Bank of England (or their dematerialised equivalent);

(f) any investment in money market funds which (i) have a credit rating of either A-1 or higher by S& P’s Rating Services or Fl or higher by Fitch Ratings Ltd or P-l or higher by Moody’s, (ii) invest substantially all their assets in securities of the types described in paragraphs (a) to (d) above and (iii) can be turned into cash on not more than 30 days’ notice; or

(g) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody’s;

(h) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clauses (a) or (b) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and

(i) money market funds that are rated AAA by S&P and Aaa by Moody’s.

“Permitted Refinancing” means a refinancing of Senior Notes with the Net Proceeds of Indebtedness for borrowed money incurred by the Parent Borrower (“Notes Refinancing Indebtedness”); provided that (a) the maturity of such Notes Refinancing Indebtedness is no earlier than, and no scheduled payments of principal in respect of such Notes Refinancing Indebtedness are required prior to, the scheduled maturity of the Senior Notes, (b) the principal amount of such Notes Refinancing Indebtedness does not exceed the sum of the principal amount of Senior Notes refinanced thereby plus the amount of accrued and unpaid interest and prepayment premiums (if any) in respect of the Senior Notes paid by the Parent Borrower in connection with such refinancing, underwriting discounts and commissions, if any, and other out-of-pocket fees, costs and expenses paid by the Parent Borrower in connection with such refinancing, (c) the terms

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(other than pricing terms) of such Notes Refinancing Indebtedness, taken as a whole, are not less favorable in any material respect to the Parent Borrower and its Subsidiaries than the terms of the Senior Notes Documents, (d) such Notes Refinancing Indebtedness is not Guaranteed by any Subsidiary that has not Guaranteed the Obligations, (e) if such Notes Refinancing Indebtedness is secured, it is secured only by Liens permitted by clause (h) of Section 6.02 and the documents pursuant to which such Liens are granted are substantially the same as the Senior Notes Security Documents, (f) all Senior Notes so refinanced shall be canceled and discharged, (g) if such Notes Refinancing Indebtedness is secured, the lenders or holders of such Notes Refinancing Indebtedness (or their agent or trustee on their behalf) shall become parties to, and bound by, the Intercreditor Agreement, and (h) the Parent Borrower shall have notified the US Agent of such refinancing and delivered to the US Agent copies of all agreements, instruments and documents evidencing, governing, securing or guaranteeing such Notes Refinancing Indebtedness, certified by a Financial Officer to be true, correct and complete copies thereof.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan or a Canadian Pension Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Parent Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“PR Borrower” means Patheon Puerto Rico, Inc., a Puerto Rican corporation.

“PR Collateral Agreement” means the ratification to the US Revolving Pledge and Security Agreement, substantially in the form of Exhibit G.

“PR Collection Accounts” means each account maintained by the Collateral Agent into which funds are transferred from any PR Deposit Account following the delivery of a Notice of Exclusive Control.

“PR Deposit Accounts” means each deposit account of the PR Borrower and each other Subsidiary organized in Puerto Rico into which cash, checks or other similar payments relating to or constituting payments made in respect of Accounts are deposited.

“PR Mortgages” means Mortgages over the corresponding PR Owned Real Property.

“PR Mortgage Note” means a bearer demand note relating to the PR Mortgages.

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“PR Owned Real Property” means the real property of the PR Borrower and the Subsidiaries organized under the laws of Puerto Rico known as State Road #670, Km. 2.7, Bo. Cote Norte, Manati, Puerto Rico 00674, subject to the PR Mortgages.

“Primary Currency” means (a) in connection with each of the UK Borrower, the French Borrower, the Italian Borrower and the Swiss Borrower and Foreign Letters of Credit issued for its account (and LC Disbursements thereunder), Euros, and (b) in connection with each other Borrower and Foreign Letters of Credit issued for its account (and LC Disbursements thereunder), US Dollars.

“Primary Currency Amount” has the meaning set forth in Section 2.05(l)(iii).

“Prime Rate” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A., as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

“Priority Obligation” means any obligation that is secured by a Lien on any Eligible Account, Eligible Inventory or other Collateral in favor of a Governmental Authority, which Lien ranks or is capable of ranking prior to or pari passu with the Liens thereon created by the applicable Security Documents, including any such Lien securing amounts owing for wages, vacation pay, severance pay, employee deductions, sales tax, excise tax, other Taxes, workers compensation, government royalties and stumpage or pension fund obligations.

“PR Security Documents” means the PR Collateral Agreement and each Mortgage with respect to a Mortgaged Property located in Puerto Rico or any jurisdiction therein.

“Qualified Preferred Stock” means any preferred Equity Interest that (a) is not subject to any requirement to pay mandatory cash dividends or similar distributions, (b) is not subject to any mandatory redemption or repurchase requirement (whether pursuant to a sinking fund obligation, or at the option of the holder thereof, or upon the occurrence of specified events, or otherwise), (c) is not convertible, or exchangeable, other than into or for common Equity Interests of the Parent Borrower or Qualified Preferred Stock of the Parent Borrower, and (d) does not entitle the holder thereof to any other rights or remedies that could subject Parent Borrower or any Subsidiary to any mandatory payment obligation; provided that the foregoing shall not be construed to prohibit rights to receive dividends and distributions in preference to those paid on any other Equity Interests of the Parent Borrower (if and when paid).

“Qualifying Bank” means any legal entity which is recognized as a bank by the banking laws in force in its country of incorporation, or if acting through a branch, in the country of that branch, and which exercises as its main purpose a true banking activity, having bank personnel, premises, communication devices of its own and the authority of decision-making and has a genuine banking activity.

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“Qualifying CRE Indebtedness” means Indebtedness permitted by clause (viii) of Section 6.01(a).

“Quotation Day” means, with respect to any Eurocurrency Borrowing denominated in a currency other than US Dollars and any Interest Period, the day on which it is market practice in the relevant interbank market for prime banks to give quotations for deposits in the currency of such Borrowing for delivery on the first day of such Interest Period. If such quotations would normally be given by prime banks on more than one day, the Quotation Day will be the last of such days.

“Register” has the meaning set forth in Section 9.04.

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

“Repositioning Expenses” means, without duplication, all expenses associated with the restructuring of the Parent Borrower’s and its Subsidiaries’ manufacturing network and processes, including severance expenses, retention expenses, third party professional expenses and costs associated with the transfer of products and services.

“Required Lenders” means, at any time, Lenders having Revolving Exposures and unused Commitments representing more than 50% of the sum of the total Revolving Exposures and unused Commitments at such time.

“Requirement of Law” means, as to any Person, collectively, any and all applicable requirements of any Governmental Authority, including any laws, judgments, orders, executive orders, decrees, ordinances, rules, regulations, statutes or case law, in each case applicable to or binding upon such Person or to which any of its property is subject.

“Reserves” means, without duplication, any and all reserves which the US Agent deems necessary, in its Permitted Discretion, to maintain (including reserves for accrued and unpaid interest on the Obligations, reserves for rent at locations leased by any Loan Party and for consignee’s, warehousemen’s and bailee’s charges, reserves for dilution of Accounts, reserves for Inventory shrinkage, reserves for customs charges and shipping charges related to any Inventory in transit, reserves for Other Obligations, reserves for the UK Overdraft Facility, reserves for contingent liabilities of any Loan Party, reserves for uninsured losses of any Loan Party, reserves for uninsured, underinsured, unindemnified or under indemnified liabilities or potential liabilities with respect to any litigation and reserves for Taxes) with respect to the Collateral or any Loan Party; provided that any Reserves imposed or established after the Effective Date shall not be effective until the date that is three Business Days after written notice thereof to the Parent Borrower.

“Reset Date” has the meaning ascribed to it in Section 1.05.

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“Restricted Entity” means (a) any Person that the Parent Borrower and the US Agent agree in writing to be a “Restricted Entity” for purposes of this Agreement and (b) any Affiliate of any such Person.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Parent Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in the Parent Borrower or any option, warrant or other right to acquire any such Equity Interests in the Parent Borrower. Any payments made to the UK Pension Scheme will not be Restricted Payments.

“Revolving Borrowing” means a Borrowing comprised of Revolving Loans.

“Revolving Exposure” means the Canadian Revolving Exposure, the UK Revolving Exposure, the US Revolving Exposure, the Swiss Revolving Exposure, the Italian Revolving Exposure the French Exposure or the European Revolving Exposure, as the context requires.

“Revolving Loan” means a Canadian Revolving Loan, a UK Revolving Loan, a US Revolving Loan, a Swiss Revolving Loan, an Italian Revolving Loan or a French Revolving Loan.

“RP Basket Amount” means, at any time, an amount equal to (a) the sum of (i) US$15,000,000 plus (ii) the ECF Amount at such time, plus (iii) the Additional Equity Amount at such time, minus (b) the sum of all Restricted Payments made pursuant to clause (iv) of Section 6.08(a), without duplication of reductions in respect of the ECF Amount or Additional Equity Amount on account of such Restricted Payments.

“S&P” means Standard & Poor’s.

“Schedule I Lender” means any Lender named on Schedule I to the Bank Act (Canada).

“Schedule II Lender” means any Lender named on Schedule II to the Bank Act (Canada).

“Schedule III Lender” means any Lender named on Schedule III to the Bank Act (Canada).

“Schedule I Reference Lender” means Schedule I Lenders as are mutually agreed upon by the US Administrative Agent and the Borrowers.

“Security Documents” means the Canadian Security Documents, the PR Security Documents, the UK Security Documents, the US Security Documents, the Swiss Security Documents, the Italian Security Documents, the French Security Documents, the

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Other Security Documents, the Intercreditor Agreement and each other security agreement or other instrument or document executed and delivered pursuant to Section 5.13 to secure any of the Obligations.

“Senior Notes” means the 8.625% Senior Secured Notes due 2017, to be issued by the Parent Borrower on or prior to the Effective Date in an initial aggregate principal amount of up to US$280,000,000 and the Indebtedness represented thereby.

“Senior Notes Documents” means the Senior Notes Indenture, the Senior Notes Security Documents and all other instruments, agreements or documents evidencing, guaranteeing or otherwise governing the terms of the Senior Notes.

“Senior Notes Indenture” means the indenture governing the Senior Notes among the Parent Borrower, as issuer, certain of its Subsidiaries, as guarantors, and U.S. Bank National Association, as trustee.

“Senior Notes Security Documents” means any and all security agreements, pledge agreements, mortgages and other agreements or documents pursuant to which any Liens are granted to secure any Indebtedness or other obligations in respect of the Senior Notes.

“Specified Obligations” means Obligations consisting of the principal of and interest on Loans, reimbursement obligations in respect of any B/As accepted hereunder, reimbursement obligations in respect of LC Disbursements and fees payable hereunder to the Lenders.

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board (or, in the case of a Borrowing denominated in a currency other than US Dollars, the applicable Governmental Authority) to which the Applicable Agent is subject with respect to the Adjusted LIBO Rate for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D, other applicable law, rule or regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“Sterling” or “£” refers to lawful money of the United Kingdom.

“Sterling/Euro Alternate Rate” means, for any day, the sum of (a) a rate per annum selected by the European Agent, in its sole discretion based on market conditions in consultation with the Lenders, (b) the Applicable Rate for Eurocurrency Loans and (c) the Mandatory Costs Rate as provided in Section 2.21. When used in reference to any Loan or Borrowing, “Sterling/Euro Alternate Rate” refers to whether

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such Loan, or the Loans comprising such Borrowing, are bearing interest at the Sterling/Euro Alternate Rate.

“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

“Subsidiary” means any subsidiary of the Parent Borrower.

“Subsidiary Loan Party” means (a) each Subsidiary that is wholly owned, directly or indirectly, by the Parent Borrower and that is organized under the laws of Canada, Puerto Rico, the United Kingdom (except Patheon UK Pension Trustees Limited), the United States of America or The Netherlands or any state, province or other jurisdiction of any of the foregoing, (b) the French Borrower, the Italian Borrower and the Swiss Borrower and (c) each other Subsidiary that has become a party to the Guarantor Agreement as a Guarantor thereunder and satisfied the Collateral and Guarantee Requirement.

“Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Parent Borrower or the Subsidiaries shall be a Swap Agreement.

“Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time (determined based on the US Dollar Equivalent, in the case of Swingline Loans denominated in currencies other than US Dollars).

“Swingline Lender” means (a) in respect of Canadian Swingline Loans, JPMorgan Chase Bank, N.A., Toronto Branch, (b) in respect of US Swingline Loans, JPMorgan Chase Bank, N.A., (c) in respect of UK Swingline Loans, JPMorgan Europe Limited, (d) in respect of French Swingline Loans, JPMorgan Europe Limited, (e) in respect of Italian Swingline Loans, JPMorgan Chase Bank, N.A., Milan Branch, and (f) in respect of Swiss Swingline Loans, JPMorgan Europe Limited.

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“Swingline Loan” means a Loan made pursuant to Section 2.04.

“Swiss Borrower” means Patheon International AG, a corporation incorporated in Switzerland.

“Swiss Borrowing Base” means, at any time, an amount (expressed in US Dollars, based on Exchange Rates prevailing at the time the applicable Borrowing Base Certificate is prepared, where applicable) equal to (a) 85% of Eligible Accounts of the Swiss Borrower at such time, minus (b) all Reserves in effect at such time in respect of such Borrowing Base minus (c) Priority Obligations. The Swiss Borrowing Base at any time shall be determined by reference to the most recent Borrowing Base Certificate delivered to the US Agent pursuant to this Agreement, but giving effect to any Reserves in effect at such time that were established after preparation of such Borrowing Base Certificate.

“Swiss LC Exposure” means, at any time, the LC Exposure in respect of Swiss Letters of Credit (and LC Disbursements thereunder) at such time. The Swiss LC Exposure of any European Lender at any time shall be its Applicable Percentage of the total Swiss LC Exposure at such time.

“Swiss Letter of Credit” means a Letter of Credit issued for the account of the Swiss Borrower.

“Swiss Revolving Exposure” means, with respect to any European Lender at any time, the sum of (a) the US Dollar Equivalent of the aggregate principal amount of such Lender’s Swiss Revolving Loans outstanding at such time and (b) such Lender’s Swiss LC Exposure and Swiss Swingline Exposure at such time.

“Swiss Revolving Loan” means a Loan made to the Swiss Borrower pursuant to Section 2.01(d).

“Swiss Security Documents” means (i) the Share Pledge Agreement and (ii) the Claims Assignment Agreement, each between the Swiss Borrower and the Collateral Agent and in form and substance satisfactory to the Collateral Agent.

“Swiss Swingline Exposure” means, at any time, the US Dollar Equivalent of the aggregate principal amount of all Swiss Swingline Loans outstanding at such time. The Swiss Swingline Exposure of any European Lender at any time shall be its Applicable Percentage of the total Swiss Swingline Exposure at such time.

“Swiss Swingline Loan” means a Swingline Loan made to the Swiss Borrower.

“Swiss Ten Non-Bank Rule” means the rule that the aggregate number of creditors of the Swiss Borrower under a Loan to the Swiss Borrower pursuant to this Agreement which are not Qualifying Banks must not at any time exceed ten, all in accordance with the Guidelines.

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“Swiss Twenty Non-Bank Rule” means the rule that the aggregate number of creditors other than Qualifying Banks of a Swiss Borrower under all outstanding debts relevant for the classification as debenture (Kassen obligation) (including intragroup loans, facilities or private placements (including Loans pursuant to this Agreement)) must not at any time exceed twenty, all in accordance within the meaning of Guidelines.

“Swiss Withholding Tax” means the Swiss withholding tax as per the Swiss Federal Withholding Tax Act of October 13, 1965, as modified from time to time.

“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

“Total Indebtedness” means, as of any date, the aggregate principal amount of Indebtedness of the Parent Borrower and the Subsidiaries outstanding as of such date (other than Qualifying CRE Indebtedness), in the amount that would be reflected on a balance sheet prepared as of such date on a consolidated basis in accordance with GAAP.

“Total Shared Borrowing Base” means, at any time, the sum of the Canadian Borrowing Base, the UK Borrowing Base and the US Borrowing Base at such time.

“Total Shared Revolving Exposure” means, at any time, the sum of (a) the total amount of the Canadian Revolving Exposures, UK Revolving Exposures and US Revolving Exposures at such time, (b) the excess, if any, of the total French Revolving Exposures over the amount of the French Borrowing Base at such time, (c) the excess, if any, of the total Italian Revolving Exposures over the amount of the Italian Borrowing Base at such time and (d) the excess, if any, of the total Swiss Revolving Exposures over the amount of the Swiss Borrowing Base at such time.

“Transactions” means (a) the execution, delivery and performance by the Loan Parties of the Loan Documents, the borrowing of Loans and purchase and acceptance of B/As hereunder, the use of the proceeds thereof and the issuance of Letters of Credit hereunder and (b) the execution, delivery and performance by the Loan Parties of the Senior Notes Documents, the issuance of the Senior Notes and the use of the proceeds thereof.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate, the Alternate Base Rate, the UK Base Rate, the Canadian Prime Rate or the Sterling/Euro Alternate Rate.

“UK Base Rate” means, for any day, a rate per annum equal to the European Agent’s reference rate for the applicable currency being the rate from time to time set by the European Agent based on various factors including the European Agent’s cost of funds and desired return and general economic conditions and which is used as a reference point for pricing loans made by it in the applicable currency; provided that, for purposes of determining the rate of interest applicable to a UK Base Rate Loan

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denominated in Euros, such rate for any day shall be the rate per annum at which one-day deposits in Euros are offered by the European Agent in immediately available funds in the London interbank market at the time that the European Agent determines such rate on such day (or, if such day is not a Business Day, then on the immediately preceding Business Day), adjusted for statutory reserves and mandatory liquid asset costs.

“UK Base Rate Loan” means a Loan bearing interest at a rate determined by reference to the UK Base Rate.

“UK Borrower” means Patheon UK Limited, a limited liability company incorporated in England.

“UK Borrower Group” means the UK Borrower and each other Subsidiary organized under the laws of the United Kingdom that is a Subsidiary Loan Party.

“UK Borrowing Base” means, at any time, an amount (expressed in US Dollars, based on Exchange Rates prevailing at the time the applicable Borrowing Base Certificate is prepared, where applicable) equal to the sum, without duplication, of (a) 85% of Eligible Accounts of the UK Borrower Group at such time, plus (b) the lesser of (i) 50% of Eligible Inventory of the UK Borrower Group, valued at the lower of original cost or market value, determined on a first-in-first-out basis, at such time and (ii) the product of 85% multiplied by the Net Orderly Liquidation Value percentage identified in the most recent inventory appraisal ordered by or delivered to the US Agent multiplied by Eligible Inventory of the UK Borrower Group, valued at the lower of original cost or market value, determined on a first-in-first-out basis, at such time, minus (c) all Reserves in effect at such time in respect of such Borrowing Base minus (d) Priority Obligations. The UK Borrowing Base at any time shall be determined by reference to the most recent Borrowing Base Certificate delivered to the US Agent pursuant to this Agreement, but giving effect to any Reserves in effect at such time that were established after preparation of such Borrowing Base Certificate.

“UK Commitment” means, with respect to each Lender, subject to Section 2.23, the commitment of such Lender to make UK Revolving Loans hereunder, and to acquire participations in UK Letters of Credit and UK Swingline Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s UK Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09, (b) increased from time to time pursuant to Section 2.20 and (c) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s UK Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption pursuant to which such Lender shall have assumed its UK Commitment, as applicable. Subject to Section 2.23, the initial aggregate amount of the UK Commitments is US$10,000,000.

“UK Debenture” means a security agreement granted by the UK Borrower in favor of the Collateral Agent, substantially in the form of Exhibit H.

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“UK LC Exposure” means, at any time, the LC Exposure in respect of UK Letters of Credit (and LC Disbursements thereunder) at such time. The UK LC Exposure of any UK Lender at any time shall be its Applicable Percentage of the total UK LC Exposure at such time.

“UK Lender” means a Lender with a UK Commitment or UK Revolving Exposure.

“UK Letter of Credit” means a Letter of Credit issued for the account of the UK Borrower.

“UK Overdraft Commitment” has the meaning ascribed to such term in Section 2.23.

“UK Overdraft Facility” has the meaning ascribed to such term in Section 2.23.

“UK Pension Scheme” means the Patheon UK Pension Plan.

“UK Revolving Exposure” means, with respect to any Lender at any time, the sum of (a) US Dollar Equivalent of the aggregate principal amount of such Lender’s UK Revolving Loans outstanding at such time and (b) such Lender’s UK LC Exposure and UK Swingline Exposure at such time.

“UK Revolving Loan” means a Loan made to the UK Borrower pursuant to Section 2.01(c).

“UK Security Documents” means the UK Debenture, the UK Share Charge, the UK Security Trust Deed, the Receivables Security Agreement and each Mortgage contained in the UK Debenture, with respect to Mortgaged Property located in England, Wales or Scotland.

“UK Security Trust Deed” means the security trust deed among the Collateral Agent and the Lenders, substantially in the form of Exhibit I.

“UK Share Charge” means a share charge in respect of the entire share capital of the UK Borrower in favor of the Collateral Agent, substantially in the form of Exhibit J.

“UK Swingline Exposure” means, at any time, the US Dollar Equivalent of the aggregate principal amount of all UK Swingline Loans outstanding at such time. The UK Swingline Exposure of any UK Lender at any time shall be its Applicable Percentage of the total UK Swingline Exposure at such time.

“UK Swingline Loan” means a Swingline Loan made to the UK Borrower.

“US Agent” means JPMorgan Chase Bank, N.A., as United States administrative agent and collateral agent for the Lenders hereunder.

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“US Borrower” means Patheon Pharmaceuticals Inc., a Delaware corporation.

“US Borrower Group” means the US Borrower, the PR Borrower and each other Subsidiary organized in the United States or Puerto Rico that is a Subsidiary Loan Party.

“US Borrowing Base” means, at any time, an amount (expressed in US Dollars, based on Exchange Rates prevailing at the time the applicable Borrowing Base Certificate is prepared, where applicable) equal to the sum, without duplication, of (a) 85% of Eligible Accounts of the US Borrower Group at such time, plus (b) the lesser of (i) 50% of Eligible Inventory of the US Borrower Group, valued at the lower of original cost or market value, determined on a first-in-first-out basis, at such time and (ii) the product of 85% multiplied by the Net Orderly Liquidation Value percentage identified in the most recent inventory appraisal ordered by or delivered to the US Agent multiplied by Eligible Inventory of the US Borrower Group, valued at the lower of original cost or market value, determined on a first-in-first-out basis, at such time, minus (c) all Reserves in effect at such time in respect of such Borrowing Base minus (d) Priority Obligations. The US Borrowing Base at any time shall be determined by reference to the most recent Borrowing Base Certificate delivered to the US Agent pursuant to this Agreement, but giving effect to any Reserves in effect at such time that were established after preparation of such Borrowing Base Certificate.

“US Collateral Agreement” means the US Revolving Pledge and Security Agreement among the members of the US Borrower Group and the Collateral Agent, substantially in the form of Exhibit K.

“US Commitment” means, with respect to each Lender, the commitment of such Lender to make US Revolving Loans and to acquire participations in US Letters of Credit and US Swingline Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s US Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09, (b) increased from time to time pursuant to Section 2.20 and (c) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s US Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption pursuant to which such Lender shall have assumed its US Commitment, as applicable. The initial aggregate amount of the US Commitments is US$35,000,000.

“US Dollar Equivalent” means, on any date of determination, (a) with respect to any amount in US Dollars, such amount, and (b) with respect to any amount in any other currency, the equivalent in US Dollars of such amount determined by the US Agent using the applicable Exchange Rate in effect on such date of determination.

“US Dollars” “US$” or “$” refers to lawful money of the United States of America.

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“US GAAP” means generally accepted accounting principles in the United States of America, applied in accordance with the consistency requirements thereof.

“US LC Exposure” means, at any time, the LC Exposure in respect of US Letters of Credit (and LC Disbursements thereunder) at such time. The US LC Exposure of any US Lender at any time shall be its Applicable Percentage of the total US LC Exposure at such time.

“US Lender” means a Lender with a US Commitment or US Revolving Exposure.

“U.S. Person” means a United States Person with the meaning of Section 7701(a)(30) of the Code.

“US Letter of Credit” means a Letter of Credit issued for the account of the US Borrower or the PR Borrower.

“US Revolving Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s US Revolving Loans and its US LC Exposure and US Swingline Exposure at such time.

“US Revolving Loan” means a Loan made to the US Borrower or the PR Borrower pursuant to Section 2.01(b).

“US Security Documents” means the US Collateral Agreement and each Mortgage with respect to a Mortgaged Property located in the United States of America or any jurisdiction therein.

“US Swingline Exposure” means, at any time, the aggregate principal amount of all US Swingline Loans outstanding at such time. The US Swingline Exposure of any US Lender at any time shall be its Applicable Percentage of the total US Swingline Exposure at such time.

“US Swingline Loan” means a Swingline Loan made to the US Borrower or the PR Borrower.

“VAT” means any tax imposed by EC Directive 2006/112/EC on the common system of value added tax and any national legislation implementing that directive, together with any legislation supplemental thereto, and any other tax of a similar nature, and all penalties, costs and interest relating thereto.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

“Withholding Agent” means any Borrower (or Guarantor) or any Agent.

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SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a “US Revolving Loan”) or by Type (e.g., a “Eurocurrency Loan”) or by Class and Type (e.g., a “Eurocurrency US Revolving Loan”). Borrowings also may be classified and referred to by Class (e.g., a “US Revolving Borrowing”) or by Type (e.g., a “Eurocurrency Borrowing”) or by Class and Type (e.g., a “Eurocurrency US Revolving Borrowing”).

SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. Except for purposes of Article II (and other provisions of the Loan Documents referring to the amounts and currencies of Commitments or Revolving Exposure or any component thereof), references to any amount in US$ shall be construed to include the equivalent in any other currency. References herein to the “laws of the United Kingdom” shall be construed to mean the laws of England and Wales and the laws of Scotland.

SECTION 1.04. Accounting Terms; GAAP. (a) Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that (i) if the Parent Borrower notifies the US Agent that the Parent Borrower requests an amendment to any provision hereof for the purpose of eliminating the effect of any change in GAAP (including any change in accounting principles referred to in Section 1.04(b) below) occurring after the date hereof or in the application thereof on the operation of such provision (regardless of whether any such notice is given before or after such change in GAAP or in the application thereof) or (ii) if the US Agent notifies the Parent Borrower that the Required Lenders request an amendment to any provision hereof for any such purpose, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith; provided further that, notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made,

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without giving effect to any election under Statement of Financial Accounting Standards 159, The Fair Value Option for Financial Assets and Financial Liabilities, or any successor thereto (including pursuant to the Accounting Standards Codification), or any analogous standards or principles of Canadian GAAP or IFRS, to value any Indebtedness of the Parent Borrower or any Subsidiary at “fair value”, as defined therein.

(b) The Parent Borrower may use Canadian GAAP, IFRS or US GAAP for financial reporting purposes, provided that the Parent Borrower will give the Administrative Agent not less than 60 days’ (or such shorter period of time as the US Agent shall agree in its sole discretion) prior written notice of any change in the accounting principles used for financial reporting by the Parent Borrower accompanied by a certificate of a Financial Officer of the Parent Borrower (i) specifying the material effects of such change in accounting principles on the Parent Borrower’s most recent audited financial statements and (ii) setting forth reasonably detailed calculations of the effect of such change in accounting principles as of the last day of the fiscal period covered by such financial statements on (A) the ratios set forth in the definition of “Coverage Ratio Condition”, (B) the Leverage Ratio, (C) the calculation of Capital Expenditures for such fiscal period for purposes of Section 6.12 and (D) the ratio set forth in Section 6.13 (whether or not Section 6.13 is applicable at such time).

(c) It is understood that changes in GAAP shall not affect any determination regarding compliance with this Agreement as of any date before such change became effective.

SECTION 1.05. Exchange Rate Calculations. On each Calculation Date, the US Agent shall (a) determine the Exchange Rates as of such Calculation Date in respect of Canadian Dollars, Euros and Sterling (and any other currency for which an Exchange Rate is required) and (b) give notice thereof to the Parent Borrower, and with respect to each Lender, to any Lender that shall have requested such information. The Exchange Rates so determined shall become effective on the first Business Day immediately following the relevant Calculation Date (each, a “Reset Date”) and shall remain effective until the next succeeding Reset Date, and shall for all purposes of this Agreement (other than any provision expressly requiring the use of a current Exchange Rate) be the Exchange Rates employed in converting amounts between US Dollars, on the one hand, and any other applicable currency on the other hand; provided that, for purposes of determining any Borrowing Base, the relevant Exchange Rates shall be determined by the Parent Borrower at the time that the relevant Borrowing Base Certificate is prepared and shall be set forth in such Borrowing Base Certificate.

SECTION 1.06. Permitted Encumbrances. Any reference in any of the Loan Documents to a Permitted Encumbrance is not intended to subordinate or postpone, and shall not be interpreted as subordinating or postponing, or as any agreement to subordinate or postpone, any Lien created by any of the Loan Documents to any Permitted Encumbrance.

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ARTICLE II

The Credits

SECTION 2.01. Commitments. (a) Subject to the terms and conditions set forth herein, each Canadian Lender agrees to make Canadian Revolving Loans to the Parent Borrower denominated in US Dollars or Canadian Dollars, including by means of B/A or B/A Equivalent Loans, from time to time during the Availability Period in an aggregate principal amount that will not result in (i) such Lender’s Canadian Revolving Exposure exceeding such Lender’s Canadian Commitment, (ii) the total Canadian Revolving Exposures exceeding the total Canadian Commitments or (iii) the Total Shared Revolving Exposure exceeding the Total Shared Borrowing Base then in effect.

(b) Subject to the terms and conditions set forth herein, each US Lender agrees to make US Revolving Loans to the US Borrower or the PR Borrower denominated in US Dollars from time to time during the Availability Period in an aggregate principal amount that will not result in (i) such Lender’s US Revolving Exposure exceeding such Lender’s US Commitment, (ii) the total US Revolving Exposures exceeding the total US Commitments or (iii) the Total Shared Revolving Exposure exceeding the Total Shared Borrowing Base then in effect.

(c) Subject to the terms and conditions set forth herein, each UK Lender agrees to make UK Revolving Loans to the UK Borrower denominated in Euros or Sterling from time to time during the Availability Period in an aggregate principal amount that will not result in (i) such Lender’s UK Revolving Exposure exceeding such Lender’s UK Commitment, (ii) the total UK Revolving Exposures exceeding the total UK Commitments or (iii) the Total Shared Revolving Exposure exceeding the Total Shared Borrowing Base then in effect.

(d) Subject to the terms and conditions set forth herein, each European Lender agrees to make European Revolving Loans to the French Borrower, the Italian Borrower or the Swiss Borrower denominated in Euros from time to time during the Availability Period in an aggregate principal amount that will not result in (i) such Lender’s European Revolving Exposure exceeding such Lender’s European Commitment, (ii) the total European Revolving Exposures exceeding the total European Commitments or (iii) the Total Shared Revolving Exposure exceeding the Total Shared Borrowing Base then in effect.

(e) Within the foregoing limits and subject to the terms and conditions set forth herein, each Borrower may borrow, prepay and reborrow Revolving Loans of the applicable Class.

SECTION 2.02. Loans and Borrowings. (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans of the same Class, Type and currency made by the Lenders ratably in accordance with their respective Commitments of such Class. B/A Drawings shall be made in accordance with Section 2.07. The failure of any Lender to make any Loan (or provide its share of any

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B/A Drawings) required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans (or provide its share of any B/A Drawings) as required.

(b) Subject to Section 2.14, each Borrowing (i) denominated in Canadian Dollars shall be comprised entirely of B/A Drawings or Canadian Prime Rate Loans, (ii) denominated in US Dollars shall be comprised entirely of ABR Loans or Eurocurrency Loans; and (iii) denominated in Euros or Sterling shall be comprised entirely of Eurocurrency Loans; in each case as the applicable Borrower may request in accordance herewith. Notwithstanding the foregoing, each Swingline Loan denominated in US Dollars shall be an ABR Loan, each Swingline Loan denominated in Canadian Dollars shall be a Canadian Prime Rate Loan and each Swingline Loan denominated in Euros or Sterling shall be a UK Base Rate Loan. Each Lender at its option may make any Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the applicable Borrower to repay such Loan in accordance with the terms of this Agreement and shall not subject any Borrower to any obligation to make payments under Sections 2.15 and 2.17 in excess of amounts that would be payable if such option had not been exercised.

(c) At the commencement of each Interest Period for any Eurocurrency Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. At the time that each ABR Revolving Borrowing, UK Base Rate Borrowing or a Canadian Prime Rate Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum; provided that (i) an ABR Revolving Borrowing, UK Base Rate Borrowing or Canadian Prime Rate Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments of the applicable Class and (ii) in the case of an ABR Revolving Borrowing, UK Base Rate Borrowing or Canadian Prime Rate Borrowing under the Commitments of the applicable Class, in an amount that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e). Unless otherwise agreed with the applicable Swingline Lender and the applicable Borrower, each Swingline Loan shall be in an amount that is (i) an integral multiple of US$500,000 and not less than US$1,000,000, (ii) an integral multiple of Cdn.$500,000 and not less than Cdn.$1,000,000, (iii) an integral multiple of €500,000 and not less than €1,000,000 or (iv) an integral multiple of £500,000 and not less than £1,000,000. B/A Drawings shall be subject to Section 2.07. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of 20 Eurocurrency Revolving Borrowings outstanding (and the number of B/A Drawings shall be subject to Section 2.07).

(d) Notwithstanding any other provision of this Agreement, the Borrowers shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period or Contract Period requested with respect thereto would end after the Maturity Date.

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SECTION 2.03. Requests for Revolving Borrowings. To request a Revolving Borrowing (other than a Swingline Loan or B/A Drawing, which shall be subject to Sections 2.04 and 2.07, respectively), the applicable Borrower shall notify the Applicable Agent (and the US Agent, if it is not the Applicable Agent) of such request by telephone (a) in the case of a Eurocurrency Borrowing, not later than 11:00 a.m., Local Time, three Business Days before the date of the proposed Borrowing, (b) in the case of an ABR Borrowing, not later than 11:00 a.m., Local Time, on the date of the proposed Borrowing or (c) in the case of a Canadian Prime Rate Borrowing, not later than 11:00 a.m., Local Time, on the date of the proposed Borrowing; provided that any such notice of an ABR Revolving Borrowing or Canadian Prime Rate Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e) may be given no later than 11:00 a.m., Local Time on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Applicable Agent (with a copy to the US Agent, if it is not the Applicable Agent) of a written Borrowing Request in a form approved by the Applicable Agent and signed by the applicable Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

(i) the identity of the Borrower requesting such Borrowing;

(ii) whether such Borrowing is a Canadian Revolving Borrowing, a US Revolving Borrowing, a UK Revolving Borrowing, a Swiss Revolving Borrowing, an Italian Revolving Borrowing or a French Revolving Borrowing;

(iii) the aggregate amount and currency of the requested Borrowing;

(iv) the date of such Borrowing, which shall be a Business Day;

(v) whether such Borrowing is to be an ABR Borrowing, a Eurocurrency Borrowing or a Canadian Prime Rate Borrowing;

(vi) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and

(vii) the location and number of the applicable Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06.

If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing if denominated in US Dollars, a Canadian Prime Rate Borrowing if denominated in Canadian Dollars, or a Eurocurrency Borrowing if denominated in Euros or Sterling. If no Interest Period is specified with respect to any requested Eurocurrency Revolving Borrowing, then the applicable Borrower shall be deemed to have selected an Interest Period of one month. Promptly following receipt of a Borrowing Request in accordance with this Section, the

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Applicable Agent shall advise each Lender of the applicable Class of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

SECTION 2.04. Swingline Loans. (a) Subject to the terms and conditions set forth herein, the applicable Swingline Lender agrees to make Swingline Loans (i) denominated in US Dollars to the Parent Borrower, PR Borrower or US Borrower, (ii) denominated in Canadian Dollars to the Parent Borrower, (iii) denominated in Euros or Sterling to the UK Borrower or (iv) denominated in Euros to the French Borrower, the Italian Borrower or the Swiss Borrower, in each case from time to time during the Availability Period, in an aggregate principal amount at any time outstanding that will not result in (A) the aggregate Swingline Exposure in respect of Swingline Loans made to the Parent Borrower, the PR Borrower, the US Borrower and the UK Borrower exceeding US$7,500,000, (B) the aggregate Swingline Exposure in respect of Swingline Loans made to the French Borrower, the Italian Borrower and the Swiss Borrower exceeding US$7,500,000, (C) the sum of the total Revolving Exposures of any Class exceeding the total Commitments of such Class or (D) the Total Shared Revolving Exposure exceeding the Total Shared Borrowing Base then in effect; provided that (1) a Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan and (2) no Swingline Loans shall be made to the French Borrower, the Italian Borrower or the Swiss Borrower unless a Liquidity Event has occurred and is continuing. Within the foregoing limits and subject to the terms and conditions set forth herein, any such Borrower may borrow, prepay and reborrow Swingline Loans.

(b) To request a Swingline Loan, except as may otherwise be agreed by the applicable Borrower and the applicable Swingline Lender, the applicable Borrower shall notify the Applicable Agent (and the US Agent, if it is not the Applicable Agent) of such request by telephone (confirmed by telecopy), not later than 11:00 a.m., Local Time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount and currency of the requested Swingline Loan. The Applicable Agent will promptly advise the applicable Swingline Lender of any such notice received from a Borrower. Except as may otherwise be agreed by the applicable Borrower and the applicable Swingline Lender, the applicable Swingline Lender shall make each Swingline Loan available to the applicable Borrower by means of a credit to the general deposit account of such Borrower with such Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e), by remittance to the applicable Issuing Bank) as early as possible (but not later than 3:00 p.m., Local Time) on the requested date of such Swingline Loan.

(c) Any Swingline Lender may by written notice given to the Applicable Agent or US Agent not later than 12:00 noon, Local Time, on any Business Day require the Lenders of the applicable Class to acquire participations on such Business Day in all or a portion of the Swingline Loans of such Swingline Lender outstanding. Such notice shall specify the aggregate amount and currency of Swingline Loans in which such Lenders will participate. Promptly upon receipt of such notice, the Applicable Agent or US Agent will give notice thereof to each Lender of the applicable Class, specifying in

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such notice such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Applicable Agent (in the relevant currency), for the account of the applicable Swingline Lender, such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans of its Class pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Applicable Agent shall promptly pay to the applicable Swingline Lender the amounts so received by it from the Lenders. The Applicable Agent or US Agent shall notify the applicable Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Applicable Agent and not to the Swingline Lender. Any amounts received by a Swingline Lender from a Borrower (or other party on behalf of a Borrower) in respect of a Swingline Loan after receipt by such Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Applicable Agent; any such amounts received by the Applicable Agent shall be promptly remitted by the Applicable Agent to the Lenders of the applicable Class that shall have made their payments pursuant to this paragraph and to such Swingline Lender, as their interests may appear; provided that any such payment so remitted shall be repaid to such Swingline Lender or to the Applicable Agent, as applicable, if and to the extent such payment is required to be refunded to a Borrower for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the applicable Borrower of any default in the payment thereof. Notwithstanding the foregoing, the Applicable Agent or US Agent, on behalf of the applicable Swingline Lender, shall request settlements with the Lenders of the applicable Class at least twice per month.

SECTION 2.05. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, at any time and from time to time during the applicable Availability Period, any Borrower may request the issuance of Letters of Credit for its own account, in a form reasonably acceptable to the Applicable Agent and applicable Issuing Bank, and denominated in Canadian Dollars, Euros, Sterling or US Dollars. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the applicable Borrower to, or entered into by the applicable Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the applicable Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have

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been approved by the applicable Issuing Bank) to the applicable Issuing Bank and the Applicable Agent (and the US Agent if it is not the Applicable Agent) reasonably in advance of the requested date of issuance, amendment, renewal or extension a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount and currency of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the applicable Issuing Bank, the applicable Borrower also shall submit a letter of credit application on the applicable Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the applicable Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed US$15,000,000, (ii) the sum of the total Revolving Exposures of each Class shall not exceed the total Commitments of such Class and (iii) the Total Shared Revolving Exposure shall not exceed the Total Shared Borrowing Base then in effect.

(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Maturity Date.

(d) Participations. By the issuance of a Letter of Credit of any Class (or an amendment to a Letter of Credit of any Class increasing the amount thereof) and without any further action on the part of the applicable Issuing Bank or the Lenders, the applicable Issuing Bank hereby grants to each Lender of such Class, and each Lender of such Class hereby acquires from such Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. For purposes of the preceding sentence each Letter of Credit outstanding on the Effective Date shall be deemed to have been issued on the Effective Date. In consideration and in furtherance of the foregoing, subject to paragraph (k) of this Section in the case of Foreign Currency Letters of Credit, each Lender of the applicable Class hereby absolutely and unconditionally agrees to pay to the Applicable Agent, for the account of the applicable Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by the applicable Issuing Bank under a Letter of Credit of such Class and not reimbursed by the applicable Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the applicable Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of

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the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

(e) Reimbursement. If an Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the applicable Borrower shall reimburse such LC Disbursement by paying to the Applicable Agent an amount equal to such LC Disbursement not later than 12:00 noon, Local Time, on the date that such LC Disbursement is made, if the applicable Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., Local Time, on such date, or, if such notice has not been received by the applicable Borrower prior to such time on such date, then not later than 12:00 noon, Local Time, on (i) the Business Day that the applicable Borrower receives such notice, if such notice is received prior to 10:00 a.m., Local Time, on the day of receipt, or (ii) the Business Day immediately following the day that the applicable Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that, if such LC Disbursement is denominated in a currency permitted for Loans to the applicable Borrower as provided in Section 2.01 or 2.04, as applicable, and is not less than the minimum borrowing amount in the applicable currency, the applicable Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.04 that such payment be financed with an ABR Revolving Borrowing, a Canadian Prime Rate Borrowing or a Swingline Loan (in each case, as applicable in the relevant currency) in an equivalent amount and, to the extent so financed, the applicable Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Borrowing, Canadian Prime Rate Borrowing or Swingline Loan. If the applicable Borrower fails to make such payment when due, the Applicable Agent shall notify each Lender of the applicable Class of the applicable LC Disbursement, the payment then due from the applicable Borrower in respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice (but subject to paragraph (k) of this Section in the case of a Foreign Currency Letter of Credit), each such Lender shall pay to the Applicable Agent its Applicable Percentage of the payment then due from the applicable Borrower, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of such Lenders), and the Applicable Agent shall promptly pay to the applicable Issuing Bank the amounts so received by it from such Lenders. Promptly following receipt by the Applicable Agent of any payment from the applicable Borrower pursuant to this paragraph, the Applicable Agent shall distribute such payment to the applicable Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraph to reimburse the applicable Issuing Bank, then to such Lenders and the applicable Issuing Bank as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse an Issuing Bank for any LC Disbursement (other than the funding of Revolving Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the applicable Borrower of its obligation to reimburse such LC Disbursement.

(f) Obligations Absolute. The applicable Borrower’s obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance

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with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, such Borrower’s obligations hereunder. Neither the Applicable Agent, the Lenders nor any Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the applicable Issuing Bank; provided that the foregoing shall not be construed to excuse the applicable Issuing Bank from liability to the applicable Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by each Borrower to the extent permitted by applicable law) suffered by the applicable Borrower that are caused by the applicable Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or wilful misconduct on the part of the applicable Issuing Bank (as finally determined by a court of competent jurisdiction), such Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the applicable Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

(g) Disbursement Procedures. The applicable Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The applicable Issuing Bank shall promptly notify the Applicable Agent and the applicable Borrower by telephone (confirmed by telecopy) of such demand for payment and whether such Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the applicable Borrower of its obligation to reimburse the applicable Issuing Bank and the Lenders of the applicable Class with respect to any such LC Disbursement.

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(h) Interim Interest. If an Issuing Bank shall make any LC Disbursement, then, unless the applicable Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the applicable Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Loans, Canadian Prime Rate Loans or UK Base Rate Loans (as applicable for the relevant currency); provided that, if the applicable Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (e) of this Section to reimburse the applicable Issuing Bank shall be for the account of such Lender to the extent of such payment.

(i) Replacement of an Issuing Bank. An Issuing Bank may be replaced at any time by written agreement among the Parent Borrower, the US Agent, the replaced Issuing Bank and the successor Issuing Bank. The US Agent shall notify the Lenders of any such replacement of an Issuing Bank. At the time any such replacement shall become effective, each Borrower shall pay all unpaid fees accrued and payable by such Borrower for the account of the replaced Issuing Bank pursuant to Section 2.12(c). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the replaced Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

(j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that a Borrower receives notice from any Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, such Borrower shall deposit in an account with the Applicable Agent (or, if requested, the US Agent), in the name of such Agent and for the benefit of the Lenders, an amount in cash equal to 103% of the LC Exposure as of such date attributable to Letters of Credit issued for the account of such Borrower plus any accrued and unpaid interest thereon (in the currency or currencies in which such Letters of Credit are denominated); provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to any Borrower described in clause (h) or (i) of Section 7.01. The applicable Borrower also shall deposit cash collateral pursuant to this paragraph as and to the extent required by Section 2.11, and any such cash collateral so deposited and held by the Applicable Agent (or, if requested, the US Agent) hereunder shall constitute part of the applicable Borrowing Base for purposes of

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determining compliance with Section 2.11. Each such deposit referred to above shall be held by the Applicable Agent (or, if requested, the US Agent) as collateral for the payment and performance of the obligations of the applicable Borrower under the Loan Documents. The Applicable Agent (or US Agent, as applicable) shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the relevant Agent and at the applicable Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the relevant Agent to reimburse the applicable Issuing Bank for LC Disbursements for which it has not been reimbursed (or, in the case of deposits by the Parent Borrower, applied to pay B/As as and when due) and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the applicable Borrower for the LC Exposure (and, in the case of deposits by the Parent Borrower, to secure outstanding B/As) at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of the Required Lenders), be applied to satisfy other obligations of the applicable Borrower under the Loan Documents. If a Borrower is required to provide an amount of cash collateral hereunder as a result of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the applicable Borrower within three Business Days after all Defaults have been cured or waived. If a Borrower is required to provide an amount of cash collateral hereunder pursuant to Section 2.11, such amount (to the extent not applied as aforesaid) shall be returned to such Borrower as and to the extent that, after giving effect to such return, the applicable Borrower would remain in compliance with Section 2.11 and no Default shall have occurred and be continuing.

(k) Foreign Currency Letters of Credit. Upon the issuance of any Foreign Currency Letter of Credit, and so long as any Foreign Currency Letter of Credit (or LC Disbursement in respect thereof) remains outstanding, the following provisions shall apply:

(l) Subject to paragraph (iii) below, the obligation of the applicable Borrower to reimburse the applicable Issuing Bank for any LC Disbursement under any Foreign Currency Letter of Credit, and to pay interest thereon, shall be payable only in the currency in which such LC Disbursement is made, and shall not be discharged by paying an amount in any other currency; provided that the applicable Issuing Bank may agree, in its sole discretion, to accept reimbursement in another currency, but any such agreement shall not affect the obligations of the Lenders or the Borrowers under paragraphs (ii) and (iii) below if such reimbursement is not actually made to the applicable Issuing Bank when due.

(i) The obligation of each Lender under paragraphs (d) and (e) of this Section to pay its Applicable Percentage of any unpaid LC Disbursement under any Foreign Currency Letter of Credit shall be payable only in the applicable Primary Currency and shall be in an amount equal to such Applicable Percentage of the Primary Currency Amount of such unpaid drawing determined as provided in paragraph (iv) below. Under no

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circumstances shall the provisions hereof permitting the issuance of Foreign Currency Letters of Credit be construed, by implication or otherwise, as imposing any obligation upon any Lender of any Class to make any Loan or other payment under the Loan Documents, or to accept any payment from any Borrower in respect of any unreimbursed LC Disbursement, in any currency other than the currency or currencies expressly provided in this Agreement for extensions of credit by Lenders of the applicable Class.

(ii) If and to the extent that any Lender pays its Applicable Percentage of any unreimbursed LC Disbursement under any Foreign Currency Letter of Credit, then, notwithstanding paragraph (i) above, the obligation of the applicable Borrower to reimburse the portion of such unreimbursed LC Disbursement funded by such Lender shall be converted to, and shall be payable only in, the applicable Primary Currency (in an amount equal to the amount funded by such Lender in such Primary Currency as provided above) and shall not be discharged by paying an amount in any other currency. Interest accrued on such unreimbursed LC Disbursement to and excluding the date of such payment by such Lender shall be for the account of the applicable Issuing Bank and be payable in the applicable currency in which such LC Disbursement was made, but interest thereafter shall accrue on the amount owed to such Lender and shall be payable in the applicable Primary Currency.

(iii) If an LC Disbursement is made by an Issuing Bank in respect of a Foreign Currency Letter of Credit and is not reimbursed by the applicable Borrower as and when required by paragraph (e) of this Section, then such Issuing Bank shall calculate the amount in the applicable Primary Currency (the “Primary Currency Amount”) that would be required in order for such Issuing Bank to purchase an amount of the currency in which such LC Disbursement was made equivalent to such unpaid LC Disbursement, employing any method of exchange that such Issuing Bank would expect to employ in the conduct of its currency exchange activities. Such Issuing Bank shall notify the Applicable Agent, the US Agent and the applicable Borrower of the Primary Currency Amount so determined by it, and such determination shall be conclusive.

(iv) Certain Notices by Issuing Banks. Each Issuing Bank that is not the same Person as the Person serving as the US Agent shall notify the US Agent of (i) the currency, amount and expiration date of each Letter of Credit issued by such Issuing Bank at or prior to the time of issuance thereof, (ii) any amendment or modification to any such Letter of Credit at or prior to the time of such amendment or modification and (iii) any termination, surrender, cancelation or expiry of any such Letter of Credit at or prior to the time of such termination, surrender, cancelation or expiration.

SECTION 2.06. Funding of Borrowings and B/A Drawings. (a) Each Lender shall make each Loan to be made by it hereunder and disburse the Discount Proceeds (net of applicable acceptance fees) of each B/A to be accepted and purchased by

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it hereunder on the proposed date thereof by wire transfer of immediately available funds in the applicable currency by 2:00 p.m., Local Time, to the account of the Applicable Agent most recently designated by it for such purpose by notice to the relevant Lenders; provided that Swingline Loans shall be made as provided in Section 2.04. The Applicable Agent will make such Loans available or disburse the Discount Proceeds (net of applicable acceptance fees in accordance with this Agreement) to the applicable Borrower by promptly crediting the amounts so received, in like funds, to an account of the applicable Borrower maintained with the Applicable Agent in (i) New York City, in the case of Loans made to the US Borrower or the PR Borrower , (ii) Toronto, in the case of Loans made to the Parent Borrower and (iii) London, in the case of Loans made to the UK Borrower, the French Borrower, the Italian Borrower or the Swiss Borrower, in each case, designated by such Borrower in the applicable Borrowing Request; provided that Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e) shall be remitted by the Applicable Agent to the applicable Issuing Bank.

(b) Unless the Applicable Agent shall have received notice from a Lender prior to the proposed date of any Borrowing or acceptance and purchase of B/As that such Lender will not make available to the Applicable Agent such Lender’s share of such Borrowing or disburse the Discount Proceeds (net of applicable acceptance fees in accordance with this Agreement), the Applicable Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the applicable Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available or disbursed the Discount Proceeds (net of applicable acceptance fees in accordance with this Agreement) to the Applicable Agent, then the applicable Lender and the applicable Borrower severally agree to pay to the Applicable Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to such Borrower to but excluding the date of payment to the Applicable Agent, at (i) in the case of such Lender, the greater of (A) the Federal Funds Effective Rate, in the case of Loans denominated in US Dollars, (B) the rate determined by the Applicable Agent to be the cost to it of funding such amount, in the case of Loans denominated in Canadian Dollars, Euros or Sterling and (C) a rate determined by the Applicable Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of a Borrower, the interest rate applicable to such Borrowing or the applicable Discount Rate plus the acceptance fee applicable to such B/As, as the case may be. If such Lender pays such amount to the Applicable Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing or such Lender’s purchase of B/As, as the case may be.

SECTION 2.07. Bankers’ Acceptances. (a) Each acceptance and purchase of B/As of a single Contract Period pursuant to Section 2.01(a) or Section 2.08 shall be made ratably by the Canadian Lenders in accordance with the amounts of their Canadian Commitments. The failure of any Canadian Lender to accept any B/A required to be accepted by it shall not relieve any other Canadian Lender of its obligations hereunder; provided that the Canadian Commitments are several and no Canadian Lender shall be responsible for any other Canadian Lender’s failure to accept B/As as required.

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(b) The B/As of a single Contract Period accepted and purchased on any date shall be in an aggregate amount that is at least equal to the Borrowing Minimum and is an integral multiple of the Borrowing Multiple. If any Canadian Lender’s ratable share of the B/As of any Contract Period to be accepted on any date would not be an integral multiple of Cdn.$100,000, the face amount of the B/As accepted by such Lender may be increased or reduced to the nearest integral multiple of Cdn.$100,000 by the Canadian Agent in its sole discretion. B/As of more than one Contract Period, but not more than five Contract Periods, may be outstanding at the same time.

(c) To request an acceptance and purchase of B/As, the Parent Borrower shall notify the Canadian Agent of such request by telephone or by telecopy not later than 11:00 a.m., Local Time, two Business Days before the date of such acceptance and purchase. Each such request shall be irrevocable and, if telephonic, shall be confirmed promptly by hand delivery or telecopy to the Canadian Agent of a written request in a form approved by the Canadian Agent and signed by the Parent Borrower. Each such telephonic and written request shall specify the following information:

(i) the aggregate face amount of the B/As to be accepted and purchased;

(ii) the date of such acceptance and purchase, which shall be a Business Day;

(iii) the Contract Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Contract Period” (and which shall in no event end after the Maturity Date); and

(iv) the location and number of the Parent Borrower’s account to which the applicable Discount Proceeds (net of applicable acceptance fees) are to be disbursed, which shall comply with the requirements of Section 2.06. If no Contract Period is specified with respect to any requested acceptance and purchase of B/As, then the Parent Borrower shall be deemed to have selected a Contract Period of 30 days’ duration.

Promptly following receipt of a request in accordance with this paragraph, the Canadian Agent shall advise each Canadian Lender of the details thereof and of the amount of B/As to be accepted and purchased by such Lender.

(d) The Parent Borrower hereby appoints each Canadian Lender as its attorney to sign and endorse on its behalf, manually or by facsimile or mechanical signature, as and when deemed necessary by such Lender, blank forms of B/As, each such Lender hereby agreeing that it will not sign or endorse B/As in excess of those required in connection with B/A Drawings that have been requested by the Parent Borrower hereunder. It shall be the responsibility of each Canadian Lender to maintain an adequate supply of blank forms of B/As for acceptance under this Agreement. The Parent Borrower recognizes and agrees that all B/As signed and/or endorsed on its behalf by any Canadian Lender shall bind the Parent Borrower as fully and effectually as if

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manually signed and duly issued by authorized officers of the Parent Borrower. Each Canadian Lender is hereby authorized to issue such B/As endorsed in blank in such face amounts as may be determined by such Lender; provided that the aggregate face amount thereof is equal to the aggregate face amount of B/As required to be accepted by such Lender. No Lender shall be liable for any damage, loss or claim arising by reason of any loss or improper use of any such instrument unless such loss or improper use results from the bad faith, gross negligence or willful misconduct of such Lender. Each Canadian Lender shall maintain a record with respect to B/As (i) received by it from the Canadian Agent in blank hereunder, (ii) voided by it for any reason, (iii) accepted and purchased by it hereunder and (iv) canceled at their respective maturities. Each Canadian Lender further agrees to retain such records in the manner and for the periods provided in applicable provincial or federal statutes and regulations of Canada and to provide such records to the Parent Borrower upon its request and at its expense. Upon request by the Parent Borrower, a Canadian Lender shall cancel all forms of B/A that have been pre-signed or pre-endorsed on behalf of the Parent Borrower and that are held by such Lender and are not required to be issued pursuant to this Agreement.

(e) Drafts of the Parent Borrower to be accepted as B/As hereunder shall be signed as set forth in paragraph (d) above. Notwithstanding that any Person whose signature appears on any B/A may no longer be an authorized signatory for any of the Canadian Lenders or Parent Borrower at the date of issuance of such B/A, such signature shall nevertheless be valid and sufficient for all purposes as if such authority had remained in force at the time of such issuance and any such B/A so signed and properly completed shall be binding on the Parent Borrower.

(f) Upon acceptance of a B/A by a Canadian Lender, such Lender shall purchase such B/A from the Parent Borrower at the Discount Rate for such Lender applicable to such B/A accepted by it and provide to the Canadian Agent the Discount Proceeds for the account of the Parent Borrower as provided in Section 2.06. The acceptance fee payable by the Parent Borrower to a Canadian Lender under Section 2.12(b) in respect of each B/A accepted by such Lender shall be set off against the Discount Proceeds payable by such Lender under this paragraph. Notwithstanding the foregoing, in the case of any B/A Drawing resulting from the conversion or continuation of a B/A Drawing or Canadian Revolving Loan pursuant to Section 2.08, the net amount that would otherwise be payable to the Parent Borrower by each Canadian Lender pursuant to this paragraph will be applied as provided in Section 2.08(f).

(g) Each Canadian Lender may at any time and from time to time hold, sell, rediscount or otherwise dispose of any or all B/A’s accepted and purchased by it.

(h) Each B/A accepted and purchased hereunder shall mature at the end of the Contract Period applicable thereto.

(i) The Parent Borrower waives presentment for payment and any other defense to payment of any amounts due to a Canadian Lender in respect of a B/A accepted and purchased by it pursuant to this Agreement which might exist solely by reason of such B/A being held, at the maturity thereof, by such Lender in its own right

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and the Parent Borrower agrees not to claim any days of grace if such Lender as holder sues the Parent Borrower on the B/A for payment of the amounts payable by the Parent Borrower thereunder. On the last day of the Contract Period of a B/A, or such earlier date as may be required pursuant to the provisions of this Agreement, the Parent Borrower shall pay to the Canadian Agent, for the account of the Canadian Lender that has accepted and purchased such B/A, the full face amount of such B/A, and after such payment the Parent Borrower shall have no further liability in respect of such B/A and such Lender shall be entitled to all benefits of, and be responsible for all payments due to third parties under, such B/A.

(j) At the option of the Parent Borrower and any Canadian Lender, B/As under this Agreement to be accepted by that Lender may be issued in the form of depository bills for deposit with The Canadian Depository for Securities Limited pursuant to the Depository Bills and Notes Act (Canada) or bills of exchange pursuant to the Bills of Exchange Act (Canada). All depository bills so issued and bills of exchange shall be governed by the provisions of this Section 2.07.

(k) If a Canadian Lender is not a bank under the Bank Act (Canada) or if a Canadian Lender notifies the Canadian Agent in writing that it is otherwise unable or unwilling to accept B/As, such Lender will, instead of accepting and purchasing B/As, make a Loan (a “B/A Equivalent Loan”) to the Parent Borrower in the amount and for the same term as each draft which such Lender would otherwise have been required to accept and purchase hereunder. Each such Lender will provide to the Canadian Agent the Discount Proceeds of such B/A Equivalent Loan for the account of the Parent Borrower in the same manner as such Lender would have provided the Discount Proceeds in respect of the draft which such Lender would otherwise have been required to accept and purchase hereunder. Each such B/A Equivalent Loan will bear interest at the same rate that would result if such Lender had accepted (and been paid an acceptance fee) and purchased (at the applicable Discount Rate) a B/A for the relevant Contract Period (it being the intention of the parties that each such B/A Equivalent Loan shall have the same economic consequences for the Canadian Lenders and the Parent Borrower as the B/A that such B/A Equivalent Loan replaces). All such interest shall be paid in advance on the date such B/A Equivalent Loan is made, and will be deducted from the principal amount of such B/A Equivalent Loan in the same amount and manner in which the deduction based on the Discount Rate and the applicable acceptance fee of a B/A would be deducted from the face amount of the B/A. Subject to the repayment requirements of this Agreement, on the last day of the relevant Contract Period for such B/A Equivalent Loan, the Parent Borrower shall be entitled to convert each such B/A Equivalent Loan into another type of Loan, or to roll over each such B/A Equivalent Loan into another B/A Equivalent Loan, all in accordance with the applicable provisions of this Agreement.

(l) Notwithstanding any provision hereof but subject to Section 2.11(c), the Parent Borrower may not prepay any B/A Drawing other than on the last day of its Contract Period.

(m) For greater certainty, all provisions of this Agreement which are applicable to B/As shall also be applicable, mutatis mutandis, to B/A Equivalent Loans.

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SECTION 2.08. Interest Elections and Contract Periods. (a) Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Revolving Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Each B/A Drawing shall have a Contract Period as specified in the applicable request therefor. Thereafter, the applicable Borrower may elect to convert such Borrowing or B/A Drawing to a different Type or to continue such Borrowing or B/A Drawing and, in the case of a Eurocurrency Revolving Borrowing, may elect Interest Periods therefor, all as provided in this Section, it being understood that no B/A Drawing may be converted or continued other than at the end of the Contract Period applicable thereto. The applicable Borrower may elect different options with respect to different portions of the affected Borrowing or B/A Drawing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing or accepting the B/As comprising such B/A Drawing, as the case may be, and any Loan or B/As resulting from an election made with respect to any such portion shall be considered a separate Borrowing or B/A Drawing.

Notwithstanding any other provision of this Section, no Borrowing or B/A Drawing may be converted into or continued as a Borrowing or B/A Drawing with an Interest Period or Contract Period ending after the Maturity Date. This Section shall not apply to Swingline Borrowings, which may not be converted or continued.

(b) To make an election pursuant to this Section, the applicable Borrower shall notify the Applicable Agent of such election by telephone (i) in the case of an election that would result in a Borrowing, by the time and date that a Borrowing Request would be required under Section 2.03 if such Borrower were requesting a Revolving Borrowing in the same currency and of the Type resulting from such election to be made on the effective date of such election, and (ii) in the case of an election that would result in a B/A Drawing or the continuation of a B/A Drawing, by the time and date that a request would be required under Section 2.07 if such Borrower were requesting an acceptance and purchase of B/As to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Applicable Agent of a written Interest Election Request in a form approved by the Applicable Agent and signed by the applicable Borrower. Notwithstanding any other provision of this Section, (i) the Borrowers shall not be permitted to change the Borrower in respect of or the currency of any Borrowing, and (ii) each conversion or continuation of a Borrowing shall comply with the applicable provisions of Section 2.02.

(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:

(i) the relevant Borrower and the Borrowing or B/A Drawing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing or B/A Drawing (in which case the information to be specified pursuant to clauses (iii) and (iv) and below shall be specified for each resulting Borrowing or B/A Drawing);

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(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing, a Eurocurrency Borrowing, a Canadian Prime Rate Borrowing or a B/A Drawing; and

(iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”, and in the case of an election of a B/A Drawing, the Contract Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Contract Period”.

If any such Interest Election Request requests a Eurocurrency Borrowing or a B/A Drawing but does not specify an Interest Period or Contact Period, then the applicable Borrower shall be deemed to have selected an Interest Period or Contract Period of one month’s or 30 days’ duration, as applicable.

(d) Promptly following receipt of an Interest Election Request, the Applicable Agent shall advise each participating Lender of the details thereof and of such Lender’s portion of each resulting Borrowing or B/A Drawing.

(e) If the relevant Borrower fails to deliver a timely Interest Election Request with respect to a Eurocurrency Revolving Borrowing or B/A Drawing prior to the end of the Interest Period or Contract Period applicable thereto, then, unless such Borrowing or B/A Drawing is repaid as provided herein, at the end of such Interest Period or Contract Period such Borrowing or B/A Drawing shall (i) in the case of a Eurocurrency Borrowing denominated in US Dollars, be converted to an ABR Borrowing, (ii) in the case of a B/A Drawing, be converted to a Canadian Prime Rate Borrowing and (iii) in the case of a Eurocurrency Borrowing denominated in Sterling or Euros, be continued as a Eurocurrency Borrowing with an Interest Period of one month. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Applicable Agent or the US Agent, at the request of the Required Lenders, so notifies the Parent Borrower, then, so long as an Event of Default is continuing (i) no outstanding Revolving Borrowing denominated in a currency other than Sterling or Euros may be converted to or continued as a Eurocurrency Borrowing, (ii) unless repaid, each Eurocurrency Borrowing denominated in US Dollars shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto, (iii) unless repaid, each Eurocurrency Borrowing denominated in Sterling or Euros shall be converted, at the end of the Interest Period applicable thereto, to a Eurocurrency Borrowing with an Interest Period of one month or such shorter period as shall be determined by the Applicable Agent in its sole discretion, (iv) no outstanding Borrowing denominated in Canadian Dollars may be converted to or continued as a B/A Drawing and (v) unless repaid, each B/A Drawing shall be converted to a Canadian Prime Rate Borrowing at the end of the applicable Contract Period thereto.

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(f) Upon the conversion of any Canadian Borrowing (or portion thereof), or the continuation of any B/A Drawing (or portion thereof), to or as a B/A Drawing, the net amount that would otherwise be payable to the Parent Borrower by each Canadian Lender pursuant to Section 2.07(f) in respect of such new B/A Drawing shall be applied against the principal of the Canadian Revolving Loan made by such Lender as part of such Canadian Revolving Borrowing (in the case of a conversion), or the reimbursement obligation owed to such Lender under Section 2.07(i) in respect of the B/As accepted by such Lender as part of such maturing B/A Drawing (in the case of a continuation), and such Borrower shall pay to such Lender an amount equal to the difference between the principal amount of such Canadian Revolving Loan or the aggregate face amount of such maturing B/As, as the case may be, and such net amount.

SECTION 2.09. Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date.

(b) The Parent Borrower may at any time terminate, or from time to time reduce, the Commitments of any Class; provided that (i) each reduction of the Commitments of any Class shall be in an amount that is an integral multiple of US$1,000,000 and not less than US$1,000,000 or the entire amount of Commitments of such Class, (ii) the Parent Borrower shall not terminate or reduce the Canadian Commitments if, after giving effect to any concurrent prepayment of the Canadian Revolving Loans in accordance with Section 2.11, the total Canadian Revolving Exposures would exceed the total Canadian Commitments, (iii) the Parent Borrower shall not terminate or reduce the US Commitments if, after giving effect to any concurrent prepayment of the US Revolving Loans in accordance with Section 2.11, the total US Revolving Exposures would exceed the total US Commitments, (iv) the Parent Borrower shall not terminate or reduce the UK Commitments if, after giving effect to any concurrent prepayment of the UK Revolving Loans in accordance with Section 2.11, the total UK Revolving Exposures would exceed the total UK Commitments and (v) the Parent Borrower shall not terminate or reduce the European Commitments if, after giving effect to any concurrent prepayment of the European Revolving Loans in accordance with Section 2.11, the total European Revolving Exposures would exceed the total European Commitments.

(c) The Parent Borrower shall notify the Applicable Agent (and the US Agent, if it is not the Applicable Agent) of any election to terminate or reduce the Commitments of any Class under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Applicable Agent shall advise the Lenders of the applicable Class of the contents thereof. Each notice delivered by the Parent Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments of any Class may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Parent Borrower (by notice to the Applicable Agent (and the US Agent, if it is not the Applicable Agent) on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall

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be made ratably among the applicable Lenders in accordance with their respective Commitments of such Class.

SECTION 2.10. Repayment of Loans and B/As; Evidence of Debt. (a) Each Borrower hereby unconditionally promises to pay (i) on the Maturity Date, to the Applicable Agent for the account of each Lender, the then unpaid principal amount of each Revolving Loan made to such Borrower and held by such Lender and (ii) to the Swingline Lender the then unpaid principal amount of each Swingline Loan made to such Borrower, on the earlier of the Maturity Date and the first date after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least two Business Days after such Swingline Loan is made; provided that on each date that a Revolving Borrowing is made by a Borrower, such Borrower shall repay any and all Swingline Loans made to it that are then outstanding. The Parent Borrower hereby unconditionally promises to pay each B/A as provided in Section 2.07.

(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of each Borrower to such Lender resulting from each Loan (including B/A Equivalent Loans) made or B/A accepted by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(c) The US Agent shall maintain accounts in which it shall record (i) the amount and currency of each Loan (including B/A Equivalent Loans) made hereunder, the Class and Type thereof and the Interest Period applicable thereto and the amount of each B/A and the Contract Period applicable thereto, (ii) the amount and currency of any principal or interest or other amount in respect of any B/A due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) the amount and currency of any sum received by any Agent hereunder for the account of any of the Lenders and each Lender’s share thereof. Each other Agent shall promptly provide the US Agent with all information needed in order for the US Agent to maintain such accounts.

(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of any Borrower to repay its Loans in accordance with the terms of this Agreement.

(e) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the applicable Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Applicable Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

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SECTION 2.11. Prepayment of Loans. (a) Each Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the requirements of this Section.

(b) In the event and on each occasion that the Total Shared Revolving Exposure exceeds the Total Shared Borrowing Base then in effect, then one or more of the Borrowers shall immediately prepay Borrowings (or, if no Borrowings included in the Total Shared Revolving Exposure are outstanding, deposit cash collateral pursuant to Section 2.05(j) in an aggregate amount sufficient to eliminate such excess.

(c) If, on any Reset Date (as a result of currency fluctuations), the total Revolving Exposures of any Class exceed 105% of the total Commitments of such Class, then the applicable Borrower shall, within three Business Days after receiving notice thereof from the Applicable Agent or US Agent, prepay one or more of its Borrowings in an aggregate amount sufficient to reduce its Revolving Exposures to an amount that does not exceed the total Commitments of the applicable Class; provided that the Parent Borrower shall not be obligated to prepay any B/A in order to comply with the terms of this Section 2.11(c); provided, further, that should a prepayment of all outstanding Borrowings of the applicable Class be insufficient to reduce the total Revolving Exposures of the applicable Class to an amount that does not exceed the total Commitments of such Class, the applicable Borrower shall provide cash collateral to the Applicable Agent pursuant to Section 2.05(j) in an amount sufficient to secure the outstanding LC Exposures (and B/As, if applicable) of the applicable Class to the extent necessary to comply with this paragraph (c) (and such collateral will be held by the Applicable Agent and applied to pay LC Disbursements in respect of Letters of Credit of the applicable Class, and B/As if applicable, as and when due).

(d) Not later than the third Business Day following the receipt of Net Proceeds in respect of any Bulk Receivables/Inventory Sale, each Borrower shall apply a portion of the Net Proceeds received in respect thereof (in an amount, equal to the lesser of such Net Proceeds and the Bulk Sale Prepayment Amount allocable to such Borrower in respect of such Bulk Receivables/Inventory Sale) to (i) first, prepay Swingline Loans of such Borrower, (ii) second, prepay Revolving Loans of such Borrower (but not B/As), (iii) third (in the case of the Parent Borrower), deposit cash collateral with the Applicable Agent pursuant to Section 2.05(j), up to the amount of B/As then outstanding, to secure such BA (and to be applied to pay B/As as and when due), and (iv) fourth, if an Event of Default has occurred and is continuing, deposit cash collateral pursuant to Section 2.05(j), up to the amount of the LC Exposure attributable to Letters of Credit issued for the account of such Borrower; provided that no such prepayment shall be required unless the total Bulk Sale Prepayment Amount in respect of such Bulk Receivables/Inventory Sale exceeds US$5,000,000 and prior to giving effect to such prepayment (A) the Available Amount is less than US$30,000,000 or (B) less than 50% of the total amount of the Commitments remains unused and available for borrowing hereunder (taking into account any limitation on borrowing hereunder as a result of the Total Shared Borrowing Base). For purposes hereof, the US Borrower and the PR Borrower shall be considered to be the same Borrower.

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(e) On each Business Day during any period that an Availability Trigger Event has occurred and is continuing, the Applicable Agent will, as and to the extent required by the terms of the applicable Security Documents, transfer cash deposited in the Cash Collection Accounts on such Business Day to the Applicable Agent, and such cash shall be applied to prepay, first, Swingline Loans and second, Revolving Borrowings (other than B/As), and, if an Event of Default has occurred and is continuing, to deposit pursuant to Section 2.05(j) to secure outstanding Letters of Credit and B/As; provided that any such cash deposited in any Cash Collection Account established under the Security Documents of any Class shall be applied to Revolving Exposure of such Class before being applied to any other Class of Revolving Exposure.

(f) Except for prepayments made pursuant to paragraph (e) above, prior to any optional or mandatory prepayment of Borrowings hereunder, the applicable Borrower shall select the Borrowing or Borrowings to be prepaid and shall specify such selection in the notice of such prepayment pursuant to paragraph (g) of this Section.

(g) Except for prepayments made pursuant to paragraph (e) above, the applicable Borrower shall notify the Applicable Agent (and the US Agent if it is not the Applicable Agent, and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of an ABR Revolving Borrowing, a Canadian Prime Rate Borrowing or a UK Base Rate Borrowing, not later than 11:00 a.m., Local Time, on the date of prepayment , (ii) in the case of prepayment of a Eurocurrency Revolving Borrowing, not later than 11:00 a.m., Local Time, three Business Days before the date of prepayment, or (iii) in the case of prepayment of a Swingline Loan, not later than 12:00 (noon), Local Time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a detailed calculation of the amount of such prepayment; provided that, if a notice of optional prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.09, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.09. Promptly following receipt of any such notice (other than a notice relating solely to Swingline Loans) relating to a Revolving Borrowing, the Applicable Agent shall advise the relevant Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13.

SECTION 2.12. Fees. (a) Each Borrower agrees to pay to the Applicable Agent for the account of each Lender of the relevant Class a commitment fee, which shall accrue at the Commitment Fee Rate on the daily unused amount of the Commitment of such Lender, during the period from and including the Effective Date to but excluding the date on which such Commitment terminates. Accrued commitment fees shall be payable

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in arrears on the last day of March, June, September and December of each year and on the date on which the Commitments of the applicable Class terminate, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). For purposes of computing commitment fees, a Commitment of a Lender of any Class shall be deemed to be used to the extent of the outstanding Revolving Loans and LC Exposure (and, in the case of Canadian Commitments, the face amount of B/As) of such Lender of such Class (and the Swingline Exposure of such Lender shall be disregarded for such purpose).

(b) The Parent Borrower agrees to pay to the Canadian Agent (by netting from the proceeds of sale of any B/A), for the account of each Canadian Lender, on each date on which B/As drawn by the Parent Borrower are accepted hereunder, in Canadian Dollars, an acceptance fee equal to (i) the product of the Applicable Rate and the face amount of each B/A accepted by such Lender multiplied by (ii) a fraction, the numerator of which is the number of days in the Contract Period applicable to such B/A and the denominator of which is 365 or 366 (as applicable).

(c) Each Borrower agrees to pay (i) to the Applicable Agent for the account of each applicable Lender a participation fee with respect to its participations in Letters of Credit issued for the account of such Borrower, which shall accrue at the same Applicable Rate used to determine the interest rate applicable to Eurocurrency Revolving Loans on the average daily amount of such Lender’s LC Exposure attributable to such Letters of Credit (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lender’s Commitment of the applicable Class terminates and the date on which such Lender ceases to have any LC Exposure attributable to such Letters of Credit, and (ii) to each Issuing Bank a fronting fee, which shall accrue at the rate of 0.25% per annum on the average daily amount of the LC Exposure attributable to Letters of Credit issued for the account of such Borrower (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Commitments of the applicable Class and the date on which there ceases to be any LC Exposure in respect of such Letters of Credit, as well as the Issuing Bank’s standard fees with respect to the issuance, amendment, renewal or extension of any such Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the Effective Date; provided that all such fees payable by any Borrower shall be payable on the date on which the relevant Commitments for such Borrower terminate and any such fees accruing after the date on which such Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

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(d) The Parent Borrower agrees to pay to the Canadian Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Parent Borrower and the US Agent. Such fees may be shared with the other Agents.

(e) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Applicable Agent (or to the applicable Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances.

(f) To comply with the provisions of Articles L.313-4 and R.313-1 of the French Code monétaire et financier, the French Borrower and the Lenders agree that the effective global interest rate for each of the Loans made available to the French Borrower cannot be calculated as of the Effective Date for the entire duration of this Agreement; however, a letter which sets forth a sample calculation of interest on the Loans shall be provided to the French Borrower by the European Agent on the Effective Date and prior to the making of any Loan to a French Borrower.

SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Rate. The Loans comprising each Canadian Prime Rate Borrowing shall bear interest at the Canadian Prime Rate plus the Applicable Rate. The Loans comprising each UK Base Rate Borrowing shall bear interest at the UK Base Rate plus the Applicable Rate. The Loans comprising each Sterling/Euro Alternate Rate Borrowing shall bear interest at the Sterling/Euro Alternate Rate.

(b) The Loans comprising each Eurocurrency Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.

(c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by any Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans (or (A) in the case of an amount denominated in Canadian Dollars, 2% plus the rate applicable to Canadian Prime Rate Loans or (B) in the case of an amount denominated in Sterling or Euros, 2% plus the Sterling/Euro Alternate Rate) as provided in paragraph (a) of this Section.

(d) Accrued interest on each Loan (which is not a B/A or B/A Equivalent Loan) of any Class shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Commitments of such Class; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan, Canadian Prime Rate Loan or UK Base

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Rate Loan prior to the end of the applicable Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Revolving Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(e) All interest (except in respect of BAs and BA Equivalent Loans) hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Canadian Prime Rate or to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate, and interest with respect to any Loan denominated in Sterling, shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Canadian Prime Rate, UK Base Rate, Adjusted LIBO Rate or Sterling/Euro Alternate Rate shall be determined by the Applicable Agent, and such determination shall be conclusive absent manifest error.

(f) Whenever interest is calculated on the basis of a year of 360 or 365 days, for the purposes of the Interest Act (Canada), the yearly rate of interest which is equivalent to the rate payable hereunder is the rate payable multiplied by the actual number of days in the year and divided by 360 or 365, as the case may be. All such interest will be calculated using the nominal rate method and not the effective rate method and the deemed reinvestment principle shall not apply to such calculations.

(g) The rates of interest provided for in this Agreement, including this Section 2.13, are minimum interest rates. When entering into this Agreement, the parties have assumed that the interest payable at the rates set out in this Section or in other Sections of this Agreement is not and will not become subject to the Swiss Withholding Tax. Notwithstanding that the parties do not anticipate that any payment of interest will be subject to the Swiss Withholding Tax, they agree that, in the event that the Swiss Withholding Tax should be imposed on interest payments by the Swiss Borrower, the payment of interest due by the Swiss Borrower shall, in line with Section 2.17, including limitations therein, be increased to an amount which (after making any deduction of the Non-Refundable Portion (as defined below) of the Swiss Withholding Tax) results in a payment to each Lender entitled to such payment of an amount equal to the payment which would have been due had no deduction of Swiss Withholding Tax been required. For this purpose, the Swiss Withholding Tax shall be calculated on the full grossed-up interest amount. For the purposes of this Section, “Non-Refundable Portion” shall mean Swiss Withholding Tax at the standard rate (being, as at the date hereof, 35%) unless a tax ruling issued by the Swiss Federal Tax Administration confirms that, in relation to a specific Lender based on an applicable double tax treaty, the Non-Refundable Portion is a specified lower rate in which case such lower rate shall be applied in relation to such Lender. The Swiss Borrower shall provide to the European Agent the documents required by law or applicable double taxation treaties for the Lenders to claim a refund of any Swiss Withholding Tax so deducted.

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SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurocurrency Borrowing of any Class denominated in any currency:

(a) the Applicable Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or

(b) the Applicable Agent is advised by a majority interest of the Lenders of the applicable Class that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;

then the Applicable Agent shall give notice thereof to the Parent Borrower (on behalf of itself and the other Borrowers) and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Applicable Agent notifies the Parent Borrower (on behalf of itself and the other Borrowers) and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing denominated in such currency to, or continuation of any Borrowing denominated in such currency as, a Eurocurrency Borrowing shall be ineffective and any Eurocurrency Borrowing denominated in such currency that is requested to be continued (A) if such currency is the US Dollar, shall be converted to an ABR Borrowing on the last day of the Interest Period applicable thereto and (B) if such currency is Sterling or Euros, shall be converted to a Sterling/Euro Alternate Rate Borrowing on the last day of the Interest Period applicable thereto, and (ii) if any Borrowing Request requests a Eurocurrency Borrowing denominated in such currency (A) if such currency is the US Dollar, such Borrowing shall be made as an ABR Borrowing and (B) if such currency is Sterling or Euros, such Borrowing shall be made as a Sterling/Euro Alternate Rate Borrowing; provided that, in the case of a notice pursuant to clause (b) above that relates only to a particular Class, such notice shall apply only to Borrowings of the affected Class.

SECTION 2.15. Increased Costs. (a) If any Change in Law (other than a Change in Law imposing an Excluded Tax) shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or any Issuing Bank; or

(ii) impose on any Lender or any Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurocurrency Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurocurrency Loan or of obtaining funds for the purchase of

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B/As (or of maintaining its obligation to make any such Loan or to accept and purchase B/As) or to increase the cost to such Lender or Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or Issuing Bank hereunder (whether of principal, interest or otherwise), then the applicable Borrower or the Parent Borrower will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

(b) If any Lender or Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or Issuing Bank’s capital or on the capital of such Lender’s or Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender or Issuing Bank or such Lender’s or Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or Issuing Bank’s policies and the policies of such Lender’s or Issuing Bank’s holding company with respect to capital adequacy), then from time to time the applicable Borrower or the Parent Borrower will pay to such Lender or Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or Issuing Bank or such Lender’s or Issuing Bank’s holding company for any such reduction suffered.

(c) A certificate of a Lender or Issuing Bank setting forth in writing the amount or amounts necessary to compensate such Lender or Issuing Bank or its holding company, as the case may be, and describing the relevant Change in Law as specified in paragraph (a) or (b) of this Section shall be delivered to the Parent Borrower and shall be conclusive absent manifest error. The applicable Borrower or the Parent Borrower shall pay such Lender or Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

(d) Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or Issuing Bank’s right to demand such compensation; provided that the applicable Borrower and Parent Borrower shall not be required to compensate a Lender or Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 270 days prior to the date that such Lender or Issuing Bank, as the case may be, notifies the Parent Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.

(e) Notwithstanding any other provision of this Section 2.15, no Lender or Issuing Bank shall be entitled to compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital under this Section unless such Lender or Issuing Bank, as the case may be, represents to the Parent Borrower that

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at the time it is the policy or general practice of such Lender or Issuing Bank to demand such compensation for comparable costs or reductions, if any, in similar circumstances, if any, under comparable provisions of other credit agreements for comparable customers.

SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any Eurocurrency Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurocurrency Loan or to issue B/As for acceptance and purchase on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.11 and is revoked in accordance therewith), or (d) the assignment of any Eurocurrency Loan or the right to receive payment in respect of a B/A other than on the last day of the Interest Period or Contract Period, as the case may be, applicable thereto as a result of a request by the Parent Borrower pursuant to Section 2.19 or the CAM Exchange, then, in any such event, the applicable Borrower or the Parent Borrower shall compensate each affected Lender for the loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in the same currency and of a comparable amount and period from other banks in the Eurocurrency market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section and a description of the basis therefor shall be delivered to the Parent Borrower and shall be conclusive absent manifest error. The applicable Borrower or the Parent Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

SECTION 2.17. Taxes. (a) Each payment by any Borrower (or Guarantor) under any Loan Document shall be made without withholding for any Taxes, unless such withholding is required by any Requirement of Law. If any Withholding Agent determines, in its sole discretion exercised in good faith, that it is so required to withhold taxes, then such Withholding Agent may so withhold and shall timely pay the full amount of withheld taxes to the relevant Governmental Authority in accordance with applicable law. If such taxes are Indemnified Taxes, then the amount payable by the applicable Borrower (or Guarantor) shall be increased as necessary so that, net of such withholding (including such withholding applicable to additional amounts payable under this Section), the Applicable Agent, each affected Lender or Issuing Bank (as the case may be) receives the amount it would have received had no such withholding been made.

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(b) In addition, the applicable Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. All amounts set out, or expressed to be payable, under any Loan Document by any party to the Applicable Agent, any Lender or any Issuing Bank which (in whole or in part) constitute the consideration for VAT purposes shall be deemed to be exclusive of any VAT which is chargeable in connection therewith.

(c) The applicable Borrower (or Guarantor) shall indemnify each Agent, each Lender and each Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by such Agent, such Lender or such Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the applicable Borrower hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.17) and any penalties, interest and reasonable out-of-pocket expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the applicable Borrower (or Guarantor) by a Lender or Issuing Bank, or by the Applicable Agent on its own behalf or on behalf of a Lender or Issuing Bank, shall be conclusive absent manifest error.

(d) Each Lender shall severally indemnify each Agent for the full amount of any Excluded Taxes attributable to such Lender that are paid or payable by the Agent in connection with any Loan Document and any reasonable expenses arising therefrom or with respect thereto, whether or not such Excluded Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. The indemnity under this paragraph (d) shall be paid within 10 days after the Agent delivers to the applicable Lender a certificate stating the amount of Excluded Taxes so payable by the Agent. Such certificate shall be conclusive of the amount so payable absent manifest error.

(e) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the applicable Borrower (or Guarantor) to a Governmental Authority, such Borrower (or Guarantor) shall deliver to the Applicable Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Applicable Agent.

(f)(i) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which a Borrower (or Guarantor) is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the applicable Borrower (or Guarantor) (with a copy to the Applicable Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower (or Guarantor) or the Applicable Agent as will permit such payments to be made without withholding or at a reduced rate. In addition, any Lender, if requested by the Borrower (or Guarantor) or the Applicable Agent, shall deliver such other documentation prescribed by law or reasonably requested by the

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Borrower (or Guarantor) or the Applicable Agent as will enable the Borrower (or Guarantor) or the Applicable Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding sentence, the completion, execution and submission of such documentation (other than such documentation set forth below in this paragraph (f)) shall not be required if in the Lender’s judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender. Upon the reasonable request of such Borrower (or Guarantor) or the Applicable Agent, any Lender shall update any form or certification previously delivered pursuant to this Section. If any form or certification previously delivered pursuant to this Section expires or becomes obsolete or inaccurate in any respect with respect to a Lender, such Lender shall promptly (and in any event within 10 days after such expiration, obsolescence or inaccuracy) notify such Borrower (or Guarantor) and the Applicable Agent in writing of such expiration, obsolescence or inaccuracy and update the form or certification if it is legally eligible to do so.

(ii) Without limiting the generality of the foregoing, if any Borrower (or Guarantor) is a U.S. Person, any Lender with respect to such Borrower (or Guarantor) shall, if it is legally eligible to do so, deliver to such Borrower (or Guarantor) and the US Agent (in such number of copies reasonably requested by such Borrower (or Guarantor) and the US Agent) on or prior to the date on which such Lender becomes a party hereto, duly completed and executed copies of whichever of the following is applicable:

(A) in the case of a Lender that is a U.S. Person, IRS Form W-9;

(B) in the case of a Non-U.S. Lender claiming the benefits of an income tax treaty to which the United States is a party (1) with respect to payments of interest under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding tax pursuant to the “interest” article of such tax treaty and (2) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding tax pursuant to the “business profits” or “other income” article of such tax treaty;

(C) in the case of a Non-U.S. Lender for whom payments under any Loan Document constitute income that is effectively connected with such Non-U.S. Lender’s conduct of a trade or business in the United States, IRS Form W-8ECI;

(D) in the case of a Non-U.S. Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code both (1) IRS Form W-8BEN and (2) a certificate substantially in the form of Exhibit M (a “U.S. Tax Certificate”) to the effect that such Non-U.S. Lender is not (a) a “bank” within the meaning of Section 881(c)(3)(A) of

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the Code, (b) a “10 percent shareholder” of the Borrower (or Guarantor) within the meaning of Section 881(c)(3)(B) of the Code, (c) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code and (d) conducting a trade or business in the United States with which the relevant interest payments are effectively connected;

(E) in the case of a Non-U.S. Lender that is not the beneficial owner of payments made under any Loan Document (including a partnership or a participating Lender) (1) an IRS Form W-8IMY on behalf of itself and (2) the relevant forms prescribed in clauses (A), (B), (C), (D) and (F) of this paragraph (f)(ii) that would be required of each such beneficial owner or partner of such partnership if such beneficial owner or partner were a Lender; provided, however, that if the Lender is a partnership and one or more of its partners are claiming the exemption for portfolio interest under Section 881(c) of the Code, such Lender may provide a U.S. Tax Certificate on behalf of such partners; or

(F) any other form prescribed by law as a basis for claiming exemption from, or a reduction of, U.S. federal withholding tax together with such supplementary documentation necessary to enable the Borrower (or Guarantor) or the Applicable Agent to determine the amount of Tax (if any) required by law to be withheld.

(iii) If a payment made to a Lender under any Loan Document would be subject to U.S. Federal withholding Tax imposed by FATCA if such Lender fails to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Withholding Agent (A) a certification signed by the chief financial officer, principal accounting officer, treasurer or controller and (B) other documentation reasonably requested by the Withholding Agent sufficient for the Withholding Agent to comply with its obligations under FATCA and to determine that such Lender has complied with such applicable reporting requirements.

(g) If the Applicable Agent or a Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by a Borrower (or Guarantor) or with respect to which a Borrower (or Guarantor) has paid additional amounts pursuant to this Section 2.17, it shall pay over such refund to such Borrower (or Guarantor) (but only to the extent of indemnity payments made, or additional amounts paid, by such Borrower (or Guarantor) under this Section 2.17 with respect to the Taxes or Other Taxes giving rise to such refund), net of all reasonable out-of-pocket expenses of the Applicable Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that the applicable Borrower (or Guarantor), upon the request of the Applicable Agent or such Lender, agrees to repay the amount paid over to the Borrower (or Guarantor) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Applicable Agent or such Lender in the

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event the Applicable Agent or such Lender is required to repay such refund to such Governmental Authority. This Section shall not be construed to require the Applicable Agent or any Lender to make available its tax returns (or any other information relating to its Taxes which it deems confidential) to the Borrower or any other Person.

(h) Each original Lender who has made a Loan to the Swiss Borrower confirms on the date of this Agreement that it is a Qualifying Bank and any other Person that shall become a Lender hereto with respect to such Loan pursuant to an Assignment and Assumption or a participation with respect to such Loan pursuant to Section 9.04 shall be deemed to have confirmed that it is (i) a Qualifying Bank or (ii) one single creditor for the purposes of the Swiss Ten Non-Bank Rule and the Swiss Twenty Non-Bank Rule.

SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) Each Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to the time expressly required hereunder or under such other Loan Document for such payment, or, if no such time is expressly required, prior to 3:00 p.m., Local Time), on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Applicable Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Applicable Agent at such account as the Applicable Agent shall from time to time specify in a notice delivered to the applicable Borrower except payments to be made directly to an Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein. The Applicable Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. Subject in each case to Section 7.02 (and Section 2.05(k), in the case of Foreign Currency Letters of Credit), all payments under any Loan Document of principal or interest in respect of any Loan or LC Disbursement denominated in Canadian Dollars or amounts owing in respect of any B/A Drawing (or of any breakage indemnity in respect of any such Loan or B/A Drawing) shall be made in Canadian Dollars; all payments under any Loan Document of principal or interest in respect of any Loan or LC Disbursement denominated in US Dollars or of any breakage indemnity in respect of any such Loan shall be made in US Dollars; all payments under any Loan Document of principal or interest in respect of any Loan or LC Disbursement denominated in Euros or of any breakage indemnity in respect of any such Loan shall be made in Euros; and all payments under any Loan Document of principal or interest in respect of any Loan or LC Disbursement denominated in Sterling or of any breakage indemnity in respect of any such Loan shall be made in Sterling. All other payments required to be made by any Loan Party under any Loan Document shall be

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made in US Dollars, except that any amounts payable under Section 2.15, 2.17 or 9.03 (or any indemnification or expense reimbursement provision of any other Loan Document) that are invoiced in a currency other than US Dollars shall be payable in the currency so invoiced.

(b) If at any time insufficient funds are received by and available to any Agent from a Borrower to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due from such Borrower hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due from such Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due from such Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.

(c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans, amount owing in respect of any B/A Drawings or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans amount owing in respect of any B/A Drawings and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans, amount owing in respect of any B/A Drawings and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans, amount owing in respect of any B/A Drawings and participations in LC Disbursements and Swingline Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by a Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to a Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Each Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in the amount of such participation, provided that, unless an Event of Default had occurred and was continuing at the time that the relevant Lender obtained the payment that resulted in such participation, such Lender shall not be entitled to receive any greater payment under Section 2.17 as a result thereof than it would otherwise be entitled to receive hereunder,

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(d) Unless the Applicable Agent shall have received notice from the relevant Borrower prior to the date on which any payment is due to the Applicable Agent for the account of the Lenders or an Issuing Bank hereunder that such Borrower will not make such payment, the Applicable Agent may assume that such Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or such Issuing Bank, as the case may be, the amount due. In such event, if such Borrower has not in fact made such payment, then each of the applicable Lenders or the applicable Issuing Bank, as the case may be, severally agrees to repay to the Applicable Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Applicable Agent, at (i) the greater of the Federal Funds Effective Rate and a rate determined by the Applicable Agent in accordance with banking industry rules on interbank compensation (in the case of an amount denominated in US Dollars) or (ii) the rate reasonably determined by the Applicable Agent to be the cost to it of funding such amount (in the case of an amount denominated in any other currency).

(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b) or 2.18(d), then the Applicable Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Applicable Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.15, or if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The applicable Borrower or the Parent Borrower shall pay all reasonable out-of-pocket costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b) If any Lender requests compensation under Section 2.15, or if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or if any Lender is a Defaulting Lender, then the Parent Borrower may, at its sole expense and effort, upon notice to such Lender and the US Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) such Borrower shall have received the prior written consent of the US Agent, which consent shall not unreasonably be withheld or

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delayed, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the applicable Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Parent Borrower to require such assignment and delegation cease to apply.

SECTION 2.20. Increase in Commitments. (a) The Parent Borrower, by written notice to the US Agent, may request that the Commitments be increased; provided that the aggregate amount by which the Commitments are increased pursuant to this Section shall not exceed US$25,000,000 and the aggregate amount by which the European Commitments are increased pursuant to this Section shall not exceed US$10,000,000. Such notice shall set forth (i) the Class or Classes of Commitments to be increased, (ii) the amount of the requested increase in such Commitments, (iii) the date on which such increase is requested to become effective (which shall be not less than 10 Business Days or more than 60 days after the date of such notice unless otherwise agreed by the Parent Borrower and the US Agent), and shall offer each Lender with a Commitment of a Class to be increased the opportunity to increase its Commitment of such Class, by its Applicable Percentage of the proposed increased amount. Each such Lender shall, by notice to the Parent Borrower and the US Agent given not more than 10 days after the date of the Parent Borrower’s notice, either agree to increase its applicable Commitment, by all or a portion of the offered amount (each Lender so agreeing being an “Increasing Lender”) or decline to increase its applicable Commitment (and any such Lender that does not deliver such a notice within such period of 10 days shall be deemed to have declined to increase its applicable Commitment) (each such Lender so declining or deemed to have declined being a “Non-Increasing Lender”). In the event that, on the 10th day after the Parent Borrower shall have delivered a notice pursuant to the first sentence of this paragraph, the applicable Lenders shall have agreed pursuant to the preceding sentence to increase their applicable Commitments by an aggregate amount less than the increase in the total Commitments of the applicable Class requested by the Parent Borrower, the Parent Borrower may, at its expense, arrange for one or more banks or other financial institutions (any such bank or other financial institution being called an “Augmenting Lender”), which may include any Lender, to extend Commitments of the applicable Class or increase their existing Commitments of the applicable Class in an aggregate amount equal to the unsubscribed amount; provided that each Augmenting Lender, if not already a Lender hereunder, shall be subject to the approval of the US Agent (which approval shall not be unreasonably withheld or delayed) and each Augmenting Lender shall execute all such documentation as the US Agent shall reasonably specify to evidence its Commitment and/or its status as a Lender hereunder. Any increase in the total Commitments may be made in an amount which is less than the increase requested by the Parent Borrower if the Parent Borrower is unable to arrange for, or chooses not to arrange for, Augmenting Lenders.

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(b) On the effective date (the “Increase Effective Date”) of any increase in the Commitments of any Class pursuant to this Section 2.20 (the “Commitment Increase”), if any Revolving Loans of such Class are outstanding, the applicable Borrower or Borrowers (i) shall prepay all Revolving Loans of such Class then outstanding (including all accrued but unpaid interest thereon) and (ii) may, at its or their option, fund such prepayment by simultaneously borrowing Revolving Loans in accordance with this Agreement, which Revolving Loans shall be made by the Lenders of the applicable Class ratably in accordance with their respective Commitments of such Class (calculated after giving effect to the Commitment Increase); provided that such prepayment of Revolving Loans pursuant to this paragraph shall not be required if such Commitment Increase is effected entirely by ratably increasing the Commitments of the existing Lenders of such Class. The payments made pursuant to clause (i) above in respect of each Eurocurrency Loan shall be subject to Section 2.16.

(c) Increases and new Commitments of any Class created pursuant to this Section 2.20 shall become effective on the date specified in the notice delivered by the Parent Borrower pursuant to the first sentence of paragraph (a) above unless otherwise agreed by the Parent Borrower and the US Agent.

(d) Notwithstanding the foregoing, no increase in the total Commitments of a Class (or in the Commitment of any Lender) or addition of a new Lender shall become effective under this Section unless, (i) on the effective date of such increase, the conditions set forth in Section 4.02 shall be satisfied as though a Borrowing were being made on such date and the US Agent shall have received a certificate to that effect dated such date and executed by a Financial Officer of the Parent Borrower, and (ii) the US Agent shall have received (with sufficient copies for each of the Lenders) documents consistent with those delivered on the Effective Date under clauses (b) and (c) of Section 4.01 as to the corporate power and authority of the applicable Borrower or Borrowers to borrow hereunder after giving effect to such increase (or, if such documents delivered on the Effective Date already contemplate an increase in an amount at least equal to the amount of such increase, stating that such documents remain in full force and effect on the date of such increase and have not been annulled, modified, rescinded or revoked).

SECTION 2.21. Additional Reserve Costs. (a) If and so long as any Lender is required by the Bank of England or any other monetary or other authority of the United Kingdom to make special deposits, to maintain reserve asset ratios or to pay fees, in each case in respect of such Lender’s Eurocurrency Loans, such Lender may require the Borrower in respect of such Loans to pay, contemporaneously with each payment of interest on each of such Loans, additional interest on such Loan at a rate per annum equal to the Mandatory Costs Rate calculated in accordance with the formula and in the manner set forth in Schedule 2.21.

(b) If and so long as any Lender is required to comply with reserve assets, liquidity, cash margin or other requirements of any monetary or other authority (including any such requirement imposed by the European Central Bank or the European System of Central Banks, but excluding requirements reflected in the Statutory Reserve

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Rate or the Mandatory Costs Rate) in respect of any of such Lender’s Eurocurrency Loans, such Lender may require the Borrower in respect of such Loans to pay, contemporaneously with each payment of interest on each of such Lender’s Eurocurrency Loans subject to such requirements, additional interest on such Loan at a rate per annum specified by such Lender to be the cost to such Lender of complying with such requirements in relation to such Loan.

(c) Any additional interest owed pursuant to paragraph (a) or (b) above shall be determined by the relevant Lender consistent with customary banking practices, which determination shall be conclusive absent manifest error, and notified to the applicable Borrower (with a copy to the Applicable Agent and the US Agent) at least five Business Days before each date on which interest is payable for the relevant Loan, and such additional interest so notified to such Borrower by such Lender shall be payable to the Applicable Agent for the account of such Lender on each date on which interest is payable for such Loan.

(d) A reference to a Lender in this Section 2.21 includes any domestic or foreign branch or Affiliate of such Lender making a Loan as contemplated by Section 2.02(b).

SECTION 2.22. Defaulting Lenders. (a) Notwithstanding any provision of this Agreement to the contrary, if one or more Lenders become Defaulting Lenders, then, upon notice to such effect by the US Agent (which notice shall be given promptly after the US Agent becomes aware that any Lender shall have become a Defaulting Lender, including as a result of being advised thereof by the Issuing Bank, the Swingline Lender, any Borrower or any other Agent) (such notice being referred to as a “Defaulting Lender Notice”), the following provisions shall apply for so long as any such Lender is a Defaulting Lender:

(i) no commitment fee shall accrue on the unused amount of any Commitment of any Defaulting Lender pursuant to Section 2.12(a);

(ii) the Commitment and Revolving Exposure of each Defaulting Lender shall be disregarded in determining whether the requisite Lenders shall have taken any action hereunder or under any other Loan Document (including any consent to any waiver, amendment or other modification pursuant to Section 9.02); provided that any waiver, amendment, or other modification that, disregarding the effect of this clause (ii), requires the consent of all Lenders or of all Lenders affected thereby and with respect to which the Defaulting Lender is being treated differently than the other Lenders or the other Lenders affected thereby, as applicable, shall continue to require the consent of each Defaulting Lender in accordance with the terms hereof;

(iii) if any Swingline Loans are outstanding or any LC Exposure exists at the time any Lender becomes a Defaulting Lender (each such Swingline Loan being referred to as a “Reallocated Swingline Loan”, and

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each Letter of Credit to which such LC Exposure is attributable being referred to as a “Reallocated Letter of Credit”), then:

(A) subject to clause (C) below, the obligation of each Non-Defaulting Lender of the applicable Class to purchase participations in each Reallocated Swingline Loan under Section 2.04(c) shall be adjusted to be determined on the basis of such Lender’s Adjusted Applicable Percentage (and all references in Sections 2.04 and 7.02 to “Applicable Percentage” shall be deemed to be references to “Adjusted Applicable Percentage”);

(B) subject to clause (C) below, the participation of each Non-Defaulting Lender of the applicable Class in each Reallocated Letter of Credit shall be adjusted to be determined under Section 2.05(d) on the basis of such Lender’s Adjusted Applicable Percentage (and all references in Sections 2.05 and 7.03 to “Applicable Percentage” shall be deemed to be references to “Adjusted Applicable Percentage”);

(C) notwithstanding the foregoing:

(1) if any Lender that becomes a Defaulting Lender shall be the Swingline Lender or an Affiliate thereof, no adjustment shall be made pursuant to clause (A) above on account of such Lender becoming a Defaulting Lender;

(2) if any Lender that becomes a Defaulting Lender shall be the Issuing Bank or an Affiliate thereof, no adjustment shall be made pursuant to clause (B) above with respect to participations in any Letter of Credit issued by the Issuing Bank; and

(3) if the sum of (x) all the Defaulting Lenders’ Applicable Percentage of the aggregate principal amount of the Reallocated Swingline Loans of the same Class (the “Defaulting Lender Swingline Exposures”) and (y) all the Defaulting Lenders’ Applicable Percentage of the LC Exposure attributable to the Reallocated Letters of Credit of the same Class (the “Defaulting Lender LC Exposures” and, together with the Defaulting Lender Swingline Exposures, the “Defaulting Lender LC/Swingline Exposures”) exceeds the unused portion of the Commitments of such Class of the Non-Defaulting Lenders of such Class as of the time the adjustments are to be made pursuant to clauses (A) and (B) above (such unused portion being referred to as the “Maximum Incremental Participations Amount”), then (I) the incremental amount of participations acquired by the Non-Defaulting Lenders of such Class under clause (A) above (the “Incremental Swingline Participations”) shall not exceed at any time the Maximum Incremental Participations Amount multiplied by a fraction of

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which the numerator is the aggregate principal amount of the Reallocated Swingline Loans of such Class at such time and the denominator is the Defaulting Lender LC/Swingline Exposure at such time and (II) the incremental amount of participations acquired by the Non-Defaulting Lenders of such Class under clause (B) above (the “Incremental LC Participations” and, together with the Incremental Swingline Participations, the “Incremental LC/Swingline Participations”) shall not exceed at any time the Maximum Incremental Participations Amount multiplied by a fraction of which the numerator is the LC Exposure attributable to the Reallocated Letters of Credit of such Class and the denominator is the Defaulting Lender LC/Swingline Exposure at such time;

(D) if the Incremental LC/Swingline Participations of any Class shall be less than the Defaulting Lender LC/Swingline Exposure of such Class as a result of the circumstances described in clause (C)(3) above, then the applicable Borrower shall, within five Business Days after receipt of written notice to that effect from the Applicable Agent, (1) first, prepay its Reallocated Swingline Loans or, if agreed to by the Swingline Lender, cash collateralize such Reallocated Swingline Loans on terms mutually agreed between the Swingline Lender and such Borrower and (2) second, cash collateralize its Reallocated Letters of Credit (in a manner and under documentation reasonably satisfactory to the Applicable Agent) in an aggregate amount equal to the excess, if any, of such Defaulting Lender LC/Swingline Exposure over the related Incremental LC/Swingline Participations or, if agreed to by the Issuing Bank, enter into other arrangements with respect to such Reallocated Letters of Credit on terms mutually agreed between the Issuing Bank and such Borrower;

(E) if any Reallocated Letter of Credit of any Class shall have been cash collateralized by the applicable Borrower pursuant to clause (D) above, then such Borrower shall not be required to pay any letter of credit participation fees to the Lenders of such Class that are Defaulting Lenders pursuant to Section 2.12(c) with respect to the portion of such Reallocated Letter of Credit that is so cash collateralized;

(F) if an adjustment shall have been made pursuant to clause (B) above to the participations of the Non-Defaulting Lenders of any Class in Reallocated Letters of Credit, then the letter of credit participation fees that would otherwise have been payable to the Lenders of such Class that are Defaulting Lenders pursuant to Section 2.12(c) with respect to the portion of such Reallocated Letters of Credit equal to the Incremental LC Participations therein shall instead accrue for the accounts of, and be payable to, the Lenders of such Class that are Non-Defaulting Lenders in accordance with their Adjusted Applicable Percentages;

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(G) if the Defaulting Lender LC Exposure of any Class at any time shall exceed the sum of the related Incremental LC Participations at such time and the portion of the Reallocated Letters of Credit of such Class cash collateralized at such time pursuant to clause (D) above, then, without prejudice to any rights or remedies of the Issuing Bank or any Non-Defaulting Lender hereunder, all letter of credit participation fees payable to the Lenders of such Class that are Defaulting Lenders under Section 2.12(c) with respect to the portion of such Defaulting Lender LC Exposure equal to such excess shall instead ratably accrue for the account of, and be payable to, the Issuing Bank that shall have issued such Reallocated Letters of Credit; and

(H) the Revolving Exposure of each Non-Defaulting Lender of any Class shall be determined after giving effect to the Incremental LC/Swingline Participations acquired by such Lender under the foregoing clauses of this clause (iii);

(iv) in the event any Swingline Loan shall be made, or any Letter of Credit shall be issued or amended to increase the amount thereof, (A) the participations of the Non-Defaulting Lenders therein shall be determined in the manner set forth in clause (iii)(A) or (iii)(B) above, as applicable, as if such Swingline Loan or Letter of Credit shall have been a Reallocated Swingline Loan or a Reallocated Letter of Credit, as the case may be, and (B) letter of credit participation fees that would otherwise have been payable to the Lenders that are Defaulting Lenders pursuant to Section 2.12(c) in respect of any such Letter of Credit shall be subject to clause (iii)(F) above; provided, however, that, notwithstanding anything to the contrary set forth herein, the Swingline Lender shall not be required to make any Swingline Loan, and the Issuing Bank shall not be required to issue, extend, renew or increase the amount of any Letter of Credit, in each case unless it is satisfied that the Defaulting Lenders’ Applicable Percentage of such Swingline Loan or of the LC Exposure attributable to such Letter of Credit will be entirely covered by participations therein of the Non-Defaulting Lenders and/or, in the case of the LC Exposure, cash collateral or other arrangements satisfactory to the Issuing Bank provided by the applicable Borrower (in a manner and under documentation satisfactory to the Issuing Bank); and

(v) any amount payable to or for the account of any Defaulting Lender in its capacity as a Lender hereunder (whether on account of principal, interest, fees or otherwise, and including any amounts payable to such Defaulting Lender pursuant to Section 2.11, but excluding any amounts payable to such Defaulting Lender pursuant to Sections 2.15, 2.16, 2.17, 2.19(b) and 9.03) shall, in lieu of being distributed to such Defaulting Lender, be retained by the Applicable Agent in a segregated account and, subject to any applicable Requirement of Law, (A) be applied, at such time or times as may be determined by the Applicable Agent, (1) first, to the payment of any amounts owing by such Defaulting Lender to any of the Agents hereunder, (2)

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second, pro rata, to the payment of any amounts owing by such Defaulting Lender to the Swingline Lender and the Issuing Bank in respect of such Defaulting Lender’s participations in Swingline Loans and Letters of Credit (and to the extent any such amounts shall have been paid by Non-Defaulting Lenders as a result of adjustments pursuant to clause (iii) above, to reimburse such Non-Defaulting Lenders for such amounts), (3) third, to cash collateralize participation obligations of such Defaulting Lender in respect of outstanding Swingline Loans and Letters of Credit and (4) fourth, to the funding of such Defaulting Lender’s Applicable Percentage of any Borrowing in respect of which such Defaulting Lender shall have failed to fund such share as required hereunder, (B) to the extent not applied as aforesaid, be held, if so determined by the Applicable Agent, as cash collateral for funding obligations of such Defaulting Lender in respect of future Revolving Loans hereunder, (C) to the extent not applied or held as aforesaid, be applied, pro rata, to the payment of any amounts owing to the applicable Borrower or the Non-Defaulting Lenders as a result of any judgment of a court of competent jurisdiction obtained by such Borrower or any Non-Defaulting Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations hereunder and (D) to the extent not applied or held as aforesaid, be distributed to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction.

(b) In the event the US Agent, the Swingline Lender, the Issuing Bank and the Parent Borrower shall have agreed that a Lender that is a Defaulting Lender has adequately remedied all matters that caused such Lender to become a Defaulting Lender, then (i) such Lender shall cease to be a Defaulting Lender for all purposes hereof, (ii) the obligations of the Lenders of the applicable Class to purchase participations in Swingline Loans under Section 2.04(c) and the participations of the Lenders in Letters of Credit under Section 2.05(d) shall be readjusted to be determined on the basis of such Lenders’ Applicable Percentages and (iii) such Lender shall purchase at par such of the Revolving Loans of the other Lenders of such Class as the Applicable Agent shall determine to be necessary in order for the Revolving Loans of such Class to be held by the Lenders of such Class in accordance with their Applicable Percentages.

(c) No Commitment of any Lender shall be increased or otherwise affected and, except as otherwise expressly provided in this Section, performance by any Borrower of its obligations hereunder and under the other Loan Documents shall not be excused or otherwise modified as a result of the operation of this Section. The rights and remedies against a Defaulting Lender under this Section are in addition to other rights and remedies that the Borrowers, the Agents, the Swingline Lender, the Issuing Bank or any Non-Defaulting Lender may have against such Defaulting Lender (and, for the avoidance of doubt, each Non-Defaulting Lender shall have a claim against any Defaulting Lender for any losses it may suffer as a result of the operation of this Section).

SECTION 2.23. UK Overdraft Facility. With the consent of the European Agent, all or a portion of the UK Commitment of Barclays Bank PLC may be applied to an overdraft facility provided to the UK Borrower Group by Barclays Bank

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PLC (the “UK Overdraft Facility”). The terms and conditions of the UK Overdraft Facility, as in effect from time to time, shall be disclosed to, and reasonably approved by, the European Agent. Notwithstanding any provision of this Agreement to the contrary, in determining the amount of the UK Commitment, Applicable Percentage or Adjusted Applicable Percentage of Barclays Bank PLC for purposes of Sections 2.01, 2.02, 2.04, 2.05, 2.12, 2.22 (except as applicable to Sections 7.02, 7.03 and 7.04) and 4.02, the UK Commitment of Barclays Bank PLC will be reduced by the maximum aggregate amount of the UK Overdraft Facility at such time (the “UK Overdraft Commitment”), whether drawn or undrawn. On the CAM Exchange Date, (a) the principal amount of any outstanding advances under the UK Overdraft Facility shall be deemed to have been converted into a UK Revolving Loan immediately prior to the CAM Exchange Date (and the accrued and unpaid interest on such advances under the terms of the UK Overdraft Facility shall be deemed to be accrued and unpaid interest on such UK Revolving Loan) and (b) the UK Commitment of Barclays Bank PLC as in effect immediately prior to the CAM Exchange shall be determined without reduction for the UK Overdraft Commitment (and the Applicable Percentage and Adjusted Applicable Percentage of Barclays Bank PLC as in effect immediately prior to the CAM Exchange shall be determined accordingly).

ARTICLE III

Representations and Warranties

Each Borrower represents and warrants to the Lenders that:

SECTION 3.01. Organization; Powers. Each of the Parent Borrower and its Subsidiaries is duly organized, validly existing and, where such qualification exists, in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and, where such qualification exists, is in good standing in, every jurisdiction where such qualification is required. The Parent Borrower is not a non-resident of Canada for the purpose of the Income Tax Act (Canada). The Centre of Main Interests of each Loan Party organized under the laws of the United Kingdom, Netherlands, Switzerland, Italy or France is situated in its jurisdiction of incorporation and it has no Establishment in any other jurisdiction.

SECTION 3.02. Authorization; Enforceability. The Transactions to be entered into by each Loan Party are within such Loan Party’s powers and have been duly authorized by all necessary action. This Agreement has been duly executed and delivered by the Borrowers and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will constitute, a legal, valid and binding obligation of the Borrowers or such Loan Party (as the case may be), enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally

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and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect and except filings necessary to perfect or register Liens created under the Loan Documents, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Parent Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Parent Borrower or any of its Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by the Parent Borrower or any of its Subsidiaries (other than in respect of Indebtedness being repaid on the Effective Date) except where such violations or results, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect, and (d) will not result in the creation or imposition of any Lien on any asset of the Parent Borrower or any of its Subsidiaries, except Liens created under the Loan Documents and the Senior Notes Security Documents.

SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Parent Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of earnings (loss), shareholders equity and cash flows (i) as of and for the fiscal year ended October 31, 2009, reported on by Ernst & Young LLP, independent auditors, and (ii) as of and for the fiscal quarter and the portion of the fiscal year ended January 31, 2010, certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Parent Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above.

(b) The Parent Borrower has heretofore furnished to the Lenders its pro forma consolidated balance sheet as of January 31, 2010, prepared giving effect to the Transactions as if the Transactions had occurred on such date. Such pro forma consolidated balance sheet (i) has been prepared in good faith, (ii) is based on the best information available to the Parent Borrower after due inquiry, (iii) accurately reflects all adjustments necessary to give effect to the Transactions and (iv) presents fairly, in all material respects, the pro forma financial position of the Parent Borrower and its consolidated Subsidiaries as of January 31, 2010, as if the Transactions had occurred on such date.

(c) Except as disclosed in the financial statements referred to above or the notes thereto or in the Information Memorandum and except for the Disclosed Matters, after giving effect to the Transactions, none of the Parent Borrower or its Subsidiaries has, as of the Effective Date, any material contingent liabilities or unusual long-term commitments.

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(d) Since October 31, 2009, there has been no material adverse change in the business, assets, operations or condition, financial or otherwise, of the Parent Borrower and its Subsidiaries, taken as a whole.

SECTION 3.05. Properties. (a) Each of the Parent Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business (including its Mortgaged Properties), except, without duplication, for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes.

(b) Each of the Parent Borrower and its Subsidiaries owns, or is licensed to use, all trademarks, trade names, copyrights, patents and other intellectual property material to its business, and, to the knowledge of the Borrowers, the use thereof by the Parent Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.

(c) Schedule 3.05 sets forth the address of each real property that is owned or leased by the Parent Borrower or any of its Subsidiaries as of the Effective Date.

(d) As of the Effective Date, neither the Parent Borrower nor any of its Subsidiaries have received notice of, or have knowledge of, any pending or contemplated condemnation proceeding affecting any Mortgaged Property or any sale or disposition thereof in lieu of condemnation. Neither any Mortgaged Property nor any interest therein is subject to any right of first refusal, option or other contractual right to purchase such Mortgaged Property or interest therein.

SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of any Borrower, threatened against or affecting the Parent Borrower or any of its Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve any of the Loan Documents or the Transactions.

(b) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect, neither the Parent Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.

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(c) Since the date of this Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.

SECTION 3.07. Compliance with Laws and Agreements. Except for Disclosed Matters, each of the Parent Borrower and its Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.

SECTION 3.08. Investment Company Status. Neither the Parent Borrower nor any of its Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

SECTION 3.09. Taxes. Each of the Parent Borrower and its Subsidiaries has accurately and timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Parent Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so would not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.10. ERISA, Other Pension Plans. (a) Each Plan has complied with and has been administered in all material respects in accordance with applicable provisions of ERISA, the Code and, if applicable, the PR Internal Revenue Code of 1994, as amended, other than any non-compliance which would not be reasonably expected to have a Material Adverse Effect. No ERISA Event has occurred with respect to any Plan that resulted or is reasonably likely to result in any liability that would be reasonably expected to have a Material Adverse Effect. The present value of all accrued benefits under the Plans maintained by the US Borrower, the PR Borrower or any ERISA Affiliate (based on the assumptions applicable under generally accepted actuarial and accounting standards used to fund each Plan as of the last annual valuation date applicable thereto), did not, as of such valuation date, exceed the value of the assets of each such Plan allocable to such benefit, except where such event would not reasonably be expected to have a Material Adverse Effect and, to each Borrower’s knowledge, no material change has occurred to such funded status as of the valuation date.

(b) Canadian Pension Plans. The Canadian Pension Plans are duly registered under the Canadian Tax Act and any other applicable laws which requires registration, have been administered in accordance with the Canadian Tax Act and such other laws and no event has occurred which would reasonably be expected to cause the loss of such registered status, except to the extent that any failure to do so would not reasonably be expected to have a Material Adverse Effect. All material obligations of the Canadian Borrower Group required to be performed by the Canadian Borrower Group in

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connection with the Canadian Pension Plans have been performed on a timely basis, except to the extent that any failure to do so would not reasonably be expected to have a Material Adverse Effect. There are no outstanding disputes concerning the assets of the Canadian Pension Plans which would reasonably be expected to have a Material Adverse Effect. No promises of benefit improvements under the Canadian Pension Plans have been made except where such improvement would not reasonably be expected to have a Material Adverse Effect. All contributions or premiums required to be made or paid by the Canadian Borrower Group to the Canadian Pension Plans have been made on a timely basis in accordance with the terms of such plans and all applicable laws. There have been no improper withdrawals or applications of the assets of the Canadian Pension Plan, each of the Canadian Pension Plans is being fully funded in accordance with all minimum funding standards on a solvency basis and going concern basis (using actuarial methods and assumptions which are consistent with the valuations last filed with the applicable Governmental Authorities). Any assessments owed to the Pension Benefits Guarantee Fund established under the Pension Benefits Act (Ontario), or other assessments or payments required under similar legislation in any other jurisdiction, have been paid when due. As of the Effective Date, no member of the Canadian Borrower Group sponsors, maintains or contributes to, or at any time in the six-year period preceding the date hereof has sponsored, maintained, or contributed to any “multi-employer pension plan” as such term is defined in the Pension Benefits Act (Ontario). No member of the Canadian Borrower Group sponsors, maintains or contributes to any plan which is considered to be a pension plan within the meaning of the Pension Benefits Act (Ontario) other than the Canadian Pension Plans.

(c) Except for the UK Pension Scheme, no Loan Party is or has at any time (i) been an employer (for the purposes of Sections 38 to 51 of the UK Pensions Act 2004) in relation to an occupational pension scheme which is not a money purchase scheme (both terms as defined in the UK Pension Schemes Act 1993) to which the powers of the Pensions Regulator (as established under the UK Pensions Act 2004) apply or (ii) been “connected” with or an “associate” of (as those terms are used in Section 38 and 43 of the UK Pensions Act 2004) such an employer.

SECTION 3.11. Disclosure. The Parent Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither the Information Memorandum nor any of the other reports, financial statements, certificates or other information furnished by or on behalf of any Loan Party to any Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrowers represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

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SECTION 3.12. Subsidiaries. Schedule 3.12 sets forth the name and jurisdiction of formation of, and the ownership interest of the Parent Borrower in, each Subsidiary and identifies each Subsidiary that is a Subsidiary Loan Party, in each case as of the Effective Date.

SECTION 3.13. Insurance. The insurance maintained by or on behalf of the Parent Borrower and its Subsidiaries provides adequate insurance coverage in at least such amounts and against at least such risks (but including in any event public liability) as are usually insured against in the same general area by companies engaged in the same or a similar business for the assets and operations of such Person. As of the Effective Date, all premiums in respect of such insurance have been paid.

SECTION 3.14. Labor Matters. As of the Effective Date, there are no strikes, lockouts or slowdowns against the Parent Borrower or any Subsidiary pending or, to the knowledge of the Borrowers, threatened. The hours worked by and payments made to employees of the US Borrower Group have not been in violation of the Fair Labor Standards Act or any other applicable federal, state, provincial, territorial, local or foreign law dealing with such matters. All amounts or payments due from, or required to be withheld by the Parent Borrower or any Subsidiary, or for which any claim may be made against the Parent Borrower or any Subsidiary, on account of wages, employee health and welfare insurance, income tax, employment insurance, pension plans and other benefits and deductions, have been paid or accrued as a liability on the books of the Parent Borrower or such Subsidiary except where failure to pay or accrue would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which the Parent Borrower or any Subsidiary is bound.

SECTION 3.15. Solvency. (a) Immediately after the consummation of the Transactions to occur on the Effective Date and immediately following the making of each Loan made on the Effective Date and after giving effect to the application of the proceeds of such Loans, (i) the fair value of the assets of each Loan Party that is organized under the laws of the United States of America or any State thereof or the District of Columbia or Puerto Rico, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (ii) the present fair saleable value of the property of each such Loan Party will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) each such Loan Party will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) each such Loan Party will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following the Effective Date.

(b) Immediately after the consummation of the Transactions to occur on the Effective Date and immediately following the making of each Loan made on the Effective Date and after giving effect to the application of the proceeds of such Loan, no

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member of the Canadian Borrower Group will be a Person: (i) who is for any reason unable to meet its obligations as they generally become due, (ii) who has ceased paying its current obligations in the ordinary course of business as they generally become due, or (iii) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all its obligations, due and accruing due.

(c) Immediately after the consummation of the Transactions to occur on the Effective Date and immediately following the making of each Loan made on the Effective Date and after giving effect to the application of the proceeds of such Loans, no member of the UK Borrower Group will be a Person: (i) who is unable to pay its debts within the meaning of Section 123(1) of the Insolvency Act 1986 (as amended), (ii) whose aggregate value of liabilities (actual, contingent and prospective) will exceed its assets within the meaning of Section 123(2) of the Insolvency Act of 1986 (as amended), and (iii) who desires to give a preference to any Person within the meaning of the insolvency laws of England and Wales.

(d) Immediately after the consummation of the Transactions to occur on the Effective Date and immediately following the making of each Loan made on the Effective Date and after giving effect to the application of the proceeds of such Loans, the French Borrower is able to meet its due liabilities (passif exigible) with its available assets (actif disponible). No corporate action, legal proceeding or other procedure or step set out in article L.611-1 of the French commercial code or any creditors’ process has been taken or, to the knowledge of the Parent Borrower or French Borrower, threatened to be taken in connection with the French Borrower.

(e) Immediately after the consummation of the Transactions to occur on the Effective Date and immediately following the making of each Loan made on the Effective Date and after giving effect to the application of the proceeds of such Loans, the Italian Borrower will be a Person that duly and regularly fulfils its payment obligations and other liabilities, contingent obligations and commitments in the normal course of business.

(f) Immediately after the consummation of the Transactions to occur on the Effective Date and immediately following the making of each Loan made on the Effective Date and after giving effect to the application of the proceeds of such Loans, the Swiss Borrower (i) is not deemed unable or admits inability to pay its debts as they fall due and is not deemed to and not declared to be unable to pay its debts or insolvent (zahlungsunfāhig) under applicable law, (ii) does not cease or suspend making payments on any of its debts or announces any intention to do so (and is not so deemed for the purposes of any law applicable to it), (iii) is not deemed to be over indebted (iiberschuldet) within the meanings of Section 725(2) of the Swiss Code of Obligations, unless creditors (other than the Lenders or any of them) of such Swiss Borrower have to the extent of any over indebtedness or insufficient coverage subordinated their claims to those of any other creditors, (iv) by reason of actual or anticipated financial difficulties, it commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness, (v) does not file a petition for the opening of bankruptcy proceedings

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because of insolvency (Zahlungsunfähigkeik) pursuant to Section 191(1) of the Swiss Federal Law Concerning Debt Enforcement and Bankruptcy (Bundesgesetz iiber Schuldbetreibung und Konkurs). In relation to the Swiss Borrower, (A) no corporate action, legal proceeding or other procedure or step or any creditors’ process has been taken or, to the knowledge of the Parent Borrower, threatened to be taken in relation to the Swiss Borrower and (B) the Swiss Borrower is in compliance with the Swiss Twenty Non-Bank Rule.

ARTICLE IV

Conditions

SECTION 4.01. Effective Date. The amendment and restatement of the Existing Credit Agreement pursuant to this Agreement and the obligations of the Lenders to make Loans and accept and purchase B/As and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02):

(a) The US Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the US Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement.

(b) The US Agent shall have received a favorable written opinion (addressed to the Agents and the Lenders and dated the Effective Date) of each of (i) in-house counsel of the Parent Borrower, substantially in the form of Exhibit L-1, (ii) Simpson Thacher & Bartlett LLP, counsel for the Loan Parties, substantially in the form of Exhibit L-2, (iii) as requested by the US Agent, local counsel opinions with respect to each Borrower, in form satisfactory to the US Agent , (iv) as requested by the US Agent, local counsel in other jurisdictions where any Subsidiary Loan Party is organized or the laws of which govern any Security Document, in a form satisfactory to the US Agent, and (v) local counsel in each jurisdiction where a Mortgaged Property (other than Mortgaged Properties in respect of which Mortgages are to be delivered after the Effective Date pursuant to Section 5.14) is located, in a form satisfactory to the US Agent, and, in the case of each such opinion required by this paragraph, covering such other matters relating to the Loan Parties, the Loan Documents or the Transactions as the Required Lenders shall reasonably request. Each of the Borrowers hereby requests such counsel to deliver such opinions.

(c) The US Agent shall have received such documents and certificates as any Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Loan Party, the authorization of the Transactions and any other legal matters relating to the Loan Parties, the Loan Documents or the Transactions, all in form and substance satisfactory to the Agents and their counsel.

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(d) The US Agent shall have received a certificate, dated the Effective Date and signed by a senior officer of the Parent Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02.

(e) The Arrangers and Agents shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all reasonable out-of-pocket expenses (including fees, charges and disbursements of counsel) required to be reimbursed or paid by any Loan Party hereunder or under any other Loan Document.

(f) Except for those actions expressly contemplated by Section 5.14 to be completed after the Effective Date, the Collateral and Guarantee Requirement shall have been satisfied and the Collateral Agent shall have received (i) a completed Perfection Certificate dated the Effective Date and signed by a Financial Officer or other senior officer of the Parent Borrower, together with all attachments contemplated thereby, including the results of a search of the Uniform Commercial Code (or equivalent) filings made with respect to the Loan Parties in the jurisdictions contemplated by the Perfection Certificate (except for those jurisdictions that the US Agent in its sole discretion determines that such searches shall not be required) and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to the Agents that the Liens indicated by such financing statements (or similar documents) are permitted by Section 6.02 or have been released, (ii) in the case of the Italian Borrower, evidence satisfactory to it that, substantially concurrently with the funding of any Loans being made on the Effective Date and the issuance of the Senior Notes, the Liens governed by Italian law over assets of the Italian Borrower (other than Liens permitted under Section 6.02) shall be released and (iii) evidence that the Cash Collection Systems shall have been established (except for the New European Collection Accounts, which shall be established pursuant to the requirements of clauses (f) and (g) of the definition of Collateral and Guarantee Requirement.

(g) The US Agent shall have received counterparts of the Intercreditor Agreement signed on behalf of each party thereto.

(h) The Senior Notes shall have been issued and the Parent Borrower shall have received gross cash proceeds of not less than US$280,000,000 therefrom. The US Agent shall have received copies of the Senior Notes Documents, certified as correct and complete by a Financial Officer or other senior officer of the Parent Borrower. The terms and conditions of the Senior Notes and the Senior Notes Documents shall be reasonably satisfactory to the US Agent.

(i) The US Agent shall have received evidence satisfactory to it that, substantially simultaneously with the funding of any Loans on the Effective Date and the issuance of the Senior Notes, all commitments under the Existing Credit Agreement (other than those continuing as Commitments under this Agreement)

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shall terminate and the applicable Borrower or Borrowers shall have repaid the principal of all outstanding loans thereunder and paid all accrued interest, fees and other amounts owing thereunder.

(j) All consents and approvals required (or, in the discretion of any Agent, advisable) to be obtained from any Governmental Authority or other Person in connection with the Transactions or the continued operations of the Parent Borrower and the Subsidiaries shall have been obtained and shall be in full force and effect, in each case without the imposition of any burdensome conditions.

(k) After giving effect to the Transactions being consummated on the Effective Date, on the Effective Date neither the Parent Borrower nor any of its Subsidiaries shall have outstanding any Indebtedness, other than, without duplication (i) Indebtedness incurred under the Loan Documents, (ii) Indebtedness incurred under the Senior Notes Documents, (iii) Indebtedness permitted by clause (iii) or (iv) of Section 6.01(a) that has been disclosed in writing to the Lenders prior to the Effective Date and (iv) Indebtedness set forth on Schedule 6.01. The US Agent shall have received evidence reasonably satisfactory to it that, substantially simultaneously with the funding of any Loans being made on the Effective Date and the issuance of the Senior Notes, all Indebtedness (and obligations accrued and owing in respect thereof) of the Parent Borrower and its Subsidiaries is being repaid (other than Indebtedness permitted by the previous sentence), all financing commitments in respect thereof are being terminated and all Liens (other than Liens securing obligations under the Existing Credit Agreement that continue to secure the Obligations) securing any such Indebtedness (and obligations) are being released.

(l) A customary field examination and appraisal with respect to the Borrowing Bases (and assets included therein), other than the French Borrowing Base and the Italian Borrowing Base, shall have been completed with results satisfactory to the US Agent, and the US Agent shall have received a completed Borrowing Base Certificate dated the Effective Date calculating each Borrowing Base (other than the French Borrowing Base and the Italian Borrowing Base) as of February 28, 2010.

(m) After giving effect to the Transactions being consummated on the Effective Date, including all Borrowings to be made on the Effective Date and the issuance of all Letters of Credit to be issued on the Effective Date, the Available Amount shall not be less than US$25,000,000.

(n) The US Agent shall have received a solvency certificate from a Financial Officer of each Borrower, or a representation as to solvency in a secretary’s, officer’s or director’s certificate delivered on behalf of each Borrower, each in form and substance satisfactory to the US Agent.

(o) The US Agent shall have received for each of the French Borrower, the Italian Borrower and the Swiss Borrower its most recent unaudited balance

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sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for the then elapsed portion of the current fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects its financial condition and results of operations in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes.

The US Agent shall notify the Parent Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and accept and purchase B/As and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on April 23, 2010 (and, in the event such conditions are not so satisfied or waived, the agreements of the parties hereto to amend and restate the Existing Credit Agreement as provided herein shall terminate at such time).

SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan or accept and purchase B/As on the occasion of any Borrowing, and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions:

(a) The representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct on and as of the date of such Borrowing or the date of acceptance and purchase of such B/As or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, except for those representations and warranties expressly made as of an earlier date (in which case such representations and warranties shall have been true and correct with respect to such earlier date).

(b) At the time of and immediately after giving effect to such Borrowing or acceptance and purchase of such B/As or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing.

(c) At the time of and immediately after giving effect to such Borrowing or acceptance and purchase of such B/As or the issuance, amendment, renewal or extension of such Letter of Credit, (i) the total Revolving Exposures of each Class shall not exceed the total Commitments of such Class and (ii) the Total Shared Revolving Exposure shall not exceed the Total Shared Borrowing Base then in effect.

Each Borrowing, each acceptance and purchase of B/As and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrowers on the date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section.

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ARTICLE V

Affirmative Covenants

Until the Commitments have expired or been terminated and the principal of and interest on each Loan, each B/A and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrowers covenant and agree with the Lenders that:

SECTION 5.01. Financial Statements; Ratings Change and Other Information. The Parent Borrower will furnish to the US Agent (with sufficient copies for each Lender):

(a) within 90 days after the end of each fiscal year of the Parent Borrower, its audited consolidated and unaudited consolidating balance sheet and related statements of operations, stockholders’ equity and cash flows (but not a consolidating statement of cash flows) as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Ernst & Young LLP or other independent auditors of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Parent Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;

(b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Parent Borrower, its consolidated and consolidating balance sheet and related statements of operations, stockholders’ equity and cash flows (but not a consolidating statement of cash flows) as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Parent Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;

(c) if an Availability Trigger Event has occurred and is continuing, within 30 days after the end of each of the first two fiscal months of each fiscal quarter of the Parent Borrower, its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal month and the then elapsed portion of the fiscal year, all certified by one of its Financial Officers as presenting in all material respects the financial condition and results of operations of the Parent Borrower and its consolidated Subsidiaries

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on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;

(d) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Parent Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations of the Leverage Ratio as of the last day of the fiscal period covered by such financial statements (and, in the case of financial statements under clause (a) above, a reasonably detailed calculation of Excess Cash Flow for the fiscal year and the Additional Equity Amount, ECF Amount and the RP Basket Amount as of the end of the fiscal year) and demonstrating compliance with Sections 6.12 (in the case of a certificate delivered with the financial statements under clause (a) above) and 6.13 (or, if Section 6.13 is not applicable at the time, reasonably detailed calculations of the ratio contemplated by such Section that would be required if such Section were applicable), (iii) indicating the change, if any, in the level on the pricing grid included in the Applicable Rate based on the Leverage Ratio and (iv) stating whether any change in accounting principles used for financial reporting by the Parent Borrower in accordance with Section 1.04(b) or any change in GAAP or in the application thereof has occurred since the date of the Parent Borrower’s audited financial statements most recently delivered pursuant to clause (a) above (or, prior to the first such delivery, referred to in Section 3.04) and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;

(e) within 20 Business Days after the end of each calendar month, a completed Borrowing Base Certificate calculating and certifying each Borrowing Base as of the last day of such calendar month, signed on behalf of the Parent Borrower by a Financial Officer (together with all reports, schedules and other supporting information required by Schedule 5.01); provided that (i) if an Availability Trigger Event has occurred and is continuing (or the US Agent so requests at any time that the US Agent reasonably believes that the then existing Borrowing Base Certificate is materially inaccurate), then such Borrowing Base Certificate shall be required (A) weekly, by Wednesday of the following week or (B) in the case of any such request, within five Business Days after such request and (ii) in the case of a Borrowing Base Certificate with respect to the last calendar month of a fiscal quarter, such Borrowing Base Certificate shall be accompanied by a certificate, signed on behalf of the Parent Borrower by a Financial Officer, calculating the Average Available Amount as of the end of such fiscal quarter; provided further that, in the case of a Borrowing Base Certificate delivered under clause (i), Eligible Accounts shall be determined as of the end of the previous week and Eligible Inventory shall be determined as of the end of the previous month;

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(f) promptly after the receipt thereof by the Parent Borrower or any of its Subsidiaries, a copy of any “management letter” received by any such Person from its independent auditors and the management’s response thereto;

(g) at least 30 days after the commencement of each fiscal year of the Parent Borrower, a detailed consolidated budget for such fiscal year (including a projected consolidated balance sheet and related statements of projected operations and cash flow as of the end of and for such fiscal year and setting forth the assumptions used for purposes of preparing such budget) and, promptly when available, any significant revisions of such budget;

(h) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Parent Borrower or any Subsidiary with the Ontario Securities Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Parent Borrower to its shareholders generally, as the case may be;

(i) promptly, and in any event within three Business Days, after entering into, or amending or modifying, any agreement or arrangement that could give rise to, or change the amount of, any Other Obligation, notice thereof; and

(j) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Parent Borrower or any Subsidiary, or compliance with the terms of any Loan Document, as any Agent (or any Lender through any Agent) may reasonably request.

SECTION 5.02. Notices of Material Events. The Parent Borrower will furnish to the US Agent prompt written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Parent Borrower or any Affiliate thereof that, if adversely determined, would reasonably be expected to result in a Material Adverse Effect;

(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Parent Borrower and its Subsidiaries in an aggregate amount exceeding US$2,000,000; and

(d) any other development that results in, or would reasonably be expected to result in, a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other senior officer of the Parent Borrower setting forth the details of

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the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

SECTION 5.03. Information Regarding Collateral. (a) The Parent Borrower will furnish to the Agents prompt written notice of any change (i) in any Loan Party’s corporate name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties, (ii) in the location of any Loan Party’s chief executive office (or, in the case of any member of the UK Borrower Group, its registered office), its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility), (iii) in any Loan Party’s identity or corporate structure or (iv) in any Loan Party’s Federal Taxpayer Identification Number (if applicable). The Borrowers agree not to effect or permit any change referred to in the preceding sentence unless all filings have been (or will concurrently with such change be) made under the Uniform Commercial Code or otherwise that are required in order for the Applicable Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral.

(b) Each year, at the time of delivery of annual financial statements with respect to the preceding fiscal year pursuant to clause (a) of Section 5.01, the Parent Borrower shall deliver to the US Agent a certificate of a Financial Officer of the Parent Borrower (i) setting forth the information required pursuant to Sections 1 and 2 of the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Effective Date or the date of the most recent certificate delivered pursuant to this Section and (ii) certifying that all Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) above to the extent necessary to protect and perfect the security interests under the US Collateral Agreement for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period).

SECTION 5.04. Existence; Conduct of Business. The Parent Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, amalgamation, liquidation or dissolution permitted under Section 6.03.

SECTION 5.05. Payment of Obligations. The Parent Borrower will, and will cause each of its Subsidiaries to, pay its indebtedness and other obligations, including Tax liabilities, that, if not paid, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect, before the same shall

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become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings and (b) the Parent Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP, or such contest effectively suspends collection of the contested obligation.

SECTION 5.06. Maintenance of Properties. The Parent Borrower will, and will cause each of its Subsidiaries to, keep and maintain all property material to the conduct of the business of the Parent Borrower and the Subsidiaries in the aggregate in good working order and condition, ordinary wear and tear excepted.

SECTION 5.07. Insurance. The Parent Borrower will, and will cause each of its Subsidiaries to, maintain, with financially sound and reputable insurance companies (a) adequate insurance coverage in at least such amounts and against at least such risks (but including in any event public liability) as are usually insured against in the same general area by companies engaged in the same or a similar business for the assets and operations of such Person and (b) all insurance required to be maintained pursuant to the Security Documents. The Parent Borrower will furnish to the Lenders, upon request of any Agent, information in reasonable detail as to the insurance so maintained.

SECTION 5.08. Casualty and Condemnation. The Borrowers (a) will furnish to the Agents and the Lenders prompt written notice of any casualty or other insured damage to any material portion of any Collateral or the commencement of any action or proceeding for the taking of any Collateral or any part thereof or interest therein under power of eminent domain or by condemnation or similar proceeding and (b) will ensure that the Net Proceeds of any such event (whether in the form of insurance proceeds, condemnation awards or otherwise) are collected and applied in accordance with the applicable provisions of the Security Documents.

SECTION 5.09. Books and Records; Inspection and Audit Rights. (a) The Parent Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Parent Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by any Agent (or by any Lender, if coordinated through an Agent and provided that such rights shall not be exercised by any Lender more frequently than once in any calendar year unless a Default has occurred and is continuing), upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested.

(b) The Parent Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by any Agent (including any consultants, accountants, lawyers and appraisers retained by any Agent) to conduct field examinations and appraisals of the Parent Borrower’s computation of any Borrowing Base and the assets included in any Borrowing Base, all at such reasonable times and as often as reasonably requested. The Parent Borrower shall pay the reasonable fees and expenses of any representatives retained by any Agent to conduct any such field examination or

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appraisal; provided that the Parent Borrower shall not be required to pay such fees and expenses for more than two such field examinations or one such appraisal (in each case, per Borrowing Base) during any calendar year unless an Event of Default has occurred and is continuing or an Availability Trigger Event has occurred; provided further that (i) the Parent Borrower shall pay the reasonable fees and expenses incurred in connection with any field examinations or appraisals incurred in connection with the review of assets resulting from a Permitted Acquisition or in connection with the initial establishment of the French Borrowing Base and (ii) the Agents shall use commercially reasonable efforts (consistent with the conduct of field examinations and appraisals under this Section that are, in their Permitted Discretion, appropriate and customary in similar circumstances) to minimize the cost to the Parent Borrower of field examinations and appraisals under this Section. The Borrowers also agree to modify or adjust the computation of any Borrowing Base (which may include maintaining additional Reserves or modifying the eligibility criteria for the components of any Borrowing Base) to the extent required by the US Agent or the Required Lenders as a result of any such field examination or appraisal.

SECTION 5.10. Compliance with Laws. The Parent Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.11. Use of Proceeds and Letters of Credit. The proceeds of the Loans will be used only for general corporate purposes of the respective Borrowers and their Subsidiaries in the ordinary course of business. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X. Letters of Credit will be issued only to support obligations of the respective Borrowers and their Subsidiaries in the ordinary course of business.

SECTION 5.12. Additional Subsidiaries. If any additional Subsidiary is formed or acquired after the Effective Date, the Parent Borrower will (a) within three Business Days after such Subsidiary is formed or acquired, notify the Collateral Agent (and the US Agent, if it is not the Collateral Agent) and the Lenders thereof and (b) within 15 Business Days (or such longer period of the time as the Collateral Agent, or the US Agent, shall agree in its sole discretion) cause the Collateral and Guarantee Requirement to be satisfied with respect to Subsidiary (if it is a Subsidiary Loan Party) and with respect to any Equity Interest in or Indebtedness of such Subsidiary owned by or on behalf of any Loan Party.

SECTION 5.13. Further Assurances. The Parent Borrower will, and will cause each Subsidiary Loan Party to, execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents), which may be required under any applicable law, or which any Agent or the Required Lenders may reasonably request, to cause the Collateral and Guarantee

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Requirement to be and remain satisfied, all at the expense of the Loan Parties. The Borrowers also agree to provide to each Agent, from time to time upon reasonable written request, evidence reasonably satisfactory to such Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents.

SECTION 5.14. Post-Closing Requirements. The Borrowers will cause the actions described in Schedule 5.14 to be taken within the time required as provided in such Schedule.

SECTION 5.15. Compliance with Swiss Twenty Non-Bank Rule. The Swiss Borrower will comply with the Swiss Twenty Non-Bank Rule.

ARTICLE VI

Negative Covenants

Until the Commitments have expired or terminated and the principal of and interest on each Loan, each B/A and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrowers covenant and agree with the Lenders that:

SECTION 6.01. Indebtedness; Certain Equity Securities. (a) The Parent Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except:

(i) Indebtedness created under the Loan Documents;

(ii) Indebtedness existing on the date hereof and set forth in Schedule 6.01 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof or result in an earlier maturity date or decreased weighted average life thereof;

(iii) Indebtedness of the Parent Borrower to any Subsidiary and of any Subsidiary to the Parent Borrower or any other Subsidiary; provided that Indebtedness of any Subsidiary that is not a Subsidiary Loan Party to the Parent Borrower or any Subsidiary Loan Party shall be subject to Section 6.04;

(iv) Guarantees by the Parent Borrower of Indebtedness of any Subsidiary and by any Subsidiary of Indebtedness of the Parent Borrower or any other Subsidiary; provided that Guarantees by the Parent Borrower or any Subsidiary Loan Party of Indebtedness of any Subsidiary that is not a Subsidiary Loan Party shall be subject to Section 6.04;

(v) Indebtedness of the Parent Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets in the ordinary course of business, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such

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assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof or result in an earlier maturity date or decreased weighted average life thereof; provided that (A) such Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement and (B) the aggregate principal amount of Indebtedness permitted by this clause (v) shall not exceed US$25,000,000 at any time outstanding;

(vi) Indebtedness of the Parent Borrower or any Subsidiary consisting of loans made, issued or Guaranteed by a Governmental Authority of the United States, Canada, Puerto Rico, the United Kingdom, Germany, Italy, France, Switzerland, Singapore or any other country reasonably approved by the US Agent in an aggregate principal amount not to exceed US$25,000,000 at any time outstanding;

(vii) Indebtedness under the Senior Notes Documents in an aggregate principal amount outstanding not to exceed, initially, US$280,000,000 (reduced by the amount of any such Indebtedness repaid or otherwise discharged, including pursuant to a Permitted Refinancing) and Notes Refinancing Indebtedness;

(viii) Indebtedness of a Loan Party incurred to a customer of such Loan Party to finance the acquisition by such Loan Party of any equipment (“Customer Requested Equipment”) necessary to perform services for such customer where the terms of such Indebtedness are consistent with those entered into with respect to similar Indebtedness prior to the Effective Date, including that (1) the repayment of such Indebtedness is conditional upon such customer ordering a specific volume of goods from such Loan Party and (2) such Indebtedness does not bear interest or provide for scheduled amortization or maturity; provided that (A) the Parent Borrower has provided prior written notice to the US Agent of the incurrence of such Indebtedness, and (B) if the agreement evidencing such Indebtedness does not prohibit the counterparty to such agreement from setting off against or otherwise deducting from any amount owing by such counterparty to such Loan Party under any Account the amount of any such Indebtedness, an amount equal to the amount of such Indebtedness shall be deducted from the applicable Borrowing Base or Borrowing Bases;

(ix) Indebtedness of any Person that becomes a Subsidiary after the date hereof; provided that (A) such Indebtedness exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary and (B) the aggregate principal amount of Indebtedness permitted by this clause (ix) shall not exceed US$10,000,000 at any time outstanding;

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(x) other unsecured Indebtedness in an aggregate principal amount not exceeding US$25,000,000 at any time outstanding; provided that the aggregate principal amount of Indebtedness of the Subsidiaries that are not Loan Parties permitted by this clause shall not exceed US$10,000,000 at any time outstanding; and

(xi) other Indebtedness for borrowed money; provided that (A) such Indebtedness shall mature no earlier than, and shall not require any scheduled payments of principal prior to, the date that is 90 days after the Maturity Date (except that up to US$15,000,000 aggregate principal amount of unsecured Indebtedness may be incurred without compliance with this clause (A)), (B) at the time of and after giving effect to the incurrence of such Indebtedness, (1) no Default has occurred and is continuing, (2) clause (a) of the Coverage Ratio Condition is satisfied and (3) no more than US$25,000,000 aggregate principal amount of Indebtedness incurred under this clause (xi) by Subsidiaries that are not Subsidiary Loan Parties shall be outstanding, and (C) the Parent Borrower shall deliver to the US Agent, at least two Business Days prior to the incurrence of such Indebtedness, a certificate signed by a Financial Officer (1) describing the Indebtedness to be incurred and the anticipated date of incurrence thereof, (2) certifying that the conditions set forth in clause (B) above are satisfied and (3) setting forth reasonably detailed calculations demonstrating satisfaction of clause (a) of the Coverage Ratio Condition.

(b) The Parent Borrower will not, nor will it permit any Subsidiary to, issue any preferred stock or other preferred Equity Interests, other than (i) Qualified Preferred Stock issued by the Parent Borrower, (ii) preferred stock or other Preferred Equity Interests issued to the Parent Borrower or a Subsidiary Loan Party or (iii) the JLL Preferred Equity.

SECTION 6.02. Liens. The Parent Borrower will not, nor will it permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:

(a) Liens created under the Loan Documents;

(b) Permitted Encumbrances;

(c) any Lien on any property or asset (or proceeds therefrom) of the Parent Borrower or any Subsidiary existing on the date hereof and set forth in Schedule 6.02; provided that (i) such Lien shall not apply to any other property or asset of the Parent Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;

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(d) any Lien on any property or asset (or proceeds therefrom) acquired after the Effective Date that is existing prior to the acquisition thereof by the Parent Borrower or any Subsidiary or on any property or asset of any Person that becomes a Subsidiary after the Effective Date that is existing prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary , as the case may be, (ii) such Lien shall not apply to any other property or assets of the Parent Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;

(e) Liens on fixed or capital assets (or proceeds therefrom) acquired, constructed or improved by the Parent Borrower or any Subsidiary in the ordinary course of business; provided that (i) such security interests secure Indebtedness permitted by clause (v) of Section 6.01(a), (ii) such security interests and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such security interests shall not apply to any other property or assets of the Parent Borrower or any Subsidiary;

(f) Liens on Customer Requested Equipment securing Indebtedness permitted by clause (viii) of Section 6.01(a);

(g) Liens securing Indebtedness permitted by clause (xi) of Section 6.01(a); provided that (i) such Liens apply only to assets or property that constitute Collateral and the holder or holders of any such Lien (or a trustee, agent or other representative on their behalf) shall become a party to the Intercreditor Agreement in a manner satisfactory to the US Agent with the effect that such Liens shall be subject to the Intercreditor Agreement either pari passu with the “Notes Liens” (as defined in the Intercreditor Agreement) or as a “Junior Subordinated Lien” (as defined in the Intercreditor Agreement), (ii) at the time of and after giving effect to the granting of such Liens (A) no Default has occurred and is continuing and (B) clause (b) of the Coverage Ratio Condition is satisfied and (iii) the Parent Borrower shall deliver to the US Agent, at least two Business Days prior to granting any such Liens, a certificate signed by a Financial Officer (A) describing such Liens and attaching true and correct copies of the agreements pursuant to which such Liens are to be granted (which shall be substantially the same as the analogous Senior Notes Security Documents applicable to the same Collateral), (B) certifying that the conditions set forth in clause (ii) above are satisfied and (C) setting forth reasonably detailed calculations demonstrating satisfaction of clause (b) of the Coverage Ratio Condition; provided further that Liens securing up to US$50,000,000 aggregate principal amount of such Indebtedness outstanding at any time may be either (x) secured by Liens on assets

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or property that do not constitute Collateral (in which case the parenthetical clause in clause (iii)(A) above shall not apply) or (y) incurred and secured by Liens on Collateral without satisfying the requirements of clause (ii)(B) above or the parenthetical clause in clause (iii)(A) above;

(h) Liens granted under the Senior Notes Security Documents securing the Senior Notes and Liens securing any Notes Refinancing Indebtedness; provided that (i) such Liens do not apply to any asset other than Collateral that is subject to a Lien granted under the Security Documents to secure the Obligations and (ii) all such Liens shall be subject to the terms of the Intercreditor Agreement (and, in the case of Liens securing Notes Refinancing Indebtedness, shall be treated under the Intercreditor Agreement either in the same manner as the Liens securing the Senior Notes or as “Junior Subordinated Liens” as defined in the Intercreditor Agreement);

(i) undetermined or inchoate Liens, rights of distress and charges incidental to current operations which have not at such time been filed or exercised, or which relate to obligations not due or payable or if due, the validity of which is being contested diligently and in good faith by appropriate proceedings by that Person;

(j) title defects, encroachments or irregularities affecting real property which are of a minor nature and which in the aggregate do not materially impair the use of the affected property for the purpose for which it is used by that Person or do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Parent Borrower or any Subsidiary;

(k) the right reserved to or vested in any Governmental Authority by the terms of any lease, license, franchise, grant or permit acquired by that Person or by any statutory provision to terminate any such lease, license, franchise, grant or permit, or to require annual or other payments as a condition to the continuance thereof;

(l) Liens given to a public utility or any Governmental Authority when required by such utility or Governmental Authority in connection with the operations of that Person in the ordinary course of its business;

(m) operating leases of vehicles or equipment which are entered into in the ordinary course of the Business;

(n) subdivision agreements, site plan control agreements, development agreements, facilities sharing agreements, cost sharing agreements and other similar agreements, in each case with respect to real property and which in the aggregate do not interfere with the ordinary conduct of business of the Parent Borrower or any Subsidiary;

(o) the rights of any tenant, occupant or licensee under any lease, occupancy agreement or license, in each case with respect to real property and

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which in the aggregate do not interfere with the ordinary conduct of business of the Parent Borrower or any Subsidiary;

(p) Liens or covenants restricting or prohibiting access to or from lands abutting on controlled access highways or covenants affecting the use to which lands may be put; provided, that such Liens or covenants do not interfere with the ordinary conduct of business of the Parent Borrower or any Subsidiary;

(q) statutory Liens incurred or pledges or deposits made, in each case in the ordinary course of business, in favor of a Governmental Authority to secure the performance of obligations of the Parent Borrower or any Subsidiary under Environmental Laws to which any such Person is subject, provided that no Event of Default shall have occurred and be continuing;

(r) Liens created pursuant to the general banking conditions (algemene bankvoorwaarden) of a banking institution operating in the Netherlands;

(s) Liens arising from the right of distraint enjoyed by landlords in applicable jurisdictions to secure the payment of arrears of rent in respect of leased properties in such jurisdictions or a Lien granted by the Parent Borrower or any Subsidiary to a landlord to secure the payment of arrears of rent in respect of leased properties in the Province of Quebec leased from such landlord, provided that such Liens are limited to the assets located at or about such leased properties; provided that a Reserve shall be taken in the applicable Borrowing Base for such amount; and

(t) Liens on cash collateral which are required to be granted by the Parent Borrower or any Subsidiary in connection with swap arrangements for gas or electricity used in the business of such Person, and not for speculative purposes.

SECTION 6.03. Fundamental Changes. (a) The Parent Borrower will not, nor will it permit any Subsidiary to, merge into, amalgamate with or consolidate with any other Person, or permit any other Person to merge into or amalgamate or consolidate with it, or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) any Subsidiary (other than a Borrower) may merge into a Borrower in a transaction in which such Borrower is the surviving corporation, (ii) a Subsidiary organized under the laws of Canada or any province thereof may amalgamate with the Parent Borrower or Subsidiary organized under the laws of Canada or any province thereof, and if the Parent Borrower is a party to such amalgamation the resulting entity shall have all of the obligations of the Parent Borrower, (iii) any Subsidiary (other than a Borrower) may merge into any Subsidiary (other than a Borrower) in a transaction in which the surviving entity is a Subsidiary and (if any party to such merger is a Subsidiary Loan Party) is a Subsidiary Loan Party, (iv) any Subsidiary (other than a Borrower) may wind-up, liquidate or dissolve if the Parent Borrower determines in good faith that such wind-up, liquidation or dissolution is in the best interests of the Parent Borrower and is not materially disadvantageous to the Lenders (it being understood that the wind-up, liquidation or

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dissolution of the Subsidiaries existing on the Effective Date and organized under the laws of Cyprus or Hungary shall be permitted by this Section 6.03) and (v) any Person may merge into or amalgamate or consolidate with the Parent Borrower or a Subsidiary in order to effect a Permitted Acquisition in compliance with the other applicable provisions of this Agreement (provided that the surviving or resulting entity is the Parent Borrower or wholly owned Subsidiary); provided that (A) any such merger or amalgamation involving a Person that is not a wholly owned Subsidiary immediately prior to such merger or amalgamation shall not be permitted unless also permitted by Section 6.04 and (B) any such amalgamation shall not be permitted under this Section 6.03 unless the amalgamated corporation shall confirm to the US Agent in writing that the amalgamated corporation is liable, by operation of law or otherwise, for the obligations of the applicable amalgamating Borrowers and/or Subsidiaries under this Agreement and the other Loan Documents to which such Borrowers and/or amalgamating Subsidiaries are a party.

(b) The Parent Borrower will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Parent Borrower and its Subsidiaries on the date of execution of this Agreement and businesses reasonably related thereto.

(c) The Parent Borrower will not cause or allow the registered office or Centre of Main Interests of any Loan Party organized under the laws of the United Kingdom, Netherlands, France, Italy or Switzerland to be in or maintain an Establishment in any jurisdiction other than its jurisdiction of incorporation.

SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. The Parent Borrower will not, and will not permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger or amalgamation with any Person that was not a wholly owned Subsidiary prior to such merger or amalgamation) any Equity Interests in or evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except:

(a) Permitted Investments;

(b) investments existing or contemplated on the date hereof and set forth on Schedule 6.04;

(c) investments by the Parent Borrower or any Subsidiary in Equity Interests in any Subsidiary, including in connection with the formation or creation of any new Subsidiary; provided that (i) any such Equity Interests held by a Loan Party shall be pledged pursuant to the US Collateral Agreement or other applicable Security Document and (ii) any such investments made on or after the

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Effective Date by Loan Parties in Subsidiaries that are not Loan Parties shall be subject to the limitations and conditions in clause (i) below;

(d) loans or advances made by the Parent Borrower to any Subsidiary and made by any Subsidiary to the Parent Borrower or any other Subsidiary; provided that (i) any such loans and advances made by a Loan Party shall be evidenced by a promissory note pledged pursuant to the US Collateral Agreement or other applicable Security Document if required by the Collateral and Guarantee Requirement and (ii) any such loans and advances made on or after the Effective Date by Loan Parties to Subsidiaries that are not Subsidiary Loan Parties shall be subject to the limitations and conditions in clause (i) below;

(e) Guarantees by the Parent Borrower of obligations of any Subsidiary and Guarantees by any Subsidiary of obligations of the Parent Borrower or any other Subsidiary; provided that (i) a Subsidiary shall not Guarantee the Senior Notes, any Notes Refinancing Indebtedness or any Indebtedness incurred pursuant to clause (xi) of Section 6.01(a) unless such Subsidiary also has Guaranteed the Obligations pursuant to the Guarantor Agreement, (ii) any Indebtedness so Guaranteed must be Indebtedness permitted by Section 6.01 and (iv) the aggregate amount of obligations of Subsidiaries that are not Subsidiary Loan Parties that is Guaranteed by Loan Parties on or after the Effective Date (including any increase on or after the Effective Date in the amount of such obligations so Guaranteed prior to the Effective Date) shall be subject to the limitations and conditions set forth in clause (i) below;

(f) investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

(g) Permitted Acquisitions; provided that the consideration for each Permitted Acquisition shall consist solely of cash, Indebtedness permitted by clause (ix) or (xi) of Section 6.01(a), Equity Interests of the Parent Borrower or a combination thereof;

(h) investments made on or promptly following the Effective Date in the Italian Borrower with proceeds from the Senior Notes in order to repay Indebtedness of the Italian Borrower; and

(i) other investments made on or after the Effective Date not otherwise permitted by this Section 6.04; provided that (i) at the time of and after giving effect to such investment (and any investment, loan, advance or Guarantee pursuant to clause (c), (d) or (e) above that is subject to the limitations and conditions set forth in this clause (i)) the Net Investment Amount does not exceed the sum of (A) US$60,000,000 plus (B) the Additional Equity Amount at such time plus (C) the ECF Amount at such time and (ii) after giving effect to any such investment (and any investment, loan, advance or Guarantee pursuant to clause (c), (d) or (e) above that is subject to the limitations or conditions set forth

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in this clause (i)), (A) no Default has occurred and is continuing, (B) clause (a) of the Coverage Ratio Condition is satisfied, and (C) the Available Amount shall exceed the greater of (x) US$16,875,000 and (y) 22.5% of the aggregate Commitments; provided further that, if no Availability Trigger Event has occurred and is continuing or would result therefrom, then up to US$10,000,000 in the aggregate of such investments (and investments, loans, advances and Guarantees pursuant to clauses (c), (d) and (e) above that are subject to the limitations and conditions in this clause (i)) shall be permitted at times when the conditions set forth in clause (ii) above cannot be satisfied (and, after a period of 60 consecutive days during which the conditions set forth in clause (ii) above are satisfied, availability in respect of any usage of such US$10,000,000 limit shall be deemed reinstated and subsequently available for purposes of this proviso).

SECTION 6.05. Asset Sales. The Parent Borrower will not, and will not permit any of its Subsidiaries to, sell, transfer, lease or otherwise dispose of any asset, including any Equity Interest owned by it, nor will the Parent Borrower permit any of it Subsidiaries to issue any additional Equity Interest in such Subsidiary, except:

(a) sales of inventory, used or surplus equipment and Permitted Investments, in each case in the ordinary course of business;

(b) sales, transfers and dispositions to the Parent Borrower or a Subsidiary; provided that any such sales, transfers or dispositions involving a Subsidiary that is not a Subsidiary Loan Party shall be made in compliance with Section 6.09;

(c) sales, transfers and other dispositions of assets that are not permitted by any other clause of this Section (including the sale-leaseback transactions permitted by clause (b) of Section 6.06); provided that (i) in the case of any such sale, transfer or disposition of Equity Interests of a Subsidiary, such sale, transfer or disposition shall include all Equity Interests of and other investments in and loans and advances to such Subsidiary (and any other Subsidiary in which such sold Subsidiary holds an Equity Interest) and, after giving effect thereto, none of the Parent Borrower and the Subsidiaries shall owe any Indebtedness to the Subsidiary so sold, transferred or otherwise disposed of, and (ii) the aggregate fair market value of all assets sold, transferred or otherwise disposed of in reliance upon this clause (c) shall not exceed US$25,000,000 during any fiscal year of the Parent Borrower; provided further that to the extent such sales, transfers and other disposition in any fiscal year ending on or after October 31, 2010, are less than the amount permitted for such fiscal year (including any amounts carried over into such fiscal year pursuant to this proviso), the unused amount (or, if less, US$50,000,000) may be carried over to the next fiscal year;

(d) any sale of fixed or capital assets pursuant to a sale-leaseback transaction permitted by clause (a) of Section 6.06; and

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(e) any sale, transfer, lease or other disposition described in Schedule 6.05;

provided that all sales, transfers, leases and other dispositions permitted hereby (other than those permitted by clause (b) above) shall be made for fair value and for at least 80% cash consideration (including Accounts, in the case of clause (a) above).

SECTION 6.06. Sale and Leaseback Transactions. The Parent Borrower will not, and will not permit any of its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred, except for (a) any such sale of any fixed or capital assets that is made for cash consideration in an amount not less than the cost of such fixed or capital asset and is consummated within 90 days after the Parent Borrower or such Subsidiary acquires or completes the construction of such fixed or capital asset, (b) the sale-leaseback transactions described in Schedule 6.06.

SECTION 6.07. Swap Agreements. The Parent Borrower will not, and will not permit any of its Subsidiaries to, enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge or mitigate risks to which the Parent Borrower or any Subsidiary has actual exposure (other than those in respect of Equity Interests of the Parent Borrower or any of its Subsidiaries), and (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of the Parent Borrower or any Subsidiary.

SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness. (a) The Parent Borrower will not, nor will it permit any Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except (i) the Parent Borrower may declare and pay dividends with respect to its Equity Interests payable solely in additional shares of its common stock or, in the case of dividends in respect of JLL Preferred Equity, additional shares of JLL Preferred Equity, (ii) Subsidiaries may declare and pay dividends ratably with respect to their Equity Interests, (iii) the Parent Borrower may make Restricted Payments in the ordinary course pursuant to and in accordance with stock option plans or other benefit plans for management or employees of the Parent Borrower and its Subsidiaries, and (iv) the Parent Borrower may make additional Restricted Payments in cash; provided that, in the case of any Restricted Payment pursuant to clause (iv) (A) at the time of and after giving effect to such Restricted Payment (1) no Default shall have occurred and be continuing, (2) the Parent Borrower would be able to incur US$1 of additional Indebtedness pursuant to clause (xi) of Section 6.01(a) and (3) the Available Amount shall not be less than the greater of US$16,875,000 and 22.5% of the aggregate Commitments, (B) such Restricted Payment shall not exceed the RP Basket Amount at the time and (C) the Parent Borrower has delivered to the US Agent, at least two Business Days prior to such Restricted Payment, a certificate signed by a Financial Officer setting forth the amount of the Restricted

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Payment, certifying that the foregoing conditions are satisfied and setting forth reasonably detailed calculations of the RP Basket Amount and demonstrating satisfaction of the condition set forth in clause (A)(2) above.

(b) The Parent Borrower will not, nor will it permit any Subsidiary to, make or agree to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Indebtedness, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancelation or termination of any Indebtedness, except:

(i) payment of Indebtedness created under the Loan Documents;

(ii) payment of regularly scheduled interest and principal payments as and when due in respect of any Indebtedness, other than payments in respect of the Indebtedness subordinated to the Obligations that are prohibited by the subordination provisions thereof;

(iii) refinancings of Indebtedness to the extent permitted by Section 6.01;

(iv) payment of secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;

(v) payment of Indebtedness owing to the Parent Borrower or a Subsidiary;

(vi) payment of Indebtedness in the ordinary course of business under demand lines of credit and other revolving credit facilities; provided that at the time of and after giving effect to such payment no Availability Trigger Event has occurred and is continuing; and

(vii) any other payment of Indebtedness; provided that at the time of and after giving effect to such payment (A) no Default has occurred and is continuing, (B) the Available Amount shall not be less than the greater of US$16,875,000 and 22.5% of the aggregate Commitments and (C) clause (a) of the Coverage Ratio Condition is satisfied.

SECTION 6.09. Transactions with Affiliates. The Parent Borrower will not, nor will it permit any Subsidiary to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Parent Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, (b) transactions between or among the Loan Parties not involving any other Affiliate, (c) any Restricted Payment not prohibited by Section 6.08 and (d) any

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sale, transfer or other disposition of outstanding Equity Interests of a Subsidiary made by the Parent Borrower or any Subsidiary to the Parent Borrower or any Subsidiary, provided that any such sale, transfer or disposition made (i) by a Loan Party to a Subsidiary that is not a Subsidiary Loan Party or (ii) by a Subsidiary that is not a Subsidiary Loan Party to a Loan Party shall be made either as an investment permitted by Section 6.04 or as a sale, transfer or disposition permitted by Section 6.05 (in which case such sale, transfer or disposition shall be made at a price and on terms and conditions not less favorable to the applicable Loan Party than could be obtained on an arm’s-length basis from unrelated third parties).

SECTION 6.10. Restrictive Agreements. The Parent Borrower will not, nor will it permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Parent Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets required to secure the Obligations under this Agreement as contemplated hereby, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any of its Equity Interests or to make or repay loans or advances to the Parent Borrower or any other Subsidiary or to Guarantee Indebtedness of the Parent Borrower or any other Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by any Loan Document or Senior Notes Document, (ii) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 6.10 (or any extension, renewal, modification or amendment thereof that does not expand the scope of any such restriction or condition or otherwise adversely affect the interests of the Lenders), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (v) clause (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof.

SECTION 6.11. Amendment of Material Documents. The Parent Borrower will not, nor will it permit any Subsidiary to, amend, modify or waive any of its rights under (a) its certificate of incorporation, by-laws or other organizational documents or (b) any agreement listed on Schedule 6.10, other than any such amendments or modifications that are not adverse (or, in the case of clause (a) above, not materially adverse) to the interests of the Lenders (it being understood that any determination of whether an amendment or modification is adverse shall be made based on the terms of the applicable agreement before giving effect to any default or non-compliance therewith).

SECTION 6.12. Capital Expenditures. The Parent Borrower will not permit the aggregate amount of Capital Expenditures made by the Parent Borrower and the Subsidiaries to exceed (a) US$75,000,000 during the fiscal year ending October 31, 2010 or (b) US$90,000,000 during any fiscal year ending thereafter; provided that the

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amount of any Capital Expenditures permitted to be made during any fiscal year (commencing with the fiscal year ending October 31, 2010) and not made during such fiscal year may be carried over and made at any time during the next succeeding fiscal year (and any amount so carried over shall be deemed the first amount applied for Capital Expenditures during such next succeeding fiscal year). Notwithstanding the foregoing, Capital Expenditures may be made in excess of those permitted by the preceding sentence to the extent that such Capital Expenditures (i) are in respect of Customer Requested Equipment financed by Qualifying CRE Indebtedness, (ii) are made with the Net Proceeds of any sale or disposition of assets outside of the ordinary course of business or (iii) do not exceed the Additional Equity Amount at the time.

SECTION 6.13. Fixed Charge Coverage Ratio. The Parent Borrower will not permit the ratio of (a) Consolidated EBITDA to (b) Consolidated Fixed Charges, in each case for any period of four consecutive fiscal quarters, to be less than 1.10 to 1.00; provided that this Section shall apply only if an Availability Trigger Event has occurred and is continuing, with the effect that, if an Availability Trigger Event shall occur, compliance with this Section shall be required for (i) the period of four consecutive fiscal quarters most recently ended prior to the occurrence of such Availability Trigger Event and (ii) each period of four consecutive fiscal quarters ended thereafter so long as such Availability Trigger Event is continuing on the last day of such period.

SECTION 6.14. UK Pension Scheme. Except for the UK Pension Scheme, no Loan Party will become an employer of an occupational pension scheme which is not a money purchase scheme (both terms as defined in the UK Pension Schemes Act 1993) and which continues to provide benefits other than on a money purchase basis in respect of ongoing employment, except with the consent of the European Agent which will not be unreasonably withheld or delayed; provided that the foregoing shall not apply to any pre-existing pension schemes of any Person that becomes a Subsidiary pursuant to a Permitted Acquisition.

ARTICLE VII

Events of Default

SECTION 7.01. Events of Default. If any of the following events (“Events of Default”) shall occur:

(a) any Borrower shall fail to pay any principal of any Loan or any B/A or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

(b) any Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Section) payable under this Agreement or any other Loan Agreement, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three Business Days;

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(c) any representation or warranty made or deemed made by or on behalf of the Parent Borrower or any Subsidiary in or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect in any material respect when made or deemed made and, if the circumstances giving rise to such incorrect representation, warranty or statement are capable of correction (such that, thereafter such representation, warranty or statement would prove correct in all material respects), such representation, warranty or statement remains incorrect in any material respect for a period of ten Business Days after the earlier of (i) knowledge thereof by a senior officer of any Borrower or (ii) the date of written notice thereof to the Parent Borrower from the US Agent (which notice shall be given at the request of any Lender);

(d) any Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02(a), 5.04 (with respect to any Borrower’s existence) or 5.11 or in Article VI; or the Parent Borrower shall fail to deliver any Borrowing Base Certificate by the time such delivery is required by Section 5.01 and the failure to deliver such Borrowing Base Certificate shall continue unremedied for a period of three Business Days;

(e) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in clause (a), (b) or (d) of this Section), and such failure shall continue unremedied for a period of 30 days after notice thereof from any Agent to the Parent Borrower (which notice will be given at the request of any Lender);

(f) the Parent Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable and such failure shall continue after any applicable grace period;

(g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;

(h) an involuntary proceeding shall be commenced or an involuntary petition, proposal or plan shall be filed seeking (i) the suspension of payment, a seizure or realization of a security, liquidation, reorganization, winding-up, dissolution, composition, compromise, arrangement, moratorium or other relief in respect of the Parent Borrower or any Subsidiary or its debts, or of a substantial

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part of its assets, or to adjudicate it insolvent under any federal, state, provincial or foreign bankruptcy, insolvency, receivership, administrative receivership, arrangement or similar law now or hereafter in effect (including any proceeding described in Article L.611-1 et seq. of the French Code de Commerce affecting the French Borrower) or (ii) the appointment of a receiver, administrator, trustee, custodian, sequestrator, provisional liquidator, provisional commissioner, liquidator, compulsory or interim manager, conservator or similar official for the Parent Borrower or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

(i) the Parent Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition, proposal or plan seeking the suspension of payment, a seizure or realization of a security, liquidation, reorganization, winding-up, dissolution, composition, compromise, arrangement, moratorium or other relief, or seeking to adjudicate it insolvent under any federal, state or foreign bankruptcy, insolvency, receivership, administrative receivership, arrangement or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding, petition or proposal described in clause (h) of this Section, (iii) apply for or consent to the appointment of a receiver, administrator, trustee, custodian, sequestrator, provisional liquidator, provisional commissioner, liquidator, compulsory or interim manager, conservator or similar official for the Parent Borrower or any Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition or proposal filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

(j) the Parent Borrower or any Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;

(k) one or more judgments for the payment of money in an aggregate amount in excess of US$7,500,000 (excluding any amounts to the extent covered by insurance if the applicable insurance company has been notified of the judgment and has not denied or disputed coverage) shall be rendered against the Parent Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Parent Borrower or any Subsidiary to enforce any such judgment;

(l) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;

(m) any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party not to be, a valid and perfected

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Lien on any Collateral, with the priority required by the applicable Security Document, except (i) as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents or (ii) as a result of the Applicable Agent’s failure to maintain possession of any stock certificates, promissory notes or other instruments delivered to it under the US Collateral Agreement or other applicable Security Document; or

(n) a Change in Control shall occur;

then, and in every such event (other than an event with respect to a Borrower described in clause (h) or (i) of this Section), and at any time thereafter during the continuance of such event, the US Agent may, and at the request of the Required Lenders shall, by notice to the Parent Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments (or the Commitments of any Class or Classes), and thereupon such Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers; and in case of any event with respect to any Borrower described in clause (h) or (i) of this Section, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers.

SECTION 7.02. CAM Exchange. (a) On the CAM Exchange Date, (i) the Commitments shall automatically and without further act be terminated as provided in Section 7.01, (ii) each Lender shall immediately be deemed to have acquired participations in the Swingline Loans in an amount equal to such Lender’s Applicable Percentage (as in effect immediately prior to the CAM Exchange) of each Swingline Loan outstanding on such date and shall promptly make payment therefor to the Applicable Agent in accordance with Section 2.04(c), (iii) simultaneously with the automatic conversions pursuant to clause (iv) below, the Lenders shall automatically and without further act (and without regard to the provisions of Section 9.04) be deemed to have exchanged interests in the Loans (other than the Swingline Loans) and B/As and participations in Swingline Loans and Letters of Credit, such that in lieu of the interest of each Lender in each Loan, B/A and Letter of Credit in which it shall participate as of such date (including such Lender’s interest in the Specified Obligations of each Borrower in respect of each such Loan, B/A and Letter of Credit), such Lender shall hold an interest in every one of the Loans (other than the Swingline Loans) and B/As, and a participation in every one of the Swingline Loans and Letters of Credit (including the Specified Obligations of each Borrower in respect of each such Loan and each Reserve Account established pursuant to Section 7.03 below), whether or not such Lender shall previously have participated therein, equal to such Lender’s CAM Percentage thereof,

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(iv) simultaneously with the deemed exchange of interests pursuant to clause (iii) above, all outstanding Revolving Loans denominated in Canadian Dollars, Euros or Sterling shall, automatically and with no further action required, be converted into US Dollars, determined using the Exchange Rate calculated as of the Business Day immediately preceding the CAM Exchange Date, and on and after such date all such Loans shall constitute ABR Loans payable in US Dollars and (v) immediately upon the date of expiration of the Contract Period in respect thereof, the Specified Obligations in respect of each B/A received in the deemed exchange of interests pursuant to clause (iii) above shall, automatically and with no further action required, be converted into US Dollars, determined using the Exchange Rate calculated as of such date, and on and after such date all such Specified Obligations shall be payable in US Dollars and bear interest at the rate applicable to ABR Loans hereunder. It is understood and agreed that Lenders holding interests in B/As on the CAM Exchange Date shall discharge the obligations to fund such B/As at maturity in exchange for the interests acquired by such Lenders in funded Loans in the CAM Exchange. Each Lender and each Borrower hereby consents and agrees to the CAM Exchange, and each Lender agrees that the CAM Exchange shall be binding upon its successors and assigns and any Person that acquires a participation in its interests in any Loan or B/A or any participation in any Swingline Loan or Letter of Credit. Each Borrower agrees from time to time to execute and deliver to each Agent all such promissory notes and other instruments and documents as such Agent shall reasonably request to evidence and confirm the respective interests of the Lenders after giving effect to the CAM Exchange, and each Lender agrees to surrender any promissory notes originally received by it in connection with its Loans hereunder to the Applicable Agent against delivery of any promissory notes evidencing its interests in the Loans and B/As so executed and delivered; provided, that the failure of any Borrower to execute or deliver or of any Lender to accept any such promissory note, instrument or document shall not affect the validity or effectiveness of the CAM Exchange.

(b) As a result of the CAM Exchange, upon and after the CAM Exchange Date, each payment received by any Agent pursuant to any Loan Document in respect of the Specified Obligations shall be distributed to the Lenders pro rata in accordance with their respective CAM Percentages, subject to Section 2.22. Any direct payment received by a Lender on or after the CAM Exchange Date, including by way of set-off, in respect of a Specified Obligation shall be paid over to an Agent for distribution to the Lenders in accordance herewith.

SECTION 7.03. Letters of Credit. (a) In the event that on the CAM Exchange Date any Letter of Credit of any Class shall be outstanding and undrawn in whole or in part, or any L/C Disbursement shall not have been reimbursed by the applicable Borrower or with the proceeds of a Revolving Loan or Swingline Borrowing, each Lender of such Class shall promptly pay over to the US Agent, in immediately available funds, an amount in US Dollars equal to such Lender’s Applicable Percentage (as in effect immediately prior to the CAM Exchange) of such undrawn face amount or (to the extent it has not already done so) such unreimbursed drawing, as applicable, together with interest thereon from the CAM Exchange Date to the date on which such amount shall be paid to the US Agent at the rate that would be applicable at the time to an ABR Revolving Loan in a principal amount equal to such undrawn face amount or

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unreimbursed drawing, as applicable. The US Agent shall establish a separate account (each, a “Reserve Account”) for each Lender for the amounts received with respect to each such Letter of Credit pursuant to the preceding sentence. The Applicable Agent shall deposit in each such Lender’s Reserve Account such Lender’s CAM Percentage of the amounts received from the Lenders as provided above. The US Agent shall have sole dominion and control over each Reserve Account, and the amounts deposited in each Reserve Account shall be held in such Reserve Account until withdrawn as provided below in this Section. The US Agent shall maintain records enabling it to determine the amounts paid over to it and deposited in the Reserve Accounts in respect of each Letter of Credit and the amounts on deposit in respect of each Letter of Credit attributable to each Lender’s CAM Percentage. The amounts held in each such Lender’s Reserve Account shall be held as a reserve against the LC Exposures, shall be the property of such Lender, shall not constitute Loans to or give rise to any claim of or against any Borrower and shall not give rise to any obligation on the part of any Borrower to pay interest to such Lender, it being agreed that the reimbursement obligations in respect of Letters of Credit shall arise only at such times as drawings are made thereunder, as provided in Section 2.05.

(b) In the event that after the CAM Exchange Date any drawing shall be made in respect of a Letter of Credit, the US Agent shall, at the request of the Issuing Bank, withdraw from the Reserve Account of each Lender any amounts, up to the amount of such Lender’s CAM Percentage of such drawing or payment, deposited in respect of such Letter of Credit and remaining on deposit and deliver such amounts to the Issuing Bank in satisfaction of the reimbursement obligations of the Lenders under Section 2.05(d) (but not of the applicable Borrower under Section 2.05(e)).

(c) In the event that after the CAM Exchange Date any Letter of Credit shall expire undrawn, the US Agent shall withdraw from the Reserve Account of each Lender the amount remaining on deposit therein in respect of such Letter of Credit and distribute such amount to such Lender.

(d) With the prior written approval of the US Agent (not to be unreasonably withheld) and the Issuing Bank, any Lender may withdraw the amount held in its Reserve Account in respect of the undrawn amount of any Letter of Credit. Any Lender making such a withdrawal shall be unconditionally obligated, in the event there shall subsequently be a drawing under such Letter of Credit, to pay over to the US Agent, for the account of the Issuing Bank, on demand, its CAM Percentage of such drawing or payment.

(e) Pending the withdrawal by any Lender of any amounts from its Reserve Account as contemplated by the above paragraphs, the US Agent will, at the direction of such Lender and subject to such rules as the US Agent may prescribe for the avoidance of inconvenience, invest such amounts in Permitted Investments. Each Lender that has not withdrawn its amounts in its Reserve Account as provided in paragraph (d) above shall have the right, at intervals reasonably specified by the US Agent, to withdraw the earnings on investments so made by the US Agent with amounts in its Reserve Account and to retain such earnings for its own account.

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SECTION 7.04. Defaulting Lenders. In the event that any Lender shall default on its obligation to pay over any amount to the US Agent in respect of any Swingline Loan as provided in Section 7.02 or any Letter of Credit as provided in Section 7.03, such Lender shall be considered a Defaulting Lender and the Swingline Lender or Issuing Bank, as the case may be, shall have a claim against such Lender to the same extent as if such Lender had defaulted on its obligations under Section 2.04(c) or Section 2.05(d), as applicable, but shall have no claim against any other Lender in respect of such defaulted amount, notwithstanding the exchange of participations in the Swingline Loans and interests in the applicable Borrower’s reimbursement obligations in respect of Letters of Credit pursuant to Section 7.02. Each other Lender shall have a claim against such Defaulting Lender for any damages sustained by it as a result of such default, including, in the event that any such Letter of Credit shall expire undrawn, its CAM Percentage of the defaulted amount.

ARTICLE VIII

The Agents

Each of the Lenders and the Issuing Bank hereby irrevocably appoints the each Agent as its agent and authorizes such Agent to take such actions on its behalf and to exercise such powers as are delegated to such Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto.

Any bank serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Parent Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder.

An Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) no Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) no Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that such Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c) except as expressly set forth in the Loan Documents, no Agent shall have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Parent Borrower or any of its Subsidiaries that is communicated to or obtained by any bank serving as an Agent or any of its Affiliates in any capacity. No Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or wilful misconduct. No Agent shall be deemed to have knowledge of any Default unless and until written notice thereof is given to such Agent by a Borrower or a Lender, and no Agent shall be responsible for or have

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any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to such Agent.

Any Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. Any Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. Any Agent may consult with legal counsel (who may be counsel for a Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

Any Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. Any Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of any Agent and any such sub-agent, and shall apply to their respective activities and the activities of the Arrangers and their Related Parties in connection with the syndication of the credit facilities provided for herein as well as activities as an Agent.

Subject to the appointment and acceptance of a successor Agent as provided in this paragraph, any Agent may resign at any time by notifying the other Agents, the Lenders, the Issuing Bank and the Parent Borrower. Upon any such resignation, the Required Lenders shall have the right with the consent, not to be unreasonably withheld or delayed, of the Parent Borrower (unless an Event of Default has occurred and is continuing), to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Agent which shall be a bank with an office in the same jurisdiction as the retiring Agent, or an Affiliate of any such bank. Upon the acceptance of its appointment as an Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Parent Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Parent Borrower and such successor. After an Agent’s resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in

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respect of any actions taken or omitted to be taken by any of them while it was acting as an Agent.

Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or related agreement or any document furnished hereunder or thereunder.

ARTICLE IX

Miscellaneous

SECTION 9.01. Notices. (a) Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

(i) if to any Borrower, to it in care of the Parent Borrower at 2100 Syntex Court, Mississauga, Ontario, L5N 7K9, Attention Chief Financial Officer (Telecopy 905-812-6705) with a copy to 2100 Syntex Court, Mississauga, Ontario, L5N 7K9, Attention of the General Counsel;

(ii) if to the US Agent, to JPMorgan Chase Bank, N.A., Loan and Agency Services Group, 1111 Fannin Street, 10th Floor, TX2-F046 Houston, TX 77002, Attention of Maria Saez (Telecopy No. 713-750-2956), with a copy to JPMorgan Chase Bank, N.A., 383 Madison Avenue, Floor 24, New York, NY 10179, Attention of Dawn Lee Lum (Telecopy No. 212-270-6637);

(iii) if to the Collateral Agent, to JPMorgan Chase Bank, N.A., 270 Park Avenue, Floor 44, New York, NY 10017, Attention of Dawn Lee Lum (Telecopy No. 212-270-6637)

(iv) if to the Canadian Agent, to JPMorgan Chase Bank, N.A., Loan and Agency Services Group, 1111 Fannin Street, 10^th Floor, TX2-F138 Houston, TX 77002, Attention of Evelyne P. Dixon for Document Management (Telecopy No. 713-750-2309) and Attention of Elizabeth Rarich for Negotiable Collateral (Telecopy No.713-750-3757);

(v) if to the European Agent, to J.P. Morgan Europe Limited, 125 London Wall, London EC2Y 5AJ, Attention of Loan and Agency Group, (Telecopy No. 011-44-207-7777-2360);

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(vi) if to any Issuing Bank (other than any other Lender or Affiliate of a Lender that is an Issuing Bank pursuant to clause (f) of the definition of Issuing Bank), to JPMorgan Chase Bank, N.A., 10420 Highland Manor Drive, Tampa, FL 33610, Attention of JPMorgan Treasury Services, Standby Letters of Credit (Telecopy No. 813-432-5161);

(vii) if to any Swingline Lender, to JPMorgan Chase Bank, N.A., Loan and Agency Services Group, 1111 Fannin Street, 10th Floor, TX2-F046 Houston, TX 77002, Attention of Maria Saez (Telecopy No. 713-750-2956), with a copy to JPMorgan Chase Bank, N.A., 383 Madison Avenue, New York, NY 10017, Attention of Dawn Lee Lum (Telecopy No. 212-270-6637); and

(viii) if to any other Lender or Issuing Bank, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the US Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the Applicable Agent and the applicable Lender. The Applicable Agent or any Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

(c) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

SECTION 9.02. Waivers; Amendments. (a) No failure or delay by any Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Agents, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether any Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time.

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(b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrowers and the Required Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Agent or Agents and the Loan Party or Loan Parties that are parties thereto, in each case with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or any amount payable in respect of any B/A or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the maturity of any Loan, or any scheduled date of payment of any B/A, or the required date of reimbursement of any LC Disbursement, or any date for the payment of any interest or fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.18(b) or (c) or any provision of any other Loan Document that governs the application of proceeds of Collateral, in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section or the percentage set forth in the definition of “Required Lenders” or any other provision of any Loan Document specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or modify any rights hereunder or thereunder or make any determination or grant any consent hereunder or thereunder, without the written consent of each Lender (or each Lender of such Class, as the case may be), (vi) release all or any substantial part (based upon the creditworthiness of the Loan Parties, rather than the number of Loan Parties) of the Guarantees of the Obligations made by the Loan Parties under the Loan Documents (except as expressly provided in the Loan Documents) without the written consent of each Lender, (vii) release all or any substantial part of the Collateral from the Liens of the Security Documents (except as expressly provided in the Security Documents or the Intercreditor Agreement), without the written consent of each Lender, (viii) change any provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders of any Class differently than those of any other Class, without the written consent of Lenders holding a majority in interest of the Commitments of each affected Class or (ix) amend, modify or otherwise alter the eligibility standards, advance rates or reserves used in determining any Borrowing Base in a manner that would have the effect of increasing the amount of such Borrowing Base above the amount thereof that would apply based upon the terms of this Agreement in effect on the Effective Date, without the written consent of each Lender; provided further that (A) no such agreement shall amend, modify or otherwise affect the rights or duties of any Agent, the Issuing Bank or the Swingline Lender without the prior written consent of such Agent, the Issuing Bank or the Swingline Lender, as the case may be, and (B) any waiver, amendment or modification of this Agreement that by its terms affects the rights or duties under this Agreement of only one Class of Lenders may be effected by an agreement or agreements in writing entered into by the Borrowers and requisite percentage in interest of the affected Class of Lenders that would be required to consent thereto under this

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Section if such Class of Lenders were the only Class of Lenders hereunder at the time. Notwithstanding the foregoing, any provision of this Agreement may be amended by an agreement in writing entered into by the Borrowers, one or more of the Lenders and the Agents (and, if their rights or obligations are affected thereby, the Issuing Bank and the Swingline Lender) if (i) by the terms of such agreement the Commitment of each Lender not consenting to the amendment provided for therein shall terminate upon the effectiveness of such amendment and (ii) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of the principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement.

(c) Notwithstanding paragraphs (a) and (b) of this Section 9.02, the US Agent may amend or supplement the Intercreditor Agreement without the consent of any Lender or the Required Lenders, but to the extent required under the Intercreditor Agreement with the consent of the Parent Borrower, (i) to cure any ambiguity, defect or inconsistency in the Intercreditor Agreement, or (ii) to make any change that would provide any additional rights or benefits to the Lenders or that does not adversely affect the rights of any Lender under the Loan Documents.

SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by each Agent and their Affiliates, including the reasonable fees, charges and disbursements of counsel for the Agents, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents or any amendments, modifications or waivers of the provisions thereof, any field examinations, evaluations or appraisals with respect to the computation of any Borrowing Base or with respect to the assets included in any Borrowing Base (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by any Agent, the Issuing Bank or any Lender, including the fees, charges and disbursements of any counsel for any Agent, the Issuing Bank or any Lender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made, the B/As accepted or the Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans, B/As or Letters of Credit.

(b) The Borrowers shall indemnify each Arranger, each Agent, the Issuing Bank and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (other than Excluded Taxes), including the reasonable fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any other agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the

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consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any Mortgaged Property or any other property currently or formerly owned or operated by the Parent Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Parent Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee.

(c) To the extent that the Borrowers fail to pay any amount required to be paid by them to any Arranger, any Agent, the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to such Arranger, such Agent, the Issuing Bank or the Swingline Lender, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against such Arranger, such Agent, the Issuing Bank or the Swingline Lender in its capacity as such. For purposes hereof, a Lender’s “pro rata share” shall be determined based upon its share of the sum of the total Revolving Exposures and unused Commitments at the time.

(d) To the extent permitted by applicable law, no Borrower shall assert, and each Borrower hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

(e) All amounts due under this Section shall be payable promptly after written demand therefor.

SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that (i) no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by any Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any

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Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees (other than a Restricted Entity) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:

(A) either the Parent Borrower or the Borrower in respect of the applicable Class of Commitment being assigned; provided that no consent of any Borrower shall be required for an assignment to (1) a Lender, an Affiliate of a Lender or an Approved Fund or (2) if an Event of Default has occurred and is continuing, any other assignee;

(B) either the US Agent or the Applicable Agent; provided that no consent of any Agent shall be required for an assignment of a Commitment to an assignee that is a Lender with a Commitment of the same Class immediately prior to giving effect to such assignment; and

(C) in the case of an assignment of any Commitment or any LC Exposure, the Issuing Bank.

(ii) Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, or an assignment of the entire remaining amount of the assigning Lender’s Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Applicable Agent) shall not be less than US$3,500,000 (or, in the case of a European Commitment, US$2,500,000) unless each of the applicable Borrower (or the Parent Borrower) and the Applicable Agent (or the US Agent) otherwise consent; provided that no such consent of any Borrower shall be required if an Event of Default has occurred and is continuing;

(B) each partial assignment of right or obligations of a Lender shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement in respect of the Class of rights and obligations being assigned;

(C) the parties to each assignment shall execute and deliver to the Applicable Agent (and, if it is not the Applicable Agent, the US Agent) an

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Assignment and Assumption, together with a processing and recordation fee payable by the assignee or assignor to the US Agent of US$3,500; and

(D) the assignee, if it shall not be a Lender, shall deliver to the Applicable Agent an Administrative Questionnaire.

(E) if the assigning Lender is a European Lender, the assignee must satisfy the requirements as set forth in the definition of European Lender.

(F) Except in the case of an assignment to a Qualifying Bank, an assignment (or other transfer of rights or obligations) of a Loan to the Swiss Borrower shall be subject to the prior written consent of the Swiss Borrower (such consent not to be unreasonably withheld).

For purposes of this Section 9.04(b), the term “Approved Fund” has the following meaning:

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by a Lender, an Affiliate of a Lender or an entity or an Affiliate of an entity that administers or manages a Lender, but in any event excluding any Restricted Entity.

(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.

(iv) The US Agent, acting for this purpose as an agent of the Borrowers, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans, B/As and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrowers, the Applicable Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this

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Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by any Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Applicable Agent or US Agent shall accept such Assignment and Assumption and, in the case of the US Agent, record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

(c) (i) Any Lender may, without the consent of any Borrower, any Agent, the Issuing Bank or the Swingline Lender, sell participations to one or more banks or other entities other than a Restricted Entity (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (C) the Borrowers, the Agents, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under the Loan Documents and (D) in the case of the sale of a participation in a Loan to the Swiss Borrower, each Participant shall be a Qualifying Bank or, if not, the prior written consent of the Swiss Borrower shall be obtained (such consent not to be unreasonably withheld). Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (c)(ii) of this Section, the Borrowers agree that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 (subject to the requirements and limitations therein) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under this Agreement (the “Participant Register”). The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

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(ii) A Participant shall not be entitled to receive any greater payment under Section 2.15 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with a Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless a Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrowers, to comply with Section 2.17(f) as though it were a Lender.

(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans, the acceptance and purchase of any B/As and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that any Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan, any B/A or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans and B/As, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.

SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to any Arranger or Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Agents and when the US Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the

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benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Borrower against any of and all the obligations of such Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York.

(b) Each Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that any Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Borrower or its properties in the courts of any jurisdiction.

(c) Each Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in

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paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d) Each Borrower hereby irrevocably appoints Patheon Pharmaceuticals Inc., c/o Patheon Inc., 4721 Emperor Boulevard,Suite 200, Durham NC, 27703, Attn: Legal Department (or a permitted alternative), as its authorized agent for service of process in any suit, action or proceeding with respect to this Agreement and for actions brought under the federal or state securities laws brought in any federal or state court located in the Borough of Manhattan in the City of NewYork and will submit to such jurisdiction, and agrees that service of process upon such agent, and written notice of said service to such Borrower by the Person serving the same in the manner provided for notices in Section 9.01, shall be deemed in every respect effective service of process upon such Borrower in any such suit or proceeding. Each Borrower further agrees to take any and all action as may be necessary to maintain such designation and appointment of such agent in full force and effect from the date of this Agreement until the Commitments have expired or been terminated and the principal of and interest on each Loan and all B/As, LC Disbursements and fees payable hereunder shall have been paid in full and no Letters of Credit are outstanding. Each other party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to the Agreement to serve process in any other manner permitted by law. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 9.12. Confidentiality. Each of the Agents, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined

147

below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Parent Borrower or any Subsidiary and its obligations, (g) with the consent of any Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to any Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than a Borrower or a Subsidiary. For the purposes of this Section, “Information” means all information received from any Borrower relating to the Borrowers or their business, other than any such information that is available to any Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by a Borrower; provided that, in the case of information received from any Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

Each Lender and Agent acknowledges that information as defined in Section 9.12(a) furnished to it pursuant to this Agreement may include material non-public information concerning a Borrower and its related parties or their respective securities, and confirms that it has developed compliance procedures regarding the use of material non-public information and that it will handle such material non-public information in accordance with those procedures and applicable law, including federal, state and provincial securities laws.

All information, including requests for waivers and amendments, furnished by any Borrower or any Agent pursuant to, or in the course of administering, this Agreement will be syndicate-level information, which may contain material non-public information about the Loan Parties and their related parties or their respective securities. Accordingly, each Lender represents to the Borrowers and the Agents that it has identified in its administrative questionnaire a credit contact who may receive information that may contain material non-public information in accordance with its compliance procedures and applicable law, including federal, state and provincial securities laws.

SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with

148

all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful under the applicable law, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

SECTION 9.14. Conversion of Currencies. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given.

(b) The obligations of each Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the “Applicable Creditor”) shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than the currency in which such sum is stated to be due hereunder (the “Agreement Currency”), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, such Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss, and if the amount of the Agreement Currency so purchased exceeds the sum originally due to the Applicable Creditor in the Agreement Currency, the Applicable Creditor shall refund the amount of such excess to the applicable Borrower. The obligations of the parties contained in this Section 9.14 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder.

SECTION 9.15. USA Patriot Act. Each Lender (other than a Lender that is not subject to the USA Patriot Act) hereby notifies the Borrowers that pursuant to the requirements of the USA Patriot Act, it is required to obtain, verify and record information that identifies each Borrower, which information includes the name and address of each Borrower and other information that will allow such Lender to identify each Borrower in accordance with the USA Patriot Act.

SECTION 9.16. Authorization of Collateral Agent. (a) For greater certainty, and without limiting the powers of the Collateral Agent, or any other Person

149

acting as an agent or mandatory for the Collateral Agent hereunder or under any of the other Loan Documents, each Borrower hereby acknowledges that, for purposes of holding any security granted by any Loan Party on property pursuant to the laws of the Province of Quebec to secure obligations of any Loan Party under any debenture, the Collateral Agent shall be the holder of an irrevocable power of attorney (fondé de pouvoir) (within the meaning of the Civil Code of Quebec) for all present and future Lenders and in particular for all present and future holders of any such debenture. Each Lender hereby irrevocably constitutes, to the extent necessary, the Collateral Agent as the holder of an irrevocable power of attorney (fondé de pouvoir) (within the meaning of Article 2692 of the Civil Code of Quebec) in order to hold security granted by any Loan Party in the Province of Quebec to secure the obligations of any Loan Party under any debenture. Each assignee of a Lender shall be deemed to have confirmed and ratified the constitution of the Collateral Agent as the holders of such irrevocable power of attorney (fondé de pouvoir) by execution of an Assignment and Assumption. Notwithstanding the provisions of Section 32 of the An Act respecting the special powers of legal persons (Quebec), the Collateral Agent may acquire and be the holder of any debenture. Each Borrower hereby acknowledges that such debenture constitutes a title of indebtedness, as such term is used in Article 2692 of the Civil Code of Quebec.

(b) The Lenders, for themselves and on behalf of the beneficiaries of the Guarantees created pursuant to the Guarantor Agreement, the Issuing Banks and the Agents, hereby appoint JPMorgan Chase Bank, N.A., Milan Branch, as “mandatario con rappresentanza” pursuant to articles 1703, 1704 and followings of the Italian Civil Code to act as their collateral agent under and in connection with the Italian Security Documents (and the Intercreditor Agreement for the purposes set forth in Section 9.17) in order to perfect and hold (including exercise all rights, remedies and/or powers of the Lenders thereunder) the security interests governed by Italian law granted by any Loan Party to secure the obligations of any Loan Party under any debenture. Each assignee of a Lender shall be deemed to have confirmed and ratified the aforesaid constitution of the Collateral Agent under Italian law.

(c) In connection with the Swiss Security Documents, the applicable Agent shall hold all securities under a Swiss Security Document that is accessory in nature (akzessorisch) for itself and for and on behalf of the Lenders as a direct representative (direkter Stellvertreter) and shall hold all securities under a Swiss Security Document that is non-accessory in nature (nicht akzessorisch) as an agent for the benefit of the Lenders (Halten unter einem Treuhandverhältnis).

(d) The Lenders, for themselves and on behalf of the Agent and the Lenders who are affiliates of the counterparties to any Swap Agreement, hereby appoint J.P. Morgan Europe Limited to create, register, manage and enforce any Liens on Collateral granted by the French Security Documents in accordance with Article 2328-1 of the French Civil Code.

SECTION 9.17. Intercreditor Agreement. Notwithstanding anything to the contrary set forth herein, this Agreement is subject to the terms and provisions of the Intercreditor Agreement. In the event of any inconsistency between the provisions of this

150

Agreement and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall supersede the provisions of this Agreement. The Lenders acknowledge and agree to the Intercreditor Agreement and authorize the Collateral Agent to (a) enter into the Intercreditor Agreement as ABL Agent (as defined therein), (b) bind the Lenders on the terms set forth in the Intercreditor Agreement and (c) perform and observe its obligations under the Intercreditor Agreement.

SECTION 9.18. Notice of Other Obligations. Each Lender hereby agrees to notify the US Agent promptly, and in any event within three Business Days, after such Lender or any of its Affiliates enters into, or amends or modifies, any agreement or arrangement that could give rise to, or change the amount of, any Other Obligation.

SECTION 9.19. Restatement of Existing Credit Agreement. (a) Each Lender that is also a lender under the Existing Credit Agreement hereby waives any requirement under the Existing Credit Agreement for notice of the termination or reduction of any Commitment (as defined therein) thereunder or any payment of any Loan (as defined therein) or other amount thereunder, in each case in respect of any such termination, reduction or payment to be made on the Effective Date.

(b) The amendment and restatement of the Existing Credit Agreement as contemplated hereby shall not be construed to discharge or otherwise affect any obligations of any Borrower accrued or otherwise owing under the Existing Credit Agreement that have not been paid, it being understood that such obligations will continue to constitute obligations under this Agreement.

151

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

PATHEON INC.,
	by
		/s/ Wesley P. Wheeler
		Name:	Wesley P. Wheeler
		Title:	President and Chief Executive Officer
PATHEON PHARMACEUTICALS INC.,
	by
		/s/ Wesley P. Wheeler
		Name:	Wesley P. Wheeler
		Title:	President and Chief Executive Officer
PATHEON UK LIMITED,
	by
		/s/ Wesley P. Wheeler
		Name:	Wesley P. Wheeler
		Title:	Director
PATHEON PUERTO RICO, INC.
	by
		/s/ Wesley P. Wheeler
		Name:	Wesley P. Wheeler
		Title:	President
PATHEON FRANCE S.A.S.,
	by
		/s/ Wesley P. Wheeler
		Name:	Wesley P. Wheeler
		Title:	Authorized Signatory

[Signature Page to the Amended and Restated Revolving Credit Agreement]

PATHEON ITALIA S.p.A.,
	by
		/s/ Wesley P. Wheeler
		Name:	Wesley P. Wheeler
		Title:	Chairman of the Board of
			Directors
PATHEON INTERNATIONAL AG,
	/s/ Wesley P. Wheeler
	Name:		Wesley P. Wheeler
	Title:		Member of the Board of Directors
JPMORGAN CHASE BANK, N.A.,
individually and as an Agent,
	by
		/s/ Dawn LeeLum
		Name:	Dawn LeeLum
		Title:	Executive Director
JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, individually and as an Agent,
	by
		/s/ Dawn LeeLum
		Name:	Dawn LeeLum
		Title:	Executive Director
J.P. MORGAN EUROPE LIMITED, individually and as an Agent,
	by
		/s/ Tim Jacob
		Name:	Tim Jacob
		Title:	Senior Vice President

[Signature Page to the Amended and Restated Revolving Credit Agreement]

SIGNATURE PAGE TO THE AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT DATED AS OF APRIL 2010 AMONG PATHEON INC., CERTAIN OF ITS SUBSIDIARIES, THE LENDERS PARTY THERETO, JPMORGAN CHASE BANK, N.A., AS US ADMINISTRATIVE AGENT AND THE OTHER AGENTS NAMED THEREIN.

NAME OF INSTITUTION:
Scotiabank de Puerto Rico
By:
	/s/ Ricardo Fishman
	Name: Ricardo Fishman
	Title: Vice President
By:
	1
	Name:
	Title:

¹ For Lenders required to have two signatories

SIGNATURE PAGE TO THE AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT DATED AS OF APRIL 2010 AMONG PATHEON INC., CERTAIN OF ITS SUBSIDIARIES, THE LENDERS PARTY THERETO, JPMORGAN CHASE BANK, N.A., AS US ADMINISTRATIVE AGENT AND THE OTHER AGENTS NAMED THEREIN.

NAME OF INSTITUTION:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
	/s/ Dennis Cloud
	Name: Dennis Cloud
	Title: Duly Authorized Signatory
By:
	1
	Name:
	Title:

¹ For Lenders required to have two signatories

SIGNATURE PAGE TO THE AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT DATED AS OF APRIL 2010 AMONG PATHEON INC., CERTAIN OF ITS SUBSIDIARIES, THE LENDERS PARTY THERETO, JPMORGAN CHASE BANK, N.A., AS US ADMINISTRATIVE AGENT AND THE OTHER AGENTS NAMED THEREIN.

NAME OF INSTITUTION:
BARCLAYS BANK PLC
By:
	/s/ David Booth
	Name: David Booth
	Title: Relationship Director
By:
	1
	Name:
	Title:

¹ For Lenders required to have two signatories

SIGNATURE PAGE TO THE AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT DATED AS OF APRIL 2010 AMONG PATHEON INC., CERTAIN OF ITS SUBSIDIARIES, THE LENDERS PARTY THERETO, JPMORGAN CHASE BANK, N.A., AS US ADMINISTRATIVE AGENT AND THE OTHER AGENTS NAMED THEREIN.

NAME OF INSTITUTION:
Wells Fargo Capital Finance, LLC
By:
	/s/ Yelena Kravchuk
	Name: Yelena Kravchuk
	Title: Vice President
By:
	/s/ Lisa M. Gonzales	1
	Name: Lisa M. Gonzales
	Title: Vice President
	Name of Institution: Wells Fargo Financial Corporation Canada

¹ For Lenders required to have two signatories

SIGNATURE PAGE TO THE AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT DATED AS OF APRIL 2010 AMONG PATHEON INC., CERTAIN OF ITS SUBSIDIARIES, THE LENDERS PARTY THERETO, JPMORGAN CHASE BANK, N.A., AS US ADMINISTRATIVE AGENT AND THE OTHER AGENTS NAMED THEREIN.

NAME OF INSTITUTION:
CIT BUSINESS CREDIT CANADA INC.
By:
	/s/ Trevor Tysick
	Name: Trevor Tysick
	Title: Associate
By:
	/s/ Donald Rogers	1
	Name: Donald Rogers
	Title: Senior Vice President

¹ For Lenders required to have two signatories

SIGNATURE PAGE TO THE AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT DATED AS OF APRIL 2010 AMONG PATHEON INC., CERTAIN OF ITS SUBSIDIARIES, THE LENDERS PARTY THERETO, JPMORGAN CHASE BANK, N.A., AS US ADMINISTRATIVE AGENT AND THE OTHER AGENTS NAMED THEREIN.

NAME OF INSTITUTION:
UBS Loan Finance LLC
By:
	/s/ Irja R. Otsa
	Name:	Irja R. Otsa
	Title:	Associate Director
		Banking Products Services, US
By:
	/s/ Mary E. Evans		1
	Name:	Mary E. Evans
	Title:	Associate Director
		Banking Products Services, US

¹ For Lenders required to have two signatories

SCHEDULE 1.01(a) – SPECIFIED ACCOUNT DEBTOR

AstraZeneca

Bristol Myers Squibb

F. Hoffman-La Roche, Ltd.

GlaxoSmithKline plc

Johnson & Johnson

Merck & Co., Inc.

Novartis AG

Pfizer Inc.

Sanofi Aventis

Schering-Plough Corporation

Actelion Pharmaceuticals Ltd.

Alcon, Inc.

Amgen Inc.

Baxter International Inc.

Bayer AG

Biogen Idec

Eli Lilly and Company

Procter & Gamble

Reckitt Benckiser Group plc

Solvay S.A.

Watson Pharmaceuticals, Inc.

and each of their respective affiliates

SCHEDULE 1.01(b) - MORTGAGED PROPERTIES

Company	Mailing Address
Patheon Inc.	2100 Syntex Court Mississauga, Ontario L5N 7K9 Canada
Patheon Inc.	111 Consumers Drive Whitby, Ontario L1N 5Z5 Canada
Patheon Pharmaceuticals Inc.	2110 East Galbraith Road Cincinnati, Ohio, U.S.A. 45237
Patheon UK Limited	Kingfisher Drive Covingham, Swindon Wiltshire SN3 5BZ England
Patheon Puerto Rico, Inc.	Villa Blanca Industrial Park State Road #1, Km. 34.8 Caguas, Puerto Rico 00725
Patheon Puerto Rico, Inc.	State Road #670 Km. 2.7 Bo. Cote Norte Manati, Puerto Rico 00674

Execution Version

Schedule 2.01

US Commitments
JPMorgan Chase Bank, N.A.	US$	6,250,000
UBS Loan Finance LLC	US$	7,500,000
Wells Fargo Capital Finance, LLC	US$	8,750,000
General Electric Capital Corporation	US$	7,500,000
Scotiabank de Puerto Rico	US$	5,000,000
Canadian Commitments
JPMorgan Chase Bank, N.A.	US$	2,000,000
UBS Loan Finance LLC	US$	3,500,000
Wells Fargo Financial Corporation Canada	US$	4,500,000
General Electric Capital Corporation	US$	5,000,000
CIT Business Credit Canada Inc.	US$	5,000,000
UK Commitments
JPMorgan Chase Bank, N.A.	US$	1,750,000
UBS Loan Finance LLC	US$	1,500,000
Wells Fargo Capital Finance, LLC	US$	1,750,000
Barclays Bank Plc	US$	5,000,000
European Commitments
JPMorgan Chase Bank, N.A.	US$	5,000,000
Barclays Bank Plc	US$	5,000,000

EXECUTION VERSION

SCHEDULE 2.21

MANDATORY COSTS FORMULAE

1. The Mandatory Costs Rate is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions).

2. On the first day of each Interest Period (or as soon as possible thereafter) the UK Agent shall calculate, as a percentage rate, a rate (the “Additional Cost Rate”) for each Lender, in accordance with the paragraphs set out below. The Mandatory Costs Rate will be calculated by the UK Agent as a weighted average of the Lenders’ Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum.

3. The Additional Cost Rate for any Lender lending from a lending office in a Participating Member State will be the percentage notified by that Lender to the UK Agent. This percentage will be certified by that Lender in its notice to the UK Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender’s participation in all Loans made from that lending office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that lending office.

4. The Additional Cost Rate for any Lender lending from a lending office in the United Kingdom will be calculated by the UK Agent as follows:

(a) in relation to a sterling Loan:

per cent. per annum

(b) in relation to a Loan in any currency other than sterling:

per cent. per annum.

Where:

A is the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which that Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.

B is the percentage rate of interest (excluding the Applicable Rate and the Mandatory Costs Rate and, if the Loan is an a sum due and payable but unpaid by the UK Borrower, the additional rate

EXECUTION COPY

of interest specified in paragraph (c) of Section 2.13 (Interest)) payable for the relevant Interest Period on the Loan.

C is the percentage (if any) of Eligible Liabilities which that Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.

D is the percentage rate per annum payable by the Bank of England to the UK Agent on interest bearing Special Deposits.

E is designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the UK Agent as being the average of the most recent rates of charge supplied by the Reference Bank to the UK Agent pursuant to paragraph 7 below and expressed in pounds per £1,000,000.

5. For the purposes of this Schedule:

(a) “Eligible Liabilities” and “Special Deposits” have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;

(b) “Fees Rules” means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;

(c) “Fee Tariffs” means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate);

(d) “Reference Bank” means JPMorgan Chase Bank, N.A., and its designees; and

(e) “Tariff Base” has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.

6. In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e. 5 per cent. will be included in the formula as 5 and not as 0.05). A negative result obtained by subtracting D from B shall be taken as zero. The resulting figures shall be rounded to four decimal places.

EXECUTION COPY

7. If requested by the UK Agent, the Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the UK Agent, the rate of charge payable by the Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by the Reference Bank as being the average of the Fee Tariffs applicable to the Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of the Reference Bank.

8. Each Lender shall supply any information required by the UK Agent for the purpose of calculating its Additional Cost Rate. In particular, but without limitation, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:

(a) the jurisdiction of its lending office; and

(b) any other information that the UK Agent may reasonably require for such purpose.

Each Lender shall promptly notify the UK Agent of any change to the information provided by it pursuant to this paragraph.

9. The percentages of each Lender for the purpose of A and C above and the rates of charge of the Reference Bank for the purpose of E above shall be determined by the UK Agent based upon the information supplied to it pursuant to paragraphs 7 and 8 above and on the assumption that, unless a Lender notifies the UK Agent to the contrary, each Lender’s obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a lending office in the same jurisdiction as its lending office.

10. The UK Agent shall have no liability to any person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or the Reference Bank pursuant to paragraphs 3, 7 and 8 above is true and correct in all respects.

11. The UK Agent shall distribute the additional amounts received as a result of the Mandatory Costs Rate to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender and the Reference Bank pursuant to paragraphs 3, 7 and 8 above.

12. Any determination by the UK Agent pursuant to this Schedule in relation to a formula, the Mandatory Costs Rate, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all Parties.

13. The UK Agent may from time to time, after consultation with the UK Borrower and the Lenders, determine and notify to all Parties any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England or the Financial Services Authority (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all Parties.

SCHEDULE 3.05 – REAL PROPERTY

PATHEON INC.

LOCATION	OWNERSHIP STATUS
7070 Mississauga Rd Suite 350 Mississauga, Ontario L5N 7J8 Canada	Leased
2100 Syntex Court Mississauga, Ontario L5N 7K9 Canada	Owned
111 Consumers Drive Whitby, Ontario L1N 5Z5 Canada	Owned
977 Century Drive Burlington, Ontario Canada	Leased
Niagara Industrial Mall 5900 Thorold Stone Rd Niagara Falls, Ontario Canada	Leased

PATHEON PHARMACEUTICALS INC.

LOCATION	OWNERSHIP STATUS
2110 East Galbraith Road Cincinnati, Ohio, U.S.A. 45237	Owned
8711 Reading Road Cincinati, Ohio, U.S.A. 45215	Leased
4750 Lake Forest Drive Blue Ash, Ohio, U.S.A. 45242	Leased
Unit H1, 8711 Reading Road Cincinnati, Ohio, U.S.A. 45215	Leased
7030 Kit Creek Road Suite 110 Morrisville, NC, U.S.A. 27560	Leased

PATHEON UK LIMITED

LOCATION	OWNERSHIP STATUS
Kingfisher Drive Covingham, Swindon Wiltshire SN3 5BZ England	Owned (long-term ground lease from Swindon Borough Council until 2070)

Unit 151, Milton Park Abingdon, Oxfordshire England OX14 4SD Leased

PATHEON FRANCE S.A.S.

LOCATION	OWNERSHIP STATUS
40, Boulevard de Champaret B.P. 448 38317 Bourgion-Jallieu, Cedex France	Owned

PATHEON ITALIA S.p.A.

LOCATION	OWNERSHIP STATUS
Via Morolense 87 03013 Ferentino (FR), Italy	Owned
Viale G.B. Stucchi 1-20053 Monza Italy	Owned

PATHEON PUERTO RICO, INC.

LOCATION	OWNERSHIP STATUS
Villa Blanca Industrial Park State Road #1, Km. 34.8 Caguas, Puerto Rico 00725	Owned
State Road #670 Km. 2.7 Bo. Cote Norte Manati, Puerto Rico 00674	Owned
Villa Blanca Industrial Park Ave. Jack Desperak Caguas, Puerto Rico 00725	Leased

CEPH INTERNATIONAL CORPORATION

LOCATION	OWNERSHIP STATUS
Puerto Rico Industrial Park State Road #3 (65th Infantry) Km. 12.6 Carolina, Puerto Rico, 00979	Owned

PATHEON INTERNATIONAL AG

LOCATION	OWNERSHIP STATUS
Switzerland Office Property Lindenstrasse 14 6340 Baar Switzerland	Leased

PATHEON PHARMACEUTICAL SERVICES INC.

LOCATION	OWNERSHIP STATUS
RTP US Headquarters 4721 Emperor Blvd Suite 200 Durham, NC 27703	Leased

SCHEDULE 3.06 - DISCLOSED MATTERS

Section 3.04(c) – Financial Condition; No Material Adverse Change

See description of BSP Pharmaceuticals investment in Schedule 6.04 representing an “unusual commitment”

Patheon (Patheon Italia S.p.A. and Patheon B.V.) has guaranteed up to Euro 1,080,000 if BSP Pharmaceuticals does not fulfill its obligations under its loan obligations representing a “material contingent commitment” (See Schedule 6.04)

See description of the Italian letters of patronage described in Schedule 6.01 representing “material contingent commitments”

Section 3.06 – Litigation and Environmental Matters

None

Section 3.07 – Compliance with Laws and Agreements

None

SCHEDULE 3.12 – SUBSIDIARIES

Subsidiary	Registered Owner/ Beneficial Owner	Number and Class of Equity Interest	Percentage of Equity Interests	Jurisdiction of Organization
Patheon International Inc.	Patheon Inc.	4292 common shares	100%	Ontario, Canada
Patheon U.S. Holdings Inc.	Patheon International Inc.	101 common shares	100%	Delaware, U.S.A.
Patheon P.R. LLC	Patheon International Inc.	5,001 membership units	100%	Delaware, U.S.A.
Patheon U.S. Holdings LLC	Patheon International Inc.	551 membership units	100%	Delaware, U.S.A.
Patheon Finance LLC	Patheon U.S. Holdings LLC	51 membership units	100%	Delaware, U.S.A.
Patheon Pharmaceuticals Inc.	Patheon U.S. Holdings Inc.	101 common shares	100%	Delaware, U.S.A.
Patheon Pharmaceuticals Services Inc.	Patheon U.S. Holdings Inc.	1 common share	100%	Delaware, U.S.A.
CEPH International Corporation	Patheon Puerto Rico Acquisitions Corporation	50,000 common shares	100%	Puerto Rico
Patheon B.V.	Patheon Holdings Cyprus Ltd.	42 shares	100%	Netherlands
Patheon UK Limited	Patheon B.V.1	100,001 ordinary shares and 2,000,000 preference shares	100%	England
Patheon Italia S.P.A.	Patheon B.V.	200,000 shares	100%	Italy
Patheon Puerto Rico, Inc.	Patheon P.R. LLC	11,131,150 Class A common shares	100%	Puerto Rico
Patheon Puerto Rico Acquisitions Corporation	Patheon Puerto Rico, Inc.	100,000 common shares	100%	Puerto Rico
Patheon Holdings S.A.S	Patheon Italia S.P.A. Patheon B.V.	292 Class A shares2 20,000 Class B shares	1.46% 98.54%	France
Patheon France S.A.S	Patheon Holdings S.A.S	200,000 ordinary shares	100%	France
Patheon International AG	Patheon B.V.	200 shares	100%	Switzerland
Patheon Research and Development Service Private Limited	Patheon Holdings Cyprus Ltd.	10,000 common shares	100%	India
Patheon Pharmaceuticals	Patheon Holdings Cyprus Ltd.	10,000 common shares	100%	India

¹ Patheon B.V. is the beneficial owner; it is anticipated it will become the registered owner after the Effective Date.

² It is anticipated that these will be redeemed after the Effective Date.

India Private Limited
Patheon KK	Patheon International Inc.	200 common shares	100%	Japan
Patheon UK Pension Trustees Limited	Patheon UK Limited	1 ordinary share	100%	England
Patheon Europe Zrt.	Patheon B.V.	21,030 registered ordinary “A” shares	100%	Hungary
Patheon Holdings Cyprus Ltd.	Patheon U.S. Holdings LLC	1,500 ordinary shares	100%	Cyprus

Each Subsidiary on the above chart is a “Subsidiary Loan Party” other than the following:

Patheon Research and Development Service Private Limited

Patheon Pharmaceuticals India Private Limited

Patheon K.K.

Patheon UK Pension Trustees Limited

Patheon Holdings Cyprus Ltd.

Patheon Europe Zrt.

Patheon, Inc.	Schedule 5.01
Collateral Monitoring Reporting Requirements	Page 1 of 1
Documents to be Submitted to the Bank

The following information is to be submitted, pursuant to Section 5.01(e) of the Amended and Restated Revolving Credit Agreement, for Patheon, Inc. as noted below. The Accounts Receivable information shall be provided for Canada US Puerto Rico, the UK, Switzerland, France and Italy unless otherwise noted or requested by the Agent. The Inventory information shall be provided for Canada US Puerto Rico, UK, Switzerland, France and Italy, unless otherwise noted or requested by the Agent. All other information shall be provided for Canada US Puerto Rico, Switzerland, France and Italy unless otherwise noted or requested by the Agent. Information requirements may be revised from time to time by the Administrative Agent in its Permitted Discretion.

	Reporting Frequency	Weekly Reporting: Due by Wednesday or (if requested) within 5 Business Days after such request if an Availability Trigger Event has occurred and is continuing	Monthly Reporting: Due 20 Business Days following the end of each calendar month
1.	Borrowing Base Certificate in the form of Exhibit G.	X	X
	Accounts Receivable Supporting Documents:
1.	Accounts receivable summary aging specifying the name, address (state and/or country), terms and balance due for each Account Debtor.	X	X
2.	Supporting documentation (system generated extract report where applicable) for the A/R ineligibles/ reserves reported on the Borrowing Base Certificate in a manner reasonably acceptable to the Administrative Agent.	X	X
3.	Accounts receivable detail aging (1) including all invoices aged by due date and (2) reconciled to the Borrowing Base Certificate delivered as of such date prepared in a manner reasonably acceptable to the Administrative Agent.	X	X
4.	Accounts receivable rollforward in an electronic format acceptable by the Administrative Agent.		X
5.	Reconciliation of A/R aging report to general ledger and financial statements.		X
	Inventory Supporting Documents:
1.	Summary of Inventory and ineligibles by category and location.	X	X
2.	Supporting documentation (system generated extract report where applicable) for the inventory ineligibles and reserves reported on the Borrowing Base Certificate.		X
3.	Reconciliation of inventory reports to general ledger and financial statements.	X	X
4.	Schedule of monthly rent for all leased locations (to the extent applicable to the Borrowing Base Certificate).	X	X
	Other Supporting Documents:
1.	Priority Payable Reserves summary and calculation (to the extent applicable to the Borrowing Base Certificate.	X	X
2.	Accounts payable agings.		X
3.	Exchange Rates used for Canada, UK and Europe.	X	X

Note: Other documents with respect to the Borrowing Base may be requested by the Administrative Agent.

Submit to:	European Collateral Requirements Submit to:
JPMorgan Chase Bank	J.P. Morgan Europe Limited
Structuring & Portfolio Group	Chase Business Credit
Attn: Robert A Kaulius	Attn: Helen Mathie
270 Park Avenue, Floor 44	10 Aldermanbury, Floor 8
New York, NY 10017	London, EC2V 7RF, United Kingdom
Phone: (212) 270 - 0285	Phone: 44 207 3259724
Fax: (646) 534 - 2274	Fax: 44 207 3256813
E-Mail: robert.a.kaulius@jpmorgan.com	E-Mail: helen.f.mathie@jpmchase.com

EXECUTION VERSION

Schedule 5.14

Within 30 days after the Effective Date (or such later date as the US Agent shall agree in its sole discretion), the Parent Borrower will deliver to the Administrative Agent copies of insurance policies (or other evidence of insurance) demonstrating that all insurance required by the Loan Documents is in effect.

Within 30 days after the Effective Date (or such later date as the US Agent shall agree in its sole discretion), the delivery requirements of clause (b) of the Collateral and Guarantee Requirement with regard to Equity Interests and any related transfer forms shall be satisfied by relevant Loan Parties.

Within 30 days after the Effective Date (or such later date as the US Agent shall agree in its sole discretion), all Cash Collection Systems and Deposit Account Control Agreements shall be in place pursuant to arrangements satisfactory to the US Agent; provided that (i) the foregoing shall not apply to the Cash Collection System for the UK Borrower Group, which must be in place on the Effective Date and (ii) the New European Collection Accounts shall not be required unless required by clause (g) of the Collateral and Guarantee Requirement.

Within 30 days after the Effective Date (or such later date as the US Agent shall agree in its sole discretion), the requirements of clause (e) of the definition of Collateral and Guarantee Requirement shall be satisfied with respect to (i) the open-end second lien mortgage, assignment of leases and rents, security agreement and financing statement from Patheon Pharmaceuticals Inc to JPMorgan Chase Bank N.A. with respect to the property located at 8600 Reading Rd & 2110 E. Galbraith Rd, Cincinnati, Hamilton Co., Ohio and (ii) the second-ranking debenture from Patheon Inc. to JPMorgan Chase Bank, N.A. having a nominal face principal amount of US$75,000,000, charging lands and premises municipally known as: 111 Consumers Drive, Whitby, Ontario; and 2100 Syntex Court, Mississauga, Ontario; together with a title insurance policy for the benefit of JPMorgan Chase, Bank, N.A., as administrative agent and collateral agent, in the form settled with Blake, Cassels & Graydon LLP.

If the consent of the landlord of the Mortgaged Property (as defined in the UK Debenture) has not been obtained by the UK Loan Party Group as of the date of the UK Debenture then, within 60 days after the Effective Date (or such later date as the US Agent shall agree in its sole discretion), the UK Loan Party Group shall use its best endeavors to obtain the consent of the landlord of the Mortgaged Property (as defined in the UK Debenture) to the creation of security over that Mortgaged Property.

Within 5 Business Days after the Effective Date (or such later date as the Agent shall agree in its sole discretion), all debtors under the Netherlands deeds of pledge of intercompany receivables will be sent notification of such pledge.

Within 10 Business Days after the Effective Date (or such later date as the Agent shall agree in its sole discretion) Patheon B.V. or the Italian Borrower as applicable shall complete the actions listed in Sections 3(a) and 3(b) of the Deed of

Amendment and Restatement of Pledge over Shares dated the Effective Date among Patheon B.V., the European Collateral Agent and the other parties thereto.

Within 45 days after the Effective Date (or such later date as the Agent shall agree in its sole discretion), a signed list of the Swiss receivables that have been assigned will be provided to the Agent.

On or prior to August 15, 2010 (or such later date as the Agent shall agree in its sole discretion), Patheon US Holdings LLC will pledge the Equity Interests of Patheon B.V. to secure the Obligations.

Patheon Italia S.p.A. will pledge its Equity Interest of Patheon Holdings S.A.S. no later than August 15, 2010 (or such later date as the Agent shall agree in its sole discretion) to secure the obligations, to the extent such Equity Interests exist.

Within 10 Business Days after the Effective Date (or such later date as the Agent shall agree in its sole discretion), Patheon Italia S.p.A. shall deliver to the Agent a notarial deed from Banca Intesa Mediocredito Italiano evidencing the release of the mortgages on its properties.

Within 30 days after the Effective Date (or such later date as the Agent shall agree in its sole discretion), landlord waivers will be obtained in favor of JPMorgan Chase Bank in Canada.

Within 30 days after the Effective Date (or such later date as the Agent shall agree in its sole discretion) Patheon B.V. shall deliver to the European Administrative Agent (i) both share certificates in respect of its holding in the preference and ordinary shares of Patheon UK Limited, (ii) blank and signed stock transfer forms in respect of the preference and ordinary shares of Patheon UK Limited and (iii) a shareholder resolution in respect of entering into the Transaction.

Within 20 Business Days after the Effective Date (or such later date as the Agent shall agree in its sole discretion) Patheon UK Limited shall deliver to the European Administrative Agent a certified copy of the register of members evidencing Patheon B.V. as its registered shareholder.

Within 5 Business Days from the Effective Date (or such later date as the Agent shall agree in its sole discretion), Patheon Italia S.p.A. shall deliver to Agent a letter from Banca Intesa Mediocredito Italiano evidencing that the long-term secured loans outstanding with Patheon Italia S.p.A. have been repaid in full (“quietanza di pagamento”).

The Swiss Borrower shall deliver an interim balance sheet as of April 30, 2010, certified by a Financial Officer, within 30 days after the Effective Date, and within 90 days after the Effective Date (or such longer period as the US Agent shall agree in its sole discretion), shall deliver such interim balance sheet approved by its statutory auditor. The interim balance sheet as of April 30, 2010, shall evidence that (i) that the Swiss Borrower is not over-indebted on the date of the interim balance sheet or (ii) has agreed

with its creditors on a subordination of debts in an amount satisfactory to the US Agent in its sole discretion.

SCHEDULE 6.01 - EXISTING INDEBTEDNESS

1. Letter of credit in the amount of U.S.$70,000 issued by JPMorgan Chase Bank, N.A. in favor of ARE-7030 Kit Creek, LLC which has been secured by reserves against borrowing base availability the Agent as of the Effective Date.

2. Letter of credit in the amount of U.S.$1,250,000 issued by JPMorgan Chase Bank, N.A. in favor of Barclays Bank PLC which has been secured by reserves against borrowing base availability the Agent as of the Effective Date.

3. Various existing capitalized lease obligations in an aggregate amount of not more than U.S.$3,000,000.

4. Guarantee (“letter of patronage”) of Patheon Inc. in favour of Sanpaolo IMI S.p.A. dated November 18, 2002 in respect of the commitment of Patheon Inc. to maintain a minimum equity investment in Patheon Italia S.p.A. of €17,172,000 to permit Patheon Italia S.p.A. to qualify for certain grants to be received from governmental authorities in Italy.

5. Patheon Italia S.p.A term loan owing to Banca lntesaBci Mediocredito S.p.A pursuant to loan agreement dated December 22, 2005 in an initial aggregate amount of €28,500,000.³

6. Guarantee (“letter of patronage”) of Patheon Inc. in favour of Credito Artigiane S.p.A. dated May 17, 2004 in respect of the commitment of Patheon Inc. to provide notification within 30 days of a change in control of Patheon Italia S.p.A. from Patheon Inc.

7. Guarantee (“letter of patronage”) of Patheon Inc. in favour of Banca IntesaBci Mediocredito S.p.A. dated June 11, 2004 in respect of the commitment of Patheon Inc. to provide notification within 30 days of a change in control of Patheon Italia S.p.A. from Patheon Inc.

8. Letter of comfort from Patheon Inc. addressed to Unicredit Banca D’Impressa S.p.A. in support of a credit facility in favor of BSP Pharmaceuticals (see Schedule 6.04 for description of BSP Pharmaceuticals investment) stating that Patheon Inc. acknowledges that, in granting the credit facility, the lender took into consideration that Patheon Inc. has an indirect interest in BSP Pharmaceuticals and Patheon Inc. will undertake not to dispose of its interest in BSP Pharmaceuticals (i) without the lender’s prior written consent prior to January 1, 2011 and (ii) only after giving the lender 30 days’ prior written notice from and after January 1, 2011.

9. Agreement for Incentives dated on May 1, 1996, as amended, between MOVA Pharmaceutical Corporation (now Patheon Puerto Rico, Inc.) and The Puerto Rico

³ It is contemplated that this debt will be repaid in connection with the Transactions.

Industrial Development Company (“PRIDCO”) for an R&D incentives grant that was effectively a loan to be repaid through royalties on MOVA production. PRIDCO, through its rights, did not consent to the change of control of MOVA when Patheon acquired it and, accordingly, an accelerated repayment schedule was agreed such that the sellers of MOVA made an aggregate lump sum payment to PRIDCO of $2,387,098.88 and Patheon Puerto Rico, Inc. made 9 quarterly payments to PRIDCO of $265,233.21 starting on April 1, 2007 and ending on April 1, 2009. The sellers of MOVA are be entitled to be reimbursed by MOVA for the lump sum payment made by them to PRIDCO as follows: Patheon Puerto Rico, Inc. makes quarterly royalty payments to the sellers of MOVA in the amount of 1% of all revenue received by Patheon Puerto Rico, Inc., if any, in respect of the manufacture by Patheon Puerto Rico, Inc. of the products Levothyroxine, Glyburide and Glycron after April 1, 2009 and ending on the date that the aggregate amount of $2,387,098.88 in royalty payments has been made.

10. Guarantee of MOVA Pharmaceutical Corporation (no Patheon Puerto Rico, Inc.) in favour of SB Pharmco Puerto Rico Inc. dated as of March 21, 1997, guaranteeing the performance by ChemSource Corporation of certain environmental obligations up to $17,500,000 under an agreement by and among ChemSource Corporation, MOVA Pharmaceutical Corporation and SB Pharmco Puerto Rico Inc.⁴

11. Financing from CILAG GmbH International and Johnson & Johnson Pharmaceutical Research & Development, a division of Janssen Pharmaceutica N.V., or affiliates thereof to Patheon UK Limited pursuant to a Manufacturing and Supply Agreement dated January 1, 2006 in the amount of €5,000,000 in respect of customer requested equipment.

12. Lines of credit to Patheon Italia S.p.A. in an aggregate principal amount of up to €17,000,000 from the following institutions: €8,000,000 from Credito Artigiano S.p.A, €5,000,000 from UniCredit Corporate Banking S.p.A. and €4,000,000 from Intesa Sanpaolo S.p.A.

13. Loan from the Ministry of Economic Development in Italy to Patheon Italia S.p.A. in an amount of approximately €3,440,000.

14. Lines of credit to Patheon France S.A.S. from (i) Societe Generale in an aggregate principal amount of €650,000 and (ii) BNP Paribas in an aggregate principal amount of €2,000,000.

⁴ Pursuant to section 5.13 of the Stock Purchase Agreement dated November 22, 2004 between Patheon Inc., as buyer, and Joaquín Viso, Olga Lizardi, José Negroni, Lorraine Hernández, Aida García and Frank Fournier, as the sellers (collectively, the “Sellers”), the Sellers provided a covenant to use reasonable efforts to cause this guarantee to be released or cancelled by the beneficiary thereunder prior to closing; since such guarantee could not be released or cancelled on or prior to closing, Sellers indemnified Patheon Inc. from and against any damages incurred by Patheon Inc. or MOVA Pharmaceutical Corporation pursuant to such guarantee.

SCHEDULE 6.02 - EXISTING LIENS

1. Liens on the assets of Patheon Italia S.p.A. in favor of its lenders.⁵

2. Pledges of the shares of BSP Pharmaceuticals held by Patheon Italia S.p.A. and Patheon BV to the lenders to BSP Pharmaceuticals as further described in Schedule 6.04.

3. Liens and encumbrances on real property disclosed in title opinions or title insurance documents delivered to the US Agent concurrently with the execution of the Agreement.

4. Liens and encumbrances indicated by copies of search results of the Parent Borrower and each Guarantor conducted in their respective jurisdictions including, without limitation, search results under the Personal Property Security Act (Ontario) and the U.S. Uniform Commercial Code, as applicable, the results of which are set out below:

[Search results chart to be attached]

⁵ It is contemplated that these liens will be released following the payoff of the debt they secure, such repayment contemplated to occur in connection with the Transactions.

PATHEON

UCC/PPSA LIENS

	Debtor	Secured Party	Filing Jurisdiction	Filing Number Filing Date	Collateral Description/Comments
1.	Patheon Pharmaceuticals Inc.	Dorman Leasing, Inc.	Delaware –SOS	UCC-l #2008 3914007 11/24/2008	Precautionary filing in connection with leased equipment.
2.	Patheon Pharmaceuticals Inc.	General Electric Capital Corporation	Delaware –SOS	UCC-l #2009 1972949 06/10/2009	See Exhibit A for list of property; all accessions thereto; warehouse receipts; all insurance and/or other proceeds of any type of the foregoing property; etc.
2.(a)	Patheon Pharmaceuticals Inc.	General Electric Capital Corporation	Delaware – SOS	Amendment #2009 4180730 12/30/2009	Amends UCC-1 #2009 1972949 dated 06/10/2009. Restated collateral description.
3.	Patheon Pharmaceuticals Inc.	General Electric Capital Corporation	Delaware – SOS	UCC-l #2009 2883269 09/08/2009	One (1) Canon Copier/Scanner together with all accessions, warehouse receipts, etc.
3.(a)	Patheon Pharmaceuticals Inc.	General Electric Capital Corporation	Delaware – SOS	Amendment #2009 2898077 09/09/2009	Amends UCC-l #2009 2883269 dated 09/08/2009. Restated collateral description.
4.	Patheon Pharmaceuticals Inc.	General Electric Capital Corporation	Delaware – SOS	UCC-l #2009 3357461 10/19/2009	Ten (1) CANON IV INC Metolift with Fork Model M2055; Ten (l0) CANON IV Inc Trane AC 30-5 Air Handling Unit, and Ten (l) CANON IV INC U20 QuadPro Comil, together with all accessions, warehouse receipts, etc.
4.(a)	Patheon Pharmaceuticals Inc.	General Electric Capital Corporation	Delaware – SOS	Amendment #2009 3452288 10/27/2009	Amends UCC-l #2009 3357461 dated 10/19/2009. Restated collateral description.
5.	Patheon Pharmaceuticals Inc.	IBM Credit LLC	Delaware – SOS	UCC-l #2009 3383756 10/21/2009	Precautionary filing in connection with IBM equipment and software.
6.	Patheon Pharmaceuticals Inc.	IBM Credit LLC	Delaware – SOS	UCC-1 #2009 3512057 11/02/2009	Precautionary filing in connection with IBM equipment and software.

PATHEON

UCC/PPSA LIENS

	Debtor	Secured Party	Filing Jurisdiction	Filing Number Filing Date	Collateral Description/Comments
7.	Patheon Pharmaceuticals Inc.	General Electric Capital Corporation	Delaware – SOS	UCC-1 #20093781165 11/24/2009	See Exhibit A for list of property; all accessions thereto; warehouse receipts; all insurance and/or other proceeds of any type of the foregoing property; etc.
7.(a)	Patheon Pharmaceuticals Inc.	IBM Credit LLC	Delaware – SOS	UCC-1 #2009 3983241 12/11/2009	Precautionary filing in connection with IBM equipment and software.
8.	Patheon Inc.	IBM Canada Limited	Province of Ontario, Canada	PPSA #656525943 09/24/2009	Equipment, accounts, etc. See PPSA.
9.	Patheon Inc.	General Electric Canada Equipment Finance G.P.	Province of Ontario, Canada	PPSA #654304959 06/18/2009	Inventory, equipment, accounts, etc. See PPSA.
10.	Patheon Inc.	General Electric Canada Equipment Finance G.P.	Province of Ontario, Canada	PPSA #654305274 06/18/2009	Inventory, equipment, accounts, etc. See PPSA.
11.	Patheon Inc.	General Electric Canada Equipment Finance G.P.	Province of Ontario, Canada	PPSA #652165011 03/19/2009	Inventory, equipment, accounts, etc. See PPSA.
12.	Patheon Inc.	CIT Financial Ltd.	Province of Ontario, Canada	PPSA 608302944 08/19/2004	Equipment (Canon IR5020 Copier).

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SCHEDULE 6.04 - EXISTING INVESTMENTS

The following are the existing investments which include any securities into which such investments may be converted from time to time.

Corporate Holdings

See Schedule 3.12 for the corporate holdings of the companies in the Patheon group.

The following changes are contemplated:

1. it is anticipated that Patheon Holdings Cyprus Ltd. will be liquidated into its parent, Patheon U.S. Holdings LLC;

2. it is anticipated that Patheon Europe Zrt. will be liquidated into its parent, Patheon B.V.

3. it is anticipated that Patheon Research and Development Service Private limited (India) and Patheon Pharmaceuticals India Private Limited will be dissolved in conjunction with the liquidation of Patheon Holdings Cyprus Ltd.

4. it is anticipated that the Equity Interests in Patheon Holdings S.A.S. held by Patheon Italia S.P.A. will be redeemed.

See chart attached to this Schedule 6.04 for effect of contemplated changes on the corporate holdings of the companies in the Patheon group.

[Chart to be attached.]

Intercompany indebtedness/advances

Please see the charts attached to this Schedule 6.04 indicating (1) intercompany loans within the Patheon group and (2) the net receivables position of the entities in the Patheon group (which includes the intercompany loans). [Charts to be attached.]

BSP Pharmaceuticals

Patheon Inc., through Patheon Italia S.p.A. and Patheon B.V., holds an interest of 18% in Pharma Services Provider srl and BSP Pharmaceuticals srl (collectively, “BSP Pharmaceuticals”). BSP, a privately-held Italian company, operates an oncology production facility in Latina, Italy that specializes in providing third-party development

and manufacturing of cytotoxic pharmaceutical products. Patheon has committed to provide equity in BSP Pharmaceuticals up to an overall amount of €2,358,000 of which €1,980,000 has been provided.

As of March 12, 2010, Patheon (Patheon Italia S.p.A. and Patheon B.V.) has guaranteed up to €1,080,000 if BSP Pharmaceuticals does not fulfill its obligations to its lenders.

The shareholders agreement includes provisions in respect of buy/sell rights among the shareholders.

The shares of BSP Pharmaceuticals held by Patheon Italia S.p.A. and Patheon B.V. have been pledged to the lenders to BSP Pharmaceuticals.

Skyepharma plc

Patheon Inc. holds 2,613 common shares of Skyepharma plc, representing an interest of less than 0.1% of the shares. The shares of Skyepharma plc are listed on the London Stock Exchange and on the NASDAQ.

PROPOSED FINAL STRUCTURE

SCHEDULE 6.05 – SALES, TRANSFERS, LEASES OR OTHER DISPOSITIONS

None

SCHEDULE 6.06 – SALE AND LEASEBACK TRANSACTIONS

None

SCHEDULE 6.10 - EXISTING RESTRICTIONS

Patheon agreed on February 9, 2006 that all intercompany indebtedness owing from Patheon Italia S.p.A. to Patheon Inc. or any affiliates is and will be subordinated to the €28,500,000 loan from Banca IntessaBci Mediocredito S.p.A. to Patheon Italia S.p.A.⁶

⁶ This obligation will expire upon repayment of this loan, which is contemplated to occur in connection with the Transactions.

CONFIDENTIAL

Exhibit A

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any letters of credit, guarantees, and swingline loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor

and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

1. Assignor:                                         

2. Assignee:                                                  

[and is an Affiliate/Approved Fund of [Identify Lender]]¹

3. Borrower(s): Patheon Inc.,

Patheon Pharmaceuticals Inc.,

Patheon Puerto Rico, Inc.,

Patheon U.K. Limited,

Patheon France S.A.S.,

Patheon Italia S.p.A.,

Patheon International AG

4. Administrative Agents: JPMorgan Chase Bank, N.A. , as US Administrative Agent under the Credit Agreement, JPMorgan Chase Bank, N.A. Toronto Branch, as Canadian Administrative Agent and JPMorgan Europe Limited, as European Administrative Agent

5. Credit Agreement: The US$75,000,000 Amended and Restated Revolving Credit Agreement dated as of April [__], 2010 among Patheon Inc., Patheon Pharmaceuticals Inc., Patheon Puerto Rico, Inc., Patheon U.K. Limited, Patheon France S.A.S., Patheon Italia S.p.A., Patheon International AG, the Lenders parties thereto, JPMorgan Chase Bank, N.A. , as the US Administrative Agent under the Credit Agreement, and the other agents party thereto.

6. Security Trust Deed: The security trust deed dated as of April [__], 2010 among Patheon UK Limited, the Collateral Agent and the Lenders party thereto.

¹ Select as applicable.

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7. Assigned Interest:

Facility Assigned2	Aggregate Amount of Commitment/Loans for all Lenders	Amount of Commitment/Loans Assigned	Percentage Assigned of Commitment/ Loans3
	$	$		%
	$	$		%
	$	$		%

Effective Date:                  , 20     [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR].

The Assignee (in the case an Assignee is not a Lender) agrees to deliver to the Administrative Agent a completed Administrative Questionnaire in which the Assignee designates one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Loan Parties and their Related Parties or their respective securities) will be made available and who may receive such information in accordance with the Assignee’s compliance procedures and applicable laws, including Federal and state securities laws.

² Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g. “Canadian Commitment”, “US Commitment”, “UK Commitment”.)

³ Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.

3

By execution of this Assignment and Assumption Agreement, the Assignee hereby accedes to the Security Trust Deed and agrees to be bound by the terms of the Security Trust Deed as a Finance Party (as that term is defined in the Security Trust Deed).

The terms set forth in this Assignment and Assumption, which is executed as a deed, are hereby agreed to:

Executed as a deed by ASSIGNOR [NAME OF ASSIGNOR],
by
	Title:
by4
	Title:
in the presence of:5
Executed as a deed by ASSIGNEE [NAME OF ASSIGNEE],
by
	Title:
by6
	Title:
in the presence of:7

⁴ If two signatories are required.

⁵ The form needs to be signed in the presence of a witness. The witness does not need to meet any specific requirements.

⁶ If two signatories are required.

⁷ The form needs to be signed in the presence of a witness. The witness does not need to meet any specific requirements.

4

Consented to and Accepted:
JPMorgan Chase Bank, N.A., as Administrative Agent,
	by

	Title:
Consented to:
JPMorgan Chase Bank, N.A., as Issuing Bank,

by

	Title:
Consented to:
Patheon Inc., as Parent Borrower

by

Title:

5

ANNEX 1

US$75,000,000 Amended and Restated Revolving Credit Agreement

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, and the Security Trust

6

Deed as a Finance Party thereunder (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached to this Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York except the accession by the Assignee to the Security Trust Deed which shall be governed by the laws of England.

7

Exhibit B

Page 1 of 3

Patheon Inc.

Monthly Borrowing Base Certificate

For the month ended February 28, 2010

		US		PR		Total US		UK		Canada		Total Shared Borrowing Base		Italy		Switzerland		France		Total Europe2		Total
(000’s USS)
A.	Available Accounts Receivable (from page 2 of 3)	$	8,951	$	6,610	$	15,561	$	4,842	$	11,752	$	32,155	$	0	$	0	$	0	$	0	$	32,155
B.	Available Inventory (from page 3 of 3)	$	4,231	$	5,114	$	9,345	$	5,539	$	9,633	$	21,516	$	0	$	0	$	0	$	0	$	24,516
C.	Less: Total Reserves	$	84	$	0	$	84	$	1,075	$	1,421		2,580	$	0	$	0	$	0	$	0	$	2,580
D.	Less: Barclays overdraft facility Reserve	$	0	$	0	$	0	$	2,500	$	0		2,500	$	0	$	0	$	0	$	0	$	2,500
E.	Borrowing Base (lines A + B - C - D)	$	13,098	$	11,724	$	24,822	$	6,806	$	19,963	$	51,591							$	0	$	51,591
F.	Revolving Commitments					$	35,000	$	10,000	$	20,000	$	65,000							$	10,000	$	75,000
G.	Lesser of lines D and E					$	24,822	$	6,806	$	19,963	$	51,591							$	0	$	51,591
H.	Excess Availability1					$	0	$	0	$	0									$	0	$	0
I.	Excess Availability Utilized (Not to Exceed Line H)1					$	0	$	0	$	0		—							$	0	$	0
J.	Total Availability (Including Excess)					$	24,822	$	6,806	$	19,963	$	51,591							$	0	$	51,591
	Revolving Exposure
	Revolving Loans	$	0	$	0	$	0	$	0	$	0			$	0	$	0	$	0	$	0	$	0
	Swingline Loans	$	0	$	0	$	0	$	0	$	0			$	0	$	0	$	0	$	0	$	0
	B/As	$	0	$	0	$	0	$	0	$	0			$	0	$	0	$	0	$	0	$	0
	Letters of Credit	$	70	$	0	$	70	$	0	$	0			$	0	$	0	$	0	$	0	$	70
K.	Total Revolving Exposure	$	70	$	0	$	70	$	0	$	0	$	70	$	0	$	0	$	0	$	0	$	70
L.	Availability to borrow					$	24,752	$	6,806	$	19,963	$	51,521							$	0	$	51,521

Officer’s Certification:

Pursuant to the Amended and Restated Revolving Credit Agreement dated as of April 23, 2010 (as amended, supplemented or otherwise modified from time to time), among Patheon Inc., the subsidiaries of Patheon Inc. party thereto, the lenders party thereto and JP Morgan Chase Bank, N.A., as US Administrative Agent, JP Morgan Chase Bank, N.A., Toronto Branch, as Canadian Administrative Agent, and J.P. Morgan Europe Limited, as European Administrative Agent, the undersigned Financial Officer of Patheon Inc. certifies that the information provided in this certificate to JP Morgan Chase Bank, N.A. as Administrative Agent, is true and correct based on the accounting records of Patheon Inc. as of February 28, 2010.

Patheon Inc.

/s/ Dean Wilson	4/23/10
Dean Wilson, VP - Corporate Controller	Date

¹ Available per section 2.01 of the Credit Agreement

Page 2 of 3

Patheon Inc.

Monthly Borrowing Base Certificate

For the month ended February 28, 2010

UK FX Rate	$	1.5238
EUR FX Rate	$	1.3620
CAD FX Rate	$	0.9498

	($000’s US)
	US			Puerto Rico			Total US			UK			Canada			Italy			Switzerland			France			Total Europe			Total
Gross A/R	$	11,849		$	9,054		$	20,903		$	8,769		$	16,227		$	—		$	—		$	—		$	—		$	46,899
Less ineligibles:
Non-investment grade customers		—			—			—			—			—			—			—			—			—			—
Past due > 60 days past due date		—			—			—			—			—			—			—			—			—			—
Past due >90 days from Invoice date		0			38			39			0			0						—						—			39
Cross-aging		—			51			51			5			1												—			57
Credits Past Due		11			259			270			36			25												—			330
Foreign		213			200			413			2,435			1,082						—						—			3,931
Deposits		836			3			839			461			1,116												—			2,416
Concentration cap		—			—			—			—			—			—			—			—			—			—
Intercompany		—			—			—			—			—												—			—
Accrued Rebates		258			726			984			135			178												—			1,298
Contra		—			—			—			—			—												—			—
Deferred Revenue		—			—			—			—			—												—			—
Pre-billed Invoices		—			—			—			—			—												—			—
Damage Claims		—			—			—			—			—												—			—
Bill and Hold		—			—			—			—			—												—			—
Other (per terms of Credit Agreement)		—			—			—			—			—												—			—
Total Ineligibles		1,318			1,278			2,596			3,072			2,402			—			—			—			—			8,070
Eligible A/R		10,530			7,776			18,307			5,697			13,825			—			—			—			—			37,829
Dilution Rate (in excess of 5%)		5.00	%		5.00	%					5.00	%		5.00	%		5.00	%		5.00	%		5.00	%		5.00	%
Less: Dilution Reserve		—			—			—			—			—			—			—			—			—			—
Adjusted eligible A/R		10,530			7,778			18,307			5,697			13,825			—			—			—			—			37,829
Advance rate		85	%		85	%		85	%		85	%		85	%		85	%		85	%		85	%		85	%		85	%
Available A/R	$	8,951		$	6,610		$	15,561		$	4,842		$	11,752		$	—		$	—		$	—		$	—		$	32,155

Page 3 of 3

Patheon Inc.

Monthly Borrowing Base Certificate

For the month ended February 28, 2010

	($000’s US)
	US			Puerto Rico			Total US		UK			Canada			Italy			Switzerland			France			Total IT, CH, FR			Total
Gross Inventory	$	12,874		$	15,247		$	28,122	$	14,187		$	18,833		$	—		$	—		$	—		$	—		$	61,143
Less ineligibles:
Supplies / MRO / PDS		1,308			—			1,308		1,597			—												—			2,904
Slow moving (GL)		10			—			10		—			—												—			10
LCM & FIFO adjustment		—			—			—		—			—												—			—
Expired		—			776			776		—			(1,315	)											—			(539	)
RM awaiting QC		—			—			—		—			—												—			—
Provision for defects		844			—			844		1,218			883												—			2,945
Bill and hold		—			—			—		—			—												—			—
Short dated		—			174			174		—			—												—			174
Hold		—			1,161			1,161		—			—												—			1,161
Good at outside processors		—			—			—		—			—												—			—
Active / customer owned		992			—			992		—			—												—			992
Costing adjustment		130			—			130		—			—												—			130
Other G/L inventory reserves		—			—			—		—			—			—			—			—			—			—
Total ineligibles		3,284			2,111			5,395		2,815			(432	)		—			—			—			—			7,778
Eligible Inventory	$	9,591		$	13,136		$	22,727	$	11,372		$	19,265		$	—		$	—		$	—		$	—		$	53,365
Lesser of:
(i) 50%		50.0	%		50.0	%				50.0	%		50.0	%		0.0	%		0.0	%		0.0	%		0.0	%
(ii) 85% of NOLV - NEW RATES		44.1	%		38.9	%				48.7	%		55.9	%		0.0	%		0.0	%		0.0	%		0.0	%
Advance Rate		44.1	%		38.9	%				48.7	%		50.0	%		0.0	%		0.0	%		0.0	%		0.0	%
Available Inventory	$	4,231		$	5,114		$	9,345	$	5,539		$	9,633		$	—		$	—		$	—		$	—		$	24,516

Exhibit C

Execution Copy

CANADIAN REVOLVING PLEDGE AND SECURITY AGREEMENT dated as of April 23, 2010, among PATHEON INC. (the “Parent Borrower”), the SUBSIDIARIES of THE PARENT BORROWER named herein and JPMORGAN CHASE BANK, N.A., as Collateral Agent (the “Collateral Agent”).

Reference is made to (a) the Amended and Restated Revolving Credit Agreement dated as of April 23, 2010 (as amended, supplemented or otherwise modified from time to time, the “Revolving Credit Agreement”), among the Parent Borrower, the Subsidiaries of the Parent Borrower named therein, the Lenders party thereto, the Collateral Agent, as US administrative agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian administrative agent (the “Canadian Agent”), and J.P. Morgan Europe Limited, as European administrative agent (the “European Agent”), (b) the Amended and Restated Revolving Guarantor Agreement dated as of April 23, 2010 (as amended, supplemented or otherwise modified from time to time, the “Guarantor Agreement”) among the Parent Borrower, the Subsidiaries of the Parent Borrower named therein and the Canadian Agent, the European Agent and the Collateral Agent, as agents, and (c) the Canadian Revolving Pledge and Security Agreement dated as of April 27, 2007 (as amended and in effect prior to giving effect to the amendment and restatement thereof pursuant to this Agreement, the “Existing Canadian Revolving Pledge and Security Agreement”) among the Parent Borrower, the subsidiaries of the Parent Borrower named therein and the Collateral Agent. The Lenders (such term and each other capitalized term used but not defined in this preliminary statement having the meaning given or ascribed to it in Article I hereof) and the Issuing Banks have agreed to extend credit to the Borrowers subject to the terms and conditions set forth in the Revolving Credit Agreement. The obligations of the Lenders and the Issuing Banks to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement. Each Grantor is a Borrower or is affiliated with the Borrowers, will derive substantial benefits from the extension of credit to the Borrowers pursuant to the Revolving Credit Agreement and is willing to execute and deliver this Agreement in order to induce the Lenders and the Issuing Banks to extend such credit. This Agreement amends and restates in its entirety the Existing Canadian Revolving Pledge and Security Agreement. Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Revolving Credit Agreement; Guarantor Agreement. (a) Capitalized terms used in this Agreement and not otherwise defined herein have the meanings specified in the Guarantor Agreement or, if not defined therein, in the Revolving Credit Agreement. All capitalized terms defined in the PPSA (as defined below) and not defined in this Agreement, the Guarantor Agreement or the Revolving Credit Agreement have the meanings specified in the PPSA; the terms “instrument” and “security certificate” shall also have the meanings specified in the PPSA.

(b) The rules of construction specified in Section 1.03 of the Revolving Credit Agreement also apply to this Agreement.

SECTION 1.02. Other Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“ABL Priority Collateral” means the portion of the Collateral consisting of any and all of the following assets now owned or at any time hereafter acquired by any Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest:

(a) all Accounts;

(b) all Chattel Paper representing Accounts;

(c) (i) all deposit accounts and all cash, checks, other negotiable instruments, funds and other evidences of payment held therein and (ii) all Securities, Security Entitlements, and Securities Accounts, in each case, to the extent constituting cash or cash equivalents or representing a claim to cash equivalents, except, in each case, for any deposit accounts and any cash, checks, other negotiable instruments, funds or other evidences of payments held therein or any Securities, Security Entitlements, Securities Accounts and all cash and cash equivalents held therein, in each case, that constitute identifiable proceeds of Notes Priority Collateral and all deposits and other funds held therein;

(d) all Inventory;

(e) all rights under letters-of-credit rights in favour of such Grantor relating to Accounts or Inventory;

(f) to the extent involving or governing any of the items referred to in the preceding clauses (a) through (e), all Documents of Title, Intangibles and Instruments;

(g) to the extent supporting any of the items referred to in clauses (a) through (e), all Supporting Obligations;

(h) all books and records relating to the foregoing; and

(i) all proceeds of any of the foregoing (including, without limitation, proceeds of insurance with respect to any or all of the foregoing clauses (a) through (h) and all collateral security and Guarantees given by any Person with respect to any of the foregoing).

“Cash Collection Account” has the meaning assigned to such term in Section 4.01.

“Collateral” means Personal Property Collateral and Pledged Collateral.

2

“Collateral Deposit Account” has the meaning assigned to such term in Section 4.01.

“Copyright License” means any written agreement, now or hereafter in effect, granting any right to any third party under any copyright now or hereafter owned by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any copyright now or hereafter owned by any third party, and all rights of such Grantor under any such agreement.

“Copyrights” means all of the following now owned or hereafter acquired by any Grantor: (a) all copyright rights in any work subject to the copyright laws of Canada, the United States or any other country, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in Canada, the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration under the Copyright Act (Canada) or under any other similar legislation of any other country or any political subdivision thereof.

“Deposit Account Control Agreement” means, with respect to a deposit account in the name of a Grantor, an agreement among such Grantor, the Collateral Agent and the depository bank pursuant to which such depository bank agrees to comply with instructions originated by the Collateral Agent directing disposition of funds in such deposit account without further consent by such Grantor.

“Funding Account” means, for any Grantor, the general fund account established at the office of JPMORGAN CHASE BANK, N.A., located at 270 Park Avenue, New York, NY 10017, in the name of such Grantor, for the purposes of this Agreement.

“Grantors” means the Parent Borrower and the Subsidiary Parties.

“Indenture” means the indenture dated as of April 23, 2010, among the Parent Borrower, the Subsidiaries listed therein and Deutsche Bank Trust Company Americas, as trustee in respect of the Senior Notes.

“Intellectual Property” means all industrial, intellectual and similar property of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or proprietary technical and business information, know-how, show-how, industrial designs, integrated circuit topographies and trade secrets or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.

“License” means any Patent License, Trademark License, Copyright License or other license or sublicense agreement to which any Grantor is a party.

3

“Lock Box” has the meaning assigned to such term in Section 4.01.

“Lock Box Agreement” has the meaning assigned to such term in Section 4.01.

“Notes Priority Collateral” means any and all Collateral that is not ABL Priority Collateral.

“Notes Priority Collateral Security Interest” means the Security Interest in any and all Notes Priority Collateral.

“Patent License” means any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a patent, now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement.

“Patents” means all of the following now owned or hereafter acquired by any Grantor: (a) all patents existing under the laws of Canada, all letters patent of the United States or the equivalent thereof in any other country, all registrations and recordings thereof, and all applications for patents existing under the laws of Canada or letters patent of the United States or the equivalent thereof in any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office, the Canadian Intellectual Property Office or any similar offices in any other country and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

“Personal Property Collateral” has the meaning assigned to such term in Section 3.01.

“Pledged Collateral” has the meaning assigned to such term in Section 2.01.

“Pledged Debt Securities” has the meaning assigned to such term in Section 2.01.

“Pledged Securities” means any promissory notes, stock certificates, security certificates or other securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.

“Pledged Stock” has the meaning assigned to such term in Section 2.01.

“PPSA” means the Personal Property Security Act as from time to time in effect in the Province of Ontario.

4

“Receiver” means a receiver, a manager or a receiver and manager.

“Revolving Credit Agreement” has the meaning assigned to such term in the preliminary statement of this Agreement.

“Securities Laws” has the meaning assigned to such term in Section 5.04.

“Security Interest” has the meaning assigned to such term in Section 3.01.

“STA” means the Securities Transfer Act (Ontario), as may be amended, renamed, replaced or otherwise modified from time to time, and includes all regulations from time to time made thereunder.

“Subsidiary Parties” means (a) the Subsidiaries identified on Schedule I and (b) each other Subsidiary that becomes a party to this Agreement as a Subsidiary Party after the Effective Date.

“Trademark License” means any written agreement, now or hereafter in effect, granting to any third party any right to use any trademark now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement.

“Trademarks” means all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office, the Canadian Intellectual Property Office or any similar offices in any state of the United States or any other country or any political subdivision thereof, and all extensions or renewals thereof, (b) all goodwill associated therewith or symbolized thereby and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill.

ARTICLE II

Pledge of Securities

SECTION 2.01. Pledge. As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in, all of such Grantor’s right, title and interest in, to and under (a) all shares of capital stock and other Equity Interests issued to or otherwise owned by such Grantor (which such Grantor represents are accurately listed on Schedule II) and any other Equity Interests obtained in the future by such Grantor that are required by the Collateral and Guarantee Requirement to be

5

pledged hereunder and the security certificates representing all such Equity Interests (the “Pledged Stock”); (b) (i) all debt securities issued to or otherwise owned by such Grantor (which such Grantor represents are accurately listed on Schedule II) that are required by the Collateral and Guarantee Requirement to be pledged hereunder, (ii) any debt securities in the future issued to such Grantor that are required by the Collateral and Guarantee Requirement to be pledged hereunder and (iii) the promissory notes and any other instruments evidencing such debt securities (the “Pledged Debt Securities”); (c) all other property that may be delivered to and held by the Collateral Agent (or to or by any other Person pursuant to the Intercreditor Agreement, in each case acting as gratuitous bailee for the Collateral Agent) pursuant to the terms of this Section 2.01; (d) subject to Section 2.04, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clauses (a), (b) and (c) above; (e) subject to Section 2.04, all rights and privileges of such Grantor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above; and (f) all Proceeds of any of the foregoing (the items referred to in clauses (a) through (f) above being collectively referred to as the “Pledged Collateral”); provided that the Pledged Collateral shall not include any assets or property that are Excluded Assets for so long as such assets or property constitute Excluded Assets.

TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever; subject, however, to the terms, covenants and conditions hereinafter set forth.

Each Grantor represents and warrants to the Collateral Agent that none of the Pledged Stock consists of shares of stock or other Equity Interests of one or more unlimited liability companies under the Companies Act (Nova Scotia), the Business Corporations Act (Alberta), the Business Corporations Act (British Columbia) or any other laws governing unlimited liability companies.

SECTION 2.02. Delivery of the Pledged Collateral. (a) To the extent required by the Collateral and Guarantee Requirement, each Grantor agrees promptly to deliver or cause to be delivered to the Collateral Agent (or to any other Person pursuant to the Intercreditor Agreement, in each case acting as gratuitous bailee for the Collateral Agent) any and all Pledged Securities. Each Grantor will deliver to or cause to be delivered to the Collateral Agent any and all such documents, agreements and other materials as may be required from to time to time to provide the Collateral Agent with control over the Pledged Collateral, as applicable, in the manner provided under the STA.

(b) To the extent required by the Collateral and Guarantee Requirement, each Grantor will cause any Indebtedness for borrowed money owed to such Grantor by any Person to be evidenced by a duly executed promissory note that is pledged and delivered to the Collateral Agent (or to any other Person pursuant to the Intercreditor Agreement, in each case acting as gratuitous bailee for the Collateral Agent) pursuant to the terms hereof.

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(c) Upon delivery to the Collateral Agent (or to any other Person pursuant to the Intercreditor Agreement, in each case acting as gratuitous bailee for the Collateral Agent), (i) any Pledged Securities shall be accompanied by stock powers duly executed in blank or other instruments of transfer satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request, (ii) all other property comprising part of the Pledged Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Grantor and such other instruments or documents as the Collateral Agent may reasonably request and (iii) if the charter, by-laws or any other constitutional document of an issuer that is a wholly owned Subsidiary of any Pledged Securities restricts the transfer of such Pledged Securities of such issuer, then the applicable Grantor shall deliver to the Collateral Agent a certified copy of a resolution of the directors or shareholders of such issuer consenting to the transfer(s) contemplated by this Agreement, including any prospective transfer of such Pledged Securities and any other related Pledged Collateral by the Collateral Agent or any Secured Party upon a realization on the security constituted hereby in accordance with this Agreement. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities, which schedule shall be attached hereto as Schedule II and made a part hereof; provided that failure to attach any such schedule hereto shall not affect the validity of such pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered.

(d) In accordance with the terms of the Intercreditor Agreement, all Pledged Collateral delivered to a Person other than the Collateral Agent shall be held by such Person in each case as gratuitous bailee for the Secured Parties solely for the purpose of perfecting the security interest therein granted under this Agreement.

SECTION 2.03. Registration in Nominee Name; Denominations. The Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Collateral Agent. Each Grantor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Grantor. The Collateral Agent shall at all times have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement. Each Grantor will cause to be recorded in its books the existence of the liens and encumbrances hereby created.

SECTION 2.04. Voting Rights; Dividends and Interest. (a) Unless and until an Event of Default shall have occurred and be continuing and the Collateral Agent shall have notified the Grantors that their rights under this Section 2.04 are being suspended:

(i) Each Grantor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the Revolving Credit Agreement and the other Loan Documents; provided that such

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rights and powers shall not be exercised in any manner that could materially and adversely affect the rights inuring to a holder of any Pledged Securities or the rights and remedies of any of the Collateral Agent or the other Secured Parties under this Agreement or the Revolving Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same.

(ii) The Collateral Agent shall execute and deliver to each Grantor, or cause to be executed and delivered to such Grantor, all such proxies, powers of attorney and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above.

(iii) Each Grantor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Securities to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Revolving Credit Agreement, the other Loan Documents and applicable laws; provided that any noncash dividends, interest, principal or other distributions that would constitute Pledged Stock or Pledged Debt Securities, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Grantor, to the extent required by the Collateral and Guarantee Requirement, shall not be commingled by such Grantor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement).

(b) Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified the Grantors of the suspension of their rights under paragraph (a)(iii) of this Section 2.04, then all rights of any Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of this Section 2.04 shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of this Section 2.04 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Grantor and, subject to the terms of the Intercreditor Agreement, shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon

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receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02. After all Events of Default have been cured or waived and the Parent Borrower has delivered to the Collateral Agent a certificate to that effect, the Collateral Agent shall promptly repay to each Grantor (without interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 2.04 and that remain in such account.

(c) Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified the Grantors of the suspension of their rights under paragraph (a)(i) of this Section 2.04, then all rights of any Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 2.04, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 2.04, shall cease, and all such rights shall thereupon become, subject to the terms of the Intercreditor Agreement, vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Grantors to exercise such rights.

SECTION 2.05. Any notice given by the Collateral Agent to the Grantors suspending their rights under paragraph (a) of this Section 2.04 (i) may be given by telephone if promptly confirmed in writing, (ii) may be given to one or more of the Grantors at the same or different times and (iii) may suspend the rights of the Grantors under paragraph (a)(i) or paragraph (a)(iii) in part without suspending all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Collateral Agent’s rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.

ARTICLE III

Security Interests in Personal Property

SECTION 3.01. Security Interest. (a) As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest (the “Security Interest”) in, all present and future property and assets of such Grantor, including, without limitation, all right, title or interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the “Personal Property Collateral”):

(i) all Accounts;

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(ii) all Chattel Paper;

(iii) all deposit accounts (as defined in the Uniform Commercial Code from time to time in effect in the State of New York);

(iv) all Documents of Title;

(v) all Equipment;

(vi) all Intangibles;

(vii) all Instruments;

(viii) all Inventory;

(ix) all Investment Property;

(x) all rights under letters-of-credit in favour of such Grantor;

(xi) all commercial tort claims (as defined in the Uniform Commercial Code from time to time in effect in the State of New York);

(xii) all books and records pertaining to the Personal Property Collateral; and

(xiii) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing;

provided that this Agreement shall not constitute a grant of security interest in, and the Personal Property Collateral shall not include, any assets or property that are Excluded Assets for so long as such assets or property constitute Excluded Assets.

(b) The Collateral Agent agrees that the Notes Priority Collateral Security Interest shall be subordinated as described in, and subject to, the Intercreditor Agreement.

(c) Each Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements (other than fixture filings) or other equivalent instruments or documents with respect to the Collateral or any part thereof and amendments thereto that (i) indicate the Collateral as all assets of such Grantor or words of similar effect as being of an equal or lesser scope or with greater detail, and (ii) contain the information required by the PPSA or the personal property security legislation of each applicable jurisdiction for the filing of any financing statement or other equivalent instruments or documents or amendment, including (a) whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor and (b) in the case of a financing statement or other equivalent instrument or document filed as a fixture filing or

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covering Personal Property Collateral constituting minerals or the like to be extracted or timber to be cut, a sufficient description of the real property to which such Personal Property Collateral relates. Each Grantor agrees to provide such information to the Collateral Agent promptly upon request.

Each Grantor also ratifies its authorization for the Collateral Agent to file in any relevant jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

(d) The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Personal Property Collateral.

(e) Each Grantor confirms that value has been given by the Secured Parties to each such Grantor, that each such Grantor has rights in the Collateral (other than after-acquired property) in which such Grantor has granted any security interests hereunder and that each Grantor and the Collateral Agent have not agreed to postpone the time for attachment of the security interests created by this Agreement to any of the Collateral. All security interests created by this Agreement will have effect and be deemed to be effective whether or not the Obligations or any part thereof are owing or in existence before or after or upon the date of this Agreement.

ARTICLE IV

Collections

SECTION 4.01. Collection of Receivables. (a) Each Grantor shall, within the time provided in Section 5.14 of the Revolving Credit Agreement, (i) execute and deliver to the Collateral Agent a Deposit Account Control Agreement for each deposit account maintained by such Grantor into which all cash, checks and other similar payments relating to or constituting payments made in respect of Accounts shall be deposited (a “Collateral Deposit Account”) and (ii) establish lock box service (the “Lock Boxes”) with such banks at which any other deposit accounts are maintained by such Grantor through which any cash, checks or other similar payments relating to or constituting payments made in respect of such Accounts shall be collected, which lock boxes shall be subject to irrevocable lockbox agreements in the form provided by or otherwise acceptable to the Collateral Agent and shall be accompanied by an acknowledgment by the bank where the Lock Box is located of the Lien of the Collateral Agent granted hereunder and by irrevocable instructions to wire all amounts collected therein to the Cash Collection Account (a “Lock Box Agreement”). The Collateral Deposit Accounts and such Lock Box Agreements shall be established in a manner and on terms satisfactory to the Collateral Agent.

(b) Each Grantor shall direct all of its Account Debtors to forward payments directly to Lock Boxes subject to Lock Box Agreements. The Collateral Agent shall have sole access to the Lock Boxes at all times and each Grantor shall take all

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actions necessary to grant the Collateral Agent such sole access. At no time shall any Grantor remove any item from a Lock Box or from a Collateral Deposit Account without the Collateral Agent’s prior written consent. If any Grantor should refuse or neglect to notify any Account Debtor to forward payments directly to a Lock Box subject to a Lock Box Agreement after notice from the Collateral Agent, the Collateral Agent shall be entitled to make such notification directly to Account Debtor. If, notwithstanding the foregoing instructions, any Grantor receives any proceeds of any Accounts, such Grantor shall receive such payments as the Collateral Agent’s trustee, and shall immediately deposit all cash, checks or other similar payments related to or constituting payments made in respect of Accounts received by it to a Collateral Deposit Account. All funds deposited into any Lock Box subject to a Lock Box Agreement or a Collateral Deposit Account will be swept on a daily basis into a collection account maintained by such Grantor with the Collateral Agent (the “Cash Collection Account”). The Collateral Agent shall hold and apply funds received into the Cash Collection Account as provided by the terms of Section 4.03.

SECTION 4.02. Covenant Regarding New Deposit Accounts; Lock Boxes. Before opening or replacing any Collateral Deposit Account, other deposit account, or establishing a new Lock Box, each Grantor shall (a) obtain the Collateral Agent’s consent in writing to the opening of such deposit account or Lock Box, and (b) cause each bank or financial institution in which it seeks to open (i) a deposit account to enter into a Deposit Account Control Agreement with the Collateral Agent in order to give the Collateral Agent control of such deposit account, or (ii) a Lock Box to enter into a Lock Box Agreement with the Collateral Agent in order to give the Collateral Agent control of the Lock Box. In the case of deposit accounts or Lock Boxes maintained with Lenders, the terms of such letter shall be subject to the provisions of the Revolving Credit Agreement regarding setoffs.

SECTION 4.03. Application of Proceeds; Deficiency. All amounts deposited in the Cash Collection Account shall be deemed received by the Collateral Agent in accordance with Section 5.02 and shall, after having been credited to the Cash Collection Account, be applied (and allocated) by the Collateral Agent in accordance with Section 5.02; provided that, so long as no Availability Trigger Event has occurred and is continuing, collections which are received into the Cash Collection Account shall be deposited into the applicable Grantor’s Funding Account rather than being used to reduce amounts owing under the Revolving Credit Agreement. The balance, if any, after all of the Obligations have been satisfied, shall be deposited by the Collateral Agent into such Grantor’s general operating account with the Collateral Agent. The Grantors shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all Obligations, including any legal fees and disbursements and other expenses incurred by the Collateral Agent or any Lender to collect such deficiency.

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ARTICLE V

Remedies

SECTION 5.01. Remedies Upon Default. Upon the occurrence and during the continuance of an Event of Default, it is agreed that the Collateral Agent shall have the right to take, personally or by agent, any of or all the following actions at the same or different times:

(a) on demand, to cause the Personal Property Collateral to become an assignment, transfer and conveyance of any of or all such Personal Property Collateral by the applicable Grantors to the Collateral Agent, or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or nonexclusive basis, any such Personal Property Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then existing licensing arrangements to the extent that waivers are not obtained);

(b) with or without legal process and with or without prior notice or demand for performance, to take possession of any or all of the Collateral and without liability for trespass to enter any premises where the Collateral or any part thereof may be located for the purpose of taking possession of or removing such Collateral and, generally, to exercise any and all rights and remedies afforded to a secured party under the PPSA and any other applicable statute, or otherwise available to the Collateral Agent at law or in equity;

(c) to demand possession of any or all of the Collateral, in which event each Grantor will, at the expense of the Grantors, immediately cause the Collateral designated by the Collateral Agent to be assembled and made available and/or delivered to the Collateral Agent at any place designated by the Collateral Agent;

(d) to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate;

(e) to hold, store and keep idle, or to operate, lease or otherwise use or to permit the use of, any or all of the Collateral for such time and on such terms as the Collateral Agent may determine, and to demand, collect and retain all earnings and other sums due or to become due from any Person in respect of any of the Collateral;

(f) to carry on, or to concur in the carrying on of, any or all of the business or undertaking of any or all Grantors and to enter on, occupy and use (without charge by the applicable Grantor) any of the premises, buildings, plant and undertaking of, or occupied or used by, any or all Grantors;

(g) to seize, collect, receive, enforce or otherwise deal with any Collateral in such manner, on such terms and conditions and at such times as the Collateral Agent deems advisable;

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(h) to apply to a court of competent jurisdiction for the sale or foreclosure of any or all of the Collateral;

(i) to notify the Account Debtors under any Accounts of the assignment of such Accounts to the Collateral Agent and to direct such Account Debtors to make payment of all amounts due or to become due to each Grantor in respect of such Accounts directly to the Collateral Agent and, upon such notification and at the expense of each Grantor, to enforce collection of any such Accounts, and to adjust, settle or compromise the amount or payment of such Accounts, in such manner and to such extent as the Collateral Agent deems appropriate in the circumstances;

(j) to transfer any Securities forming part of the Collateral (including the Pledged Stock) into the name of the Collateral Agent or its nominee, with or without disclosing that the Securities are subject to the security interests arising under this Agreement;

(k) to exercise any and all rights, privileges, entitlements and options pertaining to any Securities forming part of the Collateral (including the Pledged Stock) as if the Collateral Agent were the absolute owner of such Securities;

(l) to pay any liability secured by any Lien against any Collateral; and each Grantor hereto will immediately on demand reimburse the Collateral Agent for all such payments;

(m) to borrow money for the maintenance, preservation or protection of any Collateral or for carrying on any of the business or undertaking of any or all of the Grantors and to grant security interests on any Collateral (in priority to the security interests created by this Agreement or otherwise) as security for the money so borrowed; and each Grantor hereto will immediately on demand reimburse the Collateral Agent for all such borrowings;

(n) to appoint by instrument in writing one or more Receivers of any or all of the Grantor hereto or any or all of the Collateral with such rights, powers and authority (including any or all of the rights, powers and authority of the Collateral Agent under this Agreement) as may be provided for in the instrument of appointment or any supplemental instrument, and to remove and to replace any such Receiver from time to time; to the extent permitted by applicable law, any Receiver appointed by the Collateral Agent will (for purposes relating to responsibility for the Receiver’s acts or omissions) be considered to be the agent of each such applicable Grantor and not of the Collateral Agent; and

(o) to apply to a court of competent jurisdiction for the appointment of a Receiver of any or all of the Grantors hereto or of any or all of the Collateral.

Subject to the mandatory requirements of applicable law, the Collateral Agent shall be authorized at any sale of Securities (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the

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distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each purchaser at any sale of Collateral shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

The Collateral Agent shall give the applicable Grantors 10 days’ written notice (or such longer or shorter period of time as may be required or permitted by applicable law) of the Collateral Agent’s intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Agreement, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a

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judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court appointed receiver. Any sale pursuant to the provisions of this Section 5.01 shall be deemed to conform to the commercially reasonable standards as provided in the PPSA or its equivalent in other jurisdictions.

SECTION 5.02. Application of Proceeds. (a) Subject to the terms of the Intercreditor Agreement, the Collateral Agent shall apply the proceeds of any collection or sale of Collateral, including any Collateral consisting of cash, as follows:

FIRST, to the payment of all costs and expenses incurred by the Collateral Agent and the other Agents in connection with such collection or sale or otherwise in connection with this Agreement, any other Loan Document or any of the Obligations, including all court costs and the fees and expenses of their agents and legal counsel, the repayment of all advances made by the Collateral Agent and the other Agents hereunder or under any other Loan Document on behalf of any Grantor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document;

SECOND, to the payment of all Obligations consisting of costs and expenses incurred by the Lenders and the Issuing Banks in connection with this Agreement, any other Loan Document or any of the Obligations, including all court costs and the fees and expenses of their agents and legal counsel and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder, if any, or under any other Loan Document;

THIRD, to the payment in full of the Loan Document Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Loan Document Obligations owed to them on the date of any such distribution);

FOURTH, to the payment in full of the Other Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Other Obligations owed to them on the date of any such distribution); and

FIFTH, as required by applicable law or as a court of competent jurisdiction may otherwise direct.

The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.

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(b) Notwithstanding paragraph (a) of this Section 5.02, if an Availability Trigger Event has occurred and is continuing (but an Event of Default has not occurred and is continuing), then the Collateral Agent shall apply all amounts credited to the Cash Collection Account as provided in Section 2.11(e) of the Revolving Credit Agreement.

SECTION 5.03. Grant of License to Use Intellectual Property. For the purpose of enabling the Collateral Agent to exercise rights and remedies under this Agreement at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to the Grantors) to use, license or sublicense any of the Personal Property Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Collateral Agent may be exercised, at the option of the Collateral Agent, upon the occurrence and during the continuation of an Event of Default; provided that any license, sublicense or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon the Grantors notwithstanding any subsequent cure of an Event of Default.

SECTION 5.04. Securities Laws. In view of the position of the Grantors in relation to the Pledged Collateral, or because of other current or future circumstances, a question may arise under the Securities Act (Ontario), as now or hereafter in effect, or any similar federal, state, provincial or territorial statute now or hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the “Securities Laws”) with respect to any disposition of the Pledged Collateral permitted hereunder. Each Grantor understands that compliance with the Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Collateral, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Collateral under applicable Blue Sky or other state, provincial or territorial securities laws or similar laws analogous in purpose or effect. Each Grantor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Pledged Collateral, limit the purchasers to those who will agree, among other things, to acquire such Pledged Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its sole and absolute discretion (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Collateral or part thereof shall have been filed under the Securities Laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Each Grantor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no

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responsibility or liability for selling all or any part of the Pledged Collateral at a price that the Collateral Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 5.04 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells.

SECTION 5.05. Registration. Each Grantor agrees that, upon the occurrence and during the continuance of an Event of Default, if for any reason the Collateral Agent desires to sell any of the Pledged Collateral at a public sale, it will, at any time and from time to time, upon the written request of the Collateral Agent, use its best efforts to take or to cause the issuer of such Pledged Collateral to take such action and prepare, distribute and/or file such documents, as are required or advisable in the reasonable opinion of counsel for the Collateral Agent to permit the public sale of such Pledged Collateral. Each Grantor further agrees to indemnify, defend and hold harmless the Collateral Agent, each other Secured Party, any underwriter and their respective officers, directors, affiliates and controlling persons from and against all loss, liability, expenses, costs of counsel (including, without limitation, reasonable fees and expenses to the Collateral Agent of legal counsel), and claims (including the costs of investigation) that they may incur insofar as such loss, liability, expense or claim arises out of or is based upon any alleged untrue statement of a material fact contained in any prospectus (or any amendment or supplement thereto) or in any notification or offering circular, or arises out of or is based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements in any thereof not misleading, except insofar as the same may have been caused by any untrue statement or omission based upon information furnished in writing to such Grantor or the issuer of such Pledged Collateral by the Collateral Agent or any other Secured Party expressly for use therein. Each Grantor further agrees, upon such written request referred to above, to use its best efforts to qualify, file or register, or cause the issuer of such Pledged Collateral to qualify, file or register, any of the Pledged Collateral under the Blue Sky or other securities laws of such states, provinces or territories as may be requested by the Collateral Agent and keep effective, or cause to be kept effective, all such qualifications, filings or registrations. Each Grantor will bear all costs and expenses of carrying out its obligations under this Section 5.05. Each Grantor acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section 5.05 and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section 5.05 may be specifically enforced.

SECTION 5.06. Dealings by Collateral Agent. The Collateral Agent will not be obliged to exhaust its recourse against any Grantor or any other Person or against any other security it may hold in respect of the Obligations before realizing upon or otherwise dealing with the Collateral in such manner as the Collateral Agent may consider desirable. The Collateral Agent may grant extensions of time and other indulgences, take and give up security, accept compositions, grant releases and discharges and otherwise deal with any Grantor and any other Person, and with any or all

18

of the Collateral, and with other security and sureties, as the Collateral Agent may see fit, all without prejudice to the Obligations or to the rights and remedies of the Collateral Agent under this Agreement. The powers conferred on the Collateral Agent under this Agreement are solely to protect the interests of the Collateral Agent in the Collateral and will not impose any duty upon the Collateral Agent to exercise any such powers.

ARTICLE VI

Miscellaneous

SECTION 6.01. Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Revolving Credit Agreement, provided that notices to the Collateral Agent shall be sent to JPMorgan Chase Bank, N.A., 270 Park Avenue, 15th Floor, New York, NY 10017 Attention: Shamir Khan. All communications and notices hereunder to any Grantor shall be given to it in care of the Parent Borrower as provided in Section 9.01 of the Revolving Credit Agreement.

SECTION 6.02. Waivers; Amendment; Limitation of Liability. (a) No failure or delay by any Agent, any Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Agents, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 6.02, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or purchase of B/As or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether any Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time. No notice or demand on any Loan Party in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances.

(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Grantor or Grantors with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.02 of the Revolving Credit Agreement.

(c) Neither the Collateral Agent nor any other Secured Party will be liable to any Grantor or any other Person for any failure or delay in exercising any of the rights of the Collateral Agent under this Agreement (including any failure to take possession of, collect, sell, lease or otherwise dispose of any Collateral, or to preserve rights against

19

prior parties). Neither the Collateral Agent, any other Secured Party, a Receiver, nor any agent thereof (including, in Alberta or British Columbia, any sheriff) is required to take, or will have any liability for any failure to take or delay in taking, any steps necessary or advisable to preserve rights against other Persons under any Collateral in its possession. Neither the Collateral Agent, any other Secured Party, any Receiver, nor any agent thereof will be liable for any, and each Grantor will bear the full risk of all, loss or damage to any and all of the Collateral (including any Collateral in the possession of the Collateral Agent, any other Secured Party, any Receiver, or any agent thereof) caused for any reason other than the gross negligence or wilful misconduct of the Collateral Agent, such other Secured Party, such Receiver or such agent thereof. To the extent permitted by applicable law, each Grantor hereto unconditionally and irrevocably waives (i) all claims, damages and demands it may acquire against the Collateral Agent or any of the other Secured Parties arising out of the exercise by the Collateral Agent or any Receiver of any rights or remedies under this Agreement or at law and (ii) all of the rights, benefits and protections given by any present or future statute that imposes limitations on the rights, powers or remedies of a secured party or on the methods of, or procedures for, realization of security, including any “seize or sue” or “anti-deficiency” statute or any similar provision of any other statute.

SECTION 6.03. Collateral Agent’s Fees and Expenses; Indemnification. (a) The parties hereto agree that the Collateral Agent shall be entitled to reimbursement of its expenses incurred hereunder as provided in Section 9.03 of the Revolving Credit Agreement.

(b) Without limitation of its indemnification obligations under the other Loan Documents, each Grantor jointly and severally agrees to indemnify the Collateral Agent and the other Indemnitees (as defined in Section 9.03 of the Revolving Credit Agreement) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of, the execution, delivery or performance of this Agreement or any instrument contemplated hereby or any claim, litigation, investigation or proceeding relating to any of the foregoing or to the Collateral, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee.

(c) Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 6.03 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any other

20

Secured Party. All amounts due under this Section 6.03 shall be payable on written demand therefor.

SECTION 6.04. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

SECTION 6.05. Survival of Agreement. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and shall survive the execution and delivery of the Loan Documents, the purchase of B/As and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any Lender or on its behalf and notwithstanding that any Agent, any Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended under the Revolving Credit Agreement, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan, any B/A or any fee or any other amount payable under any Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated.

SECTION 6.06. Counterparts; Effectiveness; Several Agreement. This Agreement may be executed in counterparts, each of which shall constitute an original but all of which when taken together shall constitute a single contract. Delivery of an executed signature page to this Agreement by electronic transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. This Agreement shall become effective as to any Grantor when a counterpart hereof executed on behalf of such Grantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Grantor and the Collateral Agent and their respective permitted successors and assigns, and shall inure to the benefit of such Grantor, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Grantor shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement or the Revolving Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, waived or released with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder.

SECTION 6.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the

21

invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 6.08. Right of Set-Off. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Grantor against any of and all the obligations of such Grantor now or hereafter existing under this agreement owed to such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section 6.08 are in addition to other rights and remedies (including other rights of set-off) which such Lender may have.

SECTION 6.09. Governing Law; Jurisdiction.

(a) This Agreement shall be construed in accordance with and governed by the law of the Province of Ontario.

(b) Each party to this Agreement hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the courts of the Province of Ontario, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such courts. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Collateral Agent or any Secured Party may otherwise have to bring any action or proceeding relating to this Agreement against any Grantor or its properties in the courts of any jurisdiction.

(c) Each party to this Agreement hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section 6.09 and further irrevocably and unconditionally waives any right to which it may be entitled on account of place of residence or domicile. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defence of an inconvenient forum to the maintenance of such action or proceeding in any such court.

SECTION 6.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE

22

LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.10.

SECTION 6.11. Headings. Article and Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

SECTION 6.12. Rights and Obligations Absolute. All rights of the Collateral Agent hereunder, the Security Interest, the grant of a security interest in the Pledged Collateral and all obligations of each Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Revolving Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Revolving Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or this Agreement, other than a termination pursuant to Section 6.13.

SECTION 6.13. Termination or Release. (a) This Agreement, the Security Interest and all other security interests granted hereby shall terminate when all the Loan Document Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Revolving Credit Agreement, the LC Exposure has been reduced to zero, no B/A is outstanding or unpaid and the Issuing Banks have no further obligations to issue Letters of Credit under the Revolving Credit Agreement; provided that if, at least two Business Days prior to the time such termination conditions would otherwise be satisfied, the Collateral Agent shall have received written notice that any Other Obligations are then due and payable but have not been paid, then such termination shall not occur until all such Other Obligations that are then due and payable have been paid in full.

(b) A Subsidiary Party shall automatically be released from its obligations hereunder and the Security Interest in the Collateral of such Subsidiary Party shall be

23

automatically released upon the consummation of any transaction permitted by the Revolving Credit Agreement as a result of which such Subsidiary Party ceases to be a Subsidiary of the Parent Borrower; provided that the Required Lenders shall have consented to such transaction (to the extent required by the Revolving Credit Agreement) and the terms of such consent did not provide otherwise.

(c) Upon any sale or other transfer by any Grantor of any Collateral that is permitted under the Revolving Credit Agreement, or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 9.02 of the Revolving Credit Agreement, the security interest in such Collateral shall be automatically released.

(d) In connection with any termination or release pursuant to paragraph (a), (b) or (c), the Collateral Agent shall execute and deliver to any Grantor, at such Grantor’s expense, all documents that such Grantor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 6.13 shall be without recourse to or warranty by the Collateral Agent.

SECTION 6.14. Additional Subsidiaries. Pursuant to Section 5.13 of the Revolving Credit Agreement, a Subsidiary of the Parent Borrower that was not a Subsidiary Party on the date of the Revolving Credit Agreement may be required to enter in this Agreement as a Subsidiary Party thereafter. In addition, a Subsidiary may elect to become a Grantor hereunder if such Subsidiary has become a party to the Guarantor Agreement. Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Exhibit I hereto, such Subsidiary shall become a Subsidiary Party hereunder with the same force and effect as if originally named as a Subsidiary Party herein. The execution and delivery of any such instrument shall not require the consent of any other Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement.

SECTION 6.15. Amalgamation. Each Grantor acknowledges that if it amalgamates with any other corporation or corporations, then (i) the Collateral and the security interests created hereunder will extend to and include all the property and assets of the amalgamated corporation and to any property or assets of the amalgamated corporation thereafter owned or acquired, (ii) the term “Grantor”, where used in this Agreement, will extend to and include the amalgamated corporation, and (iii) the term “Obligations”, where used in this Agreement, will extend to and include the Obligations of the amalgamated corporation.

SECTION 6.16. Collateral Agent Appointed Attorney. Each Grantor hereby appoints the Collateral Agent the attorney of such Grantor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. The Collateral Agent agrees that it will not exercise the rights granted to it by the preceding sentence unless an Event of Default has occurred and is continuing. Without limiting the

24

generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Collateral Agent’s name or in the name of such Grantor (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral; (d) to send verifications of Accounts to any Account Debtor; (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent; and (h) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or wilful misconduct.

SECTION 6.17. Intercreditor Agreement Governs. Notwithstanding any other provision contained herein, this Agreement, the Liens created hereby and the rights, remedies, duties and obligations provided for herein are subject in all respects to the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of this Agreement and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control. Without limiting the generality of the foregoing, any obligation of any Grantor hereunder or under any other Security Document with respect to the delivery or control of any Collateral shall be satisfied if such Grantor delivers such Collateral to, or vests control of such Collateral in, the Senior Representative (as defined in the Intercreditor Agreement).

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

PATHEON INC.
by
	Name:
	Title:
PATHEON INTERNATIONAL INC.
by
	Name:
	Title:
JPMORGAN CHASE BANK, N.A., as Collateral Agent,
by
	Name:
	Title:

Canadian Revolving Pledge and Security Agreement – Signature Page

Schedule I to the

Canadian Revolving Pledge and Security Agreement

SUBSIDIARY PARTIES

PATHEON INTERNATIONAL INC.

Schedule II to the

Canadian Revolving Pledge and Security Agreement

EQUITY INTERESTS ISSUED TO OR OTHERWISE OWNED BY

PATHEON INC.

Issuer	Number of Certificates	Registered Owner	Number and Class of Equity Interest	Percentage of Equity Interests
Patheon International Inc.	8, 9, 10, 11, 12	Patheon Inc.	4292	100%

DEBT SECURITIES ISSUED TO OR OTHERWISE OWNED BY

PATHEON INC.

Issuer	Principal Amount	Date of Note	Maturity Date
Nil	Nil	Nil	Nil

EQUITY INTERESTS ISSUED TO OR OTHERWISE OWNED BY

PATHEON INTERNATIONAL INC.

Issuer	Number of Certificates	Registered Owner	Number and Class of Equity Interest	Percentage of Equity Interests
Patheon P.R. LLC	N/A	Patheon International Inc.	5,001 membership units	100%
Patheon U.S. Holdings Inc.	N/A	Patheon International Inc.	101 common shares	100%
Patheon U.S. Holdings LLC	N/A	Patheon International Inc.	501 membership units	100%

DEBT SECURITIES ISSUED TO OR OTHERWISE OWNED BY

PATHEON INTERNATIONAL INC.

Issuer	Principal Amount	Date of Note	Maturity Date
Nil	Nil	Nil	Nil

Exhibit I to the

Canadian Revolving Pledge and Security Agreement

SUPPLEMENT NO.      dated as of [    ], to the Canadian Revolving Pledge and Security Agreement dated as of April 23, 2010 (the “Canadian Collateral Agreement”) among PATHEON INC. (the “Parent Borrower”), the OTHER SUBSIDIARIES OF THE PARENT BORROWER named therein and JPMORGAN CHASE BANK, N.A., as Collateral Agent (the “Collateral Agent”).

A. Reference is made to the Amended and Restated Revolving Credit Agreement dated as of April 23, 2010 (as amended, supplemented or otherwise modified from time to time, the “Revolving Credit Agreement”), among the Parent Borrower, the US Borrower, the PR Borrower, the other Subsidiaries of Patheon Inc. named therein, the Lenders party thereto and the Collateral Agent, JPMorgan Chase Bank, N.A., Toronto Branch, and J.P. Morgan Europe Limited, as Agents.

B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Revolving Credit Agreement and the Canadian Collateral Agreement referred to therein.

C. The Grantors have entered into the Canadian Collateral Agreement in order to induce the Lenders to make Loans, the Canadian Lenders to purchase or accept B/As and the Issuing Banks to issue Letters of Credit. Section 6.14 of the Canadian Collateral Agreement provides that additional Subsidiaries of the Parent Borrower may become Subsidiary Parties under the Canadian Collateral Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the “New Subsidiary”) is executing this Supplement in accordance with the requirements of the Revolving Credit Agreement to become a Subsidiary Party under the Canadian Collateral Agreement in order to induce the Lenders to make additional Loans, the Canadian Lenders to purchase or accept additional B/As and the Issuing Banks to issue additional Letters of Credit and as consideration for Loans previously made, B/As previously purchased or accepted and Letters of Credit previously issued.

Accordingly, the Collateral Agent and the New Subsidiary agree as follows:

SECTION 1. In accordance with Section 6.14 of the Canadian Collateral Agreement, the New Subsidiary by its signature below becomes a Subsidiary Party (and accordingly, becomes a Grantor) and a Grantor under the Canadian Collateral Agreement with the same force and effect as if originally named therein as a Subsidiary Party and the New Subsidiary hereby agrees to all the terms and provisions of the Canadian Collateral Agreement applicable to it as a Subsidiary Party and Grantor thereunder. In furtherance of the foregoing, the New Subsidiary, as security for the payment and performance in full of the Obligations (as defined in the Guarantor Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Subsidiary’s right, title and interest in and to the Collateral (as defined in the Canadian Collateral

Agreement) of the New Subsidiary. Each reference to a “Grantor” in the Canadian Collateral Agreement shall be deemed to include the New Subsidiary. The Canadian Collateral Agreement is hereby incorporated herein by reference.

SECTION 2. The New Subsidiary represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.

SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received a counterpart of this Supplement that bears the signature of the New Subsidiary and the Collateral Agent has executed a counterpart hereof. Delivery of an executed signature page to this Supplement by electronic transmission shall be as effective as delivery of a manually signed counterpart of this Supplement.

SECTION 4. The New Subsidiary hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of the location of any and all Collateral of the New Subsidiary, (b) set forth on Schedule II attached hereto is a true and correct schedule of all the Pledged Securities of the New Subsidiary (and none of such Pledged Securities consists of shares of stock or other Equity Interests of one or more unlimited liability companies under the Companies Act (Nova Scotia), the Business Corporations Act (Alberta), Business Corporations Act (British Columbia) or any other laws governing unlimited liability companies) and (c) set forth under its signature hereto, is the true and correct legal name of the New Subsidiary, its jurisdiction of formation and the location of its chief executive office.

SECTION 5. Except as expressly supplemented hereby, the Canadian Collateral Agreement shall remain in full force and effect.

SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF ONTARIO.

SECTION 7. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Canadian Collateral Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 6.01 of the Canadian Collateral Agreement.

SECTION 9. The New Subsidiary agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent.

IN WITNESS WHEREOF, the New Subsidiary and the Collateral Agent have duly executed this Supplement to the Canadian Collateral Agreement as of the day and year first above written.

[NAME OF NEW SUBSIDIARY]
by
	Name:
	Title:
	Legal Name:
	Jurisdiction of Formation:
	Location of Chief Executive office:
JPMORGAN CHASE BANK, N.A., as Collateral Agent
by
	Name:
	Title:

Schedule I

to the Supplement No      to the

Canadian Revolving Pledge and Security Agreement

LOCATION OF COLLATERAL

                                 Description Location                                             

Schedule III

to the Supplement No      to the

Canadian Revolving Pledge and Security Agreement

PLEDGED SECURITIES

Equity Interests

Issuer Number of Certificate Registered Owner Number and Class of Equity Interests Percentage of Equity Interests

Debt Securities

Issuer Principal Amount Date of Note Maturity Date

Exhibit D

EXECUTION VERSION

REVOLVING GUARANTOR AGREEMENT dated as of April 23, 2010, among PATHEON INC., the SUBSIDIARIES of PATHEON INC. named herein, JPMORGAN CHASE BANK, N.A., as US Administrative Agent (the “Collateral Agent”), JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as Canadian Administrative Agent (the “Canadian Agent”), and J.P. MORGAN EUROPE LIMITED, as European Administrative Agent (the “European Agent” and, together with the Collateral Agent and the Canadian Agent, the “Agents”).

Reference is made to the Amended and Restated Revolving Credit Agreement dated as of April 23, 2010 (as amended, supplemented or otherwise modified from time to time, the “Revolving Credit Agreement”), among Patheon Inc., the Subsidiaries of Patheon Inc. named therein, the Lenders party thereto and the Agents. The Lenders (such term and each other capitalized term used but not defined in this preliminary statement having the meaning given or ascribed to it in Article I hereof) and the Issuing Banks have agreed to extend credit to the Borrowers subject to the terms and conditions set forth in the Revolving Credit Agreement. The obligations of the Lenders and the Issuing Banks to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement. Each Guarantor is affiliated with each of the Borrowers, will derive substantial benefits from the extension of credit to the Borrowers pursuant to the Revolving Credit Agreement and are willing to execute and deliver this Agreement in order to induce the Lenders and the Issuing Banks to extend such credit. This Agreement amends and restates in its entirety the Revolving Guarantor Agreement dated as of April 27, 2007, as amended and in effect prior to giving effect to the amendment and restatement thereof pursuant to this Agreement, among the Parent Borrower, the Subsidiaries of the Parent Borrower named therein, and the Agents. Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Revolving Credit Agreement; US Collateral Agreement. (a) Capitalized terms used in this Agreement and not otherwise defined herein have the meanings specified in the Revolving Credit Agreement or, if not defined therein, then in the US Collateral Agreement (as defined in the Revolving Credit Agreement). All terms defined in the New York UCC and not defined in this Agreement or the US Collateral Agreement have the meanings specified therein; the term “instrument” shall have the meaning specified in Article 9 of the New York UCC; and the term “security certificate” shall have the meaning specified in the Personal Property Security Act (Ontario) (the “PPSA”).

(b) The rules of construction specified in Section 1.03 of the Revolving Credit Agreement also apply to this Agreement.

SECTION 1.02. Other Defined Terms. As used in this Agreement, the

following terms have the meanings specified below:

“Cash Management Arrangement” means any arrangement pursuant to which any financial institution provides any Loan Party with treasury, depositary or cash management services, commercial card or purchasing card services, automated clearinghouse transfers of funds or credit card services.

“Collateral” means any and all assets (other than Mortgaged Property) securing the Obligations pursuant to the terms of any Security Document.

“Collateral Access Agreement” means any landlord waiver or other agreement, in form and substance reasonably satisfactory to the Collateral Agent, between the Collateral Agent and any third party (including any bailee, consignee, customs broker, or other similar Person) in possession of any Collateral or any landlord of any Loan Party for any real property where any Collateral is located, as such landlord waiver or other agreement may be amended, restated, or otherwise modified from time to time.

“Collateral Agent” has the meaning assigned to such term in the heading of this Agreement; provided that, where the context requires, such term means any applicable Collateral Agent as defined in the Revolving Credit Agreement.

“Corresponding Obligation” means any obligation to pay an amount to the Secured Parties or any one or more of them, whether for principal, interest, costs, any overdraft or otherwise and whether present or future: (a) in respect of any of the Obligations; or (b) in connection with any other indebtedness as the Agents, Issuing Banks and Lenders (or the Collateral Agent on their behalf) and the Parallel Obligor may agree from time to time.

“Guarantors” means the Parent Borrower and the Subsidiary Parties.

“Loan Document Obligations” means (a) the due and punctual payment by each Borrower of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on its Loans and any advances under the UK Overdraft Facility, when and as due. whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by such Borrower under the Revolving Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral, (iii) in the case of the Parent Borrower, each payment required to be made by the Parent Borrower under the Revolving Credit Agreement in respect of any B/A and (iv) all other monetary obligations of such Borrower to any of the Secured Parties under the Revolving Credit Agreement and each of the other Loan Documents, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar

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proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of any of the Borrowers under or pursuant to the Revolving Credit Agreement and each of the other Loan Documents, and (c) the due and punctual payment and performance of all the obligations of each other Loan Party under or pursuant to this Agreement and each of the other Loan Documents.

“Material Fixtures” means any fixtures owned by any of the Loan Parties that (a) are not part of a Mortgaged Property and (b) are integral to the operations of any of the Loan Parties or are otherwise material.

“Material Patents, Trademarks or Copyrights” means any Patents, Trademarks or Copyrights owned by any of the Loan Parties that are integral to the operations of any of the Loan Parties, or are material to the collateral value of any of the Collateral, or are otherwise material.

“NCC” means the Netherlands Civil Code.

“Obligations” means (a) Loan Document Obligations and (b) Other Obligations.

“Other Obligations” means the due and punctual payment and performance of all obligations of each Loan Party under each Swap Agreement and Cash Management Arrangement that (i) is in effect on the Effective Date with a counterparty that is a Lender or an Affiliate of a Lender as of the Effective Date, (ii) is entered into after the Effective Date with any counterparty that is a Lender or an Affiliate of a Lender at the time such Swap Agreement or Cash Management Arrangement is entered into or (iii) is arranged by a Lender or an Affiliate of a Lender and approved by the Collateral Agent.

“Parallel Debt” means the Parallel Debt as defined in paragraph (a) of Section 5.16.

“Parallel Obligors” means each of Patheon B.V. and Patheon U.S. Holdings LLC.

“Perfection Certificate” means a certificate substantially in the form of Exhibit F to the Revolving Credit Agreement (or any other form approved by the Collateral Agent), completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Financial Officer or executive officer of the Parent Borrower.

“Personal Property Collateral” means any Collateral other than Pledged Collateral and Mortgaged Property. For the avoidance of doubt, Personal Property Collateral includes “Article 9 Collateral” as defined in the US Collateral Agreement.

“Pledged Collateral” means all of the following: (a) the Pledged Stock; (b) the Pledged Debt Securities; (c) all other property that may be delivered to and held by the Collateral Agent (or to or by any other Person pursuant to the Intercreditor

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Agreement, in each case acting as gratuitous bailee for the Collateral Agent) pursuant to any Security Document in order to secure the Obligations; (d) subject to the terms of the Security Documents, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of. in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clauses (a) and (b) above; (e) subject to the terms of the Security Documents, all rights and privileges of each Guarantor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above; and (f) all Proceeds of any of the foregoing.

“Pledged Debt Securities” means (a) all debt securities issued to or otherwise owned by any Guarantor that are pledged (or required to be pledged) to secure the Obligations pursuant to any Security Document (to the extent required by the Collateral and Guarantee Requirement) and (b) the promissory notes and any other instruments evidencing such debt securities.

“Pledged Securities” means any promissory notes, stock certificates or other securities now or hereafter included in the Pledged Collateral, including all certificates, security certificates, instruments or other documents representing or evidencing any Pledged Collateral.

“Pledged Stock” means (a) all shares of capital stock and other Equity Interests issued to or otherwise owned by any Guarantor that are pledged (or required to be pledged) to secure the Obligations pursuant to any Security Document (to the extent required by the Collateral and Guarantee Requirement) and (b) the certificates representing all such Equity Interests.

“Restricted Obligations” has the meaning assigned to such term in Section 2.07(c).

“Revolving Credit Agreement” has the meaning assigned to such term in the preliminary statement of this Agreement.

“Secured Parties” means (a) the Lenders, (b) the Agents, (c) the Issuing Banks, (d) each counterparty to any Swap Agreement or Cash Management Arrangement with a Loan Party the obligations under which constitute Obligations, (e) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document and (f) the successors and assigns of each of the foregoing.

“Security Interests” means all security interests or other Liens assigned, pledged or granted to any of the Agents under any of the Security Documents in respect of any Collateral (other than Pledged Collateral and Mortgaged Property).

“Subsidiary Parties” means (a) the US Borrower, the UK Borrower, the PR Borrower, the French Borrower, the Italian Borrower and the Swiss Borrower, (b) the other Subsidiaries identified on Schedule I and (c) each other Subsidiary that becomes a party to this Agreement as a Subsidiary Party after the Effective Date.

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“Swiss Available Amount” has the meaning assigned to such term in Section 2.07(c).

“Swiss Guarantor” means the Swiss Borrower and any other Subsidiary Party incorporated in Switzerland.

ARTICLE II

Guarantee

SECTION 2.01. Guarantee. Subject to any applicable limitations set forth in Section 2.07, each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, the due and punctual payment and performance of the Obligations. Each of the Guarantors further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation. Each of the Guarantors waives presentment to, demand of payment from and protest to any of the Borrowers or any other Loan Party of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment.

SECTION 2.02. Guarantee of Payment. Each of the Guarantors further agrees that its guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by any of the Agents or any other Secured Party to any security held for the payment of the Obligations or to any balance of any deposit account or credit on the books of any of the Agents or any other Secured Party in favor of any of the Borrowers or any other Person. Each of the Guarantors agrees that its guarantee here under is continuing in nature and applies to all Obligations, whether currently existing or hereafter incurred.

SECTION 2.03. No Limitations. (a) Except for termination of a Guarantor’s obligations here under as expressly provided in Section 5.13 and subject to any applicable limitations set forth in Section 2.07, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by (i) the failure of any of the Agents or any other Secured Party to assert any claim or demand or to enforce any right or remedy under the provisions of any Loan Document or otherwise; (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement, including with respect to any other Guarantor under this Agreement; (iii) the release of any security held by any of the Agents or any other Secured Party for the Obligations or any of them; (iv) any default, failure or delay, wilful or otherwise, in the performance of the Obligations; or (v) any other act or omission that may or might in any

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manner or to any extent vary the risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). Each Guarantor expressly authorizes the Secured Parties to take and hold security for the payment and performance of the Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and manner of any sale thereof in their sole discretion or to release or substitute any one or more other guarantors or obligors upon or in respect of the Obligations, all without affecting the obligations of any Guarantor hereunder.

(b) To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of any of the Borrowers or any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any of the Borrowers or any other Loan Party, other than the indefeasible payment in full in cash of all the Obligations. Any of the Agents and the other Secured Parties may. at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with any of the Borrowers or any other Loan Party or exercise any other right or remedy-available to them against any of the Borrowers or any other Loan Party, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully and indefeasibly paid in full in cash; provided that the foregoing shall not be construed to grant any right or remedy other than those set forth elsewhere in the Loan Documents. To the fullest extent permitted by applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law. to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against any of the Borrowers or any other Loan Party, as the case may be, or any security.

SECTION 2.04. Reinstatement. Each of the Guarantors agrees that its guarantee hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any of the Agents or any other Secured Party upon the bankruptcy or reorganization of any of the Borrowers, any other Loan Party or otherwise.

SECTION 2.05. Agreement To Pay; Subrogation. In furtherance of the foregoing and not in limitation of any other right that any of the Agents or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of any of the Borrowers or any other Loan Party to pay any Obligation when and as the same shall become due. whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Collateral Agent for distribution to the applicable Secured Parties in cash the amount of such unpaid Obligation, subject to any applicable limitations set forth in Section 2.07. Upon payment by any Guarantor of any sums to the Collateral Agent as provided above, all rights of such Guarantor against any of the Borrowers or any other Loan Party arising as a result thereof by way of right of subrogation,

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contribution, reimbursement, indemnity or otherwise shall in all respects be subject to Article IV.

SECTION 2.06. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of each Borrower’s and each other Loan Party’s financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Agents or the other Secured Parties will have any duty to advise such Guarantor of information known to it or any of them regarding such circumstances or risks.

SECTION 2.07. Certain Limitations. (a) (i) The obligations of the French Borrower under this Article II shall be limited at all times to the Obligations of the Parent Borrower and/or any Subsidiary Party, up to a maximum principal amount equal to the aggregate of (i) the initial aggregate amount of the European Commitment on the Effective Date (US$10,000,000) and (ii) the principal amount of any intercompany loan made available (directly or indirectly) to the French Borrower on the Effective Date from the proceeds of any Loan under the Revolving Credit Agreement.

(ii) The obligations of the Patheon Holdings S.A.S. under this Article II shall be limited at all times to the Obligations of the French Borrower as Borrower and/or Guarantor, up to a maximum principal amount equal to the aggregate of (i) the initial aggregate amount of the European Commitment on the Effective Date (US$10,000,000) and (ii) the principal amount of any intercompany loan made available (directly or indirectly) to the French Borrower on the Effective Date from the proceeds of any Loan under the Revolving Credit Agreement.

(iii) The French Borrower hereby acknowledges that it will receive substantial direct or indirect benefit from the financing subject to the guarantee granted hereunder. For the avoidance of doubt, the obligations of the French Borrower under this Agreement will not extend beyond a point where they would infringe article L. 225-216 of the French commercial code.

(b) The obligations of the Italian Borrower under this Article II shall be limited to a maximum amount equal to the greater of (i) the amount of the European Commitment available from time to time to the Italian Borrower under the Revolving Credit Agreement (which, on the Effective Date, is USS10,000,000); the amount of the European Commitment for purposes of this clause (b)(i) to be determined without giving effect to a termination or reduction of the European Commitment due to an Event of Default under the Revolving Credit Agreement; and (ii) the amount actually borrowed by the Italian Borrower under the Revolving Credit Agreement plus the amount of any inter company loan or investment made to or in the Italian Borrower, directly or indirectly, out of the proceeds of the Revolving Credit Agreement; such amounts for purposes of this clause (b)(ii) to be as outstanding at the time when the Italian Borrower is requested to pay and perform any of the Obligations.

(c) If and to the extent any Swiss Guarantor is liable under this

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Agreement in relation to the Obligations of a Guarantor (other than the relevant Swiss Guarantor or any of its subsidiaries) and that complying with such Obligations would constitute a repayment of capital (Einlagerückgewähr) (including by way of a violation of the legally protected reserves (gesetzlich geschützte Reserven)) or the payment of a (constructive) dividend (Gewinnausschüttung) by such Swiss Guarantor (in relation to such Swiss Guarantor, the “Restricted Obligations”) the aggregate liability of such Swiss Guarantor for Restricted Obligations, due at any given time, shall be limited to the Swiss Available Amount existing at that time.

“Swiss Available Amount” means the maximum amount of a Swiss Guarantor’s profits and reserves available from time to time for distribution to its shareholder(s) under the then applicable Swiss law, presently being the amount equal to the positive difference between:

(i) the assets of the relevant Swiss Guarantor; and

(ii) the aggregate of the relevant Swiss Guarantor’s (a) liabilities (other than Restricted Obligations), (b) registered share capital, and (c) statutory reserves (gesetzliche Reserven).

Immediately after having been requested to perform Obligations under this Agreement that are Restricted Obligations, the relevant Swiss Guarantor shall perform any Restricted Obligations which are not affected by the above limitations and shall provide the Agents as soon as reasonably practicable with:

(i) an interim balance sheet audited by the statutory auditors (if any) of such Swiss Guarantor;

(ii) the determination by the statutory auditors (if any) of such Swiss Available Amount based on such interim audited balance sheet (such Swiss Available Amount to reflect, as the case may be, the conversion of restricted reserves into distributable reserves);

(iii) a confirmation from the statutory auditors (if any) of such Swiss Guarantor that the Swiss Available Amount complies with the terms of this Section 2.07(c) and with the provisions of Swiss corporate law which are aimed at protecting the share capital and legal reserves; and

(iv) approval by a shareholders’ meeting of such Swiss Guarantor of the (resulting) profit distribution;

and shall promptly implement all such other measures necessary or useful to allow such Swiss Guarantor to make the payments agreed hereunder with a minimum of limitations.

Such limitation as per this Section 2.07(c) shall not apply to the extent that the Obligations guaranteed under this Article II by the relevant Swiss Guarantor relates to Loan Document Obligations (or part thereof) which has been borrowed or the proceeds of which have been on-lent to or otherwise made available, directly or indirectly, to such

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Swiss Guarantor and to the extent that such amounts so borrowed or on–lent or otherwise made available, as the case may be, are still outstanding at the time of enforcement of the guarantees, obligations, liabilities, indemnities or undertakings.

If and to the extent required by applicable law (including double taxation treaties and the bilateral agreements between Switzerland and the EU) in force at the relevant time, any Swiss Guarantor which has Restricted Obligations:

(i) may deduct Swiss Withholding Tax at the rate of 35%, or such rate as is in force from time to time from any payment in respect of such Restricted Obligations;

(ii) may pay any such deduction mentioned in clause (i) above, to the Swiss Federal Tax Administration;

(iii) shall notify (or procure that the its parent notifies) the Agents that such a deduction has been made and provide the Agents with evidence that such deduction has been paid to the Swiss Federal Tax Administration; and

to the extent such deduction is made, will not be required to make an increase in accordance with Section 2.17 of the Revolving Credit Agreement, indemnify or otherwise hold harmless any Lender for the deduction of the Swiss Withholding Tax, notwithstanding anything to the contrary contained in the Loan Documents, unless such increase is permitted under the laws of Switzerland then in force provided that this shall not in any way limit any obligations of any Guarantor (other than such Swiss Guarantor) under the Loan Documents. Each Guarantor shall use its reasonable efforts to ensure that any other Guarantor which is. as a result of a payment under the Loan Documents, entitled to a full or partial refund of the Swiss Withholding Tax, will, as soon as possible after the deduction of the Swiss Withholding Tax, (i) request a refund of the Swiss Withholding Tax under any applicable law (including double taxation treaties and the bilateral agreements between Switzerland and the EU) and (ii) pay to the Agents upon receipt any amount so refunded.

Each Swiss Guarantor which has Restricted Obligations shall, and any parent company of such Swiss Guarantor being a party to this Agreement and/or the relevant Loan Document shall procure that such Swiss Guarantor will, take and cause to be taken all and any action as shall be required by the Agents which may be required as a matter of Swiss law in force at the time to make a payment or perform other Obligations with a minimum of limitations.

The limitations contained herein shall not release any Swiss Guarantor from the payment and performance of any Obligations beyond these limitations, but merely postpone the payment date until such times as payment is again permitted notwithstanding such limitation.

(d) If any Subsidiary of the Parent Borrower enters into this Agreement as a Subsidiary Party after the Effective Date pursuant to Section 5.14, the obligations of such Subsidiary Party under this Article II shall be subject to the limitations agreed to by

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the Collateral Agent in its reasonable discretion, if any, set forth in Annex A to the instrument in the form of Exhibit I hereto executed and delivered by such Subsidiary Party and the Collateral Agent; provided that such limitations shall not, in any event, limit such Subsidiary Party’s obligations under this Article II to an amount that is, at any time, less than the excess, if any. of (i) the aggregate amount of investments in, and loans and advances to, such Subsidiary Party made, directly or indirectly, by the Parent Borrower and the other Loan Parties prior to such time, minus (ii) the aggregate amount of such investments, loans and advances repaid by such Subsidiary Party to the Parent Borrower and the other Loan Parties prior to such time.

SECTION 2.08. Guarantor Intent. Each Guarantor expressly confirms that it intends that this guarantee shall extend from time to time to any (however fundamental) variation, increase, extension or addition of or to any Loan Document and/or any facility or amount made available under any Loan Document for the purposes of or in connection with any of the following: business acquisitions of any nature; increasing working capital; enabling investor distributions to be made; carrying out restructurings; refinancing existing facilities: refinancing any other indebtedness; making facilities available to new borrowers; any other variation or extension of the purposes for which any such facility or amount might be made available from time to time: and any fess, costs and/or expenses associated with any of the foregoing.

ARTICLE III

Representations, Warranties and Covenants Relating to Security

SECTION 3.01. Representations, Warranties and Covenants Relating to the Pledged Collateral. The Guarantors jointly and severally represent, warrant and covenant to and with the Collateral Agent, for the benefit of the Secured Parties, that:

(a) The applicable schedule to each Security Document correctly sets forth, with respect to each Guarantor party thereto, the percentage of the issued and outstanding units of each class of the Equity Interests of the issuer thereof represented by the Pledged Stock issued to or owned by such Guarantor and includes all Equity Interests, debt securities and promissory notes required to be pledged by such Guarantor under the Security Documents in order to satisfy the Collateral and Guarantee Requirement;

(b) the Pledged Stock and Pledged Debt Securities have been duly and validly authorized and issued by the issuers thereof and (i) in the case of Pledged Stock, are fully paid and nonassessable and (ii) in the case of Pledged Debt Securities, are legal, valid and binding obligations of the issuers thereof;

(c) except for the security interests granted under the Security Documents and under the Senior Notes Security Documents, each of the Guarantors (i) is and, subject to any transfers made in compliance with the Revolving Credit Agreement, will continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on the applicable schedule to the applicable Security Document as owned by such Guarantor, (ii) holds the same free and clear of all Liens, other than Liens expressly

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permitted by Section 6.02 of the Revolving Credit Agreement and subject to transfers made in compliance with the Revolving Credit Agreement, (iii) will make no assignment, pledge, hypothecation or transfer of. or create or permit to exist any security interest in or other Lien on. the Pledged Collateral, other than Liens expressly permitted by Section 6.02 of the Revolving Credit Agreement and transfers made in compliance with the Revolving Credit Agreement, and (iv) will defend its title or interest thereto or therein against any and all Liens (other than Liens expressly permitted by Section 6.02 of the Revolving Credit Agreement), however, arising, of all Persons whomsoever;

(d) except for restrictions and limitations imposed or permitted by the Loan Documents, or imposed by the Senior Notes Documents, securities laws generally or transfer restrictions applicable to Patheon B.V. by statute, pursuant to the blocking clause in the articles of association or otherwise under the laws of the Netherlands, or transfer restrictions applicable to Patheon International AG by statute under the laws of Switzerland, the Pledged Collateral is and will continue to be freely transferable and assignable, and none of the Pledged Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledges of such Pledged Collateral under the Security Documents, the sale or disposition thereof pursuant to the Security Documents or the exercise by any of the Agents of rights and remedies thereunder;

(e) each of the Guarantors has the power and authority to pledge the Pledged Collateral pledged by it under the Security Documents in the manner thereby done or contemplated;

(f) no consent or approval of any Governmental Authority, any securities exchange or any other Person was or is necessary to the validity of the pledges effected by the Security Documents (other than such as have been obtained and are in full force and effect);

(g) by virtue of the execution and delivery by the Guarantors of the Security Documents and the Lien priorities set forth in the Intercreditor Agreement, when any Pledged Securities are delivered to the Collateral Agent (or to any other Person pursuant to the Intercreditor Agreement, in each case acting as gratuitous bailee for the Collateral Agent) in accordance with the Security Documents, the Collateral Agent will obtain a legal, valid and perfected lien upon and security interest in such Pledged Securities as security for the payment and performance of the Obligations prior to any other Lien on any of the Pledged Securities other than (i) Liens granted under the Senior Notes Security Documents to the extent such Liens have priority in accordance with the Intercreditor Agreement and (ii) any other Liens permitted by Section 6.02 of the Revolving Credit Agreement that have priority as a matter of law;

(h) the pledges effected by the Security Documents are effective to vest in the Collateral Agent, for the benefit of the Secured Parties, the rights of the Collateral Agent in the Pledged Collateral as set forth in the Security Documents; and

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(i) each Guarantor will cause any Indebtedness for borrowed money owed to such Guarantor by any Person that is evidenced by a promissory note or other instrument (and will cause such Indebtedness to be evidenced by a promissory note or other instrument if necessary in order to perfect a security interest therein under the laws of any applicable jurisdiction) to be pledged as a Pledged Security pursuant to the applicable Security Document if required in order to comply with the Collateral and Guarantee Requirement.

SECTION 3.02. Certification of Limited Liability Company and Limited Partnership Interests. To the extent any limited liability company or limited partnership organized under the laws of the United States or the Commonwealth of Puerto Rico and controlled by any Guarantor is pledged under the US Collateral Agreement it shall be represented by a certificate or security certificate and be a “security” within the meaning of Article 8 of the New York UCC and shall be governed by Article 8 of the New York UCC to the extent such election is effective. All other limited liability companies or limited partnership controlled by any Guarantor that is pledged under the US Collateral Agreement can either be (i) represented by a certificate or security certificate and be a “security” within the meaning of Article 8 of the New York UCC and shall be governed by Article 8 of the New York UCC to the extent such election is effective or (ii) shall not be represented by certificates or security certificates and not be a “security” within the meaning of Article 8 of the New York UCC.

SECTION 3.03. Representations and Warranties Relating to the Personal Property Collateral. The Guarantors jointly and severally represent and warrant to the Collateral Agent, for the benefit of the Secured Parties, that:

(a) Each Guarantor has good and valid rights in and title to the Personal Property Collateral with respect to which it has purported to grant a Security Interest under any of the Security Documents and has full power and authority to grant to the Collateral Agent the Security Interest in such Personal Property Collateral pursuant thereto and to execute, deliver and perform its obligations in accordance with the terms of the Security Documents, without the consent or approval of any other Person other than any consent or approval that has been obtained.

(b) The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein, including the exact legal name of each Guarantor, is correct and complete as of the Effective Date. The Uniform Commercial Code financing statements or other appropriate filings, recordings or registrations prepared by the Collateral Agent based upon the information provided to the Collateral Agent in the Perfection Certificate for filing in each governmental, municipal or other office specified in Schedule 3 to the Perfection Certificate (or specified by notice from any of the Borrowers to the Collateral Agent after the Effective Date in the case of filings, recordings or registrations required by Section 5.13 of the Revolving Credit Agreement), are all the filings, recordings and registrations (other than fixture filings and filings required to be made in the United States Patent and Trademark Office, the United States Copyright Office and the Canadian Intellectual Property Office in order to perfect the Security Interest in Personal Property Collateral consisting of Patents, Trademarks

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and Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the benefit of the Secured Parties) in respect of all Personal Property Collateral in which the Security Interest may be perfected by filing, recording or registration, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any jurisdiction, except as provided under applicable law with respect to the filing of continuation statements.

(c) The Security Interests granted under the Security Documents constitute (i) legal and valid security interests in all the Personal Property Collateral securing the payment and performance of the Obligations and (ii) subject to the filings described in Section 3.03(b), perfected security interests in all Personal Property Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document pursuant to the Uniform Commercial Code or other applicable law. The Security Interests granted under the Security Documents are and shall be prior to any other Lien on any of the Personal Property Collateral, other than (i) Liens granted under the Senior Notes Security Documents to the extent such Liens have priority in accordance with the Intercreditor Agreement and (ii) any Liens expressly permitted by Section 6.02 of the Revolving Credit Agreement that have priority as a matter of law.

(d) The Personal Property Collateral is owned by the Guarantors free and clear of any Lien, except for Liens expressly permitted by Section 6.02 of the Revolving Credit Agreement and transfers made in compliance with the Revolving Credit Agreement. None of the Guarantors has filed or consented to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Personal Property Collateral, (ii) any assignment in which any Guarantor assigns any Collateral or any security agreement or similar instrument covering any Personal Property Collateral with the United States Patent and Trademark Office, the United States Copyright Office or the Canadian Intellectual Property Office or (iii) any assignment in which any Guarantor assigns any Personal Property Collateral or any security agreement or similar instrument covering any Personal Property Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens expressly permitted pursuant to Section 6.02 of the Revolving Credit Agreement.

(e) No amount payable to any Guarantor under or in connection with any Account that is an Eligible Account for purposes of any Borrowing Base is evidenced by an Instrument or Chattel Paper which has not been delivered to the Collateral Agent. As of the date of any Borrowing Base Certificate, all Accounts included in the calculation of Eligible Accounts by such Borrowing Base Certificate satisfy all requirements of an “Eligible Account” under the Revolving Credit Agreement.

(f) Except with respect to Inventory that does not constitute Collateral, the Borrowers have notified the Agents of the Inventory of each Guarantor that is a member of a Borrower Group that, as of the date hereof, is not located at a warehouse or other

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location that is owned by a Guarantor or with respect to which a Collateral Access Agreement has been obtained or is in transit, is at an outside processor, has been sold or shipped for sale (including sales on consignment or approval in the ordinary course of business) or is otherwise off-site in the ordinary course of business. As of the date of any Borrowing Base Certificate, all Inventory included in the calculation of Eligible Inventory on such Borrowing Base Certificate satisfies all requirements of “Eligible Inventory” under the Revolving Credit Agreement.

(g) As of the date hereof, there are not any Material Fixtures or Material Patents. Trademarks or Copyrights.

SECTION 3.04. Covenants Relating to the Personal Property Collateral. (a) Each Guarantor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Personal Properly Collateral owned by it as is consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Guarantor is engaged, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any part of the Personal Property Collateral, and, at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail reasonably satisfactory to the Collateral Agent showing the identity, amount and location of any and all Personal Property Collateral.

(b) Each Guarantor shall, at its own expense, take any and all actions necessary to defend title to the Personal Property Collateral against all Persons and to defend the Security Interests of the Collateral Agent in the Personal Property Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.02 of the Revolving Credit Agreement.

(c) Each Guarantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to better assure, preserve, protect and perfect the Security Interests and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement and the Security Documents, the granting of the Security Interests and the filing of any financing statements or other documents (other than fixture filings or filings in respect of Patents. Trademarks or Copyrights) in connection herewith or therewith. If any amount payable under or in connection with any of the Personal Property Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent, if required by the Collateral and Guarantee Requirement.

(d) The Collateral Agent and such Persons as the Collateral Agent may reasonably designate shall have the right, at the Guarantors’ own cost and expense, to inspect the Personal Property Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Personal Property

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Collateral is located, to discuss the Guarantors’ affairs with the officers of the Guarantors and their independent accountants and to verify under reasonable procedures, in accordance with Sections 5.03 and 5.09 of the Revolving Credit Agreement (and at times and in a manner that minimizes, to the extent reasonably possible, any disruption to the Guarantors’ business), the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Personal Property Collateral, including, in the case of Accounts or Personal Property Collateral in the possession of any third person, by contacting Account Debtors or the third person possessing such Personal Property Collateral for the purpose of making such a verification. The Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party.

(e) At its option, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Collateral and not permitted pursuant to Section 6.02 of the Revolving Credit Agreement, and may pay for the maintenance and preservation of the Personal Property Collateral to the extent any Guarantor fails to do so as required by the Revolving Credit Agreement or this Agreement (in each case upon reasonable prior notice to the Parent Borrower and then only if such amounts are not promptly paid by the applicable Guarantors, unless an Event of Default has occurred and is continuing), and each Guarantor jointly and severally agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided that nothing in this paragraph shall be interpreted as excusing any Guarantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Guarantor with respect to taxes, assessments, charges, fees. Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.

(f) If at any time any Guarantor shall take a security interest in any property of an Account Debtor or any other Person to secure payment and performance of an Account, such Guarantor shall promptly assign such security interest to the Collateral Agent. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other Person granting the security interest.

(g) Each Guarantor shall remain liable to observe and perform all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Personal Property Collateral, all in accordance with the terms and conditions thereof, and each Guarantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the other Secured Parties from and against any and all liability for such performance.

(h) None of the Guarantors shall make or permit to be made an assignment, pledge or hypothecation of the Personal Property Collateral or shall grant any other Lien in respect of the Personal Property Collateral, except as permitted by the Revolving Credit Agreement. None of the Guarantors shall make or permit to be made

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any transfer of the Personal Property Collateral and each Guarantor shall remain at all times in possession of the Personal Property Collateral owned by it, except that unless and until the Collateral Agent shall notify the Parent Borrower that an Event of Default shall have occurred and be continuing and that during the continuance thereof the Guarantors shall not sell, convey, lease, assign, transfer or otherwise dispose of any Personal Property Collateral (which notice may be given by telephone if promptly confirmed in writing), the Guarantors may use and dispose of the Personal Property Collateral in any lawful manner not inconsistent with the provisions of this Agreement, the Security Documents, the Revolving Credit Agreement or any other Loan Document.

(i) None of the Guarantors will, without the Collateral Agent’s prior written consent, grant any extension of the time of payment of any Accounts included in the Personal Property Collateral, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any Person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, compromises, settlements, releases, credits or discounts granted or made in the ordinary course of business and consistent with its current practices and in accordance with such prudent and standard practice used in industries that are the same as or similar to those in which such Guarantor is engaged.

(j) The Guarantors, at their own expense, shall maintain or cause to be maintained insurance covering physical loss or damage to the Inventory and Equipment (to the extent such Inventory or Equipment constitutes Collateral) in accordance with the requirements set forth in Schedule II hereto and Section 5.07 of the Revolving Credit Agreement. Each Guarantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by any Agent) as such Guarantor’s true and lawful agent (and attorney-in-fact) for the purpose, during the continuance of an Event of Default, of making, settling and adjusting claims in respect of Personal Property Collateral under policies of insurance, endorsing the name of such Guarantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Guarantor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or to pay any premium in whole or part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of the Guarantors hereunder or any Event of Default (but on written notice to the Parent Borrower and only if the applicable Guarantors do not promptly thereafter effect the required insurance, unless an Event of Default has occurred and is continuing), in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in connection with this paragraph, including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Guarantors to the Collateral Agent and shall be additional Obligations secured by the Security Documents.

(k) Each Guarantor shall maintain, in form and manner reasonably satisfactory to the Collateral Agent, records of its Chattel Paper and its books, records and documents evidencing or pertaining thereto.

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(1) If at any time any Inventory constituting Collateral of a Guarantor that is a member of a Borrower Group is stored or located at any leased property, owned property that is mortgaged to a mortgagee other than the Collateral Agent, warehouse, processor or converter facility or other location with respect to which a Collateral Access Agreement (which agreement provides access rights, contains a waiver or subordination of all Liens or claims that the lessor, mortgagee, bailee or consignee may assert against the Collateral at such location and is otherwise reasonably satisfactory in form and substance to the Collateral Agent) is not in effect with respect to the lessor, mortgagee, bailee or consignee thereof, as the case may be, then the applicable Guarantor shall promptly notify the Collateral Agent thereof.

(m) If at any time any Guarantor shall own or acquire any Material Fixtures or any Material Patents, Trademarks or Copyrights, then such Guarantor shall notify the Collateral Agent thereof and, if requested by the Collateral Agent or the Required Lenders, shall make such fixture filings or filings and recordings with the applicable Governmental Authority as the Collateral Agent or the Required Lenders shall request in order to grant and perfect security interests securing the Obligations on such Material Fixtures or Material Patents, Trademarks or Copyrights, as the case may be.

SECTION 3.05. Other Actions Relating to Personal Property Collateral. In order to further insure the attachment, perfection and priority of, and the ability of the Collateral Agent to enforce, the Security Interests, each Guarantor agrees, in each case at such Guarantor’s own expense, to take the following actions with respect to the following, to the extent constituting Personal Property Collateral:

(a) Instruments. If any Guarantor shall at any time hold or acquire any Instruments, such Guarantor shall forthwith endorse, assign and deliver the same to the Collateral Agent (or to any other Person pursuant to the Intercreditor Agreement, in each case acting as gratuitous bailee for the Collateral Agent), accompanied by such instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time reasonably request, to the extent required by the Collateral and Guarantee Requirement.

(b) Deposit Accounts. For each deposit account that any Guarantor at any time opens or maintains, such Guarantor shall, either (i) cause the depositary bank to agree to comply with instructions from the Collateral Agent to such depositary bank directing the disposition of funds from time to time credited to such deposit account, without further consent of such Guarantor or any other Person, pursuant to an agreement satisfactory to the Collateral Agent, or (ii) arrange for the Collateral Agent to become the customer of the depositary bank with respect to the deposit account, with the Guarantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw funds from such deposit account. The Collateral Agent agrees with each Guarantor that the Collateral Agent shall not give any such instructions or withhold any withdrawal rights from any Guarantor unless an Event of Default has occurred and is continuing, or, after giving effect to any withdrawal, would occur. The provisions of this paragraph shall not apply to (A) any deposit account for which any Guarantor, the depositary bank and the Collateral Agent have entered into a cash collateral agreement

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specially negotiated among such Guarantor, the depositary bank and the Collateral Agent for the specific purpose set forth therein, (B) deposit accounts for which the Collateral Agent is the depositary or (C) any account that is a part of a Cash Management Arrangement that has been approved of by the Collateral Agent exercising Permitted Discretion.

(c) Investment Property. Except to the extent otherwise provided in this Article III or in the Security Documents, if any Guarantor shall at any time hold or acquire any certificated securities or security certificates, such Guarantor shall forthwith endorse, assign and deliver the same to the Collateral Agent (or to any other Person pursuant to the Intercreditor Agreement, in each case acting as gratuitous bailee for the Collateral Agent) pursuant to the applicable Security Documents, accompanied by such instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time specify. If any securities now or hereafter acquired by any Guarantor are uncertificated and are issued to such Guarantor or its nominee directly by the issuer thereof, such Guarantor shall immediately notify the Collateral Agent thereof and, at the Collateral Agent’s request and option, and subject to the terms of the Intercreditor Agreement, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) cause the issuer to agree to comply with instructions from the Collateral Agent as to such securities, without further consent of any Guarantor or such nominee, or (ii) arrange for the Collateral Agent to become the registered owner of the securities. If any securities, whether certificated or uncertificated, or other investment property now or hereafter acquired by any Guarantor are held by such Guarantor or its nominee through a securities intermediary or commodity intermediary, such Guarantor shall immediately notify the Collateral Agent thereof and, at the Collateral Agent’s request and option, and subject to the terms of the Intercreditor Agreement, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) cause such securities intermediary or (as the case may be) commodity intermediary to agree to comply with entitlement orders or other instructions from the Collateral Agent to such securities intermediary as to such security entitlements, or (as the case may be) to apply any value distributed on account of any commodity contract as directed by the Collateral Agent to such commodity intermediary, in each case without further consent of any Guarantor or such nominee, or (ii) in the case of Financial Assets or other Investment Property held through a securities intermediary, arrange for the Collateral Agent to become the entitlement holder with respect to such investment property, with the Guarantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw or otherwise deal with such investment property. The Collateral Agent agrees with each of the Guarantors that the Collateral Agent shall not give any such entitlement orders or instructions or directions to any such issuer, securities intermediary or commodity intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by any Guarantor, unless an Event of Default has occurred and is continuing, or, after giving effect to any such investment and withdrawal rights would occur. The provisions of this paragraph shall not apply to any financial assets credited to a securities account for which the Collateral Agent is the securities intermediary.

(d) Electronic Chattel Paper and Transferable Records. If any Guarantor

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at any time holds or acquires an interest in any electronic chattel paper or any “transferable record,” as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such Guarantor shall promptly notify the Collateral Agent thereof and, at the request of the Collateral Agent, subject to the terms of the Intercreditor Agreement, shall take such action as the Collateral Agent may reasonably request to vest in the Collateral Agent control under New York UCC Section 9-105 of such electronic chattel paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or. as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record, to the extent such statutes are applicable. The Collateral Agent agrees with such Guarantor that the Collateral Agent will arrange, pursuant to procedures reasonably satisfactory to the Collateral Agent and so long as such procedures will not result in the Collateral Agent’s loss of control, for the Guarantor to make alterations to the electronic chattel paper or transferable record permitted under UCC Section 9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Guarantor with respect to such electronic chattel paper or transferable record.

(e) Letter-of-Credit Rights. If any Guarantor is at any time a beneficiary under a letter of credit now or hereafter issued in favor of such Guarantor that is received outside of the ordinary course of business or that exceeds US$1,000,000, such Guarantor shall promptly notify the Collateral Agent thereof and. at the request and option of the Collateral Agent, subject to the terms of the Intercreditor Agreement, such Guarantor shall, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under the letter of credit or (ii) arrange for the Collateral Agent to become the transferee beneficiary of the letter of credit, with the Collateral Agent agreeing, in each case, that the proceeds of any drawing under the letter of credit are to be paid to the applicable Guarantor unless an Event of Default has occurred or is continuing.

(f) Commercial Tort Claims. Subject to the terms of the Intercreditor Agreement, if any Guarantor shall at any time hold or acquire a commercial tort claim in an amount reasonably estimated to exceed US$5,000,000, the Guarantor shall promptly notify the Collateral Agent thereof in a writing signed by such Guarantor including a summary description of such claim and grant to the Collateral Agent in such writing a security interest therein and in the proceeds thereof, all upon the terms of the Security Documents, with such writing to be in form and substance reasonably satisfactory to the Collateral Agent.

SECTION 3.06. Covenants Regarding Patent, Trademark and Copyright Collateral. (a) Each Guarantor agrees that it will not do any act or omit to do any act (and will exercise commercially reasonable efforts to prevent its licensees from doing any

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act as omitting to do any act) whereby any Patent that is material to the conduct of such Guarantor’s business may become invalidated or dedicated to the public, and agrees that it shall continue to mark any products covered by a Patent with the relevant patent number as necessary and sufficient to establish and preserve its maximum rights under applicable patent laws.

(b) Each Guarantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of such Guarantor’s business, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for non-use, (ii) maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of Federal or foreign registration to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any third party rights.

(c) Each Guarantor (either itself or through its licensees or sublicensees) will, for each work covered by a material Copyright, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve its maximum rights under applicable copyright laws.

(d) Each Guarantor shall notify the Collateral Agent promptly if it knows or has reason to know that any Material Patent, Trademark or Copyright may become abandoned, lost or dedicated to the public, or of any materially adverse determination or development (including the institution of, or any such determination or development in any proceeding in the United States Patent and Trademark Office United States Copyright Office, Canadian Intellectual Property Office or any court or similar office of any country) regarding such Guarantor’s ownership of any Patent Trademark or Copyright, its right to register the same, or its right to keep and maintain the same.

(e) In no event shall any Guarantor, either itself or through any agent, employee, licensee or designee, file an application or registration, as the case may be, for any Material Patent, Trademark or Copyright with the United States Patent and Trademark Office, United States Copyright Office, Canadian Intellectual Property Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, unless it promptly informs the Collateral Agent, and, upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may reasonably request to evidence the Collateral Agent’s security interest in such Material Patent, Trademark or Copyright, and each Guarantor hereby appoints the Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable.

(f) Each Guarantor will take all necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office, Canadian Intellectual Property Office or any office or agency in any political subdivision of the United States or in any other country or any

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political subdivision thereof, to maintain and pursue each material application relating to the Material Patents. Trademarks or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of any Guarantor’s business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if consistent with good business judgment, to initiate opposition, interference and cancelation proceedings against third parties.

(g) In the event that any Guarantor has reason to believe that any Personal Property Collateral consisting of a Material Patent. Trademark or Copyright has been or is about to be infringed, misappropriated or diluted by a third party, such Guarantor promptly shall notify the Collateral Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as are appropriate under the circumstances to protect such Personal Property Collateral.

(h) Upon and during the continuance of an Event of Default, each Guarantor shall use its best efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License to effect the assignment of all such Guarantor’s right, title and interest thereunder to the Collateral Agent or its designee.

ARTICLE IV

Indemnity, Subrogation and Subordination

SECTION 4.01. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 4.03). each Borrower agrees that (a) in the event a payment of an Obligation of such Borrower shall be made by any Guarantor under this Agreement, such Borrower (or the Parent Borrower) shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the Person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Guarantor shall be sold pursuant to the Security Documents to satisfy in whole or in part an Obligation owed to any Secured Party, such Borrower (or the Parent Borrower) shall indemnify such Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold.

SECTION 4.02. Contribution and Subrogation. Each Guarantor other than the applicable Borrower having the obligation to indemnify in Section 4.01 (a “Contributing Party”) agrees (subject to Section 4.03) that, in the event a payment shall be made by any other Guarantor hereunder in respect of any Obligation or assets of any other Guarantor shall be sold pursuant to any Security Document to satisfy any Obligation owed to any Secured Party and such other Guarantor (the “Claiming Party”) shall not have been fully indemnified by the Borrowers as provided in Section 4.01, the Contributing Party shall indemnify the Claiming Party in an amount equal to the amount

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of such payment (less any partial indemnification by the Borrowers as provided in Section 4.01) or the greater of the book value or the fair market value of such assets (less any partial indemnification by the Borrowers as provided in Section 4.01), as the case may be, in each case multiplied by a fraction of which the numerator shall be the net worth of the Contributing Party on the date hereof (or, in the case of any Contributing Party that is a Guarantor pursuant to Section 5.14. the date of the supplement hereto executed and delivered by such Guarantor) and the denominator shall be the aggregate net worth of all the Guarantors (other than the applicable Borrower having the obligation to indemnify in Section 4.01) on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 5.14, the date of the supplement hereto executed and delivered by such Guarantor). Any Contributing Party making any payment to a Claiming Party pursuant to this Section 4.02 shall be subrogated to the rights of such Claiming Party under Section 4.01 to the extent of such payment.

SECTION 4.03. Subordination; Certain Set-Off Rights. (a) Notwithstanding any provision of this Agreement to the contrary, but subject to clause (c) below, all rights of the Guarantors under Sections 4.01 and 4.02 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of any of the Borrowers or any Guarantor to make the payments required by Sections 4.01 and 4.02 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of the obligations of such Guarantor hereunder.

(b) Each Guarantor hereby agrees that all Indebtedness and other monetary obligations owed by it to any other Guarantor or any Subsidiary that is not a Guarantor shall be fully subordinated to the indefeasible payment in full in cash of the Obligations; provided that such subordination shall not operate to prevent the payment of such Indebtedness and other monetary obligations (including, without limitation, dividends) between the Guarantors and/or any Subsidiary except after and during the continuation of an Event of Default.

(c) If the French Borrower or the Italian Borrower shall make a payment of an Obligation of another Guarantor under this Agreement, the French Borrower or the Italian Borrower, as the case may be, shall have the right, at any time after such payment under this Agreement is made, to set off the amount of such Obligation paid by it against its obligations under any intercompany loan made by any Guarantor to it from the proceeds of the Revolving Credit Agreement.

ARTICLE V

Miscellaneous

SECTION 5.01. Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Revolving Credit Agreement. All communications and notices

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hereunder to any Subsidiary Party shall be given to it in care of the Parent Borrower as provided in Section 9.01 of the Revolving Credit Agreement.

SECTION 5.02. Waivers; Amendment. (a) No failure or delay by any of the Agents, any Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Agents, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 5.02, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or purchase of B/As or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether any of the Agents, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time. No notice or demand on any Loan Party in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances.

(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by each of the Agents and the Loan Party or Loan Parties with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.02 of the Revolving Credit Agreement.

SECTION 5.03. Agents’ Fees and Expenses; Indemnification. (a) The parties hereto agree that each of the Agents shall be entitled to reimbursement of its expenses incurred hereunder as provided in Section 9.03 of the Revolving Credit Agreement.

(b) Without limitation of its indemnification obligations under the other Loan Documents, each Guarantor jointly and severally agrees to indemnify each of the Agents and the other Indemnitees (as defined in Section 9.03 of the Revolving Credit Agreement) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of, the execution, delivery or performance of this Agreement or any agreement or instrument contemplated hereby or any claim, litigation, investigation or proceeding relating to any of the foregoing or to the Collateral, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee.

23

(c) Any such amounts payable as provided hereunder shall be additional Obligations guaranteed hereby, secured by the Security Documents, and subject to any applicable limitations of Section 2.07. The provisions of this Section 5.03 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of any of the Agents or any other Secured Party. All amounts due under this Section 5.03 shall be payable on written demand therefor.

SECTION 5.04. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Guarantor or any of the Agents that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

SECTION 5.05. Survival of Agreement. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and shall survive the execution and delivery of the Loan Documents, the purchase of B/As and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any Lender or on its behalf and notwithstanding that any of the Agents, any Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended under the Revolving Credit Agreement, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan, any B/A or any fee or any other amount payable under any Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated.

SECTION 5.06. Counterparts; Effectiveness; Several Agreement. This Agreement may be executed in counterparts, each of which shall constitute an original but all of which when taken together shall constitute a single contract. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. This Agreement shall become effective as to any Loan Party when a counterpart hereof executed on behalf of such Loan Party shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of each Agent, and thereafter shall be binding upon such Loan Party and the Agents and their respective permitted successors and assigns, and shall inure to the benefit of such Loan Party, the Agents and the other Secured Parties and their respective successors and assigns, except that no Loan Party shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement or the Revolving Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Loan Party

24

and may be amended, modified, supplemented, waived or released with respect to any Loan Party without the approval of any other Loan Party and without affecting the obligations of any other Loan Party hereunder.

SECTION 5.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 5.08. Right of Set-Off. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law. to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Guarantor against any of and all the obligations of such Guarantor now or hereafter existing under this Agreement owed to such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section 5.08 are in addition to other rights and remedies (including other rights of set-off) which such Lender may have.

SECTION 5.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York.

(b) Each of the Guarantors hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that any of the Agents, the Issuing Banks or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Guarantor or its properties in the courts of any jurisdiction.

(c) Each of the Guarantors hereby irrevocably and unconditionally

25

waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section 5.09. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d) Each Guarantor hereby irrevocably appoints the process agent appointed by the Borrowers in Section 9.09(d) of the Revolving Credit Agreement as its authorized agent upon which process may be served in any such suit or proceeding brought in any federal or state court in the Borough of Manhattan in the City of New York, and agrees that service of process upon such agent, and written notice of said service to such Guarantor by the person serving the same in the manner provided for notices in Section 9.01 of the Revolving Credit Agreement, shall be deemed in every respect effective service of process upon such Guarantor in any such suit or proceeding. Each Guarantor further agrees to take any and all action as may be necessary to maintain such designation and appointment of such agent in full force and effect from the date of this Agreement until the Commitments have expired or been terminated and the principal of and interest on each Loan and all B/As, LC Disbursements and fees payable hereunder shall have been paid in full and no Letters of Credit are outstanding. Each other party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01 of the Revolving Credit Agreement. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

(e) If a Guarantor, established under the laws of the Netherlands, is represented by an attorney in connection with the signing and/or execution of this Agreement or any other agreement, deed or document referred to in this Agreement or made pursuant to this Agreement, it is hereby expressly acknowledged and accepted by the other parties to this Agreement that the existence and extent of the attorney’s authority and the effects of the attorney’s exercise or purported exercise of his authority shall be governed by the laws of the Netherlands.

SECTION 5.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 5.10.

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SECTION 5.11. Headings. Article and Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

SECTION 5.12. Rights and Obligations Absolute. All rights of the Agents hereunder and all obligations of each Guarantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Revolving Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Revolving Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Guarantor in respect of the Obligations or this Agreement, except a termination pursuant to Section 5.13.

SECTION 5.13. Termination or Release. (a) This Agreement and the Guarantees made herein shall terminate when all the Loan Document Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Revolving Credit Agreement, the LC Exposure has been reduced to zero, no B/A is outstanding or unpaid and the Issuing Banks have no further obligations to issue Letters of Credit under the Revolving Credit Agreement; provided that if, at least two Business Days prior to the time such termination conditions would otherwise be satisfied, the Collateral Agent shall have received written notice that any Other Obligations are then due and payable but have not been paid, then such termination shall not occur until all such Other Obligations that are then due and payable have been paid in full.

(b) A Subsidiary Party that is not a Borrower shall automatically be released from its obligations hereunder upon the consummation of any transaction permitted by the Revolving Credit Agreement as a result of which such Subsidiary Party ceases to be a Subsidiary of the Parent Borrower; provided that the Required Lenders shall have consented to such transaction (to the extent required by the Revolving Credit Agreement) and the terms of such consent did not provide otherwise.

(c) Upon any sale or other transfer by any Guarantor of any Collateral that is permitted under the Revolving Credit Agreement to a Person that is not a Guarantor, or upon the effectiveness of any written consent to the release of the Security Interests granted under the Security Documents in any Collateral pursuant to Section 9.02 of the Revolving Credit Agreement, the Security Interest in such Collateral shall be automatically released.

(d) In connection with any termination or release pursuant to paragraph (a), (b) or (c), the Collateral Agent shall execute and deliver to the applicable Guarantor, at such Guarantor’s expense, all documents that such Guarantor shall reasonably request

27

to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 5.13 shall be without recourse to or warranty by any Agent.

SECTION 5.14. Additional Subsidiaries. Pursuant to Section 5.13 of the Revolving Credit Agreement, a Subsidiary of the Parent Borrower that was not a Subsidiary Party on the date of the Revolving Credit Agreement may be required to enter in this Agreement as a Subsidiary Party thereafter. A Subsidiary of the Parent Borrower that is not so required to enter into this Agreement as a Subsidiary Party may elect to enter into this Agreement as a Subsidiary Party. Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Exhibit I hereto, such Subsidiary shall become a Subsidiary Party hereunder with the same force and effect as if originally named as a Subsidiary Party herein. The execution and delivery of any such instrument shall not require the consent of any other Loan Party hereunder. The rights and obligations of each Loan Party hereunder shall remain in full force and effect notwithstanding the addition of any new Subsidiary Party as a party to this Agreement.

SECTION 5.15. Collateral Agent Appointed Attorney-in-Fact. Each Guarantor hereby appoints the Collateral Agent the attorney-in-fact of such Guarantor for the purpose of carrying out the provisions of this Agreement and the Security Documents and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof or thereof, which appointment is irrevocable and coupled with an interest. The Collateral Agent agrees that it will not exercise the rights granted to it by the preceding sentence unless an Event of Default has occurred and is continuing. Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Collateral Agent’s name or in the name of such Guarantor (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof: (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to sign the name of any Guarantor on any invoice or bill of lading relating to any of the Collateral; (d) to send verifications of Accounts Receivable to any Account Debtor; (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral: (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (g) to notify, or to require any Guarantor to notify, Account Debtors to make payment directly to the Collateral Agent; and (h) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement and the Security Documents, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided that nothing herein contained shall be construed as requiring or obligating any Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by any Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall

28

be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Guarantor for any act or failure to act hereunder, except for their own gross negligence or wilful misconduct.

Without prejudice to the provisions of this agreement and the other Loan Documents, the parties hereto acknowledge and agree for the purposes of taking and ensuring the continuing validity of Swiss law governed pledges, the Collateral Agent shall hold: (i) the security that it holds under a Swiss Security Document that is accessory in nature (akzessorisch) for itself and for and on behalf of the Lenders and each Issuing Bank as a direct representative (direkte Stellvertretung) and (ii) the security that it holds under a Swiss Security Document that is non-accessory in nature (nicht-akzessorisch) as an agent for the benefit of the Lenders and each Issuing Bank (Halten unter einem Trenhandveraltnis). With regards to Collateral governed by Swiss law, each Lender for itself and for and on behalf of the Lenders and each Issuing Bank for itself hereby appoints and authorizes the Collateral Agent (i) to enter into, to take all action required in connection with and to enforce (all in accordance with this Agreement and the other Loan Documents) each Swiss Security Document that is non-accessory in nature (nicht-akzessorisch) in its own name, but for the benefit of the other Lenders and each Issuing Bank, and (ii) to enter into, to take all actions required in connection with and to enforce (all in accordance with this Agreement and the other Loan Documents) each Swiss Security Document that is accessory in nature (akzessorisch) for itself and for and on behalf of the other Lenders and each Issuing Bank as a direct representative (direkter Stellvertreter) and each of the Lenders, each Issuing Bank and the Guarantors acknowledge that each Lender (including, without limitation, any future Lender) and each Issuing Bank will be a party to the Swiss Security Document.

SECTION 5.16. Parallel Debt. (a) Each Parallel Obligor hereby irrevocably and unconditionally undertakes to pay to the European Agent an amount equal to the aggregate amount payable (verschuldigd) by such Parallel Obligor in respect of its Corresponding Obligations as they may exist from time to time. The payment undertaking of each Parallel Obligor to the European Agent under this paragraph (a) is hereinafter to be referred to as a “Parallel Debt”. Each Parallel Debt will be payable in the currency or currencies of the relevant Corresponding Obligations.

(b) Each Parallel Debt will become due and payable (opeisbaar) as and when one or more of the Corresponding Obligations become due and payable.

(c) Each of the parties to this Agreement hereby acknowledges that

(i) each Parallel Debt constitutes an undertaking, obligation and liability of the relevant Parallel Obligor to the European Agent which is separate and independent from, and without prejudice to, the Corresponding Obligations; and

(ii) each Parallel Debt represents the European Agent’s own separate and independent claim (eigen en zelfstandige vordering) to receive payment of

29

such Parallel Debt from relevant the Parallel Obligor.

(d) To the extent the European Agent irrevocably (onaantastbaar) receives any amount in payment of the Parallel Debt of a Parallel Obligor, the European Agent shall distribute such amount among the Secured Parties who are creditors of the Corresponding Obligations of such Parallel Obligor in accordance with Section 5.02 of the US Collateral Agreement relating to the distribution of proceeds. Upon irrevocable (onaantastbaar) receipt by a Secured Party of any amount so distributed to it (“Received Amount”), the Corresponding Obligations of such Parallel Obligor to the relevant Secured Party shall be reduced by amounts totaling an amount (“Deductible Amount”) equal to the Received Amount in the manner as if the Deductible Amount were received as a payment of the Corresponding Obligations on the date of receipt by such Secured Party of the Received Amount.

SECTION 5.17. Each Guarantor will make payment relative to each Obligation in the currency (the “Original Currency”) in which the applicable Borrower is required to pay such Obligation. If a Guarantor makes payment relative to any Obligation in a currency (the “Other Currency”) other than the Original Currency (whether voluntarily or pursuant to an order or judgment of a court or tribunal of any jurisdiction), such payment will constitute a discharge of the liability of such Guarantor hereunder in respect of such Obligation only to the extent of the amount of the Original Currency which the Collateral Agent is able to purchase in accordance with normal banking procedures in the relevant jurisdiction with the amount it receives on the date of receipt. If the amount of the Original Currency which the Collateral Agent is able to purchase is less than the amount of such currency originally due to it in respect to the relevant Obligation, the applicable Guarantor will indemnify and save the Collateral Agent and the other Secured Parties harmless from and against any loss or damage arising as a result of such deficiency. This indemnity will constitute an obligation separate and independent from the other obligations contained in this Agreement, will give rise to a separate and independent cause of action, will apply irrespective of any indulgence granted by the Collateral Agent or the other Secured Parties and will continue in full force and effect notwithstanding any judgment or order in respect of any amount due hereunder or under any judgment or order.

SECTION 5.18. Taxes. Each Guarantor agrees that Section 2.17 of the Revolving Credit Agreement shall, to the fullest extent permitted by law, apply to payments made by it under this Agreement.

SECTION 5.19. Intercreditor Agreement Governs. Notwithstanding any other provision contained herein, insofar as the provisions of this Agreement apply to Collateral, this Agreement and the rights, remedies, duties and obligations provided for herein are subject in all respects to the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of this Agreement and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control. Without limiting the generality of the foregoing, any obligation of any Guarantor hereunder or under any other Security Document with respect to the delivery or control of any Collateral shall be satisfied if such Guarantor delivers such Collateral to, or vests

30

control of such Collateral in, the Senior Representative (as defined in the Intercreditor Agreement).

31

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

PATHEON INC.,
	by
		Name:
		Title:
PATHEON PHARMACEUTICALS INC.,
	by
		Name:
		Title:

EXECUTED AS A DEED by	)
PATHEON UK LIMITED	)
acting by	)
Director

In the presence of:

Name:

Address:

Occupation:

PATHEON PUERTO RICO, INC.,
	by
		Name:
		Title:

32

PATHEON INTERNATIONAL INC.,
	by
		Name:
		Title:
PATHEON PHARMACEUTICALS SERVICES INC.,
	by
		Name:
		Title:
PATHEON U.S. HOLDINGS INC.,
	by
		Name:
		Title:
PATHEON P.R. LLC,
	by
		Name:
		Title:
PATHEON U.S. HOLDINGS LLC,
	by
		Name:
		Title:

33

PATHEON ITALIA, S.P.A.,
	by
		Name:
		Title:
PATHEON HOLDINGS S.A.S.,
	by
		Name:
		Title:
PATHEON FRANCE S.A.S.,
	by
		Name:
		Title:
PATHEON INTERNATIONAL AG,
	by
		Name:
		Title:

34

PATHEON FINANCE LLC,
	by
		Name:
		Title:
PATHEON PUERTO RICO ACQUISITIONS CORPORATION,
	by
		Name:
		Title:
CEPH INTERNATIONAL CORPORATION,
	by
		Name:
		Title:
PATHEON B.V.,
	by
		Name:
		Title:
JPMORGAN CHASE BANK, N.A., as Agent,
	by
		Name:
		Title:

35

JPMORGAN CHASE BANK, N.A., TORONTO BRANCH as Agent,
	by
		Name:
		Title:
J.P. MORGAN EUROPE LIMITED, as Agent,
	by
		Name:
		Title:

36

Schedule I to the

Revolving Guarantor Agreement

SUBSIDIARY PARTIES¹

Entity Name

Patheon Pharmaceuticals Inc.

Patheon UK Limited

Patheon Puerto Rico, Inc.

Patheon International Inc.

Patheon Pharmaceuticals Services Inc.

Patheon U.S. Holdings Inc.

Patheon P.R. LLC

Patheon U.S. Holdings LLC

Patheon Finance LLC

Patheon Puerto Rico Acquisitions Corporation

CEPH International Corporation

Patheon B.V.

Patheon Italia, S.p.A.

Patheon Holdings, S.A.S.

Patheon France S.A.S.

Patheon International AG

¹ To be updated.

Schedule II to the

Revolving Guarantor Agreement

INSURANCE REQUIREMENTS

(a) The Parent Borrower will, and will cause each Subsidiary Party to, maintain (or cause to be maintained on its behalf), with financially sound and reputable insurance companies:

(i) fire, boiler and machinery, and extended coverage insurance, on a replacement cost basis, with respect to all personal property and improvements to real property (in each case constituting Collateral), in such amounts as are customarily maintained by companies in the same or similar business operating in the same or similar locations;

(ii) commercial general liability insurance against claims for bodily injury, death or property damage occurring upon, about or in connection with the use of any properties owned, occupied or controlled by it. providing coverage on either an occurrence or claims-made basis. Coverage also includes bodily injury or property damage included within the products-completed operations hazard on either occurrence or claims-made basis;

(iii) business interruption insurance, insuring against either (A) loss of gross earnings or (B) loss of gross profits or (C) providing coverage on a stated amount basis for a period of not less than 12 months arising from any risks or occurrences required to be covered by insurance pursuant to clause (i) above; and

(iv) such other insurance as may be required by law.

(b) Any property, fire, boiler and machinery and extended coverage policies maintained with respect to any Collateral shall be endorsed or otherwise amended to include (i) a lenders’ loss payable clause in favor of the Collateral Agent and providing for losses thereunder to be payable to the Collateral Agent or its designee, (ii) a provision to the effect that neither any Loan Party, the Collateral Agent nor any other party shall be a coinsurer and (iii) such other provisions as the Collateral Agent may reasonably require from time to time to protect the interests of the Lenders. Commercial general liability policies shall be endorsed to name the Collateral Agent as an additional insured with respect to liability arising out of the operations of the named insured. Business interruption policies shall name the Collateral Agent as loss payee. Each such policy referred to in this paragraph also shall provide that it shall not be canceled (i) by reason of nonpayment of premium except upon not less than 10 days’ prior written notice thereof by the insurer to the Collateral Agent (giving the Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for any other reason except upon not less than 30 days’ prior written notice thereof by the insurer to the Collateral Agent. The Borrowers shall deliver to the Collateral Agent, prior to the cancellation, modification or nonrenewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Collateral Agent) together with evidence reasonably satisfactory to the Collateral Agent of payment of the premium therefor.

Exhibit I to the

Revolving Guarantor Agreement

SUPPLEMENT NO.      dated as of [—], to the Revolving Guarantor Agreement dated as of [—], 2010 (as amended, supplemented or otherwise modified from time to time, the “Guarantor Agreement”) among PATHEON INC., the SUBSIDIARIES of PATHEON INC. named therein , JPMORGAN CHASE BANK, N.A., as US Administrative Agent (the “Collateral Agent”), JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as Canadian Administrative Agent (the “Canadian Agent”), and J.P. MORGAN EUROPE LIMITED, as European Administrative Agent (the “European Agent” and, together with the Collateral Agent and the Canadian Agent, the “Agents”).

A. Reference is made to the Amended and Restated Revolving Credit Agreement dated as of April 23, 2010 (as amended, supplemented or otherwise modified from time to time, the “Revolving Credit Agreement”), among Patheon Inc., the Subsidiaries of Patheon Inc. named therein, the Lenders party thereto and the Agents.

B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Revolving Credit Agreement and the Guarantor Agreement.

C. The Guarantors have entered into the Guarantor Agreement in order to induce the Lenders to make Loans, the Canadian Lenders to purchase or accept B/As and the Issuing Banks to issue Letters of Credit. Section 5.14 of the Guarantor Agreement provides that additional Subsidiaries of the Parent Borrower may become Subsidiary Parties under the Guarantor Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the “New Subsidiary”) is executing this Supplement in accordance with the requirements of the Revolving Credit Agreement to become a Subsidiary Party under the Guarantor Agreement in order to induce the Lenders to make additional Loans, the Canadian Lenders to purchase or accept additional B/As and the Issuing Banks to issue additional Letters of Credit and as consideration for Loans previously made, B/As previously purchased or accepted and Letters of Credit previously issued.

Accordingly, the Collateral Agent and the New Subsidiary agree as follows:

SECTION 1. In accordance with Section 5.14 of the Guarantor Agreement, the New Subsidiary by its signature below becomes a Subsidiary Party (and accordingly, becomes a Guarantor) and Guarantor under the Guarantor Agreement with the same force and effect as if originally named therein as a Subsidiary Party and the New Subsidiary hereby (a) agrees to all the terms and provisions of the Guarantor Agreement applicable to it as a Subsidiary Party and Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor thereunder are true and correct on and as of the date hereof. Each reference to

a “Guarantor” in the Guarantor Agreement shall be deemed to include the New Subsidiary. The Guarantor Agreement is hereby incorporated herein by reference. [Notwithstanding the foregoing, but subject to Section 2.07(d) of the Guarantor Agreement, the obligations of the New Subsidiary under Article II of the Guarantor Agreement are subject to the limitations set forth in Annex A hereto.]²

SECTION 2. The New Subsidiary represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.

SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received a counterpart of this Supplement that bears the signature of the New Subsidiary and the Collateral Agent has executed a counterpart hereof. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement.

SECTION 4. The New Subsidiary hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of the location of any and all Collateral of the New Subsidiary, (b) set forth on Schedule II attached hereto is a true and correct schedule of all the Pledged Securities of the New Subsidiary and (c) set forth under its signature hereto, is the true and correct legal name of the New Subsidiary, its jurisdiction of formation and the location of its chief executive office.

SECTION 5. Except as expressly supplemented hereby, the Guarantor Agreement shall remain in full force and effect.

SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 7. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantor Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

² This provision to be included only if the New Subsidiary’s guarantee obligations are required by applicable local law to be limited. Any such limitations are subject to review by the Collateral Agent and confirmation by legal counsel in the relevant jurisdiction that such limitations are required.

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SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 5.01 of the Guarantor Agreement.

SECTION 9. The New Subsidiary agrees to reimburse each Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for such Agent.

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IN WITNESS WHEREOF, the New Subsidiary and the Collateral Agent have duly executed this Supplement to the Guarantor Agreement as of the day and year first above written.

[NAME OF NEW SUBSIDIARY],
	by
		Name:
		Title:
JPMORGAN CHASE BANK, N.A., as Agent,
	by
		Name:
		Title:

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Schedule I

to the Supplement No     to the

Revolving Guarantor Agreement

LOCATION OF COLLATERAL

Description Location

Schedule II

to the Supplement No     to the

Revolving Guarantor Agreement

PLEDGED SECURITIES

Equity Interests

Issuer Number of Certificate Registered Owner Number and Class of Equity Interests Percentage of Equity Interests

Debt Securities

Issuer Principal Amount Date of Note Maturity Date

Annex A

[Local law guarantee limitations]

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Exhibit E

EXECUTION COPY

INTERCREDITOR AGREEMENT

dated as of

April 23, 2010,

among

JPMORGAN CHASE BANK, N.A.,

as ABL Agent,

DEUTSCHE BANK TRUST COMPANY AMERICAS,

as Notes Agent,

PATHEON INC.

and

THE SUBSIDIARIES OF PATHEON INC. NAMED HEREIN

INTERCREDITOR AGREEMENT dated as of April 23, 2010, among JPMORGAN CHASE BANK, N.A., as agent for the ABL Secured Parties referred to herein, DEUTSCHE BANK TRUST COMPANY AMERICAS, as agent for the Notes Secured Parties referred to herein, PATHEON INC. (the “Parent”) and THE SUBSIDIARIES OF PATHEON INC. NAMED HEREIN.

Reference is made to (a) the Amended and Restated Revolving Credit Agreement dated as of April 23, 2010 (as amended, supplemented or otherwise modified from time to time, the “ABL Credit Agreement”), among the Parent, the Subsidiaries (such term and each other capitalized term used and not otherwise defined herein having the meaning assigned to it in Article I) of the Parent named therein, the lenders party thereto and JPMorgan Chase Bank, N.A., JPMorgan Chase Bank, N.A., Toronto Branch, and J.P. Morgan Europe Limited, as agents, under which the ABL Lenders have agreed to extend credit to the borrowers thereunder and (b) the Indenture dated as of April 23, 2010 (as amended, supplemented or otherwise modified from time to time, the “Indenture”) among the Parent, the Subsidiaries of the Parent party thereto as guarantors, U.S. Bank National Association, as trustee (the “Trustee”), and Deutsche Bank Trust Company Americas, as collateral agent, pursuant to which the Parent has issued $280,000,000 principal amount of 8.625% Senior Secured Notes due 2017 (the “Notes”).

In consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the ABL Agent (for itself and on behalf of the ABL Secured Parties), the Notes Agent (for itself and on behalf of the Notes Secured Parties), the Parent and the Subsidiaries of the Parent from time to time party hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Construction; Certain Defined Terms. (a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument, other document, statute or regulation herein shall be construed as referring to such agreement, instrument, other document. statute or regulation as from time to time amended, restated, replaced, supplemented or otherwise modified, (ii) any reference herein to any Person shall be construed to include such Person's successors and assigns, including any successor of any Representative in its capacity as ABL Agent, Notes Agent or Junior Subordinated Agent, as applicable, but shall not be deemed to include the subsidiaries of such Person unless express reference is made to such subsidiaries, (iii) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be

construed to refer to this Agreement in its entirety and not to any particular provision hereof, (iv) all references herein to Articles, Sections and Annexes shall be construed to refer to Articles, Sections and Annexes of this Agreement, (v) unless otherwise expressly qualified herein, the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights and (vi) the term “or” is not exclusive.

(b) All terms defined in the New York UCC and not defined in this Agreement have the meanings specified therein; the term “instrument” shall have the meaning specified in Article 9 of the New York UCC.

SECTION 1.02. Definitions. As used in this Agreement, the following terms have the meanings specified below:

“ABL Agent” means JPMorgan Chase Bank, N.A., (a) in its capacity as collateral agent under the ABL Credit Agreement and the ABL Security Documents and (b) on behalf of any of its affiliates designated by it to serve as collateral agent for purposes of any particular ABL Security Document or Collateral (including J.P. Morgan Europe Limited and JPMorgan Chase Bank, N.A., Milan Branch, acting under any ABL Security Document to which they are a party).

“ABL Collateral” means the assets on which Liens have been granted pursuant to any of the ABL Loan Documents to secure the ABL Obligations.

“ABL Credit Agreement” has the meaning assigned to such term in the preliminary statement of this Agreement.

“ABL Event of Default” means any “Event of Default” as defined in the ABL Credit Agreement.

“ABL Guarantor Agreement” means the Revolving Guarantor Agreement dated as of Aprii 23, 2010 among the Parent, the Subsidiaries of the Parent named therein and the ABL Agent, JPMorgan Chase Bank, N.A., Toronto Branch, and J.P. Morgan Europe Limited, as agents.

“ABL Lenders” means the “Lenders” and the “Issuing Banks” under and as defined in the ABL Credit Agreement.

“ABL Liens” means the Liens on the ABL Collateral created under the ABL Security Documents to secure the ABL Obligations.

“ABL Loan Documents” means the “Loan Documents” as such term is defined in the ABL Credit Agreement.

“ABL Obligations” means all Obligations secured under the ABL Security Documents.

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“ABL Obligations Payment Date” means the first date on which (a) the ABL Obligations (other than those that constitute ABL Other Obligations or Unasserted Contingent Obligations) have been indefeasibly paid in cash in full (or cash collateralized or defeased or otherwise indefeasibly satisfied and discharged in accordance with the terms of the ABL Loan Documents). (b) all commitments to extend credit under the ABL Loan Documents have been terminated, (c) there are no outstanding letters of credit, banker's acceptances or similar instruments issued under the ABL Loan Documents (other than such as have been cash collateralized or defeased in accordance with the terms of the ABL Security Documents), (d) any other conditions to the release of the ABL Liens have been satisfied or waived in accordance with the ABL Loan Documents and (e) the ABL Agent has delivered a written notice to each other Representative stating that the events described in clauses (a), (b), (e) and (d) have occurred to the satisfaction of the ABL Secured Parties, which notice shall be delivered by the ABL Agent to each other Representative promptly after the occurrence of the events described in clauses (a), (b), (c) and (d); provided that if, at least two Business Days prior to the time all such events described in clauses (a), (b), (c) and (d) have occurred, the ABL Agent shall have received written notice that any ABL Other Obligations are then due and payable but have not been paid, then the ABL Obligations Payment Date shall not occur until all such ABL Other Obligations that are then due and payable have been paid in full.

“ABL Other Obligations” means the “Other Obligations” as defined in the ABL Guarantor Agreement.

“ABL Priority Collateral” means the portion of the Collateral consisting of any and all of the following assets now owned or at any time hereafter acquired by any Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest:

(a) all Accounts;

(b) all Chattel Paper representing Accounts;

(c) (i) all Deposit Accounts and all cash, checks, other negotiable instruments, funds and other evidences of payment held therein and (ii) all Securities. Security Entitlements and Securities Accounts, in each case, to the extent constituting cash or cash equivalents or representing a claim to cash equivalents, except, in each case, for any Deposit Accounts and any cash, checks, other negotiable instruments, funds or other evidences of payments held therein or any Securities, Security Entitlements, Securities Accounts and all cash and cash equivalents held therein, in each case, that constitute identifiable proceeds of Notes Priority Collateral and all deposits and other funds held therein;

(d) all Inventory;

(e) Letter-of-Credit rights relating to Accounts or Inventory;

(f) to the extent involving or governing any of the items referred to in the preceding clauses (a) through (e), all Documents, General Intangibles (as defined in the

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US ABL Security Agreement) and Instruments;

(g) to the extent supporting any of the items referred to in clauses (a) through (e), all Supporting Obligations;

(h) all books and records relating to the foregoing; and

(i) all proceeds of any of the foregoing (including proceeds of insurance with respect to any or all of the foregoing clauses (a) through (h) and all collateral security and guarantees given by any Person with respect to any of the foregoing).

“ABL Required Parties” means, for any amendment, waiver, modification or release of or in connection with any ABL Loan Document, the parties whose consent to such amendment, waiver, modification or release is required pursuant to Section 9.02 of the ABL Credit Agreement.

“ABL Secured Parties” means the “Secured Parties” as defined in thè ABL Guarantor Agreement.

“ABL Security Documents” means the “Security Documents” as such term is defined in the ABL Credit Agreement.

“Bankruptcy Code” means Title 11 of the United States Code.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City or Toronto are authorized or required by law to remain closed.

“Collateral” means the ABL Collateral and the Notes Collateral.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Grantors” means the Parent and the Subsidiaries of the Parent party to this Agreement.

“Indenture” has the meaning assigned to such term in the preliminary statement of this Agreement.

“Insolvency Laws” means the Bankruptcy Code and any other federal, state or foreign bankruptcy, insolvency, receivership or similar laws of any jurisdiction.

“Junior Documents” means (a) for all purposes of this Agreement, any Junior Subordinated Documents, (b) in respect of the Notes Priority Collateral, prior to the Notes Obligations Payment Date, the ABL Loan Documents, and (c) in respect of the ABL Priority Collateral, prior to the ABL Obligations Payment Date, the Notes

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Documents.

“Junior Liens” means (a) in respect of all Collateral, any Junior Subordinated Liens, (b) in respect of the Notes Priority Collateral, prior to the Notes Obligations Payment Date, the ABL Liens on such Collateral. and (c) in respect of the ABL Priority Collateral, prior to the ABL Obligations Payment Date, the Notes Liens on such Collateral.

“Junior Obligations” means (a) for all purposes of this Agreement, any Junior Subordinated Obligations, (b) with respect to the Notes Obligations (to the extent such Obligations are secured by the Notes Priority Collateral), prior to the Notes Obligations Payment Date, the ABL Obligations, and (c) with respect to the ABL Obligations (to the extent such Obligations are secured by the ABL Priority Collateral), prior to the ABL Obligations Payment Date, the Notes Obligations.

“Junior Obligations Event of Default” means (a) with respect to the Notes Priority Collateral, any ABL Event of Default or any Junior Subordinated Event of Default, and (b) with respect to the ABL Priority Collateral, any Notes Event of Default or any Junior Subordinated Event of Default.

“Junior Obligations Secured Parties” means (a) for all purposes of this Agreement, any Junior Subordinated Secured Parties, (b) with respect to the Notes Priority Collateral, prior to the Notes Obligations Payment Date, the ABL Secured Parties. and (c) with respect to the ABL Priority Collateral, prior to the ABL Obligations Payment Date, the Notes Secured Parties.

“Junior Obligations Security Documents” means (a) for all purposes of this Agreement, any Junior Subordinated Security Documents, (b) with respect to the ABL Priority Collateral, prior to the ABL Obligations Payment Date, the Notes Security Documents, and (e) with respect to the Notes Priority Collateral, prior to the Notes Obligations Payment Date, the ABL Security Documents.

“Junior Representative” means (a) for all purposes of this Agreement, any Junior Subordinated Agent, (b) with respect to the Notes Priority Collateral, prior to the Notes Obligations Payment Date, the ABL Agent. and (c) with respect to the ABL Priority Collateral, prior to the ABL Obligations Payment Date, the Notes Agent.

“Junior Subordinated Agent” means any Person appointed to act as trustee, agent or representative for the holders of any Junior Subordinated Obligations pursuant to any Junior Subordinated Document.

“Junior Subordinated Debt” means any indebtedness of any Grantor issued or incurred following the date of this Agreement to the extent (a) such indebtedness is designated in writing to each Representative as “Junior Subordinated Debt” by the Parent, (b) such indebtedness and the Liens securing such indebtedness are not prohibited by the ABL Loan Documents or the Notes Documents, (c) one or more of the Grantors have granted Junior Subordinated Liens, consistent with clause (b), on all or any portion of the Collateral to secure the Obligations in respect of such indebtedness and

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(d) the Junior Subordinated Agent in respect of such indebtedness, on behalf of the holders of such indebtedness, has executed a joinder to this Agreement reasonably satisfactory to the ABL Agent and the Notes Agent acknowledging that such holders shall be bound by the terms of this Agreement.

“Junior Subordinated Documents” means any indenture, credit agreement or other agreement under which Junior Subordinated Debt or any other Junior Subordinated Obligation is issued, incurred or guaranteed, any Junior Subordinated Security Documents and each of the other agreements, documents and instruments executed pursuant thereto or in connection therewith.

“Junior Subordinated Event of Default” means an “Event of Default” as defined in any Junior Subordinated Document.

“Junior Subordinated Liens” means any Liens on the Collateral (or any portion thereof) created under any Junior Subordinated Security Document to secure any Junior Subordinated Obligations.

“Junior Subordinated Obligations” means all obligations in respect of any Junior Subordinated Debt.

“Junior Subordinated Obligations Payment Date” means the first date on which (a) the Junior Subordinated Obligations (other than those that constitute Unasserted Contingent Obligations) have been indefeasibly paid in cash in full (or cash collateralized or defeased or otherwise indefeasibly satisfied and discharged in accordance with the terms of the Junior Subordinated Documents), (b) all commitments to extend credit, if any, under the Junior Subordinated Documents have been terminated, (c) there are no outstanding letters of credit, banker's acceptances or similar instruments issued under the Junior Subordinated Documents (other than such as have been cash collateralized or defeased in accordance with the terms of the Junior Subordinated Security Documents), (d) any other conditions to the release of the Junior Subordinated Liens have been satisfied or waived in accordance with the Junior Subordinated Documents and (e) the Junior Subordinated Agent has delivered a written notice to each other Representative stating that the events described in clauses (a), (b), (c) and (d) have occurred to the satisfaction of the Junior Subordinated Secured Parties, which notice shall be delivered by the Junior Subordinated Agent to each other Representative promptly after the occurrence of the events described in clauses (a), (b), (c) and (d).

“Junior Subordinated Secured Parties” means any holders of Junior Subordinated Debt, any Junior Subordinated Agent and any other creditor in respect of any Junior Subordinated Obligations.

“Junior Subordinated Security Documents” means any agreement, document or instrument pursuant to which a Lien is granted securing any Junior Subordinated Obligations or under which rights or remedies with respect to such Liens are governed.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust,

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lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (e) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“New York UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York.

“Notes” has the meaning assigned to such term in the preliminary statement of this Agreement and, at any time. shall include any Additional Notes (as defined in the Indenture) then outstanding to the extent the Indebtedness represented by such Additional Notes is incurred in compliance with the ABL Loan Documents.

“Notes Agent” means Deutsche Bank Trust Company Americas, in its capacity as collateral agent for the Notes Secured Parties under the Indenture and the Notes Security Documents.

“Notes Collateral” means the assets on which Liens nave been granted pursuant to any of the Notes Documents to secure the Notes Obligations.

“Notes Documents” means the Indenture and the Notes Security Documents.

“Notes Event of Default” means any “Event of Default” as defined in the Indenture.

“Notes Liens” means the Liens on the Notes Collateral created under the Notes Security Documents to secure the Notes Obligations.

“Notes Obligations” means all Obligations secured under the Notes Documents.

“Notes Obligations Payment Date” means the first date on which (a) the Notes Obligations (other than those that constitute Unasserted Contingent Obligations) have been indefeasibly paid in cash in full (or cash collateralized or defeased or otherwise indefeasibly satisfied and discharged in accordance with the terms of the Notes Documents), (b) all commitments to extend credit, if any, under the Notes Documents have been terminated, (c) there are no outstanding letters of credit, banker’s acceptances or similar instruments issued under the Notes Documents (other than such as have been cash collateralized or defeased in accordance with the terms of the Notes Documents), (d) any other conditions to the release of the Notes Liens have been satisfied or waived in accordance with the Notes Documents and (e) the Notes Agent, at the written direction of the Trustee, has delivered a written notice to each other Representative stating that the events described in clauses (a), (b), (e) and (d) have occurred to the satisfaction of the Notes Secured Parties (as determined by the Trustee in accordance with the Notes Documents), which notice shall be delivered by the Notes Agent to each other

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Representative promptly after the occurrence of the events described in clauses (a), (b), (c) and (d).

“Notes Priority Collateral” means any and all Collateral that is not ABL Priority Collateral.

“Notes Required Parties” means, for any amendment, waiver, modification or release of or in connection with any Notes Document. the holders of the required percentage of Notes outstanding at such time whose consent to such amendment, waiver, modification or release is required pursuant to Section 9.02 of the Indenture.

“Notes Secured Parties” means the “Secured Parties” as defined in the US Notes Security Agreement.

“Notes Security Documents” means the “Security Documents” as defined in the Indenture.

“Obligations” means the Notes Obligations, the ABL Obligations and any Junior Subordinated Obligations.

“Obligations Payment Date” means the ABL Obligations Payment Date or the Notes Obligations Payment Date, as applicable.

“Parent” has the meaning set forth in the caption of this Agreement.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association. company, partnership, governmental authority or other entity.

“Post-Petition Interest” means any interest or entitlement to fees or expenses or other charges that accrues after the commencement of any insolvency proceeding (including any additional interest arising from or related to a default), whether or not allowed or allowable in any such insolvency proceeding.

“Refinance” means, in respect of any indebtedness, to refinance, extend. renew, defease, amend, amend and restate, modify, supplement, restructure, replace. refund or repay, or to issue other indebtedness, in exchange or replacement for, such indebtedness in whole or in part; provided that the Refinancing indebtedness is secured by Liens in respect of some or all of the same assets and properties that secured the Refinanced indebtedness prior to such Refinancing. “Refinanced” and “Refinancing” shall have correlative meanings.

“Representative” means (a) in the case of any ABL Obligations, the ABL Agent, (b) in the case of any Notes Obligations, the Notes Agent and (c) in the case of any Junior Subordinated Obligations, the relevant Junior Subordinated Agent.

“Secured Parties” means the Notes Secured Parties, the ABL Secured Parties and any Junior Subordinated Secured Parties.

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“Security Documents” means the Notes Security Documents, the ABL Security Documents and any Junior Subordinated Security Documents.

“Senior Liens” means (a) with respect to any Junior Subordinated Liens on any Collateral, the ABL Liens and the Notes Liens on such Collateral, (b) with respect to the Notes Liens on the ABL Priority Collateral, prior to the ABL Obligations Payment Date, the ABL Liens on such Collateral, and (c) with respect to the ABL Liens on the Notes Priority Collateral, prior to the Notes Obligations Payment Date, the Notes Liens on such Collateral.

“Senior Obligations” means (a) with respect to any Junior Subordinated Obligations. the ABL Obligations and the Notes Obligations, (b) with respect to the ABL Obligations (to the extent such Obligations are secured by the Notes Priority Collateral), prior to the Notes Obligations Payment Date, the Notes Obligations, and (c) with respect to the Notes Obligations (to the extent such Obligations are secured by the ABL Priority Collateral), prior to the ABL Obligations Payment Date, the ABL Obligations.

“Senior Obligations Collateral” means, with respect to any Junior Representative or any other Junior Obligations Secured Parties, the Collateral on which the Senior Obligations Secured Parties have a Senior Lien.

“Senior Obligations Documents” means, with respect to any Junior Representative or any other Junior Obligations Secured Parties, the ABL Loan Documents and/or the Notes Documents to the extent that the Obligations created thereunder are Senior Obligations.

“Senior Obligations Payment Date” means, (a) with respect to the ABL Priority Collateral, (i) prior to the ABL Obligations Payment Date, the ABL Obligations Payment Date, and (ii) following the ABL Obligations Payment Date if the Notes Obligations Payment Date has not yet then occurred, the Notes Obligations Payment Date, and (b) with respect to the Notes Priority Collateral, (i) prior to the Notes Obligations Payment Date, the Notes Obligations Payment Date, and (ii) following the Notes Obligations Payment Date if the ABL Obligations Payment Date has not yet then occurred, the ABL Obligations Payment Date.

“Senior Obligations Required Parties” means (a) with respect to the ABL Priority Collateral, (i) prior to the ABL Obligations Payment Date, the ABL Required Parties, and (ii) following the ABL Obligations Payment Date if the Notes Obligations Payment Date has not yet then occurred, the Notes Required Parties, and (b) with respect to the Notes Priority Collateral, (i) prior to the Notes Obligations Payment Date, the Notes Required Parties, and (ii) following the Notes Obligations Payment Date if the ABL Obligations Payment Date has not yet then occurred, the ABL Required Parties.

“Senior Obligations Secured Parties” means (a) with respect to all Collateral, relative to the Junior Subordinated Secured Parties, the ABL Secured Parties and the Notes Secured Parties, (b) with respect to the Notes Priority Collateral, prior to the Notes Obligations Payment Date, the Notes Secured Parties, and (c) with respect to

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the ABL Priority Collateral, prior to the ABL Obligations Payment Date, the ABL Secured Parties.

“Senior Obligations Security Documents” means, (a) with respect to the ABL Priority Collateral, (i) prior to the ABL Obligations Payment Date, the ABL Security Documents, and (ii) following the ABL Obligations Payment Date if the Notes Obligations Payment Date has not yet then occurred, the Notes Security Documents, and (b) with respect to the Notes Priority Collateral, (i) prior to the Notes Obligations Payment Date, the Notes Security Documents, and (ii) following the Notes Obligations Payment Date if the ABL Obligations Payment Date has not yet then occurred. the ABL Security Documents.

“Senior Representative” means (a) with respect to the Notes Priority Collateral, (i) prior to the Notes Obligations Payment Date, the Notes Agent, and (ii) following the Notes Obligations Payment Date if the ABL Obligations Payment Date has not yet then occurred, the ABL Agent, and (b) with respect to the ABL Priority Collateral, (i) prior to the ABL Obligations Payment Date, the ABL Agent, and (ii) following the ABL Obligations Payment Date if the Notes Obligations Payment Date has not yet then occurred, the Notes Agent.

“Subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be Consolidated with those of the parent in the parent’s Consolidated financial statements if such financial statements were prepared as of such date in accordance with the accounting principles pursuant to which the parent prepares its financial statements, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

“Trustee” has the meaning assigned to such term in the preliminary statement of this Agreement.

“UK Property” means all estates or interests in any freehold or leasehold property owned by any Subsidiary of the Parent organized in England and Wales that are the subject of any security created by any Security Documents.

“Unasserted Contingent Obligations” means, at any time, Obligations for taxes, costs, indemnifications, reimbursements, damages and other liabilities (excluding Obligations that are (a) principal (including Obligations to reimburse outstanding drawings under letters of credit, banker’s acceptances and similar instruments), interest. premium or fees and (b) contingent reimbursement Obligations in respect of amounts that may be drawn under outstanding letters of credit, banker’s acceptances and similar instruments) in respect of which no assertion of liability (whether oral or written) and no

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claim or demand for payment (whether oral or written) has been made (and, in the case of Obligations for indemnification, no notice for indemnification has been issued by the indemnitee) at such time.

“US ABL Security Agreement” means the US Revolving Pledge and Security Agreement dated as of April 23, 2010 among Patheon Pharmaceuticals Inc., Patheon Puerto Rico, Inc., the other Subsidiaries of the Parent named therein and the ABL Agent.

“US Notes Security Agreement” means the US Notes Pledge and Security Agreement dated as of April 23, 2010 among the Subsidiaries of the Parent named therein and the Notes Agent.

SECTION 1.03. Security Documents; Refinancing. (a) The parties intend that the ABL Liens and the Notes Liens be created pursuant to separate Security Documents, but acknowledge that, in some jurisdictions, it may be necessary or desirable to create the ABL Liens and the Notes Liens under the same Security Document. If and to the extent that the ABL Liens and Notes Liens are created pursuant to the same Security Document, then. for all purposes of this Agreement, such Security Document shall be treated as an ABL Security Document to the extent it secures the ABL Obligations and a Notes Security Document to the extent it secures the Notes Obligations, with the same effect as if there had been separate Security Documents.

(b) In the event of a Refinancing of any Obligations as contemplated by Section 2.10, references herein to the Obligations so Refinanced (and to the related Representative(s) and Secured Parties in respect thereof and related ABL Loan Documents, Notes Documents or Junior Subordinated Documents, as applicable) shall be deemed to refer to those resulting from such Refinancing, subject to compliance with Section 2.10.

ARTICLE II

Subordination of Junior Liens; Certain Agreements

SECTION 2.01. Subordination of Junior Liens. (a) All Junior Liens in respect of any Collateral are expressly subordinated and made junior in right, priority, operation and effect to any and all Senior Liens in respect of such Collateral, notwithstanding anything contained in this Agreement, the Notes Documents, the ABL Loan Documents, any Junior Subordinated Documents or any other agreement or instrument to the contrary, and irrespective of the time, order or method of creation, attachment or perfection of such Junior Liens and such Senior Liens or any defect or deficiency or alleged defect or deficiency in any of the foregoing, or the failure to perfect any Liens securing any Obligations, or any other circumstance whatsoever. All Senior Liens in respect of any Collateral shall be and remain (until the ABL Obligations Payment Date and/or the Notes Obligations Payment Date, as applicable) senior in right, priority, operation, effect and in all other respects to the Junior Liens in respect of such Collateral, without regard to whether such Senior Liens are subordinated to any Lien

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securing any other obligation of any of the Grantors. For the avoidance of doubt, and in furtherance of the foregoing, the parties agree that the ABL Lien on any UK Property is subordinate and junior in right, priority, operation and effect to the Notes Lien on such UK Property, and any Junior Subordinated Lien on any UK Property is subordinate and junior in right, priority, operation and effect to the ABL Lien and the Notes Lien on such UK Property.

(b) It is acknowledged that, subject to the limitations set forth in the Indenture, the ABL Credit Agreement and any Junior Subordinated Documents, (i) the aggregate amount of the Senior Obligations may be increased, (ii) a portion of the Senior Obligations consists or may consist of indebtedness that is revolving in nature, and the amount thereof that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed, and (iii) the Senior Obligations may be increased, extended, renewed, Refinanced or otherwise amended or modified from time to time, all without affecting the subordination hereunder of the Junior Liens securing the Junior Obligations or the provisions of this Agreement defining the relative rights of the ABL Secured Parties, the Notes Secured Parties and any Junior Subordinated Secured Parties. The Lien priorities provided for herein shall not be altered or otherwise affected by any amendment, modification, supplement, extension, increase, replacement, renewal, restatement or Refinancing of either the Junior Obligations or the Senior Obligations, by the release of any Collateral or guarantees securing any Senior Obligations or by any action that any Representative or Secured Party may take or fail to take in respect of any Collateral.

SECTION 2.02. No Action With Respect to Senior Obligations Collateral. (a) No Junior Representative or other Junior Obligations Secured Party shall commence or instruct any Junior Representative to commence any judicial or nonjudicial foreclosure or other collateral enforcement proceedings with respect to, seek to have a trustee, receiver, liquidator or similar official appointed for or over, attempt any action to take possession of, exercise any right, remedy or power with respect to, or otherwise take any action to enforce its interest in or realize upon, or take any other action available to it in respect of, any Senior Obligations Collateral under any Junior Obligations Security Document, applicable law or otherwise, at any time prior to the Senior Obligations Payment Date, it being agreed that only the Senior Representative, acting in accordance with the applicable Senior Obligations Security Documents, shall be entitled to take any such actions or exercise any such remedies. Notwithstanding the foregoing, any Junior Representative may, (i) subject to Section 2.05, take all such actions as it shall deem necessary to perfect or continue the perfection of its Junior Liens, (ii) file a claim or statement of interest with respect to the applicable Junior Obligations in any judicial or insolvency proceeding that has been commenced by or against any Grantor, (iii) file any necessary responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or other pleading made by any Person objecting to or otherwise seeking the disallowance of the claims of the applicable Junior Obligations Secured Parties, including any claims secured by the Senior Obligations Collateral, if any. in each case in accordance with the terms of this Agreement, (iv) vote on any plan of reorganization and file any proof of claim in a judicial or insolvency proceeding or otherwise, in each case, in accordance with the terms of this Agreement, with respect to

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the Senior Obligations Collateral, (v) exercise their rights and remedies as unsecured creditors, as provided in paragraph (c) of this Section and (vi) exercise the rights and remedies provided for in Section 2.06(e).

(b) The parties hereto acknowledge and agree that it is their intention that the Collateral securing the ABL Obligations be identical to the Collateral securing the Notes Obligations, except that accounts receivable and inventory of any Grantor organized in France (to the extent such accounts receivable may constitute Collateral after the date hereof) may secure the ABL Obligations but not the Notes Obligations. In furtherance of the foregoing, the parties hereto agree that, so long as both ABL Obligations and Notes Obligations are outstanding, none of the Grantors shall, or shall permit any of its Subsidiaries to, (i) grant or permit any additional Liens on any asset (other than accounts receivable and inventory of any Grantor organized in France) to secure any ABL Obligation unless it has granted, or concurrently therewith grants, a Lien on such asset to secure the Notes Obligations or (ii) grant or permit any additional Liens on any asset to secure any Notes Obligations unless it has granted, or concurrently therewith grants, a Lien on such asset to secure the ABL Obligations, with each such Lien to be subject to the provisions of this Agreement.

(c) Except as otherwise specifically set forth in Sections 2.02(a) and 2.04(a), each Junior Representative and any Junior Obligations Secured Party may exercise rights and remedies available to it as an unsecured creditor of any Grantor in accordance with the terms of the applicable Junior Documents and applicable law; provided that in the event that any Junior Obligations Secured Party becomes a judgment Lien creditor in respect of any Senior Obligations Collateral as a result of its enforcement of its rights as an unsecured creditor with respect to the applicable Junior Obligations, such judgment Lien shall be subject to the terms of this Agreement to the same extent as the other Liens securing the Junior Obligations. Nothing in this Agreement shall prohibit the receipt by any Junior Representative or any other Junior Obligations Secured Party of the required or permitted payments of interest, principal and other amounts owed in respect of the Junior Obligations so long as such receipt is not the direct or indirect result of the exercise by such Junior Representative or such Junior Obligations Secured Party of rights or remedies as a secured creditor (including the exercise of any right of setoff) or enforcement in contravention of this Agreement of any Junior Lien held by any of them. Nothing in this Agreement shall be construed to impair or otherwise adversely affect (i) any rights or remedies the Notes Agent or any other Notes Secured Party may have (1) with respect to any Notes Priority Collateral and (2) following the ABL Obligations Payment Date, with respect to any ABL Priority Collateral, (ii) any rights or remedies the ABL Agent or any other ABL Secured Party may have (1) with respect to any ABL Priority Collateral and (2) following the Notes Obligations Payment Date, with respect to any Notes Priority Collateral and (iii) any rights or remedies any Junior Subordinated Agent may have with respect to any Collateral after both the ABL Obligations Payment Date and the Notes Obligations Payment Date have occurred.

SECTION 2.03. No Duties of Senior Representative. Each Junior Obligations Secured Party acknowledges and agrees that neither the Senior Representative nor any other Senior Obligations Secured Party shall have any duties or

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other obligations to such Junior Obligations Secured Party with respect to any Senior Obligations Collateral, other than as set forth in Section 2.04(b) or (c), Section 3.01 or Section 3.02. In furtherance of the foregoing, each Junior Obligations Secured Party acknowledges and agrees that until the Senior Obligations Payment Date, the Senior Representative shall be entitled, for the benefit of the holders of such Senior Obligations, to sell, transfer or otherwise dispose of or deal with such Senior Obligations Collateral as provided herein and in the Senior Obligations Security Documents without regard to any Junior Lien or any rights to which the holders of the Junior Obligations would otherwise be entitled as a result of such Junior Lien. Without limiting the foregoing, each Junior Obligations Secured Party agrees that neither the Senior Representative nor any other Senior Obligations Secured Party shall have any duty or obligation first to marshal or realize upon any type of Senior Obligations Collateral (or any other collateral securing the Senior Obligations), or to sell, dispose of or otherwise liquidate all or any portion of the Senior Obligations Collateral (or any other collateral securing the Senior Obligations), in any manner that would maximize the return to the Junior Obligations Secured Parties, notwithstanding that the order and timing of any such realization, sale, disposition or liquidation may affect the amount of proceeds actually received by the Junior Obligations Secured Parties from such realization, sale, disposition or liquidation. Each of the Junior Obligations Secured Parties waives any claim such Junior Obligations Secured Party may now or hereafter have against the Senior Representative or any other Senior Obligations Secured Party (or their representatives) arising out of (i) any actions which the Senior Representative or the Senior Obligations Secured Parties take or omit to take with respect to the Senior Obligations Collateral (including actions with respect to the creation, perfection or continuation of Liens on any Senior Obligations Collateral, actions with respect to the foreclosure upon, sale, release or depreciation of, or failure to realize upon, any of the Senior Obligations Collateral and actions with respect to the collection of any claim for all or any part of the Senior Obligations from any account debtor, guarantor or any other party) in accordance with the Senior Obligations Security Documents or any other agreement related thereto or to the collection of the Senior Obligations or the valuation, use, protection or release of any security for the Senior Obligations, (ii) any election by the Senior Representative or any Senior Obligations Secured Parties, in any proceeding instituted under the Bankruptcy Code or any other Insolvency Law, of the application of Section 1111(b) of the Bankruptcy Code (or any similar provision under the Insolvency Laws of any other jurisdiction) and/or (iii) any borrowing of, or grant of a security interest or administrative expense priority under Section 364 of the Bankruptcy Code (or any similar provision under the Insolvency Laws of any other jurisdiction) to, any Grantor as debtor-in-possession.

SECTION 2.04. No Interference; Application of Proceeds; Payment Over; Reinstatement. (a) Each Junior Obligations Secured Party agrees that (i) it will not take or cause to be taken any action the purpose or effect of which is, or could be, to make any Junior Lien senior to or pari passu with, or give such Junior Obligations Secured Party any preference or priority relative to, any Senior Lien with respect to the Senior Obligations Collateral or any part thereof, (ii) it will not challenge or question in any proceeding the validity or enforceability of any Senior Obligations or Senior Obligations Security Document, or the validity, attachment, perfection or priority of any Senior Lien, or the validity or enforceability of the priorities, rights or duties established

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by, or other provisions of, this Agreement, (iii) it will not take or cause to be taken any action the purpose or intent of which is to interfere with, hinder or delay, in any manner, whether by judicial proceedings or otherwise, any sale, transfer or other disposition of any Senior Obligations Collateral by any Senior Obligations Secured Party or any Senior Representative acting on their behalf, (iv) it shall have no right to (A) direct any Senior Representative or any Senior Obligations Secured Party to exercise any right, remedy or power with respect to the Senior Obligations Collateral or (B) consent to the exercise by any Senior Representative or any other Senior Obligations Secured Party of any right, remedy or power with respect to the Senior Obligations Collateral, (v) it will not object to the forbearance by any Senior Representative or any other Senior Obligations Secured Party from bringing or pursuing any foreclosure proceeding or action nor any other exercise of any rights or remedies relating to the Senior Obligations Collateral, (vi) it will not institute any suit or assert in any suit, bankruptcy, insolvency or other proceeding under any Insolvency Law any claim against any Senior Representative or other Senior Obligations Secured Party seeking damages from or other relief by way of specific performance, instructions or otherwise with respect to, and neither any Senior Representative nor any other Senior Obligations Secured Party shall be liable for, any action taken or omitted to be taken by such Senior Representative or other Senior Obligations Secured Party with respect to any Senior Obligations Collateral, (vii) it will not seek, and hereby waives any right, to have any Senior Obligations Collateral or any part thereof marshaled upon any foreclosure or other disposition of such Senior Obligations Collateral and (viii) it will not attempt, directly or indirectly, whether by judicial proceedings or otherwise, to challenge the enforceability of any provision of this Agreement. Each Senior Obligations Secured Party agrees that it will not challenge or question in any proceeding the validity or enforceability of any Junior Obligation or Junior Obligations Security Document, or the validity, attachment, perfection or priority of any Junior Lien (including any perfection effected pursuant to Article 3 of this Agreement), or the validity or enforceability of the rights or duties established by or other provisions of this Agreement.

(b) Prior to the ABL Obligations Payment Date, whether or not any proceeding under the Bankruptcy Code or any other Insolvency Law by or against any Grantor has been commenced, all ABL Priority Collateral or proceeds thereof received by the ABL Agent in connection with the sale or other disposition of, or collection on, such Collateral upon the exercise of remedies by the ABL Agent or ABL Secured Parties shall be applied by the ABL Agent to the ABL Obligations in such order as specified in the relevant ABL Loan Documents (or in the US ABL Security Agreement, if not specified in the relevant ABL Loan Documents). After the ABL Obligations Payment Date, (i) if the Notes Obligations Payment Date shall not have then yet occurred, the ABL Agent shall deliver to the Notes Agent any ABL Priority Collateral and proceeds of such Collateral then held by it in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct and (ii) if the Notes Obligations Payment Date shall have occurred and the Junior Subordinated Obligations Payment Date shall not have then yet occurred, the ABL Agent shall deliver to the Junior Subordinated Agent any Collateral and proceeds of Collateral then held by it in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct, in each case, at the sole cost and expense of the

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Grantors and without representation or warranty on the part of the ABL Agent or any other ABL Secured Party.

(c) Prior to the Notes Obligations Payment Date, whether or not any proceeding under the Bankruptcy Code or any other Insolvency Law by or against any Grantor has been commenced, all Notes Priority Collateral or proceeds thereof received by the Notes Agent in connection with the sale or other disposition of, or collection on, such Collateral upon the exercise of remedies by the Notes Agent or the Notes Secured Parties shall be applied by the Notes Agent to the Notes Obligations in such order as specified in the Indenture. After the Notes Obligations Payment Date, (i) if the ABL Obligations Payment Date shall not have then yet occurred, the Notes Agent shall deliver to the ABL Agent any Notes Priority Collateral and proceeds of such Collateral then held by it in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct and (ii) if the ABL Obligations Payment Date shall have occurred and the Junior Subordinated Obligations Payment Date shall not have then yet occurred, the Notes Agent shall deliver to the Junior Subordinated Agent any Collateral and proceeds of Collateral then held by it in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct, in each case, at the sole cost and expense of the Grantors and without representation or warranty on the part of the Notes Agent or any other Notes Secured Party.

(d) Each Junior Representative and each other Junior Obligations Secured Party hereby agrees that if it shall obtain possession of any Senior Obligations Collateral or shall realize any proceeds or payment in respect of any such Collateral, pursuant to any Junior Obligations Security Document or by the exercise of any rights available to it under applicable law or in any bankruptcy, insolvency or similar proceeding or through any other exercise of remedies, at any time prior to the Senior Obligations Payment Date, then it shall hold such Collateral, proceeds or payment in trust for the Senior Obligations Secured Parties and transfer such Collateral, proceeds or payment, as the case may be, to the Senior Representative reasonably promptly after obtaining actual knowledge or notice from the Senior Representative or the Senior Obligations Secured Parties that it has possession of such Senior Obligations Collateral or proceeds or payments in respect thereof. Each Junior Obligations Secured Party agrees that if, at any time, it receives notice or obtains actual knowledge that all or part of any payment with respect to any Senior Obligations previously made shall be rescinded for any reason whatsoever, such Junior Obligations Secured Party shall promptly pay over to the Senior Representative any payment received by it in respect of any Senior Obligations Collateral and shall promptly turn any Senior Obligations Collateral then held by it over to the Senior Representative, and the provisions set forth in this Agreement shall be reinstated as if such payment had not been made, until the payment and satisfaction in full of the Senior Obligations.

(e) The parties to this Agreement agree that if a Junior Representative shall hold any Lien on any assets of any Grantor securing any Junior Obligations that are not also subject to a Lien in respect of the Senior Obligations under the Senior Obligations Documents and if the Obligations Payment Date in respect of such Senior

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Obligations has not occurred, then such Grantor will grant a Lien on such assets to the Senior Representative and the other Senior Obligations Secured Parties as security for the Senior Obligations (it being understood that the Senior Representative and the other Senior Obligations Secured Parties shall retain a Lien on such assets subject to the terms hereof). The parties to this Agreement agree that, notwithstanding anything to the contrary herein, prior to the ABL Obligations Payment Date, in the event that any Grantor obtains Net Proceeds of any Bulk Receivables/Inventory Sale (as such terms are defined in the ABL Credit Agreement), such Net Proceeds shall be turned over to the ABL Agent for application to the payment of ABL Obligations to the extent required by Section 2.1l(d) of the ABL Credit Agreement.

SECTION 2.05. Automatic Release of Junior Liens. Each Junior Representative and each other Junior Obligations Secured Party agree that any Junior Lien on any Senior Obligations Collateral shall terminate and be released automatically and without further action if the applicable Senior Liens on such Senior Obligations Collateral are released and such release (a) is in connection with the sale, transfer or other disposition of such Senior Obligations Collateral subject to such Junior Lien, so long as such sale, transfer or other disposition is then permitted by the applicable Junior Documents, (b) occurs in connection with the foreclosure upon or other exercise of rights and remedies with respect to such Senior Obligations Collateral or (c) shall have been approved by the Senior Obligations Required Parties, so long as no Junior Obligations Event of Default with respect to the applicable Junior Obligations shall have occurred and be continuing at such time or would result from such release. Each Junior Representative agrees to execute and deliver all such releases and other instruments as shall reasonably be requested by the Senior Representative to evidence and confirm any release of Senior Obligations Collateral provided for in this Section.

SECTION 2.06. Certain Agreements With Respect to Bankruptcy or Insolvency Proceedings. (a) This Agreement shall continue in full force and effect notwithstanding the commencement of any proceeding under the Bankruptcy Code or any other Insolvency Law by or against any Grantor.

(b) If any Grantor shall become subject to a case under the Bankruptcy Code and shall, as debtor(s)-in-possession, move for approval of financing (including on a priming basis) (“DIP Financing”) to be provided by one or more lenders (the “DIP Lenders”) under Section 364 of the Bankruptcy Code or the use of cash collateral with the consent of the DIP Lenders under Section 363 of the Bankruptcy Code, each Junior Obligations Secured Party agrees that it will raise no objection to or oppose or contest (or join with or support any third party in objecting to, opposing or contesting) any such financing or to the Liens on the Senior Obligations Collateral securing the same (“DIP Financing Liens”) or to any use of cash collateral that constitutes Senior Obligations Collateral and will not request adequate protection or any other relief in connection therewith (except as expressly agreed by the Senior Representative or other representative authorized by the Senior Obligations Secured Parties or to the extent permitted by Section 2.06(e)), unless the Senior Obligations Secured Parties, or the Senior Representative or other representative authorized by the Senior Obligations Secured Parties, shall then oppose or object to such DIP Financing or such DIP Financing

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Liens or use of cash collateral (and, to the extent that such DIP Financing Liens are senior to, or rank pari passu with, the Senior Liens in respect of the Senior Obligations Collateral, each Junior Representative will, for itself and on behalf of the other applicable Junior Obligations Secured Parties, subordinate the applicable Junior Liens in respect of the Senior Obligations Collateral to the Senior Liens and the DIP Financing Liens), so long as the Junior Obligations Secured Parties retain Liens on all the Senior Obligations Collateral, including proceeds thereof arising after the commencement of such proceeding, with the same priority in relation to the Senior Liens as existed prior to the commencement of the case under the Bankruptcy Code. The provisions of this paragraph shall apply, mutatis mutandis, in the event of any financing arrangements analogous to a DIP Financing under any other Insolvency Law.

(c) Each Junior Obligations Secured Party agrees that it will not object to or oppose a sale or other disposition of any Senior Obligations Collateral (or any portion thereof) under Section 363 of the Bankruptcy Code or any other provision of the Bankruptcy Code, or any other Insolvency Law, free and clear of its Liens (subject to attachment of proceeds with respect to the Junior Lien on such Senior Obligations Collateral in favor of such Junior Obligations Secured Party in the same order and manner as otherwise set forth herein) or other claims under Section 363 of the Bankruptcy Code if the Senior Obligations Secured Parties represented by the Senior Representative shall have consented to such sale or disposition of such Senior Obligations Collateral.

(d) Each Secured Party acknowledges and agrees that (i) the grants of Liens pursuant to the ABL Security Documents, the Notes Security Documents and any Junior Subordinated Security Documents each constitute separate and distinct grants of Liens and (ii) because of, among other things, their differing rights in the Collateral, the Notes Obligations, the ABL Obligations and any Junior Subordinated Obligations are fundamentally different from each other and must be separately classified in any plan of reorganization proposed or adopted in any proceeding under any Insolvency Laws. To further effectuate the intent of the parties as provided in the immediately preceding sentence, if it is held that the claims of the Secured Parties, or of the ABL Secured Parties and either the Notes Secured Parties or the Junior Subordinated Secured Parties, or of the Notes Secured Parties and the Junior Subordinated Secured Parties, in respect of the Collateral constitute only one secured claim or otherwise do not constitute separate classes of senior and junior secured claims as contemplated by the immediately preceding sentence, then the Secured Parties hereby acknowledge and agree that all distributions shall be made as if there were separate classes of senior and junior secured claims, in accordance with the terms of this Agreement, against the Grantors in respect of the Collateral with the effect being that (i) to the extent that the aggregate value of the ABL Priority Collateral is sufficient (for this purpose ignoring all claims held by the Notes Secured Parties and any Junior Subordinated Secured Parties), the ABL Secured Parties shall be entitled to receive, in addition to amounts distributed to them in respect of principal, pre-petition interest and other claims, all amounts owing in respect of Post-Petition Interest that is available from the ABL Priority Collateral before any distribution is made in respect of the claims held by the Notes Secured Parties or any Junior Subordinated Secured Parties, (ii) to the extent that the aggregate value of the Notes

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Priority Collateral is sufficient (for this purpose ignoring all claims held by the ABL Secured Parties and any Junior Subordinated Secured Parties), the Notes Secured Parties shall be entitled to receive, in addition to amounts distributed to them in respect of principal, pre-petition interest and other claims, all amounts owing in respect of Post-Petition Interest that is available from the Notes Priority Collateral before any distribution is made in respect of the claims held by the ABL Secured Parties or any Junior Subordinated Secured Parties, (iii) following the Notes Obligations Payment Date, to the extent that the aggregate value of the remaining Notes Priority Collateral is sufficient (for this purpose ignoring all claims held by the Notes Secured Parties and any Junior Subordinated Secured Parties), the ABL Secured Parties shall be entitled to receive, in addition to amounts distributed to them in respect of principal, pre-petition interest and other claims, all amounts owing in respect of Post-Petition Interest that is available from the Notes Priority Collateral before any distribution is made in respect of the claims held by any Junior Subordinated Secured Parties and (iv) following the ABL Obligations Payment Date, to the extent that the aggregate value of the remaining ABL Priority Collateral is sufficient (for this purpose ignoring all claims held by the ABL Secured Parties and any Junior Subordinated Secured Parties), the Notes Secured Parties shall be entitled to receive, in addition to amounts distributed to them in respect of principal, pre-petition interest and other claims, all amounts owing in respect of Post-Petition Interest that is available from the ABL Priority Collateral before any distribution is made in respect of the claims held by any Junior Subordinated Secured Parties, with the Notes Secured Parties, the ABL Secured Parties and any Junior Subordinated Secured Parties hereby acknowledging and agreeing to turn over to the ABL Secured Parties and/or the Notes Secured Parties, as applicable, amounts otherwise received or receivable by them to the extent necessary to effectuate the intent of this sentence, even if such turnover has the effect of reducing the claim or recovery of such Secured Parties.

(e) Each Junior Representative and each other Junior Obligations Secured Party agrees that it will not contest any request by any Senior Representative or any other Senior Obligations Secured Party for adequate protection or contest any objection by a Senior Representative or any other Senior Obligations Secured Party to any motion, relief, action or proceeding based on such Senior Representative or other Senior Obligations Secured Party claiming a lack of adequate protection. Notwithstanding the foregoing, if a Senior Representative or any other Senior Obligations Secured Party is granted adequate protection in the form of additional collateral in connection with any use of cash collateral constituting Senior Obligations Collateral or DIP Financing secured by Senior Obligations Collateral, then each Junior Representative and the Junior Obligations Secured Parties may seek or request adequate protection in the form of a Lien on such additional collateral, which Lien shall be Subordinated to the Liens securing the Senior Obligations and such DIP Financing on the same basis as the other Junior Liens of such Secured Parties are Subordinated to the Senior Liens under this Agreement. In the event a Junior Representative or any other Junior Obligations Secured Party seeks or requests adequate protection in respect of Junior Obligations and such adequate protection is granted in the form of additional collateral, then such Junior Representative, on behalf of itself and each other Junior Obligations Secured Party represented by it, agrees that the Senior Representative and the other Senior Obligations Secured Parties and any such DIP Financing shall also be granted a Senior Lien on such additional

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collateral as security for the Senior Obligations and for any such DIP Financing and that any Lien on such additional collateral securing the Junior Obligations shall be subordinated to the Lien on such collateral securing the Senior Obligations and any such DIP Financing and to any other Liens granted to the Senior Obligations Secured Parties as adequate protection on the same basis as the other Liens securing such Junior Obligations are subordinated to the Liens securing the Senior Obligations under this Agreement. The provisions of this paragraph shall apply, mutatis mutandis. in the event of any financing arrangements analogous to a DIP Financing under any other Insolvency Law.

(f) Each Junior Representative, for itself and on behalf of the other applicable Junior Obligations Secured Parties, agrees that no Junior Obligations Secured Party shall, without the prior written consent of the Senior Representative, (i) seek or request (or support any other Person in seeking or requesting) relief from the automatic stay or any other stay in any judicial or insolvency proceeding in respect of any part of the Senior Obligations Collateral or (ii) oppose (or support any other Person in opposing) any motion of the Senior Representative seeking relief from the automatic stay or any other stay in any judicial or insolvency proceeding in respect of any part of the Senior Obligations Collateral.

(g) If, in connection with any judicial or insolvency proceeding, debt obligations of the reorganized debtor secured by Liens upon any property of the reorganized debtor are distributed pursuant to a plan of reorganization or similar dispositive restructuring plan, both on account of the Senior Obligations and any Junior Obligations, then, to the extent the debt obligations distributed on account of the Senior Obligations and on account of such Junior Obligations are secured by Liens upon the same property, the provisions of this Agreement will survive the distribution of such debt obligations pursuant to such plan and will apply with like effect to the Liens securing such debt obligations.

(h) Each of the parties hereto acknowledges and agrees that no Junior Representative or other Junior Obligations Secured Party shall be required to vote to approve any plan of reorganization with respect to any Grantor for any reason or to agree that any provision of any Junior Obligations Document shall survive the effectiveness of any plan of reorganization with respect to any Grantor in any judicial or insolvency proceeding.

(i) This Agreement shall be applicable prior to and after the commencement of any judicial or insolvency proceeding. All references herein to any Grantor shall apply to any trustee for such Person and such Person as debtor-in-possession. The relative rights as to the Collateral and proceeds thereof shall continue after the filing thereof on the same basis as prior to the date of the petition, subject to any court order approving the financing of, or use of cash collateral by, any Grantor.

(j) Subject to Sections 2.02(a) and (c) and Section 2.06(e), nothing contained herein shall prohibit or in any way limit the Senior Representative or any Senior Obligations Secured Party from objecting in any judicial or insolvency proceeding

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or otherwise to any action taken by any Junior Representative or any other Junior Obligations Secured Party, including the seeking by any such Junior Representative or Junior Obligations Secured Party of adequate protection or the asserting by any such Junior Representative or Junior Obligations Secured Party of any of its rights and remedies under the applicable Junior Documents or otherwise, in each case to the extent affecting such Senior Representative’s or such Senior Obligations Secured Parties’ rights in its Senior Obligations Collateral.

(k) (i) Each Junior Representative, for itself and on behalf of the other applicable Junior Obligations Secured Parties, agrees that no Junior Obligations Secured Party shall oppose or seek to challenge any claim by any Senior Representative or any other Senior Obligations Secured Party for allowance in any judicial or insolvency proceeding of Senior Obligations consisting of Post-Petition Interest, fees or expenses to the extent of the value of the Senior Liens (it being understood and agreed that such value shall be determined without regard to the existence of the Junior Liens on the Senior Obligations Collateral).

(ii) Each Senior Representative, for itself and on behalf of the other applicable Senior Obligations Secured Parties, agrees that no Senior Obligations Secured Party shall oppose or seek to challenge any claim by a Junior Representative or any other Junior Obligations Secured Party for allowance in any judicial or insolvency proceeding of Junior Obligations consisting of Post-Petition Interest, fees or expenses to the extent of the value of the Junior Liens (it being understood and agreed that such value shall be determined taking into account the Senior Liens on the Senior Obligations Collateral).

SECTION 2.07. Reinstatement. In the event that any of the Senior Obligations shall be paid in full and such payment or any part thereof shall subsequently, for whatever reason (including an order or judgment for disgorgement of a preference under the Bankruptcy Code, or any other Insolvency Law, or the settlement of any claim in respect thereof), be required to be returned or repaid, the terms and conditions of this Article II shall be fully applicable thereto until all such Senior Obligations shall again have been paid in full in cash.

SECTION 2.08. Entry Upon Premises by the ABL Agent. (a) If the ABL Agent takes any enforcement action with respect to the ABL Priority Collateral, the Notes Secured Parties (i) shall cooperate with the ABL Agent in its efforts to enforce its security interest in the ABL Priority Collateral and to finish any work-in-process and assemble the ABL Priority Collateral and process, ship, produce, store, complete, supply, lease, sell or otherwise handle, deal with or dispose of, in any lawful manner, the ABL Priority Collateral, (ii) shall not hinder or restrict in any respect the ABL Agent from enforcing its security interest in the ABL Priority Collateral or from finishing any work-in-process or assembling the ABL Priority Collateral or shipping, producing, storing, completing, supplying, leasing, selling or otherwise handling, dealing with or disposing of, in any lawful manner, the ABL Priority Collateral, and (iii) shall permit the ABL Agent, its employees, agents, advisers and representatives, at the sole cost and expense of the ABL Secured Parties (but with the Grantors’ reimbursement and indemnity obligation

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with respect thereto as provided in the ABL Loan Documents, which shall not be limited hereby), to enter upon and use the Notes Priority Collateral (including (x) manufacturing. storage and transportation facilities, (y) equipment, processors, computers and other machinery related to the Storage or processing of records, documents or fìles and (z) intellectual property), for a period not to exceed 180 days after the later of (A) the date on which the Notes Agent shall obtain possession and control of such Notes Priority Collateral and (B) the taking of such enforcement action, for purposes of (1) assembling and storing the ABL Priority Collateral and completing the processing of and turning into finished goods any ABL Priority Collateral (including raw materials and work-in-process), (2) selling any or all of the ABL Priority Collateral located on such Notes Priority Collateral, whether in bulk, in lots or to customers in the ordinary course of business or otherwise, (3) removing any or all of the ABL Priority Collateral located on such Notes Priority Collateral, (4) otherwise shipping, storing, leasing, selling or otherwise handling, dealing with, assembling or disposing of, in any lawful manner, the ABL Priority Collateral and/or (5) taking reasonable actions to protect, secure, and otherwise enforce the rights of the ABL Secured Parties in and to the ABL Priority Collateral; provided, however, nothing contained in this Agreement shall restrict the rights of the Notes Agent to sell, assign or otherwise transfer any Notes Priority Collateral prior to the expiration of such 180-day period if the purchaser, assignee or transferee thereof agrees in writing (for the benefit of the ABL Agent and the ABL Secured Parties) to be bound by the provisions of this Section. If any stay or other order prohibiting the exercise of remedies with respect to the ABL Priority Collateral has been entered by a court of competent jurisdiction or otherwise arises by operation of the Bankruptcy Code or any other Insolvency Law, such 180-day period shall be tolled during the pendency of any such stay or other order.

(b) During the period of actual occupation, use and/or control by the ABL Secured Parties or their agents or representatives of any Notes Priority Collateral, the ABL Secured Parties shall be obligated to repair at their expense any physical damage to such Notes Priority Collateral resulting from such occupancy, use or control, and to leave such Notes Priority Collateral in substantially the same condition as it was at the commencement of such occupancy, use or control, ordinary wear and tear excepted. Notwithstanding the foregoing. in no event shall the ABL Secured Parties have any liability to the Notes Secured Parties pursuant to this Section as a result of any condition (including any environmental condition. claim or liability) on or with respect to the Notes Priority Collateral existing prior to the date of the exercise by the ABL Secured Parties of their rights under this Section and the ABL Secured Parties shall have no duty or liability to maintain the Notes Priority Collateral in a condition or manner better than that in which it was maintained prior to the use thereof by the ABL Secured Parties, or for any diminution in the value of the Notes Priority Collateral that results from ordinary wear and tear resulting from the use of the Notes Priority Collateral by the ABL Secured Parties in the manner and for the time periods specified under this Section 2.08. Without limiting the rights granted in this paragraph, the ABL Agent and the other ABL Secured Parties shall cooperate with the Notes Agent and the other Notes Secured Parties in connection with any efforts made by the Notes Agent and the other Notes Secured Parties to sell the Notes Priority Collateral.

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SECTION 2.09. Amendments to Security Documents. (a) Without the prior written consent of the Senior Representative. no Junior Obligations Security Document may be amended, supplemented or otherwise modified or entered into to the extent such amendment, supplement or modification, or the terms of any new Junior Obligations Security Document, would be prohibited by or inconsistent with any of the terms of this Agreement.

(b) In the event that the Senior Representative enters into any amendment. waiver or consent in respect of any of the Senior Obligations Security Documents in respect of which it is a Representative for the purpose of adding to, or deleting from, or waiving or consenting to any departures from any provisions of, such Senior Obligations Security Document or changing in any manner the rights of the Senior Representative, the applicable Senior Obligations Secured Parties or any Grantor thereunder (including the release of any Liens on Senior Obligations Collateral permitted by Section 2.05), then such amendment. waiver or consent shall apply automatically to any comparable provision of the comparable Junior Obligations Security Documents relating to the relevant Senior Obligations Collateral to the extent securing any Junior Obligations without the consent of any Junior Representative or any Junior Obligations Secured Party and without any action by any Junior Representative or any Grantor; provided, however, that (i) no such amendment, waiver or consent shall (A) remove assets subject to the Junior Liens or release any such Junior Liens, except to the extent that such release is permitted or required by Section 2.05 and provided that there is a concurrent release of the corresponding Senior Liens, (B) amend, modify or otherwise affect the rights or duties of any Junior Representative without its prior written consent or (C) permit Liens on the Collateral (other than DIP Financing Liens) which are not permitted under the terms of the Junior Documents related to such Junior Obligations and (ii) written notice of such amendment. waiver or consent shall have been given to each Junior Representative.

SECTION 2.10. Refinancings. Any of the Obligations may be Refinanced, in whole or in part, in each case, without notice to, or the consent (except to the extent a notice or consent is required to permit the Refinancing transaction under any ABL Loan Document, Notes Document or Junior Subordinated Document) of, any Representative or Secured Party, all without affecting the Lien priorities provided for herein or the other provisions hereof; provided, however, that the holders of such Refinancing indebtedness (or an authorized agent or trustee on their behalf) bind themselves in writing to the terms of this Agreement pursuant to such documents or agreements (including amendments or supplements to this Agreement) as the ABL Agent (in the case of a Refinancing of any Notes Obligations or Junior Subordinated Obligations) and/or the Notes Agent (in the case of a Refinancing of any ABL Obligations or Junior Subordinated Obligations). as the case may be, shall reasonably request and in form and substance reasonably acceptable to such Representative and any such Refinancing transaction shall be in accordance with the provisions of the ABL Loan Documents, the Notes Documents and any Junior Subordinated Documents.

SECTION 2.11. Insurance. Unless and until the ABL Obligations Payment Date occurs, (a) as between the ABL Agent, on the one hand, and the Notes

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Agent and any Junior Subordinated Agent, on the other hand. only the ABL Agent will have the right to adjust or settle any insurance policy or claim covering or constituting ABL Priority Collateral in the event of any loss thereunder and to approve any award granted in any condemnation or similar proceeding affecting the ABL Priority Collateral and (b) as between the ABL Agent. on the one hand, and any Junior Subordinated Agent, on the other hand, only the ABL Agent will have the right (subject to the next succeeding sentence) to adjust or settle any insurance policy or claim covering or constituting any Collateral in the event of any loss thereunder and to approve any award granted in any condemnation or similar proceeding affecting the Collateral. Unless and until the Notes Obligations Payment Date occurs, (a) as between the ABL Agent and any Junior Subordinated Agent. on the one hand, and the Notes Agent, on the other hand, only the Notes Agent will have the right to adjust or settle any insurance policy covering or constituting Notes Priority Collateral in the event of any loss thereunder and to approve any award granted in any condemnation or similar proceeding solely affecting the Notes Priority Collateral and (b) as between any Junior Subordinated Agent, on the one hand, and the Notes Agent, on the other hand, only the Notes Agent will have the right (subject to the immediately preceding sentence) to adjust or settle any insurance policy or claim covering or constituting any Collateral in the event of any loss thereunder and to approve any award granted in any condemnation or similar proceeding affecting the Collateral. To the extent that an insured loss covers or applies to assets or property, some of which constitute ABL Priority Collateral and some of which constitute Notes Priority Collateral, then the ABL Agent and the Notes Agent will work jointly and in good faith to collect, adjust or settle under the relevant insurance policy. The provisions of this Section are subject to the rights of the applicable Grantor under the ABL Loan Documents and Notes Documents, as applicable.

SECTION 2.12. Legends. The ABL Agent acknowledges with respect to the ABL Security Documents, the Notes Agent acknowledges with respect to the Notes Security Documents and each Junior Subordinated Agent acknowledges with respect to any applicable Junior Subordinated Security Documents that each Security Document will contain a legend substantially in the form set forth on Annex I.

ARTICLE III

Gratuitous Bailment for Perfection of Certain Security Interests; Rights Under Permits and Licenses

SECTION 3.01. General. The Senior Representative agrees that if it shall at any time hold a Senior Lien on any Collateral that can be perfected by the possession, control or assignment for security purposes of such Collateral or of any account in which such Collateral is held, and if such Collateral or any such account is in fact in the possession or under the control of, or has been assigned for security purposes to, the Senior Representative. the Senior Representative will serve as gratuitous bailee (in the case of possession or control) or gratuitous agent (in the case of assignment for security purposes) for each Junior Representative holding a Junior Lien on such Collateral and

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hold such Collateral or such account for the benefìt of such Junior Representative for the sole purpose of perfecting (and, in the case of an assignment for security purposes, creating) the Junior Lien of such Junior Representative and the other applicable Junior Obligations Secured Parties on such Collateral or such account. It is agreed that the obligations of the Senior Representative and the rights of each Junior Representative and the other Junior Obligations Secured Parties in connection with any such bailment or agency arrangement will be in all respects subject to the provisions of Article II The Senior Representative will be deemed to make no representation as to the adequacy of the steps taken by it to perfect the Junior Liens on any such Collateral or any such account and shall have no responsibility, duty, obligation or liability to any Junior Representative or any other Junior Obligations Secured Party or any other Person for such perfection or failure to perfect, it being understood that the sole purpose of this Article is to enable the Junior Obligations Secured Parties to obtain a perfected Junior Lien in such Collateral or such account to the extent, if any, that such perfection results from the possession, control or assignment for security purposes of such Collateral or such account by or to the Senior Representative. Subject to Section 2.07, upon the occurrence of the Senior Obligations Payment Date, the Senior Representative shall take commercially reasonable actions in its power, at the sole cost and expense of the Grantors, to transfer possession or control of such Collateral or such account to the Junior Representative (if there shall then be more than one Junior Representative, to the Junior Representative that becomes the Senior Representative following such Senior Obligations Payment Date) (to the extent such Junior Representative has a Lien on such Collateral or account after giving effect to any prior or concurrent releases of Liens). without representation or warranty on the part of the Senior Representative or any Senior Obligations Secured Party.

SECTION 3.02. Deposit Accounts. The Grantors, in accordance with and to the extent required under the ABL Credit Agreement, shall maintain blocked account agreements relating to deposit accounts (the “Deposit Accounts”) with certain depositary banks (the “Depositary Banks”) in which collections from Inventory and Accounts (as each such term is defined in the ABL Credit Agreement) are deposited. The ABL Agent will act as gratuitous bailee for the Notes Agent and any Junior Subordinated Agent for the purpose of perfecting the Liens of the Notes Secured Parties and any Junior Subordinated Secured Parties in all such Deposit Accounts and the cash and other assets therein as provided in Section 3.01 (but will have no duty, responsibility or obligation to the Notes Secured Parties or any Junior Subordinated Secured Parties except as set forth in the next succeeding sentence). Unless the Junior Liens on such ABL Priority Collateral shall have been or concurrently are released. after the occurrence of the ABL Obligations Payment Date, the ABL Agent shall (a) transfer all cash and other assets in such Deposit Accounts maintained with it to a Deposit Account designated by the Notes Agent (or the Junior Subordinated Agent, if the Notes Obligations Payment Date shall have occurred) and (b) cooperate with the Grantors and the Notes Agent (or the Junior Subordinated Agent, if the Notes Obligations Payment Date shall have occurred) in permitting control of any other Deposit Accounts to be transferred to the Notes Agent (or the Junior Subordinated Agent, if the Notes Obligations Payment Date shall have occurred) (or for other arrangements with respect to each such Deposit Account satisfactory to the Notes Agent (or the Junior Subordinated Agent, if the Notes Obligations Payment Date shall have occurred) to be made), in each case, at the expense of the Grantors and without

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representation or warranty on the part of the ABL Agent or any ABL Secured Party. If the Notes Obligations Payment Date shall not yet have occurred at the time of the ABL Obligations Payment Date, then after the occurrence of the Notes Obligations Payment Date, unless the Junior Subordinated Liens on such Deposit Accounts shall have been or concurrently are released, the Notes Agent shall comply with the terms of the immediately preceding sentence as though the Notes Agent were the ABL Agent and the Junior Subordinated Agent were the Notes Agent.

SECTION 3.03. Rights under Permits, Licenses and Intellectual Property. The Notes Agent (a) consents (without any representation, warranty or obligation whatsoever) to the grant by any Grantor to the ABL Agent of a non-exclusive royalty-free license to use any permit, license or intellectual property of such Grantor that is subject to a Notes Lien (or any permit, license or intellectual property acquired by a purchaser, assignee or transferee from any Grantor, as the case may be) in connection with the enforcement of any ABL Lien upon any ABL Priority Collateral and (b) agrees that if the ABL Agent shall require rights available under any permit, license or intellectual property controlled by the Notes Agent. or any of its affiliates, in order to realize on any ABL Priority Collateral, the Notes Agent shall take all such actions as shall be available to it (at the sole expense of the Grantors), consistent with applicable law and reasonably requested by the ABL Agent, to make such rights available to the ABL Agent. The ABL Agent agrees that if the Notes Agent shall require rights available under any permit, license or intellectual property controlled by the ABL Agent in order to realize on any Notes Priority Collateral, the ABL Agent shall take all such actions as shall be reasonably available to it (at the sole expense of the Grantors), consistent with applicable law, to make such rights available to the Notes Agent. Each of the ABL Agent and the Notes Agent agrees that any sale or other transfer of any Collateral consisting of intellectual property upon any exercise of remedies shall be made expressly subject to the rights to be made available pursuant to this Section in writing (for the benefit of the ABL Agent or the Notes Agent, as the case may be, and the related Secured Parties).

ARTICLE IV

Existence and Amounts of Liens and Obligations

Whenever a Representative shall be required, in connection with the exercise of its rights or the performance of its obligations hereunder, to determine the existence or amount of any Obligations, or the existence of any Lien securing any such Obligations, or the Collateral subject to any such Lien, it may request that such information be furnished to it in writing by the other Representatives and shall be entitled to make such determination on the basis of the information so furnished; provided, however, that if a Representative shall fail or refuse reasonably promptly to provide the requested information, the requesting Representative shall be entitled to make any such determination by such method as it may, in the exercise of its good faith judgment. determine, including by reliance upon a certificate of the Parent or any other Grantor. Each Representative may rely conclusively, and shall he fully protected in so relying, on any determination made by it in accordance with the provisions of the preceding sentence (or as otherwise directed by a court of competent jurisdiction) and shall have no liability

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to any Grantor, any Secured Party or any other Person as a result of such determination.

ARTICLE V

Consent of Grantors

Each Grantor hereby consents and agrees to the provisions of this Agreement and the intercreditor arrangements provided for herein and agrees that, except as otherwise provided in any ABL Loan Document, Notes Document or Junior Subordinated Document, the obligations of the Grantors under the Security Documents will in no way be diminished or otherwise affected by such provisions or arrangements.

ARTICLE VI

Miscellaneous

SECTION 6.01. Notices. All notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

(a) if to the ABL Agent, to JPMorgan Chase Bank, N.A., 270 Park Avenue, Floor 44, New York, NY 10017, Attention of Dawn Lee Lum (Telecopy No. 212-270-6637);

(b) if to the Notes Agent, to Deutsche Bank Trust Company Americas, Trust & Securities Services, 60 Wall Street, MS NYC60-2710, New York, NY 10005, Attention of Project Finance Deal Manager – Patheon (Telecopy No. 732-578-4636); and

(c) if to any Grantor, to it in the care of the Parent at 2100 Syntex Court, Mississauga, Ontario, L5N 7K9, Attention of the Chief Financial Officer (Telecopy 905- 812-6705) with a copy to 2100 Syntex Court, Mississauga, Ontario, L5N 7K9, Attention of the General Counsel.

Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto (and for this purpose a notice to the Parent shall be deemed to be a notice to each Grantor). All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 6.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 6.01. As agreed to in writing among the Parent and the Representatives from time to time, notices and other communications may also be delivered by e-mail to the e-mail address of a representative of the applicable Person provided from time to time by such Person.

SECTION 6.02. Waivers; Amendment. (a) No failure or delay on the part of any party hereto in exercising any right or power hereunder shall operate as a

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waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereto are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any party hereto in any case shall entitle such party to any other or further notice or demand in similar or other circumstances.

(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by each Representative and the Parent; provided, however, that (i) neither the Parent nor any other Grantor shall have any right to consent to or approve any waiver, amendment or modification of any provision of this Agreement (and its signature thereto shall not be required) except to the extent its rights or obligations are affected; provided that the Parent and each Grantor shall be provided with written notice of all amendments of any provision of this Agreement, and (ii) this Agreement may be amended from time to time (A) as provided in Section 6.13, (B) without the consent of any party hereto, by the joinder to this Agreement of any successor of any Representative in its capacity as ABL Agent, Notes Agent or Junior Subordinated Agent duly succeeding to such capacity pursuant to the ABL Documents, the Notes Documents or any Junior Subordinated Documents, as applicable, and of any other Person that is appointed to act in any such capacity pursuant thereto and (C) at the sole request and expense of the Parent, and without the consent of any Representative (except as required by the ABL Loan Documents, Notes Documents or Junior Subordinated Documents, as applicable with respect to such Representative), (1) (x) to add other parties (or any authorized agent thereof or trustee therefor) holding Other Pari Passu Lien Obligations (as defined in the Indenture) that are incurred in compliance with, and that are secured solely by Liens permitted (in respect of their existence and the priority accorded to such Liens hereunder) by, the ABL Loan Documents, the Notes Documents and any Junior Subordinated Documents, (y) to establish that the Liens on any Notes Priority Collateral securing such Other Pari Passu Lien Obligations shall be pari passu hereunder with the Liens on such Notes Priority Collateral securing the Notes Obligations and senior to the Liens on such Notes Priority Collateral securing the ABL Obligations and any Junior Subordinated Obligations, all on the terms provided for herein immediately prior to such amendment and (z) to establish that the Liens on any ABL Priority Collateral securing such Other Pari Passu Lien Obligations shall be pari passu hereunder with the Liens on such ABL Priority Collateral securing the Notes Obligations and junior and subordinated to the Liens on such ABL Priority Collateral securing any ABL Obligations, all on the terms provided for herein immediately prior to such amendment, (2) (x) to add other parties (or any authorized agent thereof or trustee therefor) holding Junior Subordinated Debt that is incurred in compliance with, and that is secured solely by Liens permitted (in respect of their existence and the priority accorded to such Liens hereunder) by, the ABL Loan Documents, the Notes Documents and any Junior Subordinated Documents, (y) to establish that the Liens on any ABL Priority Collateral securing such Junior Subordinated

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Debt shall be junior to the Liens on such ABL Priority Collateral securing the ABL Obligations and the Notes Obligations, all on the terms provided for herein immediately prior to such amendment and (z) to establish that the Liens on any Notes Priority Collateral securing such Junior Subordinated Debt shall be junior and subordinated to the Liens on such Notes Priority Collateral securing the Notes Obligations and the ABL Obligations, all on the terms provided for herein immediately prior to such amendment, (3) (x) to add other parties (or any authorized agent thereof or trustee therefor) holding other indebtedness that is incurred in compliance with, and that is secured solely by Liens permitted (in respect of their existence and the priority accorded to such Liens hereunder) by, the ABL Loan Documents, the Notes Documents and any Junior Subordinated Documents, (y) to establish that the Liens on any ABL Priority Collateral securing such indebtedness shall be pari passu hereunder with the Liens on such ABL Priority Collateral securing the ABL Obligations and senior to the Liens on such ABL Priority Collateral securing the Notes Obligations and any Junior Subordinated Obligations, all on the terms provided for herein immediately prior to such amendment and (z) to establish that the Liens on any Notes Priority Collateral securing such indebtedness shall be pari passu hereunder with the Liens on such Notes Priority Collateral securing the ABL Obligations and junior and subordinated to the Liens on such Notes Priority Collateral securing the Notes Obligations, all on the terms provided for herein immediately prior to such amendment and (4) (x) to add other parties (or any authorized agent thereof or trustee therefor) holding Refinancing indebtedness as provided in Section 2.10 and (y) to establish that the Liens on any Collateral securing such indebtedness shall have the same priority relative to the other Liens subject to this Agreement as the Liens on such Collateral that secured the indebtedness so Refinanced, all on the terms provided for herein immediately prior to such amendment. Any such additional party and each party hereto shall be entitled to rely upon a certificate delivered by an officer of the Parent certifying that such Other Pari Passu Lien Obligations, Junior Subordinated Debt or other indebtedness, as the case may be, were issued or borrowed in compliance with the ABL Loan Documents and the Notes Documents. Any amendment of this Agreement that is proposed to be effected without the consent of a Representative as permitted by this Section 6.02(b) shall be submitted to such Representative for its review at least five Business Days prior to the proposed effectiveness of such amendment.

SECTION 6.03. Parties in Interest. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, as well as the other Secured Parties, all of whom are intended to be bound by, and to be third party beneficiaries of, this Agreement.

SECTION 6.04. Notes Agent. Notwithstanding anything to the contrary herein, whenever reference is made in this Agreement to any discretionary action by, consent, designation, specification, requirement of approval of, notice, request or other communication from, or other discretionary direction given or discretionary action to be undertaken or to be (or not to be) suffered or omitted by the Notes Agent or to any election, decision, opinion, acceptance, use of judgment, expression of satisfaction or other exercise of discretion, rights or remedies to be made (or not to be made) by the Notes Agent, it is understood that in all cases the Notes Agent shall be fully justified in failing or refusing to take any such action under this Agreement if it shall not have

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received such written instruction, advice or concurrence of the Trustee (acting in accordance with this Agreement, the Indenture or the Notes Security Documents), as it deems appropriate. This provision is intended solely for the benefit of the Notes Agent and its successors and permitted assigns and is not intended to and will not entitle the other parties hereto to any defense, claim or counterclaim, or confer any rights or benefits on any party hereto.

SECTION 6.05. Survival of Agreement. All covenants, agreements, representations and warranties made by any party in this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement.

SECTION 6.06. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original but all of which when taken together shall constitute a single contract. Delivery of an executed signature page to this Agreement by electronic transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

SECTION 6.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction. be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 6.08. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York.

(b) Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment. and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party hereto may otherwise have to bring any action or proceeding relating to this Agreement in the courts of any jurisdiction.

(e) Each party hereto hereby irrevocably and unconditionally waives, to

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the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. Each Grantor hereby irrevocably designates and appoints Patheon Pharmaceuticals Inc. (which hereby accepts such designation), c/o Patheon Inc., 4721 Emperor Boulevard, Suite 200, Durham NC, 27703, Attn: Legal Department, as its authorized agent upon which process may be served in any suit or proceeding arising out of or relating to this Agreement and agrees that service of process upon such agent. and written notice of said service to such Grantor by the Person serving the same in the manner provided for notices in Section 6.01 shall be deemed in every respect effective service of process upon such Grantor in any such suit or proceeding. Each Grantor further agrees to take any and all action as may be necessary to maintain such designation and appointment of such agent in full force and effect.

(e) If a Grantor established under the laws of the Netherlands is represented by an attorney in connection with the signing and/or execution of this Agreement or any other agreement, deed or document referred to in this Agreement or made pursuant to this Agreement, it is hereby expressly acknowledged and accepted by the other parties to this Agreement that the existence and extent of the attorney’s authority and the effects of the attorney’s exercise or purported exercise of such authority shall be governed by the laws of the Netherlands.

SECTION 6.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY_: AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 6.10. Headings. Article, Section and Annex headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

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SECTION 6.11. Conflicts. In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of any of the other Security Documents, the provisions of this Agreement shall control.

SECTION 6.12. Provisions Solely to Define Relative Rights. The provisions of this Agreement are and are intended solely for the purpose of defining the respective relative rights of the ABL Secured Parties, the Notes Secured Parties and any Junior Subordinated Secured Parties. No Grantor or any other creditor thereof shall have any rights or obligations hereunder. except as expressly provided in this Agreement, and no Grantor may rely on the terms hereof. Nothing in this Agreement is intended to or shall impair the obligations of any Grantor, which are absolute and unconditional, to pay the Obligations as and when the same shall become due and payable in accordance with their terms. Nothing in this Agreement shall require repayment. refunding or revocation of fees and expenses paid to Representatives.

SECTION 6.13. Additional Subsidiaries. Pursuant to the terms of the ABL Loan Documents. Notes Documents or any Junior Subordinated Documents, a Subsidiary of the Parent that was not a party hereto on the date hereof may be required to enter into this Agreement as a party hereto after the date hereof. A Subsidiary of the Parent that is not so required to enter into this Agreement may elect to enter into this Agreement. Upon execution and delivery by the ABL Agent, the Notes Agent, any Junior Subordinated Agent and such Subsidiary of an instrument in the form of Exhibit I hereto or otherwise reasonably satisfactory to the ABL Agent and the Notes Agent, such Subsidiary shall become a party hereto with the same force and effect as if originally named as a party hereto. The execution and delivery of any such instrument shall not require the consent of any other Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in MI force and effect notwithstanding the addition of any new Grantor as a party to this Agreement.

SECTION 6.14. USA PATRIOT Act. The parties hereto acknowledge that in accordance with Section 326 of the USA PATRIOT Act, each Representative, like all financial institutions, is required to obtain, verify and record information that identifies each person or legal entity that establishes a relationship or opens an account with it. The parties to this Intercreditor Agreement agree that they will provide the Representatives with such information as they may request in order for the Representatives to satisfy the requirements of the USA PATRIOT Act.

32

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

JPMORGAN CHASE BANK, N.A., as ABL Agent
By:
	Name:
	Title:
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Notes Agent
By:
	Name:
	Title:
By:
	Name:
	Title:
PATHEON INC.,
by
	Name:
	Title:
PATHEON PHARMACEUTICALS INC.,
by
	Name:
	Title:

33

EXECUTED AS A DEED by	)
PATHEON UK LIMITED	)
acting by	)
Director
Director/Secretary
In the presence of:
Name:
Address:
Occupation:

PATHEON PUERTO RICO, INC.,
by
	Name:
	Title:
PATHEON INTERNATIONAL INC.,
by
	Name:
	Title:
PATHEON PHARMACEUTICALS SERVICES INC.,
by
	Name:
	Title:
PATHEON U.S. HOLDINGS INC.,
by
	Name:
	Title:

34

PATHEON P.R. LLC,
by
	Name:
	Title:
PATHEON U.S. HOLDINGS LLC,
by
	Name:
	Title:
PATHEON FINANCE LLC,
by
	Name:
	Title:
PATHEON PUERTO RICO ACQUISITIONS CORPORATION,
by
	Name:
	Title:
CEPH INTERNATIONAL CORPORATION,
by
	Name:
	Title:

35

PATHEON B.V.,
by
	Name:
	Title:
by
	Name:
	Title:
PATHEON ITALIA S.P.A.,
by
	Name:
	Title:
PATHEON INTERNATIONAL AG,
by
	Name:
	Title:
PATHEON HOLDINGS S.A.S.,
by
	Name:
	Title:
PATHEON FRANCE S.A.S.,
by
	Name:
	Title:

36

ANNEX I

Legend

Intercreditor Agreement Governs. Notwithstanding any other provision contained herein, this Agreement, the Liens created hereby and the rights, remedies, duties and obligations provided for herein are subject in all respects to the provisions of the Intercreditor Agreement dated as of April 23, 2010 (the “Intercreditor Agreement”) among JPMorgan Chase Bank, N.A., as ABL Agent, Deutsche Bank Trust Company Americas, as Notes Agent, Patheon Inc. and the subsidiaries of Patheon Inc. named therein. In the event of any conflict or inconsistency between the provisions of this Agreement and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control.

EXHIBIT I

SUPPLEMENT NO.      dated as of [                     ], to the Intercreditor Agreement dated as of April 23, 2010 (the “Intercreditor Agreement”), among JPMORGAN CHASE BANK, N.A., as agent for the ABL Secured Parties referred to therein, DEUTSCHE BANK TRUST COMPANY AMERICAS, as agent for the Notes Secured Parties referred to therein, PATHEON INC. (the “Parent”) and THE SUBSIDIARIES OF PATHEON INC. NAMED THEREIN.

Section 6.13 of the Intercreditor Agreement provides that additional Subsidiaries of the Parent may become party thereto as “Grantors” thereunder by execution and delivery of an instrument in the form of this Supplement. Pursuant to one or more of the ABL Loan Documents, the Notes Documents or any Junior Subordinated Documents, the undersigned Subsidiary (the “New Subsidiary”) of the Parent is required to become a party to the Intercreditor Agreement as a “Grantor” thereunder.

Capitalized terms used and not otherwise defined herein have the meanings assigned to them in the Intercreditor Agreement.

Accordingly, the New Subsidiary hereby agrees as follows:

SECTION 1. In accordance with Section 6.13 of the Intercreditor Agreement, the New Subsidiary by its signature below becomes a party to the Intercreditor Agreement as a “Grantor” with the same force and effect as if originally named therein as such, and the New Subsidiary hereby agrees to all the terms and provisions of the Intercreditor Agreement applicable to it in such capacity thereunder. Each reference to a “Grantor” in the Intercreditor Agreement shall be deemed to include the New Subsidiary.

SECTION 2. The New Subsidiary represents and warrants to each Representative and the Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.

SECTION 3. This Supplement shall become effective when the Representatives shall nave received a counterpart (or a copy) of this Supplement that bears the signature of the New Subsidiary. Delivery of an executed signature page to this Supplement by electronic transmission shall be as effective as delivery of a manually signed counterpart of this Supplement.

SECTION 4. Except as expressly supplemented hereby, the Intercreditor Agreement shall remain in full force and effect.

SECTION 5. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the New Subsidiary has duly executed this

Supplement as of the day and year first above written.

[NAME OF NEW SUBSIDIARY],
by
	Name:
	Title:
[ABL AGENT],
by
	Name:
	Title:
[NOTES AGENT],
by
	Name:
	Title:
by
	Name:
	Title:
[JUNIOR SUBORDINATED AGENT],
by
	Name:
	Title:

2

Exhibit F

PERFECTION CERTIFICATE

Reference is made to the Amended and Restated Revolving Credit Agreement dated as of April 23, 2010 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Patheon Inc. (the “Parent Borrower”), the Subsidiaries of the Parent Borrower named therein, the Lenders party thereto, JPMorgan Chase Bank, N.A., as US Administrative Agent (the “US Agent”), JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian Administrative Agent (the “Canadian Agent”), and J.P. Morgan Europe Limited, as European Administrative Agent (the “European Agent” and, together with the US Agent and the Canadian Agent, the “Agents”). Capitalized terms used but not defined herein have the meanings assigned in the Credit Agreement or the Guarantor Agreement or US Collateral Agreement referred to therein, as applicable.

The undersigned, a Financial Officer or senior officer of the Parent Borrower, hereby certify to the Agents and each other Secured Party as follows:

1. Names. (a) The exact legal name of each Guarantor, as such name appears in its respective certificate of formation, is as follows:

Guarantor

Patheon Inc.

Patheon International Inc.

Patheon U.S. Holdings Inc.

Patheon Pharmaceuticals Inc.

Patheon Pharmaceuticals Services Inc.

Patheon U.S. Holdings LLC

Patheon Finance LLC

Patheon P.R. LLC

Patheon Puerto Rico, Inc.

Patheon Puerto Rico Acquisitions Corporation

CEPH International Corporation

Patheon UK Limited

Patheon B.V.

Patheon Italia S.P.A.

Guarantor

Patheon Holdings ¹

Patheon France ²

Patheon International AG ³

(b) Set forth below is each other legal name each Guarantor has had in the past five years, together with the date of the relevant change:

Guarantor	Other names
Patheon Puerto Rico Acquisitions Corporation	Name changed from MOVA Acquisitions Corporation on February 13, 2008
Patheon Puerto Rico, Inc.	Name changed from MOVA Pharmaceutical Corporation on February 13, 2008
Patheon International AG	Name changed from Patheon International GmbH (German name), Patheon International Ltd. Liab. Co (English name), Patheon International SARL (French name) by resolution taken on November 26, 2008, effective on December 12, 2008
See footnotes 1 through 3 below

(c) Except as set forth in Schedule 1 hereto, no Guarantor has changed its identity or corporate structure in any way within the past five years. Changes in identity or corporate structure would include mergers, consolidations and acquisitions, as well as any change in the form, nature or jurisdiction of organization. If any such change has occurred, include in Schedule 1 the information required by Section 1 and Sections 2(a)

¹ Patheon Holdings S.A.S. is also the legal name of the entity, reflecting its organizational type. References to Patheon Holdings herein include reference to Patheon Holdings S.A.S.

² Patheon France S.A.S. is also the legal name of the entity, reflecting its organizational type. References to Patheon France herein include reference to Patheon France S.A.S.

³ Patheon International AG is the German name of the entity. The legal name in English is Patheon International Ltd. The legal name in French is Patheon International SA. References to Patheon International AG herein include reference to the English and French names.

and 2(c) of this certificate as to each acquiree or constituent party to a merger or consolidation.

(d) The following is a list of all other names (including trade names or similar appellations) used by each Guarantor or any of its divisions or other business units in connection with the conduct of its business or the ownership of its properties at any time during the past five years:

See item 1(b) above.

(e) Set forth below is the Organizational Identification Number, if any, issued by the jurisdiction of formation of each Guarantor that is a registered organization:

Guarantor	Number
Patheon Inc.	419970-7
Patheon International Inc.	1327786
Patheon U.S. Holdings Inc.	3580000
Patheon Pharmaceuticals Inc.	2976494
Patheon Pharmaceuticals Services Inc.	3600816
Patheon U.S. Holdings LLC	4335480
Patheon Finance LLC	4335339
Patheon UK Limited	3764421
Patheon B.V.	34109289
Patheon Italia S.P.A.	1566638
Patheon P.R. LLC	4335336
CEPH International Corporation	100181
Patheon Puerto Rico, Inc.	64182
Patheon Puerto Rico Acquisitions Corporation	102048
Patheon Holdings	42810777500028
Patheon France	40763454200010
Patheon International AG	170.4.008.152-8

2. Current Locations. (a) The chief executive office of each Guarantor is located at the address set forth opposite its name below:

Guarantor	Chief Executive Office	County	State or Province, Country
Patheon Inc.	2100 Syntex Court Mississauga, Ontario L5N 7K9	Regional Municipality of Peel	Ontario, Canada

Guarantor	Chief Executive Office	County	State or Province, Country
Patheon International Inc.	2100 Syntex Court Mississauga, Ontario L5N 7K9	Regional Municipality of Peel	Ontario, Canada
Patheon U.S. Holdings Inc.	2110 East Galbraith Road Cincinnati, Ohio 45215-6300	Hamilton	New York, U.S.A.
Patheon Pharmaceuticals Inc.	2110 East Galbraith Road Cincinnati, Ohio 45215-6300	Hamilton	Ohio, U.S.A.
Patheon Pharmaceuticals Services Inc.	4721 Emperor Blvd. Suite 200 Durham, North Carolina 27703	Durham	North Carolina, U.S.A.
Patheon U.S. Holdings LLC	2110 East Galbraith Road Cincinnati, Ohio 45215-6300	Hamilton	Delaware, U.S.A
Patheon Finance LLC	2110 East Galbraith Road Cincinnati, Ohio 45215-6300	Hamilton	Delaware, U.S.A.
Patheon UK Limited	Kingfisher Drive Covingham, Swindon Wiltshire SN3 5BZ		England
Patheon B.V.	Herengracht 483 1017 BT Amsterdam		Netherlands
Patheon Italia S.P.A.	Viale G.B. Stucci n. 110 20052 Monza (MB) Italy		Italy
Patheon P.R. LLC	Mailing address: The Corporation Trust Company Corporation Trust Centre 1209 Orange Street Wilmington, Delaware 19801	New Castle	Delaware, U.S.A.
Patheon Puerto Rico, Inc.	Villa Blanca Industrial Park State Road No. 1, Km. 34.8 A Street Caguas, Puerto Rico 00725	Caguas	Puerto Rico, U.S.A.
Patheon Puerto Rico Acquisitions Corporation	Villa Blanca Industrial Park State Road No. 1, Km. 34.8 A Street Caguas, Puerto Rico 00725	Caguas	Puerto Rico, U.S.A.
CEPH International Corporation	Villa Blanca Industrial Park State Road No. 1, Km. 34.8 A Street Caguas, Puerto Rico 00725	Caguas	Puerto Rico, U.S.A.
Patheon Holdings	40 Boulevard Champaret 38300 Bourgoin Jallieu France		France
Patheon France	40 Boulevard Champaret 38300 Bourgoin Jallieu France		France
Patheon International AG	Lindenstrasse 14 6340 Baar Switzerland		Switzerland

(b) Set forth below opposite the name of each Guarantor are all locations where such Guarantor maintains any books or records relating to any Accounts (with each location at which chattel paper, if any, is kept being indicated by an “*”):

Guarantor	Mailing Address	County	State or Province, Country
Patheon Inc.	2100 Syntex Court Mississauga, Ontario L5N 7K9	Regional Municipality of Peel	Ontario, Canada
Patheon International Inc.	100 King Street West 1 First Canadian Place Suite 4400 Toronto, Ontario M5X 1B1	Municipality of Metropolitan Toronto	Ontario, Canada
Patheon U.S. Holdings Inc.	2110 East Galbraith Road Cincinnati, Ohio 45215-6300	Hamilton	New York, U.S.A.
Patheon Pharmaceuticals Inc.	2110 East Galbraith Road Cincinnati, Ohio 45215-6300	Hamilton	Ohio, U.S.A.
Patheon Pharmaceuticals Services Inc.	2110 East Galbraith Road Cincinnati, Ohio 45215-6300	Hamilton	Ohio, U.S.A.
Patheon U.S. Holdings LLC	Mailing address: 2110 East Galbraith Road Cincinnati, Ohio 45215-6300	New Castle	Delaware, U.S.A
Patheon Finance LLC	Mailing address: 2110 East Galbraith Road Cincinnati, Ohio 45215-6300	New Castle	Delaware, U.S.A.
Patheon UK Limited	Kingfisher Drive Covingham, Swindon Wiltshire SN3 5BZ		England
Patheon B.V.	Herengracht 483 1017 BT Amsterdam		Netherlands
Patheon Italia S.P.A.	Viale G.B. Stucci n. 110 20052 Monza (MB) Italy		Italy
Patheon P.R. LLC	Mailing address: 2110 East Galbraith Road Cincinnati, Ohio 45215-6300	New Castle	Delaware, U.S.A.
Patheon Puerto Rico, Inc.	Villa Blanca Industrial Park State Road No. 1, Km. 34.8 A Street Caguas, Puerto Rico 00725 State Road #670 Km. 2.7 Bo. Cote Norte Manati, Puerto Rico 00674	Caguas Manati	Puerto Rico, U.S.A.
Patheon Puerto Rico Acquisitions Corporation	Villa Blanca Industrial Park State Road No. 1, Km. 34.8 A Street Caguas, Puerto Rico 00725	Caguas	Puerto Rico, U.S.A.
CEPH International Corporation	Puerto Rico Industrial Park State Road #3 (65th Infantry)	Carolina	Puerto Rico U.S.A.

Guarantor	Mailing Address	County	State or Province, Country
	Km. 12.6 Carolina, Puerto Rico 00984
Patheon Holdings	40 Boulevard Champaret 38300 Bourgoin Jallieu France		France
Patheon France	40 Boulevard Champaret 38300 Bourgoin Jallieu France		France
Patheon International AG	Lindenstrasse 14 6340 Baar Switzerland		Switzerland

(c) The jurisdiction of formation of each Guarantor that is a registered organization is set forth opposite its name below:

Guarantor	Jurisdiction
Patheon Inc.	Ontario, Canada
Patheon International Inc.	Ontario, Canada
Patheon U.S. Holdings Inc.	Delaware, U.S.A.
Patheon Pharmaceuticals Inc.	Delaware, U.S.A.
Patheon Pharmaceuticals Services Inc.	Delaware, U.S.A.
Patheon U.S. Holdings LLC	Delaware, U.S.A.
Patheon Finance LLC	Delaware, U.S.A.
Patheon UK Limited	England
Patheon B.V.	Netherlands
Patheon Italia S.P.A.	Italy
Patheon P.R. LLC	Delaware, U.S.A.
Patheon Puerto Rico, Inc.	Puerto Rico, U.S.A.
Patheon Puerto Rico Acquisitions Corporation	Puerto Rico, U.S.A.
CEPH International Corporation	Puerto Rico, U.S.A.
Patheon Holdings	France
Patheon France	France
Patheon International AG	Switzerland

(d) Set forth below opposite the name of each Guarantor are all the locations where such Guarantor maintains any Equipment or other Collateral not identified above:

Guarantor	Mailing Address	County	State or Province, Country
Patheon Inc.	977 Century Drive Burlington, Ontario L7L 5J8		Ontario, Canada
Patheon Inc.	7070 Mississauga Road Mississauga, Ontario L5N 7J8	Municipality of Metropolitan Toronto	Ontario, Canada
Patheon Inc.	111 Consumers Drive Whitby, Ontario L1N 5Z5		Ontario, Canada
Patheon Inc.	5900 Thorold Stone Road Niagara Falls, Ontario		Ontario, Canada
Patheon Pharmaceuticals Inc.	4750 Lake Forest Drive Blue Ash, Ohio 45242	Hamilton	Ohio, U.S.A.
Patheon Pharmaceuticals Inc.	8711 Reading Road Cincinnati, Ohio 45215	Hamilton	Ohio, U.S.A.
Patheon Pharmaceuticals Inc.	7030 Kit Creek Road Suite 110 Morrisville, North Carolina 27560	Wake	North Carolina, U.S.A
Patheon UK Limited	Unit 151 Milton Park Abingdon, Oxfordshire England OX14 4SD		England
Patheon Puerto Rico, Inc.	Villa Blanca Industrial Park Ave. Jack Desperak Caguas, Puerto Rico 00725	Caguas	Puerto Rico, U.S.A.
Patheon Italia S.P.A.	Via Morolense 87 03013 Ferentino (FR) Italy		Italy
Patheon Pharmaceutical Services, Inc.	4721 Emperor Blvd. Suite 200 Durham, North Carolina 27703	Durham	North Carolina, U.S.A

(e) Set forth below opposite the name of each Guarantor are all the places of business of such Guarantor not identified in paragraph (a), (b), (c) or (d) above:

[Not applicable.]

Guarantor Mailing Address County State/Province Country

(f) Set forth below opposite the name of each Guarantor are the names and addresses of all Persons other than such Guarantor that have possession of any of the Collateral of such Guarantor:

[Not applicable.]

Guarantor Mailing Address County State/Province Country

3. Unusual Transactions. All Accounts have been originated by the Guarantors and all Inventory has been acquired by the Guarantors in the ordinary course of business.

4. File Search Reports. Except to the extent the US Agent has determined that such searches shall not be required, file search reports have been obtained from each Uniform Commercial Code filing office (or analogous office in jurisdictions outside the United States) identified with respect to such Guarantor in Section 2 hereof and such search reports reflect no liens against any of the Collateral other than those permitted under the Credit Agreement.

5. UCC Filings. Financing statements in substantially the form of Schedule 2 hereto have been prepared for filing in the proper Uniform Commercial Code filing office (or analogous office in jurisdictions outside the United States) in the jurisdiction in which each Guarantor is located and, to the extent any of the Collateral is comprised of fixtures, timber to be cut or as extracted Collateral from the wellhead or minehead, in the proper local jurisdiction, in each case as set forth with respect to such Guarantor in Section 2 hereof.

6. Schedule of Filings. Attached hereto as Schedule 3 is a schedule setting forth, with respect to the filings described in Section 5 above, each filing and the filing office in which such filing is to be made.

7. Stock Ownership and other Equity Interests. Attached hereto as Schedule 4 is a true and correct list of all the issued and outstanding stock, partnership interests, limited liability company membership interests or other equity interest of each Guarantor (except the Parent Borrower) and the record and beneficial owners of such stock, partnership interests, membership interests or other equity interests. Also set forth on Schedule 4 is each equity investment of each Guarantor.

8. Debt Instruments. Attached hereto as Schedule 5 is a true and correct list of all promissory notes held by each Guarantor that are required to be pledged under the Security Documents, including all intercompany notes between such Guarantor and any other Guarantor.

9. Advances. Attached hereto as Schedule 6 is a true and correct schedule of the net amount of (a) all advances made by any Guarantor to any other Guarantor (including those identified on Schedule 5), which advances will be on and after the date hereof evidenced by one or more intercompany notes pledged to the Agents under the Security Documents (to the extent required by the Collateral and Guarantee Requirement) and (b) all unpaid accounts receivable arising as a result of intercompany transfers of goods sold and delivered by or to, or services performed by, or for any Guarantor.

10. Mortgage Filings. Attached hereto as Schedule 7 is a schedule setting forth, with respect to each Mortgaged Property, (a) the exact name of the Person that owns such property as such name appears in its certificate of incorporation or other organizational document, (b) if different from the name identified pursuant to clause (a), the exact name of the current record owner of such property reflected in the records of the filing office for such property identified pursuant to the following clause and (c) the filing office in

which a Mortgage with respect to such property must be filed or recorded in order for the Applicable Agent to obtain a perfected security interest therein.

11. Intellectual Property. None of the Guarantors owns any Material Patents, Trademarks or Copyrights, except as set forth on Schedule 8 hereto.

12. Commercial Tort Claims. Attached hereto as Schedule 9 is a true and correct list of commercial tort claims in excess of $5,000,000 held by any Guarantor, including a brief description thereof.

13. Deposit Accounts. Attached hereto as Schedule 10 is a true and correct list of all deposit accounts maintained by each Guarantor, including the name and address of the depositary institution, the type of account and the account number.

14. Securities Accounts. Attached hereto as Schedule 11 is a true and correct list of all securities accounts maintained by each Guarantor, including the name and address of the intermediary institution, the type of account and the account number.

15. Complete List. The Guarantor organized under the laws of the Netherlands does not directly or indirectly own any asset other than those listed on the schedules hereto, except as set forth below:

Asset:

[Not applicable]

[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the undersigned have duly executed this certificate on this      day of April 2010.

PATHEON INC.
	by
		Name: Eric Evans
		Title: Executive Vice President and Chief Financial Officer

SCHEDULE 1

CHANGE IN IDENTITY OR CORPORATE STRUCTURE

See Section 1(b).

Patheon Puerto Rico Investments, Inc. and Patheon Puerto Rico Real Estate Corporation were merged into Patheon Puerto Rico, Inc. as part of a consolidation; Patheon Italy B.V. was wound up into Patheon B.V.

Exact Legal Name	Jurisdiction	Org. ID #	Other Names	Chief Executive Office
Patheon Puerto Rico Investments, Inc.	Puerto Rico, U.S.A.	115306-D	Name changed from MOVA Investments, Inc. on April 2, 2008	Villa Blanca Industrial Park State Road #1, Km. 34.8 Caguas, Puerto Rico 00725
Patheon Puerto Rico Real Estate Corporation	Puerto Rico, U.S.A.	106845-D	Name changed from MOVA Real Estate Corporation on April 2, 2008	State Road #670, Km. 2.7 Bo. Coto Norte Manatí, Puerto Rico 00674
Patheon Italy B.V.	Netherlands	34118399		Herengracht 483 1017 BT Amsterdam

SCHEDULE 2

FORM OF FINANCING STATEMENTS

[See attached]

SCHEDULE 3

UCC FILINGS AND FILING OFFICES

[Please Update]

Debtor	Filing Offices
Patheon Inc.	Ontario
Patheon International Inc.	Ontario
Patheon U.S. Holdings Inc.	Office of the Secretary of State of the State of Delaware
Patheon P.R. LLC	Office of the Secretary of State of the State of Delaware
Patheon U.S. Holdings LLC	Office of the Secretary of State of the State of Delaware
Patheon Finance LLC	Office of the Secretary of State of the State of Delaware
Patheon Pharmaceuticals Services Inc.	Office of the Secretary of State of the State of Delaware
Patheon Pharmaceuticals Inc.	Office of the Secretary of State of the State of Delaware
Patheon Puerto Rico, Inc.	Department of State of Puerto Rico San Juan, Puerto Rico
Patheon Puerto Rico Acquisitions Corporation	Department of State of Puerto Rico San Juan, Puerto Rico
CEPH International Corporation	Department of State of Puerto Rico San Juan, Puerto Rico
Patheon UK Limited	Companies House/Land Registry of England and Wales
Patheon B.V.	“the Appropriate Division Large Enterprises of the Tax Department (Belastingdienst/Grote Ondernemingen)”
Patheon Italia S.P.A.	Not applicable
Patheon Holdings	Not applicable
Patheon France	The Cyprus Registrar of Companies
Patheon International AG	Not applicable

SCHEDULE 4

EQUITY INTERESTS IN GUARANTORS

Guarantor	Registered Owner/ Beneficial Owner	Number and Class of Equity Interest	Percentage of Equity Interests
Patheon International Inc.	Patheon Inc.	4292 common shares		100	%
Patheon U.S. Holdings Inc.	Patheon International Inc.	101 common shares		100	%
Patheon P.R. LLC	Patheon International Inc.	5,001 membership units		100	%
Patheon U.S. Holdings LLC	Patheon International Inc.	551 membership units		100	%
Patheon Finance LLC	Patheon U.S. Holdings LLC	51 membership units		100	%
Patheon Pharmaceuticals Inc.	Patheon U.S. Holdings Inc.	101 common shares		100	%
Patheon Pharmaceuticals Services Inc.	Patheon U.S. Holdings Inc.	1 common share		100	%
CEPH International Corporation	Patheon Puerto Rico Acquisitions Corporation	50,000 common shares		100	%
Patheon B.V.	Patheon Holdings Cyprus Ltd.	42 shares		100	%
Patheon UK Limited	Patheon B.V.	100,001 ordinary shares and 2,000,000 preference shares		100	%
Patheon Italia S.P.A.	Patheon B.V.	200,000 shares		100	%
Patheon Puerto Rico, Inc.	Patheon P.R. LLC	11,131,150 Class A common shares		100	%
Patheon Puerto Rico Acquisitions Corporation	Patheon Puerto Rico, Inc.	100,000 common shares		100	%
Patheon Holdings	Patheon Italia S.P.A. Patheon B.V.	292 Class A shares 20,000 Class B shares		1.46 98.54	%  %
Patheon France	Patheon Holdings	200,000 ordinary shares		100	%
Patheon International AG	Patheon B.V.	200 shares		100	%

EQUITY INTERESTS HELD BY GUARANTORS

Please refer to the chart above.

Issuer	Guarantor/ Registered Owner	Number and Class of Equity Interest	Percentage of Equity Interests
Skyepharma plc	Patheon Inc.	2,613 common shares		Less than 0.1%
BSP Pharmaceuticals sr14	Patheon B.V.	9% of 100,000 (i.e. one quota of Euro 9,000.00)		9% of 100,000
BSP Pharmaceuticals sr15	Patheon Italia S.P.A.	9% of 100,000 (i.e. one quota of Euro 9,000.00)		9% of 100,000
Patheon KK	Patheon International Inc.	200 common shares		100	%
Patheon UK Pension Trustees Limited	Patheon UK Limited	1 ordinary share		100	%
Patheon Europe Zrt.	Patheon B.V.	21,030 registered ordinary “A” shares		100	%
Patheon Holdings Cyprus Ltd.	Patheon U.S. Holdings LLC	1,500 ordinary shares		100	%

⁴ The shares of BSP Pharmaceuticals srl have been pledged (as a first charge) by Patheon B.V. to the lenders to BSP Pharmaceuticals srl.

⁵ The shares of BSP Pharmaceuticals srl have been pledged (as a first charge) by Patheon Italia S.P.A. to the lenders to BSP Pharmaceuticals srl.

SCHEDULE 5

DEBT INSTRUMENTS

(1) Loan from Patheon Inc. to Patheon International Inc. CAD 46,600,886 (issued June 26, 2009 maturing on demand)

(2) Loan from Patheon Inc. to Patheon Pharmaceuticals Services Inc. USD 5,000,000 (issued June 26, 2009 maturing June 26, 2014)

(3) Loan from Patheon Holdings to Patheon Europe Zrt. EUR 4,000,000 (issued October 30, 2007 maturing 2011)

(4) Loan from Patheon Holdings to Patheon Europe Zrt. EUR 2,958,070 (issued April 30, 2008 maturing April 30, 2010)

(5) Loan from Patheon Holdings to Patheon Europe Zrt. EUR 5,000,000 (issued July 22, 2008 maturing July 27, 2012)

(6) Loan from Patheon France to Patheon Europe Zrt. EUR 4,000,000 (issued July 23, 2008 maturity April 30, 2010)

(7) Loan from Patheon France to Patheon Europe Zrt. EUR 2,000,000 (issued February 23, 2010 maturing February 23, 2011)

(8) Loan from Patheon Italia S.P.A. to Patheon UK Limited EUR 3,000,000 (issued September 30, 2009 maturing September 30, 2011)

(9) Loan from Patheon Italia S.P.A. to Patheon UK Limited EUR 6,800,000 (issued September 30, 2009 maturing September 30, 2011)

(10) Loan from Patheon Finance LLC to Patheon Europe Zrt. GBP 9,563,398 (issued April 27, 2007 maturing on demand)

(11) Loan from Patheon Finance LLC to Patheon Europe Zrt. EUR 500,000 (issued March 16, 2010 maturing March 16, 2011)

(12) Loan from Patheon Finance LLC to Patheon Europe Zrt. EUR 1,000,000 (issued April 19, 2010 maturing April 19, 2011)

SCHEDULE 6

INTERCOMPANY ADVANCES/ UNPAID INTERCOMPANY ACCOUNTS RECEIVABLE

Debtor	Guarantor/Obligee	Principal Amount
[See attached chart]

SCHEDULE 7

MORTGAGE FILINGS

Company	Mailing Address	Filing Office
Patheon Inc.	2100 Syntex Court Mississauga, Ontario L5N 7K9 Canada	Land Registry Office for the Lang Titles Division of Peel (No. 43)
Patheon Inc.	111 Consumers Drive Whitby, Ontario Ll N 5Z5 Canada	Land Registry Office for the Lang Titles Division of Durham (No. 40)
Patheon Pharmaceuticals Inc.	2110 East Galbraith Road Cincinnati, Ohio 45237 USA	The Hamilton County, Ohio Recorder’s Office
Patheon U.K. Limited	Kingfisher Drive1 Covingham, Swindon Wiltshire SN3 5BZ England	Companies House/Land Registry of England and Wales
Patheon Puerto Rico, Inc.	Villa Blanca Industrial Park State Road #1, Km. 34.8 Caguas, Puerto Rico 00725	Registry of Property of Puerto Rico First Section of Caguas
Patheon Puerto Rico, Inc.	State Road # 670, Km. 2.7 Bo. Coto Norte Manatí, Puerto Rico 00674	Registry of Property of Puerto Rico Manati Section

¹ The land is leased from the Swindon Borough Council until 2070.

SCHEDULE 8

MATERIAL PATENTS, TRADEMARKS OR COPYRIGHTS

None

SCHEDULE 9

COMMERCIAL TORT CLAIMS

None

SCHEDULE 10

DEPOSIT ACCOUNTS

Bank	Transit No.	Account No.	Swift I BIC	Account Name	Currency
JPMorgan Chase Canada	00012270	4670530103	CHASCATTCTS	Patheon Inc. Corp Acct (Rec)	CAD
JPMorgan Chase Canada	00012270	4670530101	CHASCATTCTS	Patheon Inc. Corp Acct (Disb)	CAD
JPMorgan Chase Canada	00012270	4670530212	CHASCATTCTS	Patheon Inc. Corp Acct (Rec)	USD
JPMorgan Chase Canada	00012270	4670530210	CHASCATTCTS	Patheon Inc. Corp Acct (Rec)	USD
JPMorgan Chase NY	02100021	304962147	CHASUS33	Patheon Pharmaceuticals Inc. (Rec)	USD
JPMorgan Chase NA	044000037	750528044		Patheon Pharmaceuticals Inc. (Disb)	USD
JPMorgan Chase NY	02100021	765886866	CHASUS33	Patheon Finance LLC	USD
JPMorgan Chase NY	02100021	802973966	CHASUS33	Patheon, Inc. - USD Lockbox Acct	USD
Banco Popular	02150211	041-021231	ABA021502011	Patheon Puerto Rico Inc	USD
Banco Popular	02150211	041-228928	ABA021502011	CEPH International Corp	USD
Scotiabank	21502804	6086381	ABA021502804	Patheon Puerto Rico Inc	USD
Scotiabank	21502804	6086382	ABA021502804	Patheon Puerto Rico Inc	USD
Scotiabank	21502804	6086383	ABA021502804	Patheon Puerto Rico Inc	USD
Scotiabank	21502804	6086379	ABA021502804	CEPH International Corp	USD
Scotiabank	21502804	3310313	ABA021502804	Patheon Puerto Rico Inc	USD
Barclays Bank PLC		10244090	BARCGB22 / GB82BARC20710310244090	Patheon UK Limited	GBP
Barclays Bank PLC		53626393	BARCGB22 / GB17BARC20710353626393	Patheon UK Limited	GBP
Barclays Bank PLC		56629011	BARCGB22 / GB17BARC20710356629011	Patheon UK Limited	EUR
Barclays Bank PLC		88083500	BARCGB22 / GB92BARC20710388083500	Patheon UK Limited	EUR
Barclays Bank PLC		84447177	BARCGB22 / GB32BARC20710384447177	Patheon UK Limited	USD
Barclays Bank PLC		62265366	BARCGB22 / GB83BARC20710362265366	Patheon UK Limited	USD
Credito Artigano	0351220404	000000004015	ARTIITM2	Patheon Italia S.p.A.	EUR
Credito Artigano	0351220404	ES0100068001	ARTIITM2	Patheon Italia S.p.A.	USD
Credito Artigano	0351220404	000000004014	ARTIITM2	Patheon Italia S.p.A.	EUR
IntsaSanPaolo Spa	0306909473	029766240190	BCITITMM311	Patheon Italia S.p.A.	EUR
IntsaSanPaolo Spa	0306909473	615201120972	BCITITMM311	Patheon Italia S.p.A.	EUR
IntsaSanPaolo Frosinone	0306914801	029766241099	BCITITMM721	Patheon Italia S.p.A.	EUR
Unicredit	0322620400	000030002743	UNCRIT2VMNZ	Patheon Italia S.p.A.	EUR
Unicredit	0322620400	000030005370	UNCRIT2VMNZ	Patheon Italia S.p.A.	EUR
Societe Generale	3003.02280	000204087 57.22	SOGEFRPP	Patheon France S.A.S.	EUR
Societe Generale	3003.02280	080204087 57.22	SOGEFRPP	Patheon France S.A.S.	EUR
BNP Paribas	3004.02249	000103313 70.84	BNPAFRPPLPD	Patheon France S.A.S.	EUR
BNP Paribas	3004.02249	181103313 70.84	BNPAFRPPLPD	Patheon France S.A.S.	EUR
BNP Paribas	3004.02249	000103314 67.84	BNPAFRPPLPD	Patheon Holdings S.A.S.	EUR

Bank	Transit No.	Account No.	Swift I BIC	Account Name	Currency
BNP Paribas	3004.02249	181103314 67.84	BNPAFRPPLPD	Patheon Holdings S.A.S.	EUR
Fortis Bank	24.23.61.226	24.23.61.226	FTSBNL2R	Patheon B.V.	EUR
Credit Suisse	1719767-11	1719767-11	IBAN CH48 0483 5171 9767 1100 0	Patheon International AG	CHF
Credit Suisse	1719767-12	1719767-12	IBAN CH14 0483 5171 9767 1200 0	Patheon International AG	EUR
Credit Suisse	1719767-12-1	1719767-12-1	IBAN CH14 0483 5171 9767 1200 1	Patheon International AG	USD

SCHEDULE 11

SECURITIES ACCOUNTS

None

Name and Address of Intermediary Institution Type of Account Account Number

Exhibit G

RATIFICATION to US REVOLVING PLEDGE AND SECURITY AGREEMENT dated as of April 23,2010, among PATHEON PHARMACEUTICALS INC. (the “US Borrower”), PATHEON PUERTO RICO, INC. (the “PR Borrower”), the OTHER SUBSIDIARIES of PATHEON INC. named herein and JPMORGAN CHASE BANK, N.A., as Collateral Agent (the “Collateral Agent”) (the “US Revolving Pledge and Security Agreement”).

A. Reference is made to (a) the Amended and Restated Revolving Credit Agreement dated as of March [—], 2010 (as amended, supplemented or otherwise modified from time to time, the “Revolving Credit Agreement”), among Patheon Inc., the US Borrower, the PR Borrower, the other Subsidiaries of Patheon Inc. named therein, the Lenders party thereto, the Collateral Agent, as US administrative agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian administrative agent (the “Canadian Agent”), and J.P. Morgan Europe Limited, as European administrative agent (the “European Agent”), (b) the Amended and Restated Revolving Guarantor Agreement dated as of [—], 2010 (as amended, supplemented or otherwise modified from time to time, the “Guarantor Agreement”) among Patheon Inc., the Subsidiaries of Patheon Inc. named therein and the Canadian Agent, the European Agent and the Collateral Agent, as agents and (c) the US Revolving Pledge and Security Agreement dated as of April 27, 2007 (as amended and in effect prior to giving effect to the amendment and restatement thereof pursuant to this Agreement, the “Existing US Revolving Pledge and Security Agreement”) among the US Borrower the other subsidiaries of Patheon Inc. named therein, and the Collateral Agent.

B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the US Revolving Pledge and Security Agreement or, if not defined therein, in the Revolving Credit Agreement.

C. The Grantors have entered into the US Revolving Pledge and Security Agreement in order to induce the Lenders and the Issuing Banks to extend credit to the Borrowers. Pursuant to Article II, Section 2.01 of the US Revolving Pledge and Security Agreement, Grantors pledged in favor of the Collateral Agent the Pledged Collateral, including, but not limited to, the PR Mortgage Notes and the Pledged Stock, as respectively described in the Schedule I attached hereto. The Grantors are executing this Ratification in accordance with the Puerto Rico Civil Code in order to induce the Lenders and the Issuing Banks to extend credit to the Borrowers per the terms and conditions of the US Revolving Pledge and Security Agreement.

Accordingly, the Collateral Agent and the Grantors hereby incorporate by reference the US Revolving Pledge and Security Agreement and agree as follows:

SECTION 1. The Grantors by their signatures below ratify the security interest and the pledge of the PR Mortgage Notes and the Pledged Stock made pursuant to Article II, Section 2.01 of the US Revolving Pledge and Security Agreement, with the same force and effect as if originally made by each of them in Puerto Rico and the

Grantors hereby agree to all the terms and provisions of the US Revolving Pledge and Security Agreement applicable to each of them. In furtherance of the foregoing, the Grantors, as security for the payment and performance in full of the Obligations (as defined in the US Revolving Pledge and Security Agreement), do hereby re-pledge, delivers, assigns, and grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a continuing lien on and security interest in all of the Grantors’ right, title and interest in the Pledged Stock and the PR Mortgage Notes and the indebtedness evidenced thereby, together with all of the following, whether now owned or hereafter acquired (collectively, the “Pledged Collateral”): (a) the instruments from time to time evidencing the PR Mortgage Notes and the Pledged Stock, and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the PR Mortgage Notes, the Pledged Stock or the Pledged Collateral; and (b) all proceeds of any and all of the foregoing (including, without limitation, proceeds which constitute property of the types described above and, to the extent not otherwise included, cash.

SECTION 1.1. In addition to the Grantors’ covenants and agreements in the US Revolving Pledge and Security Agreement and other related Loan Documents, for long as any of the Obligations shall remain outstanding, unless the Collateral Agent, shall otherwise consent in writing:

(a) The Grantors will, at their respective expense, at any time and from time to time, promptly execute and deliver all further instruments and documents and take all further action that may be necessary or desirable or that the Collateral Agent may reasonably request in order (i) to perfect and protect the lien and security interest purported to be created hereby; (ii) to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder in respect of the Pledged Collateral; and (iii) to otherwise effect the purposes of the US Revolving Pledge and Security Agreement or this Agreement, including without limitation, executing and filing such other documents, financing statements, continuation statements or amendments hereto or thereto, as may be necessary or desirable or that the Collateral Agent may reasonably request in order to perfect and preserve the lien and security interest purported to be created hereby.

(b) The Grantors shall not (i) sell, assign (by operation of law or otherwise) or otherwise dispose of or transfer, or grant an option with respect to, or permit any such disposition to occur with respect to, the Pledged Collateral, or (ii) create, incur, assume or permit to exist any lien, security interest, or other charge or encumbrance or any other type of preferential arrangement upon or with respect to the Pledged Collateral, whether now owned or hereafter acquired, except for the lien and security interest created under the US Revolving Pledge and Security Agreement or this Agreement with respect to the Pledged Collateral.

(c) The Grantors will not take or fail to take any action that would in any manner impair the value or enforceability of the lien of the Collateral Agent in the Pledged Collateral.

2

SECTION 1.2. (a). The Grantors hereby irrevocably appoint the Collateral Agent as the Grantors’ attorney-in-fact and proxy, with full authority in the place and stead of the Grantors and in the name of the Grantors or otherwise, from time to time in the Collateral Agent’s discretion after the occurrence of an Event of Default, to take any action and to execute any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes of the US Revolving Pledge and Security Agreement or this Agreement, including, without limitation, (i) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipt for moneys due and to become due under or in respect of the Pledged Collateral, (ii) to receive, indorse and collect any drafts or other instruments, documents and chattel paper, and (iii) to file any claims or take any action or institute any proceedings necessary or desirable to enforce its rights with respect to the Pledged Collateral. The Grantors hereby ratify and approve all acts of the attorney-in-fact other than those constituting acts of gross negligence or willful misconduct. The Collateral Agent will not be liable for any acts or omissions or for any error of judgment or mistake of fact or law, except claims, losses or liabilities resulting from the gross negligence or willful misconduct of the Collateral Agent.

(b). If the Grantors fail to perform any agreement contained herein, the Collateral Agent may itself perform, or cause performance of, such agreement or obligation, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by the Grantors.

(c). The powers conferred on the Collateral Agent under this Agreement are solely to protect its interests in the Pledged Collateral and shall not impose any duty upon the Collateral Agent to exercise any such powers. Except for the safe custody of the Pledged Collateral in its possession and the accounting for monies actually received by it hereunder, the Collateral Agent shall not have any liability or duty as to the Pledged Collateral or as to the taking of any necessary steps to preserve any rights pertaining to the Pledged Collateral.

SECTION 1.3. If any Event of Default shall have occurred and be continuing:

(a) The Collateral Agent may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it at law or in equity, all of the rights and remedies of a secured party under the applicable laws of the Commonwealth of Puerto Rico, and also may (i) require the Grantors to, and the Grantors hereby agree that each of them will at their expense and upon request of the Collateral Agent forthwith, assemble all or part of the Pledged Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place to be designated by the Collateral Agent, which is reasonably convenient to both parties and (ii) without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent’s offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Collateral Agent may deem commercially reasonable. The Grantors agree that, to the extent notice of sale shall be required by law, at least ten days’

3

notice to the Grantors of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

(b) Any cash held by the Collateral Agent as Pledged Collateral and all cash proceeds received by the Collateral Agent in respect of any sale of, collection from, or other realization upon the Pledged Collateral may, in the discretion of the Collateral Agent be held as Collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Collateral Agent) in whole or in part by the Collateral Agent against, all or any part of the Obligations in such order as the Collateral Agent shall elect. Any surplus of such cash or cash proceeds held by the Collateral Agent and remaining after payment in full of all of the obligations shall be paid over the Grantors or to such Person as may be lawfully entitled to receive such surplus.

(c) All payments received by the Grantors in respect of the Pledged Collateral shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other fund of the Grantors and shall be forthwith paid over to the Collateral Agent in the same form as so received (with any necessary endorsement).

(d) In the event that the proceeds of any such sale, collection or realization are insufficient to pay all amounts to which the Collateral Agent is legally entitled, the Grantors shall be liable for the deficiency, together with interest thereon at the default rate specified in the Revolving Credit Agreement as the default rate for the Note, and for the costs of collection and the reasonable fees of any attorneys employed by the Collateral Agent to collect such deficiency.

SECTION 2. Each of the Grantors represents and warrants to the Collateral Agent and the other Secured Parties that this Ratification has been duly authorized, executed and delivered by each of them and constitute to each of them legal, a valid and binding obligation, enforceable against each of them in accordance with its terms.

SECTION 3. This Ratification may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Ratification shall become effective when the Collateral Agent shall have received a counterpart of this Ratification that bears the signature of each of the Grantors and the Collateral Agent has executed a counterpart hereof. Delivery of an executed signature page to this Ratification by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Ratification.

4

SECTION 4. The Grantors hereby represent and warrant that set forth on Schedule I and Schedule II attached hereto is a true and correct schedule of the PR Mortgage Notes and the Pledged Stock.

SECTION 5. Except for the ratification hereby made, the US Revolving Pledge and Security Agreement shall remain in full force and effect.

SECTION 6. THIS RATIFICATION SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF PUERTO RICO.

SECTION 7. In case any one or more of the provisions contained in this Ratification should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the US Revolving Pledge and Security Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 6.01 of the US Revolving Pledge and Security Agreement.

SECTION 9. The Grantors agree to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Ratification, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent.

SECTION 10. In the event of any inconsistency between this Agreement and the US Revolving Pledge and Security Agreement, the terms hereof shall be controlling as necessary to create, preserve and/or maintain a valid, enforceable and perfected lien and security interest upon the PR Mortgage Notes and/or the Pledged Stock, but otherwise, the provisions of the US Revolving Pledge and Security Agreement shall be controlling.

IN WITNESS WHEREOF, the Grantors and the Collateral Agent have duly executed this Ratification to the US Revolving Pledge and Security Agreement as of the day and year first above written.

5

PATHEON P.R. LLC
	by
		Name:
		Title:
PATHEON PUERTO RICO, INC.
	by
		Name:
		Title:
PATHEON PUERTO RICO ACQUISITIONS CORPORATION
	by
		Name:
		Title:
CEPH INTERNATIONAL CORPORATION
	by
		Name:
		Title:
JPMORGAN CHASE BANK, N.A., as Collateral Agent
	by
		Name:
		Title:

6

STATE OF NEW YORK,

COUNTY OF                                         , ss:

The foregoing instrument was acknowledged before me this          day of April, 2010, by PATHEON P.R. LLC; PATHEON PUERTO RICO, INC.; PATHEON PUERTO RICO ACQUISITIONS CORPORATION and CEPH INTERNATIONAL CORPORATION, represented herein by                                                                      , of legal, age,                 , business executive and resident of                                         ,                                         ;                                                                      , of legal, age,                 , business executive and resident of                                         ,                                         ;                                                                      , of legal, age,                 , business executive and resident of                                         ,                                         ; and                                                                      , of legal, age,                 , business executive and resident of                                         ,                                         , who are personally known to me or who has produced                                                                       as identification.

                                                                         Signature of person taking acknowledgment

                                                                          Name typed, printed, or stamped

                                                                          Title or rank

                                                                          Serial number (if applicable)

My commission Expires:                 

STATE OF NEW YORK,

COUNTY OF                                         , ss:

The foregoing instrument was acknowledged before me this          day of April, 2010, by JPMORGAN CHASE BANK, N.A., represented herein by                                         , of legal, age,                 , business executive and resident of                     ,                     , who is personally known to me or who has produced                              as identification.

                                                                          Signature of person taking acknowledgment

                                                                          Name typed, printed, or stamped

                                                                          Title or rank

                                                                          Serial number (if applicable)

My commission Expires:                

SCHEDULE 1 OF THE RATIFICATION TO US REVOLVING PLEDGE AND

SECURITY AGREEMENT

EQUITY INTERESTS ISSUED TO OR OTHERWISE OWNED BY

PATHEON PUERTO RICO, INC.

Issuer	Number of Certificate	Registered Owner	Number and Class of Equity Interest	Percentage of Equity Interests
Patheon Puerto Rico Acquisitions	[1]	Patheon Puerto Rico, Inc.	100,000 common shares	100%

DEBT SECURITIES ISSUED TO OR OTHERWISE OWNED BY

PATHEON PUERTO RICO, INC.

Issuer Principal Amount Date of Note Maturity Date

PR MORTGAGE NOTES

PATHEON PUERTO RICO, INC.

Company	Type	Amount
Patheon Puerto Rico, Inc.	Mortgage Note	[$29,000,000] secured by Deed of Mortgage Number 22 executed on December 30, 1994, before Notary Nestor R. Nadal López, recorded at page 149 overleaf of volume 1374 of Caguas, property 36,791, recorded at page 27 of volume 1086 of Caguas.
Patheon Puerto Rico, Inc.	Mortgage Note	[$10,000,000] secured by Deed of Mortgage Number 47 executed on July 13, 2001, before Notary Ronald L. Rosenbaum, recorded at the mobile page 1585 of Caguas, property 36,791, recorded at page 27 of volume 1086 of Caguas.
Patheon Puerto Rico, Inc.	Mortgage Note	[$11,000,000] ] secured by Deed of Mortgage Number 155 executed on September 22, 2000, before Notary Ronald L. Rosenbaum, recorded at page 110 of volume 1437 of Caguas, property 36,791, recorded at page 27 of volume 1086 of Caguas.
Patheon Puerto Rico, Inc.	Mortgage Note	[USD 7,000,000] secured by Deed of Mortgage Number 5 executed on July 9, 1999, before Notary Francisco Arriví Silva, recorded at the mobile page 457 of Manatí, property 7376, recorded at page 192 of volume 548 of Manatí.
Patheon Puerto Rico, Inc	Mortgage Note	[USD 2,000,000] secured by Deed of Mortgage Number 5 executed on April 23, 2010, before Notary Marta S. Ramírez Isern, to be filed to encumber 4 parcels of land comprised of 6.2029 “cuerdas”; 8.1729 “cuerdas”; 5.0192 “cuerdas”; and 3.1399 “cuerdas”, all of them segregated from property 7376, recorded at page 192 of volume 548 of Manatí.

2

EQUITY INTERESTS ISSUED TO OR OTHERWISE OWNED BY

PATHEON P.R. LLC

Issuer	Number of Certificate	Registered Owner	Number and Class of Equity Interest	Percentage of Equity Interests
Patheon Puerto Rico, Inc.	[1]	Patheon P.R. LLC	11,131,150 Class A common shares	100%

DEBT SECURITIES ISSUED TO OR OTHERWISE OWNED BY

PATHEON P.R. LLC

Issuer	Principal Amount	Date of Note	Maturity Date
Nil	Nil	NIl	Nil

PR MORTGAGE NOTES

PATHEON P.R. LLC

Nil

EQUITY INTERESTS ISSUED TO OR OTHERWISE OWNED BY

PATHEON PUERTO RICO ACQUISITIONS CORPORATION

Issuer	Number of Certificate	Registered Owner	Number and Class of Equity Interest	Percentage of Equity Interests
CEPH International Corporation	[A-6]	Patheon Puerto Rico Acquisitions Corporation	50,000 common shares	100%

DEBT SECURITIES ISSUED TO OR OTHERWISE OWNED BY

PATHEON PUERTO RICO ACQUISITIONS CORPORATION

Issuer	Principal Amount	Date of Note	Maturity Date
Nil	Nil	Nil	Nil

PR MORTGAGE NOTES

PATHEON PUERTO RICO ACQUISITIONS CORPORATION

Nil

EQUITY INTERESTS ISSUED TO OR OTHERWISE OWNED BY

CEPH INTERNATIONAL CORPORATION

3

Issuer	Number of Certificate	Registered Owner	Number and Class of Equity Interest	Percentage of Equity Interests
Nil	nil	nil	nil	nil

DEBT SECURITIES ISSUED TO OR OTHERWISE OWNED BY

CEPH INTERNATIONAL CORPORATION

Issuer	Principal Amount	Date of Note	Maturity Date
Nil	nil	nil	nil

PR MORTGAGE NOTES

CEPH INTERNATIONAL CORPORATION

Nil

4

Exhibit H

EXECUTION VERSION

Dated 23 April 2010

(1) PATHEON UK LIMITED as Chargor

(2) J.P. MORGAN EUROPE LIMITED as

European Agent

DEBENTURE

LONDON

CONTENTS

		Page
Clause
SECTION 1 INTERPRETATION
1.	Definitions and interpretation		1
SECTION 2 COVENANT TO PAY; GRANTING AND PERFECTION OF SECURITY
2.	Payment of the Secured Obligations		10
3.	Security		10
4.	Crystallisation of floating charge		12
5.	Perfection of security and further assurance		13
SECTION 3 ASSET COVENANTS
6.	Negative pledge and disposals		15
7.	Other covenants of general application		15
8.	Mortgaged Properties		17
9.	Accounts and Related Matters		19
10.	Bank Accounts		20
11.	The Investments		21
12.	Intellectual Property		22
13.	Share Covenants		23
SECTION 4 ENFORCEMENT OF SECURITY
14.	Enforcement – general provisions		25
15.	Right of appropriation		26
16.	Appointment of Receiver		27
17.	Appointment of Administrator		29
18.	Application of proceeds		30
SECTION 5 GENERAL SECURITY PROVISIONS
19.	General security provisions		31
20.	Power of attorney		32
21.	Retention of security		33
22.	Prior security interests		34
SECTION 6 ADMINISTRATION
23.	Revolving Credit Agreement provisions		35
24.	Expenses and Indemnity		35
25.	Transfers		36
26.	Calculations and certificates		36
27.	Counterparts		36

CONTENTS

		Page
Clause
28.	Conduct of business		36
SECTION 7 GOVERNING LAW AND ENFORCEMENT
29.	Governing law		37
30.	Enforcement		37
Schedules
1.	Receivables and Payables Accounts		38
2.	Properties		39
3.	Notice of Assignment of Accounts		40
4.	Notice of Assignment of Assigned Document		43
5.	Notice of Assignment of Insurance		46
6.	Notice of Charge of Receivables Account		49
7.	Notice of Charge of Payables Account		53

THIS DEBENTURE is dated 23 April 2010 and made between:

(1) PATHEON UK LIMITED, a company incorporated in England and Wales (registered number 03764421) whose registered office is at Kingfisher Drive, Covingham, Swindon, Wiltshire SN3 5BZ (the “Chargor”); and

(2) J.P. MORGAN EUROPE LIMITED, as European collateral agent and security trustee for the Secured Parties (the “European Agent”).

BACKGROUND:

(A) By a revolving credit agreement dated 27 April 2007 and amended and restated on or about the date of this Debenture and made between amongst others (1) the Chargor as UK Borrower, (2) JP Morgan Chase Bank, N.A. as US Administrative Agent and (3) J.P. Morgan Europe Limited in various capacities including as European Administrative Agent (the “Revolving Credit Agreement”), the Lenders have agreed to provide certain facilities to the Borrowers on the terms of the Revolving Credit Agreement.

(B) The entry into of this Debenture is a condition precedent to the obligations of the Lenders under the Revolving Credit Agreement. This is the “UK Debenture” as defined in the Revolving Credit Agreement.

(C) The European Agent holds the benefit of this Debenture, including the security created and other rights granted in it to the European Agent or any Secured Party, on trust for the Secured Parties on the terms set out in a security trust deed dated on or about the date of this Debenture and made between (amongst others) (1) Patheon UK Limited, (2) the Secured Parties and (3) J.P. Morgan Europe Limited as European Agent (the “Security Trust Deed”).

(D) It is intended that this Debenture takes effect as a deed notwithstanding the fact that a party may only execute this deed under hand.

THIS DEED WITNESSES that:

SECTION 1

INTERPRETATION

1. DEFINITIONS AND INTERPRETATION

1.1 Terms defined in the Revolving Credit Agreement

Terms defined in the Revolving Credit Agreement but not in this Debenture shall have the same meanings in this Debenture as in the Revolving Credit Agreement.

1.2 Definitions

In addition, in this Debenture:

“Account Debtor” means any person who is obligated in relation to an Account.

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“Accounts” means in relation to the Chargor all book debts, both present and future, due or owing to the Chargor and all other monetary debts and claims, choses in action and other rights and benefits both present and future (including, in each such case, the proceeds thereof and all damages and dividends in relation thereto) due or owing to the Chargor and the benefit of all related rights and remedies (including under negotiable or non-negotiable instruments, guarantees, indemnities, legal and equitable charges, reservation of proprietary rights, rights of tracing and liens) and all payments representing or made in respect of the same.

“Administrator” means any administrator appointed to manage the affairs, business and assets of the Chargor under this Debenture.

“Assigned Documents” means any letter of credit issued in favour of the Chargor and any bill of exchange or other negotiable instrument held by the Chargor.

“Authorisation” means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.

“Cash Management Arrangement” means any arrangement pursuant to which any financial institution provides any Loan Party with treasury, depositary or cash management services, commercial card purchasing card services, automated clearinghouse transfers of funds or credit card services.

“Derivative Rights” means all voting and other rights attached to the Shares, all rights to receive dividends, distributions, interest and other monies paid on or to be received in respect of the Shares and any benefits, money or property accruing or arising in respect of the Shares at any time.

“Discharge Date” has the meaning given to it in Clause 19.1 (Continuing security).

“Equipment” means in relation to the Chargor, all of its now owned and hereafter acquired machinery, equipment, furniture, furnishings, fixtures and other tangible personal property of any kind (except Inventory), as well as all of such types of property leased by it and all of its rights and interest with respect thereto under such leases together with all present and future additions and accessions thereto and replacements therefore, component and auxiliary parts and supplies used or to be used in connection therewith and all substitutes for any of the foregoing, and all manuals, drawings, instructions, warranties and rights with respect thereto, wherever any of the foregoing is located.

“Excluded Assets” has the meaning given to it in the Revolving Credit Agreement.

“Guarantor Agreement” has the meaning given to it in the Revolving Credit Agreement.

“IA” means the Insolvency Act 1986.

“Insolvency” of a person includes the dissolution, bankruptcy, insolvency, winding-up, liquidation, administration, examination, amalgamation, reconstruction, reorganisation, arrangement, adjustment, administrative or other receivership or dissolution of that person, the official management of all of its revenues or other

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assets or the seeking of protection or relief of debtors and any equivalent or analogous proceeding by whatever name known and in whatever jurisdiction.

“Instrument” means any document (which term includes any form of writing) under which any obligation is evidenced or undertaken or any Security Interest (or right in any Security Interest) is granted or perfected or purported to be granted or perfected.

“Insurance Proceeds” means any monies which may from time to time be payable to or received by the Chargor (whether as an insured party, beneficiary or as loss payee) under any Insurance and the proceeds of all claims made by the Chargor under any Insurance.

“Insurance” means any policy or contract of insurance (including life insurance or assurance) if any and including, for the avoidance of doubt, any renewal of or replacement for any policy or contract of insurance and in relation to the Chargor “its Insurances” means all Insurances in which it has any rights (including as loss payee or additional insured) (excluding, in each case, contracts and policies of insurance or assurance which relate to liabilities of third parties).

“Intellectual Property” means all intellectual property, including patents, utility models, trade and service marks, trade names, domain names, right in designs, copyrights, moral rights, topography rights, rights in databases, trade secrets and know-how, in all cases whether or not registered or registrable and including registrations and applications for registration of any of these and rights to apply for the same and all rights and forms of protection of a similar nature or having equivalent or similar effect to any of these anywhere in the world and in relation to the Chargor, “its Intellectual Property” means all Intellectual Property in which it has any rights.

“Intercreditor Agreement” has the meaning given to it in Clause 1.5.

“Inventory” means in relation to the Chargor, all of its now owned and hereafter acquired inventory, goods and merchandise, wherever located, to be furnished under any contract of service or held for sale or lease, all raw materials, work-in-progress, finished goods, returned goods and materials and supplies of any kind, nature or description which are or might be used or consumed in its business or used in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods, merchandise and other/personal property, and all documents of title or other documents representing them.

“Investment” means any share, stock, debenture, bond or other security or investment (in each case together with any associated dividends, interests and other assets) and in relation to the Chargor, excluding any such security or investment of the Chargor in relation to Patheon UK Pension Trustees Limited, and “its Investments” means all Investments in which it has any rights and all its rights against any nominee or other trustee, fiduciary, custodian or clearing system with respect to any Investments and includes any Permitted Investments.

“Lease” means any lease, tenancy, licence, sub-lease, sub-licence or other occupational right.

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“Lenders” has the meaning given to it in the Revolving Credit Agreement.

“Loan Documents” has the meaning given to it in the Revolving Credit Agreement and includes the Revolving Credit Agreement and this Debenture.

“Loan Document Obligations” means:

(a) the due and punctual payment by each Borrower of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on its Loans and any advances under the UK Overdraft Facility, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by such Borrower under the Revolving Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral, (iii) in the case of the Parent Borrower, each payment required to be made by the Parent Borrower under the Revolving Credit Agreement in respect of any B/A and (iv) all other monetary obligations of such Borrower to any of the Secured Parties under the Revolving Credit Agreement and each of the other Loan Documents, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding);

(b) the due and punctual performance of all other obligations of any of the Borrowers under or pursuant to the Revolving Credit Agreement and each of the other Loan Documents; and

(c) the due and punctual payment and performance of all the obligations of each other Loan Party under or pursuant to the Guarantor Agreement and each of the other Loan Documents,

but excluding any money, obligation or liability which would cause the covenant set out in Clause 2.1 (Covenant to pay) or the security which would otherwise be constituted by this Debenture to be unlawful or prohibited by any applicable law or regulation.

“Loan Parties” has the meaning given to it in the Revolving Credit Agreement.

“Losses” means losses (including loss of profit), claims, demands, actions, proceedings, damages and other payments, costs, expenses and other liabilities of any kind.

“LPA” means the Law of Property Act 1925.

“Mortgaged Properties” has the meaning given to it in Clause 3.1(a)(i) (Land), “Mortgaged Property” means any of them and any reference to one or more of the Mortgaged Properties includes all or any part of it or each of them.

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“Notice and Acknowledgement” means individually and collectively, each Notice of Assignment and Notice of Charge, together with their respective acknowledgements.

“Notice of Assignment” means a notice of assignment substantially in the form set out in Schedule 3 (Notice of Assignment of Accounts), Schedule 4 (Notice of Assignment of Assigned Document) or Schedule 5 (Notice of Assignment of Insurance), as appropriate, or in such other form as may be specified by the European Agent.

“Notice of Charge of Payables Account” means a notice of charge substantially in the form set out in Schedule 7 (Notice of Charge of Payables Account) or in such other form as may be agreed between the European Agent and the Chargor.

“Notice of Charge of Receivables Account” means a notice of charge substantially in the form set out in Schedule 6 (Notice of Charge of Receivables Account) or in such other form as may be agreed between the European Agent and the Chargor.

“Notice of Charge” means a Notice of Charge of Receivables Account or a Notice of Charge of Payables Account.

“Other Obligations” means the due and punctual payment and performance of all obligations of each Loan Party under each Swap Agreement and Cash Management Arrangement that:

(a) is in effect on the Effective Date with a counterparty that is a Lender or an Affiliate of a Lender as of the Effective Date;

(b) is entered into after the Effective Date with any counterparty that is a Lender or an Affiliate of a Lender at the time such Swap Agreement or Cash Management Arrangement is entered into; or

(c) is arranged by a Lender or an Affiliate of a Lender and approved by the Collateral Agent,

but excluding any money, obligation or liability which would cause the covenant set out in Clause 2.1 (Covenant to pay) or the security which would otherwise be constituted by this Debenture to be unlawful or prohibited by any applicable law or regulation.

“Party” means a party to this Debenture.

“Payables Account” means the accounts used by the Chargor to operate its business and details of which are set out in Schedule 1, Part 2 (Payables Accounts).

“Permitted Investments” has the meaning given to it in the Revolving Credit Agreement.

“Planning Acts” means the Town and Country Planning Act 1990, the Planning (Listed Buildings and Conservation Areas) Act 1990, the Planning (Hazardous Substances) Act 1990, the Planning (Consequential Provisions) Act 1990 and the

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Planning and Compensation Act 1991, together with all other statutes from time to time governing or controlling the use or development of land.

“Properties” means the properties brief details of which are set out in Schedule 2 (Properties), “Property” means any of them and any reference to one or more of the Properties includes all or any part of it or each of them.

“Receivables Accounts” means any and all separate and denominated accounts as may be maintained by the Chargor with a bank in accordance with the provisions of Clause 9.2 (Designated Accounts) being those accounts the account details of which are set out in Schedule 1, Part 1 (Receivables Accounts), or any account designated from time to time by the European Agent and the Chargor to which Accounts of any Chargor are to be paid or credited.

“Receiver” means any receiver, receiver and manager or (if permitted by law) administrative receiver appointed by the European Agent over all or any of the Secured Assets under this Debenture whether solely, jointly, severally or jointly and severally with any other person and includes any substitute for any of them appointed from time to time.

“Revolving Credit Agreement” has the meaning given to it in Recital (A).

“Secured Assets” means the Mortgaged Properties, the Assigned Documents, the Chargor’s Investments and the other assets from time to time the subject of this Security, “Secured Asset” means any of them and any reference to one or more of the Secured Assets includes all or any part of it or each of them.

“Secured Obligations” means together the Loan Document Obligations and the Other Obligations.

“Secured Parties” means any person to which the Loan Parties may from time to time owe any moneys or incur any obligations or other liabilities under the Loan Documents, including the Lenders, the Agents, the Issuing Bank, the Arrangers and each counterparty to any Swap Agreement or Cash Management Arrangement with a Loan Party, the beneficiaries of each indemnity or other obligation undertaken by any Loan Party under any Loan Document and the permitted successors and assigns of each of the foregoing.

“Security Documents” has the meaning given to it in the Revolving Credit Agreement.

“Security Interest” means a mortgage, charge, assignment, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

“Shares” means any shares, stock, debentures, bonds or other interests or securities of any kind (including all shares in any subsidiary of the Chargor held by it from time to time but excluding all shares held in Patheon UK Pension Trustees Limited), together with any associated dividends, interests and other assets and all of its other rights in any company, firm, consortium, joint venture or entity, and in relation to the Chargor, “its Shares” means those Shares in respect of which it has charged its rights

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pursuant to Clause 3.1(a)(x) (Shares and other Investments) including any in which it has a beneficial interest but not a legal title.

“UK Share Charge” has the meaning given to it in the Revolving Credit Agreement.

1.3 Construction

(a) Section 1.03 (Terms Generally) of the Revolving Credit Agreement shall apply as if set out in full again here, with references to “this Agreement” being construed as references to this Debenture and with such other changes as are appropriate to fit this context.

(b) In addition, in this Debenture, any reference to:

(i) “assets” includes present and future properties, revenues, rights and other assets of every description (and any reference to a particular type or category of assets includes any present or future assets of that type or category);

(ii) this Debenture includes the Recitals and Schedules which form part of this Debenture for all purposes;

(iii) a “disposal” includes any lease, licence, transfer, sale or other disposal of any kind (with related words being construed accordingly);

(iv) the masculine, feminine or neuter gender respectively includes the other genders and the singular includes the plural (and vice versa);

(v) a “guarantee” means:

(A) any guarantee, letter of credit, bond, indemnity, third party security or other legally binding assurance against loss; or

(B) any obligation, direct or indirect, actual or contingent, to purchase or assume any indebtedness of any person, to make an investment in or loan to any person or to purchase assets from any person where, in each case, that obligation is assumed in order to maintain or assist the ability of that person to meet its indebtedness;

(vi) “including” means “including without limitation” (with related words being construed accordingly), “in particular” means “in particular but without limitation” and other general words shall not be given a restrictive interpretation by reason of their being preceded or followed by words indicating a particular class of assets, matters or things;

(vii) “indebtedness” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money;

(viii) any Loan Document, other Instrument or other document is to that Loan Document, other Instrument or other document as supplemented, otherwise amended, replaced or novated from time to time (however

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fundamental that amendment, novation or replacement may be, even if it involves increased, new, additional and/or replacement facilities or an increase in any other amount or rate);

(ix) a “person” includes any individual, firm, company or other corporation, government, state or agency of a state or any association, trust or partnership (whether or not having separate legal personality) or two or more of them and any reference to a Party or other particular person includes its successors in title, permitted assignees and permitted transferees in accordance with their respective interests;

(x) a provision of law is to that provision as amended, re-enacted or replaced from time to time and includes any subordinated legislation in force under it from time to time;

(xi) a “Recital” is to a statement made under the heading “Background” above, any reference to a “Clause” or to a “Schedule” is to a clause of or a schedule to this Debenture (as the case may be);

(xii) a “right” includes any title, estate, interest, claim, remedy, power, authority, discretion or other right of any kind, both present and future (and any reference to rights in a particular asset or type or category of assets includes any rights in the proceeds of any disposal of that asset or any assets within that type or category);

(xiii) “tax” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same);

(xiv) “regulation” includes any regulation, rule, official directive, request or guideline (in each case whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation; and

(xv) “this Security” means the Security Interests constituted by or pursuant to this Debenture.

(c) The index and Clause and Schedule headings are for ease of reference only.

(d) If there is any inconsistency between the terms of this Debenture and those of the Revolving Credit Agreement, the terms of the Revolving Credit Agreement shall prevail.

1.4 Third party rights

(a) A person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or enjoy the benefit of any term of this Debenture.

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(b) No consent of any person who is not a Party is required to rescind or vary this Debenture at any time.

1.5 Intercreditor Agreement governs

Notwithstanding any other provision contained herein, this Debenture, the Security Interests created hereby and the rights, remedies, duties and obligations provided for herein are subject in all respects to the provisions of the Intercreditor Agreement dated on or about the date of this Debenture (the “Intercreditor Agreement”) among JPMorgan Chase Bank, N.A., as ABL Agent, Deutsche Bank Trust Company Americas, as Non-U.S. Notes Agent, Patheon Inc. and the subsidiaries of Patheon Inc. named therein. In the event of any conflict or inconsistency between the provisions of this Debenture and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall prevail.

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SECTION 2

COVENANT TO PAY; GRANTING AND PERFECTION OF SECURITY

2. PAYMENT OF THE SECURED OBLIGATIONS

2.1 Covenant to pay

The Chargor covenants with the European Agent that it shall pay and discharge, or procure the payment or discharge of, each of the Secured Obligations at the time and in the manner provided in the relevant Instrument for their payment or discharge by the relevant Loan Parties.

2.2 Interest

If the Chargor fails to pay or procure the payment of any amount payable by it under Clause 2.1 on its due date, interest shall accrue on a daily basis on the overdue amount from the due date up to the date of actual payment (both before and after judgment), at the rate and on the terms from time to time applicable under the relevant Instrument (or, in the absence of an applicable rate and applicable terms, to be calculated and paid at the rate referred to in Section 2.13 (Interest) of the Revolving Credit Agreement and shall be payable on demand.

2.3 Further advances

This Debenture is made to secure any further advances or other facilities made available to the Borrowers under the Loan Documents; but it does not create any obligation on any of the Lenders to make any further advances or other facilities available.

3. SECURITY

3.1 Fixed charges

(a) As security for the payment and discharge of the Secured Obligations, the Chargor with full title guarantee charges to the European Agent by way of first fixed charge (which so far as it relates to land in England and Wales vested in the Chargor as at the date of this Debenture will be a charge by way of first legal mortgage and so far as it relates to other assets shall take effect as an equitable mortgage):

(i) Land: all of its rights as at the date of this Debenture in the Properties and all of its other rights in any land (together the “Mortgaged Properties”) in each case together with all of its rights in all buildings, structures, erections, fixtures and fittings (including trade fixtures and fittings) from time to time on any of the Mortgaged Properties and any proceeds of disposal of any of the Mortgaged Properties provided that any leasehold property the charging of which requires the consent of the landlord in whom the reversion of the relevant lease is vested shall not be subject to the security created by the Debenture until the landlord’s consent has been obtained;

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(ii) Equipment: all of its rights in any Equipment and other chattels (but excluding its stock in trade or work in progress);

(iii) Goodwill: any goodwill and uncalled capital from time to time and all of its rights to future calls in respect of capital.

(iv) Inventory: all of its right in any Inventory;

(v) Accounts: all of its rights in respect of the Accounts (but only if and to the extent the rights in questions have not been effectively assigned pursuant to Clause 3.2 (Assignments));

(vi) Receivables Accounts: all of its rights in any credit balance of any Receivables Account and the indebtedness represented by it;

(vii) Payables Accounts: all of its rights in any credit balances on the Payables Accounts and the indebtedness represented by them;

(viii) Other bank accounts: all of its rights in any credit balances on any other bank accounts and the indebtedness represented by them;

(ix) Permitted Investments: all assets and Permitted Investments in any Payables Accounts;

(x) Shares and other Investments: all of its rights in any Shares and its Investments;

(xi) Intellectual property rights: all of its rights in its Intellectual Property;

(xii) Licences: all licences, consents and other Authorisations held in connection with its business or the use of any Secured Assets and all of its rights in connection with them; and

(xiii) Other documents: all of its rights in any agreements, reports, books, records and other documents from time to time relating to all or any part of the Secured Assets, other than those assigned by Clause 3.2 (Assignments).

(b) For the avoidance of doubt, nothing in this Clause 3.1 shall extend to or create Security Interests over or in respect of any of the Excluded Assets in which the Chargor has at any time an interest.

3.2 Assignments

As security for the payment and discharge of the Secured Obligations, the Chargor with full title guarantee assigns absolutely to the European Agent subject to a proviso for reassignment on redemption (save for any Excluded Assets):

(a) Accounts: all of its rights in the Accounts (not otherwise assigned under Clause 3.2(c));

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(b) Insurance: all of its rights in its Insurances, including those relating to the Mortgaged Properties, and in any Insurance Proceeds; and

(c) Assigned Documents: all of its rights under the Assigned Documents.

For the avoidance of doubt, the Chargor will remain at all times liable in respect of all of its obligations under each of the Assigned Documents to the same extent as if this Security had not been created and neither the European Agent, any other Secured Party nor any Receiver will be under any obligation or liability to the Chargor or to any other person under or in respect of any Assigned Document.

3.3 Floating charge

As security for the payment and discharge of the Secured Obligations, the Chargor with full title guarantee charges to the European Agent by way of first floating charge the whole of its undertaking and other assets (other than assets validly and effectively charged or assigned (whether at law or in equity) pursuant to Clauses 3.1 and 3.2 by way of fixed security). Schedule B1, Paragraph 14 IA (as inserted by Section 248 of, and Schedule 16 to, the Enterprise Act 2002) shall apply to the floating charge contained in this Debenture.

4. CRYSTALLISATION OF FLOATING CHARGE

4.1 Crystallisation by notice

The European Agent may at any time by notice in writing to the Chargor convert the floating charge created by the Chargor in Clause 3.3 (Floating charge) into a fixed charge with immediate effect as regards any Secured Asset specified in the notice if:

(a) an Event of Default has occurred; or

(b) the European Agent considers (acting reasonably) that any Secured Asset may be in danger of being seized or sold pursuant to any form of legal process or otherwise in jeopardy.

4.2 Automatic crystallisation

The floating charge created by the Chargor in Clause 3.3 (Floating charge) shall automatically (without notice to the Chargor) be converted into a fixed charge with immediate effect as regards all assets subject to the floating charge if:

(a) the Chargor creates a Security Interest other than as permitted pursuant to the terms of the Revolving Credit Agreement (including, without limitation, under Section 6.02 thereof) over any Secured Asset or attempts to do so or any Secured Asset is disposed of contrary to Clause 6.2 (No disposals) or is otherwise in jeopardy;

(b) any person levies or attempts to levy any distress, execution, sequestration or other process against any Secured Asset; or

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(c) the European Agent receives notice of a proposal or intention to wind up, or appoint an administrator of, the Chargor or if the Chargor is wound up or has an administrator appointed.

Nothing in this Clause 4 shall affect the crystallisation of the floating charge created by the Chargor under applicable law and regulation.

5. PERFECTION OF SECURITY AND FURTHER ASSURANCE

5.1 Notice of Assignment

The Chargor shall:

(a) after the occurrence of an Availability Trigger Event, promptly upon a request from the European Agent deliver (with a copy to the European Agent) a Notice of Assignment, duly completed, to:

(i) any Account Debtor;

(ii) any other party to an Assigned Document specified by the European Agent; and

(iii) any insurer liable on any Insurance of the Chargor specified by the European Agent;

(b) use reasonable endeavours to procure that each addressee of a Notice of Assignment acknowledges that Notice of Assignment substantially in the form attached to that Notice of Assignment, (or in such other form as the European Agent may approve, acting reasonably; and

(c) promptly upon a request from the European Agent after the occurrence of an Event of Default that is continuing (and without prejudice to the generality of Clause 4 (Crystallisation of floating charge)), take such steps as are necessary to perfect the assignment of its Accounts and Assigned Documents assigned pursuant to Clause 3.2 (Assignments).

5.2 Notice of Charge

(a) The Chargor shall:

(i) immediately on the date of this Debenture or, after the date of this Debenture immediately upon the creation of a new Receivables Account or Payables Account, deliver (with a copy to the European Agent) a Notice of Charge of Receivables Account or a Notice of Charge of Payables Account as applicable, duly completed, to any bank specified by the European Agent, being a bank with which any of the Receivables or Payables Accounts or its other bank accounts are opened or maintained;

(ii) procure that each addressee of a Notice of Charge acknowledges that Notice of Charge in the form attached to that Notice of Charge (or in such other form as the European Agent may approve) in relation to any

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Receivables Account or Payables Account opened by the date of this Debenture and any Receivables Account opened after the date of this Debenture; and

(iii) use all reasonable endeavours to procure that each addressee of a Notice of Charge acknowledges that Notice of Charge in the form attached to that Notice of Charge (or in such other form as the European Agent may approve) in relation to any Payables Account opened after the date of this Debenture.

(b) The execution of this Debenture by the Chargor and the European Agent shall constitute notice to the European Agent of the charge over any Receivables or Payables Account or other bank account of the Chargor opened or maintained with the European Agent.

5.3 Further assurance

The Chargor shall at the request of the European Agent and at its own expense promptly execute (in such form as the European Agent may reasonably require) any Instruments or other documents and otherwise do any acts and things which the European Agent may require to preserve, perfect or protect the security created (or intended to be created) by this Debenture or the priority of it or to facilitate the realisation or enforcement of it or to exercise any of the rights of the European Agent, any other Secured Party or any Receiver in relation to the same.

5.4 Non-Assignable Rights

The Chargor undertakes that to the extent that any right, title, interest or benefit in or in respect of any asset described in Clause 3.2 (Assignments) cannot be or is not effectively assigned pursuant to Clause 3.2 for whatever reason, it shall:

(a) promptly notify the European Agent of the same and the reasons therefor;

(b) hold the benefit of the same on trust for the European Agent as security for the payment, discharge and performance, when due, of the Secured Obligations; and

(c) take such steps as the European Agent may require (acting reasonably) to remove such impediment to an assignment.

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SECTION 3

ASSET COVENANTS AND WARRANTIES

6. NEGATIVE PLEDGE AND DISPOSALS

6.1 Negative pledge

The Chargor undertakes that it will not, at any time prior to the Discharge Date, create or permit to subsist any Security Interest over any Secured Asset other than as permitted pursuant to the terms of the Revolving Credit Agreement (including without limitation under Section 6.02 (Liens) thereof).

6.2 No disposals

The Chargor undertakes that it will not, at any time prior to the Discharge Date, dispose of (or agree to dispose of) any Secured Asset (except as expressly permitted by the Revolving Credit Agreement).

7. OTHER COVENANTS OF GENERAL APPLICATION

7.1 Information and access

(a) The Chargor shall deliver to the European Agent from time to time on request such information about its business, the Secured Assets and its compliance with the terms of this Debenture or any covenants affecting the Secured Assets as the European Agent may reasonably require.

(b) The Chargor shall permit the European Agent and/or such of its representatives, agents or contractors as it may reasonable delegate, free access (at all reasonable times and in a manner that minimises, to the extent reasonably practicable, any disruption to the Chargor’s business) to the Secured Assets and any books, accounts and records relating to them to examine the state and condition of those assets, to inspect and take copies and extracts from those books, accounts and records, to comply with or object to any direction or notice or other matter served on it, to carry out investigations of title of any Mortgaged Property, to make such enquiries in relation to any part of the Mortgaged Property as a prudent mortgagee may carry out or to carry out any repairs or take any other action (including the payment of money) which the European Agent reasonably considers necessary or desirable to remedy any failure to comply with any obligation of the Chargor under the Loan Documents.

7.2 Covenants, legal obligations and payments

The Chargor shall:

(a) observe, perform and otherwise comply with all covenants and other obligations and matters (whether or not contained in any Lease, agreement or other document or under any law, bye-laws, regulations whether relating to planning, building or any other matter) from time to time affecting any of the Secured Assets or their use or enjoyment, including those contained in any Lease comprised in the Secured Assets or of any Secured Assets and any other

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Assigned Documents (to the extent that any non-performance would have a Material Adverse Effect); and

(b) pay (or procure the payment of) all rents, rates, taxes, charges, assessments, impositions and other outgoings of any kind which are from time to time payable in respect of any of the Secured Assets (to the extent that any non-payment would have a Material Adverse Effect).

7.3 Enforcement of rights

The Chargor shall at its own cost use all reasonable endeavours to procure prompt compliance by the relevant party of the covenants and other obligations imposed on the lessor in any Lease comprised in the Secured Assets and on the lessee in any Lease if as a result of such non-compliance such lease may become liable to forfeiture or otherwise be terminated to the extent that such forfeiture or termination would have a Material Adverse Effect.

7.4 Management of Secured Assets

The Chargor shall:

(a) keep its Secured Assets in good and substantial repair and condition and in the case of fixtures, plant and machinery, in a good state of repair and in working order; and

(b) not do, permit or allow to be done anything which might in any way depreciate, jeopardise or otherwise prejudice the security held by the European Agent or the value of any of that Chargor’s Secured Assets.

7.5 Maintenance of insurance

The Chargor shall at all times until the Discharge Date maintain Insurance of the Secured Assets in accordance with the applicable provisions of the Guarantor Agreement and the Revolving Credit Agreement.

7.6 Default in relation to insurance

If the Chargor fails to comply with any of its obligations as to insurance, the European Agent may, but shall not be required to, take out, renew or maintain the relevant insurance on the terms, in the name(s) and in the amount(s) which it considers appropriate.

7.7 Application of insurance proceeds

All monies received by the Chargor and/or the European Agent by virtue of any Insurance on the Secured Assets shall be applied in accordance with the applicable provisions of the Revolving Credit Agreement.

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7.8 Covenants for title

The obligations of the Chargor under this Debenture shall be in addition to the covenants for title deemed to be included in this Debenture by virtue of Part 1 Law of Property (Miscellaneous Provisions) Act 1994.

8. MORTGAGED PROPERTIES

8.1 Registration at Land Registry

The Chargor shall:

(a) do all things requested by the European Agent to facilitate the registration of this Debenture against any Land Registry title comprised in the Mortgaged Properties. For that purpose, the Chargor hereby consents to the entry of the following restriction on the register of its title to each Mortgaged Property:

(i) “No disposition of the registered estate by the proprietor of the registered estate is to be registered without a written consent signed by the proprietor for the time being of the Debenture dated [—], in favour of [—] referred to in the charges register or, if appropriate, signed on such proprietor’s behalf by its secretary or conveyancer”; and

(ii) if the European Agent so requests, certify that the security over the Mortgaged Properties created by this Debenture does not contravene any of the provisions of its constitutional documents;

(b) not permit any other person to be registered at the Land Registry as proprietor of any of the Mortgaged Properties (or of any interest in any of the Mortgaged Properties); and

(c) not, without the consent of the European Agent, create or permit to arise any interest which falls within any of the paragraphs of Schedule 3 Land Registration Act 2002 or any interest preserved by the transitional provisions of Schedule 12 Land Registration Act 2002 to the extent and for so long as any interest is so preserved in or over any of the Mortgaged Properties.

8.2 Delivery of Mortgaged Property title documents

(a) The Chargor shall, on the date of this Debenture and from time to time, deliver (or procure that there are delivered) to the European Agent (or a nominee specified by the European Agent acting on its behalf) all title documents (including all local land charges, Land Registry search certificates and planning and other statutory consents as are held with such title documents) relating to the Mortgaged Properties. The European Agent shall be entitled to hold or retain (or have its nominee hold or retain) them.

(b) As soon as reasonably practicable after completion of the registration of this Debenture against any Land Registry title comprised in the Mortgaged Properties, the Chargor shall supply the European Agent with a copy of the title information document for that title.

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8.3 Future acquisitions

If the Chargor acquires any freehold or leasehold property after the date of this Debenture, which is not an Excluded Asset, it must:

(a) promptly notify the European Agent;

(b) promptly on request by the European Agent and at the cost of the Chargor, execute and deliver to the European Agent a legal mortgage in favour of the European Agent of that property in any form which the European Agent may reasonably require;

(c) if the title to that freehold or leasehold property is registered at Land Registry or required to be so registered, give Land Registry written notice of this Security; and

(d) if applicable, ensure that this Security is correctly noted in the register of title against that title at Land Registry.

8.4 Leases comprised in the Mortgaged Properties

The Chargor shall not without the prior written consent of the European Agent:

(a) surrender or determine or agree to the determination, surrender or termination of any Lease forming part of the Mortgaged Properties; or

(b) agree to any amendment of, or to any waiver of rights under, any Lease forming part of the Mortgaged Properties.

8.5 Powers of leasing of the Chargor

No grant, agreement to grant or acceptance of a surrender of a Lease by the Chargor prior to the Discharge Date shall have effect or force (by virtue of ss99 and 100 Law of Property Act 1925 or otherwise) unless expressly permitted by the Revolving Credit Agreement.

8.6 Local authority proposals

(a) The Chargor shall:

(i) within 14 days of receipt, give to the European Agent a copy of any notice or order given, issued or made by any local or other authority relating to any of the Mortgaged Properties; and

(ii) inform the European Agent of the steps taken or to be taken to comply with that notice, order or proposal.

(b) Any compensation received as a result of a notice, order or proposal referred to in Clause 8.6(a), pursuant to s25 Law of Property Act 1969 and/or the Landlord and Tenant Act 1954 or otherwise, shall be held on trust for, and promptly paid to, the European Agent. The European Agent shall apply the

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compensation as if it constituted proceeds of an enforcement of this Debenture.

8.7 Subsequent incumbrancer

For the purposes of ss99 and 100 LPA, “mortgagor” shall include any incumbrancer (as defined in the LPA) deriving title from the Chargor and s99(18) and s100(12) LPA shall not apply.

9. ACCOUNTS AND RELATED MATTERS

9.1 No dealings with Accounts

No Chargor shall create a Security Interest, dispose, release, set off, exchange, compound, grant time or indulgence, subordinate its rights in respect of any of its Accounts to the rights of any other person in relation to debts owed to such person or otherwise deal over, of or with its Accounts in favour of any person (nor, in each such case, purport to do so) otherwise than by getting in and realising them in the ordinary and proper course of its business (and for this purpose the realisation of the Accounts by means of block discounting, factoring or the like shall not be regarded as dealing in the ordinary and proper course of its business) and, in any event, not sell, assign, factor, discount or otherwise charge its Accounts in favour of any person, nor purport to do so.

9.2 Designated accounts

(a) Subject to Clause 9.2(b), the Chargor shall pay or procure the payment of the proceeds of its Accounts into a Receivables Account.

(b) Each Receivables Account shall be governed by a mandate and/or other agreement in form and substance satisfactory to the European Agent, in each case conferring control over such account on the European Agent, or such other bank as the European Agent may from time to time specify in writing.

(c) The Chargor hereby declares itself trustee of proceeds of its Accounts not from time to time so paid into a Receivables Account to hold the same upon trust for the European Agent to pay the same to the European Agent in or towards payment and discharge of the Secured Obligations in such order and manner as the European Agent may determine in accordance with the Loan Documents.

9.3 Sales of Inventory for cash and repayment of Customer Advances

If sales of Inventory are made or services are rendered for cash, the Chargor shall as soon as possible pay into a Receivables Account denominated in the currency of such Accounts the payment which it receives.

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10. BANK ACCOUNTS

10.1 Details of bank accounts

The Chargor shall not maintain any bank account, other than any Receivables Account or any Payables Account or a bank account that is an Excluded Asset.

10.2 Signing rights on bank accounts

The Chargor shall ensure that the European Agent shall have sole signing rights on the Receivables Accounts in accordance with the terms of Clause 10.3 and the Notice of Charge of Receivables Account.

10.3 Account proceeds

(a) The Chargor shall promptly pay, or procure the prompt payment of, all moneys received by it or on its behalf in respect of any Accounts into the Receivables Accounts in accordance with Clause 9.2 (Designated accounts). Until that payment, it will hold, or procure that the recipient holds, those moneys on trust for the European Agent.

(b) The Chargor agrees that, prior to the occurrence of any of the circumstances set out in Clause 10.3(c), the only manner in which moneys may be withdrawn from any Receivables Account is at the discretion of, and through the express authorisation by, the European Agent. The European Agent will, at its own discretion, authorise such withdrawals by written instruction in the form agreed by the European Agent and the Chargor upon receipt of a request to do so from the Chargor.

(c) Following the earlier of:

(i) the commencement of an Availability Trigger Event;

(ii) the Maturity Date; or

(iii) the Loan becoming immediately due and repayable under the Revolving Credit Agreement,

the European Agent shall apply the moneys standing to the credit of any Receivables Account in or towards repayment of the Secured Obligations, for application in accordance with the terms of Section 2.11(e) (Prepayment of loans) of the Revolving Credit Agreement.

(d) The European Agent may delegate its powers of withdrawal under this Clause 10.3 to any Administrator, Receiver and/or manager.

(e) After the Discharge Date, and provided the Secured Obligations have been repaid in full to the satisfaction of the European Agent, the European Agent shall return any amounts standing to the credit of the Receivables Accounts in excess of the amount required to discharge the Secured Obligations to the Chargor.

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11. THE INVESTMENTS

11.1 Delivery of Investment title documents; registration

(a) Subject to Section 5.14 of the Revolving Credit Agreement, the Chargor shall, on the date of this Debenture and from time to time, deliver (or procure that there are delivered) to the European Agent (or a nominee specified by the European Agent acting on its behalf) all share certificates or other documents of title to or representing its Investments, together with (in each case in form and substance satisfactory to the European Agent) any instrument of transfer or assignment of such Investments specified by the European Agent duly executed by each person in whose name any of those Investments are registered or held (with the name of the transferee or assignee, the consideration and the date left blank).

(b) The European Agent shall be entitled to hold or retain (or have its nominee hold or retain) all items delivered pursuant to Clause 11.1(a).

(c) The European Agent may at any time have any of the Investments registered in its name or in the name of a nominee specified by it acting on its behalf.

11.2 Rights before an Event of Default

Before the occurrence of an Event of Default which is continuing:

(a) all dividends, interest and other monies paid on the Chargor’s Investments shall be paid directly to the Chargor; and

(b) all voting and other rights attached to the Chargor’s Investments (only insofar as transferred to the European Agent or its nominee) shall be exercised as the Chargor may from time to time in writing reasonably direct, provided that the European Agent shall be under no obligation to comply with any such direction where compliance would in the European Agent’s reasonable opinion be prejudicial to this Security or the security created by any other Security Document; and

(c) the Chargor shall not exercise any rights attached to the Investments or not take or allow the taking of any action on its behalf which results in any rights attached to the Investments in any manner which in the European Agent’s opinion is material and adverse to this Security or the security created by any other Security Document.

11.3 Rights after an Event of Default which is continuing

After the occurrence of an Event of Default which is continuing, the European Agent or its nominee(s) may at the European Agent’s discretion (and in the name of the Chargor or otherwise) exercise all voting and other rights attached to the Investments and all rights to receive dividends, interest and other monies paid on or to be received in respect of the Investments.

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11.4 Calls

(a) The Chargor shall, at all times until the Discharge Date, duly and promptly pay all calls, instalments or other monies which may from time to time become due in respect of any of the Investments without deduction or set-off;

(b) If the Chargor fails to comply with Clause 11.4(a), the European Agent may pay the calls or other payments on behalf of the Chargor. The Chargor must immediately on request reimburse the European Agent for any payment made by the European Agent under this sub-clause

12. INTELLECTUAL PROPERTY

12.1 Representations

The Chargor represents to the European Agent that:

(a) as of the date hereof, there are not any Material Patents, Trademarks or Copyrights (as each term is defined in the Guarantor Agreement);

(b) it is the sole legal and beneficial owner of the Intellectual Property; and

(c) the Intellectual Property is free of any Security Interests (expect for those created under this Debenture or permitted under the Revolving Credit Agreement) and any other rights or interests (including any licences) in favour of third parties.

12.2 Preservation

To the extent required by Section 3.06 of the Guarantor Agreement:

(a) the Chargor shall make such registrations and pay such fees, registration taxes and similar amounts as are necessary to keep its Intellectual property in force;

(b) the Chargor shall do all other acts and things which may be reasonably necessary to preserve and maintain the subsistence and validity of its Intellectual Property;

(c) the Chargor shall not use or permit any of its Intellectual Property to be used in any way which may materially and adversely affect its value;

(d) the Chargor shall take such steps as are necessary (including the institution of legal proceedings) to prevent third parties infringing the Intellectual Property; and

(e) the Chargor must ensure that, except with the prior written consent of the European Agent, none of its Intellectual Property which is registered is abandoned or cancelled, lapses or is liable to any claim of abandonment for non-use or otherwise.

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13. SHARE COVENANTS

13.1 Deposit and registration

The Chargor shall deposit (or ensure that there are deposited) with the European Agent and permit the European Agent to hold and retain:

(a) all stock and share certificates and documents of title relating to the Shares;

(b) stock transfer forms with respect to the Shares duly completed in favour of the European Agent or otherwise as it may direct; and

(c) such other documents as the European Agent may from time to time require for perfecting its title to the Shares (duly executed by or signed on behalf of the registered holder) or for vesting or enabling it to vest the same in itself or its nominees or in any purchaser,

in each case to allow the European Agent at any time following the occurrence of an Event of Default which is continuing to present them for registration into the name of the European Agent or its nominee or agent as the European Agent may select.

13.2 Issue of shares

The Chargor shall at all times until the Discharge Date ensure that no shares or other securities in or of its relevant subsidiaries will be issued or allotted and no agreement, option or arrangement to make or call for such issue or allotment will be made or granted unless they become the subject of the security created by this Debenture or are Excluded Assets.

13.3 Calls and notices

The Chargor shall duly and promptly pay (or ensure that there are paid) all calls, instalments or other payments which may be made or become due in respect of any of the Shares as and when the same become due from time to time.

13.4 Derivative rights after a demand

Following the occurrence of an Event of Default which is continuing and for the purposes of preserving the value of the security, or of realising it, the European Agent may exercise in the name of the Chargor or otherwise (without any further consent or authority on the part of the Chargor) any Derivative Rights attached to the Shares and any powers or rights which may be exercisable by the person in whose name the Shares are registered or by the bearer or absolute owner of the Shares including the receipt of dividends or other like payments.

13.5 Title

The Chargor warrants and represents that with regard to Shares which amount to fifty per cent. or more of the outstanding issued share capital of any entity at any time:

(a) the Chargor is the sole beneficial legal owner free from any Security Interest other than liens permitted under the Revolving Credit Agreement;

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(b) they are fully paid;

(c) there are no moneys or liabilities outstanding or payable in respect of them or any of them;

(d) the Chargor is lawfully entitled to create this security over them in favour of the European Agent; and

(e) they are fully transferable to the European Agent or such other person as the European Agent shall direct without restriction and without prejudice to the generality of the foregoing in respect of the pre-emption rights or restrictions in the Articles of Association of the relevant company all appropriate waivers have been obtained in respect of these from any other shareholders of the relevant company, which are unconditional and irrevocable and legally binding and enforceable.

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SECTION 4

ENFORCEMENT OF SECURITY

14. ENFORCEMENT – GENERAL PROVISIONS

14.1 Enforcement

On or at any time after the occurrence of an Event of Default which is continuing and in accordance with any relevant provisions of the Intercreditor Agreement this Security shall become immediately enforceable and the European Agent may enforce all or any of its rights under this Debenture as it thinks fit. In particular, it may without further notice exercise in relation to the Secured Assets:

(a) the power of sale and all other powers conferred on mortgagees by the LPA (or otherwise by law) or on an administrative receiver by the IA, in either case as extended or otherwise amended by this Debenture;

(b) to the extent that Clause 15 (Right of appropriation) applies, the power to appropriate the Secured Assets in or towards the payment and discharge of the Secured Obligations in accordance with Clause 15.2 (Exercise of right of appropriation); and

(c) (without first appointing a Receiver) any or all of the rights which are conferred by this Debenture (whether expressly or by implication) on a Receiver, including those relating to Leases set out in Clause 16.2(d) (Dealing with Secured Assets).

14.2 LPA provisions

(a) The Secured Obligations shall be deemed for the purposes of all powers implied by statute to have become due and payable within the meaning of s101 LPA immediately on the execution of this Debenture.

(b) s93(1) LPA (restriction on the consolidation of mortgages), s103 LPA (restricting the power of sale) and s109 LPA (restricting the power to appoint a receiver) shall not apply to this Security.

14.3 Protection of third parties

(a) No purchaser, mortgagee or other person dealing with a Receiver or the European Agent shall be bound to enquire whether its right to exercise any of its rights has arisen or become exercisable, or be concerned as to the application of any money paid, raised or borrowed or as to the propriety or regularity of any sale by or other dealing with that Receiver or the European Agent.

(b) All of the protection to purchasers contained in ss104 and 107 LPA and s42(3) IA shall apply to any person purchasing from or dealing with a Receiver or the European Agent as if the Secured Obligations had become due and the statutory powers of sale and of appointing a Receiver in relation to the Secured Assets had arisen on the date of this Debenture.

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14.4 Delegation

(a) The European Agent may delegate to any person or persons all or any of the rights which are exercisable by it under this Debenture. A delegation under this Clause may be made in any manner (including by power of attorney) and on any terms (including power to sub-delegate) which the European Agent may think fit.

(b) A delegation under Clause 14.4(a) shall not preclude the subsequent exercise of those rights by the European Agent itself nor preclude the European Agent from making a subsequent delegation of them to another person or from revoking that delegation.

(c) The European Agent shall not be liable or responsible to the Chargor for any loss or damage arising from any act, default, omission or misconduct on the part of any delegate or sub-delegate.

14.5 No liability

None of the European Agent, any Receiver or any Administrator shall be liable as a mortgagee in possession or otherwise to account in relation to all or any part of the Secured Assets for any loss on realisation or for any other action, default or omission for which it or he might be liable unless such loss is determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence and wilful misconduct of the European Agent.

15. RIGHT OF APPROPRIATION

15.1 Application of right of appropriation

This Clause 15 applies to the extent the Secured Assets constitute “financial collateral” and this Debenture constitutes a “financial collateral arrangement” (within the meaning of the Financial Collateral Arrangements (No. 2) Regulations 2003).

15.2 Exercise of right of appropriation

If and to the extent that this Clause 15 applies, the European Agent may appropriate the Secured Assets. If the European Agent exercises its right of appropriation then it shall for these purposes value:

(a) any relevant Receivables Account or other bank account and the amount standing to the credit of that account, together with any accrued interest not credited to the account, at the time of the appropriation; and

(b) any other relevant Secured Asset by reference to an independent valuation or other procedure determined by the European Agent, acting reasonably, at the time of the appropriation.

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16. APPOINTMENT OF RECEIVER

16.1 Appointment of Receiver

Without prejudice to any statutory or other powers of appointment of the European Agent under the LPA as extended by this Debenture or otherwise, at any time after this Security has become enforceable or if the Chargor so requests in writing at any time the European Agent may without further notice to the Chargor do any of the following:

(a) appoint by deed or otherwise (acting through a duly authorised officer) any one or more persons qualified to act as a Receiver to be a Receiver of all or any part of the Secured Assets;

(b) either at the time of appointment or any time after that appointment fix his or their remuneration (without being limited by the maximum rate specified in s109(6) LPA); and

(c) (except as otherwise required by statute) remove any Receiver and appoint another or others in his or their place.

16.2 Powers of Receiver

Every Receiver shall have in relation to the Secured Assets (every reference in this Clause 16.2 to “Secured Assets” being a reference only to all or any part of the Secured Assets in respect of which that Receiver was appointed) the powers granted by the LPA to any receiver appointed under it or to any mortgagor or mortgagee in possession and (whether or not the Receiver is an administrative receiver) the powers granted by the IA to any administrative receiver, all as varied and extended by this Debenture. In addition, but without limiting the preceding sentence, every Receiver shall have power to do the following:

(a) Collection: enter on, take possession of, collect and get in the Secured Assets and collect and get in all rents and other income whether accrued before or after the date of his appointment and for those purposes make any demands and take any actions or other proceedings which may seem to him expedient;

(b) Compliance with Debenture: comply with and perform all or any of the acts, matters, omissions or things undertaken to be done or omitted by the Chargor under this Debenture;

(c) Management of business: carry on, manage, develop, reconstruct, amalgamate or diversify the business of the Chargor or any part of it in such manner as he shall in his discretion think fit;

(d) Dealing with Secured Assets: sell or otherwise dispose of the Secured Assets, grant Leases, easements, rights or options over or in respect of them and surrender, accept the surrender or vary any Lease, agreement or arrangement relating to them. This power may be exercised without the need to comply with ss99 and 100 LPA. Any disposal or other dealing under this Clause 16.2(d) may be effected in the manner and on the terms which he thinks fit, for

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consideration consisting of cash, debentures or other obligations, shares or other valuable consideration and this consideration may be payable in a lump sum or by instalments spread over a period as he may think fit;

(e) Severance of assets: sever from the premises to which they are annexed and sell separately (in accordance with Clause 16.2(d)) any plant, machinery or fixtures;

(f) Upkeep of Secured Assets: repair, decorate, furnish, maintain, alter, improve, replace, renew or add to the Secured Assets as he shall think fit and effect, maintain, renew or increase indemnity insurance and other insurances and obtain bonds;

(g) Dealing with third parties: appoint or dismiss officers, employees, contractors or other agents and employ professional advisers and others on such terms (as to remuneration and otherwise) as he may think fit;

(h) Agreements: perform, repudiate, terminate, amend or enter into any arrangement or compromise any contracts or agreements which he may consider expedient;

(i) Proceedings: settle, arrange, compromise or submit to arbitration any accounts, claims, questions or disputes which may arise in connection with the business of the Chargor or the Secured Assets and bring, prosecute, defend, enforce, compromise, submit to and discontinue any actions, suits, arbitrations or other proceedings;

(j) Uncalled capital: make calls on the shareholders of the Chargor in respect of any of its uncalled capital;

(k) Rights in connection with Secured Assets: exercise or permit the Chargor or any nominee of the Chargor to exercise any rights incidental to the ownership of the Secured Assets in such manner as he may think fit;

(l) Subsidiaries: form a subsidiary or subsidiaries of the Chargor and transfer, lease or license to it or them or any other person the Secured Assets on such terms as he may think fit;

(m) Assets and rights: purchase, lease, hire or otherwise acquire any assets or rights of any description which he shall consider necessary or desirable for the carrying on, improvement or realisation of the Secured Assets or the business of the Chargor or otherwise for the benefit of the Secured Assets;

(n) Landlord and tenant powers: exercise any rights conferred on a landlord or a tenant by any applicable law or regulation in relation to the Secured Assets;

(o) Raising money: in the exercise of any of the rights conferred on him by this Debenture or for any other purpose to raise and borrow money either unsecured or secured and either in priority to, pari passu with or subsequent to this Security and generally on such terms as he may think fit;

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(p) Receipts and discharges: give valid receipts for all monies and execute all discharges, assurances and other documents which may be proper or desirable for realising the Secured Assets and redeem, discharge or compromise any Security Interest whether or not having priority to the Security or any part of it;

(q) All other acts: execute and do all such other acts, things and documents as he may consider necessary or desirable for the realisation or preservation of the Secured Assets or incidental or conducive to any of the rights conferred on or vested in him under or by virtue of this Debenture or otherwise and exercise and do in relation to the Secured Assets, and at the cost of the Chargor, all the rights and things which he would be capable of exercising or doing if he were the absolute beneficial owner of the same; and

(r) Name of Chargor: use the name of the Chargor or his own name to exercise all or any of the rights conferred by this Debenture.

16.3 Agent of the Chargor

Any Receiver appointed under this Debenture whether acting solely or jointly shall be deemed to be the agent of the Chargor and to be in the same position as a receiver appointed under the LPA and the Chargor shall be solely responsible for his acts, omissions, defaults, losses and misconduct and for his remuneration and the European Agent shall not be in any way liable or responsible either to the Chargor or to any other person for any Receiver.

16.4 Joint appointment

If at any time two or more persons have been appointed as Receivers of the same Secured Assets, each one of those Receivers shall be entitled to exercise individually all of the rights conferred on Receivers under this Debenture to the exclusion of the other or others in relation to any of the Secured Assets in respect of which he has been appointed unless the European Agent shall state otherwise in the document appointing him.

17. APPOINTMENT OF ADMINISTRATOR

17.1 Appointment of Administrator

(a) The European Agent may without notice appoint any one or more persons to be an administrator of the Chargor pursuant to Schedule B1, Paragraph 14 IA at any time after this Security has become enforceable.

(b) Clause 17.1(a) shall not apply to the Chargor if Schedule B1, Paragraph 14 IA does not permit an administrator of the Chargor to be appointed.

(c) Any appointment under Clause 17.1(a) shall be in writing signed by a duly authorised officer of the European Agent.

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17.2 Replacement of an Administrator

The European Agent may (subject to any necessary approval from the court) end the appointment of any Administrator by notice in writing signed by a duly authorised officer and appoint under Clause 17.1 a replacement for any Administrator whose appointment ends for any reason.

18. APPLICATION OF PROCEEDS

Subject to the terms and conditions of the Intercreditor Agreement, any monies received by the European Agent or any Receiver under this Debenture or under the rights conferred by this Debenture shall, after the occurrence of an Event of Default which is continuing and payment of any claims having priority to this Security, be applied by the European Agent in the following order, but without prejudice to the right of the European Agent to recover any shortfall from the Chargor:

(a) where applicable, in payment of all Losses of and incidental to the appointment of the Receiver and the exercise of all or any of his powers;

(b) where applicable, in payment of the Receiver’s remuneration at such rate as may be agreed with the European Agent;

(c) in or towards payment of all costs and expenses incurred by the European Agent or any other Agent under or in connection with this Debenture, any other Loan Document or any of the Secured Obligations;

(d) in or towards payment of all costs and expenses incurred by the Lenders and Issuing Banks under or in connection with this Debenture, any other Loan Document or any of the Secured Obligations;

(e) in or towards payment in full of the Loan Document Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Loan Document Obligations owed to them on the day of such distribution);

(f) in or towards payment in full of the Other Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Other Obligations owed to them on the day of such distribution); and

(g) if the Chargor is not under any further actual or contingent liability under the Revolving Credit Agreement, in payment of the surplus (if any) to the person or persons entitled to it.

The application of monies received by an Administrator will be governed by the IA.

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SECTION 5

GENERAL SECURITY PROVISIONS

19. GENERAL SECURITY PROVISIONS

19.1 Continuing security

This Debenture is a continuing security and regardless of any intermediate payment or discharge in whole or in part to any Secured Party, shall be binding until the date (the “Discharge Date”) on which:

(a) all of the Secured Obligations have been unconditionally and irrevocably paid or discharged in full to the satisfaction of the European Agent; and

(b) the European Agent is satisfied that all of the Secured Parties have ceased to have any commitment, obligation or other liability (whether actual or contingent) to make any credit or provide any other accommodation to the any Loan Party under any Loan Document or otherwise or to any other person in respect of whose liabilities any Loan Party has undertaken a liability to the European Agent or any other Secured Party under any Loan Document.

19.2 Additional security

This Debenture is in addition to and is not in any way prejudiced by any other guarantee or Security Interest now or subsequently held by or on behalf of the European Agent.

19.3 Immediate recourse

The Chargor waives any right it may have of first requiring any Secured Party to proceed against or enforce any Security Interest or other rights or claim payment from any other person before claiming from it under this Debenture. This waiver applies irrespective of any applicable law and regulation or any provision of any Loan Document to the contrary.

19.4 Discretion in enforcement

Until the Discharge Date, the European Agent or any Receiver may:

(a) refrain from applying or enforcing any other monies, Security Interests or other rights held or received by it in respect of the Secured Obligations or apply and enforce them in such manner and order as it sees fit (whether against the Secured Obligations or otherwise) and the Chargor shall not be entitled to the benefit of the same; and

(b) hold in an interest-bearing suspense account any monies received from the Chargor or on account of the Secured Obligations.

19.5 Subsequent Security Interests

At any time following:

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(a) the European Agent or any other Secured Party’s receipt of notice (either actual or constructive) of any subsequent Security Interest affecting the Secured Assets except such Security Interests as are permitted by the Revolving Credit Agreement;

(b) the Insolvency of the Chargor; or

(c) any disposal of all or any of the Secured Assets in breach of Clause 6.2 (No disposals) except such dispositions as are permitted by the Revolving Credit Agreement,

any Secured Party may open a new account or accounts in the name of the Chargor (whether or not it permits any existing account to continue). If a Secured Party does not open such a new account, it shall nevertheless be treated as if it had done so at the time when the notice was received or was deemed to have been received or, as the case may be, the Insolvency commenced or the assignment or transfer occurred and from that time all payments made by the Chargor to, the Secured Party or received by the Secured Party for the account of the Chargor shall be credited or treated as having been credited to the new account and shall not operate to reduce the amount secured by this Debenture at the time when the Secured Party received or was deemed to have received that notice or, as the case may be, the Insolvency commenced or the assignment or transfer occurred.

20. POWER OF ATTORNEY

20.1 Appointment

The Chargor irrevocably and by way of security appoints the European Agent and any Receiver and every delegate referred to in Clause 14.4 (Delegation) and each of them jointly and also severally to be its attorney (with full powers of substitution and delegation) and in its name or otherwise and on its behalf and as its act and deed to execute, deliver and perfect all Instruments and other documents and do any other acts and things which may be required or which the attorney may consider desirable as a result of the Chargor failing to do any act or thing it is obliged to do under this Debenture:

(a) to carry out any obligation imposed on it by this Debenture;

(b) to carry into effect any disposal or other dealing by the European Agent or any Receiver;

(c) to convey or transfer any right in land or any other asset;

(d) to get in the Secured Assets; and

(e) generally to enable the European Agent and any Receiver to exercise the respective rights conferred on them by this Debenture or by applicable law and regulation,

and the Chargor undertakes to ratify and confirm all acts and things done by an attorney in the exercise or purported exercise of its powers and all monies spent by an

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attorney shall be deemed to be expenses incurred by the European Agent under this Debenture.

20.2 Irrevocable power

The Chargor acknowledges that each power of attorney granted by Clause 20.1 is granted irrevocably and for value as part of this Security to secure a proprietary interest of, and the performance of obligations owed to, the donee within the meaning of s4 Powers of Attorney Act 1971.

21. RETENTION OF SECURITY

21.1 Release of Security

Following the Discharge Date and at the request and cost of the Chargor, the European Agent shall, as soon as reasonably practicable after receipt of that request, release and discharge this Security and re-assign the assets assigned to the European Agent under this Debenture to the Chargor (or as it shall direct), at all times without recourse, representation or warranty and subject to the provisions of the Revolving Credit Agreement, Clauses 21.2 and 21.3 and the rights of any person having prior rights over those assets. In the event of a release of any Secured Assets pursuant to Section 9.02(b) (Waivers; Amendments) of the Revolving Credit Agreement and/or Sections 5.13(c) and (d) (Termination or Release) of the Guarantor Agreement, the Security Interests created pursuant to this Debenture shall be automatically released. Any release or discharge of this Security or re-assignment shall not release or discharge the Chargor from any liability to the European Agent or any other Secured Party for the Secured Obligations or any other monies which exists independently of this Debenture.

21.2 Reinstatement

(a) Any release, settlement, discharge, re-assignment or arrangement (in this Clause 21, a “release”) made by the European Agent on the faith of any assurance, security or payment shall be conditional on that assurance, security or payment not being avoided, reduced, clawed back or ordered to be repaid under any law relating to Insolvency.

(b) If any avoidance, reduction or clawback occurs or order is made as referred to in Clause 21.2(a), then the release given by the European Agent shall have no effect and shall not prejudice the right of the European Agent to enforce this Security in respect of the Secured Obligations. As between the Chargor and the European Agent, this Security shall (notwithstanding the release) be deemed to have remained at all times in effect and held by the European Agent as security for the Secured Obligations.

21.3 Retention of security

(a) The European Agent may retain all or part of this Security, the documents of title and other documents relating to the Secured Assets and its other rights under this Debenture as security for the Secured Obligations for such a period

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as the European Agent shall deem necessary (acting reasonably) after the Secured Obligations shall have been paid and discharged in full.

(b) If at any time within that period a petition is presented to a competent court for a winding-up order to be made in respect of the Chargor, steps are taken to wind up the Chargor voluntarily, an application is made to a competent court for an administration order to be made in respect of the Chargor, a notice of intention to appoint an administrator to the Chargor is filed at court or the appointment of an administrator to the Chargor takes effect, then the European Agent may continue to retain all or part of this Security, those documents and those other rights for any further period as the European Agent may in its absolute discretion determine.

22. PRIOR SECURITY INTERESTS

22.1 Redemption

The European Agent may at any time:

(a) redeem, or procure the transfer to itself of, any prior Security Interest over any Secured Assets; or

(b) settle and pass the accounts of the holder of any prior Security Interest. Any accounts so settled and passed shall be conclusive and binding on the Chargor.

22.2 Costs of redemption

All principal monies, interest, costs, expenses and other amounts incurred in and incidental to any redemption or transfer under Clause 22.1 shall be paid by the Chargor to the European Agent on demand, in each case together with interest calculated in the manner referred to in Section 2.13 of the Revolving Credit Agreement.

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SECTION 6

ADMINISTRATION

23. REVOLVING CREDIT AGREEMENT PROVISIONS

Sections 2.13 (Interest), 2.17 (Taxes), 5.04 (Existence; Conduct of Business), 9.08 (Right of set-off), 9.01 (Notices), 9.14 (Conversion of Currencies), 9.07 (Severability), 9.03 (Expenses; Indemnity; Damage Waiver); 9.02 (Waivers; Amendments), 9.06 (Counterparts; Integration; Effectiveness) and 9.12 (Confidentiality) of the Revolving Credit Agreement shall apply to this Debenture as if they were set out in full again here, with references to the Agent or the Lenders including the European Agent and with any other changes which are necessary to fit this context.

24. EXPENSES AND INDEMNITY

(a) The parties hereto agree that the European Agent shall be entitled to reimbursement of its expenses incurred hereunder as provided in Section 9.03 of the Revolving Credit Agreement;

(b) Without limitation of its indemnification obligations under the other Loan Documents, the Chargor agrees to indemnify the European Agent and the other Indemnitees (as defined in Section 9.03 of the Revolving Credit Agreement) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of, the execution, delivery or performance of this Debenture or any instrument contemplated hereby or any claim, litigation, investigation or proceeding relating to any of the foregoing or to the Secured Assets, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from gross negligence or wilful misconduct of such Indemnitee;

(c) Any such amounts payable as provided hereunder shall be additional Secured Obligations secured hereby and by the other Security Documents. The provisions of this Clause 24 shall remain operative and in full force and effect regardless of the termination of this Debenture or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Secured Obligations, the invalidity or unenforceability of any term or provision of this Debenture or any other Loan Document, or any investigation made by or on behalf of the European Agent or any other Secured Party. All amounts due under this Clause 24 shall be payable on written demand therfor.

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25. TRANSFERS

25.1 European Agent

The European Agent may assign any or all of its rights and transfer any or all of its obligations under this Debenture without the consent of the Chargor being required to a successor appointed pursuant to Clause 3.12 (Resignation of the Security Agent) of the Security Trust Deed.

25.2 Chargor

The Chargor may not assign any of its rights or transfer any of its rights or obligations under this Debenture.

26. CALCULATIONS AND CERTIFICATES

26.1 Accounts

In any litigation or other proceedings arising out of or in connection with this Debenture, the entries made in the accounts maintained by the European Agent or any other Secured Party are prima facie evidence of the matters to which they relate.

26.2 Certificates or determinations

Any certificate or determination of the European Agent as to any matter provided for in this Debenture is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

27. COUNTERPARTS

This Debenture may be executed in any number of counterparts, and this has the same effect as if the signature (and if applicable, seals) on the counterparts were on a single copy of this Debenture.

28. CONDUCT OF BUSINESS

No provision of this Debenture will:

interfere with the right of any Secured Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;

oblige any Secured Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or

oblige any Secured Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Taxes.

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SECTION 7

GOVERNING LAW AND ENFORCEMENT

29. GOVERNING LAW

This Debenture is governed by, and shall be construed in accordance with, English law.

30. ENFORCEMENT

30.1 Jurisdiction of English courts

(a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Debenture (including a dispute regarding the existence, validity or termination of this Debenture) (a “Dispute”).

(b) The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly neither Party will argue to the contrary.

(c) This Clause 30.1 is for the benefit of the European Agent only. As a result, the European Agent shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the European Agent may take concurrent proceedings in any number of jurisdictions.

EXECUTION:

The parties have shown their acceptance of the terms of this Debenture by executing it, in the case of the Chargor as a deed, at the end of the Schedules.

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SCHEDULE 1

RECEIVABLES AND PAYABLES ACCOUNTS

Part 1

Receivables Accounts

Name of account holder	Name and address of entity at which account is held	Account details
Patheon UK LTD EUR – REC	Barclays Commercial Bank, 4th Floor, Apex Plaza, Forbury Road, Reading RG1 1AX	Acc: 56629011 Sort: 207103
Patheon UK LTD GBP – REC	Barclays Commercial Bank, 4th Floor, Apex Plaza, Forbury Road, Reading RG1 1AX	Acc: 84447177 Sort: 207103
Patheon UK LTD USD – REC	Barclays Commercial Bank, 4th Floor, Apex Plaza, Forbury Road, Reading RG1 1AX	Acc: 10244090 Sort: 207103

Part 2

Payables Accounts

Name of account holder	Name and address of entity at which account is held	Account details
Patheon UK LTD EUR – Payable	Barclays Commercial Bank, 4th Floor, Apex Plaza, Forbury Road, Reading RG1 1AX	Acc: 88083500 Sort: 207103
Patheon UK LTD GBP – Payable	Barclays Commercial Bank, 4th Floor, Apex Plaza, Forbury Road, Reading RG1 1AX	Acc: 53626393 Sort: 207103
Patheon UK LTD USD – Payable	Barclays Commercial Bank, 4th Floor, Apex Plaza, Forbury Road, Reading RG1 1AX	Acc: 62265366 Sort: 207103

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SCHEDULE 2

PROPERTIES

Registered land

(Freehold (including commonhold) or leasehold property (if any) in England and Wales of which the Chargor is registered as the proprietor at Land Registry)

County and District/ London Borough	Description of Property	Title Number
1. Abingdon, Oxfordshire	Unit 151, Milton Park, Abingdon	ON203358
2. Wiltshire, Thamesdown Council	Land and building on west side of St. Paul’s Drive and land at Dorcan Way and St. Paul’s Drive.	WT182252

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SCHEDULE 3

NOTICE OF ASSIGNMENT OF ACCOUNTS

[On relevant Chargor’s notepaper]

To: [Name and address of other party]

[Date]

Dear Sirs

[Name and date of Assigned Account]

We refer to an agreement dated [—] 201[—] between us and you (as amended or novated from time to time, the “Agreement”).

We give you notice that by a Debenture (the “Debenture”) dated [—] 2010 and entered into by us in favour of J.P. Morgan Europe Limited (as European Agent, as defined in the Debenture), we have assigned all our rights in the book debts and certain other rights arising out of the Agreement.

Please note the following:

(a) we shall at all times remain solely liable to you for the performance of all of the obligations assumed by us under or in respect of the Agreement;

(b) we irrevocably and unconditionally instruct and authorise you (despite any previous instructions which we may have given to the contrary) to pay any moneys payable by you to us under the Agreement to or such account as the European Agent may from time to time notify to you in writing;

(c) all of the powers, discretions, remedies and other rights which would, but for the Debenture, be vested in us under and in respect of the Agreement are exercisable by the European Agent;

(d) we have agreed not to waive any rights under nor amend, novate, rescind or otherwise terminate the Agreement without the prior written consent of the European Agent;

(e) we agree that:

(i) none of the instructions, authorisations and confirmations in this notice can be revoked or varied in any way except with the European Agent’s prior written consent; and

(ii) you are authorised to disclose any information in relation to the Agreement to the European Agent at the European Agent’s request.

Please acknowledge receipt of this notice, and confirm your agreement to it, by signing the notice of receipt on the enclosed copy letter and returning it to the European Agent, J.P. Morgan Europe Limited at [—] marked for the attention of [—].

This letter is governed by, and shall be construed in accordance with, English law.

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Yours faithfully

[Name of relevant Chargor]

By: [Name of signatory]

41

NOTICE OF RECEIPT

To: J.P. Morgan Europe Limited

[Name of other party]

By: [Name of signatory]

Dated:

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SCHEDULE 4

NOTICE OF ASSIGNMENT OF ASSIGNED DOCUMENT

[On Chargor’s notepaper]

To: [Name and address of other party]

[Date]

Dear Sirs

[Name and date of Assigned Document]

We refer to an agreement dated [—] 201[—] between us and you (as amended or novated from time to time, the “Agreement”).

We give you notice that by a Debenture (the “Debenture”) dated [—] 201[—] and entered into by us in favour of J.P. Morgan Europe Limited (as European Agent, as defined in the Debenture), we have assigned all our rights under the Agreement including the right to receive any payments due under the Agreement.

Please note the following:

(a) we shall at all times remain solely liable to you for the performance of all of the obligations assumed by us under or in respect of the Agreement;

(b) we irrevocably and unconditionally instruct and authorise you (despite any previous instructions which we may have given to the contrary) to pay any monies payable by you to us under the Agreement to such bank account as the European Agent may from time to time specify in writing;¹

(c) all of the powers, discretions, remedies and other rights which would, but for the Debenture, be vested in us under and in respect of the Agreement are exercisable by the European Agent;

(d) we have agreed not to waive any rights under nor amend, novate, rescind or otherwise terminate the Agreement without the prior written consent of the European Agent;

(e) we agree that:

(i) none of the instructions, authorisations and confirmations in this notice can be revoked or varied in any way except with the European Agent’s prior written consent; and

(ii) you are authorised to disclose any information in relation to the Agreement to the European Agent at the European Agent’s request.

Please acknowledge receipt of this notice, and confirm your agreement to it, by signing the acknowledgement on the enclosed copy letter and returning it to the European Agent, J.P. Morgan Europe Limited, at [—] marked for the attention of [—].

¹ Include here details of the account into which sums are to be paid.

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This letter is governed by, and shall be construed in accordance with, English law.

Yours faithfully

[Name of Chargor]

By: [Name of signatory]

44

ACKNOWLEDGEMENT

To: J.P. Morgan Europe Limited

We acknowledge receipt of a notice dated [—] 201[—] addressed to us by [Name of Chargor] (the “Chargor”) regarding an agreement dated [—] 201[—] between us and the Chargor (as amended or novated from time to time, the “Agreement”).

We confirm that:

(a) we consent to the assignment of the Agreement and will comply with the terms of that notice;

(b) we have not, as at the date of this acknowledgement, received any notice that any third party has or will have any right in, or has made or will be making any claim or demand or taking any action in respect of, the rights of the Chargor under or in respect of the Agreement;

(c) if the Chargor is in breach of any of its obligations, express or implied, under the Agreement or if any event occurs which would permit us to terminate, cancel or surrender the Agreement we will:

(i) immediately on becoming aware of it, give you written notice of that breach; and

(ii) accept as an adequate remedy for that breach, performance by you of those obligations within 30 days of that notice;

(d) we confirm that no waiver of any of the Chargor’s rights under and no amendment, novation, rescission or other termination by the Chargor of, the Agreement shall be effective without the prior written consent of the European Agent; and

(e) we confirm that we shall not exercise any right of combination, consolidation or set-off which we may have in respect of any debt owed to us by the Chargor and we shall send you copies of all statements, orders and notices given by us relating to that debt.

[Name of other party]

By: [Name of signatory]

Dated:

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SCHEDULE 5

NOTICE OF ASSIGNMENT OF INSURANCE

[On Chargor’s notepaper]

To: [Name and address of insurer]

[Date]

Dear Sirs

Policy number [—]

We give you notice that by a Debenture (the “Debenture”) dated [—] 201[—] and entered into by us in favour of J.P. Morgan Europe Limited (as European Agent, as defined in the Debenture), we have assigned all our rights in the insurance policy, brief details of which are set out below (the “Policy”) and all monies which may be payable to or received by us under it.

Please note the following:

(a) we irrevocably and unconditionally instruct and authorise you (despite any previous instructions which we may have given to the contrary) to pay all monies payable by you to us under the Policy, including the proceeds of all claims, to such bank account as the European Agent may from time to time specify in writing²;

(b) all of the powers, discretions, remedies and other rights which would, but for the Debenture, be vested in us under and in respect of the Policy are exercisable by the European Agent; and

(c) we agree that:

(i) none of the instructions, authorisations and confirmations in this notice can be revoked or varied in any way except with the European Agent’s prior written consent; and

(ii) you are authorised to disclose any information in relation to the Policy to the European Agent at the European Agent’s request.

Please acknowledge receipt of this notice, and confirm your agreement to it, by signing the acknowledgement on the enclosed copy letter and returning it to the European Agent, J.P. Morgan Europe Limited, at [—] marked for the attention of [—].

This letter is governed by, and shall be construed in accordance with, English law.

² Include here details of the account into which sums are to be paid.

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Yours faithfully

[Name of Chargor]

By: [Name of signatory]

Details of Policy

Name of insured:	[—]
Nature of policy:	[—]
Policy number:	[—]
Expiry date:	[—]

47

ACKNOWLEDGEMENT

To: J.P. Morgan Europe Limited

We acknowledge receipt of a notice dated [—] 201[—] addressed to us by [Name of Chargor] (the “Chargor”) regarding the Policy (as defined in that notice).

We confirm that:

(a) we consent to the assignment of the Policy and will comply with the terms of that notice;

(b) we have not, as at the date of this acknowledgement, received any notice that any third party has or will have any right in, or has made or will be making any claim or demand or taking any action in respect of, the rights of the Chargor under or in respect of the Policy;

(c) if the Chargor is in breach of any of its obligations, express or implied, under the Policy or if any event occurs which would permit us to terminate, cancel or surrender the Policy we will:

(i) immediately on becoming aware of it, give you written notice of that breach; and

(ii) accept as an adequate remedy for that breach, performance by you of those obligations within 30 days of that notice;

(d) we confirm that no waiver of any of the Chargor’s rights under and no amendment, novation, rescission or other termination by the Chargor of, the Policy shall be effective without the prior written consent of the European Agent; and

(e) we confirm that we shall not exercise any right of combination, consolidation or set-off which we may have in respect of any debt owed to us by the Chargor and we shall send you copies of all statements, orders and notices given by us relating to that debt.

[Name of insurer]

By: [Name of signatory]

Dated:

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SCHEDULE 6

NOTICE OF CHARGE OF RECEIVABLES ACCOUNT

[On Chargor’s notepaper]

To: [Name and address of account bank]

[Date]

Dear Sirs

Receivables Account number[s]: [—]

We refer to Receivables Account number[s]: [—] (the “Receivables Account[s]”).

We give you notice that by a Debenture (the “Debenture”) dated [—] 2010 and entered into by us in favour of J.P. Morgan Europe Limited (as European Agent, as defined in the Debenture) we have charged all our rights in any credit balances on the Receivables Account[s] (the “Balances”) and the indebtedness represented by the Receivables Account[s].

We irrevocably and unconditionally instruct and authorise you (despite any previous instructions which we may have given to the contrary):

(a) that all rights, interests and benefits whatsoever accruing to or arising from the Receivables Account[s] or Balances shall be exercisable by and shall belong to the European Agent. For the avoidance of doubt:

(i) we are not permitted to withdraw any amount from the Receivables Account[s] without the prior written consent of the European Agent;

(ii) all instructions related to moneys held in the Receivables Account[s] must be signed by one authorised signatory of the European Agent set out in the following list:

Name	Position	Contact
Angie Koukouvanis	Operations Specialist	Tel: 001 312-732-7505
Angela Travis	Operations Specialist	Tel: 001 312-732-7508
Mike Culbertson	Senior Operations Manager	Tel: 001 312-732-7491
Helen Mathie	Assistant Vice President	Tel: 020 7325 9724
Tim Jacob	Senior Vice President	Tel: 020 7325 7457

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(iii) no transfers of moneys from the Receivables Account[s] can be effected at any time without prior receipt of written instructions from the European Agent in compliance with the terms of this notice;

(b) to disclose to the European Agent (without any reference to or further authority from us and without any enquiry by you as to the justification for the disclosure), any information relating to the Receivables Account[s] which the European Agent may, at any time and from time to time, request;

(c) at any time and from time to time on receipt by you of any written instruction, including facsimile transmission or email, from the European Agent, to release any amount of the Balances and to act in accordance with that instruction (without any reference to or further authority from us and without any enquiry by you as to the justification for the instruction or the validity of the same);

(d) to comply with the terms of any written notice, statement or instruction in any way relating or purporting to relate to the Receivables Account[s], the Balances or the indebtedness represented by it or them which you may receive at any time and from time to time from the European Agent (without any reference to or further authority from us and without any enquiry by you as to the justification for the notice, statement or instruction or the validity of it);

(e) that any existing payment instructions affecting the Receivables Account[s] are to be terminated and all payments and communications in respect of the Receivables Account[s] should be made only to the European Agent; and

(f) statements shall be supplied to both us and the European Agent.

We agree that:

(i) none of the instructions, authorisations and confirmations in this notice can be revoked or varied in any way except with the European Agent’s prior written consent; and

(ii) you are authorised to disclose any information in relation to the Receivables Account[s] to the European Agent at the European Agent’s request.

Please note:

(1) you may from time to time be instructed, by the European Agent (provided at their discretion), to transfer any amounts standing to the credit of the Receivables Account[s] to the following account (or such other account as the European Agent may from time to time notify to you in writing):

Name of account:	[—]
Number of account:	[—]
Bank/Bank address:	[—]
Sort code:	[—];

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(2) you may be instructed by the European Agent to set up an automatic direct debit transfer of any amounts standing to the credit of the Receivables Account[s] on a daily basis to such account as the European Agent may notify you in writing, including such an account in the name of the European Agent.

Please acknowledge receipt of this notice, and confirm your agreement to it, by signing the acknowledgement on the enclosed copy letter and returning it to the European Agent, J.P. Morgan Europe Limited, at [—] marked for the attention of [—].

This letter is governed by, and shall be construed in accordance with, English law.

Yours faithfully

[Name of Chargor]

By: [Name of signatory]

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ACKNOWLEDGEMENT

To: J.P. Morgan Europe Limited

We acknowledge receipt of a notice (the “Notice”) dated [—] 2010 addressed to us by [Name of Chargor] (the “Chargor”) regarding Receivables Account number[s]: [—] (the “Receivables Account[s]”).

We confirm that:

(a) we consent to the charge of the Receivables Account[s] and will comply with the terms of the Notice;

(b) there does not exist in our favour, and we undertake not to create, assert, claim or exercise, any mortgage, fixed or floating charge, assignment or other security interest of any kind or any agreement or arrangement having substantially the same economic or financial effect as any of the above (including any rights of counter-claim, rights of set-off or combination of accounts over or with respect to all or any part of the Receivables Account[s] and/or the Balances (as defined in the Notice);

(c) we have not, as at the date of this acknowledgement, received any notice that any third party has or will have any right in, or has made or will be making any claim or demand or taking any action in respect of, the rights of the Chargor under or in respect of the Receivables Account[s] or the Balances;

(d) we undertake that, on our becoming aware at any time that any person other than the European Agent has or will have any right in, or has made or will be making any claim or demand or taking any action in respect of the Receivables Account[s] or the Balances, we will immediately give written notice of that to the European Agent;

(e) no fees or periodic charges will be deducted from the Receivables Account[s] and/or Balances; and

(f) we shall operate the Receivables Account[s] in accordance with the terms set out in the Notice.

for and on behalf of

[Name of account bank]

By: [Name of signatory]

Dated:

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SCHEDULE 7

NOTICE OF CHARGE OF PAYABLES ACCOUNT

[On Chargor’s notepaper]

To: [Name and address of account bank]

[Date]

Dear Sirs

Payables Account number[s]: [—]

We refer to Payables Account number[s]: [—] (the “Payables Account[s]”).

We give you notice that by a Debenture (the “Debenture”) dated [—] 2010 and entered into by us in favour of J.P. Morgan Europe Limited (as European Agent, as defined in the Debenture) we have charged all our rights in any credit balances on the Payables Account[s] (the “Balances”) and the indebtedness represented by the Payables Account[s].

We irrevocably and unconditionally instruct and authorise you (despite any previous instructions which we may have given to the contrary):

(a) to disclose to the European Agent (without any reference to or further authority from us and without any enquiry by you as to the justification for the disclosure), any information relating to the Payables Account[s] which the European Agent may, at any time and from time to time, request;

(b) at any time and from time to time on receipt by you of any written instruction from the European Agent, to release any amount of the Balances and to act in accordance with that instruction (without any reference to or further authority from us and without any enquiry by you as to the justification for the instruction or the validity of the same);

(c) to comply with the terms of any written notice, statement or instruction in any way relating or purporting to relate to the Payables Account[s], the Balances or the indebtedness represented by it or them which you may receive at any time and from time to time from the European Agent (without any reference to or further authority from us and without any enquiry by you as to the justification for the notice, statement or instruction or the validity of it);

(d) statements shall be supplied to both us and the European Agent; and

(e) all rights, interests and benefits whatsoever accruing to or arising from the Payables Account[s] or Balances shall be exercisable by and shall belong to the European Agent.

We agree that:

(i) none of the instructions, authorisations and confirmations in this notice can be revoked or varied in any way except with the European Agent’s prior written consent;

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(ii) you are authorised to disclose any information in relation to the Payables Account[s] to the European Agent at the European Agent’s request; and

(iii) we are permitted to freely operate the Payables Account[s] at all times prior to you being served with a written instruction from the European Agent to the contrary in accordance with paragraph (b) above.

Please acknowledge receipt of this notice, and confirm your agreement to it, by signing the acknowledgement on the enclosed copy letter and returning it to the European Agent, J.P. Morgan Europe Limited, at [—] marked for the attention of [—].

This letter is governed by, and shall be construed in accordance with, English law.

Yours faithfully

[Name of Chargor]

By: [Name of signatory]

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ACKNOWLEDGEMENT

To: J.P. Morgan Europe Limited

We acknowledge receipt of a notice (the “Notice”) dated [—] 2010 addressed to us by [Name of Chargor] (the “Chargor”) regarding Payables Account number[s]: [—] (the “Payables Account[s]”).

We confirm that:

(a) we consent to the charge of the Payables Account[s] and will comply with the terms of the Notice;

(b) there does not exist in our favour, and we undertake not to create, assert, claim or exercise, any mortgage, fixed or floating charge, assignment or other security interest of any kind or any agreement or arrangement having substantially the same economic or financial effect as any of the above;

(c) we have not, as at the date of this acknowledgement, received any notice that any third party has or will have any right in, or has made or will be making any claim or demand or taking any action in respect of, the rights of the Chargor under or in respect of the Payables Account[s] or the Balances;

(d) we undertake that, on our becoming aware at any time that any person other than the European Agent has or will have any right in, or has made or will be making any claim or demand or taking any action in respect of the Payables Account[s] or the Balances, we will immediately give written notice of that to the European Agent; and

(e) we shall operate the Payables Account[s] in accordance with the terms set out in the Notice.

for and on behalf of

[Name of account bank]

By: [Name of signatory]

Dated:

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EXECUTION of the Debenture:

Chargor

EXECUTED AS A DEED by	)
PATHEON UK LIMITED	)
acting by Ian Jones	)
Director

In the presence of:

Name:

Address:

Occupation:

European Agent

EXECUTED AS A DEED by	)
J.P. MORGAN EUROPE LIMITED	)
acting by	)
its duly authorised attorney

In the presence of:

Name:

Address:

Occupation:

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Exhibit I

EXECUTION VERSION

Dated 23 April 2010

(1)	PATHEON UK LIMITED as Company
(2)	PATHEON INTERNATIONAL AG as Swiss Company
(3)	THE PERSONS NAMED HEREIN as Finance Parties
(4)	J.P. MORGAN EUROPE LIMITED as European Agent
SECURITY TRUST DEED

LONDON

CONTENTS

		Page
Clause
1.	Interpretation		1
2.	Security		5
3.	The European Agent		9
4.	Status of the Companies		15
5.	Changes to the Parties		15
6.	Expenses		15
7.	Severability		17
8.	Counterparts		17
9.	Notices		17
10.	Language		17
11.	Governing Law		17
12.	Enforcement		17
Schedules
1.	Original Parties		19
2.	Form of Accession Agreement		20

THIS DEED is dated 23 April 2010 and is made between:

(1) PATHEON UK LIMITED a limited company incorporated under the laws of England and Wales with its registered office at Kingfisher Drive, Covingham, Swindon, Wiltshire SN3 5BZ (Registered number 03764421) (the “Company”);

(2) PATHEON INTERNATIONAL AG a corporation with federal registration no CH-170.4.008.152-8, and having its principal business address at Lindenstrasse 14, CH-6340 Baar, Switzerland (the “Swiss Company”);

(3) THE PERSONS named in Schedule 1 (Original Parties) (the “Finance Parties”); and

(4) J.P. MORGAN EUROPE LIMITED (in its capacity as agent and trustee for the Secured Parties) (the “European Agent”).

BACKGROUND:

(1) The European Agent, the Company, the Swiss Company and the Secured Parties enter into this Deed in connection with the Security Documents.

(2) The Secured Parties wish to appoint the European Agent to hold certain security on trust for them.

(3) It is intended that this document takes effect as a deed notwithstanding the fact that a party may only execute this document under hand.

IT IS AGREED that:

1. INTERPRETATION

1.1 Definitions

“Accession Agreement” means an agreement by which a person becomes a party to this Deed, substantially in the form of Schedule 2 (Form of Accession Agreement) with such amendments as the European Agent may approve or reasonably require.

“Assignment and Assumption” has the meaning given to it in the Revolving Credit Facility Agreement.

“Borrower Group” shall have the meaning given to that term in the Revolving Credit Facility Agreement.

“Debt” means all Liabilities payable or owing by the Borrower Group to a Secured Party under or in connection with the Loan Documents.

“Loan Documents” shall have the meaning given to the term “Loan Documents” in the Revolving Credit Facility Agreement.

“Liability” means any present or future liability (actual or contingent) together with:

(a) any permitted, novation, deferral or extension of that liability;

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(b) any further advance made or which may be made under any agreement expressed to be supplemental to any document in respect of that liability together with all related interest, fees and costs;

(c) any claim for damages or restitution in the event of rescission of that liability or otherwise in respect of that liability;

(d) any claim flowing from any recovery by a payment or discharge in respect of that liability on grounds of preference or otherwise; and

(e) any amount (such as post-insolvency interest) which would be included in any of the above but for its discharge, non-provability, unenforceability or non-allowability in any Insolvency or other proceedings.

“Party” means a party to this Deed.

“Required Lenders” shall have the meaning given to that term in the Revolving Credit Facility Agreement.

“Loan Parties” shall have the meaning given to that term in the Revolving Credit Facility Agreement.

“Revolving Credit Facility Agreement” means a revolving credit agreement dated 27 April 2007 and amended and restated on or about the date of this Security Trust Deed and made between amongst others (1) the Company as UK Borrower, (2) JP Morgan Chase Bank, N.A. as US Administrative Agent and (3) J.P. Morgan Europe Limited in various capacities including as European Administrative Agent.

“Revolving Credit Facility Debenture” means the English law governed security agreement dated on or about the date of this Deed between the Company and the European Agent in connection with the Revolving Credit Facility Agreement.

“Revolving Credit Facility Share Charge” means the English law governed share charge dated on or about the date of this Deed between Patheon B.V. and the European Agent in connection with the Revolving Credit Facility Agreement.

“Secured Parties” means the Finance Parties as set out in Schedule 1 and any other party who accedes to this Deed as a Secured Party by way of an Accession Agreement.

“Security” means any Security Interest created, evidenced or conferred by or under the Security Documents.

“Security Document” means:

(a) the Revolving Credit Facility Debenture;

(b) the Revolving Credit Facility Share Charge;

(c) the Swiss Receivables Security Agreement; and

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(d) any other document designated as a “Security Document” by the Company and European Agent for the purposes of this Deed.

“Security Interest” means any mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having a similar effect.

“Swiss Receivables Security Agreement” means the English law governed receivables security agreement dated on or about the date of this Deed between Patheon International AG and the European Agent in connection with the Revolving Credit Facility Agreement.

1.2 Construction

(a) Capitalised terms defined in the Revolving Credit Facility Agreement have, unless expressly defined in this Deed, the same meaning in this Deed.

(b) In this Deed, unless the contrary intention appears, a reference to:

(i) an amendment includes a supplement, novation, extension (whether of maturity or otherwise), restatement, re-enactment or replacement (however fundamental and whether or not more onerous) and amended will be construed accordingly;

(ii) assets includes present and future properties, revenues and rights of every description;

(iii) an authorisation includes an authorisation, consent, approval, resolution, permit, licence, exemption, filing, registration or notarisation;

(iv) disposal means a sale, transfer, assignment, grant, lease, licence, declaration of trust or other disposal, whether voluntary or involuntary, and dispose will be construed accordingly;

(v) indebtedness includes any obligation (whether incurred as principal or as surety and whether present or future, actual or contingent) for the payment or repayment of money;

(vi) know your customer requirements are to the identification checks that a Secured Party requests in order to meet its obligations under any applicable law or regulation to identify a person who is (or is to become) its customer;

(vii) a person includes any individual, company, corporation, unincorporated association or body (including a partnership, trust, fund, joint venture or consortium), government, state, agency, organisation or other entity whether or not having separate legal personality;

(viii) a regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law but, if not having the

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force of law, being of a type with which any person to which it applies is accustomed to comply) of any governmental, inter-governmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

(ix) a currency is a reference to the lawful currency for the time being of the relevant country;

(x) a provision of law is a reference to that provision as extended, applied, amended or re-enacted and includes any subordinate legislation;

(xi) a Clause, a Subclause or a Schedule is a reference to a clause or subclause of, or a schedule to, this Deed;

(xii) a Party or any other person includes its successors in title, permitted assigns and permitted transferees;

(xiii) a Loan Document or other document or security includes (without prejudice to any prohibition on amendments) any amendment to that Loan Document or other document or security, including any change in the purpose of, any extension of or any increase in the amount of a facility or any additional facility; and

(xiv) a time of day is a reference to London time.

(c) Unless the contrary intention appears, a reference to a month or months is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month or the calendar month in which it is to end, except that:

(i) if the numerically corresponding day is not a Business Day, the period will end on the next Business Day in that month (if there is one) or the preceding Business Day (if there is not);

(ii) if there is no numerically corresponding day in that month, that period will end on the last Business Day in that month; and

(iii) notwithstanding subparagraph (i) above, a period which commences on the last Business Day of a month will end on the last Business Day in the next month or the calendar month in which it is to end, as appropriate.

(d) No part of this Deed creates a registrable Security Interest.

(e) Unless the contrary intention appears, a reference to a Party will not include that Party if it has ceased to be a Party under this Deed.

(f) The headings in this Deed do not affect its interpretation.

(g) If there is any conflict between the terms of this Deed and any other Loan Document (other than the Intercreditor Agreement) this Deed will prevail.

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(h) If the European Agent considers that an amount paid to a Secured Party under a Loan Document is capable of being avoided or otherwise set aside on the liquidation or administration of the payer or otherwise, then that amount will not be considered to have been irrevocably paid for the purposes of this Deed.

1.3 Third parties

(a) Except as otherwise expressly provided in this Deed, the terms of this Deed may be enforced only by a Party or any other person acceding to this Deed, and the operation of the Contracts (Rights of Third Parties) Act 1999 is excluded.

(b) Notwithstanding any term of this Deed, the consent of any third party is not required for any termination or amendment of this Deed.

1.4 Intercreditor Agreement governs

Notwithstanding any other provision contained herein, this Deed and the rights, remedies, duties and obligations provided for herein are subject in all respects to the provisions of the Intercreditor Agreement dated on or about the date of this Deed (the “Intercreditor Agreement”) among JP Morgan Chase Bank, N.A., as ABL Agent, Deutsche Bank Trust Company Americas, as Non-U.S. Notes Agent, Patheon Inc. and the subsidiaries of Patheon Inc. named therein. In the event of any conflict or inconsistency between the provisions of this Deed and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall prevail.

2. SECURITY

2.1 European Agent as holder of security

(a) Unless expressly provided to the contrary in any Loan Document, the European Agent holds any security created by a Security Document on trust for the Secured Parties as defined in the Security Documents. Section 1 of the Trustee Act 2000 will not apply to that trust. In the case of any inconsistency with the Trustee Act 2000, the terms of this Deed will constitute a restriction or exclusion for the purposes of that Act.

(b) Unless expressly provided to the contrary in any Loan Document, the European Agent holds:

(i) any security created by a Security Document; and

(ii) any proceeds of security,

for the benefit, and as the property, of the Secured Parties as defined in the Security Documents and so that they are not available to the personal creditors of the European Agent.

2.2 Responsibility

(a) The European Agent is not liable or responsible to any Secured Party for:

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(i) any failure in perfecting or protecting the security created by any Security Document; or

(ii) any other action taken or not taken by it in connection with any Security Document,

unless directly caused by its gross negligence or wilful misconduct.

(b) The European Agent is not responsible for:

(i) the right or title of any person in or to, or the value of, or sufficiency of any part of the security created by the Security Documents;

(ii) the priority of any security created by the Security Documents; or

(iii) the existence of any other Security Interest affecting any asset secured under a Security Document.

2.3 Title

The European Agent may accept, without enquiry, the title (if any) a Loan Party may have to any asset over which security is intended to be created by any Security Document.

2.4 Possession of documents

Unless the European Agent agrees otherwise, the European Agent is not obliged to hold in its own possession any Security Document, title deed or other document in connection with any asset over which security is intended to be created by a Security Document. Without prejudice to the above, the European Agent may allow any bank providing safe custody services or any professional adviser to the European Agent to retain any of those documents in its possession.

2.5 Investments

Except as otherwise provided in any Security Document, all moneys received by the European Agent under a Security Document may be:

(a) invested in the name of, or under the control of, the European Agent in any investment for the time being authorised by English law for the investment by trustees of trust money or any other investments which may be selected by the European Agent with the consent of the relevant Required Lenders in accordance with the Intercreditor Agreement; or

(b) placed on deposit in the name of, or under the control of, the European Agent at any bank or institution (including any Secured Party) and upon such terms as the European Agent may think fit.

2.6 Approval

Each Secured Party:

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(a) confirms its approval of each Security Document; and

(b) authorises and directs the European Agent (by itself or by any person(s) as it may nominate) to enter into and enforce the Security Documents as trustee (or agent) or as otherwise provided (and whether or not expressly in that Secured Party’s name) on its behalf.

2.7 Conflict with Security Documents

If there is any conflict between this Deed and any Security Document with regard to instructions to, or other matters affecting the European Agent, this Deed will prevail.

2.8 Release of security

(a) If a disposal of any asset subject to security created by a Security Document is made to a person where:

(i) the relevant Required Lenders have agreed to the disposal in accordance with the terms the Revolving Credit Facility Agreement; or

(ii) the disposal is allowed by the terms of the Loan Documents; or

(iii) the disposal is being made at the request of the European Agent in circumstances where any security created by the Security Documents has been enforced in accordance with the terms of the relevant Security Document,

the asset(s) being disposed of will be released from any security over it created by a Security Document. However the proceeds of any disposal (or an amount corresponding to them) must be applied in accordance with the requirements (if any) of the Loan Documents.

(b) Any release under this Subclause will not become effective until the date of the relevant disposal or otherwise in accordance with the consent of the relevant Required Lenders.

(c) If a disposal is not made, then any release relating to that disposal will have no effect, and the obligations of the Loan Parties under the Loan Documents will continue in full force and effect.

(d) If the European Agent is satisfied that a release is allowed under this Subclause, (at the request and expense of the Company or the Swiss Company) each Secured Party must enter into any document and do all such other things which are reasonably required to achieve that release. Each other Secured Party irrevocably authorises the European Agent to enter into any such document. Any release will not affect the obligations of any other Loan Party under the Loan Documents.

2.9 Certificate of non-crystallisation

The European Agent may, at the cost and request of the Company, issue certificates of non-crystallisation.

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2.10 Enforcement instructions

(a) The European Agent may refrain from enforcing the security created by a Security Document unless instructed otherwise by the relevant Required Lenders in accordance with the terms of the Revolving Credit Facility Agreement.

(b) If the security created by a Security Document becomes enforceable, relevant Required Lenders may give or refrain from giving instructions to the European Agent to enforce or refrain from enforcing that security as they see fit.

(c) The European Agent must, subject to the terms of the Security Documents, enforce the Security created by a Security Document in accordance with the instructions of relevant Required Lenders.

(d) In the absence of instructions, the European Agent may enforce the security created by a Security Document as it sees fit having regard first to the interests of the Secured Parties.

(e) None of the European Agent or the Secured Parties is responsible to any Loan Party for any enforcement or failure to enforce or to maximise the proceeds of any enforcement of the security created by the Security Documents. The European Agent or any Secured Party may cease enforcement at any time.

(f) The European Agent is fully protected if it acts on the instructions of relevant Required Lenders in the exercise of any right, power or discretion or any matter not expressly provided for in the Security Documents.

2.11 Competing instructions to European Agent

Any instructions given to the European Agent by the relevant Required Lenders will override any conflicting instructions given by any other Party.

2.12 Perpetuity period

The perpetuity period for trusts in this Deed is 80 years.

3. THE EUROPEAN AGENT

3.1 Appointment and duties of the European Agent

(a) Each Secured Party appoints the European Agent to act as its agent in respect of the Security under and in connection with the Security Documents.

(b) Each Secured Party irrevocably authorises the European Agent to:

(i) perform the duties and to exercise the rights, powers and discretions that are specifically given to it under the Security Documents, together with any other incidental rights, powers and discretions; and

(ii) enter into and deliver each Security Document expressed to be entered into by the European Agent.

8

(c) The European Agent has only those duties which are expressly specified in the Security Documents. Those duties are solely of a mechanical and administrative nature.

3.2 No fiduciary duties

Except as specifically provided in a Loan Document:

(a) nothing in the Loan Documents makes the European Agent a trustee or fiduciary for any other Party or any other person; and

(b) the European Agent need not hold in trust any moneys paid to it for a Party or be liable to account for interest on those moneys.

3.3 Individual position of the European Agent

(a) If it is also a Secured Party, the European Agent has the same rights and powers under the Loan Documents as any other Secured Party and may exercise those rights and powers as though it were not the European Agent.

(b) The European Agent may:

(i) carry on any business with any Loan Party or its related entities (including acting as an agent or a trustee for any other financing); and

(ii) retain any profits or remuneration it receives under the Loan Documents or in relation to any other business it carries on with any Loan Party or its related entities.

3.4 Reliance

The European Agent may:

(a) rely on any notice or document believed by it to be genuine and correct and to have been signed by, or with the authority of, the proper person;

(b) rely on any statement made by any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify;

(c) assume, unless the context otherwise requires, that any communication made by a Loan Party is made on behalf of and with the consent and knowledge of each Loan Party;

(d) engage, pay for and rely on professional advisers selected by it (including those representing a Party other than the European Agent); and

(e) act under the Security Documents through its personnel and agents.

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3.5 Required Lenders’ instructions

(a) The European Agent is fully protected if it acts on the instructions of the relevant Required Lenders in the exercise of any right, power or discretion or any matter not expressly provided for in the Security Documents. Any such instructions given by the relevant Required Lenders will be binding on all the Secured Parties. In the absence of instructions, the European Agent may act or refrain from acting as it considers to be in the best interests of the relevant Required Lenders.

(b) The European Agent may assume that unless it has received notice to the contrary, any right, power, authority or discretion vested in any Party or the relevant Required Lenders has not been exercised.

(c) The European Agent may refrain from acting (in accordance with the instructions of the relevant Required Lenders (or, if appropriate, the relevant Required Lenders)) until it has received security satisfactory to it, whether by way of payment in advance or otherwise, against any liability or loss which it may incur in complying with the instructions.

(d) The European Agent is not authorised to act on behalf of a Secured Party (without first obtaining that Secured Party’s consent) in any legal or arbitration proceedings in connection with any Security Document, unless the legal or arbitration proceedings relate to:

(i) the perfection, preservation or protection of rights under any Security Document; or

(ii) the enforcement of any Security Document.

(e) The European Agent may require the receipt of security satisfactory to it, whether by way of payment in advance or otherwise, against any liability or loss which it may incur in complying with the instructions of the relevant Required Lenders.

3.6 Responsibility

(a) The European Agent is not responsible for the adequacy, accuracy or completeness of any statement or information (whether written or oral) made in or supplied in connection with any Loan Document.

(b) The European Agent is not responsible for the legality, validity, effectiveness, adequacy, completeness or enforceability of any Loan Document or any other document.

(c) Without affecting the responsibility of the Company or the Swiss Company for information supplied by it or on its behalf in connection with any Loan Document, each Secured Party confirms that it:

(i) has made, and will continue to make, its own independent appraisal of all risks arising under or in connection with the Loan Documents (including the financial condition and affairs of the Company or the

10

Swiss Company and its related entities and the nature and extent of any recourse against any Party or its assets); and

(ii) has not relied exclusively on any information provided to it by the European Agent in connection with any Loan Document or agreement entered into in anticipation of or in connection with any Loan Document.

3.7 Exclusion of liability

(a) The European Agent is not liable to any Secured Party for any action taken or not taken by it in connection with any Loan Document, unless directly caused by its gross negligence or wilful misconduct.

(b) No Party (other than the European Agent) may take any proceedings against any officer, employee or agent of the European Agent in respect of any claim it might have against the European Agent or in respect of any act or omission of any kind by that officer, employee or agent in connection with any Loan Document. Any officer, employee or agent of the European Agent may rely on this Subclause and enforce its terms under the Contracts (Rights of Third Parties) Act 1999.

(c) The European Agent is not liable for any delay (or related consequences) in crediting an account with an amount required under the Loan Documents to be paid by the European Agent if the European Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the European Agent for that purpose.

(i) (Nothing in this Deed will oblige the European Agent to satisfy any know your customer requirement in relation to the identity of any person on behalf of any Secured Party.

(ii) Each Secured Party confirms to the European Agent that it is solely responsible for any know your customer requirements it is required to carry out and that it may not rely on any statement in relation to those requirements made by any other person.

3.8 Default

The European Agent is not obliged to monitor or enquire whether a Default has occurred. The European Agent is not deemed to have knowledge of the occurrence of a Default.

3.9 Information

(a) The European Agent must promptly forward to the person concerned the original or a copy of any document which is delivered to the European Agent by a Party for that person.

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(b) Except where a Loan Document specifically provides otherwise, the European Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.

(c) Except as provided above, the European Agent has no duty:

(i) either initially or on a continuing basis to provide any Secured Party with any credit or other information concerning the risks arising under or in connection with the Loan Documents (including any information relating to the financial condition or affairs of any Loan Party or its related entities or the nature or extent of recourse against any Party or its assets) whether coming into its possession before, on or after the date of this Deed; or

(ii) unless specifically requested to do so by a Secured Party in accordance with a Loan Document, to request any certificate or other document from the Company or the Swiss Company.

(d) In acting as the European Agent, the European Agent will be regarded as acting through its agency division which will be treated as a separate entity from its other divisions and departments. Any information acquired by the European Agent which, in its opinion, is acquired by another division or department or otherwise than in its capacity as the European Agent may be treated as confidential by the European Agent and will not be treated as information possessed by the European Agent in its capacity as such.

(e) The European Agent is not obliged to disclose to any person any confidential information supplied to it by or on behalf of the Company or the Swiss Company solely for the purpose of evaluating whether any waiver or amendment is required in respect of any term of the Loan Documents.

(f) The Company and the Swiss Company irrevocably authorise the European Agent to disclose to each Secured Party any information which, in its opinion, is received by it in its capacity as the European Agent.

3.10 Indemnities

(a) Without limiting the liability of any Loan Party under any Loan Document, each Secured Party must indemnify the European Agent for that Secured Party’s share of any loss or liability incurred by the European Agent in acting in its capacity as the European Agent for the Secured Parties, (unless the European Agent has been reimbursed by a Loan Party under a Loan Document) except to the extent that the loss or liability is caused by the European Agent’s gross negligence or wilful misconduct.

(b) A Secured Party’s share of any loss or liability under paragraph (a) above will be the proportion which the aggregate amount of Debt owing to it and available to be drawn from it under the Loan Documents bears to all the Debt then owing and available to be drawn under the Loan Documents as calculated by the European Agent. If the Debt is denominated in more than one

12

currency, the European Agent may use whatever rate of exchange it considers appropriate for this purpose.

(c) The European Agent may deduct from any amount received by it for a Secured Party any amount due to the European Agent from that Secured Party under a Loan Document but unpaid.

3.11 Compliance

The European Agent may refrain from doing anything (including disclosing any information) which might, in its opinion, constitute a breach of any law or regulation or be otherwise actionable at the suit of any person, and may do anything which, in its opinion, is necessary or desirable to comply with any law or regulation.

3.12 Resignation of the European Agent

(a) The European Agent may resign and appoint any of its Affiliates as successor European Agent by giving notice to the other Secured Parties, the Company and the Swiss Company.

(b) Alternatively, the European Agent may resign by giving notice to the Secured Parties, the Company and the Swiss Company, in which case the Required Lenders may appoint a successor European Agent resident in the U.K.

(c) If no successor European Agent has been appointed under paragraph (b) above within 30 days after notice of resignation was given, the European Agent may appoint a successor European Agent resident in the U.K.

(d) The resignation of the European Agent and the appointment of any successor European Agent must be effected by deed and will both become effective only when the following conditions have been satisfied:

(i) the successor European Agent notifies all the Parties that it accepts its appointment;

(ii) the successor European Agent has received legal advice to the effect that the rights under the Loan Documents (and any related documentation) have been transferred or assigned to it; and

(iii) each Secured Party (other than the European Agent) confirms to the European Agent that it is satisfied with the credit rating of the proposed successor European Agent.

On satisfaction of the above conditions, the successor European Agent will succeed to the position of the European Agent and the term European Agent will mean the successor European Agent.

(e) The retiring European Agent must, at its own cost make available to the successor European Agent those documents and records and provide any assistance as the successor European Agent may reasonably request for the purposes of performing its functions as the European Agent under the Loan Documents;

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(f) The Company and the Swiss Company must take any action and enter into and deliver any document which is reasonably required by the European Agent to ensure that a Security Document provides for effective and perfected Security Interests in favour of any successor European Agent.

(g) Upon its resignation becoming effective, this Clause will continue to benefit the retiring European Agent in respect of any action taken or not taken by it in connection with the Loan Documents while it was the European Agent, and, subject to paragraph (e) above, it will have no further obligations under any Loan Document.

(h) The Required Lenders may, by notice to the European Administrative Agent (as defined in the Revolving Credit Facility Agreement) and the European Agent, require the European Agent to resign under paragraph (b) above.

3.13 Relationship with Secured Parties

(a) The European Agent may treat each Secured Party as a Secured Party, entitled to payments under this Deed and as acting through its designated office until it has received not less than five Business Days’ prior notice from that Secured Party to the contrary.

(b) The European Agent may at any time, and must if requested to do so by the relevant Required Lenders, convene a meeting of the Secured Parties.

(c) The European Agent must keep a record of all the Parties and supply any other Party with a copy of the record on request.

3.14 Additional European Agent

The European Agent may at any time appoint (and subsequently remove) any person to act as a separate security trustee or as a co-trustee jointly with it:

(a) if it is necessary in performing its duties and if the European Agent considers that appointment to be in the interest of the Secured Parties; or

(b) for the purposes of complying with or confirming to any legal requirements, restrictions or conditions which the European Agent deems to be relevant; or

(c) for the purposes of obtaining or enforcing any judgment or decree in any jurisdiction,

and the European Agent will give notice to the other Parties of any such appointment.

4. STATUS OF THE COMPANIES

The Company and the Swiss Company are Parties solely for the purpose of acknowledging the priorities, rights and obligations recorded in this Deed. The Company and the Swiss Company do not have any rights under this Deed and no undertaking is given (or deemed to be given) to, or for the benefit of, the Company or the Swiss Company.

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5. CHANGES TO THE PARTIES

5.1 Companies

Neither the Company nor the Swiss Company may assign or transfer any of its rights (if any) and obligations under this Deed without the prior consent of the Secured Parties.

5.2 Secured Parties

Each party to this Deed agrees and acknowledges that the Secured Parties may assign or transfer their respective rights, liabilities and/or obligations under this Deed in accordance with the provisions of the Revolving Credit Facility Agreement, provided that (1) such assignment or transfer is in connection with the disposal of corresponding rights, liabilities and/or obligations under the Revolving Credit Facility Agreement and (2) the person to whom such assignment or transfer is made accedes to this Deed by delivering to the European Agent a duly dated and executed Accession Agreement or, as the case may be, a duly dated and executed Assignment and Assumption. Each party irrevocably authorises the European Agent to accept such Accession Agreement or, as the case may be, Assignment and Assumption on its behalf provided that such authorisation does not extend to the acceding party named in such Accession Agreement or, as the case may be, Assignment and Assumption.

6. EXPENSES

6.1 European Agent’s subsequent costs and enforcement costs

The parties hereto agree that the European Agent shall be entitled to reimbursement of its expenses incurred hereunder as provided in section 9.03 of the Revolving Credit Agreement.

6.2 European Agent’s on-going costs

(a) If:

(i) a Default occurs;

(ii) the European Agent considers it necessary or expedient; or

(iii) the European Agent is requested by a Loan Party or the relevant Required Lenders to undertake duties which the European Agent and the Company agree to be of an exceptional nature or outside the scope of the normal duties of the European Agent under the Security Documents,

the Company must pay to the European Agent any additional remuneration which may be agreed between them.

(b) If the European Agent and the Company fail to agree:

(i) whether the duties are of an exceptional nature or outside the scope of the normal duties of the European Agent; or

15

(ii) the appropriate amount of any additional remuneration,

the dispute will be determined by an investment bank (acting as an expert and not as an arbitrator) selected by the European Agent and approved by the Company.

(c) If the Company does not approve the investment bank selected by the European Agent, the dispute will be determined by an investment bank nominated (on application by the European Agent) by the President for the time being of the Law Society of England and Wales.

(d) The Company must pay the costs of nomination and of the investment bank.

(e) The determination of any investment bank will be final and binding on the Parties.

6.3 Notice period

Where this Deed specifies a minimum period of notice to be given to the European Agent, the European Agent may, at its discretion, accept a shorter notice period.

7. SEVERABILITY

If a term of this Deed is or becomes illegal, invalid or unenforceable in any respect under any jurisdiction, that will not affect:

(a) the legality, validity or enforceability in that jurisdiction of any other term of this Deed; or

(b) the legality, validity or enforceability in other jurisdictions of that or any other term of this Deed.

8. COUNTERPARTS

This Deed may be executed in any number of counterparts. This has the same effect as if the signatures on the counterparts were on a single copy of this Deed.

9. NOTICES

Any communication in connection with this Deed shall be given in accordance with section 9.01 of the Revolving Credit Facility Agreement.

10. LANGUAGE

(a) Any notice given in connection with this Deed must be in English.

(b) Any other document provided in connection with this Deed must be:

(i) in English; or

(ii) (unless the European Agent otherwise agrees) accompanied by a certified English translation. In this case, the English translation prevails unless the document is a statutory or other official document.

16

11. GOVERNING LAW

This Deed is governed by English law.

12. ENFORCEMENT

12.1 Jurisdiction

(a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Deed (including a dispute regarding the existence, validity or termination of this Deed) (a “Dispute”).

(b) The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly neither Party will argue to the contrary.

(c) This Clause 12.1 is for the benefit of the European Agent only. As a result, the European Agent shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the European Agent may take concurrent proceedings in any number of jurisdictions.

12.2 Waiver of trial by jury

Each party waives any right it may have to a jury trial of any claim or cause of action in connection with this deed or any transaction contemplated by this deed. This deed may be filed as a written consent to trial by court.

This Deed has been entered into on the date stated at the beginning of this Deed.

17

SCHEDULE 1

ORIGINAL PARTIES

Finance Parties

1. JP Morgan Chase Bank, N.A.

2. JP Morgan Chase Bank, N.A., Toronto Branch

3. J.P. Morgan Europe Limited

4. JP Morgan Securities Inc.

5. UBS Securities LLC

6. UBS Loan Finance LLC

7. Wells Fargo Capital Finance LLC

8. General Electric Capital Corporation

9. Scotiabank de Puerto Rico

10. CIT Business Credit Canada Inc.

11. Wells Fargo Financial Corporation Canada

12. Barclays Bank PLC

18

SCHEDULE 2

FORM OF ACCESSION AGREEMENT

To: [EUROPEAN AGENT] as the European Agent

From: [PROPOSED NEW PARTY]

Date: [—]

Patheon UK Limited – Security Trust Deed dated [—] (the “Security Trust Deed”)

We refer to the Security Trust Deed. Capitalised terms defined in the Security Trust Deed have the same meaning in this deed. This deed is an Accession Agreement.

We, [name of new Party] of [address/registered office], agree to be [a Secured Party/the European Agent] under the Security Trust Deed and to be bound by the terms of the Security Trust Deed as [a Secured Party//the European Agent].

Our contact details are as follows:

[

].

This deed is intended to be executed as a deed and is governed by English law.

By:

[PROPOSED NEW PARTY]

[Execution under seal]

19

EXECUTION of Security Trust Deed:
Company
EXECUTED AS A DEED by	)
PATHEON UK LIMITED	)
acting by Ian Jones	)
Director
In the presence of:
Name:
Address:
Occupation:
Swiss Company
EXECUTED AS A DEED by	)
PATHEON INTERNATIONAL AG	)
acting by Doaa Fathallah	)
Member of the Board of Directors
In the presence of:
Name:
Address:
Occupation:

20

Finance Parties
EXECUTED as a deed by	)
JPMORGAN CHASE BANK, N.A.	)
acting by	)
its duly authorised attorney
In the presence of:
Name:
Address:
Occupation:
EXECUTED as a deed by	)
JPMORGAN CHASE BANK, N.A.,	)
TORONTO BRANCH	)
acting by
its duly authorised attorney
In the presence of:
Name:
Address:
Occupation:
EXECUTED as a deed by	)
J.P. MORGAN EUROPE LIMITED	)
acting by	)
its duly authorised attorney
In the presence of:
Name:
Address:
Occupation:
EXECUTED as a deed by	)
JP MORGAN SECURITIES INC.	)
acting by	)
its duly authorised attorney
In the presence of:
Name:
Address:

21

Occupation:
EXECUTED as a deed by	)
UBS SECURITIES LLC	)
acting by	)
its duly authorised attorney
In the presence of:
Name:
Address:
Occupation:
EXECUTED as a deed by	)
UBS LOAN FINANCE LLC	)
acting by	)
its duly authorised attorney
In the presence of:
Name:
Address:
Occupation:
EXECUTED as a deed by	)
WELLS FARGO CAPITAL	)
FINANCE LLC	)
acting by
its duly authorised attorney
In the presence of:
Name:
Address:
Occupation:
EXECUTED as a deed by	)
GENERAL ELECTRIC CAPITAL	)
CORPORATION	)
acting by
its duly authorised attorney
In the presence of:
Name:
Address:
Occupation:

22

EXECUTED as a deed by	)
SCOTIABANK DE PUERTO RICO	)
acting by	)
its duly authorised attorney
In the presence of:
Name:
Address:
Occupation:
EXECUTED as a deed by	)
CIT BUSINESS CREDIT CANADA INC.	)
acting by	)
its duly authorised attorney
In the presence of:
Name:
Address:
Occupation:
EXECUTED as a deed by	)
WELLS FARGO	)
acting by	)
its duly authorised attorney
In the presence of:
Name:
Address:
Occupation:
EXECUTED as a deed by	)
BARCLAYS BANK PLC	)
acting by	)
its duly authorised attorney
In the presence of:
Name:
Address:
Occupation:

23

European Agent
EXECUTED as a deed by	)
J.P. MORGAN EUROPE LIMITED	)
acting by	)
its duly authorised attorney
In the presence of:
Name:
Address:
Occupation:

24

Exhibit J

EXECUTION VERSION

Dated 23 April 2010

(1)    PATHEON B.V. as Chargor

(2)    J.P. MORGAN EUROPE LIMITED as

European Agent

REVOLVING CREDIT FACILITY SHARE CHARGE

LONDON

CONTENTS

		Page
Clause
1.	Interpretation		1
2.	Creation of Security		7
3.	Further Assurances		7
4.	Restrictions on dealings		8
5.	Representations and Warranties		8
6.	Shares		10
7.	Preservation of Security		13
8.	When security becomes enforceable		15
9.	Enforcement of Security		15
10.	Receiver		16
11.	Powers of Receiver		17
12.	Application of Proceeds		18
13.	Expenses and Indemnity		19
14.	Delegation		20
15.	Power of Attorney		20
16.	Changes to the parties		20
17.	Miscellaneous		20
18.	Release		21
19.	Evidence and Calculations		21
20.	Notices		22
21.	Language		22
22.	Severability		22
23.	Waivers and Remedies Cumulative		22
24.	Counterparts		22
25.	Governing Law		22
26.	Enforcement		23
Schedule
1.	Shares		25

THIS DEED is dated 23 April 2010 and is made

BETWEEN:

(1) PATHEON B.V. a company existing under the laws of The Netherlands, having its official seat in Herengracht 483, 1017 BT Amsterdam (trade register number 34109289) (the “Chargor”); and

(2) J.P. MORGAN EUROPE LIMITED (the “European Agent”) as agent and trustee for the Finance Parties.

BACKGROUND:

(A) Pursuant to the Security Trust Deed, the Finance Parties have appointed the European Agent as their agent and trustee in connection with the Revolving Credit Facility Agreement.

(B) The Chargor enters into this Share Charge in connection with, among others, the Revolving Credit Facility Agreement.

(C) It is intended that this document takes effect as a deed notwithstanding the fact that a party may only execute this document under hand.

IT IS AGREED as follows:

1. INTERPREATION

1.1 Definitions

In this Share Charge:

“Act” means the Law of Property Act 1925.

“Cash Management Arrangement” shall have the meaning given to that term in the Revolver Guarantor Agreement.

“Excluded Assets” shall have the meaning given to that term in the Revolving Credit Facility Agreement.

“Finance Document” means

(a) Loan Documents;

(b) Revolver Guarantor Agreement; and

(c) Intercreditor Agreement.

“Group” means the Parent and its Subsidiaries.

“Guarantor” shall have the meaning given to that term in the Revolver Guarantor Agreement.

“Intercreditor Agreement” has the meaning given to it in Clause 1.3.

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“Legal Reservations” means:

(a) the principle that equitable remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to insolvency, reorganisation and other laws generally affecting the rights of creditors;

(b) the time barring of claims under the Limitation Acts, the possibility that an undertaking to assume liability for or indemnify a person against non-payment of UK stamp duty may be void and defences of set-off or counterclaim;

(c) similar principles, rights and defences under the laws of any relevant jurisdiction; and

(d) any other matters which are set out as qualifications or reservations as to matters of law of general application in the legal opinions provided pursuant to Section 4.01(b)(iii) of the Revolving Credit Facility Agreement.

“Loan Documents” shall have the meaning given to the term in the Revolving Credit Facility Agreement.

“Loan Secured Liabilities” means:

(a) the due and punctual payment by each Borrower of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on its Loans and any advances under the UK Overdraft Facility, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by such Borrower under the Revolving Credit Facility Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral, (iii) in the case of the Parent Borrower, each payment required to be made by the Parent Borrower under the Revolving Credit Facility Agreement in respect of any B/A and (iv) all other monetary obligations of such Borrower to any of the Finance Parties under the Revolving Credit Facility Agreement and each of the other Finance Documents, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding);

(a) the due and punctual performance of all other obligations of any of the Borrowers under or pursuant to the Revolving Credit Facility Agreement and each of the other Finance Documents; and

(b) the due and punctual payment and performance of all the obligations of each other Obligor under or pursuant to this Share Charge and each of the other Finance Documents,

2

but excluding any obligation which, if it were so included, would result in this Share Charge contravening Section 678 of the Companies Act 2006.

“Obligor” means the Guarantors, the Chargor and each other Loan Party.

“Other Secured Liabilities” means the due and punctual payment and performance of all obligations of each Obligor under each Swap Agreement and Cash Management Arrangement that:

(a) is in effect on the Effective Date with a counterparty that is a Lender or an Affiliate of a Lender as of the Effective Date;

(b) is entered into after the Effective Date with any counterparty that is a Lender or an Affiliate of a Lender at the time such Swap Agreement or Cash Management Arrangement is entered into; or

(c) is arranged by a Lender or an Affiliate of a Lender and approved by the European Agent,

but excluding any obligation which, if it were so included, would result in this Share Charge contravening Section 678 of the Companies Act 2006.

“Party” means a party to this Share Charge.

“Receiver” means a receiver and manager or a receiver, in each case, appointed under this Share Charge.

“Related Rights” means:

(a) any dividend, interest or other distribution paid or payable in relation to any Shares; and

(b) any right, money or property accruing or offered at any time in relation to any Shares by way of redemption, substitution, exchange, bonus or preference, under option rights or otherwise.

“Revolving Credit Facility Agreement” means the US$75,000,000 amended and restated revolving credit facility agreement dated on or about the date of this Share Charge between, among others, the Chargor and the European Agent.

“Revolver Guarantor Agreement” means the guarantor agreement dated on or about the date of this Share Charge between (among others) the Chargor and the European Agent in respect of the obligations of the relevant Obligors under, among others, the Loan Documents, any Swap Agreement and any Cash Management Arrangement.

“Secured Liabilities” means the Loan Secured Liabilities and the Other Secured Liabilities.

“Secured Party” means

(a) a Lender;

3

(b) an Agent;

(c) an Issuing Bank;

(d) an Arranger;

(e) each counterparty to any Swap Agreement or Cash Management Arrangement with a Loan Party the obligations under which constitute the Secured Liabilities;

(f) the beneficiaries of each indemnity or other obligation undertaken by any Loan Party under any Loan Document; and

(g) the permitted successors and assigns of each of the foregoing.

“Security” means any Security Interest created, evidenced or conferred by or under this Share Charge.

“Security Assets” means all assets of the Chargor the subject of any security created by this Share Charge.

“Security Interest” means any mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having a similar effect.

“Security Period” means the period beginning on the date of this Share Charge and ending on the later of (1) the date on which all the Loan Secured Liabilities have been unconditionally and irrevocably paid and discharged in full or (2) if, at least two Business Days prior to the time which all the Loan Secured Liabilities would otherwise have been unconditionally and irrevocably paid and discharged in full, the European Agent shall have received written notice that any Other Secured Liabilities are then due and payable but have not been paid, the date on which all such Other Secured Liabilities that are then due and payable have been unconditionally and irrevocably paid and discharged in full.

“Security Trust Deed” means the security trust deed entered into on or about the date of this Share Charge between, among others, the European Agent and the other Secured Parties.

“Shares” means all the shares in the capital of the Subject Company of whatever class now or hereafter owned by the Chargor, including but not limited to the shares specified in Schedule 1 (Shares).

“Subject Company” means the company identified in Schedule 1 (Shares).

1.2 Construction

(a) Capitalised terms defined in the Revolving Credit Facility Agreement have, unless expressly defined in this Share Charge, the same meaning in this Share Charge.

(b) In this Share Charge, unless the contrary intention appears, a reference to:

4

(i) an amendment includes a supplement, novation, restatement or re-enactment and amended will be construed accordingly;

(ii) assets includes present and future properties, revenues and rights of every description;

(iii) an authorisation includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration or notarisation;

(iv) disposal means a sale, transfer, grant, lease or other disposal, whether voluntary or involuntary, and dispose will be construed accordingly;

(v) indebtedness includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money;

(vi) a person includes any individual, company, corporation, unincorporated association or body (including a partnership, trust, joint venture or consortium), government, state, agency, organisation or other entity whether or not having separate legal personality;

(vii) a regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law but, if not having the force of law, being of a type with which any person to which it applies is accustomed to comply) of any governmental, inter-governmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

(viii) a currency is a reference to the lawful currency for the time being of the relevant country;

(ix) a provision of law is a reference to that provision as extended, applied, amended or re-enacted and includes any subordinate legislation;

(x) a Clause, a Subclause or a Schedule is a reference to a clause or subclause of, or a schedule to, this Share Charge;

(xi) a Party or any other person includes its successors in title, permitted assigns and permitted transferees;

(xii) a Finance Document or other document includes (without prejudice to any prohibition on amendments) all amendments however fundamental to that Finance Document or other document, including any amendment providing for any increase in the amount of a facility or any additional facility; and

(xiii) a time of day is a reference to London time.

(c) Unless expressly provided to the contrary in a Finance Document, a person who is not a party to a Finance Document may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999 and, notwithstanding any term of any Finance Document, no consent of any third party is required

5

for any amendment (including any release or compromise of any liability) or termination of any Finance Document.

(d) Unless the contrary intention appears:

(i) a reference to a Party will not include that Party if it has ceased to be a Party under this Share Charge;

(ii) a word or expression used in any notice given in connection with this Share Charge has the same meaning as in this Share Charge; and

(iii) any obligation of an Obligor under the Finance Documents which is not a payment obligation remains in force for so long as any payment obligation of an Obligor is or may be outstanding under the Finance Documents.

(e) The headings in this Share Charge do not affect its interpretation.

(f) A reference to a Finance Document or other document or security includes (without prejudice to any prohibition on amendments) any amendment to that Finance Document or other document or security, including any change in the purpose of, any extension or any increase in the amount of a facility or any additional facility.

(g) Any covenant of the Chargor under this Share Charge (other than a payment obligation) remains in force during the Security Period and is given for the benefit of each Finance Party.

(h) If the European Agent considers that an amount paid to a Secured Party under a Finance Document is capable of being avoided or otherwise set aside on the liquidation or administration of the payer or otherwise, then that amount will not be considered to have been irrevocably paid for the purposes of this Share Charge.

(i) Unless the context otherwise requires, a reference to a Security Asset includes:

(i) any part of that Security Asset; and

(ii) the proceeds of that Security Asset.

(j) For the purposes of the Revolving Credit Facility Agreement, this Share Charge is the UK Share Charge.

1.3 Intercreditor Agreement governs

Notwithstanding any other provision contained herein, this Share Charge, the Security Interests created hereby and the rights, remedies, duties and obligations provided for herein are subject in all respects to the provisions of the Intercreditor Agreement dated on or about the date of this Share Charge (the “Intercreditor Agreement”) among JPMorgan Chase Bank, N.A., as ABL Agent, Deutsche Bank Trust Company Americas, as Notes Agent, Patheon Inc. and the subsidiaries of Patheon Inc. named therein. In the event of any conflict or inconsistency between the provisions of this

6

Agreement and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control.

2. CREATION OF SECURITY

2.1 General

(a) All the security created under this Share Charge:

(i) is created in favour of the European Agent;

(ii) is security for the payment, discharge and performance of all the Secured Liabilities; and

(iii) is made with full title guarantee in accordance with the Law of Property (Miscellaneous Provisions) Act 1994.

(b) The European Agent holds the benefit of this Share Charge on trust for the Finance Parties.

2.2 Shares

The Chargor charges by way of a first fixed charge except to the extent constituting Excluded Assets:

(a) all the Shares; and

(b) all Related Rights.

3. FURTHER ASSURANCES

The Chargor must, at its own expense, take whatever action the European Agent or a Receiver may require for:

(a) creating, perfecting or protecting any security intended to be created by or pursuant to this Share Charge;

(b) facilitating the realisation of any Security Asset;

(c) facilitating the exercise of any right, power or discretion exercisable, by the European Agent or any Receiver or any of their delegates or sub-delegates in respect of any Security Asset; or

(d) creating and perfecting security in favour of the European Agent (equivalent to the security intended to be created by this Share Charge) over any Security Assets located in any jurisdiction outside England and Wales.

This includes:

(i) the re-execution of this Share Charge;

7

(ii) after the security created in this Share Charge has become enforceable, the execution of any transfer whether to the European Agent or to its nominee; and

(iii) the giving of any notice and the making of any filing or registration,

which in any such case, the European Agent may think necessary.

4. RESTRICTIONS ON DEALINGS

The Chargor must not:

(a) create or permit to subsist any Security Interest on any Security Asset; or

(b) sell, transfer, or otherwise dispose of any Security Asset, save as expressly permitted under the Loan Documents.

5. REPRESENTATIONS AND WARRANTIES

5.1 Representations and warranties

The Chargor makes the representations and warranties set out in this Clause to each Secured Party.

5.2 Nature of security

This Share Charge creates those Security Interests it purports to create and is not liable to be avoided or otherwise set aside on its liquidation or administration or otherwise.

5.3 Shares

(a) The Shares are duly authorised, validly issued and fully paid and are not subject to any option to purchase or similar right.

(b) The Shares represent the whole of the issued share capital of the Subject Company.

(c) The Chargor is the sole beneficial owner of the Shares and will, following (i) the payment of stamp duty (if any) in respect of the transfer of Shares from Patheon Cyprus Holdings Ltd to the Chargor and (ii) the updating of the relevant register of members of the Subject Company, be the sole legal owner of the Shares.

5.4 Stamp duties

No stamp or registration duty or similar Tax or charge is payable in its jurisdiction of incorporation in respect of this Share Charge.

8

5.5 Immunity

(a) The entry into by it of this Share Charge constitutes, and the exercise by it of its rights and performance of its obligations under this Share Charge will constitute, private and commercial acts performed for private and commercial purposes.

(b) It will not be entitled to claim immunity from suit, execution, attachment or other legal process in any proceedings taken in its jurisdiction of incorporation in relation to this Share Charge.

5.6 No adverse consequences

(a) It is not necessary under the laws of its jurisdiction of incorporation:

(i) in order to enable any Secured Party to enforce its rights under this Share Charge; or

(ii) by reason of the entry into of any Finance Document or the performance by it of its obligations under this Share Charge,

that any Secured Party should be licensed, qualified or otherwise entitled to carry on business in its jurisdiction of incorporation.

(b) No Secured Party is or will be deemed to be resident, domiciled or carrying on business in its jurisdiction of incorporation by reason only of the entry into, performance and/or enforcement of this Share Charge.

5.7 Jurisdiction/governing law

Subject to the Legal Reservations:

(a) its:

(i) irrevocable submission under this Share Charge to the jurisdiction of the courts of England;

(ii) agreement that this Share Charge is governed by English law; and

(iii) agreement not to claim any immunity to which it or its assets may be entitled,

are legal, valid and binding under the laws of its jurisdiction of incorporation; and

(b) any judgment obtained in England will be recognised and be enforceable by the courts of its jurisdiction of incorporation.

5.8 Times for making representations and warranties

(a) The representations and warranties set out in this Share Charge (including in this Clause) are made on the date of this Share Charge.

9

(b) Each representation and warranty under this Share Charge is deemed to be repeated by the Chargor on each date the representations and warranties set out in Section III of the Revolving Credit Facility Agreement are made or deemed to be made by each Borrower.

(c) When a representation and warranty is deemed to be repeated, it is applied to the circumstances existing at the time of repetition.

6. SHARES

6.1 Deposit

The Chargor must:

(a) promptly after the share certificates in the name of the Chargor have been issued deposit with the European Agent or, as the European Agent may direct, all certificates, blank stock transfer forms and other documents of title or evidence of ownership in relation to the Security Assets in accordance with the Collateral and Guarantee Requirement (as defined in the Revolving Credit Facility Agreement); and

(b) promptly on demand by the European Agent at any time after this Security is enforceable pursuant to Clause 9, execute and deliver to the European Agent all share transfers and other documents which may be requested by the European Agent in order to enable the European Agent or its nominees to be registered as the owner or otherwise obtain a legal title to any Security Assets.

6.2 Changes to rights

The Chargor must not take or allow the taking of any action on its behalf which may result in the rights attaching to any Security Assets being altered or further shares in the Subject Company being issued unless the further shares being issued to the Chargor are subject to the Security Interests created in and under this Share Charge.

6.3 Calls

(a) The Chargor must pay all calls and other payments due and payable in respect of any Security Assets.

(b) If the Chargor fails to do so, the European Agent may pay any such calls or other payments on behalf of the Chargor. The Chargor must immediately on request reimburse the European Agent for any payment made by the European Agent under this Subclause.

6.4 Other obligations in respect of Security Assets

(a) The Chargor must comply with all requests for information which is within its knowledge and which are made under any law or regulation or by any listing or other authority or any similar provision contained in any constitutional document relating to any Security Assets. If it fails to do so, the European Agent may elect to provide such information as it may have on behalf of the Chargor.

10

(b) The Chargor must promptly supply to the European Agent a copy of any information referred to in Clause 6.4(a).

(c) The Chargor must comply with all other conditions and obligations assumed by it in respect of any Security Assets.

(d) No Secured Party is obliged to:

(i) perform any obligation of the Chargor;

(ii) make any payment;

(iii) make any enquiry as to the nature or sufficiency of any payment received by it or the Chargor; or

(iv) present or file any claim or take any other action to collect or enforce the payment of any amount to which it may be entitled under this Share Charge,

in respect of any Security Assets.

6.5 Voting rights

(a) Before this Security becomes enforceable, the Chargor may continue to exercise the voting rights, powers and other rights in respect of the Security Assets.

(b) Before this Security becomes enforceable, if any Security Assets have been registered in the name of the European Agent or its nominee, the European Agent (or its nominee) must exercise the voting rights, powers and other rights in respect of the Security Assets in the manner in which the Chargor may direct in writing. The European Agent (or that nominee) will execute any form of proxy or other document which the Chargor may reasonably require for this purpose.

(c) Before this Security becomes enforceable, all dividends or other income or distributions paid or payable in relation to any Security Assets must be paid to the Chargor. To achieve this:

(i) the European Agent or its nominee must promptly execute any dividend mandate necessary to ensure that payment is made direct to the Chargor; or

(ii) if payment is made directly to the European Agent (or its nominee) before this Security becomes enforceable, the European Agent (or that nominee) must promptly pay that amount to the Chargor.

(d) Before this Security becomes enforceable, the European Agent must use its reasonable endeavours to forward promptly to the Chargor all material notices, correspondence and/or other communication it receives in relation to the Security Assets.

11

(e) After this Security has become enforceable, the European Agent or its nominee may exercise or refrain from exercising:

(i) any voting rights; and

(ii) any other powers or rights which may be exercised by the legal or beneficial owner of any Security Assets, any person who is the holder of any Security Assets or otherwise,

in each case, in the name of the Chargor, the registered holder or otherwise and without any further consent or authority on the part of the Chargor and irrespective of any direction given by the Chargor.

(f) If any Security Asset remains registered in the name of the Chargor, the Chargor irrevocably appoints the European Agent or its nominee as its proxy to exercise all voting rights in respect of those Security Assets at any time after this Security has become enforceable.

(g) The Chargor must indemnify the European Agent against any loss or liability incurred by the European Agent as a consequence of the European Agent acting in respect of the Security Assets at the direction of the Chargor unless such indemnity is determined by a court of competent jurisdiction by final and non appealable judgment to have resulted from the gross negligence or wilful misconduct of the European Agent.

6.6 Financial Collateral

(a) To the extent that the assets mortgaged or charged under this Share Charge constitute “financial collateral” and this Share Charge and the obligations of the Chargor under this Share Charge constitute a “security financial collateral arrangement” (in each case for the purpose of and as defined in the Financial Collateral Arrangements (No. 2) Regulations 2003 (SI 2003 No. 3226)) the European Agent will have the right after this Security has become enforceable to appropriate all or any part of that financial collateral in or towards the satisfaction of the Secured Liabilities.

(b) Where any financial collateral is appropriated:

(i) if the financial collateral is listed or traded on a recognised exchange its value will be taken as the value at which it could have been sold on the exchange on the date of appropriation; or

(ii) in any other case, the value of the financial collateral will be such amount as the European Agent reasonably determines having taken into account advice obtained by it from an independent investment or accountancy firm of national standing selected by it;

and each Finance Party will give credit for the proportion of the value of the financial collateral appropriated to its use.

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7. PRESERVATION OF SECURITY

7.1 Continuing security

This Security is a continuing security and will extend to the ultimate balance of the Secured Liabilities, regardless of any intermediate payment or discharge in whole or in part.

7.2 Reinstatement

(a) If any discharge (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) or arrangement is made in whole or in part on the faith of any payment, security or other disposition which is avoided or must be restored on insolvency, liquidation, administration or otherwise without limitation, the liability of the Chargor under this Share Charge will continue or be reinstated as if the discharge or arrangement had not occurred.

(b) Each Secured Party may concede or compromise any claim that any payment, security or other disposition is liable to avoidance or restoration.

7.3 Waiver of defences

The obligations of the Chargor under this Share Charge will not be affected by any act, omission or thing (whether or not known to it or any Finance Party) which, but for this provision, would reduce, release or prejudice any of its obligations under this Share Charge. This includes:

(a) any time or waiver granted to, or composition with, any person;

(b) any release of any person under the terms of any composition or arrangement;

(c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any person;

(d) any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

(e) any incapacity, lack of power, authority or legal personality of or dissolution or change in the members or status of any person;

(f) any amendment of a Finance Document or any other document or security; or

(g) any unenforceability, illegality, invalidity or non-provability of any obligation of any person under any Finance Document or any other document or security or the failure by any member of the Group to enter into or be bound by any Finance Document.

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7.4 Immediate recourse

The Chargor waives any right it may have of first requiring any Secured Party (or any trustee or agent on its behalf) to proceed against or enforce any other right or security or claim payment from any person or file any proof or claim in any insolvency, administration, winding-up or liquidation proceedings relative to any other Obligor or any other person before claiming from the Chargor under this Share Charge.

7.5 Appropriations

At any time during the Security Period, each Secured Party (or any trustee or agent on its behalf) may without affecting the liability of the Chargor under this Share Charge:

(a)	(i)	refrain from applying or enforcing any other moneys, security or rights held or received by that Secured Party (or any trustee or agent on its behalf) against those amounts; or
	(ii)	apply and enforce them in such manner and order as it sees fit (whether against those amounts or otherwise); and

(b) hold in an interest-bearing suspense account any moneys received from the Chargor or on account of the Chargor’s liability under this Share Charge.

7.6 Non-competition

Unless the Security Period has expired or the European Agent otherwise directs, the Chargor will not, after a claim has been made under this Share Charge or by virtue of any payment or performance by it under this Share Charge:

(a) be subrogated to any rights, security or moneys held, received or receivable by any Finance Party (or any trustee or agent on its behalf);

(b) be entitled to any right of contribution or indemnity in respect of any payment made or moneys received on account of the Chargor’s liability under this Clause;

(c) claim, rank, prove or vote as a creditor of any Obligor or its estate in competition with any Finance Party (or any trustee or agent on its behalf); or

(d) receive, claim or have the benefit of any payment, distribution or security from or on account of any Obligor, or exercise any right of set-off as against any Obligor.

The Chargor must hold in trust for and immediately pay or transfer to the European Agent for the Finance Parties any payment or distribution or benefit of security received by it contrary to this Clause or in accordance with any directions given by the European Agent under this Clause.

7.7 Additional security

(a) This Share Charge is in addition to and is not in any way prejudiced by any other security now or subsequently held by any Finance Party.

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(b) No prior security held by any Finance Party (in its capacity as such or otherwise) over any Security Asset will merge into this Security.

7.8 Security held by Chargor

The Chargor must not, without the prior consent of the European Agent, hold any security from any other Obligor in respect of the Chargor’s liability under this Share Charge. The Chargor will hold any security held by it in breach of this provision on trust for the European Agent.

8. WHEN SECURITY BECOMES ENFORCEABLE

8.1 Timing

This Security will become immediately enforceable if an Event of Default occurs and is continuing.

8.2 Enforcement

After this Security has become enforceable, the European Agent may in its absolute discretion enforce all or any part of this Security in any manner it sees fit or as the Required Lenders direct in a manner provided for in the Intercreditor Agreement.

9. ENFORCEMENT OF SECURITY

9.1 General

(a) The power of sale and any other powers conferred on a mortgagee by law (including under Section 101 of the Act), as amended by this Share Charge, will be immediately exercisable at any time after this Security has become enforceable.

(b) Any restriction imposed by law on the power of sale (including under Section 103 of the Act) or the right of a mortgagee to consolidate mortgages (including under Section 93 of the Act) does not apply to this Security.

9.2 No liability as mortgagee in possession

Neither the European Agent nor any Receiver will be liable, by reason of entering into possession of a Security Asset to account as mortgagee in possession or for any loss on realisation or for any default or omission for which a mortgagee in possession might be liable.

9.3 Privileges

Each Receiver and the European Agent is entitled to all the rights, powers, privileges and immunities conferred by law (including the Act) on mortgagees and receivers duly appointed under any law (including the Act), except that Section 103 of the Act does not apply.

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9.4 Protection of third parties

No person (including a purchaser) dealing with the European Agent or a Receiver or its or his agents will be concerned to enquire:

(a) whether the Secured Obligations have become payable;

(b) whether any power which the European Agent or a Receiver is purporting to exercise has become exercisable or is being properly exercised;

(c) whether any money remains due under the Finance Documents; or

(d) how any money paid to the European Agent or to that Receiver is to be applied.

9.5 Redemption of prior mortgages

(a) At any time after this Security has become enforceable, the European Agent may:

(i) redeem any prior Security Interest against any Security Asset; and/or

(ii) procure the transfer of that Security Interest to itself; and/or

(iii) settle and pass the accounts of the prior mortgagee, chargee or encumbrancer; any accounts so settled and passed will be, in the absence of manifest error, conclusive and binding on the Chargor.

(b) The Chargor must pay to the European Agent, immediately on demand, the costs and expenses incurred by the European Agent in connection with any such redemption and/or transfer, including the payment of any principal or interest.

9.6 Contingencies

If this Security is enforced at a time when no amount is due under the Finance Documents but at a time when amounts may or will become due, the European Agent (or the Receiver) may pay the proceeds of any recoveries effected by it into such number of suspense accounts as it considers appropriate.

10. RECEIVER

10.1 Appointment of Receiver

(a) Except as provided, the European Agent may appoint any one or more persons to be a Receiver of all or any part of the Security Assets if:

(i) this Security has become enforceable; or

(ii) the Chargor so requests the European Agent in writing at any time.

(b) Any appointment under paragraph (a) may be by deed, under seal or in writing under its hand.

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(c) Except as provided, any restriction imposed by law on the right of a mortgagee to appoint a Receiver (including under section 109(1) of the Act) does not apply to this Share Charge.

(d) The European Agent is not entitled to appoint a Receiver solely as a result of the obtaining of a moratorium (or anything done with a view to obtaining a moratorium) under Section 1A of the Insolvency Act 1986.

10.2 Removal

The European Agent may by writing under its hand remove any Receiver appointed by it and may, whenever it thinks fit, appoint a new Receiver in the place of any Receiver whose appointment may for any reason have terminated.

10.3 Remuneration

The European Agent may fix the remuneration of any Receiver appointed by it and any maximum rate imposed by law (including under section 109(6) of the Act) will not apply.

10.4 Agent of the Chargor

(a) A Receiver will be deemed to be the agent of the Chargor for all purposes and accordingly will be deemed to be in the same position as a Receiver duly appointed by a mortgagee under the Act. The Chargor is solely responsible for the contracts, engagements, acts, omissions, defaults and losses of a Receiver and for liabilities incurred by a Receiver.

(b) No Finance Party will incur any liability (either to the Chargor or to any other person) by reason of the appointment of a Receiver or for any other reason.

10.5 Relationship with European Agent

To the fullest extent allowed by law, any right, power or discretion conferred by this Share Charge (either expressly or impliedly) or by law on a Receiver may after this Security becomes enforceable be exercised by the European Agent in relation to any Security Asset without first appointing a Receiver or notwithstanding the appointment of a Receiver.

11. POWERS OF RECEIVER

11.1 General

(a) A Receiver has all the rights, powers and discretions set out in this Clause in addition to those conferred on it by any law. This includes all the rights, powers and discretions conferred on a receiver (or a receiver and manager) under the Act and the Insolvency Act, 1986.

(b) If there is more than one Receiver holding office at the same time, each Receiver may (unless the document appointing him states otherwise) exercise all the powers conferred on a Receiver under this Share Charge individually and to the exclusion of any other Receiver.

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11.2 Possession

A Receiver may take immediate possession of, get in and collect any Security Asset.

11.3 Sale of assets

(a) A Receiver may sell, exchange, convert into money and realise any Security Asset by public auction or private contract and generally in any manner and on any terms which he thinks fit.

(b) The consideration for any such transaction may consist of cash, debentures or other obligations, shares, stock or other valuable consideration and any such consideration may be payable in a lump sum or by instalments spread over any period which he thinks fit.

11.4 Receipts

A Receiver may give a valid receipt for any moneys and execute any assurance or thing which may be proper or desirable for realising any Security Asset.

11.5 Delegation

A Receiver may delegate his powers in accordance with this Share Charge.

11.6 Other powers

A Receiver may:

(a) do all other acts and things which he may consider desirable or necessary for realising any Security Asset or incidental or conducive to any of the rights, powers or discretions conferred on a Receiver under or by virtue of this Share Charge or law;

(b) exercise in relation to any Security Asset all the powers, authorities and things which he would be capable of exercising if he were the absolute beneficial owner of that Security Asset; and

(c) use the name of the Chargor for any of the above purposes.

12. APPLICATION OF PROCEEDS

Subject to the terms and provisions of the Intercreditor Agreement, any moneys received by the European Agent or the Receiver after this Security has become enforceable must be applied in the following order of priority:

(a) in or towards payment of or provision for all costs and expenses incurred by the European Agent or any Receiver under or in connection with this Share Charge and of all remuneration due to any Receiver under or in connection with this Share Charge;

(b) in or towards payment of or provision for all costs and expenses incurred by the Finance Parties under or in connection with this Share Charge;

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(c) in payment to the European Agent for application towards the balance of the Loan Secured Liabilities;

(d) in payment to the European Agent for application towards the balance of the Other Secured Liabilities and

(e) in payment of the surplus (if any) to the Chargor or other person entitled to it.

This Clause is subject to the payment of any claims having priority over this Security. This Clause does not prejudice the right of any Finance Party to recover any shortfall from the Chargor.

13. EXPENSES AND INDEMNITY

(a) The parties hereto agree that the European Agent shall be entitled to reimbursement of its expenses incurred hereunder as provided in Section 9.03 (Expenses; Indemnity; Damage Waiver) of the Revolving Credit Facility Agreement;

(b) Without limitation of its indemnification obligations under the other Finance Documents, the Chargor agrees to indemnify the European Agent and the other Indemnitees (as defined in Section 9.03 (Expenses; Indemnity; Damage Waiver) of the Revolving Credit Facility Agreement) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of, the execution, delivery or performance of this Share Charge or any instrument contemplated hereby or any claim, litigation, investigation or proceeding relating to any of the foregoing or to the Security Assets, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from gross negligence or wilful misconduct of such Indemnitee;

(c) Any such amounts payable as provided hereunder shall be additional Secured Liabilities secured hereby and by the other Security Documents. The provisions of this Clause 13 shall remain operative and in full force and effect regardless of the termination of this Share Charge or any other Finance Document, the consummation of the transactions contemplated hereby, the repayment of any of the Secured Liabilities, the invalidity or unenforceability of any term or provision of this Share Charge or any other Finance Document, or any investigation made by or on behalf of the European Agent or any other Finance Party. All amounts due under this Clause 13 shall be payable on written demand therefor.

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14. DELEGATION

14.1 Power of Attorney

The European Agent or any Receiver may delegate by power of attorney or in any other manner to any person any right, power or discretion exercisable by it under this Share Charge.

14.2 Terms

Any such delegation may be made upon any terms (including power to sub-delegate) which the European Agent or any Receiver may think fit.

14.3 Liability

Neither the European Agent nor any Receiver will be in any way liable or responsible to the Chargor for any loss or liability arising from any act, default, omission or misconduct on the part of any delegate or sub-delegate.

15. POWER OF ATTORNEY

The Chargor, by way of security, irrevocably and severally appoints the European Agent, each Receiver and any of their delegates or sub-delegates to be its attorney to take any action which the Chargor is obliged to take under this Share Charge. The Chargor ratifies and confirms whatever any attorney does or purports to do under its appointment under this Clause.

16. CHANGES TO THE PARTIES

16.1 The Chargor

The Chargor may not assign or transfer any of its rights or obligations under this Share Charge without the prior consent of the European Agent.

16.2 The Secured Parties

(a) Any Secured Party may assign or otherwise dispose of all or any of its rights under this Share Charge in accordance with the terms of the Finance Documents to which it is a party and may disclose any information in its possession relating to the Chargor to any actual or prospective assignee, transferee or participant.

(b) References to the European Agent in this Share Charge include any successor European Agent appointed under the Security Trust Deed.

17. MISCELLANEOUS

17.1 Covenant to pay

The Chargor must pay or discharge the Secured Obligations in the manner provided for in the Finance Documents.

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17.2 Tacking

Each Lender must perform its obligations under the Revolving Credit Facility Agreement (including any obligation to make available further advances).

17.3 New Accounts

(a) If any subsequent charge or other interest affects any Security Asset, the Secured Party may open a new account with the Chargor.

(b) If the Secured Party does not open a new account, it will nevertheless be treated as if it had done so at the time when it received or was deemed to have received notice of that charge or other interest.

(c) As from that time all payments made to the Finance Party will be credited or be treated as having been credited to the new account and will not operate to reduce any Secured Liability.

17.4 Dutch attorney

If the Chargor is represented by an attorney in connection with the signing and/or execution of this Share Charge or any other deed, agreement or document referred to in this Share Charge or made pursuant to this share Charge, it is hereby expressly acknowledged and accepted by the other parties to this Share Charge that the existence and extent of the attorney’s authority and the effects of the attorney’s exercise or purported exercise of his authority shall be governed by the law of the Netherlands.

18. RELEASE

At the end of the Security Period, the Secured Parties must, at the request and cost of the Chargor, take whatever action is necessary to release its Security Assets from this Security. In the event of a release of any Security Assets pursuant to Section 9.02(b) (Waivers; Amendment) of the Revolving Credit Facility Agreement and/or Sections 5.13(c) and (d) (Termination or Release) of the Revolver Guarantor Agreement, the Security Interests created pursuant to this Share Charge shall be automatically released.

19. EVIDENCE AND CALCULATIONS

19.1 Accounts

Accounts maintained by a Secured Party in connection with this Share Charge are prima facie evidence of the matters to which they relate for the purpose of any litigation or arbitration proceedings.

19.2 Certificates and determinations

Any certification or determination by a Secured Party of a rate or amount under the Finance Documents will be, in the absence of manifest error, conclusive evidence of the matters to which it relates.

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19.3 Calculations

Any interest or fee accruing under this Share Charge accrues from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 or 365 days or otherwise, depending on what the European Agent determines is market practice.

20. NOTICES

Any communication in connection with this Deed shall be given in accordance with section 9.01 (Notices) of the Revolving Credit Facility Agreement as if references to “Borrower” in section 9.01 of the Revolving Credit Facility Agreement were references to the Chargor and references to the “Collateral Agent” were references to the European Agent.

21. LANGUAGE

Any notice given in connection with this Share Charge must be in English.

22. SEVERABILITY

If a term of this Share Charge is or becomes illegal, invalid or unenforceable in any respect under any jurisdiction, that will not affect:

(a) the legality, validity or enforceability in that jurisdiction of any other term of this Share Charge; or

(b) the legality, validity or enforceability in any other jurisdiction of that or any other term of this Share Charge.

23. WAIVERS AND REMEDIES CUMULATIVE

The rights of each Secured Party under this Share Charge:

(a) may be exercised as often as necessary;

(b) are cumulative and not exclusive of its rights under the general law; and

(c) may be waived only in writing and specifically.

Delay in exercising or non-exercise of any right is not a waiver of that right.

24. COUNTERPARTS

This Share Charge may be executed in any number of counterparts. This has the same effect as if the signatures on the counterparts were on a single copy of this Share Charge.

25. GOVERNING LAW

This Share Charge is governed by English law.

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26. ENFORCEMENT

26.1 Jurisdiction

(a) The English courts have exclusive jurisdiction to settle any dispute in connection with this Share Charge.

(b) The English courts are the most appropriate and convenient courts to settle any such dispute in connection with this Share Charge. The Chargor agrees not to argue to the contrary and waives objection to those courts on the grounds of inconvenient forum or otherwise in relation to proceedings in connection with this Share Charge.

(c) This Clause is for the benefit of the Secured Parties only. To the extent allowed by law, a Secured Party may take:

(i) proceedings in any other court; and

(ii) concurrent proceedings in any number of jurisdictions.

(d) References in this Clause to a dispute in connection with this Share Charge includes any dispute as to the existence, validity or termination of this Share Charge.

26.2 Service of process

(a) The Chargor irrevocably appoints Patheon UK Limited as its agent under this Share Charge for service of process in any proceedings before the English courts in connection with this Share Charge.

(b) If any person appointed as process agent under this Clause is unable for any reason to so act, the Chargor must immediately (and in any event within five days of the event taking place) appoint another agent on terms acceptable to the European Agent. Failing this, the European Agent may appoint another process agent for this purpose.

(c) The Chargor agrees that failure by a process agent to notify it of any process will not invalidate the relevant proceedings.

(d) This Clause does not affect any other method of service allowed by law.

26.3 Waiver of immunity

The Chargor irrevocably and unconditionally:

(a) agrees not to claim any immunity from proceedings brought by a Finance Party against it in relation to this Share Charge and to ensure that no such claim is made on its behalf;

(b) consents generally to the giving of any relief or the issue of any process in connection with those proceedings; and

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(c) waives all rights of immunity in respect of it or its assets.

This Share Charge has been entered into and executed as a deed by the Chargor with the intention that it be delivered on the date stated at the beginning of this deed. It may be executed by the European Agent under hand or if it prefers as a deed.

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SCHEDULE 1

SHARES

Subject Company	Number of Shares		Class
Patheon UK Limited		100,001	Ordinary
Patheon UK Limited		2,000,000	Preference

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SIGNATORIES

Chargor
EXECUTED AS A DEED by	)
PATHEON B.V.	)
acting by Ian Jones	)
Director:	)
In the presence of:
Name:
Address:
Occupation:
EXECUTED AS A DEED by	)
PATHEON B.V.	)
acting by Doaa Fathallah	)
Director:	)
In the presence of:
Name:
Address:
Occupation:
European Agent
EXECUTED AS A DEED by	)
J.P. MORGAN EUROPE LIMITED	)
Acting by	)
its duly authorised attorney	)
In the presence of:
Name:
Address:
Occupation:

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Exhibit K

EXECUTION VERSION

US REVOLVING PLEDGE AND SECURITY AGREEMENT dated as of April 23, 2010, among PATHEON PHARMACEUTICALS INC. (the “US Borrower”), PATHEON PUERTO RICO, INC. (the “PR Borrower”), the OTHER SUBSIDIARIES of PATHEON INC. named herein and JPMORGAN CHASE BANK, N.A., as Collateral Agent (the “Collateral Agent”).

Reference is made to (a) the Amended and Restated Revolving Credit Agreement dated as of April 23, 2010 (as amended, supplemented or otherwise modified from time to time, the “Revolving Credit Agreement”), among Patheon Inc., the US Borrower, the PR Borrower, the other Subsidiaries of Patheon Inc. named therein, the Lenders party thereto, the Collateral Agent, as US administrative agent. JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian administrative agent (the “Canadian Agent”), and J.P. Morgan Europe Limited, as European administrative agent (the “European Agent”), (b) the Amended and Restated Revolving Guarantor Agreement dated as of April 23, 2010 (as amended, supplemented or otherwise modified from time to time, the “Guarantor Agreement”) among Patheon Inc., the Subsidiaries of Patheon Inc. named therein and the Canadian Agent, the European Agent and the Collateral Agent, as agents and (c) the US Revolving Pledge and Security Agreement dated as of April 27, 2007 (as amended and in effect prior to giving effect to the amendment and restatement thereof pursuant to this Agreement, the “Existing US Revolving Pledge and Security Agreement”) among the US Borrower the other subsidiaries of Patheon Inc. named therein, and the Collateral Agent. The Lenders (such term and each other capitalized term used but not defined in this preliminary statement having the meaning given or ascribed to it in Article I hereof) and the Issuing Banks have agreed to extend credit to the Borrowers subject to the terms and conditions set forth in the Revolving Credit Agreement. The obligations of the Lenders and the Issuing Banks to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement. Each Grantor is affiliated with the Borrowers, will derive substantial benefits from the extension of credit to the Borrowers pursuant to the Revolving Credit Agreement and is willing to execute and deliver this Agreement in order to induce the Lenders and the Issuing Banks to extend such credit. This Agreement amends and restates in its entirety the Existing US Revolving Pledge and Security Agreement. Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Revolving Credit Agreement; Guarantor Agreement. (a) Capitalized terms used in this Agreement and not otherwise defined herein have the meanings specified in the Guarantor Agreement or, if not defined therein, in the Revolving Credit Agreement. All terms defined in the New York UCC and not defined in this Agreement, the Guarantor Agreement or the Revolving Credit Agreement have the

meanings specified therein; the term “instrument” shall have the meaning specified in Article 9 of the New York UCC.

(b) The rules of construction specified in Section 1.03 of the Revolving Credit Agreement also apply to this Agreement.

SECTION 1.02. Other Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“ABL Priority Collateral” means the portion of the Collateral consisting of any and all of the following assets now owned or at any time hereafter acquired by any Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest:

(a) all Accounts:

(b) all Chattel Paper representing Accounts;

(c) (i) all Deposit Accounts and all cash, checks, other negotiable instruments, funds and other evidences of payment held therein and (ii) all Securities, Security Entitlements, and Securities Accounts, in each case, to the extent constituting cash or cash equivalents or representing a claim to cash equivalents, except, in each case, for any Deposit Accounts and any cash, checks, other negotiable instruments, funds or other evidences of payments held therein or any Securities, Security Entitlements, Securities Accounts and all cash and cash equivalents held therein, in each case, that constitute identifiable proceeds of Notes Priority Collateral and all deposits and other funds held therein;

(d) all Inventory;

(e) Letter-of-Credit rights relating to Accounts or Inventory;

(f) to the extent involving or governing any of the items referred to in the preceding clauses (a) through (e). all Documents, General Intangibles and Instruments;

(g) to the extent supporting any of the items referred to in clauses (a) through (e), all Supporting Obligations;

(h) all books and records relating to the foregoing; and

(i) all proceeds of any of the foregoing (including, without limitation, proceeds of insurance with respect to any or all of the foregoing clauses (a) through (h) and all collateral security and Guarantees given by any Person with respect to any of the foregoing).

“Accounts” has the meaning specified for such term in Section 9-102 of the New York UCC.

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“Article 9 Collateral” has the meaning assigned to such term in Section 3.01.

“Cash Collection Account” has the meaning assigned to such term in Section 4.01.

“Collateral” means Article 9 Collateral and Pledged Collateral.

“Collateral Deposit Account” has the meaning assigned to such term in Section 4.01.

“Copyright License” means any written agreement, now or hereafter in effect, granting any right to any third party under any copyright now or hereafter owned by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any copyright now or hereafter owned by any third party, and all rights of such Grantor under any such agreement.

“Copyrights” means all of the following now owned or hereafter acquired by any Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office.

“Deposit Account Control Agreement” means, with respect to a deposit account in the name of a Grantor, an agreement among such Grantor, the Collateral Agent and the depository bank pursuant to which such depository bank agrees to comply with instructions originated by the Collateral Agent directing disposition of funds in such deposit account without further consent by such Grantor.

“Document” has the meaning specified for such term in Section 9-102 of the New York UCC.

“Federal Securities Laws” has the meaning assigned to such term in Section 5.04.

“Funding Account” means, for any Grantor, the general fund account established at the office of JPMORGAN CHASE BANK, N.A., located at 270 Park Avenue. New York, NY 10017, in the name of such Grantor, for the purposes of this Agreement.

“General Intangibles” means all choses in action and causes of action and all other intangible personal property of every kind and nature (other than Accounts) now owned or hereafter acquired by any Grantor, including corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, Swap Agreements and other agreements). Intellectual Property, goodwill, registrations, franchises, tax refund claims and any letter of credit,

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guarantee, claim, security interest or other security held by or granted to any Grantor to secure payment by an Account Debtor of any of the Accounts.

“Grantors” means the US Borrower, the PR Borrower and the Subsidiary Parties.

“Indenture” means the indenture dated as of April 23, 2010, among the Parent Borrower, the Subsidiaries listed therein and Deutsche Bank Trust Company Americas, as trustee in respect of the Senior Notes.

“Intellectual Property” means all intellectual and similar property of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents. Copyrights, Licenses, Trademarks, trade secrets, confidential or proprietary technical and business information, know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.

“Inventory” has the meaning specified for such term in Section 9-102 of the New York UCC.

“License” means any Patent License, Trademark License, Copyright License or other license or sublicense agreement to which any Grantor is a party.

“Lock Box” has the meaning assigned to such term in Section 4.01.

“Lock Box Agreement” has the meaning assigned to such term in Section 4.01.

“New York UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York.

“Notes Priority Collateral” means any and all Collateral that is not ABL Priority Collateral.

“Notes Priority Collateral Security Interest” means the Security Interest in any and all Notes Priority Collateral.

“Patent License” means any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a patent, now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement.

“Patents” means all of the following now owned or hereafter acquired by any Grantor: (a) all letters patent of the United States or the equivalent thereof in any

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other country, all registrations and recordings thereof, and all applications for letters patent of the United States or the equivalent thereof in any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office or any similar offices in any other country, and (b) all reissues, continuations, divisions, continuations-in-part renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

“Pledged Collateral” has the meaning assigned to such term in Section 2.01.

“Pledged Debt Securities” has the meaning assigned to such term in Section 2.01.

“Pledged Securities” means any promissory notes (including the PR Mortgage Notes), stock certificates or other securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.

“Pledged Stock” has the meaning assigned to such term in Section 2.01.

“Revolving Credit Agreement” has the meaning assigned to such term in the preliminary statement of this Agreement.

“Subsidiary Parties” means (a) the Subsidiaries identified on Schedule I and (b) each other Subsidiary that becomes a party to this Agreement as a Subsidiary Party after the Effective Date.

“Security Interest” has the meaning assigned to such term in Section 3.01.

“Trademark License” means any written agreement, now or hereafter in effect, granting to any third party any right to use any trademark now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement.

“Trademarks” means all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office or any similar offices in any State of the United States or any other country or any political subdivision thereof, and all extensions or renewals thereof, (b) all goodwill associated therewith or symbolized thereby and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill.

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ARTICLE II

Pledge of Securities

SECTION 2.01. Pledge. As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in. all of such Grantor’s right, title and interest in, to and under (a) all shares of capital stock and other Equity Interests issued to or otherwise owned by such Grantor (which such Grantor represents are accurately listed on Schedule II) and any other Equity Interests obtained in the future by such Grantor that are required by the Collateral and Guarantee Requirement to be pledged hereunder and the certificates representing all such Equity Interests (the “Pledged Stock”); (b) (i) all debt securities issued to or otherwise owned by such Grantor (including the PR Mortgage Notes) (which such Grantor represents are accurately listed on Schedule II) that are required by the Collateral and Guarantee Requirement to be pledged hereunder. (ii) any debt securities in the future issued to such Grantor that are required by the Collateral and Guarantee Requirement to be pledged hereunder and (iii) the promissory notes and any other instruments evidencing such debt securities (the “Pledged Debt Securities”); (c) all other property that may be delivered to and held by the Collateral Agent (or to or by any other Person pursuant to the Intercreditor Agreement, in each case acting as gratuitous bailee for the Collateral Agent) pursuant to the terms of this Section 2.01; (d) subject to Section 2.04, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clauses (a), (b) and (c) above: (e) subject to Section 2.04, all rights and privileges of such Grantor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above; and (f) all Proceeds of any of the foregoing (the items referred to in clauses (a) through (f) above being collectively referred to as the “Pledged Collateral”); provided that the Pledged Collateral shall not include any assets or property that are Excluded Assets for so long as such assets or property constitute Excluded Assets.

TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever; subject, however, to the terms, covenants and conditions hereinafter set forth.

SECTION 2.02. Delivery of the Pledged Collateral. (a) To the extent required by the Collateral and Guarantee Requirement, each Grantor agrees promptly to deliver or cause to be delivered to the Collateral Agent (or to any other Person pursuant to the Intercreditor Agreement, in each case acting as gratuitous bailee for the Collateral Agent) any and all Pledged Securities.

(b) To the extent required by the Collateral and Guarantee Requirement, each Grantor will cause any Indebtedness for borrowed money owed to such Grantor by

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any Person to be evidenced by a duly executed promissory note that is pledged and delivered to the Collateral Agent (or to any other Person pursuant to the Intercreditor Agreement, in each case acting as gratuitous bailee for the Collateral Agent) pursuant to the terms hereof.

(c) Upon delivery to the Collateral Agent (or to any other Person pursuant to the Intercreditor Agreement, in each case acting as gratuitous bailee for the Collateral Agent), (i) any Pledged Securities shall be accompanied by stock powers duly executed in blank or other instruments of transfer satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request and (ii) all other property comprising part of the Pledged Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Grantor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities, which schedule shall be attached hereto as Schedule II and made a part hereof: provided that failure to attach any such schedule hereto shall not affect the validity of such pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered.

(d) In accordance with the terms of the Intercreditor Agreement, all Pledged Collateral delivered to a Person other than the Collateral Agent shall be held by such Person in each case as gratuitous bailee for the Secured Parties solely for the purpose of perfecting the security interest therein granted under this Agreement.

SECTION 2.03. Registration in Nominee Name; Denominations. The Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Collateral Agent. Each Grantor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Grantor. The Collateral Agent shall at all times have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement. Each Grantor will cause to be recorded in its books the existence of the liens and encumbrances hereby created.

SECTION 2.04. Voting Rights; Dividends and Interest. (a) Unless and until an Event of Default shall have occurred and be continuing and the Collateral Agent shall have notified the Grantors that their rights under this Section 2.04 are being suspended:

(i) Each Grantor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the Revolving Credit Agreement and the other Loan Documents; provided that such rights and powers shall not be exercised in any manner that could materially and adversely affect the rights inuring to a holder of any Pledged Securities or the

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rights and remedies of any of the Collateral Agent or the other Secured Parties under this Agreement or the Revolving Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same.

(ii) The Collateral Agent shall execute and deliver to each Grantor, or cause to be executed and delivered to such Grantor, all such proxies, powers of attorney and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above.

(iii) Each Grantor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Securities to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Revolving Credit Agreement, the other Loan Documents and applicable laws; provided that any noncash dividends, interest, principal or other distributions that would constitute Pledged Stock or Pledged Debt Securities, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Grantor, to the extent required by the Collateral and Guarantee Requirement, shall not be commingled by such Grantor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement).

(b) Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified the Grantors of the suspension of their rights under paragraph (a)(iii) of this Section 2.04. then all rights of any Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of this Section 2.04 shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of this Section 2.04 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Grantor and, subject to the terms of the Intercreditor Agreement, shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02. After all Events of Default have been cured or waived and

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the Parent Borrower has delivered to the Collateral Agent a certificate to that effect, the Collateral Agent shall promptly repay to each Grantor (without interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 2.04 and that remain in such account.

(c) Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified the Grantors of the suspension of their rights under paragraph (a)(i) of this Section 2.04. then all rights of any Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 2.04, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 2.04, shall cease, and all such rights shall thereupon become, subject to the terms of the Intercreditor Agreement, vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Grantors to exercise such rights.

SECTION 2.05. Any notice given by the Collateral Agent to the Grantors suspending their rights under paragraph (a) of this Section 2.04 (i) may be given by telephone if promptly confirmed in writing, (ii) may be given to one or more of the Grantors at the same or different times and (iii) may suspend the rights of the Grantors under paragraph (a)(i) or paragraph (a)(iii) in part without suspending all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Collateral Agent’s rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.

ARTICLE III

Security Interests in Personal Property

SECTION 3.01. Security Interest. (a) As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest (the “Security Interest”) in, all right, title or interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the “Article 9 Collateral”):

(i) all Accounts;

(ii) all Chattel Paper;

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(iii) all Deposit Accounts;

(iv) all Documents;

(v) all Equipment;

(vi) all General Intangibles;

(vii) all Instruments (including the PR Mortgage Notes);

(viii) all Inventory;

(ix) all Investment Property:

(x) all Letter-of-Credit rights;

(xi) all commercial tort claims;

(xii) all books and records pertaining to the Article 9 Collateral; and

(xiii) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and Guarantees given by any Person with respect to any of the foregoing;

provided that this Agreement shall not constitute a grant of a security interest in, and the Article 9 Collateral shall not include, any assets or property that are Excluded Assets for so long as such assets or property constitute Excluded Assets.

(b) The Collateral Agent agrees that the Notes Priority Collateral Security Interest shall be subordinated as described in, and subject to, the Intercreditor Agreement.

(c) Each Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements (other than fixture filings) with respect to the Article 9 Collateral or any part thereof and amendments thereto that (i) indicate the Collateral as all assets of such Grantor or words of similar effect as being of an equal or lesser scope or with greater detail, and (ii) contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including (a) whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor and (b) in the case of a financing statement filed as a fixture filing or covering Article 9 Collateral constituting minerals or the like to be extracted or timber to be cut, a sufficient description of the real property to which such Article 9 Collateral relates. Each Grantor agrees to provide such information to the Collateral Agent promptly upon request.

Each Grantor also ratifies its authorization for the Collateral Agent to file in any relevant jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

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(d) The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Article 9 Collateral.

ARTICLE IV

Collections

SECTION 4.01. Collection of Receivables. (a) Each Grantor shall , within the time provided in Section 5.14 of the Revolving Credit Agreement, F (i) execute and deliver to the Collateral Agent a Deposit Account Control Agreement for each deposit account maintained by such Grantor into which all cash, checks and other similar payments relating to or constituting payments made in respect of Accounts shall be deposited (a “Collateral Deposit Account”) and (ii) establish lock box service (the “Lock Boxes”) with such banks at which any other deposit accounts are maintained by such Grantor through which any cash, checks or other similar payments relating to or constituting payments made in respect of such Accounts shall be collected, which lock boxes shall be subject to irrevocable lockbox agreements in the form provided by or otherwise acceptable to the Collateral Agent and shall be accompanied by an acknowledgment by the bank where the Lock Box is located of the Lien of the Collateral Agent granted hereunder and by irrevocable instructions to wire all amounts collected therein to the Cash Collection Account (a “Lock Box Agreement”). The Collateral Deposit Accounts and such Lock Box Agreements shall be established in a manner and on terms satisfactory to the Collateral Agent.

(b) Each Grantor shall direct all of its Account Debtors to forward payments directly to Lock Boxes subject to Lock Box Agreements. The Collateral Agent shall have sole access to the Lock Boxes at all times and each Grantor shall take all actions necessary to grant the Collateral Agent such sole access. At no time shall any Grantor remove any item from a Lock Box or from a Collateral Deposit Account without the Collateral Agent’s prior written consent. If any Grantor should refuse or neglect to notify any Account Debtor to forward payments directly to a Lock Box subject to a Lock Box Agreement after notice from the Collateral Agent, the Collateral Agent shall be entitled to make such notification directly to Account Debtor. If. notwithstanding the foregoing instructions, any Grantor receives any proceeds of any Accounts, such Grantor shall receive such payments as the Collateral Agent’s trustee, and shall immediately deposit all cash, checks or other similar payments related to or constituting payments made in respect of Accounts received by it to a Collateral Deposit Account. All funds deposited into any Lock Box subject to a Lock Box Agreement or a Collateral Deposit Account will be swept on a daily basis into a collection account maintained by such Grantor with the Collateral Agent (the “Cash Collection Account”). The Collateral Agent shall hold and apply funds received into the Cash Collection Account as provided by the terms of Section 4.03.

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SECTION 4.02. Covenant Regarding New Deposit Accounts; Lock Boxes. Before opening or replacing any Collateral Deposit Account, other deposit account, or establishing a new Lock Box, each Grantor shall (a) obtain the Collateral Agent’s consent in writing to the opening of such deposit account or Lock Box, and (b) cause each bank or financial institution in which it seeks to open (i) a deposit account to enter into a Deposit Account Control Agreement with the Collateral Agent in order to give the Collateral Agent control of such deposit account, or (ii) a Lock Box to enter into a Lock Box Agreement with the Collateral Agent in order to give the Collateral Agent control of the Lock Box. In the case of deposit accounts or Lock Boxes maintained with Lenders, the terms of such letter shall be subject to the provisions of the Revolving Credit Agreement regarding setoffs.

SECTION 4.03. Application of Proceeds; Deficiency. All amounts deposited in the Cash Collection Account shall be deemed received by the Collateral Agent in accordance with Section 5.02 and shall, after having been credited to the Cash Collection Account, be applied (and allocated) by the Collateral Agent in accordance with Section 5.02; provided that, so long as no Availability Trigger Event has occurred and is continuing, collections which are received into the Cash Collection Account shall be deposited into the applicable Grantor’s Funding Account rather than being used to reduce amounts owing under the Revolving Credit Agreement. The balance, if any, after all of the Obligations have been satisfied, shall be deposited by the Collateral Agent into such Grantor’s general operating account with the Collateral Agent. The Grantors shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all Obligations, including any attorneys’ fees and other expenses incurred by the Collateral Agent or any Lender to collect such deficiency.

ARTICLE V

Remedies

SECTION 5.01. Remedies Upon Default. Upon the occurrence and during the continuance of an Event of Default, each Grantor agrees to deliver each item of Collateral to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or all the following actions at the same or different times: (a) with respect to any Article 9 Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Article 9 Collateral by the applicable Grantors to the Collateral Agent, or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or nonexclusive basis, any such Article 9 Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers cannot be obtained), and (b) with or without legal process and with or without prior notice or demand for performance, to take possession of the Article 9 Collateral and without liability for trespass to enter any premises where the Article 9 Collateral may be located for the purpose of taking possession of or removing the Article 9 Collateral and, generally, to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law. Without limiting the generality of the

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foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law. to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale of securities (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any sale of Collateral shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

The Collateral Agent shall give the applicable Grantors 10 days’ written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of the Collateral Agent’s intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Agreement, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and, with the consent of the Collateral Agent, may make payment on account thereof by using any claim (constituting an Obligation) then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon

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compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 5.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the New York UCC or its equivalent in other jurisdictions.

SECTION 5.02. Application of Proceeds, (a) Subject to the terms of the Intercreditor Agreement, the Collateral Agent shall apply the proceeds of any collection or sale of Collateral, including any Collateral consisting of cash, as follows:

FIRST, to the payment of all costs and expenses incurred by the Collateral Agent and the other Agents in connection with such collection or sale or otherwise in connection with this Agreement, any other Loan Document or any of the Obligations, including all court costs and the fees and expenses of their agents and legal counsel, the repayment of all advances made by the Collateral Agent and the other Agents hereunder or under any other Loan Document on behalf of any Grantor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document;

SECOND, to the payment of all Obligations consisting of costs and expenses incurred by the Lenders and the Issuing Banks in connection with this Agreement, any other Loan Document or any of the Obligations, including all court costs and the fees and expenses of their agents and legal counsel and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder, if any, or under any other Loan Document:

THIRD, to the payment in full of the Loan Document Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Loan Document Obligations owed to them on the date of any such distribution);

FOURTH, to the payment in full of the Other Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Other Obligations owed to them on the date of any such distribution); and

FIFTH, to the Grantors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct.

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The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.

(b) Notwithstanding paragraph (a) of this Section 5.02, if an Availability Trigger Event has occurred and is continuing (but an Event of Default has not occurred and is continuing), then the Collateral Agent shall apply all amounts credited to the Cash Collection Account as provided in Section 2.1 l(e) of the Revolving Credit Agreement.

SECTION 5.03. Grant of License to Use Intellectual Property. For the purpose of enabling the Collateral Agent to exercise rights and remedies under this Agreement at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to the Grantors) to use, license or sublicense any of the Article 9 Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Collateral Agent may be exercised, at the option of the Collateral Agent, upon the occurrence and during the continuation of an Event of Default; provided that any license, sublicense or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon the Grantors notwithstanding any subsequent cure of an Event of Default.

SECTION 5.04. Securities Act. In view of the position of the Grantors in relation to the Pledged Collateral, or because of other current or future circumstances, a question may arise under the Securities Act of 1933. as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the “Federal Securities Laws”) with respect to any disposition of the Pledged Collateral permitted hereunder. Each Grantor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Collateral, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Collateral under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Each Grantor recognizes that in light of such restrictions and limitations the Collateral Agent may. with respect to any sale of the Pledged Collateral, limit the purchasers to those who will agree, among other things, to acquire such Pledged Collateral for their own account, for investment, and not with a view to the

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distribution or resale thereof. Each Grantor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its sole and absolute discretion (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Collateral or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Each Grantor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price that the Collateral Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 5.04 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells.

SECTION 5.05. Registration. Each Grantor agrees that, upon the occurrence and during the continuance of an Event of Default, if for any reason the Collateral Agent desires to sell any of the Pledged Collateral at a public sale, it will, at any time and from time to time, upon the written request of the Collateral Agent, use its best efforts to take or to cause the issuer of such Pledged Collateral to take such action and prepare, distribute and/or file such documents, as are required or advisable in the reasonable opinion of counsel for the Collateral Agent to permit the public sale of such Pledged Collateral. Each Grantor further agrees to indemnify, defend and hold harmless the Collateral Agent, each other Secured Party, any underwriter and their respective officers, directors, affiliates and controlling persons from and against all loss, liability, expenses, costs of counsel (including, without limitation, reasonable fees and expenses to the Collateral Agent of legal counsel), and claims (including the costs of investigation) that they may incur insofar as such loss, liability, expense or claim arises out of or is based upon any alleged untrue statement of a material fact contained in any prospectus (or any amendment or supplement thereto) or in any notification or offering circular, or arises out of or is based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements in any thereof not misleading, except insofar as the same may have been caused by any untrue statement or omission based upon information furnished in writing to such Grantor or the issuer of such Pledged Collateral by the Collateral Agent or any other Secured Party expressly for use therein. Each Grantor further agrees, upon such written request referred to above, to use its best efforts to qualify, file or register, or cause the issuer of such Pledged Collateral to qualify, file or register, any of the Pledged Collateral under the Blue Sky or other securities laws of such states as may be requested by the Collateral Agent and keep effective, or cause to be kept effective, all such qualifications, filings or registrations. Each Grantor will bear all costs and expenses of carrying out its obligations under this Section 5.05. Each Grantor acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section 5.05 and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section 5.05 may be specifically enforced.

16

ARTICLE VI

Miscellaneous

SECTION 6.01. Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Revolving Credit Agreement. All communications and notices hereunder to any Grantor shall be given to it in care of the Parent Borrower as provided in Section 9.01 of the Revolving Credit Agreement.

SECTION 6.02. Waivers; Amendment. (a) No failure or delay by any Agent any Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Agents, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 6.02, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or purchase of B/As or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether any Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time. No notice or demand on any Loan Party in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances.

(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Grantor or Grantors with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.02 of the Revolving Credit Agreement.

SECTION 6.03. Collateral Agent’s Fees and Expenses; Indemnification. (a) The parties hereto agree that the Collateral Agent shall be entitled to reimbursement of its expenses incurred hereunder as provided in Section 9.03 of the Revolving Credit Agreement.

(b) Without limitation of its indemnification obligations under the other Loan Documents, each Grantor jointly and severally agrees to indemnify the Collateral Agent and the other Indemnitees (as defined in Section 9.03 of the Revolving Credit Agreement) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of, the execution, delivery or performance of this Agreement or any instrument contemplated hereby or any claim, litigation, investigation

17

or proceeding relating to any of the foregoing or to the Collateral, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee.

(c) Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 6.03 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 6.03 shall be payable on written demand therefor.

SECTION 6.04. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

SECTION 6.05. Survival of Agreement. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and shall survive the execution and delivery of the Loan Documents, the purchase of B/As and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any Lender or on its behalf and notwithstanding that any Agent, any Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended under the Revolving Credit Agreement, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan, any B/A or any fee or any other amount payable under any Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated.

SECTION 6.06. Counterparts; Effectiveness; Several Agreement. This Agreement may be executed in counterparts, each of which shall constitute an original but all of which when taken together shall constitute a single contract. Delivery of an executed signature page to this Agreement by electronic transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. This Agreement shall become effective as to any Grantor when a counterpart hereof executed on behalf of such Grantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Grantor and the Collateral Agent and their respective permitted successors and

18

assigns, and shall inure to the benefit of such Grantor, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Grantor shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement or the Revolving Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, waived or released with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder.

SECTION 6.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 6.08. Right of Set-Off. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Grantor against any of and all the obligations of such Grantor now or hereafter existing under this agreement owed to such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section 6.08 are in addition to other rights and remedies (including other rights of set-off) which such Lender may have.

SECTION 6.09. Governing Law, This Agreement shall be construed in accordance with and governed by the law of the State of New York.

SECTION 6.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW. ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO

19

THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.10.

SECTION 6.11. Headings. Article and Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

SECTION 6.12. Rights and Obligations Absolute. All rights of the Collateral Agent hereunder, the Security Interest, the grant of a security interest in the Pledged Collateral and all obligations of each Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Revolving Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Revolving Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or this Agreement, other than a termination pursuant to Section 6.13.

SECTION 6.13. Termination or Release. (a) This Agreement, the Security Interest and all other security interests granted hereby shall terminate when all the Loan Document Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Revolving Credit Agreement, the LC Exposure has been reduced to zero, no B/A is outstanding or unpaid and the Issuing Banks have no further obligations to issue Letters of Credit under the Revolving Credit Agreement; provided that if, at least two Business Days prior to the time such termination conditions would otherwise be satisfied, the Collateral Agent shall have received written notice that any Other Obligations are then due and payable but have not been paid, then such termination shall not occur until all such Other Obligations that are then due and payable have been paid in full.

(b) A Subsidiary Party shall automatically be released from its obligations hereunder and the Security Interest in the Collateral of such Subsidiary Party shall be automatically released upon the consummation of any transaction permitted by the Revolving Credit Agreement as a result of which such Subsidiary Party ceases to be a Subsidiary of the Parent Borrower; provided that the Required Lenders shall have consented to such transaction (to the extent required by the Revolving Credit Agreement) and the terms of such consent did not provide otherwise.

(c) Upon any sale or other transfer by any Grantor of any Collateral that is permitted under the Revolving Credit Agreement, or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral

20

pursuant to Section 9.02 of the Revolving Credit Agreement, the security interest in such Collateral shall be automatically released.

(d) In connection with any termination or release pursuant to paragraph (a), (b) or (c), the Collateral Agent shall execute and deliver to any Grantor, at such Grantor’s expense, all documents that such Grantor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 6.13 shall be without recourse to or warranty by the Collateral Agent.

SECTION 6.14. Additional Subsidiaries. Pursuant to Section 5.13 of the Revolving Credit Agreement, a Subsidiary of the Parent Borrower that was not a Subsidiary Party on the date of the Revolving Credit Agreement may be required to enter in this Agreement as a Subsidiary Party thereafter. In addition, a Subsidiary may elect to become a Grantor hereunder if such Subsidiary has become a party to the Guarantor Agreement. Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Exhibit I hereto, such Subsidiary shall become a Subsidiary Party hereunder with the same force and effect as if originally named as a Subsidiary Party herein. The execution and delivery of any such instrument shall not require the consent of any other Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement.

SECTION 6.15. Intercreditor Agreement Governs. Notwithstanding any other provision contained herein, this Agreement, the Liens created hereby and the rights, remedies, duties and obligations provided for herein are subject in all respects to the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of this Agreement and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control. Without limiting the generality of the foregoing, any obligation of any Grantor hereunder or under any other Security Document with respect to the delivery or control of any Collateral shall be satisfied if such Grantor delivers such Collateral to, or vests control of such Collateral in, the Senior Representative (as defined in the Intercreditor Agreement).

21

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

PATHEON PHARMACEUTICALS INC.,
	by
		Name:
		Title:
PATHEON PHARMACEUTICALS SERVICES INC.,
	by
		Name:
		Title:
PATHEON U.S. HOLDINGS INC.,
	by
		Name:
		Title:
PATHEON U.S. HOLDINGS LLC,
	by
		Name:
		Title:
PATHEON FINANCE LLC,
	by
		Name:
		Title:

22

PATHEON P.R. LLC,
	by
		Name:
		Title:
PATHEON PUERTO RICO, INC.,
	by
		Name:
		Title:
PATHEON PUERTO RICO ACQUISITIONS CORPORATION,
	by
		Name:
		Title:

23

CEPH INTERNATIONAL CORPORATION,
	by
		Name:
		Title:
JPMORGAN CHASE BANK, N.A., as Collateral Agent,
	by
		Name:
		Title:

24

Schedule I to the

Amended and Restated US Revolving Pledge and Security Agreement

SUBSIDIARY PARTIES

Entity Name

Patheon Pharmaceuticals Services Inc.

Patheon U.S. Holdings Inc.

Patheon P.R. LLC

Patheon U.S. Holdings LLC

Patheon Finance LLC

Patheon Puerto Rico Acquisitions Corporation

CEPH International Corporation

EQUITY INTERESTS ISSUED TO OR OTHERWISE OWNED BY

PATHEON PUERTO RICO, INC.

Issuer	Number of Certificate	Registered Owner	Number and Class of Equity Interest	Percentage of Equity Interests
Patheon Puerto Rico Acquisitions	[1]	Patheon Puerto Rico, Inc.	100,000 common shares	100%

DEBT SECURITIES ISSUED TO OR OTHERWISE OWNED BY

PATHEON PHARMACEUTICALS INC.

Issuer	Principal Amount	Date of Note	Maturity Date
nil	nil	nil	nil

PR MORTGAGE NOTES

PATHEON PHARMACEUTICALS INC.

Company	Type	Amount
Patheon Puerto Rico, Inc.	Mortgage Note	[$29,000,000] secured by Deed of Mortgage Number 22 executed on December 30, 1994, before Notary Nestor R. Nadal Lopez, recorded at page 149 overleaf of volume 1374 of Caguas, property 36,791, recorded at page 27 of volume 1086 of Caguas.
Patheon Puerto Rico, Inc.	Mortgage Note	[$10,000,000] secured by Deed of Mortgage Number 47 executed on July 13, 2001, before Notary Ronald L. Rosenbaum, recorded at the mobile page 1585 of Caguas, property 36,791, recorded at page 27 of volume 1086 of Caguas.
Patheon Puerto Rico, Inc.	Mortgage Note	[$11,000,000] ] secured by Deed of Mortgage Number 155 executed on September 22, 2000, before Notary Ronald L. Rosenbaum, recorded at page 110 of volume 1437 of Caguas, property 36,791, recorded at page 27 of volume 1086 of Caguas.
Patheon Puerto Rico, Inc.	Mortgage Note	[USD 7,000,000] secured by Deed of Mortgage Number 5 executed on July 9, 1999, before Notary Francisco Arrivi Silva, recorded at the mobile page 457 of Manati, property 7376, recorded at page 192 of volume 548 of Manati.
Patheon Puerto Rico, Inc	Mortgage Note	[USD 2,000,000] secured by Deed of Mortgage Number 6 executed on April 23, 2010, before Notary Marta S. Ramirez Isern, to be filed to encumber 4 parcels of land comprised of 6.2029 “cuerdas”; 8.1729 “cuerdas”; 5.0192 “cuerdas”; and 3.1399 “cuerdas”, all of them segregated from property 7376, recorded at page 192 of volume 548 of Manati.

EQUITY INTERESTS ISSUED TO OR OTHERWISE OWNED BY

PATHEON PUERTO RICO, INC.

Issuer	Number of Certificate	Registered Owner	Number and Class of Equity Interest	Percentage of Equity Interests
Patheon Puerto Rico, Inc.	[1]	Patheon P.R. LLC	11,131,150 Class A common shares	100%

PR MORTGAGE NOTES

PATHEON P.R. LLC

Nil

EQUITY INTERESTS ISSUED TO OR OTHERWISE OWNED BY

PATHEON PUERTO RICO ACQUISITIONS CORPORATION

Issuer	Number of Certificate	Registered Owner	Number and Class of Equity Interest	Percentage of Equity Interests
CEPH International Corporation	[A-6]	Patheon Puerto Rico Acquisitions Corporation	50,000 common shares	100%

DEBT SECURITIES ISSUED TO OR OTHERWISE OWNED BY

PATHEON PUERTO RICO ACQUISITIONS CORPORATION

Issuer	Principal Amount	Date of Note	Maturity Date
Nil	Nil	Nil	Nil

PR MORTGAGE NOTES

PATHEON PUERTO RICO ACQUISITIONS CORPORATION

Nil

EQUITY INTERESTS ISSUED TO OR OTHERWISE OWNED BY

CEPH INTERNATIONAL CORPORATION

Issuer	Number of Certificate	Registered Owner	Number and Class of Equity Interest	Percentage of Equity Interests
Nil	nil	nil	nil	nil

DEBT SECURITIES ISSUED TO OR OTHERWISE OWNED BY

CEPH INTERNATIONAL CORPORATION

2

Issuer	Principal Amount	Date of Note	Maturity Date
Nil	nil	nil	nil

PR MORTGAGE NOTES

CEPH INTERNATIONAL CORPORATION

Nil

3

Exhibit I to the

US Revolving Pledge and Security Agreement

SUPPLEMENT NO.      dated as of [—], to the US Revolving Pledge and Security Agreement dated as of [—], 2010 (the “US Collateral Agreement”) among PATHEON PHARMACEUTICALS INC. (the “US Borrower”), PATHEON PUERTO RICO, INC. (the “PR Borrower”), the OTHER SUBSIDIARIES OF PATHEON INC. named therein and JPMORGAN CHASE BANK, N.A., as Collateral Agent (the “Collateral Agent”).

A. Reference is made to the Amended and Restated Revolving Credit Agreement dated as of March [—], 2010 (as amended, supplemented or otherwise modified from time to time, the “Revolving Credit Agreement”), among Patheon Inc., the US Borrower, the PR Borrower, the other Subsidiaries of Patheon Inc. named therein, the Lenders party thereto and the Collateral Agent, JPMorgan Chase Bank, N.A., Toronto Branch, and J.P. Morgan Europe Limited, as Agents.

B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Revolving Credit Agreement and the US Collateral Agreement referred to therein.

C. The Grantors have entered into the US Collateral Agreement in order to induce the Lenders to make Loans, the Canadian Lenders to purchase or accept B/As and the Issuing Banks to issue Letters of Credit. Section 6.14 of the US Collateral Agreement provides that additional Subsidiaries of the Parent Borrower may become Subsidiary Parties under the US Collateral Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the “New Subsidiary”) is executing this Supplement in accordance with the requirements of the Revolving Credit Agreement to become a Subsidiary Party under the US Collateral Agreement in order to induce the Lenders to make additional Loans, the Canadian Lenders to purchase or accept additional B/As and the Issuing Banks to issue additional Letters of Credit and as consideration for Loans previously made, B/As previously purchased or accepted and Letters of Credit previously issued.

Accordingly, the Collateral Agent and the New Subsidiary agree as follows:

SECTION 1. In accordance with Section 6.14 of the US Collateral Agreement, the New Subsidiary by its signature below becomes a Subsidiary Party (and accordingly, becomes a Grantor) and a Grantor under the US Collateral Agreement with the same force and effect as if originally named therein as a Subsidiary Party and the New Subsidiary hereby agrees to all the terms and provisions of the US Collateral Agreement applicable to it as a Subsidiary Party and Grantor thereunder. In furtherance of the foregoing, the New Subsidiary, as security for the payment and performance in full of the Obligations (as defined in the Guarantor Agreement), does hereby create and grant to the Collateral Agent its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Subsidiary’s

right, title and interest in and to the Collateral (as defined in the US Collateral Agreement) of the New Subsidiary. Each reference to a “Grantor” in the US Collateral Agreement shall be deemed to include the New Subsidiary. The US Collateral Agreement is hereby incorporated herein by reference.

SECTION 2. The New Subsidiary represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.

SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received a counterpart of this Supplement that bears the signature of the New Subsidiary and the Collateral Agent has executed a counterpart hereof. Delivery of an executed signature page to this Supplement by electronic transmission shall be as effective as delivery of a manually signed counterpart of this Supplement.

SECTION 4. The New Subsidiary hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of the location of any and all Collateral of the New Subsidiary, (b) set forth on Schedule II attached hereto is a true and correct schedule of all the Pledged Securities of the New Subsidiary and (c) set forth under its signature hereto, is the true and correct legal name of the New Subsidiary, its jurisdiction of formation and the location of its chief executive office.

SECTION 5. Except as expressly supplemented hereby, the US Collateral Agreement shall remain in full force and effect.

SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 7. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the US Collateral Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 6.01 of the US Collateral Agreement.

SECTION 9. The New Subsidiary agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement,

including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent.

IN WITNESS WHEREOF, the New Subsidiary and the Collateral Agent have duly executed this Supplement to the US Collateral Agreement as of the day and year first above written.

[NAME OF NEW SUBSIDIARY],
	by
		Name:
		Title:
		Legal Name:
		Jurisdiction of Formation:
		Location of Chief Executive office:
JPMORGAN CHASE BANK, N.A., as Collateral Agent
	by
		Name:
		Title:

Schedule I

to the Supplement No      to the

US Revolving Pledge and Security Agreement

LOCATION OF COLLATERAL

Description Location

Schedule II

to the Supplement No      to the

US Revolving Pledge and Security Agreement

PLEDGED SECURITIES

Equity Interests

Issuer Number of Certificate Registered Owner Number and Class of Equity Interests Percentage of Equity Interests

Debt Securities

Issuer Principal Amount Date of Note Maturity Date

Exhibit L

April 23, 2010

JPMorgan Chase Bank, N.A., as US Administrative

Agent and Collateral Agent under the Amended and

Restated Revolving Credit Agreement, as hereinafter

defined (the “Administrative Agent”),

and

The Lenders listed on Schedule I hereto

Ladies and Gentlemen:

I am the General Counsel for Patheon Inc., a corporation organized under the Canadian Business Corporation Act (the “Company”). This opinion is delivered to you pursuant to Section 4.01 (b) of the Amended and Restated Revolving Credit Agreement dated April 23, 2010 (the “Credit Agreement”), among Patheon Inc., Patheon Pharmaceuticals Inc., a Delaware corporation (the “US Borrower”), Patheon P.R. LLC, Patheon U.S. Holdings LLC and Patheon Finance LLC, each a Delaware limited liability company, and Patheon U.S. Holdings Inc. and Patheon Pharmaceuticals Services Inc., each a Delaware corporation (collectively the “US Guarantors”; the US Borrower and the US Guarantors being referred to herein collectively as the “US Credit Parties”) and the Subsidiaries of Patheon Inc. listed on Schedule II hereto (collectively the “Non-US Credit Parties”, and collectively with the US Credit Parties the “US/Non-US Credit Parties”), the Lenders party thereto, JPMorgan Chase Bank, N.A., as US Administrative Agent, JPMorgan Chase Bank, N.A. Toronto Branch, as Canadian Administrative Agent and J.P. Morgan Europe Limited, as European Administrative Agent. Unless otherwise indicated, capitalized terms used but not defined herein shall have the respective meanings set forth in the Credit Agreement.

-2- APRIL 23, 2010

I have examined the documents listed in Annex A hereto (the “Transaction Documents”). I have also examined the originals, or duplicates or certified or conformed copies, of such records, agreements, instruments and other documents and have made such other investigations as I have deemed relevant and necessary in connection with the opinions expressed herein. For the purposes of the opinions herein, I have relied upon statements, certificates and other assurances of public officials and of officers and other representatives of the Company, and upon such other certificates as I have deemed appropriate, which factual matters have not been independently established or verified by me.

In rendering the opinions set forth below, I have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as duplicates or certified or conformed copies, and the authenticity of the originals of such latter documents.

Based upon the foregoing, and subject to the qualifications and limitations set forth herein, I am of the opinion that:

1. Each of the US/Non-US Credit Parties is duly qualified to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, and has the corporate or limited liability company power and authority, as applicable, necessary to own or hold its respective properties and to conduct the businesses in which it is engaged, except where the failure to so qualify or be in good standing or have such power and authority would not reasonably be expected to result in a Material Adverse Effect.

2. All the outstanding shares of capital stock or other equity interests of each of the US/Non-US Credit Parties have been duly and validly authorized and issued, are fully paid and non-assessable, and are owned by the Company directly or indirectly.

3. There are no pending actions, suits or proceedings against or affecting the Company, any of its subsidiaries or any of their respective properties that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect, or would materially and adversely affect the ability of any of the US/Non-US Credit Parties to perform their respective obligations under any of the Transaction Documents and no such actions, suits or proceedings are, to my knowledge, threatened or contemplated.

-3- APRIL 23, 2010

4. The execution, delivery and performance by each US/Non-US Credit Party of each of the Transaction Documents to which it is a party, the compliance by the each of the US/Non-US Credit Parties. with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, will not (i) breach or result in a default under any material agreements or instruments to which any US/Non-US Credit Party is subject, (ii) result in any violation of the certificate of incorporation, certificate of formation, by-laws or limited liability company agreement, as applicable, of any of the US/Non-US Credit Parties or (iii) result in the violation of any rule, regulation or order issued by any court or governmental agency, or body having jurisdiction over any of the US/Non-US Credit Parties or any of their properties, except, (a) in the case of clauses (i) and (iii) above, for any such conflict, breach, violation or default that, individually or in the aggregate, would not have a Material Adverse Effect.

5. To my knowledge, no consent, approval, authorization, order, filing, registration or qualification of or with any court or arbitrator or governmental or regulatory authority in Canada or any of its provinces is required for the execution, delivery and performance by the Company and Patheon International Inc. of each of the Transaction Documents, the compliance by the Company and Patheon International Inc. with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents.

The qualification of any opinion or statement herein by the use of the words “to my knowledge” means that, during the course of my employment in connection with the affairs of the Company and with respect to the transactions contemplated by the Transaction Documents, no information has come to my attention that gives me actual knowledge of the existence of the matters, items or facts so qualified. However, I have not undertaken any independent investigation or inquiry to determine the existence of such matters, items or facts, other than such investigation or inquiry of the other attorneys in the legal department of the Company that I have deemed necessary or appropriate to render the foregoing opinions, and no inference as to my knowledge thereof shall be drawn from the fact of my employment by any entity. As used in this paragraph, the term “actual knowledge” means conscious awareness.

I am a member of the Bar of the State of California, and I do not express any opinion herein concerning any law other than federal law, the law of the State of California, the Delaware General Corporation Law and the Delaware Limited Liability Company Act. My

-4- APRIL 23, 2010

opinions are rendered only with respect to the laws, and the rules, regulations and orders under those laws that are currently in effect.

This opinion letter is rendered to you in connection with the transactions described in the Credit Agreement. This opinion letter may not be relied upon by you for any other purpose, or relied upon by, or furnished to, any other person, firm or corporation without my prior written consent.

-5- APRIL 23, 2010

Very truly yours,

Doaa A. Fatallah

[General Counsel Opinion]

Very truly yours,

Doaa A. Fathallah

[General Counsel Opinion]

-6- APRIL 23, 2010

Schedule I

JPMorgan Chase Bank, N.A.

UBS Loan Finance LLC

Wells Fargo Capital Finance LLC

General Electric Capital Corporation

Scotiabank de Puerto Rico

CIT Business Credit Canada Inc.

Barclays Bank PLC

J.P. Morgan Europe Limited

JPMorgan Chase Bank, N.A., Toronto Branch

Wells Fargo Financial Corporation Canada

-7- APRIL 23, 2010

Schedule II

1. Patheon Holdings S.A.S.

2. Patheon France S.A.S.

3. Patheon Italia S.p.A.

4. Patheon International AG

5. Patheon Puerto Rico, Inc.

6. Patheon Puerto Rico Acquisitions Corporation

7. CEPH International Corporation

8. Patheon UK Limited

9. Patheon B.V.

10. Patheon International Inc.

-8- APRIL 23, 2010

Annex A

1. The Credit Agreement (as defined above).

2. The Guarantor Agreement, dated April 23, 2010 (the “Guarantor Agreement”), among the Company, the Guarantors and JPMorgan Chase Bank, N.A., and the Agents party thereto.

3. The Intercreditor Agreement, dated April 23, 2010, among the Company, the Guarantors, the Deutsche Bank Trust Company Americas, as notes collateral agent and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent under the Credit Agreement.

U.S. Security Documents

1. The US Revolving Pledge and Security Agreement, dated April 23, 2010, among the Guarantors party thereto and the Collateral Agent.

2. The Receivables Security Agreement, dated April 23, 2010, among Patheon International AG and the Collateral Agent.

3. The Mortgage, dated April 23, 2010, of the property located at 2110 East Galbraith Road, Cincinnati, Ohio 45237.

Canadian Security Documents

1. The Canadian Revolving Pledge and Security Agreement, dated April 23, 2010, among the Company, Patheon International Inc. and the Collateral Agent.

2. The Debenture, dated April 23, 2010, granted by the Company in favor of the Collateral Agent in respect of lands known municipally as 2100 Syntex Court, Mississauga, Ontario and 111 Consumers Drive, Whitby, Ontario.

Puerto Rican Security Documents

-9- APRIL 23, 2010

1. The Ratification to the US Revolving Pledge and Security Agreement dated April 23, among the Guarantors party thereto and the Collateral Agent.

2. The Deeds of Mortgage executed respectively by the legal predecessors of Patheon Puerto Rico, Inc., Patheon Puerto Rico Acquisitions Corporation and CEPH International Corporation (the “Puerto Rico Mortgages”).

3. The mortgage promissory notes in the principal sums of US$             issued by Patheon Puerto Rico, Inc., Patheon Puerto Rico Acquisitions Corporation and CEPH International Corporation or its legal predecessors secured by the Puerto Rico Mortgages.

U.K. Security Documents

1. The Debenture, dated April 23, 2010, granted in favor of the Collateral Agent by Patheon UK Limited.

2. The Revolving Facility Share Charge, dated April 23, 2010, in relation to shares held by Patheon B.V. in Patheon UK Limited, among Patheon B.V. as charger and the Collateral Agent.

3. The Receivables Security Agreement, dated April 23, 2010, among Patheon International AG as assignor and the Collateral Agent.

Italian Security Documents

1. The Deed of Amendment and Restatement of Pledge Over Shares, dated April 23, 2010, of pledge over shares of Patheon Italia S.p.A. held by Patheon B.V,, among Patheon B.V. as pledgor, the Collateral Agent and Deutsche Bank Trust Company Americas, as notes collateral agent.

French Security Documents

-10- APRIL 23, 2010

1. The Financial Securities Account Pledge Agreement (Second Ranking), dated April 23. 2010, over shares held by Patheon Holdings S.A.S. in Patheon France S.A.S., among Patheon Holdings S.A.S. as pledger and the Collateral Agent.

2. The Financial Securities Account Pledge Agreement (Second Ranking), dated April 23, 2010, over shares held by Patheon B.V. in Patheon Holdings S.A.S., among Patheon B.V. as pledger and the Collateral Agent.

Swiss Security Documents

1. The Assignment Agreement., dated April 23, 2010, among Patheon International AG as assignor, the Collateral Agent and Deutsche Bank Trust Company Americas, as notes collateral agent.

2. The Share Pledge Agreement, dated April 23, 2010, over shares of Patheon International AG granted by Patheon B.V., among Patheon B.V. as pledger and the Collateral Agent.

Dutch Security Documents

1. The Deed of Disclosed Pledge Over Receivables (Intercompany Claims), dated April 23, 2010, over intercompany receivables, among Patheon B.V. as pledger and the Collateral Agent.

SIMPSON THACHER & BARTLETT LLP

425 LEXINGTON AVENUE

NEW YORK, N.Y. 10017-3954

(212) 455-2000

FACSIMILE: (212) 455-2502

DIRECT DIAL NUMBER E-MAIL ADDRESS

April 23, 2010

JPMorgan Chase Bank, N.A., as US Administrative

Agent under the Amended and Restated Revolving

Credit Agreement, as hereinafter

defined (the “Administrative Agent”),

and

The Lenders listed on Schedule I hereto

Re: Amended and Restated Revolving Credit Agreement, dated as of April 23, 2010 (the “Credit Agreement”), among Patheon Inc., the Subsidiaries of Patheon Inc. named therein, the Lenders party thereto, JPMorgan Chase Bank, N.A., as US Administrative Agent, JPMorgan Chase Bank, N.A. Toronto Branch, as Canadian Administrative Agent and J.P. Morgan Europe Limited, as European Administrative Agent.

Ladies and Gentlemen:

We have acted as counsel to Patheon Pharmaceuticals Inc., a Delaware corporation (the “US Borrower”). Patheon P.R. LLC, Patheon U.S. Holdings LLC and Patheon Finance LLC, each a Delaware limited liability company, and Patheon U.S. Holdings Inc. and Patheon Pharmaceuticals Services Inc., each a Delaware corporation (collectively the “US Guarantors”; the US Borrower and the US Guarantors being referred to herein collectively as the “US Credit Parties”), Patheon Inc., a Canadian corporation and the Subsidiaries of Patheon Inc. listed on Schedule II hereto (collectively the “Non-US Credit Parties”, and collectively with the US Credit Parties the “US/Non-US Credit Parties”) in connection with the preparation, execution and delivery of the following documents: (i) the Credit Agreement; (ii) the Intercreditor Agreement; (iii) the Guarantor Agreement; (iv) the US Collateral Agreement; and (v) the US Revolving Security Agreement dated April 23, 2010 between Patheon International AG and the Collateral Agent. The documents described in the foregoing clauses (i) through (v) are collectively referred to herein as the “Credit Documents”; the documents described in the foregoing clauses (iv) and (v) are referred to herein as the “Security Documents”. Unless otherwise indicated, capitalized terms used but not defined herein shall have

LOS ANGELES        PALO ALTO        WASHINGTON, D.C.        BEIJING        HONG KONG        LONDON        TOKYO

SIMPSON THACHER & BARTLETT LLP -2- April 23, 2010

the respective meanings set forth in the Credit Agreement. This opinion is delivered to you pursuant to Section 4.01(b) of the Credit Agreement.

We have examined the following:

(i) the Credit Agreement, signed by each US/Non-US Credit Party that is a party thereto and by the Agents and certain of the Lenders;

(ii) each other Credit Document, signed by each US/Non-US Credit Party that is a party thereto; and

(iii) unfiled copies of the financing statements listed on Schedule III hereto (the “Financing Statements”), naming the US Credit Parties indicated on such Schedule III as debtors and the Collateral Agent as secured party, which we understand will be filed in the Office of the Secretary of State of the State of Delaware (the “Delaware Filing Office”).

In addition, we have examined, and have relied as to matters of fact upon, the documents delivered to you at the closing, and upon originals, or duplicates or certified or conformed copies, of such corporate records, agreements, documents and other instruments and such certificates or comparable documents of public officials and of officers and representatives of the US/Non-US Credit Parties, and have made such other investigations, as we have deemed relevant and necessary in connection with the opinions hereinafter set forth. In such examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies and the authenticity of the originals of such latter documents. As to questions of fact material to this opinion, we have relied upon certificates of public officials and of officers and representatives of the US/Non-Credit Parties. In addition, we have relied as to certain matters of fact upon the representations made in the Credit Documents.

In addition, we have assumed that (1) the US/Non-US Credit Parties have rights in the Collateral existing on the date hereof and will have rights in property which becomes Collateral after the date hereof; (2) “value” (as defined in Section 1-201(44) of the Uniform Commercial Code as in effect on the date hereof in the State of New York (the “New York UCC”)) has been given by the Lenders to the US/Non-US Credit Parties for the security interests and other rights in the Collateral; (3) to the extent our opinion in paragraph 11 relates to securities purportedly represented by a certificate and issued by an issuer not organized under the laws of one of the States of the United

SIMPSON THACHER & BARTLETT LLP -3- April 23, 2010

States, such securities are “certificated securities” within the meaning of Section 8-102(a)(4) of the New York UCC and (4) to the extent our opinion in paragraph 10 relates to promissory notes, such notes are “instruments” within the meaning of New York UCC Section 9-102(a)(47).

Based upon and subject to the foregoing, and subject to the qualifications and limitations set forth herein, we are of the opinion that:

1. Each of the US Credit Parties (a) is validly existing and in good standing as a corporation or limited liability company, as applicable, under the laws of the State of Delaware, (b) has the corporate or limited liability company, as applicable, power and authority to execute and deliver each of the Credit Documents to which it is a party and to borrow (in the case of Borrower) and perform its obligations thereunder and to grant the security interests to be granted by it pursuant to the Security Documents and (c) has duly authorized, executed and delivered each Credit Document to which it is a party; each of the Non-US Credit Parties has duly executed and delivered each Credit Document to which it is a party in accordance with the laws of the State of New York.

2. The execution and delivery by any US/Non-US Credit Party of the Credit Documents to which it is a party, its borrowings (in the case of the Borrowers) in accordance with the terms of the Credit Documents, the performance of its payment obligations thereunder, and the granting of the security interests to be granted by it pursuant to the Security Documents (a) will not result in any violation of (1) the certificate of incorporation or certificate of formation, as applicable, or by laws or limited liability company agreement, as applicable, of such US/Non-US Credit Party (other than the Non-US Credit Parties, as to which we express no opinion in this paragraph 2) or (2) assuming that proceeds of borrowings will be used in accordance with the terms of the Credit Agreement, any federal or New York statute or the Delaware General Corporation Law or the Delaware Limited Liability Company Act or any rule or regulation issued pursuant to any federal or New York statute or the Delaware General Corporation Law or the Delaware Limited Liability Company Act or any order known to us issued by any court or governmental agency or body and (b) will not breach or result in a default under or result in the creation of any lien upon or security interest in the US/Non-US Credit Parties’ properties pursuant to the terms of any agreement or instrument identified on Schedule IV hereto.

3. No consent, approval, authorization, order, filing, registration or qualification of or with any federal or New York governmental agency or body or any Delaware governmental agency or body acting pursuant to the Delaware General Corporation Law or the Delaware Limited Liability Company Act is required for the execution and delivery by any US/Non-US Credit Party of the Credit Documents to which it is a party, the borrowings by any Borrower in accordance with the terms of the Credit Documents or the performance by any US/Non-US Credit Party of its payment obligations under the Credit Documents to which such US/Non-US Credit

SIMPSON THACHER & BARTLETT LLP -4- April 23, 2010

Party is a party, or the granting of any security interests under the Security Documents, except filings required for the perfection of security interests granted pursuant to the Security Documents.

4. Assuming that each of the Credit Documents is a valid and legally binding obligation of each of the parties thereto other than the US/Non-US Credit Parties, and assuming that (a) each of the Non-US Credit Parties is validly existing and in good standing under the laws of the jurisdiction in which it is organized and has duly authorized, executed and delivered the Credit Documents to which it is a party in accordance with its organizational documents, (b) execution, delivery and performance by each US/Non-US Credit Party of the Credit Documents to which it is a party do not violate any applicable laws (excepting the law of the State of New York, the Delaware General Corporation Law, the Delaware Limited Liability Company Act and the federal laws of the United States), and (c) execution, delivery and performance by each US/Non-US Credit Party of the Credit Documents to which it is a party do not constitute a breach or violation of any agreement or instrument which is binding upon any US/Non-US Credit Party (except that we do not make the assumption in the foregoing clause (c) with respect to the agreements and instruments that are the subject of clause (b) of opinion paragraph 2 of this opinion letter), each Credit Document constitutes the valid and legally binding obligation of each US/Non-US Credit Party which is a party thereto, enforceable against such US/Non-US Credit Party in accordance with its terms.

5. To our knowledge there is no action, suit or proceeding now pending before or by any court, arbitrator or governmental agency, body or official to which any US/Non-US Credit Party is a party or to which the business, assets or property of any US/Non-US Credit Party is subject, and no such action, suit or proceeding is threatened to which any US/Non-US Credit Party would be a party or to which the business, assets or property of any US/Non-US Credit Party would be subject, that in either case questions the validity of the Credit Documents.

6. No US/Non-US Credit Party is an “investment company” within the meaning of, and subject to regulation under, the Investment Company Act of 1940, as amended.

7. Assuming that the Borrowers will comply with the provisions of the Credit Agreement relating to the use of proceeds, the execution and delivery of the Credit Agreement by the Borrowers and the making of the Loans under the Credit Agreement will not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System.

8. The Security Documents create in favor of the Collateral Agent for the benefit of the Lenders a security interest in the Collateral described therein in which a security interest may be created under Article 9 of the New York UCC (collectively, the “Security Agreement Article 9 Collateral”).

9. The US Collateral Agreement creates in favor of the Collateral Agent for the benefit of the Lenders a security interest under the New York UCC in the

SIMPSON THACHER & BARTLETT LLP -5- April 23, 2010

“investment property” (as defined in Section 9-102(a)(49) of the New York UCC) identified on Schedule V (the “Pledged Securities”).

10. The security interest of the Collateral Agent for the benefit of the Lenders in that portion of the Collateral identified on Schedule VI as instruments will be a perfected security interest upon delivery of such instruments to the Notes Agent (as defined in the Intercreditor Agreement, the “Notes Agent”) in the State of New York, as agent on behalf of the Collateral Agent for the benefit of the Lenders.

11. The Collateral Agent will have a perfected security interest in the Pledged Securities for the benefit of the Lenders under the New York UCC upon delivery to the Notes Agent, as agent on behalf of the Collateral Agent for the benefit of the Lenders, in the State of New York of the certificates representing the Pledged Securities in registered form, indorsed in blank by an effective indorsement or accompanied by undated stock powers with respect thereto duly indorsed in blank by an effective indorsement. Assuming neither the Collateral Agent nor any of the Lenders has notice of any adverse claim to the Pledged Securities, the Collateral Agent will acquire the security interest in the Pledged Securities for the benefit of the Lenders free of any adverse claim.

Although we express no opinion as to the law of the State of Delaware (other than the Delaware General Corporation Law and the Delaware Limited Liability Company Act), we have reviewed Article 9 of the Uniform Commercial Code in effect in the State of Delaware as set forth in the Commerce Clearing House, Inc. Secured Transactions Guide as supplemented through April 13, 2010 (the “Delaware UCC”) and, based solely on such review, we advise you that (a) the Financing Statements to be filed in the Delaware Filing Office are in appropriate form for filing in the Delaware Filing Office and (b) upon the filing of the Financing Statements in the Delaware Filing Office, the Collateral Agent will have a perfected security interest for the benefit of the Lenders in that portion of the Security Agreement Article 9 Collateral of each US Credit Party in which a security interest is perfected by filing a financing statement in the Delaware Filing Office.

Our opinions in paragraphs 4, 8 and 9 above are subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law), (iii) an implied covenant of good faith and fair dealing and (iv) the effects of possible judicial application of foreign laws or foreign governmental or judicial action affecting creditors’ rights. Our opinion in paragraph 4 above also is subject to the qualification that certain provisions of the Security Documents may not be enforceable in whole or in part, although

SIMPSON THACHER & BARTLETT LLP -6- April 23, 2010

the inclusion of such provisions does not render the Security Documents invalid, and the Security Documents and the law of the State of New York contain adequate remedial provisions for the practical realization of the rights and benefits afforded thereby.

Our opinions in paragraphs 8, 9 and 10, and our advice in the second preceding paragraph above, are limited to Article 9 of the New York UCC or Article 9 of the Delaware UCC, as the case may be, and our opinion in paragraph 11 is limited to Articles 8 and 9 of the New York UCC, and, therefore, those opinion and advice paragraphs do not address (i) collateral of a type not subject to Article 9 or 8, as the case may be, of the New York UCC or the Delaware UCC and (ii) what law governs perfection of the security interests granted in the collateral covered by this opinion letter.

We express no opinion and render no advice with respect to:

(i) perfection of any security interest in (1) any collateral of a type represented by a certificate of title and (2) any collateral consisting of money or cash equivalents;

(ii) the effect of § 9-315(a)(2) of the New York UCC with respect to any proceeds of Collateral that are not identifiable;

(iii) perfection of any security interest whose priority is subject to Section 9-334 of the New York UCC;

(iv) the priority of any security interest (except as expressly provided in paragraph 11);

(v) any matters subject to federal or state healthcare or health insurance laws, and the rules and regulations promulgated thereunder (including, without limitation, regulations promulgated under Medicare and Medicaid);

(vi) the effect of Section 552 of the Bankruptcy Code (11 U.S.C. 552) (relating to property acquired by a pledgor after the commencement of a case under the United States Bankruptcy Code with respect to such pledgor) and Section 506(c) of the Bankruptcy Code (11 U.S.C. 506(c)) (relating to certain costs and expenses of a trustee in preserving or disposing of collateral);

(vii) the effect of any provision of the Credit Documents which is intended to establish any standard other than a standard set forth in the New York UCC as the measure of the performance by any party thereto of such party’s obligations of good faith, diligence, reasonableness or care or of the fulfillment of the duties imposed on any secured party with respect to the maintenance, disposition or redemption of collateral, accounting for surplus proceeds of collateral or accepting collateral in discharge of liabilities;

(viii) the effect of any provision of the Credit Documents which is intended to permit modification thereof only by means of an agreement in writing signed by the parties thereto;

SIMPSON THACHER & BARTLETT LLP -7- April 23, 2010

(ix) the effect of any provision of the Credit Documents insofar as it provides that any Person purchasing a participation from a Lender or other Person may exercise set-off or similar rights with respect to such participation or that any Lender or other Person may exercise set-off or similar rights other than in accordance with applicable law;

(x) the effect of any provision of the Credit Documents imposing penalties or forfeitures;

(xi) the enforceability of any provision of the Credit Documents to the extent that such provision constitutes a waiver of illegality as a defense to performance of contract obligations; and

(xii) the effect of any provision of the Credit Documents relating to indemnification or exculpation in connection with violations of any securities laws or relating to indemnification, contribution or exculpation in connection with willful, reckless or criminal acts or gross negligence of the indemnified or exculpated Person or the Person receiving contribution.

In connection with the provisions of the Credit Documents whereby the parties submit to the jurisdiction of the courts of the United States of America located in the State of New York, we note the limitations of 28 U.S.C. §§ 1331 and 1332 on subject matter jurisdiction of the federal courts. In connection with the provisions of the Credit Documents which relate to forum selection (including, without limitation, any waiver of any objection to venue or any objection that a court is an inconvenient forum), we note that under NYCPLR § 510 a New York state court may have discretion to transfer the place of trial, and under 28 U.S.C. § 1404(a) a United States district court has discretion to transfer an action from one federal court to another.

We do not express any opinion herein concerning any law other than the law of the State of New York, the federal law of the United States, the Delaware General Corporation Law and the Delaware Limited Liability Company Act.

Insofar as the opinions expressed herein relate to or are dependent upon matters governed by laws other than those of the State of Delaware or the State of New York, we understand that you are relying upon the opinions of (i) Fiddler Gonzáles & Rodriguez with respect to all matters of Puerto Rican law, (ii) Stikeman Elliott LLP with respect to all matters of the laws of Canada, (iii) Mayer Brown International LLP with respect to all matters of the laws of England and Wales, (iv) Legance Studio Legale Associato and Montanari Brescia e Associati, Studio Legale with respect to all matters of Italian law, (v) Walder Wyss & Partners Ltd. and Meyer Müller Eckert and Partners with respect to all matters of Swiss law, (vi) NautaDutilh N.V. with respect to all matters of Dutch law, (vii) Mayer Brown International LLP and Cabinet Ratheaux with respect to all matters of French law and (viii) Thompson Hine LLP with respect to all matters of Ohio law.

SIMPSON THACHER & BARTLETT LLP -8- April 23, 2010

This opinion letter is rendered to you at the request of the US/Non-US Credit Parties in connection with the above described transactions. This opinion letter may not be relied upon by you for any other purpose, or relied upon by, or furnished to, any other person, firm or corporation without our prior written consent.

Very truly yours,

SIMPSON THACHER & BARTLETT LLP

SIMPSON THACHER & BARTLETT LLP

SCHEDULE I

THE LENDERS

JPMorgan Chase Bank, N.A.

UBS Loan Finance LLC

Wells Fargo Capital Finance LLC

General Electric Capital Corporation

Scotiabank de Puerto Rico

CIT Business Credit Canada Inc.

Barclays Bank PLC

J.P. Morgan Europe Limited

JPMorgan Chase Bank, N.A., Toronto Branch

Wells Fargo Financial Corporation Canada

SIMPSON THACHER & BARTLETT LLP

SCHEDULE II

NON-US CREDIT PARTIES

Patheon Inc.

Patheon International Inc.

Patheon Puerto Rico, Inc.

Patheon Puerto Rico Acquisitions Corporation

CEPH International Corporation

Patheon B.V.

Patheon UK Limited

Patheon Italia S.p.A.

Patheon Holdings S.A.S.

Patheon France S.A.S.

Patheon International AG

SIMPSON THACHER & BARTLETT LLP

SCHEDULE III

FINANCING STATEMENTS

The following financing statements on form UCC-1, naming the Person listed below as debtor and the Collateral Agent as secured party for the benefit of the Lenders, to be filed in the Delaware Filing Office:

Debtor

Patheon Pharmaceuticals Inc.

Patheon Pharmaceuticals Services Inc.

Patheon U.S. Holdings Inc.

Patheon P.R. LLC

Patheon U.S. Holdings LLC

Patheon Finance LLC

SIMPSON THACHER & BARTLETT LLP

SCHEDULE IV

AGREEMENTS AND INSTRUMENTS

1. Senior Notes Indenture.

2. US Notes Security Agreement, dated April 23, 2010 between Patheon International AG and Deutsche Bank Trust Company Americas, as Collateral Agent.

3. US Notes Pledge and Security Agreement, dated April 23, 2010 among the Guarantors party thereto and Deutsche Bank Trust Company Americas, as Collateral Agent.

SIMPSON THACHER & BARTLETT LLP

SCHEDULE V

PLEDGED SECURITIES

Issuer	Pledgor	Certificate No.		Number of Equity Interests
Patheon Pharmaceuticals Inc.	Patheon U.S. Holdings Inc.		3		1 share
Patheon Pharmaceuticals Inc.	Patheon U.S. Holdings Inc.		4		100 shares
Patheon Pharmaceuticals Services Inc.	Patheon U.S. Holdings Inc.		2		1 share
Mova Pharmaceutical Corporation (n/k/a Patheon Puerto Rico, Inc.)	Patheon P.R. LLC		C-A-39		11,131,150 shares

SIMPSON THACHER & BARTLETT LLP

SCHEDULE VI

INSTRUMENTS

Promissory note evidencing loan from Patheon Finance LLC to Patheon Europe Zrt. GBP 9,563,398 (issued April 27, 2007 maturing on demand)

Promissory note evidencing loan from Patheon Finance LLC to Patheon Europe Zrt. EUR 500,000 (issued March 16, 2010 maturing March 16, 2011)

Promissory note evidencing loan from Patheon Finance LLC to Patheon Europe Zrt. EUR 1,000,000 (issued April 19, 2010 maturing April 19, 2011)

Exhibit M

EXHIBIT M-1

FORM OF

U.S. TAX CERTIFICATE

(For Non-U.S. Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Amended and Restated Revolving Credit Agreement dated as of April 23, 2010 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Patheon Inc., the subsidiaries of Patheon Inc. named in the Credit Agreement, and each lender from time to time party thereto.

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended, (the “Code”), (iii) it is not a ten percent shareholder of the Borrower within the meaning of Code Section 871(h)(3)(B), (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code and (v) the interest payments in question are not effectively connected with the undersigned’s conduct of a U.S. trade or business.

The undersigned has furnished the Applicable Agent and the Borrower with a certificate of its non-U.S. person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Applicable Agent and (2) the undersigned shall have at all times furnished the Borrower and the Applicable Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[NAME OF LENDER]
By:
	Name:
	Title:

Date:                  , 20[    ]

EXHIBIT M-2

FORM OF

U.S. TAX CERTIFICATE

(For Non-U.S. Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Amended and Restated Revolving Credit Agreement dated as of April 23, 2010 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Patheon Inc., the subsidiaries of Patheon Inc. named in the Credit Agreement, and each lender from time to time party thereto.

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its partners/members are the sole beneficial owners of such Loan(s) (as well as any note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement or any other Loan Document, neither the undersigned nor any of its partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended, (the “Code”), (iv) none of its partners/members is a ten percent shareholder of the Borrower within the meaning of Code Section 871(h)(3)(B), (v) none of its partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code, and (vi) the interest payments in question are not effectively connected with the undersigned’s or its partners/members’ conduct of a U.S. trade or business.

The undersigned has furnished the Applicable Agent and the Borrower with IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of its partners/members claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Applicable Agent and (2) the undersigned shall have at all times furnished the Borrower and the Applicable Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[NAME OF LENDER]
By:
	Name:
	Title:

Date:                  , 20[    ]

EXHIBIT M-3

FORM OF

U.S. TAX CERTIFICATE

(For Non-U.S. Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Amended and Restated Revolving Credit Agreement dated as of April 23, 2010 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Patheon Inc., the subsidiaries of Patheon Inc. named in the Credit Agreement, and each lender from time to time party thereto.

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended, (the “Code”), (iii) it is not a ten percent shareholder of the Borrower within the meaning of Code Section 871(h)(3)(B), (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code, and (v) the interest payments in question are not effectively connected with the undersigned’s conduct of a U.S. trade or business.

The undersigned has furnished its participating Lender with a certificate of its non-U.S. person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[NAME OF PARTICIPANT]
By:
	Name:
	Title:

Date:                  , 20[    ]

EXHIBIT M-4

FORM OF

U.S. TAX CERTIFICATE

(For Non-U.S. Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Amended and Restated Revolving Credit Agreement dated as of April 23, 2010 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Patheon Inc., the subsidiaries of Patheon Inc. named in the Credit Agreement, and each lender from time to time party thereto.

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended, (the “Code”), (iv) none of its partners/members is a ten percent shareholder of the Borrower within the meaning of Code Section 871(h)(3)(B), (v) none of its partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code, and (vi) the interest payments in question are not effectively connected with the undersigned’s or its partners/members’ conduct of a U.S. trade or business.

The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of its partners/members claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[NAME OF PARTICIPANT]
By:
	Name:
	Title:

Date:                  , 20[    ]

Exhibit N

EXECUTION COPY

Dated              2010

(1) PATHEON FRANCE

as Assignor

(2) JP MORGAN EUROPE LIMITED

as Security Agent

(3) THE CREDIT INSTITUTIONS LISTED IN

SCHEDULE 1

as Assignees

MASTER RECEIVABLES ASSIGNMENT

AGREEMENT

under articles L.313-23 et seq. of the French monetary

and financial code

PARIS

En accord avec les parties, les présentes ont été reliées par le procédé ASSEMBLACT R.C. empêchant toute substitution ou addition et sont seulement signées à la dernière page.

CONTENTS

Clause	Page
1.    INTERPRETATION		1
2.    ASSIGNMENT OF RECEIVABLES		3
3.    DELIVERY OF THE ASSIGNMENT SCHEDULES		3
4.    INTERCREDITOR AGREEMENT		4
5.    REPRESENTATIONS AND WARRANTIES		4
6.    UNDERTAKINGS		5
7.    NOTICES TO ASSIGNED DEBTORS AND ORDER OF DISTRIBUTIONS		6
8.    MISCELLANEOUS		6
9.    SUCCESSORS AND ASSIGNS		6
10.    TERM AND RELEASE		7
11.    EXPENSES		7
12.    NOTICES		7
13.    GOVERNING LAW AND JURISDICTION		8
SCHEDULE 1		14
LIST OF ASSIGNEES		14
SCHEDULE 2		15
FORM OF ASSIGNMENT SCHEDULE		15
SCHEDULE 3		16
INFORMATION RELATING TO ASSIGNED RECEIVABLES		16
SCHEDULE 4		17
FORM OF NOTIFICATION TO THE ASSIGNED DEBTORS		17

JPM/Patheon – Master Receivables Assignment Agreement

THIS MASTER RECEIVABLES ASSIGNMENT AGREEMENT is made between:

(1) PATHEON FRANCE, a company incorporated under the laws of France as a société par actions simplifiée, whose registered office is at 40, boulevard de Champaret, 38300 Bourgoin-Jallieu, France, registered with the Trade and Companies Registry (Registre du Commerce et des Sociétés) of Vienne under number 407 634 542, as assignor (the “Assignor”);

(2) JP MORGAN EUROPE LIMITED, a bank governed by the laws of England, whose office is at 125 London Wall, London EC2Y 5AJ, United Kingdom, as security agent (the “Security Agent”); and

(3) THE CREDIT INSTITUTIONS LISTED IN SCHEDULE 1 (List of Assignees), as assignees (the “Assignees”);

(The Assignor, the Security Agent and the Assignees being collectively referred to as the “Parties” and, individually, a “Party”).

BACKGROUND:

(A) By a revolving credit agreement dated 27 April 2007 and amended and restated on or about the date of this Agreement and made between amongst others (1) Patheon Inc., (2) its subsidiaries named therein (among which the Assignor), (3) JP Morgan Chase Bank, N.A. as US Administrative Agent and (4) the Security Agent in various capacities including as European Agent (the “Revolving Credit Agreement”), the Lenders have agreed to make available to the Assignor the French Revolving Loans denominated in Euros in a maximum aggregate amount equivalent to USD 10,000,000.

(B) As security for the due performance of the Secured Liabilities, the Assignor has agreed to assign the Receivables to the Assignees in accordance with the provisions of this Agreement.

(C) Pursuant to section 9.16(d) of the Revolving Credit Agreement, the Assignees have appointed the Security Agent to create, register, manage and enforce any Liens on Collateral granted by the French Security Documents in accordance with Article 2328-1 of the French Civil code.

NOW IT IS AGREED, as follows:

1. INTERPRETATION

1.1 Definitions

In this Agreement:

“Agreement”	means this master receivables assignment agreement together with the Schedules hereto.
“Assigned Debtor”	means any debtor of the Assignor in relation to Assigned Receivables.

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JPM/Patheon – Master Receivables Assignment Agreement

“Assigned Receivables”	means all Receivables due or owing to the Assignor by Assigned Debtors assigned pursuant to an Assignment Schedule.
“Assignment Schedule”	means an assignment schedule (bordereau de cession de créances professionnelles) entered into in the form set out in Schedule 2 (Form of Assignment Schedule) and in accordance with the terms of this Agreement.
“Code”	means the French Monetary and Financial Code (Code Monétaire et Financier).
“Dailly Law”	means articles L.313-23 et seq. of the Code.
“Excluded Assets”	has the meaning given to it in the Revolving Credit Agreement.
“Instrument”	means any “effet de commerce” listed under Livre Cinquième – Titre Premier of the French commercial code (Code de commerce).
“Receivables”	means any contingent or future debt held by the Assignor against any (i) legal person (personne morale) or (ii) natural person (personne physique) in the exercise of that natural person’s professional activity, originating from the provision of goods or services (créances commerciales ou de prestations de services) to any customer (other than Excluded Assets).
“Receivables Account”	means the following bank account opened in the name of the Assignor in the books of the Security Agent: bank:             , account number:             , IBAN number:             .
“Revolving Credit Agreement”	has the meaning given to it in Background (A).
“Secured Liabilities”	means all present and future moneys, debts and liabilities due, owing or incurred by the Assignor to the Assignees under the Loan Documents as Borrower, up to a maximum principal amount of USD 10,000,000, plus applicable interest, late interest, fees, costs and expenses.
“Security Interest”	means any mortgage, charge, pledge, lien or other security interest securing any obligation of any person, or any arrangement having similar effect.

1.2 Construction

(a) Save as expressly defined in this Agreement, capitalised terms defined in the Revolving Credit Agreement shall have the same meaning when used in this

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JPM/Patheon – Master Receivables Assignment Agreement

Agreement. Terms defined in the Background shall have the same meaning when used in the remainder of this Agreement.

(b) In this Agreement unless a contrary intention appears, a reference to:

(i) a “Clause”, “Schedule” or the “Background” is a reference to a clause, schedule, or the background of this Agreement;

(ii) a provision of law is a reference to that provision as extended, applied, amended or re-enacted and includes any subordinate legislation;

(iii) words importing the plural shall include the singular and vice versa;

(iv) a person is a reference to or includes its successors and permitted assignees; and

(v) an agreement or document includes a reference to that agreement or document as amended, novated, supplemented, restated or replaced from time to time.

(c) The headings in this Agreement are for convenience only and shall not affect the construction of this Agreement.

2. ASSIGNMENT OF RECEIVABLES

2.1 Assignment

In order to secure the full and punctual payment, performance and discharge by the Assignor of the Secured Liabilities, the Assignor undertakes and agrees to assign by way of security the Receivables to the Assignees in accordance with the provisions of this Agreement and the Dailly Law.

2.2 Transfer of title

Any assignment of Receivables effected under this Agreement shall:

(a) occur on the date on which the Assignment Schedule relating to such Receivables is time stamped by the Security Agent (acting on behalf of the Assignees); and

(b) transfer, as of such date, full legal title to such Receivables to the Assignee, including principal, interest and ancillary payments relating to such Receivables, as well as all Security Interest, warranties, and other related rights and obligations arising out of or in relation to such Receivables.

3. DELIVERY OF THE ASSIGNMENT SCHEDULES

3.1 Assignment Schedule

Each assignment of Receivables referred to in Clause 2.1 (Assignment) above shall be carried out by the delivery by the Assignor to the Security Agent (acting on behalf of the Assignees) of an Assignment Schedule which shall:

3

JPM/Patheon – Master Receivables Assignment Agreement

(a) relate to as many Receivables as are necessary to ensure compliance with the provisions of Clause 3.2 (Occurrence) below;

(b) provide any and all information required under the Dailly Law and any other applicable law or regulation to effect the assignment of the Receivables to which it relates;

(c) where Assigned Receivables are listed electronically in accordance with the Dailly Law, take the form of Schedule 2 (Form of Assignment Schedule) and be accompanied by appropriate electronic media providing the information set out in Schedule 3 (Information relating to Assigned Receivables);

(d) be signed by the Assignor’s legal representative or another duly authorised representative of the Assignor.

3.2 Occurrence

(a) The first Assignment Schedule shall be delivered by the Assignor on the date of the first Borrowing made by the Assignor.

(b) Until the date on which this Agreement is terminated in accordance with Clause 10 (Term and Release) below, the Assignor shall, on a monthly basis from the date of the first Borrowing (or more frequently as the Security Agent may request at any time whilst an Event of Default is continuing), deliver to the Security Agent (acting on behalf of the Assignees) an Assignment Schedule relating to all Receivables owned by the Assignor at such time (to the extent not previously assigned pursuant to an Assignment Schedule).

4. INTERCREDITOR AGREEMENT

Notwithstanding any other provision contained herein, this Agreement, any Assignment Schedule and the Liens created thereby and the rights, remedies, duties and obligations provided for herein or in any Assignment Schedule are subject in all respects to the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of this Agreement or any Assignment Schedule and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall prevail.

5. REPRESENTATIONS AND WARRANTIES

On the date hereof and at each time specified in section 4.02 (Credit Event) of the Credit Agreement, the Assignor represents and warrants that:

(a) all corporate and other action required to authorise the entry by the Assignor into this Agreement as well as any Assignment Schedule (to the extent already entered into at the time of the relevant representation made pursuant to this Clause) and their execution and performance has been duly taken or obtained.

(b) it has valid title to, and is the sole legal owner of the Receivables;

4

JPM/Patheon – Master Receivables Assignment Agreement

(c) save as permitted by the Loan Documents, none of the Assigned Receivables is subject to any Security Interest, or any legal, contractual or judicial restriction;

(d) there are no shareholders’ agreements or any other agreement or commitment binding on the Assignor (except as permitted under the Loan Documents, as the case may be) which would reasonably be expected to prevent or limit the entry into, performance and/or enforcement of this Agreement and/or any Assignment Schedule.

6. UNDERTAKINGS

For the duration of this Agreement, the Assignor undertakes (in each case unless otherwise permitted by the Loan Documents):

(a) not to create any Security Interest over, dispose of (including by way of selling, assigning, factoring, discounting or otherwise charging), release, grant time or indulgence, set off, compound, exchange, or otherwise deal with the Receivables and/or Assigned Receivables;

(b) not to subordinate its rights in respect of any Receivables and/or Assigned Receivables to the rights of any other person in relation to debts owed to such person or otherwise deal with the Receivables and/or Assigned Receivables in favour of any person;

(c) not to do, or cause, or omit to do anything which will, or could be reasonably expected to, materially adversely affect the rights of the Assignees under this Agreement and/or any Assignment Schedule, or which is in any way depreciates, jeopardises or otherwise prejudices the rights of the Assignees over the Receivables and/or Assigned Receivables;

(d) promptly on request deliver to the Security Agent all information and documents which are necessary for asserting claims, on the Assigned Receivables, as the Security Agent may reasonably require;

(e) provide to the Security Agent, upon delivery of each Assignment Schedule, all information and documents relating to the Assigned Debtors to enable the Security Agent (as the case may be) to notify the assignment of the Assigned Receivables to the Assigned Debtors;

(f) before the occurrence of an Event of Default, procure that any Assigned Receivables are paid by the Assigned Debtors into the Receivables Account (and, if not paid into such account, promptly transfer such sums to the Receivables Account);

(g) upon the occurrence and during the continuance of an Event of Default, procure that any any Assigned Receivables are paid into such account as may be specified in writing by the Security Agent.

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JPM/Patheon – Master Receivables Assignment Agreement

(h) promptly endorse any bills of exchange or promissory notes evidencing Assigned Receivables in favour of the Security Agent (on behalf of the Assignees).

7. NOTICES TO ASSIGNED DEBTORS AND ORDER OF DISTRIBUTIONS

(a) The Assignees (represented by the Security Agent) shall be entitled at the times and in the manner specified in paragraph (g) of the definition of “Collateral and Guarantee Requirement” of the Credit Agreement:

(i) to notify the assignment of the Assigned Receivables to any or all Assigned Debtors in accordance with article L.313-28 of the Code by sending a notification in the form attached hereto as Schedule 4 (Form of Notification to the Assigned Debtors); and

(ii) to receive the payment of any sums collected from the Assigned Receivables and apply such sums towards satisfaction of the Secured Liabilities.

(b) Any sum received or recovered hereunder by the Assignor (whether or not an Event of Default has occurred) shall be received or recovered as agent for the Assignees and all amounts so received or recovered shall be the property of the Assignees.

8. MISCELLANEOUS

(a) No failure to exercise, nor any delay in exercising, on the part of the Security Agent and/or any Assignee, any right, power or remedy of the Security Agent and/or any Assignee provided by this Agreement or by law shall operate as a waiver, nor shall any single or partial exercise of that right, power or remedy prevent any further or other exercise of that or any other right, power or remedy of the Security Agent and/or relevant Assignee provided by this Agreement or by law.

(b) If, at any time, any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, the legality, validity or enforceability of the remaining provisions of this Agreement will not be affected or impaired in any way.

9. SUCCESSORS AND ASSIGNS

(a) The Assignor may not assign, transfer, novate or dispose of any of, or any interest in, its rights and/or obligations hereunder without the prior written consent of the Security Agent, except as permitted by the Loan Document.

(b) The Security Agent and/or any Assignee may assign, transfer, novate or otherwise dispose of any of, or any interest in, its rights and/or obligations hereunder to any third party in accordance with the terms of the Loan Documents.

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JPM/Patheon – Master Receivables Assignment Agreement

(c) The rights, privileges, powers and actions of the Security Agent and/or any Assignee will inure to the benefit of its successors and assigns as contemplated in this Clause and in accordance with the Loan Documents.

(d) Any Assignment Schedule will be assignable by the Assignees to French Qualifying Lenders in accordance with article L.313-26 of the Code.

10. TERM AND RELEASE

(a) Subject to section 9.02 of the Revolving Credit Agreement, this Agreement will remain in full force and effect until the date on which the Secured Liabilities are fully, unconditionally and irrevocably repaid in accordance with the Loan Documents (hereinafter, the “Discharge Date”).

(b) Upon any sale or other transfer by the Assignor of any Collateral that is permitted under the Revolving Credit Agreement to a Person that is not a Guarantor, or upon the effectiveness of any written consent to the release of the Security Interests granted under the Security Documents in any Collateral pursuant to section 9.02 of the Revolving Credit Agreement, the Security Interest in such Collateral shall be automatically released.

(c) In connection with any termination or release pursuant to this Clause 10, the Security Agent (acting on behalf of the Assignees) shall, at the request and expense of the Assignor, execute any instrument reasonably necessary to acknowledge the satisfaction or the discharge of the Secured Liabilities, and shall execute and deliver all such further instruments and documents, as may be reasonably necessary, to release or otherwise terminate this Agreement.

11. EXPENSES

The Assignor undertakes to pay the Security Agent (acting on behalf of the Assignees), immediately on demand of the Security Agent, all reasonable costs and expenses (including reasonable legal fees and expenses), and all charges, duties, taxes or registration fees relating thereto, incurred by the Security Agent and/or any Assignee, by every attorney or other person appointed by them, in relation to the preparation, negotiation (including any re-negotiation), perfection, execution, enforcement, preservation and/or release of this Agreement and/or any Assignment Schedule.

12. NOTICES

(a) Any communication in connection with this Agreement and/or any Assignment Schedule must be made, and will be effective, in the manner set out in section 9.01 (Notices) of the Revolving Credit Agreement.

(b) Any Party may change its contact details by giving five (5) Business Days’ notice to the other Parties.

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JPM/Patheon – Master Receivables Assignment Agreement

13. GOVERNING LAW AND JURISDICTION

(a) This Agreement shall be governed by, and construed in accordance with French law.

(b) The Parties hereto agree that the Commercial Court of Paris (Tribunal de Commerce de Paris) shall have exclusive jurisdiction to settle any disputes or proceedings arising out of or relating to this Agreement or any documents delivered pursuant to it (including any Assignment Schedule).

Signed in                      on                      2010

in three (3) original copies.

8

JPM/Patheon – Master Receivables Assignment Agreement

[signature]

PATHEON FRANCE

The Assignor

By:

Title:

9

JPM/Patheon – Master Receivables Assignment Agreement

[signature]

JP MORGAN EUROPE LIMITED

The Security Agent

By:

Title:

10

JPM/Patheon – Master Receivables Assignment Agreement

[signature]

JP MORGAN EUROPE LIMITED

Assignee

By:

Title:

11

JPM/Patheon – Master Receivables Assignment Agreement

[signature]

J.P. MORGAN CHASE BANK N.A.

Paris Branch

Assignee

By:

Title:

12

JPM/Patheon – Master Receivables Assignment Agreement

[signature]

BARCLAYS BANK PLC

Assignee

By:

Title:

13

JPM/Patheon – Master Receivables Assignment Agreement

SCHEDULE 1

LIST OF ASSIGNEES

(1) J.P. MORGAN EUROPE LIMITED, whose office is at 125 London Wall, London EC2Y 5AJ, United Kingdom ;

(2) J.P. MORGAN CHASE BANK N.A., whose office is at 1111 Polaris Parkway, Columbus, Ohio, 43240, USA, acting through its Paris Branch ;

(3) BARCLAYS BANK PLC, whose office is at 5 The North Colonnade, Canary Wharf, London E14 4BB, United Kingdom.

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JPM/Patheon – Master Receivables Assignment Agreement

SCHEDULE 2

FORM OF ASSIGNMENT SCHEDULE

to be used for the assignment of Receivables

Acte de cession de créances professionnelles à titre de garantie soumis aux dispositions des articles L.313-23 à L.313-34 du Code monétaire et financier

Entreprise cédante : Patheon France, société par actions simplifiée dont le siège social est situé 40, boulevard de Champaret, 38300 Bourgoin-Jallieu, France, RCS Vienne 407 634 542

Etablissement(s) de crédit cessionnaire(s) : [—] en qualité de cessionnaire(s) (Assignee(s)) (le(s) “Cessionnaire(s)”) au titre du contrat de crédit en langue anglaise intitulé Amended and Restated Revolving Credit Agreement (le “Contrat de Crédit”) en date du [—] 2010 conclu entre notamment Patheon France en qualité d’emprunteur et le(s) Cessionnaire(s) en qualité de prêteur(s).

Identification des créances cédées : [—]

[débiteurs, lieu de paiement, montant ou évaluation, échéance]

Le présent bordereau est soumis à l’ensemble des stipulations du contrat cadre de cession de créances professionnelles en langue anglaise et intitulé Master Receivables Assignment Agreement conclu le [—] 2010 entre (notamment) Patheon France, JP Morgan Europe Limited et le(s) Cessionnaire(s).

Le présent bordereau est stipulé à ordre, transmissible par endos au profit d’un autre établissement de crédit.

Date :              (apposée par le(s) Cessionnaire(s))

Signature et cachet du représentant de l’entreprise cédante

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JPM/Patheon – Master Receivables Assignment Agreement

SCHEDULE 3

INFORMATION RELATING TO ASSIGNED RECEIVABLES

Each listing on magnetic support referred to in Clause 3.1 (c) of this Agreement shall contain as many of the following headings as possible and provide the corresponding information in relation to each Assigned Receivable in order to ensure the identification (“désignation et individualisation”) of each such Assigned Receivable. Such information shall be up to date as of the date of the corresponding Assignment Schedule:

• Name and address of the Assigned Debtor

• Amount of the Assigned Receivable (expressed in the currency of payment and, where applicable, in its Euro equivalent as of the date of the Assignment Schedule)

• References of the Assigned Receivable in the books of the Assignor (client number and bill)

• References of the agreement giving rise to the Assigned Receivable

• Maturity date and place of payment of the Assigned Receivable

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JPM/Patheon – Master Receivables Assignment Agreement

SCHEDULE 4

FORM OF NOTIFICATION TO THE ASSIGNED DEBTORS

(article R.313-15 of the Monetary and financial code)

Dans les conditions prévues par les articles L.313-23 à L.313-35 du Code monétaire et financier, la société PATHEON FRANCE nous a cédé, par bordereau de cession de créances professionnelles à titre de garantie en date du [date de l’acte de cession de créances professionnelles concerné] les créances dont vous êtes débiteur envers elle dont les caractéristiques figurent ci-dessous :

[—]

Conformément aux dispositions de l’article L.313-28 du Code monétaire et financier, nous vous demandons de cesser, à compter de la présente notification, tout paiement au titre de ces créances à PATHEON FRANCE.

En conséquence, le règlement de votre dette devra être effectué à l’ordre de [—] par virement au compte dont les références sont les suivantes :

[réferences du compte]

Pursuant to the provisions of articles L.313-23 to L.313-35 of the French Monetary and Financial Code (Code monétaire et financier), PATHEON FRANCE has assigned to us pursuant to the Assignment Schedule dated [insert date of assignment schedule] the receivables in respect of which you are the debtor and which are identified below:

[—]

Pursuant to the provisions of Article L.313-28 of the French Monetary and Financial Code (Code monétaire et financier), we hereby request that you cease, as of the date hereof, to make any payment in respect of such receivables to PATHEON FRANCE.

Consequently, any payment in respect of such receivables should henceforth be made to our benefit by way of bank draft or transfer at the following account:

[insert references of account]

17

Exhibit O

EXECUTION COPY

Dated              2010

(1) PATHEON FRANCE

as Pledgor

(2) J.P. MORGAN EUROPE LIMITED

as Security Agent

PLEDGE OVER BANK ACCOUNTS AGREEMENT

(Acte de Nantissement de Comptes Bancaires

de premier rang)

(FIRST RANKING)

PARIS

En accord avec les parties, les présentes ont été reliées par le procédé ASSEMBLACT R.C. empêchant toute substitution ou addition et sont seulement signées à la dernière page.

CONTENTS

Clause		Page
1.	INTERPRETATION		1
2.	PLEDGE		3
3.	PRIORITY		4
4.	OPERATION OF THE PLEDGED ACCOUNTS		4
5.	ENFORCEMENT		5
6.	REPRESENTATIONS AND WARRANTIES		6
7.	UNDERTAKINGS		6
8.	MISCELLANEOUS		7
9.	SUCCESSORS AND ASSIGNS		7
10.	TERM AND RELEASE		7
11.	EXPENSES		8
12.	NOTICES		8
13.	GOVERNING LAW AND JURISDICTION		8

SCHEDULE 1	PLEDGED ACCOUNTS	11
SCHEDULE 2	FORM OF NOTICE OF PLEDGE OVER BANK ACCOUNTS	12
SCHEDULE 3	FORM OF BLOCKING NOTICE	15
SCHEDULE 4	FORM OF ENFORCEMENT NOTICE	16

JPM/Patheon – Pledge over Bank Accounts (First Ranking)

THIS AGREEMENT is made between:

(1) PATHEON FRANCE, a company incorporated under the laws of France as a société par actions simplifiée, whose registered office is at 40, boulevard de Champaret, 38300 Bourgoin-Jallieu, France, registered with the Trade and Companies Registry (Registre du Commerce et des Sociétés) of Vienne under number 407 634 542, as pledgor (the “Pledgor”); and

(2) J.P. MORGAN EUROPE LIMITED, a bank governed by the laws of England, whose office is at 125 London Wall, London EC2Y 5AJ, United Kingdom, as security agent (the “Security Agent”).

(The Pledgor and the Security Agent being collectively referred to as the “Parties” and, individually, a “Party”).

BACKGROUND:

(A) By a revolving credit agreement dated 27 April 2007 and amended and restated on or about the date hereof and made between amongst others (1) Patheon Inc., (2) its subsidiaries named therein (among which the Pledgor), (3) J.P. Morgan Chase Bank, N.A. as US Administrative Agent and (4) the Security Agent in various capacities including as European Agent (the “Revolving Credit Agreement”), the Lenders have agreed to make available to the Pledgor the French Revolving Loans denominated in Euros in a maximum aggregate amount equivalent to USD 10,000,000.

(B) As security for the due performance of the Secured Liabilities, the Pledgor has agreed to grant this first ranking bank account pledge agreement over the Pledged Accounts.

(C) Pursuant to section 9.16(d) of the Revolving Credit Agreement, the Secured Parties have appointed the Security Agent to create, register, manage and enforce any Liens on Collateral granted by the French Security Documents (including the Pledge created pursuant to this Agreement) in accordance with Article 2328-1 of the French Civil Code.

NOW IT IS AGREED, as follows:

1. INTERPRETATION

1.1 Definitions

In this Agreement:

“Account Holding Bank”	means in respect of each Pledged Account, the relevant French credit institution, details of which are provided in the table set forth in Schedule 1 (Pledged Accounts) and any other French credit institution with which the Pledgor may maintain a bank account from time to time and “Account Holding Banks” means all of them.
“Agreement”	means this first ranking pledge over bank accounts

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JPM/Patheon – Pledge over Bank Accounts (First Ranking)

	agreement together with the Schedules hereto.
“Blocking Notice”	means a notice in the form of Schedule 3 (Form of Blocking Notice) sent out to any Account Holding Bank by the Security Agent acting on behalf of the Secured Parties with a copy to the Pledgor, in accordance with Clause 4.2 (After a Blocking Notice).
“Enforcement Notice”	means the enforcement notice substantially in the form set out in Schedule 4 (Form of Enforcement Notice).
“Excluded Assets”	has the meaning given to it in the Revolving Credit Agreement.
“Pledge”	has the meaning given to it in Clause 2 (Pledge).
“Pledged Accounts”	means the accounts maintained with the Account Holding Banks by the Pledgor, the references of which are set forth in Schedule 1 (Pledged Accounts).
“Revolving Credit Agreement”	has the meaning given to it in Background (A).
“Secured Liabilities”	means all present and future moneys, debts and liabilities due, owing or incurred by the Pledgor to the Secured Parties under the Loan Documents, whether as Borrower or as Guarantor (subject to the applicable limitations set forth in section 2.07(a) of the Guarantor Agreement), up to an amount equal to the sum of (i) the aggregate principal amount of any intercompany loans, advances and/or shareholders’ account (as the case may be) made or to be made available (directly or indirectly) on the Effective Date to the Pledgor from the proceeds of the Revolving Credit Agreement and (ii) the European Commitments.
“Secured Parties”	means any person to which the Loan Parties may from time to time owe any moneys or incur any obligations or other liabilities under the Loan Documents, including the Lenders, the Agents (including the Security Agent), the Issuing Bank, the Arrangers and each counterparty to any Swap Agreement or Cash Management Arrangement with a Loan Party, the beneficiaries of each indemnity or other obligation undertaken by any Loan Party under any Loan Document and the permitted successors and assigns of each of the foregoing.
“Trigger Event”	means the earlier of:
	(i)	the commencement of an Availability Trigger

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JPM/Patheon – Pledge over Bank Accounts (First Ranking)

	Event;
(ii)	the Maturity Date; or
(iii)	the Loan becoming immediately due and repayable under the Revolving Credit Agreement.

1.2 Construction

(a) Save as expressly defined in this Agreement, capitalised terms defined in the Revolving Credit Agreement shall have the same meaning when used in this Agreement. Terms defined in the Background shall have the same meaning when used in the remainder of this Agreement.

(b) In this Agreement unless a contrary intention appears, a reference to:

(i) a “Clause”, “Schedule” or the “Background” is a reference to a clause, schedule, or the background of this Agreement;

(ii) a provision of law is a reference to that provision as extended, applied, amended or re-enacted and includes any subordinate legislation;

(iii) words importing the plural shall include the singular and vice versa;

(iv) a person is a reference to or includes its successors and permitted assignees; and

(v) an agreement or document includes a reference to that agreement or document as amended, novated, supplemented, restated or replaced from time to time.

(c) The headings in this Agreement are for convenience only and shall not affect the construction of this Agreement.

(d) If there is any inconsistency between the terms of this Agreement and those of the Revolving Credit Agreement or the Guarantor Agreement (as the case may be), the terms of the Revolving Credit Agreement or the Guarantor Agreement, as applicable, shall prevail.

2. PLEDGE

(a) As security for the full repayment, discharge and performance of the Secured Liabilities, the Pledgor in accordance with the provisions of articles 2355 et seq. of the French Civil code and L.521 1 et seq. of the French Commercial code hereby pledges in favour of the Security Agent (acting on behalf of the Secured Parties in accordance with article 2328-1 of the French Civil code), all of its rights over the credit balance (as at the date of enforcement of this Pledge, in accordance with article 2360 of the French Civil code) (other than

3

JPM/Patheon – Pledge over Bank Accounts (First Ranking)

any Excluded Asset) of each of the Pledged Accounts. The pledge created pursuant to this Agreement shall be a first ranking pledge (the “Pledge”).

(b) Pursuant to article 2361 of the French Civil code, the Pledge created hereunder is valid between the Parties and, subject to the provisions of Clause 2(c), enforceable as against third parties (opposable aux tiers) at the date hereof, without the need for any further steps to be taken.

(c) The Account Holding Banks will be notified of the Pledge created under this Agreement by recorded delivery letter substantially in the form set out in Schedule 2SCHEDULE 2 (Form of Notice of Charge over Bank Accounts) in accordance with article 2362 of the French Civil code.

3. PRIORITY

The Pledge is a first ranking pledge. Notwithstanding any other provision contained herein, this Agreement, the Liens created hereby and the rights, remedies, duties and obligations provided for herein are subject in all respects to the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of this Agreement and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control.

4. OPERATION OF THE PLEDGED ACCOUNTS

4.1 Prior to a Blocking Notice

At any time until a Blocking Notice has been delivered in accordance with the provisions of Clause 4.2 below, the Pledgor shall freely use and dispose of any amounts standing to the credit of the Pledged Accounts in accordance with the provisions of the Loan Documents.

4.2 After a Blocking Notice

(a) Upon the occurrence of a Trigger Event which is continuing, the Security Agent (acting on behalf the Secured Parties), may deliver to each Account Holding Bank a Blocking Notice. From the date of receipt of such Blocking Notice by the Account Holding Banks, (i) the amounts standing to the credit of the Pledged Accounts will become unavailable to the Pledgor and (ii) no debit may be made from the Pledged Accounts save for debit transactions initiated prior to such date of receipt or debit transactions agreed by the Security Agent.

(b) The Pledgor undertakes not to give any instructions to the Account Holding Banks in breach of this Clause 4. The Parties hereby agree that each of the Account Holding Banks shall not incur any liability solely for acting in accordance with such instructions. It is further specified that the steps set out in Clause 4.2(a) above are not intended to close (clôturer) the relevant Pledged Accounts.

(c) If the Trigger Event referred to in Clause 4.2(a) above is remedied to the satisfaction of the Security Agent or waived in writing, the Security Agent shall promptly notify each of the Account Holding Banks that the Blocking

4

JPM/Patheon – Pledge over Bank Accounts (First Ranking)

Notice is terminated, whereupon the amounts standing to the credit of the Pledged Accounts will become available again to the Pledgor on the terms set out in Clause 4.1 above.

5. ENFORCEMENT

(a) Exercise of their rights by the Secured Parties

(i) Upon the occurrence of an Event of Default referred to in section 7.01(a) or 7.01(b) of the Revolving Credit Agreement and relating to the Secured Liabilities, or upon acceleration by the Secured Parties of all or part of the Secured Liabilities, the Security Agent shall be entitled (acting on behalf of the Secured Parties) to exercise all rights or actions in relation to the Pledged Accounts which are available to the Secured Parties under this Agreement and, in particular, may require immediate transfer to it of the credit balance remaining in the Pledged Accounts by sending to each of the Account Holding Banks an Enforcement Notice. Following receipt of such Enforcement Notice(s), the credit balance (as at such date of receipt) of the Pledged Accounts may only be paid to the Security Agent (acting on behalf of the Secured Parties) in accordance with article 2363 of the French Civil code up to the amount due and payable in respect of the Secured Liabilities (and mentioned as such in the Enforcement Notice).

Pursuant to the provisions of article 2360 of the French Civil code, the rights of the Security Agent under this Clause 5(a) shall extend to the credit balance, whether provisional or definitive, of the Pledged Accounts on the respective dates on which each Account Holding Bank receives an Enforcement Notice and, in all cases, after taking into account debits and credits initiated prior to such dates but not yet completed.

(ii) If the amount received by the Security Agent in accordance with paragraph (i) above happens to exceed the actual due and payable amount in respect of the Secured Liabilities at the time of receipt by the Pledgor of the payment demand sent by the Security Agent, the Security Agent shall promptly pay to the Pledgor an amount equal to the positive difference between (x) the amount received by the Security Agent in accordance with paragraph (i) above and (y) the actual due and payable amount in respect of the Secured Liabilities at the time of receipt in (x).

(b) No liability of the Account Holding Bank(s)

The Parties acknowledge and agree that the Account Holding Bank(s) will be under no duty to perform any verification of any nature whatsoever in relation to the Enforcement Notice and will not be under any liability for having transferred the amount requested in the Enforcement Notice to the Security Agent.

(c) Rights of the Security Agent discretionary

5

JPM/Patheon – Pledge over Bank Accounts (First Ranking)

The Security Agent may at its discretion and at the time of its choice elect whether or not to exercise the rights conferred upon it by this Clause 5 as well as any other rights or actions in relation to the Pledged Accounts which are available to the Security Agent.

6. REPRESENTATIONS AND WARRANTIES

On the date hereof and at each time specified in section 4.02 (Credit Event) of the Credit Agreement, the Pledgor represents and warrants that:

(a) all corporate and other action required to authorise the entry by the Pledgor into this Agreement as well as its execution and performance has been duly taken or obtained.

(b) it has valid title to, and is the sole legal owner of the Pledged Accounts and the credit balance of each of the Pledged Accounts;

(c) save as permitted under the Loan Documents, none of the Pledged Accounts or the credit balance of the Pledged Accounts is subject to any security interest, or any legal, contractual or judicial restriction which may affect the rights of the Secured Parties under this Agreement or the Pledge;

(d) there are no shareholders’ agreements or any other agreement or commitment binding on the Pledgor (except as permitted under the Loan Documents) which would reasonably be expected to prevent or limit the entry into, performance and/or enforcement of this Agreement and/or the Pledge.

7. UNDERTAKINGS

For the duration of this Agreement, the Pledgor undertakes (in each case unless otherwise permitted by the Loan Documents):

(a) to grant to the Secured Parties (represented, as the case may be, by the Security Agent in accordance with article 2328-1 of the French Civil code) security in any additional bank account which may be opened by the Pledgor with a French credit institution following a disposal, amalgamation, merger, demerger or corporate reconstruction (including a change of form), in each instance as permitted under the Loan Documents. Such additional security shall be granted pursuant to documentation in form and substance similar to this Agreement and reasonably satisfactory to the Security Agent;

(b) not to do anything in a way which would, or could reasonably be expected to materially and adversely affect the rights of the Secured Parties under this Agreement and the Pledge, or the value of the Pledge;

(c) to take all necessary measures in order to defend its rights in respect of the Pledged Accounts and the credit balance thereof, to protect the rights of the Secured Parties under this Agreement and the Pledge; to that effect the Pledgor undertakes to do all such acts or execute all such documents (and, as the case may be, shall procure that the Account Holding Banks do the same)

6

JPM/Patheon – Pledge over Bank Accounts (First Ranking)

as the Security Agent may reasonably request to protect, perfect and/or enforce the Pledge;

(d) not to create or permit to subsist any security over all or any part of the Pledged Accounts, except as permitted under the Loan Documents (including in particular under the Senior Notes Security Documents);

(e) not to close (clôturer) the Pledged Accounts; and

(f) not to transfer, assign or otherwise dispose of the Pledged Accounts and the credit balance thereof.

8. MISCELLANEOUS

(a) No failure to exercise, nor any delay in exercising, on the part of the Security Agent, any right, power or remedy of the Security Agent provided by this Agreement or by law shall operate as a waiver, nor shall any single or partial exercise of that right, power or remedy prevent any further or other exercise of that or any other right, power or remedy of the Security Agent provided by this Agreement or by law.

(b) If, at any time, any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, the legality, validity or enforceability of the remaining provisions of this Agreement will not be affected or impaired in any way.

9. SUCCESSORS AND ASSIGNS

(a) The Pledgor may not assign, transfer, novate or dispose of any of, or any interest in, its rights and/or obligations hereunder except as permitted under the Loan Documents.

(b) The Security Agent may assign, transfer, novate or otherwise dispose of any of, or any interest in, its rights and/or obligations hereunder to any third party in accordance with the terms of the Loan Documents.

(c) The rights, privileges, powers and actions of the Security Agent will inure to the benefit of its successors and assigns as contemplated in this Clause and in accordance with the Loan Documents.

(d) In the event of a transfer by way of a novation of all or part of the Security Agent’s rights and obligations, the Security Agent (acting on behalf of the Secured Parties) expressly reserves the rights, powers, privileges and actions that it enjoys under this Agreement in favour of its successors, in accordance with articles 1278 et seq. of the French Civil code.

10. TERM AND RELEASE

(a) Subject to section 9.02 of the Revolving Credit Agreement, this Agreement will remain in full force and effect until the date on which the Secured Liabilities are fully, unconditionally and irrevocably repaid in accordance with the Loan Documents.

7

JPM/Patheon – Pledge over Bank Accounts (First Ranking)

(b) Upon any sale or other transfer by the Pledgor of any Collateral that is permitted under the Revolving Credit Agreement to a Person that is not a Guarantor, or upon the effectiveness of any written consent to the release of the Security Interests granted under the Security Documents in any Collateral pursuant to Section 9.02 of the Revolving Credit Agreement, the Security Interest in such Collateral shall be automatically released.

(c) In connection with any termination or release pursuant to this Clause 10, the Security Agent (acting on behalf of the Secured Parties) shall, at the request of the Pledgor, execute any instrument reasonably necessary to acknowledge the satisfaction or the discharge of the Secured Liabilities, and shall execute and deliver all such further instruments and documents, as may be reasonably necessary, to release or otherwise terminate this Agreement.

11. EXPENSES

The Pledgor undertakes to pay the Security Agent, immediately on demand of the Security Agent, all costs and expenses (including reasonable legal fees and expenses), and all charges, duties, taxes or registration fees relating thereto, incurred by the Security Agent, by every attorney or other person appointed by the Security Agent, in relation to the preparation, negotiation (including any re-negotiation), perfection, execution, enforcement, preservation and/or release of this Agreement.

12. NOTICES

(a) Any communication in connection with this Agreement must be made, and will be effective, in the manner set out in section 9.01 (Notices) of the Revolving Credit Agreement.

(b) Any Party may change its contact details by giving five Business Days’ notice to the other Party.

13. GOVERNING LAW AND JURISDICTION

13.1 Governing Law

This Agreement shall be governed by and construed in accordance with French law.

13.2 Jurisdiction

The Parties hereto agree that the Commercial Court of Paris (Tribunal de Commerce de Paris) shall have exclusive jurisdiction to settle any disputes or proceedings arising out of or relating to this Agreement or any documents or securities delivered pursuant to it.

8

JPM/Patheon – Pledge over Bank Accounts (First Ranking)

Signed in                      on              2010

in two (2) original copies.

[signature]

PATHEON FRANCE SAS

The Pledgor

By: Antonella MANCUSO, President

9

JPM/Patheon – Pledge over Bank Accounts (First Ranking)

[signature]

J.P. MORGAN EUROPE

LIMITED

The Security Agent

By:

En accord avec les parties, les présentes ont été
reliées par le procédé ASSEMBLACT R.C.
empêchant toute substitution ou addition et sont
seulement signées à la dernière page

10

JPM/Patheon – Pledge over Bank Accounts (First Ranking)

SCHEDULE 1            PLEDGED ACCOUNTS

Account Holding Bank	Address	IBAN Number
Société Générale	Attn: Ivan Jouravleff Tour Swiss Life 1 Bd Vivier Merle 20ème étage 69443 Lyon cedex 03 Tel : 04 37 91 58 88 Fax : 04 37 91 58 98	FR76 30003 02280 00020408757 22
BNP Paribas	Attn: Jane Chadwick Centre d’Affaires Lyon Métropole Entreprises 20 Rue de la Villette 69328 Lyon Cedex 03 Tel. : +33(0)4 72 12 33 15 Fax : +33(0)4 72 12 33 69	FR76 3000 4022 4900 0103 3137 084

11

JPM/Patheon – Pledge over Bank Accounts (First Ranking)

SCHEDULE 2             FORM OF NOTICE OF PLEDGE OVER BANK ACCOUNTS

(Notification de nantissement de comptes bancaires)

[Sur papier à en-tête de l’Agent des Sûretés]

De: J.P. Morgan Europe Limited, en qualité d’agent des sûretés (Security Agent) (l’“Agent des Sûretés”), agissant pour le compte des Bénéficiaires (Secured Parties) conformément aux dispositions de l’article 2328-1 du Code civil

A:             , en qualité de banque teneuse de compte (Account Holding Bank)

[Date]

Messieurs,

Nantissement de comptes bancaires de premier rang en date du              2010

1. Nous vous notifions par la présente, que, en garantie de la bonne exécution de ses obligations (Secured Liabilities) au titre, notamment, d’un contrat de crédits renouvelables en langue anglaise en date du              2010 et intitulé “Amended and Restated Revolving Credit Agreement”, Patheon France, une société par actions simplifiée dont le siège social est situé 40 boulevard de Champaret, 38300 Bourgoin-Jallieu, France, immatriculée au registre du commerce et des sociétés de Vienne sous le numéro 407 634 542 (le “Constituant”) a affecté en nantissement de premier rang au profit de l’Agent des Sûretés (agissant pour le compte des Bénéficiaires (Secured Parties) conformément aux dispositions de l’article 2328-1 du Code civil), conformément aux articles 2355 et suivants du Code civil et L.521-1 et suivants du Code de commerce, les créances de restitution qu’il détient sur vous résultant du(des) solde(s) créditeur(s) du(des) compte(s) bancaire(s) ouvert(s) à son nom dans vos livres, aux termes d’un acte de nantissement de comptes bancaires de premier rang en date du              2010 (l’“Acte de Nantissement de Comptes Bancaires de Premier Rang”) et dont une copie figure en annexe des présentes. Cette notification est celle prévue à l’article 2362 du Code civil.

2. Vous trouverez ci-après le(s) numéro(s) du(des) compte(s) nanti(s) :

•

•

(le(s) “Compte(s) Nanti(s)”).

12

JPM/Patheon – Pledge over Bank Accounts (First Ranking)

3. Nous vous précisons, afin d’éviter toute ambiguïté, que la constitution et l’existence du nantissement n’affecteront en aucune façon le fonctionnement matériel du(des) Compte(s) Nanti(s), et que le Constituant peut valablement effectuer des mouvements au débit et au crédit des Comptes Nantis et disposer de toute somme figurant au crédit du(des) Compte(s) Nanti(s) conformément aux stipulations de l’Acte de Nantissement de Comptes Bancaires de Premier Rang tant qu’aucune Notification de Blocage (telle que définie sous les termes “Blocking Notice” dans l’Acte de Nantissement de Comptes Bancaires de Premier Rang) ne vous aura été transmise. A compter de la réception par vous d’une Notification de Blocage, le solde du(des) Compte(s) Nanti(s) devra(ont) être bloqué(s) sous réserve de la réalisation des opérations de débit initiées avant la réception de ladite Notification de Blocage.

Nous vous remercions de bien vouloir accuser réception des présentes en nous retournant un exemplaire daté et signé de la présente lettre.

[signature]

J.P. MORGAN EUROPE LIMITED

Agent des Sûretés

Par:

13

JPM/Patheon – Pledge over Bank Accounts (First Ranking)

Annexe

Copie de l’Acte de Nantissement de Comptes Bancaires de Premier Rang

14

JPM/Patheon – Pledge over Bank Accounts (First Ranking)

SCHEDULE 3             FORM OF BLOCKING NOTICE

(Notification de Blocage)

[Sur papier à en-tête de l’Agent des Sûretés]

[Nom et adresse de la Banque Teneuse de Compte]

agissant en qualité de Banque Teneuse de Compte

Notification de Blocage

Messieurs,

(a) Nous faisons référence au contrat de nantissement de compte(s) bancaires(s) de premier rang conclu le              2010 entre notre société en qualité d’Agent des Sûretés (Security Agent) (agissant pour le compte des Bénéficiaires (Secured Parties) conformément aux dispositions de l’article 2328-1 du Code civil) et Patheon France en qualité de constituant (le “Nantissement de Comptes Bancaires de Premier Rang”) et qui vous a été notifié le              , aux termes duquel le compte ouvert par Patheon France dans vos livres sous le numéro              (le “Compte Nanti”) est nanti au profit des Bénéficiaires (Secured Parties).

(b) Conformément aux stipulations de l’Article 4.2 (After a Blocking Notice) du Nantissement de Comptes Bancaires de Premier Rang, nous vous donnons par les présentes instruction de bloquer toutes les opérations au débit qui se présenteraient sur le Compte Nanti, sauf les opérations en cours à la date de réception par vous de la présente Notification de Blocage et ce, jusqu’à notification contraire de notre part.

(c) La présente Notification de Blocage est sans préjudice des droits qui nous sont conférés par l’article 5 (Enforcement) du Nantissement de Comptes Bancaires de Premier Rang.

[signature]

J.P. MORGAN EUROPE LIMITED

Agent des Sûretés

Par:

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JPM/Patheon – Pledge over Bank Accounts (First Ranking)

SCHEDULE 4             FORM OF ENFORCEMENT NOTICE

(Notification de réalisation)

[Sur papier à en-tête de l’Agent des Sûretés]

[Nom et adresse de la Banque Teneuse de Compte]

agissant en qualité de Banque Teneuse de Compte

Messieurs,

Notification de réalisation

(a) Nous faisons référence au contrat de nantissement de comptes bancaires de premier rang conclu le              2010 entre notre société en qualité d’Agent des Sûretés (Security Agent) (agissant pour le compte des Bénéficiaires (Secured Parties) conformément aux dispositions de l’article 2328-1 du Code civil) et Patheon France en qualité de constituant (le “Nantissement de Comptes Bancaires de Premier Rang”) et qui vous a été notifié le             , aux termes duquel le compte ouvert par Patheon France dans vos livres sous le numéro             (le “Compte Nanti”) est nanti au profit des Bénéficiaires (Secured Parties).

(b) Nous vous informons qu’à la date des présentes la somme de             , dont le paiement est garanti par le Nantissement de Comptes Bancaires de Premier Rang, nous est due, est exigible et demeure impayée.

(c) Conformément aux stipulations de l’article 5 (Enforcement) du Nantissement de Comptes Bancaires de Premier Rang, nous vous donnons par les présentes instruction de virer sur le compte numéro             , ouvert à notre nom dans les livres de la banque             , les sommes figurant au crédit du Compte Nanti, à hauteur de la somme de [insérer la somme due à l’Agent des Sûretés] et ce, sous réserve de la régularisation des opérations en cours comme il est prévu à l’article 2360 du Code civil.

[signature]

J.P. MORGAN EUROPE LIMITED

Agent des Sûretés

Par:

16

Exhibit P

To:

Patheon Italia S.p.A.

[—]

[—] 2010

Dear Sir,

ASSIGNMENT OF RECEIVABLES BY WAY OF SECURITY - Acceptance

Following our recent conversations, we acknowledge the receipt of your proposal dated the date hereof, which we hereby reproduce below duly initialised on all the pages and signed at the end as a acceptance of Your offer.

<<

[ON PATHEON ITALIA SPA Letterhead]

To:

J.P. Morgan Europe Limited

125 London Wall,

London EC2Y 5AJ,

Telecopy No. 011-44-207-7777-2360

Attention of Loan and Agency Group

And

Deutsche Bank Trust Company Americas

Trust & Securities Services

60 Wall Street, MS NYC60-2710

New York, New York 10005

Fax:732-578-4636

Attention of:Project Finance Deal Manager – Pathe

[—] 2010

Dear Sirs,

ASSIGNMENT OF RECEIVABLES BY WAY OF SECURITY – Proposal

Following to our recent conversations we hereby propose to you to enter into an assignment of receivables by way of security upon the terms and subject to the conditions set forth below.

*****

ASSIGNMENT OF RECEIVABLES BY WAY OF SECURITY

(Cessione di crediti in garanzia)

BETWEEN

(1) PATHEON ITALIA S.P.A., a società per azioni incorporated and existing under the laws of Italy, with registered office at Monza (MB) Viale G.B. Stucchi 110, Fiscal Code 01924610346 (the “Assignor”);

AND

(2) J.P. MORGAN EUROPE LIMITED in the name and on behalf of the persons (the “Revolving Finance Parties”) listed in Schedule A, Part I, hereof, as mandatario con rappresentanza of the latter pursuant to Section 9.16 of the Credit Agreement (as defined below)(together with any successor thereto in such capacity of collateral agent under the Credit Agreement (as defined below), the “Revolving Collateral Agent”);

(3) Deutsche Bank Trust Company Americas in the name and on behalf of the persons (the “Notes Finance Parties”) listed in Schedule A, Part II, hereof, as mandatario con rappresentanza of the latter pursuant to Section 12.08 of the Indenture (as defined below) (together with any successor thereto in such capacity of notes collateral agent under the Indenture (as defined below), the “Notes Collateral Agent”).

WHEREAS:

(A) by a US Dollars, Canadian Dollars, Euros and Sterling revolving credit agreement made on 27 April 2007, amended and restated on 23 April 2010 (the Credit Agreement) between, among others, the Parent (as defined below), the Assignor and the subsidiaries of the Parent named therein, on the one side, and JPMorgan Chase Bank, N.A., as US Administrative Agent, JP Morgan Chase Bank, N.A., Toronto Branch, as Canadian Administrative Agent, and J.P. Morgan Europe Limited, as European Administrative Agent,, on the other side, whereby the latter have agreed, inter alia, to make certain revolving credit facilities (the “Facilities”) available to the Assignor on the terms and subject to the conditions set out in the Credit Agreement. The main economics terms of the Facilities are described in Schedule 1, Part 1 (Description of the Secured Claims);

(B) in order to secure the fulfilment of the obligations of the Loan Parties (as defined in the Credit Agreement) under the Credit Agreement and connected documentation, on 23 April 2010 the Assignor has entered into a US law guarantors’ agreement (the “Revolving Guarantee”);

(C) On 23 April 2010 Parent has issued US$ 280,000,000 in aggregate principal amount of 8,625% senior secured notes due 2017 (the “Notes”) pursuant to an indenture (the “Indenture”) among Parent, each of its subsidiaries listed therein, the Notes Collateral Agent and the Trustee (as defined below). The Notes have been purchased by the initial purchasers listed therein (the “Initial Purchasers”) pursuant to a purchase agreement between Parent, certain its subsidiaries listed therein and J.P. Morgan Securities Inc., in the name and on behalf of the Initial Purchasers (the “Purchase Agreement”). The main economic terms of the Notes are described in Schedule 1, Part 2 (Description of the Secured Claims);

(D) in order to guarantee the obligation of Parent under the Notes, the Indenture and connected documentation, under the Indenture the Assignor has granted a US law guarantee(the “Notes Guarantee”);

(E) The Assignor is willing hereby to assign by way of security the Receivables (as defined below) in favour of the Secured Creditors (as defined below) arising from the Supply

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Agreements (as defined below), in order to secure the full and unconditional performance of the Secured Claims (as defined below);

(F) [J.P. Morgan Europe Limited] is hereby appointed by the Secured Creditors (as defined below) as their agent (“mandatario con rappresentanza”) for the purpose of exercising all rights, remedies and/or powers of the Secured Creditors provided under this Agreement.

NOW THEREFORE, it is hereby agreed as follows:

1. RECITALS, SCHEDULES AND DEFINITIONS

1.1 Recitals and Schedules

The above recitals and the Schedules hereto constitute an integral and substantial part of this Agreement.

Capitalised terms used in this Agreement, unless otherwise expressly stated herein, shall have the same meaning ascribed to them under the Credit Agreement.

1.2 Definitions

In addition to the terms defined in the above Recitals or in this Agreement the terms set forth under this Clause 1.2 (Definitions) shall have the following meaning:

“Agent” means [J.P. Morgan Europe Limited].

“Agreement” means this agreement.

“Assigned Debtors” means any counterparty of the Assignor under the Supply Agreements, as well as any of their successors, transferees or assignees (“successore a titolo universale, successore a titolo particolare o avente causa”)

“Assignment” means the assignment of the Receivables by way of security referred to in Clause 2 below, as well as any other assignment of receivables by way of security to be made by the Assignor in favour of the Secured Creditors in accordance with the provisions of this Agreement.

“Assignor” means Patheon Italia S.p.A..

“Availability Triggering Event” means the occurrence of a Revolving Event of Default and/or of a Liquidity Event.

“Business Day” has the meaning ascribed to this term in the Credit Agreement.

“Credit Agreement” has the meaning ascribed to this term in recital (A) above.

“Decree 170” means the Legislative Decree No. 170 dated 21 May, 2004, as amended and/or supplemented from time to time.

“Enforcement Event” means:

(a) the occurrence of a Revolving Event of Default specified in (i) Article VII, sub Sections 7.01 letters (a), (b), (f), (g), (h), (i) and (l) and 7.02 of the Credit Agreement or any other Revolving Event of Default which triggers the acceleration of the Secured Claims by operation of law; or

(b) the occurrence of a Revolving Event of Default in respect of which a notice has been served by the US Agent (as defined in the Credit Agreement) in accordance with Article VII, sub Sections 7.01 of the Credit Agreement; or

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(c) a non payment of any sums which is or becomes however due and payable to the Secured Creditors under the Credit Agreement, once expired any applicable grace period provided under the Credit Agreement;

(d) in respect of the Secured Claims referred to in paragraphs A) letters (c) and (d), (B) letters (c) and (d), (C) letters (c) and (d) or (D) of the definition of Secured Claims in Subclause 1.1 (Definitions), failure by a Loan Party (as defined in the Credit Agreement) to pay any such Secured Claims when due and payable, once expired any applicable grace period provided under the Credit Agreement; and

(e) a Note Event of Default which has triggered the acceleration of any of the Secured Claims.

“Event of Default” means a Note Event of Default and/or a Revolving Event of Default.

“Excluded Assets” has the meaning ascribed to this term in the Credit Agreement.

“Facilities” has the meaning ascribed to this term in recital (A) above.

“Indenture” has the meaning ascribed to this term in recital (C) above.

“Initial Purchasers” has the meaning ascribed to this term in recital (C) above.

“Insolvency Laws” means Italian Royal Decree No. 267 of 16th March, 1942 as amended and supplemented.

“Insolvency Proceeding” has the meaning ascribed to this term in the Credit Agreement.

“Intercreditor Agreement” has the meaning given to this term in the Credit Agreement.

“Issuer” means Parent.

“JPM Account” means the bank account no [—] opened by [—] with [—].

“Liquidity Event” has the meaning given to this term in the Credit Agreement.

“Loan” has the meaning given to this term in the Credit Agreement.

“Maturity Date” has the meaning given to this term in the Credit Agreement.

“Notes” has the meaning ascribed to this term in recital (C) above.

“Notes Collateral Agent” has the meaning ascribed to this term in the preamble.

“Notes Collateral Document” has the meaning ascribed to the term “Security Documents” under the Indenture.

“Notes Documentation” means the Notes, the Indenture, the Note Guarantee, the Notes Collateral Documents and the Intercreditor Agreement.

“Notes Event of Default” has the meaning ascribed to the term “Event of Default” under Section 6.01 of the Indenture.

“Notes Finance Parties” has the meaning ascribed to this term in the preamble.

“Notes Guarantee” has the meaning ascribed to this term in recital (D) above

“Notes Guarantor” means the Assignor as guarantor pursuant to the Note Guarantee.

“Notes Obligor” means the Issuer.

“Obligors” means the Note Guarantor, the Note Obligor and the Revolving Obligor.

“Parent” means Patheon Inc..

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“Parties” means the parties of this Agreement.

“Purchase Agreement” has the meaning ascribed to this term in recital (C) above.

“Receivables” has the meaning ascribed to this term under Clause 2 (Security Interest).

“Revolving Collateral Agent” has the meaning ascribed to this term in the preamble.

“Revolving Event of Default” has the meaning ascribed to the term “Event of Default” in the Credit Agreement.

“Revolving Finance Parties” has the meaning ascribed to this term in the preamble.

“Revolving Guarantee” has the meaning ascribed to this term in recital (B) above.

“Revolving Obligor” means the Assignor as, respectively, borrower pursuant to the Credit Agreement and guarantor pursuant to the Revolving Guarantee.

“Schedule/s” means the schedules to this Agreement.

“Secured Claim” or “Secured Claims” means:

(A) (a) the due and punctual payment by the Revolving Obligor of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on its Loans (as defined in the Credit Agreement) and any advances, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Revolving Obligor under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral, and (iii) all other monetary obligations of such Borrower to any of the Secured Parties under the Credit Agreement and each of the other Loan Documents, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of the Revolving Obligor under or pursuant to the Credit Agreement and each of the other Loan Documents and the Intercreditor Agreement;

(B) any principal of and interest (including any interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on any loan and all other monetary obligations, including fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) of the Notes Obligors under the Notes Documentation, in any case up to a maximum amount equal to Euro 73,000,000;

(C) all current and future monetary obligations (obbligazioni pecuniarie) of the Assignor towards any of the Secured Creditors under this Agreement,

provided that if one or more of the obligations described in paragraphs (A); (B) or (C) above is declared invalid or unenforceable for whatever reason, or if the Assignment cannot or can

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no longer secure, for whatever reason, one or more of such obligations, this shall not prejudice the validity and the enforceability of the Assignment, which shall continue to secure the full and unconditional performance of all other obligations referred to in this definition; and

“Secured Creditors” means the Revolving Finance Parties, the Notes Finance Parties, the Revolving Collateral Agent and the Notes Collateral Agent as well as any successor or assignee (successore a titolo particolare, successore a titolo universale or avente causa) of any of the persons referred to in this definition.

“Security” means any mortgage, pledge, lien, charge (fixed or floating), assignment, hypothecation, set-off or trust arrangement for the purpose of creating security, reservation of title or security interest or any other agreement or arrangement having a substantially similar effect.

“Supply Agreements” means the supply agreements listed in Schedule 2 hereto as well as any other agreement whereby the Assignor undertakes to carry out activities analogous to that to be carried out pursuant to the agreements included in the aforesaid list.

“Statement Date” has the meaning ascribed to this term in Clause 4.1 (Statement of the Assignor) below.

“Trustee” means U.S. Bank National Association as trustee, until a successor replaces it in accordance with the applicable provisions of the Indenture and thereafter means the successor serving thereunder.

1.3 Construction

(a) Reference to a person, including the Secured Creditors, is, where relevant, deemed to be a reference to or to include, as appropriate, their respective successors, permitted assignees or transferees.

(b) References to Clauses and Schedules are references to, respectively, clauses of and schedules to this Agreement and references to this Agreement include its Schedules.

(c) Reference to any agreement (including, without limitation, the Credit Agreement and the Notes Documentation) is to be construed as a reference to that agreement as it may from time to time be amended, varied, supplemented, restated or novated.

(d) Words importing the plural shall include the singular and vice versa.

(e) The provisions of Section 1.03 (Terms Generally) of the Credit Agreement (to the extent applicable) apply to this Agreement as though they were set out in full in this Agreement, except that references to the Credit Agreement are to be construed as references to this Agreement.

2. SECURITY INTEREST

2.1 As security for all the Secured Claims, subject to Clause 2.2 below, the Assignor hereby irrevocably assignsby way of security, also pursuant to the Decree 170, to the Secured Creditors, to the extent not constituting an Excluded Asset, the following (the “Receivables”):

(a) any and all the outstanding and future monetary rights (including claims, indemnities, damages, liquidated damages, receivables and guarantees); and/or

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(b) any and all sums, from time to time received or receivable in relation to any of the outstanding and future monetary rights (including claims, indemnities, damages, liquidated damages, receivables and guarantees),

to which the Assignor is entitled under the Supply Agreements.

2.2 Pursuant to the provisions of Article 1263 of the Italian Civil Code, and subject to Clause 2.1 above, by effect of this Agreement, the Receivables are transferred to the Secured Creditors with any privileges, security interests and/or guarantees.

2.3 In case, following the date of execution of this Agreement, the Assignor enters into further Supply Agreement to the extent not constituting an Excluded Asset, the Assignor hereby undertakes to assign by way of security, as security for all the Secured Claims, all the Receivables arising from such further Supply Agreements pursuant to the terms and conditions set forth hereunder. To this end, within 10 Business Days from the execution of any new Supply Agreement, the Assignor and the Agent, in name and on behalf of the Secured Creditors, shall enter into an agreement of extension of the Assignment at the same terms and conditions of this Agreement and the Assignor shall carry out the formalities prescribed under Clause 4.1 below with respect to such new Assignment.

3. EFFECTIVENESS OF THE SECURITY

3.1 Irrelevance of partial repayments

The Assignment shall remain valid and effective in its entirety, notwithstanding any partial repayment, discharge or satisfaction of the Secured Claims and until all the Secured Claims are unconditionally satisfied in full.

3.2 Irrelevance of prepayments

In the event that any of the Secured Claims has been repaid prior to its maturity date, the Assignment shall remain in full force and effect in its entirety until all the Secured Claims have been wholly and unconditionally paid.

3.3 Additional security

The Assignment shall be in addition to and independent from any other security or guarantee of which the Secured Creditors may or will have the benefit, at any time, according to law or by contract, in respect of all or some of the Secured Claims.

3.4 Irrelevance of amendments

The Assignment shall remain in full force and effect, regardless of any subsequent amendment to the Secured Claims, including, by way of example but not limited to, any amendment to the terms of performance and total or partial assignment of the Credit Agreement, the Notes Documentation or the Secured Claims.

3.5 Preservation of the security

The parties of this Agreement agree that, also for the purposes of Articles 1232 and 1275 of the Italian Civil Code, the Assignment shall remain in full force and effect in its entirety until the complete, full and unconditional satisfaction of all the Secured Claims including, without limitation, as a result of an amendment, postponement, novation or assignment (either in whole or in part) of the rights arising under the Credit Agreement or the Notes Documentation and it shall neither be reduced nor deemed as being waived if the Obligors or any third party (on behalf of the Obligors) makes partial or advanced repayments under the Credit Agreement and the Notes Documentation or the Secured Creditors waive, in whole or

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in part, the Secured Claims, unless otherwise provided in a written statement made by the Secured Creditors.

4. PERFECTION OF THE ASSIGNMENT

4.1 Statement of the Assignor

Without prejudice to Article 2 and Article 3 of the Decree 170, on the date of execution of this Agreement, the Assignor shall either (i) notify through a court bailiff (or other means of notification bearing certified date upon the reasonable judgment of the Agent) to the Assigned Debtors, or (ii) procure the acceptance by the Assigned Debtors, bearing a certified date (data certa), of a statement in the form set out in Schedule 3 hereto, in order to ensure that the effectiveness and enforceability vis-à-vis the Assigned Debtors of the Assignment pursuant to this Agreement benefit of and comply with the requirements set out under Articles 1264 of the Italian Civil Code and under Decree 170. Copy of any notifications or acceptance under this Clause 4.1 shall be delivered promptly to the Agent.

Furthermore, on the first Business Day of January, April, July and October of each year until the full and unconditional fulfillment of all the Secured Claims (each, a “Statement Date”), the Assignor shall either (i) notify through a court bailiff (or other means of notification bearing certified date upon the reasonable judgment of the Agent) to the Assigned Debtors, or (ii) procure the acceptance by the Assigned Debtors, bearing a certified date (data certa), of a statement in the form set out in Schedule 4 hereto along with the list of the invoices issued in relation to such Assigned Debtors and related Supply Agreements from the last Statement Date. Copy of any notifications or acceptance under this Clause 4.1 shall be delivered promptly to the Agent.

4.2 Statement of the Agent

Without prejudice to Clause 4.1 (Statement of the Assignor) above, the Agent is hereby authorised, and it is hereby irrevocably granted all the relevant powers by the Assignor to act, in its name and on its behalf, in case no statement pursuant to Clause 4.1 (Statement of the Assignor) above is executed and delivered, as the case may be, by the Assignor, and in any other case deemed appropriate by the Agent, to carry out at any time any activity necessary for the purpose of creating a valid and enforceable assignment pursuant to the terms and conditions of this Agreement, including, but not limited to, the issuing of the statements referred to in Clause 4.1 (Statement of the Assignor) above.

5. RIGHT OF USE OF COLLECTION OF THE RECEIVABLES

5.1 The Assignor is entitled to collect in its name the Receivables until the occurrence of the circumstances listed in following paragraph 5.2.

5.2 Following the earlier of:

(i) the commencement of an Availability Trigger Event;

(ii) the Maturity Date; or

(iii) the Loan becoming immediately due and repayable under the Credit Agreement,

the Assignor shall be prohibited from collecting the Receivables and any amount under the Receivables shall be collected in the JPM Account in or towards repayment of the Secured

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Claims, for application in accordance with the terms of Section 2.11(e) of the Credit Agreement, the Notes Documentation and the Intercreditor Agreement.

6. REPRESENTATIONS AND WARRANTIES

6.1 Representations and warranties

In addition and without prejudice to the representations and warranties given by the Assignor under the Credit Agreement and the Notes Documentation, the Assignor hereby represents and warrants to the Secured Creditors as follows:

(i) it is the sole owner of the Receivables and the same are freely transferable, free and clear of any Security, except for those in favour of the Secured Creditors and the liens permitted by the Credit Agreement and in the Indenture and those that might have been created by operation of law. The Assignor has not assigned, charged, pledged or created any other form of security interest over any of its rights, title or interest to or in the Receivables or otherwise agreed to sell or transfer any of its rights, title or interest to or in the Receivables except as permitted under the Credit Agreement or the Indenture;

(ii) the Assigned Debtors represent all the counterparties of the Assignor under the Supply Agreements;

(iii) the Supply Agreements are all supply agreements the Assignor has entered into;

(iv) no claims or civil, arbitral or administrative proceedings before any civil, arbitral or administrative authorities or any other claim in respect of the Supply Agreements and/or the Receivables which may affect the validity, the effectiveness and/or the enforceability of this Agreement are pending, nor such claims or proceedings have been threatened;

(v) as a result of the fulfilment of the formalities set forth under Clause 4 (Perfection of the Assignment) of this Agreement, the Assignment will create a perfected, valid and enforceable vis-à-vis any third party assignment by way of security of the Receivables in favour of the Secured Creditors, securing the payment and performance of the Secured Claims;

(vi) the constitutional documents of the Assignor do not contain any provision which may prevent or limit in any manner the creation of the Assignment and do not contain any provision which may adversely affect any material rights of any of the Secured Creditors arising under this Agreement, including the right to enforce the Assignment;

(vii) the Receivables are not object of claims of set off by any Assigned Debtor.

6.2 Repetition of the representations and warranties

The representations and warranties set forth in Clause 6.1 (Representations and warranties) above are given as of (i) the date of execution of this Agreement; (ii) the date on which any act aimed at perfecting the Assignment pursuant to Article 4 is carried out; and (iii) any date of Borrowing (as define in the Credit Agreement). The representations and warranties set forth in Clause 6.1 (Representations and warranties) above, shall be true and accurate on each date on which shall be repeated pursuant this Clause in each case with reference to facts and circumstances then existing.

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7. ASSIGNMENT OR TRANSFER OF THE RIGHTS OF THE SECURED CREDITORS

7.1 Assignment of rights

The Assignor irrevocably accepts that the Assignment shall remain in full force and effect in its entirety and may be transferred, in whole or in part, without the Assignor’s further consent, as a legal consequence of any total or partial assignment by the Secured Creditors of any of the Secured Claims. In this respect, the Assignor irrevocably undertakes to execute any deed, document, or certificate (including the acknowledgement deed in the form of Schedule 5 hereto) that the Agent, in its opinion or acting on behalf ot the Secured Creditors, may reasonably deem necessary and/or convenient to ensure the effectiveness of the Assignment and/or the provisions contained herein.

7.2 Effects of the assignment

For the purposes of this Agreement, any assignment or transfer (in whole or in part) of the Secured Claims shall take effect, respectively, as an assignment or transfer of a contract (cessione di contratto) or an assignment of receivables (cessione di credito), as the case may be, without having any novating effect (efficacia novativa) on the Secured Claims outstanding at the time the assignment or the transfer is perfected.

8. UNDERTAKINGS OF THE ASSIGNOR

In addition to and without any prejudice to the provisions under this Agreement, the Credit Agreement and the Notes Documentation, the Assignor shall:

(i) within [2] Business Days from the date hereof, deliver to the Agent any document evidencing the Receivables (such as invoices, orders or similar evidence);

(ii) promptly notify to the Agent and deliver, at its own expense, copies of any notice or communication received in relation to the Supply Agreements and/or the Receivables, whoever may be the sender, which may impair the rights of the Secured Creditors under this Agreement including, but not limited to, any claim or action brought or threatened by any party in relation to the Supply Agreements and/or the Receivables, including any request of attachment, seizure, distress or execution affecting the Supply Agreements and/or the Receivables;

(iii) refrain from carrying out any actions or omission which may, directly or indirectly, affect the validity and/or enforceability of the Assignment or the right of the Secured Creditors to exercise and enforce their rights under this Agreement and promptly perform and fulfil, at its own expenses, any activity which is necessary or reasonably requested by the Agent, acting in the name and on behalf of the Secured Creditors, in order to protect the Receivables and/or the other rights and interest of the Secured Creditors arising under this Agreement;

(iv) subject to any conflicting provision set forth hereunder, promptly fulfil, at its expenses, any activity necessary or reasonably requested by the Agent, in order to protect the security interests and the other rights of the Secured Creditors arising from this Agreement with respect to any third party claim;

(v) subject to any conflicting provision set forth hereunder, from time to time enter into any further documents and instruments and take any further actions as may be necessary or which the Agent, acting reasonably, may deem necessary in order to: (a) ensure and maintain the validity and the enforceability, also towards third parties, of the Assignment and the admissibility of the Assignment as evidence in

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court; and (b) allow the Agent, in the name and on behalf of the Secured Creditors, to exercise any of their rights in relation to the Receivables;

(vi) not create, or permit the creation of any Security or right of third parties over the Receivables, except for those in favour of the Secured Creditors to secure the Secured Claims, the liens permitted under the Credit Agreement and the Indenture and those that might have been created by operation of law;

(vii) not use the Receivables unless in accordance with Clause 5 above;

(viii) extend, by means of the pledge to any obligation of a Loan Party (as defined in the Credit Agreement) arising from the Swap Agreement and any Cash Management Arrangement (both as defined in the Revolving Guarantee), upon request of the Agent at its sole discretion, once any of such agreement has been entered into. For such purposes, the Assignor shall promptly take all actions and shall execute all documents reasonably requested by the Agent for the valid and enforceable extension of the Assignment to such new secured claims.

9. ENFORCEMENT OF THE ASSIGNMENT

9.1 Default of the Secured Claims

(a) Subject to the Intercreditor Agreement, upon the occurrence of an Enforcement Event and at any time thereafter, if the relevant Secured Claims have not been promptly and fully satisfied following the exercise by the Agent (acting in the name and on behalf of the Secured Creditors) of the relevant rights against the Assignor pursuant to the Credit Agreement or the Notes Documentation (and the giving of relevant notices thereunder), the Agent, acting in the name and on behalf of the Secured Creditors, pursuant to Article 1851 of the Italian Civil Code and Article 4 of the Decree 170, shall have the right to:

(i) determine the amount corresponding to the Secured Claims still outstanding and due to the Secured Creditors following the occurrence of the Enforcement Event,

(ii) cause any proceed or other realisation deriving from the Receivables to be applied against any and all of the Secured Claims which are then due and payable, but remained unpaid also pursuant to Article 4 of Legislative Decree 170, in accordance with the applicable provision(s) of the Credit Agreement, the Notes Documentation and/or the Intercreditor Agreement.

(b) It is hereby understood that, if all the Secured Claims have been fully and unconditionally satisfied or indemnified, any excess of the Receivables, if any, shall be promptly released and returned to the Assignor.

(c) The Agent, pursuant to Article 4, paragraph 2, of Decree 170, following the allocation of the Receivables to discharge the Secured Claims (to be made pursuant to the relevant provisions of the Credit Agreement, the Notes Documentation and/or Intercreditor Agreement), will promptly give written notice to the Assignor, of the circumstances and the resolutions described under this Clause 9.1 (Default of the Secured Claims).

(d) The Assignor and the Agent (in the name and on behalf of the Secured Creditors) hereby acknowledge that the determination of the amount corresponding to the Secured Claims pursuant to this Clause 9.1 (Default of the Secured Claims) shall be considered as reasonable in any respect in accordance with Article 8, paragraph 1, of Decree 170.

(e) It is understood that the provisions set forth by this Clause 9.1 (Default of the Secured Claims) are without prejudice to the right of the Agent, acting on behalf of the Secured

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Creditors, to exercise any remedy and/or to enforce the Assignment also in accordance with any applicable provision of the Italian law, as the case may be, upon the occurrence of an Enforcement Event.

(f) Without limitation to the generality of Article 4 of the Decree 170 and Article 2799 of Italian civil code, in case the Agent on behalf of the Secured Creditors enforces only partially the Assignment pursuant to this Clause 9.1 (Default of the Secured Claims), or otherwise agrees to release in part the Assignment, and the Secured Claims have not been fully and unconditionally satisfied, the Assignment shall continue to apply to the remaining Receivables which has not been enforced or released.

(g) For the avoidance of doubt, in the event that the Receivables are insufficient to pay all the Secured Claims, the Assignor shall remain liable for the shortfall, in accordance with this Agreement, the Credit Agreement, the Notes Documentation and/or the Intercreditor Agreement, in any case subject to Section 2.07 of the Revolving Guarantee.

9.2 Agent as attorney of the Secured Creditors

For the purposes of the foregoing, the Assignor hereby accepts that the Agent may represent each of the Secured Creditors in respect of any formality related to the enforcement of the Assignment.

10. AGENT

10.1 Power of attorney

Each of the Secured Creditors appoints the Agent as mandatario con rappresentanza to act as Agent for the purpose of exercising all rights, remedies and/or powers of the Secured Creditors hereunder in the name and on behalf of same Secured Creditors and the Agent accepts such appointment.

The Assignor acknowledges that the Agent shall have the right to represent, both as plaintiff and defendant, in court proceedings or otherwise, the Secured Creditors, in connection with the Assignment. Therefore, the Agent shall be entitled to exercise any and all rights and discretions attributed to the Secured Creditors, jointly and/or severally, pursuant to this Agreement and in relation to the Assignment and to take any legal action, also for interim or precautionary measures, for the protection and enforcement of the rights arising under the Assignment, in the name and on behalf of the Secured Creditors.

In light of the above paragraph of this Clause 10.1 (Power of attorney), the Assignorr may validly send any notice only to the Agent (even if such notice is only directed to the Secured Creditors) and consider any notice received by the Agent in relation to the Assignment as also delivered to the other Secured Creditors, unless otherwise stated therein.

10.2 Replacement of the Agent

The Assignor acknowledges and accepts the right of the Secured Creditors to replace the Agent, and the right of the Agent to request to the Secured Creditors to be replaced with another party who shall have the same rights and discretions provided under this Agreement to the Agent.

The replacement of the Agent shall take effect with respect to the Assignor from the date of receipt of a notice of replacement by the Assignor from both the old and the new Agent.

10.3 No liability

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Neither the Agent nor any of its directors, employees or agents shall be liable for any action taken or omitted to be taken by it or any of them under or in connection with this Agreement unless caused by its or their gross negligence or wilful misconduct. The Agent shall not be responsible for any statements, representations or warranties in this Agreement or for any information supplied or provided or hereafter to be supplied or provided to the Secured Creditors in respect of any matter relating to this Agreement or for the execution, effectiveness, genuineness, validity, enforceability or sufficiency of such documents or any of the other documents referred to herein or therein or for the recoverability of any of the Secured Claims.

11. RELEASE OF THE ASSIGNMENT

11.1 Without prejudice for Clause 11.2 below, the Assignment shall be released by the Agent and full title to the Receivables shall return to the Assignor, at the request and at the cost and expenses of the Assignor:

(a) promptly after the date falling six months (or (i) should article 67, first paragraph, second sub-paragraph, of the Insolvency Law be capable of applying, the first anniversary, or (ii) should article 65 of the Insolvency Law be capable of applying, the second anniversary) after the full and unconditional discharge of the Secured Claims or, in any case, any term different to the above as a result of any changes to the Insolvency Law or promptly after the expiry of the relevant hardening period under any law applicable in any other jurisdiction if all the commitments of the Secured Creditors to the Obligors have been terminated or cancelled; provided that, if in the meantime any Obligor or any other person who has made payments discharging the Secured Claims on behalf of any Obligor or otherwise is adjudicated bankrupt or submitted to any insolvency proceeding which may trigger the applicability of article 65 or article 67 of the Insolvency Law or any analogous provision applicable in any other jurisdiction, such term shall be extended until no revocatory action pursuant to Italian law (or any analogous remedy available under any applicable law in any other jurisdiction) can be exercised and if all the commitments of the Secured Creditors to the Obligors have been terminated or cancelled; or

(b) notwithstanding anything to the contrary set forth in this Agreement, immediately after the full and unconditional discharge of the Secured Claims, if:

(i) no Event of Default was outstanding at the time of the last payment made to discharge the Secured Claims (the Relevant Payment); and

(ii) the Assignor delivers the following documentation to the Agent, in form and substance satisfactory to the Agent and dated no earlier than 10 (ten) Business Days before the date of the release, in respect of each person who has made payments discharging the Secured Claims (the Relevant Company):

(A) a certificate addressed to the Agent by both the chairman of the board of directors or the sole director of the Relevant Company confirming that, as of the date of such certificate and as of the date of the Relevant Payment:

I. the Relevant Company is not and was not insolvent or in a situation contemplated by articles 2446, 2447, 2482-bis or 2482-ter of the Civil Code (or, if the Relevant Company is not

13

incorporated in Italy, the analogous provision under the applicable law);

II. there are and there were no facts or circumstances affecting the Relevant Company which, based on factual circumstances then existing, would entail an insolvency situation;

(B) a certificate issued by the competent register of enterprises (certificato di vigenza) confirming that no insolvency proceedings have been initiated against the Relevant Company (or, if the Relevant Company is not incorporated in Italy, the corresponding document in the relevant jurisdiction, if applicable);

(C) a court insolvency certificate (certificato fallimentare) of the Sezione Fallimentare of the competent Court, confirming that the Relevant Company is not and has not been subjected to any insolvency proceedings (or, if the Relevant Company is not incorporated in Italy, the corresponding document in the relevant jurisdiction, if applicable);

(D) the latest unaudited quarterly management accounts of the Relevant Company, in case such documents have not been already delivered to the Agent pursuant to the Credit Agreement.

11.2 Without prejudice to Article 11.1 above, in any case subject to any relevant provision under the Intercreditor Agreement, the Credit Agreement, the Revolving Guarantee or the Notes Documentation the relevant Receivable shall be automatically released from the Pledge upon (a) any sale or other transfer by the Pledgor of any Receivable that is permitted under the Credit Agreement, the Revolving Guarantee and the Indenture, or (b) upon the effectiveness of any written consent to the release of the Receivables from the Assignment pursuant to Section 9.02 of the Credit Agreement and Section IX of the Indenture or (c) in the other cases provided under the Indenture and the Intercreditor Agreement.

12. ELECTION OF DOMICILE AND NOTICES

12.1 Election of Domicile

For the purposes of this Agreement, the Assignor elects domicile at the address indicated in Clause 12.2 (Notices) below. The Assignor may be sent any notices in relation to this Agreement and the rights arising hereunder at such elected domicile, including any notice of legal proceedings and records of trials relating to this Agreement and the rights arising hereunder.

12.2 Notices

Any notice, communication or document to be sent to any of the parties hereto, shall be in writing and in English, unless otherwise agreed, and sent by letter or fax to the concerned party at the address indicated hereunder or at any other address subsequently communicated in writing by any of the parties pursuant to this Clause 12.1 (Election of Domicile and Notices).

To the Assignor :

Patheon Italia S.p.A.

[—]

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For the attention of: [—]

To the Secured Creditors, the Agent in the name and on behalf of each Secured Creditors, to the address of the Agent indicated below.

To the Notes Collateral Agent:

Deutsche Bank Trust Company Americas

Trust & Securities Services

60 Wall Street, MS NYC60-2710

New York, New York 10005

Fax: 732-578-4636

Attention of: Project Finance Deal Manager – Patheon

Copy to: Agent

To the Revolving Collateral Agent:

J.P. Morgan Europe Limited

125 London Wall,

London EC2Y 5AJ,

Telecopy No. 011-44-207-7777-2360

Attention of Loan and Agency Group-Patheon

13. MISCELLANEOUS

13.1 No waiver

No failure on the part of the Secured Creditors and/or the Agent to exercise, and no delay in exercising, any right hereunder or under the Credit Agreement and the Notes Documentation shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies conferred on the Secured Creditors and/or on the Agent hereunder and under the Credit Agreement and the Notes Documentation are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law or by other contracts or agreements. The rights of the Secured Creditors and/or the Agent hereunder and/or under the Credit Agreement and the Notes Documentation against any party thereto are not conditional or contingent on any attempt by the Secured Creditors and/or the Agent to exercise any of their rights hereunder and/or under the Credit Agreement and the Notes Documentation against such party or against any other person.

13.2 Limitation of liability

The Assignor acknowledges that the Secured Creditors and the Agent shall not be liable for damages caused to the Assignor by reason of the manner in which they exercise, attempt to exercise or fail to exercise any of their rights, actions, powers, remedies or discretions under this Agreement and the Assignment created hereunder, except in cases of wilful misconduct (dolo) or gross negligence (colpa grave), it being understood that such liability is limited to

15

the party to whom the relevant wilful misconduct (dolo) or gross negligence (colpa grave) is imputable.

13.3 Amendments to the Agreement

No amendment to the provisions of this Agreement or to the Assignment, or any waiver of the rights arising hereunder, shall be effective unless such amendment or waiver is documented in a written deed signed by the Assignor and the Agent (acting also on behalf of the Secured Creditors).

13.4 Conflicting provisions

The parties of this Agreement agree that, in case of any conflict between the provisions contained in the Intercreditor Agreement, the Credit Agreement, the Revolving Guarantee or the Notes Documentation and those contained herein, the former shall prevail.

13.5 Partial invalidity

The illegality, invalidity or unenforceability of any provision of this Agreement shall not affect the validity and enforceability of any other provision of this Agreement, in accordance with the applicable law.

13.6 Headings

The headings of this Agreement are inserted for convenience only and shall not be relevant in construing this Agreement.

13.7 Collateral Agents

Notwithstanding anything else to the contrary herein, whenever reference is made in this Deed to any discretionary action by, consent, designation, specification, requirement or approval of, notice, request or other communication from, or other direction given or action to be undertaken or to be (or not to be) suffered or omitted by the Notes Collateral Agent (also as Security Agent hereunder) or to any election, decision, opinion, acceptance, use of judgment, expression of satisfaction or other exercise of discretion, rights or remedies to be made (or not to be made) by the Notes Collateral Agent (also as Security Agent hereunder), it is understood that in all cases the Notes Collateral Agent (also as Security Agent hereunder) shall be fully justified in failing or refusing to take any such action under this Agreement if it shall not have received such written instruction, advice or concurrence of U.S. Bank National Association, acting as Trustee under and in accordance with the Indenture, or, if required by the Intercreditor Agreement, J.P, Morgan Europe Limited, acting as Revolving Collateral Agent under and in accordance with the Intercreditor Agreement, as it deems appropriate. This provision is intended solely for the benefit of the [Notes Collateral Agent/Revolving Collateral Agent] (also as Agent hereunder) and its successors and permitted assigns and is not intended to and will not entitle the other parties hereto to any defense, claim or counterclaim, or confer any rights or benefits on any party hereto.

14. TAXES, CHARGES AND EXPENSES

To the extent provided in the Credit Agreement and in the Notes Documents, any tax, charge (including any interest and penalties), and all documented costs, and expenses, (including legal fees and notarial fees) relating to or otherwise connected with the Assignment, this Agreement and the execution and/or the enforcement and/or amendment thereof shall be borne by the Assignor.

15. GOVERNING LAW

16

This Agreement as well as the Assignment any contractual and non contractual obligation created hereunder shall be governed by, and construed in accordance with, Italian law.

16 JURISDICTION

The courts of Milan shall have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement and the Assignment created hereunder, with the express exclusion of jurisdiction of any other competent court and without prejudice to the mandatory jurisdiction provided under applicable law. Nothing contained herein shall prevent the Secured Creditors, even through the Agent, from commencing proceedings before any other court of competent jurisdiction pursuant to applicable laws.

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SCHEDULE A

Part I

Revolving Finance Parties

1. Lenders

(a) US Lenders

JPMorgan Chase Bank, N.A.

UBS Loan Finance LLC

Wells Fargo Capital Finance, LLC

General Electric Capital Corporation

Scotiabank de Puerto Rico

(b) Canadian Commitments

JPMorgan Chase Bank, N.A.

UBS Loan Finance LLC

Wells Fargo

General Electric Capital Corporation

CIT Business Credit Canada Inc.

(c) UK Lenders

JPMorgan Chase Bank, N.A.

UBS Loan Finance LLC

Wells Fargo

Barclays Bank Plc

(d) European Lenders

JPMorgan Chase Bank, N.A.

Wells Fargo

Barclays Bank Plc

2. Issuing Banks

JPMorgan Chase Bank, N.A.; PMorgan Chase Bank, N.A. Toronto Branch; J.P. Morgan Europe Limited, .P. Morgan Europe Limited, JPMorgan Chase Bank, N.A., Milan Branch; any other Lender (or Affiliate of a Lender) that agrees to act as an Issuing Bank and is approved by the Parent Borrower and the US Agent

3. Joint Bookrunners and Joint Lead Arrangers

J.P. MORGAN SECURITIES INC., UBS SECURITIES LLC

4. Agents

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JPMorgan Chase Bank, N.A., as US administrative agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian administrative agent, and J.P. Morgan Europe Limited, as European administrative agent; JPMorgan Chase Bank, N.A., as US administrative agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian administrative agent, and J.P. Morgan Europe Limited, as European administrative agent

19

SCHEDULE A

Part II

Notes Finance Parties

1. Initial Purchasers¹

[—]J.P. Morgan Securities Inc.

UBS Securities LLC

Barclays Capital Inc

2. Trustee

U.S. Bank National Association

3. Beneficiaries of the Notes Guarantee

Deutsche Bank Trust Company Americas

¹ TO BE UPDATED WITH THE INDICATION OF THE CURRENT HOLDER OF THE NOTES AT THE TIME OF THE ENTERING INTO OF THIS AGREEMENT

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SCHEDULE 1

DESCRIPTION OF SECURED CLAIMS

Part 1

Facilities

Amount:	US$75,000,0000 (subject to increase, under certain circustamstances, by US$ 25,000,000), available in US$, Cdn.$, € or £.
Borrowers:	Patheon Inc. (“Parent Borrower”) Patheon Pharmaceuticals Inc. (“US Borrower”) Patheon Puerto Rico Inc. (“PR Borrower”) Patheon UK Limited (“UK Borrower”) Patheon Italia S.p.A. (“Italian Borrower”) Patheon France S.A.S. (“French Borrower”) Patheon International AG (“Swiss Borrower”)
Availability:	On a revolving basis from the “Effective Date” (April 23, 2010) to the “Maturity Date” (April 23, 2014), subject to limitations by reference to a borrowing base.
Interest Rates:	The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Rate. The Loans comprising each Canadian Prime Rate Borrowing shall bear interest at the Canadian Prime Rate plus the Applicable Rate. The Loans comprising each UK Base Rate Borrowing shall bear interest at the UK Base Rate plus the Applicable Rate. The Loans comprising each Sterling/Euro Alternate Rate Borrowing shall bear interest at the Sterling/Euro Alternate Rate. The Loans comprising each Eurocurrency Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate. All the aforesaid terms as defined in the Credit Agreement. “Applicable Rate” means with respect to any ABR Loan, Eurocurrency Loan, BA Drawing, Canadian Prime Rate Loan or UK Base Rate Loan, as the case may be, the applicable rate per annum set forth below
Repayment:	On or before the Maturity Date.

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SCHEDULE 1

DESCRIPTION OF SECURED CLAIMS

Part 2

Notes

Issuer:	Patheon Inc.
Security description:	Senior Secured Notes
Distribution:	Rule 144A / Regulation S for life
Size:	$280,000,000
Gross proceeds:	$280,000,000
Maturity:	April 15, 2017
Coupon:	8.625%
Price:	100% of face amount
Yield to maturity:	8.625%
Spread to Treasury:	+526 basis points
Benchmark:	UST 3.25% due 3/31/2017
Interest Payment Dates:	April 15 and October 15, commencing October 15, 2010
Clawback:	Up to 35% at 108.625%
Until:	April 15, 2013
Optional redemption:
	Make-whole call @ T+50 bps prior to April 15, 2013 then:
	On or after:	Price:
	April 15, 2013	106.469%
	April 15, 2014	104.313%
	April 15, 2015	102.156%
	April 15, 2016 and thereafter	100.000%
	Special annual call at 103% of principal plus accrued interest for up to $28,000,000 principal amount of the Senior Secured Notes in any 12-month period commencing on or after the issue date and ending prior to April 15, 2013
Change of control:	Putable at 101% of principal plus accrued interest

22

Trade date:	April 9, 2010
Settlement:	T+10; April 23, 2010
Rule 144A CUSIP / ISIN:	70319WAA6 / US70319WAA62
Regulation S CUSIP / ISIN:	C7197EAA2 / USC7197EAA22
Denominations/Multiple:	$2,000 x $1,000
Corporate Family Ratings:	B2 (Moody’s) / B+ (S&P)
Senior Secured Notes Ratings*:	B1 (Moody’s) / B+ (S&P)
Bookrunners:	J.P. Morgan Securities Inc.
	UBS Securities LLC
Co-Manager:	Barclays Capital Inc.

23

SCHEDULE 2

List of Supply Agreements

[•]

24

SCHEDULE 3

Declaration of Assignment according to Clause4.1

[On the letterhead of the Assignor]

To:	[Name and address of the Assigned Debtor]2
Copy to:	[Agent]

[Place and date of execution]

Re: Assignment of receivables by way of security

Dear Sirs,

We hereby inform you that on [—] 2010, inter alios, our company (the “Assignor”), and [—] in its name and in the name and on behalf of the Secured Creditors listed therein (the “Secured Creditors”) entered into an assignment agreement of receivables by way of security (the “Assignment Agreement”), whereby the Assignor assigned by way of security to the Secured Creditors all the outstanding and future monetary receivables (crediti pecuniari) of the Assignor towards your company (the “Receivables”), arising for whatever reason from or in connection with agreements already executed or to be executed, for the supply of goods and /or services to You (the “Supply Agreements”).

Therefore, we hereby, pursuant to and to the effects of Articles 1264 and 1265 of the Italian civil code, notify your company that the Receivables are assigned by way of security to the Secured Creditors pursuant to the Assignment Agreement.

Without prejudice to the following, you are authorised to carry out any payment under the Receivables as carried out so far.

Furthermore, by means of this letter we irrevocably and unconditionally instruct and authorise you (despite any previous instructions which we may have given to the contrary):

(a) to disclose to the Agent (without any reference to or further authority from us and without any enquiry by you as to the justification for the disclosure), any information relating to the Receivables which the Agent may, at any time and from time to time, request;

(b) at any time and from time to time on receipt by you of any written instruction from the Agent, to act in accordance with that instruction (without any reference to or further authority from us and without any enquiry by you as to the justification for the instruction or the validity of the same);

(c) to comply with the terms of any written notice, statement or instruction in any way relating or purporting to relate to the Receivables which you may receive at any time and from time to time from the Agent (without any reference to or further authority from us and without any enquiry by you as to the justification for notice, statement or instruction or the validity of it);

(d) any notice or communication related to the Receivables shall be supplied to both us and the Agent.

We agree that none of the instructions, authorisations and confirmations in this notice can be revoked or varied in any way except with the Agent’s prior written consent;

² A single notice shall be sent for each Assigned Debtor

25

Please note:

(1) at any time and from time to time on receipt by you of a written instruction from the Agent to that end, we are not permitted to receive any payment under the Receivables without the prior written consent of the Agent;

(2) no later than the business day following the day on which you have been delivered by the Agent with written instruction to that end, you shall carry out any payment under the Receivables in the following account:

Number of account:	[—]
Bank/Bank address:	[—]

(3) all instructions related to Receivables must be signed by one authorised signatory of the Agent set out in the following list, provided that specimen of the signatures below shall be sent to you forthwith by the Agent:

Name	Position	Contact
[—]

(4) for the avoidance of doubt, following the receipt by you of the notices mentioned in point (1) or (2) above, no payment under the Receivables can be effected at any time without prior receipt of written instructions from the Agent in compliance with the terms of this notice.

Please acknowledge receipt of this notice, and confirm your agreement to it, by signing this letter and returning it to the Agent [—] for the attention of [—].

This letter is governed by, and shall be construed in accordance with, the laws of the Republic of Italy.

Best Regards,

The Assignor

[CERTIFIED DATE]

26

SCHEDULE 4

[On the letterhead of the Assignor]

To:	[Name and address of the Assigned Debtor]3
Copy to:	[Agent]

[Place and date of execution]

Re: Assignment of receivables by way of security

Dear Sirs,

we make reference to the agreement for an assignment of receivables by way of security dated [—] between, inter alios, our company (the “Assignor”), and [—] in its name and in the name and on behalf of the Secured Creditors listed therein (the “Secured Creditors”) (the “Agreement”) and to the notice delivered to You whereby, inter alia, we have informed You that all the outstanding and future monetary receivables (crediti pecuniari) of the Assignor towards your company (the “Receivables”), arising for whatever reason from or in connection with agreements already executed or to be executed, for the supply of goods and /or services to You (the “Supply Agreements”) are assigned by way of security to the Secured Creditors pursuant to the Agreement.

We hereby confirm to you that the Receivables arising from the invoices listed in the Annex hereto are assigned by way of security to the Secured Creditors pursuant to the Agreement.

Best regards,

[The Assignor]

[CERTIFIED DATE]

³ A single notice shall be sent for each Assigned Debtor

27

ANNEX

Assigned Debtor	No Invoice	Date of Issuing	Date of Payment	Amount
[—]	[—]	[—]	[—]	[—]

28

SCHEDULE 5

Form of the acknowledgement deed referred to in Clause 7.1

This Acknowledgement Deed is made in [—] today, [—] by:

[—](the “Assignor”) represented by [—], born in [—], on [—], duly authorised to execute this Acknowledgement Deed;

WHEREAS

(A) under the assignment agreement (hereinafter, the “Agreement”) entered into on [—] between, inter alios, the Pledgor, JP Morgan Chase Bank N.A. (the “Agent”) and the Secured Creditors (as defined under the Agreement), the Pledgor has assigned by way of security the Receivables (as defined in the Agreement) (the “Receivables”), in order to secure the discharge of the Secures Claims (as defined in Clause 3 (Secured Claims) of the Agreement);

(B) on [—] the [event] has occurred;

(C) it is not intention of the Pledgor to give any novation effect (“novare” in the meaning attributed to such expression by Articles 1230 et seq. of the Italian Civil Code) to this Acknowledgement Deed.

Capitalised terms used in this Acknowledgement Deed shall have the same meaning ascribed to them under the Agreement.

NOW THEREFORE,

the Assignor acknowledges that the [event] has occurred and hereby expressly agrees to maintain in force the Assignment, which will continue to give rise to a first ranking security, valid and enforceable against third parties, in favour of the Secured Creditors as security for the prompt satisfaction of any and all Secured Claims.

[place, date and Assignor’s signature]

[CERTIFIED DATE]

29

*****

If you agree with such terms as set forth above, please send us a letter incorporating such terms duly initialised on all the pages and signed at the end as a acceptance of our offer.

Yours faithfully,

PATHEON ITALIA S.P.A.

As Assignor

>>

For Acceptance

[—] as Revolving Collateral Agent

[—] as Notes Collateral Agent

30

Exhibit Q

To:

Patheon Italia S.p.A.

[—]

[—] 2010

Dear Sir,

PLEDGE AGREEMENT OVER BANK ACCOUNTS - Acceptance

Following our recent conversations, we acknowledge the receipt of your proposal dated the date hereof, which we hereby reproduce below duly initialised on all the pages and signed at the end as a acceptance of Your offer.

<<

[ON PATHEON ITALIA SPA Letterhead]

To:

J.P. Morgan Europe Limited

125 London Wall,

London EC2Y 5AJ,

Telecopy No. 011-44-207-7777-2360

Attention of Loan and Agency Group

And

Deutsche Bank Trust Company Americas

Trust & Securities Services

60 Wall Street, MS NYC60-2710

New York, New York 10005

Fax:732-578-4636

Attention of:Project Finance Deal Manager – Patheon

[—] 2010

Dear Sirs,

PLEDGE AGREEMENT OVER BANK ACCOUNTS – Proposal

Following to our recent conversations we hereby propose to you to enter into a pledge agreement over Bank Accounts upon the terms and subject to the conditions set forth below.

*****

PLEDGE AGREEMENT OVER BANK ACCOUNTS

(Contratto di pegno su conti correnti)

BETWEEN

(1) PATHEON ITALIA S.P.A., a società per azioni incorporated and existing under the laws of Italy, with registered office at Monza (MB) Viale G.B. Stucchi 110, Fiscal Code 01924610346 (the “Pledgor”);

AND

(2) J.P. MORGAN EUROPE LIMITED in the name and on behalf of the persons (the “Revolving Finance Parties”) listed in Schedule A, Part I, hereof, as mandatario con rappresentanza of the latter pursuant to Section 9.16 of the Credit Agreement (as defined below)( together with any successor thereto in such capacity of collateral agent under the Credit Agreement (as defined below), the “Revolving Collateral Agent”);

(3) Deutsche Bank Trust Company Americas in the name and on behalf of the persons (the “Notes Finance Parties”) listed in Schedule A, Part II, hereof, as mandatario con rappresentanza of the latter pursuant to Section 12.08 of the Indenture (as defined below) ( together with any successor thereto in such capacity of notes collateral agent under the Indenture (as defined below), the “Notes Collateral Agent”).

WHEREAS:

(A) by a US Dollars, Canadian Dollars, Euros and Sterling revolving credit agreement made on 27 April 2007, amended and restated on 23 April 2010 (the Credit Agreement) between, among others, the Parent (as defined below), the Pledgor and the subsidiaries of the Parent named therein, on the one side, and JPMorgan Chase Bank, N.A., as US Administrative Agent, JP Morgan Chase Bank, N.A., Toronto Branch, as Canadian Administrative Agent, and J.P. Morgan Europe Limited, as European Administrative Agent,, on the other side, whereby the latter have agreed, inter alia, to make certain revolving credit facilities (the “Facilities”) available to the Pledgor on the terms and subject to the conditions set out in the Credit Agreement. The main economic terms of the Facilities are described in Schedule 1, Part I (Description of the Secured Claims);

(B) in order to guarantee the obligations of the Loan Parties (as defined in the Credit Agreement) under the Credit Agreement and connected documentation, on 23 April 2010 the Pledgor has entered into a US law guarantors’ agreement up to a maximum secured amount of Euro [10,000,000] (the “Revolving Guarantee”);

(C) on 23 April 2010 Parent has issued US$280,000,000 in aggregate principal amount of 8,625% senior secured notes due 2017 (the “Notes”) pursuant to an indenture (the “Indenture”) among Parent, each of its subsidiaries listed therein, the Notes Collateral Agent and the Trustee(as defined below). The Notes have been purchased by the initial purchasers listed therein (the “Initial Purchasers”) pursuant to a purchase agreement between Parent, certain its subsidiaries listed therein and J.P. Morgan Securities Inc., in the name and on behalf of the Initial Purchasers (the “Purchase Agreement”). The main terms of the Notes are described in Schedule 1, Part II (Description of the Secured Claims);

(D) in order to guarantee the obligation of Parent under the Notes the Indenture and connected documentation, under the Indenture the Pledgor has granted a US law guarantee up to a maximum secured amount of Euro [73,000,000](the “Notes Guarantee”);

(E) the Pledgor is willing to secure the complete and timely fulfilment of all the Secured Claims (as defined below) by granting this pledge over the following bank accounts:

• [—] held with [—]

2

(hereinafter referred to as “Bank Accounts”),

as well as on any right to the sums credited from time to time to the Bank Accounts (or to any right to the payment of the credit balance existing from time to time on the Bank Accounts), as provided under Clause 2 (Pledge) below, pursuant to the terms and conditions set forth hereunder;

(F) [J.P. Morgan Europe Limited] is hereby appointed by the Secured Creditors (as defined below) as their agent (“mandatario con rappresentanza”) for the purpose of exercising all rights, remedies and/or powers of the Secured Creditors provided under this Agreement.

NOW THEREFORE, it is hereby agreed as follows:

1. RECITALS, SCHEDULES AND DEFINITIONS

1.1 Recitals and Schedules

The above recitals and the Schedules hereto constitute an integral and substantial part of this Agreement.

Capitalised terms used in this Agreement, unless otherwise expressly stated herein, shall have the same meaning ascribed to them under the Credit Agreement.

1.2 Definitions

In addition to the terms defined in the above Recitals or in this Agreement the terms set forth under this Clause 1.2 (Definitions) shall have the following meaning:

“Account Banks” means [—].

“Agent” means [J.P. Morgan Europe Limited].

“Agreement” means this agreement.

“Availability Triggering Event” means the occurrence of a Revolving Event of Default and/or of a Liquidity Event.

“Bank Accounts” has the meaning ascribed to this term in recital (E) above.

“Business Day” has the meaning ascribed to this term in the Credit Agreement.

“Credit Agreement” has the meaning ascribed to this term in recital (A) above.

“Decree 170” means the Legislative Decree No. 170 dated 21 May, 2004, as amended and/or supplemented from time to time.

“Enforcement Event” means:

(a) the occurrence of a Revolving Event of Default specified in (i) Article VII, sub Sections 7.01 letters (a), (b), (f), (g), (h), (i) and (l) and 7.02 of the Credit Agreement or any other Revolving Event of Default which triggers the acceleration of the Secured Claims by operation of law; or

(b) the occurrence of a Revolving Event of Default in respect of which a notice has been served by the US Agent (as defined in the Credit Agreement) in accordance with Article VII, sub Sections 7.01 of the Credit Agreement; or

(c) a non payment of any sums which is or becomes however due and payable to the Secured Creditors under the Credit Agreement, once expired any applicable grace period provided under the Credit Agreement;

3

(d) in respect of the Secured Claims referred to in paragraphs (A) letters (c) and (d), (B) letters (c) and (d), (C) letters (c) and (d) or (D) of the definition of Secured Claims in Subclause 1.1 (Definitions), failure by a Loan Party (as defined in the Credit Agreement) to pay any such Secured Claims when due and payable, , once expired any applicable grace period provided under the Credit Agreement;

(e) a Note Event of Default which has triggered the acceleration of any of the Secured Claims.

“Event of Default” means a Note Event of Default and/or a Revolving Event of Default.

“Excluded Assets” has the meaning ascribed to this term in the Credit Agreement.

“Facilities” has the meaning ascribed to this term in recital (A) above.

“Indenture” has the meaning ascribed to this term in recital (C) above.

“Initial Purchasers” has the meaning ascribed to this term in recital (C) above.

“Financial Collateral” means, to the extent not constituting an Excluded Asset, any and all of the Pledgor’s rights and claims in relation to:

(i) the Bank Accounts;

(ii) all amounts from time to time standing to the credit of the Bank Accounts including all amounts that will be deposited on the Bank Accounts in the future by third parties or upon instructions of the Pledgor;

(iii) the reimbursement of all existing amounts from time to time standing to the credit of the Bank Accounts, including all amounts that will be deposited on the Bank Accounts in the future by third parties or upon instructions of the Pledgor; and

(iv) accrued or accruing interests in relation to each of the amounts described under paragraphs (i), (ii) and (iii) above.

“Insolvency Laws” means Italian Royal Decree No. 267 of 16th March, 1942 as amended and supplemented.

“Insolvency Proceeding” has the meaning ascribed to this term in the Credit Agreement.

“Intercreditor Agreement” has the meaning given to this term in the Credit Agreement.

“Issuer” means Parent.

“JPM Account” means the bank account no [—] opened by [—] with [—].

“Liquidity Event” has the meaning given to this term in the Credit Agreement.

“Loan” has the meaning given to this term in the Credit Agreement.

“Maturity Date” has the meaning given to this term in the Credit Agreement.

“Notes” has the meaning ascribed to this term in recital (C) above.

“Notes Collateral Agent” has the meaning ascribed to this term in the preamble.

“Notes Collateral Document” has the meaning ascribed to the term “Security Documents” under the Indenture.

“Notes Documentation” means the Notes, the Indenture, the Notes Guarantee, the Notes Collateral Documents and the Intercreditor Agreement.

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“Notes Event of Default” has the meaning ascribed to the term “Event of Default” under Section 6.01 of the Indenture.

“Notes Finance Parties” has the meaning ascribed to this term in the preamble.

“Notes Guarantee” has the meaning ascribed to this term in recital (D) above

“Notes Guarantor” means the Pledgor as guarantor pursuant to the Note Guarantee.

“Notes Obligor” means the Issuer.

“Obligors” means the Note Guarantor, Note Obligors and the Revolving Obligor.

“Parent” means Patheon Inc..

“Parties” means the parties of this Agreement.

“Perfection Notice” has the meaning ascribed to this term in Clause 4.1 (Statement of the Pledgor) below.

“Pledge” means the pledge created pursuant to this Agreement.

“Pledgor” means Patheon Italia S.p.A..

“Purchase Agreement” has the meaning ascribed to this term in recital (C) above.

“Revolving Collateral Agent” has the meaning ascribed to this term in the preamble.

“Revolving Event of Default” has the meaning ascribed to the term “Event of Default” in the Credit Agreement.

“Revolving Finance Parties” has the meaning ascribed to this term in the preamble.

“Revolving Guarantee” has the meaning ascribed to this term in recital (B) above.

“Revolving Obligor” means the Pledgor as, respectively, borrower pursuant to the Credit Agreement and guarantor pursuant to the Revolving Guarantee.

“Schedule/s” means the schedules to this Agreement.

“Secured Claim” or “Secured Claims” means

(A) (a) the due and punctual payment by the Revolving Obligor of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on its Loans (as defined in the Credit Agreement) and any advances, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Revolving Obligor under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral, and (iii) all other monetary obligations of such Borrower to any of the Secured Parties under the Credit Agreement and each of the other Loan Documents, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of the Revolving Obligor under or pursuant to the Credit Agreement and each of the other Loan Documents and the Intercreditor Agreement;

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(B) any principal of and interest (including any interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on any loan and all other monetary obligations, including fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) of the Notes Obligors under the Notes Documentation, in any case up to a maximum amount equal to Euro 73,000,000;

(C) all current and future monetary obligations (obbligazioni pecuniarie) of the Pledgor towards any of the Secured Creditors under this Agreement,

provided that if one or more of the obligations described in paragraphs (A); (B) or (C) above is declared invalid or unenforceable for whatever reason, or if the Assignment cannot or can no longer secure, for whatever reason, one or more of such obligations, this shall not prejudice the validity and the enforceability of the Assignment, which shall continue to secure the full and unconditional performance of all other obligations referred to in this definition.

“Secured Creditors” means the Revolving Finance Parties, the Notes Finance Parties, the Revolving Collateral Agent and the Notes Collateral Agent as well as any successor or assignee (successore a titolo particolare, successore a titolo universale or avente causa) of any of the persons referred to in this definition.

“Security” means any mortgage, pledge, lien, charge (fixed or floating), assignment, hypothecation, set-off or trust arrangement for the purpose of creating security, reservation of title or security interest or any other agreement or arrangement having a substantially similar effect.

“Statement Date” has the meaning ascribed to this term in Clause 4.1 (Statement of the Pledgor) below.

“Trustee” means U.S. Bank National Association as trustee, until a successor replaces it in accordance with the applicable provisions of the Indenture and thereafter means the successor serving thereunder.

1.3 Construction

(a) Reference to a person, including the Secured Creditors, is, where relevant, deemed to be a reference to or to include, as appropriate, their respective successors, permitted assignees or transferees.

(b) References to Clauses and Schedules are references to, respectively, clauses of and schedules to this Agreement and references to this Agreement include its Schedules.

(c) Reference to any agreement (including, without limitation, the Credit Agreement and the Notes Documentation) is to be construed as a reference to that agreement as it may from time to time be amended, varied, supplemented, restated or novated.

(d) Words importing the plural shall include the singular and vice versa.

(e) The provisions of Section 1.03 (Terms Generally) of the Credit Agreement (to the extent applicable) apply to this Agreement as though they were set out in full in this Agreement, except that references to the Credit Agreement are to be construed as references to this Agreement.

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2. PLEDGE

The Pledgor hereby irrevocably grants in favour of each of the Secured Creditors pursuant to Articles 2787 and 2800 of the Italian Civil Code, as well as the provisions of Decree 170, a first ranking pledge, as security for the Secured Claims, over the Financial Collateral.

3. EFFECTIVENESS OF THE SECURITY

3.1 Irrelevance of partial repayments

Without prejudice to Clause 11 hereof, the Pledge shall remain valid and effective in its entirety, notwithstanding any partial repayment, discharge or satisfaction of the Secured Claims and until all the Secured Claims are unconditionally satisfied in full.

3.2 Irrelevance of prepayments

In the event that any of the Secured Claim has been repaid prior to its maturity date, the Pledge shall remain in full force and effect in its entirety until all the Secured Claims have been wholly and unconditionally paid.

3.3 Additional security

The Pledge shall be in addition to and independent from any other security or guarantee of which the Secured Creditors may or will have the benefit, at any time, according to law or by contract, in respect of all or some of the Secured Claims.

3.4 Irrelevance of amendments

The Pledge shall remain in full force and effect, regardless of any subsequent amendment to the Secured Claims, including, by way of example but not limited to, any amendment to the terms of performance and total or partial assignment of the Credit Agreement, the Notes Documentation or the Secured Claims.

3.5 Preservation of the security

The parties of this Agreement agree that, also for the purposes of Articles 1232 and 1275 of the Italian Civil Code, the Pledge shall remain in full force and effect in its entirety until the complete, full and unconditional satisfaction of all the Secured Claims including, without limitation, as a result of an amendment, postponement, novation or assignment (either in whole or in part) of the rights arising under the Credit Agreement or the Notes Documentation and it shall neither be reduced nor deemed as being waived if the Obligors or any third party (on behalf of the Obligors) makes partial or advanced repayments under the Credit Agreement and the Notes Documentation or the Secured Creditors waive, in whole or in part, the Secured Claims, unless otherwise provided in a written statement made by the Secured Creditors.

4. PERFECTION OF THE PLEDGE

4.1 Statement of the Pledgor

Without prejudice to Article 2 and Article 3 of the Decree 170, within:

(i) 5 Business Days from the date hereof (the “Perfection Notice”); and

(ii) following the delivery of the Perfection Notice, 5 Business Days from the first Business Day of January, April, July and October of each year until the full and unconditional fulfillment of all the Secured Claims,

(collectively indicated as the “Statement Date”)

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the Pledgor shall either (i) notify through a court bailiff (or other means of notification bearing certified date upon the reasonable judgment of the Agent) to each of the Account Banks, or (ii) procure the acceptance by each of the Account Banks, bearing a certified date (data certa), of a statement in the form set out in Schedule 2 hereto, together with a bank statement relating to the Bank Accounts as of the Statement Date, in order to ensure that the rights of Pledge created pursuant to this Agreement benefit of and comply with, with reference to the Financial Collateral existing on the relevant Statement Date, the requirements set out under Articles 2787, 2800 and 2805 of the Italian Civil Code and under Decree 170. Such bank statements shall indicate the Financial Collateral existing on the relevant Statement Date and the details of all the deposits made and registered on the Bank Accounts during the period between the most recent Statement Date and the Statement Date in relation to which a statement is to be executed and delivered pursuant to this Clause 4.1 (Statement of the Pledgor). Copy of any notifications or acceptance under this Clause 4.1 shall be delivered promptly to the Agent.

4.2 Statement of the Agent

Without prejudice to Clause 4.1 (Statement of the Pledgor) the Agent is hereby authorised, and it is hereby irrevocably granted all the relevant powers by the Pledgor to act, in its name and on its behalf, in case no statement pursuant to Clause 4.1 (Statement of the Pledgor) above is executed and delivered, as the case may be, by the Pledgor, and in any other case deemed appropriate by the Agent, to carry out at any time any activity necessary for the purpose of creating a valid and enforceable pledge pursuant to the terms and conditions of this Agreement, including, but not limited to, the issuing of the statement referred to in Clause 4.1 (Statement of the Pledgor) above and/or the power to receive a bank statement from each of the Account Banks indicating the Financial Collateral on the relevant Statement Date.

5. RIGHT OF USE OF THE FINANCIAL COLLATERAL

5.1 The Pledgor is entitled to use and dispose the Financial Collateral until the occurrence of the circumstances listed in following paragraph 5.2.

5.2 Following the earlier of:

(i) the commencement of an Availability Trigger Event;

(ii) the Maturity Date; or

(iii) the Loan becoming immediately due and repayable under the Credit Agreement,

the Pledgor shall be prohibited from using and dispose the Financial Collateral and any amount credited on the Bank Accounts shall be transferred in the JPM Account in or towards repayment of the Secured Claims, for application in accordance with the terms of Section 2.11(e) of the Credit Agreement or the Intercreditor Agreement or in the Notes Documentation.

6. REPRESENTATIONS AND WARRANTIES

6.1 Representations and warranties

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In addition and without prejudice to the representations and warranties given by the Pledgor under the Credit Agreement and the Notes Documentation, Pledgor hereby represents and warrants to the Secured Creditors as follows:

(i) as of the date of execution of this Agreement the balance of each of the Bank Accounts is not negative;

(ii) it is the sole owner of the Bank Accounts, of the Financial Collateral and the same are freely transferable, free and clear of any Security, except for those in favour of the Secured Creditors, those that might have been created by operation of law and those permitted by the Credit Agreement or in the Indenture. The Pledgor has not assigned, charged, pledged or created any other form of security interest over any of its rights, title or interest to or in the Financial Collateral or otherwise agreed to sell or transfer any of its rights, title or interest to or in the Financial Collateral except as permitted by the Credit Agreement or in the Indenture;

(iii) the Pledgor has no bank accounts other than the Bank Accounts and bank accounts that are Excluded Assets;

(iv) no claims or civil, arbitral or administrative proceedings before any civil, arbitral or administrative authorities or any other claim in respect of the Bank Accounts and/or the Financial Collateral which may affect the validity, the effectiveness and/or the enforceability of this Agreement are pending, nor such claims or proceedings have been threatened;

(v) as a result of the fulfilment of the formalities set forth under Clause 4 (Perfection of the Pledge) of this Agreement, the Pledge will give rise to a first ranking security, valid and enforceable against third parties, in favour of the Secured Creditors as security for the prompt satisfaction of any and all Secured Claims;

(vi) the constitutional documents of the Pledgor do not contain any provision which may prevent or limit in any manner the creation of the Pledge and do not contain any provision which may adversely affect any material rights of any of the Secured Creditors arising under this Agreement, including the right to enforce the Pledge;

(vii) the Financial Collateral is not object of claims of set off by any Account Bank.

6.2 Repetition of the representations and warranties

The representations and warranties set forth in Clause 6.1 (Representations and warranties) above are given as of (i) the date of execution of this Agreement; (ii) the date on which any act aimed at perfecting the Pledge pursuant to Article 4 is carried out; and (iii) any date of Borrowing (as define in the Credit Agreement). The representations and warranties set forth in Clause 6.1 (Representations and warranties) above, shall be true and accurate on each date on which shall be repeated pursuant this Clause in each case with reference to facts and circumstances then existing.

7. ASSIGNMENT OR TRANSFER OF THE RIGHTS OF THE SECURED CREDITORS

7.1 Assignment of rights

The Pledgor irrevocably accepts that the Pledge shall remain in full force and effect in its entirety and may be transferred, in whole or in part, without the Pledgor’s further consent, as a legal consequence of any total or partial assignment by the Secured Creditors of any of the Secured Claims. In this respect, the Pledgor irrevocably undertakes to execute any deed,

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document, or certificate (including the acknowledgement deed in the form of Schedule 3 hereto) that the Agent, in its opinion or acting on behalf ot the Secured Creditors, may reasonably deem necessary and/or convenient to ensure the effectiveness of the Pledge and/or the provisions contained herein.

7.2 Effects of the assignment

For the purposes of this Agreement, any assignment or transfer (in whole or in part) of the Secured Claims shall take effect, respectively, as an assignment or transfer of a contract (cessione di contratto) or an assignment of receivables (cessione di credito), as the case may be, without having any novating effect (efficacia novativa) on the Secured Claims outstanding at the time the assignment or the transfer is perfected.

8. UNDERTAKINGS OF THE PLEDGOR

In addition to and without any prejudice to the provisions under this Agreement, the Credit Agreement and the Notes Documentation, until the full release of the Pledge, the Pledgor shall:

(i) maintain the Bank Accounts;

(ii) not open any other bank account in Italy save constituting Excluded Assets;

(iii) promptly notify to the Agent and deliver, at its own expense, copies of any notice or communication received in relation to the Financial Collateral and/or the Bank Accounts, whoever may be the sender, which may impair the rights of the Secured Creditors under this Agreement including, but not limited to, any claim or action brought or threatened by any party in relation to the Financial Collateral and/or Bank Accounts, including any request of attachment, seizure, distress or execution affecting the Financial Collateral and/or Bank Accounts;

(iv) refrain from carrying out any actions or omission which may, directly or indirectly, affect the validity and/or enforceability of the Pledge or the right of the Secured Creditors to exercise and enforce their rights under this Agreement and promptly perform and fulfil, at its own expenses, any activity which is necessary or reasonably requested by the Agent, acting in the name and on behalf of the Secured Creditors, in order to protect the Bank Accounts, the Financial Collateral and/or the other rights and interest of the Secured Creditors arising under this Agreement;

(v) promptly fulfil, at its expenses, any activity necessary or reasonably requested by the Agent, in order to protect the security interests and the other rights of the Secured Creditors arising from this Agreement with respect to any third party claim;

(vi) from time to time enter into any further documents and instruments and take any further actions as may be necessary or which the Agent, acting reasonably, may deem necessary in order to: (a) ensure and maintain the validity and the enforceability, also towards third parties, of the Pledge and the admissibility of the Pledge as evidence in court; and (b) allow the Agent, in the name and on behalf of the Secured Creditors, to exercise any of their rights in relation to the Financial Collateral and the Bank Accounts;

(vii) not create, or permit the creation of any Security over the Bank Accounts and/or the Financial Collateral, except for those in favour of the Secured Creditors to secure the Secured Claims, the liens permitted under the Credit Agreement or under the Indenture and those that might have been created by operation of law;

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(viii) not use the Financial Collateral unless in accordance with Clause 5 above;

(ix) extend, by means of the pledge to any obligation of a Loan Party (as defined in the Credit Agreement) arising from the Swap Agreement and any Cash Management Arrangement (both as defined in the Revolving Guarantee), upon request of the Security Agent at its sole discretion, once any of such agreement has been entered into. For such purposes, the Pledgor shall promptly take (and procure that the Company takes) all actions and shall execute (and procure that the Company executes) all documents reasonably requested by the Security Agent for the valid and enforceable extension of the Pledge to such new secured claims.

9. ENFORCEMENT OF THE PLEDGE

9.1 Default of the Secured Claims

(a) Subject to the Intercreditor Agreement, upon the occurrence of an Enforcement Event and at any time thereafter, if the relevant Secured Claims have not been promptly and fully satisfied within 5 (five) days from the notice by the court bailiff of a request to the relevant debtors and the Pledgor to perform the Secured Claims pursuant to article 2797 Italian Civil Code, the Agent, acting in the name and on behalf of the Secured Creditors, pursuant to Article 1851 of the Italian Civil Code and Article 4 of the Decree 170, shall have the right to:

(i) determine the amount corresponding to the Secured Claims still outstanding and due to the Secured Creditors following the occurrence of the Enforcement Event;

(ii) instruct the Account Banks to draw and transfer, or to procure that the Financial Collateral, existing on the day of enforcement, is transferred to the Agent, which shall be applied against any and all of the Secured Claims which are then due and payable, but remained unpaid also pursuant to Article 4 of Legislative Decree 170, in accordance with the applicable provision(s) of the Credit Agreement, the Notes Documentation and/or the Intercreditor Agreement.

(b) The Pledgor hereby undertakes to give irrevocable instructions to the Account Bank to transfer to the Agent, upon receipt of a written request by the Agent pursuant to point (ii) above, the Financial Collateral existing on that date, on the bank account which shall be indicated by the Agent and, in any case, to operate on the Bank Accounts to allow the exercise of the rights referred to under point (ii) above. Such instructions shall be given within the term indicated in Clause 4.1(i) (Statement of the Pledgor) and in the form set out in Schedule 2 (Part I) hereto.

(c) The Pledgor, also pursuant to Article 1723, paragraph 2 of the Italian Civil Code, irrevocably allows, as of the date of this Agreement, the Agent to operate and draw the Financial Collateral in the name and on behalf of the same Pledgor to exercise the right provided under point (ii) above.

(d) It is hereby understood that, if all the Secured Claims have been fully and unconditionally satisfied or indemnified pursuant to point (i) and (ii) above, any excess of the Financial Collateral, if any, shall be promptly released and returned to the Pledgor.

(e) The Agent, pursuant to Article 4, paragraph 2, of Decree 170, following the allocation of the Financial Collateral to discharge the Secured Claims (to be made pursuant to the relevant provisions of the Credit Agreement and/or Intercreditor Agreement and/or the Notes Documents), will promptly give written notice to the Pledgor and to the Account Banks, of the circumstances and the resolutions described under points (a) and (b) of this Clause 9.1 (Default of the Secured Claims).

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(f) The Pledgor and the Agent (in the name and on behalf of the Secured Creditors) hereby acknowledge that the determination of the amount corresponding to the Secured Claims pursuant to point (i) of this Clause 9.1 (Default of the Secured Claims) shall be considered as reasonable in any respect in accordance with Article 8, paragraph 1, of Decree 170.

(g) It is understood that the provisions set forth by this Clause 9.1 (Default of the Secured Claims) are without prejudice to the right of the Agent, acting on behalf of the Secured Creditors, to exercise any remedy and/or to enforce the Pledge also in accordance with any applicable provision of the Italian law, as the case may be, upon the occurrence of an Enforcement Event.

(h) Without limitation to the generality of Article 4 of the Decree 170 and Article 2799 of Italian civil code, in case the Agent on behalf of the Secured Creditors enforces only partially the Pledge pursuant to this Clause 9.1 (Default of the Secured Claims), or otherwise agrees to release in part the Pledge, and the Secured Claims have not been fully and unconditionally satisfied, the Pledge shall continue to apply to the remaining Financial Collateral which has not been enforced or released.

(i) For the avoidance of doubt, in the event that the Financial Collateral is insufficient to pay all the Secured Claims, the Pledgor shall remain liable for the shortfall, in accordance with this Agreement, the Credit Agreement, the Notes Documentation and/or the Intercreditor Agreement, in any case subject to Section 2.07 of the Revolving Guarantee.

9.2 Agent as attorney of the Secured Creditors

For the purposes of the foregoing, the Pledgor hereby accepts that the Agent may represent each of the Secured Creditors in respect of any formality related to the enforcement of the Pledge.

10. AGENT

10.1 Power of attorney

Each of the Secured Creditors appoints the Agent as mandatario con rappresentanza to act as Agent for the purpose of exercising all rights, remedies and/or powers of the Secured Creditors hereunder in the name and on behalf of same Secured Creditors and the Agent accepts such appointment.

The Pledgor acknowledges that the Agent shall have the right to represent, both as plaintiff and defendant, in court proceedings or otherwise, the Secured Creditors, in connection with the Pledge. Therefore, the Agent shall be entitled to exercise any and all rights and discretions attributed to the Secured Creditors, jointly and/or severally, pursuant to this Agreement and in relation to the Pledge and to take any legal action, also for interim or precautionary measures, for the protection and enforcement of the rights arising under the Pledge, in the name and on behalf of the Secured Creditors.

In light of the above paragraph of this Clause 10.1 (Power of attorney), the Pledgor may validly send any notice only to the Agent (even if such notice is only directed to the Secured Creditors) and consider any notice received by the Agent in relation to the Pledge as also delivered to the other Secured Creditors, unless otherwise stated therein.

10.2 Replacement of the Agent

The Pledgor acknowledges and accepts the right of the Secured Creditors to replace the Agent, and the right of the Agent to request to the Secured Creditors to be replaced with

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another party who shall have the same rights and discretions provided under this Agreement to the Agent.

The replacement of the Agent shall take effect with respect to the Pledgor from the date of receipt of a notice of replacement by the Pledgor from both the old and the new Agent.

10.3 No liability

Neither the Agent nor any of its directors, employees or agents shall be liable for any action taken or omitted to be taken by it or any of them under or in connection with this Agreement unless caused by its or their gross negligence or wilful misconduct. The Agent shall not be responsible for any statements, representations or warranties in this Agreement or for any information supplied or provided or hereafter to be supplied or provided to the Secured Creditors in respect of any matter relating to this Agreement or for the execution, effectiveness, genuineness, validity, enforceability or sufficiency of such documents or any of the other documents referred to herein or therein or for the recoverability of any of the Secured Claims.

11. RELEASE OF THE PLEDGE

11.1 Without prejudice for Clause 11.2 below, the Pledge shall be released by the Agent, at the request and at the cost and expenses of the Pledgor:

(a) promptly after the date falling six months (or (i) should article 67, first paragraph, second sub-paragraph, of the Insolvency Law be capable of applying, the first anniversary, or (ii) should article 65 of the Insolvency Law be capable of applying, the second anniversary) after the full and unconditional discharge of the Secured Claims or, in any case, any term different to the above as a result of any changes to the Insolvency Law or promptly after the expiry of the relevant hardening period under any law applicable in any other jurisdiction if all the commitments of the Secured Creditors to the Obligors have been terminated or cancelled; provided that, if in the meantime any Obligor or any other person who has made payments discharging the Secured Claims on behalf of any Obligor or otherwise is adjudicated bankrupt or submitted to any insolvency proceeding which may trigger the applicability of article 65 or article 67 of the Insolvency Law or any analogous provision applicable in any other jurisdiction, such term shall be extended until no revocatory action pursuant to Italian law (or any analogous remedy available under any applicable law in any other jurisdiction) can be exercised and if all the commitments of the Secured Creditors to the Obligors have been terminated or cancelled; or

(b) notwithstanding anything to the contrary set forth in this Agreement, immediately after the full and unconditional discharge of the Secured Claims, if:

(i) no Event of Default was outstanding at the time of the last payment made to discharge the Secured Claims (the Relevant Payment); and

(ii) the Pledgor delivers the following documentation to the Agent, in form and substance satisfactory to the Agent and dated no earlier than 10 (ten) Business Days before the date of the release, in respect of each person who has made payments discharging the Secured Claims (the Relevant Company):

(A) a certificate addressed to the Agent by both the chairman of the board of directors or the sole director of the Relevant Company

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confirming that, as of the date of such certificate and as of the date of the Relevant Payment:

I. the Relevant Company is not and was not insolvent or in a situation contemplated by articles 2446, 2447, 2482-bis or 2482-ter of the Civil Code (or, if the Relevant Company is not incorporated in Italy, the analogous provision under the applicable law);

II. there are and there were no facts or circumstances affecting the Relevant Company which, based on factual circumstances then existing, would entail an insolvency situation;

(B) a certificate issued by the competent register of enterprises (certificato di vigenza) confirming that no insolvency proceedings have been initiated against the Relevant Company (or, if the Relevant Company is not incorporated in Italy, the corresponding document in the relevant jurisdiction, if applicable);

(C) a court insolvency certificate (certificato fallimentare) of the Sezione Fallimentare of the competent Court, confirming that the Relevant Company is not and has not been subjected to any insolvency proceedings (or, if the Relevant Company is not incorporated in Italy, the corresponding document in the relevant jurisdiction, if applicable);

(D) the latest unaudited quarterly management accounts of the Relevant Company, in case such documents have not been already delivered to the Agent pursuant to the Credit Agreement.

11.2 Without prejudice to Article 11.1 above, in any case subject to any relevant provision under the Intercreditor Agreement, the Credit Agreement, the Revolving Guarantee or the Notes Documentation the relevant Financial Collateral shall be automatically released from the Pledge upon (a) any sale or other transfer by the Pledgor of any Financial Collateral that is permitted under the Credit Agreement, the Revolving Guarantee and the Indenture, or (b) upon the effectiveness of any written consent to the release of the Financial Collaterals from the Pledge pursuant to Section 9.02 of the Credit Agreement and Section IX of the Indenture or (c) in the other cases provided under the Indenture and the Intercreditor Agreement.

12. THE ACCOUNT BANKS – ACCEPTANCE OF THE INSTRUCTIONS

The Pledgor shall procure within the term indicated in Clause 4.1(i) (Statement of the Pledgor) the acceptance by the Account Banks of the instructions provided to it by the Pledgor pursuant to Clause 9.1(b) above.

In case any of the Account Banks should not accept the instructions within the term set forth in Clause 4.1(i) above, within [10] days from expiration of such term, the Pledgor shall:

(a) open a new bank account (for the purpose of this Clause 12, the “New Bank Account”) with another account bank available to accept the instructions provided under Clause 9.1(b) above (for the purpose of this Clause 12, the “New Account Bank”);

(b) deliver evidence to the Agent of: (i) the opening of such New Bank Account, (ii) the transfer in the New Bank Account of the credit balance standing on the bank account held with the Account Bank refusing to accept the instructions under Clause 9.1(b) above (for the

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purpose of this Clause 12, the “Old Bank Account”); (iii) the termination of such Old Bank Account and (iv) the acceptance of the New Account Bank of the instructions under Clause 9.1(b) above.

13. ELECTION OF DOMICILE AND NOTICES

13.1 Election of Domicile

For the purposes of this Agreement, the Pledgor elects domicile at the address indicated in Clause 13.2 (Notices) below. The Pledgor may be sent any notices in relation to this Agreement and the rights arising hereunder at such elected domicile, including any notice of legal proceedings and records of trials relating to this Agreement and the rights arising hereunder.

13.2 Notices

Any notice, communication or document to be sent to any of the parties hereto, shall be in writing and in English, unless otherwise agreed, and sent by letter or fax to the concerned party at the address indicated hereunder or at any other address subsequently communicated in writing by any of the parties pursuant to this Clause 13.1 (Election of Domicile and Notices).

To the Pledgor :

Patheon Italia S.p.A.

[—]

For the attention of: [—]

To the Secured Creditors, the Agent in the name and on behalf of each Secured Creditors, to the address of the Agent indicated below.

To the Agent:

To the Notes Collateral Agent:

Deutsche Bank Trust Company Americas

Trust & Securities Services

60 Wall Street, MS NYC60-2710

New York, New York 10005

Fax: 732-578-4636

Attention of: Project Finance Deal Manager – Patheon

Copy to: Agent

To the Revolving Collateral Agent:

J.P. Morgan Europe Limited

125 London Wall,

London EC2Y 5AJ,

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Telecopy No. 011-44-207-7777-2360

Attention of Loan and Agency Group-Patheon

14. MISCELLANEOUS

14.1 No waiver

No failure on the part of the Secured Creditors and/or the Agent to exercise, and no delay in exercising, any right hereunder or under the Credit Agreement and the Notes Documentation shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies conferred on the Secured Creditors and/or on the Agent hereunder and under the Credit Agreement and the Notes Documentation are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law or by other contracts or agreements. The rights of the Secured Creditors and/or the Agent hereunder and/or under the Credit Agreement and the Notes Documentation against any party thereto are not conditional or contingent on any attempt by the Secured Creditors and/or the Agent to exercise any of their rights hereunder and/or under the Credit Agreement and the Notes Documentation against such party or against any other person.

14.2 Limitation of liability

The Pledgor acknowledges that the Secured Creditors and the Agent shall not be liable for damages caused to the Pledgor by reason of the manner in which they exercise, attempt to exercise or fail to exercise any of their rights, actions, powers, remedies or discretions under this Agreement and the Pledge created hereunder, except in cases of wilful misconduct (dolo) or gross negligence (colpa grave), it being understood that such liability is limited to the party to whom the relevant wilful misconduct (dolo) or gross negligence (colpa grave) is imputable.

14.3 Amendments to the Agreement

No amendment to the provisions of this Agreement or to the Pledge, or any waiver of the rights arising hereunder, shall be effective unless such amendment or waiver is documented in a written deed signed by the Pledgor and the Agent (acting also on behalf of the Secured Creditors).

14.4 Conflicting provisions

The parties of this Agreement agree that, in case of any conflict between the provisions contained in the Intercreditor Agreement, the Credit Agreement, the Revolving Guarantee or the Notes Documentation and those contained herein, the former shall prevail.

14.5 Partial invalidity

The illegality, invalidity or unenforceability of any provision of this Agreement shall not affect the validity and enforceability of any other provision of this Agreement, in accordance with the applicable law.

14.6 Headings

The headings of this Agreement are inserted for convenience only and shall not be relevant in construing this Agreement.

14.7 Collateral Agents

16

Notwithstanding anything else to the contrary herein, whenever reference is made in this Deed to any discretionary action by, consent, designation, specification, requirement or approval of, notice, request or other communication from, or other direction given or action to be undertaken or to be (or not to be) suffered or omitted by the Notes Collateral Agent (also as Security Agent hereunder) or to any election, decision, opinion, acceptance, use of judgment, expression of satisfaction or other exercise of discretion, rights or remedies to be made (or not to be made) by the Notes Collateral Agent (also as Security Agent hereunder), it is understood that in all cases the Notes Collateral Agent (also as Security Agent hereunder) shall be fully justified in failing or refusing to take any such action under this Agreement if it shall not have received such written instruction, advice or concurrence of U.S. Bank National Association, acting as Trustee under and in accordance with the Indenture, or, if required by the Intercreditor Agreement, J.P, Morgan Europe Limited, acting as Revolving Collateral Agent under and in accordance with the Intercreditor Agreement, as it deems appropriate. This provision is intended solely for the benefit of the [Notes Collateral Agent/Revolving Collateral Agent] (also as Agent hereunder) and its successors and permitted assigns and is not intended to and will not entitle the other parties hereto to any defense, claim or counterclaim, or confer any rights or benefits on any party hereto.

15. TAXES, CHARGES AND EXPENSES

To the extent provided in the Credit Agreement and in the Notes Documents, any tax, charge (including any interest and penalties), and all documented costs, and expenses, (including legal fees and notarial fees) relating to or otherwise connected with the Assignment, this Agreement and the execution and/or the enforcement and/or amendment thereof shall be borne by the Assignor.

16. GOVERNING LAW

This Agreement as well as the Pledge any contractual and non contractual obligation created hereunder shall be governed by, and construed in accordance with, Italian law.

17. JURISDICTION

The courts of Milan shall have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement and the Pledge created hereunder, with the express exclusion of jurisdiction of any other competent court and without prejudice to the mandatory jurisdiction provided under applicable law. Nothing contained herein shall prevent the Secured Creditors, even through the Agent, from commencing proceedings before any other court of competent jurisdiction pursuant to applicable laws.

17

SCHEDULE A

Part I

Revolving Finance Parties

1. Lenders

(a) US Lenders

JPMorgan Chase Bank, N.A.

UBS Loan Finance LLC

Wells Fargo Capital Finance, LLC

General Electric Capital Corporation

Scotiabank de Puerto Rico

(b) Canadian Commitments

JPMorgan Chase Bank, N.A.

UBS Loan Finance LLC

Wells Fargo

General Electric Capital Corporation

CIT Business Credit Canada Inc.

(c) UK Lenders

JPMorgan Chase Bank, N.A.

UBS Loan Finance LLC

Wells Fargo

Barclays Bank Plc

(d) European Lenders

JPMorgan Chase Bank, N.A.

Wells Fargo

Barclays Bank Plc

2. Issuing Banks

JPMorgan Chase Bank, N.A.; PMorgan Chase Bank, N.A. Toronto Branch; J.P. Morgan Europe Limited, .P. Morgan Europe Limited, JPMorgan Chase Bank, N.A., Milan Branch; any other Lender (or Affiliate of a Lender) that agrees to act as an Issuing Bank and is approved by the Parent Borrower and the US Agent

3. Joint Bookrunners and Joint Lead Arrangers

J.P. MORGAN SECURITIES INC., UBS SECURITIES LLC

4. Agents

18

JPMorgan Chase Bank, N.A., as US administrative agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian administrative agent, and J.P. Morgan Europe Limited, as European administrative agent; JPMorgan Chase Bank, N.A., as US administrative agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian administrative agent, and J.P. Morgan Europe Limited, as European administrative agent

19

SCHEDULE A

Part II

Notes Finance Parties

1. Initial Purchasers¹

J.P. Morgan Securities Inc.

UBS Securities LLC

Barclays Capital Inc

2. Trustee

U.S. Bank National Association

3. Beneficiaries of the Notes Guarantee

Deutsche Bank Trust Company Americas

¹ TO BE UPDATED WITH THE INDICATION OF THE CURRENT HOLDER OF THE NOTES AT THE TIME OF THE ENTERING INTO OF THIS AGREEMENT

20

SCHEDULE 1

DESCRIPTION OF THE SECURED CLAIMS

Part I

Facilities

Amount:	US$75,000,0000 (subject to increase, under certain circustamstances, by US$ 25,000,000), available in US$, Cdn.$, € or £.
Borrowers:	Patheon Inc. (“Parent Borrower”) Patheon Pharmaceuticals Inc. (“US Borrower”) Patheon Puerto Rico Inc. (“PR Borrower”) Patheon UK Limited (“UK Borrower”) Patheon Italia S.p.A. (“Italian Borrower”) Patheon France S.A.S. (“French Borrower”) Patheon International AG (“Swiss Borrower”)
Availability:	On a revolving basis from the “Effective Date” (April 23, 2010) to the “Maturity Date” (April 23, 2014), subject to limitations by reference to a borrowing base.
Interest Rates:	The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Rate. The Loans comprising each Canadian Prime Rate Borrowing shall bear interest at the Canadian Prime Rate plus the Applicable Rate. The Loans comprising each UK Base Rate Borrowing shall bear interest at the UK Base Rate plus the Applicable Rate. The Loans comprising each Sterling/Euro Alternate Rate Borrowing shall bear interest at the Sterling/Euro Alternate Rate. The Loans comprising each Eurocurrency Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate. All the aforesaid terms as defined in the Credit Agreement.
	“Applicable Rate” means with respect to any ABR Loan, Eurocurrency Loan, BA Drawing, Canadian Prime Rate Loan or UK Base Rate Loan, as the case may be, the applicable rate per annum set forth below
Repayment:	On or before the Maturity Date.

21

SCHEDULE 1

DESCRIPTION OF SECURED CLAIMS

Part II

Notes

Issuer:	Patheon Inc.
Security description:	Senior Secured Notes
Distribution:	Rule 144A / Regulation S for life
Size:	$280,000,000
Gross proceeds:	$280,000,000
Maturity:	April 15, 2017
Coupon:	8.625%
Price:	100% of face amount
Yield to maturity:	8.625%
Spread to Treasury:	+526 basis points
Benchmark:	UST 3.25% due 3/31/2017
Interest Payment Dates:	April 15 and October 15, commencing October 15, 2010
Clawback:	Up to 35% at 108.625%
Until:	April 15, 2013
Optional redemption:
	Make-whole call @ T+50 bps prior to April 15, 2013 then:
	On or after:	Price:
	April 15, 2013	106.469%
	April 15, 2014	104.313%
	April 15, 2015	102.156%
	April 15, 2016 and thereafter	100.000%
	Special annual call at 103% of principal plus accrued interest for up to $28,000,000 principal amount of the Senior Secured Notes in any 12-month period commencing on or after the issue date and ending prior to April 15, 2013
Change of control:	Putable at 101% of principal plus accrued interest

22

Trade date:	April 9, 2010
Settlement:	T+10; April 23, 2010
Rule 144A CUSIP / ISIN:	70319WAA6 / US70319WAA62
Regulation S CUSIP / ISIN:	C7197EAA2 / USC7197EAA22
Denominations/Multiple:	$2,000 x $1,000
Corporate Family Ratings:	B2 (Moody’s) / B+ (S&P)
Senior Secured Notes Ratings*:	B1 (Moody’s) / B+ (S&P)
Bookrunners:	J.P. Morgan Securities Inc.
	UBS Securities LLC
Co-Manager:	Barclays Capital Inc.

23

SCHEDULE 2

Declaration of Pledge according to Clause4.1/9.1(b)

[On the letterhead of the Pledgor]

Part 1 –Perfection Notice.

To: [each Account Bank]

[—]

Copy to: JP Morgan Chase Bank N.A.

[—]

We wish to inform you that as of [—] we, as pledgor, have entered into in a pledge agreement (the “Agreement”) with, inter alios, JP Morgan Chase Bank N.A. (the “Agent”) and the secured creditors listed therein (the “Secured Creditor”) under which we have created, in favour of the Secured Creditors, a pledge over our bank account No [—] opened with [—] (the “Bank Account”).

By means of this letter we confirm that:

(i) the balance of the Bank Account is not negative as resulting from the bank statement attached hereto; and

(ii) the balance of the Bank Account as well as any claim or right of the Pledgor to the sums credited into the Bank Account are pledged in favour of the Secured Creditors, under the terms of the Agreement.

Furthermore, by means of this letter we irrevocably and unconditionally instruct and authorise you (despite any previous instructions which we may have given to the contrary):

(a) to disclose to the Agent (without any reference to or further authority from us and without any enquiry by you as to the justification for the disclosure), any information relating to the Bank Account which the Agent may, at any time and from time to time, request;

(b) at any time and from time to time on receipt by you of any written instruction from the Agent, to release any amount of the balance of the Bank Account and to act in accordance with that instruction (without any reference to or further authority from us and without any enquiry by you as to the justification for the instruction or the validity of the same);

(c) to comply with the terms of any written notice, statement or instruction in any way relating or purporting to relate to the Bank Account which you may receive at any time and from time to time from the Agent (without any reference to or further authority from us and without any enquiry by you as to the justification for notice, statement or instruction or the validity of it);

(d) statements shall be supplied to both us and the Agent.

We agree that none of the instructions, authorisations and confirmations in this notice can be revoked or varied in any way except with the Agent’s prior written consent

Please note:

(1) at any time and from time to time on receipt by you of a written instruction from the Agent to that end, we are not permitted to withdraw, or dispose of, any amount from the Bank Account without the prior written consent of the Agent;

24

(2) no later than the business day following the day on which you have been delivered by the Agent with written instruction to that end, you shall transfer all amounts deposited into the Bank Account to the following account:

Number of account: [—]

Bank/Bank address: [—]

(3) all instructions related to monies held in the Bank Account must be signed by one authorised signatory of the Agent set out in the following list, provided that specimen of the signatures below shall be sent to you forthwith by the Agent:

Name	Position	Contact
[—]

(4) for the avoidance of doubt, following the receipt by you of the notices mentioned in point (1) or (2) above, no transfers of monies from the Bank Account can be effected at any time without prior receipt of written instructions from the Agent in compliance with the terms of this notice.

This statement is given for the purposes of articles 2800 of the Italian Civil Code and Decree 170.

Please acknowledge receipt of this notice, and confirm your agreement to it, by signing the acknowledgement on the enclosed copy letter and returning it to the Agent [—] for the attention of [—].

This letter is governed by, and shall be construed in accordance with, the laws of the Republic of Italy.

[Place and Date]

[Pledgor]

[CERTIFIED DATE]

25

To: Agent

We acknowledge receipt of a notice (the “Notice”) dated [—] 2010 addressed to us by Patheon Italia S.p.A. (the “Pledgor”) regarding Bank Account [—] (the “Bank Account”).

We confirm that:

(a) we consent to the pledge of the Bank Account and will comply with the terms of the Notice;

(b) there does not exist in our favour, and we undertake not to create, assert, claim or exercise, any mortgage, fixed or floating charge, assignment or other security interest of any kind or any agreement or arrangement having substantially the same economic or financial effect as any of the above (including any rights of counter-claim, rights of set-off or combination of accounts over or with respect to all or any part of the Bank Account and/or the balances standing on the Bank Account);

(c) we have not, as at the date of this acknowledgement, received any notice that any third party has or will have any right in, or has made or will be making any claim or demand or taking any action in respect of, the rights of the Pledgor under or in respect of the Bank Account or the balances standing on the Bank Account;

(d) we undertake that, on our becoming aware at any time that any person other than the Agent has or will have any right in, or has made or will be making any claim or demand or taking any action in respect of the Bank Account or the balances standing on the Bank Account, we will immediately give written notice of that to the Agent;

(e) no fees or periodic charges (other than those required under mandatory provisions of Italian Law) are payable in respect of the Bank Account and/or balances standing on the Bank Account; and

(f) we shall operate the Bank Account in accordance with the terms set out in the Notice.

for and on behalf of

[—]]

By: [Name of signatory]

Dated:

[CERTIFIED DATE]

26

Part 2 – Further declarations to be made pursuant to Clause 4.1.

To: [each Account Bank]

[—]

Copy to: [Agent]

[—]

We refer to the agreement for the creation of the pledge (the “Agreement”) over the bank account No. [—] (the “Bank Account”) entered into on [—] between, inter alia, the Pledgor and the Secured Creditors.

By means of this letter we confirm that:

(i) the balance of the Bank Account is equal to Euro [—] as resulting from the bank statement attached hereto;

(ii) the balance of the Bank Account as well as any claim or right of the Pledgor to the sums credited into the Bank Account are pledged in favour of the Secured Creditors (as defined in the Agreement), under the terms of the Agreement.

This statement is given for the purposes of articles 2800 of the Italian Civil Code and Decree 170.

[Place and Date]

[Pledgor]

[CERTIFIED DATE]

27

SCHEDULE 3

Form of the acknowledgement deed referred to in Clause 7.2

This Acknowledgement Deed is made in [—] today, [—] by:

[—](the “Pledgor”) represented by [—], born in [—], on [—], duly authorised to execute this Acknowledgement Deed;

WHEREAS

(A) under the pledge agreement (hereinafter, the “Agreement”) entered into on [—] between, inter alios, the Pledgor, JP Morgan Chase Bank N.A. (the “Agent”) and the Secured Creditors (as defined under the Agreement), the Pledgor has pledged in favour of the Secured Creditors the Bank Accounts number [—] [—] and [—] opened by the Pledgor with the Account Banks (as defined in the Agreement) (the “Bank Account”), and any existing or future pecuniary claim and right to the sums credited from time to time to the Bank Accounts (or to any right to the payment of the credit balance existing from time to time on the Bank Accounts) in order to secure the discharge of the Secures Claims (as defined in Clause 3 (Secured Claims) of the Agreement);

(B) on [—] the [event] has occurred;

(C) it is not intention of the Pledgor to give any novation effect (“novare” in the meaning attributed to such expression by Articles 1230 et seq. of the Italian Civil Code) to this Acknowledgement Deed.

Capitalised terms used in this Acknowledgement Deed shall have the same meaning ascribed to them under the Agreement.

NOW THEREFORE,

the Pledgor acknowledges that the [event] has occurred and hereby expressly agrees to maintain in force the Pledge, which will continue to give rise to a first ranking security, valid and enforceable against third parties, in favour of the Secured Creditors as security for the prompt satisfaction of any and all Secured Claims.

[place, date and Pledgor’s signature]

[CERTIFIED DATE]

28

*****

If you agree with such terms as set forth above, please send us a letter incorporating such terms duly initialised on all the pages and signed at the end as a acceptance of our offer.

Yours faithfully,

Patheon Italia S.p.A.

As pledgor

>>

For Acceptance

J.P. Morgan Europe Limited as Revolving Collateral Agent

Deutsche Bank Trust Company Americas as Notes Collateral Agent

29

EX-10.2

Exhibit 10.2

PURCHASE AGREEMENT

PATHEON INC.

– and –

JLL PARTNERS FUND V, L.P.

March 1, 2007

TABLE OF CONTENTS

ARTICLE 1
INTERPRETATION
1.1	Definitions	1
1.2	Construction	6
1.3	Knowledge	7
1.4	Schedules	7
ARTICLE 2
PURCHASE AND SALE OF PURCHASED SECURITIES
2.1	Issue and Sale of Purchased Securities	8
2.2	Payment	8
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1	Organization	8
3.2	Subsidiaries	8
3.3	Compliance with Laws and Licences	9
3.4	Capitalization	10
3.5	Authority and Non-Conflict	11
3.6	Consents and Approvals	11
3.7	Shareholder Rights Plan	12
3.8	Filings	12
3.9	Books and Records	12
3.10	Financial Statements	13
3.11	Absence of Certain Changes or Events	13
3.12	No Defaults	13
3.13	Rights of Other Persons	14
3.14	Real Property	14
3.15	Expropriation	14
3.16	Employee Matters and Benefits	14
3.17	Employment Agreements for Senior Officers	15
3.18	Litigation, Etc.	15
3.19	Environmental	16
3.20	Taxes	16
3.21	Insurance	17
3.22	Restrictions on Business Activities	17
3.23	Customers and Suppliers	17
3.24	Foreign Corrupt Practices Act	17
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1	Organization	18
4.2	Authority and Non-Conflict	18

- i -

4.3	Consents and Approvals	19
4.4	Securities Law Matters	19
4.5	Financing Arrangements	21
ARTICLE 5
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
5.1	Survival of Representations and Warranties	21
ARTICLE 6
COVENANTS
6.1	Investigation	21
6.2	Shareholder Approval	22
6.3	Election of Purchaser Representatives	22
6.4	Use of Proceeds	22
6.5	Exclusivity	22
6.6	Termination Fee and Alternative Transaction Fee	23
6.7	Reasonable Commercial Efforts	23
6.8	Securities Law Matters; TSX Listing	23
6.9	Restricted Share Units	24
ARTICLE 7
CLOSING CONDITIONS
7.1	Closing Conditions in Favour of the Purchaser	24
7.2	Closing Conditions in Favour of the Company	25
ARTICLE 8
CLOSING
8.1	Place of Closing	26
8.2	Certificate(s)	26
ARTICLE 9
INDEMNIFICATION
9.1	Indemnification by the Company	26
9.2	Indemnification by the Purchaser	27
9.3	Notice of Claim	27
9.4	Direct Claims	28
9.5	Third Party Claims	28
9.6	Settlement of Third Party Claims	28
9.7	Computation of Indemnifiable Losses	29
9.8	Co-operation	29
9.9	Monetary Limits on Indemnification	29
9.10	Exclusivity	29

- ii -

ARTICLE 10
TERMINATION
10.1	Termination	30
10.2	Effect of Termination	30
ARTICLE 11
GENERAL PROVISIONS
11.1	Further Assurances	30
11.2	Expenses	31
11.3	Brokers	31
11.4	Public Statements	31
11.5	Notices	32
11.6	Severability	33
11.7	Amendment	33
11.8	Waiver	33
11.9	Arbitration	33
11.10	Entire Agreement, Assignment and Governing Law	34
11.11	Construction	34
11.12	Counterparts	34

Schedule A TERMS OF CONVERTIBLE PREFERRED SHARES

Schedule B TERMS OF SPECIAL VOTING PREFERRED SHARES

Schedule C FORM OF INVESTOR AGREEMENT

Schedule D FORM OF EMPLOYMENT AGREEMENT AMENDING AGREEMENTS

Schedule E LEGEND

Schedule F CERTIFICATE FOR LEGEND REMOVAL

- iii -

PURCHASE AGREEMENT

THIS AGREEMENT made the 1st day of March, 2007.

B E T W E E N:

PATHEON INC.,

a corporation existing under the laws of Canada,

(hereinafter called the “Company”)

- and -

JLL PARTNERS FUND V, L.P.,

a limited partnership existing under the laws of the State of Delaware,

(hereinafter called the “Purchaser”).

WHEREAS, on the terms and conditions of this Agreement, the Company has agreed to issue and sell, and the Purchaser agreed to purchase, the Purchased Securities (as defined herein);

AND WHEREAS, as a condition of the Purchaser’s entering into this Agreement, each of the directors and Senior Officers of the Company, including Joaquín Viso (collectively, the “Voting Group”) has entered into a voting agreement, dated as of the date hereof, with Purchaser and the Company (the “Voting Agreement”), which agreement provides that, subject to the terms and conditions thereof, the members of the Voting Group party thereto will vote their Common Shares (as defined herein) at the Meeting (as defined herein) in favour of the resolutions required for the Shareholder Approval (as defined herein);

NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party, the parties hereto hereby covenant and agree as follows:

ARTICLE 1

INTERPRETATION

1.1 Definitions

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:

“1933 Act” means the United States Securities Act of 1933, as amended;

“affiliate” has the meaning given to that term in NI 45-106;

“Alternative Transaction” means a private placement or public offering (other than a rights offering for which no existing shareholder or third party investor, other than the Purchaser or any person acting jointly or in concert with the Purchaser, provides a standby commitment) of Preferred Equity Units or equity securities of the Company or other securities convertible into or exchangeable for such equity securities for aggregate gross proceeds to the Company in excess of $50 million or any acquisition of, or merger, consolidation, amalgamation or similar business combination involving, the Company;

“applicable laws” includes any federal, provincial, state, regional, municipal or local law, ordinances, rules, policies, guidelines, decrees, orders, authorizations, approvals, notices, licences, permits, directives or other requirements of any Governmental Authority having force of law;

“Benefit Plans” has the meaning set out in Section 3.16(c);

“Board” means the board of directors of the Company;

“business day” means any day other than a Saturday or Sunday or statutory holiday in Toronto or New York;

“CBCA” mean the Canada Business Corporations Act, as amended;

“Closing Date” means the date that is two (2) business days after the satisfaction or, to the extent permitted by applicable law, waiver of the conditions to Closing set forth in Article 7 hereof, or such other date as may be mutually agreed upon by the Company and the Purchaser. The parties currently intend that the Closing Date will be April 20, 2007;

“Common Shares” means the common shares in the capital of the Company;

“Company Subsidiary” means a subsidiary of the Company;

“Confidentiality and Standstill Agreement” means the confidentiality and standstill agreement dated October 6, 2006 between the Company and the Purchaser;

“Contractual Consents” has the meaning set out in Section 3.6;

“Convertible Preferred Shares” means the Class I Preferred Shares, Series C, of the Company having the rights, privileges, restrictions and conditions set out in Schedule A;

“Data Room Information” means the documents and other information made available to the Purchaser, its counsel or other advisors on or before the date hereof via the Davies Ward Phillips & Vineberg LLP Deal Room website, a copy of the index of which is annexed to the Disclosure Statement, together with any documents, information or materials (in whatever format), or written responses to requests for information, in each case, provided by the Company or the Company Subsidiaries or their respective employees, counsel or other advisors to the Purchaser, its counsel or other advisors;

- 2 -

“Disclosure Statement” means the disclosure statement of the Company delivered to the Purchaser contemporaneously with the execution and delivery of this Agreement;

“Employment Agreement Amending Agreements” means the employment agreement amending agreements between the Company and each Riccardo Trecroce and Nick DiPietro, providing that the transactions contemplated by this Agreement shall be deemed not to be a “Change in Control” within the meaning of such agreements, substantially in the form attached as Error! Reference source not found.;

“Encumbrance” means any mortgage, pledge, assignment, charge, lien, claim, security interest, adverse interest, adverse claim, other third person interest or encumbrance of any kind, whether contingent or absolute, and any agreement, option, right or privilege (whether by applicable law, contract or otherwise) capable of becoming any of the foregoing;

“Environmental Laws” has the meaning set out in Section 3.19;

“Exclusivity Period” means the period from the date hereof until the Closing Date;

“FDCA” means the U.S. Food, Drug and Cosmetic Act of 1938, as amended;

“Financial Advisors” means RBC Dominion Securities Inc. and Greenhill & Co. Canada Ltd.;

“GAAP” means generally accepted accounting principles in Canada consistently applied;

“Governmental Authorities” means any (i) multinational, federal, provincial, territorial, regional, state, municipal, local or other governmental or public department, central bank, court, tribunal, commission, commissioner, tribunal, board, bureau, agency, ministry or instrumentality, domestic or foreign, (ii) any subdivision or authority of any of the foregoing, or (iii) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the above;

“Indebtedness” means: (a) any liability for borrowed money, or evidenced by an instrument for the payment of money, or incurred in connection with the acquisition of any property, services or assets (including securities and the deferred purchase price for assets or stock), or relating to a capitalized lease obligation, other than accounts payable or any other indebtedness to trade creditors created or assumed in the ordinary course of business in connection with the obtaining of materials or services; (b) any obligations under exchange rate contracts or interest rate protection agreements; (c) any obligations to reimburse the issuer of any letter of credit, surety bond, performance bond or other guarantee of contractual performance, in each case to the extent drawn or otherwise not contingent; and (d) any payments, fines, fees, penalties or other amounts applicable to or otherwise incurred in connection with or as a result of any prepayment or early satisfaction of any obligation described in clauses (a) through (c) above, including accrued and unpaid interest thereon;

- 3 -

“Investor Agreement” means the Investor Agreement between the Company and the Purchaser, substantially in the form attached hereto as Schedule A;

“Losses”, in respect of any matter, means all losses, damages, liabilities, penalties and expenses (including reasonable legal fees and out-of-pocket disbursements) arising as a result of such matter (but excluding any lost profits or other consequential or indirect losses; provided, however, that the foregoing exclusion of lost profits and other consequential or indirect losses shall not limit a party’s ability to recover direct or general damages or change or have any bearing on the interpretation of what constitutes direct or general damages, it being understood that direct and general damages shall be given its normal meaning under the law;

“Material Adverse Effect” means a change, effect, event, circumstance, fact or occurrence which, individually or together with any other change, effect, event, circumstance, fact or occurrence, has a material adverse effect on the financial position, business, properties, assets or results of operations of the Company and the Company Subsidiaries, taken as a whole, other than any change, effect, event, circumstance, fact or occurrence (i) relating to general political, economic or financial conditions, (ii) relating to the state of securities or commodities markets in general, (iii) relating to the industries in which the Company and the Company Subsidiaries operate in general and not to the Company or the Company Subsidiaries in any specific manner, (iv) relating to changes in GAAP, (v) relating to any change in the market price of the Common Shares; (vi) attributable to the negotiation, execution, announcement or performance of this Agreement or the transactions contemplated hereby or the consummation of the transactions contemplated by this Agreement, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, investors, venture partners, vendors or employees, (vii) relating to any suit, claim, action or proceedings brought, asserted or threatened by or on behalf of any holder or holders of Common Shares in the Company, arising out of or relating to this Agreement or the transactions contemplated by this Agreement, or (viii) relating to any action taken by the Company or the Company Subsidiaries at the request or with the consent of the Purchaser; except, in the case of clauses (i), (ii), (iii) or (iv) above, to the extent such change, event, fact, circumstance or development disproportionately affects the Company. The parties agree that the mere fact of a decrease in the market price of the Common Shares shall not, in and of itself, constitute a Material Adverse Effect, but any effect, event, development or change underlying such decrease shall be considered in determining whether there has been a Material Adverse Effect;

“Material Consents” means, collectively, the Contractual Consents and the Regulatory Consents;

“Meeting” means the annual and special meeting of Shareholders to be held on April 19, 2007 and includes any amendment or postponement thereof;

“NI 45-106” means National Instrument 45-106 of the Canadian Securities Administrators;

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“Ontario Securities Laws” means, collectively, the applicable securities laws of the Province of Ontario and the respective regulations and rules made and forms prescribed thereunder together with all applicable published policy statements and blanket orders and rules of the Ontario Securities Commission;

“Option Plan” means the incentive stock option plan of the Company, as amended;

“Options” means options to purchase Common Shares granted under the Option Plan;

“Payment Calculation Date” means, in respect of any Restricted Share Unit, the date stipulated at the time of the grant of the Restricted Share Unit, as such date may be changed from time to time in the discretion of the Compensation and Human Resources Committee of the board of directors of the Company, on which the amount of the payment that is to be made to the participant to whom the Restricted Share Unit was granted shall be calculated;

“person” includes any individual, firm, partnership, joint venture, venture capital fund, association, trust, trustee, executor, administrator, legal personal representative, estate, group, corporation, unincorporated association or organization, Governmental Authority, syndicate or other entity, whether or not having legal status;

“Public Documents” has the meaning set out in Section 3.8(c);

“Purchased Securities” has the meaning set out in Section 2.1;

“Purchaser Representative” means a nominee designated by the Purchaser for election or appointment to the Board;

“Restricted Share Unit” means a restricted share unit granted to a director, officer or key employee of the Company or a Company Subsidiary or a person or company providing ongoing management or consulting services to the Company who has been designated for participation in the Restricted Share Unit Plan, pursuant to and in accordance with the terms and provisions thereof;

“Restricted Share Unit Plan” means the Patheon Inc. Restricted Share Unit Plan, dated as of February 22, 2005;

“Regulatory Consents” has the meaning set out in Section 3.6;

“Senior N.A. Credit Facilities” means the Credit Agreement dated as of December 15, 2005 among the Company, MOVA Pharmaceutical Corporation, Patheon Pharmaceuticals Inc., the institutions identified on the signature pages thereto as lenders and Royal Bank of Canada, as Administrative Agent, as amended by a first amendment agreement dated July 28, 2006 and by a second amendment agreement dated October 17, 2006 and as further amended, restated, supplemented or otherwise modified;

“Senior Officer” means any officer of the Company who holds the title of Senior Vice-President or a more senior position;

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“Shareholder Approval” means the approval of Shareholders, by ordinary resolution passed at the Meeting, of (a) the issue and sale of the Purchased Securities by the Company to the Purchaser and (b) the waiver, pursuant to section 6.1(b) of the Shareholder Rights Plan, to waive the application of section 4.1 of the Shareholder Rights Plan to the purchase of the Purchased Securities;

“Shareholder Rights Plan” means the amended and restated shareholder rights plan agreement dated as of March 31, 2005 between the Company and Computershare Trust Company of Canada, as rights agent;

“Shareholders” means the holders of Common Shares;

“Special Voting Preferred Shares” means the Class I Preferred Shares, Series D of the Company having the rights, privileges, restrictions and conditions set out in Error! Reference source not found.;

“subsidiary” has the meaning set out in NI 45-106;

“Tax” and “Taxes” means, with respect to any entity, all income taxes (including any tax on or based upon net income, gross income, earnings or profits and all capital taxes, gross receipts taxes, sales taxes, use taxes, ad valorem taxes, value added taxes, transfer taxes, franchise taxes, licence taxes, withholding taxes, payroll taxes, employment taxes, Canada or Québec Pension Plan premiums, excise, severance, social security, workers’ compensation, unemployment insurance or compensation, stamp taxes, occupation taxes, premium taxes, property taxes, windfall profits taxes, alternative or add-on minimum taxes, goods and services tax, customs duties or other taxes, fees, imposts, assessments or charges of any kind whatsoever, together with any interest and any penalties or additional amounts imposed by any taxing authority (domestic or foreign) on such entity, and any interest, penalties, additional taxes and additions to tax imposed with respect to the foregoing;

“Tax Returns” means all returns, declarations, reports, information returns and statements required to be filed with any taxing authority relating to Taxes;

“Termination Fee” has the meaning set out in Section 6.5;

“Time of Closing” means 10:00 a.m. (Toronto time) on the Closing Date; and

“TSX” means the Toronto Stock Exchange.

1.2 Construction

In this Agreement, unless otherwise expressly stated or the context otherwise requires:

(a) the division of this Agreement into Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement;

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(b) the terms, “this Agreement”, “herein”, “hereby”, “hereof” and “hereunder” and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof and include any agreement or instrument supplemental or ancillary hereto;

(c) references to Articles, Sections and Schedules are to the specified Articles, Sections of or Schedules to this Agreement;

(d) words importing the singular include the plural and vice versa and words importing any gender shall include the masculine, feminine and neutral genders;

(e) the words “includes” and “including”, when following any general term or statement, are not to be construed as limiting the general term or statement to the specific items or matters set forth or to similar items or matters, but rather as referring to all other items or matters that could reasonably fall within the broadest possible scope of the general term or statement;

(f) the words “material” and “materially” shall be construed, measured or assessed on the basis of whether the matter would materially affect a party and its subsidiaries, taken as a whole;

(g) all references herein to dollar amounts are references to U.S. dollars;

(h) all accounting terms shall have the meanings attributable thereto under GAAP and all determinations of an accounting nature required to be made shall be made in a manner consistent with GAAP; and

(i) if the date on which any action is required to be taken hereunder by any of the Parties is not a business day, such action shall be required to be taken on the next succeeding day that is a business day.

1.3 Knowledge

In this Agreement, “to the knowledge of the Company” means the actual knowledge of the Chief Executive Officer, the President and Chief Operating Officer, the Chief Financial Officer of the Company, Mr. Clive Bennett, Dr. Shabbir Anik or Mr. Aldo Braca after due internal inquiry of the appropriate senior officers of the Company and Company Subsidiaries having responsibility for the matter in question, but for greater certainty, shall not require any such person or employee to make any external inquiries or searches of Governmental Authorities or third parties.

1.4 Schedules

The following schedules are incorporated in and form an integral part of this Agreement:

Schedule A	–     Terms of Convertible Preferred Shares
Schedule B	–     Terms of Special Voting Preferred Shares

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Schedule C	–     Form of Investor Agreement
Schedule D	–     Form of Employment Agreement Amending Agreement
Schedule E	–     Legend
Schedule F	–     Certificate for Legend Removal

ARTICLE 2

PURCHASE AND SALE OF PURCHASED SECURITIES

2.1 Issue and Sale of Purchased Securities

Subject to the terms and conditions of this Agreement, the Company covenants and agrees to issue and sell to the Purchaser and the Purchaser covenants and agrees to purchase from the Company, at the Time of Closing, 150,000 duly authorized, validly issued, fully paid and non-assessable Convertible Preferred Shares and 150,000 duly authorized, validly issued, fully paid and non-assessable Special Voting Preferred Shares (together, the “Purchased Securities”), free and clear of all Encumbrances, at a purchase price of US $1,000 per Purchased Security.

2.2 Payment

The aggregate purchase price payable by the Purchaser to the Company for the Purchased Securities (the “Purchase Price”) shall be the sum of $150,000,000 payable by wire transfer in immediately available funds to the Company at the Time of Closing in accordance with the Company’s instructions.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Purchaser as follows, and acknowledges that the Purchaser is relying upon these representations and warranties in connection with the entering into of this Agreement:

3.1 Organization

The Company is a corporation validly existing under the CBCA and has full power and authority to own its assets and conduct its activities as now owned and conducted. The Company is in good standing and is qualified to do business in each jurisdiction in which the character of its properties, owned or leased, or the nature of its activities makes such qualification necessary, except where the failure to be so qualified or in good standing would not reasonably be expected to have a Material Adverse Effect. To the Company’s knowledge, no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification.

3.2 Subsidiaries

Each of the Company Subsidiaries is validly existing under the laws of its jurisdiction of incorporation and each has all requisite power and authority to carry on its activities as now conducted. Each Company Subsidiary is in good standing and is qualified to do

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business in each jurisdiction in which the character of its properties, owned or leased, or the nature of its activities makes such qualification necessary, except where the failure to be so qualified or in good standing would not reasonably be expected to have a Material Adverse Effect. The Company’s interest in each of the Company Subsidiaries is disclosed in the Disclosure Statement. All shares outstanding in each of the Company Subsidiaries have been duly authorized and validly issued and, if applicable, are fully paid and non-assessable. There are no options, warrants, conversion privileges or other rights, agreements, arrangements or commitments (pre-emptive, contractual or otherwise) obligating any Company Subsidiary to issue or sell any of its shares or securities or obligations of any kind convertible into or exchangeable for shares or other securities of such Company Subsidiary. Except as disclosed in the Disclosure Statement, the Company does not own, directly or indirectly, any capital stock of, or other ownership interest in, any other corporation, partnership, limited liability company or other entity that is not a Company Subsidiary.

3.3 Compliance with Laws and Licences

Except as disclosed in the Disclosure Statement, the Company and each of the Company Subsidiaries has complied in all material respects with and is in compliance in all material respects with all laws and regulations applicable to the operation of their respective operations or activities, including the requirements of all applicable corporate and securities laws and other applicable laws including, without limitation, applicable laws in relation to the issue and trading of its securities and in all matters relating to the transactions contemplated by this Agreement; each of them has all material licences, permits, orders or approvals of, and has made all required material registrations with, any Governmental Authority that are required in connection with the ownership of their respective assets or the present conduct of their respective operations or activities, and has obtained all applicable authorizations under the regulations of the FDCA, and the regulations of the Food and Drug Administration promulgated thereunder, and any of the foregoing required by any similar Governmental Authority, including the European Medicines Agency and Health Canada, and the Company and each of the Company Subsidiaries has complied in all material respects with and is in compliance in all material respects with all such licences, permits, orders, approvals, authorizations and registrations. Except as disclosed in the Disclosure Statement, none of the Company or any of the Company Subsidiaries has received any notification from any Governmental Authority (i) asserting a material violation of any law statute, ordinance or regulation or the terms of any judgments, order, decrees, injunctions or writs applicable to the conduct of their respective business; (ii) threatening revocation or non-renewal of any such material licences, permits, orders, approvals or registrations; or (iii) restricting or limiting in any material respect its operations as currently conducted or proposed to be conducted. The Company is not debarred under the FDCA or otherwise excluded or restricted in any manner from participation in, any government program related to pharmaceutical products and, to its knowledge, does not employ or use the services of any individual or entity that is or, during the time the individual or entity was employed by or providing services to the Company or any of its subsidiaries, was debarred or otherwise excluded or restricted.

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3.4 Capitalization

(a) The authorized equity capital of the Company consists of an unlimited number of Common Shares. As of the date hereof, 92,958,688 Common Shares are issued and outstanding. In addition, as of the date hereof, there are outstanding 3,886,481 Options providing for the issuance of 3,886,481 Common Shares upon the exercise thereof (all of which Options were issued under the Option Plan). Except as described in this Agreement and the Disclosure Statement, there are no options, warrants, conversion privileges or other rights, agreements, arrangements or commitments obligating the Company to issue or sell any Common Shares or securities or obligations of any kind convertible into or exchangeable for Common Shares of the Company. All Common Shares outstanding have been duly authorized and validly issued, fully paid and non-assessable, and have not been issued in violation of any applicable laws, and are not subject to any preemptive or subscription rights. In addition, other than as described herein, there are no bonds, debentures or other evidences of indebtedness of the Company outstanding having a right to vote (or that are convertible for securities having a right to vote) with Shareholders on any matter. Except as disclosed in the Disclosure Statement, there does not exist nor is there outstanding any right or security granted or issued to any person to cause the Company to issue or sell any Common Shares of, or other equity interests in, the Company to any person (including any warrant, option, convertible debt obligation, subscription for Common Shares or other equity interests or securities convertible into Common Shares of, or other equity interest in, the Company, or any other similar right, security, instrument or agreement) and there is no obligation, contingent or otherwise, of the Company to (i) repurchase, redeem or otherwise acquire any Common Shares or other equity interests of the Company, or (ii) provide funds to, or make any investment in (in the form of a loan, capital contribution or otherwise), or provide any guarantee with respect to the obligations of, any person except for Company Subsidiaries. There are no dividends which have accrued or been declared but are unpaid on any Common Shares or other equity interests of the Company.

(b) The Common Shares of the Company are listed for trading on the TSX. The Company is a “reporting issuer” in each of the provinces of Canada within the meaning of the applicable laws, and has been a “reporting issuer” for more than four months. Except as disclosed in the Disclosure Statement, no order ceasing or suspending trading in securities of the Company nor prohibiting the sale of such securities has been issued to and is outstanding against the Company or its directors, officers or promoters or against any other companies that have common directors, officers or promoters and no investigations or proceedings for such purposes are pending or threatened. Neither the Company nor any of the Company Subsidiaries has taken any action which would be reasonably expected to result in the delisting or suspension of the Common Shares of the Company on or from the TSX and the Company has complied, in all material respects, with the rules and regulations of the TSX.

(c) Assuming the accuracy of the representations made by the Purchaser under Section 4.1, the offer and sale of the Purchased Securities to the Purchaser as contemplated by this Agreement is exempt from the registration requirements of the 1933 Act. None of the Company or any of the Company Subsidiaries nor any person acting on its behalf has conducted any general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offer or sale of any of the Purchased Securities.

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3.5 Authority and Non-Conflict

The Company has the requisite power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated by this Agreement have been duly authorized by the Board and no other proceedings on the part of the Company are necessary to authorize this Agreement and the performance by the Company of its obligations hereunder, other than the Shareholder Approval and the Shareholder Rights Plan waiver referred to in Section 7.1(e). This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable by the Purchaser against the Company in accordance with its terms, subject, however, to limitations with respect to enforcement imposed by law in connection with bankruptcy, insolvency or similar proceedings and to the extent that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought. The execution and delivery by the Company of this Agreement and the performance by the Company of its obligations hereunder do not:

(a) violate, conflict with or result in a breach, in any material respect and subject to the receipt of Material Consents, of any provision of:

(i) its articles or the articles or other constating documents of the Company Subsidiaries;

(ii) any material agreement, contract, indenture, deed of trust, mortgage, bond, instrument, licence, franchise or permit to which it or any of the Company Subsidiaries is a party or by which it or any of the Company Subsidiaries is bound; or

(iii) any law, regulation, order, judgment or decree to which it is subject or by which it or any of the Company Subsidiaries is bound;

(b) subject to the receipt of the Material Consents, give rise to any right of termination, or acceleration of Indebtedness, under any material agreement, contract, indenture, deed of trust, mortgage, bond, instrument, licence, franchise or permit; or

(c) subject to the receipt of the Material Consents, result in the imposition of any material Encumbrance upon any of its assets.

3.6 Consents and Approvals

The Disclosure Statement contains an accurate description of all material consents, waivers, approvals or authorizations of, or declarations, filings or notices to Governmental Authorities necessary for the consummation of the transactions contemplated by this Agreement (the consents so listed in the Disclosure Statement being referred to as the (“Regulatory Consents”). Except for the Regulatory Consents and the contractual consents listed in the Disclosure Statement (collectively, the “Contractual Consents”), no material consents, waivers or approvals from other parties to contracts, agreements, guarantees, leases,

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indenture, debt obligations or other commitments or obligations to which it is or any of the Company Subsidiaries is a party or by which it or they are bound, is required by the Company or the Company Subsidiaries in connection with the execution and delivery of this Agreement by the Company or the consummation of the transactions contemplated by this Agreement.

3.7 Shareholder Rights Plan

The Shareholder Rights Plan was approved by a majority of the Shareholders on March 31, 2005 and is in full force and effect, unamended, as of the date hereof. The Board has deferred the Separation Time (as defined in the Shareholder Rights Plan) in connection with this Agreement and the transactions contemplated hereby to May 1, 2007.

3.8 Filings

(a) The Company is a reporting issuer in each of the provinces and territories of Canada and is not in default in the performance of its obligations under the securities legislation of such provinces and territories and is in compliance with the applicable rules and regulations of the TSX, except where failing to be in compliance would not reasonably be expected to result in a Material Adverse Effect.

(b) No order ceasing or suspending trading in the Common Shares is outstanding and no proceedings for this purpose have been instituted or are pending, or, to the knowledge of the Company, contemplated or threatened.

(c) Documents filed by the Company under applicable Canadian securities laws since October 31, 2004, including the Company’s: (a) audited consolidated financial statements for the financial years ended October 31, 2004, 2005 and 2006; (b) annual information forms for the fiscal years ended October 31, 2004, 2005 and 2006; and (c) any material change reports that have been filed by the Company between October 31, 2006 and the date hereof and any such documents filed by the Company after the date hereof and before the Time of Closing (collectively, the “Public Documents”) were, as of their respective dates, in compliance in all material respects with applicable laws and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading as of the date made.

(d) The Company has not filed any confidential material change reports as of the date of this Agreement.

3.9 Books and Records

The books, records and accounts of the Company and the Company Subsidiaries: (i) have been maintained in accordance with good business practices on a basis consistent with prior years; (ii) are stated in reasonable detail and accurately and fairly reflect the transactions and dispositions of the assets of the Company and the Company Subsidiaries; and (iii) accurately and fairly reflect the basis for the consolidated financial statements of the Company, in each case, in all material respects. The books of account, minute books, stock ledger and other records of the Company and each Company Subsidiary are complete and correct in all material

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respects and have been maintained in accordance with business practices generally in use with respect to organizations of its size and business activity, including the maintenance of an adequate system of internal controls.

3.10 Financial Statements

The audited consolidated balance sheets and related consolidated statements of earnings and retained earnings, and consolidated statements cash flows of the Company contained in the Public Documents filed since October 31, 2004, complied, as of their respective dates of filing, in all material respects with applicable accounting requirements and the applicable published rules and regulations of the TSX and the Ontario Securities Commission with respect thereto, were prepared in accordance with GAAP and fairly present the consolidated financial condition of the Company at the dates indicated and the results of operations of the Company (on a consolidated basis) for the periods covered thereby. There is no transaction, arrangement or other relationship between the Company, or any of the Company Subsidiaries and an unconsolidated or other off-balance sheet entity that is required to be disclosed to Governmental Authorities and is not so disclosed. There are no such transactions, arrangements or other relationships that may create contingencies or liabilities that are not otherwise disclosed to the Purchaser.

3.11 Absence of Certain Changes or Events

Except as disclosed in the Public Documents, since October 31, 2006, (a) the Company and the Company Subsidiaries have conducted their respective businesses, in all material respects, in the ordinary course; (b) neither the Company nor any of the Company Subsidiaries has incurred any material liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent or otherwise) of a nature required to be disclosed on a consolidated balance sheet or in the related notes to the consolidated balance sheet prepared in accordance with GAAP, except for liabilities or obligations incurred in the ordinary course of business consistent with past practice or in connection with this Agreement; and (c) there has not been any event or condition which has had or would be reasonably expected to have a Material Adverse Effect. There is not currently, any material change relating to the Company or the Company Subsidiaries or any of their respective properties, or change in any material fact, as defined in the applicable laws, relating to any of the Purchased Securities which has not been or will not be fully disclosed in accordance with the requirements of applicable laws and the TSX rules.

3.12 No Defaults

Each material contract, agreement, mortgage, lease, indenture or similar arrangement or understanding to which the Company or any of the Company Subsidiaries is a party, or by which the Company’s or any Company Subsidiary’s properties or assets are bound (each, a “Material Contract”) is valid and binding on the Company or one of the Company Subsidiaries and, to the knowledge of the Company, each other party thereto, and is in full force and effect, and the Company or one of the Company Subsidiaries, as applicable, and, to the knowledge of the Company, each other party thereto, has performed in all material respects all obligations required to be performed by it to date under each Material Contract. Neither the

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Company nor any of the Company Subsidiaries is in default beyond any applicable cure period under, and, subject to obtaining the Material Consents, except for circumstances relating to the Company's North American credit facilities that are discussed in the Public Documents, there exists no event, condition or occurrence which, after notice or lapse of time or both, would constitute such a default under, any Material Contract to which it is a party or any agreements in respect of any Indebtedness of the Company or the Company Subsidiaries which would, if terminated due to such default, have a Material Adverse Effect.

3.13 Rights of Other Persons

No person has any right of first refusal or option to purchase or any other right of participation in any of the properties or assets owned by the Company or any of the Company Subsidiaries, or any part thereof, other than as disclosed in the Disclosure Statement.

3.14 Real Property

Except as set out in the Disclosure Statement, neither the Company nor any of the Company Subsidiaries is the beneficial or registered owner of, nor has any of them agreed to acquire, any real property or any interest in any real property. Neither the Company nor any of the Company Subsidiaries is a party to any lease or agreement in the nature of a lease in respect of any real property, whether as lessor or lessee, other than the leases disclosed in the Disclosure Statement, each of which leases is in good standing and in full force and effect without amendment thereto and neither the Company nor any of the Company Subsidiaries nor, to the knowledge of the Company, any other party thereto is in breach of any covenants, conditions or obligations contained therein, except for any such breach which would not reasonably be expected to have a Material Adverse Effect.

3.15 Expropriation

No part of the property or assets of the Company or the Company Subsidiaries has been taken, condemned or expropriated by any Governmental Authority nor has any written notice or material proceeding in respect thereof been given or commenced nor, to the knowledge of the Company, is there any proposal to give such notice or commence any such proceedings.

3.16 Employee Matters and Benefits

(a) Except as set forth in the Disclosure Statement, neither the Company nor any of the Company Subsidiaries is a party to any collective bargaining agreement, nor to the knowledge of the Company, subject to any application for certification or threatened union-organizing campaigns for employees not covered under a collective bargaining agreement nor are there any current or, to the knowledge of the Company, threatened strikes or lockouts or work stoppages affecting the Company or any of the Company Subsidiaries or any complaints of unfair labour practices or any grievances (other than routine individual grievances). There has been delivered or otherwise disclosed or made available to the Purchaser true, correct and complete copies of all collective bargaining agreements (other than statutory collective bargaining agreements covering employees in Italy and France), together with all written amendments, modifications or supplements thereto.

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(b) Each of the Company and the Company Subsidiaries has operated in all material respects in accordance with all applicable laws with respect to employment and labour, and there are no current, pending or, to the knowledge of the Company, threatened proceedings before any board or tribunal with respect to any employment or labour matters which, if decided against the Company, would reasonably be expected to result in a Material Adverse Effect.

(c) All of all material employee benefit, health, welfare, pension, deferred compensation, stock option or purchase, retirement plans or arrangements applicable to present or former employees or directors of the Company or any of the Company Subsidiaries which are currently maintained or participated in by the Company or any of the Company Subsidiaries (the “Benefit Plans”) are registered where required by, and have been administered and invested in all material respects in accordance with, all applicable laws and other legislative, administrative or judicial promulgations applicable to the Benefit Plans. Other than routine claims for benefits, there are no actions, claims, or proceedings, pending or, to the knowledge of the Company, threatened, relating to Benefit Plans which, if determined in a manner adverse to the Company, would reasonably be expected to result in a Material Adverse Effect and, to the knowledge of the Company, no fact or circumstance exists which would reasonably be expected to give rise to any such action, claim or proceedings.

(d) There are no outstanding charges or proceedings pending or, to the knowledge of the Company, threatened, under applicable occupational health and safety legislation which, if determined in a manner adverse to the Company, would reasonably be expected to result in a Material Adverse Effect, and the Company and the Company Subsidiaries have complied in all material respects with any orders issued under such legislation.

(e) All contributions have been made and all premiums have been paid in respect of each Benefit Plan in a timely fashion in accordance with the terms of each Benefit Plan and applicable laws.

3.17 Employment Agreements for Senior Officers

Other than as set out in the Disclosure Statement, the Company is not a party to any employment agreement with any Senior Officer of the Company.

3.18 Litigation, Etc.

Except as disclosed or reflected in the Public Documents or as set forth in the Disclosure Statement, there is no claim, action, proceeding or investigation pending or, to the knowledge of the Company, threatened against or relating to the Company or any of the Company Subsidiaries or affecting any of their properties or assets before or by any Governmental Authority which, if adversely determined, would reasonably be expected to have a Material Adverse Effect and, to the knowledge of the Company, there is no basis for any such claim, action, proceeding or investigation. Neither the Company nor any of the Company Subsidiaries is subject to any outstanding order, writ, injunction or decree which would reasonably be expected to have a Material Adverse Effect.

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3.19 Environmental

To the knowledge of the Company, except as disclosed in the Disclosure Statement all operations of the Company and the Company Subsidiaries have been, and are now, in compliance in all material respects with all laws or regulations relating to the protection of the environment or the storage, handling or transportation of hazardous or toxic materials (collectively, “Environmental Laws”). Neither the Company nor any Company Subsidiary is subject to:

(a) any material proceeding, application, order or directive which relates to environmental health or safety matters, and which may require any work, repairs, construction or expenditures; or

(b) any written demand or notice made with respect to the material breach of any Environmental Laws applicable to the Company or any Company Subsidiary, including, without limitation, any regulations respecting the use, storage, treatment, transportation, or disposition of any pollutants, contaminant, waste of any nature, hazardous material, toxic substance, dangerous substance or dangerous good as defined in any applicable Environmental Laws.

3.20 Taxes

(a) The Company and each of the Company Subsidiaries have timely filed, or caused to be filed, all material Tax Returns required to be filed by them (all of which returns were correct and complete in all material respects) and have paid, collected, withheld or remitted, or caused to be paid, collected, withheld or remitted, all material Taxes that are due and payable (including all instalments on account of Taxes for the current year, that are due and payable by the Company whether or not assessed (or reassessed) by the appropriate Governmental Authority). The Company has provided adequate accruals in accordance with GAAP in its most recently published consolidated financial statements for any material Taxes for the period covered by such financial statements that have not been paid, whether or not shown as being due on any Tax Returns. Since such publication date, no material Tax liability not reflected in such statements or otherwise provided for has been assessed, proposed to be assessed, incurred or accrued other than in the ordinary course of business.

(b) There are no material proceedings, investigations, audits or claims now pending or, to the knowledge of the Company, threatened against the Company in respect of any Taxes and there are no material matters under discussion, audit or appeal with any Governmental Authority relating to Taxes.

(c) To the knowledge of the Company, there are no material proposed (but unassessed) additional Taxes and none have been asserted in writing by the Canada Revenue Agency or any other taxing authority, including, any sales tax authority, in connection with any of the Tax Returns referred to above, and no waivers of statutes of limitations have been given or requested with respect to the Company or any Company Subsidiary, No material Tax liens have been filed.

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3.21 Insurance

All insurance maintained by the Company and any of the Company Subsidiaries is in full force and effect and in good standing. Neither the Company nor any of the Company Subsidiaries is in default, in any material respect, whether as to payment of premium or otherwise, under the terms of such insurance, nor has the Company or any of the Company Subsidiaries failed to give any material notice or present any material claim under any such insurance in a due and timely manner or received written notice or otherwise has knowledge of any intent of an insurer to either claim any default on the part of the Company or any of the Company Subsidiaries or not to renew any policy of insurance on its expiry or to increase any deductible or cost.

3.22 Restrictions on Business Activities

Other than as set out in the Disclosure Statement, there is no agreement, judgment, injunction, order or decree binding upon the Company or any Company Subsidiary that has the effect of materially prohibiting, restricting or impairing any business practice of the Company or any Company Subsidiary, any acquisition of property by the Company or any Company Subsidiary or the conduct of business by the Company or any Company Subsidiary as currently conducted.

3.23 Customers and Suppliers

Section 3.23 of the Disclosure Statement sets forth a list of (a) the top 10 suppliers of the Company determined by reference to the aggregate payments made to such supplier by the Company and the Company Subsidiaries and (b) the top 10 customers of the Company and the Company Subsidiaries determined by reference to the revenues generated by such customer, in each case, during the fiscal year ended October 31, 2006. Except as disclosed in the Disclosure Statement, to the knowledge of the Company, no customer or supplier required to be listed in Section 3.23 of the Disclosure Statement has (a) given notice to the Company or any Company Subsidiary that it intends to terminate its relationship with the Company or any Company Subsidiary, as the case may be, or (b) threatened in writing to terminate its relationship with the Company or any Company Subsidiary, as the case may be.

3.24 Foreign Corrupt Practices Act

None of the Company, or any of the Company Subsidiaries, nor, to the knowledge of the Company, any director, officer, agent, employee or other Person acting on behalf of the Company, or any of the Company Subsidiaries has, in the course of its actions for, or on behalf of, any of them (I) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

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ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser represents and warrants to the Company as follows, and acknowledges that the Company is relying upon these representations and warranties in connection with the entering into of this Agreement:

4.1 Organization

The Purchaser is validly existing under the laws of its jurisdiction of incorporation and has the requisite corporate power and authority to conduct its business as it is now being conducted.

4.2 Authority and Non-Conflict

The Purchaser has the requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by the Purchaser and the performance by it of its obligations hereunder have been duly authorized by its board of directors and no other corporate proceedings on its part are necessary to authorize this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered by the Purchaser and constitutes a legal, valid and binding obligation of the Purchaser, enforceable by the Company against the Purchaser in accordance with its terms, subject, however, to limitations with respect to enforcement imposed by law in connection with bankruptcy, insolvency or similar proceedings and to the extent that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought. The execution and delivery by the Purchaser of this Agreement and the performance by it of its obligations hereunder do not:

(a) violate, conflict with or result in a breach of any provision of:

(i) certificate of incorporation or by-laws or other applicable constating documents of the Purchaser;

(ii) any agreement, contract, indenture, deed of trust, mortgage, bond, instrument, licence, franchise or permit to which the Purchaser is a party or by which the Purchaser is bound;

(iii) any law, regulation, order, judgment or decree to which it is subject or by which the Purchaser is bound,

except for any such violation, conflict or breach which would not, individually or in the aggregate, prevent or materially delay consummation of the transactions contemplated by this agreement;

(b) give rise to any right of termination, or acceleration of indebtedness, under any such agreement, contract, indenture, deed of trust, mortgage, bond, instrument, licence, franchise or permit, except for any right of termination or acceleration of indebtedness which would not, individually or in the aggregate, prevent or

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materially delay consummation of the transactions contemplated by this Agreement; or

(c) result in the imposition of any Encumbrance upon any of assets of the Purchaser, other than any such violations, conflicts, breaches, rights or Encumbrances which would not, individually or in the aggregate, prevent or materially delay consummation of the transactions contemplated by this Agreement.

4.3 Consents and Approvals

Other than in connection or in compliance with the provisions of the Competition Act (Canada) and the Hart-Scott Rodino Anti-Trust Improvements Act of 1976, as amended and any antitrust or competition filings that may be required under the applicable laws of the European Union, any member state thereof or any other foreign jurisdiction in connection with the transactions contemplated by this Agreement (the “Purchaser Regulatory Consents”), no authorization, approval, license, permit, order, authorization of, or registration, declaration or filing with, any third party or Governmental Authority is required to be obtained or made by or with respect to the Purchaser or the Purchaser in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, except for such authorizations, consents, approvals and filings as to which the failure to obtain or make would not, individually or in the aggregate, prevent or materially delay consummation of the transactions contemplated by this Agreement.

4.4 Securities Law Matters

(a) The Purchaser has had access to such financial and other information, if any, concerning the Company as it has considered necessary in connection with its investment decision to acquire the Purchased Securities;

(b) The Purchaser has not purchased the Purchased Securities as a result of any general solicitation or general advertising, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television or other form of electronic display, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;

(c) No prospectus or offering memorandum (within the meaning of Ontario Securities Laws) has been delivered to or summarized for or seen by the Purchaser in connection with the purchase and sale of the Purchased Securities and the Purchaser is not aware of any prospectus or offering memorandum having been prepared by the Company;

(d) The Purchaser acknowledges it is solely responsible for obtaining such tax, investment, legal and other professional advice, if any, as it considers appropriate in connection with the execution, delivery and performance by it of this Agreement and the transactions contemplated hereunder (including the resale and transfer restrictions applicable to the Purchased Securities and Common Shares referred to herein);

(e) The Purchaser understands that a prospectus has not and will not be filed under Ontario Securities Laws to qualify the distribution of the Purchased Securities, and that the

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Purchased Securities and Common Shares to be issued upon the exercise or deemed exercise of the Purchased Securities have not been and will not be registered under the 1933 Act or any applicable state securities laws;

(f) The Purchaser is an “accredited investor” as defined in Rule 501 of Regulation D under the 1933 Act).

(g) the Purchaser agrees that if it decides to offer, sell or otherwise transfer any of the Purchased Securities and Common Shares issued upon the exercise or deemed exercise of the Purchased Securities, such securities may be offered, sold or otherwise transferred only (1) to the Company, (2) outside the United States in accordance with Rule 904 of Regulation S under the 1933 Act, (3) inside the United States pursuant to an exemption from registration under the 1933 Act or (4) under an effective registration statement under the 1933 Act, and in each case in accordance with any applicable state securities laws in the United States or securities laws of any other applicable jurisdiction; provided that, if the Purchased Securities or Common Shares are being sold under (2) above, the legend set out in Schedule C may be removed by providing a declaration to the Company (in the case of Purchased Securities) or Computershare Trust Company of Canada (in the case of Common Shares), to the effect set forth in Schedule D, or in such other form as the Company or Computershare Trust Company of Canada may from time to time prescribe; provided, further, that if any such Purchased Securities or Common Shares are being sold under (3) above, the legend may be removed by delivery to the Company or Computershare Trust Company of Canada of an opinion of counsel of recognized standing reasonably satisfactory to the Company to the effect that such legend is no longer required under applicable requirements of the 1933 Act or state securities laws;

(h) The Purchaser understands and acknowledges that upon the original issuance thereof, and until such time as the same is no longer required under applicable requirements of the 1933 Act or applicable state securities laws, certificates representing the Purchased Securities or Common Shares issued upon exercise or deemed exercise of the Purchased Securities, and all certificates issued in exchange therefor or in substitution thereof, will bear a legend to the effect of the resale restrictions set forth in Schedule C;

(i) The Purchased Securities are being acquired, and the Common Shares will be acquired, for the Purchaser's own account not with a view to resale or distribution in violation of the 1933 Act;

(j) The Purchaser is purchasing as principal and is an “accredited investor” for the purposes of NI 45-106; and

(k) The Purchaser understands and acknowledges:

(i) that prior to the four month anniversary of the Closing Date, the Purchased Securities and Common Shares issued upon the exercise or deemed exercise thereof are subject to statutory “hold periods” during which they may not be resold, except pursuant to a prospectus or further statutory exemption from the applicable prospectus and registration requirements

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under the Ontario Securities Laws, or unless an appropriate discretionary order is obtained pursuant to applicable Ontario Securities Laws; and

(ii) that upon the original issuance thereof, and until such time as the same is no longer required under applicable requirements of Ontario Securities Laws, certificates representing the Purchased Securities and Common Shares issued upon exercise or deemed exercise of the Purchased Securities, and all certificates issued in exchange therefor or in substitution thereof, will bear a legend to the effect of the resale restrictions Schedule B.

4.5 Financing Arrangements

The Purchaser has made adequate arrangements to ensure that the required funds are available to effect payment in full for the Purchased Securities at the Time of Closing.

ARTICLE 5

SURVIVAL OF REPRESENTATIONS AND WARRANTIES

5.1 Survival of Representations and Warranties

Except for the representations and warranties set forth in Sections 3.1 and 3.4, the first three sentences of Section 3.5, Section 4.1 and the first three sentences of Section 4.2, each of which shall survive indefinitely, the representations and warranties of a party contained in this Agreement and any agreement, instrument, certificate or other document executed or delivered pursuant hereto shall survive the closing of the transactions contemplated in this Agreement until the 18-month anniversary of the Closing Date, unless a bona fide notice of a claim shall have been made in writing before such date, in which case the representation and warranty to which such notice applies shall survive in respect of that claim until the final determination or settlement of the claim, and, notwithstanding such closing nor any investigation made by or on behalf of the party entitled to rely on such representation and warranty, shall continue in full force and effect for the benefit of such party during such period.

ARTICLE 6

COVENANTS

6.1 Investigation

Upon reasonable notice and subject to the Confidentiality and Standstill Agreement, the Company agrees to continue to provide the Purchaser and its representatives with reasonable access, without disruption to the conduct of the Company's business, to all books, records, information and files in its possession and control, and access to its personnel on an as reasonably requested basis as well as reasonable access to the properties of the Company in order to allow the Purchaser to conduct such investigations as the Purchaser may consider necessary or advisable and further agrees to assist the Purchaser in all reasonable ways in any investigations which the Purchaser and its representatives may wish to conduct.

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6.2 Shareholder Approval

The Company shall seek the Shareholder Approval at the Meeting. In connection with the Meeting, the Company shall (a) prepare and mail to shareholders a management information circular in respect of, among other things, the Shareholder Approval, (b) solicit proxies in support of the Shareholder Approval and (c) use reasonable commercial efforts to obtain the Shareholder Approval. The Company shall provide the Purchaser and its representatives with a reasonable opportunity to review and comment on the management information circular and shall consider in good faith any comments on such management information circular made by the Purchaser and its representatives, recognizing that whether such comments are appropriate will be determined by the Company, acting reasonably. The Board shall recommend that Shareholders vote in favour of the Shareholder Approval.

6.3 Election of Purchaser Representatives

The Company shall include three Purchaser Representatives among the nominees proposed by the Board to the Shareholders for election to the Board at the Meeting. The Company shall use its reasonable commercial efforts to cause the election of such Purchaser Representatives at the Meeting and shall solicit proxies in favour of the election of such Purchaser Representatives. If the Shareholder Approval is not obtained at the Meeting, the Purchaser Representatives shall either decline to serve on the Board prior to their election at the Meeting or, if elected, shall promptly resign from the Board.

6.4 Use of Proceeds

The Company shall use the Purchase Price paid hereunder to partially repay existing indebtedness and for general corporate purposes.

6.5 Exclusivity

The Company agrees that, during the Exclusivity Period, the Company will not, directly or indirectly, through any officer, director, employee, representative or agent, nor will it permit any officer, director, employee, representative or agent to, make, solicit, initiate or encourage enquiries from, or the submission of proposals or offers from, any other person (including any of such person’s officers, directors, employees, representatives or agents) relating to any acquisition or purchase from the Company of a material portion of the equity interests (including securities or securities convertible into or exchangeable for equity securities) in, the Company (any such foregoing proposals or offers being referred to herein as an “Equity Financing Proposal”).

The Company further agrees that, during the Exclusivity Period, it will not, directly or indirectly, through any officer, director, employee, representative or agent, nor will it permit any officer, director, employee, representative or agent to, discuss or negotiate with, provide information to, enter into any form of agreement, arrangement or understanding with, or otherwise assist, facilitate or encourage, any person other than the Purchaser with respect to a possible Equity Financing Proposal.

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6.6 Termination Fee and Alternative Transaction Fee

If Shareholder Approval is not obtained on or prior to April 30, 2007, the Company shall within one business day thereafter pay to the Purchaser a termination fee in the amount of $2 million (the “Termination Fee”). In addition, if the issue, sale and purchase of the Purchased Securities hereunder is not completed and, on or prior to August 31, 2007 the Company enters into a definitive agreement with respect to an Alternative Transaction with a third party other than the Purchaser or any person acting jointly or in concert with the Purchaser, the Company shall pay to the Purchaser an additional fee in the amount of $4 million (the “Alternative Transaction Fee”) within four business days after the date of execution of such agreement. Each of the Termination Fee and the Alternative Transaction Fee, if payable, shall be paid by the Company by way of wire transfer in immediately available funds to an account specified by the Purchaser.

6.7 Reasonable Commercial Efforts

The Purchaser shall use its reasonable commercial efforts to cause the conditions set out in Section 7.1 to be satisfied. The Company shall use its reasonable commercial efforts to cause the conditions set out in Section 7.2 to be satisfied.

6.8 Securities Law Matters; TSX Listing

The Company hereby covenants and agrees that:

(a) within 10 days of the Closing Date it will file with the Ontario Securities Commission a report of the exempt distribution on Form 45-106F1, prepared, executed and filed in accordance with National Instrument 45-106 – Prospectus and Registration Exemptions;

(b) within the time frame required by Section 607 of the TSX Listed Company Manual, it has filed or will file with the TSX the following items:

(i) a signed and completed Form 11 “Private Placement – Regular Filing” requesting final approval for the sale of the Purchased Securities to the Purchaser; and

(ii) any applicable filing fees;

(c) forthwith following the Time of Closing, it will give the TSX notice in writing of closing of the transaction and comply with the other requirements of the TSX Letter within the time frame specified therein; and

(d) within 15 calendar days of the Closing Date, it will file a Form D with the United States Securities and Exchange Commission.

If required by applicable securities legislation, regulations or rules by any securities commission or stock exchange, or other regulatory authority having jurisdiction, the Purchaser will execute, deliver, file and otherwise assist the Company in filing such reports,

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undertakings and other documents with respect to the issue of the Purchased Securities as may be required.

6.9 Restricted Share Units

The Company shall not, whether by action of the board of directors, any committee thereof or otherwise, change the Payment Calculation Date (from the date which is in effect as of the date hereof) with respect to any Restricted Share Units issued pursuant to the Company's Restricted Share Unit Plan for which a Payment Calculation Date for such Restricted Share Units has not yet occurred.

ARTICLE 7

CLOSING CONDITIONS

7.1 Closing Conditions in Favour of the Purchaser

The transactions contemplated hereby are subject to the following terms and conditions for the exclusive benefit of the Purchaser, to be fulfill or performed at or prior to the Time of Closing;

(a) the representations and warranties of the Company set out herein shall be true and correct in all material respects (other than in respect of those representations and warranties which are already subject to a materiality or Material Adverse Effect qualification, which shall be true and correct in all respects) on the date hereof and on and as at the Closing Date as if made on and as at such date;

(b) no Material Adverse Effect shall have occurred on or after October 31, 2006;

(c) no legal or regulatory acts nor proceedings shall be pending or threatened by any person which would, in the reasonable opinion of the Purchaser, enjoin, restrict or prohibit the issuance, sale or purchase of the Purchased Securities contemplated hereby;

(d) the Shareholder Approval shall have been obtained;

(e) the Board shall have waived, pursuant to section 6.1(b) of the Shareholder Rights Plan, the application of section 4.1 of the Shareholder Rights Plan to the purchase of the Purchased Securities and such waiver shall have been approved by the Shareholders;

(f) the Company shall have duly executed and delivered the Investor Agreement to the Purchaser at the Time of Closing;

(g) Messrs. Trecroce and DiPietro and the Company shall have duly executed the Employment Agreement Amending Agreements, and the Company shall have delivered a fully-executed copy of each of the Employment Agreement Amending Agreements to the Purchaser at the Time of Closing;

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(h) the Purchaser shall have been provided with evidence satisfactory to it, acting reasonably, that the TSX shall have approved the issuance to the Purchaser of the Purchased Securities, on terms and conditions satisfactory to the Purchaser, acting reasonably;

(i) the Company shall have obtained all Regulatory Consents and all Contractual Consents (other than the Contractual Consents in respect of agreements identified in Schedule 3.6 of the Disclosure Statement as including change of control provisions triggered at a share ownership threshold of 30% or higher), the failure of which to be obtained or made would reasonably be expected to have a Material Adverse Effect;

(j) the Company shall have: (i) refinanced all of the outstanding indebtedness under the Senior N.A. Credit Facilities on terms satisfactory to the Purchaser, acting reasonably; (ii) entered into arrangements, in form and substance satisfactory to the Purchaser, acting reasonably, providing for the refinancing of all of the indebtedness outstanding under the Senior N.A. Credit Facilities as of or immediately following the Time of Closing, and all conditions to such refinancing except for consummation of the transactions contemplated hereby shall have been satisfied or waived; or (iii) the Company shall have entered into an amendment to, or waiver of, the terms of the Senior N.A. Credit Facilities, in each case on terms satisfactory to the Purchaser, acting reasonably, pursuant to which the lenders under the Senior N.A. Credit Facilities shall have agreed to modify the financial covenants under the Senior N.A. Credit Facilities and /or agreed to forebear from taking action in connection only with any breach of such covenants to accelerate the maturity of the indebtedness outstanding or otherwise exercise remedies thereunder for a period of not less than 12 months from and after the Closing, and such amendment or waiver shall be in full force and effect; and

(k) the Purchaser shall have obtained all Purchaser Regulatory Consents.

7.2 Closing Conditions in Favour of the Company

The transactions contemplated hereby are subject to the following terms and conditions for the exclusive benefit of the Company, to be fulfilled or performed at or prior to the Time of Closing;

(a) the representations and warranties of the Purchaser set out herein shall be true and correct in all material respects (other than in respect of those representations and warranties which are already subject to a materiality qualification which shall be true and correct in all respects) on the date hereof and on and as at the Closing Date as if made on and as at such date;

(b) no legal or regulatory acts nor proceedings shall be pending or threatened by any person which would, in the reasonable opinion of the Company, enjoin, restrict or prohibit the issuance, sale or purchase of the Purchased Securities contemplated hereby;

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(c) the Shareholder Approval shall have been obtained;

(d) the Purchaser shall have duly executed and delivered the Investor Agreement to the Company at the Time of Closing;

(e) the TSX shall have approved the issuance to the Purchaser of the Purchased Securities, on terms and conditions satisfactory to the Company, acting reasonably;

(f) the Company shall have obtained all Regulatory Consents and all Contractual Consents (other than the Contractual Consents in respect of agreements identified in Schedule 3.6 of the Disclosure Statement as including change of control provisions triggered at a share ownership threshold of 30% or higher), the failure of which to be obtained or made would reasonably be expected to have a Material Adverse Effect; and

(g) the Purchaser shall have obtained all Purchaser Regulatory Consents.

ARTICLE 8

CLOSING

8.1 Place of Closing

The closing shall take place at the Time of Closing at the office of Davies Ward Phillips and Vineberg LLP, counsel to the Company, 44th Floor, 1 First Canadian Place, Toronto, Ontario, M5X 1B1

8.2 Certificate(s)

At the Time of Closing, upon fulfillment of all the conditions set out in Article 7 which have not been waived in writing by the Purchaser or the Company, as the case may be, the Company shall deliver to the Purchaser certificate(s) representing all the Purchased Securities bearing any legends required by applicable securities legislation or the TSX registered in the name of the Purchaser or as the Purchaser may otherwise direct.

ARTICLE 9

INDEMNIFICATION

9.1 Indemnification by the Company

Subject to Section 9.9, the Company agrees to indemnify and save harmless the Purchaser from and against all Losses suffered or incurred by the Purchaser (except to the extent that such Losses are the direct result of negligence or wilful misconduct on the part of the Purchaser) as a result of:

(a) any breach by the Company of or any inaccuracy of any representation or warranty of the Company contained in this Agreement or in any agreement, certificate or other document delivered by the Company pursuant hereto (provided

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that the Company shall not be required to indemnify or save harmless the Purchaser in respect of any breach or inaccuracy of any such representation or warranty unless the Purchaser shall have provided notice to the Company in accordance with Section 9.3 on or prior to the eighteen (18) month anniversary of the Closing Date, except in the case of any claim relating to breach of the representations and warranties set forth in Sections 3.1 and 3.4 and the first three sentences of Section 3.5 which may be made at any time after the Closing); or

(b) any breach or non-performance by the Company of any covenant to be performed by it contained in this Agreement or in any agreement, certificate or other document delivered to the Purchaser by the Company pursuant hereto.

9.2 Indemnification by the Purchaser

Subject to Section 9.9, the Purchaser agrees to indemnify and save harmless the Company from and against all Losses suffered or incurred by the Company (except to the extent that such Losses are the direct result of negligence or wilful misconduct on the part of the Company) as a result of:

(a) any breach by the Purchaser of or any inaccuracy of any representation or warranty of the Purchaser contained in this Agreement or in any agreement, certificate or other document delivered by the Purchaser pursuant hereto (provided that the Purchaser shall not be required to indemnify or save harmless the Company in respect of any breach or inaccuracy of any such representation or warranty unless the Company shall have provided notice to the Purchaser in accordance with Section 9.3 on or prior to the eighteen (18) month anniversary of the Closing Date, except in the case of any claim relating to breach of the representations and warranties set forth in Section 4.1 and the first three sentences of Section 4.2 which may be made at any time after the Closing); or

(b) any breach or non-performance by the Purchaser of any covenant to be performed by it contained in this Agreement or in any agreement, certificate or other document delivered to the Purchaser by the Purchaser pursuant hereto.

9.3 Notice of Claim

In the event that a party (the “Indemnified Party”) shall become aware of any claim, proceeding or other matter (a “Claim”) in respect of which another party (the “Indemnifying Party”) agreed to indemnify the Indemnified Party pursuant to this Agreement, the Indemnified Party shall promptly give written notice thereof to the Indemnifying Party. Such notice shall specify whether the Claim arises as a result of a claim by a person against the Indemnified Party (a “Third Party Claim”) or whether the Claim does not so arise (a “Direct Claim”), and shall also specify with reasonable particularity (to the extent that the information is available) the factual basis for the Claim and the amount of the Claim, if known.

If, through the fault of the Indemnified Party, the Indemnifying Party does not receive notice of any Claim in time to contest effectively the determination of any liability susceptible of being contested, the Indemnifying Party shall be entitled to set off against the

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amount claimed by the Indemnified Party the amount of any Losses incurred by the Indemnifying Party resulting from the Indemnified Party's failure to give such notice on a timely basis; provided, however, that an Indemnifying Party shall not be entitled to any set off if the failure by the Indemnified Party to timely give notice of a Claim does not prejudice such Indemnifying Party.

9.4 Direct Claims

With respect to any Direct Claim, following receipt of notice from the Indemnified Party of the Claim, the Indemnifying Party shall have 30 days to make such investigation of the Claim as is considered necessary or desirable. For the purpose of such investigation, the Indemnified Party shall make available to the Indemnifying Party the information relied upon by the Indemnified Party to substantiate the Claim, together with all such other information as the Indemnifying Party may reasonably request. If both parties agree at or prior to the expiration of such 30-day period (or any mutually agreed upon extension thereof) to the validity and amount of such Claim, the Indemnifying Party shall immediately pay to the Indemnified Party the full agreed upon amount of the Claim, failing which the matter shall be referred to binding arbitration in accordance with Section 11.9.

9.5 Third Party Claims

With respect to any Third Party Claim, the Indemnifying Party shall have the right, at its expense, to participate in or assume control of the negotiation, settlement or defence of the Claim and, in such event, the Indemnifying Party shall reimburse the Indemnified Party for all the Indemnified Party's out-of-pocket expenses as a result of such participation or assumption. If the Indemnifying Party elects to assume such control, the Indemnified Party shall have the right to participate in the negotiation, settlement or defence of such Third Party Claim and to retain counsel to act on its behalf, provided that the fees and disbursements of such counsel shall be paid by the Indemnified Party unless the Indemnifying Party consents to the retention of such counsel or unless the named parties to any action or proceeding include both the Indemnifying Party and the Indemnified Party and the representation of both the Indemnifying Party and the Indemnified Party by the same counsel would be inappropriate due to the actual or potential differing interests between them (such as the availability of different defences). If the Indemnifying Party, having elected to assume such control, thereafter fails to defend the Third Party Claim within a reasonable time, the Indemnified Party shall be entitled to assume such control, and the Indemnifying Party shall be bound by the results obtained by the Indemnified Party with respect to such Third Party Claim.

9.6 Settlement of Third Party Claims

If the Indemnifying Party fails to assume control of the defence of any Third Party Claim, the Indemnified Party shall have the exclusive right to contest, settle or pay the amount claimed. Whether or not the Indemnifying Party assumes control of the negotiation, settlement or defence of any Third Party Claim, the Indemnifying Party shall not settle any Third Party Claim without the written consent of the Indemnified Party, which consent shall not be unreasonably withheld or delayed; provided that the liability of the Indemnifying Party shall be

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limited to the proposed settlement amount if any such consent is unreasonably withheld or the settlement fails to be completed if such consent is unreasonably delayed.

9.7 Computation of Indemnifiable Losses

In calculating any Losses, the amount payable in respect of any Claim shall be reduced to reflect any compensation actually received by the Indemnified Party from any insurance claim (an “Insurance Benefit”), provided that the amount of such Insurance Benefit is not subject to reimbursement as a result of the amount payable in respect of such Claim; provided, however, that such reduction shall not apply to the extent of any retroactive adjustments or increase in insurance premium of such Indemnified Party.

9.8 Co-operation

The Indemnified Party and the Indemnifying Party shall co-operate fully with each other with respect to Third Party Claims, and shall keep each other fully advised with respect thereto (including supplying copies of all relevant documentation promptly as it becomes available).

9.9 Monetary Limits on Indemnification

No Claim shall be made pursuant to Sections 9.1 or 9.2 until the aggregate Losses suffered or incurred by the Indemnified Party in respect of all matters which could be the subject of such a Claim exceed $1,500,000, at which time the Indemnified Party may make Claims in respect of all Losses, including, for greater certainty, the Losses included in such $1,500,000 amount. An Indemnifying Party shall have no liability to indemnify an Indemnified Party for any Losses after the aggregate of all successful Claims for Losses made by the Purchaser under Section 9.1 or by the Company under Section 9.2, as the case may be, exceeds $30,000,000. In view of the limitations on indemnification set forth in this Section 9.9, for the purposes of determining whether the $1,500,000 deductible amount referenced above has been exceeded with respect to a Claim for breach of a representation and warranty, the concepts of materiality, Material Adverse Effect, “in all material respects” and other similar qualifying language contained in such representation and warranty and any certification relating thereto of or on behalf of the Company shall be disregarded, provided for certainty that such qualifying language as to materiality shall not be disregarded for the purposes of establishing whether or not there has been a breach of representation and warranty so as to give rise to a Claim.

9.10 Exclusivity

The provisions of this Article 9 shall apply to any claim for breach of any covenant, representation, warranty or other provision of this Agreement or any agreement, certificate or other document delivered pursuant hereto (other than a claim for specific performance or injunctive relief) with the intent that all such claims shall be subject to the limitations and other provisions contained in this Article 9. Notwithstanding anything to the contrary contained herein, no limitation or condition of liability or indemnity shall apply to any rights or claims based upon fraud or intentional misrepresentation and nothing contained herein shall prevent an indemnified party from pursuing remedies as may be available to such party

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under applicable law in the event of an indemnifying party’s fraud, intentional misrepresentation or other intentional misconduct.

ARTICLE 10

TERMINATION

10.1 Termination

This Agreement may be terminated:

(a) in writing by mutual consent of the parties; or

(b) by written notice by the Company to the Purchaser or by the Purchaser to the Company, as the case may be, in the event that the Time of Closing has not occurred on or prior to April 30, 2007 for any reason other than

(i) delay or non-performance by the party seeking such termination or

(ii) the mutual agreement of the Company and the Purchaser to a Closing Date after April 30, 2007.

10.2 Effect of Termination

In the event of termination of this Agreement pursuant to this Article 10, this Agreement shall forthwith become void and there shall be no liability on the part of any party except for obligations under Section 6.6, Article 9 and Article 11 and this Article 10, all of which shall survive such termination. For greater certainty, notwithstanding the termination of this agreement pursuant to this Article 10, any Indemnified Party may also make Claims against an Indemnifying Party pursuant to Article 9 after the termination of this Agreement for Losses resulting from a breach of covenant, representation or warranty of such Indemnifying Party.

ARTICLE 11

GENERAL PROVISIONS

11.1 Further Assurances

Subject to the conditions herein provided, each party hereto agrees to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as is practicable the transactions contemplated by this Agreement, including the execution and delivery of such documents as the other party hereto may reasonably require and shall use its commercially reasonable efforts to obtain all necessary waivers, consents and approvals, and to effect all necessary registrations and filings, including, but not limited to, filings under applicable laws and submissions of information requested by Governmental Authorities. Each of the parties hereto, where appropriate, shall reasonably cooperate with the other party in taking such actions.

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11.2 Expenses

In the event that the transactions contemplated by this Agreement are completed, the Company shall pay to the Purchaser such amount (the “Expense Reimbursement Amount”) as is required to reimburse the Purchaser for all reasonable costs and expenses incurred by it in connection with this Agreement and the transactions contemplated hereunder, including all reasonable fees, costs and expenses of its legal, financial, auditing, professional and other advisors and all other reasonable costs and expenses whatsoever or howsoever incurred, in connection with this Agreement and the transactions contemplated hereunder; provided, however, that such Expense Reimbursement Amount shall be limited to a maximum of $3 million. The Expense Reimbursement Amount shall be paid on the later of (a) the date of termination of this Agreement or the date of consummation of the transactions contemplated hereby and (b) four business days after the date on which the Purchaser delivers to the Company a reasonably detailed itemized breakdown of the costs and expenses for which it is claiming reimbursement pursuant to this Section 11.2. The Expense Reimbursement Amount shall be paid by the Company by way of wire transfer in immediately available funds to an account specified by the Purchaser. If requested by the Company, the Purchaser shall provide to the Company copies of such invoices, accounts and other supporting documents that the Company shall reasonably request to allow the Company to verify the costs and expenses for which the Purchaser is claiming reimbursement pursuant to this Section 11.2. The parties agree that all other out-of-pocket third party transaction expenses, including financial advisory fees, legal fees, regulatory filing fees, all disbursements by advisors and printing and mailing costs, shall be paid by the party incurring such expenses.

11.3 Brokers

The Company represents and warrants to the Purchaser, except for the Financial Advisors, for whose fees and expenses the Company shall be responsible, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission, or to the reimbursement of any of its expenses, in connection with the transactions contemplated by this Agreement or any similar transaction based upon arrangements made by or on behalf of the Company. The Purchaser represents and warrants to the Company that no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission, or, except as provided in Section 11.2, to the reimbursement of any of its expenses, in connection with the transactions contemplated by this Agreement or any similar transaction based upon arrangements made by or on behalf of the Purchaser.

11.4 Public Statements

Except as required by applicable law, neither the Purchaser nor the Company shall make any public announcement or statement with respect to this Agreement or the transactions contemplated hereunder without the approval of the Company or the Purchaser, such approval not to be unreasonably withheld or delayed except to the extent necessary to comply with law. Moreover, in any event, to the extent practicable given time constraints, each party agrees to give prior notice to the other of any public announcement relating to this Agreement and the transactions contemplated hereunder and agrees to consult with each other prior to issuing each such public announcement and promptly after the entering into of this Agreement, it

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shall issue a press release announcing the entering into of this Agreement, which press release shall, in such case, be satisfactory in form and substance to the other party, acting reasonably.

11.5 Notices

Any notice, consent, waiver, direction or other communication required or permitted to be given under this Agreement by a party shall be in writing and may be given by delivering same or sending same by facsimile transmission or by delivery addressed to the party to which the notice is to be given at its address for service herein. Any notice, consent, waiver, direction or other communication aforesaid shall, if delivered, be deemed to have been given and received on the date on which it was delivered to the address provided herein (if a business day or, if not, on the next succeeding business day) and if sent by facsimile transmission, be deemed to have been given and received at the time of receipt (if a business day or, if not, on the next succeeding business day) unless actually received after 4:00 p.m. (Toronto time) at the point of delivery, in which case it shall be deemed to have been given and received on the next business day.

The address for service for each of the parties hereto shall be as follows:

(a)	If to the Purchaser:
	JLL Partners Fund V, L.P.
	c/o JLL Partners, Inc.
	450 Lexington Avenue, Suite 3350
	New York, NY 10017
	Fax:	212-286-8626
	Attention:	Ramsey Frank
	With a copy (which shall not constitute notice) to:
	Skadden, Arps, Slate, Meagher & Flom, LLP
	One Rodney Square
	Wilmington, DE 19801
	Fax:	302-651-3001
	Attention:	Robert B. Pincus, Esq.
(b)	If to the Company:
	Patheon Inc.
	7070 Mississauga Road - Suite 350
	Mississauga, ON L5N 7J8
	Fax:	905-812-6705
	Attention:	Chief Executive Officer
	With a copy (which shall not constitute notice) to:

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Davies Ward Phillips & Vineberg LLP
44th Floor, 1 First Canadian Place Toronto, ON M5X 1B1
Fax:	416-863-0871
Attention:	Cameron M. Rusaw and Patrick E. Moyer

A party may change its address for service from time to time by giving notice to the other party in accordance with this Section 11.5.

11.6 Severability

If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated and the parties shall negotiate in good faith to modify the Agreement to preserve each party's anticipated benefits under this Agreement.

11.7 Amendment

This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.

11.8 Waiver

At any time prior to the Time of Closing, any party hereto may (a) extend the time for the performance of any of the obligations or other acts of any other party thereto or (b) waive compliance with any of the agreements of any other party or with any conditions to its own obligations, in each case only to the extent such obligations, agreements and conditions are intended for its benefit.

11.9 Arbitration

If any dispute or controversy shall occur between the parties relating to or arising out of the interpretation or implementation of any of the provisions of this Agreement, such dispute shall be resolved by arbitration. Such arbitration shall be conducted by a single arbitrator. The arbitrator shall be appointed by agreement between the parties or, in default of agreement, such arbitrator shall be appointed by a judge of the Superior Court of Justice of Ontario sitting in Toronto, upon application of any of the parties. The arbitration shall be held in Toronto, Ontario. The procedure to be followed shall be agreed to by the Parties or, in default of agreement, determined by the arbitrator. The arbitration shall proceed in accordance with the provisions of the Arbitration Act, 1991 (Ontario). The arbitrator shall have the power to proceed with the arbitration and to deliver its award notwithstanding the default by any party in respect of any procedural order made by the arbitrator. Subject to the provisions of the Arbitration Act, 1991 (Ontario), the decision arrived by the arbitrator shall be final and binding and no appeal shall lie therefrom on any matter of law, fact or mixed law and fact. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. Fees and expenses of the arbitrator shall be allocated among the parties according to the arbitrator's determination based upon the merit of the respective positions of the parties.

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11.10 Entire Agreement, Assignment and Governing Law

(a) This Agreement and the Confidentiality and Standstill Agreement (together with all other documents and instruments referred to herein) constitute the entire agreement and supersede all other prior agreements and undertakings, both written and oral, among the parties with respect to the subject matter hereof and thereof. Notwithstanding the foregoing, in the event of any inconsistency between the terms and provisions of this Agreement and those contained in the Confidentiality and Standstill Agreement, the terms and provisions of this Agreement shall prevail.

(b) Except for the specific representations and warranties of Company expressly set forth in Article 3, neither the Company nor any other person makes or has made any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information provided (including in any management presentations, the Data Room Information, supplemental information or other materials or information with respect to the Company) or otherwise made available to Purchaser.

(c) This Agreement: (i) shall not be assigned by operation of law or otherwise, except that the Purchaser may assign all or any portion of its rights under this Agreement to any affiliate of the Purchaser or to any financing source of Purchaser for collateral security purposes, but no such assignment shall relieve the Purchaser of its obligations hereunder; and (ii) shall be governed in all respects, including validity, interpretation and effect, by the laws of the Province of Ontario and the laws of Canada applicable therein, without giving effect to the principles of conflict of laws thereof. Subject to Section 11.9 and without derogation therefrom, each party hereto irrevocably attorns to the non-exclusive jurisdiction of the courts of such province.

11.11 Construction

The parties hereto acknowledge that their respective legal counsel have reviewed and participated in settling the terms of this Agreement and that any rule of construction to the effect that any ambiguity is to be resolved against the drafting party, including the rule or doctrine of contra proferentum, shall not be applicable in the interpretation of this Agreement.

11.12 Counterparts

This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce more than one counterpart.

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IN WITNESS WHEREOF, the parties have executed this Agreement.

PATHEON INC.
By:	/s/ Riccardo Trecroce
	Name:  Riccardo Trecroce
	Title:    Chief Executive Officer

JLL PARTNERS FUND V, L.P.
By:	JLL Associates V, L.P.
	its General Partner
By:	JLL Associates G.P. V, L.L.C.
	its General Partner

By:	/s/ Paul S. Levy
	Paul S. Levy   Managing Member

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SCHEDULE A

TERMS OF CONVERTIBLE PREFERRED SHARES

The Class I Preferred Shares, Series C (the “Series C Preferred Shares”) shall have the following rights, privileges, restrictions and conditions (the “Series C Provisions”) in addition to the rights, privileges, restrictions and conditions attaching to the Class I Preferred Shares as a class:

1. Interpretation

1.1 Definitions

Where used in these Series C Provisions, the following terms shall, unless there is something in the context otherwise inconsistent therewith, have the meanings set out below and grammatical variations of such terms shall have corresponding meanings:

“Act” means the Canada Business Corporations Act;

“Adjustment Election” has the meaning set out in Section 4.2;

“affiliate” has the meaning given to that term in NI 45-106;

“associate” has the meaning given to that term in NI 45-106;

“business day” means a day other than a Saturday, Sunday or any other statutory holiday in the City of Toronto, Ontario or New York, New York;

“Capital Reorganization” has the meaning given to that term in Section 5.3(b);

“Change of Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any person or group (within the meaning of the Securities Act (Ontario)) other than the Purchaser and its affiliates, of capital stock of the Company representing more than a majority of the aggregate ordinary voting power represented by the issued and outstanding voting securities of the Company; (b) if, during any period of up to 12 consecutive months, commencing on the Original Issue Date, individuals who at the beginning of such period (together with any new directors whose election or whose nomination for election by the stockholders was approved by a vote of 66-2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination was previously so approved or was otherwise consented to by the directors elected by holders of Series D Preferred Shares) were directors of the Company shall cease for any reason (other than the death, disability or retirement of an officer of the Company that is serving as a director at such time so long as another officer of the Company replaces such person as a director or the replacement of designees of the Series C Holders pursuant to the terms hereof) to constitute a majority of the Board of Directors of the Company; or (c) the consummation of any merger, consolidation, amalgamation or similar scheme or arrangement pursuant to which the Company is not the surviving or resulting corporation and as a result of which the stockholders of the Company immediately prior to such transaction cease to own, directly or indirectly, beneficially or of record, at least a majority of the voting power of the outstanding shares of capital stock of the surviving or resulting corporation in such transaction;

“Common Share Reorganization” has the meaning given to that term in Section 5.3(a);

“Common Shares” means the common shares without par value in the capital of the Corporation;

“Conversion Notice” has the meaning given to that term in Section 5.1(b);

“Conversion Rate” at any time means the number of Common Shares obtained when the Issue Price is divided by the Reference Price, subject to the cumulative effect of all adjustments contemplated by Section 4 and Section 5;

“Convertible Security” means any evidence of indebtedness, share or other security convertible into or exchangeable for Common Shares;

“Current Market Price” of the Common Shares on any date means the volume weighted average trading price per share at which the Common Shares have traded in board lots on the TSX or, if the Common Shares are not then listed on the TSX, on such stock exchange or automated quotation system on which such shares are listed or quoted as may be selected by the board of directors for such purpose or, if not listed on any stock exchange, in the over-the-counter market, in each case, as of the last full trading day prior to the date of determination;

“director” means a director of the Corporation for the time being and “directors” or “board of directors” means the board of directors of the Corporation and reference, without further elaboration, to any action by the directors means action by the directors of the Corporation as a board;

“Dividend Payment Date” has the meaning given to that term in Section 3.1(a);

“Fiscal Year” means, in respect of the Corporation, the twelve-month period ending October 31 in each year;

“herein”, “hereto”, “hereunder”, “hereof”, “hereby” and similar expressions mean or refer to these Series C Provisions and not to any particular section, paragraph, clause, subclause, subdivision or portion hereof, and the expression “Section” followed by a number or a letter means and refers to the specified section of these Series C Provisions;

“Initial Adjustment Period” has the meaning set out in Section 4.1;

“Issue Price” means US$1,000 per Series C Preferred Share;

“Junior Shares” means any shares in the capital of the Corporation ranking after or subordinate to the Series C Preferred Shares as to the payment of dividends or the return of capital, including, without limiting the generality of the foregoing, the Common Shares;

“Mandatory Conversion Date” has the meaning given to that term in Section 5.2(b);

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“Mandatory Conversion Notice” has the meaning given to that term in Section 5.2(b);

“NI 45-106” means National Instrument 45-106 of the Canadian Securities Administrators;

“Maturity Date” means the tenth anniversary of the Original Issue Date;

“Option” means any right, option, warrant or other security carrying, or agreement pursuant to which any person has, a contingent or vested right to acquire Common Shares or Convertible Securities; [Note to Draft: The dates contained herein will be revised, if closing is to occur on a date other than April 20, as appropriate to reflect any delay.]

“Original Issue Date” means the first date of issuance of Series C Preferred Shares, which is expected to be April 20, 2007;

“person” includes any individual, firm, partnership, joint venture, venture capital fund, association, trust, trustee, executive, administrator, legal personal representative, estate group, corporation, unincorporated association organization, governmental authority, syndicate, or other entity, whether or not having legal status;

“Purchaser” means JLL Partners Fund V, L.P.;

“Reference Price” means US$4.77 (representing the approximate U.S. dollar equivalent of C$5.55 as at March 1, 2007), subject to adjustment in accordance with Section 5;

“Series C Holder” means a person recorded on the securities register of the Corporation as being the registered holder of one or more Series C Preferred Shares;

“Series C Liquidation Preference” as of any date, means the Issue Price per Series C Preferred Share subject to adjustment in accordance with Section 4, plus all accrued and unpaid dividends per Series C Preferred Share as of such date, calculated pursuant to Section 3.1(a);

“Series D Preferred Shares” means the Class I Preferred Shares, Series D in the capital of the Corporation;

“Stub Period Fraction” shall mean a fraction, (x) the denominator of which is equal to the number of days between the last Dividend Payment Date prior to the date of the conversion or Liquidation, as the case may be, and the next Dividend Payment Date after the date of the conversion or Liquidation, and (y) the numerator of which is equal to the number days elapsed from the last Dividend Payment Date to the date of such conversion or Liquidation; and

“TSX” means the Toronto Stock Exchange.

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1.2 Gender, etc.

Words importing only the singular number include the plural and vice versa and words importing any gender include all genders.

1.3 Currency

Unless otherwise indicated, all monetary amounts referred to herein shall be in lawful money of Canada.

1.4 Headings

The division of these Series C Provisions into sections, paragraphs or other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof.

1.5 Business Day

In the event that any date upon which any dividends on the Series C Preferred Shares are payable by the Corporation, or upon or by which any other action is required to be taken by the Corporation or any Series C Holder hereunder, is not a business day, then such dividend shall be payable or such other action shall be required to be taken on or by the next succeeding day which is a business day.

2. Voting Rights

The Series C Holders shall be entitled to receive notice of and to attend all meetings of the shareholders of the Corporation which the holders of the Common Shares are entitled to attend and shall have one vote at all such meetings of the shareholders of the Corporation for each Common Share into which a Series C Preferred Share held is then convertible in respect of all matters to be voted on by the holders of Common Shares, except for the election of directors. Except as set out in these Series C Provisions or as otherwise required by law, the Series C Preferred Shares and Common Shares shall vote together as a single class. Fractional votes shall not be permitted and any fractional voting rights resulting from the above formula (after aggregating all Common Shares into which Series C Preferred Shares held by each holder could then be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).

3. Dividends

3.1 Cash Dividend Entitlement

(a) After the Initial Adjustment Period, subject to Section 4.2, the Series C Holders, in priority to the holders of Common Shares and any other Junior Shares, shall be entitled to receive and, subject to the Act, the Corporation shall pay, as and when declared by the board of directors out of monies properly applicable to the payment of dividends, cumulative preferential dividends, from the October 21, 2009 through and including the date on which such dividends

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are paid at the annual rate of 8.50% of the applicable Series C Liquidation Preference per Series C Preferred Share, payable in arrears on the 20^th day of each of July, October, January and April (the “Dividend Payment Date”), commencing on January 20, 2010; provided that accumulated and unpaid dividends for any prior quarterly period may be paid at any time. Subject to Section 4.2, such dividends shall be deemed to accrue on the Series C Preferred Shares from October 21, 2009 and be cumulative whether or not earned or declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends.

(b) From and after the conversion of any Series C Preferred Share into Common Shares, (i) the Series C Holder of such Series C Preferred. Share shall not be entitled to the payment of any accrued and unpaid cumulative dividends on such Series C Preferred Share referred to in Section 3.1(a) above, whether or not theretofore declared by the board of directors, and (ii) such Series C Holder shall be deemed to have waived its entitlement to receive any such dividends on such Series C Preferred Share but shall be entitled to all dividends declared and paid on the Common Shares on or after such conversion.

3.2 Restriction on Dividends on Junior Shares

Commencing with the Fiscal Year ending October 31, 2010, no dividends or distributions shall be paid on the Junior Shares, and no Junior Shares shall redeemed, repurchased or otherwise acquired for value by the Company, in any Fiscal Year until dividends on the Series C Preferred Shares in the full preferential amount specified in Section 3.1(a), less the amount of any such dividends otherwise payable on a Dividend Payment Date in respect of which the Corporation has made the Adjustment Election pursuant to Section 4.2 (or such Adjustment Election has been to deemed to have been made as provided below), have been declared and paid during such Fiscal Year.

4. Periodic Adjustments

4.1 Initial Adjustment Period

During the period from the Original Issue Date to and including October 20, 2009 (the “Initial Adjustment Period”), on the 20th day of each of July, October, January and April no dividends shall be payable on the Series C Preferred Shares, but each of the Series C Liquidation Preference and the Conversion Rate shall be automatically adjusted by multiplying each of the Series C Liquidation Preference and the Conversion Rate in effect immediately prior to such date by 1.02125. Accordingly, on the dates set out below, for illustrative purposes, the Series C Liquidation Preference per Series C Preferred Share and the Conversion Rate, assuming that no other adjustment to the Reference Price is required pursuant to Section 5, will be as follows:

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Date	Series C Liquidation Preference		Conversion Rate
July 20, 2007	$	1,021.25		214.1644
October 20, 2007	$	1,042.95		218.7154
January 20, 2008	$	1,065.11		223.3631
April 20, 2008	$	1,087.74		228.1096
July 20, 2008	$	1,110.85		232.9569
October 20, 2008	$	1,134.46		237.9072
January 20, 2009	$	1,158.57		242.9628
April 20, 2009	$	1,183.19		248.1257
July 20, 2009	$	1,208.33		253.3984
October 20, 2009	$	1,234.01		258.7831

4.2 Adjustment Election

(a) Notwithstanding Section 3.1(a), after the Initial Adjustment Period, in lieu of payment or accumulation of dividends to which the Series C Holders would otherwise be entitled on any Dividend Payment Date pursuant to Section 3.1(a), the Corporation may elect (the “Adjustment Election”) to instead adjust each of the Series C Liquidation Preference and the Conversion Rate on such Dividend Payment Date by multiplying each of the Series C Liquidation Preference and the Conversion Rate in effect immediately prior to such Dividend Payment Date by 1.02125.

(b) If the Corporation determines to make the Adjustment Election in respect of a Dividend Payment Date, it shall deliver or cause to be delivered, in accordance with Section 8, a notice of such election (the “Adjustment Election Notice”) at least 10 days before such Dividend Payment Date to the Series C Holders at their last addresses as the same appear on the books of the Corporation. The Adjustment Election Notice, if delivered in the manner herein provided, shall be conclusively deemed to have been duly given, whether or not the Series C Holders receive such notice. Each such Adjustment Election Notice shall specify the Dividend Payment Date in respect of which such election is made and shall set out the Series C Liquidation Preference and the Conversion Rate immediately before and after giving effect to the adjustment thereof pursuant to Section 4.2(a).

(c) In the event that the Company fails to give the notice required by Section 4.2(b) and fails to make payment of the required dividend in cash, the Conversion Rate shall be adjusted as provided in Section 4.2(b) as though the Company had given an Adjustment Election Notice with respect to such Dividend Payment Date.

4.3 Adjustments Cumulative; Pro Rata Adjustment for Partial Periods

(a) For the avoidance of doubt, all adjustments to the Conversion Rate contemplated by this Section 4 shall be cumulative in effect and each adjustment shall be applied to the

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Conversion Rate as adjusted on the immediately prior Dividend Payment Date, subject to adjustment of the Reference Price pursuant to Section 5 hereof. In the event of any adjustment to the Reference Price pursuant to Section 5 hereof, the Conversion Rate shall be calculated to give effect to all prior adjustments contemplated by this Section 4 as though the Reference Price as adjusted pursuant to Section 5 were the Reference Price from the Original Issue Date, and all adjustments to the Conversion Rate pursuant to this Section 4 were then applied.

(b) In the event of any conversion of the Series C Preferred Shares pursuant to Section 5 hereof at a time between Dividend Payment Dates, either (i) if the conversion occurs during the Initial Adjustment Period or if the conversion occurs after the Initial Adjustment Period and the Corporation so elects, the Conversion Rate then in effect shall be multiplied by the sum of (A) one (1) plus (B) (x) 0.02125 multiplied by (y) the Stub Period Fraction, or (ii) if the conversion occurs after the Initial Adjustment Period and the Corporation elects not to make the adjustment described in (i) above, the Corporation shall pay to the holder of such shares an amount equal to the product of (A) 0.02125 and (B) the Stub Period Fraction.

5. Conversion

5.1 Optional Conversion

(a) Upon and subject to the terms and conditions set out in this Section 5.1, the Series C Holders shall have the right, at any time and from time to time, to convert all or any part of their Series C Preferred Shares into that number of fully paid and non-assessable Common Shares that is equal to the number of Series C Preferred Shares to be converted multiplied by the Conversion Rate in effect on the date of conversion.

(b) The conversion right provided for in Section 5.1(a) may be exercised by any Series C Holder by delivery of a notice in writing (the “Conversion Notice”), together with the certificate or certificates representing the Series C Preferred Shares in respect of which the Series C Holder wishes to exercise its right of conversion and delivering such certificate or certificates to the Secretary of the Corporation at the Corporation’s registered office. The Conversion Notice shall be signed by such holder or by its duly authorized attorney or agent and shall specify the number of Series C Preferred Shares which the Series C Holder desires to have converted. If less than all the Series C Preferred Shares represented by a certificate or certificates are to be converted, the Series C Holder shall be entitled to receive, at the expense of the Corporation, a new certificate representing the Series C Preferred Shares represented by the surrendered certificate or certificates that are not to be converted.

(c) The share certificates representing any Common Shares issued upon the conversion of Series C Preferred Shares shall be issued at the expense of the Corporation in the name of the registered holder of the Series C Preferred Shares converted or in such name or names as the registered holder may direct in writing. In any case where the Common Shares are to be issued in the name of a person other than the holder of the converted Series C Preferred Shares, the transfer form on the back of the certificates in question shall be endorsed by the registered holder of the Series C Preferred Shares or its duly authorized attorney or agent.

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(d) Each Series C Holder who elects to convert its Series C Preferred Shares, in whole or in part (or any other person or persons in whose name or names any certificates representing Common Shares are issued as provided in Section 5.1(c)), shall be deemed to have become the holder of record of the Common Shares into which such Series C Preferred Shares are converted, for all purposes, on the date of receipt by the Corporation of a duly completed Conversion Notice and the certificate or certificates representing the Series C Preferred Shares to be converted as provided in Section 5.1(b) and, effective as of such date, the Series C Holder shall cease to be registered as the holder of record of the Series C Preferred Shares so converted.

5.2 Mandatory Conversion

(a) Upon and subject to the terms and conditions set out in this Section 5.2, at any time after the Initial Adjustment Period, if the Current Market Price exceeds 165% of the then applicable Reference Price during any sixty (60) consecutive trading days on the TSX, the Corporation shall have the right to require the Series C Holders to convert all, but not less than all, of their Series C Preferred Shares into that number of fully paid and non-assessable Common Shares that is equal to the number of Series C Preferred Shares to be converted multiplied by the Conversion Rate in effect on the date of conversion (as adjusted pursuant to Section 4.3(b)).

(b) If the Corporation determines to require that all of the outstanding Series C Preferred Shares be converted into Common Shares pursuant to Section 5.2(a), it shall fix a date for conversion (the “Mandatory Conversion Date”) and it shall deliver or cause to be delivered, in accordance with Section 8, a notice of such conversion (the “Mandatory Conversion Notice”) at least 10 days prior to the Mandatory Conversion Date to the Series C Holders at their last addresses as the same appear on the books of the Corporation. The Mandatory Conversion Notice, if delivered in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not the Series C Holders receive such notice. The Mandatory Conversion Notice shall specify the Mandatory Conversion Date, the number of Common Shares into which each Series C Preferred Share is to be converted, the place or places for surrender of certificates representing such Series C Preferred Shares and that such Common Shares will be delivered upon presentation and surrender of certificates representing such Series C Preferred Shares. The Mandatory Conversion Notice shall be accompanied by a certificate of an officer of the Corporation certifying that the Current Market Price has exceeded 165% of the then applicable Reference Price during any sixty (60) consecutive trading days on the TSX.

(c) As promptly as practicable upon receipt of a Mandatory Conversion Notice, but in any event within 5 business days after receipt thereof, each Series C Holder shall surrender the certificate or certificates for such Series C Preferred Shares, duly endorsed, at a place designated for such surrender. The share certificates representing any Common Shares issued upon the conversion of Series C Preferred Shares shall be issued at the expense of the Corporation in the name of the registered holder of the Series C Preferred Shares converted or in such name or names as the registered holder may direct in writing. In any case where the Common Shares are to be issued in the name of a person other than the holder of the converted Series C Preferred Shares, the transfer form on the back of the certificates in question shall be endorsed by the registered holder of the Series C Preferred Shares or its duly authorized attorney or agent.

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(d) As promptly as practicable after the later of the Mandatory Conversion Date and the satisfaction of the requirements for surrender set forth in Section 5.2(c), but in any event within 5 business days after receipt thereof, the Corporation shall issue and deliver to such Series C Holder at the address designated in such instructions a certificate or certificates for the number of Common Shares specified in the Mandatory Conversion Notice in accordance with this Section 5.2.

(e) Each Series C Holder (or any other person or persons in whose name or names any certificates representing Common Shares are issued as provided in Section 5.2(c)), shall be deemed to have become the holder of record of the Common Shares into which such Series C Preferred Shares are converted, for all purposes, on the Mandatory Conversion Date and, effective as of such date, the Series C Holder shall cease to be registered as the holder of record of the Series C Preferred Shares so converted.

5.3 Anti-Dilution Adjustments

(a) If and whenever at any time and from time to time the Corporation shall: (i) subdivide, redivide or change its then outstanding Common Shares into a greater number of Common Shares; (ii) reduce, combine or consolidate or change its then outstanding Common Shares into a lesser number of Common Shares; or (iii) issue Common Shares or Convertible Securities to the holders of all or substantially all of its then outstanding Common Shares by way of stock dividend or other distribution (any of such events being herein called a “Common Share Reorganization”), the Conversion Rate shall be adjusted effective immediately after the record date at which the holders of Common Shares are determined for the purpose of the Common Share Reorganization by adjusting the Reference Price to a Reference Price that is the product of (i) the Reference Price in effect on the record date, and (ii) a fraction:

(i) the numerator of which shall be the number of Common Shares outstanding on the record date before giving effect to the Common Share Reorganization; and

(ii) the denominator of which shall be the number of Common Shares outstanding after the completion of such Common Share Reorganization (but before giving effect to the issue of any Common Shares issued after such record date otherwise than as part of such Common Share Reorganization), including, in the case where securities exchangeable or convertible into Common Shares are distributed, the number of Common Shares that would have been outstanding had such securities been exchanged for or converted into Common Shares on such record date.

(b) If and whenever there is a capital reorganization of the Corporation not otherwise provided for in this Section 5.3 or a consolidation, merger, arrangement or amalgamation (statutory or otherwise) of the Corporation with or into another body corporate (any such event being called a “Capital Reorganization”), any Series C Holder who has not exercised its right of conversion prior to the record date for such Capital Reorganization shall be entitled to receive and shall accept, upon the exercise of such right at any time after the record date for such Capital Reorganization, in lieu of the number of Common Shares to which it was theretofore entitled

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upon conversion, the amount of cash or other property or the aggregate number of shares or other securities of the Corporation or of the corporation or body corporate resulting, surviving or continuing from the Capital Reorganization that such holder would have been entitled to receive as a result of such Capital Reorganization if, on the record date, such holder had been the registered holder of the number of Common Shares to which it was theretofore entitled upon conversion, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in Section 5.3(a). No such Capital Reorganization shall be carried into effect unless all necessary steps shall have been taken so that the Series C Holders shall thereafter be entitled to receive such cash or other property, or the number of shares or other securities of the Corporation or of the corporation or body corporate resulting, surviving or continuing from the Capital Reorganization.

5.4 Rules for Adjustment of Reference Price

The following rules and procedures shall be applicable to adjustments of the Reference Price made pursuant to Section 5.3:

(a) forthwith after any adjustment in the Reference Price, the Corporation shall deliver to each of the Series C Holders a certificate setting out the amount of such adjustment and, in reasonable detail, the event requiring and the manner of computing such adjustment; and

(b) any question or issue that at any time or from time to time arises with respect to the Reference Price or any adjustment in the amount of the Reference Price shall be conclusively determined by the auditors from time to time of the Corporation and shall be binding upon the Corporation and all holders of the Series C Preferred Shares and Common Shares.

5.5 Notice of Certain Events

If the Corporation intends to fix a record date for any Common Share Reorganization (other than a subdivision, consolidation or reclassification) or Capital Reorganization, the Corporation shall, not less than 10 days prior to such record date, notify each Series C Holder of such intention by written notice setting forth the particulars of such Common Share Reorganization or Capital Reorganization in reasonable detail. The Series C Holders may waive the giving of any such notice in the manner provided for the giving of consents and approvals of the Series C Holders contained in Section 8.

5.6 No Fractional Shares

No fractional Common Shares shall be issuable on the conversion of Series C Preferred Shares. In any case where a fraction of a Common Share would otherwise be issuable on conversion of one or more Series C Preferred Shares, the aggregate number of Common Shares to be issued upon such conversion shall be rounded to the nearest whole number, with one-half being rounded up.

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5.7 Reservation of Common Shares

So long as any of the Series C Preferred Shares are outstanding and entitled to the right of conversion herein provided, the Corporation shall at all times reserve and hold out of its unissued Common Shares a sufficient number of unissued Common Shares to enable all of the Series C Preferred Shares outstanding to be converted upon the basis and upon the terms and conditions herein provided in this Section 5.

6. Liquidation Entitlement

(a) In the event of a liquidation, dissolution or winding up of the Corporation, or other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs (a “Liquidation”), there will be paid to each Series C Holder, in respect of each Series C Preferred Share held by such holder, in preference to and priority over any distribution or payment on any other share in the capital of the Corporation, the greater of (i) the Series C Liquidation Preference and (ii) (x) the amount per Common Share that would be paid to the holder of a Common Share in the Liquidation of the Company multiplied by (y) the Conversion Rate then in effect, and after such payment such Series C Holder shall not be entitled to participate in any further distribution of property or assets of the Corporation.

(b) In the event of any Liquidation that takes place at a time between Dividend Payment Dates, the Series C Liquidation Preference then in effect shall be multiplied by the sum of (i) one (1) plus (ii) (x) 0.02125 multiplied by (y) the Stub Period Fraction.

7. Redemption

7.1 Mandatory Redemption

(a) The Corporation shall not be entitled to redeem any Series C Preferred Shares, except in accordance with this Section 7.1.

(b) Subject to the Act, on the Maturity Date, the Corporation shall redeem all, but not less than all, of the then outstanding Series C Preferred Shares for cash at a redemption price per Series C Preferred Share equal to the Series C Liquidation Preference as of such date.

(c) Subject to the Act, upon the occurrence of a Change of Control, the Corporation shall redeem all, but not less than all, of the then outstanding Series C Preferred Shares for cash at a redemption price per Series C Preferred Share equal to the greater of (a) the Series C Liquidation Preference and (b) the product of (i) the cash consideration per Common Share, if any, to be received by the holders thereof pursuant to the Change of Control transaction and (ii) the Conversion Rate then in effect.

7.2 Rules and Procedures for Redemption

All redemptions of Series C Preferred Shares shall be in accordance with the following rules and procedures:

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(i) subject as provided in paragraph (ii), on any redemption the Corporation shall, at least 30 days and not more than 60 days before the redemption is to take place, give notice of redemption to each Series C Holder who at the date the notice is given is the registered holder of a Series C Preferred Share to be redeemed, but accidental failure to give any such notice to one or more such holders shall not affect the validity of the redemption;

(ii) a Series C Holder may waive notice of redemption or consent to the abridgement of the time for giving such notice, and if the notice is waived the Corporation shall be deemed to have given a notice specifying as the date for redemption the date the redemption actually occurs;

(iii) a notice of redemption will set out the date on which redemption is to take place, the applicable redemption price, the number of Series C Preferred Shares to be redeemed, the place or places for surrender of certificates representing such Series C Preferred Shares and that the applicable redemption price will be delivered upon presentation and surrender of certificates representing such Series C Preferred Shares;

(iv) on or after the date specified for redemption in such notice the Corporation will, on presentation and surrender at a place designated for such surrender of the certificate or certificates for the Series C Preferred Shares to be redeemed, pay or cause to be paid, to or to the order of the Series C Holder, the applicable redemption price therefor;

(v) a Series C Preferred Share in respect of which the applicable redemption price is paid as provided herein shall thereupon be and be deemed to be redeemed and the certificate or certificates representing such Series C Preferred Shares shall be cancelled;

(vi) after the date for redemption specified in a notice of redemption, the holder of a Series C Preferred Share called for redemption shall not be entitled to exercise any of the rights of a holder thereof unless payment of the applicable redemption price is not made on presentation of the certificate or certificates therefor in accordance with the provisions hereof, in which case the rights of the holder will thereupon be restored;

(vii) if a Series C Holder fails to present and surrender the certificate or certificates evidencing the Series C Preferred Shares before the expiration of 15 days after the date specified for redemption, the Corporation may deposit the applicable redemption price for the Series C Preferred Shares to be redeemed in a special account in any chartered bank or trust company in Ontario to be paid without interest to or to the order of the holder upon presentation and surrender to such bank or trust company of the certificate or certificates, and upon the making of such deposit every Series C Preferred Share in respect of which the deposit is made will and will be deemed to be redeemed and the rights of the holder thereof after

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such deposit will be limited to receiving without interest the applicable redemption price therefor so deposited against presentation and surrender of the certificate or certificates; and

(viii) where notice of redemption has been given by the Corporation, no transfer of any Series C Preferred Shares may be made by a Series C Holder to whom the particular notice was directed.

8. Notices

Any notice required or permitted to be given to any Series C Holder shall be delivered by courier or by mail to such holder at its address as it appears on the records of the Corporation. Any such notice shall be deemed to be received on the earlier of (i) the date of actual receipt and (ii) two business days following the date on which the notice is sent.

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SCHEDULE B

TERMS OF SPECIAL VOTING PREFERRED SHARES

The Class I Preferred Shares, Series D (the “Series D Preferred Shares”) shall have the following rights, privileges, restrictions and conditions (the “Series D Provisions”) in addition to the rights, privileges, restrictions and conditions attaching to the Class I Preferred Shares as a class:

1. Interpretation

1.1 Definitions

Where used in these Series D Provisions, the following terms shall, unless there is something in the context otherwise inconsistent therewith, have the meanings set out below and grammatical variations of such terms shall have corresponding meanings:

“Act” means the Canada Business Corporations Act;

“business day” means a day other than a Saturday, Sunday or any other statutory holiday in the City of Toronto, Ontario or New York, New York;

“Common Shares” means the common shares without par value in the capital of the Corporation;

“director” means a director of the Corporation for the time being and “directors” or “board of directors” means the board of directors of the Corporation and reference, without further elaboration, to any action by the directors means action by the directors of the Corporation as a board;

“herein”, “hereto”, “hereunder”, “hereof”, “hereby” and similar expressions mean or refer to these Series D Provisions and not to any particular section, paragraph, clause, subclause, subdivision or portion hereof, and the expression “Section” followed by a number or a letter means and refers to the specified section of these Series D Provisions;

“JLL” means JLL Partners Fund V, L.P.;

“JLL Representative Number” means:

(a) if JLL holds at least 90,000 Series C Preferred Shares (or the corresponding number of Common Shares issued upon the exercise of conversion rights attaching to the Series C Preferred Shares), then the JLL Representative Number shall be three (3);

(b) if JLL holds at least 45,000, but fewer than 90,000, Series C Preferred Shares (or the corresponding number of Common Shares issued upon the exercise of conversion rights attaching to the Series C Preferred Shares), then the JLL Representative Number shall be two (2);

(c) if JLL holds at least 22,500, but fewer than 45,000, Series C Preferred Shares (or the corresponding number of Common Shares issued upon the

exercise of conversion rights attaching to the Series C Preferred Shares), then the JLL Representative Number shall be one (1).

“Series C Holder” means a person recorded on the securities register of the Corporation as being the registered holder of one of more Series C Preferred Shares;

“Series C Preferred Shares” means the Class I Preferred Shares, Series C in the capital of the Corporation; and

“Series D Holder” means a person recorded on the securities register of the Corporation as being the registered holder of one or more Series D Preferred Shares.

1.2 Gender, etc.

Words importing only the singular number include the plural and vice versa and words importing any gender include all genders.

1.3 Currency

Unless otherwise indicated, all monetary amounts referred to herein shall be in lawful money of Canada.

1.4 Headings

The division of these Series D Provisions into sections, paragraphs or other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof.

1.5 Business Day

In the event that any date upon which any action is required to be taken by the Corporation or any Series D Holder hereunder, is not a business day, then such dividend shall be payable or such other action shall be required to be taken on or by the next succeeding day which is a business day.

2. Voting Rights

The Series D Holders shall be entitled to receive notice of and to attend all meetings of the shareholders of the Corporation which the holders of the Common Shares and the Series C Holders are entitled to attend. The Series D Holders, voting separately as a class, shall have the right to elect the JLL Representative Number of directors of the Corporation from time to time and shall not be entitled, as such, to vote in the election of the remaining directors of the Corporation. Except as provided in the immediately preceding sentence or as otherwise required by the Act, the Series D Holders shall not be entitled, as such, to vote at any meeting of the shareholders of the Corporation. The Series D Holders may exercise their right to elect the JLL Representative Number of directors pursuant to this Section 2 by one or more instruments in writing signed by holders of a majority of the Series D Preferred Shares then outstanding or by a

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resolution passed by a majority of the votes cast at a meeting of the Series D Holders duly called and held for that purpose.

3. Dividends

The Class D Holders shall not be entitled, as such, to receive any dividends.

4. Liquidation Entitlement

In the event of a liquidation, dissolution or winding up of the Corporation, or other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, subject to the prior rights of the Series C Holders, there will be paid to each Series D Holder, in respect of each Series D Preferred Share held by such holder, in preference to and priority over any distribution or payment on any other share in the capital of the Corporation other than the Series C Preferred Shares, the amount of $0.0001, and after such payment such Series D Holder shall not be entitled to participate in any further distribution of property or assets of the Corporation.

5. Automatic Cancellation

The Series D Preferred Shares shall automatically be cancelled, without any further action on the part of the Corporation, if JLL at any time ceases to hold at least 22,500 Series C Preferred Shares (or the corresponding number of Common Shares issued upon the exercise of conversion rights attaching to the Series C Preferred Shares).

6. Notices

Any notice required or permitted to be given to any Series D Holder shall be delivered by courier or by mail to such holder at its address as it appears on the records of the Corporation. Any such notice shall be deemed to be received on the earlier of (i) the date of actual receipt and (ii) two business days following the date on which the notice is sent.

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SCHEDULE C

FORM OF INVESTOR AGREEMENT

INVESTOR AGREEMENT

PATHEON INC.

– and –

JLL PARTNERS FUND V, L.P.

April 20, 2007

TABLE OF CONTENTS

ARTICLE 1
INTERPRETATION
1.1	Definitions	1
1.2	Construction	4
ARTICLE 2 GOVERNANCE
2.1	Board Representation	5
2.2	Special Approval Rights	7
2.3	Expiry of Special Approval Rights	7
ARTICLE 3
STANDSTILL
3.1	Standstill	8
3.2	Exception for Bid for All	9
3.3	Expiry of Standstill	9
ARTICLE 4
DEMAND REGISTRATION
4.1	Requests for Demand Registrations	10
4.2	Demand Registration Expenses	10
4.3	Selection of Lead Underwriters	10
4.4	Participation by the Company	10
ARTICLE 5
INCIDENTAL REGISTRATION
5.1	Incidental Registrations	11
5.2	Incidental Registration Expenses	11
ARTICLE 6
RESTRICTIONS
6.1	Restrictions on Demand Registrations	11
6.2	Expiry of Registration Rights Provisions	12
ARTICLE 7 PRO-RATION
7.1	General	12

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ARTICLE 8
REGISTRATION PROCEDURES
8.1	Procedures	13
8.2	Other Sales	16
8.3	Obligations of the Purchaser	16
8.4	Obligations of the Company.	16
ARTICLE 9
DUE DILIGENCE; INDEMNIFICATION
9.1	Preparation; Reasonable Investigation.	17
9.2	Indemnification.	17
ARTICLE 10
GENERAL PROVISIONS
10.1	Notices	19
10.2	Severability	20
10.3	Amendment	21
10.4	Waiver	21
10.5	Entire Agreement, Assignment and Governing Law	21
10.6	Construction	21
10.7	Counterparts	21

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INVESTOR AGREEMENT

THIS AGREEMENT made the 20th day of April, 2007.

BETWEEN:

PATHEON INC.,

a corporation existing under the laws of Canada,

(hereinafter called the “Company”)

                                 -and-

JLL PARTNERS FUND V, L.P.,

a limited partnership existing under the laws of the

State of Delaware,

(hereinafter called the “Purchaser”).

WHEREAS the Company and the Purchaser have entered into an agreement (the “Purchase Agreement”) dated March 1, 2007 which provides for the issue and sale by the Company to the Purchaser of 150,000 Convertible Preferred Shares and 150,000 Special Voting Preferred Shares of the Company (the “Private Placement”);

AND WHEREAS pursuant to sections 7.1 and 7.2 of the Purchase Agreement, it is a condition of closing of the Private Placement that the Company and the Purchaser shall have entered into this Agreement;

NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party, the parties hereto hereby covenant and agree as follows:

ARTICLE 1

INTERPRETATION

1.1 Definitions

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:

“1933 Act” means the United States Securities Act of 1933, as amended;

“affiliate” has the meaning given to that term in NI 45-106;

“applicable laws” includes any federal, provincial, state, regional, municipal or local law, ordinances, rules, policies, guidelines, decrees, orders, authorizations, approvals, notices, licences, permits, directives or other requirements of any Governmental Authority having force of law;

“Board” means the board of directors of the Company;

“business day” means any day other than a Saturday or Sunday or statutory holiday in Toronto or New York;

“Canadian Securities Acts” means the applicable securities legislation of each of the provinces of Canada and all published regulations, policy statements, orders, rules, national instruments, rulings, communiques and interpretation notes issued thereunder or in relation thereto, as the same may hereafter be amended from time to time or replaced;

“Canadian Securities Commissions” means the securities commission or similar securities regulatory authority in each of the provinces of Canada;

“CBCA” mean the Canada Business Corporations Act, as amended;

“Common Shares” means the common shares in the capital of the Company;

“control distribution” has the meaning given to that term in NI 45-106;

“Convertible Preferred Shares” means the Class I preferred shares, Series C, of the Company, having the rights, privileges, restrictions and conditions set forth in the Share Provisions and Articles of Amendment relating thereto.

“Convertible Securities” means securities convertible into or exchangeable for Common Shares, including, the greater certainty, the Convertible Preferred Shares;

“Demand Registration” has the meaning set out in Section 4.1;

“Demand Registrable Securities” has the meaning set out in Section 5.1;

“Fully-Diluted Shares” means, collectively, Common Shares which are issued and outstanding and unissued Common Shares issuable upon the exercise of any conversion or acquisition rights attached to outstanding Convertible Securities;

“GAAP” means generally accepted accounting principles in Canada consistently applied;

“Incidental Registration” has the meaning set out in Section 5.1;

“Meeting” has the meaning set out in the Purchase Agreement;

“MOVA Seller” means, together, Joaquín Viso and Olga Lizardi;

“MOVA Seller Registration Rights Agreement” means the registration rights agreement dated as of December 23, 2004 between the Company and the MOVA Seller;

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“NI 45-102” means National Instrument 45-102 of the Canadian Securities Administrators;

“NI 45-106” means National Instrument 45-106 of the Canadian Securities Administrators;

“person” includes any individual, firm, partnership, joint venture, venture capital fund, association, trust, trustee, executor, administrator, legal personal representative, estate, group, corporation, unincorporated association or organization, governmental authority, syndicate or other entity, whether or not having legal status;

“Private Placement” has the meaning set out in the first recital hereto;

“Purchaser Group” has the meaning set out in Section 3.1(a)(i);

“Purchaser Representative” has the meaning set out in Section 2.1;

“Registrable Securities” means:

(a) the Convertible Preferred Shares;

(b) any Common Shares issued or issuable upon the conversion of the Convertible Preferred Shares;

(c) any securities of the Company issued as a distribution made in respect of the securities referred to in clause (a) or (b) above;

(d) any securities of the Company issued in exchange for or in replacement of the securities referred to in clause (a), (b) or (c) above,

“Registration” means the qualification under any of the Canadian Securities Acts (and, if the Company is eligible to effect such qualification in the United States under a registration statement on Form F-10 and the Purchaser so requests, the 1933 Act) of the distribution of Registrable Securities to the public in any or all of the provinces of Canada (and the United States, if applicable);

“Registration Expenses” means all expenses (other than fees or commissions payable to any underwriter, investment banker, manager or agent in connection with the distribution of the Registrable Securities) incurred in connection with a Registration, including the following:

(a) all fees, disbursements and expenses of counsel and auditors to the Company;

(b) all expenses in connection with the preparation, translation, printing and filing of any preliminary prospectus, prospectus or any other offering document and any amendments and supplements thereto and the mailing and delivering of copies thereof to any underwriters and dealers;

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(c) all filing fees of any Canadian Securities Commission;

(d) all transfer agents’, depositaries’ and registrars’ fees and the fees of any other agent appointed by the Company in connection with a Registration;

(e) all fees and expenses payable in connection with the listing of any Registrable Securities on each securities exchange or over the counter market on which the Common Shares are then listed;

(f) all printing, copying and mailing expenses, all messenger and delivery expenses;

(g) all expenses reasonably incurred by the Purchaser in connection with the Registration, including any fees and expenses of the Purchaser’s counsel, independent public accountants and other advisors; and

(h) all costs and expenses of the Company associated with the conduct of any “road show” related to such Registration;

“Request” has the meaning set out in Section 4.1;

“SEC” means the United States Securities and Exchange Commission;

“Shareholder Rights Plan” has the meaning set out in the Purchase Agreement;

“Shareholders” means holders of Common Shares or Convertible Preferred Shares;

“Special Voting Preferred Shares” means the Class I preferred shares, Series D, of the Company, having the rights, privileges, restrictions and conditions set forth in the Share Provisions and Articles of Amendment relating thereto;

“Standstill Expiry Date” has the meaning set out in Section 3.3;

“subsidiary” has the meaning set out in NI 45-106;

“Transfer” means any sale, exchange, transfer, assignment, gift, pledge, encumbrance, hypothecation, alienation, grant of a security interest or other transaction, whether voluntary, involuntary or by operation of law, by which the legal or beneficial ownership of, or any security or other interest in, such security passes from one person to another person or to the same person in a different capacity, whether or not for value, except to an affiliate of the Purchaser;

“TSX” means the Toronto Stock Exchange; and

“underwriter” has the meaning set out in the Securities Act (Ontario).

1.2 Construction

In this Agreement, unless otherwise expressly stated or the context otherwise requires:

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(a) the division of this Agreement into Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement;

(b) the terms, “this Agreement”, “herein”, “hereby”, “hereof” and “hereunder” and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof and include any agreement or instrument supplemental or ancillary hereto;

(c) references to Articles, Sections and Schedules are to the specified Articles, Sections of or Schedules to this Agreement;

(d) words importing the singular include the plural and vice versa and words importing any gender shall include the masculine, feminine and neutral genders;

(e) the words “includes” and “including”, when following any general term or statement, are not to be construed as limiting the general term or statement to the specific items or matters set forth or to similar items or matters, but rather as referring to all other items or matters that could reasonably fall within the broadest possible scope of the general term or statement;

(f) the words “material” and “materially” shall be construed, measured or assessed on the basis of whether the matter would materially affect a party and its subsidiaries, taken as a whole;

(g) all references herein to dollar amounts are references to United States dollars; and

(h) if the date on which any action is required to be taken hereunder by any of the Parties is not a business day, such action shall be required to be taken on the next succeeding day that is a business day.

ARTICLE 2

GOVERNANCE

2.1 Board Representation

(a) The Board shall consist of up to nine members. The Purchaser shall be entitled to designate nominees for election or appointment to the Board (the “Purchaser Representatives”) as follows:

(i) so long as the Purchaser holds at least 90,000 Convertible Preferred Shares (or the corresponding number of the Common Shares issued upon conversion of the Convertible Preferred Shares), it shall be entitled to designate three Purchaser Representatives;

(ii) so long as the Purchaser holds at least 45,000 Convertible Preferred Shares (or the corresponding number of the Common Shares issued upon

- 5 -

conversion of the Convertible Preferred Shares), it shall be entitled to designate two Purchaser Representatives; and

(iii) so long as the Purchaser holds at least 22,500 Convertible Preferred Shares (or the corresponding number of the Common Shares issued upon conversion of the Convertible Preferred Shares), it shall be entitled to designate one Purchaser Representative.

The parties hereto acknowledge and agree that the Purchaser is entitled to appoint certain designees to the Company's Board of Directors pursuant to the terms of the Special Voting Preferred Shares and that this provision is intended to be in furtherance of such rights. In no event will this Section 2.1 be construed to duplicate the rights granted to the Purchaser pursuant to the terms of the Special Voting Preferred Shares. The Purchaser shall not Transfer any of the Special Voting Preferred Shares. In the event that the Purchaser no longer holds any Special Voting Preferred Shares and is therefore not entitled to elect directors to the Company’s Board of Directors pursuant to the terms thereof, this Section 2.1 shall be controlling.

(b) The Purchaser acknowledges that three Purchaser Representatives were elected to the Board at the Meeting. Subject to the Purchaser’s Representative(s) consenting and writing to serve as a director of the Company, the Company shall cause the Purchaser Representative(s) to be included as nominees proposed by the Board to the Shareholders for election to the Board at each future meeting of the Shareholders where directors are to be elected by Shareholders. The Company shall use its reasonable commercial efforts to cause the election of such Purchaser Representative(s) at such meetings and shall solicit proxies in favour of the election of such Purchaser Representative(s) at such meetings.

(c) The Purchaser shall advise the Company of the identity of any Purchaser Representative at least 50 days prior to any meeting of Shareholders at which directors of the Company are to be elected or within 10 days of being notified of the record date for such a meeting. If the Purchaser does not advise the Company of the identity of any Purchaser Representative prior to such deadline, then the Purchaser will be deemed to have nominated its encumbent nominee. Any nominations by the Purchaser shall be subject to such nominee being acceptable to the Company’s corporate governance and nominating committee, acting reasonably.

(d) In the event that any Purchaser Representative shall cease to serve as a director of the Company, whether due to such Purchaser Representative’s death, disability, resignation or removal, the Company shall cause the Board to appoint a replacement Purchaser Representative designated by the Purchaser to fill the vacancy created by such death, disability, resignation or removal.

(e) The Purchaser shall promptly notify the Company in writing if ceases to hold at least 90,000, 45,000 or 22,500, as the case may be, Convertible Preferred Shares (or the corresponding number of the Common Shares issued upon conversion of the Convertible Preferred Shares). In addition, the Purchaser shall deliver a certificate to the Company, from time-to-time as the Company shall reasonably request, certifying the number of securities of the Company beneficially owned by the Purchaser as at the date of such certificate.

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2.2 Special Approval Rights

In addition to any other approval that may be required at law or pursuant to the articles of the Company, subject to Section 2.3 the Company shall not take any of the following actions without the prior approval of the Purchaser:

(a) the creation or issuance of any shares of capital stock ranking pari passu with or senior to the Convertible Preferred Shares and any issuance of additional Common Shares or other equity securities of the Company, or securities convertible for or exchangeable into, such securities, other than pursuant to the Company’s incentive stock option plan or any other security-based compensation arrangement consented to by the Purchaser;

(b) declaration or payment of dividends or other distributions (including capital) on the Common Shares or other equity securities;

(c) redemption, repurchase or other acquisition of any Common Shares or other equity securities;

(d) any change to the articles of the Company;

(e) any change to the rights of the existing classes of Common Shares of the Company;

(f) any merger, consolidation, sale of all or substantially all of the assets of the Company or any similar business combination transaction;

(g) incurrence of any indebtedness for borrowed money in excess of US$20 million, excluding borrowings under the Company’s credit facilities and any indebtedness incurred to fund all or part of the redemption price for all of the Preferred Equity Units;

(h) initiation of any insolvency, restructuring or reorganization process, voluntary liquidation, dissolution or winding-up of the Company;

(i) any change of the Chief Executive Officer of the Company; or

(j) any change in the size of the board of directors of the Company.

2.3 Expiry of Special Approval Rights

The provisions of Section 2.2 shall terminate and expire if the Purchaser ceases to hold at least 52,500 Convertible Preferred Shares (or the corresponding number of the Common Shares issued upon conversion of such Convertible Preferred Shares).

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ARTICLE 3

STANDSTILL

3.1 Standstill

The Purchaser covenants and agrees that, except as otherwise contemplated in this Agreement or the Purchase Agreement, prior to the Standstill Expiry Date, neither the Purchaser nor any of its affiliates will, without the prior written approval of the Company:

(a) subject to Section 3.2, acquire or offer to acquire, directly or indirectly, by purchase or otherwise, any Common Shares or Convertible Securities or direct or indirect rights or options to acquire any Common Shares, other than:

(i) securities received by the Purchaser and its wholly-owned subsidiary or subsidiaries that hold Common Shares or Convertible Securities from time to time (collectively, the “Purchaser Group”) as a result of a stock dividend or distribution made by, or a recapitalization of, the Company;

(ii) securities acquired by the Purchaser Group in accordance with the terms of any dividend reinvestment or Common Share purchase plan made available from time to time by the Company to holders of Common Shares;

(iii) rights and securities acquired pursuant to the exercise of rights issued to the Purchaser Group pursuant to a rights offering made by the Company to the holders of the Common Shares;

(iv) securities acquired by the Purchaser Group on the exercise or exchange of rights issued pursuant to any shareholder rights plan of the Company and attached to Common Shares currently held, or subsequently acquired in accordance with this Agreement, by the Purchaser Group; and

(v) Shares issued on conversion or exchange of any Convertible Securities or pursuant to any Subscription arrangement with the Company.

(b) except pursuant to Section 3.2, engage in any discussions or negotiations, conclude any understandings or enter into any agreement, or otherwise act jointly or in concert with any third party to, propose or effect any take-over bid, amalgamation, merger, arrangement or other business combination with respect to the Company or to propose or effect any acquisition or purchase of any of the assets of the Company;

(c) make or engage in, directly or indirectly, any solicitation of votes or proxies in respect of voting securities of the Company or in any manner influence any other person or entity to make or engage in such a solicitation, other than a proxy solicitation by management of the Company for any meeting of shareholders, where the matter or matters in respect of which such solicitation is made would

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reasonably be expected to result in the alteration of the structure of the Board as it exists at the date hereof;

(d) initiate or solicit any other shareholder of the Company to initiate any shareholder proposal or requisition or solicit any shareholder of the Company to requisition the Board to call any meeting of shareholders or submit or solicit any other shareholder of the Company to submit any resolution to any meeting of shareholders where such shareholder proposal, the matter or matters in respect of which such requisition is made, or such resolution, as the case may be, would reasonably be expected to result in the alteration of the structure of the Board as it exists at the date hereof; or

(e) form, join or in any way participate in a group acting jointly or in concert with respect to the acquisition of any Common Shares or Convertible Securities other than with its wholly-owned subsidiaries for the purpose of making acquisitions permitted by this Agreement.

3.2 Exception for Bid for All

Nothing in Section 3.1(a) shall prevent or restrict the Purchaser Group from

(a) making an offer to all holders of Common Shares by way of take-over bid circular to acquire all but not less than all of the outstanding Common Shares (and any associated rights) held by such holders, and taking up any Common Shares tendered thereto; or

(b) making an offer to all holders of any class or series of Convertible Securities by way of take-over bid circular to acquire all but not less than all of the outstanding securities of such class or series and taking up any such securities tendered thereto, provided that such offer is only made in conjunction with an offer referred to in Section 3.2(a),

, provided that such offer is made in compliance with the Shareholder Rights Plan, if it remains in effect when such offer is made. The Company shall use its reasonable commercial efforts to exempt from the operation of the Shareholder Rights Plan any offer by the Purchaser that complies with the provisions of this Section 3.2 and that is a Permitted Bid (as defined in the Shareholder Rights Plan).

3.3 Expiry of Standstill

The provisions of Section 3.1 shall terminate and expire on the earliest of the following (the “Standstill Expiry Date”):

(a) the fifth anniversary of the date hereof;

(b) the date upon which the Purchaser Group (i) ceases to own beneficially, directly or indirectly, Common Shares and Convertible Preferred Shares that represent at

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least 20% of the number of Common Shares then issued and outstanding and (ii) no longer has the right to nominate a Purchaser Representative to the Board; and

(c) the date on which the Board approves any of the following actions, or approves the entering into by the Company of an agreement in respect of any transaction involving, (i) the sale of Common Shares or Convertible Securities representing more than 35% of the Fully-Diluted Shares to any third party other than a member of the Purchaser Group or any person acting jointly or in concert with any member of the Purchaser Group, (ii) a consolidation, merger, arrangement or amalgamation (statutory or otherwise) of the Company with any such third party or (iii) the acquisition by any such third party or group of such third parties of Common Shares or Convertible Securities representing more than 35% of the Fully-Diluted Shares.

ARTICLE 4

DEMAND REGISTRATION

4.1 Requests for Demand Registrations

Subject to Article 6, at any time, the Purchaser may request the Company to effect a qualification under the Canadian Securities Acts of the distribution to the public in any or all of the provinces of Canada of all or part of the Registrable Securities held by the Purchaser (such qualification being hereinafter referred to as a “Demand Registration”). Any such request shall be made by notice in writing (a “Request”) to the Company and shall specify the number and the class or classes of Registrable Securities to be sold (the “Designated Registrable Securities”) by the Purchaser, the intended method of disposition and the provinces in which the qualification is to be effected.

4.2 Demand Registration Expenses

All Registration Expenses incident to the Company’s performance of, or compliance with, its obligations under this Article 4 (excluding underwriting or placement discounts and commissions) shall be borne by the Company.

4.3 Selection of Lead Underwriters

The lead underwriters for any offering in connection with a Demand Registration shall be selected by the Purchaser. The Purchaser's selection will be subject to the approval of the Company, such approval not to be unreasonably withheld or delayed.

4.4 Participation by the Company

If at any time the Purchaser requests a Demand Registration, the Company shall have the right, within 48 hours of receipt of such request, to require the Purchaser to qualify for distribution to the public under such prospectus an offering of Common Shares of the Company from treasury. The Purchaser shall use all reasonable efforts to include in the proposed distribution such number of Common Shares of the Company as the Company shall request, upon the same terms (including the method of distribution) as such Demand Registration;

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provided that the Purchaser shall not be required to include any such Common Shares in any such Demand Registration if the Purchaser is advised by its lead underwriter for the offering that in its good faith opinion the inclusion of such securities may materially and adversely affect the price or success of the offering or otherwise limit the number of shares able to be sold by Purchaser in connection with such offering.

ARTICLE 5

INCIDENTAL REGISTRATION

5.1 Incidental Registrations

Each time the Company elects to proceed with the preparation and filing of a prospectus under any Canadian Securities Act in connection with a proposed distribution of any of its securities for cash, whether by the Company or any of its security holders, the Company shall give written notice thereof to the Purchaser as soon as practicable. In such event, the Purchaser shall be entitled, by notice in writing given to the Company within 48 hours after the receipt of any such notice by the Purchaser, to request that the Company cause any or all of the Registrable Securities (the “Designated Registrable Securities”) held by the Purchaser to be included in such prospectus (such qualification being hereinafter referred to as an “Incidental Registration”). Notwithstanding the foregoing:

(a) no Designated Registrable Securities shall be included in such prospectus, and no notice shall be required to be given to the Purchaser under this Section 5.1, if the lead underwriter for the offering shall advise the Company and the Purchaser that in its good faith opinion the inclusion of such securities may materially and adversely affect the price or success of the offering; and

(b) the Company may at any time, and without the consent of the Purchaser, abandon the proposed offering in which the Purchaser has requested to participate.

5.2 Incidental Registration Expenses

All Registration Expenses incident to the Company’s performance of, or compliance with, its obligations under this Article 5 (excluding underwriting or placement discounts and commissions) shall be borne by the Company.

ARTICLE 6

RESTRICTIONS

6.1 Restrictions on Demand Registrations

(a) The Company shall not be obligated to effect more than two Demand Registrations pursuant to this Agreement. For the purposes of this Section 6.1, a Demand Registration shall not be considered as having been effected until a receipt has been issued by the Canadian Securities Commission(s) for the (final) prospectus pursuant to which the Registrable Securities are to be sold. Notwithstanding anything to the contrary contained herein, a Demand

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Registration shall not be deemed to have been effected unless Purchaser shall have sold at least 50% of the Registrable Securities sought to be included in such Demand Registration.

(b) The Company’s obligation to comply with any request for a Demand Registration shall be subject to the limitation that the Company shall be entitled to postpone for a reasonable period of time (not to exceed 90 days or such greater period not in excess of 120 days required pursuant to the terms of an underwriting agreement to which the Company is a party) the filing of such prospectus otherwise required to be prepared and filed by it pursuant to this Agreement if, at the time it receives the Request, a majority of the directors of the Company determines, in their reasonable judgement, that the qualification or sale of the Designated Registrable Securities would have a material adverse effect on the Company or its securityholders because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material non-public information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under Ontario Securities Laws or the 1933 Act and gives prompt notice of such determination to the Purchaser; provided, however, that the Company may only invoke this right to postpone only once in any period of twelve (12) consecutive months, and that it shall not register any securities for its own account or that of any shareholder during such period of postponement.

6.2 Expiry of Registration Rights Provisions

The rights granted to the Purchaser pursuant to Article 4 hereof (or any assignee of the Purchaser permitted pursuant to Section 10.2) shall terminate and be of no further force or effect at such time as the Purchaser and its affiliates (or, in the case of any assignee, such assignee and its affiliates) no longer beneficially owns Registrable Securities representing at least 12,500,000 Fully Diluted Shares and the rights granted to the Purchaser pursuant to Article 5 (or any assignee of the Purchaser permitted pursuant to Section 10.2) shall terminate and be of no further force or effect at such time as the Purchaser and its affiliates (or, in the case of any assignee, such assignee and its affiliates) no longer beneficially owns Registrable Securities representing at least 6,250,000 Fully Diluted Shares. The Purchaser (and any assignee of the Purchaser permitted under Section 10.2) shall promptly notify the Company if its beneficial ownership of Registrable Securities falls below either of these thresholds.

ARTICLE 7

PRO-RATION

7.1 General

(a) Notwithstanding the provisions of Articles 4 and 5, if Registrable Securities are to be included in accordance with Articles 4, 5 and 6 in a prospectus pertaining to one or more underwritten public offerings and the lead underwriter for the offering(s) advises the Company in writing that in its good faith opinion the number of securities to be included exceeds the number of securities that can be sold in such offering(s) without materially and adversely affecting the price or success of the offering, the Company shall include securities in such prospectus qualification in the following priority, to the extent possible:

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(i) first (in respect of Demand Registrations), such Registrable Securities as to which prospectus qualification rights have been exercised by the Purchaser under Article 4 (the “Demand Securities”);

(ii) second, the securities that the Company proposes to distribute; and

(iii) third, (in respect of Incidental Registrations only) the total number of the Registrable Securities requested by the Purchaser to be included which in the good faith opinion of such lead underwriter can be sold without materially and adversely affecting the price or success of the offering, on a pro rata basis as between the Purchaser and the MOVA Seller based on the relation of the number of Fully-Diluted Shares represented by the Designated Registrable Securities specified in the notice, if any, given to the Company by the Purchaser accordance with Section 5.1 and by the Designated Registrable Securities (as defined in the MOVA Seller Registration Rights Agreement) specified in the notice, if any, given to the Company by the MOVA Seller in accordance with section 3.1 of the MOVA Seller Registration Rights Agreement, it being acknowledged and agreed by the Company that any Registrable Securities sought to be included in such offering by the Purchaser shall have priority over any securities sought to be included by any person other than the MOVA Seller having incidental registration rights.

(b) Without the prior written consent of the Purchaser, the Company shall not grant registration rights to any Person that are superior to, or otherwise inconsistent with, the rights granted to the Purchaser pursuant to this Agreement.

ARTICLE 8

REGISTRATION PROCEDURES

8.1 Procedures

Upon receipt of a Request or a notice from the Purchaser pursuant to Article 5, the Company shall use its best efforts to effect the Demand Registration or Incidental Registration, as the case may be. In particular, the Company shall:

(a) in the case of a Demand Registration, subject to Article 4, prepare and file (in any event within 45 days after the Request has been delivered to the Company) in the English language and, if required, French language, a preliminary prospectus under and in compliance with the Canadian Securities Acts in each jurisdiction in which the Registration is to be effected (and, if the Company is eligible to effect the Registration in the United States under a registration statement on Form F-10 and the Purchaser so requests, a registration statement on Form F-10) and such other related documents as may be necessary to be filed in connection with any such preliminary prospectus and shall, as soon as possible after any comments of the Canadian Securities Commissions have been satisfied with respect thereto, prepare and file under and in compliance with the Canadian Securities Acts a prospectus in the English language and, if required, French language and use its best efforts to cause a receipt to be issued for such

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prospectus as soon as possible and shall take all other steps and proceedings that may be necessary in order to qualify the Designated Registrable Securities under the applicable Canadian Securities Acts for distribution by registrants who comply with the relevant provisions of the Canadian Securities Acts and, if the Registration is to be effected in the United States by the filing of a registration statement on Form F-10, under the 1933 Act (provided that, before filing all such documents referred to in this Section 8.1(a), the Company shall furnish to the counsel to the Purchaser copies thereof and otherwise comply with Section 9.1);

(b) prepare and file with the applicable Canadian Securities Commissions in the jurisdictions in which the Registration is to be effected all such amendments and supplements to such preliminary prospectus and prospectus (and registration statement, if applicable) as may be necessary to comply with the provisions of the applicable Canadian Securities Acts with respect to the distribution of the Designated Registrable Securities, and to take such steps as are necessary to maintain the qualification of such prospectus (and registration statement, if applicable) until the earlier of (i) the time at which the distribution of the Designated Registrable Securities is completed and (ii) 42 days after the receipt for such prospectus has been issued by each of the applicable Canadian Securities Commissions (provided that, before filing such documents, the Company shall furnish to the counsel to the Purchaser copies thereof and otherwise comply with Section 9.1);

(c) furnish to the Purchaser such number of copies of such preliminary prospectus, prospectus and any amendment and supplement thereto (including any documents incorporated therein by reference) and such other relevant documents as the Purchaser may reasonably request in order to facilitate the disposition of the Designated Registrable Securities owned by the Purchaser;

(d) cause to be furnished to the Purchaser, the underwriter or underwriters of any offering and such other persons as the Purchaser may reasonably specify:

(iv) an opinion of counsel to the Company, subject to customary assumptions and qualifications, addressed to the Purchaser and the underwriter or underwriters of such offering and dated the closing date of the offering as to the Company’s legal status and capacity, the Company’s authorized capital, the valid issuance of the Designated Registrable Securities, the enforceability against the Company of any underwriting agreement to which the Company is a party, the qualification of the distributions of the Designated Registrable Securities and such other customary matters as the Purchaser or any such underwriter may reasonably require;

(v) a non-statutory “comfort” letter addressed to the underwriters dated the date of the prospectus and the closing date of the offering signed by the auditors of the Company in respect of the financial information contained in the prospectus;

(vi) if the prospectus is filed in Quebec, opinions of Quebec counsel to the Company and the auditors of the Company addressed to the Purchaser and relating to the translation of the preliminary prospectus and the prospectus

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from the English language to the French language, such opinions being dated the dates of the preliminary prospectus and the prospectus; and

(vii) such corporate certificates as are customarily furnished in securities offerings,

and, in each case, covering substantially the same matters as are customarily covered in such documents in the relevant jurisdictions and such other matters as the Purchaser may reasonably request;

(e) immediately notify the Purchaser of the occurrence of any event during the period referred to in Section 1(b) as a result of which the preliminary prospectus or the prospectus, as then in effect, might include an untrue statement of material fact or would omit any fact that is required to be stated or that is necessary to make any statement therein not misleading in light of the circumstances in which it was made (other than facts or statements provided by the Purchaser or any underwriter);

(f) otherwise use its best efforts to comply with the Canadian Securities Acts (and, if the Registration is to be effected in the United States by the filing of a registration statement on Form F-10, the 1933 Act), the Toronto Stock Exchange and any other stock exchange and over-the-counter market on which the Designated Registrable Securities are then listed or quoted;

(g) cause all such Designated Registrable Securities to be listed on each securities exchange or over-the-counter market on which similar securities issued by the Company are then listed;

(h) enter into an underwriting agreement with the underwriters for the offering containing such representations and warranties by the Company and such other terms and provisions as are customarily contained in Canadian underwriting agreements with respect to secondary distributions and indemnification agreements consistent with Section 9.2 and such other documents on such terms and conditions as are customary in secondary offerings and take all such other actions as are permitted by law as the Purchaser or the underwriters reasonably request in order to expedite or facilitate the disposition of the Designated Registrable Securities by the Purchaser; and

(i) in the event of the issuance of any order or ruling suspending the effectiveness of a prospectus receipt or any order suspending or preventing the use of any prospectus or suspending the qualification or the distribution of any of the Designated Registrable Securities qualified by such prospectus for sale in any applicable Canadian provinces, the Company shall promptly notify the Purchaser of such event and use its best efforts promptly to obtain the withdrawal of such order or ruling. The Company shall promptly notify the Purchaser of the withdrawal of any such order or ruling. The Purchaser shall not (until further notice) effect sales of Designated Registrable Securities or deliver any prospectus in respect of such sale after notification by the Company of any order or ruling suspending the effectiveness of the prospectus or after notification by the Company under Section 6.1(e).

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8.2 Other Sales

After receipt by the Company of a Request, the Company shall not, without the prior written consent of the Purchaser, authorize, issue or sell Common Shares or Convertible Securities in any jurisdiction or agree to do so or publicly announce any intention to do so (except for securities issued pursuant to any legal obligation in effect on the date of the Request, pursuant to any security-based compensation arrangement or distribution reinvestment plan of the Company or as consideration paid to the vendors of any business or property directly or indirectly acquired by the Company) until the date which is 90 days after the later of (a) the date on which receipts are issued under all Canadian Securities Acts for the prospectus filed in connection with such Demand Registration and (b) the completion of the offering contemplated by the Demand Registration (unless the offering is not completed within such 90-day period).

8.3 Obligations of the Purchaser

In connection with any Demand Registration or Incidental Registration, the Purchaser shall:

(a) provide such information with respect to itself and the securities of the Company held by the Purchaser as may be reasonably required by the Company to comply with the applicable Canadian Securities Acts in each jurisdiction in which the Registration is to be effected;

(b) immediately notify the Company of the happening of any event during the period in Section 1(b), as a result of which the preliminary prospectus or the prospectus, as in effect, might include an untrue statement of material fact or would omit any fact that is required to be stated or is necessary to make any statement therein not misleading in light of the circumstances in which it was made insofar as such facts or statements relate to or were provided by the Purchaser; and

(c) comply with any applicable published policies, rules and regulations of the applicable Canadian Securities Commissions and any stock exchange and over-the-counter market on which the Registrable Securities are then listed or quoted.

8.4 Obligations of the Company.

The Company covenants and agrees to use its reasonable commercial efforts to make all filings required under the Canadian Securities Acts to maintain the Company’s status as a “reporting issuer” (or analogous status) under such legislation and maintain the listing and posting for trading of the Common Shares on the Toronto Stock Exchange; provided that the foregoing covenant shall not restrict the right of the Company to undertake a merger, sale or similar transaction involving the sale of all or substantially all of the Common Shares or assets of the Company as a result of which the Company ceases to be a “reporting issuer” (or hold analogous status) and/or ceases to maintain the listing of the Common Shares, provided that, for greater certainty Section 2.2, if otherwise applicable, shall continue to apply to such transaction. For greater certainty, nothing in this Agreement shall require the Company to (a) effect any Registration in the United States unless it is eligible to effect such registration by filing a registration statement on Form F-10 or (b) become eligible to register securities on Form F-10.

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The Company shall not, without the prior written consent of the Purchaser, grant to any person registration or prospectus qualification rights or agree to register or qualify a prospectus of any kind or nature with respect to outstanding Common Shares or other securities of the Company if such rights would rank pari passu with or have a priority over the rights granted to the Purchaser pursuant to this Agreement, whether in terms of the number of Common Shares or other securities of the Company which the Purchaser may include in any prospectus qualification, the timing of any registration or prospectus qualification of Common Shares or other securities of the Company, the rights of the Purchaser to demand registration or prospectus qualification of Common Shares held by them at the time requested by them, or in any other material respect.

ARTICLE 9

DUE DILIGENCE; INDEMNIFICATION

9.1 Preparation; Reasonable Investigation.

In connection with the preparation and filing of any preliminary prospectus or prospectus as herein contemplated, the Company shall give the Purchaser, its underwriters, and their respective counsel, auditors and other representatives, the opportunity to participate in the preparation of such documents and each amendment thereof or supplement thereto, and shall insert therein such material, furnished to the Company in writing, which in the reasonable judgment of the Purchaser and their counsel should be included. Subject to the entering into of confidentiality agreements satisfactory to the Company, acting reasonably, the Company shall give the Purchaser and the underwriters such reasonable and customary access to the books and records of the Company and its subsidiaries and such reasonable and customary opportunities to discuss the business of the Company with its officers and auditors as shall be necessary in the reasonable opinion of the Purchaser, such underwriters and their respective counsel. The Company shall cooperate with the Purchaser and its underwriters in the conduct of all reasonable and customary due diligence which the Purchaser, such underwriters and their respective counsel may reasonably require in order to conduct a reasonable investigation for purposes of establishing a due diligence defence as contemplated by the Canadian Securities Acts and in order to enable such underwriters to execute the certificate required to be executed by them for inclusion in each such document.

9.2 Indemnification.

(a) By the Company. The Company agrees to indemnify, to the extent permitted by law, the Purchaser and the partners, members, officers and directors of the Purchaser and its affiliates and each person, if any, who participates as an underwriter in the offering or sale of the Designated Registrable Securities, their respective officers and directors and each person who controls such underwriter (within the meaning of any applicable Canadian Securities Act) against all losses (excluding loss of revenues or profits), claims, damages, liabilities and expenses arising out of or based upon (i) any information or statement contained in the preliminary prospectus, the prospectus or any amendment thereto which at the time and in light of the circumstances under which it was made contains a misrepresentation (as defined in the applicable Canadian Securities Act); (ii) any omission to state in the preliminary prospectus or the prospectus any fact that was required to be stated in such document or necessary to make any statement in such

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document not misleading at the time and in light of the circumstances under which it was made; (iii) any order made or inquiry, investigation or proceedings commenced or threatened by any applicable Canadian Securities Commission, the SEC, any court or other competent authority based upon any untrue statement or omission or any misrepresentation in the preliminary prospectus, the prospectus or any amendment thereto or based upon any failure to comply with applicable securities laws (other than any failure by the Purchaser or the underwriters) preventing or restricting the trading in or the sale and distribution of the Designated Registrable Securities pursuant to a Demand Registration; and (iv) non-compliance by the Company with any of the Canadian Securities Acts (or the 1933 Act, in the case of a Registration under that act) in connection with a Demand Registration and the distribution effected thereunder, except insofar as any information or statement referred to in clause (i), (ii) or (iii) of this Section 1(a) has been furnished in writing to the Company by the Purchaser pursuant to Section 1(b) or the underwriters expressly for use therein or the non-compliance is caused by the Purchaser's or any underwriter’s failure to deliver to a purchaser of Designated Registrable Securities a copy of the prospectus or any amendments or supplements thereto after the Company has furnished Purchaser with a sufficient number of copies of the same.

(b) By Purchaser. In connection with any Registration of Designated Registrable Securities, the Purchaser shall furnish to the Company in writing such information with respect to itself and the securities of the Company held by the Purchaser as may be reasonably required by the Company to comply with the applicable Canadian Securities Acts in each jurisdiction in which the Registration is to be effected and, to the extent permitted by law, shall indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of any Canadian Securities Act) against any losses (excluding loss of revenues or profits), claims, damages, liabilities and expenses arising out of or based upon: (i) any untrue statement of material fact contained in the prospectus or any amendment thereof or supplement thereto or any omission of a material fact required to be stated therein or necessary to make any statement therein not misleading, but only to the extent that such untrue statement, or omission is contained in any information so furnished in writing by the Purchaser pursuant to this Section 9.2(b); or (ii) any default by the Purchaser in respect of its obligations under Section 8.3(c).

(c) Procedure. Any Person entitled to indemnification hereunder shall: (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification; and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defence of such claim with counsel satisfactory to the indemnified party, acting reasonably. If such defence is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld or delayed). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party, without the express written consent of an indemnified party, may settle any claims.

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(d) Survival; Contribution. The indemnification provided for under this Agreement shall survive the expiry of this Agreement and shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and shall survive any transfer of securities pursuant thereto. In the event the indemnification is applicable in accordance with its terms but is unavailable in whole or in part for any reason under this Section 9.2, the Company and the Purchaser shall contribute to the aggregate of all losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative benefits received by the Company from the agreements being entered into between the Purchaser and the Company contemporaneously herewith and benefits received by the Purchaser from the distribution of Designated Registrable Securities and the relative fault of the Company and the Purchaser in connection with the event giving rise to liability.

ARTICLE 10

GENERAL PROVISIONS

10.1 Notices

Any notice, consent, waiver, direction or other communication required or permitted to be given under this Agreement by a party shall be in writing and may be given by delivering same or sending same by facsimile transmission or by delivery addressed to the party to which the notice is to be given at its address for service herein. Any notice, consent, waiver, direction or other communication aforesaid shall, if delivered, be deemed to have been given and received on the date on which it was delivered to the address provided herein (if a business day or, if not, on the next succeeding business day) and if sent by facsimile transmission, be deemed to have been given and received at the time of receipt (if a business day or, if not, on the next succeeding business day) unless actually received after 4:00 p.m. (Toronto time) at the point of delivery, in which case it shall be deemed to have been given and received on the next business day.

The address for service for each of the parties hereto shall be as follows:

(a) If to the Company:

Patheon Inc.

7070 Mississauga Road

Suite 350

Mississauga, ON L5N 7J8

Fax: 905-812-6705

Attention: Chief Executive Officer

With a copy (which shall not constitute notice) to:

Davies Ward Phillips & Vineberg LLP

44^th Floor, 1 First Canadian Place

Toronto, ON M5X 1B1

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Fax:416-863-0871

Attention:Cameron M. Rusaw and Patrick E. Moyer

(b) If to the Purchaser:
	c/o JLL Partners, Inc.
	450 Lexington Avenue Suite 3350 New York, NY 10017
	Fax:	212-286-8626
	Attention:	Ramsey Frank
	With a copy (which shall not constitute notice) to:
	Skadden, Arps, Slate, Meagher & Flom LLP
	One Rodney Square
	Wilmington, DE 19801
	Facsimile:	302-651-3001
	Attention:	Robert B. Pincus, Esq.

A party may change its address for service from time to time by giving notice to the other party in accordance with this Section 10.1.

10.2 Assignment of Registration Rights

All or a portion of the rights to cause the Company to register Registrable Securities pursuant to this Agreement may be assigned (but only with all related obligations) by the Purchaser to a transferee of Registrable Securities representing at least 6,250,000 Fully-Diluted Shares; provided, however, that (w) the Company must be furnished with prior written notice of the name and address of such transferee and the Registrable Securities with respect to which such registration rights are being transferred; (x) such transferee shall agree in writing to be bound by and subject to the terms and conditions of this Agreement; (y) after such transfer the transferee shall be required to hold the number of Registrable Securities specified in Section 6.2 hereof to exercise rights under Article 4 or Article 5 hereof, as applicable; and (z) in no event shall the assignment of registration rights pursuant to this Section 10.2 increase the aggregate number of Demand Registrations that can be exercised pursuant to Article 5.

10.3 Severability

If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated and the parties shall negotiate in good faith to modify the Agreement to preserve each party’s anticipated benefits under this Agreement.

- 20 -

10.4 Amendment

This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.

10.5 Waiver

At any time prior to the Effective Time, any party hereto may (a) extend the time for the performance of any of the obligations or other acts of any other party thereto or (b) waive compliance with any of the agreements of any other party or with any conditions to its own obligations, in each case only to the extent such obligations, agreements and conditions are intended for its benefit.

10.6 Entire Agreement, Assignment and Governing Law

(a) This Agreement and the Confidentiality and Standstill Agreement (together with all other documents and instruments referred to herein) constitute the entire agreement and supersede all other prior agreements and undertakings, both written and oral, among the parties with respect to the subject matter hereof and thereof. Notwithstanding the foregoing, in the event of any inconsistency between the terms and provisions of this Agreement and those contained in the Confidentiality and Standstill Agreement, the terms and provisions of this Agreement shall prevail.

(b) This Agreement: (i) shall not be assigned by operation of law or otherwise; and (ii) shall be governed in all respects, including validity, interpretation and effect, by the laws of the Province of Ontario and the laws of Canada applicable therein, without giving effect to the principles of conflict of laws thereof. Each party hereto irrevocably attorns to the non-exclusive jurisdiction of the courts of such province.

10.7 Construction

The parties hereto acknowledge that their respective legal counsel have reviewed and participated in settling the terms of this Agreement and that any rule of construction to the effect that any ambiguity is to be resolved against the drafting party, including the rule or doctrine of contra proferentum, shall not be applicable in the interpretation of this Agreement.

10.8 Counterparts

This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce more than one counterpart.

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IN WITNESS WHEREOF, the parties have executed this Agreement.

PATHEON INC.
By:
	Name:  Riccardo Trecroce
	Title:    Chief Executive Officer

JLL PARTNERS FUND V, L.P.
By:	JLL Associates V, L.P.
	its General Partner
By:	JLL Associates G.P. V, L.L.C.
	its General Partner

By:
	Paul S. Levy
	Managing Member

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SCHEDULE D

FORM OF EMPLOYMENT AGREEMENT AMENDING AGREEMENTS

AMENDING AGREEMENT

THIS AGREEMENT made as of the [20th] day of April, 2007,

B E T W E E N:

PATHEON INC.,

a corporation existing under the laws of Canada,

(hereinafter called the “Company”),

- and -

[    ],

an individual residing in [    ],

(hereinafter called the “Executive”),

WHEREAS the Company and the Executive are party to an employment agreement dated [    ], as amended by an agreement dated [    ](the “Employment Agreement”);

AND WHEREAS the Company has entered into a purchase agreement dated March 1, 2007 (the “Purchase Agreement”) with JLL Partners Fund V, L.P., a Delaware limited partnership, providing for the issuance to and purchase by the Purchaser, subject to the terms and conditions set out therein, of 150,000 Class I Preferred Shares, Series C;

AND WHEREAS it is a condition to the completion of the transactions contemplated by the Purchase Agreement that the Company and the Executive enter into this Agreement;

AND WHEREAS the Company and the Executive wish to amend the Employment Agreement on the terms and conditions set out herein.

NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the respective covenants, agreements, representations, warranties and indemnities of the parties hereinafter contained and for other good and valuable consideration (the receipt and sufficiency of which are acknowledged by each party), and intending to be legally bound, the parties covenant and agree as follows:

1. Amendment to Definition of “Change in Control”

The Employment Agreement is hereby amended by inserting the following at the end of the definition of “Change in Control” in section 1.1 of the Employment Agreement:

“; provided that the transactions contemplated under the purchase agreement dated March 1, 2007 between the Corporation, JLL Partners Fund V, L.P., including the payment of any paid-in-kind dividends paid by the Corporation in respect of the Class I Preferred Shares, Series C issued thereunder, shall not be or shall be deemed not to constitute a Change in Control”.

2. Counterparts

This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

3. Governing Law

This Agreement shall in all respects be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable in that province, and the parties hereby irrevocably attorn to the non-exclusive jurisdiction of the courts of such province.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above.

PATHEON INC.
By:
	Peter A.W. Green
	Chairman
By:
	[    ]

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SCHEDULE E

LEGEND

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE AUGUST 21, 2007 [4 months and 1 day after the date of issue].

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SAID ACT .”

SCHEDULE F

CERTIFICATE FOR LEGEND REMOVAL

TO: Computershare Investor Services Inc.

as registrar and transfer agent for Common Shares of Patheon Inc.

The undersigned:

• acknowledges that the sale of the securities of Patheon Inc. to which this declaration relates is being made in reliance on Rule 904 of Regulation S (“Regulation S”) under the United States U.S. Securities Act of 1933, as amended (the “1933 Act”), and

• certifies that:

1. it is not an affiliate of Patheon Inc. (as defined in Rule 405 under the 1933 Act);

2. the offer of the securities was not made to a person in the United States and either (A) at the time the buy order was originated, the buyer was outside the United States, or the seller and any person acting on its behalf reasonably believe that the buyer was outside the United States, or (B) the transaction was executed on or through the facilities of the Toronto Stock Exchange or any other designated offshore securities market, and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States; and

3. neither the seller nor any affiliate of the seller nor any person acting on any of their behalves has engaged or will engage in any “directed selling efforts” (as such term is defined in Regulation S) in the United States in connection with the offer and sale of the securities.

Unless otherwise indicated, terms used in this declaration have the meanings given to them in Regulation S.

Dated:	By:
		Name:
		Title:

EX-10.3

Exhibit 10.3

INVESTOR AGREEMENT

PATHEON INC.

– and –

JLL PATHEON HOLDINGS, LLC

April 27, 2007

TABLE OF CONTENTS

ARTICLE 1

INTERPRETATION

1.1	Definitions	1
1.2	Construction	5
	ARTICLE 2 GOVERNANCE
2.1	Board Representation	5
2.2	Special Approval Rights	7
2.3	Expiry of Special Approval Rights	7
	ARTICLE 3 STANDSTILL
3.1	Standstill	8
3.2	Exception for Bid for All	9
3.3	Expiry of Standstill	9
	ARTICLE 4 DEMAND REGISTRATION
4.1	Requests for Demand Registrations	10
4.2	Demand Registration Expenses	10
4.3	Selection of Lead Underwriters	10
4.4	Participation by the Company	10
	ARTICLE 5 INCIDENTAL REGISTRATION
5.1	Incidental Registrations	11
5.2	Incidental Registration Expenses	11
	ARTICLE 6 RESTRICTIONS
6.1	Restrictions on Demand Registrations	11
6.2	Expiry of Registration Rights Provisions	12
	ARTICLE 7 PRO-RATION
7.1	General	12

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ARTICLE 8 REGISTRATION PROCEDURES
8.1	Procedures	13
8.2	Other Sales	16
8.3	Obligations of the Purchaser	16
8.4	Obligations of the Company	16
	ARTICLE 9 DUE DILIGENCE; INDEMNIFICATION
9.1	Preparation; Reasonable Investigation	17
9.2	Indemnification	17
	ARTICLE 10 GENERAL PROVISIONS
10.1	Notices	19
10.2	Severability	20
10.3	Amendment	21
10.4	Waiver	21
10.5	Entire Agreement, Assignment and Governing Law	21
10.6	Construction	21
10.7	Counterparts	21

-ii-

INVESTOR AGREEMENT

THIS AGREEMENT made the 27th day of April, 2007.

BETWEEN:

PATHEON INC.,
a corporation existing under the laws of Canada,
(hereinafter called the “Company”)
	- and -
JLL PATHEON HOLDINGS, LLC, a limited liability company existing under the laws of the State of Delaware,
(hereinafter called the “Purchaser”).

WHEREAS the Company and JLL Partners Fund V, L.P. (“JLL”) entered into an agreement (the “Purchase Agreement”) dated March 1, 2007 which provides for the issue and sale by the Company to the Purchaser of 150,000 Convertible Preferred Shares and 150,000 Special Voting Preferred Shares of the Company (the “Private Placement”);

AND WHEREAS JLL has assigned all its rights, title and interest under the Purchase Agreement to the Purchaser;

AND WHEREAS pursuant to sections 7.1 and 7.2 of the Purchase Agreement, it is a condition of closing of the Private Placement that the Company and the Purchaser shall have entered into this Agreement;

NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party, the parties hereto hereby covenant and agree as follows:

ARTICLE 1

INTERPRETATION

1.1 Definitions

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:

“1933 Act” means the United States Securities Act of 1933, as amended;

“affiliate” has the meaning given to that term in NI 45-106;

“applicable laws” includes any federal, provincial, state, regional, municipal or local law, ordinances, rules, policies, guidelines, decrees, orders, authorizations, approvals, notices, licences, permits, directives or other requirements of any Governmental Authority having force of law;

“Board” means the board of directors of the Company;

“business day” means any day other than a Saturday or Sunday or statutory holiday in Toronto or New York;

“Canadian Securities Acts” means the applicable securities legislation of each of the provinces of Canada and all published regulations, policy statements, orders, rules, national instruments, rulings, communiques and interpretation notes issued thereunder or in relation thereto, as the same may hereafter be amended from time to time or replaced;

“Canadian Securities Commissions” means the securities commission or similar securities regulatory authority in each of the provinces of Canada;

“CBCA” mean the Canada Business Corporations Act, as amended;

“control distribution” has the meaning given to that term in NI 45-106;

“Convertible Preferred Shares” means the Class I preferred shares, Series C, of the Company, having the rights, privileges, restrictions and conditions set forth in the Share Provisions and Articles of Amendment relating thereto.

“Convertible Securities” means securities convertible into or exchangeable for Restricted Voting Shares, including, the greater certainty, the Convertible Preferred Shares;

“Demand Registration” has the meaning set out in Section 4.1;

“Demand Registrable Securities” has the meaning set out in Section 5.1;

“Fully-Diluted Shares” means, collectively, Restricted Voting Shares which are issued and outstanding and unissued Restricted Voting Shares issuable upon the exercise of any conversion or acquisition rights attached to outstanding Convertible Securities;

“GAAP” means generally accepted accounting principles in Canada consistently applied;

“Incidental Registration” has the meaning set out in Section 5.1;

“Meeting” has the meaning set out in the Purchase Agreement;

“MOVA Seller” means, together, Joaquin Viso and Olga Lizardi;

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“MOVA Seller Registration Rights Agreement” means the registration rights agreement dated as of December 23, 2004 between the Company and the MOVA Seller;

“NI 45-102” means National Instrument 45-102 of the Canadian Securities Administrators;

“NI 45-106” means National Instrument 45-106 of the Canadian Securities Administrators;

“person” includes any individual, firm, partnership, joint venture, venture capital fund, association, trust, trustee, executor, administrator, legal personal representative, estate, group, corporation, unincorporated association or organization, governmental authority, syndicate or other entity, whether or not having legal status;

“Private Placement” has the meaning set out in the first recital hereto;

“Purchaser Group” has the meaning set out in Section 3.1(a)(i);

“Purchaser Representative” has the meaning set out in Section 2.1;

“Registrable Securities” means:

(a) the Convertible Preferred Shares;

(b) any Restricted Voting Shares issued or issuable upon the conversion of the Convertible Preferred Shares;

(c) any securities of the Company issued as a distribution made in respect of the securities referred to in clause (a) or (b) above;

(d) any securities of the Company issued in exchange for or in replacement of the securities referred to in clause (a), (b) or (c) above,

“Registration” means the qualification under any of the Canadian Securities Acts (and, if the Company is eligible to effect such qualification in the United States under a registration statement on Form F-10 and the Purchaser so requests, the 1933 Act) of the distribution of Registrable Securities to the public in any or all of the provinces of Canada (and the United States, if applicable);

“Registration Expenses” means all expenses (other than fees or commissions payable to any underwriter, investment banker, manager or agent in connection with the distribution of the Registrable Securities) incurred in connection with a Registration, including the following:

(a) all fees, disbursements and expenses of counsel and auditors to the Company;

(b) all expenses in connection with the preparation, translation, printing and filing of any preliminary prospectus, prospectus or any other offering document and any

- 3 -

amendments and supplements thereto and the mailing and delivering of copies thereof to any underwriters and dealers;

(c) all filing fees of any Canadian Securities Commission;

(d) all transfer agents’, depositaries’ and registrars’ fees and the fees of any other agent appointed by the Company in connection with a Registration;

(e) all fees and expenses payable in connection with the listing of any Registrable Securities on each securities exchange or over the counter market on which the Restricted Voting Shares are then listed;

(f) all printing, copying and mailing expenses, all messenger and delivery expenses;

(g) all expenses reasonably incurred by the Purchaser in connection with the Registration, including any fees and expenses of the Purchaser’s counsel, independent public accountants and other advisors; and

(h) all costs and expenses of the Company associated with the conduct of any “road show” related to such Registration;

“Request” has the meaning set out in Section 4.1;

“Restricted Voting Shares” means the restricted voting shares in the capital of the Company;

“SEC” means the United States Securities and Exchange Commission;

“Shareholder Rights Plan” has the meaning set out in the Purchase Agreement;

“Special Voting Preferred Shares” means the Class I preferred shares, Series D, of the Company, having the rights, privileges, restrictions and conditions set forth in the Share Provisions and Articles of Amendment relating thereto;

“Standstill Expiry Date” has the meaning set out in Section 3.3;

“subsidiary” has the meaning set out in NI 45-106;

“Transfer” means any sale, exchange, transfer, assignment, gift, pledge, encumbrance, hypothecation, alienation, grant of a security interest or other transaction, whether voluntary, involuntary or by operation of law, by which the legal or beneficial ownership of, or any security or other interest in, such security passes from one person to another person or to the same person in a different capacity, whether or not for value, except to an affiliate of the Purchaser;

“TSX” means the Toronto Stock Exchange; and

“underwriter” has the meaning set out in the Securities Act (Ontario).

- 4 -

1.2 Construction

In this Agreement, unless otherwise expressly stated or the context otherwise requires:

(a) the division of this Agreement into Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement;

(b) the terms, “this Agreement”, “herein”, “hereby”, “hereof’ and “hereunder” and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof and include any agreement or instrument supplemental or ancillary hereto;

(c) references to Articles, Sections and Schedules are to the specified Articles, Sections of or Schedules to this Agreement;

(d) words importing the singular include the plural and vice versa and words importing any gender shall include the masculine, feminine and neutral genders;

(e) the words “includes” and “including”, when following any general term or statement, are not to be construed as limiting the general term or statement to the specific items or matters set forth or to similar items or matters, but rather as referring to all other items or matters that could reasonably fall within the broadest possible scope of the general term or statement;

(f) the words “material” and “materially” shall be construed, measured or assessed on the basis of whether the matter would materially affect a party and its subsidiaries, taken as a whole;

(g) all references herein to dollar amounts are references to United States dollars; and

(h) if the date on which any action is required to be taken hereunder by any of the Parties is not a business day, such action shall be required to be taken on the next succeeding day that is a business day.

ARTICLE 2

GOVERNANCE

2.1 Board Representation

(a) The Board shall consist of up to nine members. The Purchaser shall be entitled to designate nominees for election or appointment to the Board (the “Purchaser Representatives”) as follows:

(i) so long as the Purchaser holds at least 90,000 Convertible Preferred Shares (or the corresponding number of the Restricted Voting Shares issued upon

- 5 -

conversion of the Convertible Preferred Shares), it shall be entitled to designate three Purchaser Representatives;

(ii) so long as the Purchaser holds at least 45,000 Convertible Preferred Shares (or the corresponding number of the Restricted Voting Shares issued upon conversion of the Convertible Preferred Shares), it shall be entitled to designate two Purchaser Representatives; and

(iii) so long as the Purchaser holds at least 22,500 Convertible Preferred Shares (or the corresponding number of the Restricted Voting Shares issued upon conversion of the Convertible Preferred Shares), it shall be entitled to designate one Purchaser Representative.

The parties hereto acknowledge and agree that the Purchaser is entitled to appoint certain designees to the Company’s Board of Directors pursuant to the terms of the Special Voting Preferred Shares and that this provision is intended to be in furtherance of such rights. In no event will this Section 2.1 be construed to duplicate the rights granted to the Purchaser pursuant to the terms of the Special Voting Preferred Shares. The Purchaser shall not Transfer any of the Special Voting Preferred Shares. In the event that the Purchaser no longer holds any Special Voting Preferred Shares and is therefore not entitled to elect directors to the Company’s Board of Directors pursuant to the terms thereof; this Section 2.1 shall be controlling.

(b) The Company acknowledges that the Purchaser shall be entitled to appoint three Purchaser Representatives to the Board pursuant to the terms governing the Special Voting Shares upon issuance of the Special Voting Shares to the Purchaser by the Company.

(c) The Purchaser acknowledges that it shall appoint the Purchaser Representative(s) to the Board in accordance with the terms governing the Special Voting Preferred Shares directly following the issuance of the Special Voting Preferred Shares to the Purchaser by the Company and following each future meeting of the holders of the Restricted Voting Shares where directors of the Company have been elected by holders of the Restricted Voting Shares at such meeting. Any appointees by the Purchaser shall be subject to such appointee being acceptable to the Company’s corporate governance and nominating committee, acting reasonably.

(d) In the event that any Purchaser Representative shall cease to serve as a director of the Company, whether due to such Purchaser Representative’s death, disability, resignation or removal, the Company shall cause the Board to appoint a replacement Purchaser Representative designated by the Purchaser to fill the vacancy created by such death, disability, resignation or removal.

(e) The Purchaser shall promptly notify the Company in writing if ceases to hold at least 90,000, 45,000 or 22,500, as the case may be, Convertible Preferred Shares (or the corresponding number of the Restricted Voting Shares issued upon conversion of the Convertible Preferred Shares). In addition, the Purchaser shall deliver a certificate to the Company, from time-to-time as the Company shall reasonably request, certifying the number of securities of the Company beneficially owned by the Purchaser as at the date of such certificate.

- 6 -

2.2 Special Approval Rights

In addition to any other approval that may be required at law or pursuant to the articles of the Company, subject to Section 2.3 the Company shall not take any of the following actions without the prior approval of the Purchaser:

(a) the creation or issuance of any shares of capital stock ranking pari passu with or senior to the Convertible Preferred Shares and any issuance of additional Restricted Voting Shares or other equity securities of the Company, or securities convertible for or exchangeable into, such securities, other than pursuant to the Company’s incentive stock option plan or any other security-based compensation arrangement consented to by the Purchaser;

(b) declaration or payment of dividends or other distributions (including capital) on the Restricted Voting Shares or other equity securities;

(c) redemption, repurchase or other acquisition of any Restricted Voting Shares or other equity securities;

(d) any change to the articles of the Company;

(e) any change to the rights of the existing classes of Restricted Voting Shares of the Company;

(f) any merger, consolidation, sale of all or substantially all of the assets of the Company or any similar business combination transaction;

(g) incurrence of any indebtedness for borrowed money in excess of US$20 million, excluding borrowings under the Company’s credit facilities and any indebtedness incurred to fund all or part of the redemption price for all of the Preferred Equity Units;

(h) initiation of any insolvency, restructuring or reorganization process, voluntary liquidation, dissolution or winding-up of the Company;

(i) any change of the Chief Executive Officer of the Company; or

(j) any change in the size of the board of directors of the Company.

2.3 Expiry of Special Approval Rights

The provisions of Section 2.2 shall terminate and expire if the Purchaser ceases to hold at least 52,500 Convertible Preferred Shares (or the corresponding number of the Restricted Voting Shares issued upon conversion of such Convertible Preferred Shares).

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ARTICLE 3

STANDSTILL

3.1 Standstill

The Purchaser covenants and agrees that, except as otherwise contemplated in this Agreement or the Purchase Agreement, prior to the Standstill Expiry Date, neither the Purchaser nor any of its affiliates will, without the prior written approval of the Company:

(a) subject to Section 3.2, acquire or offer to acquire, directly or indirectly, by purchase or otherwise, any Restricted Voting Shares or Convertible Securities or direct or indirect rights or options to acquire any Restricted Voting Shares, other than:

(i) securities received by the Purchaser and its wholly-owned subsidiary or subsidiaries that hold Restricted Voting Shares or Convertible Securities from time to time (collectively, the “Purchaser Group”) as a result of a stock dividend or distribution made by, or a recapitalization of, the Company;

(ii) securities acquired by the Purchaser Group in accordance with the terms of any dividend reinvestment or Restricted Voting Share purchase plan made available from time to time by the Company to holders of Restricted Voting Shares;

(iii) rights and securities acquired pursuant to the exercise of rights issued to the Purchaser Group pursuant to a rights offering made by the Company to the holders of the Restricted Voting Shares;

(iv) securities acquired by the Purchaser Group on the exercise or exchange of rights issued pursuant to any shareholder rights plan of the Company and attached to Restricted Voting Shares currently held, or subsequently acquired in accordance with this Agreement, by the Purchaser Group; and

(v) Shares issued on conversion or exchange of any Convertible Securities or pursuant to any Subscription arrangement with the Company.

(b) except pursuant to Section 3.2, engage in any discussions or negotiations, conclude any understandings or enter into any agreement, or otherwise act jointly or in concert with any third party to, propose or effect any take-over bid, amalgamation, merger, arrangement or other business combination with respect to the Company or to propose or effect any acquisition or purchase of any of the assets of the Company;

(c) make or engage in, directly or indirectly, any solicitation of votes or proxies in respect of voting securities of the Company or in any manner influence any other person or entity to make or engage in such a solicitation, other than a proxy solicitation by management of the Company for any meeting of shareholders,

- 8 -

where the matter or matters in respect of which such solicitation is made would reasonably be expected to result in the alteration of the structure of the Board as it exists at the date hereof;

(d) initiate or solicit any other shareholder of the Company to initiate any shareholder proposal or requisition or solicit any shareholder of the Company to requisition the Board to call any meeting of shareholders or submit or solicit any other shareholder of the Company to submit any resolution to any meeting of shareholders where such shareholder proposal, the matter or matters in respect of which such requisition is made, or such resolution, as the case may be, would reasonably be expected to result in the alteration of the structure of the Board as it exists at the date hereof; or

(e) form, join or in any way participate in a group acting jointly or in concert with respect to the acquisition of any Restricted Voting Shares or Convertible Securities other than with its wholly-owned subsidiaries for the purpose of making acquisitions permitted by this Agreement.

3.2 Exception for Bid for All

Nothing in Section 3.1(a) shall prevent or restrict the Purchaser Group from

(a) making an offer to all holders of Restricted Voting Shares by way of takeover bid circular to acquire all but not less than all of the outstanding Restricted Voting Shares (and any associated rights) held by such holders, and taking up any Restricted Voting Shares tendered thereto; or

(b) making an offer to all holders of any class or series of Convertible Securities by way of take-over bid circular to acquire all but not less than all of the outstanding securities of such class or series and taking up any such securities tendered thereto, provided that such offer is only made in conjunction with an offer referred to in Section 3.2(a),

, provided that such offer is made in compliance with the Shareholder Rights Plan, if it remains in effect when such offer is made. The Company shall use its reasonable commercial efforts to exempt from the operation of the Shareholder Rights Plan any offer by the Purchaser that complies with the provisions of this Section 3.2 and that is a Permitted Bid (as defined in the Shareholder Rights Plan).

3.3 Expiry of Standstill

The provisions of Section 3.1 shall terminate and expire on the earliest of the following (the “Standstill Expiry Date”):

(a) the fifth anniversary of the date hereof;

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(b) the date upon which the Purchaser Group (i) ceases to own beneficially, directly or indirectly, Restricted Voting Shares and Convertible Preferred Shares that represent at least 20% of the number of Restricted Voting Shares then issued and outstanding and (ii) no longer has the right to nominate a Purchaser Representative to the Board; and

(c) the date on which the Board approves any of the following actions, or approves the entering into by the Company of an agreement in respect of any transaction involving, (i) the sale of Restricted Voting Shares or Convertible Securities representing more than 35% of the Fully-Diluted Shares to any third party other than a member of the Purchaser Group or any person acting jointly or in concert with any member of the Purchaser Group, (ii) a consolidation, merger, arrangement or amalgamation (statutory or otherwise) of the Company with any such third party or (iii) the acquisition by any such third party or group of such third parties of Restricted Voting Shares or Convertible Securities representing more than 35% of the Fully-Diluted Shares.

ARTICLE 4

DEMAND REGISTRATION

4.1 Requests for Demand Registrations

Subject to Article 6, at any time, the Purchaser may request the Company to effect a qualification under the Canadian Securities Acts of the distribution to the public in any or all of the provinces of Canada of all or part of the Registrable Securities held by the Purchaser (such qualification being hereinafter referred to as a “Demand Registration”). Any such request shall be made by notice in writing (a “Request”) to the Company and shall specify the number and the class or classes of Registrable Securities to be sold (the “Designated Registrable Securities”) by the Purchaser, the intended method of disposition and the provinces in which the qualification is to be effected.

4.2 Demand Registration Expenses

All Registration Expenses incident to the Company’s performance of, or compliance with, its obligations under this Article 4 (excluding underwriting or placement discounts and commissions) shall be borne by the Company.

4.3 Selection of Lead Underwriters

The lead underwriters for any offering in connection with a Demand Registration shall be selected by the Purchaser. The Purchaser’s selection will be subject to the approval of the Company, such approval not to be unreasonably withheld or delayed.

4.4 Participation by the Company

If at any time the Purchaser requests a Demand Registration, the Company shall have the right, within 48 hours of receipt of such request, to require the Purchaser to qualify for distribution to the public under such prospectus an offering of Restricted Voting Shares of the

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Company from treasury. The Purchaser shall use all reasonable efforts to include in the proposed distribution such number of Restricted Voting Shares of the Company as the Company shall request, upon the same terms (including the method of distribution) as such Demand Registration; provided that the Purchaser shall not be required to include any such Restricted Voting Shares in any such Demand Registration if the Purchaser is advised by its lead underwriter for the offering that in its good faith opinion the inclusion of such securities may materially and adversely affect the price or success of the offering or otherwise limit the number of shares able to be sold by Purchaser in connection with such offering.

ARTICLE 5

INCIDENTAL REGISTRATION

5.1 Incidental Registrations

Each time the Company elects to proceed with the preparation and filing of a prospectus under any Canadian Securities Act in connection with a proposed distribution of any of its securities for cash, whether by the Company or any of its security holders, the Company shall give written notice thereof to the Purchaser as soon as practicable. In such event, the Purchaser shall be entitled, by notice in writing given to the Company within 48 hours after the receipt of any such notice by the Purchaser, to request that the Company cause any or all of the Registrable Securities (the “Designated Registrable Securities”) held by the Purchaser to be included in such prospectus (such qualification being hereinafter referred to as an “Incidental Registration”). Notwithstanding the foregoing:

(a) no Designated Registrable Securities shall be included in such prospectus, and no notice shall be required to be given to the Purchaser under this Section 5.1, if the lead underwriter for the offering shall advise the Company and the Purchaser that in its good faith opinion the inclusion of such securities may materially and adversely affect the price or success of the offering; and

(b) the Company may at any time, and without the consent of the Purchaser, abandon the proposed offering in which the Purchaser has requested to participate.

5.2 Incidental Registration Expenses

All Registration Expenses incident to the Company’s performance of, or compliance with, its obligations under this Article 5 (excluding underwriting or placement discounts and commissions) shall be borne by the Company.

ARTICLE 6

RESTRICTIONS

6.1 Restrictions on Demand Registrations

(a) The Company shall not be obligated to effect more than two Demand Registrations pursuant to this Agreement. For the purposes of this Section 6.1, a Demand

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Registration shall not be considered as having been effected until a receipt has been issued by the Canadian Securities Commission(s) for the (final) prospectus pursuant to which the Registrable Securities are to be sold. Notwithstanding anything to the contrary contained herein, a Demand Registration shall not be deemed to have been effected unless Purchaser shall have sold at least 50% of the Registrable Securities sought to be included in such Demand Registration.

(b) The Company’s obligation to comply with any request for a Demand Registration shall be subject to the limitation that the Company shall be entitled to postpone for a reasonable period of time (not to exceed 90 days or such greater period not in excess of 120 days required pursuant to the terms of an underwriting agreement to which the Company is a party) the filing of such prospectus otherwise required to be prepared and filed by it pursuant to this Agreement if, at the time it receives the Request, a majority of the directors of the Company determines, in their reasonable judgement, that the qualification or sale of the Designated Registrable Securities would have a material adverse effect on the Company or its securityholders because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material nonpublic information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under Ontario Securities Laws or the 1933 Act and gives prompt notice of such determination to the Purchaser; provided, however, that the Company may only invoke this right to postpone only once in any period of twelve (12) consecutive months, and that it shall not register any securities for its own account or that of any shareholder during such period of postponement.

6.2 Expiry of Registration Rights Provisions

The rights granted to the Purchaser pursuant to Article 4 hereof (or any assignee of the Purchaser permitted pursuant to Section 10.2) shall terminate and be of no further force or effect at such time as the Purchaser and its affiliates (or, in the case of any assignee, such assignee and its affiliates) no longer beneficially owns Registrable Securities representing at least 12,500,000 Fully Diluted Shares and the rights granted to the Purchaser pursuant to Article 5 (or any assignee of the Purchaser permitted pursuant to Section 10.2) shall terminate and be of no further force or effect at such time as the Purchaser and its affiliates (or, in the case of any assignee, such assignee and its affiliates) no longer beneficially owns Registrable Securities representing at least 6,250,000 Fully Diluted Shares. The Purchaser (and any assignee of the Purchaser permitted under Section 10.2) shall promptly notify the Company if its beneficial ownership of Registrable Securities falls below either of these thresholds.

ARTICLE 7

PRO-RATION

7.1 General

(a) Notwithstanding the provisions of Articles 4 and 5, if Registrable Securities are to be included in accordance with Articles 4, 5 and 6 in a prospectus pertaining to one or more underwritten public offerings and the lead underwriter for the offering(s) advises the Company in writing that in its good faith opinion the number of securities to be included exceeds the number of securities that can be sold in such offering(s) without materially and adversely affecting the

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price or success of the offering, the Company shall include securities in such prospectus qualification in the following priority, to the extent possible:

(i) first (in respect of Demand Registrations), such Registrable Securities as to which prospectus qualification rights have been exercised by the Purchaser under Article 4 (the “Demand Securities”);

(ii) second, the securities that the Company proposes to distribute; and

(iii) third, (in respect of Incidental Registrations only) the total number of the Registrable Securities requested by the Purchaser to be included which in the good faith opinion of such lead underwriter can be sold without materially and adversely affecting the price or success of the offering, on a pro rata basis as between the Purchaser and the MOVA Seller based on the relation of the number of Fully-Diluted Shares represented by the Designated Registrable Securities specified in the notice, if any, given to the Company by the Purchaser accordance with Section 5.1 and by the Designated Registrable Securities (as defined in the MOVA Seller Registration Rights Agreement) specified in the notice, if any, given to the Company by the MOVA Seller in accordance with section 3.1 of the MOVA Seller Registration Rights Agreement, it being acknowledged and agreed by the Company that any Registrable Securities sought to be included in such offering by the Purchaser shall have priority over any securities sought to be included by any person other than the MOVA Seller having incidental registration rights.

(b) Without the prior written consent of the Purchaser, the Company shall not grant registration rights to any Person that are superior to, or otherwise inconsistent with, the rights granted to the Purchaser pursuant to this Agreement.

ARTICLE 8

REGISTRATION PROCEDURES

8.1 Procedures

Upon receipt of a Request or a notice from the Purchaser pursuant to Article 5, the Company shall use its best efforts to effect the Demand Registration or Incidental Registration, as the case may be. In particular, the Company shall:

(a) in the case of a Demand Registration, subject to Article 4, prepare and file (in any event within 45 days after the Request has been delivered to the Company) in the English language and, if required, French language, a preliminary prospectus under and in compliance with the Canadian Securities Acts in each jurisdiction in which the Registration is to be effected (and, if the Company is eligible to effect the Registration in the United States under a registration statement on Form F-10 and the Purchaser so requests, a registration statement on Form F-10) and such other related documents as may be necessary to be filed in connection with any such preliminary prospectus and shall, as soon as possible after any comments of the Canadian Securities Commissions have been satisfied with respect thereto, prepare and file under and in

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compliance with the Canadian Securities Acts a prospectus in the English language and, if required, French language and use its best efforts to cause a receipt to be issued for such prospectus as soon as possible and shall take all other steps and proceedings that may be necessary in order to qualify the Designated Registrable Securities under the applicable Canadian Securities Acts for distribution by registrants who comply with the relevant provisions of the Canadian Securities Acts and, if the Registration is to be effected in the United States by the filing of a registration statement on Form F-10, under the 1933 Act (provided that, before filing all such documents referred to in this Section 8.1(a), the Company shall furnish to the counsel to the Purchaser copies thereof and otherwise comply with Section 9.1);

(b) prepare and file with the applicable Canadian Securities Commissions in the jurisdictions in which the Registration is to be effected all such amendments and supplements to such preliminary prospectus and prospectus (and registration statement, if applicable) as may be necessary to comply with the provisions of the applicable Canadian Securities Acts with respect to the distribution of the Designated Registrable Securities, and to take such steps as are necessary to maintain the qualification of such prospectus (and registration statement, if applicable) until the earlier of (i) the time at which the distribution of the Designated Registrable Securities is completed and (ii) 42 days after the receipt for such prospectus has been issued by each of the applicable Canadian Securities Commissions (provided that, before filing such documents, the Company shall furnish to the counsel to the Purchaser copies thereof and otherwise comply with Section 9.1);

(c) furnish to the Purchaser such number of copies of such preliminary prospectus, prospectus and any amendment and supplement thereto (including any documents incorporated therein by reference) and such other relevant documents as the Purchaser may reasonably request in order to facilitate the disposition of the Designated Registrable Securities owned by the Purchaser;

(d) cause to be furnished to the Purchaser, the underwriter or underwriters of any offering and such other persons as the Purchaser may reasonably specify:

(iv) an opinion of counsel to the Company, subject to customary assumptions and qualifications, addressed to the Purchaser and the underwriter or underwriters of such offering and dated the closing date of the offering as to the Company’s legal status and capacity, the Company’s authorized capital, the valid issuance of the Designated Registrable Securities, the enforceability against the Company of any underwriting agreement to which the Company is a party, the qualification of the distributions of the Designated Registrable Securities and such other customary matters as the Purchaser or any such underwriter may reasonably require;

(v) a non-statutory “comfort” letter addressed to the underwriters dated the date of the prospectus and the closing date of the offering signed by the auditors of the Company in respect of the financial information contained in the prospectus;

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(vi) if the prospectus is filed in Quebec, opinions of Quebec counsel to the Company and the auditors of the Company addressed to the Purchaser and relating to the translation of the preliminary prospectus and the prospectus from the English language to the French language, such opinions being dated the dates of the preliminary prospectus and the prospectus; and

(vii) such corporate certificates as are customarily furnished in securities offerings,

and, in each case, covering substantially the same matters as are customarily covered in such documents in the relevant jurisdictions and such other matters as the Purchaser may reasonably request;

(e) immediately notify the Purchaser of the occurrence of any event during the period referred to in Section 8.1(b) as a result of which the preliminary prospectus or the prospectus, as then in effect, might include an untrue statement of material fact or would omit any fact that is required to be stated or that is necessary to make any statement therein not misleading in light of the circumstances in which it was made (other than facts or statements provided by the Purchaser or any underwriter);

(f) otherwise use its best efforts to comply with the Canadian Securities Acts (and, if the Registration is to be effected in the United States by the filing of a registration statement on Form F-10, the 1933 Act), the Toronto Stock Exchange and any other stock exchange and over-the-counter market on which the Designated Registrable Securities are then listed or quoted;

(g) cause all such Designated Registrable Securities to be listed on each securities exchange or over-the-counter market on which similar securities issued by the Company are then listed;

(h) enter into an underwriting agreement with the underwriters for the offering containing such representations and warranties by the Company and such other terms and provisions as are customarily contained in Canadian underwriting agreements with respect to secondary distributions and indemnification agreements consistent with Section 9.2 and such other documents on such terms and conditions as are customary in secondary offerings and take all such other actions as are permitted by law as the Purchaser or the underwriters reasonably request in order to expedite or facilitate the disposition of the Designated Registrable Securities by the Purchaser; and

(i) in the event of the issuance of any order or ruling suspending the effectiveness of a prospectus receipt or any order suspending or preventing the use of any prospectus or suspending the qualification or the distribution of any of the Designated Registrable Securities qualified by such prospectus for sale in any applicable Canadian provinces, the Company shall promptly notify the Purchaser of such event and use its best efforts promptly to obtain the withdrawal of such order or ruling. The Company shall promptly notify the Purchaser of the withdrawal of any such order or ruling. The Purchaser shall not (until further notice) effect sales of Designated Registrable Securities or deliver any prospectus in respect of such sale after

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notification by the Company of any order or ruling suspending the effectiveness of the prospectus or after notification by the Company under Section 6.1(e).

8.2 Other Sales

After receipt by the Company of a Request, the Company shall not, without the prior written consent of the Purchaser, authorize, issue or sell Restricted Voting Shares or Convertible Securities in any jurisdiction or agree to do so or publicly announce any intention to do so (except for securities issued pursuant to any legal obligation in effect on the date of the Request, pursuant to any security-based compensation arrangement or distribution reinvestment plan of the Company or as consideration paid to the vendors of any business or property directly or indirectly acquired by the Company) until the date which is 90 days after the later of (a) the date on which receipts are issued under all Canadian Securities Acts for the prospectus filed in connection with such Demand Registration and (b) the completion of the offering contemplated by the Demand Registration (unless the offering is not completed within such 90-day period).

8.3 Obligations of the Purchaser

In connection with any Demand Registration or Incidental Registration, the Purchaser shall:

(a) provide such information with respect to itself and the securities of the Company held by the Purchaser as may be reasonably required by the Company to comply with the applicable Canadian Securities Acts in each jurisdiction in which the Registration is to be effected;

(b) immediately notify the Company of the happening of any event during the period in Section 8.1(b), as a result of which the preliminary prospectus or the prospectus, as in effect, might include an untrue statement of material fact or would omit any fact that is required to be stated or is necessary to make any statement therein not misleading in light of the circumstances in which it was made insofar as such facts or statements relate to or were provided by the Purchaser; and

(c) comply with any applicable published policies, rules and regulations of the applicable Canadian Securities Commissions and any stock exchange and over-the-counter market on which the Registrable Securities are then listed or quoted.

8.4 Obligations of the Company.

The Company covenants and agrees to use its reasonable commercial efforts to make all filings required under the Canadian Securities Acts to maintain the Company’s status as a “reporting issuer” (or analogous status) under such legislation and maintain the listing and posting for trading of the Restricted Voting Shares on the Toronto Stock Exchange; provided that the foregoing covenant shall not restrict the right of the Company to undertake a merger, sale or similar transaction involving the sale of all or substantially all of the Restricted Voting Shares or assets of the Company as a result of which the Company ceases to be a “reporting issuer” (or hold analogous status) and/or ceases to maintain the listing of the Restricted Voting Shares, provided that, for greater certainty Section 2.2, if otherwise applicable, shall continue to apply to

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such transaction. For greater certainty, nothing in this Agreement shall require the Company to (a) effect any Registration in the United States unless it is eligible to effect such registration by filing a registration statement on Form F-10 or (b) become eligible to register securities on Form F-10.

The Company shall not, without the prior written consent of the Purchaser, grant to any person registration or prospectus qualification rights or agree to register or qualify a prospectus of any kind or nature with respect to outstanding Restricted Voting Shares or other securities of the Company if such rights would rank pari passu with or have a priority over the rights granted to the Purchaser pursuant to this Agreement, whether in terms of the number of Restricted Voting Shares or other securities of the Company which the Purchaser may include in any prospectus qualification, the timing of any registration or prospectus qualification of Restricted Voting Shares or other securities of the Company, the rights of the Purchaser to demand registration or prospectus qualification of Restricted Voting Shares held by them at the time requested by them, or in any other material respect.

ARTICLE 9

DUE DILIGENCE; INDEMNIFICATION

9.1 Preparation; Reasonable Investigation.

In connection with the preparation and filing of any preliminary prospectus or prospectus as herein contemplated, the Company shall give the Purchaser, its underwriters, and their respective counsel, auditors and other representatives, the opportunity to participate in the preparation of such documents and each amendment thereof or supplement thereto, and shall insert therein such material, furnished to the Company in writing, which in the reasonable judgment of the Purchaser and their counsel should be included. Subject to the entering into of confidentiality agreements satisfactory to the Company, acting reasonably, the Company shall give the Purchaser and the underwriters such reasonable and customary access to the books and records of the Company and its subsidiaries and such reasonable and customary opportunities to discuss the business of the Company with its officers and auditors as shall be necessary in the reasonable opinion of the Purchaser, such underwriters and their respective counsel. The Company shall cooperate with the Purchaser and its underwriters in the conduct of all reasonable and customary due diligence which the Purchaser, such underwriters and their respective counsel may reasonably require in order to conduct a reasonable investigation for purposes of establishing a due diligence defence as contemplated by the Canadian Securities Acts and in order to enable such underwriters to execute the certificate required to be executed by them for inclusion in each such document.

9.2 Indemnification.

(a) By the Company. The Company agrees to indemnify, to the extent permitted by law, the Purchaser and the partners, members, officers and directors of the Purchaser and its affiliates and each person, if any, who participates as an underwriter in the offering or sale of the Designated Registrable Securities, their respective officers and directors and each person who controls such underwriter (within the meaning of any applicable Canadian Securities Act) against all losses (excluding loss of revenues or profits), claims, damages, liabilities and expenses arising

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out of or based upon (i) any information or statement contained in the preliminary prospectus, the prospectus or any amendment thereto which at the time and in light of the circumstances under which it was made contains a misrepresentation (as defined in the applicable Canadian Securities Act); (ii) any omission to state in the preliminary prospectus or the prospectus any fact that was required to be stated in such document or necessary to make any statement in such document not misleading at the time and in light of the circumstances under which it was made; (iii) any order made or inquiry, investigation or proceedings commenced or threatened by any applicable Canadian Securities Commission, the SEC, any court or other competent authority based upon any untrue statement or omission or any misrepresentation in the preliminary prospectus, the prospectus or any amendment thereto or based upon any failure to comply with applicable securities laws (other than any failure by the Purchaser or the underwriters) preventing or restricting the trading in or the sale and distribution of the Designated Registrable Securities pursuant to a Demand Registration; and (iv) non-compliance by the Company with any of the Canadian Securities Acts (or the 1933 Act, in the case of a Registration under that act) in connection with a Demand Registration and the distribution effected thereunder, except insofar as any information or statement referred to in clause (i), (ii) or (iii) of this Section 9.2(a) has been furnished in writing to the Company by the Purchaser pursuant to Section 9.2(b) or the underwriters expressly for use therein or the non-compliance is caused by the Purchaser’s or any underwriter’s failure to deliver to a purchaser of Designated Registrable Securities a copy of the prospectus or any amendments or supplements thereto after the Company has furnished Purchaser with a sufficient number of copies of the same.

(b) By Purchaser. In connection with any Registration of Designated Registrable Securities, the Purchaser shall furnish to the Company in writing such information with respect to itself and the securities of the Company held by the Purchaser as may be reasonably required by the Company to comply with the applicable Canadian Securities Acts in each jurisdiction in which the Registration is to be effected and, to the extent permitted by law, shall indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of any Canadian Securities Act) against any losses (excluding loss of revenues or profits), claims, damages, liabilities and expenses arising out of or based upon: (i) any untrue statement of material fact contained in the prospectus or any amendment thereof or supplement thereto or any omission of a material fact required to be stated therein or necessary to make any statement therein not misleading, but only to the extent that such untrue statement, or omission is contained in any information so furnished in writing by the Purchaser pursuant to this Section 9.2(b); or (ii) any default by the Purchaser in respect of its obligations under Section 8.3(c).

(c) Procedure. Any Person entitled to indemnification hereunder shall: (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification; and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defence of such claim with counsel satisfactory to the indemnified party, acting reasonably. If such defence is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld or delayed). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any

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indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party, without the express written consent of an indemnified party, may settle any claims.

(d) Survival; Contribution. The indemnification provided for under this Agreement shall survive the expiry of this Agreement and shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and shall survive any transfer of securities pursuant thereto. In the event the indemnification is applicable in accordance with its terms but is unavailable in whole or in part for any reason under this Section 9.2, the Company and the Purchaser shall contribute to the aggregate of all losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative benefits received by the Company from the agreements being entered into between the Purchaser and the Company contemporaneously herewith and benefits received by the Purchaser from the distribution of Designated Registrable Securities and the relative fault of the Company and the Purchaser in connection with the event giving rise to liability.

ARTICLE 10

GENERAL PROVISIONS

10.1 Notices

Any notice, consent, waiver, direction or other communication required or permitted to be given under this Agreement by a party shall be in writing and may be given by delivering same or sending same by facsimile transmission or by delivery addressed to the party to which the notice is to be given at its address for service herein. Any notice, consent, waiver, direction or other communication aforesaid shall, if delivered, be deemed to have been given and received on the date on which it was delivered to the address provided herein (if a business day or, if not, on the next succeeding business day) and if sent by facsimile transmission, be deemed to have been given and received at the time of receipt (if a business day or, if not, on the next succeeding business day) unless actually received after 4:00 p.m. (Toronto time) at the point of delivery, in which case it shall be deemed to have been given and received on the next business day.

The address for service for each of the parties hereto shall be as follows:

(a) If to the Company:

Patheon Inc.

7070 Mississauga Road

Suite 350

Mississauga, ON L5N 7J8

Fax:                    905-812-6705

Attention:           Chief Executive Officer

With a copy (which shall not constitute notice) to:

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Davies Ward Phillips & Vineberg LLP

44^th Floor, 1 First Canadian Place

Toronto, ON M5X 1B1

Fax:                416-863-0871

Attention:       Cameron M. Rusaw and Patrick E. Moyer

(b) If to the Purchaser:

c/o JLL Partners, Inc.

450 Lexington Avenue

Suite 3350

New York, NY 10017

Fax:                212-286-8626

Attention:       Ramsey Frank

With a copy (which shall not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom LLP

One Rodney Square

Wilmington, DE 19801

Facsimile:                302-651-3001

Attention:                Robert B. Pincus, Esq.

A party may change its address for service from time to time by giving notice to the other party in accordance with this Section 10.1.

10.2 Assignment of Registration Rights

All or a portion of the rights to cause the Company to register Registrable Securities pursuant to this Agreement may be assigned (but only with all related obligations) by the Purchaser to a transferee of Registrable Securities representing at least 6,250,000 Fully-Diluted Shares; provided, however, that (w) the Company must be furnished with prior written notice of the name and address of such transferee and the Registrable Securities with respect to which such registration rights are being transferred; (x) such transferee shall agree in writing to be bound by and subject to the terms and conditions of this Agreement; (y) after such transfer the transferee shall be required to hold the number of Registrable Securities specified in Section 6.2 hereof to exercise rights under Article 4 or Article 5 hereof, as applicable; and (z) in no event shall the assignment of registration rights pursuant to this Section 10.2 increase the aggregate number of Demand Registrations that can be exercised pursuant to Article 5.

10.3 Severability

If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms,

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provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated and the parties shall negotiate in good faith to modify the Agreement to preserve each party’s anticipated benefits under this Agreement.

10.4 Amendment

This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.

10.5 Waiver

At any time prior to the Effective Time, any party hereto may (a) extend the time for the performance of any of the obligations or other acts of any other party thereto or (b) waive compliance with any of the agreements of any other party or with any conditions to its own obligations, in each case only to the extent such obligations, agreements and conditions are intended for its benefit.

10.6 Entire Agreement, Assignment and Governing Law

(a) This Agreement and the Confidentiality and Standstill Agreement (together with all other documents and instruments referred to herein) constitute the entire agreement and supersede all other prior agreements and undertakings, both written and oral, among the parties with respect to the subject matter hereof and thereof. Notwithstanding the foregoing, in the event of any inconsistency between the terms and provisions of this Agreement and those contained in the Confidentiality and Standstill Agreement, the terms and provisions of this Agreement shall prevail.

(b) This Agreement: (i) shall not be assigned by operation of law or otherwise; and (ii) shall be governed in all respects, including validity, interpretation and effect, by the laws of the Province of Ontario and the laws of Canada applicable therein, without giving effect to the principles of conflict of laws thereof. Each party hereto irrevocably attorns to the non-exclusive jurisdiction of the courts of such province.

10.7 Construction

The parties hereto acknowledge that their respective legal counsel have reviewed and participated in settling the terms of this Agreement and that any rule of construction to the effect that any ambiguity is to be resolved against the drafting party, including the rule or doctrine of contra proferentum, shall not be applicable in the interpretation of this Agreement.

10.8 Counterparts

This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce more than one counterpart.

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IN WITNESS WHEREOF, the parties have executed this Agreement.

PATHEON INC.
By:	/s/ Riccardo Trecroce
	Name: Riccardo Trecroce
	Title: Chief Executive Officer

JLL PATHEON HOLDINGS, LLC.
By:	/s/ Ramsey A. Frank
	Name: Ramsey A. Frank
	Title: Authorized Person

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EX-10.4

Exhibit 10.4

AGREEMENT

THIS AGREEMENT made the 4th day of September, 2008.

B E T W E E N:

PATHEON INC.,

a corporation existing under the laws of Canada,

(hereinafter called the “Company”)

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JLL PATHEON HOLDINGS, LLC,

a limited liability company existing under the laws of the

State of Delaware,

(hereinafter called the “Shareholder”).

WHEREAS, on April 27, 2007, the Company issued and sold, and the Shareholder subscribed for, 150,000 Class I preferred shares, Series C of the Company (the “Convertible Preferred Shares”) and 150,000 Class I preferred shares, Series D of the Company (together with the Convertible Preferred Shares, the “Preferred Shares”);

AND WHEREAS, upon closing of the issue and sale of the Preferred Shares, the Company and the Shareholder entered into an Investor Agreement dated April 27, 2007 (the “Investor Agreement”);

AND WHEREAS the Shareholder has agreed to waive the application of certain provisions attaching to the Convertible Preferred Shares in consideration for which the Company has agreed to issue certain Restricted Voting Shares (as defined below) to the Shareholder and to provide a limited waiver of the standstill provisions contained in the Investor Agreement, in each case on the terms and subject to the conditions contained in this Agreement;

AND WHEREAS the transactions contemplated hereby have been reviewed by a special committee of the board of directors of the Company (the “Special Committee”);

NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party, the parties hereto hereby covenant and agree as follows:

ARTICLE 1

INTERPRETATION

1.1 Definitions

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:

“affiliate” has the meaning given to that term in NI 45-106;

“business day” means any day other than a Saturday or Sunday or statutory holiday in Toronto or New York;

“Closing” means the closing contemplated by this Agreement in accordance with the provisions of this Agreement;

“Closing Date” means the second business day after all of the conditions in Section 6.1 and 6.2 are satisfied or such later date as the Company and the Shareholder may agree upon;

“Closing Time” means 10:00 a.m. (Toronto time) on the Closing Date, or such other time as the Company and Shareholder may agree upon;

“Consideration Shares” has the meaning set out in Section 2.2;

“Convertible Preferred Shares” has the meaning set out in the first recital to this Agreement;

“Investor Agreement” has the meaning set out in the second recital to this Agreement;

“Mandatory Redemption Provision” has the meaning set out in Section 2.1;

“Maturity Date” has the meaning set out in section 1.1 of schedule A to the articles of amendment dated April 26, 2007 of the Company;

“NI 45-106” means National Instrument 45-106 of the Canadian Securities Administrators;

“person” includes any individual, firm, partnership, joint venture, venture capital fund, association, trust, trustee, executor, administrator, legal personal representative, estate, group, corporation, unincorporated association or organization, governmental authority, syndicate or other entity, whether or not having legal status;

“Restricted Voting Shares” means the restricted voting shares in the capital of the Company;

“Transfer” means any sale, exchange, transfer, assignment, gift, pledge, encumbrance, hypothecation, alienation, grant of a security interest or other transaction, whether

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voluntary, involuntary or by operation of law, by which the legal or beneficial ownership of, or any security or other interest in, such security passes from one person to another person or to the same person in a different capacity, whether or not for value, including to an affiliate of the Shareholder;

“TSX” means the Toronto Stock Exchange; and

“Waiver Amendment” has the meaning set out in Section 2.4.

1.2 Construction

In this Agreement, unless otherwise expressly stated or the context otherwise requires:

(a) the division of this Agreement into Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement;

(b) the terms, “this Agreement”, “herein”, “hereby”, “hereof” and “hereunder” and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof and include any agreement or instrument supplemental or ancillary hereto;

(c) references to Articles, Sections and Schedules are to the specified Articles, Sections of or Schedules to this Agreement;

(d) words importing the singular include the plural and vice versa and words importing any gender shall include the masculine, feminine and neutral genders; and

(e) the words “includes” and “including”, when following any general term or statement, are not to be construed as limiting the general term or statement to the specific items or matters set forth or to similar items or matters, but rather as referring to all other items or matters that could reasonably fall within the broadest possible scope of the general term or statement,

ARTICLE 2

MANDATORY REDEMPTION WAIVER

2.1 Mandatory Redemption Waiver

Subject to the satisfaction or waiver of the conditions to closing set forth in Section 6.1 and 6.2, effective as of and from the Closing, (i) the Shareholder agrees that, notwithstanding section 7.1(b) of schedule A to the certificate and articles of amendment of the Company dated April 26, 2007 and Schedule A of the Purchase Agreement dated as of March 1, 2007, , as amended, between the Shareholder and the Company (the “Mandatory Redemption Provision”), the Company shall not be required to redeem the Shareholder's Convertible Preferred Shares on the Maturity Date, and hereby irrevocably waives all of its rights pursuant to the Mandatory Redemption Provision and (ii) the Shareholder agrees that it will not assert in any

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manner any claim against the Company or otherwise that it is entitled to have its Convertible Preferred Shares redeemed under the Mandatory Redemption Provision; provided that such waiver is without prejudice to any right of redemption or other right the Shareholder may have under any other provision of the Preferred Shares.

2.2 Issuance of Restricted Voting Shares

As consideration for the waiver contained in Section 2.1, the Company shall issue and deliver to the Shareholder at Closing 400,000 Restricted Voting Shares (the “Consideration Shares”).

2.3 Withholding Rights

The Company shall be entitled to deduct and withhold from any consideration payable to the Shareholder hereunder such amounts as the Company determines, acting reasonably, upon the advice of the Company's outside counsel, are required to be deducted and withheld with respect to such payment under the Income Tax Act (Canada) (the “Tax Act”) or any applicable provision of federal, provincial, territorial, or foreign tax law, in each case, as amended. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to the Shareholder, provided that such withheld amounts are actually remitted to the appropriate taxing authority, including any amount that the Company is entitled to deduct and withhold for purposes of section 116 of the Tax Act. To the extent that the Company at any time determines that withholding is required in connection with any of the transactions contemplated by this Agreement, the Company shall confer with the Shareholder regarding the need for such withholding and will reasonably cooperate with the Shareholder in an effort to mitigate any such withholding requirements. The Shareholder hereby agrees to indemnify and hold harmless the Company in respect of any withholding taxes that the Company becomes liable to pay (including but not limited to any liability for taxes arising under or pursuant to sections 116, 215 or 227 of the Tax Act) as a result of the transactions contemplated herein, including the issuance of the Consideration Shares to the Shareholder, together with any interest assessed against the Company in respect of such indemnified taxes that accrues from and after the date that the Shareholder receives notice of the assessment of any such taxes. For the avoidance of doubt, the Company shall not be entitled to indemnification from the Shareholder under this Section 2.3 with respect to penalties or interest, except as expressly set forth above.

2.4 Shareholder Approval

The Company may, at its option, propose, at any future meeting or meetings of shareholders of the Company, the amendment of the articles of the Company to delete the Mandatory Redemption Provision and to make such other incidental amendments as may be necessary or desirable to give full effect to such deletion (the “Waiver Amendment”). If the Company does so propose the Waiver Amendment, subject to the satisfaction or waiver of the conditions to closing set forth in Section 6.1 and 6.2, effective as of and from the Closing, the Shareholder shall, and shall cause its affiliates to, support such proposal and vote all shares of the Company held by it or them, as the case may be, in favour of any shareholder approval of the Waiver Amendment.

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2.5 Transfers

The Shareholder shall not Transfer any of its Convertible Preferred Shares to any person (a “Transferee”) at any time prior to the time when the Waiver Amendment is effective, unless this Agreement has been terminated or the Transferee first enters into an agreement with the Company, in form and substance satisfactory to the Company, acting reasonably, providing that the Transferee agrees to be bound by Sections 2.1, 2.3 and 2.5, and this Section 2.4 as if the Transferee were the Shareholder; provided, in either case, that any such Transfer shall comply with all transfer restrictions contained in the articles of the Corporation that are applicable to such Transfer.

2.6 Share Exchange

Subject to the satisfaction or waiver of the conditions to closing set forth in Section 6.1 and 6.2, effective as of and from the Closing, if a Waiver Amendment has not become effective prior to the Maturity Date, the Company may, at its option, require the Shareholder to surrender and exchange, prior to the Maturity Date, all of the Convertible Preferred Shares held by it for shares of another series of Class I preferred shares of the Company having an aggregate liquidation preference equal to the aggregate liquidation preference of the Convertible Preferred Shares surrendered for exchange and having the same terms as such Convertible Preferred Shares except for the deletion of the Mandatory Redemption Provision. The Company may exercise its option to require such exchange prior to the Maturity Date by written notice to the Shareholder at least 10 days prior to the Maturity Date.

ARTICLE 3

STANDSTILL WAIVER

3.1 Standstill Waiver

The Company hereby irrevocably waives section 3.1(a) of the Investor Agreement to the extent required to permit the Shareholder to acquire through the facilities of the TSX up to 1,256,929 Restricted Voting Shares during the period from the Closing Date to the first anniversary of the Closing Date. All other provisions of article 3 of the Investor Agreement shall remain in full force and effect.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Shareholder as follows, and acknowledges that the Shareholder is relying upon these representations and warranties in connection with the entering into of this Agreement:

4.1 Organization

The Company is a corporation validly existing under the Canada Business Corporations Act.

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4.2 Authority and Non-Conflict

The Company has the requisite power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated by this Agreement have been duly authorized by the board of directors of the Company and no other proceedings on the part of the Company are necessary to authorize this Agreement and the performance by the Company of its obligations hereunder. This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable by the Shareholder against the Company in accordance with its terms, subject, however, to limitations with respect to enforcement imposed by law in connection with bankruptcy, insolvency or similar proceedings and to the extent that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought. The execution and delivery by the Company of this Agreement and the performance by the Company of its obligations hereunder do not violate, conflict with or result in a breach, in any material respect, of any provision of (a) its articles or the articles or other constating documents of the Company or (b) any law, regulation, order, judgment or decree to which it is subject or by which it is bound.

4.3 Consideration Shares

The Consideration Shares, when issued by the Company in accordance with the terms hereof, will be duly authorized, validly issued fully paid and non-assessable Restricted Voting Shares.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER

The Shareholder represents and warrants to the Company as follows, and acknowledges that the Company is relying upon these representations and warranties in connection with the entering into of this Agreement:

5.1 Organization

The Shareholder is validly existing under the laws of its jurisdiction of the State of Delaware.

5.2 Authority and Non-Conflict

The Shareholder has the requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by the Shareholder and the performance by it of its obligations hereunder have been duly authorized by its board of directors and no other corporate proceedings on its part are necessary to authorize this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered by the Shareholder and constitutes a legal, valid and binding obligation of the Shareholder, enforceable by the Company against the Shareholder in accordance with its terms, subject, however, to limitations with respect to enforcement imposed by law in connection with bankruptcy, insolvency or similar proceedings

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and to the extent that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought. The execution and delivery by the Shareholder of this Agreement and the performance by it of its obligations hereunder do not violate, conflict with or result in a breach of any provision of (a) certificate of incorporation or by-laws or other applicable constating documents of the Shareholder or (b) any law, regulation, order, judgment or decree to which it is subject or by which the Shareholder is bound.

5.3 Securities Law Matters

(a) The Shareholder has had access to such financial and other information, if any, concerning the Company as it has considered necessary in connection with its investment decision to acquire the Consideration Shares;

(b) The Shareholder has not purchased the Consideration Shares as a result of any general solicitation or general advertising, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television or other form of electronic display, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;

(c) No prospectus or offering memorandum (within the meaning of Ontario Securities Laws) has been delivered to or summarized for or seen by the Shareholder in connection with the purchase and sale of the Consideration Shares and the Shareholder is not aware of any prospectus or offering memorandum having been prepared by the Company;

(d) The Shareholder acknowledges it is solely responsible for obtaining such tax, investment, legal and other professional advice, if any, as it considers appropriate in connection with the execution, delivery and performance by it of this Agreement and the transactions contemplated hereunder (including the resale and transfer restrictions applicable to the Consideration Shares and Common Shares referred to herein);

(e) The Shareholder understands that a prospectus has not and will not be filed under Ontario Securities Laws to qualify the distribution of the Consideration Shares, and that the Consideration Shares and Common Shares to be issued upon the exercise or deemed exercise of the Consideration Shares have not been and will not be registered under the 1933 Act or any applicable state securities laws;

(f) The Shareholder is an “accredited investor” as defined in Rule 501 of Regulation D under the 1933 Act).

(g) the Shareholder agrees that if it decides to offer, sell or otherwise transfer any of the Consideration Shares, such securities may be offered, sold or otherwise transferred only (1) to the Company, (2) outside the United States in accordance with Rule 904 of Regulation S under the 1933 Act, (3) inside the United States pursuant to an exemption from registration under the 1933 Act or (4) under an effective registration statement under the 1933 Act, and in each case in accordance with any applicable state securities laws in the United States or securities laws of any other applicable jurisdiction; provided that, if the Consideration Shares are being sold under (2) above, the legend set out in Schedule A may be removed by providing a declaration to the Computershare Trust Company of Canada to the effect set forth in Schedule B, or in such other

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form Computershare Trust Company of Canada may from time to time prescribe; provided, further, that if any such Consideration Shares are being sold under (3) above, the legend may be removed by delivery to Computershare Trust Company of Canada of an opinion of counsel of recognized standing reasonably satisfactory to the Company to the effect that such legend is no longer required under applicable requirements of the 1933 Act or state securities laws;

(h) The Shareholder understands and acknowledges that upon the original issuance thereof, and until such time as the same is no longer required under applicable requirements of the 1933 Act or applicable state securities laws, certificates representing the Consideration Shares, and all certificates issued in exchange therefor or in substitution thereof, will bear a legend to the effect of the resale restrictions set forth in Schedule A;

(i) The Consideration Shares are being acquired for the Shareholder's own account not with a view to resale or distribution in violation of the 1933 Act;

(j) The Shareholder is acquiring the Consideration Shares as principal and is an “accredited investor” for the purposes of NI 45-106; and

(k) The Shareholder understands and acknowledges:

(a) that prior to the four month anniversary of the date of issuance of the Consideration Shares, the Consideration Shares are subject to statutory “hold periods” during which they may not be resold, except pursuant to a prospectus or further statutory exemption from the applicable prospectus and registration requirements under the Ontario Securities Laws, or unless an appropriate discretionary order is obtained pursuant to applicable Ontario Securities Laws; and

(b) that upon the original issuance thereof, and until such time as the same is no longer required under applicable requirements of Ontario Securities Laws, certificates representing the Consideration Shares, and all certificates issued in exchange therefor or in substitution thereof, will bear a legend to the effect of the resale restrictions set forth in Schedule A.

ARTICLE 6

CONDITIONS OF CLOSING

6.1 Conditions of Closing in Favour of the Company

The completion of the transactions contemplated by this Agreement is subject to the following terms and conditions for the exclusive benefit of the Company, to be fulfilled or performed at or prior to the Closing Time:

(a) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or enforced by any court or other tribunal or governmental entity that prohibits the consummation of the transactions contemplated hereby, and shall continue to be in effect.

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(b) Representations and Warranties. The representations and warranties of the Shareholder contained in this Agreement shall be true and correct in all material respects at the Closing Time, with the same force and effect as if such representations and warranties were made at and as of such time and a certificate of a senior officer of the Shareholder, dated the Closing Date to that effect shall have been delivered to the Shareholder, such certificate to be in form and substance satisfactory to the Company, acting reasonably.

(c) Covenants. The Shareholder shall have complied, in all material respects, with all of its covenants and agreements set forth in this Agreement.

(d) No Violation of Material Agreements. The execution and delivery by the Company and the Shareholder of this Agreement, the performance by the Company and the Shareholder of their respective obligations hereunder and the implementation of the Waiver Amendment shall have been determined by the Company, acting reasonably, not to violate, conflict with or result in a breach of any agreement or indenture material to the Company and its subsidiaries, taken as a whole.

(e) TSX Approval. The TSX shall have accepted notice of the issuance of the Consideration Shares and conditionally approved the listing of the Consideration Shares subject only to customary post-closing conditions, it being understood and agreed that the Company shall use its reasonable best efforts to obtain conditional approval as soon as practicable after the date hereof.

Any condition contained in this Section 6.1 may be waived in whole or in part by the Company without prejudice to any claims it may have for breach of covenant, representation or warranty.

6.2 Conditions of Closing in Favour of the Shareholder

The completion of the transactions contemplated by this Agreement is subject to the following terms and conditions for the exclusive benefit of the Shareholder, to be fulfilled or performed at or prior to the Closing Time:

(f) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or enforced by any court or other tribunal or governmental entity that prohibits the consummation of the transactions contemplated hereby, and shall continue to be in effect.

(g) Representations and Warranties. The representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects at the Closing Time, with the same force and effect as if such representations and warranties were made at and as of such time and a certificate of a senior officer of the Company, dated the Closing Date to that effect shall have been delivered to the Purchaser, such certificate to be in form and substance satisfactory to the Shareholder, acting reasonably.

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(h) Covenants. The Company shall have complied, in all material respects, with all of its covenants and agreements set forth in this Agreement.

(i) No Violation of Material Agreements. The execution and delivery by the Company and the Shareholder of this Agreement, the performance by the Company and the Shareholder of their respective obligations hereunder and the implementation of the Waiver Amendment shall have been determined by the Shareholder, acting reasonably, not to violate, conflict with or result in a breach of any agreement or indenture material to the Company and its subsidiaries, taken as a whole.

(j) TSX Approval. The TSX shall have accepted notice of the issuance of the Consideration Shares and conditionally approved the listing of the Consideration Shares subject only to customary post-closing conditions.

Any condition contained in this Section 6.2 may be waived in whole or in part by the Shareholder without prejudice to any claims it may have for breach of covenant, representation or warranty.

ARTICLE 7

TERMINATION

7.1 Termination

This Agreement may be terminated at any time prior to the Closing:

(k) by mutual written consent of the Company and the Shareholder;

(l) by either the Company or the Shareholder, If the transactions contemplated by this Agreement have not been consummated by October 31, 2008;

(m) by the Company upon a breach of any representation, warranty, covenant or agreement on the part of the Shareholder set forth in this Agreement such that the conditions set forth in Section 6.1(b) or Section 6.1(c), respectively, would not be satisfied as of the time of such breach and in any such case such breach shall be incapable of being cured or shall not have been cured in all material respects within thirty (30) days after written notice thereof shall have been received by the Shareholder; and

(n) by the Shareholder upon a breach of any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement such that the conditions set forth in Section 6.2(b) or Section 6.2(c), respectively, would not be satisfied as of the time of such breach and in any such case such breach shall be incapable of being cured or shall not have been cured in all material respects within thirty (30) days after written notice thereof shall have been received by the Company.

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ARTICLE 8

CLOSING ARRANGEMENTS

8.1 Place of Closing

The Closing shall take place at the Closing Time at the offices of Davies Ward Phillips & Vineberg LLP, 1 First Canadian Place, 44^th Floor, Toronto, Ontario, Canada, M5X 1B1, or at such other place as may be mutually agreed upon by the Company and the Shareholder.

8.2 Issuance of Consideration Shares

At the Closing Time, upon fulfillment of all of the conditions set out in Article 6 which have not been waived by the Company or the Shareholder, the Company shall issue and deliver to the Shareholder the Consideration Shares.

8.3 Convertible Preferred Share Legend

At the Closing Time, the Shareholder shall surrender to the Company the original share certificate representing the Convertible Preferred Shares, and the Company shall deliver to the Shareholder a replacement certificate representing such Convertible Preferred Shares bearing the following legend:

“THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF AN AGREEMENT ENTERED INTO BETWEEN PATHEON INC. AND THE HOLDER, WHICH AGREEMENT CONTAINS RESTRICTIONS ON THE RIGHT TO TRANSFER, PLEDGE OR OTHERWISE DEAL WITH SUCH SECURITIES. NOTICE OF SUCH RESTRICTIONS AND THE OTHER PROVISIONS OF SUCH AGREEMENT IS HEREBY GIVEN.

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SAID ACT.”

ARTICLE 9

GENERAL PROVISIONS

9.1 Notices

Any notice, consent, waiver, direction or other communication required or permitted to be given under this Agreement by a party shall be in writing and may be given by delivering same or sending same by facsimile transmission or by delivery addressed to the party to which the notice is to be given at its address for service herein. Any notice, consent, waiver,

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direction or other communication aforesaid shall, if delivered, be deemed to have been given and received on the date on which it was delivered to the address provided herein (if a business day or, if not, on the next succeeding business day) and if sent by facsimile transmission, be deemed to have been given and received at the time of receipt (if a business day or, if not, on the next succeeding business day) unless actually received after 4:00 p.m. (Toronto time) at the point of delivery, in which case it shall be deemed to have been given and received on the next business day.

The address for service for each of the parties hereto shall be as follows:
If to the Company:
Patheon Inc.
7070 Mississauga Road
Suite 350
Mississauga, ON L5N 7J8
Fax:	905-812-6705
Attention:	Chief Executive Officer
	General Counsel, North America and Corporate Secretary
With a copy (which shall not constitute notice) to:
Davies Ward Phillips & Vineberg LLP
44th Floor, 1 First Canadian Place
Toronto, ON M5X 1B1
Fax:	416-863-0871
Attention:	William N. Gula
If to the Shareholder:
c/o JLL Partners, Inc. 450 Lexington Avenue Suite 3350 New York, NY 10017
Fax:	212-286-8626
Attention:	Ramsey Frank
With a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP One Rodney Square Wilmington, DE 19801 Fax: (302) 651-3001
Attention:	Robert B. Pincus

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Steven J. Daniels

A party may change its address for service from time to time by giving notice to the other party in accordance with this Section 9.1.

9.2 Severability

If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated and the parties shall negotiate in good faith to modify the Agreement to preserve each party's anticipated benefits under this Agreement.

9.3 Amendment

This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.

9.4 Entire Agreement, Assignment and Governing Law

(a) This Agreement constitutes the entire agreement and supersede all other prior agreements and undertakings, both written and oral, among the parties with respect to the subject matter hereof and thereof.

(b) This Agreement: (i) shall not be assigned by operation of law or otherwise; and (ii) shall be governed in all respects, including validity, interpretation and effect, by the laws of the Province of Ontario and the laws of Canada applicable therein, without giving effect to the principles of conflict of laws thereof. Each party hereto irrevocably attorns to the non-exclusive jurisdiction of the courts of such province.

9.5 Construction

The parties hereto acknowledge that their respective legal counsel have reviewed and participated in settling the terms of this Agreement and that any rule of construction to the effect that any ambiguity is to be resolved against the drafting party, including the rule or doctrine of contra proferentum, shall not be applicable in the interpretation of this Agreement.

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9.6 Effect of Certain Breaches

In the event that, at any time after the date hereof (whether before or after the Closing Date), the execution and delivery by the Company and the Shareholder of this Agreement, the performance by the Company and the Shareholder of their respective obligations hereunder and the implementation of the Waiver Amendment shall have been mutually determined by the Company and the Shareholder, acting reasonably, to violate, conflict with or result in a breach of any agreement or indenture material to the Company and its subsidiaries, taken as a whole, this Agreement and the transactions contemplated hereby shall be void ab initio and shall be unwound by the Company and the Shareholder, acting reasonably.

9.7 Counterparts

This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce more than one counterpart.

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IN WITNESS WHEREOF, the parties have executed this Agreement.

PATHEON INC.
By:	(signed) Wesley P. Wheeler
	Name: Wesley P. Wheeler
	Title: Chief Executive Officer
JLL PATHEON HOLDINGS, LLC
By:	(signed) Ramsey Frank
	Name: Ramsey Frank
	Title: Managing Director

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SCHEDULE A

LEGEND

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [    ], 2008 [4 months and 1 day after the date of issue].

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SAID ACT.”

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SCHEDULE B

CERTIFICATE FOR LEGEND REMOVAL

TO:	Computershare Trust Company of Canada
	as registrar and transfer agent for Restricted Voting Shares of Patheon Inc.

The undersigned:

• acknowledges that the sale of the securities of Patheon Inc. to which this declaration relates is being made in reliance on Rule 904 of Regulation S (“Regulation S”) under the United States U.S. Securities Act of 1933, as amended (the “1933 Act”), and

• certifies that:

1. it is not an affiliate of Patheon Inc. (as defined in Rule 405 under the 1933 Act);

2. the offer of the securities was not made to a person in the United States and either (A) at the time the buy order was originated, the buyer was outside the United States, or the seller and any person acting on its behalf reasonably believe that the buyer was outside the United States, or (B) the transaction was executed on or through the facilities of the Toronto Stock Exchange or any other designated offshore securities market, and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States; and

3. neither the seller nor any affiliate of the seller nor any person acting on any of their behalves has engaged or will engage in any “directed selling efforts” (as such term is defined in Regulation S) in the United States in connection with the offer and sale of the securities.

Unless otherwise indicated, terms used in this declaration have the meanings given to them in Regulation S.

Dated:	By:
		Name:
		Title:

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EX-10.5

Exhibit 10.5

[PATHEON]

November 29, 2009

JLL Patheon Holdings, LLC

c/o JLL Partners, Inc.

450 Lexington Avenue, Suite 3350

New York, NY 10017

Attention: Paul S. Levy, Ramsey A. Frank and Thomas S. Taylor

Patheon Inc.

This letter agreement sets out the terms and conditions on which Patheon Inc. (“Patheon”), the members of the Special Committee of the Board of Directors of Patheon, JLL Patheon Holdings, LLC (“JLL”) and the nominees of JLL to the Board of Directors of Patheon have agreed to settle the currently pending litigation among them (the “Settlement”).

The terms of the Settlement are set out in the term sheet attached as Schedule A to this agreement.

The parties agree that this agreement is subject to obtaining all necessary court approvals of the Settlement. If such approvals are not obtained prior to December 11, 2009, this agreement shall be null and void.

Subject to the conditions set out in Schedule A to this agreement, each party hereto agrees to use its commercial best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as is practicable and to otherwise give effect to the matters contemplated by this agreement, including obtaining any necessary court approvals of the Settlement prior to December 11, 2009. Each of the parties hereto shall reasonably cooperate with the other party in taking such actions.

This agreement is intended to be a binding agreement, enforceable against each of the parties hereto. In the event of any inconsistency between the terms and provisions of this agreement and those contained in the Investor Agreement dated April 27, 2007 between Patheon and JLL, the terms and provisions of this Agreement shall prevail.

If any provision of this agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, all other provisions of this agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto.

This agreement shall be construed, interpreted and enforced in accordance with, and the respective rights and obligations of the parties hereto shall be governed by, the laws of the Province of Ontario. Each party hereto irrevocably attorns to the non-exclusive jurisdiction of the courts of such province.

This agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument.

[Signature Page Follows]

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If this agreement accurately sets forth the agreement among the parties, please return a fully-executed copy of this agreement to us as soon as possible.

Yours very truly,
PATHEON INC.
by	(signed) Paul W. Currie
	Paul W. Currie
	Chairman of the Special
	Committee of the Board of Directors
	Claudio F. Bussandri
	Paul W. Currie
	Roy T. Graydon
	Derek J. Watchorn
	G. Wesley Voorheis
by	(signed) Paul W. Currie
	Paul W. Currie

Confirmed and accepted this 30th day of November, 2009.

JLL PATHEON HOLDINGS, LLC
by	(signed) Ramsey A. Frank
	Ramsey A. Frank
	Authorized Person
	Ramsey A. Frank
	Paul S. Levy
	Thomas S. Taylor
by	(signed) Ramsey A. Frank
	Ramsey A. Frank

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SCHEDULE A

LITIGATION SETTLEMENT TERMS

Set _.forth below is a term sheet (this “Term Sheet” setting out terms and conditions for the settlement of the currently pending litigation between Patheon Inc., the members of the Special Committee of the Board of Directors of Patheon Inc., JLL Patheon Holdings, LLC and the nominees of JLL Patheon Holdings, LLC to the Board of Directors of Patheon Inc.

Resolution of Litigation	Each of Patheon Inc. (“Patheon”) and JLL Patheon Holdings, LLC (“JLL”), as well as their respective affiliates, will take all action necessary (including obtaining required orders of the Court) to dismiss on consent, with prejudice and without costs all litigation proceedings and claims currently pending between or among the parties, including any and all claims made by JLL against the current and former members of the Special Committee of the Board of Directors of Patheon (the “Special Committee”) and any and all claims made by Patheon against JLL and its affiliates and the members of the Board of Directors of Patheon appointed by JLL (the “JLL Nominees”) pursuant to Patheon’s Class I Preferred Shares, Series D (collectively, the “Litigation”).
Mutual Releases	Each of Patheon and JLL will release and forever discharge each other and their respective affiliates, as well as the JLL Nominees and each of the current or former members of the Special Committee, from any and all claims arising from or relating to the offer (“Offer”) by JLL and its affiliates to purchase any and all of the issued and outstanding restricted voting shares of Patheon (“Restricted Voting Shares”) at a price per Restricted Voting Share of U.S. $2.00 in cash, including (i) all claims asserted or which could have been asserted in the Litigation; (ii) any actions or omissions by Patheon, the members of the Special Committee, JLL, and the JLL Nominees in connection with the announcement of the Offer or taken in response to the announcement or commencement thereof, whether before or after the commencement or consummation thereof, (iii) all actions or omissions by any of the foregoing parties asserted as a basis for any claims raised or that could have been raised in connection with the Litigation, and (iii) the conduct of the Special Committee since its inception, including with respect to the discussions between Patheon and Lonza Group AG.
Board of Directors	Upon settlement of the Litigation by obtaining issued dismissal orders (the date on which such dismissal orders are issued being referred to herein as the “Effective Date”), the composition of the Board of Directors of Patheon will be modified to consist of the following individuals:
	•     three JLL Nominees;
	•     one additional director selected by JLL;
	•     Roy T. Graydon and Derek J. Watchorn (the “Board Nominees”), each of whom is a resident Canadian within the

meaning of the Canada Business Corporations Act (the “CBCA”);

•     Brian G. Shaw (the “Third Independent Nominee” and, collectively with the Board Nominees, the “Independent Directors”);

•     the Chief Executive Officer of Patheon; and

•     Joaquín B. Viso.

Subject to the next following sentence, at each meeting of shareholders of Patheon held prior to March 1, 2011 at which directors of Patheon are to be elected, JLL will vote all of its shares in favour of the re-election of, and will otherwise use its reasonable commercial efforts to re-elect, each of the Independent Directors and, at any requisitioned meeting called for the purpose of removing and/or electing directors, JLL will vote all of its shares against the removal of any of the directors specified above. If either of the Board Nominees is unable or unwilling to stand for re-election at any such meeting of shareholders, or vacates his office, a replacement nominee will be selected by the Board with the unanimous approval of all of the remaining Independent Directors then in office, and JLL will vote all of its shares in favour of the election of, and will otherwise use its reasonable commercial efforts to elect or cause to be appointed, such replacement nominee as a director of Patheon. If the Third Independent Nominee is unable or unwilling to stand for re-election at any such meeting of shareholders, or vacates his office, a replacement nominee who would be a qualifying independent director will be identified by JLL. Following such election or appointment for the purposes of this Term Sheet, the term “Independent Directors” includes any such replacement nominees.

At each meeting of shareholders of Patheon held after March 1, 2011 and prior to March 1, 2012 (including any requisitioned meeting), JLL will vote all of its shares in favour of the election of, and against the removal of, and will otherwise use its reasonable commercial efforts to elect, at least three persons (who may or may not be one or more of the Independent Directors then in office) to the Board of Patheon who would be qualifying independent directors, and these individuals shall constitute the “Independent Directors” for purposes of any actions to be taken by the Independent Directors after March 1, 2011 hereunder. If any of such Independent Directors vacates his office, a replacement nominee who would be a qualifying independent director will be selected by the Board, and JLL will vote all of its shares in favour of the election of, and will otherwise use its reasonable commercial efforts to elect or cause to be appointed, such replacement nominee as a director of Patheon. For the purposes of this section “qualifying independent director” means a person who would be an independent director under the definition in the TSX Company Manual; provided, however, that the Third Independent Nominee shall not be disqualified as an independent director under the definition in the TSX Company Manual solely by virtue of the fact that he or she has been identified by JLL. Following such election or appointment, for the purposes of this Term Sheet, the term “Independent Directors” includes such replacement nominee.

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	Each member of the Special Committee who is not selected as an Independent Director will resign from the Board of Directors of Patheon effective as of the close of business on the Effective Date.
	Promptly upon the resignation of these directors, Patheon shall pay to each such director all outstanding director fees (including any unpaid annual retainer amounts) payable to him and shall redeem all of the deferred share units held by or issuable to each such director in accordance with section 11 of the Directors Deferred Share Unit Plan dated February 22, 2008, as amended March 27, 2008 (the “DSU Plan”). For greater certainty, section 12 of the DSU Plan will not apply to any of such directors.
Transition	Until the Effective Date, all decisions of the Board will require unanimity.
	Effective as of the Effective Date, Derek Watchorn will be appointed as a member of the Audit Committee, and Roy Graydon will be appointed as the Chairman of the Audit Committee. The Audit Committee will continue to be composed of three members, the third member being Thomas Taylor, and no further changes will be made to the composition of the Audit Committee until after the date of the release of Patheon’s year-end financial results (the “Release Date”). After the Release Date, the Board may reconstitute the Audit Committee as it deems appropriate.
	Until the Release Date, all matters to be considered by the Board relating to Patheon’s fiscal year ended October 31, 2009 or affecting Patheon’s financial results or financial statements for fiscal 2009 or any portion thereof (“Year-End Matters”), including without limitation the approval of Patheon’s earnings release, financial statements and MD&A, and all determinations regarding discretionary compensation in respect of fiscal 2009 or any portion thereof, will be dealt with as follows: (a)     Year-End Matters within the current mandate of the Audit Committee shall be dealt with by the Audit Committee, acting reasonably, which shall make recommendations to the Board in accordance with its mandate. The Board, acting reasonably, will determine to either accept the recommendations of the Audit Committee or to propose changes in respect of the subject-matter thereof, provided that no change will be implemented without the approval of the Audit Committee, acting reasonably; and (b)     Year-End Matters not within the current mandate of the Audit Committee will be dealt with by the Board, acting reasonably, provided that the Board shall take no action in respect of any such matter without the approval of each of the Board Nominees, acting reasonably. Patheon shall not take any action in respect of any Year-End Matter unless it has been approved in accordance with the foregoing.

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Special Committee	The Special Committee will be disbanded on the Effective Date. Patheon will pay all outstanding accounts for services rendered by advisors to the Special Committee prior to the Effective Date, which accounts have been approved by the Special Committee. Appropriate documentation of such expenses will be provided to Patheon’s Chief Financial Officer.
Investor Agreement	The Investor Agreement, dated April 27, 2007, by and between Patheon and JLL (the “Investor Agreement”) shall continue in effect.
Standstill	JLL will not acquire, nor make any announcement of any intention to acquire, any additional Restricted Voting Shares for a period ending on the first anniversary of the Effective Date. Thereafter, for so long as the standstill provisions of the Investor Agreement remain in effect, JLL will not acquire any additional Restricted Voting Shares unless such acquisition complies with the standstill provisions of the Investor Agreement and (i) if the acquisition is to be effected by means of a merger, consolidation, amalgamation or similar transaction requiring a vote of shareholders, the acquisition is approved by a majority vote of the holders of the outstanding Restricted Voting Shares not already held by JLL or its associates, affiliates and/or joint actors and (ii) if the acquisition is to be effected by means of a takeover bid, such takeover bid is subject to an irrevocable condition requiring the valid tender to the bid of at least a majority of the outstanding Restricted Voting Shares not already held by JLL or its associates, affiliates and/or joint actors. For the purposes of (i) and (ii), above, the acquisition shall be effected on terms that provide identical consideration to all holders of Restricted Voting Shares, other than JLL, and JLL shall not have entered into any agreement, arrangement or understanding with any other shareholder that provides different consideration (including alternative investment choices) or any collateral benefit associated with the transaction.
	JLL will not request any waiver or amendment to the foregoing standstill provisions by public announcement or make any public announcement relating thereto or announce any intention to do so.
Independent Director Approvals of Patheon Actions	Patheon shall not do any of the following, unless approved by a majority of the Independent Directors: •     until April 27, 2012, enter into any transaction with JLL or any associate or affiliate of JLL, or in which any of the foregoing has a material interest (other than an interest solely through the holding of shares of Patheon) (a “JLL Related Transaction”), including, for greater certainty, any amendment or waiver of the Investor Agreement or the terms hereof; •     until April 27, 2011, acquire, or announce any intention to acquire, any Restricted Voting Shares pursuant to an issuer bid or otherwise or thereafter until April 27, 2012 do so other than pursuant to an exempt issuer bid; or

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	•     until April 27, 2012, (i) engage in any rights offering (whether or not backstopped by JLL or one of its affiliates) at a price that is less than 85% of the volume weighted average trading price of the Restricted Voting Shares on the TSX, as calculated pursuant to Subsection 607(e) of the TSX Company Manual, or (ii) for a period of 12 months after the Effective Date, engage in any rights offering that would produce aggregate gross proceeds to Patheon of more than $30 million. In the event of any uncertainty as to whether a particular transaction does or does not fall within these approval requirements, the Independent Directors shall make the final determination, which shall be binding on the parties.
Shareholder Arrangements by JLL	Unless approved in advance by a majority of the Independent Directors, until April 27, 2012, JLL will not enter into, or agree to, any oral or written agreement, arrangement or understanding, formal or informal, direct or indirect, with any other shareholder of Patheon, in respect of the acquisition of any securities of Patheon or in respect of any merger, consolidation, amalgamation or similar transaction involving Patheon.
Consideration to JLL	In further consideration for the settlement contemplated hereby, on the Effective Date or as soon as practicable thereafter, Patheon will pay to JLL US$1.5 million in cash.
Litigation Fees and Expenses	The parties will jointly advise the Ontario Superior Court of Justice that any claims for costs relating to applications or motions decided prior to the Effective Date are no longer being pursued. Patheon will pay the fees and expenses incurred by it and the members of the Special Committee in connection with the Litigation, and JLL will pay the fees and expenses incurred by it and the JLL Nominees in connection with the Litigation.
Announcements	Promptly after this Term Sheet is agreed to by the parties, the parties shall issue a joint press release regarding the Litigation settlement and mutual releases contemplated hereby, which press release shall be mutually agreed to by all parties, acting reasonably. Neither Patheon nor JLL shall issue any other press release or make any other public announcement related to the matters contemplated hereby unless mutually agreed to by the parties.

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EX-10.6

Exhibit 10.6

Dated 15^th January 1996

LANSDOWN ESTATES GROUP LIMITED (1)

and

OXFORD ASYMMETRY LIMITED (2)

LEASE

of Unit 151

Milton Park Abingdon

Oxfordshire

[Cole and Cole Solicitors]

THIS LEASE is made on the Lease Date BETWEEN (1) the Landlord and (2) the Tenant

PARTICULARS DEFINITIONS AND INTERPRETATION

Particulars

A. “Lease Date” is fifteenth of January, 1996

B. “Landlord” is LANSDOWN ESTATES GROUP LIMITED whose registered office is at 12 St James’s Square London SW1Y 4LB (Company Registration Number 1772924)

C. “Tenant” is OXFORD ASYMMETRY LIMITED whose registered office is at 3 Worcester Street Oxford OX1 2PZ (Company Registration Number 2674265)

D. “Premises” are more particularly described in Part I of the schedule to this Lease and shortly known as 151 Milton Park Abingdon Oxfordshire

E. “Estate” is the Landlord’s estate of which the Premises form part known as Milton Park Abingdon Oxfordshire shown verged red on the Plan together with such additional land or excluding such land of lesser area (but including the Premises and the land over which it enjoys rights granted by this Lease) as the Landlord may from time to time reasonably specify and together with all buildings fixtures or structures whatsoever from time to time thereon

F. “Rent Commencement Date” is 29th September 1995

G. “Term Date” is 29th September 1995

H. “Term” is 25 years calculated from the Term Date

I. “Principal Rent” for the period commencing on the Rent Commencement Date and ending immediately before the first Review Date is ninety eight thousand five hundred and fifty pounds (£98,500.00) per annum and for the period commencing on the first Review Date and thereafter until the next following Review Date is the Review Rent per annum fixed in accordance with clause 6

J. “Permitted Use” is use within Classes B1 or B8 of the Schedule to the Town and Country Planning (Use Classes) Order 1987

K. “Service Rent” is the relevant proportion applicable to the Premises from time to time of the Estate Service Expenditure for any relevant Service Period

L. “Provisional Sum” in relation to each Service Period means an amount calculated by the Landlord’s managing agents acting as experts and not arbitrators as their reasonable and proper estimate of the likely Service Rent for the relevant Service Period

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M. “Reversionary Obligations” are the covenants declarations and other matters affecting the Premises contained or referred to in the Landlord’s freehold reversionary title number BK102078 as at the date of this Lease

N. “Regulations” are the regulations made by the Landlord applicable to the Estate a copy of which in their form current at the date of this Lease has been given to the Tenant

          DEFINITIONS AND INTERPRETATION

1.	(1)	The following expressions and those contained in the particulars have the meanings specified
1.	(1)	(a)	“Adjoining Premises” means any land or buildings adjoining or near to the Premises whether or not comprised in the Estate
1.	(1)	(b)	“Conduits” means pipes sewers drains mains ducts and all other conducting media and ancillary equipment
1.	(1)	(c)	“Enactment” means every Act of Parliament and all subordinate legislation made under such Acts
1.	(1)	(d)	“Estate Services” means the services specified in Part IV of the Schedule
1.	(1)	(e)	“Estate Service Expenditure” means all expenditure reasonably incurred by the Landlord or which the Landlord anticipates is likely reasonably to be incurred in providing all or any of the Estate Services including the cost of employing managing agents (whether or not the Landlord’s own employees) and caretakers in relation to the Estate but excluding any expenditure on any part of the Estate for which any other tenant shall be responsible
1.	(1)	(f)	“Insurers” means the insurance office or underwriters (being an office or underwriters of repute) with whom the Premises are insured
1.	(1)	(g)	“Insured Risks” means:—
1.	(1)	(g)	(i)	loss damage or destruction whether total or partial caused by fire and other perils against which the Landlord from time to time thinks fit to insure except for such exclusions and limitations as may be imposed by the Insurers;
1.	(1)	(g)	(ii)	property owners liability; and
1.	(1)	(g)	(iii)	loss of three years Principal Rent and Service Rent
1.	(1)	(h)	“Insurance Rent” means in respect of any period for which the same is required to be calculated an amount equal to the aggregate

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			of the total premium and other costs expended by the Landlord for insuring the Premises against the Insured Risks
1.	(1)	(i)	“Interest” means interest during the period from the date on which the relevant payment is due to the date of payment (both before and after any judgement) calculated on a daily basis at the rate of two per centum (2%) per annum above the base rate for the time being of Barclays Bank plc or of some other bank nominated in writing from time to time by the Landlord or if base rates cease to be published then such other reasonable rate of interest as the Landlord may from time to time specify
1.	(1)	(j)	“Outline Specification” means the specification marked “Outline Specification” and the drawings numbered 9315/002A, ML3431/151/10B annexed
1.	(1)	(k)	“Plan” means the plan or (if more than one) the plans annexed to this Lease
1.	(1)	(l)	“Public Authority” means the Secretary of State and any government department public local or any other authority or institution and any court of law or any of them or any of their duly authorised officers
		Rent Review Definitions
1.	(1)	(m)	“Review Date” means every fifth anniversary of the Term Date
			“Current Rent” means the Principal Rent payable under this Lease immediately before the Review Date
			“Market Rent” means the yearly rent which might reasonably be expected to be payable on a letting of the Premises at the Review Date in the open market between willing parties with vacant possession without fine or premium for a term of ten years calculated from the Review Date but otherwise on the terms of this Lease (other than the actual amount of Principal Rent but including the same rent review provisions) on the assumptions that all covenants in it have been complied with that the Tenant and any hypothetical lessee and their successors in title is and will remain registered for Value Added Tax purposes and able fully to recover all or any Value Added Tax which may become payable on supplies made by the Landlord under the Lease and that any rent free or rent concessionary period given to cover fitting out has expired and that the Premises are as described in the Outline Specification save that it shall be further assumed that:
			(I)	the first floor slab within the Premises is at a uniform level throughout and

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			(II)	the lift at the northern end of the Premises adequately services the occupational needs of the Tenant in relation to the first and ground floor offices at the southern end of the Premises
			but disregarding the effect on rent of the matters set out in Section 34(1) Landlord and Tenant Act 1954 as amended by the Law of Property Act 1969
			“Review Rent” means the higher of the Current Rent and the Market Rent
			“Surveyor” means an independent chartered surveyor having not less than ten years practice in the United Kingdom next before the date of his appointment and recent substantial experience in the sale letting and valuation of premises of similar character and quality to those of the Premises and who is a partner or director of a leading firm or company of surveyors having specialist market and valuation knowledge of such premises
1.	(2)	Singular words include the plural and vice versa and the masculine gender includes the neuter gender and vice versa and each includes the feminine gender
1.	(3)	The expressions “Landlord” and “Tenant” wherever the context so admits include their respective successors in title and where two or more persons comprise the “Tenant” such persons covenant with the Landlord jointly and severally
1.	(4)	The Tenant by covenanting not to do or omit any act or thing also covenants not to permit or suffer it to be done or omitted
1.	(5)	References in this Lease to:-
1.	(5)	(a)	any consent licence or approval of the Landlord or words to similar effect mean a consent licence or other approval in writing signed by or on behalf of the Landlord
1.	(5)	(b)	the Premises (except in clause 3(10)) shall be construed as extending to any part of the Premises
1.	(5)	(c)	a specific Enactment includes every statutory modification consolidation and re-enactment and statutory extension of it for the time being in force
1.	(5)	(d)	any rent (whether or not defined in the Particulars or in clause 1(1)) and other amounts which may be or become payable to the Landlord under this Lease are exclusive of all Value Added Tax which may be or become chargeable on the relevant supply by the Landlord

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1.	(6)	This Lease shall be governed by and construed in all respects in accordance with the law of England and the Tenant submits to the non-exclusive jurisdiction of the English Courts and irrevocably agrees that any process may be served on it by leaving a copy of the relevant documents at the Premises
	DEMISE AND RENTS
2.	The Landlord DEMISES the Premises to the Tenant for the Term YIELDING and PAYING:
2.	(1)	FIRST yearly and proportionately for any part of a year the Principal Rent payable by equal quarterly payments in advance on the usual quarter days in each year without deduction the first payment or a proportionate part for the period commencing on the Rent Commencement Date (calculated on an annual basis) to be made on the Term Date
2.	(2)	SECONDLY with effect from the Term Date as additional yearly rent the Insurance Rent payable without deduction within fourteen (14) days of demand
2.	(3)	THIRDLY with effect from the Term Date as additional yearly rent the Service Rent (including the Provisional Sum on account) payable in accordance with clause 7
2.	(4)	FOURTHLY as additional rent from time to time such sums as the Landlord may expend following any default by the Tenant in expending them in pursuance of its obligations to do so under this Lease the payment of which shall be made without deduction within fourteen (14) days of demand
2.	(5)	FIFTHLY as additional rent Interest payable on demand on any sum of whatsoever nature:—
2.	(5)	(a)	due from the Tenant to the Landlord (whether as rent or otherwise) which shall not be received by the Landlord within fourteen days after the sum is due
2.	(5)	(b)	properly or reasonably incurred by the Landlord in connection with and following some default by the Tenant under this Lease
	TENANT’S COVENANTS
3.	The Tenant covenants with the Landlord throughout the Term:
	Payment of Rents
3.	(1)	(a)	To pay the rents reserved by this Lease on the days and in the manner set out in clause 2
3.	(1)	(b)	To pay in addition to the rents and other amounts which may be

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			or become payable by the Tenant to the Landlord under this Lease all Value Added Tax which may be or become chargeable on the relevant supply by the Landlord to the Tenant
	Payment of Outgoings
3.	(2)	To pay (or if the Landlord shall properly and lawfully require to pay the Landlord) all existing and future rates taxes (including Value Added Tax) duties charges and other outgoings whatsoever whether recurring non-recurring usual or novel which are now or at any time during the Term shall be payable by the owner landlord tenant or occupier in respect of the Premises excluding all sums payable by the Landlord in respect of any dealing with the reversion of this Lease or of the Landlord’s receipt of income
	Payment of Cost of Notices Consents Etc
3.	(3)	To pay all costs charges and expenses (including counsel’s solicitors’ and surveyors’ fees) incurred by the Landlord in and incidental to:
3.	(3)	(a)	the preparation and service of a notice under Section 146 Law of Property Act 1925 or in or in contemplation of any proceedings under Section 146 or 147 of that Act notwithstanding that forfeiture is avoided otherwise than by relief granted by the court and
3.	(3)	(b)	every step taken during or after the expiration of the Term and in contemplation of or in connection with or with the actual service of all notices and schedules of dilapidations relating to the Tenant’s obligations
3.	(3)	(c)	every application for consent or licence or approval under this Lease
	Repair Decoration and General Condition
3.	(4)	Subject to Clause 4(4) and with the exception of any defect in the design or construction of the Premises and any disrepair arising as a consequence of any such defect to put and keep the Premises in good and substantial repair and condition (damage to the Premises by any Insured Risk excepted to the extent the insurance or the payment of insurance money has not been invalidated solely or in part because of some act or default of the Tenant or of any person for whom it is responsible) and clean and tidy and in good decorative order in conformity with the principles of good estate management and (without prejudice to the foregoing) no less frequently than as to the exterior once in every third year and as to the interior once in every fifth year and also as to both the interior and the exterior (but not twice in any one year) in the last six months of the Term to prepare paint or otherwise treat all parts of the Premises usually or which ought properly to be so dealt with in a good and workmanlike manner with appropriate materials

6

			of good quality (in the last year of the Term in a colour scheme first approved by the Landlord) to the Landlord’s satisfaction and to replace whenever the same shall be necessary any Landlord’s fixtures plant machinery or equipment comprised in the Premises with new articles of similar kind and quality
	Structural and other Alterations and Signs
3.	(5)	(a)	Not to make any alteration or addition to the Premises except with the Landlord’s consent (which will not be unreasonably withheld or delayed) and (if the consent is given) to carry the work out in a good and workmanlike manner PROVIDED that the Tenant may without any such consent erect alter or remove demountable partitioning and carry out other internal alterations which do not affect the main structure of the Premises
3.	(5)	(b)	Not to attach to or exhibit in or on the Premises (including the windows) any sign or other material which is visible from the outside without the Landlord’s consent (such consent not to be unreasonably withheld)
3.	(5)	(c)	At the expiration of the Term if and to the extent required by the Landlord to remove all alterations additions and signs made to or installed on the Premises by the Tenant and to restore and make good the Premises to the plan and design which existed before the alterations additions or installations were made
	Compliance with Enactments
3.	(6)	(a)	To comply with all Enactments and with the requirements of every Public Authority in respect of the Premises and their use and any permitted work being carried out to them and not to do or omit anything by which the Landlord may become liable to make any payment or do anything under any Enactment or requirement of a Public Authority
3.	(6)	(b)	Forthwith on receipt of any communication or proposal from any Public Authority relating to the Premises to send the Landlord a copy of it
	Landlord’s Right to Enter for Various Purposes
3.	(7)	To permit the Landlord and all others authorised by it at reasonable times on reasonable prior notice (except in an emergency) to enter and remain on the Premises with or without equipment for all purposes in connection with the Premises or any Adjoining Premises and to carry out works thereon which are necessary on condition that the Landlord:
3.	(7)	(a)	causes as little damage and inconvenience as is reasonably possible

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3.	(7)	(b)	promptly makes good any damage caused to the Premises or anything therein and
3.	(7)	(c)	follows all reasonable directions given by the Tenant in connection with such entry or anything done or omitted by the Landlord while on the Premises
	Compliance with Notices relating to Repair and Condition
3.	(8)	If within one month after service of a notice from the Landlord to remedy any breach of covenant relating to the state of repair or condition of the Premises (or earlier in the case of emergency) the Tenant shall not have commenced and be proceeding expeditiously with the remedial work or if in the Landlord’s reasonable opinion the Tenant is unlikely to have completed or has not completed the relevant work within a reasonable time after service of the notice to permit the Landlord to enter the Premises and as the Tenant’s agent remedy the breach and to pay the Landlord the cost of doing so and all expenses incurred (including solicitors costs and surveyors fees) within seven days of demand
	Use
3.	(9)	Not to use the Premises or any tenant’s chattels in them:-
3.	(9)	(a)	for any purpose (and not to do anything in or to the Premises) which may be or become or cause a nuisance
3.	(9)	(b)	for any dangerous noxious illegal or offensive trade business or activity or for residential purposes
3.	(9)	(c)	(without prejudice to the preceding paragraphs of this sub-clause) except for the Permitted Use
	Alienation
3.	(10)	(a)	Not to assign underlet or otherwise part with possession or share occupation of the Premises or any part of them except that the Tenant may :—
3.	(10)	(a)	(i)	assign the whole of the Premises with the Landlord’s consent which shall not be unreasonably withheld
3.	(10)	(a)	(ii)	underlet any part of the Premises in accordance with paragraph (b) of this sub-clause
3.	(10)	(a)	(iii)	share occupation of the Premises or any part thereof with a company which is either the holding company of the Tenant or a subsidiary company of the Tenant or of the Tenant’s holding company as those terms are defined by Section 736 of the Companies Act 1985 provided that such sharing of occupation shall not afford the relevant

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				company security of tenure in the Premises or any part thereof nor create a relationship of landlord and tenant
3.	(10)	(b)	Not to underlet any part of the Premises (being referred to in this paragraph as the premises) except:-
3.	(10)	(b)	(i)	to a person who before the underletting shall have covenanted with the Landlord to observe and perform the Tenant’s obligations under this lease during the sub-term to the extent they relate to the premises to be underlet (other than the payment of rents) and a covenant not to assign the whole of such premises without the Landlord’s consent (which shall not be unreasonably withheld) and an unqualified covenant not to assign part of the premises or to underlet or otherwise part with possession of the premises or any part of them;
3.	(10)	(b)	(ii)	by reserving as a yearly rent without payment of a fine or premium (in addition to a pro rata proportion of the Insurance Rent and the Service Rent payable under this lease) an amount equal to the then open market rack rental value of the premises payable by equal quarterly instalments in advance on the usual quarter days
3.	(10)	(b)	(iii)	by a form of underlease to be approved by the Landlord such approval not to be unreasonably withheld or delayed if the other provisions of this paragraph are observed;
3.	(10)	(b)	(iv)	on a basis:-
3.	(10)	(b)	(iv)	(a)	requiring the underlessee during the sub-term to observe and perform all the covenants and other provisions binding on the Tenant under this lease (other than the covenant by the Tenant to pay rents) to the extent they relate to the premises and providing for:-
3.	(10)	(b)	(iv)	(b)	a condition for re-entry by the underlessor on breach of any covenant by the underlessee
3.	(10)	(b)	(iv)	(c)	a qualified covenant not to assign the whole of the premises and an absolute covenant not to assign part of the premises or to underlet or otherwise part with possession or share the occupation of the premises or any part of them
3.	(10)	(b)	(iv)	(d)	the exclusion of Sections 24 to 28 inclusive Landlord and Tenant Act 1954 in relation to the underlease in pursuance of an Order duly made under Section 38 (4) of that Act before the grant of the underlease

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3.	(10)	(b)	(v)	with the Landlord’s consent issued within three months before completion of the underletting which consent (subject to compliance with the foregoing conditions precedent) shall not be unreasonably withheld or delayed
3.	(10)	(c)	In relation to any underlease:-
3.	(10)	(c)	(i)	to except from the underlease all necessary circulation areas and plant and equipment (if any) which will serve the Premises in common and to reserve a separate service charge rent in respect of their maintenance repair and renewal
3.	(10)	(c)	(ii)	in no circumstances to permit more than four separate occupations simultaneously of the whole of the Premises (including the occupancy of the Tenant)
3.	(10)	(d)	To use reasonable efforts to enforce the observance and performance by every such underlessee and its successors in title of the provisions of the underlease and not expressly or impliedly to waive any breach of them nor vary the terms of any underlease
3.	(10)	(e)	Within twenty-one days after any assignment underletting or other devolution of this Lease to give notice of it in duplicate to the Landlord with a copy of the instrument (including any relevant probate letters of administration or assent)
	Insurance and Fire Fighting Equipment
3.	(11)	(a)	(If particulars of the relevant policy shall have been given to the Tenant) not to do or omit anything by which any insurance policy of the Landlord relating to the Premises or any Adjoining Premises becomes void or voidable or by which the rate of premium on such policy may be increased
3.	(11)	(b)	To comply with all requirements and reasonable recommendations of the Insurers and to provide and maintain unobstructed appropriate operational fire fighting equipment on the Premises and not to obstruct the means of escape in case of emergency from or to the Premises
	Not to Obstruct or Overload
3.	(12)	Not to obstruct:-
3.	(12)	(a)	or damage or use any area leading to the Premises in a way which causes nuisance damage or annoyance

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3.	(12)	(b)	or discharge any deleterious matter into any Conduits serving the Premises and to keep them (so far as they are within the Premises) clear and functioning properly
3.	(12)	(c)	stop-up or darken the windows and other openings of the Premises except as part of any alterations or additions for which consent has been given or which are permitted under clause 3(5)
3.	(12)	(d)	or to overload or cause undue strain to the Premises or to any structure surrounding or located within (but excluded from) the Premises or to any Conduits
	Preservation of Easements
3.	(13)	(a)	Not to give any acknowledgement that any easements belonging to the Premises are enjoyed by consent
3.	(13)	(b)	Not to do or omit anything which might subject the Premises to the creation of any new easement and to give notice to the Landlord forthwith of any encroachment known to the Tenant which might have that effect
	Defective Premises
3.	(14)	Immediately upon becoming aware of the same to give notice to the Landlord of any defect in the Premises which might give rise to:—
3.	(14)	(a)	an obligation on the Landlord to do or refrain from doing anything in relation to the Premises; or
3.	(14)	(b)	any duty of care or the need to discharge such duty imposed by the Defective Premises Act 1972 or otherwise and at all times to display and maintain all notices which the Landlord may from time to time reasonably require to be displayed at the Premises in relation to their state of repair and condition
	Yield Up
3.	(15)	At the expiration of the Term to remove all tenant’s fixtures and chattels and to yield up the Premises in the state of repair condition decorative order and layout required by this Lease
	Covenants
3.	(16)	To observe and perform:-
3.	(16)	(a)	the obligations of the grantee or licensee contained in every consent licence or approval granted in pursuance of this Lease; and
3.	(16)	(b)	the Reversionary Obligations and Regulations

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	LANDLORD’S COVENANTS
4.	The Landlord covenants with the Tenant:
	Quiet Enjoyment
4.	(1)	That if the Tenant observes and performs its covenants contained in this Lease the Tenant may peaceably and quietly hold and enjoy the Premises without any lawful interruption by the Landlord or any person rightfully claiming through under or in trust for it
	Insurance
4.	(2)	(a)	to keep the Premises insured against the Insured Risks and (in relation to the risks described in clause 1(1)(g)(i)) in a sum which in the Landlord’s opinion is the full rebuilding cost (but not necessarily the facsimile reinstatement cost) of the Premises on terms including a waiver by the insurers of the right of subrogation in respect of claims against the Tenant
4.	(2)	(b)	on request to supply the Tenant with evidence of such insurance
4.	(2)	(c)	if and whenever during the Term the Premises are damaged or destroyed by an Insured Risk and the payment of the insurance monies is not refused in whole or in part by reason of any act or default of the Tenant or of any person for whom it is responsible the Landlord will (subject to clause 5(3)) with all reasonable speed take the necessary steps to obtain any requisite planning permissions and consents and if they are obtained to lay out all monies received in respect of such insurance (except sums in respect of public liability and loss of rent) in and towards replacing (but not necessarily in facsimile reinstatement) the damaged or destroyed parts as soon as reasonably practicable and will make up any deficiency out of its own money PROVIDED ALWAYS THAT the Landlord shall not be liable to do so if it is unable (having used all reasonable endeavours) to obtain every planning permission and consent necessary to execute the relevant work in which event the Landlord shall be entitled to retain all the insurance monies received by it
	Maintenance and Repair
4.	(3)	Save for any reason or circumstances beyond the Landlord’s control (for which it shall not be liable but which control it shall use all reasonable endeavours to restore) and save to the extent that the same are maintainable at the public expense to take all steps necessary consistent with the principles of good estate management to maintain and repair such of the Conduits and roadways as are referred to in paragraphs (a) and (d) of Part III of the Schedule and the areas referred to in paragraphs (e) and (f) of the said Part III

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	Latent and Inherent Defects
4.	(4)	To use all reasonable endeavours to remedy any defect in the design or construction of the Premises which becomes apparent before 31 December 2004 and any consequential disrepair to the Premises arising from or attributable to such defect before that date PROVIDED that for the avoidance of doubt nothing in this clause shall render the Landlord liable for consequential damage or loss (other than damage to the Premises and consequential disrepair as aforesaid) resulting from such defect and PROVIDED further that no cognisance shall be taken of defects the cost of remedying which in any one year of the Term (calculated from the Term Date) is not more than £1,000
5.	IT IS AGREED AND DECLARED THAT:-
	Re-entry
5.	(1)	Without prejudice to any other remedies and powers contained in this Lease or otherwise available to the Landlord if
5.	(1)	(a)	the whole or part of the rents shall be unpaid for twenty-one days after becoming payable (in the case of the Principal Rent whether formally demanded or not); or
5.	(1)	(b)	any of the Tenant’s covenants in this Lease are not performed or observed; or
5.	(1)	(c)	the Tenant (or if more than one person any one of them being a company) is the subject of a petition for its winding up; or enters into liquidation whether voluntary (except for reconstruction or amalgamation of a solvent company) or compulsorily; or has a provisional liquidator or a receiver (including an administrative receiver) appointed; or is the subject of an administration order or a petition for one or of a voluntary arrangement or a proposal for one under Part I Insolvency Act 1986; or is unable to pay its debts within the meaning of Section 123 Insolvency Act 1986 or is otherwise insolvent; or having been registered with unlimited liability it acquires limited liability; or
5.	(1)	(d)	the Tenant (or if more than one person any one of them being an individual) is the subject of a bankruptcy petition or bankruptcy order or of any application or order or appointment under Section 253 or Section 273 or Section 286 Insolvency Act 1986; or otherwise becomes bankrupt or insolvent; or
5.	(1)	(e)	the Tenant enters into or makes any proposal to enter into any arrangement or composition for the benefit of his creditors
		then the Landlord may at any time thereafter (and notwithstanding the waiver of any previous right of re-entry) re-enter the Premises

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		whereupon this Lease shall absolutely determine but without prejudice to any Landlord’s right of action in respect of any antecedent breach of the Tenant’s covenants in this Lease
	Rent Cesser
5.	(2)	If and whenever during the Term:-
5.	(2)	(a)	the Premises or the access thereto from a public highway are destroyed or damaged by an Insured Risk so that the Premises are unfit for occupation and use or it is not possible to gain access thereto with vehicles or at all; and
5.	(2)	(b)	the insurance of the Premises and the payment of any insurance money has not been vitiated by the act neglect default or omission of the Tenant or of any person for whom it is responsible
		the Principal Rent and the Service Rent or a fair proportion of them according to the nature and extent of the damage sustained by the Premises or the degree of impairment of access shall be suspended and cease to be payable from the date of destruction or damage until the date on which the Premises are made fit for substantial occupation and use or full access thereto is again possible or until the third anniversary of the date of destruction or damage whichever shall first occur and any dispute about such suspension and cesser shall be referred to the award of a single arbitrator to be appointed in default of agreement on the application of either party by the President for the time being of the Royal Institution of Chartered Surveyors in accordance with the Arbitration Acts 1950 and 1979
	Determination: Destruction
5.	(3)	If any destruction or damage of the Premises by an Insured Risk shall not have been made good so as to render the Premises fit for substantial occupation and use by the second anniversary of the date of destruction or damage and if the insurance of the Premises and the payment of any insurance money has not been vitiated by the act neglect default or omission of the Tenant or of any person for whom it is responsible the Landlord or the Tenant may by not more than twelve months nor less than six months notice served on the other taking effect to expire on the third anniversary aforesaid determine this Lease without prejudice to any claim by either party against the other in respect of any prior breach of covenant but only if upon the expiry of that notice the Premises are free of occupation by and of any estate or interest vested in the Tenant and any third party
	Notices
5.	(4)	In addition to any other mode of service any notice required or authorised to be given under this Lease shall be validly served if served in accordance with Section 196 Law of Property Act 1925 as amended by

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		the Recorded Delivery Service Act 1962
	Determination: Contractual
5.	(5)	(a)	subject to the provisions of this sub-clause the Tenant may determine this Lease as at any of the fifth tenth fifteenth and twentieth anniversaries of the Term Date (the “Break Date”);
5.	(5)	(b)	the Tenant shall give to the Landlord written notice of its intention to determine at least twelve months before the Break Date;
5.	(5)	(c)	if the Tenant serves any notice under this clause it shall procure that vacant possession of the Premises will be available on the determination of the Lease free of occupation by and of any estate or interest vested in the Tenant and any third party and the Lease shall not determine as a result of any notice served by the Tenant if it is in material breach (being a breach of which the Landlord shall have given written notice to the Tenant and which shall be capable of being remedied) of any of the significant covenants on its part contained in this Lease (including those contained in this sub-clause) at the Break Date (except to the extent if at all the Landlord in its absolute discretion waives compliance with any of them) until such later date as such breach shall have been substantially remedied
5.	(5)	(d)	if the Tenant duly serves notice and if (to the extent applicable) the requirements of paragraph (c) of this sub-clause are first satisfied this Lease and the Term shall determine on the Break Date or (if applicable) such later date as is referred to in paragraph (c) of this sub-clause without prejudice to any rights or remedies which may have accrued to either party in respect of any breach of any of the covenants or obligations contained in this Lease including obligations under this clause which shall continue to bind the parties;
5.	(5)	(e)	time is of the essence of all dates and periods referred to in this sub-clause
	Release
5.	(6)	If following an assignment of this Lease in pursuance of the Landlord’s licence authorising the assignment the Landlord shall receive:—
5.	(6)	(a)	the notice in duplicate required by clause 3(10)(b) together with a duly stamped duplicate of the assignment and a certificate by the solicitors for the assignor and the solicitors for the assignee that the original and the duplicate assignment have been delivered absolutely free of conditions; and
5.	(6)	(b)	any other duly perfected security which the Landlord may have

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			required as a condition of its licence to assign
		the Landlord shall forthwith at the assignor’s cost release the assignor from its future liability under this Lease (but not from liability for any antecedent breach) in such form as the Landlord may reasonably require so long as simultaneously:—
5.	(6)	(b)	(i)	the assignor releases the Landlord from any liability it may owe the assignor under this Lease; and
5.	(6)	(b)	(ii)	if the Landlord so requires the assignee joins the release to confirm or perfect any covenant given by it with the Landlord given in the licence to assign
	No Implied Warranty
5.	(7)	Nothing herein contained shall imply or warrant that the Premises may be used in accordance with any Enactment for any particular purpose
	RENT REVIEW
6.	(1)	The Market Rent may be agreed in writing at any time between the Landlord and Tenant
6.	(2)	If the Landlord and the Tenant shall not have agreed the Market Rent by the date three months immediately before the Review Date either party may in its discretion require the Market Rent to be assessed by the Surveyor in the following manner:—
6.	(2)	(a)	the Surveyor shall be appointed to assess the Market Rent by the Landlord and the Tenant or (if they fail to agree the appointment) by or on behalf of the President for the time being of the Royal Institution of Chartered Surveyors on the application of either the Landlord or the Tenant
6	(2)	(b)	the Surveyor shall act as an expert and not as an arbitrator (and shall give the Landlord and the Tenant the opportunity to make written representations to him in such manner as he may direct but shall make the determination in accordance with his own opinion)
6.	(3)	If the Surveyor shall die delay or become incapable of acting or unwilling to act or if for any other reason the President or the person acting on his behalf shall in his absolute discretion think fit the President may by writing discharge the Surveyor and appoint another in his place
6.	(4)	The cost of the reference to the Surveyor shall be shared equally between the Landlord and the Tenant and his decision shall be final and binding on the Landlord and the Tenant
6.	(5)	When the Market Rent as at the Review Date has been ascertained in

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		accordance with this Lease memoranda of the Review Rent shall be signed by or on behalf of the Landlord and Tenant (at their own cost) and annexed to this Lease and its counterpart
6.	(6)	If the Market Rent has not been ascertained by the Review Date the Tenant will continue to pay the Current Rent and when the Market Rent is ascertained the tenant will forthwith pay the Landlord any amount by which the Review Rent for the period commencing on the Review Date and ending on the quarter day following the date of payment exceeds the Current Rent plus Interest (but calculated at the relevant base rate) on the excess from time to time from the Review Date
	SERVICE RENT
7.	(1)	For the purposes of this Lease:-
7.	(1)	(a)	“Account Date” means 30th September in every year of the Term or such other date as the Landlord may from time to time nominate
7.	(1)	(b)	“Service Period” means the period:-
7.	(1)	(b)	(i)	from the Term Date to (and including) the first Account Date; and thereafter
7.	(1)	(b)	(ii)	between two consecutive Account Dates (excluding the first and including the second); and thereafter
7.	(1)	(b)	(iii)	commencing immediately after the last Account Date of the Term and ending on the expiration of the Term
7.	(2)	The Landlord shall as soon as convenient after each Account Date prepare an account showing the Estate Service Expenditure for the Service Period ended on that Account Date and containing a fair summary of the expenditure referred to and upon the account being certified by the Landlord’s managing agents it shall be conclusive evidence for the purposes of this Lease of all matters of fact referred to except in case of manifest error
7.	(3)	The Tenant shall pay the Landlord on account of Service Rent the Provisional Sum in relation to each Service Period the first payment (being a proportionate sum in respect of the period commencing on the Term Date and ending immediately before the quarter day next after the Lease Date) to be made on the Term Date and the subsequent payments to be made by equal instalments in advance on the usual quarter days
7.	(4)	If the Service Rent for any Service Period:-
7.	(4)	(a)	exceeds the Provisional Sum for that Service Period the excess shall be due to the Landlord on demand; or

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7.	(4)	(b)	is less than the Provisional Sum for that Service Period the overpayment shall be credited to the Tenant against subsequent payments on account of Service Rent until the overpayment is balanced
	CERTIFICATE
8.	IT IS HEREBY certified that this Lease has not been granted pursuant to any agreement for lease enforceable by virtue of Section 2 Law of Property (Miscellaneous Provisions) Act 1989

EXECUTED as a deed by the parties on the date first set out above

THE SCHEDULE

PART I

(The Premises)

The land and building shown for identification only edged green on the Plan including the works specified in the Outline Specification EXCEPT AND RESERVED as mentioned in Part II of the Schedule and TOGETHER WITH the rights mentioned in Part III of the Schedule

PART II

EXCEPT AND RESERVED to the Landlord (and all other persons authorised by the Landlord or having like rights) the free and uninterrupted rights:—

(1) to the passage and running of water soil gas electricity telephone and other services or supply to and from any Adjoining Premises through the Conduits in or under the Premises

(2) for the Landlord to enter the Premises for the purposes mentioned in this Lease

(3) of light air and protection now or after the date of this Lease enjoyed by any Adjoining Premises

(4) at any time hereafter to alter rebuild make connections to or demolish any building on any Adjoining Premises in such manner as the person exercising the right shall think fit notwithstanding the same may obstruct affect or interfere with the amenity of or the passage of light to the Premises or have an insignificant effect on the means of access or the passage of air to them

(5) to erect and retain for a reasonable period scaffolding notwithstanding that it may temporarily restrict (but not so as to prevent the use of the Premises for the purposes hereby permitted) the access to or enjoyment and use of the Premises

PROVIDED THAT if the Landlord exercises any of the above rights by carrying out work on the Premises it shall forthwith make good any damage caused to the Premises or anything in them unless the right has been exercised because of some breach by the Tenant

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PART III

TOGETHER WITH the benefit of the rights:-

(a) to the passage and running of water soil gas electricity telephone and other services or supply to and from the Premises through the Conduits in or under the Adjoining Premises

(b) support and protection as is now enjoyed from the Adjoining Premises

(c) at convenient times and upon reasonable notice (except in emergency) to enter any Adjoining Premises of the Landlord if it shall be reasonable to do so in order to view the state of condition of or carry out work to the Premises and to make good all damage and disturbance caused to the Adjoining Premises

(d) (in common with the Landlord and all other persons having a like right) to pass and repass to and from the Premises at all times and for all purposes connected with the Permitted Use (but not otherwise) over and along those parts of the Estate which are designed and intended for those purposes

(e) exclusively to park motor vehicles in the area edged yellow on the Plan

(f) (in common with the Landlord and all others having the like right) to park motor vehicles in the area hatched brown on the Plan subject to space being available at any time and from time to time

PART IV

Schedule of the cost and expense of services to be provided or made available for the Estate and other expenses outgoings and obligations to be paid incurred or discharged by the Landlord in respect of the Estate subject to proportionate reimbursement by the Tenant

(a) the cost of repairing resurfacing cleaning lighting maintaining renewing replacing and improving the estate roads serving the Estate and the forecourts car parking areas loading bays landscaped areas boundary walls fences hedges gates entrances and signs now or at any time during the said term constructed on the Estate including any drains sewers pipes cables gutters inspection chambers or any other services or fittings relating thereto over in or under the Estate;

(b) the cost of retaining and providing the services of all staff necessary for the efficient maintenance and management of the Estate together with any accommodation for such staff;

(c) the cost of maintaining proper security in respect of the Estate roads and other areas on the Estate used by the Tenant in common with any other tenants and occupiers (but excluding the Premises and any other premises let or capable of being let) until such time as the Estate roads become adopted by the local authority;

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(d) the cost of the maintenance replacement renewal and improvement of the sewerage pumping station and drainage and sewerage system serving the Estate;

(e) the cost of and incidental to compliance by the Landlord with every notice regulation or order of any competent local or other authority in relation to the Estate or its appurtenances;

(f)	(i)	all fees charges expenses and commissions incurred in the administration and management of the Estate or payable to any solicitor accountant surveyor valuer agent or architect or any of them whom the Landlord may from time to time employ in connection with the management or maintenance of the Estate including the cost of preparing or causing to be prepared statements of said costs charges and expenses and auditing the same but excluding any fees charges expenses and commission paid for the collection of rent from the tenants of and the letting or reletting of any premises on the Estate;
(f)	(ii)	a charge equivalent to ten per centum of the aggregate costs expenses and outgoings referred to in this Schedule (but excluding this sub-paragraph (f)(ii)) such sum to be in respect of the general administration and supervision costs of the Landlord relating to or in connection with the matters specified or referred to in this Schedule or any of them PROVIDED THAT any sums payable to a managing agent under the immediately preceding sub-paragraph (f)(i) in respect of the management or supervision of the Estate and which shall be included in the calculation of the said aggregate costs expenses and outgoings shall be deducted from the charge included by virtue of this sub-paragraph;

(g) the costs of effecting and maintaining in force an insurance policy or policies against any and every liability of the Landlord for injury to or death of any person (including every agent servant and workman of the Landlord) and damage to or destruction of the property of any such person arising out of the maintenance of the Estate;

(h) the cost of carrying out all other work or providing services of any kind whatsoever which the Landlord may from time to time reasonably consider necessary or desirable for the purpose of maintaining or improving the Estate in the interests of the tenants thereof;

(i) such sum as the Landlord shall in its discretion think fit as being a reasonable provision for expenditure likely to be incurred in the future in connection with the matters mentioned in this and the preceding paragraphs

THE COMMON SEAL of LANSDOWN
ESTATES GROUP LIMITED was hereunto affixed in the presence of:—
Director	/s/ James L. Tuckey
Secretary	/s/ D. B. J. Price

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151 MILTON PARK OUTLINE SPECIFICATION

A - BUILDING SHELL

A.1 FOUNDATIONS

Mass concrete pad and trench fill foundations to the steel frame, external walls and reinforced concrete lift pit designed in accordance with the recommendations of the site investigation report.

A.2 FLOOR SLAB

The floor is mesh reinforced concrete slab on a granular sub base. Uniformly distributed load of 30 Kn/m² (600lbs/sq ft). Damp proof membrane under whole floor.

Tolerance	-	Concrete Society Category 2 as defined in Technical Report No. 34.
Surface Treatment	-	Power float finish with dust sealant and surface hardener.

A.3 EXTERNAL WALLS

A.3.1 Masonry

Cavity masonry wall with external skin fair faced and rendered blockwork, insulated cavity and internal skin of fair faced blockwork.

‘U’ value of 0.45W/m²/°C or better.

A.3.2 Windows

Aluminium vertical sliding sash windows - Kawneer Alderley double hung lockable windows.

Aluminium top hung casement windows - Kawneer Econ 40 lockable windows.

A.4 STRUCTURAL FRAME

Single span, hot rolled steel columns and trusses with cold rolled steel purlins.

Loading and Finish

Design Loading

Services	-	0.15 Kn/sq.m.
Imposed Load	-	To Code of Practice 3 Chp. V Wind Loading.
Dead	-	To British Standard 6399.
Finish
Main frame	-	Internal members are shot blasted and coated with zinc phosphate primer (75DFT) and combined undercoat/top coat light grey/white.

All purlins, cladding rails, bolts etc are galvanised.

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151 MILTON PARK OUTLINE SPECIFICATION

A.5 FIRST FLOOR

Prestressed concrete floor planks on steel beams supported from main steel columns -uniformly distributed load of 4 kN/m² (80 lbs/Sq.Ft).

A.6 DOORS

Personnel and Fire Escape Doors

Double glazed aluminium doors and frames-Kawneer heavy duty 350 door complete with Grundmann UK ironmongery.

A.7 MAIN ENTRANCE DOORS

Double glazed aluminium doors, Kawneer heavy duty 350 doors with teak faced plywood canopy over, supported on steelwork from the external wall. Doors fitted with letterbox and Grundmann UK locks and ironmongery.

A.8 ROOF

Pitched Roof

The roof is constructed in mill finish curved aluminium sheeting with white aluminium lining trays internally.

Insulation	-	“U” value will be 0.45 W/m2/°C or better.
Gutters	-	Aluminium gutters and aluminium external downpipes.
Rooflight	-	Centrally positioned double skin rooflight. 4 No. transparent & 5 No. translucent.

A latchway roof access system provided.

A.9 EXTERNAL BALCONY

Hardwood flooring supported on galvanised painted mild steel structure.

A.10 SUN LOUVRES

External galvanised painted mild steel sun louvres above windows indicated on drawing ML3431/151/10 supported from the external wall.

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151 MILTON PARK OUTLINE SPECIFICATION

B - EXTERNAL AREAS AND SERVICES

B.1 CAR PARKING

Car parking is provided for approximately 30 cars. Loading-Light delivery vehicles and cars. Finish-Bituminous macadam roads and spaces with white lining at corners. Rumble strips at each end of car park area.

B.2 YARD AREAS

Bituminous macadam yard area.

Loading - 40 tonne HGV standard.

B.3 SERVICES

Services are installed to the buildings as follows:-

Foul and surface water sewers - Connected to existing main drainage system.

Electricity - Cables laid to existing SEB low voltage system.

Gas - Pipes laid to British Gas main supply.

BT and Mercury - Ducts are installed for BT and Mercury Communications.

Water Supply - Pipework laid to the existing Thames Water mains supply.

B.4 LANDSCAPING

Soft and hard landscaping within and around the site to reinforce the existing perimeter planting.

B.5 LIGHTING

External yard areas are lit by building mounted floodlights and the car park is lit by free-standing street lights.

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151 MILTON PARK OUTLINE SPECIFICATION

C - LANDLORDS FITTING OUT

Shell building fitted out in the areas shown on drawing No. ML3431/151/10.

C.1 LIFT

8 person (630 kg) hydraulic ‘Ceser’ passenger lift.

2 stops, 2 entrances, clear opening size 800mm x 2000mm.

Car dimensions 1100mm (w) x 1400 (d) x 2200 (h).

C.2 EXTERNAL FIRE ESCAPE STAIRCASE

Mild steel galvanised and painted spiral staircase complete with balustrade and tubular handrail from Spiral Construction Ltd.

C.3 STAIRS

The main staircase is constructed in steelwork with filled treads and closed risers. The balustrade is fabricated in metal and spray painted with hardwood handrails.

C.4 INTERNAL WALLS

Internal walls are constructed in concrete blockwork generally to underside of structure over with a plaster and paint finish to exposed faces to office areas.

C.5 INTERNAL FITTINGS AND FINISHES

Office areas are provided in an open plan layout.

Floors - Office, Reception and Common Areas have sand cement screed with heavy duty contract carpet tiles with IBM/ICL anti-static protection - Escopallas XL with border tile stairs. Esco Escopallas XL carpet tiles.

WC’s have sand/cement screed with Heckmondwike Hippo vinyl flooring (non slip).

Walls -

Office and Common Areas	-	Three coats of emulsion paint.
WC’s	-	Full height ceramic tiles to wet walls only.
		Emulsion paint elsewhere.

Ceilings - - Ground floor - exposed grid suspended ceiling the system. Armstrong Microlook Adira 600 × 600 tiles to General Office, Reception, Common Areas. Moisture resistant ceiling finish to W.C.’s.

First floor - Plasterboard on framing to flat and sloping sections. Open grid eggcrate ceiling to central rooflight section.

Joinery - softwood architraves, door frames skirtings and window boards with laminate to the ground floor wood faced veneer doors to the first floor stained with a suitable decorative finish.

Door furniture - stainless steel, lever handle on a rose - Newman Tonks Randi line.

- 4 -

151 MILTON PARK OUTLINE SPECIFICATION

Toilets - Toilet areas have white vitreous china sanitary ware, Armitage Shanks contour range mirrors, toilet roll holders, outlet for hand driers, shaver points and coat hooks. Formica lifeseal dividers between cubicles.

Disabled Toilet - White vitreous china sanitaryware Armitage Shanks Wentworth range.

C.6 ELECTRICAL INSTALLATION

Power Supply -	Offices wired with dado trunking (3 compartment). Wall sockets to Reception and Circulation Areas for Cleaners.
Lighting-	Office - Recessed mains frequency fluorescent fittings (Glamox category 2 diffusers) providing ave 400 lux illumination at working plane with zone switching. Circular compact low energy luminaries to WC’s and stairs
Alarm Systems-	Break Glass fire alarm system to serve open plan offices to Fire Officer’s requirements and with facility to be connected to an external monitoring system.

C.7 HEATING, PLUMBING AND VENTILATION

Heating System is a gas fired low pressure hot water system with Stelrad Elite range perimeter panel radiators complete with thermostatic valves to offices.

Cold water supply via a storage tank to the WC cisterns and basins.

Ventilation extract system to toilet area.

- 5 -

MEMORANDUM OF RENT REVIEW

Date of Lease	:	15 January 1996
Original Landlord	:	MEPC Milton Park Limited (formerly known as Lansdown Estates Group Limited)
Original Tenant	:	Evotec OAI Limited (formerly known as Oxford Asymmetry Limited
Current Landlord	:	MEPC Milton Park Limited
Current Tenant	:	Evotec OAI Limited
		(Co. No. 2674265)
Premises	:	Premises known as Unit 151 Milton Park
		Abingdon Oxfordshire
Review Date	:	29 September 2000
Annual Rent	:	£121,500
Date of Memorandum	:	14th February 2002

The Current Landlord and the Current Tenant record that the rent reserved by the above mentioned Lease (“the Lease”) has been reviewed and it has been agreed pursuant to and in accordance with the provisions contained therein that the rent first reserved by the Lease (exclusive of outgoings VAT and all other charges) payable from and including the Review Date shall be increased to one hundred and twenty one thousand five hundred pounds (£ 121,500) per annum subject to further review as provided in the above mentioned Lease.

/s/ M. Polywka

For and on behalf of Evotec OAI Limited

/s/ Christopher Williams

For and on behalf of MEPC Milton Park Limited

EX-10.7

Exhibit 10.7

Dated 28 April 2006

MEPC MILTON PARK NO. 1 LIMITED and

MEPC MILTON PARK NO. 2 LIMITED

and

EVOTEC (UK) LIMITED

and

PATHEON UK LIMITED

LICENCE TO ASSIGN

relating to

Unit 151

Milton Park

Abingdon Oxfordshire

[bsdr solicitors] [miltonpark]

PARTICULARS
1	Date	:	28 April 2006
2	Parties	:
	Landlord	:	MEPC MILTON PARK NO. 1 LIMITED (Company number 5491670) and MEPC MILTON PARK NO. 2 LIMITED (Company number 5491806) both of whose registered offices are at 4th Floor Lloyds Chambers 1 Portsoken Street London El 8LW
	Tenant	:	EVOTEC (UK) LIMITED (Company number 2674265) whose registered office is at 111 Milton Park Abingdon Oxfordshire OX14 4RZ
	Assignee	:	PATHEON UK LIMITED (Company number 3764421) whose registered office is at Kingfisher Drive Swindon Wiltshire SN3 5BZ
3	Lease
	Date	:	15 January 1996
	Parties	:	(1) Lansdown Estates Group Limited (2) The Tenant (then called Oxford Asymmetry Limited)
	Premises	:	Unit 151 Milton Park, Abingdon, Oxfordshire
	Term	:	25 years from 29 September 1995

THIS DEED made on the date and between the parties specified in the Particulars Witnesses as follows:

1 Definitions

In this Deed:

1.1 Landlord, Tenant, and Assignee mean the parties so named in the Particulars and include their successors in title;

1.2 Bank means The Governor and Company of the Bank of Scotland of whose registered office is at The Mound Edinburgh EH1 lYZ;

1.3 Clearing Bank means a shareholder in CHAPS Clearing Co. Limited;

1.4 Guarantee means a guarantee dated              2006 between (1) the Bank and (2) the Landlord;

1.5 Lease means the lease so referred to in the Particulars and includes documents supplemental to or entered into pursuant to it;

1.6 Lease Term means the term of years granted by the Lease;

1.7 Premises means the premises let by the Lease;

1.8 Principal Rent has the same meaning as is ascribed to that expression in the Lease;

1.9 VAT means Value Added Tax and any similar tax substituted for it;

1.10 1995 Act means the Landlord and Tenant (Covenants) Act 1995;

1.11 Obligations undertaken by more than one person are joint and several;

1.12 References to Costs include all liabilities, claims, demands, proceedings, damages, losses and proper costs and expenses.

2 Title

The reversion immediately expectant upon the Term is now vested in the Landlord and the benefit of the Lease remains vested in the Tenant.

3 Licence

The Landlord grants licence to the Tenant to assign the Lease to the Assignee.

4 Assignee’s Covenants

The Assignee covenants with the Landlord as from the date of the deed of transfer or assignment authorised by this Deed throughout the residue of the Lease Term or until released pursuant to the 1995 Act:

4.1 to pay all moneys payable under the Lease (including any arrears); and

4.2 to perform and observe the tenant’s covenants and conditions in the Lease; and

4.3 if the Guarantee shall end solely as a result of effluxion of time pursuant to the provisions of clause 3(a) of the Guarantee to procure that on or before 29 September 2011 (as to which time shall be of the essence) a guarantee or guarantees on the same terms as the Guarantee (mutatis mutandis) but for the unexpired residue of the Lease Term and in a sum equal to the aggregate of eighteen (18) months’ worth of Principal Rent for the time being payable under the Lease plus an amount equal to VAT at the standard rate for the time being thereon shall be issued in favour of the Landlord by a Clearing Bank; and

5 Contracts (Rights of Third Parties) Act 1999

A person who is not a party to this Licence has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Licence.

Executed by the parties as a Deed the day and year first before written.

EXECUTED AS A DEED BY MEPC	)
MILTON PARK NO. 1 LIMITED	)
acting by a director and the company	)
secretary or by two directors	)
Director /s/ David Burrows
Director/Company Secretary /s/ Emily Mousley
EXECUTED AS A DEED BY MEPC	)
MILTON PARK NO. 2 LIMITED	)
acting by a director and the company	)
secretary or by two directors	)
Director /s/ David Burrows
Director/Company Secretary /s/ Emily Mousley

EX-10.8

Exhibit 10.8

DATE 3^rd May 2006

EVOTEC (UK) LIMITED (1)

PATHEON UK LIMITED (2)

CONTRACT FOR THE SALE OF LEASEHOLD LAND

WITH VACANT POSSESSION

At

151 Milton Park, Abingdon, Oxfordshire

Manches LLP

9400 Garsington Road

Oxford Business Park

Oxford OX4 2HN

Tel +44 (0)1865 722 106

Fax +44 (0)1865 201 012

DX 4322 Oxford

www.manches.com

Ref: SPS/OX238789

Draft No: 1

Date: 24.02.2006

INDEX

1.	INTERPRETATION	1
2.	SALE AND PURCHASE	3
3.	CONDITIONS	3
4.	DEDUCING TITLE	4
5.	VACANT POSSESSION	4
6.	TITLE GUARANTEE	4
7.	FURNITURE	4
8.	MATTERS AFFECTING THE PROPERTY	5
9.	CONSENT	5
10.	ASSIGNMENT	6
11.	RENT INDEMNITY	6
12.	VAT	6
13.	ELECTRICITY SUPPLY	7
14.	EFFECTIVE DATE	7
15.	CLEANING	7
16.	RENT REVIEW	8
17.	COMPLETION	8
18.	SERVICE CHARGE DUE UNDER THE LEASE	9
19.	BUYER’S ACKNOWLEDGEMENT OF CONDITION	9
20.	ENTIRE AGREEMENT	9
21.	JOINT AND SEVERAL LIABILITY	10
22.	NOTICES	10
23.	RIGHTS OF THIRD PARTIES	11
24.	GOVERNING LAW AND JURISDICTION	11
25.	NON-MERGER	12

DATE 3^rd May 2006

PARTIES

(1) EVOTEC (UK) LIMITED incorporated and registered in England and Wales with company number 02674265 whose registered office is at 111 Milton Park, Abingdon, Oxfordshire, OX14 4RZ (“Seller”)

(2) PATHEON UK LIMITED incorporated and registered in England and Wales with company number 03774421 whose registered office is at Kingfisher Drive, Swindon, SN3 5BZ (“Buyer”)

AGREED TERMS

1. INTERPRETATION

1.1. The definitions in this clause apply in this contract

“Buyer’s Conveyancer”	Veale Wasbrough Lawyers, Orchard Court, Orchard Lane, Bristol, BS1 5WS. Telephone: 0117 925 2020. Fax: 0117 925 2025. Ref rmr/2pj87/0006
“Completion Date”	3rd May 2006
“Consent”	a consent by the Landlord to the assignment to the Buyer of the residue of the term granted by the Lease
“Contract Rate”	3% per annum above the base lending rate from time to time of Barclays Bank PLC
“Landlord”	The person entitled to the immediate reversion to the Lease
“Lease”	the lease of the building known as Unit 151 Milton Park Abingdon and dated 15 January 1996 made between Lansdown Estates Group Limited and Oxford Asymmetry Limited (now known as Evotec (UK) Limited) and every document varying or

1

	supplemental or collateral to it
“Part 1 Conditions”	the conditions in Part 1 of the Standard Commercial Property Conditions (Second Edition) and “Condition “means any one of them
“Part 2 Conditions”	the conditions in Part 2 of the Standard Commercial Property Conditions (Second Edition)
“Property”	the leasehold property at Unit 151 Milton Park as demised by the Lease
“Seller’s Conveyancer”	Stephen Stratton of Manches LLP of 9400 Garsington Road, Oxford Business Park, Oxford, OX4 2HN. Telephone: 01865-722106. Fax: 01865-201012. Ref: SPS/OX238789
“VAT”	value added tax chargeable under the Value Added Tax Act 1994 and any similar replacement and any similar additional tax
“1994 Act”	Law of Property (Miscellaneous Provisions) Act 1994

1.2. The rules of interpretation in this clause apply in this contract

1.3. A “person” includes a corporate or unincorporated body

1.4. Unless otherwise specified, a reference to a particular law is a reference to it as it is in force for the time being, taking account of any amendment, extension, application or re-enactment and includes any subordinate legislation for the time being in force made under it

1.5. A reference to laws in general is to all local, national and directly applicable supra-national laws in force for the time being, taking account of any amendment, extension, application or re-enactment and includes any subordinate laws for the time being in force made under them and all orders, notices, codes of practice and guidance made under them

2

1.6. The expression “tenant covenant” has the meaning given to it by the Landlord and Tenant (Covenants) Act 1995

1.7. “Writing” or “written” includes faxes but not e-mail

1.8. Except where a contrary intention appears, a reference to a clause or Schedule is a reference to a clause of or Schedule to this contract

1.9. Clause and Schedule headings do not affect the interpretation of this contract

2. SALE AND PURCHASE

2.1. The term of years created by the Lease remains vested in the Seller

2.2. In consideration of their respective obligations under this contract, the Seller will assign to the Buyer and the Buyer will take from the Seller an assignment of the residue of the term of years granted by the Lease on the terms of this contract. No purchase price or deposit is payable

2.3. The Buyer cannot require the Seller to:

2.3.1. assign the Lease or any part of it to any person other than the Buyer; or

2.3.2. assign the Lease in more than one parcel or by more than one transfer

3. CONDITIONS

3.1. The Part 1 Conditions are incorporated in this contract so far as they:

3.1.1. apply to a sale by private treaty;

3.1.2. relate to leasehold property

3.1.3. are not inconsistent with the other clauses in this contract; and

3.1.4. have not been modified or excluded by any of the other clauses in this contract

3.2. The Part 2 Conditions are not incorporated into this contract

3

4. DEDUCING TITLE

4.1. The Seller’s title to the Lease has been deduced to the Buyer’s Conveyancer before the date of this contract.

4.2. The Buyer is deemed to have full knowledge of the title and is not entitled to raise any objection, enquiry or requisition in relation to it

4.3. Conditions 6.3.1 and 6.4.2 do not apply to this contract

5. VACANT POSSESSION

5.1. The Property will be sold with vacant possession on completion

5.2. The Seller shall include with the assignment of the Lease all those items of furniture listed in Appendix 1

5.3. The Seller shall prior to actual completion of the Assignment of the Lease clean the Laboratory areas of the Property such cleaning to be carried out in accordance with the guidelines contained in Appendix 2

6. TITLE GUARANTEE

The Seller will assign the Lease with full title guarantee but the covenants implied by sections 3 and 4 of the 1994 Act shall be limited so that the Seller will have no liability under them for the consequences of any breach of the terms of the Lease relating to the physical state or condition of the Property

7. FURNITURE

The Seller confirms that:-

7.1. They own the legal title to all items listed in Appendix 1 free of any charge, lien or any credit sale agreement, leasing or hiring agreement, hire purchase agreement or any similar agreement or arrangement; and

7.2. None of the items listed in Appendix 1 are subject to, and there is no agreement to create, a security interest or other encumbrance and prior to the Completion Date no such interest or encumbrance will be created or agreed to be created or permitted to arise; and

7.3. None of the items listed in Appendix 1 will be disposed of prior to the Completion Date and;

4

7.4. None of the items listed in Appendix 1 were purchased by the Seller on terms that provided for a reservation of title by the Seller

8. MATTERS AFFECTING THE PROPERTY

8.1. The Seller will assign the residue of the term of years granted by the Lease free from encumbrances other than:

8.1.1. the tenant covenants and all terms and conditions contained or referred to in the Lease

8.1.2. any matters discoverable by inspection of the Property before the date of this contract

8.1.3. any matters which the Seller does not and could not reasonably know about

8.1.4. any matters disclosed or which would have been disclosed by the searches and enquiries which a prudent buyer would have made before entering into this contract;

8.1.5. public requirements

8.1.6. any matters which are, or (where the Lease is not registered) would be unregistered interests which override first registration under Schedule 1 to the Land Registration Act 2002

8.2. Conditions 3.1.1, 3.1.2, 3.1.3 and 3.3 do not apply to this contract

8.3. The Buyer is deemed to have full knowledge of the matters referred to in clause 8.1 and will not raise any enquiry, objection, requisition or claim in respect of any of them

9. CONSENT

9.1. Completion is conditional on the Consent such Consent being evidenced in a written, formal licence to assign, dated and being obtained on reasonable terms, signed or executed by or on behalf of each of the parties to it

9.2. The Buyer shall contribute the sum of £2450 plus VAT to the costs incurred by the Landlord in granting the Consent such contribution to be paid to the Seller on or before the Completion Date

5

10. ASSIGNMENT

10.1. The assignment to the Buyer will be in the agreed form initialled by the parties and annexed to this contract as Appendix 3

10.2. The Buyer and the Seller will execute the assignment in duplicate

11. RENT INDEMNITY

11.1. To secure the Buyer’s agreement to this sale and purchase, the Seller will indemnify the Buyer up to and including 31 July 2006 against the rent first reserved by the Lease in the sum equivalent to the sum representing the rent first reserved by the Lease for the period beginning on the first day of the month following the Completion Date and expiring on 31 July 2006 and for the avoidance of doubt this indemnity shall be against the rent first reserved by the Lease at a rate of £121,500 per annum

11.2. The Seller warrants to the Buyer that it has paid to the Landlord the rent firstly reserved by the Lease in respect of the period from 1 April 2006 to and including 30 April 2006 at the rate of £121,500 per annum

11.3. The Seller shall pay to the Buyer on completion a sum equivalent to the VAT due on the payment from the Seller to the Buyer under clause 11.1

11.4. The Buyer shall on completion deliver to the Seller a receipted VAT invoice for the payment received from the Seller pursuant to clause 11.1 above

12. VAT

12.1. Each amount stated to be payable by the Buyer to the Seller or by the Seller to the Buyer under or pursuant to this contract is exclusive of VAT (if any)

12.2. If any VAT is chargeable on any supply made by the Seller or the Buyer under or pursuant to this contract, the Buyer or the Seller (as the case may be) will on receipt of a valid VAT invoice, pay to the other an amount equal to that VAT as additional consideration on completion

6

13. ELECTRICITY SUPPLY

13.1. Following the Completion Date the Seller will continue to procure a supply of electricity to the Property through its adjoining property at Units 150 Milton Park

13.2. The Buyer will pay to the Seller all charges properly and reasonably incurred for such electricity supply used at the Property at the commercial rate payable.

13.3. The Buyer will provide the Seller all reasonable access to the Property to enable the Seller to read the electricity meter in the Property

13.4. The Buyer will use its reasonable endeavours to arrange a separate electricity supply to the Property prior to 1 August 2006. If it is unable to procure a separate electricity supply to the Property by this date the Seller and the Buyer nevertheless agree that the Seller will continue to procure a supply of electricity to the Property until such time as the Buyer has arranged a separate supply subject to the Buyer continuing to reimburse the Seller all charges for such supply of electricity at the usual commercial rates.

14. EFFECTIVE DATE

With effect from 1 April 2006 the Buyer will be responsible for and indemnify the Seller against all payments due under the terms of the Lease except for payments of the rent firstly reserved by the Lease at a rate pf £121,500 per annum up to and including 31 July 2006.

15. CLEANING

Prior to the Completion Date the Seller will clean the Property in accordance with the attached Schedule at Appendix 2 to the reasonable satisfaction of the Buyer and the Seller will confirm when they have completed the cleaning and notify the Buyer that the Property is available for inspection

7

16. RENT REVIEW

16.1. Under the terms of the Lease there is an outstanding rent review. The review date under the Lease was 29 September 2005

16.2. Following completion of the Assignment (but not before) the Buyer may continue with the negotiations to agree the review rent under the Lease (“the Review Rent”) with the Landlord as soon as reasonably practicable but may not agree the level of the revised rent without the written consent of the Seller, such consent not to be unreasonably withheld or delayed

16.3. The Buyer is to keep the Seller informed of the progress of the rent review negotiations

16.4. The Buyer may refer the Review Rent to an independent Surveyor pursuant to the terms of the Lease and will keep the Seller informed of progress of determination of the Review Rent

16.5. When the Review Rent has been agreed or determined the Seller must account to the Buyer for payment of the sum by which the current rent (payable in accordance with the terms of the Lease immediately before the date of this Agreement) is exceeded by the Review Rent plus interest in accordance with clause 6 of the Lease from and including 29 September 2005 up to and including 31st March 2006 such payment is to be made within five working days of the Buyer providing the Seller with a written demand

16.6. The Buyer shall be responsible for any increased rent and any interest payable which relates to their period as tenant under the Lease which for the avoidance of doubt shall be the period beginning on 1st April 2006 and continuing for the remainder of the term of the Lease

16.7. The Buyer will be responsible for any costs incurred in relation to any rent review negotiations following the Completion Date

17. COMPLETION

17.1. Completion will take place on the Completion Date

8

17.2. Condition 1.1.3(b) is amended to read: “in the case of the seller, even though a mortgage remains secured on the property, if the amount to be paid on completion enables the property to be transferred freed of all mortgages, (except those to which the sale is expressly subject) or if the seller produces reasonable evidence that this is the case.”

17.3. Condition 8.4 is amended to add, “(d) any other sum which the parties agree under the terms of the contract should be paid or allowed on completion”

18. SERVICE CHARGE DUE UNDER THE LEASE

The service charge and insurance rent payable in accordance with clause 2 (2) and clause 2 (3) of the Lease will be apportioned and the Buyer will indemnify the Seller for those items of service charge and insurance rent expenditure that are billed by the Landlord to the Seller on or after 1st April 2006 EXCEPT in respect of any balancing payments due to the Landlord from the Seller for costs relating to service charge and insurance rent prior to 1st April 2006

19. BUYER’S ACKNOWLEDGEMENT OF CONDITION

The Buyer acknowledges that before the date of this contract, the Seller has given the Buyer and others authorised by the Buyer, permission and the opportunity to inspect, survey and carry out investigations as to the condition of the Property. The Buyer has formed its own view as to the condition of the Property and the suitability of the Property for the Buyer’s purposes

20. ENTIRE AGREEMENT

20.1. This contract and the documents annexed to it constitute the entire agreement and understanding of the parties and supersede any previous agreement between them relating to the subject matter of this contract

20.2. The Buyer acknowledges and agrees that in entering into this contract, it does not rely on and shall have no remedy in respect of any statement, representation, warranty, collateral agreement or other assurance (whether made negligently or innocently) of any person (whether party to this contract or not) other than as expressly set out in this contract or the documents annexed to it or in any written replies which the Seller’s Conveyancer has given to any written enquiries raised by the Buyer’s

9

Conveyancer before the date of this contract. Nothing in this clause shall, however, operate to limit or exclude any liability for fraud

20.3. Condition 9.1.1 is varied to read, “If any plan or statement in the contract or in written replies which the seller’s Conveyancer has given to any written enquiry raised by the buyer’s Conveyancer or in the negotiations leading to it before the date of this contract, is or was misleading or inaccurate due to an error or omission the remedies available are as follows.”

21. JOINT AND SEVERAL LIABILITY

Where the Buyer is more than one person, the Seller may release or compromise the liability of any of those persons under this contract or grant time or other indulgence without affecting the liability of any other of them

22. NOTICES

22.1. Any notice given under this contract must be in writing and signed by or on behalf of the party giving it

22.2. Any notice or document to be given or delivered under this contract may be given by delivering it personally or sending it by pre-paid first class post, or recorded delivery, or fax to the address and for the attention of the relevant party as follows:

22.2.1. to the Seller at:

111 Milton Park, Abingdon, OX14 4RZ

Fax No: 01235 863139

marked for the attention of: DR MARIO POLYWKA

or at the Seller’s Conveyancer, quoting the reference SPS/OX238789

22.2.2. to the Buyer at:

Kingfisher Drive, Swindon, SN3 5BZ

Fax No: 01793 501010

10

marked for the attention of: RICHARD MORRIS, EUROPEAN LEGAL COUNSEL

22.3. Giving or delivering a notice or a document to a party’s Conveyancer has the same effect as giving it to that party

22.4. Any such notice or document will be deemed to have been received:

22.4.1. if delivered personally, at the time of delivery provided that if delivery occurs before 9.00 am on a working day, the notice will be deemed to have been received at 9.00 am on that day, and if delivery occurs after 5.00 pm on a working day, or at any time on a day which is not a working day, the notice will be deemed to have been received at 9.00 am on the next working day

22.4.2. in the case of pre-paid first class or recorded delivery post, at 9.00 am on the second working day after posting; and

22.4.3. in the case of fax, at the time of transmission

22.5. In proving delivery, it will be sufficient to prove that delivery was made or that the envelope containing the notice or document was properly addressed and posted as a prepaid first class, recorded delivery or registered letter or that the fax message was properly addressed and transmitted, as the case may be

22.6. A notice or document delivered under this contract will not be validly given or delivered if sent by e-mail.

22.7. Condition 1.3 does not apply to this contract

23. RIGHTS OF THIRD PARTIES

A person who is not a party to this contract will not have any rights under or in connection with it by virtue of the Contracts (Rights of Third Parties) Act 1999

24. GOVERNING LAW AND JURISDICTION

24.1. This contract will be governed by and construed in accordance with the law of England and Wales

24.2. Each party irrevocably agrees to submit to the exclusive jurisdiction of the courts of England and Wales over any claim or matter arising under or in

11

connection with this contract or the legal relationships established by this contract

24.3. Each party irrevocably consents to any process in any legal action or proceedings arising out of or in connection with this contract being served on it in accordance with the provisions of this contract relating to service of notices. Nothing contained in this contract shall affect the right to serve process in any other manner permitted by law

25. NON-MERGER

The provisions of this Agreement will remain in full force and effect (notwithstanding completion of the assignment of the Lease) to the extent that they remain to be complied with

Executed by the parties as a deed and delivered on but not before the date inserted as the date of this deed.

EXECUTED as a Deed by

EVOTEC (UK) LIMITED

Acting by:

Director /s/ M. Polywka

Director/Secretary /s/ M. Ashton

EXECUTED as a Deed by

PATHEON UK LIMITED

Acting by:

Director /s/ Ian Jones

Director/Secretary /s/ Richard Morris

12

From:
151 1st Floor Office 1	Desk Round Table × 1 4 × chairs
151 1st Floor Office 2	Desk Round Table × 1 4 × chairs 1 × PC chair
151 1st Floor Office 3	Desk Filing cabinet × 1 Small bookcase × 2 1 × PC chair
151 1st Floor Office 4	Desk 1 × chair
151 1st Floor Office 5	Desk Round Table × 1 3 × chairs 1 × PC chair
151 First Floor Office 6	Desk Filing cabinets × 2 Bookcase × 1 small 2 × chairs 1 × PC chair
151 1st Floor Office 7	Desk 1 × PC chair Metal Filing cabinet
151 1st Floor Office 8	Straight Desk × 2 Filing Cabinets × 2 Small Bookcase × 1 1 × PC chair
151 1st Floor Office 9	1 × desk 1 × PC chair
151 1st Floor Office 10	1 × desk
	1 × PC chair
151 1st Floor Office 11	Desk

	1 × chair
151 1st Floor 1st Flr Mtg Rm	Conference Table 6 × chairs
151 1st Floor Open Plan Areas	2 × 4-man workstations
151 Archive Store	EMPTY
151 Stationery Store	Racking Grey Cabinet
151 Kitchen	Water Boiler
151 Canteen Area	Conference Tables × 3 12 × chairs 3 × vending machines
151 1st Floor Locker Room	Lockers Benches Grey Cupboard
151 Ground Flr Office 12	2 × desks 2 × chairs
151 Ground Flr Office 13	1 × Desk 1 × chair
151 Ground Flr Office 14	Desk × 1 Filing Cabinet × 1 Bookcase × 2 1 × PC chair
151 Ground Flr Office 15	1 × Desk 1 × Chair
151 Ground Flr Reception	Reception Desk Table Pedestal 5 × chairs
151 Ground Flr Board Room	Conference Table

	12 × chairs
151 Ground Flr Meeting Room	Conference Table 12 × chairs
151 Ground Flr Reading Room 1	10 desks 10 chairs
151 Ground Flr Glassware Store
151 Ground Flr Reading Room 2	10 desks 10 chairs
Laboratories	The laboratories will all remain (including benching, fume cupboards etc, but excluding glassware, instruments, the NMR, all HPLCs and other moveable equipment)
Plant and Access	All plant fittings will remain (including HVAC systems, heat/cool units and the door access system (although this will be separated form the main system). The phone system switch will be removed but the crone blocks and the CAT 5 data cabling from the desk blocks to the RJ45 patch panels will remain. The conferencing and video unit in the ground floor meeting room will also remain.

HOWARTH CONSULTANCY

Decommissioning Check-list for Laboratories

The following list may be used as an aide in decommissioning laboratories and associated areas. It should be borne in mind that careful attention should be given to ensuring that no hazardous materials, equipment or situations remain in the areas concerned; especially so when premises are to pass into the hands of a third party, such as, new owner, contract cleaners or building construction workers, etc. Note that even where it is planned for the laboratory to be cleaned after vacating, there is a responsibility to ensure that all chemical contamination has been appropriately dealt with before cleaners carry out their operation.

COSHH Regulations: Note all decommissioning & clean-up operations must be carried out with due regard compliance with COSHH Regulations. Spillages / residues of unknown nature should be categorised as HIGH HAZARD and treated accordingly as set out in the Spillage Control Procedure Hazard Card.

Mercury Spillages: Not uncommonly spillages of metallic mercury are found during decommissioning. These should be dealt with in accordance with the specified measures set out in the Spillage Control Procedure Hazard Card.

Fume cupboards:

Check all fume cupboard areas are cleared of apparatus, equipment & chemicals.

Ensure bench tops are decontaminated; if necessary by removing, cleaning and replacing. Check side-panels, rear baffles, etc. for any residues, splashes, etc. and clean up as appropriate.

Ensure any broken glass fragments, capillaries, Pasteur pipettes, etc. are removed.

Remove any redundant notices appertaining to the fume cupboard; including marker-pen writing, etc. on the sash window.

Disconnect & remove any connections to service outlets (eg. rubber tubing on water taps).

Check drains are free running & not left obstructed with any debris.

Check services are left turned off-no water taps left dripping.

Check that any damage to service controls is duly notified to maintenance staff.

Check space below fume cupboard is cleared completely; if there is a storage cupboard beneath the bench, check it is emptied / decontaminated of any chemicals, etc.

Side-benches / Island benches:

Check cupboards & drawers are all completely emptied. Remove any redundant labelling on same. Ensure any residual contamination due to chemical materials is fully cleaned up (including cleaning behind movable/removable cupboards). Ensure any broken glass fragments, capillaries, samples, Pasteur pipettes, etc. are removed.

Ensure the bench-top is cleared of all equipment, apparatus, chemicals, etc.; and is then wiped over and left in a clean condition.

Waste receptacles:

Check all waste receptacles are emptied & cleaned out; and, if appropriate, are removed from the premises being decommissioned.

Check fully the areas where the waste receptacles are normally located & ensure that no waste has fallen behind or into the outer container; remove same and decontaminate, if necessary.

Measures should be taken to ensure no further use is made of cleaned / decontaminated waste receptacles during the remainder of decommissioning. …………./cont.

1

HOWARTH CONSULTANCY

Cont./…….

Sinks / Drain troughs:

Check sinks are cleaned out; debris, equipment, apparatus being removed.

Check any drain troughs, etc. are cleaned out.

Ensure all sinks / drain troughs are free running (ie. not blocked).

Documentation, Notices, Signage:

Ensure all health & safety documentation (and any other documentation relevant to the laboratory) is removed and archived, where appropriate-especially with respect to records (eg. fume cupboard servicing).

Ensure all redundant notices / signage, etc. (including nameplate, if appropriate) are removed; especially where a change of use is to take place.

Final check / ‘orphan samples’ / fire extinguishers

Ensure a final walk-round check is made; verify all the floor area has been cleared; all fume cupboards clear; all bench areas & waste receptacles clear.

Ensure any ‘orphan samples’ (ie. ownership unknown) have been removed from the laboratory & assigned to an approved course of action (identification / disposal, etc.).

Ensure there are no residual fragments of broken glass.

Ensure compliance is made on policy re.- fire extinguishers (ie. to remain or be removed).

Ensure all items to be removed, have been removed.

Ensure no potential hazards remain in the decommissioned area, attributable to the previous occupancy, which could be detrimental to other (uninformed) personnel entering / working / cleaning, etc. in the area.

Laboratory fittings / wired-in electrical appliances:

Establish policy with regard to fittings (eg. shelf-units) and electrical appliances wired to fused outlets (eg. certain refrigerators / washing machines) and ensure compliance is made regarding their removal / non-removal.

Refrigerators / Freezers:

Ensure refrigerators / freezers are emptied of all samples / reagents / chemicals (which should be properly relocated); are switched off & decommissioned / disconnected; and removed from the laboratory.

Quality Verification:

Written confirmation that the following classes of compound have not been used in the areas (or in the event that they have what cleaing and decontamination ahs taken place):-

(i) Beta-lactams, carbopenems, penicillins;

(ii) Teratogens and mutagens;

(iii) Respiratory sensitisers;

(iv) Cytotoxic and cytostatic compounds;

(v) Controlled substances;

(vi) Radioactive materials;

(vii) Any other substances required to be registered with the DoH; and

(viii) Hormones or sex hormones.

2

DATE            2006

EVOTEC (UK) LIMITED (1)

PATHEON UK LIMITED (2)

ASSIGNMENT

of leasehold property at

151 Milton Park, Abingdon

Manches LLP

9400 Garsington Road

Oxford Business Park

Oxford OX4 2HN

Tel +44 (0)1865 722 106

Fax +44 (0)1865 201 012

DX 4322 Oxford

www.manches.com

Ref: SPS/238789

Draft No: 1

Date: 24.02.2006

[MANCHES]

Page 1

INDEX

1.	DEFINITIONS AND INTERPRETATION	1
2.	RECITALS	3
3.	ASSIGNMENT	3
4.	TITLE GUARANTEE	3

Page 2

ASSIGNMENT

DATE: [                                                          ] 2006

PARTIES:

(1)	“Seller”	EVOTEC (UK) LIMITED
		Company No: 02674265
		Registered Office: 111 Milton Park, Abingdon
(2)	“Buyer”	PATHEON UK LIMITED
		Company No: 03764421
		Registered Office: Kingfisher Drive,
		Swindon, SN3 5BZ

1.	Definitions and Interpretation
	1.1.         Definitions
	In this deed the following words and expressions have the following meanings:
	“Lease”	a lease of the Property dated 15 January 1996 and made between Lansdown Estates Group Limited (1) and Oxford Asymmetry Limited (now known as Evotec (UK) Limited) (2) as varied or supplemented by any licences and deeds of variation
	“Property”	the leasehold property known as Unit 151 Milton Park Abingdon described in and demised by the Lease
	“Term”	the term of years granted by the Lease including any period of holding over or extension or continuation whether implied or granted by statute or common law
	“VAT”	Value Added Tax or any tax amending and/or

replacing it

1.2. Interpretation

In this deed:

1.2.1. the headings are for convenience only and do not affect its construction or interpretation and references to a clause are references (unless otherwise stated) to a clause in this deed

1.2.2. words of one gender include all other genders and any reference to a person includes a reference to a company authority board department or other body

1.2.3. if an obligation is owed to or by more than one person that obligation is owed to or by those persons separately jointly or in any combination

1.2.4. any obligation on a party to do any act or thing includes an obligation to procure that it is done and any obligation not to do any act or thing includes an obligation not to permit the doing of the act or thing

1.2.5. any consent approval authorisation or notice required or given under this deed will only take effect if given in writing

1.2.6. references to “statute” are references to any statute or statutory provision for the time being in force and any regulations orders byelaws or other subordinate legislation made under any such statute or statutory provision from time to time

1.2.7. unless expressly stated to the contrary any reference to a specific statute includes any statutory extension or modification amendment or re-enactment of that statute and any regulations or orders made under it

1.2.8. the expression “tenant covenants” has the same meaning as in Section 28(1) of the Landlord and Tenant (Covenants) Act 1995

Page 2

2. Recitals

2.1. By the Lease the Property was demised to the Seller for the Term subject to the rent reserved by and the covenants and conditions in the Lease

2.2. The Lease remains vested in the Seller for the unexpired period of the Term and the Seller has agreed to assign the Lease to the Buyer

2.3. The Lease is a new tenancy as defined by Section 1 of the Landlord and Tenant (Covenants) Act 1995

3. Assignment

In consideration of the covenants on the part of the Buyer contained in this deed the Seller assigns the Lease to the Buyer for the unexpired period of the Term subject from now on to the Buyer paying the rent and observing and performing the covenants and conditions in the Lease

4. Title Guarantee

4.1. This assignment is made with full title guarantee except that:

4.2. The Seller is not liable under the covenants implied by Section 3 or Section 4 of the Law of Property (Miscellaneous Provisions) Act 1994 for the consequences of any breach of the terms of the Lease concerning the condition of the Property

4.3. This assignment is made subject to all matters to which the contract dated the              day of          2006 between the Seller (1) the Buyer (2) for this assignment is made

4.4. All matters recorded at the date of this assignment in registers open to public inspection are deemed to be within the actual knowledge of the Buyer for the purposes of Section 6(2)(a) of the Law of Property (Miscellaneous Provisions) Act 1994, notwithstanding Section 6(3) of that Act

4.5. The Property will not, by virtue of the assignment, have any rights, easements or the benefit of any other matters over land, if any, retained by the Seller other than those (if any) which are expressly mentioned or granted by the assignment and Section 62 of the Law of Property Act 1925 will not apply to this assignment

Page 3

Executed by the parties as a deed and delivered on but not before the date inserted as the date of this deed

EXECUTED as a Deed by	)
EVOTEC (UK) LIMITED	)
acting by:	)
	Director
	Secretary
EXECUTED as a Deed by	)
PATHEON UK LIMITED	)
acting by:	)
	Director
	Secretary

Page 4

EX-10.9

Exhibit 10.9

DATE 3^rd May 2006

EVOTEC (UK) LIMITED (1)

PATHEON UK LIMITED (2)

ASSIGNMENT

of leasehold property at

151 Milton Park, Abingdon

We certify this to be a true copy of the original

Veale Wasbrough

Orchard Court, Orchard Lane, Bristol, BSI 5WS

Manches LLP

9400 Garsington Road

Oxford Business Park

Oxford OX4 2HN

Tel +44 (0)1865 722 106

Fax +44 (0)1865 201 012

DX 4322 Oxford

www.manches.com

Ref: SPS/238789

Draft No: 1

Date: 24.02.2006

[MANCHES]

Page 1

INDEX

1.	DEFINITIONS AND INTERPRETATION	1
2.	RECITALS	5
3.	ASSIGNMENT	6
4.	TITLE GUARANTEE	6

Page 2

ASSIGNMENT

DATE: 3^rd May 2006

PARTIES:

(1)	“Seller”	EVOTEC (UK) LIMITED
		Company No: 02674265
		Registered Office: 111 Milton Park, Abingdon
(2)	“Buyer”	PATHEON UK LIMITED
		Company No: 03764421
		Registered Office: Kingfisher Drive,
		Swindon, SN3 5BZ

1. Definitions and Interpretation

1.1. Definitions

In this deed the following words and expressions have the following meanings:

“Lease”	a lease of the Property dated 15 January 1996 and made between Lansdown Estates Group Limited (1) and Oxford Asymmetry Limited (now known as Evotec (UK) Limited) (2) as varied or supplemented by any licences and deeds of variation
“Property”	the leasehold property known as Unit 151 Milton Park Abingdon described in and demised by the Lease
“Term”	the term of years granted by the Lease including any period of holding over or extension or continuation whether implied or granted by statute or common law
“VAT”	Value Added Tax or any tax amending and/or

replacing it

1.2. Interpretation

In this deed:

1.2.1. the headings are for convenience only and do not affect its construction or interpretation and references to a clause are references (unless otherwise stated) to a clause in this deed

1.2.2. words of one gender include all other genders and any reference to a person includes a reference to a company authority board department or other body

1.2.3. if an obligation is owed to or by more than one person that obligation is owed to or by those persons separately jointly or in any combination

1.2.4. any obligation on a party to do any act or thing includes an obligation to procure that it is done and any obligation not to do any act or thing includes an obligation not to permit the doing of the act or thing

1.2.5. any consent approval authorisation or notice required or given under this deed will only take effect if given in writing

1.2.6. references to “statute” are references to any statute or statutory provision for the time being in force and any regulations orders byelaws or other subordinate legislation made under any such statute or statutory provision from time to time

1.2.7. unless expressly stated to the contrary any reference to a specific statute includes any statutory extension or modification amendment or re-enactment of that statute and any regulations or orders made under it

1.2.8. the expression “tenant covenants” has the same meaning as in Section 28(1) of the Landlord and Tenant (Covenants) Act 1995

Page 2

2. Recitals

2.1. By the Lease the Property was demised to the Seller for the Term subject to the rent reserved by and the covenants and conditions in the Lease

2.2. The Lease remains vested in the Seller for the unexpired period of the Term and the Seller has agreed to assign the Lease to the Buyer

2.3. The Lease is a new tenancy as defined by Section 1 of the Landlord and Tenant (Covenants) Act 1995

3. Assignment

In consideration of the covenants on the part of the Buyer contained in this deed the Seller assigns the Lease to the Buyer for the unexpired period of the Term subject from now on to the Buyer paying the rent and observing and performing the covenants and conditions in the Lease

4. Title Guarantee

4.1. This assignment is made with full title guarantee except that:

4.2. The Seller is not liable under the covenants implied by Section 3 or Section 4 of the Law of Property (Miscellaneous Provisions) Act 1994 for the consequences of any breach of the terms of the Lease concerning the condition of the Property

4.3. This assignment is made subject to all matters to which the contract dated the 3^rd day of May 2006 between the Seller (1) the Buyer (2) for this assignment is made

4.4. All matters recorded at the date of this assignment in registers open to public inspection are deemed to be within the actual knowledge of the Buyer for the purposes of Section 6(2)(a) of the Law of Property (Miscellaneous Provisions) Act 1994, notwithstanding Section 6(3) of that Act

4.5. The Property will not, by virtue of the assignment, have any rights, easements or the benefit of any other matters over land, if any, retained by the Seller other than those (if any) which are expressly mentioned or granted by the assignment and Section 62 of the Law of Property Act 1925 will not apply to this assignment

Page 3

Executed by the parties as a deed and delivered on but not before the date inserted as the date of this deed

EXECUTED as a Deed by	)
EVOTEC (UK) LIMITED	)
acting by:	)
/s/ M. Polywka	Director
/s/ M. Ashton	Secretary
EXECUTED as a Deed by	)
PATHEON UK LIMITED	)
acting by:	)
/s/ Ian Jones	Director
/s/ Richard Morris	Secretary

Page 4

EX-10.10

Exhibit 10.10

THIS LEASE is made as of the 1st day of December, 1993

B E T W E E N:

The Cadillac Fairview Corporation limited

(the “Landlord”)

- and -

Custom Pharmaceuticals and Promix Laboratories, Divisions of Patheon Inc.

(the ‘Tenant”)

ARTICLE I

PREMISES - TERM AND USE

1.01 Grant and Premises In consideration of the performance by the Tenant of its obligations under this lease, the Landlord leases the Premises to the Tenant for the Term.

1.02 Term The Term of this lease shall commence on the earlier of: (i) the date on which this lease is fully executed by the Landlord and the Tenant; and (ii) the date on which the Tenant is entitled to possession of the Premises, and it shall expire on the last day of June, 2004.

1.03 Construction of Premises

(a) The Landlord shall pay to the Tenant, without deduction or set-off of any kind, a cash allowance net of GST (the “Allowance”) of $120,000 to be applied to the construction of the Leasehold Improvements. The Allowance shall be payable by the Landlord to the Tenant within 3 business days of the later of the following:

(i) upon waiving of all conditions contained in the Lease Proposal;

(ii) execution of this lease by the Landlord and the Tenant;

(iii) the Commencement Date; and

(iv) occupancy of the Premises by the Tenant.

(b) The Tenant may make all alterations and improvements to the Premises, as outlined in Schedule “B” of the Lease Proposal, subject to Section 9 of the Lease Proposal.

(c) The Landlord represents and warrants that the Building including the roof and all structural components thereof and all mechanical and electrical systems are in good operating condition on the Commencement Date and the Landlord shall remove, prior to the Commencement Date, the remnants of the previous exterior sign.

1.04 Use and Conduct of Business The Premises shall be used principally for general office, production/manufacturing, warehousing and distribution of pharmaceutical products, including ancillary uses as required by the Tenant and for no other purpose. The Tenant shall conduct its business in the Premises in a reputable and first class manner.

ARTICLE II

RENT

2.01 Covenant to Pay

(a) Except as may be provided in Section 2.02, the Tenant shall pay Rent from the Commencement Date without prior demand and without any deduction, abatement, set-off or compensation. If the Commencement Date is not on the first day of a calendar month, or the first or last Fiscal Year of the Term comprises less than 12 calendar months, then Rent for such month and such Fiscal Years shall be pro-rated on a per diem basis, based upon a period of 365 days.

(b) The Tenant will deliver to the Landlord on each Fiscal Year end throughout the Term, a series of monthly post-dated cheques for the next ensuing twelve month period, for the total of the monthly payments of Net Rent and any Additional Rent estimated by the Landlord in advance. Notwithstanding the foregoing, so long as the Tenant is Patheon Inc., is in possession of and conducting its business in the whole of the Premises and there is no Event of Default, the requirement to present post-dated cheques shall be suspended.

2.02 Net Rent

(a) The Tenant shall pay Net Rent in equal monthly instalments each in advance on the first day of each calendar month of the Term as follows:

Rent	Annual Net Rent		Monthly Instalments		Net Rent Per Square Foot
Commencement Date - June 30, 1999	$	131,938.40	$	10,994.87	$	2.90
July 1, 1999 – June 30, 2004	$	154,686.40	$	12,890.53	$	3.40

(b) Notwithstanding subsection (a) above, the Tenant shall not be required to pay any Net Rent from the Commencement Date to and including June 30, 1994. During such period, however, the Tenant shall be required to pay all Additional Rent required by the provisions of this lease.

2.03 Payment of Additional Rent

(a) The Rent payable by the Tenant shall be net to the Landlord and clear all of Taxes, insurance premiums and all costs relating to the Premises, except for the Landlord’s corporate and income taxes (except as otherwise provided herein), and any principal, interest or other costs payable by the Landlord in respect of the Landlord’s debts. The Tenant shall, except for those costs required to be paid by the Landlord under this lease, pay all costs and expenses relating to, or incurred in respect of, the Premises.

(b) There shall be no reduction in Rent if all or part of the Premises become unusable or are damaged or destroyed, except as provided for in Article V.

(c) The Tenant shall pay when due all Business Tax. If the Tenant’s Business Tax is payable by the Landlord to the relevant taxing authority, the Tenant shall pay the amount thereof to the Landlord or as it directs.

(d) The Tenant shall promptly deliver to the Landlord on request, copies of assessment notices, tax bills and other documents received by the Tenant relating to Taxes

- 2 -

and Business Tax and receipts for payment of Taxes and Business Tax payable by the Tenant.

(e) The Tenant shall on demand, pay to the Landlord or to the appropriate taxing authority if required by the Landlord, all goods and services taxes, sales taxes, value added taxes, business transfer taxes, or any other taxes imposed on the Landlord with respect to Rent or in respect of the rental of space under this lease, whether characterized as a goods and services tax, sales tax, value added tax, business transfer tax or otherwise. The Landlord shall have the same remedies and rights with respect to the payment or recovery of such taxes as it has for the payment or recovery of Rent under this lease.

(f) The Tenant shall pay all Taxes and the cost of insurance which the Landlord is obligated or permitted to obtain under this lease, all in accordance with Section 2.04. The Landlord estimates such cost for the 12 month period ending June 1, 1994 to be approximately $1,200.00.

(g) The Tenant shall have the right to contest the amount or legality of the realty taxes forming part of the Taxes (the “Realty Taxes”) and to make application for the reduction of Realty Taxes or of any assessment upon which the Realty Taxes are based. The Tenant shall diligently prosecute any such contest, and shall immediately after the final determination of such contest, pay the amount of the Realty Taxes which were the subject of such contest as so determined, as and when they become due and payable, together with any interest, penalties or other charges which are payable in connection with the Realty Taxes. Before commencing proceedings to contest any the Realty Taxes, the Tenant shall pay to the Landlord the amount of Realty Taxes due, or such alternative security as requested by the Landlord, to be held by the Landlord pending the determination of such contest. On the determination of such contest, the Landlord shall pay, out of the amount held by it, the amount required to be paid by the Tenant on account of the Realty Taxes, and if the amount held by the Landlord exceeds the amount of Realty Taxes required to be paid by the Tenant, the Landlord shall make the necessary rebate of such excess amount to the Tenant. If the amount held by the Landlord is insufficient to pay all of the Realty Taxes, the Tenant shall, immediately on the determination of such contest, pay to the appropriate taxing authorities such additional amount as may be required to satisfy the Realty Taxes in full. The Tenant shall deliver to the Landlord within 90 days after the date on which the Realty Taxes and charges described in this Section are paid, official receipts of the appropriate taxing authority evidencing payment of same.

2.04 Payment of Estimated Taxes and Insurance Premiums

(a) The amount of Taxes and insurance premiums referred to in Section 2.03 may be estimated by the Landlord for such period as the Landlord determines from time to time, and the Tenant agrees to pay to the Landlord the amounts so estimated in equal instalments in advance on the first day of each month during such period. Notwithstanding the foregoing, when bills for all or any portion of the amounts so estimated are received, the Landlord may bill the Tenant for such amounts after crediting against such amounts any monthly payments of estimated Taxes and insurance premiums previously made by the Tenant and the Tenant shall pay the Landlord the amounts so billed.

(b) Within a reasonable time after the end of the period for which such estimated payments have been made, the Landlord shall submit to the Tenant a statement showing the final amount of Taxes and insurance premiums.

If: (i) the amount the Tenant has paid is less than the amounts due, the Tenant shall pay such deficiency to the Landlord; or (ii) the amount paid by the Tenant is greater than the amounts due, the Landlord shall pay such excess to the Tenant. The obligations contained in this subsection shall survive the expiration or earlier termination of the Term. Failure of the Landlord to render any statement of Taxes or insurance premiums shall not prejudice

- 3 -

the Landlord’s right to render such statement thereafter or with respect to any other period. The rendering of any such statement shall also not affect the Landlord’s right to subsequently render an amended or corrected statement.

2.05 Additional Rent Except as otherwise provided in this lease, all Additional Rent shall be payable by the Tenant to the Landlord within 5 business days after demand.

2.06 Rent Past Due All Rent past due shall bear interest from the date on which the same became due until the date of payment at 2% per annum in excess of the prime interest rate for Canadian Dollar demand loans announced from time to time by any Canadian chartered bank designated by the Landlord.

2.07 Utilities The Tenant shall pay, when due, all charges for gas, electricity, water, steam, telephone and other utilities used in or on the Premises. The Tenant shall also pay for apparatus, meters and other things leased or purchased in connection with utility services, and for all work performed by anyone in connection with such utilities.

2.08 Net Lease This lease is a completely net lease to the Landlord, except as expressly herein set out. The Landlord is not responsible for any expenses or outlays of any nature arising from or relating to the Premises, or the use or occupancy thereof, or the contents thereof or the business carried on therein, save and except any management fees. The Tenant shall pay all charges, impositions and outlays of every nature and kind relating to the Premises except as expressly herein set out.

2.09 Deposit The Landlord acknowledges receipt of the Tenant’s deposit of $23,885.40 in Canadian funds which will be applied without interest against the Net Rent due in the first and last months of the Term.

ARTICLE III

MAINTENANCE, REPAIRS AND ALTERATIONS

3.01 Maintenance by Tenant

(a) Except for damage caused by fire or other insured casualty, the repair of which is provided for in Article V, the Tenant shall, at its own expense:

(i) subject to paragraph (ii) below, maintain and repair the interior and the exterior and the structure of the Building in good order and first class condition in the same manner as a careful and prudent owner would do including, without limitation, the repair of wear and tear which is necessary to maintain the improvements and equipment of the Building in such manner so that they function properly having regard to their nature and purpose for which they are intended to be used or to keep the appearance of the Premises neat, clean and presentable. Notwithstanding the foregoing, the Tenant’s repair obligation aforesaid shall apply during the Term and any extension, provided that upon the expiration of the Term or any extension, the Tenant shall be required to leave the Premises in the same condition as on the Commencement Date, assuming that all construction pursuant to Section 1.03(b) had been completed; and

(ii) maintain and make such repairs and replacements to the structure, roof, equipment, facilities, paved areas, fences, landscaping and other installations forming part of the Building or the Premises to keep same in good order and first class condition in the same manner as a careful and prudent owner would do including, without limitation, the repair of wear and tear which is necessary

- 4 -

to maintain same in such manner so that they function properly having regard to their nature and the purpose for which they are intended to be used or to keep the appearance of the Premises neat, clean and presentable. Notwithstanding the foregoing, the Tenant shall not be required to replace the structure of the Building or the roof, and the Landlord will replace, at its sole cost, if same cannot be repaired, the structure of the Building and the roof.

(b) The Landlord may enter the Premises to view the state of repair. If the Landlord notifies the Tenant of the need for repairs, the Tenant will repair in accordance with such notice, subject to the exceptions set out in subsection (a) above. On the expiration or date of early termination of this lease, the Tenant shall surrender the Premises to the Landlord in a good state of repair consistent with the obligations imposed upon the Tenant during the Term. No provision of this subsection (b) shall require the Tenant on the expiration or other termination of this lease to repair reasonable wear and tear, except to the extent that repair of wear and tear is necessary to maintain the improvements and equipment of the Building in such manner so that they shall function properly, having regard to their nature and the purpose for which they are intended to be used, and except to the extent that repair of wear and tear is necessary to keep the appearance of the Premises neat, clean and presentable. All repairs required to be made pursuant to this subsection (b) shall be completed prior to the date upon which this lease terminates.

(c) If the Tenant is in default of the provisions of subsections (a) and (b) above, the Landlord may proceed to make the needed repairs and may then charge its costs for so doing to the Tenant for immediate payment on demand.

(d) The Tenant shall keep the Premises and the sidewalks and other areas adjacent to the Premises clean and free of refuse and other obstructions, and shall comply with any laws governing the condition or cleanliness of the Premises. The Tenant shall also, at its own expense, operate and maintain the Lands and parking areas, entrance areas, driveways, walkways, ramps and landscaped areas on the Lands in a proper and first class manner.

(e) The Tenant shall not, by its act or omission, permit anything to occur in the Premises which shall be or shall result in a nuisance.

(f) The Tenant shall promptly comply with the requirements of all laws at any time in force during the Term which affect the condition or use of the Premises, and with every reasonable recommendation or requirement of the Insurers Advisory Organization (as determined from time to time by the Landlord), or by any recognized body having similar functions, or any insurance company by which either the Landlord or the Tenant may be insured during the Term. If the Tenant defaults under the provisions of this subsection, the Landlord may itself comply with the requirements of this subsection, and the Tenant shall pay all expenses (including insurance premiums) incurred by the Landlord in so doing on demand.

(g) The Tenant shall heat the Building at its own expense to such temperature as may be necessary to prevent damage to the Building, the Leasehold Improvements and the Trade Fixtures.

3.02 Tenant’s Alterations

(a) The Tenant shall not place any thing on, nor make any opening in, the roof or exterior walls of the Building, without the prior written consent of the Landlord, which consent shall not be unreasonably withheld or delayed. On the termination of this lease, or at such time as the Tenant vacates the Premises, the Tenant shall repair any damage caused

- 5 -

to the Building as a result of having placed any thing on, or having made openings in, the roof, and shall restore the roof and exterior walls to their former condition, all to the satisfaction of the Landlord.

(b) The Tenant shall have the right, at its sole costs, to erect such corporate signage on the Lands or Building as it may require to identify its business. All signs shall be in conformity with applicable laws and by-laws, and shall be subject to the prior written approval of the Landlord which approval shall not be unreasonably withheld. Prior to the expiration of the Term, the Tenant shall, at its cost, remove all such signage on the Premises and any damage caused to the Building or Lands as a result of erecting or removing signs shall be repaired by the Tenant, at its sole cost, to the reasonable satisfaction of the Landlord, prior to the expiration of the Term.

(c) Save and except for the Alterations pursuant to Section 1.03(b), the Tenant shall make no Alterations to the Building or on the Lands unless it has first delivered to the Landlord plans showing such proposed alterations or additions in reasonable detail, and obtained the written consent of the Landlord to such plans and any Alterations. The Landlord shall not unreasonably withhold or delay such consent, but may give consent on such conditions as the Landlord considers proper in the circumstances. All work performed shall be performed at the Tenant’s sole cost, in a good and workmanlike manner, free from defects and using new first class materials, and construction shall be subject to supervision by the Landlord. It shall not be considered unreasonable for the Landlord to withhold its consent to any Alterations if they in any way involve the structural elements of the Building or Premises. In addition, all work shall be completed to the satisfaction of the Landlord, acting reasonably. The Tenant shall, at its cost, obtain all required permits and comply with all laws, by-laws and regulations of all governmental authorities having jurisdiction.

(d) The Tenant shall pay the costs of installing and maintaining a sprinkler supervisory system in the Building, if such a system is required by any law or regulation of any governmental authority, or by The Insurers Advisory Organization or any body having similar functions, or any fire or liability insurance company by which either the Landlord or Tenant may be insured during the Term. Without limitation, a portion of the Building presently contains a sprinkler supervisory system (the “Present System”) and the Tenant shall pay the cost of maintaining such system. The Landlord warrants that, as of the Commencement Date, the Present System is in good working condition.

3.03 Removal of Improvements and Fixtures All Leasehold Improvements (other than Trade Fixtures) shall immediately upon their placement become the property without compensation to the Tenant. Except as otherwise agreed by the Landlord in writing, no Leasehold Improvements shall be removed from the Premises by the Tenant either during or at the expiry or sooner termination of the Term except that: (a) the Tenant may, during the Term, in the usual course of its business, remove its Trade Fixtures, provided that the Tenant is not in default under this lease; (b) the Tenant shall, at the expiration or earlier termination of the Term, at its sole cost, remove its Trade Fixtures from the Premises, failing which, at the option of the Landlord, the Trade Fixtures shall become the property of the Landlord and may be removed from the Premises and sold or disposed of by the Landlord in such manner as it deems advisable; and (c) the Tenant shall, at the expiration or earlier termination of the Term, at its sole cost, either remove such of the Leasehold Improvements in the Premises (except those effected in the general office area of the Premises) as the Landlord shall require to be removed, and restore the Premises (other than the general office area of the Premises) to the Landlord’s then current base Building standard to the extent required by the Landlord, or at the Tenant’s option, pay to the Landlord the estimated cost of such removal and restoration as determined by the Architect, acting reasonably. If the Tenant does perform such work, then: (i) the Tenant shall submit detailed demolition drawings to the Landlord for its prior approval, and such work shall be completed under the supervision of the Landlord; (ii) the Tenant shall, at its expense, repair any damage caused to the Building by such removal; and (iii) if the Tenant

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fails to complete such work within 30 days following the expiry or earlier termination of the Term, the Tenant shall pay compensation to the Landlord for each day following such 30th day until completion of such work, at a rate equal to the per diem Rent payable during the last month preceding the expiry or earlier termination of the Term, which sum is agreed by the parties to be a reasonable estimate of the damages suffered by the Landlord for the loss of use of the Premises. The Tenant’s obligation aforesaid shall also include the obligation of the Tenant to close off all electrical wiring which may have previously served any machinery or equipment installed by the Tenant in the Building.

3.04 Liens The Tenant shall promptly pay for all materials supplied and work done in respect of the Premises so as to ensure that no lien is registered against any portion of the Lands or Building or against the Landlord’s or Tenant’s interest therein. If a lien is registered or filed, the Tenant shall discharge it at its expense forthwith, failing which the Landlord may at its option discharge the lien by paying the amount claimed to be due into court or directly to the lien claimant and the amount so paid and all expenses of the Landlord including legal fees (on a solicitor and client basis) shall be paid by the Tenant to the Landlord.

3.05 Notice by Tenant The Tenant shall notify the Landlord of any accident, defect, damage or deficiency in any part of the Premises which comes to the attention of the Tenant, its employees or contractors notwithstanding that the Landlord may have no obligation in respect thereof.

ARTICLE IV

INSURANCE AND INDEMNITY

4.01 Tenant’s Insurance

(a) The Tenant shall maintain the following insurance throughout the Term at its sole cost: (i) “All Risks” (including flood and earthquake) property insurance with deductibles not exceeding 3% of the amount insured, naming the Tenant, the Landlord, the owners of the Lands and Building and the Mortgagee as insured parties, containing a waiver of any subrogation rights which the Tenant’s insurers may have against the Landlord and against those for whom the Landlord is in law responsible, and (except with respect to the Tenant’s chattels) incorporating the Mortgagee’s standard mortgage clause. Such insurance shall insure: (1) property of every kind owned by the Tenant or for which the Tenant is legally liable located on or in the Building including, without limitation, Leasehold Improvements, in an amount equal to not less than 90% of the full replacement cost thereof, subject to a stated amount co-insurance clause; and (2) extra expense insurance in such amount as will reimburse the Tenant for loss attributable to all perils referred to in this paragraph 4.01(a)(i) or resulting from prevention of access to the Premises; (ii) comprehensive general liability insurance which includes the following coverages: owners protective; personal injury; occurrence property damage; and employers and blanket contractual liability. Such policies shall: contain inclusive limits of not less than $5,000,000; provide for cross liability; and name the Landlord as an insured; (iii) Tenant’s “all risks” legal liability insurance for the replacement cost value of the Premises; (iv) automobile liability insurance on a non-owned form including contractual liability, and on an owner’s form covering all licensed vehicles operated by or on behalf of the Tenant, which insurance shall have inclusive limits of not less than $1,000,000; and (v) any other form of insurance which the Tenant or the Landlord, acting reasonably, or the Mortgagee requires from time to time in form, in amounts and for risks against which a prudent tenant would insure.

(b) All policies referred to in this Section 4.01 shall: (i) be taken out with insurers reasonably acceptable to the Landlord; (ii) be in a form reasonably satisfactory to the Landlord; (iii) be non-contributing with, and shall apply only as primary and not as excess

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to, any other insurance available to the Landlord; (iv) not be invalidated as respects the interests of the Landlord or the Mortgagee by reason of any breach of or violation of any warranty, representation, declaration or condition; and (v) contain an undertaking by the insurers to notify the Landlord by registered mail not less than 30 days prior to any material change, cancellation or termination. Certificates of insurance on the Landlord’s standard form or, if required by the Landlord, certified copies of such insurance policies, shall be delivered to the Landlord forthwith upon request. If the Tenant fails to take out or to keep in force any insurance referred to in this Section 4.01 or should any such insurance not be approved by either the Landlord or the Mortgagee and should the Tenant not commence to diligently rectify (and thereafter proceed to diligently rectify) the situation within 48 hours after written notice by the Landlord to the Tenant (stating, if the Landlord or the Mortgagee, from time to time, does not approve of such insurance, the reasons therefor) the Landlord has the right without assuming any obligation in connection therewith, to effect such insurance at the sole cost of the Tenant and all outlays by the Landlord shall be paid by the Tenant to the Landlord without prejudice to any other rights or remedies of the Landlord under this lease.

4.02 Cancellation of Insurance If any insurer under any insurance policy covering any part of the Building or any occupant thereof cancels or threatens to cancel its insurance policy or reduces or threatens to reduce coverage under such policy by reason of the use of the Premises by the Tenant or by any Transferee, or by anyone permitted by the Tenant to be upon the Premises, the Tenant shall remedy such condition within 48 hours after notice thereof by the Landlord.

4.03 Landlord’s Insurance The Landlord shall throughout the Term carry: (a) insurance on the Building (excluding the foundations and excavations) and the machinery, boilers and equipment in or servicing the Building and owned by the Landlord or the owners of the Building (excluding any property which the Tenant is obliged to insure under Section 4.01) against damage by fire and extended perils coverage; and (b) such other form or forms of insurance as the Landlord or the Mortgagee reasonably considers advisable. Such insurance shall be in such reasonable amounts and with such reasonable deductibles as would be carried by a prudent owner of a reasonably similar building, having regard to size, age and location. Notwithstanding the Landlord’s covenant in this Section and notwithstanding any contribution by the Tenant to the cost of the Landlord’s insurance premiums, the Tenant acknowledges and agrees that: (a) the Tenant is not relieved of any liability arising from or contributed to by its negligence or its wilful act or omissions; (b) no insurable interest is conferred upon the Tenant under any insurance policies carried by the Landlord; and (c) the Tenant has no right to receive any proceeds of any insurance policies carried by the Landlord.

4.04 Loss or Damage The Landlord shall not be liable for any death or injury arising from or out of any occurrence in, upon, at or relating to the Lands or Building or damage to property of the Tenant or of others located on the Premises or elsewhere in the Building, nor shall it be responsible for any loss of or damage to any property of the Tenant or others from any cause, except to the extent any such death, injury, loss or damage results from the negligence, acts or omissions of the Landlord, its agents, employees, contractors, or others for whom it may, in law, be responsible. Without limiting the generality of the foregoing, but subject to the qualifications aforesaid, the Landlord shall not be liable for any injury or damage to Persons or property resulting from fire, explosion, falling plaster, falling ceiling tile, falling fixtures, steam, gas, electricity, water, rain, flood, snow or leaks from any part of the Premises or from the pipes, sprinklers, appliances, plumbing works, roof, windows or subsurface of any floor or ceiling of the Building or from the street or any other place or by dampness or by any other cause whatsoever. The Landlord shall not be liable for any such damage caused by Persons on the Lands or in the Building or by occupants of adjacent property thereto, or the public, or caused by construction or by any private, public or quasi-public work. All property of the Tenant kept or stored on the Premises shall be so kept or stored at the risk of the Tenant only and the Tenant releases and agrees to

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indemnify the Landlord and save it harmless from any claims arising out of any damage to the same including, without limitation, any subrogation claims by the Tenant’s insurers.

4.05 Indemnification of the Landlord Notwithstanding any other provision of this lease, the Tenant shall indemnify the Landlord and save it harmless from all loss (including loss of Net Rent and Additional Rent) claims, actions, damages, liability and expense in connection with loss of life, personal injury, damage to property or any other loss or injury whatsoever arising out of this lease, or any occurrence in, upon or at the Premises, or the occupancy or use by the Tenant of the Premises or any part thereof, or occasioned wholly or in part by any act or omission of the Tenant or by anyone permitted to be on the Premises by the Tenant, except to the extent any such loss, etc., results from the negligence, acts or omissions of the Landlord or those for whom it is in law responsible. If the Landlord shall, without fault on its part, be made a party to any litigation commenced by or against the Tenant, then the Tenant shall protect, indemnify and hold the Landlord harmless in connection with such litigation. The Landlord may at its option participate in, or assume carriage of, any litigation or settlement discussions relating to the foregoing, or any other matter for which the Tenant is required to indemnify the Landlord under this lease. Alternatively, the Landlord may require the Tenant to assume carriage of and responsibility for all or any part of such litigation or discussions.

ARTICLE V

DAMAGE AND DESTRUCTION

5.01 No Abatement If the Building is damaged or destroyed in whole or in part by fire or any other occurrence, this lease shall continue in full force and effect and there shall be no abatement of Rent except as provided in this Article V.

5.02 Damage to Building If the Building is at any time destroyed or damaged as a result of fire or any other casualty required to be insured against by the Landlord under this lease or otherwise insured against by the Landlord and not caused or contributed to by the Tenant, then the following provisions shall apply: (a) if the Building is rendered untenantable only in part, the Landlord shall diligently repair the Building and Net Rent shall abate proportionately to the portion of the Building rendered untenantable from the date of destruction or damage until the Landlord’s repairs have been completed; (b) if the Building is rendered wholly untenantable, the Landlord shall diligently repair the Building and Net Rent shall abate entirely from the date of destruction or damage until the Landlord’s repairs have been completed; (c) if the Building is not rendered untenantable in whole or in part, the Landlord shall diligently perform such repairs to the Building, but in such circumstances Net Rent shall not terminate or abate; (d) upon being notified by the Landlord that the Landlord’s repairs have been substantially completed, the Tenant shall diligently perform all repairs to the Building which are the Tenant’s responsibility under Article IV, and all other work required to fully restore the Building for use in the Tenant’s business, in every case at the Tenant’s cost and without any contribution to such cost by the Landlord, whether or not the Landlord has at any time made any contribution to the cost of supply, installation or construction of Leasehold Improvements in the Building; and (e) nothing in this Section shall require the Landlord to rebuild the Building in the condition which existed before any such damage or destruction so long as the Building as rebuilt will have reasonably similar facilities (including, without limitation, the size and utility of the Building and all finishes and services existing as of the Commencement Date) to those in the Building prior to such damage or destruction, having regard, however, to the age of the Building at such time.

5.03 Right of Termination Notwithstanding Section 5.02, if the damage or destruction which has occurred in the Building is such that in the reasonable opinion of the Landlord the Building cannot be rebuilt or made fit for the purposes of the Tenant within

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270 days of the happening of the damage or destruction, the Landlord may, at its option, terminate this lease on notice to the Tenant given within 30 days after such damage or destruction. If such notice of termination is given, Rent shall be apportioned and paid to the date of such damage or destruction and the Tenant shall immediately deliver vacant possession of the Premises in accordance with the terms of this lease. If the Landlord decides to rebuild the Building, it shall make every reasonable effort to have the Building rebuilt within the said 270 day period.

5.04 Architect’s Certificate The certificate of the Architect shall bind the parties as to: (a) whether or not the Building is rendered untenantable and the percentage of the Building rendered untenantable; (b) the date upon which either the Landlord’s or Tenant’s work of reconstruction or repair is completed or substantially completed and the date when the Building is rendered tenantable; and (c) the state of completion of any work of the Landlord or the Tenant.

ARTICLE VI

ASSIGNMENT, SUBLETTING AND TRANSFERS

6.01 Assignments, Subleases and Transfers The Tenant shall not enter into, consent to or permit any Transfer without the prior written consent of the Landlord in each instance, which consent shall not be unreasonably withheld but shall be subject to the Landlord’s rights under Section 6.02. Notwithstanding any statutory provision to the contrary, it shall not be considered unreasonable for the Landlord to take into account whether in the Landlord’s opinion, the financial background, business history and capability of the proposed Transferee is satisfactory. Consent by the Landlord to any Transfer if granted shall not constitute a waiver of the necessity for such consent to any subsequent Transfer. This prohibition against Transfer shall include a prohibition against any Transfer by operation of law and no Transfer shall take place by reason of the failure of the Landlord to give notice to the Tenant within 20 days as required by Section 6.02.

6.02 Landlord’s Right to Terminate If the Tenant intends to effect a Transfer, the Tenant shall give prior notice to the Landlord of such intent specifying the identity of the Transferee, the type of Transfer contemplated, the portion of the Premises affected thereby, and the financial and other terms of the Transfer, and shall provide such financial, business or other information relating to the proposed Transferee and its principals as the Landlord or any Mortgagee requires, together with copies of any documents which record the particulars of the proposed Transfer. The Landlord shall, within 20 days after having received such notice and all requested information, notify the Tenant either that: (a) it consents or does not consent to the Transfer in accordance with the provisions and qualifications of this Article VI; or (b) it elects to cancel this lease as to the whole or part, as the case may be, of the Premises affected by the proposed Transfer, in preference to giving such consent. If the Landlord elects to terminate this lease it shall stipulate in its notice the termination date of this lease, which date shall be no less than 30 days nor more than 90 days following the giving of such notice of termination. If the Landlord elects to terminate this lease, the Tenant shall notify the Landlord within 10 days thereafter of the Tenant’s intention either to refrain from such Transfer or to accept termination of this lease or the portion thereof in respect of which the Landlord has exercised its rights. If the Tenant fails to deliver such notice within such 10 days or notifies the Landlord that it accepts the Landlord’s termination, this lease will as to the whole or affected part of the Premises, as the case may be, be terminated on the date of termination stipulated by the Landlord in its notice of termination. If the Tenant notifies the Landlord within such 10 days that it intends to refrain from such Transfer, then the Landlord’s election to terminate this lease shall become void.

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6.03 Conditions of Transfer

(a) If there is a permitted Transfer, the Landlord may collect rent from the Transferee and apply the net amount collected to the Rent payable under this lease but no acceptance by the Landlord of any payments by a Transferee shall be deemed a waiver of the Tenant’s covenants or any acceptance of the Transferee as tenant or a release from the Tenant from the further performance by the Tenant of its obligations under this lease. Any consent by the Landlord shall be subject to the Tenant and Transferee executing an agreement with the Landlord agreeing that the Transferee will be bound by all of the terms of this lease and, except in the case of a sublease, that the Transferee will be so bound as if it had originally executed this lease as tenant.

(b) Notwithstanding any Transfer permitted or consented to by the Landlord, the Tenant shall remain liable under this lease and shall not be released from performing any of the terms of this lease.

(c) The Landlord’s consent to any Transfer shall be subject to the condition that if the net rent and additional rent to be paid by the Transferee under such Transfer exceeds the Net Rent and Additional Rent payable under this lease, the amount of such excess (the “Profit”) shall be paid by the Tenant to the Landlord. If the Tenant receives from any Transferee, either directly or indirectly, any consideration other than net rent or additional rent for such Transfer, either in the form of cash, goods or services (other than the proceeds of any financing as the result of a Transfer involving a mortgage, charge or similar security interest in this lease) the Tenant shall forthwith pay to the Landlord an amount equivalent to such consideration. The Tenant and the Transferee shall execute any agreement required by the Landlord to give effect to the foregoing terms. Notwithstanding the foregoing, in calculating any Profit which is payable to the Landlord, the Tenant may deduct any and all advertising costs, leasing commissions, brokerage fees, legal expenses and other expenses incurred by the Tenant with respect to any portion of the Premises which has been sublet including any loss of rental income during periods of vacancy of such sublet premises.

(d) Notwithstanding the effective date of any permitted Transfer as between the Tenant and the Transferee, all Net Rent and Additional Rent for the month in which such effective date occurs shall be paid in advance by the Tenant so that the Landlord will not be required to accept partial payments of Net Rent and Additional Rent for such month from either the Tenant or Transferee.

(e) Any document evidencing any Transfer permitted by the Landlord, or setting out any terms applicable to such Transfer or the rights and obligations of the Tenant or Transferee thereunder, shall be prepared by the Landlord or its solicitors and all associated legal costs shall be paid by the Tenant.

(f) The Tenant shall not be in default under this lease at the time it requests the consent of the Landlord to any Transfer as herein provided.

6.04 Change of Control If the Tenant is at any time a corporation or partnership, any actual or proposed Change of Control in such corporation or partnership shall be deemed to be a Transfer and subject to all of the provisions of this Article VI. The Tenant shall immediately advise the Landlord of any Change of Control. The Tenant shall make available to the Landlord or its representatives all of its corporate or partnership records, as the case may be, for inspection, upon the Landlord’s reasonable suspicion of a Change of Control, in order to ascertain whether any Change of Control has occurred.

6.05 Assignment by Landlord Subject to Section 9.20, the Landlord shall have the unrestricted right to sell, lease, convey or otherwise dispose of all or any part of the Building or Lands and this lease or any interest of the Landlord in this lease. To the extent that the purchaser or assignee from the Landlord assumes the obligations of the Landlord under this

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lease, the Landlord shall thereupon and without further agreement be released from all liability under this lease.

6.06 “For Sale” Signs The Landlord may within 6 months before the expiration of the Term, unless the Term has been renewed, or within 6 months before the expiration of the renewal term (if any) place on the Premises a notice of reasonable dimensions stating that the Premises are for rent and the Tenant shall not permit such notice to be removed.

ARTICLE VII

DEFAULT

7.01 Default and Remedies

If and whenever an Event of Default occurs, then without prejudice to any other rights which it has pursuant to this lease or at law, the Landlord shall have the following rights and remedies, which are cumulative and not alternative: (a) to terminate this lease by notice to the Tenant; (b) to enter the Premises as agent of the Tenant and to relet the Premises for whatever term, and on such terms as the Landlord in its discretion may determine and to receive the rent therefor and as agent of the Tenant to take possession of any property of the Tenant on the Premises, to store such property at the expense and risk of the Tenant or to sell or otherwise dispose of such property in such manner as the Landlord may see fit without notice to the Tenant; to make alterations to the Premises to facilitate their reletting; and to apply the proceeds of any such sale or reletting first, to the payment of any expenses incurred by the Landlord with respect to any such reletting or sale; second, to the payment of any indebtedness of the Tenant to the Landlord other than Rent; and third, to the payment of Rent in arrears; with the residue to be held by the Landlord and applied in payment of future Rent as it becomes due and payable. The Tenant shall remain liable for any deficiency to the Landlord; (c) to remedy or attempt to remedy any default of the Tenant under this lease for the account of the Tenant and to enter upon the Premises for such purposes. No notice of the Landlord’s intention to perform such covenants need be given the Tenant unless expressly required by this lease. The Landlord shall not be liable to the Tenant for any loss, injury or damage caused by acts of the Landlord in remedying or attempting to remedy such default and the Tenant shall pay to the Landlord all expenses incurred by the Landlord in connection with remedying or attempting to remedy such default; (d) to recover from the Tenant all damages and expenses incurred by the Landlord as a result of any breach by the Tenant including, if the Landlord terminates this lease, any deficiency between those amounts which would have been payable by the Tenant for the portion of the Term following such termination and the net amounts actually received by the Landlord during such period of time with respect to the Premises; (e) to recover from the Tenant the full amount of the current month’s Rent together with the next 3 months’ instalments of Rent, all of which shall accrue on a day-to-day basis and shall immediately become due and payable as accelerated rent; and (f) if this lease has been terminated in accordance with Section 7.01(a), to recover from the Tenant the unamortized portion of any leasehold improvement allowance or inducement paid by the Landlord under the terms of this lease or the Lease Proposal, such amortization to be calculated from the date which is the later of the date of payment by the Landlord or the Commencement Date, and reducing on a straight line basis to zero over the initial Term.

7.02 Distress Notwithstanding any provision of this lease or any provision of applicable legislation, none of the goods and chattels of the Tenant on the Premises at any time during the Term shall be exempt from levy by distress for Rent in arrears, and the Tenant waives any such exemption. If the Landlord makes any claim against the goods and chattels of the Tenant by way of distress, this provision may be pleaded as an estoppel against the Tenant in any action brought to test the right of the Landlord to levy such distress.

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7.03 Costs The Tenant shall pay to the Landlord all damages and costs (including, without limitation, all legal fees on a solicitor and his client basis) incurred by the Landlord in enforcing the terms of this lease, or with respect to any matter or thing which is the obligation of the Tenant under this lease, or in respect of which the Tenant has agreed to insure, or to indemnify the Landlord.

7.04 Allocation of Payments The Landlord may at its option apply sums received from the Tenant against any amounts due and payable by the Tenant under this lease in such manner as the Landlord sees fit.

7.05 Survival of Obligations If the Tenant has failed to fulfil its obligations under this lease with respect to the maintenance, repair and alteration of the Building and the Premises and removal of improvements and fixtures from the Building during or at the end of the Term, such obligations and the Landlord’s rights in respect thereto shall remain in full force and effect notwithstanding the expiration or sooner termination of the Term.

ARTICLE VIII

STATUS STATEMENT ATTORNMENT AND SUBORDINATION

8.01 Status Statement Within 10 days after written request by the Landlord, the Tenant shall deliver in a form supplied by the Landlord a statement or estoppel certificate to the Landlord as to the status of this lease, including as to whether this lease is unmodified and in full force and effect (or, if there have been modifications that this lease is in full force and effect as modified and identifying the modification agreements); the amount of Net Rent and Additional Rent then being paid and the dates to which same have been paid; whether or not there is any existing or alleged default by either party with respect to which a notice of default has been served and if there is any such default, specifying the nature and extent thereof; and any other matters pertaining to this lease as to which the Landlord shall request such statement or certificate.

8.02 Subordination On request, the Tenant shall subordinate this lease and its rights under this lease to any and all such Mortgages and leases and to all advances made under such Mortgages, provided that the Tenant is given a non-disturbance agreement from any Mortgagee or any lessor under any leases. The form of such subordination shall be as required by the Landlord or any Mortgagee or the lessee under any such lease.

8.03 Attornment The Tenant shall promptly on request attorn to any Mortgagee, or to the owners of the Building and Lands, or the lessor under any ground, operating, overriding, underlying or similar lease of all or substantially all of the Building made by the Landlord or otherwise affecting the Building and Lands, or the purchaser on any foreclosure or sale proceedings taken under any Mortgage, and shall recognize such Mortgagee, owner, lessor or purchaser as the landlord under this lease.

8.04 Execution of Documents Subject to Section 8.02, the Tenant irrevocably constitutes the Landlord the agent and attorney of the Tenant for the purpose of executing any agreement, certificate, attornment or subordination required by this lease and for registering postponements in favour of any Mortgagee if the Tenant fails to execute such documents within 15 days after request by the Landlord.

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ARTICLE IX

GENERAL PROVISIONS

9.01 Delay Except as expressly provided in this lease, whenever the Landlord or Tenant is delayed in the fulfilment of any obligation under this lease (other than the payment of Rent and surrender of the Premises on termination) by an unavoidable occurrence which is not the fault of the party delayed in performing such obligation, then the time for fulfilment of such obligation shall be extended during the period in which such circumstances operate to delay the fulfilment of such obligation.

9.02 Overholding If the Tenant remains in possession of the Premises after the end of the Term with the consent of the Landlord but without having executed and delivered a new lease or an agreement extending the Term, there shall be no tacit renewal of this lease, and the Tenant shall be deemed to be occupying the Premises as a tenant from month to month at a monthly Net Rent payable in advance on the first day of each month equal to twice the monthly amount of Net Rent payable during the last month of the Term, and otherwise upon the same terms as are set forth in this lease, so far as these are applicable to a monthly tenancy.

9.03 Waiver If either the Landlord or Tenant excuses or condones any default by the other of any obligation under this lease, no waiver of such obligation shall be implied in respect of any continuing or subsequent default.

9.04 Registration Neither the Tenant nor anyone claiming under the Tenant shall register this lease or any Transfer without the prior written consent of the Landlord. If the Tenant or any permitted Transferee wishes to register a document for the purposes of giving notice of this lease or a Transfer, then the Landlord shall at the request and expense of the Tenant execute a notice, caveat or short form of lease for the purposes of registration in such form as approved by the Landlord and without disclosure of any terms which the Landlord does not desire to have disclosed. If the Lands comprise more than one parcel of land, the Landlord may direct the Tenant or Transferee as to the parcel or parcels against which registration may be effected.

9.05 Notices Any notice, consent or other instrument which may be or is required to be given under this lease shall be in writing and shall be delivered in person or sent by registered mail postage prepaid addressed:

(a) if to the Landlord,

c/o The Cadillac Fairview Corporation Limited

20 Queen Street West

Toronto, Ontario

M5H 3R4

Attention: Corporate Secretary

and

(b) if to the Tenant, at the Premises and

c/o Ross & McBride

1 King Street West

P.O. Box 907

Hamilton, Ontario

LSN 3P6

Attention: Donald M. Mann

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Any such notice or other instrument shall be deemed to have been given and received on the day upon which personal delivery is made or, if mailed, then 48 hours following the date of mailing. Either party may give notice to the other of any change of address and after the giving of such notice, the address therein specified is deemed to be the address of such party for the giving of notices. If postal service is interrupted or substantially delayed, all notices or other instruments shall be delivered in person.

9.06 Successors The rights and liabilities created by this lease extend to and bind the successors and assigns of the Landlord and the heirs, executors, administrators and permitted successors and assigns of the Tenant. No rights, however, shall enure to the benefit of any Transferee unless the provisions of Article VI are complied with.

9.07 Joint and Several Liability If there is at any time more than one Tenant or more than one Person constituting the Tenant, their covenant shall be considered to be joint and several and shall apply to each and every one of them. If the Tenant is or becomes a partnership, each Person who is a member, or shall become a member, of such partnership or its successors shall be and continue to be jointly and severally liable for the performance of all covenants of the Tenant pursuant to this lease, whether or not such Person ceases to be a member of such partnership or its successor.

9.08 Captions and Section Numbers The captions, section numbers, article numbers and table of contents appearing in this lease are inserted only as a matter of convenience and in no way affect the substance of this lease.

9.09 Extended Meanings The words “hereof’, “hereto” and “hereunder” and similar expressions used in this lease relate to the whole of this lease and not only to the provisions in which such expressions appear. This lease shall be read with all changes in number and gender as may be appropriate or required by the context. Any reference to the Tenant includes, where the context allows, the employees, agents, invitees and licensees of the Tenant and all others over whom the Tenant might reasonably be expected to exercise control.

9.10 Partial Invalidity All of the provisions of this lease are to be construed as covenants even though not expressed as such. If any such provision is held or rendered illegal or unenforceable it shall be considered separate and severable from this lease and the remaining provisions of this lease shall remain in force and bind the parties as though the illegal or unenforceable provision had never been included in this lease.

9.11 Entire Agreement This lease and the Schedules and riders, if any, attached hereto and the tenant leasehold improvement manual referred to in Section 1.03 set forth the entire agreement between the Landlord and Tenant concerning the Premises and there are no agreements or understandings between them other than as are herein set forth. This lease and its Schedules and riders may not be modified except by agreement in writing executed by the Landlord and Tenant.

9.12 Governing Law This lease shall be construed in accordance with and governed by the laws of the Province of Ontario.

9.13 Time of the Essence Time is of the essence of this lease.

9.14 Quiet Enjoyment If the Tenant pays Rent, fully performs all of its obligations under this lease, and there has been no Event of Default, the Tenant shall be entitled to peaceful and quiet enjoyment of the Premises for the Term without interruption or interference by the Landlord or any Person claiming through the Landlord.

9.15 Access by Landlord The Landlord and its representatives shall be permitted to enter the Building and the Lands for the purposes of doing any work which the Landlord

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may require or be obligated to perform by this lease. Entry by the Landlord shall be restricted to the normal business hours of the Tenant, and only if reasonable notice (which need not be in writing) is given to the Tenant of such proposed entry, except in cases of emergency.

9.16 Adjustment The Landlord and Tenant shall adjust between themselves on the commencement and termination of this lease, all taxes, water rates, insurance premiums and other charges relating to the Premises with the intention that the Landlord shall bear such charges until commencement of this lease and the Tenant shall bear such charges thereafter and until it delivers possession of the Premises to the Landlord in accordance with the provisions of this lease.

9.17 Intentionally Deleted.

9.18 Environmental Liability

(a) The Tenant assumes the sole responsibility for the contamination of the Premises created during the Term and any renewals thereof by any contaminant (for the purposes of this lease, a “contaminant” means any solid, liquid, gas, odour, heat, sound, vibration or radiation that results directly or indirectly from human activities that may cause an adverse effect) and shall wholly indemnify the Landlord with respect thereto. The Tenant shall not bring onto the Premises any contaminant, provided that the Tenant may bring onto the Premises hazardous pharmaceutical ingredients or products necessary for the conduct of a pharmaceutical business, subject to the provisions of this Section relating to liability and indemnity. Any such hazardous materials will be properly contained and stored in accordance with all applicable environmental laws and regulations. The Tenant shall be similarly liable for, and shall indemnify the Landlord with respect to, any claims, actions or demands of any kind whatsoever, with respect to any pollutant or toxic substance on or in the Premises created or caused during the Term and any renewals thereof as a result of the activities of the Tenant or any other person, except for the Landlord or those for whom it is in law responsible. The Tenant shall bear sole responsibility for the cleanup and removal of any such contaminant, pollutant or toxic substance and shall be solely liable for any consequential damages claimed by anyone with respect thereto and shall wholly indemnify the Landlord with respect thereto. The liability of the Tenant shall extend, but shall not be limited to, any liability for damages or otherwise to owners, tenants or other occupants of properties adjacent to the Premises. The liability of the Tenant shall not be affected by or limited to contaminants, pollutants, or toxic substances within the knowledge or control of the Tenant and the Tenant’s liability shall extend to all contaminants, pollutants or toxic substances on or in the Premises created during the Term and any renewals thereof, no matter how caused. The Tenant: shall comply with all environmental laws and regulations affecting the Premises; shall promptly advise the Landlord in writing of any orders or claims issued by any governmental authority or agency with respect to the state or condition of the Premises and their compliance or noncompliance with environmental laws and regulations; shall present to the Landlord for the Landlord’s approval (not to be unreasonably withheld or delayed) any remedial plans which the Tenant elects or is required to initiate or perform with respect to causing the Premises to comply with all applicable environmental laws and regulations; shall promptly notify the Landlord in writing if any statutory or civil proceedings are commenced against the Tenant under any environmental law or regulation; shall permit the Landlord at any time on reasonable notice to the Tenant to enter the Premises to inspect same in connection with compliance with environmental laws and regulations and to conduct such tests and procedures on the Premises as the Landlord may elect in connection with the existence of contaminants, pollutants or toxic substances and the compliance of the Premises with environmental laws and regulations, all such activities to be conducted so as to cause as little interference with Tenant’s business as possible in the circumstances; and shall clean up and, provided such removal is permitted in accordance with all applicable laws and regulations, remove any contaminants, pollutants or toxic substances caused during the Term or any renewal of the Term, prior to expiration of the Term or any renewal of the

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Term (including the removal of any storage tanks, bin, plumbing, machinery, equipment or other facilities affected by same) all to the satisfaction of any governmental agencies with jurisdiction over same and in accordance with all applicable laws and regulations. If the Tenant elects to maintain insurance with respect to claims arising out of breach of environmental laws and regulations or otherwise with respect to the existence of contaminants, pollutants or toxic substances on the Premises, the Landlord shall be shown as an additional named insured under the applicable policies of insurance. Such policies shall be endorsed so that the ability of the Landlord to recover thereunder shall be unaffected by any act, omission or negligence of the Tenant. The obligations of the Tenant, including its obligations to indemnify the Landlord, shall survive the expiration or termination of this lease and shall remain in full force and effect until fully complied with. If the Tenant refuses to comply with any of the foregoing obligations or, if the Tenant is not, in a timely and diligent fashion (given the existing circumstances), attempting to comply with any of the foregoing obligations, such failure shall constitute an event of default under this lease and shall entitle the Landlord to the same rights and remedies available with respect to any other default, including, without limitation the right of terminating this lease and re-entering the Premises, all without releasing the Tenant from its obligations. If the Tenant fails to comply with the foregoing obligations, the Landlord may, at its option, elect to comply with same at the cost and expense of the Tenant (including Landlord’s legal fees on a solicitor on his own client basis) and the Tenant shall pay all such costs and expenses, together with the additional sum of 15% of such costs and expenses for Landlord’s overhead, to the Landlord forthwith on demand.

(b) Notwithstanding Section 9.18, the Tenant shall not be responsible for any contamination which was caused by the Landlord, its agents, servants, employees or those for whom in law the Landlord is responsible.

(c) Notwithstanding this Section 9.18, the Tenant shall only be responsible for any contamination created during the Term or any renewal or extension thereof, and the Landlord shall wholly indemnify the Tenant with respect to any loss, damage, costs and actions arising from any contamination which may have occurred on the Premises prior to the Commencement Date.

9.19 Option to Extend Provided that there is not an Event of Default the Tenant has given written notice to the Landlord at least 9 months prior to the expiration of the Term of its intention to exercise the following option to extend, then the Tenant shall have the right to extend the Term on an “as is” basis for a further period of 5 years and all of the terms of this lease shall apply to such extension term, except that:

(i) That there shall be no further right to extend the Term.

(ii) The Tenant shall not be entitled to any further leasehold improvement allowance, rent-free period, allowance construction or financial inducements or any right of first refusal to purchase the Premises as provided in Section 9.20. For greater certainty, the right of first refusal in favour of the Tenant pursuant to Section 9.20 shall apply only during the initial Term and not during the renewal term.

(iii) During the extension term, the Tenant shall pay net rent to be agreed upon in bona fide negotiations between the Landlord and the Tenant. In the event that such net rent has not been agreed upon by the parties at least ninety days prior to the commencement of the extension term, such net rent shall be determined by binding arbitration pursuant to the Arbitration Act (Ontario). Such arbitration shall be settled by the decision of three arbitrators or a majority of them, one to be named by the Landlord and one by the Tenant at least sixty days prior to the expiration of the Term, and the two arbitrators thus chosen shall forthwith select a third. If the two arbitrators thus chosen

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fail to select a third arbitrator to be appointed, either the Landlord or the Tenant, on written notice to the other, may apply to a Justice of the Ontario Court of Justice (General Division) to appoint a third arbitrator. If either party neglects or refuses to name its arbitrator within fifteen days after the naming of the arbitrator of the other party, or shall neglect or refuse to proceed with the said arbitration, the arbitrator named by the other party shall determine the net rent and the decision shall be final and binding. The net rent, as determined by the arbitrator(s), shall be equal to, and determined with reference to, the current fair market rental rate for similar premises in the general geographic area of the Premises. The decision of the arbitrator(s) or a majority of them, as the case may be, shall, unless otherwise agreed, be made before the expiration of the Term. Each party shall bear its own cost and expenses of the arbitration, and shall, unless otherwise determined by the arbitrator(s), bear the costs and expenses of the arbitrators equally.

If, by agreement, the arbitration decision is not made before the expiration of the Term, the Tenant shall continue to pay Net Rent at the rate payable during the final year of the Term, and upon receipt of the arbitration decision, the Tenant or the Landlord, as the case may be, shall forthwith and without demand pay to the other party the total amount of the difference between the rate of net rent so determined by the arbitration and the Net Rent actually paid, accrued during the period from the first day of the extension term to and including the last day of the month in which the arbitration decision is received, without interest.

9.20 Right of First Refusal Provided that the Tenant has not been (and is not then) in breach of its covenants and obligations under this lease, the Landlord hereby grants to the Tenant the Right of First Refusal from November 15, 1993 up to and including June 30, 2004, on the terms and conditions of any bona fide Offer to Purchase acceptable to the Landlord. The Landlord agrees to deliver a true copy of any such bona fide Offer to Purchase to the Tenant. The Tenant shall have 5 business days from such delivery within which to exercise the Right of First Refusal.

The Right of First Refusal may only be exercised within such time as is set out above, by the Tenant delivering a notice in writing to the Landlord of the Tenant’s intention to exercise the Right of First Refusal, together with a certified cheque payable to the Landlord for the deposit contemplated by the Offer to Purchase, whereupon a binding agreement to purchase the Premises shall exist between the Landlord and Tenant on the terms and conditions contained in the said bona fide Offer to Purchase.

If the Tenant does not deliver the above deposit cheque and a notice in writing to the Landlord indicating the Tenant’s intention to exercise this Right of First Refusal, the Premises may thereafter be sold by the Landlord subject to the financial terms and conditions contained therein, but not otherwise, and failing selling the Premises as aforesaid, the provisions of this Section shall apply to any future bona fide Offers to Purchase.

If the Premises are sold by the Landlord to the persons identified in the said bona fide Offer to Purchase, subject to the terms and conditions contained therein, then this Section shall have no further effect. This Right of First Refusal may only be exercised by:

(i) Patheon Inc.; or

(ii) an affiliate of Patheon Inc.; or

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(iii) a purchaser of substantially all of the assets of Patheon Inc., in each case while any of the foregoing are themselves in actual occupation of the Premises. For greater certainty, this Right of First Refusal is not otherwise assignable.

IN WITNESS WHEREOF the Landlord and Tenant have signed this lease under seal.

THE CADILLAC FAIRVIEW CORPORATION LIMITED
By:	/s/ illegible
By:	/s/ illegible
CUSTOM PHARMACEUTICALS and
PROMIX LABORATORIES,
DIVISIONS OF PATHEON INC.
By:	/s/ Nick DiPietro - President
By:	/s/ Peter W. Reimer - Controller

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SCHEDULE “A”

DEFINITIONS

In this lease and in the Schedules to this lease:

1. “Additional Rent” means all sums of money required to be paid by the Tenant under this lease (except Net Rent) whether or not the same are designated “Additional Rent” or are payable to the Landlord or otherwise.

2. “Alterations” means all repairs, replacements, improvements or alterations to the Premises by the Tenant.

3. “Architect” means the architect from time to time named by the Landlord.

4. “Building” means the industrial building located on the Lands. The Building has a leasable area of approximately 45,496 square feet.

5. “Business Tax” means all taxes (whether imposed on the Landlord or Tenant) attributable to the personal property, trade fixtures, business, income, occupancy or sales of the Tenant or any other occupant of the Premises and to any Leasehold Improvements installed in the Premises and to the use of the Building or Lands by the Tenant.

6. Intentionally Deleted.

7. “Change of Control” means, in the case of any corporation or partnership, the transfer or issue by sale, assignment, subscription, transmission on death, mortgage, charge, security interest, operation of law or otherwise, of any shares, voting rights or interest which would result in any change in the effective control of such corporation or partnership unless such change occurs as a result of trading in the shares of a corporation listed on a recognized stock exchange in Canada or the United States and then only so long as the Landlord receives assurances reasonably satisfactory to it that there will be a continuity of management and of the business practices of such corporation notwithstanding such Change of Control.

8. “Commencement Date” means the date on which the Term commences under Section 1.02.

9. An “Event of Default” shall occur whenever: (a) any Rent is in arrears and is not paid within 5 days after written demand by the Landlord; (b) the Tenant has breached any of its obligations in this lease (other than the payment of Rent) and: (i) fails to remedy such breach within 15 days (or such shorter period as may be provided in this lease); or (ii) if such breach cannot reasonably be remedied within 15 days or such shorter period, the Tenant fails to commence to remedy such breach within such 15 days or shorter period or thereafter fails to proceed diligently to remedy such breach; in either case after notice in writing from the Landlord; (c) the Tenant becomes bankrupt or insolvent or takes the benefit of any statute for bankrupt or insolvent debtors or makes any proposal, assignment or arrangement with its creditors, or any steps are taken or proceedings commenced by any Person for the dissolution, winding-up or other termination of the Tenant’s existence or the liquidation of its assets; (d) a trustee, receiver, receiver/manager or like Person is appointed with respect to the business or assets of the Tenant; (e) the Tenant makes a sale in bulk of all or a substantial portion of its assets other than in conjunction with a Transfer approved by the Landlord; (f) this lease or any of the Tenant’s assets are taken under a writ of execution; (g) the Tenant purports to make a Transfer other than in compliance with the provisions of this lease; (h) the Tenant abandons or attempts to abandon the Premises or disposes of its goods so that there would not after such disposal be sufficient goods of the Tenant on the Premises subject to distress to satisfy Rent for at least 3 months, or the Premises become vacant and unoccupied for a period of 10 consecutive days or more without the consent of the Landlord; or (i) any insurance policies covering any part of the Building or any occupant thereof are actually cancelled or adversely changed as a result of any use or occupancy of the Premises.

10. “Landlord” means the party named as landlord on the first page of this lease.

11. “Lands” means the lands situated in the City of Burlington in the Province of Ontario on which the Building is or will be constructed, and known municipally as 977 Century Drive, Burlington, Ontario.

12. “Lease Proposal” means the written proposal to lease between the Landlord and Tenant with respect to the Premises, dated the 8th day of November, 1993.

13. “Leasehold Improvements” means leasehold improvements in the Premises determined according to common law, and shall include, without limitation, all fixtures, improvements, installations, alterations and additions from time to time made, erected or installed in the Building or on the Lands by or on behalf of the Tenant or any previous occupant of the Premises, including signs and lettering, partitions, doors and hardware however affixed and whether or not movable, all mechanical, electrical and utility installations and all carpeting and drapes with the exception only of furniture and equipment not in the nature of fixtures. Notwithstanding anything contained elsewhere in this Schedule or in this lease, Leasehold Improvements shall not include any services installed by the Tenant required to support its manufacturing services including, without limitation, any dehumidification system, any dust collection systems, compressors, any other HVAC systems (installed by the Tenant) and primary 575 volt electrical service (including transformers and switch gears), which systems shall be classified as Trade Fixtures.

14. “Mortgage” means any and all mortgages, charges, debentures, security agreements, trust deeds, hypothecs or like instruments resulting from any financing, refinancing or collateral financing (including renewals or extensions thereof) made or arranged by the Landlord of its interest in all or any part of the Premises.

15. “Mortgagee” means the holder of, or secured party under, any Mortgage and includes any trustee for bondholders.

16. “Net Rent” means the annual rent payable by the Tenant under Section 2.02.

17. “Person” means any person, firm, partnership or corporation, or any group or combination of persons, firms, partnerships or corporations.

18. “Premises” means the Lands and the Building and includes Leasehold Improvements in or on such premises.

19. “Rent” means the aggregate of Net Rent and Additional Rent.

20. “Taxes” means all taxes, levies, charges, local improvement rates, school assessments (separate and otherwise) and assessments whatsoever assessed or charged against the Building and the Lands or any part thereof by any lawful taxing authority and including any amounts assessed or charged in substitution for or in lieu of any such taxes, but excluding only such taxes as capital gains taxes, corporate, income, profit or excess profit taxes, capital taxes and Federal Large Corporations Tax to the extent such taxes are not levied in lieu of any of the foregoing against the Building or Lands or the Landlord in respect thereof.

21. “Tenant” means the party named as tenant on the first page of this lease.

22. “Term” means the period set out in Section 1.02.

23. “Trade Fixtures” means trade fixtures as determined at common law, but for greater certainty, shall not include: (a) heating, ventilating or air conditioning systems, facilities and equipment in or serving the Building; (b) floor coverings affixed to the floor

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of the Building; (c) light fixtures; (d) internal stairways and doors; and (e) any fixtures, facilities, equipment or installations installed by or at the expense of the Landlord pursuant to the Lease Proposal or otherwise.

24. “Transfer” means an assignment of this lease in whole or in part, a sublease of all or any part of the Premises, any transaction whereby the rights of the Tenant under this lease or to the Premises are transferred to another, any transaction by which any right of use or occupancy of all or any part of the Premises is conferred upon anyone, any mortgage, charge or encumbrance of this lease or the Premises or any part thereof or other arrangement under which either this lease or the Premises become security for any indebtedness or other obligations and includes any transaction or occurrence whatsoever (including, but not limited to, expropriation, receivership proceedings, seizure by legal process and transfer by operation of law), which has changed or might change the identity of the Persons having lawful use or occupancy of any part of the Premises.

25. “Transferee” means the Person or Persons to whom a Transfer is or is to be made.

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EX-10.11

Exhibit 10.11

RENEWAL AGREEMENT

THIS AGREEMENT made as of the 10^th day of April, 2004.

BETWEEN:

KLAUS STEPHAN REECKMANN

Haselknick 35, 22397 Hamburg, Germany

(the “Landlord”)

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PATHEON INC.

(the “Tenant”)

WHEREAS “The Cadillac Fairview Corporation Limited” as Landlord, and “Custom Pharmaceuticals and Promix Laboratories, Division of Patheon Inc.” as Tenant entered into a Lease dated the 1st day of December, 1993, for the premises municipally know as 977 Century Dive, in the City of Burlington in the Province of Ontario.

AND WHEREAS “The Cadillac Fairview Corporation Limited” assigned all of its right and interest in the said Lease to Klaus Stephan Reeckmann by way of Assignment and Assumption Agreement dated the 13^th day of September 1994.

AND WHEREAS the Landlord and the Tenant have agreed to extend and amend the terms of the Lease in accordance with the terms and conditions as herein set out. The rest of the initial Lease will be as it is.

NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged by each of the parties), the parties covenant and agree as follows:

1. Extension

Effective July 1^st, 2004, the Term of the Lease is hereby extended so as to expire on June 30^th, 2014 (the period from July 1st, 2004 to September 30^th, 2014 being called the Extended Term.) The Lease shall continue on the same terms and conditions throughout the Extended Term, save and except as set out herein:

(a) The leased premises shall continue to consist solely of those premises located at 977 Century Drive, in the City of Burlington, in the Province of Ontario. The parties hereto confirm that the rentable area of the leased premises is deemed to be 45,496 square feet.

(b) The Term of the Lease shall be deemed to be the Extended Term as set out above.

(c) The Landlord confirms that it is holding a Tenant’s deposit in the amount of $12,890.53 which was to be applied to the last month’s Minimum Rent due at

the end of the original Term. The Tenant’s Deposit shall be increased by the Tenant to $20,000.00 before 15^th of June 2004 and will now be applied to Minimum Rent due in the last month of the Extended Term of the Lease.

(d) The Minimum Rent during the Extended Term shall be

Term	Annual Minimum Rent		Monthly Minimum Rent		Rate Per Square Foot
July 1st, 2004 to June 30th, 2009	$	247,953.20	$	20,662.77	$	5.45
July 1st, 2009 to June 30th, 2014	$	266,151.60	$	22,179.30	$	5.85

(e) The Tenant will not be entitled to any leasehold improvement allowance, tenant inducement or rent free period, save and except for the Landlord’s work as herein set out.

(f) The Landlord agrees that prior to September 15^th, 2004, it shall replace the roof membrane on the East Section of the roof of the building located on the leased premises, with the scope of such work to consist of the following:

• Remove and dispose of existing built up roofing, insulation and metal flashing;

• Over the prepared steel deck, install single layer of 1.5” insulation, mechanically fastened, followed by a single layer of  ¹/2” fiber board set in asphalt;

• Over the insulation, install a new four-ply asphalt felt, asphalt and gravel roof system as per Canadian Roofing Contractors Association Specification with total system R-Value 12-0;

• At all eves, wall and curb locations, install composite base felt flashing of 3 additional plysof felt coated with asphalt;

• Install new pre-painted metal flashings at all locations;

• Re-install all ancillary items like vent stack flashing, roof drain inserts, etc., as required to complete the system, and;

• Two (2) years Ontario Industrial Roofing Contractors Association guarantee to be provided.

If the Landlord in good faith is delayed or prevented from doing any or all of the work set out above, because of a strike, labour trouble, inability to get materials or services, power failure, restrictive governmental laws or regulations, riots, insurrection, sabotage, rebellion, war, act of God, or any other similar reason that is not the fault of the Landlord, the doing of the work is excused for the period of the delay and the Landlord will do what was delayed or prevented within the appropriate period after the delay. The preceding sentence does not excuse the Tenant from payment any rent in the amounts and at the times specified in the Lease.

The Tenant will provide to the Landlord or its agent all necessary keys and entry passes.

The Tenant acknowledges and warrants to the Landlord or its agent that all necessary plans, drawings and permits will be obtained so as to allow the Landlord to fulfill the above obligation within the period prescribed.

The Tenant acknowledges and agrees that the Landlord shall not be responsible for any damages suffered by the Tenant, its servants, agents or employees or any other persons using the leased premises, arising out of the Landlord’s work, including, but not limited to, claims arising from production stoppages, noise or dust.

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(g) Provided the Tenant is not in default under the provisions of the Lease, the Tenant may extend the Term for an additional period of five (5) years (such extended period being call “the Second Extended Term”) provided that the Tenant exercises such right by giving written notice to the Landlord no later than December 31st, 2013, failing which this right to extend shall be deemed null and void.

If the Tenant exercises such right to extend in accordance with the foregoing, the Term of the Lease shall be extended so as to expire on June 30^th, 2019, and the Minimum Rent during the Second Extended Term shall be:

Annual Minimum Rent	Monthly Minimum Rent		Rate Per Square Foot
$286,624.80	$	23,885.40	$	6.30

Any exercise of the within right to extend is solely within the control of the Tenant and nothing contained in this Agreement obligates or requires the Landlord to remind the Tenant to exercise the within right to extend.

(h) The parties acknowledge and agree that the Lease shall continue to be a net and carefree Lease to the Landlord throughout the Extended Term and the Second Extended Term, all in accordance with the terms of the said Lease.

(i) The Tenant may terminate this lease on the 30^th day of June, 2009, provided that the Tenant has delivered written notice of its intention to the Landlord not later than June 30^th, 2008, and provided that the Tenant has delivered with its written notice a certified cheque in the sum of the total of $123,976.62 which sum consists of a non-refundable payment of an amount equal to six (6) months net rent of $5.45 per square foot per annum, plus GST, together with an amount equal to $33,269.00 plus GST, being the portion of the real estate commissions recoverable for the balance of the Lease for the months from July 1st, 2009 to June 30^th, 2014.

(j) Both of the parties herein represent and warrant that the recitals as set out above are true and correct in substance and in fact, as each such recital relates to each party, and are incorporated as an irrevocable part of this Renewal Agreement.

(k) This Renewal Agreement, together with the Lease dated December 1st, 1993 and the Assignment and Assumption Agreement dated September 13^th, 1994, constitute the entire Agreement between the parties pertaining to the subject matter herein. The parties confirm that there are no representations, warranties or other agreements, whether oral or written, between the parties in connection with the subject matter of this Agreement, except as specifically set out herein.

(l) This Renewal Agreement shall enure to the benefit of and shall be binding upon the parties and their respective heirs, executors, administrators, successors and assigns.

3

IN WITNESS WHEREOF the parties have executed this Agreement on the date first set out on the first page of this Agreement.

KLAUS STEPHAN REECKMANN
Per:	/s/ Klaus Stephan Reeckman
	Name: Klaus Stephan Reeckman
	Title: Landlord
PATHEON, INC.
Per:	/s/ Riccardo Trecroce
	Name: Riccardo Trecroce
	Title: General Counsel & Senior Vice President             Corporate Administration

4

EX-10.12

Exhibit 10.12

PATHEON INC.

AMENDED AND RESTATED

INCENTIVE STOCK OPTION PLAN

SEPTEMBER 4, 2008

1. Purposes of the Plan

The purposes of the Amended and Restated Incentive Stock Option Plan (the “Plan”) are (i) to grant to directors, officers and key employees of Patheon Inc. (the “Corporation”) and its subsidiaries or any other person or company engaged to provide ongoing management or consulting services to the Corporation or any entity controlled by the Corporation (each, an “Eligible Person”) options (the “Options”) to purchase restricted voting shares (the “Shares”) of the Corporation in order to encourage the productivity of such Eligible Persons in furthering the growth and development of the Corporation and (ii) to assist the Corporation in retaining and attracting executives with experience and ability to reward significant performance achievements.

2. Administration

The Plan shall be administered by a committee (the “Compensation Committee”) of three or more members of the board of directors of the Corporation. The Compensation Committee shall have full and complete authority to interpret the Plan and to prescribe such rules and regulations and make such other determinations as it deems necessary or desirable for the administration of the Plan.

Individual members of the Compensation Committee shall be eligible to be granted Options under the Plan. Where it is proposed that Options be issued to a member of the Compensation Committee, such member shall refrain from voting on the resolution of the Compensation Committee approving such issuance, and such Options shall only be granted if approved by a majority of the other members of the Compensation Committee.

3. Shares Subject to the Plan

The maximum number of Shares that may be issued upon the exercise of Options granted under the Plan shall be 7.5% of the sum of the issued and outstanding Shares (on a non-diluted basis) and the aggregate number of Shares issuable upon exercise of the conversion rights attaching to the issued and outstanding Class I Preferred Shares, Series C of the Corporation. The maximum number of Shares reserved for issuance under Options granted to any one person shall not exceed 5% of the outstanding Shares (on a non-diluted basis) from time to time and the aggregate number of Shares reserved for issuance under Options granted to directors of the Corporation who are not employees of the Corporation (“Outside Directors”) shall not exceed 1% of the number of Shares outstanding from time to time. The number of Shares issuable to insiders, at any time, under all security based compensation arrangements, cannot exceed 10% of issued and outstanding Shares. The number of Shares issued to insiders, within any one year period, under all security based compensation arrangements, cannot exceed 10% of issued and outstanding Shares. All Shares subject to Options that have terminated, been forfeited or been surrendered shall be available for any subsequent issuance of Options under the Plan.

4. Grant of Options

The Compensation Committee shall from time to time designate the Eligible Persons to whom Options shall be granted (the “Optionees”) and the number of Shares to be covered by each such Option. Any Optionee, at the time of the granting of the Option, may hold more than one Option. The granting of each Option shall be evidenced by a letter from the Corporation addressed to the Optionee setting forth the number of Shares covered by such Option, the subscription price and the option period(s).

5. Subscription Price

The subscription price for each Share (the “Option Price”) covered by an Option shall be established by the Compensation Committee but under no circumstances shall any price be less than the “market price” of the Shares. For the purposes hereof, “market price” per Share shall be the weighted average price at which the Shares of the Corporation have traded on The Toronto Stock Exchange (or, if the Shares are not then listed and posted for trading on The Toronto Stock Exchange, on such stock exchange in Canada on which such Shares are listed and posted for trading as may be selected for such purpose by the board of directors of the Corporation) during the two trading days immediately preceding the date of the granting of the Option.

6. Option Period

Each Option shall be exercisable during a period (an “Option Period”) established by the Compensation Committee which shall commence not earlier than the date of the grant of the Option and shall terminate not later than ten years after such date. Subject to the proviso that under no circumstances shall any Option Period extend beyond ten years from the date of grant, the following shall also apply:

(a) in the event of the death of the Optionee either before of after retirement, the Option Period for Options outstanding at the time of death shall terminate 24 months after the date of death and may be exercised by the legal personal representative(s) of the Optionee;

(b) if an Optionee’s employment or other service with the Corporation terminates because of retirement at or subsequent to normal retirement age, the Option Period for Options then outstanding shall terminate 24 months after the date of retirement or such later date as the Compensation Committee may fix (but not after the termination date of the Option first established by the Compensation Committee);

(c) if an Optionee’s employment or other service with the Corporation terminates for any cause other than death, retirement at or subsequent to normal retirement age or dismissal for fraud or wilful fault or neglect, the Option Period for Options then outstanding shall terminate 12 months after the date of termination of employment or such later date as the Compensation Committee may fix (but not after the termination date of the Option first established by the Compensation Committee);

(d) if an Optionee’s employment or other service with the Corporation terminates by reason of his dismissal or removal for fraud or wilful fault or neglect, the Option Period for Options then outstanding shall terminate on the date of such dismissal;

(e) notwithstanding the foregoing but subject to the Compensation Committee otherwise determining, an Option and all rights to purchase Shares pursuant thereto granted to an Outside Director shall expire and terminate immediately upon the Optionee ceasing to be a director of the Corporation; and

(f) unless the Compensation Committee otherwise determines in the case of an employee with less than one year’s service at the date of the grant of the Option, the Option Period shall commence not earlier than the first anniversary of the date of commencement of his employment, and if such employee’s employment terminates for any cause other than death prior to such first anniversary, the Option Period shall terminate on the date of such termination of employment.

All rights under (i) an Option unexercised at the termination of the Option Period or (ii) an Option for which the Option Period has not commenced prior to the date of death or termination of employment or other service with the Corporation shall be forfeited.

All rights under an Option for which the Option Period has not commenced prior to a material change in employment of the Optionee shall be reduced or forfeited as determined by the Compensation Committee in its sole discretion. For the purposes of this paragraph, a “material change in employment” shall be deemed to have occurred on the date fixed by the Compensation Committee as the date when an Optionee is holding an office or required to perform services as an employee which the Compensation Committee in its sole discretion considers to be of lesser value to the Corporation or subsidiary employing him than the office held or the services required to be performed by such Optionee at the time the Option was granted.

Notwithstanding the foregoing, if the term of an Option held by any Optionee expires during or within 10 business days of the expiration of a period when the Optionee is prohibited from trading in the Corporation’s securities pursuant to (i) the Corporation’s written policies then applicable, or (ii) a notice in writing to the Optionee by a senior officer or director of the Corporation (the “Black-out Period”), then the term of such Option shall be extended to the close of business at the tenth business day following the expiration of the Black-out Period.

Where used in this clause 6, the word “month” means a period of 30 consecutive days and the term “business day” means any day other than Saturday and Sunday on which the Toronto Stock Exchange is open for business.

7. Exercise of Option

An Option may be exercised in whole at any time or in part from time to time during the Option Period. Exercise shall be made by written notice to the Corporation setting forth the number of Shares with respect to which the Option is being exercised and specifying the address to which the certificate evidencing such Shares is to be delivered. Such notice shall be accompanied by a certified cheque made payable to the Corporation or other evidence of payment satisfactory to the Corporation in the amount of the Option Price. The Corporation shall cause a certificate for the number of Shares specified in the notice to be issued in the

name of the Optionee and delivered to the address specified in the notice not later than five business days following receipt of such notice and cheque or other evidence of payment.

Notwithstanding any of the provisions contained in the Plan or in any Option, the Corporation’s obligation to issue Shares to an Optionee pursuant to the exercise of an Option shall be subject to:

(a) completion of such registration or other qualification of such Shares or obtaining approval of such governmental authority as the Corporation shall determine to be necessary or advisable in connection with the authorization, issuance or sale thereof;

(b) the admission of such Shares to listing on any stock exchange on which the Shares may then be listed; and

(c) the receipt from the Optionee of such representations, agreements and undertakings, including as to future dealings in such Shares, as the Corporation or its counsel determines to be necessary or advisable in order to safeguard against the violation of the securities laws of any jurisdiction.

In this connection the Corporation shall, to the extent necessary, take all reasonable steps to obtain such approvals, registrations and qualifications as may be necessary for the issuance of such Shares in compliance with applicable securities laws and for the listing of such Shares on any stock exchange on which the Shares are then listed.

8. Non-assignable

No Option or any interest therein shall be assignable or transferable by the Optionee otherwise than by will or the law of succession.

9. Not a Shareholder

An Optionee shall have no rights as a shareholder of the Corporation with respect to any Shares covered by his or her Option until he or she shall have become the holder of record of such Shares.

10. Effects of Alteration of Share Capital

In the event of any change in the outstanding Shares of the Corporation by reason of any stock dividend, split, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change, an equitable adjustment shall be made in the maximum number of kind of Shares issuable under the Plan or subject to outstanding Options and in the Option Price. Such adjustment shall be made by the Compensation Committee and shall be conclusive and binding for all purposes of the Plan.

11. Amendment or Termination of the Plan

The board of directors of the Corporation may from time to time in its absolute discretion make amendments, modifications and changes to the Plan or to any Option granted hereunder without notice to or approval by the shareholders of the Corporation other than with respect to the following specific matters:

(a) any increase in the maximum number of Shares issuable under the Plan (other than pursuant to Clause 10);

(b) any reduction in the Option Price or extension of the period during which an Option may be exercised;

(c) any increase in the maximum Option Period permitted under the Plan;

(d) any increase in the maximum number of Shares that may be reserved for issuance under Options granted to Outside Directors;

(e) any increase in the maximum number of Shares that may be reserved for issuance to insiders under all security based compensation arrangements;

(f) any increase in the maximum number of Shares that may be issued to insiders in any one year period under all security based compensation arrangements;

(g) the cancellation and reissue of any Option; and

(h) any amendment to the provisions of the Plan that would permit Options to be transferred or assigned other than by will or the law of succession.

For the purposes of this Clause 11, an amendment does not include an accelerated expiry of an Option by reason of the fact that an Optionee ceases to be a director, officer or employee of the Corporation or any of its subsidiaries.

The shareholders’ approval of an amendment, if required pursuant to the terms hereof, shall be given by approval of the holders of a majority of the Shares present and voting in person or by proxy at a duly called meeting of the shareholders. Options may be granted under the Plan prior to the approval of the amendment, provided that no Shares may be issued pursuant to the amended terms of the Plan until the shareholders’ approval of the amendment has been obtained.

No amendment, modification or change may, without the consent of the Optionee to whom Options shall theretofore have been granted, adversely affect the rights of such Optionee.

12. Change in Control

(a) In the event of a Change in Control, each Option granted and outstanding under the Plan shall become exercisable, even in such Option is not otherwise vested or exercisable in accordance with its term.

(b) In the event of a Change in Control or a potential Change in Control, the Board of Directors shall have the power, subject to Clause 11, to make such changes to the terms of the Options as it considers fair and appropriate in the circumstances, including but not limited to: (i) accelerating the date at which Options become exercisable; and (ii) otherwise modifying the terms of the Options to assist the Optionees to tender into a take-over bid or other arrangement leading to a Change in Control.

(c) For purposes of this Clause 12, “Change in Control” means the occurrence of any of the following:

(a) any person or group, other than JLL Patheon Holdings LLC or its affiliates (as determined pursuant to applicable securities legislation, including all regulations, rules, policy statements, rulings, notices, orders or other instruments promulgated thereunder), acquires beneficial ownership of securities of the Corporation carrying 30% or more of the voting rights attached to all securities of the Corporation then outstanding entitled to vote in the election of directors of the Corporation (collectively, “Voting Shares”) including securities convertible into, or exchangeable for, or providing for the issuance of, Voting Shares; provided, however, that, for the purposes of this paragraph (a), the following acquisitions shall not constitute a Change in Control:

(i) any acquisition of beneficial ownership of Voting Shares by the Corporation or any of its subsidiaries;

(ii) any acquisition of beneficial ownership of Voting Shares by any employee benefit plan (or related trust) of the Corporation or its subsidiaries;

(iii) any acquisition of beneficial ownership of Voting Shares by any person pursuant to a transaction which complies with clauses (i), (ii) and (iii) of paragraph (b); or

(iv) any acquisition of beneficial ownership of Voting Shares by any person whose ordinary business includes the management of investment funds for others and such Voting Shares are beneficially owned by such person in the ordinary course of such business;

(b) consummation of a merger, amalgamation, arrangement, business combination, reorganization or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination:

(i) persons who were the beneficial owners, respectively, of the outstanding common shares immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding Voting Shares of the person resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more subsidiaries);

(ii) no person (excluding any person resulting from the Business Combination or any employee benefit plan (or related trust) of the Corporation or such person resulting from the Business Combination) or group beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding Voting Shares of the person resulting from such Business Combination except to the extent that such ownership existed prior to the Business Combination; and

(iii) at least a majority of the members of the board of directors of the person resulting from such Business Combination were members of the incumbent board of directors at the time of the execution of the initial agreement providing for, or the action of the board of directors approving, such Business Combination.

Appendix A – U.S. Residents (other than Puerto Rico)

Options granted to Eligible Persons who are residents of the United States of America (other than Puerto Rico) are subject to the following additional conditions:

1. Withholding Taxes

Pursuant to applicable United States federal and state laws, the Corporation is or may be required to collect withholding taxes upon the exercise of an Option. The Corporation may require, as a condition to the exercise of an Option or the issuance of a share certificate, that the Optionee concurrently pay to the Corporation in cash the entire amount or a portion of any taxes which the Corporation is required to withhold by reason of such exercise, in such amount as the Compensation Committee in its discretion may determine.

2. Investment Representation

Each Optionee by accepting an Option represents and agrees, for himself or herself and his or her transferees by will or the laws of descent and distribution, that all Shares purchased upon the exercise of the Option will be acquired for investment and not for resale or distribution. Upon such exercise of any portion of any Option, the person entitled to exercise the same shall upon request of the Corporation furnish evidence satisfactory to the Corporation (including a written and signed representation) to the effect that the Shares are being acquired in good faith for investment and not for resale or distribution. Furthermore, the Corporation may if it deems appropriate affix a legend to certificates representing Shares purchased upon exercise of Options indicating that such shares have not been registered with the Securities and Exchange Commission and may so notify its transfer agent.

3. Offers and Sales Made in Ohio; No Offers or Sales Where Prohibited

Each Optionee by accepting an Option represents and agrees, for himself or herself and his or her transferees by will or the laws of descent and distribution, that the offer of the Shares which may be purchased upon exercise of an Option and the sale of any Shares upon exercise of an Option has and will occur (unless the Corporation otherwise determines) only in the State of Ohio, which is the operating location of the Corporation’s subsidiaries, Patheon Pharmaceuticals Inc. and Patheon Pharmaceuticals Services Inc. NO OFFER IS HEREBY MADE (AND THE GRANT OF AN OPTION SHALL NOT CONSTITUTE AN OFFER) TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, SHARES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.

4. No Approval of Options or Shares by any Regulatory Authority

NEITHER THE OPTIONS NOR THE SHARES HAVE BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, THE OHIO DIVISION OF SECURITIES OR ANY OTHER AGENCY NOR HAS THE COMMISSION, THE DIVISION OR ANY SUCH OTHER AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION PROVIDED TO OPTIONEES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Appendix B – Residents of Puerto Rico

Options granted to Eligible Persons who are residents of Puerto Rico are subject to the following additional conditions:

1. Eligible Persons

The definition of “Eligible Persons” shall mean only directors, officers and key employees of the Corporation and its subsidiaries.

2. Shares Subject to the Plan

Notwithstanding clause 3 of the Plan, the maximum number of Shares that may be issued upon the exercise of Options granted under the Plan is 7.5% of the issued and outstanding Shares (on a non-diluted basis) as of March 31, 2005, subject to adjustment pursuant to clause 10 of the Plan.

3. Withholding Taxes, etc.

Pursuant to applicable United States federal laws and laws of the Commonwealth of Puerto Rico, the Corporation is or may be required to collect withholding taxes upon the exercise of an Option. The Corporation may require, as a condition to the exercise of an Option or the issuance of a share certificate, that the Optionee concurrently pay to the Corporation in cash the entire amount or a portion of any taxes which the Corporation is required to withhold by reason of such exercise, in such amount as the Compensation Committee in its discretion may determine.

4. Restrictions to be “Qualified Options”

In order to be “qualified options” pursuant to the Puerto Rico Internal Revenue Code, the aggregate market value or aggregate book value of Shares with respect to which Options may be exercised for the first time by an individual during any calendar year (under all plans of the Corporation or any of its subsidiaries) may not exceed $100,000 or such other amount as may be prescribed from time to time. In addition, such Options must have been granted no later than March 31, 2015.

5. Investment Representation

Each Optionee by accepting an Option represents and agrees, for himself or herself and his or her transferees by will or the laws of descent and distribution, that all Shares purchased upon the exercise of the Option will be acquired for investment and not for resale or distribution. Upon such exercise of any portion of any Option, the person entitled to exercise the same shall upon request of the Corporation furnish evidence satisfactory to the Corporation (including a written and signed representation) to the effect that the Shares are being acquired in good faith for investment and not for resale or distribution. Furthermore, the Corporation may if it deems appropriate affix a legend to certificates representing Shares purchased upon exercise of Options indicating that such shares have not been registered with the Securities and Exchange Commission and may so notify its transfer agent.

6. Offers and Sales Made in Puerto Rico; No Offers or Sales Where Prohibited

Each Optionee by accepting an Option represents and agrees, for himself or herself and his or her transferees by will or the laws of descent and distribution, that the offer of the Shares which may be purchased upon exercise of an Option and the sale of any Shares upon exercise of an Option has and will occur (unless the Corporation otherwise determines) only in the Commonwealth of Puerto Rico, which is the operating location of the Corporation’s subsidiary, MOVA Pharmaceutical Corporation. NO OFFER IS HEREBY MADE (AND THE GRANT OF AN OPTION SHALL NOT CONSTITUTE AN OFFER) TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, SHARES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.

7. No Approval of Options or Shares by any Regulatory Authority

NEITHER THE OPTIONS NOR THE SHARES HAVE BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, THE COMMISSIONER OF FINANCIAL INSTITUTIONS OF PUERTO RICO OR ANY OTHER AGENCY NOR HAS THE COMMISSION, THE DIVISION OR ANY SUCH OTHER AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION PROVIDED TO OPTIONEES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

EX-10.13

Exhibit 10.13

CONFIDENTIAL

Date

Grant of Option Under Amended and Restated Incentive Stock Option Plan

This letter, together with the enclosed copy of the Amended and Restated Incentive Stock Option Plan (the “Plan”) of Patheon Inc. (the “Corporation”), sets out the terms and conditions upon which the Corporation has granted to you (the “Participant”) an option to purchase restricted voting shares of the Corporation (“Restricted Shares”). This grant is subject to your execution and return to the Corporation of this letter in acknowledgement that you have reviewed and agreed to the provisions of the Plan and of this letter. All capitalized terms utilized herein or in the Schedules hereto shall, except where the context otherwise requires, bear the respective meanings given to them under the Plan.

1. Grant of Option

The Corporation confirms that it has granted to the Participant on [insert date of Grant] (the “Date of Grant”), on the terms and subject to the conditions set forth herein and/or in the Plan, an option (the “Option”) to purchase that number of Restricted Shares specified on the annexed Schedule A (subject to adjustment of such shares or of such number of shares in accordance with Article 10 of the Plan). The term “Optioned Shares” means, at any relevant time, all those Restricted Shares (as the same may from time to time be so adjusted) which have not then been purchased, and otherwise remain purchasable in accordance herewith, under the Option.

2. Option Price

Subject to adjustment in accordance with Article 10 of the Plan, the Option Price at which each Optioned Share may be purchased upon exercise of the Option at any time and from time to time shall be the price specified on the annexed Schedule A which has been determined, in accordance with Article 5 of the Plan, based on the “market price” (as that term is defined in the Plan) as at the Date of Grant.

3. Exercise of Option and Vesting Periods

3.1 Subject to the terms and conditions set out herein or in the Plan, the Participant shall have the right to exercise the Option to purchase the Optioned Shares, in whole or in part, at any time and from time to time, during the periods specified below:

[_______]¹

At 5:00 p.m. (Mississauga time) on the Expiry Date specified in the annexed Schedule A or such earlier time as may be determined in accordance with Article 5 hereof or Article 6 of the Plan (the “Expiry Time”), the Option shall expire and be of no further force or effect whatsoever as to the Optioned Shares in respect of which the Option has not been exercised. For greater certainty, on resignation or voluntary termination of a Participant who is an employee of the Corporation, all Options then outstanding in the name of the Participant shall expire and be of no further force or effect as of the effective date of resignation or voluntary termination.

¹Insert vesting schedule.

3.2 The Option shall be exercisable, in accordance with section 3.1 hereof, by the delivery by the Participant to the Corporation at its office in Mississauga of a notice in writing substantially in the form of Schedule B annexed hereto signed by the Participant or, in the case of the Participant’s death or incapacity, the Participant’s legal personal representative and addressed to the Corporation accompanied by payment in full (by cash or certified cheque) of the applicable Option Price for the Optioned Shares which are the subject of such exercise.

3.3 If and when the Participant exercises the Option in accordance with section 3.1 hereof, the Participant may incur a tax liability (calculated at the time of such exercise) and this tax liability will be the responsibility of the Participant. To determine the amount and timing of this tax obligation, the Participant should consult his or her tax advisor.

4. Registration and Possession of Optioned Shares

Upon each exercise of the Option in accordance with Article 3 hereof, the Corporation shall cause the transfer agent of the Restricted Shares forthwith to register in the name of the Participant the Optioned Shares paid for by the Participant in connection with that exercise of the Option (the “Purchased Shares”) and to prepare and deliver to the Participant a definitive certificate in the name of the Participant representing such Purchased Shares.

5. Termination of Option by Participant

Notwithstanding anything herein provided, the Participant may at any time in the Participant’s sole discretion terminate the Option by written notice given to the Corporation at its registered address, and, forthwith upon the receipt by the Corporation of any such notice in writing, the Option shall forthwith expire and terminate as to such of the Optioned Shares in respect of which the Option has not been exercised.

6. Participant Not Required to Exercise Option

Nothing herein contained or done pursuant hereto shall obligate the Participant to purchase and/or pay for, or the Corporation to issue, any Optioned Shares except those Optioned Shares in respect of which the Participant shall have exercised the Option to purchase hereunder in the manner hereinbefore provided.

7. Representation and Warranty by Participant

The Participant represents and warrants to the Corporation, as a continuing representation and warranty which shall be true and correct on the Date of Grant and on each date that the Participant exercises the Option as if made and given on and as of each such date, that the Participant is acquiring the Option and will acquire the Purchased Shares purchased by the Participant upon any exercise of the Option as principal.

8. General

8.1 Time shall be of the essence of this agreement.

8.2 All dollar amounts referred to in this agreement are in Canadian funds.

8.3 The division of this agreement into Articles, sections, paragraphs, subparagraphs and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this agreement.

8.4 The terms “this agreement”, “hereof”, “herein”, “hereunder”, “hereby” and similar expressions refer to this agreement and not to any particular Article, section, paragraph, subparagraph or other subdivision hereof.

8.5 Words importing the singular number only shall include the plural and vice versa, words importing the masculine gender shall include the feminine and neuter genders and vice versa and words importing persons shall include individuals, partnerships, associations, trusts, unincorporated organizations and corporations and vice versa.

8.6 In the event that any day on or before which any action is to be taken hereunder is not a business day in the place where the action is to be taken, then such action shall be required to be taken on or before the requisite time on the next succeeding day that is a business day in such place.

8.7 This agreement shall be construed, interpreted and enforced in accordance with, and the respective rights and obligations of the parties shall be governed by, the laws of the Province of Ontario and the federal laws of Canada applicable therein, and each party hereby irrevocably and unconditionally attorns to the non-exclusive jurisdiction of the courts of such Province.

8.8 This agreement shall enure to the benefit of and be binding on and enforceable by the parties hereto and the successors and assigns of the Corporation and the heirs and legal personal representatives of the Participant.

8.9 This agreement and the Option granted to the Participant hereby is non-assignable and non-transferable and, except in the case of the Participant’s death or incapacity, the Option shall be exercisable only by the Participant.

8.10 This agreement may be executed by the parties in counterparts and, when so executed, such counterparts shall constitute a single agreement.

If the terms and conditions of the Plan and of this letter are acceptable to you, please indicate your acceptance thereof and agreement thereto by signing this letter and printing your name and address where indicated below.

Yours truly,

PATHEON INC.

by

The undersigned Participant has reviewed, and hereby accepts and agrees to, the provisions of the Plan and of this letter.

SIGNED, SEALED & DELIVERED	)
in the presence of	)	Signature of Participant
		Name of Participant
		Address of Participant

SCHEDULE A

Optioned Shares:	[            ] Restricted Voting Shares
Date of Grant:
Option Price:	$[        ] CAD Per Optioned Share
Expiry Date:

SCHEDULE B

NOTICE OF EXERCISE OF OPTION

UNDER PATHEON INC. AMENDED AND RESTATED INCENTIVE STOCK

OPTION PLAN

TO: PATHEON INC.

7070 Mississauga Road

Suite 350

Mississauga, Ontario

L5N 7J8

Attention: General Counsel

Name of Participant:
Address of Participant:
Option Agreement dated:
Number of Optioned Shares in respect of which Option is being exercised:
Aggregate Option Price:	$ ______________________________________________________________

The undersigned hereby notifies the Corporation of the undersigned’s exercise, as detailed above, of the option (herein referred to as the “Option”) granted by the Corporation pursuant to the above-referenced Option Agreement. A certified cheque (or cash) in payment in full of the amount of the aggregate Option Price payable in connection with such exercise of the Option is enclosed.

Date

Signature of the Participant or of Legal

Personal Representative of Participant

EX-10.14

Exhibit 10.14

CONFIDENTIAL

Date

Grant of Options Under Amended and Restated Incentive Stock Option Plan

This letter, together with the Amended and Restated Incentive Stock Option Plan (the “Plan”) of Patheon Inc. (the “Corporation”), sets out the terms and conditions upon which the Corporation has granted to you (the “Participant”) an option to purchase restricted voting shares of the Corporation (“Restricted Shares”). This grant is subject to your execution and return to the Corporation of this letter in acknowledgement that you have reviewed and agreed to the provisions of the Plan and of this letter. All capitalized terms utilized herein or in the Schedules hereto and not otherwise defined herein or in the Schedules hereto shall, except where the context otherwise requires, bear the respective meanings given to them under the Plan. This letter sets forth certain terms of the Option granted hereunder, which may be in addition to or different from those provided under the Plan. In case of conflict between the terms of the Plan and the specific terms set forth in this letter, the terms of this letter shall govern the Option granted hereunder.

1. Grant of Option

The Corporation confirms that it has granted to the Participant on [insert date of grant] (the “Date of Grant”), on the terms and subject to the conditions set forth herein and/or in the Plan, an option (the “Option”) to purchase that number of Restricted Shares specified on the annexed Schedule A (subject to adjustment of such shares or of such number of shares in accordance with Article 10 of the Plan). The term “Optioned Shares” means, at any relevant time, all those Restricted Shares (as the same may from time to time be so adjusted) which have not then been purchased, and otherwise remain purchasable in accordance herewith, under the Option.

2. Option Price

Subject to adjustment in accordance with Article 10 of the Plan, the Option Price at which each Optioned Share may be purchased upon exercise of the Option at any time and from time to time shall be the price specified on the annexed Schedule A which has been determined, in accordance with Article 5 of the Plan, based on the “market price” (as that term is defined in the Plan) as at the Date of Grant.

3. Exercise of Option and Vesting Periods

3.1 Subject to the terms and conditions set out herein or in the Plan, the Participant shall have the right to exercise the Option to purchase the Optioned Shares, in whole or in part, at any time and from time to time, during the periods specified below:

[                     ]¹

At 5:00 p.m. (Mississauga time) on the Expiry Date specified in the annexed Schedule A or such earlier time as may be determined in accordance with Article 6 hereof or Article 6 of the Plan (the “Expiry Time”), the Option shall expire and be of no further force or effect whatsoever as to the Optioned Shares in respect of which the Option has not been exercised. For greater certainty, on resignation or voluntary termination of a Participant who is an employee of the Corporation, all Options then outstanding in the name of the Participant shall expire and be of no further force or effect as of the effective date of resignation or voluntary termination.

¹ Insert vesting schedule.

3.2 The Option shall be exercisable, in accordance with section 3.1 hereof, by the delivery by the Participant to the Corporation at its office in Mississauga of a notice in writing substantially in the form of Schedule B annexed hereto signed by the Participant or, in the case of the Participant’s death or incapacity, the Participant’s legal personal representative and addressed to the Corporation accompanied by payment in full (by cash or certified cheque) of the applicable Option Price for the Optioned Shares which are the subject of such exercise.

3.3 If and when the Participant exercises the Option in accordance with section 3.1 hereof, the Participant may incur a tax liability (calculated at the time of such exercise) and this tax liability will be the responsibility of the Participant. To determine the amount and timing of this tax obligation, the Participant should consult his or her tax advisor.

4. Change in Control

In the event of a change in control (“Change in Control”) (as defined immediately below), the Option granted hereunder shall become exercisable, even if such Option is not otherwise vested in accordance with its term.

A Change in Control means the occurrence of any of the following:

(a) Any “Person” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than JLL Partners or its affiliates, becomes a Beneficial Owner (within the meaning of Exchange Act Rule 13d-3) of more than fifty percent (50%) of the voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors;

(b) The Corporation’s shareholders approve a dissolution or liquidation of the Corporation;

(c) The consummation of a reorganization, merger, consolidation or amalgamation to which the Corporation is a party and, as a result of which persons other than the shareholders of the Corporation immediately prior to such reorganization, merger, consolidation or amalgamation cease to own at least fifty percent (50%) of the voting power of the then outstanding voting securities of the surviving corporation in such reorganization, merger, consolidation or amalgamation entitled to vote generally in the election of directors;

(d) The sale or other disposition of all or substantially all of the assets of the Corporation; or

(e) A majority of the seats on the board of directors of the Corporation (other than vacant seats) are held by persons who were not directors at the Date of Grant and were neither (i) nominated for election by the board of directors nor (ii) appointed by directors so nominated.

5. Registration and Possession of Optioned Shares

Upon each exercise of the Option in accordance with Article 3 hereof, the Corporation shall cause the transfer agent of the Restricted Shares forthwith to register in the name of the Participant the Optioned Shares paid for by the Participant in connection with that exercise of the Option (the “Purchased Shares”) and to prepare and deliver to the Participant a definitive certificate in the name of the Participant representing such Purchased Shares.

6. Termination of Option by Participant

Notwithstanding anything herein provided, the Participant may at any time in the Participant’s sole discretion terminate the Option by written notice given to the Corporation at its registered address, and, forthwith upon the receipt by the Corporation of any such notice in writing, the Option shall forthwith expire and terminate as to such of the Optioned Shares in respect of which the Option has not been exercised.

7. Participant Not Required to Exercise Option

Nothing herein contained or done pursuant hereto shall obligate the Participant to purchase and/or pay for, or the Corporation to issue, any Optioned Shares except those Optioned Shares in respect of which the Participant shall have exercised the Option to purchase hereunder in the manner hereinbefore provided.

8. Representation and Warranty by Participant

The Participant represents and warrants to the Corporation, as a continuing representation and warranty which shall be true and correct on the Date of Grant and on each date that the Participant exercises the Option as if made and given on and as of each such date, that the Participant is acquiring the Option and will acquire the Purchased Shares purchased by the Participant upon any exercise of the Option as principal.

9. General

9.1 Time shall be of the essence of this agreement.

9.2 All dollar amounts referred to in this agreement are in Canadian funds.

9.3 The division of this agreement into Articles, sections, paragraphs, subparagraphs and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this agreement.

9.4 The terms “this agreement”, “hereof”, “herein”, “hereunder”, “hereby” and similar expressions refer to this agreement and not to any particular Article, section, paragraph, subparagraph or other subdivision hereof.

9.5 Words importing the singular number only shall include the plural and vice versa, words importing the masculine gender shall include the feminine and neuter genders and vice versa and words importing persons shall include individuals, partnerships, associations, trusts, unincorporated organizations and corporations and vice versa.

9.6 In the event that any day on or before which any action is to be taken hereunder is not a business day in the place where the action is to be taken, then such action shall be required to be taken on or before the requisite time on the next succeeding day that is a business day in such place.

9.7 This agreement shall be construed, interpreted and enforced in accordance with, and the respective rights and obligations of the parties shall be governed by, the laws of the Province of Ontario and the federal laws of Canada applicable therein, and each party hereby irrevocably and unconditionally attorns to the non-exclusive jurisdiction of the courts of such Province.

9.8 This agreement shall enure to the benefit of and be binding on and enforceable by the parties hereto and the successors and assigns of the Corporation and the heirs and legal personal representatives of the Participant.

9.9 This agreement and the Option granted to the Participant hereby is non-assignable and non-transferable and, except in the case of the Participant’s death or incapacity, the Option shall be exercisable only by the Participant.

9.10 This agreement may be executed by the parties in counterparts and, when so executed, such counterparts shall constitute a single agreement.

If the terms and conditions of the Plan and of this letter are acceptable to you, please indicate your acceptance thereof and agreement thereto by signing this letter and printing your name and address where indicated below.

Yours truly,

PATHEON INC.

by:

The undersigned Participant has reviewed, and hereby accepts and agrees to, the provisions of the Plan and of this letter.

SIGNED, SEALED & DELIVERED	)
in the presence of	)	Signature of Participant
		Name of Participant
		Address of Participant

SCHEDULE A

Optioned Shares:	[        ] Restricted Voting Shares
Date of Grant:
Option Price:	$[        ] CAD per Optioned Share
Expiry Date:

SCHEDULE B

NOTICE OF EXERCISE OF OPTION

UNDER PATHEON INC. AMENDED AND RESTATED INCENTIVE STOCK

OPTION PLAN

TO: PATHEON INC.

2100 Syntex Court

Mississauga, Ontario

L5N 7K9

Attention: General Counsel

Name of Participant:
Address of Participant:
Option Agreement dated:
Number of Optioned Shares in respect of which Option is being exercised:
Aggregate Option Price:	$

The undersigned hereby notifies the Corporation of the undersigned’s exercise, as detailed above, of the option (herein referred to as the “Option”) granted by the Corporation pursuant to the above-referenced Option Agreement. A certified cheque (or cash) in payment in full of the amount of the aggregate Option Price payable in connection with such exercise of the Option is enclosed.

Date

    Signature of the Participant or of

    Legal Personal Representative of Participant

EX-10.15

Exhibit 10.15

PATHEON INC.

AMENDED AND RESTATED RESTRICTED

SHARE UNIT PLAN

September 4, 2008

PATHEON INC.

AMENDED AND RESTATED RESTRICTED SHARE UNIT PLAN

September 4, 2008

1. Purposes of the Plan.

The purpose of this Restricted Share Unit Plan (the “Plan”) is to grant, when and to the extent appropriate, restricted share units on the terms set out in this Plan to directors, officers and key employees of Patheon Inc. (the “Corporation”) and its Subsidiaries, or any other person or company engaged to provide ongoing management or consulting services to the Corporation or a Subsidiary of the Corporation in order to: (i) encourage participants under the Plan to further the growth and development of the Corporation; and (ii) assist the Corporation to retain and attract executives and key employees with experience and ability; and (iii) reward significant achievements.

2. Definitions.

For the purposes of the Plan, the following terms shall have the respective meanings set out below, and grammatical variations of such terms shall have corresponding meanings:

“Board” means the Board of Directors of the Corporation.

“Change in Control” means the occurrence of any of the following:

(a) any Person or group, other than JLL Patheon Holdings LLC or its affiliates (as determined pursuant to applicable securities legislation, including all regulations, rules, policy statements, rulings, notices, orders or other instruments promulgated thereunder), acquires beneficial ownership of securities of the Corporation carrying 30% or more of the voting rights attached to all securities of the Corporation then outstanding entitled to vote in the election of directors of the Corporation (collectively, “Voting Shares”) including securities convertible into, or exchangeable for, or providing for the issuance of, Voting Shares; provided, however, that, for the purposes of this paragraph (a), the following acquisitions shall not constitute a Change in Control:

(i) any acquisition of beneficial ownership of Voting Shares by the Corporation or any of its Subsidiaries;

(ii) any acquisition of beneficial ownership of Voting Shares by any employee benefit plan (or related trust) of the Corporation or its Subsidiaries;

(iii) any acquisition of beneficial ownership of Voting Shares by any Person pursuant to a transaction which complies with clauses (i), (ii) and (iii) of paragraph (b); or

(iv) any acquisition of beneficial ownership of Voting Shares by any Person whose ordinary business includes the management of investment funds for others and such Voting Shares are beneficially owned by such Person in the ordinary course of such business;

(b) consummation of a merger, amalgamation, arrangement, business combination, reorganization or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination:

(i) Persons who were the beneficial owners, respectively, of the outstanding common shares immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding Voting Shares of the Person resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more Subsidiaries);

(ii) no Person (excluding any Person resulting from the Business Combination or any employee benefit plan (or related trust) of the Corporation or such Person resulting from the Business Combination) or group beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding Voting Shares of the Person resulting from such Business Combination except to the extent that such ownership existed prior to the Business Combination; and

(iii) at least a majority of the members of the board of directors of the Person resulting from such Business Combination were members of the incumbent Board at the time of the execution of the initial agreement providing for, or the action of the Board approving, such Business Combination.

“Committee” means the Compensation and Human Resources Committee of the Board, or such other committee of the Board as the Board shall from time to time designate to be the committee of the Board responsible for administering and interpreting, and granting Restricted Share Units under, the Plan on behalf of the Corporation.

“Corporation” has the meaning set out in Section 1.

“Director” means a member of the Board of Directors of the Corporation.

“Insider” means an insider of the Corporation as defined by the Securities Act (Ontario).

“Market Price” means, in respect of any date, the weighted average price at which the Shares have traded on the TSX during the two trading days immediately prior to such date (or, if the Shares are not then listed and posted for trading on the TSX, on such stock exchange in Canada on which the Shares are then listed selected by the Committee). In the event that the Shares did not trade on any such trading day, the Market Price shall be the average of the closing bid and ask prices in respect of the Shares on such trading day. If the Shares are not then listed on any stock exchange in Canada, the Market Price shall be determined by the Committee in good faith.

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“Participant” means a director, officer or key employee of the Corporation or a Subsidiary of the Corporation or a person or company providing ongoing management or consulting services to the Corporation who has been designated by the Committee for participation in the Plan and who has agreed to participate in the Plan on such terms as the Corporation may specify by executing a Participant acknowledgement, substantially in the form of the Participant acknowledgement attached hereto as Schedule A.

“Payment Calculation Date” means, in respect of any Restricted Share Unit, the date stipulated at the time of the grant of the Restricted Share Unit, as such date may be changed from time to time in the discretion of the Committee pursuant to Section 12 or 14, on which the amount of the payment that is to be made pursuant to Section 8 to the Participant to whom the Restricted Share Unit was granted shall be calculated.

“Person” includes any individual, legal or personal representative, corporation, company, partnership, syndicate, unincorporated association, trust, trustee, government body, regulatory authority or any other entity howsoever designated or constituted.

“Plan” has the meaning set out in Section 1.

“Reorganization” means any (i) capital reorganization; (ii) merger; (iii) amalgamation; (iv) offer for shares of the Corporation which if successful would entitle the offeror to acquire all of the Shares; (v) sale of a material portion of the assets of the Company; or (vi) an arrangement or other scheme of reorganization.

“Restricted Share Unit” means a restricted share unit granted to a Participant pursuant to Section 6 and in accordance with the terms and provisions of the Plan.

“Retirement” means the retirement of a Participant from employment with the Corporation or any Subsidiary in accordance with the normal retirement policy of his or her employer.

“Subsidiary” means a body corporate or limited partnership directly or indirectly controlled by the Corporation.

“Shareholder” means a holder of Shares.

“Shares” means the common shares of the Corporation.

“TSX” means the Toronto Stock Exchange.

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3. Administration.

The Committee shall be responsible for the administration and interpretation of the Plan in accordance with the provisions of the Plan. The Committee may, from time to time, establish administrative rules and regulations and prescribe forms or documents relating to the operation of the Plan as it may deem necessary or advisable to implement or further the purposes of the Plan and amend or repeal such rules and regulations or forms or documents. The Committee may interpret or make such determinations with respect to the Plan as may be necessary or appropriate for the administration of the Plan. Any such interpretation shall be final, binding and conclusive for all purposes.

The Committee shall keep or cause to be kept such records and accounts as may be necessary or appropriate in connection with the administration of the Plan and the discharge of its duties hereunder. The Committee may delegate to any Director, officer of the Corporation or employee of the Corporation or a Subsidiary such duties and powers relating to the Plan as it sees fit. The Committee may also appoint or engage a trustee, custodian, administrator or other agent to administer or implement the Plan. All costs and expenses of administering the Plan will be paid by the Corporation.

4. Restricted Share Units Subject to the Plan.

(a) The maximum number of Restricted Share Units that may be issued under the Plan shall be 2,000,000, as of February 22, 2005, subject to adjustment pursuant to Section 9 or Section 10.

(b) The maximum number that any one Person may hold of:

(i) Restricted Share Units which represent Shares that would otherwise be reserved for issuance in satisfaction of rights under Restricted Share Units if such rights included the right to receive a Share instead of cash; plus

(ii) Shares reserved for issuance under the Corporation’s Incentive Stock Option Plan or any other existing share compensation arrangements of the Corporation from time to time;

shall not exceed 5% of the outstanding Shares from time to time.

(c) The maximum number that Insiders may hold of:

(i) Restricted Share Units which represent Shares that would otherwise be reserved for issuance in satisfaction of rights under Restricted Share Units if such rights included the right to receive a Share instead of cash; plus

(ii) Shares reserved for issuance under the Corporation’s Incentive Stock Option Plan or any other existing share compensation arrangements of the Corporation from time to time

shall not exceed 10% of the outstanding Shares from time to time.

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(d) All Restricted Share Units that have terminated, been forfeited, been surrendered or been exercised shall be available for any subsequent issuance of Restricted Share Units under the Plan.

5. Restricted Share Units Rights.

Each Restricted Share Unit shall represent the right, subject to any conditions imposed at the time of grant pursuant to Section 6 and subject to Section 12, to receive a payment payable on the Payment Calculation Date for such Restricted Share Unit in accordance with Section 8 equal to the Market Value on the Payment Calculation Date. The Corporation shall maintain records for each Participant showing the number of Restricted Share Units to which such Participant is entitled, and the Payment Calculation Date(s) for such Restricted Share Units, in accordance with the Plan. No certificates shall be issued with respect to Restricted Share Units. At such times as the Committee shall determine, the Corporation may furnish the Participant with a statement setting forth the details of his or her Restricted Share Units.

6. Restricted Share Unit Grants.

(a) From time to time the Committee, on behalf of the Corporation, may grant Restricted Share Units to Participants in accordance with the Plan. In granting such Restricted Share Units, the Committee shall designate: (i) the number of Restricted Share Units granted to the Participant; and (ii) the Payment Calculation Date(s), which shall be no later than three years from the last day of the year in which the grant has been awarded.

(b) Subject to the terms of the Plan, the Committee may determine other terms or conditions, if any, of any Restricted Share Units, including:

(i) any additional conditions on the grant of Restricted Share Units under the Plan, including conditions as to the ownership of Shares by a Participant; and

(ii) any additional conditions on the payment to be made on the Payment Calculation Date in respect of Restricted Share Units granted under the Plan, including (without limitation) conditions in respect of:

(A) the Market Price;

(B) the financial performance or results of the Corporation and/or its Subsidiaries; and

(C) such other terms or conditions as the Committee may in its discretion determine.

7. Distributions.

Upon the declaration at any time and from time to time by the Board and the payment by the Corporation of a cash distribution on the Shares, each Participant holding Restricted Share Units on the record date established for such cash distribution (or, if no record date is established for such distribution, the date on which such distribution is paid to

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Unitholders) (the “Record Date”) shall be entitled to receive that number of additional Restricted Share Units equal to the number of Restricted Share Units held by such Participant on the Record Date multiplied by the amount of the cash distribution per Share, divided by the Market Price on the date on which such distribution is paid to Shareholders. Fractional Restricted Share Units may be granted pursuant to this Section 7. The Payment Calculation Date for each Restricted Share Unit, or fraction thereof, granted pursuant to this Section 7 shall be the same as the Payment Calculation Date for the Restricted Share Units held by the Participant on the Record Date in respect of which the additional Restricted Share Units are issued.

The Corporation may in lieu of the above grant of all or a portion of the additional Restricted Share Units make a cash payment equal to the number of Restricted Share Units held by such Participant on the Record Date multiplied by the amount of the cash distribution per Share.

8. Payment Calculation Dates.

(a) Subject to Section 12, Restricted Share Units shall vest and be payable as to one third each on each of the first, second and third anniversary dates of the date of the grant of such Restricted Share Units.

(b) Subject to Section 5(b), on the respective Payment Calculation Date for any Restricted Share Unit that has vested, an amount equal to the Market Price on the Payment Calculation Date shall be payable to the Participant holding such Restricted Share Unit, and such payment shall be paid to such Participant by the Corporation or a Subsidiary within 30 days after such Payment Calculation Date.

9. Adjustments.

If the number of outstanding Shares shall be increased or decreased or otherwise changed as a result of a Share split or consolidation, subdivision, reclassification or recapitalization and not as a result of the issuance of Shares for additional consideration or by way of a stock dividend in the ordinary course the Committee may make such adjustments to the number of Restricted Share Units granted to each Participant in such manner as the Committee in its sole discretion deems to be equitable or appropriate. Any determinations by the Committee as to the adjustments shall be made in its sole discretion, and all such adjustments shall be conclusive and binding for all purposes under the Plan.

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10. Reorganizations.

In the event of a Reorganization or proposed Reorganization, the Committee may make such adjustments or substitutions to the Plan and to the Restricted Share Units granted hereunder as the Committee, in its sole discretion, deems to be equitable or appropriate, including (without limitation) adjustments to the aggregate number, class and kind of securities or other consideration that may be delivered under the Plan and changes to the Payment Calculation Date(s) for any Restricted Share Units, which adjustments or substitutions may be conditional upon the completion of the Reorganization. Any determinations made by the Committee as to the adjustments or substitutions shall be made in its sole discretion, and all such adjustments or substitutions shall be conclusive and binding for all purposes under the Plan.

11. No Adjustment for Decrease in Value.

For greater certainty, no amount will be paid to, or in respect of, a Participant under the Plan or pursuant to any other arrangement, and no additional Restricted Share Units will be granted to any such Participant to compensate for a downward fluctuation in the Market Price of the Shares, nor will any other form of benefit be conferred upon, or in respect of, a Participant for such purpose.

12. Termination of Employment and Forfeiture.

(a) If a Participant ceases to be an employee of the Corporation or any Subsidiary by reason of the termination of the Participant’s employment by the Corporation or the Subsidiary other than for cause, then any Restricted Share Units granted to such Participant for which the Payment Calculation Date shall not yet have occurred but which will occur prior to the end of the notice period (or the implied notice period if pay is given in lieu of notice) shall continue to be outstanding. If a Participant’s employment with the Corporation or a Subsidiary is terminated for cause, in accordance with the law of the jurisdiction in which the employee was employed, then all Restricted Share Units granted to such Participant with a Payment Calculation Date which is later than the date of termination of employment shall be immediately forfeited as of the date of termination of employment. Unless otherwise agreed by the Corporation or otherwise determined by the Committee at any time in its sole discretion, all other Restricted Share Units granted to such Participant for which the Payment Calculation Date is at least one year following the date on which notice of termination is given shall be immediately forfeited as of such date.

For greater certainty, unless otherwise agreed by the Corporation or otherwise determined by the Committee at any time in its sole discretion, neither any period of notice, if any, nor any payment in lieu thereof shall be considered as extending the period of employment for the purposes of the Plan. No cash or other compensation shall at any time be paid in lieu of any rights under Restricted Share Units that have been forfeited under the Plan.

(b) If a Participant (i) dies, or (ii) ceases to be an employee of the Corporation or any Subsidiary by reason of long-term disability or Retirement or for any other reason in each case specified by the Committee, the Committee may change the Payment Calculation Date for all Restricted Share Units granted to such Participant for which the Payment Calculation Date shall

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not yet have occurred, which Payment Calculation Date may be changed but shall in any event be not later than: (i) the original Payment Calculation Date for such Restricted Share Units; and (ii) one year following the date of the Participant’s death or termination of employment.

(c) Upon the occurrence of Change in Control of Patheon, the Payment Calculation Date for all Restricted Share Units granted to such Participant for which the applicable Payment Calculation Date shall not yet have occurred (i) shall, if the Change in Control results in the Corporation or its successor not being listed for trading on the TSX or another stock exchange or quotation system, be the date of the Change in Control; and (ii) may, if the Corporation or its successor continues to be listed for trading on the TSX or another stock exchange or quotation system, be changed to a date determined by the Committee or the Board of Directors, but shall in any event be not later than the original Payment Calculation Date for such Restricted Share Units. Where clause (i) above applies to the Change in Control, the amount payable as of the applicable Payment Calculation Date in respect of a Restricted Share Unit shall be determined as if the conditions applicable to such Restricted Share Unit were met and payment shall be made within sixty (60) days of the date of the Change in Control.

13. Assignment.

No Restricted Share Unit or any interest therein shall be assignable by the Participant, by pledge, assignment or in any other manner other than by will or the law of succession.

14. Amendment and Termination.

The Committee may, in its sole discretion, at any time and from time to time amend, suspend or terminate the Plan or amend the terms of any Restricted Share Unit granted under the Plan; provided, however, that: (i) any approvals required under any applicable law or any applicable rules of any stock exchange on which securities of the Corporation are then listed; and (ii) no such amendment or termination shall be made at any time which materially adversely affects the existing rights of a Participant under Restricted Share Units granted under the Plan without his or her consent in writing, unless the Corporation, at its sole option, acquires such existing rights under such Restricted Share Units for an amount equal to the fair market value of such rights at such time as verified by an independent valuator.

15. Miscellaneous.

(a) Participation Voluntary. The participation in the Plan by each Participant is voluntary, and any decision not to participate shall not affect any individual’s continued employment or office with the Corporation or any Subsidiary. Nothing contained herein shall be construed as conferring upon any Person any right with respect to continuance of employment or continuance as an officer of the Corporation or a Subsidiary or interfere in any way with the right of the Corporation or a Subsidiary to terminate the employment or office of any such Person at any time in accordance with applicable law.

(b) Limitation of Rights. Unless otherwise determined by the Corporation in its sole discretion, the Plan shall remain an unfunded obligation of the Corporation. No Participant shall have, by virtue of the Plan, any right, title or interest whatsoever in or to the assets of the

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Corporation. Restricted Share Units are not Shares and will not entitle any Participant to any shareholder rights, including (without limitation) voting rights, entitlements to distributions or rights on liquidation. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Corporation and any person.

(c) No Recourse Against Shareholders and Others. As a condition of participation in the Plan, each Participant disavows any liability upon and waives any claim against Shareholders, Directors and officers of the Corporation and the Subsidiaries and the obligations created hereunder are not personally binding upon, nor shall resort be had to, nor shall recourse or satisfaction be sought from any Director or officer of the Corporation or any Shareholder. The benefit of this provision is restricted to the Directors and officers of the Corporation and each Shareholder.

(d) Withholding Taxes. Any and all payments to be made pursuant to the Plan shall be made subject to the deduction of any and all applicable taxes or withholdings.

(e) Trustee and Trust Fund. The Corporation may appoint in the form attached as Schedule B, a trust company that deals at arms length with the Corporation as the Trustee for the purpose of holding any Shares for the purposes of this Plan. Subject to applicable law, the Trustee shall not exercise the voting rights attached to the Shares.

16. Construction.

In this Plan, unless otherwise expressly stated or the context otherwise requires:

(a) references to “herein”, “hereby”, “hereunder”, “hereof” and similar expressions are references to the Plan and not to any particular Section of the Plan;

(b) references to a “Section” are references to a Section of the Plan;

(c) words importing the singular shall include the plural and vice versa, words importing gender shall include the masculine, feminine and neuter genders;

(d) the use of headings is for convenience of reference only and shall not affect the construction or interpretation hereof; and

(e) for greater certainty, unless otherwise expressly provided herein, where any reference is made in the Plan to the Corporation, such reference shall be construed and applied for all purposes as if it referred to the Trustees in their capacity as trustees of the Corporation under the declaration of trust governing the Corporation.

17. Severability.

If any provision of the Plan is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such determination shall not impair or affect

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the validity, legality or enforceability of the remaining provisions hereof, and each provision is hereby declared to be separate, severable and distinct.

18. Governing Law.

The Plan is established under the laws of the Province of Ontario and the rights of all parties and the construction of each and every provision of the Plan and any Restricted Share Units granted hereunder shall be construed according to the laws of the Province of Ontario.

19. Effective Date.

The effective date of the Plan shall be February 22, 2005.

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EX-10.16

Exhibit 10.16

PATHEON INC.

PERFORMANCE SHARE UNIT PLAN

December 13, 2007

PATHEON INC.

PERFORMANCE SHARE UNIT PLAN

December 13, 2007

1. Purposes of the Plan.

The purposes of this Performance Share Unit Plan (the “Plan”) are to (i) encourage participants under the Plan to further the growth and development of the Corporation; and (ii) assist the Corporation to retain and attract executives and key employees with experience and ability; and (iii) reward significant achievements.

2. Definitions.

For the purposes of the Plan, the following terms shall have the respective meanings set out below, and grammatical variations of such terms shall have corresponding meanings:

“Applicable Law” means any applicable provision of law, domestic or foreign, including, without limitation, applicable securities legislation, together with all regulations, rules, policy statements, rulings, notices, orders or other instruments promulgated thereunder

“Board” means the Board of Directors of the Corporation.

“Change in Control” means the occurrence of any of the following:

(a) any Person or group, other than JLL Patheon Holdings LLC or its affiliates (as determined pursuant to applicable securities legislation, including all regulations, rules, policy statements, rulings, notices, orders or other instruments promulgated thereunder), acquires beneficial ownership of securities of the Corporation carrying 30% or more of the voting rights attached to all securities of the Corporation then outstanding entitled to vote in the election of directors of the Corporation (collectively, “Voting Shares”) including securities convertible into, or exchangeable for, or providing for the issuance of, Voting Shares; provided, however, that, for the purposes of this paragraph (a), the following acquisitions shall not constitute a Change in Control:

(i) any acquisition of beneficial ownership of Voting Shares by the Corporation or any of its Subsidiaries;

(ii) any acquisition of beneficial ownership of Voting Shares by any employee benefit plan (or related trust) of the Corporation or its Subsidiaries;

(iii) any acquisition of beneficial ownership of Voting Shares by any Person pursuant to a transaction which complies with clauses (i), (ii) and (iii) of paragraph (b); or

(iv) any acquisition of beneficial ownership of Voting Shares by any Person whose ordinary business includes the management of investment funds for others and such Voting Shares are beneficially owned by such Person in the ordinary course of such business;

(b) consummation of a merger, amalgamation, arrangement, business combination, reorganization or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination:

(i) Persons who were the beneficial owners, respectively, of the outstanding common shares immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding Voting Shares of the Person resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more Subsidiaries);

(ii) no Person (excluding any Person resulting from the Business Combination or any employee benefit plan (or related trust) of the Corporation or such Person resulting from the Business Combination) or group beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding Voting Shares of the Person resulting from such Business Combination except to the extent that such ownership existed prior to the Business Combination; and

(iii) at least a majority of the members of the board of directors of the Person resulting from such Business Combination were members of the incumbent Board at the time of the execution of the initial agreement providing for, or the action of the Board approving, such Business Combination.

“Committee” means the Compensation and Human Resources Committee of the Board, or such other committee of the Board as the Board shall from time to time designate to be the committee of the Board responsible for administering and interpreting, and granting Performance Share Units under, the Plan on behalf of the Corporation.

“Corporation” means Patheon Inc.

“Director” means a member of the Board.

“Disability” means a Participant’s physical or mental incapacity that prevents him or her from substantially fulfilling his or her duties and responsibilities on behalf of the Corporation or a Subsidiary, and in respect of which the Participant commences receiving, or is eligible to receive, disability benefits under a long-term disability plan of the Corporation or a Subsidiary or and “date of Disability” means the date on which the Participant first becomes eligible for such disability benefits as a result of such incapacity;

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“Fiscal Year” means a fiscal year of the Corporation which, until changed by the Board, shall be the twelve (12) month period commencing November 1 in a calendar year and ending October 31 of the next calendar year

“Grant Agreement” means an agreement between the Corporation and a Participant under which a Performance Share Unit is granted, as contemplated by Section 5, in substantially the form attached hereto as Schedule A, together with such amendments, deletions or changes thereto as are permitted under the Plan.

“Grant Date” means the effective date of a grant of Performance Share Units as set out in the applicable Grant Agreement.

“Insider” means an insider of the Corporation as defined by the Securities Act (Ontario).

“Market Price” means, in respect of any date, the weighted average price at which the Shares have traded on the TSX during the two trading days immediately prior to such date (or, if the Shares are not then listed and posted for trading on the TSX, on such stock exchange in Canada on which the Shares are then listed selected by the Committee). In the event that the Shares did not trade on any such trading day, the Market Price shall be the average of the closing bid and ask prices in respect of the Shares on such trading day. If the Shares are not then listed on any stock exchange in Canada, the Market Price shall be determined by the Committee in good faith.

“Participant” means a director, officer or key employee of the Corporation or a Subsidiary of the Corporation or a person or company providing ongoing management or consulting services to the Corporation who has been designated by the Committee for participation in the Plan and who has agreed to participate in the Plan on such terms as the Corporation may, in accordance with the Plan, specify in the applicable Grant Agreement.

“Performance Condition” means such measure of the Corporation’s financial performance as may be determined by the Committee pursuant to section 5(b)(ii) with respect to a grant of Performance Share Units.

“Person” includes any individual, legal or personal representative, corporation, company, partnership, syndicate, unincorporated association, trust, trustee, government body, regulatory authority or any other entity howsoever designated or constituted.

“Performance Period” means, with respect to a grant of Performance Share Units, unless otherwise determined by the Committee, the period commencing on the first day of the Fiscal Year that includes the Grant Date of such Performance Share Units and ending on the last day of the second Fiscal Year commencing after such Grant Date.

“Plan” has the meaning set out in Section 1.

“Reorganization” means any (i) capital reorganization; (ii) merger; (iii) amalgamation; (iv) offer for shares of the Corporation which if successful would entitle the offeror to acquire all of the Shares; (v) sale of a material portion of the assets of the Company; or (vi) an arrangement or other scheme of reorganization.

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“Performance Share Unit” means a Performance Share Unit granted to a Participant pursuant to Section 5 and in accordance with the terms and provisions of the Plan.

“Retirement” means the retirement of a Participant from employment with the Corporation or any Subsidiary in accordance with the normal retirement policy of his or her employer.

“Shareholder” means a holder of Shares.

“Shares” means the restricted voting shares of the Corporation.

“Subplan” shall mean, individually and collectively, any appendix as may be added to this Plan at the discretion of the Committee setting out the rules governing the operation of the Plan in respect of Participants who are subject to the tax and/or other laws of the non-Canadian jurisdiction named in the appendix and will be considered part of the Plan. Unless otherwise stated, the Subplan for a particular jurisdiction will override other parts of this Plan with respect to their application in such jurisdiction to the extent required to conform to the Applicable Laws of such jurisdiction.

“Subsidiary” means a body corporate or limited partnership directly or indirectly controlled by the Corporation.

“TSX” means the Toronto Stock Exchange.

3. Administration.

The Committee shall be responsible for the administration and interpretation of the Plan in accordance with the provisions of the Plan. The Committee may, from time to time, establish administrative rules and regulations and prescribe forms or documents relating to the operation of the Plan as it may deem necessary or advisable to implement or further the purposes of the Plan and amend or repeal such rules and regulations or forms or documents. The Committee may interpret or make such determinations with respect to the Plan as may be necessary or appropriate for the administration of the Plan. Any such interpretation shall be final, binding and conclusive for all purposes.

The Committee shall keep or cause to be kept such records and accounts as may be necessary or appropriate in connection with the administration of the Plan and the discharge of its duties hereunder. The Committee may delegate to any Director, officer of the Corporation or employee of the Corporation or a Subsidiary such duties and powers relating to the Plan as it sees fit. The Committee may also appoint or engage a trustee, custodian, administrator or other agent to administer or implement the Plan. All costs and expenses of administering the Plan will be paid by the Corporation.

4. Performance Share Units Rights.

(a) Each Performance Share Unit shall represent the right, subject to any conditions imposed at the time of grant pursuant to Section 5 and subject to Section 11, to receive a payment for such Performance Share Unit, to the extent that it vests, in accordance with Section 7 equal to the Market Price at the end of the Performance Period applicable to such Performance

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Share Unit. The Corporation shall maintain records for each Participant showing the number of Performance Share Units to which such Participant is entitled, and the Performance Period for such Performance Share Units, in accordance with the Plan. No certificates shall be issued with respect to Performance Share Units. At such times as the Committee shall determine, the Corporation may furnish the Participant with a statement setting forth the details of his or her Performance Share Units.

5. Performance Share Unit Grants.

(a) From time to time the Committee, on behalf of the Corporation, may grant Performance Share Units to Participants in accordance with the Plan. In granting such Performance Share Units, the Committee shall designate: (i) the number of Performance Share Units granted to the Participant; (ii) the Performance Period for such Performance Share Units; and (iii) the Grant Date of such Performance Share Units. Each grant of Performance Share Units to a Participant shall be evidenced in a written Grant Agreement between the Corporation and the Participant.

(b) Subject to the terms of the Plan, the Committee may determine other terms or conditions, if any, of any Performance Share Units, including:

(i) any additional conditions on the grant of Performance Share Units under the Plan, including conditions as to the ownership of Shares by a Participant; and

(ii) The Performance Conditions to be applied to determine the extent to which Performance Share Units vest and the payment, if any, to be made in respect of vested Performance Share Units, including (without limitation) conditions in respect of:

(A) the Market Price;

(B) the financial performance or results of one or more of the Corporation, a Subsidiary, or a business unit of the Corporation or a Subsidiary; and

(C) such other terms or conditions as the Committee may in its discretion determine

(iii) one or more multipliers, expressed as a percentage (which may be less than, equal to or greater than 100%), to be applied to each Performance Condition established pursuant to (ii) above, having regard to the extent of satisfaction of such Performance Condition and the weighting as between different Performance Conditions (where more than one such condition is established). The Performance Conditions, weighting thereof, and multipliers established in connection with a grant of Performance Share Units shall be set out in the Grant Agreement relating to such Performance Share Units.

(c) The Committee may, without the consent of any Participant, subsequent to the granting of Performance Share Units waive any Performance Condition applicable to such Performance Share Units, or determine that it has been satisfied.

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(d) The Committee may, without the consent of any Participant, change or replace any Performance Condition, modify the weighting as between difference Performance Conditions, or change or replace any multipliers applicable to a particular Performance Share Units as the Committee sees fit:

(i) in the event of a Reorganization, in addition to or in lieu of any other action it may take under Section 9;

(ii) in the event of any other material change affecting the Corporation, including a material acquisition, disposition, change in Applicable Law or change in accounting standards applicable to the Corporation or a Subsidiary,

provided that the Committee reasonably determines that (i) the change or replacement is required to preserve the rights of the Participants under the Plan on a basis substantially proportionate to that which existed prior to the event giving rise to the change or replacement, or (ii) that the change or replacement will not materially adversely affect the likelihood or amount of any payment under the Plan.

6. Distributions.

Unless otherwise determined by the Committee upon the declaration at any time and from time to time by the Board and the payment by the Corporation of a cash distribution on the Shares, each Participant holding Performance Share Units on the record date established for such cash distribution (or, if no record date is established for such distribution, the date on which such distribution is paid to Unitholders) (the “Record Date”) shall be entitled to receive that number of additional Performance Share Units equal to the number of Performance Share Units held by such Participant on the Record Date multiplied by the amount of the cash distribution per Share, divided by the Market Price on the date on which such distribution is paid to Shareholders. Fractional Performance Share Units may be granted pursuant to this Section 6. The Performance Period and Performance Conditions applicable to each Performance Share Unit, or fraction thereof, granted pursuant to this Section 6 shall be the same as the Performance Period and Performance Conditions for the Performance Share Units held by the Participant on the Record Date in respect of which the additional Performance Share Units are issued.

The Corporation may in lieu of the above grant of all or a portion of the additional Performance Share Units make a cash payment equal to the number of Performance Share Units held by such Participant on the Record Date multiplied by the amount of the cash distribution per Share.

For greater certainty, no additional Performance Share Units shall be credited or cash payment made in respect of dividends declared on any class of shares of the Corporation other than the Shares.

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7. Vesting and Payment.

(a) Subject to Section 10 and the terms of the applicable Grant Agreement, following the end of each Performance Period, the Committee shall determine the extent to which the Performance Share Units granted in respect of such Performance Period shall vest and become payable to the Participants to whom they were granted. Vesting of Performance Share Units will be determined in accordance with the applicable Grant Agreement based on the extent to which the Performance Conditions set out in such Grant Agreement were met for the Performance Period specified in such Grant Agreement.

(b) Subject to Section 10 and the terms of the applicable Grant Agreement, as soon as practicable following the end of the Performance Period applicable to a Performance Share Unit that has vested, and in any event no later than December 31 of the calendar year following the year that includes the end of such Performance Period, an amount equal to the Market Price on the last date of such Performance Period shall be paid to the Participant holding such Performance Share Unit provided he or she remains actively employed by the Corporation or a Subsidiary on the date on which such payment is made.

8. Adjustments.

If the number of outstanding Shares shall be increased or decreased or otherwise changed as a result of a Share split or consolidation, subdivision, reclassification or recapitalization, exchange of shares, or any other similar changes affecting the Shares, other than a change resulting from the issuance of Shares for additional consideration or by way of a stock dividend in the ordinary course, the Committee may make such adjustments to the number of Performance Share Units granted to each Participant in such manner as the Committee in its sole discretion deems to be equitable or appropriate. Any determinations by the Committee as to the adjustments shall be made in its sole discretion, and all such adjustments shall be conclusive and binding for all purposes under the Plan.

9. Reorganizations.

Subject to Section 10(c), in the event of a Reorganization or proposed Reorganization, the Committee may make such adjustments or substitutions to the Plan and to the Performance Share Units granted hereunder as the Committee, in its sole discretion, deems to be equitable or appropriate, including (without limitation) adjustments to the aggregate number, class and kind of securities or other consideration that may be delivered under the Plan, changes to the Performance Period and changes to the Performance Conditions for any Performance Share Units, which adjustments or substitutions may be conditional upon the completion of the Reorganization. Any determinations made by the Committee as to the adjustments or substitutions shall be made in its sole discretion, and all such adjustments or substitutions shall be conclusive and binding for all purposes under the Plan.

10. Termination of Employment and Forfeiture.

(a) Unless otherwise agreed by the Corporation or otherwise determined by the Committee at any time in its sole discretion, if a Participant ceases to be an employee of the Corporation or any Subsidiary by reason of the termination of the Participant’s employment by

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the Corporation or the Subsidiary other than for cause, then any Performance Share Units granted to such Participant for which the Performance Period shall not yet have terminated but which will terminate prior to the end of the notice period (or the implied notice period if pay is given in lieu of notice) shall continue to be outstanding. If a Participant’s employment with the Corporation or a Subsidiary is terminated for cause, in accordance with the law of the jurisdiction in which the employee was employed, then all Performance Share Units granted to such Participant which remain outstanding and in respect of which the Participant has not received payment shall be immediately forfeited as of the date of termination of employment.

(b) If a Participant (i) dies, or (ii) ceases to be an active employee of the Corporation or any Subsidiary by reason of Disability or Retirement or for any other reason in each case specified by the Committee, the Committee may deem all Performance Share Units granted to such Participant which remain outstanding and in respect of which the Participant has not yet received payment to be vested Performance Share Units and cause a payment to be made prior to the end of any Performance Period applicable to such Performance Share Units Where the Committee elects, pursuant to this Section 10(b), to make a payment in respect of a Participant’s Performance Share Units prior to the end of the Performance Period applicable to such Performance Share Units, the amount payable in respect of such Performance Share Units shall be determined as if the Performance Conditions applicable to such Performance Share Units were met and any multiplier applicable to such Performance Conditions equalled 100%.

(c) Unless otherwise determined by the Corporation, if a Participant terminates employment for any reason other than as set out in Sections 10(a) and (b), the Participant shall cease to be a Participant effective on the earlier of the date on which the Participant gives notice of termination of employment and the date on which he or she ceases to provide services to the Corporation or a Subsidiary and no payment shall be made on account of Performance Share Units which remain credited to the Participant when he or she ceases to participate in the Plan as provided in this Section 10(c).

(d) Upon the occurrence of Change in Control of Patheon, the Performance Period for all Performance Share Units granted to such Participant for which the Performance Period specified in the applicable Grant Agreement shall not yet have terminated (i) shall, if the Change in Control results in the Corporation or its successor not being listed for trading on the TSX or another stock exchange or quotation system, end on the date of the Change in Control; and (ii) may, if the Corporation or its successor continues to be listed for trading on the TSX or another stock exchange or quotation system, be changed to a period determined by the Committee or the Board of Directors, but shall in any event end not later than the original Performance Period for such Performance Share Units. Where clause (i) above applies to the Change in Control, the amount payable as of the end of the applicable Performance Period in respect of a Performance Share Unit shall be determined as if the Performance Conditions applicable to such Performance Share Unit were met and any multiplier applicable to such Performance Conditions equalled 100% and payment shall be made within sixty (60) days of the date of the Change in Control.

(e) For greater certainty, unless otherwise agreed by the Corporation or otherwise determined by the Committee at any time in its sole discretion, employment for purposes of the Plan shall terminate on the date on which a Participant receives or gives notice of termination of employment and neither any period of notice, if any, nor any payment in lieu thereof shall be

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considered as extending the period of employment for the purposes of the Plan. A Participant will be considered to be actively employed for purposes of the Plan where such Participant is on a leave of absence in respect of which the Participant is guaranteed reemployment by contract or statute upon expiration of such leave, except that in the event active employment with the Corporation or a Subsidiary is not renewed at the end of the leave of absence, the employment relationship shall be deemed to have ceased at the beginning of the leave of absence.

(f) Any Performance Share Units credited to a Participants account under the Plan that fail to vest under Section 7 or in respect of which, pursuant to this Section 10, payment is otherwise not made shall be forfeited by the Participant. No cash or other compensation shall at any time be paid to any Participant or any person claiming through a Participant, as damages or otherwise, in respect of, or lieu of any rights under, Performance Share Units that have been forfeited under the Plan.

11. Assignment.

No Performance Share Unit or any interest therein shall be assignable by the Participant, by pledge, assignment or in any other manner other than by will or the law of succession.

12. Amendment and Termination.

The Committee may, in its sole discretion, at any time and from time to time amend, suspend or terminate the Plan or amend the terms of any Performance Share Unit granted under the Plan; provided, however, that: (i) any approvals required under any Applicable Law; and (ii) no such amendment or termination shall be made at any time which materially adversely affects the existing rights of a Participant under Performance Share Units granted under the Plan without his or her consent in writing, unless the Corporation, at its sole option, acquires such existing rights under such Performance Share Units for an amount equal to the fair market value of such rights at such time as verified by an independent valuator or unless such amendment or termination is, in the opinion of the Committee acting reasonably, required for purposes of compliance with Applicable Law.

13. Miscellaneous.

(a) Participation Voluntary. The participation in the Plan by each Participant is voluntary, and any decision not to participate shall not affect any individual’s continued employment or office with the Corporation or any Subsidiary. Nothing contained herein shall be construed as conferring upon any Person any right with respect to continuance of employment or continuance as an officer of the Corporation or a Subsidiary or interfere in any way with the right of the Corporation or a Subsidiary to terminate the employment or office of any such Person at any time in accordance with Applicable Law.

(b) Limitation of Rights. Unless otherwise determined by the Corporation in its sole discretion, the Plan shall remain an unfunded obligation of the Corporation. No Participant shall have, by virtue of the Plan, any right, title or interest whatsoever in or to the assets of the Corporation. Performance Share Units are not Shares and will not entitle any Participant to any shareholder rights, including (without limitation) voting rights, entitlements to distributions or

- 9 -

rights on liquidation. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Corporation and any person. Neither designation of an employee as a Participant nor the grant of any Performance Share Units to any Participant entitles any Participant to the grant, or any additional grant, as the case may be, of any Performance Share Units under the Plan, except as outlined previously in the Plan.

(c) No Recourse Against Shareholders and Others. As a condition of participation in the Plan, each Participant disavows any liability upon and waives any claim against Shareholders, Directors and officers of the Corporation and the Subsidiaries and the obligations created hereunder are not personally binding upon, nor shall resort be had to, nor shall recourse or satisfaction be sought from any Director or officer of the Corporation or any Shareholder. The benefit of this provision is restricted to the Directors and officers of the Corporation and each Shareholder.

(d) Withholding Taxes. Any and all payments to be made pursuant to the Plan shall be made subject to the deduction of any and all applicable taxes or withholdings

(e) Subplans. The Committee may make rules, which shall not be inconsistent with the purposes of the Plan, which will govern the operation of the Plan with respect to Participants who are subject to tax and/or other laws of jurisdictions other than Canada and such rules [may/shall] be set out in a Subplan.

14. Construction.

In this Plan, unless otherwise expressly stated or the context otherwise requires:

(a) references to “herein”, “hereby”, “hereunder”, “hereof” and similar expressions are references to the Plan and not to any particular Section of the Plan;

(b) references to a “Section” are references to a Section of the Plan;

(c) words importing the singular shall include the plural and vice versa, words importing gender shall include the masculine, feminine and neuter genders;

(d) the use of headings is for convenience of reference only and shall not affect the construction or interpretation hereof; and

(e) for greater certainty, unless otherwise expressly provided herein, where any reference is made in the Plan to the Corporation, such reference shall be construed and applied for all purposes as if it referred to the Directors in their capacity as members of the Board.

15. Compliance with Laws and Policies.

(a) Each Participant shall acknowledge and agree (and shall be conclusively deemed to have so acknowledged and agreed by participating in the Plan) that the Participant will, at all times, act in strict compliance with Applicable Law and all

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other laws and any policies of the Corporation applicable to the Participant in connection with the Plan. Such laws, regulations, rules and policies shall include, without limitation, those governing “insiders” of “reporting issuers” as those terms are construed for the purposes of applicable securities laws, regulations and rules.

(b) The Corporation’s issuance of any Performance Share Units or its obligation to make any payments hereunder is subject to compliance with Applicable Law.

16. Designation of Beneficiary.

Subject to Applicable Law, a Participant may designate in writing a person as a beneficiary to receive any benefits that are payable under the Plan upon the death of such Participant. The Participant may, subject to Applicable Law, change such designation from time to time. Such designation or change shall be in such form and executed and filed in such manner as the Committee may from time to time determine.

17. Severability.

If any provision of the Plan is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such determination shall not impair or affect the validity, legality or enforceability of the remaining provisions hereof, and each provision is hereby declared to be separate, severable and distinct.

18. Governing Law.

The Plan is established under the laws of the Province of Ontario and the rights of all parties and the construction of each and every provision of the Plan and any Performance Share Units granted hereunder shall be construed according to the laws of the Province of Ontario.

19. Effective Date.

The effective date of the Plan shall be December 13, 2007.

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SCHEDULE A

PATHEON INC.

Performance Share Unit Plan

Grant Agreement

Patheon Inc. (the “Corporation”) has granted the following Performance Share Units¹ to the employee named below (the “Participant”), in accordance with and subject to the terms, conditions and restrictions of this Agreement, together with the provisions of the Patheon Inc. Performance Share Unit Plan (the “Plan”) dated [            ], 2007.

Name of Participant:                                         

Grant Date: [            ], 200[  ]

Number of Performance Share Units
Market Price at Grant	$
Performance Period	[November 1, 2007 – October 31, 2010]

By signing this Grant Agreement the Participant hereby acknowledges and agrees to the following:

1. Grant of Performance Share Units

1.1 Pursuant to the Plan and in respect of services to be provided to the Corporation by the Participant, the Corporation has granted the number of Performance Share Units set out above to the Participant for the Performance Period set out above.

1.2 The grant of Performance Share Units and payment of any amount in respect of any such Performance Share Units are subject to the terms and conditions of the Plan, all of which are incorporated into and form an integral part of this Grant Agreement.

2. Vesting of Performance Share Units

2.1 The Performance Share Units shall become vested and eligible for payment in accordance with Section 3.1 below subject to the terms of the Plan and having regard to the extent to which each of the Performance Conditions set out Schedule A of this Grant Agreement is met, except that in any case, provided the Participant remains actively employed by the Corporation or a Subsidiary on the date establishing by the Corporation for payment, a minimum of 50% of the Performance Share Units will vest.

¹ Capitalized terms not defined herein shall have the meanings given to those terms in the Plan.

Performance Share Unit Plan

[November 1, 2007 – October 31, 2010] Performance Period

3. Payment

3.1 Subject to the provisions of the Plan and the provisions of this Grant Agreement, the Participant shall be entitled to receive payment of in respect of his/her vested Performance Share Units by March 1, 2011 in the form of a lump sum cash payment, net of applicable withholdings, provided he/she remains actively employed by the Corporation or a Subsidiary on the date on which such payment is made.

3.2 For greater certainty, no cash or other compensation shall be paid to any person in respect of any Performance Share Units that are forfeited by the Participant or otherwise ceases to be payable to the Participant or his or her estate, on account of damages, or otherwise.

4. Tax

4.1 The Corporation or a Subsidiary may withhold from any amount payable to the Participant, either under the Plan, or otherwise, such amount as may be necessary so as to ensure that the Corporation or Subsidiary will be able to comply with the applicable provisions of any federal, provincial, state or other law relating to the withholding of tax or other required deductions.

5. Personal Information

5.1 The Participant consents to the holding and processing of personal data provided by the Participant to the Corporation or any Subsidiary or to any third party service provider for all purposes relating to the operation of the Plan, including (i) administering and maintaining records of the Participant; (ii) providing information to the Corporation, any Subsidiary, their agents and any third party administrators of the Plan; (iii) providing information to future purchasers of the Corporation, any Subsidiary or the business unit in which the Participant works; and (iv) transferring information about the Participant to a country or territory outside his or her home country that may not provide the same statutory protection for the information as the Participant’s home country.

6. Binding Agreement

6.1 This Grant Agreement shall be binding upon the Participant and the legal representatives of his or her estate and any other person who acquires the Participant’s rights in respect of the Performance Share Units granted hereunder by inheritance or otherwise, provided that in the event of any conflict between the terms of this Grant Agreement and the terms of the Plan, the terms of the Plan will govern.

13

Performance Share Unit Plan

[November 1, 2007 – October 31, 2010] Performance Period

7. Section 409A Compliance

7.1 The Plan and this Grant Agreement are intended to satisfy the short-term deferral exception to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”). As a result, notwithstanding anything contained in the Plan or this Grant Agreement to the contrary, all payments provided under the Plan or this Grant Agreement for which a payment date is not otherwise specified, including dividend equivalents (if any), must be made no later than two-and-a-half months after the end of the year (the calendar year or the Corporation’s fiscal year, whichever is later) in which the right to the payment is no longer subject to a substantial risk of forfeiture as defined under Section 409A. The Performance Share Units shall not be deferred, accelerated, extended, paid out, settled, substituted or modified in a manner that would result in the imposition of an additional tax under Section 409A of the Code upon the Participant.

DATED as of the [    ] day of [            ], 200[  ].

I [insert name of Participant] hereby confirm and acknowledge the terms of the grant of Performance Share Units to me as set out above and confirm and acknowledge that I have received, read and understood the terms of the Plan. I also confirm and acknowledge that I have not been induced to enter into this Grant Agreement by expectation of employment or continued employment with the Corporation or any Subsidiary.

  [Participant]

14

Schedule A

Performance Share Units

Performance Period[    ]

There are two Performance Conditions applicable to the Performance Share Units granted pursuant to this Agreement:

(1) the Corporation’s Three (3) Year Average Return on Invested Capital (ROIC)

(2) the Corporation’s Three (3) Year Average Annual Share Price Increase

The extent to which each Performance Condition is met will be based on data taken from the annual financial statements of the Corporation, as approved by the Board, for the three Fiscal Years beginning [November 1, 2007 and ending October 31, 2010].

Each Performance Condition is weighted 50% for purposes of calculating the amount payable in respect of vested Performance Share Units.

Multipliers applicable to threshold, target and maximum levels of performance for each Performance Condition are set out in the chart below. Performance between defined performance levels will be interpolated.

Performance	50% Weighting		50% Weighting
	3 Year Average ROIC	Multiplier	3 Year Average Share Price Increase	Multiplier
< Threshold	<15.5%	50%	<20%	50
Threshold	15.5%	50%	20%	50%
Target	17.6%	100%	30%	100%
Max	25.4%	150%	40%	150%

Performance Share Unit Plan

[November 1, 2007 – October 31, 2010] Performance Period

The Committee may, without the consent of any Participant, change or replace any Performance Condition, modify the weighting as between difference Performance Conditions, or change or replace any multipliers applicable to a particular Performance Share Units as the Committee sees fit:

(iii) in the event of a Reorganization, in addition to or in lieu of any other action it may take under Section 9 of the Plan;

(iv) in the event of any other material change affecting the Corporation, including a material acquisition, disposition, change in Applicable Law or change in accounting standards applicable to the Corporation or a Subsidiary,

provided that the Committee reasonably determines that (i) the change or replacement is required to preserve the rights of the Participants under the Plan on a basis substantially proportionate to that which existed prior to the event giving rise to the change or replacement, or (ii) that the change or replacement will not materially adversely affect the likelihood or amount of any payment under the Plan.

16

EX-10.17

Exhibit 10.17

PATHEON INC.

Performance Share Unit Plan

Grant Agreement

Patheon Inc. (the “Corporation”) has granted the following Performance Share Units¹ to the employee named below (the “Participant”), in accordance with and subject to the terms, conditions and restrictions of this Agreement, together with the provisions of the Patheon Inc. Performance Share Unit Plan (the “Plan”) dated [                    ].

Name of Participant:                                         

Grant Date: [                    ]

Number of Performance Share Units
Market Price at Grant	$
Performance Period

By signing this Grant Agreement the Participant hereby acknowledges and agrees to the following:

1. Grant of Performance Share Units

1.1 Pursuant to the Plan and in respect of services to be provided to the Corporation by the Participant, the Corporation has granted the number of Performance Share Units set out above to the Participant for the Performance Period set out above.

1.2 The grant of Performance Share Units and payment of any amount in respect of any such Performance Share Units are subject to the terms and conditions of the Plan, all of which are incorporated into and form an integral part of this Grant Agreement.

2. Vesting of Performance Share Units

2.1 The Performance Share Units shall become vested and eligible for payment in accordance with Section 3.1 below subject to the terms of the Plan and having regard to the extent to which each of the Performance Conditions set out Schedule A of this Grant Agreement is met, except that in any case, provided the Participant remains actively employed by the Corporation or a Subsidiary on the date establishing by the Corporation for payment, a minimum of 50% of the Performance Share Units will vest.

¹ Capitalized terms not defined herein shall have the meanings given to those terms in the Plan.

Performance Share Unit Plan

[                                         ] Performance Period

3. Payment

3.1 Subject to the provisions of the Plan and the provisions of this Grant Agreement, the Participant shall be entitled to receive payment of in respect of his/her vested Performance Share Units by [                    ] in the form of a lump sum cash payment, net of applicable withholdings, provided he/she remains actively employed by the Corporation or a Subsidiary on the date on which such payment is made.

3.2 For greater certainty, no cash or other compensation shall be paid to any person in respect of any Performance Share Units that are forfeited by the Participant or otherwise ceases to be payable to the Participant or his or her estate, on account of damages, or otherwise.

4. Tax

4.1 The Corporation or a Subsidiary may withhold from any amount payable to the Participant, either under the Plan, or otherwise, such amount as may be necessary so as to ensure that the Corporation or Subsidiary will be able to comply with the applicable provisions of any federal, provincial, state or other law relating to the withholding of tax or other required deductions.

5. Personal Information

5.1 The Participant consents to the holding and processing of personal data provided by the Participant to the Corporation or any Subsidiary or to any third party service provider for all purposes relating to the operation of the Plan, including (i) administering and maintaining records of the Participant; (ii) providing information to the Corporation, any Subsidiary, their agents and any third party administrators of the Plan; (iii) providing information to future purchasers of the Corporation, any Subsidiary or the business unit in which the Participant works; and (iv) transferring information about the Participant to a country or territory outside his or her home country that may not provide the same statutory protection for the information as the Participant’s home country.

6. Binding Agreement

6.1 This Grant Agreement shall be binding upon the Participant and the legal representatives of his or her estate and any other person who acquires the Participant’s rights in respect of the Performance Share Units granted hereunder by inheritance or otherwise, provided that in the event of any conflict between the terms of this Grant Agreement and the terms of the Plan, the terms of the Plan will govern.

2

Performance Share Unit Plan

[                                         ] Performance Period

7. Section 409A Compliance

7.1 The Plan and this Grant Agreement are intended to satisfy the short-term deferral exception to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”). As a result, notwithstanding anything contained in the Plan or this Grant Agreement to the contrary, all payments provided under the Plan or this Grant Agreement for which a payment date is not otherwise specified, including dividend equivalents (if any), must be made no later than two-and-a-half months after the end of the year (the calendar year or the Corporation’s fiscal year, whichever is later) in which the right to the payment is no longer subject to a substantial risk of forfeiture as defined under Section 409A. The Performance Share Units shall not be deferred, accelerated, extended, paid out, settled, substituted or modified in a manner that would result in the imposition of an additional tax under Section 409A of the Code upon the Participant.

DATED as of the [    ] day of [            ].

I [insert name of Participant] hereby confirm and acknowledge the terms of the grant of Performance Share Units to me as set out above and confirm and acknowledge that I have received, read and understood the terms of the Plan. I also confirm and acknowledge that I have not been induced to enter into this Grant Agreement by expectation of employment or continued employment with the Corporation or any Subsidiary.

[Participant]

3

Schedule A

Performance Share Units

Performance Period[    ]

There are two Performance Conditions applicable to the Performance Share Units granted pursuant to this Agreement:

(1) the Corporation’s Three (3) Year Average Return on Invested Capital (ROIC)

(2) the Corporation’s Three (3) Year Average Annual Share Price Increase

The extent to which each Performance Condition is met will be based on data taken from the annual financial statements of the Corporation, as approved by the Board, for the three Fiscal Years beginning [                        ].

Each Performance Condition is weighted 50% for purposes of calculating the amount payable in respect of vested Performance Share Units.

Multipliers applicable to threshold, target and maximum levels of performance for each Performance Condition are set out in the chart below. Performance between defined performance levels will be interpolated.

	50% Weighting						50% Weighting
Performance	3 Year Average ROIC			Multiplier			3 Year Average Share Price Increase			Multiplier
< Threshold		<15.5	%		50	%		< 20	%		50
Threshold		15.5	%		50	%		20	%		50	%
Target		17.6	%		100	%		30	%		100	%
Max		25.4	%		150	%		40	%		150	%

4

Performance Share Unit Plan

[                                         ] Performance Period

The Committee may, without the consent of any Participant, change or replace any Performance Condition, modify the weighting as between difference Performance Conditions, or change or replace any multipliers applicable to a particular Performance Share Units as the Committee sees fit:

(i) in the event of a Reorganization, in addition to or in lieu of any other action it may take under Section 9 of the Plan;

(ii) in the event of any other material change affecting the Corporation, including a material acquisition, disposition, change in Applicable Law or change in accounting standards applicable to the Corporation or a Subsidiary,

provided that the Committee reasonably determines that (i) the change or replacement is required to preserve the rights of the Participants under the Plan on a basis substantially proportionate to that which existed prior to the event giving rise to the change or replacement, or (ii) that the change or replacement will not materially adversely affect the likelihood or amount of any payment under the Plan.

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EX-10.18

Exhibit 10.18

PATHEON INC.

DIRECTORS DEFERRED SHARE UNIT PLAN

February 22, 2008, as amended March 27, 2008

PATHEON INC.

DIRECTORS DEFERRED SHARE UNIT PLAN

February 22, 2008

1. Purposes of the Plan.

The purposes of this Directors Deferred Share Unit Plan (the “Plan”) are to (i) promote a greater alignment of interests between the directors and shareholders of the Corporation; and (ii) provide a compensation system for directors that, together with the other director compensation mechanisms of the Corporation, is reflective of the responsibility, commitment and risk accompanying Board membership and the performance of the duties required of the various committees of the Board.

2. Definitions.

(a) For the purposes of the Plan, the following terms shall have the respective meanings set out below, and grammatical variations of such terms shall have corresponding meanings:

“Account” has the meaning ascribed thereto in Section 4.

“Affiliate” means an affiliate of the Corporation, as applicable, as the term “affiliate” is defined in paragraph 8 of the Canada Revenue Agency’s interpretation bulletin IT-337R4, Retiring Allowances.

“Applicable Law” means any applicable provision of law, domestic or foreign, including, without limitation, applicable securities legislation, together with all regulations, rules, policy statements, rulings, notices, orders or other instruments promulgated thereunder.

“Board” means the Board of Directors of the Corporation.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Committee” means the Compensation and Human Resources Committee of the Board, or such other committee of the Board as the Board shall from time to time designate to be the committee of the Board responsible for administering and interpreting, and granting Deferred Share Units under, the Plan on behalf of the Corporation.

“Corporation” means Patheon Inc.

“Disability” means an Eligible Director’s physical or mental incapacity that prevents him or her from substantially fulfilling his or her duties and responsibilities on behalf of the Corporation.

“Deferred Share Unit” means a unit granted to an Eligible Director pursuant to Section 6 and in accordance with the terms and provisions of the Plan, the value of which at any particular date shall be the Market Price at that date.

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“Electable Eligible Remuneration” means the Annual Retainer or the Chair’s Retainer.

“Election Notice” means the written election in the form of Schedule A hereto.

“Eligible Director” means any director of the Corporation who is not an employee of the Corporation or any Affiliate, and includes any non-executive Chair of the Board.

“Eligible Remuneration” means the following amounts payable to an Eligible Director by the Corporation in respect of the services provided by the Eligible Director to the Corporation in connection with such Eligible Director’s service on the Board in a fiscal year,

(a) in the case of Eligible Directors, other than the Chair (i) upon due submission of an election by the Eligible Director, the annual retainer fee for serving as a director (“Annual Retainer”); (ii) the initial retainer fee for serving as a director payable either upon initiation of the Plan or upon being elected or appointed a director (the “Initial Retainer”), and (iii) the base retainer in respect of each fiscal year (“Base Retainer”); and

(b) in the case of the Chair, upon due submission of an election by the Chair, an amount equal to the Annual Retainer and the Initial Retainer or the Base Retainer (collectively the “Chair’s Retainer”);

but, for greater certainty, excludes any retainer fees for serving as a member of a Board committee or for serving as a Chair of any committee, any meeting fees payable in respect of attendance at individual meetings or any amounts received by an Eligible Director as a reimbursement for expenses incurred in attending meetings, which amounts shall, unless otherwise determined by the Board or the Committee, be payable Quarterly in arrears.

“Insider” means an insider of the Corporation as defined by the Securities Act (Ontario).

“Market Price” means, in respect of any date, the weighted average price at which the Shares have traded on the TSX during the two trading days immediately prior to such date (or, if the Shares are not then listed and posted for trading on the TSX, on such stock exchange in Canada on which the Shares are then listed selected by the Committee). In the event that the Shares did not trade on any such trading day, the Market Price shall be the average of the closing bid and ask prices in respect of the Shares on such trading day. If the Shares are not then listed on any stock exchange in Canada, the Market Price shall be determined by the Committee in good faith.

“Payment Date” means the effective date on which Deferred Share Units are credited Quarterly to an Eligible Director’s Account, which shall be the last day of the Quarter in which the Eligible Remuneration being provided in the form of Deferred Share Units accrued.

“Person” includes any individual, legal or personal representative, corporation, Corporation, partnership, syndicate, unincorporated association, trust, trustee, government body, regulatory authority or any other entity howsoever designated or constituted.

“Plan” has the meaning set out in Section 1.

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“Quarter” means a fiscal quarter of the Corporation, which, until changed by the Corporation, shall be the three month period ending January 31, April 30, July 31 or October 31 in any year and “Quarterly” means each Quarter.

“Redemption Amount” means the amount calculated by multiplying the number of Deferred Share Units in an Eligible Director’s Account by the Market Price as of the Redemption Date.

“Redemption Date” has the meaning set out in Section 11 or Section 12, as applicable.

“Reorganization” means any (i) capital reorganization; (ii) merger; (iii) amalgamation; (iv) offer for shares of the Corporation which if successful would entitle the offeror to acquire all of the Shares; (v) sale of a material portion of the assets of the Corporation; or (vi) an arrangement or other scheme of reorganization.

“Shareholder” means a holder of Shares.

“Shares” means the restricted voting shares of the Corporation.

“Termination Date” means the date of (i) the voluntary resignation or retirement of an Eligible Director from the Board; (ii) the death or Disability of an Eligible Director; (iii) removal of an Eligible Director from the Board whether by shareholder resolution or failure to achieve re-election; provided that the Eligible Director is not then an employee of the Corporation or an employee or director of an Affiliate and provided further, that in the case of an Eligible Director who is a U.S. Taxpayer, the Termination Date shall be the date on which the Eligible Director has a “separation from service” within the meaning of Section 409A of the Code.

“TSX” means the Toronto Stock Exchange.

“U.S. Taxpayer” means a citizen or resident of the United States for United States federal income tax purposes.

3. Administration.

The Committee shall be responsible for the administration and interpretation of the Plan in accordance with the provisions of the Plan. The Committee may, from time to time, establish administrative rules and regulations and prescribe forms or documents relating to the operation of the Plan as it may deem necessary or advisable to implement or further the purposes of the Plan and amend or repeal such rules and regulations or forms or documents. Subject to Section 17(c), the Committee may interpret or make such determinations with respect to the Plan as may be necessary or appropriate for the administration of the Plan. Any such interpretation shall be final, binding and conclusive for all purposes.

The Committee shall keep or cause to be kept such records and accounts as may be necessary or appropriate in connection with the administration of the Plan and the discharge of its duties hereunder. The Committee may delegate to any Director, officer of the Corporation or employee of the Corporation such duties and powers relating to the Plan as it sees fit. The Committee may also appoint or engage a trustee, custodian, administrator or other agent to

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administer or implement the Plan. All costs and expenses of administering the Plan will be paid by the Corporation.

4. Deferred Share Units Rights.

Each Deferred Share Unit shall represent the right to receive a payment for such Deferred Share Unit in accordance with Section 11 equal to the Market Price on the Redemption Date applicable to such Deferred Share Unit. The Corporation shall maintain an account (the “Account”) for each Eligible Director showing the number of Deferred Share Units to which such Eligible Director is entitled. No certificates shall be issued with respect to Deferred Share Units. At such times as the Committee shall determine, the Corporation may furnish the Eligible Director with a statement setting forth the details of his or her Deferred Share Units. Upon payment in satisfaction of Deferred Share Units credited to an Eligible Director’s Account, such Deferred Share Units shall be cancelled.

5. Election Under the Plan

(a) Subject to the remaining provisions of this Section 5 and such rules, regulations, approvals and conditions as the Committee may impose, an Eligible Director shall receive his Initial Retainer and Base Retainer in Deferred Share Units and may elect to receive his Electable Eligible Remuneration in the form of Deferred Share Units or cash or any combination thereof. Notwithstanding the foregoing, the Chair must provide an election as to his Electable Eligible Remuneration to receive any Deferred Share Units.

(b) An Eligible Director may elect the form or forms of payment of Electable Eligible Remuneration earned in a fiscal year by delivering a completed Election Notice to the Secretary of the Corporation prior to the first day of such fiscal year. The Election Notice shall become irrevocable for such fiscal year on the last day of the preceding fiscal year.

(c) Notwithstanding Section 5(b), an individual who becomes an Eligible Director during a fiscal year and each individual who is an Eligible Director on the effective date of the Plan may elect the form or forms of payment of Electable Eligible Remuneration earned in Quarters of that fiscal year that commence after the date the election is made by delivering a completed Election Notice to the Secretary of the Corporation. An Election Notice shall not be effective to require that Electable Eligible Remuneration earned in the fiscal year in which the individual becomes an Eligible Director be provided in the form of Deferred Share Units if such Election Notice is not completed and delivered to the Secretary of the Corporation within 30 days after the individual becomes an Eligible Director, or the effective date of the Plan, as the case may be. Such Election Notice, or the default election of cash if the Election Notice is not effective, shall become irrevocable with respect to such fiscal year on the earlier of date the election is made or the last day of the 30-day election period described in this Section 5(c).

(d) An Election Notice delivered to the Secretary of the Corporation pursuant to Section 5(b) or 5(c) shall remain in effect for the fiscal year for which it is made and each fiscal year thereafter unless the Eligible Director changes the form or forms of payment of his Electable Eligible Remuneration by delivering a subsequent Election Notice pursuant to Section 5(b).

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(e) For greater certainty, the Committee may prescribe election forms for use by Eligible Directors who are residents of a jurisdiction other than Canada that differ from the election forms it prescribes for use by Canadian resident Eligible Directors where the Committee determines it is necessary or desirable to do so to obtain comparable treatment for the Plan, the Eligible Directors or the Corporation under the laws or regulatory policies of such other jurisdiction as is provided under the laws and regulatory policies of Canada and its Provinces, provided that no election form prescribed for use by a non-resident of Canada shall contain terms that would cause the Plan to cease to meet the requirements of paragraph 6801(d) of the regulations under the Income Tax Act (Canada) and any successor to such provisions.

6. Crediting of Deferred Share Units

Deferred Share Units allocated to an Eligible Director pursuant to the Plan shall be credited to the Eligible Director’s Account as of the applicable Payment Date. The number of Deferred Share Units (including fractional Deferred Share Units) to be credited to an Eligible Director’s Account as of a particular Payment Date pursuant to this Section 6 shall be determined by dividing the portion of that Eligible Director’s Eligible Remuneration for the applicable period to be satisfied by Deferred Share Units by the Market Price on the particular Payment Date.

7. Vesting

Deferred Share Units granted under Section 6 together with any additional Deferred Share Units granted in respect thereof under Section 8 will be fully vested upon being credited to an Eligible Director’s Account, and the Eligible Director’s entitlement to payment of such Deferred Share Units at his Termination Date shall not thereafter be subject to satisfaction of any requirements as to any minimum period of membership on the Board.

8. Dividends

On any payment date for dividends paid on Shares, an Eligible Director shall be credited with dividend equivalents in respect of Deferred Share Units credited to the Eligible Director’s Account as of the record date for payment of dividends. Such dividend equivalents shall be converted into additional Deferred Share Units (including fractional Deferred Share Units) based on the Market Price as of the payment date for such dividends.

9. Adjustments.

If the number of outstanding Shares shall be increased or decreased or otherwise changed as a result of a Share split or consolidation, subdivision, reclassification or recapitalization, exchange of shares, or any other similar changes affecting the Shares, other than a change resulting from the issuance of Shares for additional consideration or by way of a stock dividend in the ordinary course, the Committee may make such adjustments to the number of Deferred Share Units granted to each Eligible Director in such manner as the Committee in its sole discretion deems to be equitable or appropriate. Any determinations by the Committee as to the adjustments shall be made in its sole discretion subject to Section 17(c), and all such adjustments shall be conclusive and binding for all purposes under the Plan.

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10. Reorganizations.

In the event of a Reorganization or proposed Reorganization, the Committee may make such adjustments or substitutions to the Plan and to the Deferred Share Units granted hereunder as the Committee, in its sole discretion, deems to be equitable or appropriate, including (without limitation) adjustments to the aggregate number, class and kind of securities on which the value of the Deferred Share Units is based or to the consideration that may be delivered under the Plan, which adjustments or substitutions may be conditional upon the completion of the Reorganization. Any determinations made by the Committee as to the adjustments or substitutions shall be made in its sole discretion subject to Section 17(c), and all such adjustments or substitutions shall be conclusive and binding for all purposes under the Plan.

11. Redemption of Deferred Share Units

Subject to Section 12 and Appendix I, an Eligible Director, or an Eligible Director’s beneficiary, as the case may be, shall be paid the value of the Deferred Share Units credited to his or her Account on his or her Termination Date, after deduction of any applicable taxes and other source deductions required to be withheld by the Corporation, on the date that is forty-five (45) days following the Eligible Director’s Termination Date or the following business day if such forty-fifth (45th) day is not a business day (the “Redemption Date”).

12. Extended Redemption Date

(a) In the event that the Committee is unable, by an Eligible Director’s Redemption Date determined under Section 11, to compute the final value of the Deferred Share Units recorded in such Eligible Director’s Account by reason of the fact that any data required in order to compute the Market Price is not publicly available to the Committee, then the Redemption Date shall be the next following trading day on which such data is made available to the Committee.

(b) Notwithstanding any other provision of the Plan, if the Eligible Director is a “specified employee”, as determined under the Corporation’s policy for determining specified employees, on the Termination Date, then to the extent required in order to comply with Section 409A of the Code, the Redemption Date shall be the first business day following the six (6) month anniversary of such Termination Date (or if earlier, the Eligible Director’s death).

(c) Notwithstanding any other provision of the Plan, (i) all amounts payable to, or in respect of, an Eligible Director who is not a U.S. Taxpayer shall be paid on or before December 31 of the calendar year commencing immediately after the Eligible Director’s Termination Date, and (ii) all amounts payable to, or in respect of, an Eligible Director who is a U.S. Taxpayer shall be paid on or before the latest of (A) December 31 of the calendar year containing the Eligible Director’s Termination Date, (B) the fifteenth (15th) day of the third (3rd) month following the Eligible Director’s Termination Date, (C) the Redemption Date specified in Section 12(a) or (D) the Redemption Date specified in Section 12(b).

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13. Assignment.

No Deferred Share Unit or any interest therein shall be assignable by the Eligible Director, by pledge, assignment or in any other manner other than by will or the law of succession.

14. Amendment and Termination.

The Committee may, in its sole discretion, at any time and from time to time amend, suspend or terminate the Plan or amend the terms of any Deferred Share Unit granted under the Plan; provided, however, that: (i) no such amendment or termination shall be made unless and until the Corporation obtains any approvals required under any Applicable Law; (ii) no such amendment or termination shall be effective with respect to an Eligible Director who is a U.S. Taxpayer to the extent such action would result in an “acceleration of benefits” or a “change in time or form of distribution” within the meaning of Section 409A of the Code, and (iii) no such amendment or termination shall be made at any time which materially adversely affects the existing rights of a Eligible Director under Deferred Share Units credited under the Plan without his or her consent in writing. Notwithstanding the foregoing, any amendment or termination of the Plan shall be such that the Plan continuously meets the requirements of paragraph 6801(d) of the regulations under the Income Tax Act (Canada) or any successor to such provision and the requirements of Section 409A of the Code as may apply to Eligible Directors who are U.S. Taxpayers.

15. Miscellaneous.

(a) Participation Voluntary. The participation in the Plan by each Eligible Director in respect of the Electable Eligible Remuneration is voluntary, and any decision not to participate shall not affect any individual’s continued membership on the Board.

(b) Limitation of Rights. Unless otherwise determined by the Corporation in its sole discretion, the Plan shall remain an unfunded obligation of the Corporation. No Eligible Director shall have, by virtue of the Plan, any right, title or interest whatsoever in or to the assets of the Corporation. Deferred Share Units are not Shares and will not entitle any Eligible Director to any shareholder rights, including (without limitation) voting rights, entitlements to distributions or rights on liquidation. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Corporation and any person. Neither designation of an employee as a Eligible Director nor the grant of any Deferred Share Units to any Eligible Director entitles any Eligible Director to the grant, or any additional grant, as the case may be, of any Deferred Share Units under the Plan, except as outlined previously in the Plan.

(c) No Recourse Against Shareholders and Others. As a condition of participation in the Plan, each Eligible Director disavows any liability upon and waives any claim against Shareholders, other Directors and officers of the Corporation and the Affiliates and the obligations created hereunder are not personally binding upon, nor shall resort be had to, nor shall recourse or satisfaction be sought from any other Director or officer of the Corporation or

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any Shareholder. The benefit of this provision is restricted to the Directors and officers of the Corporation and each Shareholder.

(d) Withholding Taxes. Any and all payments to be made pursuant to the Plan shall be made subject to the deduction of any and all applicable taxes or withholdings.

(e) Foreign Directors. The Committee may make rules, which shall not be inconsistent with the purposes of the Plan, which will govern the operation of the Plan with respect to Eligible Directors who are subject to tax and/or other laws of jurisdictions other than Canada or the United States and such rules may be set out in an Appendix to this Plan.

16. Construction.

In this Plan, unless otherwise expressly stated or the context otherwise requires:

(a) references to “herein”, “hereby”, “hereunder”, “hereof” and similar expressions are references to the Plan and not to any particular Section of the Plan;

(b) references to a “Section” are references to a Section of the Plan;

(c) words importing the singular shall include the plural and vice versa, words importing gender shall include the masculine, feminine and neuter genders;

(d) the use of headings is for convenience of reference only and shall not affect the construction or interpretation hereof; and

(e) for greater certainty, unless otherwise expressly provided herein, where any reference is made in the Plan to the Corporation, such reference shall be construed and applied for all purposes as if it referred to the Directors in their capacity as members of the Board.

17. Compliance with Laws and Policies.

(a) Each Eligible Director shall acknowledge and agree (and shall be conclusively deemed to have so acknowledged and agreed by participating in the Plan) that the Eligible Director will, at all times, act in strict compliance with Applicable Law and all other laws and any policies of the Corporation applicable to the Eligible Director in connection with the Plan. Such laws, regulations, rules and policies shall include, without limitation, those governing “insiders” of “reporting issuers” as those terms are construed for the purposes of applicable securities laws, regulations and rules. Deferred Share Units shall be considered a “security” of the Corporation solely for the reporting purposes of the insider trading policy of the Corporation

(b) The Corporation’s issuance of any Deferred Share Units and its obligation to make any payments hereunder is subject to compliance with Applicable Law.

(c) Notwithstanding any other provision herein, with respect to U.S. Taxpayers, this Plan shall be construed, administered, and governed in a manner that is consistent with, and that satisfies the requirements of, Section 409A of the Code and any regulations or other guidance issued thereunder, so that taxation of any U.S. Taxpayer who is an Eligible Director is deferred

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under this Plan until distribution as provided hereunder. Any provision that would cause the Plan to fail to satisfy the requirements of Section 409A of the Code and any regulations or other guidance issued thereunder shall have no force and effect with respect to U.S. Taxpayers until amended to comply with such requirements (which amendment may be retroactive to the extent permitted by Section 409A of the Code and may be made by the Board (or any committee thereof) without the consent of the Eligible Directors).

18. Designation of Beneficiary and Beneficiary’s Rights.

(a) Subject to Applicable Law, an Eligible Director may designate in writing a person as a beneficiary to receive any benefits that are payable under the Plan upon the death of such Eligible Director. The Eligible Director may, subject to Applicable Law, change such designation from time to time. Such designation or change shall be in such form and executed and filed in such manner as the Committee may from time to time determine.

(b) In the event of an Eligible Director’s death, any and all Deferred Stock Units then credited to the Eligible Director’s Account shall become payable to the Eligible Director’s beneficiary in accordance with Section 11 and the date of death shall be deemed to be the Termination Date.

19. Severability.

If any provision of the Plan is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such determination shall not impair or affect the validity, legality or enforceability of the remaining provisions hereof, and each provision is hereby declared to be separate, severable and distinct.

20. Governing Law.

The Plan is established under the laws of the Province of Ontario and the rights of all parties and the construction of each and every provision of the Plan and any Deferred Share Units granted hereunder shall be construed according to the laws of the Province of Ontario.

21. Effective Date.

The effective date of the Plan shall be February 22, 2008.

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SCHEDULE A

Patheon Inc. Directors Deferred Share Unit Plan (the “Plan”)

ELECTION NOTICE

I. Election:

Subject to Part II of this Notice, I hereby elect to receive the following percentage of Electable Eligible Remuneration by way of Deferred Share Units (“DSUs”):

	Amount	Percentage in DSUs		Percentage in Cash*
Electable Eligible Remuneration	$		%		%

* cash payments will be made quarterly in arrears

II. Acknowledgement

I confirm and acknowledge that:

1. I have received and reviewed a copy of the terms of the Plan and agree to be bound by them.

2. I will not be able to cause the Corporation or any Affiliate to redeem DSUs granted under the Plan until my Termination Date. [I will not be able to cause the Corporation or any Affiliate to redeem DSUs granted under the Plan until the date specified in the plan following my Termination Date.][NTD: Alternative language added for U.S. Taxpayers.]

3. When DSUs credited to my account pursuant to this election are redeemed in accordance with the terms of the Plan after my Termination Date, income tax and other withholdings as required will arise at that time. Upon redemption of the DSUs, the Corporation will make all appropriate withholdings as required by law at that time.

4. The value of DSUs are based on the value of the Shares and therefore are not guaranteed.

5. No funds will be set aside to guarantee the payment of DSUs. Future payment of DSUs will remain an unfunded and unsecured liability recorded on the books of the Corporation.

A-1

6. The foregoing is only a brief outline of certain key provisions of the Plan. In the event of any discrepancy between the terms of the Plan and the terms of this Election Notice, the terms of the Plan shall prevail. All capitalized expressions used herein shall have the same meaning as in the Plan unless otherwise defined herein.

Date	(Name of Eligible Director)
	(Signature of Eligible Director)

A-2

SCHEDULE B

BENEFICIARY DESIGNATION

To:    [    ]

I,                                          , being a participant in the Patheon Inc. Directors Deferred Share Unit Plan (the “Plan”) hereby designate the following person as my beneficiary for purposes of the Plan:

Name of Beneficiary:

Address of Beneficiary:

This designation revokes any previous beneficiary designation made by me under the Plan. Under the terms of the Plan, I reserve the right to revoke this designation and to designate another person as my beneficiary.

Date:
Name:	(please print)
Signature:

B-1

APPENDIX I

TO PATHEON INC. DIRECTORS DEFERRED SHARE UNIT PLAN

A. Application of Appendix I

Notwithstanding Section 11 of the Plan, the redemption of the Deferred Share Units credited to the Account of [insert name of Director] (the “Retiring Canadian Director”), shall be governed by the provisions of this Appendix I, provided that, for greater certainty, the balance of the Plan, and, in particular, clause (i) of Section 12(c) shall in any event continue to apply to the Retiring Canadian Director’s Deferred Share Units.

B. Redemption of Deferred Share Units

The Deferred Share Units credited to the Retiring Canadian Director’s Account on his Termination Date shall be redeemable at the Retiring Canadian Director’s option (or the option of his beneficiary, as the case may be) after such Termination Date. In order to redeem such Deferred Share Units, the Retiring Canadian Director (or his beneficiary, as the case may be) shall file a written redemption request with the Corporate Secretary of the Corporation, specifying a date (the “Redemption Date”), which must be after the date on which the redemption request is filed with the Corporation and no later than December 15 of the first calendar year commencing after the Retiring Canadian Director’s Termination Date. The Corporation shall pay the value of the Retiring Canadian Director’s Deferred Share Units (calculated by multiplying the number of Deferred Share Units by the Market Price on the Redemption Date) to the Retiring Canadian Director (or his beneficiary, as the case may be), after deduction of any applicable taxes and other source deductions required to be withheld by the Corporation, on the Redemption Date or the following business day if the Redemption Date is not a business day. If no redemption request been filed hereunder by December 15 of the first calendar year commencing after the Retiring Canadian Director’s Termination Date, the Redemption Date for the Retiring Canadian Director’s Deferred Share Units shall be December 15 of the first calendar year commencing after his Termination Date.

EX-10.19

Exhibit 10.19

Patheon Inc.

Description of Compensation for Non-Employee Directors

Each of the non-employee directors of Patheon Inc. (“Patheon”), other than the Chair of Patheon’s Board of Directors (the “Board”), is entitled to receive an initial retainer upon appointment or election to the Board; an annual Board retainer; an annual committee chair retainer, if applicable; an annual committee member retainer, if applicable; and meeting attendance fees, as applicable. The Chair of the Board is entitled to receive an initial retainer upon appointment or election to the Board; an annual chairperson retainer; an annual committee chair retainer, if applicable; and an annual committee member retainer, if applicable. Certain of these amounts are either required to be, or may be, paid in the form of deferred share units (“DSUs”) under the terms of the Directors Deferred Share Unit Plan (the “DSU Plan”). The following table summarizes the retainers and fees to which Patheon’s non-employee directors are entitled, including the amounts paid in cash and/or DSUs.

Initial Retainer (upon being appointed or elected to Board)	$32,000 per annum(1)
Board Retainer	$67,000 per annum(2)
Chairperson Retainer	$140,000 per annum(3)
Committee Chair Retainer
Chair of Audit Committee	$14,000 per annum(4)
Chair of Other Standing Board Committee	$5,000 per annum(4)
Committee Member Retainer
Member of Audit Committee	$6,000 per annum(4)
Member of Other Standing Board Committee	$4,000 per annum(4)
Board and Standing Committee Meeting Attendance Fees	$1,500 per meeting(5)

⁽¹⁾ Payable entirely in DSUs.

⁽²⁾ $32,000 of this amount is payable in DSUs, and the remainder is payable in cash or DSUs at the election of the director.

⁽³⁾ $73,000 of this amount is payable in cash, and the remainder is payable in cash or DSUs at the election of the Chair.

⁽⁴⁾ Payable entirely in cash.

⁽⁵⁾ Payable entirely in cash. The Chair of the Board is not entitled to any meeting attendance fees for Board or standing committee meetings.

EX-10.20

Exhibit 10.20

PATHEON PHARMACEUTICALS INC.

DEFERRED COMPENSATION PLAN

The Company adopted the Patheon Pharmaceuticals Inc. Deferred Compensation Plan (the “Plan”), effective January 1, 2003. The Plan is hereby amended and restated, as set forth below, to comply with the restrictions imposed by Section 409A of the Code.

In order to comply with Section 409A of the Code, effective immediately before January 1, 2008, the Plan is divided into two parts, one of which shall be named “Part One” and the other of which shall be named “Part Two”. Part One of the Plan shall be governed by the terms and conditions of the Plan as in effect on October 3, 2004. Part Two of the Plan shall be governed by the terms and conditions set forth herein. Any “amounts deferred” in taxable years beginning before January 1, 2005 (within the meaning of Section 409A of the Code) and any earnings thereon shall be governed by the terms of Part One of the Plan, and it is intended that such amounts and the earnings thereon shall be exempt from the application of Section 409A of the Code. Any “amounts deferred” in taxable years beginning on or after January 1, 2005 (within the meaning of Section 409A of the Code) and any earnings thereon shall be governed by the terms and conditions of Part Two of the Plan, and it is intended that such amounts and the earnings thereon shall be subject to and comply with the payment restrictions imposed under Section 409A of the Code.

ARTICLE I

DEFINITIONS

For purposes of the Plan, the following words and phrases shall have the meanings set forth below, unless their context clearly requires a different meaning:

“Account” means the bookkeeping account maintained by the Committee on behalf of each Participant pursuant to this Plan. The sum of each Participant’s Sub-Accounts, in the aggregate, shall constitute his Account. The Account and each and every Sub-Account shall be a bookkeeping entry only and shall be used solely as a device to measure and determine the amounts, if any, to be paid to a Participant or his Beneficiary under the Plan.

“Affiliated Group” means (i) the Company, and (ii) all entities with whom the Company would be considered a single employer under Sections 414(b) and 414(c) of the Code, provided that in applying Section 1563(a)(1), (2), and (3) for purposes of determining a controlled group of corporations under Section 414(b) of the Code, the language “at least 50 percent” is used instead of “at least 80 percent” each place it appears in Section 1563(a)(1), (2), and (3), and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Section 414(c), “at least 50 percent” is used instead of “at least 80 percent” each place it appears in that regulation. Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Section 409A of the Code.

“Base Salary” means the annual base rate of cash compensation payable by the Affiliated Group to an Eligible Employee during a calendar year, excluding Incentive Compensation, bonuses, special/overtime pay bonuses, commissions, severance payments, Employer Contributions, qualified plan contributions or benefits, expense reimbursements, fringe benefits and all other payments, and prior to reduction for any deferrals under this Plan or any other plan of the Affiliated Groups under Sections 125 or 401(k) of the Code. For purposes of this Plan, Base Salary payable after the last day of a calendar year solely for services performed during the final payroll period described in Section 3401(b) of the Code containing December 31 of such year shall be treated as earned during the subsequent calendar year.

“Beneficiary” or “Beneficiaries” means the person or persons, including one or more trusts, designated by a Participant in accordance with the Plan to receive payment of the remaining balance of the Participant’s Account in the event of the death of the Participant prior to the Participant’s receipt of the entire vested amount credited to his Account.

“Beneficiary Designation Form” means the form established from time to time by the Committee (in a paper or electronic format) that a Participant completes signs and returns to the Committee to designate one or more Beneficiaries.

“Board” means the Board of Directors of the Company.

“Change in Control” means the occurrence of a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code; except that for purposes of a “change in the effective control” of the Company, a 35% threshold shall be substituted for the 30% threshold.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commencement Date” has the meaning given to such term in Section 2.3 hereof.

“Committee” means the committee appointed to administer the Plan. Unless and until otherwise specified, the Committee under the Plan shall be the Company’s Benefit Plans Committee, or its designee.

“Company” means Patheon Pharmaceuticals Inc. and its successors, including, without limitation, the surviving corporation resulting from any merger or consolidation of Patheon Pharmaceuticals Inc. with any other corporation, limited liability company, joint venture, partnership or other entity or entities.

“Deferral Election” means the Participant’s election on a form approved by the Committee to defer a portion of his Base Salary, Incentive Compensation or both in accordance with the provisions of Article III.

“Eligible Employee” has the meaning given to such term in Section 2.1 hereof.

“Employer Contributions” has the meaning given to such term in Section 5.1 hereof.

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Incentive Compensation” means cash or equity compensation payable pursuant to an incentive compensation or retention plan in which an Eligible Employee participates, including but not limited to an annual or long-term incentive compensation plan, whether such plan is now in effect or hereafter established by the Affiliated Group, which the Committee may designate from time to time.

“Installment Calculation Date” has the meaning given to such term in Section 7.1(e).

“In-Service Sub-Account” means each bookkeeping In-Service Sub-Account maintained by the Committee on behalf of each Participant pursuant to Article IV hereof.

“Part One” has the meaning given to such term in Section 11.1 hereof.

“Part Two” has the meaning given to such term in Section 11.1 hereof.

“Participant” means any Eligible Employee who (i) at any time elected to defer the receipt of Base Salary and/or Incentive Compensation in accordance with the Plan (including an amount treated as a Transferred Amount) or received a credit to his Account pursuant to Section 5.1 hereof (including an amount treated as a Transferred Amount), and (ii) in conjunction with his Beneficiary, has not received a complete payment of the vested amount credited to his Account.

“Payment Election” means the Participant’s election on a form approved by the Committee that is filed along with a Deferral Election and that sets forth the time and form of payment of such deferrals as provided in Article IV.

“Performance-Based Compensation” means Incentive Compensation that is based on services performed over a period of at least twelve (12) months and that constitutes “performance-based compensation” within the meaning of Section 409A of the Code. Where a portion of an amount of Incentive Compensation would qualify as Performance-Based Compensation if the portion were the sole amount available under a designated incentive plan, that portion of the award will not fail to qualify as Performance-Based Compensation if that portion is designated separately by the Committee on the Deferral Election or is otherwise separately identifiable under the terms of the designated incentive plan, and the amount of each portion is determined independently of the other.

“Performance Period” means, with respect to any Incentive Compensation, the period of time during which such Incentive Compensation is earned.

“Plan” means this deferred compensation plan, which shall be known as the Patheon Pharmaceuticals Inc. Deferred Compensation Plan.

“Retirement Sub-Account” means the bookkeeping Retirement Sub-Account maintained by the Committee on behalf of each Participant pursuant to Article IV hereof.

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“Separation from Service” means a termination of employment with the Affiliated Group in such a manner as to constitute a “separation from service” as defined under Section 409A of the Code. Upon a sale or other disposition of the assets of the Company or any member of the Affiliated Group to an unrelated purchaser, the Committee reserves the right, to the extent permitted by Section 409A of the Code, to determine whether Participants providing services to the purchaser after and in connection with the purchase transaction have experienced a Separation from Service.

“Specified Employee” means a “specified employee”, as defined in Section 409A of the Code (with such classification to be determined in accordance with the methodology established by the Committee from time to time in its sole discretion) of the Company or any entity which would be considered to be a single employer with the Company under Section 414(b) or Section 414(c) of the Code.

“Sub-Account” means each bookkeeping Retirement Sub-Account and In-Service Sub-Account maintained by the Committee on behalf of each Participant pursuant to the Plan.

“Subsequent Payment Election” has the meaning given to such term in Section 7.1(c) hereof.

“Transferred Amounts” shall have the meaning provided in Section 11.1(b).

“Unforeseeable Emergency” means an “unforeseeable emergency” as defined under Section 409A of the Code.

ARTICLE II

ELIGIBILITY

2.1. Selection by Committee. Participation in the Plan is limited to those employees of the Affiliated Group who are (i) expressly selected by the Committee, in its sole discretion, to participate in the Plan, and (ii) a member of a “select group of management or highly compensated employees,” within the meaning of Sections 201, 301 and 401 of ERISA (the “Eligible Employees”). In lieu of expressly selecting Eligible Employees for Plan participation, the Committee may establish eligibility criteria (consistent with the requirements of paragraph (ii) of this Section) providing for participation of all Eligible Employees who satisfy such criteria. The Committee may at any time, in its sole discretion, change the eligibility criteria for Eligible Employees, or determine that one or more Participants will cease to be an Eligible Employee.

2.2. Enrollment Requirements. As a condition to participation, each selected Eligible Employee shall complete, execute and return to the Committee a Deferral Election, Payment Election and Beneficiary Designation Form no later than the date or dates specified by the Committee. In addition, the Committee may establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary.

2.3. Commencement Date. Each Eligible Employee shall commence participation on the date designated by the Committee (the “Commencement Date”); provided, however, that if an Eligible Employee has not satisfied the applicable enrollment requirements of Section 2.2

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within thirty (30) days of his Commencement Date (or such earlier date as specified by the Committee), such Eligible Employee’s Commencement Date shall be the first day of the calendar year next following the date the Eligible Employee satisfies such enrollment requirements. Any Eligible Employee as of the Effective Date with respect to whom Transferred Amounts are credited hereunder shall have a Commencement Date of January 1, 2008.

2.4. Termination. An Eligible Employee’s entitlement to defer Base Salary and Incentive Compensation shall cease with respect to the calendar year (or the Performance Period, as the case may be) following the calendar year (or the Performance Period, as the case may be) in which he ceases to be an Eligible Employee, although such individual shall continue to be subject to all of the terms and conditions of the Plan for as long as he remains a Participant.

ARTICLE III

DEFERRAL ELECTIONS

3.1. New Participants.

(a) Qualification as a New Participant. This Section 3.1 applies to each Eligible Employee (i) whose Commencement Date occurs after the first day of a calendar year but prior to December 1 of such calendar year (or such earlier or later date as specified by the Committee from time to time), and (ii) who was not previously eligible to participate in the Plan or an “aggregated plan”. For this purpose, where an Eligible Employee has ceased being eligible to participate in the Plan or an “aggregated plan” (other than the accrual of earnings), regardless of whether his entire Account balance has been paid, and subsequently becomes an Eligible Employee, the individual may be treated as being initially eligible to participate in the Plan if the individual had not been eligible to participate in the Plan or an “aggregated plan” at any time during the 24-month period ending on the date the individual becomes an Eligible Employee. For purposes of this Section 3.1(a), an aggregated plan is a plan that is required to be aggregated with the Plan under Section 409A of the Code.

(b) Deferral Election. An Eligible Employee described in Section 3.1(a) may elect to defer his Base Salary earned during such calendar year or his Incentive Compensation earned during a Performance Period that commences in such calendar year by filing a Deferral Election with the Committee in accordance with the following rules:

(i) Timing; Irrevocability. The Deferral Election must be filed with the Committee by, and shall become irrevocable as of, the thirtieth (30th) day following the Participant’s Commencement Date (or such earlier date as specified by the Committee on the Deferral Election).

(ii) Base Salary. The Deferral Election shall only apply to Base Salary earned during such calendar year beginning with the first payroll period that begins immediately after the date that the Deferral Election becomes irrevocable in accordance with Section 3.1(b)(i) hereof.

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(iii) Incentive Compensation. Where a Deferral Election is made in the first year of eligibility but after the commencement of a Performance Period, then, except as otherwise provided in Section 3.2 below, the Deferral Election shall only apply to that portion of Incentive Compensation earned for such Performance Period equal to the total amount of the Incentive Compensation earned during such Performance Period multiplied by a fraction, the numerator of which is the number of days beginning on the day immediately after the date that the Deferral Election becomes irrevocable in accordance with Section 3.1(b)(i) hereof and ending on the last day of the Performance Period, and the denominator of which is the total number of days in the Performance Period.

3.2. Annual Deferral Elections. Unless Section 3.1 applies, each Eligible Employee may elect to defer Base Salary for a calendar year or his Incentive Compensation for a Performance Period, as the case may be, by filing a Deferral Election with the Committee in accordance with the following rules:

(a) Base Salary. The Deferral Election with respect to Base Salary must be filed with the Committee by, and shall become irrevocable as of, December 31 (or such earlier date as specified by the Committee on the Deferral Election) of the calendar year next preceding the calendar year for which such Base Salary would otherwise be earned.

(b) Incentive Compensation. The Deferral Election with respect to Incentive Compensation must be filed with the Committee by, and shall become irrevocable as of, December 31 (or such earlier date as specified by the Committee on the Deferral Election) of the calendar year next preceding the first day of the Performance Period for which such Incentive Compensation would otherwise be earned.

(c) Performance-Based Compensation.

(i) Notwithstanding anything contained in this 3.2 to the contrary, and only to the extent permitted by the Committee, the Deferral Election with respect to Incentive Compensation that constitutes Performance-Based Compensation must be filed with the Committee by, and shall become irrevocable as of, the date that is 6 months before the end of the applicable Performance Period (or such earlier date as specified by the Committee on the Deferral Election), provided that in no event may such Deferral Election be made after such Incentive Compensation has become “readily ascertainable” within the meaning of Section 409A of the Code.

(ii) In order to make a Deferral Election under this Section 3.2(c), the Participant must perform services continuously from the later of the beginning of the Performance Period or the date the performance criteria are established through the date a Deferral Election becomes irrevocable under this Section 3.2(c).

(iii) A Deferral Election made under this Section 3.2(c) shall not apply to any portion of the Performance-Based Compensation that is actually earned by a Participant regardless of satisfaction of the performance criteria.

(iv) To the extent permitted by the Committee, an Eligible Employee described in Section 3.1(a) hereof shall be permitted to make a Deferral Election with respect to

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Performance-Based Compensation in accordance with this Section 3.2(c) provided that the Eligible Employee satisfies all of the other requirements of this Section.

3.3. Amount Deferred. A Participant shall designate on the Deferral Election the portion of his Base Salary, Incentive Compensation or both that is to be deferred in accordance with this Article III. Unless otherwise determined by the Committee, a Participant may defer (in 1% increments) up to 25% of his Base Salary and up to 100% of his Incentive Compensation for any Plan Year; provided, however, that the Participant shall not be permitted to defer less than 1% of each of his Base Salary or his Incentive Compensation during any one calendar year or Performance Period, as the case may be, and any such attempted deferral shall not be effective. To the extent permitted by the Committee, a Participant may specify on the Deferral Election that different percentages or dollar amounts shall apply to bonuses payable under different bonus or incentive compensation plans.

3.4. Duration and Cancellation of Deferral Elections.

(a) Duration. Once irrevocable, a Deferral Election shall only be effective for the calendar year or Performance Period with respect to which such election was timely filed with the Committee. Except as provided in Section 3.4(b) hereof, a Deferral Election, once irrevocable, cannot be cancelled during a calendar year or Performance Period.

(b) Cancellation.

(i) The Committee may, in its sole discretion, cancel a Participant’s Deferral Election where such cancellation occurs by the later of the end of the Participant’s taxable year or the 15th day of the third month following the date the Participant incurs a “disability.” For purposes of this Section 3.4(b)(i), a disability refers to any medically determinable physical or mental impairment resulting in the Participant’s inability to perform the duties of his or her position or any substantially similar position, where such impairment can be expected to result in death or can be expected to last for a continuous period of not less than six months.

(ii) The Committee may, in its sole discretion, cancel a Participant’s Deferral Election due to an Unforeseeable Emergency or a hardship distribution pursuant to Treasury Regulation Section 1.401(k)-1(d)(3).

(iii) If a Participant’s Deferral Election is cancelled with respect to a particular calendar year or Performance Period in accordance with this Section 3.4(b), he may make a new Deferral Election for a subsequent calendar year or Performance Period, as the case may be, only in accordance with Section 3.2 hereof.

ARTICLE IV

SUB-ACCOUNTS; PAYMENT ELECTIONS

4.1. Sub-Accounts. The Committee shall establish and maintain separate Retirement Sub-Accounts and one or more In-Service Sub-Accounts for each Participant. The Committee, in its sole discretion, shall specify the maximum number (including zero) of permitted In-Service Sub-Accounts for each Participant. Amounts credited to a Retirement Sub-Account shall

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commence to be paid following the Participant’s Separation from Service as provided in Article VII. Amounts credited to an In-Service Sub-Account shall commence to be paid in a year specified by the Participant as provided in Section 4.2 and Article VII below.

4.2. Payment Elections. A Participant shall file a Payment Election in accordance with the following rules:

(a) Timing; Irrevocability.

(i) Payment Elections with respect to a deferral of Base Salary or Incentive Compensation shall be filed with the Committee by, and shall become irrevocable as of, the applicable election filing deadline of the related Deferral Election as specified in Article III. In the event an Eligible Employee is eligible to receive credits of Employer Contributions but does not elect to defer Base Salary or Incentive Compensation, then the Payment Election shall be filed with the Committee by, and shall become irrevocable as of, the thirtieth (30th) day following the Eligible Employee’s Commencement Date (or such earlier date as specified by the Committee on the Deferral Election).

(ii) Once irrevocable, a Payment Election may only be changed in accordance with Section 7.1(c) hereof.

(b) Allocation of Deferrals Among Sub-Accounts.

(i) The Payment Election with respect to a deferral of Base Salary or Incentive Compensation shall contain the Participant’s allocation of deferrals of Base Salary and Incentive Compensation among a Retirement Sub-Account and, to the extent permitted by the Committee from time to time, one or more In-Service Sub-Accounts. In the event that a Participant allocates deferrals of Base Salary or Incentive Compensation to an In-Service Sub-Account, the Participant must designate the year in which payments will commence to be paid, which year may not be earlier than two years after the date on which such Payment Election becomes irrevocable. Base Salary or Incentive Compensation that a Participant elects to defer shall be treated as if it were set aside in one or more Sub-Accounts on the date the Base Salary or Incentive Compensation would otherwise have been paid to the Participant.

(ii) To the extent that a Participant does not designate the Sub-Account to which deferrals of Base Salary or Incentive Compensation shall be credited on a Payment Election as provided in this Section 4.2(b) (or such designation does not comply with the terms of the Plan), such deferrals shall be credited to the Participant’s Retirement Sub-Account.

(c) Form of Payment for Sub-Accounts.

(i) A Participant may elect, on the first Payment Election that he delivers to the Committee, to receive his Retirement Sub-Account in cash in a single lump sum or in a number of approximately equal annual installments over a specified period not exceeding ten years. The form of payment designated on that first Payment Election will apply to all amounts credited to the Retirement Sub-Account under the Plan (whether attributable to

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Employer Contributions, deferrals of Base Salary or Incentive Compensation, or earnings on such amounts) unless changed in accordance with the rules of Section 7.1(c).

(ii) A Participant may elect, on the first Payment Election that he delivers to the Committee pursuant to which deferrals of Base Salary or Incentive Compensation are credited to an In-Service Sub-Account, to receive the In-Service Sub-Account in cash in a single lump sum or in a number of approximately equal annual installments over a specified period not exceeding ten years. The form of payment designated on that first Payment Election will apply to all amounts credited to that In-Service Sub-Account under the Plan (whether attributable to Employer Contributions, deferrals of Base Salary or Incentive Compensation, or earnings on such amounts) unless changed in accordance with the rules of Section 7.1(c). A Participant may choose different forms of payment for each separate In-Service Sub-Account in accordance with this Section 4.2(c).

(iii) To the extent that a Participant does not designate the form of payment of a Sub-Account on a Payment Election as provided in this Section 4.2(c) (or such designation does not comply with the terms of the Plan), such Sub-Account shall be paid in cash in a single lump sum.

4.3. Change in Control Election. A Participant may elect, on the first Payment Election that he delivers to the Committee in connection with his or her commencement of participation in the Plan, whether to (i) receive his entire vested Account in cash in a single lump sum following a Change in Control, or (ii) have his Account remain in the Plan upon the occurrence of a Change in Control subject to the terms and conditions of the Plan. If a Participant does not make any election with respect to the payment of his Account upon a Change in Control, then such Participant’s Account shall remain in the Plan upon a Change in Control and shall be subject to the terms and conditions of the Plan.

ARTICLE V

EMPLOYER CONTRIBUTIONS; VESTING

5.1. Employer Contributions. Any entity in the Affiliated Group may, in its sole discretion, provide contributions (“Employer Contributions”) under this Plan with respect to one or more Participants. The amount and type of such Employer Contributions, if any, shall be determined by the contributing entity in its sole discretion. Employer Contributions shall be allocated among the various Sub-Accounts as provided in the Committee’s sole discretion at the time of such contribution.

5.2. Vesting. Each Participant shall at all times have a fully vested and nonforfeitable interest in his Account balance attributable to voluntary deferrals of Base Salary and Incentive Compensation. The portion of each Participant’s Account, if any, attributable to Employer Contributions shall be subject to such vesting schedule as may be determined by the Company or other member of the Affiliated Group from time to time.

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ARTICLE VI

CREDITING OF GAINS, LOSSES AND EARNINGS TO ACCOUNTS

To the extent provided by the Committee in its sole discretion, each Participant’s Account will be credited with gains, losses and earnings based on investment directions made by the Participant in accordance with investment deferral crediting options and procedures established from time to time by the Committee. The Committee specifically retains the right in its sole discretion to change the investment deferral crediting options and procedures from time to time. By electing to defer any amount under the Plan (or by receiving or accepting any benefit under the Plan), each Participant acknowledges and agrees that the Affiliated Group is not and shall not be required to make any investment in connection with the Plan, nor is it required to follow the Participant’s investment directions in any actual investment it may make or acquire in connection with the Plan or in determining the amount of any actual or contingent liability or obligation of the Company or any other member of the Affiliated Group thereunder or relating thereto. Any amounts credited to a Participant’s Account with respect to which a Participant does not provide investment direction shall be credited with gains, losses and earnings as if such amounts were invested in an investment option to be selected by the Committee in its sole discretion.

ARTICLE VII

PAYMENTS

7.1. Date of Payment of Sub-Accounts. Except as otherwise provided in this Article VII, a Participant’s Sub-Accounts shall commence to be paid as follows:

(a) Retirement Sub-Account. The vested amounts credited to a Participant’s Retirement Sub-Account shall commence to be paid in the calendar year following the calendar year of the Participant’s Separation from Service. Such amounts shall be paid in the form of payment selected by the Participant in accordance with Section 4.2(c). Subject to Section 7.2 hereof, the Committee has the discretion to establish administrative procedures for designating the date within the applicable calendar year upon which payments shall commence.

(b) In-Service Sub-Account.

(i) In general, the vested amounts credited to a Participant’s In-Service Sub-Account shall commence to be paid in January of the year specified by the Participant for such Sub-Account in accordance with Section 4.2(b) hereof. Each In-Service Sub-Account shall be paid in the form of payment selected by the Participant with respect to that In-Service Sub-Account in accordance with Section 4.2(c).

(ii) If a Participant’s Separation from Service occurs prior to the complete distribution of one or more In-Service Sub-Accounts, then amounts credited to such In-Service Sub-Accounts shall immediately be transferred to the Participant’s Retirement Sub-Account and payment of the transferred amounts shall thereafter be governed by the terms and conditions applicable to the Retirement Sub-Account, including, without limitation, Section 7.2 hereof.

(c) Subsequent Payment Elections. A Participant may elect on a form provided by the Committee to change the Payment Election with respect to one or more of his

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Sub-Accounts (a “Subsequent Payment Election”). The Subsequent Payment Election shall become irrevocable upon receipt by the Committee and shall be made in accordance with the following rules:

(i) In General. The Subsequent Payment Election may not take effect until at least twelve (12) months after the date on which it is accepted by the Committee. The Subsequent Payment Election most recently accepted by the Committee and that satisfies the requirements of this Section 7.1(c) shall govern the payout of the Sub-Accounts notwithstanding anything contained in Section 7.1(a) or (b) hereof to the contrary.

(ii) Retirement Sub-Account. A Participant may make a one-time election to change the form of payment of his Retirement Sub-Account to a form otherwise permitted under the Plan. Except in the event of the death or Unforeseeable Emergency of the Participant, the payment of such Sub-Account will be delayed until the fifth (5th) anniversary of the first day of the calendar year that the Sub-Account would otherwise have been paid under the Plan if such Subsequent Payment Election had not been made (or, in the case of installment payments, which are treated as a single payment for purposes of this Section, on the fifth (5th) anniversary of the first day of the calendar year that the first installment payment was scheduled to be made).

(iii) In-Service Sub-Account. A Participant may make one or more elections to delay the payment date or change the form of payment of one or more In-Service Sub-Account(s) to a time or form permitted under the Plan. Such Subsequent Payment Election must be filed with the Committee at least twelve (12) months prior to the first day of the calendar year that the Sub-Account would otherwise have been paid under the Plan (or, in the case of installment payments, at least twelve (12) months from the first day of the calendar year that the first installment payment was scheduled to be made). On such Subsequent Payment Election, the Participant must delay the payment date for a period of at least five (5) years after the first day of the calendar year that the Sub-Account would otherwise have been paid under the Plan (or, in the case of installment payments, at least five (5) years from the first day of the calendar year that the first installment payment was scheduled to be made).

(iv) Acceleration Prohibited. The Committee shall disregard any Subsequent Payment Election by a Participant to the extent such election would result in an acceleration of the time or schedule of any payment or amount scheduled to be paid under the Plan within the meaning of Section 409A of the Code.

(d) Small Payments. In the event that a Sub-Account is paid in installments and the balance of the remaining amounts to be paid in installments falls below $25,000 (either as of the date that the installments payments commence to be paid or at any time thereafter), then the remaining installments shall be paid to the Participant in a single lump sum within 30 days.

(e) Calculation of Installment Payments. In the event that a Sub-Account is paid in installments: (i) the first installment shall commence on the date specified in Section 7.1 (subject to Section 7.2), and each subsequent installment shall be paid annually until the Sub-Account has been fully paid; (ii) the amount of each installment shall equal the quotient obtained by dividing the Participant’s vested Sub-Account balance as of the end of the month immediately

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preceding the month of such installment payment (the “Installment Calculation Date”) by the number of installment payments remaining to be paid at the time of the calculation; and (iii) the amount of such Sub-Account remaining unpaid shall continue to be credited with gains, losses and earnings as provided in Article VI hereof. By way of example, if the Participant elects to receive payments of a Sub-Account in equal annual installments over a period of ten (10) years, the first payment shall equal 1/10th of the vested Sub-Account balance, calculated as described in this Section 7.1(e). The following year, the payment shall be 1/9 of the vested Sub-Account balance, calculated as described in this Section 7.1(e).

7.2. Mandatory Six-Month Delay. Except as otherwise provided in Sections 7.6(a), 7.6(b) and 7.6(c), in no event may payments from a Retirement Sub-Account commence prior to the first business day of the seventh month following the Participant’s Separation from Service (or if earlier, upon the Participant’s death).

7.3. Death of Participant.

(a) Each Participant shall file a Beneficiary Designation Form with the Committee at the time the Participant files an initial Deferral Election. A Participant’s Beneficiary Designation Form may be changed at any time prior to his death by the execution and delivery of a new Beneficiary Designation Form. The Beneficiary Designation Form on file with the Committee that bears the latest date at the time of the Participant’s death shall govern. If a Participant fails to properly designate a Beneficiary in accordance with this Section 7.3(a), then his Beneficiary shall be his estate.

(b) In the event of the Participant’s death, the remaining amount of the Participant’s vested Sub-Accounts shall be paid to the Beneficiary or Beneficiaries designated on a Beneficiary Designation Form, in a single lump sum within 30 days of the Participant’s death.

7.4. Change in Control. If a Change in Control occurs and the Participant has elected to receive payment of his vested Account upon a Change in Control in accordance with Section 4.3, then the remaining amount of the Participant’s vested Account shall be paid to the Participant or his Beneficiary within thirty (30) days following the Change in Control, or such later date as required by Section 7.2 hereof.

7.5. Withdrawal Due to Unforeseeable Emergency. A Participant shall have the right to request, on a form provided by the Committee, an accelerated payment of all or a portion of his Account in a lump sum if he experiences an Unforeseeable Emergency. The Committee shall have the sole discretion to determine whether to grant such a request and the amount to be paid pursuant to such request.

(a) Determination of Unforeseeable Emergency. Whether a Participant is faced with an unforeseeable emergency permitting a payment under this Section 7.5 is to be determined based on the relevant facts and circumstances of each case, but, in any case, a payment on account of an Unforeseeable Emergency may not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of deferrals under the Plan. Payments

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because of an Unforeseeable Emergency must be limited to the amount reasonably necessary to satisfy the emergency need (which may include amounts necessary to pay any Federal, state, local, or foreign income taxes or penalties reasonably anticipated to result from the payment). Determinations of amounts reasonably necessary to satisfy the emergency need must take into account any additional compensation that is available if the Plan provides for cancellation of a Deferral Election upon a payment due to an Unforeseeable Emergency. However, the determination of amounts reasonably necessary to satisfy the emergency need is not required to take into account any additional compensation that is available from a qualified plan of the Company as defined in Section 409A of the Code (including any amount available by obtaining a loan under such plan, or that due to the Unforeseeable Emergency is available under another nonqualified deferred compensation plan but has not actually been paid (including a plan that would provide for deferred compensation except due to the application of the effective date provisions of Section 409A of the Code).

(b) Payment of Account. Payment shall be made within thirty (30) days following the determination by the Committee that a withdrawal will be permitted under this Section 7.5, or such later date as may be required under Section 7.2 hereof.

7.6. Discretionary Acceleration of Payments. To the extent permitted by Section 409A of the Code, the Committee may, in its sole discretion, accelerate the time or schedule of a payment under the Plan as provided in this Section. The provisions of this Section are intended to comply with the exception to accelerated payments under Treasury Regulation Section 1.409A-3(j) and shall be interpreted and administered accordingly.

(a) Domestic Relations Orders. The Committee may, in its sole discretion, accelerate the time or schedule of a payment under the Plan to an individual other than the Participant as may be necessary to fulfill a domestic relations order (as defined in Section 414(p)(1)(B) of the Code).

(b) Conflicts of Interest. The Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan to the extent necessary for any Federal officer or employee in the executive branch to comply with an ethics agreement with the Federal government. Additionally, the Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan to the extent reasonably necessary to avoid the violation of an applicable Federal, state, local, or foreign ethics law or conflicts of interest law (including where such payment is reasonably necessary to permit the Participant to participate in activities in the normal course of his or her position in which the Participant would otherwise not be able to participate under an applicable rule).

(c) Employment Taxes. The Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan to pay the Federal Insurance Contributions Act (FICA) tax imposed under Sections 3101, 3121(a), and 3121(v)(2) of the Code, or the Railroad Retirement Act (RRTA) tax imposed under Sections 3201, 3211, 3231(e)(1), and 3231(e)(8) of the Code, where applicable, on compensation deferred under the Plan (the FICA or RRTA amount). Additionally, the Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment, to pay the income tax at source on wages imposed under Section 3401 of the Code or the corresponding withholding provisions

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of applicable state, local, or foreign tax laws as a result of the payment of the FICA or RRTA amount, and to pay the additional income tax at source on wages attributable to the pyramiding Section 3401 of the Code wages and taxes. However, the total payment under this acceleration provision must not exceed the aggregate of the FICA or RRTA amount, and the income tax withholding related to such FICA or RRTA amount.

(d) Limited Cash-Outs. Subject to Section 7.2 hereof, the Committee may, in its sole discretion, require a mandatory lump sum payment of amounts deferred under the Plan that do not exceed the applicable dollar amount under Section 402(g)(1)(B) of the Code, provided that the payment results in the termination and liquidation of the entirety of the Participant’s interest under the Plan, including all agreements, methods, programs, or other arrangements with respect to which deferrals of compensation are treated as having been deferred under a single nonqualified deferred compensation plan under Section 409A of the Code.

(e) Payment Upon Income Inclusion Under Section 409A. Subject to Section 7.2 hereof, the Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan at any time the Plan fails to meet the requirements of Section 409A of the Code. The payment may not exceed the amount required to be included in income as a result of the failure to comply with the requirements of Section 409A of the Code.

(f) Certain Payments to Avoid a Nonallocation Year under Section 409(p). Subject to Section 7.2 hereof, the Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan to prevent the occurrence of a nonallocation year (within the meaning of Section 409(p)(3) of the Code) in the plan year of an employee stock ownership plan next following the plan year in which such payment is made, provided that the amount paid may not exceed 125 percent of the minimum amount of payment necessary to avoid the occurrence of a nonallocation year.

(g) Payment of State, Local, or Foreign taxes. Subject to Section 7.2 hereof, the Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan to reflect payment of state, local, or foreign tax obligations arising from participation in the Plan that apply to an amount deferred under the Plan before the amount is paid or made available to the Participant (the state, local, or foreign tax amount). Such payment may not exceed the amount of such taxes due as a result of participation in the Plan. The payment may be made in the form of withholding pursuant to provisions of applicable state, local, or foreign law or by payment directly to the Participant. Additionally, the Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan to pay the income tax at source on wages imposed under Section 3401 of the Code as a result of such payment and to pay the additional income tax at source on wages imposed under Section 3401 of the Code attributable to such additional wages and taxes. However, the total payment under this acceleration provision must not exceed the aggregate of the state, local, and foreign tax amount, and the income tax withholding related to such state, local, and foreign tax amount.

(h) Certain Offsets. Subject to Section 7.2 hereof, the Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan

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as satisfaction of a debt of the Participant to the Company (or any entity which would be considered to be a single employer with the Company under Section 414(b) or Section 414(c) of the Code), where such debt is incurred in the ordinary course of the service relationship between the Company (or any entity which would be considered to be a single employer with the Company under Section 414(b) or Section 414(c) of the Code) and the Participant, the entire amount of reduction in any of the taxable years of the Company (or any entity which would be considered to be a single employer with the Company under Section 414(b) or Section 414(c) of the Code) does not exceed $5,000, and the reduction is made at the same time and in the same amount as the debt otherwise would have been due and collected from the Participant.

(i) Bona Fide Disputes as to a Right to a Payment. Subject to Section 7.2 hereof, the Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan where such payments occur as part of a settlement between the Participant and the Company (or any entity which would be considered to be a single employer with the Company under Section 414(b) or Section 414(c) of the Code) of an arm’s length, bona fide dispute as to the Participant’s right to the deferred amount.

(j) Plan Terminations and Liquidations. Subject to Section 7.2 hereof, the Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan as provided in Section 9.2 hereof.

(k) Other Events and Conditions. Subject to Section 7.2 hereof, a payment may be accelerated upon such other events and conditions as the Internal Revenue Service may prescribe in generally applicable guidance published in the Internal Revenue Bulletin.

Except as otherwise specifically provided in this Plan, including but not limited to Section 3.4(b), Section 7.1(d), this Section 7.6 and Section 9.2 hereof, the Committee may not accelerate the time or schedule of any payment or amount scheduled to be paid under the Plan within the meaning of Section 409A of the Code.

7.7. Delay of Payments. To the extent permitted under Section 409A of the Code, the Committee may, in its sole discretion, delay payment under any of the following circumstances, provided that the Committee treats all payments to similarly situated Participants on a reasonably consistent basis:

(a) Federal Securities Laws or Other Applicable Law. A Payment may be delayed where the Committee reasonably anticipates that the making of the payment will violate federal securities laws or other applicable law; provided that the delayed payment is made at the earliest date at which the Committee reasonably anticipates that the making of the payment will not cause such violation. For purposes of the preceding sentence, the making of a payment that would cause inclusion in gross income or the application of any penalty provision or other provision of the Code is not treated as a violation of applicable law.

(b) Other Events and Conditions. A payment may be delayed upon such other events and conditions as the Internal Revenue Service may prescribe in generally applicable guidance published in the Internal Revenue Bulletin.

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7.8. Actual Date of Payment. To the extent permitted by Section 409A of the Code, the Committee may delay payment in the event that it is not administratively possible to make payment on the date (or within the periods) specified in this Article VII, or the making of the payment would jeopardize the ability of the Company (or any entity which would be considered to be a single employer with the Company under Section 414(b) or Section 414(c) of the Code) to continue as a going concern. Notwithstanding the foregoing, payment must be made no later than the latest possible date permitted under Section 409A of the Code.

7.9. Discharge of Obligations. The payment to a Participant or his Beneficiary of a his Sub-Account in a single lump sum or the number of installments elected by the Participant pursuant to this Article VII shall discharge all obligations of the Affiliated Group to such Participant or Beneficiary under the Plan with respect to that Sub-Account.

ARTICLE VIII

ADMINISTRATION

8.1. General. The Company, through the Committee, shall be responsible for the general administration of the Plan and for carrying out the provisions hereof. In general, the Committee shall have the full power, discretion and authority to carry out the provisions of the Plan; in particular, the Committee shall have full discretion to (a) interpret all provisions of the Plan, (b) resolve all questions relating to eligibility for participation in the Plan and the amount in the Account of any Participant and all questions pertaining to claims for benefits and procedures for claim review, (c) resolve all other questions arising under the Plan, including any factual questions and questions of construction, (d) determine all claims for benefits, and (e) take such further action as the Company shall deem advisable in the administration of the Plan. The actions taken and the decisions made by the Committee hereunder shall be final, conclusive, and binding on all persons, including the Company, its shareholders, the other members of the Affiliated Group, employees, Participants, and their estates and Beneficiaries.

8.2. Compliance with Section 409A of the Code.

(a) It is intended that the Plan comply with the provisions of Section 409A of the Code, so as to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year that is prior to the taxable year or years in which such amounts would otherwise actually be paid or made available to Participants or Beneficiaries. This Plan shall be construed, administered, and governed in a manner that effects such intent, and the Committee shall not take any action that would be inconsistent with such intent.

(b) Although the Committee shall use its best efforts to avoid the imposition of taxation, interest and penalties under Section 409A of the Code, the tax treatment of deferrals under this Plan is not warranted or guaranteed. Neither the Company, the other members of the Affiliated Group, the Board, nor the Committee (nor its designee) shall be held liable for any taxes, interest, penalties or other monetary amounts owed by any Participant, Beneficiary or other taxpayer as a result of the Plan.

(c) Any reference in this Plan to Section 409A of the Code will also include any proposed, temporary or final regulations, or any other guidance, promulgated with respect to

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such Section 409A by the U.S. Department of Treasury or the Internal Revenue Service. For purposes of the Plan, the phrase “permitted by Section 409A of the Code,” or words or phrases of similar import, shall mean that the event or circumstance shall only be permitted to the extent it would not cause an amount deferred or payable under the Plan to be includible in the gross income of a Participant or Beneficiary under Section 409A(a)(1) of the Code.

ARTICLE IX

AMENDMENT AND TERMINATION

9.1. Amendment. The Company reserves the right to amend, terminate or freeze the Plan, in whole or in part, at any time by action of the Board. Moreover, the Committee may amend the Plan at any time in its sole discretion to ensure that the Plan complies with the requirements of Section 409A of the Code or other applicable law; provided, however, that such amendments, in the aggregate, may not materially increase the benefit costs of the Plan to the Company. In no event shall any such action by the Board or Committee adversely affect any Participant or Beneficiary who has an Account, or result in any change in the timing or manner of payment of the amount of any Account (except as otherwise permitted under the Plan), without the consent of the Participant or Beneficiary, unless the Board or the Committee, as the case may be, determines in good faith that such action is necessary to ensure compliance with Section 409A of the Code. To the extent permitted by Section 409A of the Code, the Committee may, in its sole discretion, modify the rules applicable to Deferral Elections, Payment Elections and Subsequent Payment Elections to the extent necessary to satisfy the requirements of the Uniformed Service Employment and Reemployment Rights Act of 1994, as amended, 38 U.S.C. 4301-4334.

9.2. Payments Upon Termination of Plan. In the event that the Plan is terminated, the amounts allocated to a Participant’s Sub-Accounts shall be paid to the Participant or his Beneficiary on the dates on which the Participant or his Beneficiary would otherwise receive payments hereunder without regard to the termination of the Plan. Notwithstanding the preceding sentence, and subject to Section 7.2 hereof:

(a) Liquidation; Bankruptcy. The Board shall have the authority, in its sole discretion, to terminate the Plan and pay each Participant’s entire Account to the Participant or, if applicable, his Beneficiary within twelve (12) months of a corporate dissolution taxed under Section 331 of the Code or with the approval of a bankruptcy court pursuant to 11 U.S.C. 503(b)(1)(a), provided that the amounts are included in the Participant’s gross income in the latest of the following years (or, if earlier, the taxable year in which the amount is actually or constructively received): (i) the calendar year in which the Plan termination and liquidation occurs; (ii) the first calendar year in which the amount is no longer subject to a substantial risk of forfeiture as defined under Section 409A of the Code; or (iii) the first calendar year in which the payment is administratively practicable.

(b) Change in Control. The Board shall have the authority, in its sole discretion, to terminate the Plan and pay each Participant’s entire Account to the Participant or, if applicable, his Beneficiary pursuant to an irrevocable action taken by the Board within the 30 days preceding or the 12 months following a Change in Control, provided that this paragraph will only apply if all agreements, methods, programs, and other arrangements sponsored by the

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Company (or any entity which would be considered to be a single employer with the Company under Section 414(b) or Section 414(c) of the Code) immediately after the time of the Change in Control event with respect to which deferrals of compensation are treated as having been deferred under a single plan under Section 409A of the Code are terminated and paid with respect to each Participant that experienced the Change in Control event, so that under the terms of the termination and payment all such Participants are required to receive all amounts of compensation deferred under the terminated agreements, methods, programs, and other arrangements within 12 months of the date the Company (or any entity which would be considered to be a single employer with the Company under Section 414(b) or Section 414(c) of the Code) irrevocably takes all necessary action to terminate and liquidate the agreements, methods, programs, and other arrangements.

(c) Discretionary Terminations. The Board shall have the authority, in its sole discretion, to terminate the Plan and pay each Participant’s entire Account to the Participant or, if applicable, his Beneficiary, provided that: (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Company (or any entity which would be considered to be a single employer with the Company under Section 414(b) or Section 414(c) of the Code); (ii) The Company (or any entity which would be considered to be a single employer with the Company under Section 414(b) or Section 414(c) of the Code) terminates and liquidates all agreements, methods, programs, and other arrangements sponsored by the Company (or any entity which would be considered to be a single employer with the Company under Section 414(b) or Section 414(c) of the Code) that would be aggregated with any terminated and liquidated agreements, methods, programs, and other arrangements under Section 409A of the Code if the same Participant had deferrals of compensation under all of the agreements, methods, programs, and other arrangements that are terminated and liquidated; (iii) no payments in liquidation of the Plan are made within 12 months of the date the Board takes all necessary action to irrevocably terminate and liquidate the Plan other than payments that would be payable under the terms of the Plan if the action to terminate and liquidate the Plan had not occurred; (iv) all payments are made within 24 months of the date the Board takes all necessary action to irrevocably terminate and liquidate the Plan; and (v) the Company (or any entity which would be considered to be a single employer with the Company under Section 414(b) or Section 414(c) of the Code) does not adopt a new plan that would be aggregated with any terminated and liquidated plan under Section 409A of the Code if the same Participant participated in both plans, at any time within three years following the date the Board takes all necessary action to irrevocably terminate and liquidate the Plan.

(d) Other Events. The Board shall have the authority, in its sole discretion, to terminate the Plan and pay each Participant’s entire Account to the Participant or, if applicable, his Beneficiary upon such other events and conditions as the Internal Revenue Service may prescribe in generally applicable guidance published in the Internal Revenue Bulletin.

ARTICLE X

MISCELLANEOUS

10.1. Non alienation of Deferred Compensation. Except as permitted by the Plan, no right or interest under the Plan of any Participant or Beneficiary shall, without the written consent of the Company, be (i) assignable or transferable in any manner, (ii) subject to

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alienation, anticipation, sale, pledge, encumbrance, attachment, garnishment or other legal process or (iii) in any manner liable for or subject to the debts or liabilities of the Participant or Beneficiary. Notwithstanding the foregoing, to the extent permitted by Section 409A of the Code and subject to Section 7.6(a) hereof, the Committee shall honor a judgment, order or decree from a state domestic relations court which requires the payment of part or all of a Participant’s or Beneficiary’s interest under this Plan to an “alternate payee” as defined in Section 414(p) of the Code.

10.2. Participation by Employees of Affiliated Group Members. Any member of the Affiliated Group may, by action of its board of directors or equivalent governing body and with the consent of the Board, adopt the Plan; provided that the Board may waive the requirement that such board of directors or equivalent governing body effect such adoption. By its adoption of or participation in the Plan, the adopting member of the Affiliated Group shall be deemed to appoint the Company its exclusive agent to exercise on its behalf all of the power and authority conferred by the Plan upon the Company and accept the delegation to the Committee of all the power and authority conferred upon it by the Plan. The authority of the Company to act as such agent shall continue until the Plan is terminated as to the participating affiliate. An Eligible Employee who is employed by a member of the Affiliated Group and who elects to participate in the Plan shall participate on the same basis as an Eligible Employee of the Company. The Account of a Participant employed by a participating member of the Affiliated Group shall be paid in accordance with the Plan solely by such member to the extent attributable to Base Salary or Incentive Compensation that would have been paid by such participating member in the absence of deferral pursuant to the Plan, unless the Board otherwise determines that the Company shall be the obligor.

10.3. Interest of Participant.

(a) The obligation of the Company and any other participating member of the Affiliated Group under the Plan to make payment of amounts reflected in an Account merely constitutes the unsecured promise of the Company (or, if applicable, the participating members of the Affiliated Group) to make payments from their general assets and no Participant or Beneficiary shall have any interest in, or a lien or prior claim upon, any property of the Affiliated Group. Nothing in the Plan shall be construed as guaranteeing future employment to Eligible Employees. It is the intention of the Affiliated Group that the Plan be unfunded for tax purposes and for purposes of Title I of ERISA. The Company may create a trust to hold funds to be used in payment of its and the Affiliated Group’s obligations under the Plan, and may fund such trust; provided, however, that any funds contained therein shall remain liable for the claims of the general creditors of the Company and the other participating members of the Affiliated Group.

(b) In the event that, in the sole discretion of the Committee, the Company and/or the other members of the Affiliated Group purchases an insurance policy or policies insuring the life of any Participant (or any other property) to allow the Company and/or the other members of the Affiliated Group to recover the cost of providing the benefits, in whole or in part, hereunder, neither the Participants nor their Beneficiaries or other distributees shall have nor acquire any rights whatsoever therein or in the proceeds therefrom. The Company and/or the other members of the Affiliated Group shall be the sole owner and beneficiary of any such policy or policies and, as such, shall possess and may exercise all incidents of ownership therein. A

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Participant’s participation in the underwriting or other steps necessary to acquire such policy or policies may be required by the Company and, if required, shall not be a suggestion of any beneficial interest in such policy or policies to such Participant or any other person.

10.4. Claims of Other Persons. The provisions of the Plan shall in no event be construed as giving any other person, firm or corporation any legal or equitable right as against the Affiliated Group or the officers, employees or directors of the Affiliated Group, except any such rights as are specifically provided for in the Plan or are hereafter created in accordance with the terms and provisions of the Plan.

10.5. Severability. The invalidity and unenforceability of any particular provision of the Plan shall not affect any other provision hereof, and the Plan shall be construed in all respects as if such invalid or unenforceable provision were omitted.

10.6. Governing Law. Except to the extent preempted by federal law, the provisions of the Plan shall be governed and construed in accordance with the laws of the State of Delaware.

10.7. Relationship to Other Plans. The Plan is intended to serve the purposes of and to be consistent with any incentive compensation plan approved by the Committee for purposes of the Plan.

10.8. Successors. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume this Plan. This Plan shall be binding upon and inure to the benefit of the Company and any successor of or to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business and/or assets of the Company whether by sale, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the “Company” for the purposes of this Plan), and the heirs, beneficiaries, executors and administrators of each Participant.

10.9. Withholding of Taxes. Subject to Section 7.6 hereof, to the extent required by the law in effect at the time payments are made, the Affiliated Group may withhold or cause to be withheld from any amounts deferred or payable under the Plan all federal, state, local and other taxes as shall be legally required. The Affiliated Group shall have the right in its sole discretion to (i) require a Participant to pay or provide for payment of the amount of any taxes that the Affiliated Group may be required to withhold with respect to amounts that the Company credits to a Participant’s Account or (ii) deduct from any amount of salary, Incentive Compensation, incentive compensation or other payment otherwise payable in cash to the Participant the amount of any taxes that the Company may be required to withhold with respect to amounts that the Company credits to a Participant’s Account.

10.10. Electronic or Other Media. Notwithstanding any other provision of the Plan to the contrary, including any provision that requires the use of a written instrument, the Committee may establish procedures for the use of electronic or other media in communications and transactions between the Plan or the Committee and Participants and Beneficiaries. Electronic or

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other media may include, but are not limited to, e-mail, the Internet, intranet systems and automated telephonic response systems.

10.11. Headings; Interpretation. Headings in this Plan are inserted for convenience of reference only and are not to be considered in the construction of the provisions hereof. Unless the context clearly requires otherwise, the masculine pronoun wherever used herein shall be construed to include the feminine pronoun.

10.12. Participants Deemed to Accept Plan. By accepting any benefit under the Plan, each Participant and each person claiming under or through any such Participant shall be conclusively deemed to have indicated his acceptance and ratification of, and consent to, all of the terms and conditions of the Plan and any action taken under the Plan by the Board, the Committee or the Company or the other members of the Affiliated Group, in any case in accordance with the terms and conditions of the Plan.

ARTICLE XI

PRIOR PLAN AND TRANSITION RULES

11.1. Effective Date. This amendment and restatement of the Plan is effective as of January 1, 2008 (the “Effective Date”). In order to comply with section 409A of the Code, effective immediately before January 1, 2008, the Plan is divided into two parts, one of which shall be named “Part One” and the other of which shall be named “Part Two”. Part One of the Plan shall be governed by the terms and conditions of the Plan as in effect on October 3, 2004. Part Two of the Plan shall be governed by the terms and conditions set forth herein.

(a) Pre-2005 Deferrals. Any “amounts deferred” in taxable years beginning before January 1, 2005 (within the meaning of Section 409A of the Code) and any earnings thereon shall be governed by the terms of Part One of the Plan, and it is intended that such amounts and the earnings thereon shall be exempt from the application of Section 409A of the Code. Nothing contained herein is intended to materially enhance a benefit or right existing under Part One of the Plan as of October 3, 2004 or add a new material benefit or right to Part One of the Plan. As of January 1, 2008, Part One of the Plan is frozen, and neither the Company, its affiliates nor any individual shall make or permit to be made any additional contributions or deferrals under Part One of the Plan (other than earnings) on or after that date.

(b) Post-2004 Deferrals. Any “amounts deferred” in taxable years beginning on or after January 1, 2005 (within the meaning of Section 409A of the Code) and any earnings thereon shall be governed by the terms and conditions of Part Two of the Plan. To the extent that any of those amounts were deferred under the Plan prior to the Effective Date (the “Transferred Amounts”), then the Committee shall transfer the Transferred Amounts from Part One of the Plan to Part Two of this Plan and credit those amounts to the appropriate Sub-Accounts under Part Two of this Plan, as selected by the Committee in its sole discretion. As a result of such transfer and crediting, all of the Company’s obligations and Participant’s rights with respect to the Transferred Amounts under Part One of the Plan, if any, shall automatically be extinguished and become obligations and rights under Part Two of this Plan without further action.

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11.2. Transition Relief for Payment Elections. A Participant designated by the Committee may, no later than a date specified by the Committee (provided that such date occurs no later than December 31, 2008) elect on a form provided by the Committee to (i) change the date of payment of his Sub-Accounts to a date otherwise permitted under the Plan or (ii) change the form of payment of his Sub-Accounts to a form of payment otherwise permitted under the Plan, without complying with the special timing requirements of Section 7.1(c). This Section 11.2 is intended to comply with Notice 2007-86 and the applicable proposed and final Treasury Regulations issued under Section 409A of the Code and shall be interpreted in a manner consistent with such intent.

EXECUTED at Cincinnati, Ohio on this 18^th day of December, 2008

PATHEON PHARMACEUTICALS INC.
	By:	/s/ Brad Mitchell
Title:		Treasurer

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EX-10.21

Exhibit 10.21

EXECUTION COPY

[PATHEON]

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is entered into and effective as of February 7, 2011 (“Effective Date”), by and between Patheon Pharmaceutical Services, Inc., on behalf of itself and any and all of its subsidiaries (together, the “Company”) and James Mullen (“Executive”).

RECITALS

A. The Company is in the business of providing its customers with pharmaceutical development services, clinical trial manufacturing and packaging, and commercial manufacturing and packaging.

B. The Company wishes to employ Executive to serve as its Chief Executive Officer (“CEO”).

C. Executive wishes to be employed by the Company and to serve in such capacity under the terms and conditions set forth in this Agreement.

D. The Company and Executive agree that the terms, provisions and mutual covenants of this Agreement suffice as adequate consideration for their mutual promises made in this Agreement.

NOW, THEREFORE, the parties agree as follows:

1. Position and Duties; Location.

(a) During the Term (as defined below), Executive shall serve as the CEO of the Company, with such authority, duties and responsibilities as are commensurate with such position and will report directly to the Board of Directors (the “Board”). In addition, the Company shall cause Executive to be appointed as a member of the Board as of the Effective Date. During Executive’s tenure as CEO, the Board will recommend to the Company’s shareholders that Executive be re-elected to the Board. Other than Executive, no other employee or executive will report directly to the Board during the Term.

(b) The location of Executive’s employment will be the Company’s Raleigh/Durham offices, located at 4721 Emperor Boulevard, Suite 200, Durham, North Carolina 27703, USA, or such other location where the principal executive offices may be relocated from time to time by the Board. Executive will be permitted to commute to the Company’s Raleigh/Durham offices from his primary residence in Boston, Massachusetts, provided that Executive will be expected to devote his full working time and attention to his duties as CEO and, except as permitted in Section 2 below, shall render no material business services to any other person or Company. Executive will be expected to be at the Company’s Raleigh/Durham offices or any other offices of the Company or otherwise engaged in the performance of his duties at least five days per week, subject to required business travel, vacation and holidays. For the initial six months of the Term, (i) Executive will be entitled to a

reasonable housing allowance from the Company for the cost of housing arrangements in the Raleigh/Durham area and (ii) the Company will pay for or reimburse travel expenses related to Executive’s weekly commute between Boston and the Raleigh/Durham area.

2. Standards of Performance. Executive will, at all times, faithfully, industriously and to the best of his ability, experience and talents, perform all of the duties required of and from him pursuant to the terms of this Agreement. Notwithstanding the foregoing, Executive is permitted (i) to spend reasonable amounts of time to manage his personal, financial and legal affairs, (ii) to continue to serve on the boards of PerkinElmer, Inc. and Percivia, LLC and (iii) with the Company’s consent, which will not be unreasonably withheld, to serve on civic, charitable, not-for-profit, industry or other for profit corporate boards, provided that such activities, individually and collectively, do not materially interfere with the performance of Executive’s duties hereunder. Executive shall be subject to the Company’s policies, procedures and approval practices, as generally in effect from time to time.

3. Term. The Company hereby agrees to employ Executive, and Executive hereby agrees to be employed by the Company, on the terms and subject to the conditions of this Agreement (including, without limitation, Section 6), for the period commencing on the Effective Date and ending on the second anniversary of the Effective Date. Unless terminated prior to that date, the Term shall be automatically renewed for successive one-year periods on the terms and subject to the conditions of this Agreement (including, without limitation, Section 6), commencing on the second anniversary of the Effective Date, and on each anniversary date thereafter, unless either the Company or Executive gives the other party written notice (in accordance with Section 11 hereof), at least 90 days prior to the end of such initial or extended Term, of its or his intention not to renew this Agreement. Any reference to the “Term” of this Agreement shall include the original term and any extension thereof.

4. Compensation, Benefits and Policies.

(a) Base Salary. As an annual base salary (“Base Salary”), the Company will pay Executive an annual initial Base Salary at a rate of nine hundred thousand dollars ($900,000.00) US, less necessary withholdings and authorized deductions, and payable pursuant to the Company’s regular payroll practices in effect at the time. For the Fiscal Year 2011, Executive’s Base Salary will be prorated from the Effective Date. During the Term, Executive’s Base Salary shall be reviewed annually by the Board, at such time as the salaries of other senior executives of the Company are reviewed generally, and is subject to increase, but not decrease, at the Board’s discretion. If so increased, the Base Salary shall be increased for all purposes of this Agreement.

(b) Paid Time Off and Benefits. Executive will accrue paid time off for vacation at the rate of four (4) weeks for each year of employment, in addition to four (4) floating holidays annually in accordance with the Company’s policies, as may be in effect from time to time, for its senior executives generally. Executive will accrue paid time off for illness pursuant to the Company’s regular policies. In addition, Executive is entitled to (i) participate in any plans regarding benefits of employment, including pension, profit sharing, group health, disability insurance, employee pension and welfare benefit plans for U.S. resident-based senior executives now existing or hereafter established and (ii) participate in any other perquisite program of the Company on a basis at least as favorable as other senior level executives of the Company. Executive may also waive participation under the Company’s medical benefits plans and receive such benefits on a cost-equivalent basis. The Company may, in its sole discretion and from time to time, establish additional senior management benefit plans as it

deems appropriate. Executive understands that any such plans may be modified or eliminated in the Company’s sole discretion in accordance with applicable law, provided that no such modification or elimination shall result in reducing or eliminating any benefits in which Executive’s right has vested.

(c) Reimbursement of Business Expenses. The Company will promptly reimburse to Executive his business expenses in connection with the performance of his duties under this Agreement in accordance with the policies and procedures established by the Company.

(e) Retirement Benefits. Executive will be entitled to participate in the 401(k) retirement plan and any other qualified or nonqualified deferred compensation and retirement plans on a basis at least as favorable as other senior executives of the Company generally, in each case as amended from time to time.

(f) Equity Compensation.

(i) As soon as practicable after the end of the current period during which certain activities with respect to the Company’s shares are prohibited or restricted (any such period, a “Blackout Period”)¹, Executive will be granted (the date of such grant, the “Grant Date”), of an option to acquire 5,000,000 of the Company’s restricted voting shares (the “Initial Grant”). The Initial Grant will have a per-share exercise price equal to the closing price of the underlying shares on the Toronto Stock Exchange on the Grant Date and will vest in five (5) equal installments on each of the first five anniversaries of the Effective Date, in accordance with the Company’s 2011 Amended and Restated Incentive Stock Option Plan. In the event of a Change in Control, Executive’s unvested portion of the Initial Grant will become immediately vested and exercisable and remain in force for the duration of their original term (as described in clause (ii) below).

(ii) All options granted to Executive will expire ten (10) years from the date of grant.

(iii) Executive will be required to comply with the terms of any share ownership guidelines applicable to senior executives of the Company generally, as amended from time to time. The Company will count ownership of any vested Options or other vested equity of the Company (either from the Initial Grant or otherwise) toward meeting any ownership requirements instituted by the Company.

(iv) As used in this Agreement, a “Change in Control” shall mean any of the following events:

(i) any “Person” (within the meaning of Section 13(d)(3) or 14(d)(2)) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than JLL Partners or its affiliates, becomes a Beneficial Owner (within the meaning of Exchange Act Rule 13d-3) of more than fifty (50%) of the voting power of the then outstanding voting securities of Patheon Pharmaceutical Services, Inc. entitled to vote generally in the election of directors;

(ii) there is consummated a merger or consolidation of Patheon Pharmaceutical Services, Inc. or any direct or indirect subsidiary of Patheon Pharmaceutical

¹ The current Blackout Period is expected to end on March 10, 2011.

Services, Inc. with any other company, other than a merger or consolidation that would result in the voting securities of Patheon Pharmaceutical Services, Inc. outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the securities of Patheon Pharmaceutical Services, Inc. or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or

(iii) the stockholders of Patheon Pharmaceutical Services, Inc. approve a plan of complete liquidation or dissolution of the company or there is consummated an agreement for the sale or disposition by Patheon Pharmaceutical Services, Inc. of all or substantially all of its assets.

However, in no event shall a “Change in Control” be deemed to have occurred for purposes of this Agreement solely because Patheon Pharmaceutical Services, Inc. engages in an internal reorganization, which may include a transfer of assets to, or a merger or consolidation with, one or more affiliates.

(g) Sarbanes-Oxley Act Loan Prohibition. To the extent that any Company benefit, program, practice, arrangement or this Agreement would or might otherwise result in Executive’s receipt of an illegal loan (the “Loan”), the Company shall use commercially reasonable efforts to provide Executive with a substitute for the Loan that is lawful and of at least equal value to Executive. If this cannot be done, or if doing so would be significantly more expensive to the Company than making the Loan, the Company need not make the Loan to Executive or provide him a substitute for it.

(h) Executive Performance Bonus. Executive will be eligible to receive an annual bonus (a “Performance Bonus”) with a target bonus equal to 100% of Executive’s Base Salary (based on achieving 100% of the financial and other targets recommended by Executive and approved by the Board). Executive may earn amounts greater than the target bonus pursuant to the terms of the annual incentive targets. These annual incentive targets will be pre-determined by the Compensation Committee of the Board, after consultation with, and recommendation from, Executive from time to time. For Fiscal Year 2011, Executive’s Performance Bonus will be no less than 50% of his Base Salary, pro-rated from the Effective Date. Nothing contained in this Section 4(h) will prevent the Board of Directors from establishing performance goals and compensation targets applicable only to Executive.

5. Termination of Employment.

(a) By Company Without Cause. The Company may terminate Executive’s employment without Cause (as defined below), effective immediately upon written notice (pursuant to Section 11 below) (such date of termination, the “Termination Date”). If the Company delivers to Executive a notice of non-renewal upon the expiration of the Term as provided in Section 3 above, the expiration of the Term shall constitute a termination by the Company without Cause. In the event of such a termination and subject to the other provisions of this Agreement, Executive will be entitled to the following from the Company:

(i) payment of all earned but unpaid compensation (including accrued unpaid vacation) through the effective date of termination, payable on or before the Termination Date;

(ii) reimbursement of expenses incurred on or before the Termination Date in accordance with Section 4(c), above; and

(iii) continued payment for two years of his then current Base Salary rate (less necessary withholdings and authorized deductions) (the “Severance Payments”), payable in equal monthly installments over the two-year period following the Termination Date (the “Severance Period”).

In addition, with respect to the Initial Grant, a pro-rata portion of the shares subject to the Initial Grant in which Executive would have become vested on the following anniversary of the Effective Date will become immediately vested and exercisable on the Termination Date; provided however, that if Executive’s Termination Date is within six (6) months of the Effective Date, 500,000 of the shares subject to the Initial Grant will immediately become vested and exercisable as of the Termination Date (either such amount, the “Equity Severance”).

If Executive is terminated under circumstances in which he becomes entitled to the Equity Severance, Executive will be permitted to exercise his vested options within three (3) months after his Termination Date (the “QT Exercise Period”); provided however, that if Executive would be prevented from selling his shares during the QT Exercise Period due to law or applicable Company policy preventing the sale of shares (a “Blackout Period”) that occurs or is ongoing during the QT Exercise Period, the QT Exercise Period shall be extended to a date that is ten (10) days after the last day of the Blackout Period.

The Severance Payments and the Equity Severance shall be referred to collectively as the “Severance Benefits”. Executive shall not receive the Severance Benefits unless Executive executes the release attached hereto as Schedule A (the “Release”), and the same becomes effective pursuant to its terms and is not revoked. In addition, Executive’s rights to the Severance Benefits are subject to Executive’s continued compliance with the provisions of Section 6 below.

(b) By Company With Cause. The Company may terminate Executive’s employment for Cause at any time and without prior notice, written or otherwise, effective immediately upon notice. As used in this Agreement, “Cause” shall mean the determination, in good faith, by the Board, after notice to Executive, that one or more of the following events has occurred:

(i) Executive has willfully failed to perform his material duties, and such failure has not been cured after a period of thirty (30) days’ notice from the Company;

(ii) any reckless or grossly negligent act by Executive having the effect of injuring the interest, business or reputation of the Company, or any of its parent, subsidiaries or affiliates in any material respect;

(iii) Executive’s commission of any felony (including entry of a nolo contendere plea);

(iv) any misappropriation or embezzlement of the property of the Company, or any of its parents or affiliates; or

(v) a breach of any material provision of the Employment Agreement by Executive, which breach, if curable, remains uncured for a period of thirty (30) days after receipt by Executive of written notice from the Company of such breach, which notice shall contain the specific reasonable cure requested by the Company.

In the event Executive is terminated for Cause, Executive will be entitled only to the Accrued Benefits through the Termination Date. The Company will have no further obligation to pay any compensation of any kind (including, without limitation, any bonus or portion of a bonus that otherwise may have become due and payable to Executive with respect to the year in which such termination date occurs), or severance payment of any kind, nor will the Company have any obligation to make any payment in lieu of notice. The definition of Cause set forth in this Agreement shall govern for purposes of Executive’s equity compensation and any other compensation containing such a concept. For purposes of this agreement, Accrued Benefits shall mean (i) payment of Base Salary through the Termination Date, (ii) payment of any Performance Bonus for performance periods completed prior to the Termination Date (provided that Executive is not terminated for Cause or does resign without Good Reason) and (iii) any payments or benefits under the Company’s benefit plans that are earned or accrued prior to the Termination Date.

(c) Incapacity or Death.

(i) If a healthcare provider selected by the Company’s Board or its insurers determines Executive has become unable, due to physical or mental illness or injury, to perform the essential duties of his position for more than twelve (12) weeks, whether or not the days of disability are consecutive, in any twelve (12) month period during this Agreement with or without reasonable accommodation (“Incapacity”), the Company has the right to terminate Executive’s employment on fifteen (15) days’ written notice. In the event of termination for Incapacity, Executive will be entitled to receive the Accrued Benefits and, subject to Executive (or his legal representative on his behalf) executing the Release and the same becoming effective pursuant to its terms and not revoked, the Equity Severance; and

(ii) Executive’s employment pursuant to this Agreement shall be immediately terminated without notice by the Company upon the death of Executive. If Executive dies while actively employed pursuant to this Agreement (or if Executive’s employment is terminated (a) by the Company without Cause, (b) by Executive for Good Reason (as defined below), or (c) due to Executive’s Incapacity, but Executive dies prior to the date that is seven (7) days after the day the Company presents him with the Release), his estate or designated beneficiaries will be entitled to receive from the Company the Accrued Benefits and subject to the trustee of Executive’s estate or Executive’s designated beneficiaries signing and executing a release of all claims against the Company and the same becoming effective pursuant to its terms and not revoked, the Equity Severance.

(d) Resignation for Good Reason. Executive may terminate this Agreement for Good Reason (as defined below) by giving written notice of such termination, which termination will become effective on the thirtieth (30th) day following receipt by the Company. As used in this Agreement, “Good Reason” shall mean the occurrence of any of the following events without the prior consent of Executive:

(i) removal of Executive from Executive’s position;

(ii) material reduction by the Company of Executive’s duties or responsibilities or the assignment to Executive of duties materially inconsistent with such position; or

(iii) material breach by the Company of the Employment Agreement, which breach remains uncured for a period of thirty (30) days after receipt by the Company of written notice from Executive.

No termination for Good Reason shall be effective until (a) Executive has given the Company written notice (pursuant to Section 11 below) within sixty (60) days of Executive becoming aware of the initial occurrence of any of the foregoing specifying the event or condition constituting the Good Reason (the date of such notice, the “Measurement Date”), and the specific reasonable cure requested by Executive (b) the Company has failed to cure the occurrence within thirty (30) days of the Measurement Date, and (c) Executive resigns within three (3) months following the initial occurrence. Further, Executive shall not have “Good Reason” under clauses (i) – (iii) above if, on the Measurement Date, (x) grounds exist for a termination by the Company for Cause or (y) Executive has already given the Company notice of (1) non-renewal of his Agreement at the end of the Term pursuant to Section 3 above or (2) his intention to resign without Good Reason. In the event of a termination for Good Reason, Executive will be entitled to the Accrued Benefits and, subject to the same conditions as are set forth in the final paragraph of Section 5(a), the Severance Benefits.

(e) Voluntary Resignation without Good Reason. Executive may terminate this Agreement without Good Reason effective on sixty (60) day’s written notice (pursuant to Section 11 below), unless the Company in its sole discretion accepts the resignation earlier. In the event that Executive resigns without Good Reason as defined above in Section 5(d), Executive will be entitled only to the Accrued Benefits through the Termination Date. Executive’s equity awards (including the Initial Grant) shall be treated in accordance with their terms. The Company will have no further obligation to pay any compensation of any kind (including, without limitation, any bonus or portion of a bonus that otherwise may have become due and payable to Executive with respect to the year in which such Termination Date occurs), or severance payments of any kind.

(f) Resignation from All Positions. Notwithstanding any other provision of this Agreement, upon the termination of Executive’s employment for any reason, unless otherwise requested by the Board, Executive shall immediately resign as of the Termination Date from all positions that he holds or has ever held with the Company, including his position as a member of the Board (and with any other entities with respect to which the Company has requested Executive to perform services). Executive hereby agrees to execute any and all documentation to effectuate such resignations upon request by the Company, but he shall be treated for all purposes as having so resigned upon termination of his employment, regardless of when or whether he executes any such documentation.

(i) Effect of Accrued Benefits and Severance Benefits Payments. Executive shall not be entitled to any other severance pay or benefits under any severance plan, program or policy of the Company or any member of the Company, unless otherwise specifically provided therein in a specific reference to this Agreement.

6. Proprietary Information Obligations.

(a) Proprietary Information, Confidentiality and Non-Disparagement. Both before and during the term of Executive’s employment, Executive will have access to and become acquainted with Company confidential and proprietary information (together “Proprietary Information”), including but not limited to information or plans concerning the Company’s customer relationships; personnel; sales, marketing and financial operations and methods; trade secrets, formulae, devices; secret inventions; processes; and other compilations of information, records, and specifications. As a result, Executive confirms that he is bound by the provisions of and agrees to execute, effective as of the Effective Date, the Company’s customary confidentiality agreement (the “Confidentiality Agreement”). Executive also agrees not to criticize, denigrate, or otherwise disparage the Company, or any of its directors, officers, products, processes, experiments, policies, practices, standards of business conduct, or areas or techniques of research. The Company agrees to use its reasonable commercial efforts not to permit, authorize or condone denigrating or disparaging statements about Executive in any press release or other formally released announcement. Factually accurate statements in legal or public filings shall not violate this provision. In addition, nothing in this Section 6(a) shall prohibit Executive or the Company or the Board, or any of their employees or members from complying with any lawful subpoena or court order or taking any other actions affirmatively authorized by law (including testifying truthfully in any legal proceeding).

(b) Non-Solicitation of Customers and Other Business Partners. Executive recognizes that by virtue of his employment with the Company, he will be introduced to and involved in the solicitation and servicing of existing customers and other business partners of the Company and new customers and business partners obtained by the Company during his employment. Executive understands and agrees that all efforts expended in soliciting and servicing such customers and business partners shall be for the benefit of the Company. In addition, Executive agrees that, for a period beginning on the Effective Date and ending two (2) years after his Termination Date, regardless of the reason for such termination, Executive shall not use any Proprietary Information to, directly or indirectly (i) solicit, direct, interfere with, or entice away from the Company any existing customer, business partner, licensee, licensor, vendor, contractor or distributor of the Company or (ii) solicit, encourage or otherwise direct any customer or other business partner to expand its business with a Competitor, without the prior written consent of the Board.

(c) Non-Solicitation of Employees. Executive recognizes the substantial expenditure of time and effort which the Company devotes to the recruitment, hiring, orientation, training and retention of its employees. Accordingly, Executive agrees that, for a period beginning on the Effective Date and ending two (2) years after his Termination Date, regardless of the reason for such termination, Executive shall not intentionally use any Proprietary Information, directly for himself, or on behalf of any other person or entity, to knowingly solicit, offer employment to, hire or otherwise retain the services of any salaried employee of the Company. For purposes of the foregoing, “employee of the Company” shall include any person who was an employee of the Company at any time within six (6) months prior to the prohibited conduct.

(d) Non-Competition. Executive recognizes that his loyal and complete fulfillment of employment subsequent to his employment with the Company may inevitably require him to reveal or utilize the Company’s Proprietary Information. Accordingly, for a period beginning on the Effective Date and ending two (2) years after his Termination Date, regardless of the reason for such termination, Executive shall not in any manner, directly or indirectly, compete with the Company by (a) becoming an officer, agent, employee, partner, director, consultant, independent contractor of a Competitor, or (b) acquiring an ownership interest in a

Competitor, provided that Executive may, for investment purposes, own not more than 1% of the outstanding stock of any class of a Competitor that is listed on a recognized stock exchange or traded in the over-the-counter market in Canada or the United States, without the Company’s written consent if the CEO reasonably determines that Executive’s subsequent competition would compromise the Company’s Proprietary Information. For purposes of this Agreement, the term “Competitor” means any person or entity that is primarily or principally engaged in the business of contract drug manufacturing or contract drug development in Canada, the United States (including the Commonwealth of Puerto Rico), India, Europe or other geographic location in which the Company is doing business at the time.

(e) Company Property and Materials.

(i) All files, records, documents, computer-recorded or electronic information, drawings, specifications, equipment, and similar items relating to Company business, whether prepared by Executive or otherwise coming into his possession, will remain the Company’s exclusive property and will not be removed from Company premises under any circumstances whatsoever without the Company’s prior written consent, except when, and only for the period, necessary to carry out Executive’s duties hereunder;

(ii) In the event of termination of Executive’s employment for any reason, Executive will promptly deliver to the Company all Company equipment (including, without limitation, any cellular phones, beeper/pagers, computer hardware and software, fax machines and other tools of the trade) and all originals and copies of all documents, including without limitation, all books, customer lists, forms, documents supplied by customers, records, product lists, writings, manuals, reports, financial documents and other documents or property in Executive’s possession or control, which relate to the Company’s business in any way whatsoever, and in particular to customers of the Company, or which may be considered to constitute or contain Proprietary Information as defined above, and Executive will neither retain, reproduce, nor distribute copies thereof (other than copies of Executive’s rolodex or similar electronic or hardcopy address and telephone directories).

(f) Remedies for Breach. Executive acknowledges that any breach by Executive of the covenants set forth in either this Section 6 or the Confidentiality Agreement (collectively, the “Restrictive Covenants”) would cause the Company irreparable injury and damage for which monetary damages are inadequate. Accordingly, in the event of a breach or a threatened breach of the Restrictive Covenants by Executive, Executive agrees that (i) the Company will be entitled to seek an injunction restraining such breach and (ii) the Company’s obligation to pay any unpaid portion of the Severance Benefits or other benefits as set forth in Sections 5(a) and (d) of this Agreement will be extinguished. Nothing contained herein will be construed as prohibiting the Company from pursuing any other remedy available to the Company for such breach or such threatened breach. Executive agrees not to circumvent the spirit of these restrictions by attempting to accomplish indirectly what Executive is otherwise restricted from doing directly.

(g) Reasonableness and Revision. Executive has carefully read and considered the restrictions and limitations set forth in the Restrictive Covenants and agrees and acknowledges that the Restrictive Covenants (i) are reasonable and necessary for the protection of the Company’s business interests and goodwill due to the uniqueness of Executive’s services and the confidential nature of the information he will possess and (ii) do not prevent Executive from working or from supporting his family and obligations. Moreover, Executive agrees that the geographic restriction on competitive activities by Executive is

reasonable, given the global nature of the Company’s business and Executive’s role in that business. If, at the time of enforcement of this Section 6 and/or the Confidentiality Agreement, a court or other tribunal holds that the Restrictive Covenants are in whole or in part unreasonable under circumstances then existing, the parties agree that (i) the maximum period or scope reasonable under such circumstances will be substituted for the stated period or scope and that the court or other tribunal shall be authorized and directed by the parties to revise the restrictions contained herein to cover the maximum period or scope permitted by law and (ii) the remaining provisions of the Restrictive Covenants shall be enforced as written.

(h) Section 6 Acknowledgement. Executive agrees and acknowledges that the promises and obligations made by the Company in this Agreement (specifically including, but not limited to, the payments and benefits provided for under Section 5) constitute sufficient consideration for the Restrictive Covenants. Executive further acknowledges that it is not the Company’s intention to interfere in any way with his employment opportunities, except in such situations where the same conflict with the legitimate business interests of the Company. Executive agrees that he will notify the Company in writing if he has, or reasonably should have, any questions regarding the applicability of this Section 6.

(i) Section 6 Survival. Subject to any limits on applicability contained therein, the Restrictive Covenants shall survive and continue in full force in accordance with its terms notwithstanding any expiration or termination of this Agreement.

7. Interpretation, Governing Law and Exclusive Forum. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of New York (excluding any that mandate the use of another jurisdiction’s laws). Any arbitration (unless otherwise mutually agreed), litigation or similar proceeding with respect to such matters only may be brought within New York, and all parties to this Agreement consent to New York’s jurisdiction.

8. Entire Agreement. This Agreement, together with Schedule A attached hereto and the Confidentiality Agreement referred to herein, when executed by both parties shall constitute the entire agreement pertaining to Executive’s employment with the Company and supersedes all prior agreements, understandings, term sheets, negotiations and discussions, whether written or oral, pertaining to Executive’s employment, and there are no representations, undertakings or agreements of any kind between the parties respecting the subject matter hereof except those contained herein.

9. Severability. In the event that one or more of the provisions contained in this Agreement are held to be invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such holding shall not impair the validity, legality or enforceability of the remaining provisions herein.

10. Successors and Assigns. This Agreement shall be binding upon, and shall inure to the benefit of, Executive and his estate, but Executive may not assign or pledge this Agreement or any rights arising under it, except to the extent permitted under the terms of the benefit plans in which he participates. No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company shall require any successor (whether direct or indirect, by purchase, merger, reorganization, sale, transfer of stock, consideration or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no succession had taken

place. As used in this Agreement, “Company” means the Company as hereinbefore defined and any successor to its business and/or assets (by merger, purchase or otherwise as provided in this Section 10) which executes and delivers the agreement provided for in this Section 10 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. In the event that any successor refuses to assume the obligations hereunder, the Company as hereinbefore defined shall remain fully responsible for all obligations hereunder.

11. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be given by hand delivery, electronic mail, facsimile, telecopy, overnight courier service, or by United States certified or registered mail, return receipt requested. Each such notice, request, demand or other communication shall be effective (i) if delivered by hand or by overnight courier service, when delivered at the address specified in this Section 11; (ii) if given by electronic mail, facsimile or telecopy, when such electronic mail, facsimile or telecopy is transmitted to the electronic mail address or facsimile or telecopy number specified in this Section 11 and confirmation is received if during normal business hours on a business day, and otherwise, on the next business day; and (iii) if given by certified or registered mail, three (3) days after the mailing thereof. Notices shall be addressed to the parties as follows (or at such other address, email address or fax number as either party may from time to time specify in writing by giving notice as provided herein):

If to the Company:         Patheon Pharmaceutical Services, Inc.

Human Resources

Patheon Pharmaceutical Services Inc.

P.O. Box 110145

Research Triangle Park, North Carolina 27709-9998

If to Executive:             James Mullen

636 Charles River St.

Needham, MA 02492

12. Indemnification. The Company will indemnify Executive to the fullest extent permitted by the laws of the State of New York.

13. Dispute Resolution. The parties agree that all disputes, claims or controversies between them and between Executive and any of the Company’s affiliated entities and the successor of all such entities, including any dispute, claim or controversy arising from or otherwise in connection with this Agreement and/or Executive’s employment with the Company, will be resolved as follows:

(a) Prior to initiating any other proceeding, the complaining party will provide the other party with a written statement of the claim identifying any supporting witnesses or documents and the requested relief. The responding party shall within forty-five (45) days furnish a statement of the relief, if any, that it is willing to provide, and identify supporting witnesses or documents. The parties then shall meet to attempt informal resolution.

(b) If the parties cannot informally resolve the dispute between them, any controversy or claim between Executive and the Company and any of its current or former directors, officers and employees, including any arising out of or relating to this Agreement or breach thereof, shall be settled by final and binding arbitration in the state of New York, or

elsewhere as mutually agreed by the parties, by a single arbitrator pursuant to the Employment Arbitration Rules & Procedures of Judicial Arbitration & Mediation Services (“JAMS”), unless the parties to the dispute agree to another arbitration service or independent arbitrator. The parties may conduct discovery to the extent permitted in a court of law; the arbitrator will render an award together with a written opinion indicating the bases for such opinion; and the arbitrator will have full authority to award all remedies that would be available in court. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Each party shall bear its own attorney’s fees and costs, unless the claim is based on a statute that provides otherwise. Where required by law, the Company will pay the arbitrator’s fees and any administrative charges of the arbitration service, except that if Executive initiates the claim, he will pay a portion of the administrative charges equal to the amount he would have paid to initiate the claim in a court of general jurisdiction.

(c) EXECUTIVE AND THE COMPANY AGREE THAT THIS ARBITRATION PROCEDURE WILL BE THE EXCLUSIVE MEANS OF REDRESS FOR ANY DISPUTES RELATING TO OR ARISING FROM EXECUTIVE’S EMPLOYMENT WITH THE COMPANY OR TERMINATION THEREFROM, INCLUDING DISPUTES OVER UNPAID WAGES, BREACH OF CONTRACT OR TORT, VIOLATION OF PUBLIC POLICY, RIGHTS PROVIDED BY FEDERAL, STATE OR LOCAL STATUTES, REGULATIONS, ORDINANCES, AND COMMON LAW, LAWS THAT PROHIBIT DISCRIMINATION BASED ON ANY PROTECTED CLASSIFICATION, AND ANY OTHER STATUTES OR LAWS RELATING TO AN EXECUTIVE’S RELATIONSHIP WITH THE COMPANY. THE FOREGOING NOTWITHSTANDING, CLAIMS FOR WORKERS’ COMPENSATION BENEFITS OR UNEMPLOYMENT INSURANCE, OR ANY OTHER CLAIMS WHERE MANDATORY ARBITRATION IS PROHIBITED BY LAW, ARE NOT COVERED BY THIS ARBITRATION PROVISION. THE PARTIES EXPRESSLY WAIVE THE RIGHT TO A JURY TRIAL, AND AGREE THAT THE ARBITRATOR’S AWARD SHALL BE FINAL AND BINDING ON BOTH PARTIES. THIS ARBITRATION PROVISION IS TO BE CONSTRUED AS BROADLY AS IS PERMISSIBLE UNDER APPLICABLE LAW.

14. Representations. Each person executing this Agreement hereby represents and warrants on behalf of himself and of the entity/individual on whose behalf he is executing the Agreement that he is authorized to represent and bind the entity/individual on whose behalf he is executing the Agreement. Executive specifically represents and warrants to the Company that he reasonably believes (a) he is not under any contractual or other obligations, including but not limited to any employment contract, non-competition or other covenants or restrictions, that would prevent, limit or impair Executive’s ability to commence work on the Effective Date or otherwise limit his ability to perform all responsibility and obligations of the position of CEO, (b) that entering into this Agreement will not result in a breach of any other agreement to which he is a party, and (c) that he will not knowingly use any trade secret, confidential information, or other intellectual property right of any former employer or any other person to whom Executive has an obligation of confidentiality in the performance of his duties hereunder and that the Company has not requested the disclosure by Executive of any such information.

15. Amendments and Waivers. No provisions of this Agreement may be modified, waived, or discharged except by a written document signed by Executive and a duly authorized Company officer. Thus, for example, promotions, commendations, and/or bonuses shall not, by themselves, modify, amend, or extend this Agreement. A waiver of any conditions or provisions of this Agreement in a given instance shall not be deemed a waiver of such conditions or provisions at any other time.

16. Taxes.

(a) Withholdings. The Company may withhold from any compensation and benefits payable under this Agreement all federal, state, city and other taxes or amounts as shall be determined by the Company to be required to be withheld pursuant to applicable laws, or governmental regulations or rulings. Executive shall be solely responsible for the satisfaction of any taxes (including employment taxes) imposed on employees and penalty taxes on nonqualified deferred compensation.

(b) Net Proceeds Maximization. Notwithstanding any provision of this Agreement to the contrary, if all or any portion of the payments or benefits received or realized by Executive pursuant to this Agreement either alone or together with other payments or benefits that Executive receives or realizes or is then entitled to receive or realize from the Company or any of its affiliates would constitute an “excess parachute payment” within the meaning of Section 280G of the Internal Revenue Code (the “Code”), the payments or benefits provided to Executive under this Agreement will be reduced by reducing the amount of payments or benefits payable to Executive to the extent necessary so that no portion of Executive’s payments or benefits will be subject to the excise tax imposed by Section 4999 of the Code. Notwithstanding the foregoing, a reduction will be made under the previous sentence only if, by reason of that reduction, Executive’s net after tax benefit exceeds the net after tax benefit he would realize if the reduction were not made. For purposes of this paragraph, “net after tax benefit” means the sum of (i) the total amount received or realized by Executive pursuant to this Agreement that would constitute a “parachute payment” within the meaning of Section 280G of the Code, plus (ii) all other payments or benefits that Executive receives or realizes or is then entitled to receive or realize from the Company and any of its affiliates that would constitute a “parachute payment” within the meaning of Section 280G of the Code and any corresponding and applicable state law provision, less (iii) the amount of federal or state income taxes payable with respect to the payments or benefits described in (i) and (ii) above calculated at the maximum marginal individual income tax rate for each year in which payments or benefits are realized by Executive (based upon the rate in effect for that year as set forth in the Code at the time of the first receipt or realization of the foregoing), less (iv) the amount of excise taxes imposed with respect to the payments or benefits described in (i) and (ii) above by Section 4999 of the Code. All determinations and calculations made in this paragraph shall be made by an independent accounting firm (the “Accounting Firm”) selected by the Company prior to the Change in Control. The Accounting Firm shall be a nationally recognized United States public accounting firm which has not, during the two (2) years preceding the date of its selection, acted in any way on behalf of (x) the Company or any affiliate thereof or (y) Executive.

(c) Section 409A Compliance.

(i) Section 409A Six-Month Delay Rule. If any amounts that become due under this Agreement on account of Executive’s termination of employment constitute “nonqualified deferred compensation” within the meaning of Code section 409A (“Section 409A”), payment of such amounts shall not commence until Executive experiences a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h). If, at the time of Executive’s separation from service, Executive is a “specified employee” (under Section 409A), then to the extent necessary to comply with Section 409A, any such amounts will not be paid until after the first business day of the seventh (7th) month after Executive’s separation from service (the “409A Suspension Period”). Within fourteen (14) calendar days after the end of the 409A Suspension Period, Employee shall be paid a lump sum payment in cash equal to any payments delayed because of the preceding sentence, together with interest

on them for the period of delay at a rate equal to the average prime interest rate published in the Wall Street Journal on any day chosen by the Company during that period. Thereafter, Executive shall receive any remaining benefits as if there had not been an earlier delay.

(ii) Interpretation. This Agreement is intended to comply with or be exempt from Section 409A, and shall be interpreted and construed by the Company in a manner that the Company reasonably believes, after consultation with Executive, establishes an exemption from (or otherwise conforms them to) the requirements of Section 409A. To the extent that any regulations or other guidance issued under Section 409A (after application of the previous sentence) would result Executive being subject to the payment of interest or any additional tax under Section 409A, the parties agree, to the extent reasonably possible, to amend this Agreement in order to avoid the imposition of any such interest or additional tax under Section 409A, which such amendment shall have the minimum economic effect necessary and be reasonably determined in good faith by Executive and the Company, provided it does not increase the overall expense to the Company in providing the benefits.

Although the Company shall use its best efforts to avoid the imposition of taxation, interest and penalties under Section 409A of the Code, the tax treatment of the benefits provided under this Agreement is not warranted or guaranteed. Neither the Company nor its directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by Executive or other taxpayer pursuant to Section 409A as a result of the Agreement. Any reference in this Agreement to Section 409A of the Code will also include any proposed, temporary or final regulations, or any other guidance, promulgated with respect to such Section 409A by the U.S. Department of Treasury or the Internal Revenue Service.

17. U.S. Citizenship and Immigration Services. Executive agrees to timely file all documents required by the Department of Homeland Security to verify his identity and lawful employment in the United States.

18. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute the same instrument.

19. Legal Fees. The Company will pay up to $10,000 of any reasonable legal fees and expenses Executive incurs during the negotiation of this Agreement, provided that such fees and expenses are supported by reasonable supporting documentation.

20. Executive’s Acknowledgement.

EXECUTIVE ACKNOWLEDGES THAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE COMPANY AND HIM RELATING TO THE SUBJECTS COVERED IN THIS AGREEMENT ARE CONTAINED IN IT (INCLUDING THE AGREEMENTS SET FORTH AS EXHIBITS) AND THAT HE HAS ENTERED INTO THIS AGREEMENT VOLUNTARILY AND NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE COMPANY OTHER THAN THOSE CONTAINED IN THIS AGREEMENT.

EXECUTIVE FURTHER ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT (INCLUDING THE AGREEMENTS SET FORTH AS EXHIBITS), THAT HE UNDERSTANDS ALL OF SUCH AGREEMENTS, AND THAT HE HAS BEEN GIVEN THE OPPORTUNITY TO DISCUSS SUCH AGREEMENTS WITH HIS PRIVATE LEGAL COUNSEL

AND HAS AVAILED HIMSELF OF THAT OPPORTUNITY TO THE EXTENT HE WISHED TO DO SO. EXECUTIVE UNDERSTANDS THAT THE DISPUTE RESOLUTION PROVISIONS OF THIS AGREEMENT GIVE UP THE RIGHT TO A JURY TRIAL ON MATTERS COVERED BY THEM.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

“Executive”

/s/ James Mullen

James Mullen

“Company”

Patheon Pharmaceutical Services, Inc.

/s/ Eric Evans

By: Eric Evans

Title: Chief Financial Officer

[PATHEON]

SCHEDULE A

TO

EMPLOYMENT AGREEMENT WITH

JAMES MULLEN

GENERAL RELEASE

This General Release (“Release”), dated as of                     , 20    confirms the following understandings and agreements between James Mullen, an individual (“Executive”), and Patheon Pharmaceutical Services, Inc., on behalf of itself and all of its affiliates and subsidiaries (collectively, the “Company”).

In consideration of the promises set forth in that certain employment agreement between Executive and the Company, effective as of February 7, 2011 (the “Employment Agreement”), Executive agrees as follows:

1. Release by Executive.

(a) For and in consideration of the severance payments and benefits described in the Employment Agreement (the “Consideration”), which are being provided in exchange for your execution of this Release and would not be provided absent your execution of this Release, Executive, for himself and his heirs, executors, administrators, assigns, successors and agents (collectively, the “Executive’s Affiliates”) hereby fully and without limitation releases and forever discharges the Company and each of its agents, representatives, shareholders, owners, officers, directors, employees, consultants, attorneys, auditors, accountants, investigators, affiliates, successors and assigns (collectively, the “Company Releasees”), both individually and collectively, from any and all waivable rights, claims, demands, liabilities, actions, causes of action, damages, losses, costs, expenses and compensation, of whatever nature whatsoever, known or unknown, fixed or contingent, which Executive or any of Executive’s Affiliates has or may have or may claim to have against the Company Releasees by reason of any matter, cause, or thing whatsoever, from the beginning of time to the date Executive signs this Release (“Claims”), arising out of, based upon, or relating to his employment or the termination of his employment with the Company and/or his service as an officer of any of the Company Releasees, and/or any agreement or compensation arrangement between Executive and any of the Company Releasees, to the maximum extent permitted by law.

(b) The Claims released by Executive include, but are not limited to, any Claims arising out of or based on: Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the National Labor Relations Act, the Equal Pay Act, the Age Discrimination in Employment Act (“ADEA”), the Civil Rights Act of 1991, the Family Medical Leave Act, Sections 1981 through 1988 of Title 42 of the United States Code, the Employee Retirement Income Security Act of 1974 (“ERISA”) (except for any vested benefits under any tax qualified benefit plan), the Immigration Reform and Control Act, the Worker Adjustment and Retraining

Notification Act, the Occupational Safety and Health Act, the Fair Credit Reporting Act, and the Sarbanes-Oxley Act of 2002 (in each case as the same may be amended from time to time); fraud, misrepresentation, negligence, defamation, infliction of emotional distress or other tort, common law, breach of contract (whether express or implied, written or oral) or covenant, violation of public policy or wrongful termination; state or federal wage and hour laws; or any other state or federal law, rule, or regulation dealing with the employment relationship, except those claims which may not be released herein as a matter of law. The released Claims also include any Claims by Executive for compensation, wages, back pay, reinstatement or reemployment, bonuses, or benefits of any kind or any nature arising out of, based upon, or relating to his employment or the termination of his employment with the Company and/or his service as an officer of any of the Company Releasees, and/or any agreement or compensation arrangement between Executive and any of the Company Releasees.

(c) Nothing contained in this Section 1 or any other provision of this Release shall release or waive any right that Executive has to (i) the Consideration, which shall be deemed to include the Initial Grant (as defined in the Employment Agreement) and any other equity awards Executive has received from the Company, (ii) any employee benefit Executive is entitled to receive from the Company pursuant to any Company employee benefit plan or program, including any health claim or (iii) indemnification and/or reimbursement of expenses by the Company with respect to which Executive may be eligible as provided by law, the Company’s Certificates of Incorporation, Bylaws and any applicable directors and officers, errors & omissions, umbrella or general liability insurance policies, or any indemnification agreements, including the Employment Agreement. Further, nothing contained in this Release shall restrict or inhibit any communications by Executive with the Equal Employment Opportunity Commission (“EEOC”) or any other government or law enforcement agency.

2. Waiver of Applicable Release Laws.

(a) Executive understands and agrees that the release provided herein extends to all Claims released above whether known or unknown, suspected or unsuspected, which may be released as a matter of law. Executive expressly waives and relinquishes any and all rights he may have under state law that prohibits the general release of unknown claims.

(b) It is the intention of each party through this Release to fully, finally and forever settle and release the Claims as set forth above. In furtherance of such intention, the release herein given shall be and remain in effect as a full and complete release of such matters notwithstanding the discovery of any additional Claims or facts relating thereto.

3. Review and Revocation Rights. Executive hereby is advised of the following:

(a) Executive has the right to consult with an attorney before signing this Release and is encouraged by the Company to do so;

(b) Executive has twenty-one (21) days from his receipt of this Release to consider it, although Executive may sign and return the Release at any earlier time, in which case Executive waives all rights to the balance of this twenty-one (21) day review period; and

(c) Executive has seven (7) days after signing this Release to revoke this Release, and this Release will not be effective until that revocation period has expired without revocation. Executive agrees that in order to exercise his right to revoke this Release within such seven (7) day period, he must do so in a signed writing delivered to the Company’s Board

of Directors of the Company (“Board”) before the close of business on the seventh calendar day after he signs this Release.

(d) Nothing in this Release prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs for doing so, unless specifically authorized by federal law.

4. No Filings. Executive represents that he has not filed any waivable lawsuits, claims, charges or complaints, which are pending as of the date hereof, against the Company Releasees with any local, state or federal agency or court from the beginning of time to the date of execution of this Release, and he agrees that he shall not accept any award, damages, recovery or settlement from any proceeding brought by him or on his behalf relating to his employment or the termination of his employment with the Company and/or his service as an officer of any of the Company Releasees or otherwise.

5. Cooperation Clause.

(a) To facilitate the orderly conduct of the Company, Executive agrees to cooperate, at no charge, with the Company’s reasonable requests for information or assistance related to (i) the time of his employment, (ii) any investigations (including internal investigations) and audits of the Company’s management’s current and past conduct and business and accounting practices and (iii) the Company’s defense of, or other participation in, any administrative, judicial, or other proceeding arising from any charge, complaint or other action which has been or may be filed relating to the period during which Executive was employed by the Company. The Company will promptly reimburse Executive for his reasonable, customary and documented out-of-pocket business expenses in connection with the performance of his duties under this Section 5.

6. Governing Law. This Release shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles of conflict of laws.

7. Dispute Resolution. The parties hereby agree that all disputes, claims or controversies arising from or otherwise in connection with this Release (except for injunctive relief sought by either party) between them and between Executive and any of the Company’s affiliated entities and the successor of all such entities, and any director, shareholder or employee of the Company will be resolved in accordance with Section 13 of the Employment Agreement, except for its attorneys’ fee provision.

8. Attorneys’ Fees. Except as otherwise provided herein or as prohibited by law, in any action, litigation or proceeding between the parties arising out of or in relation to this Release, including any purported breach of this Release, each party shall bear its own attorney’s fees and costs.

9. Non-Admission of Liability. The parties understand and agree that neither the furnishing of the Consideration nor the execution of this Release by the parties will constitute or be construed as an admission of any wrongdoing or liability whatsoever by any party.

10. Severability. If any one or more of the provisions contained herein (or parts thereof), or the application thereof in any circumstances, is held invalid, illegal or unenforceable

in any respect for any reason, the validity and enforceability of any such provision in every other respect and of the remaining provisions hereof will not be in any way impaired or affected, it being intended that all of the rights and privileges shall be enforceable to the fullest extent permitted by law.

11. Entire Agreement. This Release represents the sole and entire agreement among the parties and, except as expressly stated herein, supersedes all prior agreements, negotiations and discussions among the parties with respect to the subject matters contained herein.

12. Waiver. No waiver by any party hereto at any time of any breach of, or compliance with, any condition or provision of this Release to be performed by any other party hereto may be deemed a waiver of similar or dissimilar provisions or conditions at the same time or at any prior or subsequent time.

13. Counterparts. This Release may be executed in counterparts, each of which will be deemed to be an original as against any party that has signed it, but both of which together will constitute one and the same instrument.

14. Miscellaneous Provisions.

(a) The parties represent that they have read this Release and fully understand all of its terms; that they have conferred with their attorneys, or have knowingly and voluntarily chosen not to confer with their attorneys about this Release; that they have executed this Release without coercion or duress of any kind; and that they understand any rights that they have or may have, and they are signing this Release with full knowledge of any such rights.

(b) Both parties have participated in the drafting of this Release with the assistance of counsel to the extent they desired. The language in all parts of this Release must be in all cases construed simply according to its fair meaning and not strictly for or against any party. Whenever the context requires, all words used in the singular must be construed to have been used in the plural, and vice versa, and each gender must include any other gender. The captions of the Sections of this Release are for convenience only and must not affect the construction or interpretation of any of the provision herein.

(c) Each provision of this Release to be performed by a party hereto is both a covenant and condition, and is a material consideration for the other party’s performance hereunder, and any breach thereof by the party will be a material default hereunder. All rights, remedies, undertakings, obligations, options, covenants, conditions and agreements contained in this Release are cumulative and no one of them is exclusive of any other. Time is of the essence in the performance of this Release.

(d) Each party acknowledges that no representation, statement or promise made by any other party, or by the agent or attorney of any other party, except for those in this Release, has been relied on by him or it in entering into this Release.

(e) Unless expressly set forth otherwise, all references herein to a “day” are deemed to be a reference to a calendar day. Unless expressly stated otherwise, cross-references herein refer to provisions within this Release and are not references to any other document.

(f) Each party to this Release will cooperate fully in the execution of any and all other documents and in the completion of any additional actions that may be necessary or appropriate to give full force and effect to the terms and intent of this Release.

(g) Executive represents that he has returned all Company property and materials in accordance with paragraph 6(e) of the Employment Agreement.

EACH OF THE PARTIES ACKNOWLEDGES THAT HE/IT HAS READ THIS AGREEMENT, UNDERSTANDS IT AND IS VOLUNTARILY ENTERING INTO IT, AND THAT IT INCLUDES A WAIVER OF THE RIGHT TO A TRIAL BY JURY, AND, WITH RESPECT TO EXECUTIVE, HE UNDERSTANDS THAT THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS OTHER THAN AS PROVIDED FOR HEREIN.

IN WITNESS WHEREOF, the parties have executed this Release as of the dates indicated below.

“Executive”

James Mullen

Date:

“Company”

Patheon Pharmaceutical Services, Inc.

By:

Title:

Date:

EX-10.22

Exhibit 10.22

EMPLOYMENT AGREEMENT

THIS AGREEMENT is made as of the 3rd day of December, 2007 between Patheon Pharmaceutical Services Inc. (the “Corporation”) and Wesley P. Wheeler, an Executive residing in the City of Corona del Mar in the State of California, (the “Executive”).

WHEREAS, the Corporation and the Executive wish to enter into this Agreement to set forth the rights and obligations of each of them with respect to the employment of the Executive.

WHEREAS, the Corporation agrees to employ the Executive on the terms and subject to the conditions set forth in this Agreement to render exclusive and full-time services to the Affiliated Group (as defined below),

NOW, THEREFORE, THIS AGREEMENT WITNESSES that in consideration of the premises and mutual covenants and agreements hereinafter contained and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the parties agree with each other as follows:

ARTICLE 1

INTERPRETATION

1.1 Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of New York. Each of the parties hereby irrevocably consents to the jurisdiction of the courts in the State of New York with respect to any matters arising out of this Agreement.

1.2 Definitions. In this Agreement, including Schedule A and B hereto, unless the context otherwise requires, the following terms shall have the following meanings, respectively:

(a) “Affiliated Group” means the Corporation and any entity controlled by, controlling, or under common control with the Corporation.

(b) “Agreement” means this Employment Agreement as it may be amended or supplemented from time to time,

(c) “Annual Base Salary” has the meaning given such term in Section 3.1.

(d) “Board of Directors” means the Board of Directors of Patheon.

(e) “Cause” means the determination, in good faith, by the Board of Directors, after notice to the Executive and, if curable. a reasonable opportunity to cure, that one or more of the following events has occurred: (i) the Executive has failed to perform his material duties, and such failure has not been cured after a period of 30 days notice from the Corporation; (ii) any reckless or grossly negligent act by

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the Executive having the effect of injuring the interests, business or reputation of any member of the Affiliated Group in any material respect; (iii) the Executive’s commission of any felony (including entry of a nolo contendere plea); (iv) any misappropriation or embezzlement of the property of any member of the Affiliated Group; or (v) a breach of any material provision of this Agreement by the Executive.

(f) “Change in Control” means any of the following events:

(i) Any “Person” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than JLL Partners or its affiliates, becomes a Beneficial Owner (within the meaning of Exchange Act Rule 13d-3) of more than fifty percent (50%) of the voting power of the then outstanding voting securities of Patheon entitled to vote generally in the election of directors;

(ii) There is consummated a merger or consolidation of Patheon or any direct or indirect subsidiary of Patheon with any other company, other than a merger or consolidation that would result in the voting securities of Patheon outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof ) at least fifty percent (50%) of the combined voting power of the securities of Patheon or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or

(iii) The stockholders of Patheon approve a plan of complete liquidation or dissolution of the company or there is consummated an agreement for the sale or disposition by Patheon of all or substantially all of its assets.

(g) “Code” means the Internal Revenue Code of 1986, as amended.

(h) “Competitor” has the meaning given such term in Section 6.4.

(i) “Date of Termination” has the meaning given such term in Section 4.5.

(j) “Effective Date” has the meaning given such term in Section 2.1.

(k) “Good Reason” means the occurrence of any of the following events without the prior consent of the Executive: (i) removal of the Executive from the Executive’s position as President & Chief Executive Officer of Patheon; (ii) a material reduction by the Corporation of the Executive’s duties or responsibilities or the assignment to the Executive of duties or responsibilities or the assignment to the Executive of duties materially inconsistent with such position; or (iii) a material breach by the Corporation of this Agreement, which breach remains uncured for a period of 30 days after receipt by the Corporation of written notice from the Executive. “Patheon” means Patheon Inc.

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(l) “Target Bonus” has the meaning given such term in Section 3.2.

(m) “Term” has the meaning given such term in Section 2.1.

ARTICLE 2

EFFECTIVE DATE; TERMS OF EMPLOYMENT

2.1 Term

The Corporation hereby agrees to employ the Executive. and the Executive hereby agrees to be employed by the Corporation on the terms and subject to the conditions of this Agreement (including, without limitation, Article 6), for the period commencing on December 3, 2007 (the “Effective Date”) and ending on the second anniversary of the Effective Date (the “Term”). Unless terminated prior to that date, the Term shall be automatically renewed for successive one-year periods on the terms and subject to the conditions of this Agreement (including, without limitation. Article 6), commencing on the second anniversary of the Effective Date, and on each anniversary date thereafter, unless either the Corporation or the Executive gives the other party written notice (in accordance with Section 7.4 hereof), at least 90 days prior to the end of such initial or extended Term, of its or his intention not to renew this Agreement or the employment of the Executive. For purposes of this Agreement, any reference to the “Term” of this Agreement shall include the original term and any extension thereof.

2.2 Position and Duties

During the Term, the Executive shall serve as the President & Chief Executive Officer of Patheon, with such authority, duties and responsibilities as are commensurate with such position, reporting directly to the Board of Directors. In addition, the Corporation shall cause the Executive to be appointed as a member of the Board of Directors as of the Effective Date, and following such date, the Executive shall remain on the Board of Directors, subject to Section 4.6, and shall perform his duties as a director of Patheon conscientiously and faithfully.

The Executive shall also be responsible for the functions and responsibilities set out in the Position Description for the President & Chief Executive Officer approved by the Corporation’s Board of Directors attached as Schedule A.

The Executive also shall serve, without additional compensation, as an officer and director of each of the other members of the Affiliated Group, as determined by the Corporation, provided, that such service does not materially interfere with the Executive’s performance of his duties and responsibilities as the President & Chief Executive Officer of Patheon.

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2.3 Time Commitments

During the Term, the Executive shall devote all of his business time, energies and talents to serving as the President & Chief Executive Officer of Patheon, perform his duties conscientiously and faithfully subject to the reasonable and lawful directions of the Board of Directors, and in accordance with each of the corporate governance and ethics guidelines, conflict of interests policies and code of conduct applicable to all employees or senior executives generally of the Affiliated Group. During the Term, subject to the prior written approval of the Board of Directors, it shall not be a violation of this Agreement for the Executive, subject to the requirements of Article 6, to (a) serve on corporate, civic or charitable boards or committees, (b) deliver lectures or fulfill speaking engagements and (c) manage personal investments.

2.4 Location

(a) For a period of up to 18 months after the Effective Date, the Executive will be permitted to commute to the Corporation’s executive offices from his primary residence in California; provided that the Executive will be expected to devote his full time and attention to his duties as President & Chief Executive Officer of the Corporation. In this regard, the Executive will be expected to be at the Corporation’s executive offices in Toronto, Canada (or, if the Corporation’s executive offices are relocated, at such new executive office location) or another facility of the Corporation or otherwise engaged in the performance of his duties five days per week, subject to vacation and holidays.

(b) At any time after the 18 month anniversary of the Effective Date, the Corporation may require that the Executive relocate to a location to be determined on the East Coast of the United States. Upon such relocation, the Corporation will provide the Executive with relocation assistance in the form of closing costs on the sale of the Executive’s current residence, as well as costs associated with moving the Executive’s personal belongings.

(c) For a period of up to 18 months after the Effective Date, the Executive will be entitled to a reasonable housing allowance for the cost of housing arrangements in the Toronto area, as well as the use of a Corporation-provided automobile for use while in the Toronto area (or, if the Corporation’s executive offices are relocated, at such new executive office location).

ARTICLE 3

COMPENSATION AND BENEFITS

3.1 Base Salary

During the Term, the Corporation shall pay the Executive an annualized base salary (“Annual Base Salary”) at a rate of $600,000 US, payable in regular installments in accordance with the Corporation’s normal payroll practices. During the Term, the

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Annual Base Salary shall be reviewed annually by the Board of Directors, for increase only, at such time as the salaries of other senior executives of Patheon are reviewed generally. If so increased, the Annual Base Salary shall be increased for all purposes of this Agreement.

3.2 Executive Performance Bonus

For each fiscal year during the Term, the Executive shall be eligible to participate in an annual incentive plan under terms and conditions no less favorable than other senior executives of Patheon; provided that the Executive’s “target” annual bonus opportunity shall be up to 100% of his Annual Base Salary (the “Target Bonus”). The Executive’s payment under the annual incentive plan shall be based on meeting predetermined personal objectives and Patheon’s financial performance. Both the personal objectives and financial performance measures will be recommended by the Executive and subject to final approval by the Board of Directors. For fiscal 2008, the performance bonus will be prorated from the Effective Date of this Agreement. The annual performance bonus, if earned, will be paid to the Executive by the Corporation no later than three months after the end of the applicable performance period, generally the fiscal year end of the Corporation. Nothing contained in this Section 3.2 will guarantee the Executive any specific amount of incentive compensation, or prevent the Board of Directors from establishing performance goals and compensation targets applicable only to the Executive.

3.3 Sign-on Bonus

The Corporation will pay the Executive in a lump sum, within 30 business days of the Effective Date, a sign-on bonus of $380,000 U.S.

3.4 Equity Compensation

(a) The Executive shall be granted a stock option to purchase 1,260,000 restricted voting shares of Patheon at an exercise price per share equal to the Market Price” of the of the restricted voting shares of the Corporation (as defined in the Amended and Restated Incentive Stock Option Plan (the “ISOP”) on the date of the grant (the “First Option”). Except as otherwise provided in the ISOP or stock option award agreement (the “Stock Related Documents”), the First Option will (i) vest as to 1/3 of the shares subject to the First Option on each of the first three anniversaries of the date of grant, subject to the Executive’s continued employment with the Affiliated Group until the relevant vesting dates, and (ii) have a seven year term. The First Option will be subject to the terms, definitions and provisions of the applicable Stock Related Documents.

(b) The Executive also shall be granted a stock option to purchase an additional 470,000 restricted voting shares of Patheon at an exercise price per share equal to the Market Price of the restricted voting shares on the date of the grant (the “Second Option”). The Second Option will (i) be fully vested on the date of grant and, except as otherwise provided in the applicable Stock Related Documents,

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and (ii) have a seven year term. The Second Option will be subject to the terms, definitions and provisions of the applicable Stock Related Documents.

(c) During the Term, and at the discretion of the Board of Director or its Compensation and Human Resources Committee, if such power is delegated to the Committee, the Executive also shall be eligible to receive additional stock options and other long-term incentives under the ISOP or other incentive plans adopted by Patheon from time to time.

(d) Upon the occurrence of a Change in Control, any stock options to purchase restricted voting shares of Patheon then held by the Executive shall, to the extent not otherwise provided in the applicable Stock Related Documents, become immediately vested and exercisable and shall remain exercisable for the remaining term of such stock option (which remaining term shall be determined without regard to the Executive’s termination of employment).

(e) The Executive will be required to comply with the terms of any share ownership guidelines applicable to senior executives of Patheon generally, as amended from time to time.

3.5 Retirement Benefits

During the Term, the Executive also shall be eligible to participate in any qualified or nonqualified deferred compensation and retirement plans maintained by the Corporation applicable to senior executives of the Corporation generally, in each case as amended from time to time.

3.6 Other Benefit Plans

During the Term, the Executive also shall be entitled to participate in all welfare, perquisites, fringe benefit, and other benefit plans, practices, policies and programs, as may be in effect from time to time, for U.S. resident-based senior executives of Patheon generally. The fringe benefits and perquisites described in the preceding sentence shall include additional life insurance coverage in an amount equal to three (3) times the Executive’s Annual Base Salary and an allowance of $25,000 US per year to pay for the Executive’s cost of an automobile, financial planning and additional insurance. The cash allowance shall be paid to the Executive in regular semi-monthly installments during the Term.

3.7 Tax Equalization

The Corporation will make Executive whole for any additional tax liability that may be incurred as a result of time worked in Canada over that which would be incurred for work completed solely in the United States. For further clarity, the Executive will continue to pay U.S. Federal, California State and Social Security taxes on his remuneration, benefits and allowances, through withholding of tax by the Employer. If

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the aggregate of the Federal and Provincial income taxes payable by the Executive to the Canada Revenue Agency (“CRA”) and the U.S. Federal and State income taxes payable by the Executive to the U.S. and California authorities as applicable in any tax year during the period of assignment, exceeds what would have been payable by the Executive for income and social security taxes if the Executive had solely been working in the U.S.A., the Corporation will pay the excess as soon as practicable after such excess amount has been determined by the Corporation engaged tax accountants following the calendar year with respect of which the tax is payable. This amount shall be paid no later than the end of the Executive’s taxable year next following the Executive’s taxable year in which the Executive remits the related taxes.

3.8 Expenses

The Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses actually and properly incurred by the Executive during the Term in connection with carrying out his duties hereunder in accordance with the Corporation’s policies, as may be in effect from time to time, for its senior executives generally.

3.9 Vacation

During the Term, the Executive shall be entitled to five (5) weeks paid vacation in accordance with the Corporation’s policies. as may be in effect from time to time, for its senior executives generally.

ARTICLE 4

TERMINATION OF EMPLOYMENT

4.1 Death or Disability

The Executive’s employment shall terminate automatically upon the Executive’s death. If the Corporation determines in good faith that the Disability of the Executive has occurred during the Term (as defined below), it may give to the Executive written notice in accordance with Section 7.4 of this Agreement of its intention to terminate the Executive’s employment; provided that such notice is provided no later than 150 days following the Executive’s first day of Disability. In such event, the Executive’s employment shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the failure of the Executive to perform his duties under this Agreement for at least 90 consecutive business days as a result of any medically determinable physical or mental impairment. The determination of Disability shall be made by a physician selected by the Corporation or its insurers and reasonably acceptable to the Executive or the Executive’s legal representative.

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4.2 Cause

The Executive’s employment with the Corporation may be terminated with or without Cause.

4.3 Good Reason

The Executive’s employment with the Corporation may be terminated by the Executive with or without Good Reason.

4.4 Notice of Termination

Any termination by the Corporation for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party in accordance with Section 7.4. For purposes of this Agreement, a “Notice of Termination” means a written notice which (a) indicates the specific termination provision in this Agreement relied upon, (b) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (c) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Corporation or the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Corporation or the Executive, respectively, hereunder or preclude the Corporation or the Executive, respectively, from asserting such fact or circumstance in enforcing the Corporation’s or the Executive’s rights hereunder.

4.5 Date of Termination

“Date of Termination” means (a) if the Executive’s employment is terminated by the Corporation for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (b) if the Executive’s employment is terminated by the Corporation other than for Cause or Disability, the Date of Termination shall be the date on which the Corporation notifies the Executive of such termination and (c) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. The Corporation and the Executive shall take all steps necessary (including with regard to any post-termination services by the Executive) to ensure that any termination described in this Section 4.5 constitutes a “separation from service” within the meaning of Section 409A of the Code, and the date on which such separation from service takes place shall be the “Date of Termination.”

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4.6 Resignation from All Positions

Notwithstanding any other provision of this Agreement, upon the termination of the Executive’s employment for any reason, unless otherwise requested by the Board of Directors, the Executive shall immediately resign as of the Date of Termination from all positions that he holds or has ever held with the Affiliated Group (and with any other entities with respect to which the Affiliated Group has requested the Executive to perform services), including, without limitation, the Board of Directors and all boards of directors of any member of the Affiliated Group. The Executive hereby agrees to execute any and all documentation to effectuate such resignations upon request by the Corporation, but he shall be treated for all purposes as having so resigned upon termination of his employment, regardless of when or whether he executes any such documentation.

ARTICLE 5

OBLIGATIONS OF CORPORATION UPON TERMINATION

5.1 Death; Disability; Good Reason; Other than for Cause

If, during the Term, the Corporation shall terminate the Executive’s employment for Disability or other than for Cause, or if the Executive shall terminate employment for Good Reason or as a result of his death:

(a) The Corporation shall pay, or cause to be paid, to the Executive (or bis estate) in a lump sum in cash the sum of: (i) the Executive’s Annual Base Salary through the Date of Termination, and (ii) any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (i) and (ii) shall be hereinafter referred to as the “Accrued Obligations”). The Accrued Obligations shall be paid within 30 days after the Date of Termination.

(b) The Corporation shall pay, or cause to be paid, to the Executive (or his estate) in 24 equal monthly installments, an amount equal to two times the Executive’s Annual Base Salary. The first installment shall commence within the 30 day period commencing on the 60th day following the Date of Termination, or such later date set forth in Section 7.8.

(c) To the extent not theretofore paid or provided, the Affiliated Group shall pay or provide, or cause to be paid or provided, to the Executive (or his estate) any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Affiliated Group (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”), in accordance with the terms and normal procedures of each such plan, program, policy or practice or contract or agreement, based on accrued and vested benefits through the Date of Termination.

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(d) If the Date of Termination occurs within six months after the occurrence of a Change in Control, then, in addition to the amounts described in Sections 5.1(a), (b) and (c) above, the Corporation shall pay, or cause to be paid, to the Executive (or his estate) in 24 equal monthly installments an amount equal to two times the Executive’s Target Bonus for the year in which the Date of Termination occurs. The first installment shall commence within the 30 day period commencing on the 60th day following the Date of Termination, or such later date set forth in Section 7.8.

If the Executive receives payments and benefits pursuant to this Section 5.1, then the Executive shall not be entitled to any other severance payor benefits under any severance plan, program or policy of any member of the Affiliated Group, unless otherwise specifically provided therein in a specific reference to this Agreement.

5.2 Cause; Other than for Good Reason

If the Executive’s employment is terminated for Cause, if the Corporation elects not to automatically renew the Term, or if the Executive voluntarily terminates his employment without Good Reason (including any election by the Executive not to automatically renew the Term), this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive his Accrued Obligations through the Date of Termination and the Other Benefits, in each case to the extent not theretofore paid or provided. All Accrued Obligations shall be paid to the Executive in accordance with Section 5.1(a) and the Other benefits shall be paid to the Executive in accordance with Section 5.1(c).

5.3 Full Settlement

In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment.

5.4 Release

Notwithstanding anything contained herein to the contrary, the Corporation shall only be obligated to make the payments under Sections 5.1(b) and 5.I(d) hereof if: (a) within the 50-day period after the Date of Termination, the Executive executes a general release, in a form provided by the Corporation, of all current or future claims, known or unknown, against the Affiliated Group, its officers, directors, shareholders, employees and agents arising on or before the date of the release, including but not limited to all claims arising out of the Executive’s employment with the Affiliated Group or the termination of such employment, and (b) the Executive does not revoke the release during the seven-day revocation period prescribed by the Age Discrimination in Employment Act of 1967, as amended, or any similar revocation period, if applicable. The Corporation shall be obligated to provide such release to the Executive promptly following the Date of Termination.

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ARTICLE 6

RESTRICTIVE COVENANTS

6.1 In General

The Executive acknowledges that in the course of his employment he will become familiar with trade secrets and customer lists of and other confidential information concerning the Affiliated Group and that his services have been of special, unique and extraordinary value to the Affiliated Group.

6.2 Confidentiality Undertaking

The Executive confirms that he is bound by the provisions of the Confidentiality Undertaking covenant set out in Schedule B hereto.

6.3 Non-Solicitation

(a) During the 24-month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, hire or retain any employee of any member of the Affiliated Group or solicit, induce or attempt to solicit or induce any employee of any member of the Affiliated Group to quit or abandon his or her employ or to become an officer, agent, employee, partner, director, consultant or independent contractor of the Executive, his affiliates or any other individual or entity.

(b) During the 24-month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, solicit, induce or attempt to solicit or induce, any customer, supplier or licensor of any member of the Affiliated Group to cease doing business with any member of the Affiliated Group, or in any way interfere with the relationships between any customer, supplier or licensor of the Affiliated Group.

6.4 Non-Competition

During the 24-month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, compete with the business of any member of the Affiliated Group by (a) becoming an officer, agent, employee, partner, director, consultant, independent contractor of a Competitor, or (b) acquiring an ownership interest in a Competitor, provided that the Executive may, for investment purposes, own not more than 1% of the outstanding stock of any class of a Competitor that is listed on a recognized stock exchange or traded in the over-the-counter market in Canada or the United States. For purposes of this Agreement, the term “Competitor” means any person or entity that engages in the pharmaceutical development and manufacturing outsourcing business in Canada, the United States (including the Commonwealth of Puerto Rico), India or Europe.

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6.5 Reasonableness and Revision

The Executive agrees and acknowledges that due to the uniqueness of his services and the confidential nature of the information he will possess, the covenants set forth in this Article 6 and Schedule B are reasonable and necessary for the protection of the business interests and goodwill of the Affiliated Group. Moreover, a worldwide restriction on any competitive activities by the Executive is reasonable, given the global nature of the Affiliated Group’s business and the Executive’s role in that business. If, at the time of enforcement of this Article and/or Schedule B, a court or other tribunal holds that the restrictions herein are in whole or in part unreasonable under circumstances then existing, the parties agree that the maximum period or scope reasonable under such circumstances will be substituted for the stated period or scope and that the court or other tribunal shall be authorized and directed by the parties to revise the restrictions contained herein to cover the maximum period or scope permitted by law.

6.6 Acknowledgements

The Executive agrees and acknowledges that the promises and obligations made by the Corporation in this Agreement (specifically including, but not limited to, the payments and benefits provided for under Section 5.1(b) and (d) hereof) constitute sufficient consideration for the covenants contained in this Article 6. The Executive further acknowledges that it is not the Affiliated Group’s intention to interfere in any way with his employment opportunities, except in such situations where the same conflict with the legitimate business interests of the Affiliated Group. The Executive agrees that he will notify the Corporation in writing if he has, or reasonably should have, any questions regarding the applicability of this Article 6.

6.7 Enforcement

Because the Executive’s services are unique and because the Executive has access to Confidential Information and work product, the parties agree that the Affiliated Group will be damaged irreparably in the event any of the provisions of Section 6.2, 6.3 and 6.4 are not performed in accordance with their specific terms or are otherwise breached and that money damages will be an inadequate remedy for any such non-performance or breach. Therefore, any one or more of the members of the Affiliated Group, or their respective successors and assigns, will be entitled, in addition to other rights and remedies existing in their favor, to an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). The Executive agrees and acknowledges that he will not assert in any such enforcement action that there is an adequate remedy in damages and that such rights and remedies will be in addition to and not in lieu of any other rights or remedies available to the Affiliated Group at law or in equity.

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6.8 Survival

Subject to any limits on applicability contained therein, this Article 6 shall survive and continue in full force in accordance with its terms notwithstanding any expiration or termination of the Term or this Agreement.

ARTICLE 7

GENERAL PROVISIONS

7.1 Entire Agreement

This Agreement together with Schedules A and B attached hereto when executed by both parties shall constitute the entire agreement pertaining to the Executive’s employment and supersedes all prior agreements, understandings, negotiations and discussions, whether written or oral, pertaining to the Executive’s employment, and there are no representations, undertakings or agreements of any kind between the parties respecting the subject matter hereof except those contained herein.

7.2 Severability

If any provision of this Agreement is declared void or unenforceable, such provision shall be deemed severed from this Agreement to the extent of the particular circumstances giving rise to such declaration and such provision as it applies to other persons and circumstances and the remaining terms and conditions of this Agreement shall remain in full force and effect.

7.3 Representations

The Executive represents and warrants that (a) he is not a party to any contract, understanding, agreement or policy, whether or not written, with his current employer (or any previous employer) or otherwise, that would be breached by the Executive’s entering into, or performing services under, this Agreement and (b) will not knowingly use any trade secret, confidential information, or other intellectual property right of any other party in the performance of his duties hereunder. The Executive will indemnify, defend, and hold each member of the Affiliated Group harmless, from any and all suits and claims arising out of any breach of such restrictive contracts, understandings, agreements or policies.

7.4 Notices

All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

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If to the Executive:

3808 Key Bay

Corona del Mar, CA 92625

If to the Corporation:

Patheon Pharmaceutical Services Inc.

2110 East Galbraith Road

Cincinnati, OH 45237

Attention: Chair, Compensation and Human Resources Committee of Patheon Inc.

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

7.5 Withholding

The Corporation may withhold from any amounts payable under this Agreement such Federal, state, local, foreign or other taxes as shall be required to be withheld pursuant to any applicable law or regulation.

7.6 Waiver

The Executive’s or the Corporation’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Corporation may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

7.7 Successors

(a) This Agreement is personal to the Executive is not assignable by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives. This Agreement shall inure to the benefit of and be binding upon the Corporation, the other members of the Affiliated Group, and their respective successors and assigns.

(b) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Patheon or the Corporation to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.

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7.8 Compliance with Section 409A of the Code

(a) Notwithstanding anything contained in this Agreement to the contrary. if the Executive is a “specified employee,” as determined under the Corporation’s policy for identifying specified employees on the Date of Termination, then to the extent required in order to comply with Section 409A of the Code, all payments, benefits or reimbursements paid or provided under this Agreement that constitute a “deferral of compensation” within the meaning of Section 409A of the Code, that are provided as a result of a “separation from service” within the meaning of Section 409A and that would otherwise be paid or provided during the first six months following such Date of Termination shall be accumulated through and paid or provided (together with interest on the delayed amount at the applicable federal rate under Section 7872(f)(2)(A) of the Code in effect on the Date of Termination) within 30 days after the first business day following the six month anniversary of such Date of Termination (or, if the Executive dies during such six-month period, within 30 days after the Executive’s death).

(b) To the extent required to comply with Section 409A Code, any reimbursement of expenses pursuant to Section 2.4(b), 2.4(c), 3.8, 5.3(b) or 7.9 that will not be excluded from Executive’s income when received is subject to the following requirements: (i) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided in any other calendar year; (ii) the reimbursement of the eligible expense must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (iii) the right to reimbursement is not subject to liquidation or exchange for another benefit.

(c) It is intended that the payments and benefits provided under this Agreement shall either be exempt from the application of, or comply with, the requirements of Section 409A of the Code. This Agreement shall be construed, administered, and governed in a manner that effects such intent, and the Corporation shall not take any action that would be inconsistent with such intent. Without limiting the foregoing, the payments and benefits provided under this Agreement may not be deferred, accelerated, extended, paid out or modified in a manner that would result in the imposition of an additional tax under Section 409A of the Code upon Executive. Although the Corporation shall use its best efforts to avoid the imposition of taxation, interest and penalties under Section 409A of the Code, the tax treatment of the benefits provided under this Agreement is not warranted or guaranteed. Neither the Affiliated Group nor its directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by the Executive or other taxpayer as a result of the Agreement. Any reference in this Agreement to Section 409A of the Code will also include any proposed, temporary or final regulations, or any other guidance, promulgated with respect to such Section 409A by the U.S. Department of Treasury or the Internal Revenue Service.

7.9 Assistance

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During and after the Term, the Executive shall assist in the defense of any claims, or potential claims that may be made or threatened to be made against any member of the Affiliated Group in any action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (a “Proceeding”), and shall assist in the prosecution of any claims that may be made by any member of the Affiliated Group in any Proceeding, to the extent that such claims may relate to the Executive’s employment or the period of the Executive’s employment. The Executive shall promptly inform the Corporation if the Executive is asked to participate (or otherwise become involved) in any Proceeding involving such claims or potential claims. The Executive also shall promptly inform the Corporation if the Executive is asked to assist in any investigation (whether governmental or otherwise) of any member of the Affiliated Group (or their actions), regardless of whether a lawsuit has then been filed against any member of the Affiliated Group with respect to such investigation. The Corporation agrees to reimburse the Executive for all of the Executive’s reasonable out-of-pocket expenses associated with such assistance, including travel expenses and any attorneys’ fees and .shall pay a reasonable per diem fee for the Executive’s service; provided that the expenses to be reimbursed must be incurred during the Term or during the 10 year period following the Date of Termination.

NOW THEREFORE, the parties below have entered into this Agreement as of the date first written above.

PATHEON PHARMACEUTICAL SERVICES INC.

By: /s/ Derek Watchorn

Name: Derek Watchorn

Title: Authorized Signatory

SIGNED, SEALED AND DELIVERED        )
in the presence of	)
	)
/s/ Jacqueline Le Saux	)	/s/ Wesley P. Wheeler
Name of Witness:		WESLEY P. WHEELER

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SCHEDULE A

TO

EMPLOYMENT AGREEMENT WITH

WESLEY P. WHEELER

PATHEON INC.

POSITION DESCRIPTION

PRESIDENT & CHIEF EXECUTIVE OFFICER

This position description for the President & Chief Executive Officer of the Corporation was adopted by the board of directors (the “Board”) of the Corporation on December 18, 2002.

The President & Chief Executive Officer of the Corporation will have the following functions and responsibilities:

A. PLANNING

1. Development of Strategic Plan. Develop, and recommend to the Board each year basis, a long-term strategic plan setting out the strategy and vision for the Corporation that will lead to creation of shareholder value.

2. Development of Annual Business Plan, Financial Plan and Annual Objectives. Develop, and recommend to the Board each year, an annual business plan, financial plan and annual objectives that support the Corporation’s long-term strategy.

B. MANAGEMENT

1. Implementation of Strategic Plan. Strive to implement the Corporation’s strategic plan.

2. Achievement of Annual Business Plan, Financial Plan and Annual Objectives. Strive to achieve the Corporation’s financial and operating goals and objectives, as approved annually by the Board.

3. Development of Management Team and Succession Plan. Ensure that the Corporation has an effective management team below the level of President & Chief Executive Officer, and has an active plan for its development and succession.

4. Management of Operations. Ensure that the day-to-day business affairs of the Corporation are appropriately managed.

5. Management of Investor Relations. Ensure that the investor relations function of the Corporation is appropriately managed.

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6. Management of Financial Affairs. Ensure, through the Chief Financial Officer, that the financial affairs of the Corporation are appropriately managed.

7. Management of Legal Affairs. Ensure, through the General Counsel, that the legal affairs of the Corporation are appropriately managed.

8. CEO Succession Plan. Ensure, in cooperation with the Board, that there is an effective succession plan in place for the position of Chief Executive Officer.

9. Other Duties. Carry out such other duties as requested by the Board from time to time, depending on need and circumstances.

C. ETHICS, CULTURE, POLICY & PUBLIC REPRESENTATION

1. Corporate Culture. Foster a corporate culture that promotes the Corporation’s core values as reflected in the Corporation’s Code of Business Conduct.

2. Work Climate. Maintain a work climate that is conducive to:

(i) attracting and retaining a diverse group of top-quality employees at all levels; and

(ii) motivating these employees to perform their duties with the highest standards of integrity, responsibility and excellence; standards that are essential for the success of a Corporation that provides pharmaceutical product development and manufacturing services worldwide.

3. Corporate Policies. Formulate and oversee the implementation of major corporate policies.

4. Corporate Spokesperson. Serve as the chief spokesperson for the Corporation.

D. COMMUNICATIONS WITH BOARD OF DIRECTORS

1. Meetings and Agenda. Coordinate with the Chair of the Board to schedule meetings of the Board and prepare the relevant agenda for each meeting. Coordinate, where appropriate, with the chairs of the committees of the Board to schedule meetings of the committees and prepare the agendas for each such meeting.

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2. Inform the Board. Promote the proper flow of information to the Board and keep the Board fully apprised of all matters that the Board should be made aware of in order to permit it to discharge its mandate to supervise the business and affairs of the Corporation.

3. Inform Committees. Promote the proper flow of information to each of the committees of the Board, including the Audit Committee, and keep each committee fully apprised of all matters that such committee should be made aware of to permit it to discharge its specific mandate to the Board.

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SCHEDULE B

TO

EMPLOYMENT AGREEMENT WITH

WESLEY P. WHEELER

CONFIDENTIALITY UNDERTAKING

In consideration of Wesley P. Wheeler (the “Executive”) accepting an employment agreement between the Executive and Patheon Pharmaceuticals Services Inc. dated December 3, 2007 (the “Agreement”) to which this Confidentiality Undertaking is attached as Schedule B, the Executive undertakes and covenants with the Affiliated Group (as defined in the Agreement) as follows:

I. CONFIDENTIAL INFORMATION

1.1 Confidential Information

The Executive acknowledges that all information and facts relating to the business and affairs of the Affiliated Group and its customers, including, without limitation, trade secrets, data, notes, marketing plans, sales patterns, and private corporate and financial information (the “Confidential Information”) is confidential and proprietary to the Affiliated Group and a valuable trade secret of the Affiliated Group, disclosure of which could severely damage the economic interests of the Affiliated Group. Confidential Information includes, without limitation, any document, work, instrument or other medium assembled or composed by the Executive which contains Confidential Information.

1.2 Non-Disclosure of Confidential Information

The Executive shall not, either during the term of the Agreement or at any time thereafter, use or disclose, directly or indirectly, any of such Confidential Information to any person outside the Affiliated Group, except where such disclosure is necessary for the proper and bona fide execution of the Executive’s duties under the Agreement, without the prior written consent of the Affiliated Group. The Executive’s obligation not to use or disclose Confidential Information without prior written consent shall continue to apply after the Executive has ceased to be an employee of the Affiliated Group until such time as the Confidential Information becomes public knowledge through no fault of the Executive. The Affiliated Group will have full right, title and authority to deal in and with the proprietary rights and the Confidential Information notwithstanding any other provision of the Agreement or the termination thereof for any reason whatsoever. The Executive acknowledges and agrees that the restrictions contained in this Article 1 are reasonable in the circumstances in order to protect the business of the Affiliated Group.

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1.3 Return of Confidential Information

Confidential Information and the documents, works, instruments or other media containing Confidential Information shall remain the property of the Affiliated Group and be returned to the Affiliated Group upon request or immediately following termination of the Agreement for any reason whatsoever.

2. INVENTIONS

2.1 Inventions

Subject to Section 2.2, the Executive agrees that all discoveries, improvements, designs, ideas or inventions made or conceived, in whole or in part, by the Executive during the term of the Agreement or within three years following termination of the Agreement for any reason whatsoever (the “Inventions”) shall be the sole property of the Affiliated Group. The Executive shall:

(a) promptly disclose and describe all such Inventions in writing to the Affiliated Group;

(b) assign, and the Executive does hereby assign, to the Affiliated Group, without further compensation, all of the Executive’s rights, title and interest in and to such Inventions and to all applications for letters of patent, copyrights, industrial design or other forms of protection granted for such Inventions throughout the world;

(c) deliver promptly to the Affiliated Group, upon request and in the form and manner prescribed by the Affiliated Group (without charge to the Affiliated Group but at the Affiliated Group’s expense) the written instruments described in paragraph (b) and perform such acts as deemed necessary by the Affiliated Group to obtain and maintain such instruments and to transfer all rights and title thereto to the Affiliated Group; and

(d) give all assistance that may be required by the Affiliated Group to enable it to protect or exploit the Inventions in any country of the world.

The Executive does hereby waive in whole any moral rights that the Executive may have in each of the Inventions and any part or parts thereof , including, but not limited to, the right to the integrity of the Inventions, the right to be associated with the Inventions as its author by name or under a pseudonym and the right to remain anonymous.

2.2 Excluded Inventions

The provisions of Section 2.1 shall not apply to Inventions which fulfill all of the following criteria:

(a) Inventions for which no equipment, supplies, facility or Confidential Information belonging to the Affiliated Group were used; and

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(b) Inventions that do not relate to the business of the Affiliated Group or to the Affiliated Group’s actual or demonstrably anticipated processes, research or development which the Executive had access to or knowledge of ; and

(c) Inventions that do not result from any work performed by the Executive for the Affiliated Group.

3. GENERAL

This Confidentiality Undertaking shall be governed and construed in accordance with the laws of New York State applicable therein. Nothing herein shall be construed so as to limit any obligations owed by you to the Affiliated Group as a matter of common law. The Executive acknowledges that the business of the Affiliated Group cannot be properly protected from adverse consequences of the Executive’s actions other than by the restrictions set forth in this Undertaking and the Agreement. The Affiliated Group, in addition to any other right or relief to which it may be entitled, shall be entitled to an injunction restricting further breaches of this Undertaking or the Agreement This Confidentiality Undertaking shall survive the termination of the Agreement and the Executive’s employment thereunder.

IN WITNESS WHEREOF this Confidentiality Undertaking has been executed by the undersigned on this 16th day of April, 2008.

SIGNED, SEALED AND DELIVERED        )
in the presence of	)
	)
/s/ Jacqueline Le Saux	)	/s/ Wesley P. Wheeler
Name of Witness:		WESLEY P. WHEELER

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EX-10.23

Exhibit 10.23

[PATHEON]
	7070 Mississauga Road, Suite 350
	Mississauga, Ontario L5N 7J8
	www.patheon.corn

May 5, 2009

Mr. Wesley P. Wheeler

3808 Key Bay

Corona Del Mar, California 92625

Re: First Amendment to Employment Agreement

Dear Wes:

I am writing to confirm our agreement to amend the language of your December 3, 2007 Employment Agreement in order to clarify the parties’ intent with respect to the Term of your employment as reflected in Article 2.1. Currently, the Term of your employment will expire on December 3, 2010. By execution of this letter, you and Patheon Pharmaceutical Services Inc. (the “Corporation”) agree to amend Article 2.1 to read as follows:

2.1 Term

The Corporation hereby agrees to employ the Executive, and the Executive hereby agrees to be employed by the Corporation, on the terms and subject to the conditions of this Agreement (including, without limitation, Article 6), for the period commencing on December 3, 2007 (the “Effective Date”) and ending on the second anniversary of the Effective Date (the “Term”). The Term shall be automatically renewed on every annual anniversary of the Effective Date for an additional one year period, unless either the Corporation or the Executive gives the other party written notice (in accordance with Article 7.4 hereof), at least 90 days prior to such annual anniversary date, of its or his intention not to renew this Agreement or the employment of the Executive beyond the then-existing Term. By way of example, unless such notice is given by either party at least 90 days prior to the anniversary of the Effective Date on December 3, 2009, the Term shall be automatically extended by one year to December 3, 2011. Any such renewals shall be on the terms and subject to the conditions of this Agreement (including, without limitation, Article 6). For purposes of this Agreement, any reference to the “Term” of this Agreement shall include the original term and any extension thereof.

Both you and the Corporation specifically acknowledge that the above accurately reflects the parties’ intent when they entered into the December 3, 2007 Employment Agreement. All other terms of the December 3, 2007 Employment Agreement remain in full force and effect notwithstanding this revision to Article 2.1. Please indicate your agreement to this Amendment by signing where indicated below.

Very truly yours.

/s/ Derek J. Watchorn

Patheon Pharmaceutical Services Inc.

By: Derek J. Watchorn

Title: Authorized Signatory

Accepted and agreed to as of this 11th day of June, 2009

/s/ Wesley P. Wheeler

Wesley P. Wheeler

EX-10.24

Exhibit 10.24

November 30, 2010

Mr. Wesley Wheeler

1211 Village Crossing Drive

Chapel Hill, NC 27517

Re: Separation from Employment and Release of Claims

Dear Wes:

As we recently discussed, this letter confirms notice of your separation from the position of President and Chief Executive Officer of Patheon Inc. (the “Patheon”) effective November 30, 2010 (the “Separation Date”). Effective as of the Separation Date, you shall no longer be a member of the Board of Directors of Patheon or hold any positions as an employee, officer or director of Patheon Pharmaceutical Services Inc. (the “Corporation”) or any entity controlled by, controlling, or under common control with the Corporation (the “Affiliated Group”) and you agree to execute such documents and take such actions as may be necessary or desirable to further effectuate the foregoing. Reference is made to the Employment Agreement between you and the Corporation, dated December 3, 2007 as amended on May 5, 2009 (the “Employment Agreement”) and Schedule B to the Employment Agreement, dated April 16, 2008 (the “Confidentiality Undertaking”). Except as otherwise provided herein, any of your rights under the Employment Agreement shall terminate as of the Separation Date.

1. Accrued Obligations. Regardless of whether you sign this agreement:

1.1 within 30 days following the Separation Date, you will be provided with all earned, but unpaid salary through the Separation Date, at the annualized rate of $650,000 US (the “Annual Base Salary Rate”);

1.2 within 30 days following the Separation Date, you will be provided with 5 weeks accrued and unused vacation pay;

1.3 consistent with Corporation policy and after submission of appropriate documentation, you will be provided with all any reasonable business expenses you incurred through the Separation Date in accordance with Corporation policy; and

1.4 following the Separation Date, pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), you shall be entitled to seek continued health insurance coverage at your own expense and subject all respects to the requirements,

conditions and limitations of COBRA and of Patheon’s health insurance plan, which may be amended from time to time.

2. Separation Payments. The termination of your employment shall be treated as a termination other than for “Cause” under your Employment Agreement. Pursuant to Section 5.4 of the Employment Agreement, the Corporation is offering you certain separation payments and benefits set forth in Section 2 herein (the “Separation Payments”) conditional upon you executing this Agreement and agreeing to the full waiver and release of all claims and your compliance with the other terms and conditions of this agreement. Provided that the Effective Date has occurred, in exchange for your waiver and release of all claims and your agreement to abide by the other terms and conditions set forth herein, the Corporation will provide you with the following payments and benefits following your execution (and non-revocation pursuant to Section 6(ii)) of this agreement:

2.1 Salary Continuation: From the Separation Date through the second anniversary of the Separation Date, you will be provided with an amount equal to two times your annual Base Salary Rate, which will be payable in 24 equal monthly installments commencing within the 30 day period commencing on the 60th day following the Separation Date.

2.2 Executive Incentive Performance Bonus: You will remain eligible for a 2010 incentive plan bonus payable in accordance with the terms of the plan, which shall be determined in the sole direction of the Board of Directors of Patheon and in a manner consistent with the method used to determine incentive plan payouts of other senior executives of the Company. Such bonus shall be payable within three months after the end of Patheon’s fiscal year relating to 2010.

2.3 The “Effective Date” for purposes of this agreement shall be the eighth (8th) calendar day following the date that you sign and return this agreement to the Corporation, provided that you do not revoke or attempt to revoke your acceptance of this agreement prior to such date in accordance with Section 6(ii) herein.

2.4 All amounts payable to you under this agreement shall be less all applicable tax withholding and other authorized, statutory or legally required deductions.

3. Equity. Pursuant to Section 3.4 of the Employment Agreement, certain options to acquire Restricted Voting Shares of Patheon you were granted in Patheon have vested as follows: 470,000 on December 18, 2007; 420,000 on December 18, 2008; and 420,000 on December 18, 2009. Such options will continue to be governed by Section 3.4 of the Employment Agreement and the terms of the Patheon Amended And Restated Incentive Stock Option Plan dated September 4, 2008. You shall have no rights relating to any unvested options to acquire Restricted Voting Shares of Patheon.

4. Continuing Obligations. You acknowledge and agree that your covenant not to compete and other obligations set forth in Article 6 of the Employment Agreement, Section 7.9 of the Employment Agreement and the Confidentiality Undertaking continue following the Separation Date. You further acknowledge and agree that the terms of this agreement are to be treated as confidential information under the Confidentiality Undertaking.

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5. Waiver and Release.

5.1 Waiver and Release of all Claims By You. In consideration for the covenants and agreements set forth herein, the sufficiency of which you hereby acknowledge, you, on behalf of yourself and your successors, assigns, executors and administrators, voluntarily, knowingly and willingly release and forever discharge the Corporation, the Affiliated Group and JLL Partners, Inc., together with each of their respective past and present parents, subsidiaries, and affiliates, together with each of their officers, directors, stockholders, partners, employees, agents, representatives, attorneys and their respective advisors and each of their subsidiaries, affiliates, estates, predecessors, successors, and assigns (collectively, the “Releasees”) from any and all rights, claims, charges, actions, causes of action, complaints, sums of money, suits, debts, covenants, contracts, agreements, promises, obligations, damages, demands or liabilities of every kind whatsoever, in law or in equity, whether known or unknown, suspected or unsuspected (collectively, “Claims”) which you or your executors, administrators, successors or assigns ever had, now has or may hereafter claim to have by reason of any matter, cause or thing whatsoever, arising from the beginning of time up to the date of this agreement including, but not limited to: (i) any Claims arising under any foreign, federal, provincial, local, state, territory or commonwealth statute, constitution or regulation, including, without limitation, the Age Discrimination in Employment Act (ADEA), the Older Workers Benefit Protection Act (OWBPA), the Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, the Sarbanes-Oxley Act of 2002, the Worker Adjustment and Retraining Notification Act, the Rehabilitation Act of 1973, Executive Order 11246, the Family and Medical Leave Act of 1993, and/or the applicable foreign, federal, provincial, local, state, territory or commonwealth law against discrimination; (ii) Claims relating to your hiring, your employment or your cessation of employment with the Corporation, the Affiliated Group or any of the Releasees, as well as the circumstances thereof; and (iii) Claims arising under or relating to any policy, agreement, understanding or promise, written or oral, formal or informal, between the Corporation, the Affiliated Group and any of the Releasees and you existing as of the date of this agreement, including, but not limited to, the Employment Agreement. This Section 5.1 does not waive or attempt to waive (i) any Claims that cannot legally be waived; (ii) any rights you may have to file a charge with a federal or state administrative agency in the United States; provided, however, that you acknowledge and agree that, you are not entitled to any personal recovery in any such agency proceedings; (iii) any Claims you may have under this agreement; (iv) any rights you may have to defenses and indemnity under any certificate, bylaw, resolution, policy or practice of the Corporation; (v) any rights you may have under any liability insurance as provided by the Corporation; and (vi) any vested benefits you may have, subject to the terms of the plan documents.

5.2 Your Waiver and Release Includes Unknown Claims. For the purpose of implementing a full and complete release, you understand and agree that this release of claims is intended to include all claims, if any, which you may have and which you do not now know or suspect to exist in your favor against the Releasees and that this agreement extinguishes those claims. Accordingly, you expressly waive all rights afforded by any state statute or regulation in any applicable jurisdiction prohibiting, limiting, or restricting the waiver of unknown claims.

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5.3 No Other Claims. By signing this Agreement, you represent and warrant that you have not commenced or joined in any Claim whatsoever against any of the Releasees arising out of or relating to any of the matters set forth in Section 5.1 above.

5.4 No Further Rights Or Benefits. You acknowledge and agree that, other than as specifically provided above in this Agreement, you are not entitled to any compensation, rights or amounts under the Employment Agreement or any contract, plan, policy or practice, past or present, of the Corporation, the Affiliated Group or any of the other Releasees. Except as set forth above, you acknowledge and agree that as of the Separation Date, you shall not be eligible to participate or continue to participate in any employee benefit plans or compensation arrangements of the Corporation, the Affiliated Group or any of the other Releasees or otherwise be entitled to any perquisite or fringe benefit.

6. Review and Revocation. You understand and agree that you are waiving your rights under the ADEA and the OWBPA and, in accordance with those statutes, you have been informed and you understand and agree that: (i) you have fifty (50) calendar days after receipt of this agreement to consider whether to sign it; (ii) you may revoke this agreement in writing (notice to Patheon Human Relations Department) at any time during the seven (7) calendar days after this agreement is signed by you, in which case none of the provisions of this agreement will have any effect; (iii) you have been advised to consult with an attorney of your choice concerning the legal consequences of this agreement; (iv) you are not waiving, releasing, or otherwise discharging any claims under the ADEA that may arise after the date you sign this agreement; and (v) the Separation Payments provided herein constitute consideration beyond which you would be entitled to receive but for your execution (and non-revocation) of this agreement.

7. Non-Disparagement.

7.1 Your Obligation. You agree that you will not, will fully at any time, make, directly or indirectly, any oral or written public statements that are disparaging of the Corporation, the Affiliated Group or JLL Partners, Inc., or any of their respective affiliates or subsidiaries, products or services, or present or former officers, directors, partners, stockholders or employees. The Corporation, the Affiliated Group, or JLL Partners, Inc. agree that the members of the Board of Directors and Executive Committee will not willfully, at any time, make, directly or indirectly, any oral or written public statements that are disparaging of you.

7.2 Responding to Legal Process. Nothing in this agreement shall prohibit you from responding to a valid subpoena, court order or similar legal process; provided, however, that prior to you responding to a valid subpoena, court order or similar legal process which may require the disclosure of confidential information, you shall provide the Corporation, the Affiliated Group and JLL Partners, Inc. with written notice of the subpoena, court order or similar legal process sufficiently in advance of such disclosure to afford such entity a reasonable opportunity to challenge the subpoena, court order or similar legal process.

8. Return of Affiliated Group Property. You agree that you shall promptly, and in any event within three (3) business days of the Separation Date, return to the Corporation all of the

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Affiliated Group’s property and all documents and materials that in any way incorporate, reflect or constitute the Affiliated Group’s confidential and proprietary information and/or trade secrets, provided however, that you may retain your Blackberry with existing phone numbers and the contacts list contained in your Outlook data file.

9. 409A Compliance. Section 7.8 of the Employment Agreement is incorporated by reference as if restated herein. However, for the avoidance of doubt, all amounts payable to you under this agreement shall be treated as set forth in Section 2.4 herein.

10. Entire Agreement. Except as specifically provided herein, this agreement constitutes the complete, final and exclusive embodiment of the entire agreement between you, the Corporation and the Affiliated Group with regard to its subject matter. It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations, including those set forth in the Employment Agreement. This agreement may not be modified or amended except in a writing signed by both you and a duly authorized officer of the Corporation. This agreement shall bind the heirs, personal representatives, successors and assigns of both you and the Corporation, and inure to the benefit of both you and the Corporation, their heirs, successors and assigns.

11. Representations. You acknowledge and agree that, if you choose to sign this agreement, that it is executed voluntarily and without any duress or undue influence on the part of the Corporation or the Affiliated Group. You further acknowledge that, prior to executing this agreement, that you read this agreement and fully understood the terms and consequences of this agreement and of the release it contains and that you had the opportunity to consult with legal counsel of your own choice prior to executing the agreement.

12. No Admission of Liability. You understand and acknowledge that this agreement constitutes a compromise and settlement of any and all potential disputed claims. No action taken by the Corporation or the Affiliated Group hereto, either previously or in connection with this agreement, shall be deemed or construed to be: (a) an admission of the truth or falsity of any potential claims; or (b) an acknowledgment or admission by the Corporation or the Affiliated Group of any fault or liability whatsoever to you or to any third party.

13. Severability. If any provision of this agreement is determined to be invalid or unenforceable, in whole or in part, this determination will not affect any other provision of this agreement and the provision in question shall be modified by the court so as to be rendered enforceable.

14. Governing Law. This agreement shall be deemed to have been entered into and shall be construed and enforced in accordance with the laws of the State of New York without regard to its conflicts of law principles. In the event a dispute arises out of or pertains to this agreement, you and the Corporation agree to use our reasonable efforts to resolve such dispute through negotiation. In the event such dispute cannot be settled through negotiation, we agree that any action or proceeding instituted with respect thereto shall be commenced and maintained exclusively in the courts of and within the State of New York, which may exercise jurisdiction over the subject matter.

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15. Tax Advice and Information. You acknowledge that none of the Corporation, the Affiliated Group or any of their representatives have provided you with any tax advice or tax-related representations concerning the payments provided for in this agreement or any other aspect of this agreement. Further, you understand and agree that you should consult your own tax advisor(s) for any such tax advice or information.

16. Captions. The title and captions used in this agreement are for convenience only and are not to be construed in interpreting this agreement.

If you agree to its terms and conditions contained in this agreement, please sign below and return the original to me. We wish you the best of luck in your future endeavors.

Sincerely,

PATHEON PHARMACEUTICAL SERVICES INC.
By:	/s/ Eric Evans
NAME:	Eric Evans
TITLE:	CFO

I READ AND UNDERSTAND AND AGREE TO THE TERMS AND CONDITIONS OF THIS AGREEMENT, SPECIFICALLY INCLUDING THE WAIVER AND RELEASE OF ALL CLAIMS AGAINST THE CORPORATION, THE AFFILIATED GROUP AND THE OTHER RELEASEES.

ACCEPTED AND AGREED:
/s/ Wesley Wheeler	14 December 2010
Wesley Wheeler	Date

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EX-10.25

Exhibit 10.25

[PATHEON]

Wesley P. Wheeler

Chief Executive Officer & President

Patheon Inc

PO Box 110145

Research Triangle Park, NC 27709

Phone: 919-226-3201

Fax: 919-226-3202

wes.wheeler@patheon.com

December 31, 2009

PRIVATE AND CONFIDENTIAL

Peter T. Bigelow, P.E.

60 Diamond Road

Phoenixville, PA 19460-2780

Dear Peter:

RE: Employment Agreement: President, North American Operations

I am pleased to confirm the terms of your employment (“Employment Agreement”). This Employment Agreement represents your contractual arrangements with Patheon Pharmaceutical Services Inc. (the “Corporation”) and supersedes any arrangements, understandings and verbal commitments to you during our discussions.

Sincerely,

/s/ Wesley P. Wheeler

Wesley P. Wheeler

Chief Executive Officer

[PATHEON]

EMPLOYMENT AGREEMENT

THIS AGREEMENT is made as of the 31st day of December, 2009 between Patheon Pharmaceutical Services Inc. (the “Corporation”) and Peter Bigelow, an Executive residing in the City of Phoenixville, in the State of Pennsylvania (the “Executive”).

WHEREAS, the Corporation and the Executive wish to enter into this Agreement to set forth the rights and obligations of each of them with respect to the employment of the Executive.

WHEREAS, the Corporation agrees to employ the Executive on the terms and subject to the conditions set forth in this Agreement to render exclusive and full-time services to the Affiliated Group (as defined below).

NOW, THEREFORE, THIS AGREEMENT WITNESSES that in consideration of the premises and mutual covenants and agreements hereinafter contained and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the parties agree with each other as follows:

ARTICLE 1

INTERPRETATION

1.1 Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of North Carolina. Each of the parties hereby irrevocably consents to the jurisdiction of the courts in the State of North Carolina with respect to any matters arising out of this Agreement.

1.2 Definitions. In this Agreement, including Schedule A and B hereto, unless the context otherwise requires, the following terms shall have the following meanings, respectively:

(a) “Affiliated Group” means the Corporation and any entity controlled by, controlling, or under common control with the Corporation.

(b) “Agreement” means this Employment Agreement as it may be amended or supplemented from time to time.

(c) “Annual Base Salary” has the meaning given such term in Section 3.1.

(d) “Board of Directors” means the Board of Directors of Patheon.

(e) “Cause” means the determination, in good faith, by the Board of Directors, after notice to the Executive and, if curable, a reasonable opportunity to cure, that one or more of the following events has occurred: (i) the Executive has failed to perform his material duties. and such failure has not been cured after a period of 30 days notice from the Corporation; (ii) any reckless or grossly negligent act by the Executive having the effect of injuring the interests, business or reputation of any member of the Affiliated Group in any material respect; (iii) the Executive’s commission of any felony (including entry of a nolo contendere plea): (iv) any misappropriation or embezzlement of the property of any member of the Affiliated

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Group; or (v) a breach of any material provision of this Agreement by the Executive.

(f) “Change in Control” means any of the following events:

(i) Any “Person” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than JLL Partners or its affiliates, becomes a Beneficial Owner (within the meaning of Exchange Act Rule 13d-3) of more than fifty percent (50%) of the voting power of the then outstanding voting securities of Patheon entitled to vote generally in the election of directors;

(ii) There is consummated a merger or consolidation of Patheon or any direct or indirect subsidiary of Patheon with any other company, other than a merger or consolidation that would result in the voting securities of Patheon outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the securities of Patheon or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or

(iii) The stockholders of Patheon approve a plan of complete liquidation or dissolution of the company or there is consummated an agreement for the sale or disposition by Patheon of all or substantially all of its assets.

(g) “Code” means the Internal Revenue Code of 1986, as amended.

(h) “Competitor” has the meaning given such term in Section 6.4.

(i) “Date of Termination” has the meaning given such term in Section 4.5.

(j) “Effective Date” has the meaning given such term in Section 2.1.

(k) “Good Reason” means the occurrence of any of the following events without the consent of the Executive: (i) a material reduction by the Corporation of the Executive’s duties or responsibilities or the assignment to the Executive of duties or responsibilities materially inconsistent with the Executive’s position; or (ii) a material breach by the Corporation of this Agreement; or (iii) requirement by the Corporation that the Executive work more than fifty (50) miles from Executive’s principle office upon commencement of Employment. A termination of the Executive’s employment by Executive shall not be deemed to be for Good Reason unless (i) the Executive gives notice to the Corporation of the existence of the event or condition constituting Good Reason within 30 days after such event or condition initially occurs or exists, (ii) the Corporation fails to cure such event or condition within 30 days after receiving such notice, and (iii) the Executive’s “separation from service” within the meaning of Section 409A of the Code occurs not later than 90 days after such event or condition initially occurs or exists.

(l) “Patheon” means Patheon Inc.

(m) “Target Bonus” has the meaning given such term in Section 3.2.

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ARTICLE 2

EFFECTIVE DATE; TERMS OF EMPLOYMENT

2.1 Term

The Corporation hereby agrees to employ the Executive, and the Executive hereby agrees to be employed by the Corporation on the terms and subject to the conditions of this Agreement (including, without limitation. Article 6), commencing on start date (the “Effective Date”).

2.2 Position and Duties

The Executive shall serve as the President, North American Operations, with such authority, duties and responsibilities as are commensurate with such position, reporting to the Chief Executive Officer.

The Executive shall also be responsible for the functions and responsibilities set out in the Position Description for the President, North American Operations attached as Schedule A.

2.3 Time Commitments

During the Executive’s employment, the Executive shall devote substantially all of his business time, energies and talents to serving as the President, North American Operations, perform his duties conscientiously and faithfully subject to the reasonable and lawful directions of the Chief Executive Officer, and in accordance with each of the corporate governance and ethics guidelines, conflict of interests policies and code of conduct applicable to all employees or senior executives generally of the Affiliated Group. During the Executive’s employment, it shall not be a violation of this Agreement for the Executive, subject to the requirements of Article 6, to (a) fulfill speaking engagements and (b) manage personal investments, so long as such activities do not materially interfere with the performance of the Executive’s duties or responsibilities under this Agreement.

ARTICLE 3

COMPENSATION AND BENEFITS

3.1 Base Salary

The Corporation shall pay the Executive an annualized base salary (“Annual Base Salary”) at a rate of not less than $ 425,000 US, payable in regular installments in accordance with the Corporation’s normal payroll practices. The Annual Base Salary shall be reviewed by the Chief Executive Officer, for increase only, at such time as the salaries of other senior executives of Patheon are reviewed generally. If so increased, the Annual Base Salary shall be increased for all purposes of this Agreement.

3.2 Executive Performance Bonus

For each fiscal year, the Executive shall be eligible to participate in an annual incentive plan under terms and conditions no less favorable than other senior executives of Patheon; provided that the Executive’s Target Bonus shall not be less than 45% of his Annual Base Salary. The Executive’s payment under the annual incentive plan shall be

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based on meeting predetermined personal objectives and Patheon’s financial performance. The personal objectives will be set by the Chief Executive Officer, and the financial performance measures will be set by the Chief Executive Officer. For fiscal 2010, the performance bonus will be prorated from the Effective Date. The annual performance bonus, if earned, will be paid to the Executive by the Corporation in the same manner and payment period generally applicable under the annual incentive plan, but in no event later than two and a half months after the later of (i) the end of the applicable performance period, or (ii) the end of the calendar year in which the performance period ends. Nothing contained in this Section 3.2 will guarantee the Executive any specific amount of incentive compensation, or prevent the Chief Executive Officer from establishing performance goals and compensation targets applicable only to the Executive.

3.3 Sign-on Bonus

The Corporation will pay the Executive in a lump sum, within 30 business days of the Effective Date, a sign-on bonus of $ 100,000 U.S. If Executive voluntarily terminates employment with the Corporation within one year after the Effective Date, Executive shall reimburse the Corporation this $ 100,000 payment within 30 days of termination. If Executive fails to make this reimbursement payment within 30 days of termination, the Corporation shall withhold the unpaid amount from any amounts otherwise owed to the Executive (but only to the extent those amounts are not considered deferred compensation under Section 409(A).

3.4 Stock Options

(a) Subject to the approval of the Board of Directors, the Executive shall be granted a stock option to purchase 200,000 shares of common stock of Patheon at an exercise price per share equal to the market value of the common stock on the date of the grant (the “Option”). Except as otherwise provided in the Amended and Restated Incentive Stock Option Plan (the “ISOP”) or stock option award agreement (together with the ISOP, the “Stock Related Documents”), the Option will (i) vest as to 1/3 of the shares subject to the Option on each of the first three anniversaries of the date of grant, subject to the Executive’s continued employment with the Affiliated Group until the relevant vesting dates, and (ii) have a seven year term. The Option will be subject to the terms, definitions and provisions of the applicable Stock Related Documents.

(b) During the Executive’s employment, at the discretion of the Board of Directors or its delegate, the Executive also shall be eligible to receive additional stock options and other long-term incentives under the ISOP or any similar plan adopted by Patheon from time to time.

(c) The Executive will be required to comply with the terms of any share ownership guidelines applicable to senior executives of Patheon generally, as amended from time to time.

3.5 Retirement Benefits

Executive will be entitled to participate in the 401(k) retirement plan and any other qualified or nonqualified deferred compensation and retirement plans applicable to senior executives of the Corporation generally, in each case as amended from time to time.

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3.6 Other Benefit Plans

The Executive’s principal office will be at the US Headquarters location in Durham, North Carolina. The Executive will be required to relocate to Raleigh/Durham area as a condition employment. The Executive will be eligible for relocation assistance in accordance with the attached North American Tier 1 program. The move must be completed within 12 months of Executive’s employment. Notwithstanding anything to the contrary in the North American Tier 1 program, Executive shall be entitled to reimbursement for temporary living accommodations for up to a maximum of 12 months.

During the Executive’s employment, the Executive also shall be entitled to participate in all welfare, perquisites, fringe benefit, and other benefit plans, practices, policies and programs, as may be in effect from time to time, for U.S. resident-based senior executives of Patheon generally.

The Corporation shall also pay the Executive, in regular semi-monthly installments, an allowance of $ 1,200 allowance for level US per month for car related expenses.

3.7 Expenses

The Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses actually and properly incurred by the Executive during the Executive’s employment in connection with carrying out his duties hereunder in accordance with the Corporation’s policies, as may be in effect from time to time, for its senior executives generally.

3.9 Vacation

During the Executive’s employment, the Executive shall be entitled to four (4) weeks paid vacation in addition to four (4) floating holidays annually in accordance with the Corporation’s policies, as may be in effect from time to time, for its senior executives generally.

ARTICLE 4

TERMINATION OF EMPLOYMENT

4.1 Death or Disability

The Executive’s employment shall terminate automatically upon the Executive’s death. If the Corporation determines in good faith that the Disability (as defined below) of the Executive has occurred during the Executive’s employment, it may give to the Executive written notice in accordance with Section 7.4 of this Agreement of its intention to terminate the Executive’s employment; provided that such notice is provided no later than 150 days following the Executive’s first day of Disability. In such event, the Executive’s employment shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the failure of the Executive to perform his duties under this Agreement for at least 90 consecutive business days as a result of any medically determinable physical or mental impairment. The determination of Disability shall be made by a physician selected by the Corporation

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or its insurers and reasonably acceptable to the Executive or the Executive’s legal representative.

4.2 Cause

The Executive’s employment with the Corporation may be terminated with or without Cause.

4.3 Good Reason

The Executive’s employment with the Corporation may be terminated by the Executive with or without Good Reason.

4.4 Notice of Termination

Any termination by the Corporation for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party in accordance with Section 7.4. For purposes of this Agreement, a “Notice of Termination” means a written notice which (a) indicates the specific termination provision in this Agreement relied upon, (b) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (c) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Corporation or the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Corporation or the Executive, respectively, hereunder or preclude the Corporation or the Executive, respectively, from asserting such fact or circumstance in enforcing the Corporation’s or the Executive’s rights hereunder.

4.5 Date of Termination

“Date of Termination” means (a) if the Executive’s employment is terminated by the Corporation for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (b) if the Executive’s employment is terminated by the Corporation other than for Cause or Disability, the Date of Termination shall be the date on which the Corporation notifies the Executive of such termination and (c) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. The Corporation and the Executive shall take all steps necessary (including with regard to any post-termination services by the Executive) to ensure that any termination described in this Section 4.5 constitutes a “separation from service” within the meaning of Section 409A of the Code, and the date on which such separation from service takes place shall be the “Date of Termination.”

4.6 Resignation from All Positions

Notwithstanding any other provision of this Agreement, upon the termination of the Executive’s employment for any reason, unless otherwise requested by the Board of Directors, the Executive shall immediately resign as of the Date of Termination from all positions that he holds or has ever held with the Affiliated Group (and with any other

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entities with respect to which the Affiliated Group has requested the Executive to perform services). The Executive hereby agrees to execute any and all documentation to effectuate such resignations upon request by the Corporation, but he shall be treated for all purposes as having so resigned upon termination of his employment, regardless of when or whether he executes any such documentation.

ARTICLE 5

OBLIGATIONS OF CORPORATION UPON TERMINATION

5.1 Good Reason; Other than for Cause

If the Corporation shall terminate the Executive’s employment other than for Cause, or if the Executive shall terminate the Executive’s employment for Good Reason:

(a) The Corporation shall pay, or cause to be paid, to the Executive in a lump sum in cash the sum of: (i) the Executive’s Annual Base Salary through the Date of Termination, and (ii) any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (i) and (ii) shall be hereinafter referred to as the “Accrued Obligations”). The Accrued Obligations shall be paid within 30 days after the Date of Termination.

(b) The Corporation shall pay, or cause to be paid, to the Executive an amount equal to the Executive’s Annual Base Salary plus an amount determined by the Board of Directors in its sole discretion to reflect the annual incentive the Executive would have otherwise earned during the year in which the Date of Termination occurs. Such amount shall generally be paid in cash in twelve equal monthly installments beginning within 60 days after the Date of Termination or such later date set forth in Section 7.8. Notwithstanding the foregoing, if the severance benefit described in this Section 5.1(b) exceeds two times the lesser of (i) the Executive’s annual compensation or (ii) the compensation limit in effect under Section 401(a)(17) of the Code for the calendar year including the Date of Termination, any amounts not yet paid as of the “short-term deferral date” shall be paid in a lump sum on the “short-term deferral date.” The “short-term deferral date” is the date that is two and one-half months after the end of the later of (i) the calendar year containing the Date of Termination or (ii) the Company’s fiscal year containing the Date of Termination. Such payment shall be paid to Executive within 30 days after the Date of Termination.

(c) To the extent not theretofore paid or provided, the Affiliated Group shall pay or provide, or cause to be paid or provided, to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Affiliated Group (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”), in accordance with the terms and normal procedures of each such plan, program, policy or practice or contract or agreement, based on accrued and vested benefits through the Date of Termination.

(d) If the Date of Termination occurs within six months after the occurrence of a Change in Control, any stock options to purchase shares of the common stock of Patheon then held by the Executive shall, to the extent not otherwise provided in the applicable Stock Related Documents, become immediately vested and exercisable and shall remain exercisable for a period of (12) months from the Date of Termination.

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If the Executive receives payments and benefits pursuant to this Section 5.1, then the Executive shall not be entitled to any other severance pay or benefits under any severance plan, program or policy of any member of the Affiliated Group, unless otherwise specifically provided therein in a specific reference to this Agreement.

5.2 Death or Disability; Cause; Other than for Good Reason

If the Executive’s employment is terminated due to death or Disability or for Cause, or if the Executive voluntarily terminates his employment without Good Reason, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive his Accrued Obligations through the Date of Termination and the Other Benefits, in each case to the extent not theretofore paid or provided. Subject to any withholding required by Section 3.3, all Accrued Obligations shall be paid to the Executive in accordance with Section 5.1(a) and the Other Benefits shall be paid to the Executive in accordance with Section 5.1(c).

5.3 Release

Notwithstanding anything contained herein to the contrary, the Corporation shall only be obligated to make the payments under Section 5.1(b) if: (a) within the 50-day period after the Date of Termination, the Executive executes a general release, in a form provided by the Corporation, of all current or future claims, known or unknown, against the Affiliated Group, its officers, directors, shareholders, employees and agents arising on or before the date of the release, including but not limited to all claims arising out of the Executive’s employment with the Affiliated Group or the termination of such employment, and (b) the Executive does not revoke the release during the seven-day revocation period prescribed by the Age Discrimination in Employment Act of 1967, as amended, or any similar revocation period, if applicable. The Corporation shall be obligated to provide such release to the Executive promptly following the Date of Termination.

ARTICLE 6

RESTRICTIVE COVENANTS

6.1 In General

The Executive acknowledges that in the course of his employment he will become familiar with trade secrets and customer lists of and other confidential information concerning the Affiliated Group and that his services have been of special, unique and extraordinary value to the Affiliated Group.

6.2 Confidentiality Undertaking

The Executive confirms that he is bound by the provisions of the Confidentiality Undertaking covenant set out in Schedule B hereto.

6.3 Non-Solicitation/No-Hire

(a) During the 12-month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, hire, solicit, induce or attempt to solicit or induce any employee of any member of the Affiliated Group to quit or abandon his or her employ or to become an officer, agent, employee, partner, director, consultant or independent contractor of the Executive, his affiliates or any other individual or entity.

Page 9

(b) During the 12-month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, hire, solicit, induce or attempt to solicit or induce, any customer, supplier or licensor of any member of the Affiliated Group to cease doing business with any member of the Affiliated Group, or in any way interfere with the relationships between any customer, supplier or licensor of the Affiliated Group.

6.4 Non-Competition

During the 12-month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, compete with the business of any member of the Affiliated Group by (a) becoming an officer, agent, employee, partner, director, consultant, independent contractor of a Competitor, or (b) acquiring an ownership interest in a Competitor, provided that the Executive may, for investment purposes, own not more than 1% of the outstanding stock of any class of a Competitor that is listed on a recognized stock exchange or traded in the over-the-counter market in Canada or the United States. For purposes of this Agreement, the term “Competitor” shall mean any person or entity whose primary business is in contract pharmaceutical development, pharmaceutical contract manufacturing and/or packaging for pharmaceutical products and/or clinical drug supplies in Canada, the United States (including the Commonwealth of Puerto Rico), India or Europe.

6.5 Reasonableness and Revision

The Executive agrees and acknowledges that due to the uniqueness of his services and the confidential nature of the information he will possess, the covenants set forth in this Article 6 and Schedule B are reasonable and necessary for the protection of the business interests and goodwill of the Affiliated Group. Moreover, the geographic restriction on competitive activities by the Executive is reasonable, given the global nature of the Affiliated Group’s business and the Executive’s role in that business. If, at the time of enforcement of this Article and/or Schedule B, a court or other tribunal holds that the restrictions herein are in whole or in part unreasonable under circumstances then existing, the parties agree that the maximum period or scope reasonable under such circumstances will be substituted for the stated period or scope and that the court or other tribunal shall be authorized and directed by the parties to revise the restrictions contained herein to cover the maximum period or scope permitted by law.

6.6 Acknowledgements

The Executive agrees and acknowledges that the promises and obligations made by the Corporation in this Agreement (specifically including, but not limited to, the payments and benefits provided for under Section 5.1(b) and (d) hereof) constitute sufficient consideration for the covenants contained in this Article 6. The Executive further acknowledges that it is not the Affiliated Group’s intention to interfere in any way with his employment opportunities, except in such situations where the same conflict with the legitimate business interests of the Affiliated Group. The Executive agrees that he will notify the Corporation in writing if he has, or reasonably should have, any questions regarding the applicability of this Article 6.

6.7 Enforcement

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Because the Executive’s services are unique and because the Executive has access to Confidential Information and work product, the parties agree that the Affiliated Group will be damaged irreparably in the event any of the provisions of Section 6.2, 6.3 and 6.4 are not performed in accordance with their specific terms or are otherwise breached and that money damages will be an inadequate remedy for any such non-performance or breach. Therefore, any one or more of the members of the Affiliated Group, or their respective successors and assigns, will be entitled, in addition to other rights and remedies existing in their favor, to an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). The Executive agrees and acknowledges that he will not assert in any such enforcement action that there is an adequate remedy in damages and that such rights and remedies will be in addition to and not in lieu of any other rights or remedies available to the Affiliated Group at law or in equity.

6.8 Survival

Subject to any limits on applicability contained therein, this Article 6 shall survive and continue in full force in accordance with its terms notwithstanding any expiration or termination of this Agreement.

ARTICLE 7

GENERAL PROVISIONS

7.1 Entire Agreement

This Agreement together with Schedules A and B attached hereto when executed by both parties shall constitute the entire agreement pertaining to the Executive’s employment and supersedes all prior agreements, understandings, negotiations and discussions, whether written or oral, pertaining to the Executive’s employment, and there are no representations, undertakings or agreements of any kind between the parties respecting the subject matter hereof except those contained herein.

7.2 Severability

If any provision of this Agreement is declared void or unenforceable, such provision shall be deemed severed from this Agreement to the extent of the particular circumstances giving rise to such declaration and such provision as it applies to other persons and circumstances and the remaining terms and conditions of this Agreement shall remain in full force and effect.

7.3 Representations

The Executive represents and warrants that (a) he is not a party to any contract, understanding, agreement or policy, whether or not written, with his current employer (or any previous employer) or otherwise, that would be breached by the Executive’s entering into, or performing services under, this Agreement and (b) will not knowingly use any trade secret, confidential information, or other intellectual property right of any other party in the performance of his duties hereunder. The Executive will indemnify, defend, and hold each member of the Affiliated Group harmless, from any and all suits and claims arising out of any breach of such restrictive contracts, understandings, agreements or policies.

7.4 Notices

Page 11

All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

Peter T. Bigelow, P.E.

60 Diamond Road

Phoenixville, PA 19460-2780

If to the Corporation:

Attention:

Executive Human Resources

Patheon Pharmaceutical Services Inc.

P.O. Box 110145

Research Triangle Park, North Carolina 27709-9998

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

7.5 Withholding

The Corporation may withhold from any amounts payable under this Agreement such Federal, state, local, foreign or other taxes as shall be required to be withheld pursuant to any applicable law or regulation.

7.6 Waiver

The Executive’s or the Corporation’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Corporation may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

7.7 Successors

(a) This Agreement is personal to the Executive is not assignable by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives. This Agreement shall inure to the benefit of and be binding upon the Corporation, the other members of the Affiliated Group, and their respective successors and assigns.

(b) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Patheon or the Corporation to assume expressly and agree to perform this Agreement in the same manner and to the same extent that

Page 12

the Corporation would be required to perform if no such succession had taken place.

7.8 Compliance with Section 409A of the Code

(a) It is the Corporation’s intent that the payments and benefits provided under this Agreement shall be exempt from the application of, or otherwise comply with, the requirements of Section 409A of the Code (“Section 409A”). Specifically, any taxable benefits or payments provided under this Agreement are intended to be separate payments that qualify for the “short-term deferral” exception to Section 409A to the maximum extent possible, and to the extent they do not so qualify, are intended to qualify for the involuntary separation pay exceptions to Section 409A to the maximum extent possible. This Agreement shall be construed, administered, and governed in a manner that effects such intent, and the Corporation shall not take any action that would be inconsistent with such intent. Without limiting the foregoing, the payments and benefits provided under this Agreement may not be deferred, accelerated, extended, paid out or modified in a manner that would result in the imposition of an additional tax under Section 409A upon the Executive.

(b) If neither the “short-term deferral” or the involuntary separation pay exceptions to Section 409A described above applies to a benefit, payment or reimbursement under this Agreement, then notwithstanding any provision in this Plan to the contrary, the remaining provisions of this Section 7.8(b) shall apply.

(i) If the Executive is a “specified employee,” as determined under the Corporation’s policy for identifying specified employees on the Date of Termination, then to the extent required in order to comply with Section 409A of the Code, all payments, benefits or reimbursements paid or provided under this Agreement that constitute a “deferral of compensation” within the meaning of Section 409A of the Code, that are provided as a result of a “separation from service” within the meaning of Section 409A and that would otherwise be paid or provided during the first six months following such Date of Termination shall be accumulated through and paid or provided (together with interest on the delayed amount at the applicable federal rate under Section 7872(f)(2)(A) of the Code in effect on the Date of Termination) within 30 days after the first business day following the six month anniversary of such Date of Termination (or, if the Executive dies during such six-month period, within 30 days after the Executive’s death).

(ii) To the extent required to comply with Section 409A Code, any reimbursement of expenses pursuant to Section 2.4(b), 2.4(c) or 3.8, that will not be excluded from Executive’s income when received is subject to the following requirements: (i) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided in any other calendar year; (ii) the reimbursement of the eligible expense must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (iii) the right to reimbursement is not subject to liquidation or exchange for another benefit.

Page 13

(c) Although the Corporation shall use its best efforts to avoid the imposition of taxation, interest and penalties under Section 409A of the Code, the tax treatment of the benefits provided under this Agreement is not warranted or guaranteed. Neither the Affiliated Group nor its directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by the Executive or other taxpayer as a result of the Agreement. Any reference in this Agreement to Section 409A of the Code will also include any proposed, temporary or final regulations; or any other guidance, promulgated with respect to such Section 409A by the U.S. Department of Treasury or the Internal Revenue Service.

NOW THEREFORE, the parties below have entered into this Agreement as of the date first written above.

PATHEON PHARMACEUTICAL SERVICES INC.

/s/ Wes Wheeler

By: Wes Wheeler

Title: Chief Executive Officer and President

SIGNED, SEALED AND DELIVERED	)
in the presence of	)
	)
/s/ Mitchell Wienick	)	/s/ Peter T. Bigelow
Name of Witness: Mitchell Wienick		Peter T. Bigelow
		Jan 7, 2010

Page 14

[PATHEON]

SCHEDULE A

TO

EMPLOYMENT AGREEMENT WITH

Peter T. Bigelow

PATHEON INC.

POSITION DESCRIPTION

President, North American Operations

The responsibilities will include all necessary to operate, grow and successfully lead the six operating facilities in this region: Cincinnati, Toronto, Whitby, Burlington. Caguas and Manati. You will be responsible for negotiating new contracts, extend existing contracts, optimizing your business and maximizing EBITDA and operating cashflow. You will have a P&L, balance sheet and cash flow to manage. You will also be asked to locate and acquire new plants, work with large pharma companies as they re-structure their own networks and find opportunities.

Operational duties and responsibilities include:

• The execution of corporate plans and strategies as they relate to areas of operation responsibility.

• The development of appropriate operating strategies to support the Patheon business plans and growth initiatives.

• The overall management of all Canadian and US Sites, working closely with each Site Executive Director and GM.

• Ensuring that Patheon’s Canadian and US operations have adequate physical and human resource capacity to meet client needs and support Patheon’s growth objectives.

• The development and management of Canadian and US Site operating budgets and capital expenditure programs.

• The development and monitoring of programs and actions needed to ensure that each Canadian and US site operates in compliance with cGMP’s, client requirements and Patheon’s quality policies and goals.

• The overall responsibility for client service functions at all Canadian and US sites to ensure that each site achieves and consistently maintains exceptional client service levels.

• The development and maintenance of each Canadian and US site as a client oriented operating business unit in accordance with the Patheon operating philosophy.

• The participation, with other members of Patheon’s Executive Management Team, in presentations and preparation of proposals to prospective clients. Primary responsibility for the development and implementation of the operating plans needed to support new business opportunities.

• Membership on the Executive Committee.

December 18, 2009

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[PATHEON]

SCHEDULE B

TO

EMPLOYMENT AGREEMENT WITH

Peter T. Bigelow

CONFIDENTIALITY UNDERTAKING

In consideration of Peter T. Bigelow (the “Executive”) accepting an employment agreement between the Executive and Patheon Pharmaceuticals Services Inc. dated December 18, 2009 (the “Agreement”) to which this Confidentiality Undertaking is attached as Schedule B, the Executive undertakes and covenants with the Affiliated Group (as defined in the Agreement) as follows:

1. CONFIDENTIAL INFORMATION

1.1 Confidential Information

The Executive acknowledges that all information and facts relating to the business and affairs of the Affiliated Group and its customers, including, without limitation, trade secrets, data, notes, marketing plans, sales patterns, and private corporate and financial information (the “Confidential Information”) is confidential and proprietary to the Affiliated Group and a valuable trade secret of the Affiliated Group, disclosure of which could severely damage the economic interests of the Affiliated Group. Confidential Information includes, without limitation, any document, work, instrument or other medium assembled or composed by the Executive which contains Confidential Information.

1.2 Non-Disclosure of Confidential Information

The Executive shall not, either during the term of the Agreement or at any time thereafter. use or disclose, directly or indirectly, any of such Confidential Information to any person outside the Affiliated Group, except where such disclosure is necessary for the proper and bona fide execution of the Executive’s duties under the Agreement, without the prior written consent of the Affiliated Group. The Executive’s obligation not to use or disclose Confidential Information without prior written consent shall continue to apply after the Executive has ceased to be an employee of the Affiliated Group until such time as the Confidential Information becomes public knowledge through no fault of the Executive. The Affiliated Group will have full right, title and authority to deal in and with the proprietary rights and the Confidential Information notwithstanding any other provision of the Agreement or the termination thereof for any reason whatsoever. The Executive acknowledges and agrees that the restrictions contained in this Article 1 are reasonable in the circumstances in order to protect the business of the Affiliated Group.

1.3 Return of Confidential Information

Confidential Information and the documents, works, instruments or other media containing Confidential Information shall remain the property of the Affiliated Group and be returned to the Affiliated Group upon request or immediately following termination of the Agreement for any reason whatsoever.

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2. INVENTIONS

2.1 Inventions

Subject to Section 2.2, the Executive agrees that all discoveries, improvements, designs, ideas or inventions made or conceived, in whole or in part, by the Executive during the term of the Agreement or within three years following termination of the Agreement for any reason whatsoever (the “Inventions”) shall be the sole property of the Affiliated Group. The Executive shall:

(a) promptly disclose and describe all such Inventions in writing to the Affiliated Group;

(b) assign, and the Executive does hereby assign, to the Affiliated Group, without further compensation, all of the Executive’s rights, title and interest in and to such Inventions and to all applications for letters of patent, copyrights, industrial design or other forms of protection granted for such Inventions throughout the world;

(c) deliver promptly to the Affiliated Group, upon request and in the form and manner prescribed by the Affiliated Group (without charge to the Affiliated Group but at the Affiliated Group’s expense) the written instruments described in paragraph (b) and perform such acts as deemed necessary by the Affiliated Group to obtain and maintain such instruments and to transfer all rights and title thereto to the Affiliated Group; and

(d) give all assistance that may be required by the Affiliated Group to enable it to protect or exploit the Inventions in any country of the world.

The Executive does hereby waive in whole any moral rights that the Executive may have in each of the Inventions and any part or parts thereof, including, but not limited to, the right to the integrity of the Inventions, the right to be associated with the Inventions as its author by name or under a pseudonym and the right to remain anonymous.

2.2 Excluded Inventions

The provisions of Section 2.1 shall not apply to Inventions which fulfill all of the following criteria:

(a) Inventions for which no equipment, supplies, facility or Confidential Information belonging to the Affiliated Group were used; and

(b) Inventions that do not relate to the business of the Affiliated Group or to the Affiliated Group’s actual or demonstrably anticipated processes, research or development which the Executive had access to or knowledge of; and

(c) Inventions that do not result from any work performed by the Executive for the Affiliated Group.

3. GENERAL

This Confidentiality Undertaking shall be governed and construed in accordance with the laws of North Carolina applicable therein. Nothing herein shall be construed so as to limit any obligations owed by you to the Affiliated Group as a matter of common law. The Executive acknowledges that the business of the Affiliated Group cannot be properly protected from

Page 17

adverse consequences of the Executive’s actions other than by the restrictions set forth in this Undertaking and the Agreement. The Affiliated Group, in addition to any other right or relief to which it may be entitled, shall be entitled to an injunction restricting further breaches of this Undertaking or the Agreement. This Confidentiality Undertaking shall survive the termination of the Agreement and the Executive’s employment thereunder.

IN WITNESS WHEREOF this Confidentiality Undertaking has been executed by the undersigned on this 07 day of Jan, 2010.

SIGNED, SEALED AND DELIVERED	)
in the presence of	)
	)
	)	/s/ Peter T. Bigelow
Name of Witness:		Peter T. Bigelow

Page 18

EX-10.26

Exhibit 10.26

[PATHEON]

Date: November 21, 2008

PRIVATE AND CONFIDENTIAL

Eric W. Evans

85 Linwood Circle

Princeton, NJ 08540

Dear Eric:

RE: Employment Agreement

I am pleased to confirm the terms of your employment (“Employment Agreement”), dated November 21, 2008. This Employment Agreement represents your contractual arrangements with Patheon Pharmaceutical Services Inc. (the “Corporation”) and supersedes any arrangements, understandings and verbal commitments to you during our discussions.

Sincerely,

/s/ Wesley P. Wheeler

Wesley P. Wheeler

Chief Executive Officer

[PATHEON]

EMPLOYMENT AGREEMENT

THIS AGREEMENT is made as of the 23rd day of July, 2008 between Patheon Pharmaceutical Services Inc. (the “Corporation”) and Eric W. Evans, an Executive residing in the City of Princeton, in the State of New Jersey, (the “Executive”).

WHEREAS, the Corporation and the Executive wish to enter into this Agreement to set forth the rights and obligations of each of them with respect to the employment of the Executive.

WHEREAS, the Corporation agrees to employ the Executive on the terms and subject to the conditions set forth in this Agreement to render exclusive and full-time services to the Affiliated Group (as defined below).

NOW, THEREFORE, THIS AGREEMENT WITNESSES that in consideration of the premises and mutual covenants and agreements hereinafter contained and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the parties agree with each other as follows:

ARTICLE 1

INTERPRETATION

1.1 Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of New York. Each of the parties hereby irrevocably consents to the jurisdiction of the courts in the State of New York, with respect to any matters arising out of this Agreement.

1.2 Definitions. In this Agreement, including Schedule A and B hereto, unless the context otherwise requires, the following terms shall have the following meanings, respectively:

(a) “Affiliated Group” means the Corporation and any entity controlled by, controlling, or under common control with the Corporation.

(b) “Agreement” means this Employment Agreement as it may be amended or supplemented from time to time.

(c) “Annual Base Salary” has the meaning given such term in Section 3.1.

(d) “Board of Directors” means the Board of Directors of Patheon.

(e) “Cause” means the determination, in good faith, by the Board of Directors, after notice to the Executive and, if curable, a reasonable opportunity to cure, that one or more of the following events has occurred: (i) the Executive has failed to perform his material duties, and such failure has not been cured after a period of

30 days notice from the Corporation; (ii) any reckless or grossly negligent act by the Executive having the effect of injuring the interests, business or reputation of any member of the Affiliated Group in any material respect; (iii) the Executive’s commission of any felony (including entry of a nolo contendere plea); (iv) any misappropriation or embezzlement of the property of any member of the Affiliated Group; or (v) a breach of any material provision of this Agreement by the Executive.

(f) “Change in Control” means any of the following events:

(i) Any “Person” (within the meaning of section 13(d)(3) or 14(d)(2} of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than JLL Partners or its affiliates, becomes a Beneficial Owner (within the meaning of Exchange Act Rule 13d-3) of more than fifty percent (50%) of the voting power of the then outstanding voting securities of Patheon entitled to vote generally in the election of directors;

(ii) There is consummated a merger or consolidation of Patheon or any direct or indirect subsidiary of Patheon with any other company, other than a merger or consolidation that would result in the voting securities of Patheon outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the securities of Patheon or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or

(iii) The stockholders of Patheon approve a plan of complete liquidation or dissolution of the company or there is consummated an agreement for the sale or disposition by Patheon of all or substantially all of its assets.

(g) “Code” means the Internal Revenue Code of 1986, as amended.

(h) “Competitor” has the meaning given such term in Section 6.4.

(i) “Date of Termination” has the meaning given such term in Section 4.5.

(j) “Effective Date” has the meaning given such term in Section 2.1.

(k) “Good Reason” means the occurrence of any of the following events without the consent of the Executive: (i) a material reduction by the Corporation of the Executive’s duties or responsibilities or the assignment to the Executive of duties or responsibilities or the assignment to the Executive of duties materially inconsistent with such position; or (ii) a material breach by the Corporation of this Agreement. A termination of the Executive’s employment by Executive shall not be deemed to be for Good Reason unless (i) the Executive gives notice to the Corporation of the existence of the event or condition constituting Good Reason within 30 days after such event or condition initially occurs or exists, (ii) the Corporation fails to cure such event or condition within 30 days after receiving

such notice, and (iii) the Executive’s “separation from service” within the meaning of Section 409A of the Code occurs not later than 90 days after such event or condition initially occurs or exists.

(l) “Patheon” means Patheon Inc.

(m) “Target Bonus” has the meaning given such term in Section 3.2.

ARTICLE 2

EFFECTIVE DATE; TERMS OF EMPLOYMENT

2.1 Term

The Corporation hereby agrees to employ the Executive, and the Executive hereby agrees to be employed by the Corporation on the terms and subject to the conditions of this Agreement (including, without limitation, Article 6), commencing on May 27, 2008, (the “Effective Date”).

2.2 Position and Duties

The Executive shall serve as the Chief Financial Officer of Patheon, with such authority, duties and responsibilities as are commensurate with such position, reporting to the Chief Executive Officer. In addition, the Executive will be a member of the Patheon Executive Committee and become legal officer on all related US and Canadian subsidiaries.

The Executive shall also be responsible for the functions and responsibilities set out in the Position Description for the Chief Financial Officer, attached as Schedule A.

2.3 Time Commitments

During the Executive’s employment, the Executive shall devote substantially all of his business time, energies and talents to serving as the Chief Financial Officer of Patheon, perform his duties conscientiously and faithfully subject to the reasonable and lawful directions of the Chief Executive Officer, and in accordance with each of the corporate governance and ethics guidelines, conflict of interests policies and code of conduct applicable to all employees or senior executives generally of the Affiliated Group. During the Executive’s employment, it shall not be a violation of this Agreement for the Executive, subject to the requirements of Article 6, to (a) serve on corporate, civic or charitable boards or committees, (b) deliver lectures or fulfill speaking engagements and (c) manage personal investments, so long as such activities do not materially interfere with the performance of the Executive’s duties or responsibilities under this Agreement

2.4 Location

(a) Initially, it is understood that the Executive’s principal office will be a home office located in the Executive’s residence in the city of Princeton, New Jersey.

(b) While the Executive’s principal office is located in the Executive’s residence, the Corporation shall reimburse the Executive for reasonable automobile expenses and travel expenses associated with him commuting from his personal residence in New Jersey to Patheon’s current corporate headquarters during this period. Reimbursements under this section 2.4(b) shall be paid to the Executive in the calendar month after the month in which they are incurred, subject to such reasonable documentation requirements as may be requested from time to time by the Corporation.

(c) When the new U.S. headquarters location in North Carolina is available for occupancy, the Corporation will require the Executive to be based within this facility. Under the terms of Patheon’s Tier 1 relocation program, the Executive shall be reimbursed for all reasonable transaction costs and expenses (including any real estate brokerage fees, commissions and closing costs, but excluding any loss on the sale of the Executive’s personal residence) and moving expenses incurred by the Executive, in connection with relocating the Executive’s spouse, dependents and personal property and goods from the Executive’s current residence. Reimbursements under this Section 2.4(c) shall be paid to the Executive in the calendar month after the month that they are incurred, subject to such reasonable documentation requirements as may be requested from time to time by the Corporation.

ARTICLE 3

COMPENSATION AND BENEFITS

3.1 Base Salary

The Corporation shall pay the Executive an annualized base salary “‘Annual Base Salary”) at a rate of not less than $350,000 US, payable in regular installments in accordance with the Corporation’s normal payroll practices. The Annual Base Salary shall be reviewed by the Chief Executive Officer, for increase only, at such time as the salaries of other senior executives of Patheon are reviewed generally. If so increased, the Annual Base Salary shall be increased for all purposes of this Agreement.

3.2 Executive Performance Bonus

For each fiscal year, the Executive shall be eligible to participate in an annual incentive plan under terms and conditions no less favorable than other senior executives of Patheon; provided that the Executive’s “target” annual bonus opportunity shall not be less than 45% of his Annual Base Salary. The Executive’s payment under the annual incentive plan shall be based on meeting predetermined personal objectives and Patheon’s financial performance. Both the personal objectives and financial performance measures will be recommended by the Executive and subject to final approval by the Chief Executive Officer. For fiscal 2008, the performance bonus will be prorated from the Effective Date of this Agreement. The annual performance bonus, if earned, will be paid to the Executive by the Corporation in the same manner and payment period generally applicable under the annual incentive plan, but in no event later than two and a half months after the later of (i) the end of the applicable performance period, or (ii) the end of the calendar year in which the performance period ends. Nothing contained in this Section 3.2 will guarantee the Executive any specific

amount of incentive compensation, or prevent the Chief Executive Officer from establishing performance goals and compensation targets applicable only to the Executive.

3.3 Sign-on Bonus

The Corporation will pay the Executive in a lump sum, within 30 business days of the Effective Date, a sign-on bonus of $50,000 U.S. If Executive voluntarily terminates employment with the Corporation other than for Good Reason within one year after the Effective Date, Executive shall reimburse the Corporation this $50,000 payment within 30 days of termination. If Executive fails to make this reimbursement payment within 30 days of termination, the Corporation shall withhold the unpaid amount from any amounts otherwise owed to the Executive (but only to the extent those amounts are not considered deferred compensation under Section 409A).

3.4 Equity Compensation

(a) Subject to the approval of the Board of Directors, the Executive shall be granted a stock option to purchase 200,000 shares of common stock of Patheon at an exercise price per share equal to the market value of the common stock on the date of the grant (the “Option”). Except as otherwise provided in the Amended and Restated Incentive Stock Option Plan (the “ISOP”) or stock option award agreement (together with the ISOP, the “Stock Related Documents”), the Option will (i) vest as to 1/3 of the shares, subject to the Option on each of the first three anniversaries of the date of grant, subject to the Executive’s continued employment with the Affiliated Group until the relevant vesting dates, and (ii) have a seven year term. The Option will be subject to the terms, definitions and provisions of the applicable Stock Related Documents.

(b) During the Executive’s employment, at the discretion of the Board of Directors or its delegate, the Executive also shall be eligible to receive additional stock options and other long-term incentives under the ISOP or any similar plan adopted by Patheon from time to time.

(c) Upon the occurrence of a Change in Control, any stock options to purchase shares of the common stock of Patheon then held by the Executive shall, to the extent not otherwise provided in the applicable Stock Related Documents, become immediately vested and exercisable and shall remain exercisable for the remaining term of such stock option (which remaining term shall be determined without regard to the Executive’s termination of employment).

(d) The Executive will be required to comply with the terms of any share ownership guidelines applicable to senior executives of Patheon generally, as amended from time to time.

3.5 Retirement Benefits

Executive will be entitled to participate in the 401(k) retirement plan and any other qualified or nonqualified deferred compensation and retirement plans maintained by the

Corporation applicable to senior executives of the Corporation generally, in each case as amended from time to time.

3.6 Other Benefit Plans

During the Executive’s employment, the Executive also shall be entitled to participate in all welfare, perquisites, fringe benefit, and other benefit plans, practices, policies and programs, as may be in effect from time to time, for U.S. resident-based senior executives of Patheon generally.

The Corporation shall also pay the Executive, in regular semi-monthly installments, an allowance of $1,200 US per month for car related expenses.

In addition, beginning with calendar year 2009, the Corporation shall pay for an annual club membership of the Executive’s choice up to $2,000 per annum. This club membership payment shall be made in cash to the Executive in January of each year once documentation of the expenditure or invoice has been provided to Patheon.

3.7 Expenses

The Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses actually and properly incurred by the Executive during the Executive’s employment in connection with carrying out his duties hereunder in accordance with the Corporation’s policies, as may be in effect from time to time, for its senior executives generally.

3.8 Vacation

During the Executive’s employment, the Executive shall be entitled to four (4) weeks paid vacation in addition to four (4) floating holidays annually in accordance with the Corporation’s policies, as may be in effect from time to time, for its senior executives generally.

ARTICLE 4

TERMINATION OF EMPLOYMENT

4.1 Death or Disability

The Executive’s employment shall terminate automatically upon the Executive’s death. If the Corporation determines in good faith that the Disability (as defined below) of the Executive has occurred during the Executive’s employment, it may give to the Executive written notice in accordance with Section 7.4 of this Agreement of its intention to terminate the Executive’s employment; provided that such notice is provided no later than 150 days following the Executive’s first day of Disability. In such event, the Executive’s employment shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the

Executive’s duties. For purposes of this Agreement, “Disability” shall mean the failure of the Executive to perform his duties under this Agreement for at least 90 consecutive business days as a result of any medically determinable physical or mental impairment. The determination of Disability shall be made by a physician selected by the Corporation or its insurers and reasonably acceptable to the Executive or the Executive’s legal representative.

4.2 Cause

The Executive’s employment with the Corporation may be terminated with or without Cause.

4.3 Good Reason

The Executive’s employment with the Corporation may be terminated by the Executive with or without Good Reason.

4.4 Notice of Termination

Any termination by the Corporation for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party in accordance with Section 7.4. For purposes of this Agreement, a “Notice of Termination” means a written notice which (a) indicates the specific termination provision in this Agreement relied upon, (b) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (c) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Corporation or the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Corporation or the Executive, respectively, hereunder or preclude the Corporation or the Executive, respectively, from asserting such fact or circumstance in enforcing the Corporation’s or the Executive’s rights hereunder.

4.5 Date of Termination

“Date of Termination” means (a) if the Executive’s employment is terminated by the Corporation for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (b) if the Executive’s employment is terminated by the Corporation other than for Cause or Disability, the Date of Termination shall be the date on which the Corporation notifies the Executive of such termination and (c) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. The Corporation and the Executive shall take all steps necessary (including with regard to any post-termination services by the Executive) to ensure that any termination described in this Section 4.5 constitutes a “separation from service” within the meaning of Section 409A of the Code, and the date on which such separation from service takes place shall be the “Date of Termination.”

4.6 Resignation from All Positions

Notwithstanding any other provision of this Agreement, upon the termination of the Executive’s employment for any reason, unless otherwise requested by the Board of Directors, the Executive shall immediately resign as of the Date of Termination from all positions that he holds or has ever held with the Affiliated Group (and with any other entities with respect to which the Affiliated Group has requested the Executive to perform services). The Executive hereby agrees to execute any and all documentation to effectuate such resignations upon request by the Corporation, but he shall be treated for all purposes as having so resigned upon termination of his employment, regardless of when or whether he executes any such documentation.

ARTICLE 5

OBLIGATIONS OF CORPORATION UPON TERMINATION

5.1 Good Reason; Other than for Cause

If the Corporation shall terminate the Executive’s employment other than for Cause, or if the Executive shall terminate the Executive’s employment for Good Reason:

(a) The Corporation shall pay, or cause to be paid, to the Executive in a lump sum in cash the sum of: (i) the Executive’s Annual Base Salary through the Date of Termination, and (ii) any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (i) and (ii) shall be hereinafter referred to as the “Accrued Obligations”). The Accrued Obligations shall be paid within 30 days after the Date of Termination.

(b) The Corporation shall pay, or cause to be paid, to the Executive in a lump sum in cash an amount equal to the Executive’s Annual Base salary. Such lump sum payment shall be made within 60 days after the Date of Termination or such later date set forth in section 7.8.

(c) To the extent not theretofore paid or provided, the Affiliated Group shall pay or provide, or cause to be paid or provided, to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Affiliated Group (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”), in accordance with the terms and normal procedures of each such plan, program, policy or practice or contract or agreement, based on accrued and vested benefits through the Date of Termination.

(d) The Corporation shall pay, or cause to be paid, to the Executive in a lump sum in cash an amount equal to the Executive’s “average annual bonus” (described below). Such payment shall be made within 60 days after the Date of Termination, or such later date set forth in Section 7.8, and shall be in lieu of any annual incentive for the year of termination. For this purpose, average annual bonus means an amount equal to the average of the bonuses earned by the Executive under the Corporation’s annual incentive plan for the last two fiscal years prior to the Date of Termination. For purposes of clarity, (i) if the Executive earns a prorated bonus for one or more of the applicable years, the average annual bonus will be calculated using the prorated amount for such year(s), and (ii) if the Executive does not receive a bonus for one or more of the applicable years, the average annual bonus wm be calculated using a zero dollar amount for such year(s).

(e) If the Date of Termination occurs within twelve months after the occurrence of a Change in Control, then, in lieu of the amounts described in Sections 5.1(b) and (d) above, the Corporation shall pay, or cause to be paid, to the Executive in a lump sum in cash the sum of: (i) the Executive’s Annual Base Salary and (ii) the Executive’s “target” annual bonus opportunity (as described in Section 3.2). Such lump sum payment shall be made within 60 days after the Date of Termination or such later date set forth in Section 7.8.

If the Executive receives payments and benefits pursuant to this Section 5.1, then the Executive shall not be entitled to any other severance pay or benefits under any severance plan, program or policy of any member of the Affiliated Group, unless otherwise specifically provided therein in a specific reference to this Agreement.

5.2 Death or Disability; Cause; Other than for Good Reason

If the Executive’s employment is terminated due to death or Disability or for Cause, or if the Executive voluntarily terminates his employment without Good Reason, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive his Accrued Obligations through the Date of Termination and the Other Benefits, in each case to the extent not theretofore paid or provided. Subject to any withholding required by Section 3.3, all Accrued Obligations shall be paid to the Executive in accordance with Section 5.1(a) and the Other benefits shall be paid to the Executive in accordance with Section 5.1(c).

5.3 Release

Notwithstanding anything contained herein to the contrary, the Corporation shall only be obligated to make the payments under Sections 5.1(b). 5.l(d) and 5.l(e) if: (a) within the 50-day period after the Date of Termination, the Executive executes a general release, in a form provided by the Corporation, of all current or future claims, known or unknown, against the Affiliated Group, its officers, directors, shareholders, employees and agents arising on or before the date of the release, including but not limited to all claims arising out of the Executive’s employment with the Affiliated Group or the termination of such employment, and (b) the Executive does not revoke the release during the seven-day revocation period prescribed by the Age Discrimination in

Employment Act of 1967, as amended, or any similar revocation period, if applicable. The Corporation shall be obligated to provide such release to the Executive promptly following the Date of Termination.

ARTICLE 6

RESTRICTIVE COVENANTS

6.1 In General

The Executive acknowledges that in the course of his employment he will become familiar with trade secrets and customer lists of and other confidential information concerning the Affiliated Group and that his services have been of special, unique and extraordinary value to the Affiliated Group.

6.2 Confidentiality Undertaking

The Executive confirms that he is bound by the provisions of the Confidentiality Undertaking covenant set out in Schedule B hereto.

6.3 Non-Solicitation

(a) During the 12-month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, solicit, induce or attempt to solicit or induce any employee of any member of the Affiliated Group to quit or abandon his or her employ or to become an officer, agent, employee, partner, director, consultant or independent contractor of the Executive, his affiliates or any other individual or entity.

(b) During the 12-month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, solicit, induce or attempt to solicit or induce, any customer, supplier or licensor of any member of the Affiliated Group to cease doing business with any member of the Affiliated Group, or in any way interfere with the relationships between any customer, supplier or licensor of the Affiliated Group.

6.4 Non-Competition

During the 12-month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, compete with the business of any member of the Affiliated Group by (a) becoming an officer, agent, employee, partner, director, consultant, independent contractor of a Competitor, or (b) acquiring an ownership interest in a Competitor, provided that the Executive may, for investment purposes, own not more than 1% of the outstanding stock of any class of a Competitor that is listed on a recognized stock exchange or traded in the over-the-counter market in Canada or the United States. For purposes of this Agreement, the term “Competitor” means any person or entity that engages in the pharmaceutical development and manufacturing outsourcing business in Canada, the United States (including the Commonwealth of Puerto Rico), India or Europe. Notwithstanding the foregoing, this Section 6.4 shall not apply if the Executive is terminated by the Corporation other than for Cause.

6.5 Reasonableness and Revision

The Executive agrees and acknowledges that due to the uniqueness of his services and the confidential nature of the information he will possess, the covenants set forth in this Article 6 and Schedule B are reasonable and necessary for the protection of the business interests and goodwill of the Affiliated Group. Moreover, the geographic restriction on competitive activities by the Executive is reasonable, given the global nature of the Affiliated Group’s business and the Executive’s role in that business. If, at the time of enforcement of this Article and/or Schedule B, a court or other tribunal holds that the restrictions herein are in whole or in part unreasonable under circumstances then existing, the parties agree that the maximum period or scope reasonable under such circumstances will be substituted for the stated period or scope and that the court or other tribunal shall be authorized and directed by the parties to revise the restrictions contained herein to cover the maximum period or scope permitted by law.

6.6 Acknowledgements

The Executive agrees and acknowledges that the promises and obligations made by the Corporation in this Agreement (specifically including, but not limited to, the payments and benefits provided for under Section 5.1(b) and (d) hereof) constitute sufficient consideration for the covenants contained in this Article 6. The Executive further acknowledges that it is not the Affiliated Group’s intention to interfere in any way with his employment opportunities, except in such situations where the same conflict with the legitimate business interests of the Affiliated Group. The Executive agrees that he will notify the Corporation in writing if he has, or reasonably should have, any questions regarding the applicability of this Article 6.

6.7 Enforcement

Because the Executive’s services are unique and because the Executive has access to Confidential Information and work product, the parties agree that the Affiliated Group will be damaged irreparably in the event any of the provisions of Section 6.2, 6.3 and 6.4 are not performed in accordance with their specific terms or are otherwise breached and that money damages will be an inadequate remedy for any such non-performance or breach. Therefore, anyone or more of the members of the Affiliated Group, or their respective successors and assigns, will be entitled. in addition to other rights and remedies existing in their favor, to an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). The Executive agrees and acknowledges that he will not assert in any such enforcement action that there is an adequate remedy in damages and that such rights and remedies will be in addition to and not in lieu of any other rights or remedies available to the Affiliated Group at law or in equity.

6.8 Survival

Subject to any limits on applicability contained therein, this Article 6 shall survive and continue in full force in accordance with its terms notwithstanding any expiration or termination of this Agreement.

ARTICLE 7

GENERAL PROVISIONS

7.1 Entire Agreement

This Agreement together with Schedules A and 8 attached hereto when executed by both parties shall constitute the entire agreement pertaining to the Executive’s employment and supersedes all prior agreements. understandings, negotiations and discussions, whether written or oral, pertaining to the Executive’s employment, and there are no representations, undertakings or agreements of any kind between the parties respecting the subject matter hereof except those contained herein.

7.2 Severability

If any provision of this Agreement is declared void or unenforceable, such provision shall be deemed severed from this Agreement to the extent of the particular circumstances giving rise to such declaration and such provision as it applies to other persons and circumstances and the remaining terms and conditions of this Agreement shall remain in full force and effect.

7.3 Representations

The Executive represents and warrants that (a) he is not a party to any contract, understanding, agreement or policy, whether or not written, with his current employer (or any previous employer) or otherwise, that would be breached by the Executive’s entering into, or performing services under, this Agreement and (b) will not knowingly use any trade secret, confidential information, or other intellectual property right of any other party in the performance of his duties hereunder. The Executive will indemnify, defend, and hold each member of the Affiliated Group harmless. from any and all suits and claims arising out of any breach of such restrictive contracts, understandings, agreements or policies.

7.4 Notices

All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

Eric W. Evans

85 Linwood Circle

Princeton, NJ 08540

If to the Corporation:

Attention:

Roy Wieschkowski

Patheon Pharmaceutical Services Inc.

PO Box 110145

Research Triangle Park, NC 27709-9998

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

7.5 Withholding

The Corporation may withhold from any amounts payable under this Agreement such Federal, state, local, foreign or other taxes as shall be required to be withheld pursuant to any applicable law or regulation.

7.6 Waiver

The Executive’s or the Corporation’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Corporation may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

7.7 Successors

(a) This Agreement is personal to the Executive is not assignable by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives. This Agreement shall inure to the benefit of and be binding upon the Corporation, the other members of the Affiliated Group, and their respective successors and assigns.

(b) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Patheon or the Corporation to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.

7.8 Compliance with Section 409A of the Code

(a) It is the Corporation’s intent that the payments and benefits provided under this Agreement shall be exempt from the application of, or otherwise comply with, the requirements of Section 409A of the Code (“Section 409A”). Specifically, any taxable benefits or payments provided under this Agreement are intended to be separate payments that qualify for the “short-term deferral” exception to Section 409A to the maximum extent possible, and to the extent they do not so qualify, are intended to qualify for the involuntary separation pay exceptions to Section 409A to the maximum extent possible. This Agreement shall be construed, administered, and governed in a manner that effects such intent, and the Corporation shall not take any action that would be inconsistent with such intent.

Without limiting the foregoing, the payments and benefits provided under this Agreement may not be deferred, accelerated, extended, paid out or modified in a manner that would result in the imposition of an additional tax under Section 409A upon the Executive.

(b) If neither the “short-term deferral” or the involuntary separation pay exceptions to Section 409A described above applies to a benefit, payment or reimbursement under this Agreement, then notwithstanding any provision in this Plan to the contrary, the remaining provisions of this Section 7.8(b) shall apply.

(i) If the Executive is a “specified employee,” as determined under the Corporation’s policy for identifying specified employees on the Date of Termination, then to the extent required in order to comply with Section 409A of the Code, all payments, benefits or reimbursements paid or provided under this Agreement that constitute a “deferral of compensation” within the meaning of Section 409A of the Code, that are provided as a result of a “separation from service” within the meaning of section 409A and that would otherwise be paid or provided during the first six months following such Date of Termination shall be accumulated through and paid or provided (together with interest on the delayed amount at the applicable federal rate under Section 7872(f)(2)(A) of the Code in effect on the Date of Termination) within 30 days after the first business day following the six month anniversary of such Date of Termination (or, if the Executive dies during such six-month period, within 30 days after the Executive’s death).

(ii) To the extent required to comply with Section 409A Code, any reimbursement of expenses pursuant to Section 2.4(b), 2.4(c) or 3.7, that will not be excluded from Executive’s income when received is subject to the following requirements: (i) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement. or in-kind benefits to be provided in any other calendar year; (ii) the reimbursement of the eligible expense must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (iii) the right to reimbursement is not subject to liquidation or exchange for another benefit.

(c) Although the Corporation shall use its best efforts to avoid the imposition of taxation, interest and penalties under section 409A of the Code, the tax treatment of the benefits provided under this Agreement is not warranted or guaranteed. Neither the Affiliated Group nor its directors. officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by the Executive or other taxpayer as a result of the Agreement. Any reference in this Agreement to Section 409A of the Code will also include any proposed, temporary or final regulations, or any other guidance, promulgated with respect to such Section 409A by the U.S. Department of Treasury or the Internal Revenue Service.

NOW THEREFORE. the parties below have entered into this Agreement as of the date first written above.

PATHEON PHARMACEUTICAL SERVICES INC.

By: Toni T. Sweeney

Title: Vice President, Human Resources, North America

SIGNED, SEALED AND DELIVERED	)
in the presence of	)
	)
/s/ Gwynne Kong	)	/s/ Eric W. Evans
Name of Witness:		ERIC W. EVANS

[PATHEON]

SCHEDULE A

TO

EMPLOYMENT AGREEMENT WITH

ERIC W. EVANS

PATHEON INC.

POSITION DESCRIPTION

Chief Financial Officer

This position description for the Chief Financial Officer of the Corporation was enacted by the Chief Executive Officer on May 27, 2008.

The Chief Financial Officer of the Corporation will have the following functions and responsibilities:

A. PLANNING

B. MANAGEMENT

C. ETHICS, CULTURE, POLICY & PUBLIC REPRESENTATION

1. Corporate Culture. Foster a North American corporate culture that promotes the Corporation’s core values as reflected in the Corporation’s Code of Business Conduct.

2. Work Climate. Maintain a work climate that is conducive to:

(i) attracting and retaining a diverse group of top-quality employees at all levels; and

(ii) motivating these employees to perform their duties with the highest standards of integrity, responsibility and excellence; standards that are essential for the success of a Corporation that provides pharmaceutical product development and manufacturing services worldwide.

May 27, 2008

[PATHEON]

SCHEDULE B

TO

EMPLOYMENT AGREEMENT WITH

Eric W. Evans

CONFIDENTIALITY UNDERTAKING

In consideration of Eric W. Evans (the “Executive”) accepting an employment agreement between the Executive and Patheon Pharmaceuticals Services Inc. dated July 23. 2008, 2008 (the “Agreement”) to which this Confidentiality Undertaking is attached as Schedule B, the Executive undertakes and covenants with the Affiliated Group (as defined in the Agreement) as follows:

1. CONFIDENTIAL INFORMATION

1.1 Confidential Information

The Executive acknowledges that all information and facts relating to the business and affairs of the Affiliated Group and its customers, including, without limitation, trade secrets, data, notes, marketing plans, sales patterns, and private corporate and financial information (the Confidential Information”) is confidential and proprietary to the Affiliated Group and a valuable trade secret of the Affiliated Group, disclosure of which could severely damage the economic interests of the Affiliated Group. Confidential Information includes, without limitation, any document, work, instrument or other medium assembled or composed by the Executive which contains Confidential Information.

1.2 Non-Disclosure of Confidential Information

The Executive shall not, either during the term of the Agreement or at any time thereafter, use or disclose, directly or indirectly, any of such Confidential Information to any person outside the Affiliated Group, except where such disclosure is necessary for the proper and bona fide execution of the Executive’s duties under the Agreement, without the prior written consent of the Affiliated Group. The Executive’s obligation not to use or disclose Confidential Information without prior written consent shall continue to apply after the Executive has ceased to be an employee of the Affiliated Group until such time as the Confidential Information becomes public knowledge through no fault of the Executive. The Affiliated Group will have full right, title and authority to deal in and with the proprietary rights and the Confidential Information notwithstanding any other provision of the Agreement or the termination thereof for any reason whatsoever. The Executive acknowledges and agrees that the restrictions contained in this Article 1 are reasonable in the circumstances in order to protect the business of the Affiliated Group.

1.3 Return of Confidential Information

Confidential Information and the documents, works, instruments or other media containing Confidential Information shall remain the property of the Affiliated Group and be returned to the Affiliated Group upon request or immediately following termination of the Agreement for any reason whatsoever.

2. INVENTIONS

2.1 Inventions

Subject to Section 2.2, the Executive agrees that all discoveries, improvements, designs, ideas or inventions made or conceived, in whole or in part, by the Executive during the term of the Agreement or within three years following termination of the Agreement for any reason whatsoever (the “Inventions”) shall be the sole property of the Affiliated Group. The Executive shall:

(a) promptly disclose and describe all such Inventions in writing to the Affiliated Group;

(b) assign, and the Executive does hereby assign, to the Affiliated Group, without further compensation, all of the Executive’s rights, title and interest in and to such Inventions and to all applications for letters of patent, copyrights, industrial design or other forms of protection granted for such Inventions throughout the world;

(c) deliver promptly to the Affiliated Group, upon request and in the form and manner prescribed by the Affiliated Group (without charge to the Affiliated Group but at the Affiliated Group’s expense) the written instruments described in paragraph (b) and perform such acts as deemed necessary by the Affiliated Group to obtain and maintain such instruments and to transfer all rights and title thereto to the Affiliated Group; and

(d) give all assistance that may be required by the Affiliated Group to enable it to protect or exploit the Inventions in any country of the world.

The Executive does hereby waive in whole any moral rights that the Executive may have in each of the Inventions and any part or parts thereof, including, but not limited to, the right to the integrity of the Inventions, the right to be associated with the Inventions as its author by name or under a pseudonym and the right to remain anonymous.

2.2 Excluded Inventions

The provisions of Section 2.1 shall not apply to Inventions which fulfill all of the following criteria:

(a) Inventions for which no equipment, supplies, facility or Confidential Information belonging to the Affiliated Group were used; and

(b) Inventions that do not relate to the business of the Affiliated Group or to the Affiliated Group’s actual or demonstrably anticipated processes, research or development which the Executive had access to or knowledge of; and

(c) Inventions that do not result from any work performed by the Executive for the Affiliated Group.

3. GENERAL

This Confidentiality Undertaking shall be governed and construed in accordance with the laws of New York State applicable therein. Nothing herein shall be construed so as to limit any obligations owed by you to the Affiliated Group as a matter of common law. The Executive acknowledges that the business of the Affiliated Group cannot be properly protected from adverse consequences of the Executive’s actions other than by the restrictions set forth in this Undertaking and the Agreement. The Affiliated Group, in addition to any other right or relief to which it may be entitled, shall be entitled to an injunction restricting further breaches of this Undertaking or the Agreement. This Confidentiality Undertaking shall survive the termination of the Agreement and the Executive’s employment thereunder.

IN WITNESS WHEREOF this Confidentiality Undertaking has been executed by the undersigned on this 31st day of December, 2008.

SIGNED, SEALED AND DELIVERED	)
in the presence of	)
	)
/s/ Gwynne Kong	)	/s/ Eric W. Evans
Name of Witness:		ERIC W. EVANS

EX-10.27

Exhibit 10.27

[PATHEON]

Wesley P. Wheeler

Chief Executive Officer & President

Patheon Inc

PO Box 110145

Research Triangle Park, NC 27709

Phone: 919-226-3201

Fax: 919-226-3202

wes.wheeler@patheon.com

January 22, 2010

PRIVATE AND CONFIDENTIAL

Warren Horton

598 Cutler Road

Blounts Creek, North Carolina 27814

Dear Warren:

RE: Employment Agreement: Vice President, Global Quality Operations

I am pleased to confirm the terms of your employment (“Employment Agreement”), dated April 21, 2008. This Employment Agreement represents your contractual arrangements with Patheon Pharmaceutical Services Inc. (the “Corporation”) and supersedes any arrangements, understandings and verbal commitments to you during our discussions.

Sincerely,

/s/ Wesley P. Wheeler

Wesley P. Wheeler

Chief Executive Officer

[PATHEON]

EMPLOYMENT AGREEMENT

THIS AGREEMENT is made as of the 22^nd day of January, 2010 between Patheon Pharmaceutical Services Inc. (the “Corporation”) and Warren Horton, an Executive residing in the City of Blounts Creek, in the State of North Carolina (the “Executive”).

WHEREAS, the Corporation and the Executive wish to enter into this Agreement to set forth the rights and obligations of each of them with respect to the employment of the Executive.

WHEREAS, the Corporation agrees to employ the Executive on the terms and subject to the conditions set forth in this Agreement to render exclusive and full-time services to the Affiliated Group (as defined below).

NOW, THEREFORE, THIS AGREEMENT WITNESSES that in consideration of the premises and mutual covenants and agreements hereinafter contained and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the parties agree with each other as follows:

ARTICLE 1

INTERPRETATION

1.1 Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of North Carolina. Each of the parties hereby irrevocably consents to the jurisdiction of the courts in the State of North Carolina with respect to any matters arising out of this Agreement.

1.2 Definitions. In this Agreement, including Schedule A and B hereto, unless the context otherwise requires, the following terms shall have the following meanings, respectively:

(a) “Affiliated Group” means the Corporation and any entity controlled by, controlling, or under common control with the Corporation.

(b) “Agreement” means this Employment Agreement as it may be amended or supplemented from time to time.

(c) “Annual Base Salary” has the meaning given such term in Section 3.1.

(d) “Board of Directors” means the Board of Directors of Patheon.

(e) “Cause” means the determination, in good faith, by the Board of Directors, after notice to the Executive and, if curable, a reasonable opportunity to cure, that one or more of the following events has occurred: (i) the Executive has failed to perform his material duties, and such failure has not been cured after a period of 30 days notice from the Corporation; (ii) any reckless or grossly negligent act by the Executive having the effect of injuring the interests, business or reputation of any member of the Affiliated Group in any material respect; (iii) the Executive’s commission of any felony (including entry of a nolo contendere plea); (iv) any misappropriation or embezzlement of the property of any member of the Affiliated

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Group; or (v) a breach of any material provision of this Agreement by the Executive.

(f) “Change in Control” means any of the following events:

(i) Any “Person” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than Partners or its affiliates, becomes a Beneficial Owner (within the meaning of Exchange Act Rule 13d-3) of more than fifty percent (50%) of the voting power of the then outstanding voting securities of Patheon entitled to vote generally in the election of directors;

(ii) There is consummated a merger or consolidation of Patheon or any direct or indirect subsidiary of Patheon with any other company, other than a merger or consolidation that would result in the voting securities of Patheon outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the securities of Patheon or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or

(iii) The stockholders of Patheon approve a plan of complete liquidation or dissolution of the company or there is consummated an agreement for the sale or disposition by Patheon of all or substantially all of its assets.

(g) “Code” means the Internal Revenue Code of 1986, as amended.

(h) “Competitor” has the meaning given such term in Section 6.4.

(i) “Date of Termination” has the meaning given such term in Section 4.5.

(j) “Effective Date” has the meaning given such term in Section 2.1.

(k) “Good Reason” means the occurrence of any of the following events without the consent of the Executive: (i) a material reduction by the Corporation of the Executive’s duties or responsibilities or the assignment to the Executive of duties or responsibilities materially inconsistent with the Executive’s position; or (ii) a material breach by the Corporation of this Agreement. A termination of the Executive’s employment by Executive shall not be deemed to be for Good Reason unless (i) the Executive gives notice to the Corporation of the existence of the event or condition constituting Good Reason within 30 days after such event or condition initially occurs or exists, (ii) the Corporation fails to cure such event or condition within 30 days after receiving such notice, and (iii) the Executive’s “separation from service” within the meaning of Section 409A of the Code occurs not later than 90 days after such event or condition initially occurs or exists.

(l) “Patheon” means Patheon Inc.

(m) “Target Bonus” has the meaning given such term in Section 3.2.

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ARTICLE 2

EFFECTIVE DATE; TERMS OF EMPLOYMENT

2.1 Term

The Corporation hereby agrees to employ the Executive, and the Executive hereby agrees to be employed by the Corporation on the terms and subject to the conditions of this Agreement (including, without limitation, Article 6), commencing on start date (the “Effective Date”).

2.2 Position and Duties

The Executive shall serve as the VP, Global Quality Operations, with such authority, duties and responsibilities as are commensurate with such position, reporting to the Chief Executive Officer and President.

The Executive shall also be responsible for the functions and responsibilities set out in the Position Description for the VP, Global Quality Operations attached as Schedule A.

2.3 Time Commitments

During the Executive’s employment, the Executive shall devote substantially all of his business time, energies and talents to serving as the VP, Global Quality Operations, perform his duties conscientiously and faithfully subject to the reasonable and lawful directions of the Chief Executive Officer, and in accordance with each of the corporate governance and ethics guidelines, conflict of interests policies and code of conduct applicable to all employees or senior executives generally of the Affiliated Group. During the Executive’s employment, it shall not be a violation of this Agreement for the Executive, subject to the requirements of Article 6, to (a) fulfill speaking engagements and (b) manage personal investments, so long as such activities do not materially interfere with the performance of the Executive’s duties or responsibilities under this Agreement.

2.4 Location

(a) Initially, it is understood that the Executive’s principal office will be a home office located in the Executive’s residence in the city of Blounts Creek, North Carolina.

(b) While the Executive’s principal office is located in the Executive’s residence, the Corporation shall reimburse the Executive for reasonable automobile expenses and travel expenses associated with him commuting from his personal residence in North Carolina to Patheon’s current corporate headquarters during this period. Reimbursements under this Section 2.4(b) shall be paid to the Executive in the calendar month after the month in which they are incurred, subject to such reasonable documentation requirements as may be requested from time to time by the Corporation.

(c) When the new U.S. headquarters location in North Carolina is available for occupancy, the Corporation will require the Executive to be based within this facility. Under the terms of Patheon’s Tier 1 relocation program, the Executive shall be reimbursed for all reasonable transaction costs and expenses (including any real estate brokerage fees, commissions and closing costs, but excluding any loss on the sale of the Executive’s personal residence) and moving expenses

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incurred by the Executive, in connection with relocating the Executive’s spouse, dependents and personal property and goods from the Executive’s current residence. Reimbursements under this Section 2.4(c) shall be paid to the Executive in the calendar month after the month that they are incurred, subject to such reasonable documentation requirements as may be requested from time to time by the Corporation.

ARTICLE 3

COMPENSATION AND BENEFITS

3.1 Base Salary

The Corporation shall pay the Executive an annualized base salary (“Annual Base Salary”) at a rate of not less than $ 240,000 US, payable in regular installments in accordance with the Corporation’s normal payroll practices. The Annual Base Salary shall be reviewed by the Chief Executive Officer, for increase only, at such time as the salaries of other senior executives of Patheon are reviewed generally. If so increased, the Annual Base Salary shall be increased for all purposes of this Agreement.

3.2 Executive Performance Bonus

For each fiscal year, the Executive shall be eligible to participate in an annual incentive plan under terms and conditions no less favorable than other senior executives of Patheon; provided that the Executive’s Target Bonus shall not be less than 35% of his Annual Base Salary. The Executive’s payment under the annual incentive plan shall be based on meeting predetermined personal objectives and Patheon’s financial performance. The personal objectives will be set by the Chief Executive Officer, and the financial performance measures will be set by the Chief Executive Officer. For fiscal 2008, the performance bonus will be prorated from the Effective Date. The annual performance bonus, if earned, will be paid to the Executive by the Corporation in the same manner and payment period generally applicable under the annual incentive plan, but in no event later than two and a half months after the later of (i) the end of the applicable performance period, or (ii) the end of the calendar year in which the performance period ends. Nothing contained in this Section 3.2 will guarantee the Executive any specific amount of incentive compensation, or prevent the Chief Executive Officer from establishing performance goals and compensation targets applicable only to the Executive.

3.3 Sign-on Bonus

The Corporation will pay the Executive in a lump sum, within 30 business days of the Effective Date, a sign-on bonus of $ 30,000 U.S. If Executive voluntarily terminates employment with the Corporation within one year after the Effective Date, Executive shall reimburse the Corporation this $30,000 payment within 30 days of termination. If Executive fails to make this reimbursement payment within 30 days of termination, the Corporation shall withhold the unpaid amount from any amounts otherwise owed to the Executive (but only to the extent those amounts are not considered deferred compensation under Section 409(A).

3.4 Stock Options

(a) Subject to the approval of the Board of Directors, the Executive shall be granted a stock option to purchase 9,000 shares of common stock of Patheon at an exercise price per share equal to the market value of the common stock on the

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date of the grant (the “Option”). Except as otherwise provided in the Amended and Restated incentive Stock Option Plan (the “ISOP”) or stock option award agreement (together with the ISOP, the “Stock Related Documents”), the Option will (i) vest as to 1/3 of the shares subject to the Option on each of the first three anniversaries of the date of grant, subject to the Executive’s continued employment with the Affiliated Group until the relevant vesting dates, and (ii) have a seven year term. The Option will be subject to the terms, definitions and provisions of the applicable Stock Related Documents.

(b) During the Executive’s employment, at the discretion of the Board of Directors or its delegate, the Executive also shall be eligible to receive additional stock options and other long-term incentives under the ISOP or any similar plan adopted by Patheon from time to time.

(c) The Executive will be required to comply with the terms of any share ownership guidelines applicable to senior executives of Patheon generally, as amended from time to time.

3.5 Performance Share Units

(a) Subject to the approval of the Board of Directors, the Executive shall be granted 9,000 performance share units (the “PSUs”) under the Patheon Inc. Performance Share Unit Plan (the “PSU Plan”). Except as otherwise provided in the PSU Plan or the award agreement, the PSUs generally vest on the third anniversary of the date of grant, and the actual amount of PSUs that will vest will be dependent upon the formula set by the Board of Directors from time to time. The PSUs will be subject to the terms, definitions and provisions of the PSU Plan and the applicable award agreement.

(b) During the Executive’s employment, at the discretion of the Board of Directors or its delegate, the Executive also shall be eligible to receive additional grants under the PSU Plan or any similar plan adopted by Patheon from time to time.

3.6 Retirement Benefits

Executive will be entitled to participate in the 401(k) retirement plan and any other qualified or nonqualified deferred compensation and retirement plans applicable to senior executives of the Corporation generally, in each case as amended from time to time.

3.7 Other Benefit Plans

During the Executive’s employment, the Executive also shall be entitled to participate in all welfare, perquisites, fringe benefit, and other benefit plans, practices, policies and programs, as may be in effect from time to time, for U.S. resident-based senior executives of Patheon generally.

The Corporation shall also pay the Executive, in regular semi-monthly installments, an allowance of $1,000 US per month for car related expenses.

In addition, beginning with calendar year 2009, the Corporation shall pay for an annual club membership of the Executive’s choice up to $2,000 US per annum. This club membership payment shall be made in cash to the Executive in January of each year once documentation of the expenditure or invoice has been provided to Patheon.

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3.8 Expenses

The Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses actually and properly incurred by the Executive during the Executive’s employment in connection with carrying out his duties hereunder in accordance with the Corporation’s policies, as may be in effect from time to time, for its senior executives generally.

3.9 Vacation

During the Executive’s employment, the Executive shall be entitled to five (5) weeks paid vacation in addition to four (4) floating holidays annually in accordance with the Corporation’s policies, as may be in effect from time to time, for its senior executives generally.

ARTICLE 4

TERMINATION OF EMPLOYMENT

4.1 Death or Disability

The Executive’s employment shall terminate automatically upon the Executive’s death. If the Corporation determines in good faith that the Disability (as defined below) of the Executive has occurred during the Executive’s employment, it may give to the Executive written notice in accordance with Section 7.4 of this Agreement of its intention to terminate the Executive’s employment; provided that such notice is provided no later than 150 days following the Executive’s first day of Disability. In such event, the Executive’s employment shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the failure of the Executive to perform his duties under this Agreement for at least 90 consecutive business days as a result of any medically determinable physical or mental impairment. The determination of Disability shall be made by a physician selected by the Corporation or its insurers and reasonably acceptable to the Executive or the Executive’s legal representative.

4.2 Cause

The Executive’s employment with the Corporation may be terminated with or without Cause.

4.3 Good Reason

The Executive’s employment with the Corporation may be terminated by the Executive with or without Good Reason.

4.4 Notice of Termination

Any termination by the Corporation for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party in accordance with Section 7.4. For purposes of this Agreement, a “Notice of Termination” means a written notice which (a) indicates the specific termination provision in this Agreement relied upon, (b) to the extent applicable, sets forth in reasonable detail the facts and

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circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (c) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Corporation or the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Corporation or the Executive, respectively, hereunder or preclude the Corporation or the Executive, respectively, from asserting such fact or circumstance in enforcing the Corporation’s or the Executive’s rights hereunder.

4.5 Date of Termination

“Date of Termination” means (a) if the Executive’s employment is terminated by the Corporation for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (b) if the Executive’s employment is terminated by the Corporation other than for Cause or Disability, the Date of Termination shall be the date on which the Corporation notifies the Executive of such termination and (c) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. The Corporation and the Executive shall take all steps necessary (including with regard to any post-termination services by the Executive) to ensure that any termination described in this Section 4.5 constitutes a “separation from service” within the meaning of Section 409A of the Code, and the date on which such separation from service takes place shall be the “Date of Termination.”

4.6 Resignation from All Positions

Notwithstanding any other provision of this Agreement, upon the termination of the Executive’s employment for any reason, unless otherwise requested by the Board of Directors, the Executive shall immediately resign as of the Date of Termination from all positions that he holds or has ever held with the Affiliated Group (and with any other entities with respect to which the Affiliated Group has requested the Executive to perform services). The Executive hereby agrees to execute any and all documentation to effectuate such resignations upon request by the Corporation, but he shall be treated for all purposes as having so resigned upon termination of his employment, regardless of when or whether he executes any such documentation.

ARTICLE 5

OBLIGATIONS OF CORPORATION UPON TERMINATION

5.1 Good Reason; Other than for Cause

If the Corporation shall terminate the Executive’s employment other than for Cause, or if the Executive shall terminate the Executive’s employment for Good Reason:

(a) The Corporation shall pay, or cause to be paid, to the Executive in a lump sum in cash the sum of: (i) the Executive’s Annual Base Salary through the Date of Termination, and (ii) any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (i) and (ii) shall be hereinafter referred to as the “Accrued Obligations”). The Accrued Obligations shall be paid within 30 days after the Date of Termination.

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(b) The Corporation shall pay, or cause to be paid, to the Executive an amount equal to six months worth of the Executive’s Annual Base Salary plus an amount determined by the Board of Directors in its sole discretion to reflect the annual incentive the Executive would have otherwise earned during the year in which the Date of Termination occurs. Such amount shall generally be paid in cash in six equal monthly installments beginning within 60 days after the Date of Termination or such later date set forth in Section 7.8. Notwithstanding the foregoing, if the severance benefit described in this Section 5.1(b) exceeds two times the lesser of (i) the Executive’s annual compensation or (ii) the compensation limit in effect under Section 401(a)(17) of the Code for the calendar year including the Date of Termination, any amounts not yet paid as of the “short-term deferral date” shall be paid in a lump sum on the “short-term deferral date.” The “short-term deferral date” is the date that is two and one-half months after the end of the later of (i) the calendar year containing the Date of Termination or (ii) the Company’s fiscal year containing the Date of Termination. Such payment shall be paid to Executive within 30 days after the Date of Termination.

(c) To the extent not theretofore paid or provided, the Affiliated Group shall pay or provide, or cause to be paid or provided, to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Affiliated Group (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”), in accordance with the terms and normal procedures of each such plan, program, policy or practice or contract or agreement, based on accrued and vested benefits through the Date of Termination.

(d) If the Date of Termination occurs within six months after the occurrence of a Change in Control, any stock options to purchase shares of the common stock of Patheon then held by the Executive shall, to the extent not otherwise provided in the applicable Stock Related Documents, become immediately vested and exercisable and shall remain exercisable for a period of (12) months from the Date of Termination.

If the Executive receives payments and benefits pursuant to this Section 5.1, then the Executive shall not be entitled to any other severance pay or benefits under any severance plan, program or policy of any member of the Affiliated Group, unless otherwise specifically provided therein in a specific reference to this Agreement.

5.2 Death or Disability; Cause; Other than for Good Reason

If the Executive’s employment is terminated due to death or Disability or for Cause, or if the Executive voluntarily terminates his employment without Good Reason, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive his Accrued Obligations through the Date of Termination and the Other Benefits, in each case to the extent not theretofore paid or provided. Subject to any withholding required by Section 3.3, all Accrued Obligations shall be paid to the Executive in accordance with Section 5.1(a) and the Other Benefits shall be paid to the Executive in accordance with Section 5.1(c).

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5.3 Release

Notwithstanding anything contained herein to the contrary, the Corporation shall only be obligated to make the payments under Section 5.1(b) if: (a) within the 50-day period after the Date of Termination, the Executive executes a general release, in a form provided by the Corporation, of all current or future claims, known or unknown, against the Affiliated Group, its officers, directors, shareholders, employees and agents arising on or before the date of the release, including but not limited to all claims arising out of the Executive’s employment with the Affiliated Group or the termination of such employment, and (b) the Executive does not revoke the release during the seven-day revocation period prescribed by the Age Discrimination in Employment Act of 1967, as amended, or any similar revocation period, if applicable. The Corporation shall be obligated to provide such release to the Executive promptly following the Date of Termination.

ARTICLE 6

RESTRICTIVE COVENANTS

6.1 In General

The Executive acknowledges that in the course of his employment he will become familiar with trade secrets and customer lists of and other confidential information concerning the Affiliated Group and that his services have been of special, unique and extraordinary value to the Affiliated Group.

6.2 Confidentiality Undertaking

The Executive confirms that he is bound by the provisions of the Confidentiality Undertaking covenant set out in Schedule B hereto.

6.3 Non-Solicitation/No-Hire

(a) During the six (6) month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, hire, solicit, induce or attempt to solicit or induce any employee of any member of the Affiliated Group to quit or abandon his or her employ or to become an officer, agent, employee, partner, director, consultant or independent contractor of the Executive, his affiliates or any other individual or entity.

(b) During the six (6) month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, hire, solicit, induce or attempt to solicit or induce, any customer, supplier or licensor of any member of the Affiliated Group to cease doing business with any member of the Affiliated Group, or in any way interfere with the relationships between any customer, supplier or licensor of the Affiliated Group.

6.4 Non-Competition

During the six (6) month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, compete with the business of any member of the Affiliated Group by (a) becoming an officer, agent, employee, partner, director, consultant, independent contractor of a Competitor, or (b) acquiring an ownership interest in a Competitor, provided that the Executive may, for investment purposes, own not more than 1% of the outstanding stock of any class of a Competitor that is listed on a recognized stock exchange or traded in the over-the-counter market in

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Canada or the United States. For purposes of this Agreement, the term “Competitor’ means any person or entity that engages in the pharmaceutical development and/or manufacturing outsourcing business in Canada, the United States (including the Commonwealth of Puerto Rico), India or Europe.

6.5 Reasonableness and Revision

The Executive agrees and acknowledges that due to the uniqueness of his services and the confidential nature of the information he will possess, the covenants set forth in this Article 6 and Schedule B are reasonable and necessary for the protection of the business interests and goodwill of the Affiliated Group. Moreover, the geographic restriction on competitive activities by the Executive is reasonable, given the global nature of the Affiliated Group’s business and the Executive’s role in that business. if, at the time of enforcement of this Article and/or Schedule B, a court or other tribunal holds that the restrictions herein are in whole or in part unreasonable under circumstances then existing, the parties agree that the maximum period or scope reasonable under such circumstances will be substituted for the stated period or scope and that the court or other tribunal shall be authorized and directed by the parties to revise the restrictions contained herein to cover the maximum period or scope permitted by law.

6.6 Acknowledgements

The Executive agrees and acknowledges that the promises and obligations made by the Corporation in this Agreement (specifically including, but not limited to, the payments and benefits provided for under Section 5.1(b) and (d) hereof) constitute sufficient consideration for the covenants contained in this Article 6. The Executive further acknowledges that it is not the Affiliated Group’s intention to interfere in any way with his employment opportunities, except in such situations where the same conflict with the legitimate business interests of the Affiliated Group. The Executive agrees that he will notify the Corporation in writing if he has, or reasonably should have, any questions regarding the applicability of this Article 6.

6.7 Enforcement

Because the Executive’s services are unique and because the Executive has access to Confidential Information and work product, the parties agree that the Affiliated Group will be damaged irreparably in the event any of the provisions of Section 6.2, 6.3 and 6.4 are not performed in accordance with their specific terms or are otherwise breached and that money damages will be an inadequate remedy for any such non-performance or breach. Therefore, any one or more of the members of the Affiliated Group, or their respective successors and assigns, will be entitled, in addition to other rights and remedies existing in their favor, to an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). The Executive agrees and acknowledges that he will not assert in any such enforcement action that there is an adequate remedy in damages and that such rights and remedies will be in addition to and not in lieu of any other rights or remedies available to the Affiliated Group at law or in equity.

6.8 Survival

Subject to any limits on applicability contained therein, this Article 6 shall survive and continue in full force in accordance with its terms notwithstanding any expiration or termination of this Agreement.

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ARTICLE 7

GENERAL PROVISIONS

7.1 Entire Agreement

This Agreement together with Schedules A and B attached hereto when executed by both parties shall constitute the entire agreement pertaining to the Executive’s employment and supersedes all prior agreements, understandings, negotiations and discussions, whether written or oral, pertaining to the Executive’s employment, and there are no representations, undertakings or agreements of any kind between the parties respecting the subject matter hereof except those contained herein.

7.2 Severability

If any provision of this Agreement is declared void or unenforceable, such provision shall be deemed severed from this Agreement to the extent of the particular circumstances giving rise to such declaration and such provision as it applies to other persons and circumstances and the remaining terms and conditions of this Agreement shall remain in full force and effect.

7.3 Representations

The Executive represents and warrants that (a) he is not a party to any contract, understanding, agreement or policy, whether or not written, with his current employer (or any previous employer) or otherwise, that would be breached by the Executive’s entering into, or performing services under, this Agreement and (b) will not knowingly use any trade secret, confidential information, or other intellectual property right of any other party in the performance of his duties hereunder. The Executive will indemnify, defend, and hold each member of the Affiliated Group harmless, from any and all suits and claims arising out of any breach of such restrictive contracts, understandings, agreements or policies.

7.4 Notices

All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

Warren A. Horton

598 Cutler Road

Blounts Creek, North Carolina 27814

If to the Corporation:

Attention:

Executive Human Resources

Patheon Pharmaceutical Services Inc.

P.O. Box 110145

Research Triangle Park, North Carolina 27709-9998

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or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

7.5 Withholding

The Corporation may withhold from any amounts payable under this Agreement such Federal, state, local, foreign or other taxes as shall be required to be withheld pursuant to any applicable law or regulation.

7.6 Waiver

The Executive’s or the Corporation’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Corporation may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

7.7 Successors

(a) This Agreement is personal to the Executive is not assignable by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives. This Agreement shall inure to the benefit of and be binding upon the Corporation, the other members of the Affiliated Group, and their respective successors and assigns.

(b) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Patheon or the Corporation to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.

7.8 Compliance with Section 409A of the Code

(a) It is the Corporation’s intent that the payments and benefits provided under this Agreement shall be exempt from the application of, or otherwise comply with, the requirements of Section 409A of the Code (“Section 409A”). Specifically, any taxable benefits or payments provided under this Agreement are intended to be separate payments that qualify for the “short-term deferral” exception to Section 409A to the maximum extent possible, and to the extent they do not so qualify, are intended to qualify for the involuntary separation pay exceptions to Section 409A to the maximum extent possible. This Agreement shall be construed, administered, and governed in a manner that effects such intent, and the Corporation shall not take any action that would be inconsistent with such intent. Without limiting the foregoing, the payments and benefits provided under this Agreement may not be deferred, accelerated, extended, paid out or modified in a manner that would result in the imposition of an additional tax under Section 409A upon the Executive.

(b) If neither the “short-term deferral” or the involuntary separation pay exceptions to Section 409A described above applies to a benefit, payment or reimbursement under this Agreement, then notwithstanding any provision in this Plan to the contrary, the remaining provisions of this Section 7.8(b) shall apply.

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(i) If the Executive is a “specified employee,” as determined under the Corporation’s policy for identifying specified employees on the Date of Termination, then to the extent required in order to comply with Section 409A of the Code, all payments, benefits or reimbursements paid or provided under this Agreement that constitute a “deferral of compensation” within the meaning of Section 409A of the Code, that are provided as a result of a “separation from service” within the meaning of Section 409A and that would otherwise be paid or provided during the first six months following such Date of Termination shall be accumulated through and paid or provided (together with interest on the delayed amount at the applicable federal rate under Section 7872(f)(2)(A) of the Code in effect on the Date of Termination) within 30 days after the first business day following the six month anniversary of such Date of Termination (or, if the Executive dies during such six-month period, within 30 days after the Executive’s death).

(ii) To the extent required to comply with Section 409A Code, any reimbursement of expenses pursuant to Section 2.4(b), 2.4(c) or 3.8, that will not be excluded from Executive’s income when received is subject to the following requirements: (i) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided in any other calendar year; (ii) the reimbursement of the eligible expense must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (iii) the right to reimbursement is not subject to liquidation or exchange for another benefit.

(c) Although the Corporation shall use its best efforts to avoid the imposition of taxation, interest and penalties under Section 409A of the Code, the tax treatment of the benefits provided under this Agreement is not warranted or guaranteed. Neither the Affiliated Group nor its directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by the Executive or other taxpayer as a result of the Agreement. Any reference in this Agreement to Section 409A of the Code will also include any proposed, temporary or final regulations, or any other guidance, promulgated with respect to such Section 409A by the U.S. Department of Treasury or the Internal Revenue Service.

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NOW THEREFORE, the parties below have entered into this Agreement as of the date first written above.

PATHEON PHARMACEUTICAL SERVICES INC.

By: Wes Wheeler

Title: Chief Executive Officer and President

SIGNED, SEALED AND DELIVERED	)
in the presence of	)
	)
	)	/s/ Warren Horton
Name of Witness:		Warren Horton

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[PATHEON]

SCHEDULE A

TO

EMPLOYMENT AGREEMENT WITH

WARREN A. HORTON

PATHEON INC.

POSITION DESCRIPTION

V.P. GLOBAL QUALITY OPERATIONS

This position description for the V.P. Global Quality Operations of the Corporation was enacted by the Chief Executive Officer on May 19, 2008.

The V.P. Global Quality Operations of the Corporation will have the following functions and responsibilities:

A. PLANNING

B. MANAGEMENT

C. ETHICS, CULTURE, POLICY & PUBLIC REPRESENTATION

1. Corporate Culture. Foster a North American corporate culture that promotes the Corporation’s core values as reflected in the Corporation’s Code of Business Conduct.

2. Work Climate. Maintain a work climate that is conducive to:

(i) attracting and retaining a diverse group of top-quality employees at all levels; and

(ii) motivating these employees to perform their duties with the highest standards of integrity, responsibility and excellence; standards that are essential for the success of a Corporation that provides pharmaceutical product development and manufacturing services worldwide.

May 19, 2008

Page 16

[PATHEON]

SCHEDULE B

TO

EMPLOYMENT AGREEMENT WITH

Warren Horton

CONFIDENTIALITY UNDERTAKING

In consideration of Warren Horton (the “Executive”) accepting an employment agreement between the Executive and Patheon Pharmaceuticals Services Inc. dated January 22, 2010 (the “Agreement”) to which this Confidentiality Undertaking is attached as Schedule B, the Executive undertakes and covenants with the Affiliated Group (as defined in the Agreement) as follows:

1. CONFIDENTIAL INFORMATION

1.1 Confidential Information

The Executive acknowledges that all information and facts relating to the business and affairs of the Affiliated Group and its customers, including, without limitation, trade secrets, data, notes, marketing plans, sales patterns, and private corporate and financial information (the “Confidential Information”) is confidential and proprietary to the Affiliated Group and a valuable trade secret of the Affiliated Group, disclosure of which could severely damage the economic interests of the Affiliated Group. Confidential Information includes, without limitation, any document, work, instrument or other medium assembled or composed by the Executive which contains Confidential Information.

1.2 Non-Disclosure of Confidential Information

The Executive shall not, either during the term of the Agreement or at any time thereafter, use or disclose, directly or indirectly, any of such Confidential Information to any person outside the Affiliated Group, except where such disclosure is necessary for the proper and bona fide execution of the Executive’s duties under the Agreement, without the prior written consent of the Affiliated Group. The Executive’s obligation not to use or disclose Confidential Information without prior written consent shall continue to apply after the Executive has ceased to be an employee of the Affiliated Group until such time as the Confidential Information becomes public knowledge through no fault of the Executive. The Affiliated Group will have full right, title and authority to deal in and with the proprietary rights and the Confidential Information notwithstanding any other provision of the Agreement or the termination thereof for any reason whatsoever. The Executive acknowledges and agrees that the restrictions contained in this Article 1 are reasonable in the circumstances in order to protect the business of the Affiliated Group.

1.3 Return of Confidential Information

Confidential Information and the documents, works, instruments or other media containing Confidential Information shall remain the property of the Affiliated Group and be returned to the Affiliated Group upon request or immediately following termination of the Agreement for any reason whatsoever.

Page 17

2. INVENTIONS

2.1 Inventions

Subject to Section 2.2, the Executive agrees that all discoveries, improvements, designs, ideas or inventions made or conceived, in whole or in part, by the Executive during the term of the Agreement or within three years following termination of the Agreement for any reason whatsoever (the “Inventions”) shall be the sole property of the Affiliated Group. The Executive shall:

(a) promptly disclose and describe all such Inventions in writing to the Affiliated Group;

(b) assign, and the Executive does hereby assign, to the Affiliated Group, without further compensation, all of the Executive’s rights, title and interest in and to such Inventions and to all applications for letters of patent, copyrights, industrial design or other forms of protection granted for such Inventions throughout the world;

(c) deliver promptly to the Affiliated Group, upon request and in the form and manner prescribed by the Affiliated Group (without charge to the Affiliated Group but at the Affiliated Group’s expense) the written instruments described in paragraph (b) and perform such acts as deemed necessary by the Affiliated Group to obtain and maintain such instruments and to transfer all rights and title thereto to the Affiliated Group; and

(d) give all assistance that may be required by the Affiliated Group to enable it to protect or exploit the Inventions in any country of the world.

The Executive does hereby waive in whole any moral rights that the Executive may have in each of the Inventions and any part or parts thereof, including, but not limited to, the right to the integrity of the Inventions, the right to be associated with the Inventions as its author by name or under a pseudonym and the right to remain anonymous.

2.2 Excluded Inventions

The provisions of Section 2.1 shall not apply to Inventions which fulfill all of the following criteria:

(a) inventions for which no equipment, supplies, facility or Confidential Information belonging to the Affiliated Group were used; and

(b) Inventions that do not relate to the business of the Affiliated Group or to the Affiliated Group’s actual or demonstrably anticipated processes, research or development which the Executive had access to or knowledge of; and

(c) Inventions that do not result from any work performed by the Executive for the Affiliated Group.

3. GENERAL

This Confidentiality Undertaking shall be governed and construed in accordance with the laws of North Carolina State applicable therein. Nothing herein shall be construed so as to limit any obligations owed by you to the Affiliated Group as a matter of common law. The Executive acknowledges that the business of the Affiliated Group cannot be properly protected from

Page 18

adverse consequences of the Executive’s actions other than by the restrictions set forth in this Undertaking and the Agreement. The Affiliated Group, in addition to any other right or relief to which it may be entitled, shall be entitled to an injunction restricting further breaches of this Undertaking or the Agreement. This Confidentiality Undertaking shall survive the termination of the Agreement and the Executive’s employment thereunder.

IN WITNESS WHEREOF this Confidentiality Undertaking has been executed by the undersigned on this      day of                     , 2010.

SIGNED, SEALED AND DELIVERED	)
in the presence of	)
	)
	)	/s/ Warren Horton
Name of Witness:		Warren Horton

Page 19

EX-10.28

Exhibit 10.28

[PATHEON]

Wesley P. Wheeler

Chief Executive Officer & President

Patheon Inc

PO Box 110145

Research Triangle Park, NC 27709

Phone: 919-226-3201

Fax: 919-226-3202

wes.wheeler@patheon.com

March 17, 2010

PRIVATE AND CONFIDENTIAL

RE: Terms of Employment

Mark J. Kontny, Phd.

573 Shoreline Drive

Grayslake, IL 60030

Dear Mark:

Further to our discussions, I am pleased to present these revised terms of employment to you as President, Global Pharmaceutical Development Services and Chief Scientific Officer (President, Global PDS & CSO), with Patheon Pharmaceutical Services Inc. (“Patheon”), commencing April 15, 2010. Attached hereto, as Exhibit A, is a summary of the key terms of your employment arrangement Your employment with Patheon shall be governed by the terms set forth on Exhibit A, subject to the execution of an employment agreement between you and Patheon on substantially the terms set forth on Exhibit A (the “Employment Agreement).

By executing this letter, you agree that your employment will be governed by the terms set forth on Exhibit A, subject to the final execution of the Employment Agreement.

Mark, I am truly looking forward to working with you.

Very truly yours,

/s/ Wesley P. Wheeler

Wesley P. Wheeler

Chief Executive Officer

Accepted as of this 19th Day of March, 2010

/s/ Mark J. Kontny

Mark J. Kontny, PhD

EXHIBIT A

Summary of Key Terms

For Proposed Employment between Patheon Pharmaceutical Services, Inc.

(the “Company”)

and

Mark J. Kontny (“Executive”)

1. Title

President, Global Pharmaceutical Development Services & Chief Scientific Officer (“President, Global PDS & CSO”).

Position reports to the Chief Executive Officer and President (“CEO & President”).

2. Term and Effective Date

Indefinite term with start date of April 15, 2010 (“Effective Date”)

3. Location of Duties

The Executive’s principal office will be at the US Headquarters location in Durham, North Carolina. The Executive will be required to relocate to the Raleigh/Durham area as a condition of employment. The Executive will be eligible for relocation assistance in accordance with the North American Tier 1 program. The Executive’s move must be completed within 9 months.

4. Direct Reports and Functional Responsibility

The Executive will serve as the President, Global Pharmaceutical Development Services & Chief Scientific Office (CSO); with such authority, duties and responsibilities as are commensurate with such position, reporting to the Chief Executive Officer & President. In addition the Executive will be a member of the Patheon Executive Committee and become legal officer on all related subsidiaries as needed.

The Executive will have the responsibility for leading the Company’s strategy for global PDS initiatives and providing strong R&D stewardship for the Company, including full P&L leadership responsibilities.

5. Base Salary

$400,000 USD annually.

6. Performance Bonus

Executive will be eligible to receive a target performance bonus of 45% of Executive’s Base Salary, based on achieving predetermined financial and other targets set by the Chief Executive Officer and President.

7. Equity Compensation – Stock Options

Executive will he eligible to participate in the Company’s Stock Option Plan and awarded options from time to time in accordance with the terms of such plan.

Any options granted shall vest as to one-third per year over the first three years of the grant. All options granted to the Executive will expire seven (7) years from the grant date.

8. Initial Grant of Stock Options

As an initial grant to the Executive, subject to approval of the Board of Directors at a meeting following the Effective Date of this agreement, the Executive would receive a stock option grant of 350,000 options under the terms of the Patheon Stock Option Plan. As per securities regulatory requirements, options may not be issued when the Company is in possession of material undisclosed information. The options shall vest as to one-third per year over the first three years. The subscription price for the shares under option will be the market price (as defined in the Patheon Stock Option Plan) on the day the grant is approved by the Committee.

In addition to the initial grant, Executive will be entitled to participate as a senior executive of the Company, in the opportunity to be granted further options at the discretion of the Board of Directors in the course of their periodic review of executive compensation arrangements.

Executive will be expected to comply with the terms of any share ownership program implemented by the Company.

9. Employee Benefits

Executive will be entitled to participate in the employee welfare benefit programs of the Company on a basis at least as favorable as other senior-level executives of the Company including medical, dental, life insurance, 401-K retirement plans and other health benefit programs.

In addition, the Executive will be entitled to four (4) weeks of vacation time.

10. Perquisites

Executive will be entitled to an allowance of $1,200 USD per month for car related expenses subject to the normal statutory and withholding deductions.

11. Sign-On Cash Compensation

The Company will pay Executive within 30 business days of the Effective Date, a sign-on bonus of US $ 75,000.

12. Severance

In the event the Executive’s employment is terminated by the Company without Cause or if the Executive terminates employment with the Company for Good Reason (as defined below), the Executive will be entitled to receive an amount equal to (i) 12 months Base Salary and (ii) an additional amount, determined by the Board of Directors in its sole discretion, equal to the bonus he would reasonably be expected to have earned during the fiscal year in which his employment is terminated. The Executive shall be entitled to this severance benefit only if he executes and does not revoke a Company-drafted waiver and release within a prescribed time period following termination of employment.

The severance benefit described above shall generally be paid in equal installments over 12 months, beginning after the date the waiver and release becomes irrevocable. However, to the extent that the Executive’s severance payment exceeds two times the lesser of (i) the Executive’s annual compensation or (ii) the IRS compensation limit for the year of termination, any amounts not yet paid as of the “short-term deferral date” shall be paid in a lump sum on the “short-term deferral date.” The “short-term deferral date” is the date that is two and one-half months after the end of the later of (i) the calendar year in which the Executive’s employment is terminated or (ii) the Company’s fiscal year in which the Executive’s employment is terminated.

“Good Reason” means the occurrence of any of the following events without the consent of the Executive: (i) a material reduction by the Company of the Executive’s duties or responsibilities or the assignment to the Executive of duties or responsibilities or the assignment to the Executive of duties materially inconsistent with such position; (ii) a material breach by the Company of this Agreement; or (iii) requirement by the Company that the Executive’s work more than fifty (50) miles from Executive’s principle office upon commencement of Employment. A termination of the Executive’s employment by Executive shall not be deemed to be for Good Reason unless (i) the Executive gives notice to the Company of the existence of the event or condition constituting Good Reason within 30 days after such event or condition initially occurs or exists, (ii) the Company fails to cure such event or condition within 30 days after receiving such notice, and (iii) the Executive’s “separation from service” within the meaning of Section 409A of the Code occurs not later than 90 days after such event or condition initially occurs or exists.

In the event of termination for Cause, the Executive shall not be entitled to severance.

For purposes of this agreement “Cause” means the determination, in good faith, by the Board, after notice to the Executive and, if curable, a reasonable opportunity to cure, that one or more of the following events has occurred: (i) Executive has failed to perform his material duties, and such failure has not been cured after a period of 30

days notice from the Company; (ii) any reckless or grossly negligent act by Executive having the effect of injuring the interest, business or reputation of the Company, or any of its parent, subsidiaries or affiliates in any material respect; (iii) Executive’s commission of any felony (including entry of a nolo contendere plea); (iv) any misappropriation or embezzlement of the property of the Company, or any of its parent, subsidiaries or affiliates; or (v) a breach of any material provision of the Employment Agreement by Executive.

13. Change in Control

Notwithstanding the foregoing, in the event that the Executive’s employment is terminated by the Company without Cause or terminated by the Executive for Good Reason at any time during the 6 month period following the consummation of a Change in Control (as defined below), the Executive will be entitled to receive (i) 12 months Base Salary and (ii) an additional amount, determined by the Board of Directors in its sole discretion, equal to the bonus he would reasonably be expected to have earned during the fiscal year in which his employment is terminated. The Executive shall be entitled to this benefit only if he executes and does not revoke a Company-drafted waiver and release within a prescribed time period following termination of employment.

The severance benefit described above shall generally be paid in equal installments over 12 months, beginning after the date the waiver and release becomes irrevocable. However, to the extent that the Executive’s severance payment exceeds two times the lesser of (i) the Executive’s annual compensation or (ii) the IRS compensation limit for the year of termination, any amounts not yet paid as of the “short-term deferral date” shall be paid in a lump sum on the “short-term deferral date.” The “short-term deferral date” is the date that is two and one-half months after the end of the later of (i) the calendar year in which the Executive’s employment is terminated or (ii) the Company’s fiscal year in which the Executive’s employment is terminated.

In addition, in the event that the Executive’s employment is terminated by the Company without Cause or terminated by the Executive for Good Reason at any time during the 6 month period following the consummation of a Change in Control the Executive’s unvested options will be considered vested and exercisable and remain in force for the duration of the original term.

“Change in Control” means any of the following events:

Any “Person” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than JLL Partners or its affiliates, becomes a Beneficial Owner (within the meaning of Exchange Act Rule 13d-3) of more than fifty percent (50%) of the voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors:

There is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other Company, other than a merger or

consolidation that would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or

The stockholders or the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.

14. Other

Confidentiality, one year non-solicit/no-hire and one year non-competition covenants.

The Executive to represent that he is under no employment contract, non-competition or other covenants or restrictions that could limit his ability to commerce work on the Effective Date or otherwise limits his ability to perform all responsibilities of the position.

15. Governing Law

North Carolina

16. Section 409A Compliance

The compensation and benefits described in this summary are designed to be exempt from, or to comply with, Section 409A of the Internal Revenue Code (“Section 409A”). The terms of employment described in this summary will be reflected in an employment agreement, which shall include all necessary provisions to ensure exemption from or compliance with Section 409A. The Executive shall have the opportunity to have the agreement reviewed by counsel prior to signature. In order to comply with Section 409A, the agreement must be finalized by the end of the calendar year that includes the Effective Date.

EX-10.29

[PATHEON]

Exhibit 10.29

February 20, 2008

PRIVATE AND CONFIDENTIAL

Doaa A. Fathallah

Weidstrasse 11, 6300

Zug, Switzerland,

RE: Terms of Employments

Dear Doaa:

I am pleased to present these terms of employment for you as General Counsel, Europe and Global Pharmaceutical Development Services (“PDS”) with Patheon Inc. (“Patheon”), commencing March 3, 2008. Attached hereto as Revised Exhibit A-1 is a summary of the key terms of your employment arrangements. Patheon agrees that your employment by Patheon will be governed by the terms set forth on Revised Exhibit A-1, subject to the execution of an employment agreement between you and Patheon on substantially the terms set forth on Revised Exhibit A-1 (the “Employment Agreement”).

By executing this letter, you agree that your employment will be governed by the terms set forth on Revised Exhibit A-1 , subject to the final execution of the Employment Agreement

Doaa, I am looking forward to working with you once again

Very truly yours, PATHEON INC.
By:	/s/ Wesley P. Wheeler
	Wesley P. Wheeler
	Chief Executive Officer

Accepted as of this              Day of

February, 2008

/s/ Doaa A. Fathallah

Doaa A. Fathallah

[PATHEON]

Revised EXHIBIT A-1

Summary of Key Terms

For Proposed Employment between Patheon Inc (the “Company”)

and

Doaa A. Fathallah (“Executive”)

1. Title and Position

Executive’s title shall be Senior Vice President, General Counsel, Europe and Global Pharmaceutical Development Services (“PDS”). Executive’s title shall be adjusted pursuant to Patheon’s expansion into Asia. The Position reports directly to Chief Executive Officer (“CEO”) with dotted line reporting to President – Europe and President – PDS. Executive and the General Counsel, North America and Corporate Secretary shall coordinate to address Company administrative matters as necessary.

Executive shall become a member of the European Executive Management team. Executive shall become legal officer for (i) all existing European businesses, affiliates and subsidiaries and (ii) any newly acquired businesses, affiliates and subsidiaries pursuant to Patheon’s expansion in Asia

Executive will be employed by the US Patheon Pharmaceutical Services Inc. organization.

2. Term and Effective Date

Indefinite term with start date to be agreed upon between Executive and CEO (“Effective Date”).

3. Location of Duties

It is understood that the Executive’s principal office will be a home office located in the Executive’s residence in the city of Zug, Switzerland. Patheon shall cover all reasonable costs associated with setting up and maintaining Executive’s home office, including but not limited to acquiring the necessary office equipment, supplies and set up services, and maintaining all necessary services, as consistent with applicable Patheon policy and procurement practices. Such amount to be in accordance with policy and require the normal and customary approvals.

Further and dependent upon the needs of the organization, Executive and Patheon Inc may enter into discussions as to a potential repatriation back to the US to serve in a global corporate office capacity. This global corporate office location has yet to be determined.

4. Direct Reports and Functional Responsibility

The Executive shall have responsibility for all legal matters for Europe, Global PDS and any expansion into Asia

As of the Effective Date, the Executive shall have 2 direct reports as follows:

Head Legal Counsel in Italy

Head Legal Counsel in the UK

Executive shall have the discretion to determine and meet future personnel needs of the legal department relating to Europe, Global PDS and any expansion into Asia, subject to the normal and customary headcount approval processes.

5. Base Salary

$300,000 US annually (“Base Salary”). This annual base salary is commensurate with expatriation duties and responsibilities while abroad in Europe. Dependent upon both the Executives repatriation back to the US, and the nature of those repatriated duties, this compensation may be adjusted to reflect the new responsibilities.

For fiscal 2008, Base Salary will be prorated from Effective Date.

6. Performance Bonus

Executive shall be eligible to receive a target performance bonus of 40% of Executive’s Base Salary, based on achieving predetermined financial and other targets set by the CEO in consultation with Executive. Should Executive exceed target performance, Executive shall receive, dependent upon the above plan level up to a maximum bonus of 60 % of Executive’s Base Salary.

For fiscal 2008, Performance Bonus will be prorated from the Effective Date.

7. Sign-On Bonus

Executive shall be paid a sign-on bonus in the amount of $50,000 US within 30 days of Effective Date. Executive shall reimburse Patheon this amount should Executive resign for other than Good Reason within (as defined herein) one year of the Effective Date.

8. Equity Compensation — Stock Options

Executive will be eligible to participate in the Corporations Stock Option Plan and awarded options from time to time in accordance with the terms of such plan.

Any options granted shall vest as to one-third per year over the first three years of the grant. All options granted to the Executive will expire seven (7) years from the grant date.

9. Initial Grant of Stock Options

As an initial grant to the Executive, subject to Board of Director approval, the Executive would receive a stock option grant of 50,000 options under the terms of the Patheon Stock Option Plan. The options shall vest as to one-third per year over the first three years from the date you commence employment. The subscription price for the shares under option will be the market price (as defined in the Patheon Stock Option Plan) on the day your grant is approved by the Board of Directors.

In addition to the initial grant, Executive will be entitled to participate as a senior executive of the Company, in the opportunity to be granted further options at the discretion of the Board of Directors in the course of their periodic review of executive compensation arrangements.

Executive will be expected to comply with the terms of any share ownership program implemented by the Company.

10. Employee Benefits

Executive will be entitled to participate in the Ambassador employee welfare benefit programs of the Company including medical, dental, life insurance. In addition, the Executive will be eligible to participate in the US 401-K retirement plans and other health benefit programs afforded to Executives at the same level within the organization.

In addition to the 401-K plan, Patheon is in the process of reviewing its executive compensation arrangements, including whether to implement a Supplemental Executive Retirement Plan (“SERP”). If Patheon implements a SERP or other retirement plan available to senior executives, the Executive will be entitled to participate in that plan on terms substantially similar to the terms applicable to other senior executives of Patheon.

In addition, the Executive will be entitled to twenty-five (25) working days of vacation time per year with additional vacation time based on seniority per Patheon vacation policy.

11. Perquisites

Executive will be entitled to an allowance of $2,500 US per month for car related expenses subject to the normal payroll source deductions.

Executive shall be entitled to be reimbursed for annual roundtrip business class tickets for her and her family to travel from Europe to the United States.

12. Severance

In the event the Executive’s employment is terminated by the Company without Cause or if Executive terminates employment with Company for Good Reason (as defined below), the Executive will be entitled to receive one year Base Salary. The Executive is also entitled to receive an amount equal to the bonus she would reasonably be expected to have earned during the year following termination.

“Good Reason” means the occurrence of any of following events without the prior consent of Executive: (i) removal of Executive from Executive’s position, (ii) material reduction by the Company of Executive’s duties or responsibilities or the assignment to Executive of duties materially inconsistent with such position, (iii) requirement by the Company that Executive work more than thirty miles from Executive’s principle office upon commencement of Employment, or (iv) material breach by the Company of Employment Agreement or Company policy, which breach remains uncured for period of 30 days after receipt by the Company of written notice from Executive.

In the event of termination for Cause, the Executive shall not be entitled to severance.

For purposes of this agreement “Cause” means the determination, in good faith, by the Board, after notice to the Executive and, if curable, a reasonable opportunity to cure, that one or more of the following events has occurred: (i) Executive has failed to perform her material duties, and such failure has not been cured after a period of 30 days notice from the Company; (ii) any reckless or grossly negligent act by Executive having the effect of injuring the interest, business or reputation of the Company, or any of its parent, subsidiaries or affiliates in any material respect; (iii) Executive’s commission of any felony (including entry of a nolo contendere plea); (iv) any misappropriation or embezzlement of the property of the Company, or any of its parent, subsidiaries or affiliates; or (v) a breach of any material provision of the Employment Agreement by Executive.

13. Change in Control

Notwithstanding the foregoing, in the event that Executive’s employment is terminated by the Company without Cause or terminated by Executive for Good Reason, at any time during the six-month period following the consummation of a Change in Control (as defined below), Executive will be entitled to continue to receive Base Salary payable in equal monthly installments, plus Executive’s target performance bonus for 12 months following termination. In addition, upon the occurrence of a Change in Control, Executive’s unvested options will become immediately vested and exercisable and remain in force for the duration of their original term.

“Change in Control” means any of the following events:

Any “Person” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than JLL Partners or its affiliates, becomes a Beneficial Owner (within the meaning of Exchange Act Rule 13d-3) of more than fifty percent (50%) of the voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors;

There is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other Company, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or

The stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets

14. Other

Confidentiality, one year non-solicit/no-hire.

Executive to represent that she is under no employment contract, non- competition or other covenants or restrictions that could limit her ability to commence work on the Effective Date or otherwise limit her ability to perform all responsibilities of the position.

15. Governing Law

New York

EX-10.30

[PATHEON] Exhibit 10.30

Patheon International GmbH

Employment Agreement

between

Patheon International GmbH, Zug, Switzerland or any successor entity in Switzerland thereof (hereinafter the “Company”)

and

Doaa Fathallah (hereinafter the “Employee”).

This Employment Agreement shall be subject to the competent authorities issuing the work and residence permits required for the Employee under Swiss law.

This Employment Agreement is conditional upon the Employee successfully obtaining and maintaining valid and subsisting Swiss Work and Residence Permits, and any renewals thereof. If such Work and Residence Permits are not issued to the Employee by the Swiss Immigration authorities then this Employment Agreement shall be deemed null and void. As a point of clarification, it is understood and agreed that the issuance of any initial Work and Residence Permits and any renewals thereof cannot be guaranteed and the Company makes no representations, warranties or inducements to the Employee in this regard.

The Employee acknowledges that, she will be required to relocate to Zug, Switzerland and agrees to consent to such relocation as the Company deems such relocation necessary, in its sole discretion.

1. FUNCTION AND FIELD OF ACTIVITY

The Employee is employed as Senior Vice President, General Counsel, Europe and Global Pharmaceutical Services (“PDS”) and shall work at the offices of the Company in Zug. The Employee will continue to provide and have responsibility

[Patheon International GmbH Letterhead] between Doaa Fathallah and Patheon International GmbH,

for all legal matters for Europe, Global PDS and Asia. The Company has the right to assign other duties and responsibilities to the Employee which are in accordance with the Employee’s education and knowledge.

2. REPORTING

The Employee shall regularly report to Wes Wheeler, President and CEO. Important events which might affect the Company as a whole shall be reported without delay to the President and CEO.

3. CONFLICT OF INTERESTS

The Employee shall not engage in any activities which might lead to a conflict of interests with respect to her position with the Company.

In particular, the Employee shall refrain from operating, working for, or participating in any business which competes with the Company.

Investments in companies competing or doing business with the Company are subject to the prior written consent of the President and CEO.

4. TERM AND STARTING DATE

This Employment Agreement is concluded for an indefinite term. The Employee shall start working on May 6, 2008.

In the event of the Employee’s dismissal by the Company without Cause or if Employee terminates employment for Good Reason (each of “Cause” and ‘Good Reason” as defined in the Employee’s current employment terms with Patheon Pharmaceuticals Services Inc.), the Company, by and no later than 30 (thirty) days of the effective date of termination of the Employee’s employment, shall pay you a severance amount equal to (i) one year of the Employee’s base salary less applicable deductions, and (ii) one year of bonus payments based on an amount you would reasonably be expected to have earned during the year following termination, less applicable deductions. Such severance is inclusive of any notice entitlements hereunder.

5. WORKING HOURS, PART-TIME ACTIVITIES

The Employee shall devote her full working capacity exclusively to the Company.

The Employee shall not engage in any professional part-time activities, whether

2

[Patheon International GmbH Letterhead] between Doaa Fathallah and Patheon International GmbH,

remunerated or not, without prior written consent of Wes Wheeler.

Other part-time activities require the written consent of Wes Wheeler, if they involve the use of the Company’s infrastructure and/or personnel.

6. BASE SALARY

The gross base salary amounts to USD 300,000 as a Swiss Franc Equivalent per year, less applicable deductions payable in 12 monthly installments. Swiss Franc equivalents are based on an exchange rate of 1 USD equaling 1.2213 Swiss Francs. The Company will review the Employee’s Swiss salary periodically and determine if any adjustments are warranted due to significant exchange rate fluctuations.

This amount includes all compensation for overtime.

7. EXECUTIVE BONUS PLAN

In addition to the Employee’s base salary, the Employee shall continue to be eligible to receive an annual bonus targeted at 40% of the Employee’s gross base salary, based on achieving predetermined targets set by Employee’s supervisor in consultation with Employee. Should Employee exceed her target performance the Employee shall receive up to a maximum of two times her target bonus, subject at all times to the terms and conditions of the Company’s Executive Bonus Plan.

8. INTERNATIONAL RELOCATION INCENTIVE

In addition to the compensation elements noted above, an additional allowance equal to 25% of the Employee’s gross base salary subject to the required statutory deductions will be provided during the Employee’s first twelve month assignment to Switzerland. This will be paid in equal monthly instalments in accordance with the Swiss payroll cycle.

An additional amount equal to 25% of the Employee’s gross ease salary subject to the required statutory deductions will be paid in equal monthly instalments for the subsequent twelve months ending May 2010 in accordance with the Swiss payroll cycle.

These additional payments will be made to you conditional upon the Employee’s ongoing active employment in Switzerland at that time and of course, would be made in addition to any other payments, including bonus payments, to which you may be entitled.

3

[Patheon International GmbH Letterhead] between Doaa Fathallah and Patheon International GmbH,

9. EXPENSES AND REPRESENTATION ALLOWANCE

The Company shall cover all reasonable expenses above CHF 50 (including travelling and hotel expenses, expenses for invitations etc.) which arise in connection with the Employee’s activities for the Company.

In addition, the Company shall pay the Employee a non-taxable representation allowance in the amount of CHF 6,000 per year, payable in 12 monthly instalments at the end of each month which is intended to cover all reasonable expenses below CHF 50. Notwithstanding anything to the contrary herein this Section 9 paragraph shall be subject to approval by the competent tax authorities.

10. CAR ALLOWANCE

During the term of the employment the Company shall provide the Employee with a car allowance of USD 30,000 as a Swiss Franc Equivalent per year, less applicable deductions payable in 12 monthly instalments. Swiss Franc equivalents are based on an exchange rate of 1 USD equaling 1.2213. The Company will review the Employee’s Swiss car allowance periodically and determine if any adjustments are warranted due to significant exchange rate fluctuations.

11. SOCIAL SECURITY CONTRIBUTIONS AND PENSION PLAN

The Company shall pay 100% of the contributions for each of AHV (Old Age and Survivors’ Insurance), IV (Invalidity Insurance), EO (Loss of Earnings) and ALV (Unemployment Insurance) for the Employee’s benefit.

The Employee shall participate in the Company’s pension plan. The Company shall pay 100% of the contributions for the benefit of the Employee, all such contributions and the benefits of which shall be in accordance with the rules and regulations of the pension plan. The Company shall pay for all social security and pension plan contributions on behalf of the Employee from the commencement of this Employment Agreement.

In addition, subject to US Pension committee approval, the Employee will be eligible to participate in the Patheon Pharmaceuticals Retirement Savings Plan. Under the terms of that plan, the Employee will be eligible to make pre-tax salary deferral contributions, but will not be eligible for employer contributions.

12. ACCIDENT AND ILLNESS

The Employee is insured for occupational as well as non-occupational accidents.

4

[Patheon International GmbH Letterhead] between Doaa Fathallah and Patheon International GmbH,

In case of the Employee’s inability to perform her duties under this Employment Agreement due to illness, the Employee shall receive her salary according to the terms and conditions of the insurance for loss of earnings due to illness. If there is no insurance for loss of earnings due to illness, the continuation of salary payment is determined by Art. 324a of the Swiss Code of Obligations.

13. INTERNATIONAL HEALTHCARE PLAN

During the term of employment, the Company shall provide the Employee and each of her eligible dependants, coverage in a healthcare plan providing adequate medical, dental, vision and other appropriate coverage (including the mandatory and supplementary insurances under Swiss laws). Such plan may either be provided through a local health provider or through an international healthcare plan provider as the Company shall deem appropriate from time to lime.

14. MILITARY SERVICE

The Company shall pay the Employee her full salary during her mandatory military or alternative civilian service”

Military or alternative civilian service of over four weeks duration shall be coordinated in advance and in due time with the board of directors. A separate agreement shall be reached regarding the length and amount of the respective continuation of pay.

15. VACATION

The Employee is entitled to 5 weeks of paid vacation (25 working days) per year.

The vacation dates shall be subject to the prior approval of the Employee’s immediate supervisor.

16. Payroll

As the majority of the Employee’s day to day expenses will be incurred in Switzerland, the Employee will be placed onto the Swiss payroll. However, it may be advantageous for the Employee to maintain a certain portion of her total gross income on

5

[Patheon International GmbH Letterhead] between Doaa Fathallah and Patheon International GmbH,

the USA payroll. As such, Patheon will work with the Employee to facilitate a split payroll between both the USA and Switzerland.

17. CONFIDENTIALITY, TRADE SECRETS

All manufacturing or trade secrets including customer base, technical, organisational and financial information and all other information directly or indirectly related to the business of the Company or to the business of any customer of the Company, which is disclosed to the Employee by the Company or any of its employees and which the Employee gets acquainted with during the employment relationship with the Company, shall be treated as confidential information. At all times, both during the employment and after the termination thereof, the Employee shall keep such information secret and shall refrain from disclosing it or using it in any way for her own benefit or for the benefit of any person other than the Company.

18. INTELLECTUAL PROPERTY RIGHTS

Inventions, designs, developments and improvements which the Employee makes while performing her employment activity and contractual duties or to which the Employee contributes belong to the Company, regardless of their protect ability.

Inventions and designs which the Employee makes while performing her employment activity but not during the performance of her contractual duties or to which the Employees contributes are assigned to the Company without further formalities. The Employee shall inform the Company of such inventions or designs. The Company shall inform the Employee in writing within 6 months whether it wishes to keep the rights to the invention or the design or to release them to the Employee. In case that the invention or the design is not released to the Employee, the Company shall pay her a special appropriate compensation within the meaning of Art. 332(4) of the Swiss Code of Obligations.

The rights to works of authorship (drafts, models, plans, drawings, texts) which the Employee creates while performing her employment activity, whether during the performance of her contractual duties or not, including the right to uses not yet known at this time, are transferred completely and exclusively to the Company.

19. NON-COMPETITION/NO HIRE

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[Patheon International GmbH Letterhead] between Doaa Fathallah and Patheon International GmbH,

For a period of one year after the termination of this Employment Agreement, the Employee agrees to refrain (i) within the territory of Europe and within the business areas of the Company from directly or indirectly engaging himself as owner, partner or employee of any business which competes with the Company, and (ii) from hiring any employee of the Company and/or any of its affiliates. Notwithstanding the foregoing, nothing herein shall prevent the Employee from owning not more than 10% of the issued shares of a company, the shares of which are listed on a recognized stock exchange or traded in any over the counter market, which carries on a business which is the same or substantially similar to or competes with or would compete with the business of the Company or any of its affiliates.

As compensation for Employee’s agreement not to compete and not to hire employees of the Company and/or its affiliates in accordance with this Section 19 and in addition to any other payment required to be made by the Company under this Employment Agreement, the Company hereby agrees to pay the Employee a monthly payment in an amount equal to her last monthly salary prior to termination for the one year period after termination of the Employment Agreement.

In case of violation of this non-competition clause, the Employee shall pay to the Company liquidated damages in the amount of the Employees last yearly gross salary amount for each instance of violation. The payment of liquidated damages shall not discharge the Employee from observing this non-competition and no hire undertaking.

In addition to the payment of liquidated damages and further damages incurred by the Company, the Company shall have the right to request the termination of any of the Employee’s activities which violate this non-competition and no hire agreement.

20. MISCELLANEOUS

Amendments to this Employment Agreement shall only be valid if made in writing.

All other terms and conditions of the Employee’s employment will remain the same as per the current employment terms with Patheon Pharmaceuticals Services Inc. unless expressly altered and accepted in this Employment Agreement.

Professional tax advice will be made available to you at Patheon’s expense, as well as assistance with the preparation and filing of both USA and Swiss tax returns for the tax years while you are on assignment. As this is a highly specialized

7

[Patheon International GmbH Letterhead] between Doaa Fathallah and Patheon International GmbH,

area of tax, you are required to utilize the tax advisory firm selected by Patheon for this purpose.

Patheon reserves the right to change, alter, modify the applicable benefit, pension, allowance, relocation and general insurances in its sole discretion subject to reasonable notice to the employee of such changes.

21. APPLICABLE LAW / JURISDICTION

This Employment Agreement is subject to Swiss law. In case of any dispute arising out of this Employment Agreement, the Courts according to Art. 24 of the Federal Act on the Place of Jurisdiction (Gerichtsstandsgesetz) applies.

Place, Date: Zug 16/12/2008
Employer:	Employee:
/s/ Wes Wheeler	/s/ Doaa Fathallah
Wes Wheeler	Doaa Fathallah

/s/ Roy Wieschkowski

Roy Wieschkowski

8

EX-10.31

[PATHEON] Exhibit 10.31

7070 Mississauga Road, Suite 350

Mississauga, Ontario L5N 7J8

www.patheon.com

June 29, 2010 Patheon.com

Ms. Doaa A. Fathallah

Weidstrasse II

6300 Zug

Switzerland

Re: First Amendment to Employment Agreement

Dear Doaa:

I am writing to confirm our agreement to amend the language of your May 6, 2008 Employment Agreement with Patheon International AG, as successor entity to Patheon International GmbH (the “Employment Agreement”) as follows:

8. International Relocation Allowance

The Company shall continue to pay you the international relocation allowance amount set forth in your Employment Agreement for so long as you are working for Patheon in Switzerland.

Very truly yours,
/s/ Wesley P. Wheeler
Patheon International AG
By:	Wesley P. Wheeler
Title:	Authorized Signatory

EX-10.32

[PATHEON] Exhibit 10.32

Wesley P. Wheeler

Chief Executive Officer & President

Patheon Inc

PO Box 110145

Research Triangle Park, NC 27709

Phone: 919-228-3201

Fax: 919-226-3202

wes.wheeler@patheon.com

December 17, 2009

PRIVATE AND CONFIDENTIAL

Doaa Fathallah

Dear Doaa;

I am delighted to confirm your promotion to the role of Executive Vice President, General Counsel & Corporate Secretary, effective December 17, 2009 (the “Effective Date”). This offer letter (the “Letter Agreement”) describes the terms and conditions of your promotion and once signed by you will serve as an addendum to the employment agreement between you and Patheon International AG (GmbH) signed December 16, 2008 (the “Employment Agreement”). You will report to me in my capacity as Chief Executive Officer and President.

In this Letter Agreement, you may be referred to as the “Executive”, and Patheon International AG or Patheon Inc. may be referred to as “Patheon” or the “Corporation”.

1. General Provisions

This Letter Agreement, when fully executed, together with the Employment Agreement, reflects the entire agreement regarding the terms and conditions of the Executive’s employment and promotion. Unless expressly modified by this Letter Agreement, all terms and conditions of the Employment Agreement, including the Executive’s confidentiality undertaking, will remain the same.

2. Responsibilities & Duties

In your new role as Executive Vice President, General Counsel & Corporate Secretary, you will be assuming additional responsibilities for Patheon’s global legal strategy. The Executive shall have such authority, duties and responsibilities as are commensurate with such position, reporting to the Chief Executive Officer and President. The Executive’s title shall be Executive Vice President, General Counsel & Corporate Secretary.

3. Compensation & Benefits

3.1 Base Salary

In recognition of these changes in your responsibilities your Annual Base Salary will be increased to 400,000 (CHF) Swiss Francs per year, less applicable deductions, payable in 12 monthly installments.

The Annual Base Salary shall be reviewed by the Chief Executive Officer and President, for increase only, at such time as the salaries of other senior executives of Patheon are reviewed generally. If so increased, the Annual Base Salary shall be increased for all purposes of the Employment Agreement.

3.2 Performance Incentive Plan

In your new capacity, you will be eligible to participate in the Patheon Annual Performance Incentive Plan (the Performance Incentive Plan”) established for your position at a new target level of 45%. The personal objectives will be set by the Chief Executive Officer, and the financial performance measures will be set by the Chief Executive Officer. The annual performance bonus, if earned, will be paid to the Executive by the Corporation in the same manner and payment period generally applicable under the Performance Incentive Plan, but in no event later than two and a half months after the later of (i) the end of the applicable performance period, or (ii) the end of the calendar year in which the performance period ends. Nothing contained in this Section 3.2 will guarantee the Executive any specific amount of incentive compensation, or prevent the Chief Executive Officer from establishing performance goals and compensation targets applicable only to the Executive.

3.3 Stock Options

Further, as recognition of your new role and subject to the approval of the Board of Directors, we are pleased to provide you an additional grant of 50,000 shares of common stock of Patheon at an exercise price per share equal to the market value of the common stock on the date of the grant (the “Option”).

(a) Except as otherwise provided in the Amended and Restated Incentive Stock Option Plan (the “ISOP”) or stock option award agreement (together with the ISOP, the “Stock Related Documents”), the Option will (i) vest as to 1/3 of the shares subject to the Option on each of the first three anniversaries of the date of grant, subject to the Executive’s continued employment with the Affiliated Group until the relevant vesting dates, and (ii) have a seven year term. The Option will be subject to the terms, definitions and provisions of the applicable Stock Related Documents.

(b) During the Executive’s employment, at the discretion of the Board of Directors or its delegate, the Executive also shall be eligible to receive additional stock options and other long-term incentives under the ISOP or any similar plan adopted by Patheon from time to time.

(c) The Executive will be required to comply with the terms of any share ownership guidelines applicable to senior executives of Patheon generally, as amended from time to time.

Doaa, I congratulate you on this opportunity to play a larger role in the growth of Patheon in the future. I look forward to working with you in this new capacity.

Page 2

To confirm your decision to accept this promotion, please sign and date this Letter Agreement below and return the signed version to Corporate Human Resources.

NOW THEREFORE, the parties below have entered into this Letter Agreement as of the date first written above.

PATHEON PHARMACEUTICAL SERVICES INC.

/s/ Wesley P. Wheeler

By: Wesley P. Wheeler

Title: Chief Executive Officer and President

SIGNED, SEALED AND DELIVERED
in the presence of
/s/ Gwynne Kong	)	/s/ Doaa Fathallah
Name of Witness:		Doaa Fathallah

Page 3

EX-10.33

Exhibit 10.33

[PATHEON]

Date: January 15, 2009

PRIVATE AND CONFIDENTIAL

Paul M. Garofolo

1436 Mariners Drive

Newport Beach, California 92660

Dear Paul:

RE: Employment Agreement:

I am pleased to confirm the terms of your employment (“Employment Agreement”), dated May 12, 2008. This Employment Agreement represents your contractual arrangements with Patheon Pharmaceutical Services Inc. (the “Corporation”) and supersedes any arrangements, understandings and verbal commitments to you during our discussions.

Sincerely,

/s/ Wesley P. Wheeler

Wesley P. Wheeler

Chief Executive Officer

EMPLOYMENT AGREEMENT

THIS AGREEMENT is made as of the 12th day of May, 2008 between Patheon Pharmaceutical Services Inc. (the “Corporation”) and Paul M. Garofolo, an Executive residing in the City of Newport Beach, in the State of California (the “Executive”).

WHEREAS, the Corporation and the Executive wish to enter into this Agreement to set forth the rights and obligations of each of them with respect to the employment of the Executive.

WHEREAS, the Corporation agrees to employ the Executive on the terms and subject to the conditions set forth in this Agreement to render exclusive and full-time services to the Affiliated Group (as defined below).

NOW, THEREFORE, THIS AGREEMENT WITNESSES that in consideration of the premises and mutual covenants and agreements hereinafter contained and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the parties agree with each other as follows:

ARTICLE 1

INTERPRETATION

1.1 Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of New York. Each of the parties hereby irrevocably consents to the jurisdiction of the courts in the State of New York with respect to any matters arising out of this Agreement.

1.2 Definitions. In this Agreement, including Schedule A and B hereto, unless, the context otherwise requires, the following terms shall have the following meanings, respectively:

(a) “Affiliated Group” means the Corporation and any entity controlled by, controlling, or under common control with the Corporation.

(b) “Agreement” means this Employment Agreement as it may be amended or supplemented from time to time.

(c) “Annual Base Salary” has the meaning given such term in Section 3.1.

(d) “Board of Directors” means the Board of Directors of Patheon.

(e) “Cause” means the determination, in good faith, by the Board of Directors, after notice to the Executive and, if curable, a reasonable opportunity to cure, that one or more of the following events has occurred: (i) the Executive has failed to perform his material duties, and such failure has not been cured after a period of

30 days notice from the Corporation; (ii) any reckless or grossly negligent act by the Executive having the effect of injuring the interests, business or reputation of any member of the Affiliated Group in any material respect; (iii) the Executive’s commission of any felony (including entry of a nolo contendere plea); (iv) any misappropriation or embezzlement of the property of any member of the Affiliated Group; or (v) a breach of any material provision of this Agreement by the Executive.

(f) “Change in Control” means any of the following events:

(i) Any “Person” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than JLL Partners or its affiliates, becomes a Beneficial Owner (within the meaning of Exchange Act Rule 13d-3) of more than fifty percent (50%) of the voting power of the then outstanding voting securities of Patheon entitled to vote generally in the election of directors;

(ii) There is consummated a merger or consolidation of Patheon or any direct or indirect subsidiary of Patheon with any other company, other than a merger or consolidation that would result in the voting securities of Patheon outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the securities of Patheon or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or

(iii) The stockholders of Patheon approve a plan of complete liquidation or dissolution of the company or there is consummated an agreement for the sale or disposition by Patheon of all or substantially all of its assets.

(g) “Code” means the Internal Revenue Code of 1986, as amended.

(h) “Competitor” has the meaning given such term in Section 6.4.

(i) “Date of Termination” has the meaning given such term in Section 4.5.

(j) “Effective Date” has the meaning given such term in Section 2.1.

(k) “Good Reason” means the occurrence of any of the following events without the consent of the Executive: (i) a material reduction by the Corporation of the Executive’s duties or responsibilities or the assignment to the Executive of duties or responsibilities materially inconsistent with the Executive’s position; or (ii) a material breach by the Corporation of this Agreement. A termination of the Executive’s employment by Executive shall not be deemed to be for Good Reason unless (i) the Executive gives notice to the Corporation of the existence of the event or condition constituting Good Reason within 30 days after such event or condition initially occurs or exists, (ii) the Corporation fails to cure such event or condition within 30 days after receiving such notice, and (iii) the

Executive’s “separation from service” within the meaning of Section 409A of the Code occurs not later than 90 days after such event or condition initially occurs or exists.¹

(l) “Patheon” means Patheon Inc.

(m) “Target Bonus” has the meaning given such term in Section 3.2.

ARTICLE 2

EFFECTIVE DATE; TERMS OF EMPLOYMENT

2.1 Term

The Corporation hereby agrees to employ the Executive, and the Executive hereby agrees to be employed by the Corporation on the terms and subject to the conditions of this Agreement (including, without limitation, Article 6), commencing on May 12, 2008, (the “Effective Date”).

2.2 Position and Duties

The Executive shall serve as the Chief Information Officer of Patheon, with such authority, duties and responsibilities as are commensurate with such position, reporting to the Chief Technical Officer for all global IT matters and to the Chief Executive Officer for operational excellence and other matters. In addition, the Executive will be a member of the Patheon Technical Management Committee.

The Executive shall also be responsible for the functions and responsibilities set out in the Position Description for the Chief Information Officer, attached as Schedule A.

2.3 Time Commitments

During the Executive’s employment, the Executive shall devote substantially all of his business time energies and talents to serving as the Chief Information Officer of Patheon, perform his duties conscientiously and faithfully subject to the reasonable and lawful directions of the Chief Technical Officer or the Chief Executive Officer, as appropriate, and in accordance with each of the corporate governance and ethics guidelines, conflict of interests policies and code of conduct applicable to all employees or senior executives generally of the Affiliated Group. During the Executive’s employment, it shall not be a violation of this Agreement for the Executive, subject to the requirements of Article 6, to (a) serve on corporate, civic or charitable boards or committees, (b) deliver lectures or fulfill speaking engagements and (c) manage personal investments, so long as such activities do not materially interfere with the performance of the Executive’s duties or responsibilities under this Agreement.

¹ In order to comply with Section 409A, this definition is slightly different from the definition in the term sheet.

2.4 Location

(a) Initially, it is understood that the Executive’s principal office will be a home office located in the Executive’s residence in the city of Newport Beach, California.

(b) While the Executive’s principal office is located in the Executive’s residence, the Corporation shall reimburse the Executive for reasonable automobile expenses and travel expenses associated with him commuting from his personal residence in California to Patheon’s current corporate headquarters during this period. The Corporation shall also reimburse the Executive for reasonable expenses incurred to set up a home office, including to obtain necessary office equipment, supplies and set-up services, in accordance with the Corporation’s policy and procurement practices. Reimbursements under this Section 2.4(b) shall be paid to the Executive in the calendar month after the month in which they are incurred, subject to such reasonable documentation requirements as may be requested from time to time by the Corporation.

(c) When the new U.S. headquarters location in North Carolina is available for occupancy, the Corporation will require the Executive to be based within this facility. Under the terms of Patheon’s Tier 1 relocation program, the Executive shall be reimbursed for all reasonable transaction costs and expenses (including any real estate brokerage fees, commissions and closing costs, but excluding any loss on the sale of the Executive’s personal residence) and moving expenses incurred by the Executive, in connection with relocating the Executive’s spouse, dependents and personal property and goods from the Executive’s current residence. Reimbursements under this Section 2.4(c) shall be paid to the Executive in the calendar month after the month that they are incurred, subject to such reasonable documentation requirements as may be requested from time to time by the Corporation.

ARTICLE 3

COMPENSATION AND BENEFITS

3.1 Base Salary

The Corporation shall pay the Executive an annualized base salary (“Annual Base Salary”) at a rate of not less than $290,000 US, payable in regular installments in accordance with the Corporation’s normal payroll practices. The Annual Base Salary shall be reviewed by the Chief Executive Officer, for increase only, at such time as the salaries of other senior executives of Patheon are reviewed generally. If so increased, the Annual Base Salary shall be increased for all purposes of this Agreement.

3.2 Executive Performance Bonus

For each fiscal year, the Executive shall be eligible to participate in an annual incentive plan under terms and conditions no less favorable than other senior executives of Patheon; provided that the Executive’s Target Bonus shall not be less than 40% of his Annual Base Salary. The Executive’s payment under the annual incentive plan shall be based on meeting predetermined personal objectives and Patheon’s financial performance. Both the personal objectives and financial performance measures will be

recommended by the Executive and subject to final approval by the Chief Executive Officer. For fiscal 2008, the performance bonus will be prorated from the Effective Date. The annual performance bonus, if earned, will be paid to the Executive by the Corporation in the same manner and payment period generally applicable under the annual incentive plan, but in no event later than two and a half months after the later of (i) the end of the applicable performance period, or (ii) the end of the calendar year in which the performance period ends. Nothing contained in this Section 3.2 will guarantee the Executive any specific amount of incentive compensation, or prevent the Chief Executive Officer from establishing performance goals and compensation targets applicable only to the Executive.

3.3 Sign-on Bonus

The Corporation will pay the Executive in a lump sum, within 30 business days of the Effective Date, a sign-on bonus of $50,000 US. If Executive voluntarily terminates employment with the Corporation other than for Good Reason within one year after the Effective Date, Executive shall reimburse the Corporation this $50,000 payment within 30 days of termination. If Executive fails to make this reimbursement payment within 30 days of termination, the Corporation shall withhold the unpaid amount from any amounts otherwise owed to the Executive (but only to the extent those amounts are not considered deferred compensation under Section 409A).

3.4 Equity Compensation

(a) Subject to the approval of the Board of Directors, the Executive shall be granted a stock option to purchase 75,000 shares of common stock of Patheon at an exercise price per share equal to the market value of the common stock on the date of the grant (the “Option”). Except as otherwise provided in the Amended and Restated Incentive Stock Option Plan (the “ISOP”) or stock option award agreement (together with the ISOP, the “Stock Related Documents”), the Option will (i) vest as to 1/3 of the shares subject to the Option on each of the first three anniversaries of the date of grant, subject to the Executive’s continued employment with the Affiliated Group until the relevant vesting dates, and (ii) have a seven year term. The Option will be subject to the terms, definitions and provisions of the applicable Stock Related Documents.

(b) During the Executive’s employment, at the discretion of the Board of Directors or its delegate, the Executive also shall be eligible to receive additional stock options and other long-term incentives under the ISOP or any similar plan adopted by Patheon from time to time.

(c) Upon the occurrence of a Change in Control, any stock options to purchase shares of the common stock of Patheon then held by the Executive shall, to the extent not otherwise provided in the applicable Stock Related Documents, become immediately vested and exercisable and shall remain exercisable for the remaining term of such stock option (which remaining term shall be determined without regard to the Executive’s termination of employment).

(d) The Executive will be required to comply with the terms of any share ownership guidelines applicable to senior executives of Patheon generally, as amended from time to time.

3.5 Retirement Benefits

Executive will be entitled to participate in the 401(k) retirement plan and any other qualified or nonqualified deferred compensation and retirement plans maintained by the Corporation applicable to senior executives of the Corporation generally, in each case as amended from time to time.

3.6 Other Benefit Plans

During the Executive’s employment, the Executive also shall be entitled to participate in all welfare, perquisites, fringe benefit, and other benefit plans, practices, policies and programs, as may be in effect from time to time, for U.S. resident-based senior executives of Patheon generally.

The Corporation shall also pay the Executive, in regular semi-monthly installments, an allowance of $1,200 US per month for car related expenses.

In addition, beginning with calendar year 2009, the Corporation shall pay for an annual club membership of the Executive’s choice up to $2,000 US per annum. This club membership payment shall be made in cash to the Executive in January of each year once documentation of the expenditure or invoice has been provided to Patheon.

3.7 Expenses

The Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses actually and properly incurred by the Executive during the Executive’s employment in connection with carrying out his duties hereunder in accordance with the Corporation’s policies, as may be in effect from time to time, for its senior executives generally.

3.8 Vacation

During the Executive’s employment, the Executive shall be entitled to four (4) weeks paid vacation in addition to four (4) floating holidays annually in accordance with the Corporation’s policies, as may be in effect from time to time, for its senior executives generally.

ARTICLE 4

TERMINATION OF EMPLOYMENT

4.1 Death or Disability

The Executive’s employment shall terminate automatically upon the Executive’s death. If the Corporation determines in good faith that the Disability (as defined below) of the

Executive has occurred during the Executive’s employment, it may give to the Executive written notice in accordance with Section 7.4 of this Agreement of its intention to terminate the Executive’s employment; provided that such notice is provided no later than 150 days following the Executive’s first day of Disability. In such event, the Executive’s employment shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the failure of the Executive to perform his duties under this Agreement for at least 90 consecutive business days as a result of any medically determinable physical or mental impairment. The determination of Disability shall be made by a physician selected by the Corporation or its insurers and reasonably acceptable to the Executive or the Executive’s legal representative.

4.2 Cause

The Executive’s employment with the Corporation may be terminated with or without Cause.

4.3 Good Reason

The Executive’s employment with the Corporation may be terminated by the Executive with or without Good Reason.

4.4 Notice of Termination

Any termination by the Corporation for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party in accordance with Section 7.4. For purposes of this Agreement, a “Notice of Termination” means a written notice which (a) indicates the specific termination provision in this Agreement relied upon, (b) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (c) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Corporation or the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Corporation or the Executive, respectively, hereunder or preclude the Corporation or the Executive, respectively, from asserting such fact or circumstance in enforcing the Corporation’s or the Executive’s rights hereunder.

4.5 Date of Termination

“Date of Termination” means (a) if the Executive’s employment is terminated by the Corporation for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be (b) if the Executive’s employment is terminated by the Corporation other than for Cause or Disability, the Date of Termination shall be the date on which the Corporation notifies the Executive of such termination and (c) if the Executive’s employment is terminated by

reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. The Corporation and the Executive shall take all steps necessary (including with regard to any post-termination services by the Executive) to ensure that any termination described in this Section 4.5 constitutes a “separation from service within the meaning of Section 409A of the Code, and the date on which such separation from service takes place shall be the “Date of Termination.”

4.6 Resignation from All Positions

Notwithstanding any other provision of this Agreement, upon the termination of the Executive’s employment for any reason, unless otherwise requested by the Board of Directors, the Executive shall immediately resign as of the Date of Termination from all positions that he holds or has ever held with the Affiliated Group (and with any other entities with respect to which the Affiliated Group has requested the Executive to perform services), The Executive hereby agrees to execute any and all documentation to effectuate such resignations upon request by the Corporation, but he shall be treated for all purposes as having so resigned upon termination of his employment, regardless of when or whether he executes any such documentation.

ARTICLE 5

OBLIGATIONS OF CORPORATION UPON TERMINATION

5.1 Good Reason; Other than for Cause

If the Corporation shall terminate the Executive’s employment other than for Cause, or if the Executive shall terminate the Executive’s employment for Good Reason:

(a) The Corporation shall pay, or cause to be paid, to the Executive in a lump sum in cash the sum of: (i) the Executive’s Annual Base Salary through the Date of Termination, and (ii) any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (i) and (ii) shall be hereinafter referred to as the “Accrued Obligations”). The Accrued Obligations shall be paid within 30 days after the Date of Termination.

(b) The Corporation shall pay, or cause to be paid, to the Executive in a lump sum in cash an amount equal to the Executive’s Annual Base Salary. Such lump sum payment shall be made within 60 days after the Date of Termination or such later date set forth in Section 7.8.

(c) To the extent not theretofore paid or provided, the Affiliated Group shall pay or provide, or cause to be paid or provided, to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Affiliated Group (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”), in accordance with the terms and normal procedures of each such plan, program, policy or practice or contract or agreement, based on accrued and vested benefits through the Date of Termination.

(d) The Corporation shall pay, or cause to be paid, to the Executive in a lump sum in cash an amount equal to the Executive’s “average annual bonus” (described below). Such payment shall be made within 60 days after the Date of Termination, or such later date set forth in Section 7.8, and shall be in lieu of any annual incentive for the year of termination. For this purpose, average annual bonus means an amount equal to the average of the bonuses earned by the Executive under the Corporation’s annual incentive plan for the last two fiscal years prior to the Date of Termination. For purposes of clarity, (i) if the Executive earns a prorated bonus for one or more of the applicable years, the average annual bonus will be calculated using the prorated amount for such year(s), and (ii) if the Executive does not receive a bonus for one or more of the applicable years, the average annual bonus will be calculated using a zero dollar amount for such year(s).

(e) If the Date of Termination occurs within twelve months after the occurrence of a Change in Control, then, in lieu of the amounts described in Sections 5.1(b) and (d) above, the Corporation shall pay, or cause to be paid, to the Executive in a lump sum in cash the sum of: (i) the Executive’s Annual Base Salary and (ii) the Executive’s Target Bonus. Such lump sum payment shall be made within 60 days after the Date of Termination or such later date set forth in Section 7.8.

If the Executive receives payments and benefits pursuant to this Section 5.1, then the Executive shall not be entitled to any other severance pay or benefits under any severance plan, program or policy of any member of the Affiliated Group, unless otherwise specifically provided therein in a specific reference to this Agreement.

5.2 Death or Disability; Cause; Other than for Good Reason

If the Executive’s employment is terminated due to death or Disability or for Cause, or if the Executive voluntarily terminates his employment without Good Reason, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive his Accrued Obligations through the Date of Termination and the Other Benefits, in each case to the extent not theretofore paid or provided. Subject to any withholding required by Section 3.3, all Accrued Obligations shall be paid to the Executive in accordance with Section 5.1(a) and the Other benefits shall be paid to the Executive in accordance with Section 5.1(c).

5.3 Release

Notwithstanding anything contained herein to the contrary, the Corporation shall only be obligated to make the payments under Sections 5.1(b), 5.1(d) and 5.1(e) if: (a) within the 50-day period after the Date of Termination, the Executive executes a general release, in a form provided by the Corporation, of all current or future claims, known or unknown, against the Affiliated Group, its officers, directors, shareholders, employees and agents arising on or before the date of the release, including but not limited to all claims arising out of the Executive’s employment with the Affiliated Group or the termination of such employment, and (b) the Executive does not revoke the release during the seven-day revocation period prescribed by the Age Discrimination in

Employment Act of 1967, as amended, or any similar revocation period, if applicable. The Corporation shall be obligated to provide such release to the Executive promptly following the Date of Termination.

ARTICLE 6

RESTRICTIVE COVENANTS

6.1 In General

The Executive acknowledges that in the course of his employment he will become familiar with trade secrets and customer lists of and other confidential information concerning the Affiliated Group and that his services have been of special, unique and extraordinary value to the Affiliated Group.

6.2 Confidentiality Undertaking

The Executive confirms that he is bound by the provisions of the Confidentiality Undertaking covenant set out in Schedule B hereto.

6.3 Non-Solicitation

(a) During the 12-month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, solicit, induce or attempt to solicit or induce any employee of any member of the Affiliated Group to quit or abandon his or her employ or to become an officer, agent, employee, partner, director, consultant or independent contractor of the Executive, his affiliates or any other individual or entity.

(b) During the 12-month period immediately following the Date of Termination, the Executive shall not in, any manner, directly or indirectly, solicit, induce or attempt to solicit or induce, any customer, supplier or licensor of any member of the Affiliated Group to cease doing business with any member of the Affiliated Group, or in any way interfere with the relationships between any customer, supplier or licensor of the Affiliated Group.

6.4 Non-Competition

During the 12-month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, compete with the business of any member of the Affiliated Group by (a) becoming an officer, agent, employee, partner, director, consultant, independent contractor of a Competitor, or (b) acquiring an ownership interest in a Competitor, provided that the Executive may, for investment purposes, own not more than 1% of the outstanding stock of any class of a Competitor that is listed on a recognized stock exchange or traded in the over-the-counter market in Canada or the United States. For purposes of this Agreement, the term “Competitor” means any person or entity that engages in the pharmaceutical development and manufacturing outsourcing business in Canada, the United States (including the Commonwealth of Puerto Rico), India or Europe. Notwithstanding the foregoing, this Section 6.4 shall not apply if, the Executive is terminated by the Corporation other than for Cause.

6.5 Reasonableness and Revision

The Executive agrees and acknowledges that due to the uniqueness of his services and the confidential nature of the information he will possess, the covenants set forth in this Article 6 and Schedule B are reasonable and necessary for the protection of the business interests and goodwill of the Affiliated Group. Moreover, the geographic restriction on competitive activities by the Executive is reasonable, given the global nature of the Affiliated Group’s business and the Executive’s role in that business. If, at the time of enforcement of this Article and/or Schedule B, a court or other tribunal holds that the restrictions herein are in whole or in part unreasonable under circumstances then existing, the parties agree that the maximum period or scope reasonable under such circumstances will be substituted for the stated period or scope and that the court or other tribunal shall be authorized and directed by the parties to revise the restrictions contained herein to cover the maximum period or scope permitted by law.

6.6 Acknowledgements

The Executive agrees and acknowledges that the promises and obligations made by the Corporation in this Agreement (specifically including, but not limited to, the payments and benefits provided for under Section 5.1(b) and (d) hereof) constitute sufficient consideration for the covenants contained in this Article 6. The Executive further acknowledges that it is not the Affiliated Group’s intention to interfere in any way with his employment opportunities, except in such situations where the same conflict with the legitimate business interests of the Affiliated Group. The Executive agrees that he will notify the Corporation in writing if he has, or reasonably should have, any questions regarding the applicability of this Article 6.

6.7 Enforcement

Because the Executive’s services are unique and because the Executive has access to Confidential Information and work product, the parties agree that the Affiliated Group will be damaged irreparably in the event any of the provisions of Section 6.2, 6.3 and 6.4 are not performed in accordance with their specific terms or are otherwise breached and that money damages will be an inadequate remedy for any such non-performance or breach. Therefore, any one or more of the members of the Affiliated Group, or their respective successors and assigns, will be entitled, in addition to other rights and remedies existing in their favor, to an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). The Executive agrees and acknowledges that he will not assert in any such enforcement action that there is an adequate remedy in damages and that such rights and remedies will be in addition to and not in lieu of any other rights or remedies available to the Affiliated Group at law or in equity.

6.8 Survival

Subject to any limits on applicability contained therein, this Article 6 shall survive and continue in full force in accordance with its terms notwithstanding any expiration or termination of this Agreement.

ARTICLE 7

GENERAL PROVISIONS

7.1 Entire Agreement

This Agreement together with Schedules A and B attached hereto when executed by both parties shall constitute the entire agreement pertaining to the Executive’s employment and supersedes all prior agreements, understandings, negotiations and discussions, whether written or oral, pertaining to the Executive’s employment, and there are no representations, undertakings or agreements of any, kind between the parties respecting the subject matter hereof except those contained herein.

7.2 Severability

If any provision of this Agreement is declared void or unenforceable, such provision shall be deemed severed from this Agreement to the extent of the particular circumstances giving rise to such declaration and such provision as it applies to other persons and circumstances and the remaining terms and conditions of this Agreement shall remain in full force and effect.

7.3 Representations

The Executive represents and warrants that (a) he is not a party to any contract, understanding, agreement or policy, whether or not written, with his current employer (or any previous employer) or otherwise, that would be breached by the Executive’s entering into, or performing services under, this Agreement and (b) will not knowingly use any trade secret, confidential information, or other intellectual property right of any other party in the performance of his duties hereunder. The Executive will indemnify, defend, and hold each member of the Affiliated Group harmless, from any and all suits and claims arising out of any breach of such restrictive contracts, understandings, agreements or policies.

7.4 Notices

All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage, prepaid, addressed as follows:

If to the Executive:

Paul M. Garofolo

1436 Mariners Drive

Newport Beach, California 92660

If to the Corporation:

Attention:

Roy Wieschkowski

Patheon Pharmaceutical Services Inc.

P.O. Box 110145

Research Triangle Park, North Carolina 27709-9998

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

7.5 Withholding

The Corporation may withhold from any amounts payable under this Agreement such Federal, state, local, foreign or other taxes as shall be required to be withheld pursuant to any applicable law or regulation.

7.6 Waiver

The Executive’s or the Corporation’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Corporation may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

7.7 Successors

(a) This Agreement is personal to the Executive is not assignable by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives. This Agreement shall inure to the benefit of and be binding upon the Corporation, the other members of the Affiliated Group, and their respective successors and assigns.

(b) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Patheon or the Corporation to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.

7.8 Compliance with Section 409A of the Code

(a) It is the Corporation’s intent that the payments and benefits provided under this Agreement shall be exempt from the application of, or otherwise comply with, the requirements of Section 409A of the Code (“Section 409A). Specifically, any taxable benefits or payments provided under this Agreement are intended to be separate payments that qualify for the “short-term deferral” exception to Section 409A to the maximum extent possible, and to the extent they do not so qualify,

are intended to qualify for the involuntary separation pay exceptions to Section 409A to the maximum extent possible. This Agreement shall be construed, administered, and governed in a manner that effects such intent, and the Corporation shall not take any action that would be inconsistent with such intent. Without limiting the foregoing, the payments and benefits provided under this Agreement may not be deferred, accelerated, extended, paid out or modified in a manner that would result in the imposition of an additional tax under Section 409A upon the Executive.

(b) If neither the “short-term deferral” or the involuntary separation pay exceptions to Section 409A described above applies to a benefit, payment or reimbursement under this Agreement, then notwithstanding any provision in this Plan to the contrary, the remaining provisions of this Section 7.8(b) shall apply.

(i) If the Executive is a “specified employee,” as determined under the Corporation’s policy for identifying specified employees on the Date of Termination, then to the extent required in order to comply with Section 409A of the Code, all payments, benefits or reimbursements paid or provided under this Agreement that constitute a “deferral of compensation” within the meaning of Section 409A of the Code, that are provided as a result of a “separation from service” within the meaning of Section 409A and that would otherwise be paid or provided during the first six months following such Date of Termination shall be accumulated through and paid or provided (together with interest on the delayed amount at the applicable federal rate under Section 7872(f)(2)(A) of the Code in effect on the Date of Termination) within 30 days after the first business day following the six month anniversary of such Date of Termination (or, if the Executive dies during such six-month period, within 30 days after the Executive’s death).

(ii) To the extent required to comply with Section 409A Code, any reimbursement of expenses pursuant to Section 2.4(b), 2.4(c) or 3.7, that will not be excluded from Executive’s income when received is subject to the following requirements: (i) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided in any other calendar year; (ii) the reimbursement of the eligible expense must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (iii) the right to reimbursement is not subject to liquidation or exchange for another benefit.

(c) Although the Corporation shall use its best efforts to avoid the imposition of taxation, interest and penalties under Section 409A of the Code, the tax treatment of the benefits provided under this Agreement is not warranted or guaranteed. Neither the Affiliated Group nor its directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by the Executive or other taxpayer as a result of the Agreement. Any reference in this Agreement to Section 409A of the Code will also include

any proposed, temporary or final regulations, or any other guidance, promulgated with respect to such Section 409A by the U.S. Department of Treasury or the Internal Revenue Service.

NOW THEREFORE, the parties below have entered into this Agreement as of the date first written above.

PATHEON PHARMACEUTICAL SERVICES INC.
By: Toni T. Sweeney
Title: Vice President, Human Resources, North America
SIGNED, SEALED AND DELIVERED	)
in the presence of	)
	)
/s/ Gwynne A. Kong	)	/s/ Paul M. Garofolo
Name of Witness:		PAUL M. GAROFOLO

SCHEDULE A

TO

EMPLOYMENT AGREEMENT WITH

PAUL M. GAROFOLO

PATHEON INC.

POSITION DESCRIPTION

Chief Information Officer

This position description for the Chief Information Officer of the Corporation was enacted by the Chief Executive Officer on May 12, 2008.

The Chief Information Officer of the Corporation will have the following functions and responsibilities:

A. PLANNING

1. Lead the Corporation’s strategy for enterprise-wide IT initiatives & global systems management of all IT functions.

2. Lead the process of preparing annual global IT plans and subsequent forecasts for the Corporation.

3. Working with operations management, manage the allocation of capital expenditures against approved plans or projects.

B. MANAGEMENT

1. Provide a strong IT and regulatory stewardship for the Corporation, including budgeting, reporting, planning and general IT control management.

2. Responsible for all functions, services and personnel of the Information Technology and Services organization of the Corporation.

C. ETHICS, CULTURE, POLICY & PUBLIC REPRESENTATION

1. Corporate Culture. Foster a North American corporate culture that promotes the Corporation’s core values as reflected in the Corporation’s Code of Business Conduct.

2. Work Climate. Maintain a work climate that is conducive to:

(i) attracting and retaining a diverse group of top-quality employees at all levels; and

(ii) motivating these employees to perform their duties with the highest standards of integrity, responsibility and excellence; standards that are essential for the success of a Corporation that provides pharmaceutical product development and manufacturing services worldwide.

SCHEDULE B

TO

EMPLOYMENT AGREEMENT WITH

PAUL M. GAROFOLO

CONFIDENTIALITY UNDERTAKING

In consideration of Paul M. Garofolo (the “Executive”) accepting, an employment agreement between the Executive and Patheon Pharmaceuticals Services Inc. dated May 12, 2008 (the “Agreement”) to which this Confidentiality Undertaking is attached as Schedule B, the Executive undertakes and covenants with the Affiliated Group (as defined in the Agreement) as follows:

1. CONFIDENTIAL INFORMATION

1.1 Confidential Information

The Executive acknowledges that all information and facts relating to the business and affairs of the Affiliated Group and its customers, including, without limitation, trade secrets, data, notes, marketing plans, sales patterns, and private corporate and financial information (the “Confidential Information”) is confidential and proprietary to the Affiliated Group and a valuable trade secret of the Affiliated Group, disclosure of which could severely damage the economic interests of the Affiliated Group. Confidential Information includes, without limitation, any document, work, instrument or other medium assembled or composed by the Executive which contains Confidential Information.

1.2 Non-Disclosure of Confidential Information

The Executive shall not, either during the term of the Agreement or at any time thereafter, use or disclose, directly or indirectly, any of such Confidential Information to any person outside the Affiliated Group, except where such disclosure is necessary for the proper and bona fide execution of the Executive’s duties under the Agreement, without the prior written consent of the Affiliated Group. The Executive’s obligation not to use or disclose Confidential Information without prior written consent shall continue to apply after the Executive has ceased to be an employee of the Affiliated Group until such time as the Confidential Information becomes public knowledge through no fault of the Executive. The Affiliated Group will have full right, title and authority to deal in and with the proprietary rights and the Confidential Information notwithstanding any other provision of the Agreement or the termination thereof for any reason whatsoever. The Executive acknowledges and agrees that the restrictions contained in this Article 1 are reasonable in the circumstances in order to protect the business of the Affiliated Group.

1.3 Return of Confidential Information

Confidential Information and the documents, works, instruments or other media containing Confidential Information shall remain the property of the Affiliated Group and be returned to the Affiliated Group upon request or immediately following termination of the Agreement for any reason whatsoever.

2. INVENTIONS

2.1 Inventions

Subject to Section 2.2, the Executive agrees that all discoveries, improvements, designs, ideas or inventions made or conceived, in whole or in part, by the Executive during the term of the Agreement or within three years following termination of the Agreement for any reason whatsoever (the “Inventions”) shall be the sole property of the Affiliated Group. The Executive shall:

(a) promptly disclose and describe all such Inventions in writing to the Affiliated Group;

(b) assign, and the Executive does hereby assign, to the Affiliated Group, without further compensation, all of the Executive’s rights, title and interest in and to such Inventions and to all applications for letters of patent, copyrights, industrial design or other forms of protection granted for such Inventions throughout the world;

(c) deliver promptly to the Affiliated Group, upon request and in the form and manner prescribed by the Affiliated Group (without charge to the Affiliated Group but at the Affiliated Group’s expense) the written instruments described in paragraph (b) and perform such acts as deemed necessary by the Affiliated Group to obtain and maintain such instruments and to transfer all rights and title thereto to the Affiliated Group; and

(d) give all assistance that may be required by the Affiliated Group to enable it to protect or exploit the Inventions in any country of the world.

The Executive does hereby waive in whole any moral rights that the Executive may have in each of the Inventions and any part or parts thereof, including, but not limited to, the right to the integrity of the Inventions, the right to be associated with the Inventions as its author by name or under a pseudonym and the right to remain anonymous.

2.2 Excluded Inventions

The provisions of Section 2.1 shall not apply to Inventions which fulfill all of the following criteria:

(a) Inventions for which no equipment, supplies, facility or Confidential Information belonging to the Affiliated Group were used; and

(b) Inventions that do not relate to the business of the Affiliated Group or to the Affiliated Group’s actual or demonstrably anticipated processes, research or development which the Executive had access to or knowledge of; and

(c) Inventions that do not result from any work performed by the Executive for the Affiliated Group.

3. GENERAL

This Confidentiality Undertaking shall be governed and construed in accordance with the laws of New York State applicable therein. Nothing herein shall be construed so as to limit any obligations owed by you to the Affiliated Group as a matter of common law. The Executive acknowledges that the business of the Affiliated Group cannot be properly protected from adverse consequences of the Executive’s actions other than by the restrictions set forth in this Undertaking and the Agreement. The Affiliated Group, in addition to any other right or relief to which it may be entitled, shall be entitled to an injunction restricting further breaches of this Undertaking or the Agreement. This Confidentiality Undertaking shall survive the termination of the Agreement and the Executive’s employment thereunder.

IN WITNESS WHEREOF this Confidentiality Undertaking has been executed by the undersigned on this 29th day of January, 2009.

SIGNED, SEALED AND DELIVERED	)
in the presence of	)
	)
/s/ Gwynne A. Kong	)	/s/ Paul M. Garofolo
Name of Witness:		Paul M. Garofolo

EX-10.34

[PATHEON] Exhibit 10.34

Sent via Email: paul.garofolo@patheon.com

November 26, 2008

PRIVATE AND CONFIDENTIAL

Mr. Paul Garofolo

317 Bolton Grant Drive

Cary, NC 27519

Dear Paul:

Re: Amendment to Contract

It is with great pleasure that I can extend to you an opportunity to take a new and exciting senior strategic role with Patheon to help build the foundation already established in our technical areas.

I would also like to express my sincere appreciation for the role you have played during the last six months establishing our IT master strategy, building the operational excellence footprint for the Company and supporting the creation of a new Corporate Technology Division. With that said, set out below are the terms for your promotion to Executive Vice President, Corporate Technology.

This letter constitutes an amendment to your contract of May 7, 2008. Except as amended by this letter, the provisions of your contract dated May 7, 2008, 2008 (the “Original Term Sheet Letter”) remain in force.

1. RESPONSIBILITIES AND DUTIES

Effective November 23, 2008 (the “Effective Date”) you will assume the position of Executive Vice President, Corporate Technology for Patheon, Inc. and become the key Senior Executive charged with developing and enhancing the new Corporate Technology Division encompassing four central support functions of the company: Global engineering, Global Procurement & Logistics, Information Technology and Operational Excellence. A detailed position profile is attached in Schedule A.

As Executive Vice President, Corporate Technology for the organization, you will work closely with the other members of my Executive Committee to build and enhance our Technical capabilities across the organization.

You shall continue to report directly to me in my capacity as President and Chief Executive Officer of Patheon Inc. and participate as a member of the Executive Team in respect of the above technical matters.

2. COMPENSATION AND BENEFITS

2.1 Base Cash Salary

Effective November 23, 2008, your base salary will be USD $315,000 per annum, payable in regular installments in accordance with our usual pay practices. We shall deduct from your salary any applicable taxes and source deductions that we are required and authorized to withhold or make.

2.2 Bonus

Effective November 23, 2008 your annual bonus target will be 45% of base cash salary based on meeting predetermined personal objectives and Patheon’s performance on a consolidated basis.

2.3 Stock Options

As a promotion grant subject to approval of the Compensation and Human Resources Committee (the “Committee”) of the Board of Directors, you would receive a further stock option grant of 50,000

options under the terms of the Patheon Stock Option Plan. As per securities regulatory requirements options may not be issued when the Company is in possession of material undisclosed information. The options shall vest as to one-third per year over the first three years. The subscription price for the shares under option will be the market price (as defined in the Patheon Stock Option Plan) on the day the grant is approved by the Committee.

Paul, please acknowledge your agreement with the foregoing by executing this letter where indicated below. Execution of this letter will serve to formally amend your contract, as of the Effective Date.

Congratulations on your new role with Patheon and I look forward to working with you in the future.

Sincerely,

/s/ Wesley P. Wheeler

Wesley P. Wheeler

Chief Executive Officer & President

I, Paul Garofalo, have read, understand and agree to the terms in this letter and understand that upon execution of this letter, my contract shall be formally amended as set forth in this letter.

/s/ Paul Garofolo	Date	November 23, 2008
PAUL GAROFOLO

Witness

SCHEDULE A

SCOPE AND KEY RESPONSIBILITIES OF EVP-CORPORATE TECHNOLOGY

A. SCOPE OF ROLE

The EVP-Corporate Technology is the key Senior Executive charged with creation of a new Corporate Technology Division encompassing four central support functions of the company. Global engineering, Global Procurement & Logistics, Information Technology and Operational Excellence. The position has an annual expense of $21.5m and $57m in annual capital expenditures for the 2009 fiscal year.

B. KEY RESPONSIBILITIES

Act as the Executive representative for global engineering, procurement and logistics, information technology and operational excellence.

Leads and oversees the integration of engineering under one global engineering head. Create an integrated engineering organization with heads of engineering in each facility and site-based project engineers.

Manage the global capital expenditure budget and coordinate with line operations regarding key engineering decisions relating to client business opportunities.

Execute the IT master strategy over the next five years to allow for a common platform for data collection, reporting and information sharing throughout the organization.

Establish a new global procurement function in Zug Switzerland including the build out a logistics function to take advantage of synergies available in the company.

Focus a strategy on four key global procurement strategies: raw materials & excipients, primary and secondary packaging, consumables & non-inventory and capital & utilities.

Develop leadership skills and succession strategies of staff within the engineering, procurement & logistics, IT and Operational Excellence organizations.

Continue to develop the Patheon Advantage and operational excellence program by developing black and green belts in each key business unit to create a culture of excellence.

Focus on key operational projects applying lean six sigma principles to obtain higher results to drive KPI’s and further enhance customer satisfaction.

Continue to develop a harmonized “One Patheon” relating to business process and practices globally.

EX-10.35

Exhibit 10.35

[PATHEON]

April 30, 2009

PRIVATE AND CONFIDENTIAL

Geoffrey M. Glass

506 Dahlia Ave, Unit A

Corona del Mar, California 92625

Dear Geoffrey:

RE: Employment Agreement:

I am pleased to confirm the terms of your employment (“Employment Agreement”), dated March 17, 2009. This Employment Agreement represents your contractual arrangements with Patheon Pharmaceutical Services Inc. (the “Corporation”) and supersedes any arrangements, understandings and verbal commitments to you during our discussions.

Sincerely,

/s/ Wesley P. Wheeler

Wesley P. Wheeler

Chief Executive Officer

Page 1

[PATHEON]

EMPLOYMENT AGREEMENT

THIS AGREEMENT is made as of the 17th day of March, 2009 between Patheon Pharmaceutical Services Inc. (the “Corporation”) and Geoffrey M. Glass, an Executive residing in the City of Corona del Mar, in the State of California (the “Executive”).

WHEREAS, the Corporation and the Executive wish to enter into this Agreement to set forth the rights and obligations of each of them with respect to the employment of the Executive.

WHEREAS, the Corporation agrees to employ the Executive on the terms and subject to the conditions set forth in this Agreement to render exclusive and full-time services to the Affiliated Group (as defined below).

NOW, THEREFORE, THIS AGREEMENT WITNESSES that in consideration of the premises and mutual covenants and agreements hereinafter contained and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the parties agree with each other as follows:

ARTICLE 1

INTERPRETATION

1.1 Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of North Carolina. Each of the parties hereby irrevocably consents to the jurisdiction of the courts in the State of North Carolina with respect to any matters arising out of this Agreement.

1.2 Definitions. In this Agreement, including Schedule A and B hereto, unless the context otherwise requires, the following terms shall have the following meanings, respectively:

(a) “Affiliated Group” means the Corporation and any entity controlled by, controlling, or under common control with the Corporation.

(b) “Agreement” means this Employment Agreement as it may be amended or supplemented from time to time.

(c) “Annual Base Salary” has the meaning given such term in Section 3.1.

(d) “Board of Directors” means the Board of Directors of Patheon.

(e) “Cause” means the determination, in good faith, by the Board of Directors, after notice to the Executive and, if curable, a reasonable opportunity to cure, that one or more of the following events has occurred: (i) the Executive has failed to perform his material duties, and such failure has not been cured after a period of 30 days notice from the Corporation; (ii) any reckless or grossly negligent act by the Executive having the effect of injuring the interests, business or reputation of

Page 2

any member of the Affiliated Group in any material respect; (iii) the Executive’s commission of any felony (including entry of a nolo contendere plea); (iv) any misappropriation or embezzlement of the property of any member of the Affiliated Group; or (v) a breach of any material provision of this Agreement by the Executive.

(f) “Change in Control” means any of the following events:

(i) Any “Person” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than JLL Partners or its affiliates, becomes a Beneficial Owner (within the meaning of Exchange Act Rule 13d-3) of more than fifty percent (50%) of the voting power of the then outstanding voting securities of Patheon entitled to vote generally in the election of directors;

(ii) There is consummated a merger or consolidation of Patheon or any direct or indirect subsidiary of Patheon with any other company, other than a merger or consolidation that would result in the voting securities of Patheon outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the securities of Patheon or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or

(iii) The stockholders of Patheon approve a plan of complete liquidation or dissolution of the company or there is consummated an agreement for the sale or disposition by Patheon of all or substantially all of its assets.

(g) “Code” means the Internal Revenue Code of 1986, as amended.

(h) “Competitor” has the meaning given such term in Section 6.4.

(i) “Date of Termination” has the meaning given such term in Section 4.5.

(j) “Effective Date” has the meaning given such term in Section 2.1.

(k) “Good Reason” means the occurrence of any of the following events without the consent of the Executive: (i) a material reduction by the Corporation of the Executive’s duties or responsibilities or the assignment to the Executive of duties or responsibilities materially inconsistent with the Executive’s position; or (ii) a material breach by the Corporation of this Agreement. A termination of the Executive’s employment by Executive shall not be deemed to be for Good Reason unless (i) the Executive gives notice to the Corporation of the existence of the event or condition constituting Good Reason within 30 days after such event or condition initially occurs or exists, (ii) the Corporation fails to cure such event or condition within 30 days after receiving such notice, and (iii) the Executive’s “separation from service” within the meaning of Section 409A of the Code occurs not later than 90 days after such event or condition initially occurs or exists.

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(l) “Patheon” means Patheon Inc.

(m) “Target Bonus” has the meaning given such term in Section 3.2.

ARTICLE 2

EFFECTIVE DATE; TERMS OF EMPLOYMENT

2.1 Term

The Corporation hereby agrees to employ the Executive, and the Executive hereby agrees to be employed by the Corporation on the terms and subject to the conditions of this Agreement (including, without limitation, Article 6), commencing on April 1, 2009 (the “Effective Date”).

2.2 Position and Duties

The Executive shall serve as the Senior Vice President, Strategy, Corporate Development and Integration, with such authority, duties and responsibilities as are commensurate with such position, reporting to the Chief Executive Officer.

The Executive shall also be responsible for the functions and responsibilities set out in the Position Description for the S.V.P. Strategy, Corporate Development and Integration attached as Schedule A.

2.3 Time Commitments

During the Executive’s employment, the Executive shall devote substantially all of his business time, energies and talents to serving as the S.V.P. Strategy, Corporate Development and Integration, perform his duties conscientiously and faithfully subject to the reasonable and lawful directions of the Chief Executive Officer, and in accordance with each of the corporate governance and ethics guidelines, conflict of interests policies and code of conduct applicable to all employees or senior executives generally of the Affiliated Group. During the Executive’s employment, it shall not be a violation of this Agreement for the Executive, subject to the requirements of Article 6, to (a) serve on corporate, civic or charitable boards or committees, (b) deliver lectures or fulfill speaking engagements and (c) manage personal investments, so long as such activities do not materially interfere with the performance of the Executive’s duties or responsibilities under this Agreement.

2.4 Location

(a) Initially, it is understood that the Executive’s principal office will be a home office located in the Executive’s residence in the city of Corona del Mar, California.

(b) While the Executive’s principal office is located in the Executive’s residence, the Corporation shall reimburse the Executive for reasonable automobile expenses and travel expenses associated with him commuting from his personal residence in California to Patheon’s current corporate headquarters during this period. Reimbursements under this Section 2.4(b) shall be paid to the Executive in the calendar month after the month in which they are incurred, subject to such

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reasonable documentation requirements as may be requested from time to time by the Corporation.

(c) As the new U.S. headquarters location in North Carolina is available for occupancy, the Corporation will require the Executive to be based within this facility. Under the terms of Patheon’s Tier 1 relocation program, the Executive shall be reimbursed for all reasonable transaction costs and expenses (including any real estate brokerage fees, commissions and closing costs, but excluding any loss on the sale of the Executive’s personal residence) and moving expenses incurred by the Executive, in connection with relocating the Executive’s spouse. dependents and personal property and goods from the Executive’s current residence. Reimbursements under this Section 2.4(c) shall be paid to the Executive in the calendar month after the month that they are incurred, subject to such reasonable documentation requirements as may be requested from time to time by the Corporation.

ARTICLE 3

COMPENSATION AND BENEFITS

3.1 Base Salary

The Corporation shall pay the Executive an annualized base salary (“Annual Base Salary”) at a rate of not less than $325,000 US, payable in regular installments in accordance with the Corporation’s normal payroll practices. The Annual Base Salary shall be reviewed by the Chief Executive Officer, for increase only, at such time as the salaries of other senior executives of Patheon are reviewed generally. If so increased, the Annual Base Salary shall be increased for all purposes of this Agreement.

3.2 Executive Performance Bonus

For each fiscal year, the Executive shall be eligible to participate in an annual incentive plan under terms and conditions no less favorable than other senior executives of Patheon; provided that the Executive’s Target Bonus shall not be less than 40% of his Annual Base Salary. The Executive’s payment under the annual incentive plan shall be based on meeting predetermined personal objectives and Patheon’s financial performance. The personal objectives will be set by the Chief Executive Officer, and the financial performance measures will be set by the Chief Executive Officer. For fiscal 2009, the performance bonus will be prorated from the Effective Date. The annual performance bonus, if earned, will be paid to the Executive by the Corporation in the same manner and payment period generally applicable under the annual incentive plan, but in no event later than two and a half months after the later of (i) the end of the applicable performance period, or (ii) the end of the calendar year in which the performance period ends. Nothing contained in this Section 3.2 will guarantee the Executive any specific amount of incentive compensation, or prevent the Chief Executive Officer from establishing performance goals and compensation targets applicable only to the Executive.

3.3 Stock Options

(a) Subject to the approval of the Board of Directors, the Executive shall be granted a stock option to purchase 125,000 shares of common stock of Patheon at an exercise price per share equal to the market value of the common stock on the

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date of the grant (the “Option”). Except as otherwise provided in the Amended and Restated Incentive Stock Option Plan (the “ISOP”) or stock option award agreement (together with the ISOP, the “Stock Related Documents”), the Option will (i) vest as to  ¹/3 of the shares subject to the Option on each of the first three anniversaries of the date of grant, subject to the Executive’s continued employment with the Affiliated Group until the relevant vesting dates, and (ii) have a seven year term. The Option will be subject to the terms, definitions and provisions of the applicable Stock Related Documents.

(b) During the Executive’s employment, at the discretion of the Board of Directors or its delegate, the Executive also shall be eligible to receive additional stock options and other long-term incentives under the ISOP or any similar plan adopted by Patheon from time to time.

(c) The Executive will be required to comply with the terms of any share ownership guidelines applicable to senior executives of Patheon generally, as amended from time to time.

3.4 Retirement Benefits

Executive will be entitled to participate in the 401(k) retirement plan and any other qualified or nonqualified deferred compensation and retirement plans applicable to senior executives of the Corporation generally, in each case as amended from time to time.

3.5 Other Benefit Plans

During the Executive’s employment, the Executive also shall be entitled to participate in all welfare, perquisites, fringe benefit, and other benefit plans, practices, policies and programs, as may be in effect from time to time, for U.S. resident-based senior executives of Patheon generally.

The Corporation shall also pay the Executive, in regular semi-monthly installments, an allowance of $1,200 US per month for car related expenses.

3.6 Expenses

The Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses actually and properly incurred by the Executive during the Executive’s employment in connection with carrying out his duties hereunder in accordance with the Corporation’s policies, as may be in effect from time to time, for its senior executives generally.

3.9 Vacation

During the Executive’s employment, the Executive shall be entitled to four (4) weeks paid vacation in addition to four (4) floating holidays annually in accordance with the Corporation’s policies, as may be in effect from time to time, for its senior executives generally.

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ARTICLE 4

TERMINATION OF EMPLOYMENT

4.1 Death or Disability

The Executive’s employment shall terminate automatically upon the Executive’s death. If the Corporation determines in good faith that the Disability (as defined below) of the Executive has occurred during the Executive’s employment, it may give to the Executive written notice in accordance with Section 7.4 of this Agreement of its intention to terminate the Executive’s employment; provided that such notice is provided no later than 150 days following the Executive’s first day of Disability. In such event, the Executive’s employment shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the failure of the Executive to perform his duties under this Agreement for at least 90 consecutive business days as a result of any medically determinable physical or mental impairment. The determination of Disability shall be made by a physician selected by the Corporation or its insurers and reasonably acceptable to the Executive or the Executive’s legal representative.

4.2 Cause

The Executive’s employment with the Corporation may be terminated with or without Cause.

4.3 Good Reason

The Executive’s employment with the Corporation may be terminated by the Executive with or without Good Reason.

4.4 Notice of Termination

Any termination by the Corporation for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party in accordance with Section 7.4. For purposes of this Agreement, a “Notice of Termination” means a written notice which (a) indicates the specific termination provision in this Agreement relied upon, (b) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (c) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Corporation or the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Corporation or the Executive, respectively, hereunder or preclude the Corporation or the Executive, respectively, from asserting such fact or circumstance in enforcing the Corporation’s or the Executive’s rights hereunder.

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4.5 Date of Termination

“Date of Termination” means (a) if the Executive’s employment is terminated by the Corporation for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (b) if the Executive’s employment is terminated by the Corporation other than for Cause or Disability, the Date of Termination shall be the date on which the Corporation notifies the Executive of such termination and (c) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. The Corporation and the Executive shall take all steps necessary (including with regard to any post-termination services by the Executive) to ensure that any termination described in this Section 4.5 constitutes a “separation from service” within the meaning of Section 409A of the Code, and the date on which such separation from service takes place shall be the ‘Date of Termination.”

4.6 Resignation from All Positions

Notwithstanding any other provision of this Agreement, upon the termination of the Executive’s employment for any reason, unless otherwise requested by the Board of Directors, the Executive shall immediately resign as of the Date of Termination from all positions that he holds or has ever held with the Affiliated Group (and with any other entities with respect to which the Affiliated Group has requested the Executive to perform services). The Executive hereby agrees to execute any and all documentation to effectuate such resignations upon request by the Corporation, but he shall be treated for all purposes as having so resigned upon termination of his employment, regardless of when or whether he executes any such documentation.

ARTICLE 5

OBLIGATIONS OF CORPORATION UPON TERMINATION

5.1 Good Reason; Other than for Cause

If the Corporation shall terminate the Executive’s employment other than for Cause, or if the Executive shall terminate the Executive’s employment for Good Reason:

(a) The Corporation shall pay, or cause to be paid, to the Executive in a lump sum in cash the sum of: (i) the Executive’s Annual Base Salary through the Date of Termination, and (ii) any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (i) and (ii) shall be hereinafter referred to as the “Accrued Obligations”). The Accrued Obligations shall be paid within 30 days after the Date of Termination.

(b) The Corporation shall pay, or cause to be paid, to the Executive an amount equal to the Executive’s Annual Base Salary plus an amount determined by the Board of Directors in its sole discretion to reflect the annual incentive the Executive would have otherwise earned during the year in which the Date of Termination occurs. Such amount shall generally be paid in cash in twelve equal monthly installments beginning within 60 days after the Date of Termination or such later date set forth in Section 7.8. Notwithstanding the foregoing, if the severance benefit described in this Section 5.1(b) exceeds two times the lesser of (i) the

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Executive’s annual compensation or (ii) the compensation limit in effect under Section 401(a)(17) of the Code for the calendar year including the Date of Termination, any amounts not yet paid as of the short-term deferral date’ shall be paid in a lump sum on the “short-term deferral date.” The “short-term deferral date” is the date that is two and one-half months after the end of the later of (i) the calendar year containing the Date of Termination or (ii) the Company’s fiscal year containing the Date of Termination.

(c) To the extent not theretofore paid or provided, the Affiliated Group shall pay or provide, or cause to be paid or provided, to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Affiliated Group (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”), in accordance with the terms and normal procedures of each such plan, program, policy or practice or contract or agreement, based on accrued and vested benefits through the Date of Termination.

(d) If the Date of Termination occurs within six months after the occurrence of a Change in Control, any stock options to purchase shares of the common stock of Patheon then held by the Executive shall, to the extent not otherwise provided in the applicable Stock Related Documents, become immediately vested and exercisable and shall remain exercisable for the remaining term of such stock option (which remaining term shall be determined without regard to the Executive’s termination of employment).

If the Executive receives payments and benefits pursuant to this Section 5.1, then the Executive shall not be entitled to any other severance pay or benefits under any severance plan, program or policy of any member of the Affiliated Group, unless otherwise specifically provided therein in a specific reference to this Agreement.

5.2 Death or Disability; Cause; Other than for Good Reason

If the Executive’s employment is terminated due to death or Disability or for Cause, or if the Executive voluntarily terminates his employment without Good Reason, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive his Accrued Obligations through the Date of Termination and the Other Benefits, in each case to the extent not theretofore paid or provided. Subject to any withholding required by Section 3.3, all Accrued Obligations shall be paid to the Executive in accordance with Section 5.1(a) and the Other benefits shall be paid to the Executive in accordance with Section 5.1(c).

5.3 Release

Notwithstanding anything contained herein to the contrary, the Corporation shall only be obligated to make the payments under Section 5.1(b) if: (a) within the 50-day period after the Date of Termination, the Executive executes a general release, in a form provided by the Corporation, of all current or future claims, known or unknown, against the Affiliated Group, its officers, directors, shareholders, employees and agents arising on or before the date of the release, including but not limited to all claims arising out of the Executive’s employment with the Affiliated Group or the termination of such

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employment, and (b) the Executive does not revoke the release during the seven-day revocation period prescribed by the Age Discrimination in Employment Act of 1967, as amended, or any similar revocation period, if applicable. The Corporation shall be obligated to provide such release to the Executive promptly following the Date of Termination.

ARTICLE 6

RESTRICTIVE COVENANTS

6.1 In General

The Executive acknowledges that in the course of his employment he will become familiar with trade secrets and customer lists of and other confidential information concerning the Affiliated Group and that his services have been of special, unique and extraordinary value to the Affiliated Group.

6.2 Confidentiality Undertaking

The Executive confirms that he is bound by the provisions of the Confidentiality Undertaking covenant set out in Schedule B hereto.

6.3 Non-Solicitation

(a) During the 12-month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, solicit, induce or attempt to solicit or induce any employee of any member of the Affiliated Group to quit or abandon his or her employ or to become an officer, agent, employee, partner, director, consultant or independent contractor of the Executive, his affiliates or any other individual or entity.

(b) During the 12-month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, solicit, induce or attempt to solicit or induce, any customer, supplier or licensor of any member of the Affiliated Group to cease doing business with any member of the Affiliated Group, or in any way interfere with the relationships between any customer, supplier or licensor of the Affiliated Group.

6.4 Non-Competition

During the 12-month period immediately following the Date of Termination, the Executive shall not in any manner, directly or indirectly, compete with the business of any member of the Affiliated Group by (a) becoming an officer, agent, employee, partner, director, consultant, independent contractor of a Competitor, or (b) acquiring an ownership interest in a Competitor, provided that the Executive may, for investment purposes, own not more than 1% of the outstanding stock of any class of a Competitor that is listed on a recognized stock exchange or traded in the over-the-counter market in Canada or the United States. For purposes of this Agreement, the term “Competitor” means any person or entity that engages in the pharmaceutical development and manufacturing outsourcing business in Canada, the United States (including the Commonwealth of Puerto Rico), India or Europe. Notwithstanding the foregoing, this Section 6.4 shall not apply if the Executive is terminated by the Corporation other than for Cause.

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6.5 Reasonableness and Revision

The Executive agrees and acknowledges that due to the uniqueness of his services and the confidential nature of the information he will possess, the covenants set forth in this Article 6 and Schedule B are reasonable and necessary for the protection of the business interests and goodwill of the Affiliated Group. Moreover, the geographic restriction on competitive activities by the Executive is reasonable, given the global nature of the Affiliated Group’s business and the Executive’s role in that business. If, at the time of enforcement of this Article and/or Schedule B, a court or other tribunal holds that the restrictions herein are in whole or in part unreasonable under circumstances then existing, the parties agree that the maximum period or scope reasonable under such circumstances will be substituted for the stated period or scope and that the court or other tribunal shall be authorized and directed by the parties to revise the restrictions contained herein to cover the maximum period or scope permitted by law.

6.6 Acknowledgements

The Executive agrees and acknowledges that the promises and obligations made by the Corporation in this Agreement (specifically including, but not limited to, the payments and benefits provided for under Section 5.1(b) and (d) hereof) constitute sufficient consideration for the covenants contained in this Article 6. The Executive further acknowledges that it is not the Affiliated Group’s intention to interfere in any way with his employment opportunities, except in such situations where the same conflict with the legitimate business interests of the Affiliated Group. The Executive agrees that he will notify the Corporation in writing if he has, or reasonably should have, any questions regarding the applicability of this Article 6.

6.7 Enforcement

Because the Executive’s services are unique and because the Executive has access to Confidential Information and work product, the parties agree that the Affiliated Group will be damaged irreparably in the event any of the provisions of Section 6.2, 6.3 and 6.4 are not performed in accordance with their specific terms or are otherwise breached and that money damages will be an inadequate remedy for any such non-performance or breach. Therefore, any one or more of the members of the Affiliated Group, or their respective successors and assigns, will be entitled, in addition to other rights and remedies existing in their favor, to an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). The Executive agrees and acknowledges that he will not assert in any such enforcement action that there is an adequate remedy in damages and that such rights and remedies will be in addition to and not in lieu of any other rights or remedies available to the Affiliated Group at law or in equity.

6.8 Survival

Subject to any limits on applicability contained therein, this Article 6 shall survive and continue in full force in accordance with its terms notwithstanding any expiration or termination of this Agreement.

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ARTICLE 7

GENERAL PROVISIONS

7.1 Entire Agreement

This Agreement together with Schedules A and B attached hereto when executed by both parties shall constitute the entire agreement pertaining to the Executive’s employment and supersedes all prior agreements, understandings, negotiations and discussions, whether written or oral, pertaining to the Executive’s employment, and there are no representations, undertakings or agreements of any kind between the parties respecting the subject matter hereof except those contained herein.

7.2 Severability

If any provision of this Agreement is declared void or unenforceable, such provision shall be deemed severed from this Agreement to the extent of the particular circumstances giving rise to such declaration and such provision as it applies to other persons and circumstances and the remaining terms and conditions of this Agreement shall remain in full force and effect.

7.3 Representations

The Executive represents and warrants that (a) he is not a party to any contract, understanding, agreement or policy, whether or not written, with his current employer (or any previous employer) or otherwise, that would be breached by the Executives entering into, or performing services under, this Agreement and (b) will not knowingly use any trade secret, confidential information, or other intellectual property right of any other party in the performance of his duties hereunder. The Executive will indemnify, defend, and hold each member of the Affiliated Group harmless, from any and all suits and claims arising out of any breach of such restrictive contracts, understandings, agreements or policies.

7.4 Notices

All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

Geoffrey M. Glass

506 Dahlia Ave. Unit A

Corona del Mar, CA 92625

If to the Corporation:

Attention:

Executive Human Resources

Patheon Pharmaceutical Services Inc.

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P.O. Box 110145

Research Triangle Park, North Carolina 27709-9998

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

7.5 Withholding

The Corporation may withhold from any amounts payable under this Agreement such Federal, state, local, foreign or other taxes as shall be required to be withheld pursuant to any applicable law or regulation.

7.6 Waiver

The Executive’s or the Corporation’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Corporation may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

7.7 Successors

(a) This Agreement is personal to the Executive is not assignable by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives. This Agreement shall inure to the benefit of and be binding upon the Corporation, the other members of the Affiliated Group, and their respective successors and assigns.

(b) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Patheon or the Corporation to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.

7.8 Compliance with Section 409A of the Code

(a) It is the Corporation’s intent that the payments and benefits provided under this Agreement shall be exempt from the application of, or otherwise comply with, the requirements of Section 409A of the Code (“Section 409A”). Specifically, any taxable benefits or payments provided under this Agreement are intended to be separate payments that qualify for the “short-term deferral” exception to Section 409A to the maximum extent possible, and to the extent they do not so qualify, are intended to qualify for the involuntary separation pay exceptions to Section 409A to the maximum extent possible. This Agreement shall be construed, administered, and governed in a manner that effects such intent, and the Corporation shall not take any action that would be inconsistent with such intent. Without limiting the foregoing, the payments and benefits provided under this Agreement may not be deferred, accelerated, extended, paid out or modified in a

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manner that would result in the imposition of an additional tax under Section 409A upon the Executive.

(b) If neither the “short-term deferral” the involuntary separation pay exceptions to Section 409A described above applies to a benefit, payment or reimbursement under this Agreement, then notwithstanding any provision in this Plan to the contrary, the remaining provisions of this Section 7.8(b) shall apply.

(i) If the Executive is a “specified employee,” as determined under the Corporation’s policy for identifying specified employees on the Date of Termination, then to the extent required in order to comply with Section 409A of the Code, all payments, benefits or reimbursements paid or provided under this Agreement that constitute a “deferral of compensation” within the meaning of Section 409A of the Code, that are provided as a result of a “separation from service” within the meaning of Section 409A and that would otherwise be paid or provided during the first six months following such Date of Termination shall be accumulated through and paid or provided (together with interest on the delayed amount at the applicable federal rate under Section 7872(f)(2)(A) of the Code in effect on the Date of Termination) within 30 days after the first business day following the six month anniversary of such Date of Termination (or, if the Executive dies during such six-month period, within 30 days after the Executive’s death).

(ii) To the extent required to comply with Section 409A Code, any reimbursement of expenses pursuant to Section 2.4(b), 2.4(c) or 3.8, that will not be excluded from Executive’s income when received is subject to the following requirements: (i) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided in any other calendar year; (ii) the reimbursement of the eligible expense must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (iii) the right to reimbursement is not subject to liquidation or exchange for another benefit.

(c) Although the Corporation shall use its best efforts to avoid the imposition of taxation, interest and penalties under Section 409A of the Code, the tax treatment of the benefits provided under this Agreement is not warranted or guaranteed. Neither the Affiliated Group nor its directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by the Executive or other taxpayer as a result of the Agreement. Any reference in this Agreement to Section 409A of the Code will also include any proposed, temporary or final regulations, or any other guidance, promulgated with respect to such Section 409A by the U.S. Department of Treasury or the Internal Revenue Service.

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NOW THEREFORE, the parties below have entered into this Agreement as of the date first written above.

PATHEON PHARMACEUTICAL SERVICES INC.
By: Toni T. Sweeney
Title: Vice President, Human Resources, North America
SIGNED, SEALED AND DELIVERED	)
in the presence of	)
	)
/s/ Gwynne Kong	)	/s/ Geoffrey M. Glass
Name of Witness:		Geoffrey M. Glass

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[PATHEON]

SCHEDULE A

TO

EMPLOYMENT AGREEMENT WITH

GEOFFREY M. GLASS

PATHEON INC,

POSITION DESCRIPTION

S.V.P. STRATEGY, CORPORATE DEVELOPMENT AND INTEGRATION

This position description for the S.V.P. Strategy, Corporate Development and Integration of the Corporation was enacted by the Chief Executive Officer on March 17, 2009.

The S.V.P. Strategy, Corporate Development and Integration of the Corporation will be responsible for (a) strategy formulation, (b) strategy execution, (c) corporate development activity including mergers & acquisitions, (d) global marketing, (e) business intelligence, (f) bids & contracts, and (g) other projects and strategic initiatives related to achieving profitable growth. Lead and/or work with multi-disciplinary teams to develop and implement strategic initiatives. Conduct strategic analysis, prepare business cases, and perform business intelligence research. Essential Functions:

A. PLANNING

1. Lead the development of business plans for new business ventures.

2. Facilitate the establishment of corporate strategic goals by leading / facilitating teams of senior management in strategy development & corporate visioning planning sessions; gathering pertinent business, financial, service and operations information; identifying and evaluating trends and options; choosing a course of action; defining objectives; evaluating outcomes.

3. Develop and manage an effective Sales Operations function that supports new business development in all regions.

4. Develop a team and methodology to transition PDS clients to Commercial customers.

B. MANAGEMENT

1. Drive business growth by identifying & prioritizing potential business opportunities and evaluating potential investments & strategic partnerships; organizing business development meetings with potential partners & acquisition candidates; and leading efforts to implement these opportunities.

2. Assess industry trends, market size and structure, competitor benchmarks, and perform value chain analysis.

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3. Develop and maintain working relationships with other functional groups within Patheon, as well as developing solutions with partner, client and vendor organizations.

4. Standardizing and streamlining the quotation and bid process, pricing and customer acquisition process across Commercial and PDS in every region.

5. Developing and enhancing the Business Management group in North America.

C. ETHICS, CULTURE, POLICY & PUBLIC REPRESENTATION

1. Corporate Culture. Foster a corporate culture that promotes the Corporation’s core values as reflected in the Corporation’s Code of Business Conduct.

2. Work Climate. Maintain a work climate that is conducive to:

(i) attracting and retaining a diverse group of top-quality employees at all levels; and

(ii) motivating these employees to perform their duties with the highest standards of integrity, responsibility and excellence; standards that are essential for the success of a Corporation that provides pharmaceutical product development and manufacturing services worldwide.

March 17, 2009

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[PATHEON]

SCHEDULE B

TO

EMPLOYMENT AGREEMENT WITH

GEOFFREY M. GLASS

CONFIDENTIALITY UNDERTAKING

In consideration of Geoffrey M. Glass (the “Executive”) accepting an employment agreement between the Executive and Patheon Pharmaceuticals Services Inc. dated March 17, 2009 (the “Agreement”) to which this Confidentiality Undertaking is attached as Schedule B, the Executive undertakes and covenants with the Affiliated Group (as defined in the Agreement) as follows:

1. CONFIDENTIAL INFORMATION

1.1 Confidential Information

The Executive acknowledges that all information and facts relating to the business and affairs of the Affiliated Group and its customers, including, without limitation, trade secrets, data, notes, marketing plans, sales patterns, and private corporate and financial information (the “Confidential Information”) is confidential and proprietary to the Affiliated Group and a valuable trade secret of the Affiliated Group, disclosure of which could severely damage the economic interests of the Affiliated Group. Confidential Information includes, without limitation, any document, work, instrument or other medium assembled or composed by the Executive which contains Confidential Information.

1.2 Non-Disclosure of Confidential Information

The Executive shall not, either during the term of the Agreement or at any time thereafter, use or disclose, directly or indirectly, any of such Confidential Information to any person outside the Affiliated Group, except where such disclosure is necessary for the proper and bona fide execution of the Executive’s duties under the Agreement, without the prior written consent of the Affiliated Group. The Executive’s obligation not to use or disclose Confidential Information without prior written consent shall continue to apply after the Executive has ceased to be an employee of the Affiliated Group until such time as the Confidential Information becomes public knowledge through no fault of the Executive. The Affiliated Group will have full right, title and authority to deal in and with the proprietary rights and the Confidential Information notwithstanding any other provision of the Agreement or the termination thereof for any reason whatsoever. The Executive acknowledges and agrees that the restrictions contained in this Article 1 are reasonable in the circumstances in order to protect the business of the Affiliated Group.

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1.3 Return of Confidential Information

Confidential Information and the documents, works, instruments or other media containing Confidential Information shall remain the property of the Affiliated Group and be returned to the Affiliated Group upon request or immediately following termination of the Agreement for any reason whatsoever.

2. INVENTIONS

2.1 Inventions

Subject to Section 2.2, the Executive agrees that all discoveries, improvements, designs, ideas or inventions made or conceived, in whole or in part, by the Executive during the term of the Agreement or within three years following termination of the Agreement for any reason whatsoever (the “Inventions”) shall be the sole property of the Affiliated Group. The Executive shall:

(a) promptly disclose and describe all such Inventions in writing to the Affiliated Group;

(b) assign, and the Executive does hereby assign, to the Affiliated Group, without further compensation, all of the Executive’s rights, title and interest in and to such Inventions and to all applications for letters of patent, copyrights, industrial design or other forms of protection granted for such Inventions throughout the world;

(c) deliver promptly to the Affiliated Group, upon request and in the form and manner prescribed by the Affiliated Group (without charge to the Affiliated Group but at the Affiliated Group’s expense) the written instruments described in paragraph (b) and perform such acts as deemed necessary by the Affiliated Group to obtain and maintain such instruments and to transfer all rights and title thereto to the Affiliated Group; and

(d) give all assistance that may be required by the Affiliated Group to enable it to protect or exploit the Inventions in any country of the world.

The Executive does hereby waive in whole any moral rights that the Executive may have in each of the Inventions and any part or parts thereof, including, but not limited to, the right to the integrity of the Inventions, the right to be associated with the Inventions as its author by name or under a pseudonym and the right to remain anonymous.

2.2 Excluded Inventions

The provisions of Section 2.1 shall not apply to Inventions which fulfill all of the following criteria:

(a) Inventions for which no equipment, supplies, facility or Confidential Information belonging to the Affiliated Group were used; and

(b) Inventions that do not relate to the business of the Affiliated Group or to the Affiliated Group’s actual or demonstrably anticipated processes, research or development which the Executive had access to or knowledge of; and

Page 19

(c) Inventions that do not result from any work performed by the Executive for the Affiliated Group.

3. GENERAL

This Confidentiality Undertaking shall be governed and construed in accordance with the laws of New York State applicable therein. Nothing herein shall be construed so as to limit any obligations owed by you to the Affiliated Group as a matter of common law. The Executive acknowledges that the business of the Affiliated Group cannot be properly protected from adverse consequences of the Executive’s actions other than by the restrictions set forth in this Undertaking and the Agreement. The Affiliated Group, in addition to any other right or relief to which it may be entitled, shall be entitled to an injunction restricting further breaches of this Undertaking or the Agreement. This Confidentiality Undertaking shall survive the termination of the Agreement and the Executive’s employment thereunder.

IN WITNESS WHEREOF this Confidentiality Undertaking has been executed by the undersigned on this 7th day of May, 2009.

SIGNED, SEALED AND DELIVERED	)
in the presence of	)
	)
/s/ Gwynne Kong	)	/s/ Geoffrey M. Glass
Name of Witness:		Geoffrey M. Glass

Page 20

EX-10.36

[PATHEON] Exhibit 10.36

Wesley P. Wheeler

Chief Executive Officer & President

Patheon Inc

PO Box 110145

Research Triangle Park. NC 27709

Phone: 919-226-3201

Fax: 919-226-3202

wes.wheeler@patheon.com

October 22, 2009

PRIVATE AND CONFIDENTIAL

Geoffrey M. Glass

506 Dahlia Ave. Unit A

Corona del Mar, CA 92625

Dear Geoff;

I am delighted to confirm your promotion to the role of Executive Vice President, Global Strategy, Sales & Marketing, effective October 1, 2009 (the “Effective Date”). This offer letter (the “Letter Agreement”) describes the terms and conditions of your promotion and once signed by you will serve as an addendum to the employment agreement between you and Patheon Pharmaceutical Services Inc. dated April 30, 2009 (the “Employment Agreement”). You will report to me in my capacity as Chief Executive Officer and President.

In this Letter Agreement, you may be referred to as the “Executive”, and Patheon Pharmaceutical Services Inc. or Patheon Inc. may be referred to as “Patheon” or the ‘Corporation”.

1. General Provisions

This Letter Agreement, when fully executed, together with the Employment Agreement, reflects the entire agreement regarding the terms and conditions of the Executive’s employment and promotion. Unless expressly modified by this Letter Agreement, all terms and conditions of the Employment Agreement, including the Executive’s confidentiality undertaking, will remain the same.

2. Responsibilities & Duties

In your new role as Executive Vice President, you will be assuming additional responsibilities for Patheon’s global strategy and global sales and marketing function. The Executive shall have such authority, duties and responsibilities as are commensurate with such position, reporting to the Chief Executive Officer. The Executive’s title shall be Executive Vice President, Global Strategy, Sales & Marketing.

The Executive shall also be responsible for the functions and responsibilities set out in the Position Description attached hereto as Schedule A.

3. Compensation & Benefits

3.1 Base Salary

In recognition of these changes in your responsibilities your Annual Base Salary will be increased to $350,000 per annum subject to the normal tax withholdings and statutory deductions. The Annual Base Salary shall be reviewed by the Chief Executive Officer, for increase only, at such time as the salaries of other senior executives of Patheon are reviewed generally. If so increased, the Annual Base Salary shall be increased for all purposes of the Employment Agreement.

3.2 Performance Incentive Plan

In your new capacity, you will be eligible to participate in the Patheon Annual Performance Incentive Plan (the “Performance Incentive Plan”) established for your position at a new target level of 45%. The personal objectives will be set by the Chief Executive Officer, and the financial performance measures will be set by the Chief Executive Officer. For fiscal 2009, the performance bonus will be prorated from the Effective Date. The annual performance bonus, if earned, will be paid to the Executive by the Corporation in the same manner and payment period generally applicable under the Performance Incentive Plan, but in no event later than two and a half months after the later of (i) the end of the applicable performance period, or (ii) the end of the calendar year in which the performance period ends. Nothing contained in this Section 3.2 will guarantee the Executive any specific amount of incentive compensation, or prevent the Chief Executive Officer from establishing performance goals and compensation targets applicable only to the Executive.

3.3 Stock Options

Further, as recognition of your new role and subject to the approval of the Board of Directors, we are pleased to provide you an additional grant of 25,000 shares of common stock of Patheon at an exercise price per share equal to the market value of the common stock on the date of the grant (the “Option”).

(a) Except as otherwise provided in the Amended and Restated Incentive Stock Option Plan (the “ISOP”) or stock option award agreement (together with the ISOP, the “Stock Related Documents”), the Option will (i) vest as to 1/3 of the shares subject to the Option on each of the first three anniversaries of the date of grant, subject to the Executive’s continued employment with the Affiliated Group until the relevant vesting dates, and (ii) have a seven year term. The Option will be subject to the terms, definitions and provisions of the applicable Stock Related Documents.

(b) During the Executive’s employment, at the discretion of the Board of Directors or its delegate, the Executive also shall be eligible to receive additional stock options and other long-term incentives under the ISOP or any similar plan adopted by Patheon from time to time.

(c) The Executive will be required to comply with the terms of any share ownership guidelines applicable to senior executives of Patheon generally, as amended from time to time.

Page 2

(d) The Executive has been informed and the Executive acknowledges that, due to a potential take-over bid of Patheon by JLL or others, the Corporation is currently under an extended trading blackout during which options may not be issued. Notwithstanding anything herein to the contrary, should the Corporation no longer be able to provide options following the conclusion of the blackout period or the potential takeover bid process, the Company will provide an alternative long-term incentive to replace the Option benefit described above.

3.4 Other Benefits

The Corporation shall also pay the Executive, in regular semi-monthly installments, an allowance of $1,200 US per month for car related expenses.

4. Definition of “Good Reason”

The definition of “Good Reason” in the Employment Agreement:

“Good Reason” means the occurrence of any of the following events without the consent of the Executive: (i) a material reduction by the Corporation of the Executive’s duties or responsibilities or the assignment to the Executive of duties or responsibilities materially inconsistent with the Executive’s position; or (ii) a material breach by the Corporation of this Agreement. Notwithstanding the foregoing, a material reduction in or termination of the Executive’s responsibilities for global sales and marketing shall be deemed to not constitute Good Reason. A termination of the Executive’s employment by Executive shall be deemed to be not for Good Reason unless (i) the Executive gives notice to the Corporation of the existence of the event or condition constituting Good Reason within 30 days after such event or condition initially occurs or exists, (ii) the Corporation fails to cure such event or condition within 30 days after receiving such notice, and (iii) the Executive’s “separation from service” within the meaning of Section 409A of the Code occurs not later than 90 days after such event or condition initially occurs or exists.”

Geoff, I congratulate you on this opportunity to play a larger role in the growth of Patheon in the future. I look forward to working with you in this new capacity.

Page 3

To confirm your decision to accept this promotion, please sign and date this Letter Agreement below and return the signed version to Michael Giannini, SVP Corporate Human Resources.

NOW THEREFORE, the parties below have entered into this Letter Agreement as of the date first written above.

PATHEON PHARMACEUTICAL SERVICES INC.

/s/ Wesley P. Wheeler

By: Wesley P. Wheeler

Title: Chief Executive Officer and President

SIGNED, SEALED AND DELIVERED	)
in the presence of	)
	)
/s/ Michael J. Giannini	)	/s/ Geoffrey M. Glass
Name of Witness:		Geoffrey M. Glass

Page 4

[PATHEON]

SCHEDULE A

TO

EMPLOYMENT AGREEMENT WITH

Geoffrey M. Glass

PATHEON INC.

POSITION DESCRIPTION

Executive Vice President, Global Strategy, Sales & Marketing

The Executive Vice President, Global Strategy, Sales & Marketing reports to the CEO and is a member of the company’s executive team. He is responsible for the direction and management of all sales, marketing and corporate development operations, including market competitiveness, pricing, compensation, and distribution and channel strategy.

Essential Functions:

1. Assess industry trends, market size and structure, competitor benchmarks and perform value chain analysis

2. Oversee the hiring and development of a (global) sales organization

3. Establish compensation, training, and sales incentive programs

4. Drive development of global sales strategies

5. Develop, establish, and direct channel and distribution strategies and programs

6. Maintain key customer relationships and develop and implement strategies for expanding the company’s customer base

7. Manage overall sales process, set appropriate metrics for sales funnel management

8. Develop pricing policies, including volume discounts and terms with Commercial and PDS leadership

9. Lead the development of business plans for new business ventures

10. Facilitate the establishment of corporate strategic goals by leading/facilitating teams of senior management in strategy development & corporate visioning planning sessions; gathering pertinent business, financial, service and operations information; identifying and evaluating trends and option; choosing course of action; defining objectives; evaluating outcomes

11. Drive business growth by identifying & prioritizing potential business opportunities and evaluating potential investments & strategic partnerships; organizing business development meetings with potential partners & acquisition candidates; and leading efforts to implement these opportunities

12. Develop and maintain working relationships with other functional groups within Patheon, as well as developing solutions with partner, client and vendor organizations.

13. Standardizing and streamlining the quotation and bid process, pricing and customer acquisition process across Commercial and PDS in every region.

14. Developing and enhancing the Business Management group in North America

Page 5

15. Develop and manage an effective Sales Operations function that supports new business development in all regions

16. Develop a team and methodology to transition PDS clients to Commercial customers

17. Be a role model for the company culture

Page 6

EX-10.37

PATHEON UK LIMITED Exhibit 10.37

Proposed Term Sheet for Employment Agreement

Between Andrew Kelley and Patheon UK Limited

This Statement dated      October 2005 sets out the particulars of main terms of employment under which Patheon UK Limited, Kingfisher Drive, Covingham, Swindon, Wiltshire, SN3 5BZ offers to employ Andrew Kelley.

There are no collective agreements affecting your terms and conditions of employment.

Any changes or amendments to these terms will be confirmed in writing within one month of them occurring.

Commencement Date

Your period of continuous employment will begin on 1st January 2006. Your employment may be terminated by either party at any time during this period by giving the notice detailed in the Notice section.

Job Title

You will be employed as: Vice President Patheon Europe (Swindon Operations)

The Company reserves the right to require you to perform other duties and work in other departments from time to time, and it is a condition of your employment that you are prepared to do this.

Place of Work

Your normal place of work will be at the address above. However, you will be expected to undertake such travel as is necessary to fulfil your responsibilities.

Pay

Your salary will be paid at the rate of £130,000 per annum by electronic transfer at monthly intervals on the 15^th day of each month.

At the discretion of the Company, you will be eligible to receive an annual bonus targeted at 40% of your base salary dependent on the achievement of Patheon Corporate and Swindon site objectives and your achievement of personal business objectives. Further details of the bonus scheme will be notified to you separately. The Company reserves the right to change or withdraw this bonus scheme at any time by giving three months’ prior notification.

If, as a result of accepting our offer of employment you will have to forfeit all or a portion of an incentive bonus you would have otherwise received from your current employer in respect of your current employer’s 2005 fiscal year then you will be eligible to receive a special incentive payment representing £20,000, less applicable statutory deductions, which shall be paid as 25% within 30 days of the date you commence employment and the remaining 75% to be paid in three instalments during 2006 (May 1, August 1, November 1). However, this special incentive payment amount shall be reduced by the amount, if any, you receive from your current employer as a bonus for your employer’s current fiscal year.

Andrew Kelley Page 1 of 6 PATH1

PATHEON UK LIMITED

Proposed Term Sheet for Employment Agreement

Between Andrew Kelley and Patheon UK Limited

The Company has the right to deduct from your pay any sum which you owe to the Company including, without limitation, any overpayment of pay or expenses, loans made to you by the Company, or any other item identified in this Statement and/or the Employee Handbook as being repayable by you to the Company.

Employee Share Purchase Savings Plan

You will also be able to take advantage of Patheon’s Employee Share Purchase Savings Plan (“ESPSP”) on the first of the month following the completion of your probationary period. This Plan provides you an opportunity to invest any amount up to 5% of your Base Salary in. the purchase of Patheon shares at market prices on regular intervals, with a 50% matching contribution by Patheon.

Stock Options

Subject to the approval of Patheon Inc.’s Board of Directors, Patheon Inc. will make an initial grant of 15,000 options to you under its Incentive Stock Option Plan. The exercise price will be based on the market price as defined in Patheon’s Executive Stock Option Plan on the day you accept this offer of employment. The options shall vest as to one-third per year over the first three years from the date you commence employment. The subscription price for the shares under option will be the market price (as defined in the Patheon Stock Option Plan) on the day this letter is accepted by you.

Restricted Stock Units

Subject to the approval of Patheon Inc.’s Board of Directors, Patheon Inc. will also grant to you 15,000 Restricted Share Units pursuant to Patheon’s Restricted Share Unit Plan. These units shall vest on the following “Payment Calculation Dates”: (i) the first one-third on February 1, 2007; (ii) the second one-third on February 1, 2008; and (iii) the last one third on February 1, 2009.

What this means is that in each of the next three years, on February 1, as long as you continue to be employed with Patheon, you will be entitled to a receive a cash payment equal to: (A) 1 /3rd of the Restricted Share Units awarded to you; multiplied by (B) the Market Value (as defined in the Plan) of Patheon’s common share as at that date, which may be more or less than the current market value of Patheon’s common shares.

Company Car Allowance

You will be entitled to a company leased vehicle of your choice from a fairly extensive list. Alternatively you may elect to receive an automobile and petrol allowance of £10,000 per year.

Hours of Work

Your normal hours of work are 8.30 a.m. to 4.40 p.m., Monday to Friday with a 15 minute morning coffee/tea break and a 40 minutes break for lunch each day.

In addition to these hours, you are required to work those hours necessary to fulfil the requirements of your position to the satisfaction of the Company.

Andrew Kelley Page 2 of 6 PATH1

PATHEON UK LIMITED

Proposed Term Sheet for Employment Agreement

Between Andrew Kelley and Patheon UK Limited

Holiday Entitlement

Your basic annual holiday entitlement will be 22 days in the holiday year which runs from 1^st January to 31^st December. In addition, you will be entitled to the following recognised bank/public holidays where they fall on one of your normal working days:

New Year’s Day*	Spring Bank Holiday Monday
Good Friday	Late Summer Bank Holiday Monday
Easter Monday	Christmas Day*
May Day Bank Holiday Monday	Boxing Day*

* Re-designated days where 25^th and/or 26^th December and/or 1st January fall on a Saturday or Sunday.

The Company may also give you additional holidays each year to achieve a closure between 25^th December and 1^st January. Details will be confirmed in advance each year.

If either a bank/public holiday or an additional Company nominated holiday falls on a day when you would not normally work, you are not entitled to any additional payment or time off in lieu.

Your annual holiday entitlement will increase as follows:

23 days after 5 years’ service

24 days after 6 years’ service

25 days after 7 years’ service

26 days after 8 years’ service

27 days after 9 years’ service

The additional entitlement will be granted from the start of the next holiday year.

You will accrue annual holidays on the basis of 1/12^th of the annual entitlement for each month of service in the holiday year. Further details of how holiday entitlement is calculated is available on request from the Human Resources Department.

Annual holiday entitlement will cease to accrue in cases where you are absent from work for a continuous period in excess of 2 months. However, the Company will ensure that the statutory minimum holiday entitlement obligations have been met. Accrual will recommence after the completion of 1 calendar month of working.

Generally, you will only be permitted to take a maximum of two weeks’ holiday at any one time during the period between 1^st May and 30^th September.

All holidays must have prior approval and authorisation. Requests for holidays should be submitted to your manager using a holiday request form, subject always to the following minimum notice periods:

Requested Holiday Duration	Advance Notice Required
5 – 9 days	2 weeks
10 days or more	4 weeks

The Company will respond to your request as soon as possible. No responsibility will be accepted for monies lost as a consequence of your failure to comply with this procedure.

Andrew Kelley Page 3 of 6 PATH1

PATHEON UK LIMITED

STATEMENT OF MAIN TERMS OF EMPLOYMENT

A maximum of one week’s unused holiday entitlement may be carried forward into the next holiday year with the permission of your manager/supervisor. Carried forward leave must be used by 31st March of the following leave year. These days will be lost if not taken by that date.

Upon termination of your employment, payment will normally be made for all unused accrued holiday entitlement. If you have taken more annual holiday entitlement than you have accrued during the holiday year, the balance will be deducted from any outstanding pay. Payment for holidays in these circumstances will be made on a pro-rata basis to your service in the current holiday year.

Sick Pay

The payment for and the procedure you must follow in the event of periods of absence from work due to sickness are set out in the Employee Handbook.

Pension

The Company operates an Occupational Pension Scheme, details of which will be made available to you. There is a contracting out certificate in force in respect of this scheme.

If you do not join the Company’s Pension Scheme you will be contracted into the current Secondary State Pension Scheme unless personal pension arrangements have been made.

Notice

You will be required to give the Company 6 months’ notice to terminate your employment. You will be entitled to receive 6 months’ notice from the Company of your termination of employment.

By mutual agreement, these notice periods may be waived.

The Company has the right to terminate your employment without notice or payment in lieu of notice in the event that you commit a fundamental breach of contract.

The Company reserves the right to require you not to carry out your duties or attend your place of work during the period of notice.

Other Employment

You will be required to devote the whole of your time, attention and abilities during your hours of work to your duties with the Company and may not undertake any other work during this time.

You will not, without the prior consent of the Company (which will not be unreasonably withheld), engage in any business or employment which is similar to or competitive with the business of the Company, or which could be considered to impair your ability to act at all times in the best interests of the Company, outside your hours of work for the Company.

If you do engage in any other employment, you must notify the Company in writing of hours worked elsewhere to enable the Company to comply with its statutory obligations.

Confidentiality

You must not disclose any secrets or other information of a confidential nature relating to the Company or its business, or in respect of any obligation of confidence which the Company owes to any third party, during or after your employment except in the proper course of your employment or as required by law.

Any documents or tangible items which belong to the Company or which contain any confidential information must not be removed from the Company’s premises at any time without proper authorisation, and must be returned to the Company upon request and, in any event, upon the termination of your employment.

Andrew Kelley Page 4 of 6 PATH1

PATHEON UK LIMITED

STATEMENT OF MAIN TERMS OF EMPLOYMENT

If requested by the Company, all confidential information, other documents and tangible items which contain or refer to any confidential information, and which are in your possession or under your control, must be deleted or destroyed.

Inventions, Improvements and Patents

You should disclose to the Company any discovery or invention or improvement to an existing invention or process. Any and all improvements, designs or inventions, whether capable of registration or not, made by you during the course of your employment with the Company, shall be the property of the Company and you will sign all documents and do all necessary acts required to transfer title in such improvements or inventions to the Company without any additional compensation or payment, save for any expenses or disbursements incurred for the purposes of transferring title to the Company. Nothing in this clause shall affect any rights conferred by the Patents Act 1977, the Copyright, Designs and Patents Act 1988 or any statutory modification or re-enactment thereof.

Presentations/Publications

You shall obtain permission from a Director of the Company before agreeing to prepare a technical paper for presentation before a scientific body or any article/letter for publication or take part in a radio or television programme which concerns or may have an effect on the business or affairs of the Company or any Associated Company. Where this is agreed, you shall arrange for texts to be approved by the appropriate member of the Executive Committee.

Where independent and personal comment is made on matters which could affect the Company’s interests, a disclaimer shall be added emphasising that such comment is a personal view and does not necessarily represent the views of the Company.

Exclusion of Third Party Rights

This Statement does not create any right enforceable by any person not a party to it.

Data Protection

The Company has developed guidelines, which are set out in the Employee Handbook, for the processing of personal data to meet the requirements of current legislation; the Company may change these guidelines at any time at its discretion. The Company will keep personal information on you and discuss such information only on a need to know basis as and when required. In signing this Statement you expressly consent to the processing of information which is held about yourself, including sensitive data such as sickness and health records, ethnic origin and trade union membership/non membership.

Monitoring of Personal Communications

You should be aware that the Company may monitor, intercept or record all communications received or made via the Company’s telephone system or any other system including e-mail and internet usage. You should not use the Company’s telephone or e-mail system for personal use without permission; full guidance is given in the Employee Handbook as to what is acceptable. If you wish to make a call that cannot be monitored you should discuss this with management. Monitoring may be conducted by any member of management but will be for work-related purposes only.

Declaration

I, Andrew Kelley, acknowledge receipt of this Statement and my own copy of the Employee Handbook and confirm that I have read the Statement and the Employee Handbook which set out the principal rules, policies and procedures relating to my employment.

Andrew Kelley Page 5 of 6 PATH1

PATHEON UK LIMITED

STATEMENT OF MAIN TERMS OF EMPLOYMENT

For the purpose of the application of statutory holiday entitlement under the Working Time Regulations, I agree that the holiday section of this Statement will be held to be a “relevant agreement”.

I understand that a permanent copy of the Employee Handbook is kept in the Human Resources Department.

Signed by the employee	/s/ A.J. Kelley	Date	November 1, 2005
	Andrew Kelley

Signed on behalf of the Company	/s/ Aldo Braca	Date         Oct. 26, 2005
	(Company Representative)

Andrew Kelley Page 6 of 6 PATH1

EX-10.38

[PATHEON] Exhibit 10.38

Patheon Inc.

Corporate Office

7070 Mississauga Road, Suite 350

Mississauga, Ontario L5N 7J8

Canada

Tel: 905-821-4001 Fax: 905-812-6705

August 16, 2006

Mr. Andrew Kelley

Vice President Patheon Europe, Swindon Operations

39, London Road

Marlborough

Wiltshire

SN8 2AA

Dear Andrew:

Re: Amendment to Employment Agreement

In November of 2005 you and Patheon UK Limited (“Patheon”) entered into an employment agreement which provides the terms and conditions of your employment with Patheon (the “Employment Agreement”). The purpose of this letter is to outline a proposed amendment to your Employment Agreement, the details of which appear on Schedule A to this letter.

Should you agree with the terms and conditions contained on Schedule A, please execute this letter and provide the original to Roy Wieschkowski. Execution of this letter will serve to formally amend your Employment Agreement, effective as of the date of execution. Except as provided in Schedule A, the terms and conditions of your Employment Agreement remain unchanged.

Should you have any questions or concerns regarding such amendment, please feel free to contact Roy Wieschkowski.

Sincerely.

Patheon UK Limited

/s/ Nick A. DiPietro

Nick A. DiPietro

Director

I, Andrew Kelley, have read, understood and agree to the terms in this letter and the attached Schedule A, and understand that upon execution of this letter, my Employment Agreement shall be formally amended to include the language in the attached Schedule A.

/s/ A.J. Kelley	Date	20-09-06
Andrew Kelley

Schedule A

For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties, each of Patheon UK Limited (the “Company”) and Andrew Kelley hereby agree that the Employment Agreement dated November 1, 2005 between Andrew Kelley and Patheon UK Limited (“the Employment Agreement”) is amended as follows:

1. The following language shall be added to your Employment Agreement:

“Subject to the termination provisions contained in the section entitled “Notice” of the Employment Agreement and notwithstanding anything to the contrary contained herein, the following provisions shall apply in the event of a Change of Control (as defined below).

(a) in the event of a Change of Control which within 18 months from the date of such Change of Control results in the termination of your employment, by dismissal or constructive dismissal, you shall be entitled to receive:

i. a lump sum payment equal to 6 months base cash salary, pension contribution, automobile allowance, vacation pay and benefits payable to you by Patheon, such payment to be made within 21 days of termination (“the Lump Sum Payment”); and

ii. a payment in lieu of any unexpired period of notice to which you are entitled under the “Notice” section of the Employment Agreement (“the Notice Payment”) together the “Change in Control Payment”;

(b) payment of the Change in Control Payment shall not be subject to any duty or obligation on you to seek alternate employment or other sources of income or benefits, or to mitigate your damages, or to any similar duty or obligation; and

(c) the Change in Control Payment will be made to you net of any income tax and employee national insurance contributions that are due in respect of the sum, and except in respect of these actual deductions which have been made from the Change in Control payment made under this agreement, you agree that you will be responsible for the payment of any other taxation or deductions of any nature which may arise by reason of the payment which you receive under the terms of this agreement.

For the purposes of this Agreement:

The term “Change in Control” means the occurrence of any of the following:

(a) any Person or group acquires beneficial ownership of securities of the Company’s holding company (as defined by S736 of the Companies Act 1985) (“the Holding Company”) carrying 30% or more of the voting rights attached to all securities of the Holding Company then outstanding entitled to vote in the election of directors of the Holding Company (collectively, “Voting Shares”) including securities

1

convertible into, or exchangeable for, or providing for the issuance of, Voting Shares; provided, however, that, for the purposes of this paragraph (a), the following acquisitions shall not constitute a Change in Control:

(i) any acquisition of beneficial ownership of Voting Shares by the Holding Company or any of its subsidiaries;

(ii) any acquisition of beneficial ownership of Voting Shares by any employee benefit plan (or related trust) of the Holding Company or its Subsidiaries;

(iii) any acquisition of beneficial ownership of Voting Shares by any Person pursuant to a transaction which complies with clauses (i), (ii) and (iii) of paragraph (c); or

(iv) any acquisition of beneficial ownership of Voting Shares by any Person whose ordinary business includes the management of investment funds for others and such Voting Shares are beneficially owned by such Person in the ordinary course of such business;

(b) individuals who, as the date hereof, constitute the Board of Directors of the -Holding Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Holding Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, excluding, for this purpose, any individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies by or on behalf of a Person other than the Board of Directors of the Holding Company; or

(c) consummation of a merger, amalgamation, arrangement, business combination, reorganization or consolidation or sale or other disposition of all or substantially all of the assets of the Holding Company (a “Business Combination”), in each case, unless following such Business Combination:

(i) Persons who were the beneficial owners, respectively, of the outstanding common shares immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then outstanding Voting Shares of the Person resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Holding Company or all or substantially all of the Holding Company’s assets either directly or through one or more subsidiaries);

2

(ii) no Person (excluding any Person resulting from the Business Combination or any employee benefit plan (or related trust) of the Holding Company or such Person resulting from the Business Combination) or group beneficially owns, directly or indirectly, 30% or more of the then outstanding Voting Shares of the Person resulting from such Business Combination except to the extent that such ownership existed prior to the Business Combination; and

(iii) at least a majority of the members of the board of directors of the Person resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement providing for, or the action of the Board of Directors of the Holding Company approving, such Business Combination.

The term “Person” means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, an incorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted.”

3

EX-10.39

Exhibit 10.39

[PATHEON]

January 31, 2009

PRIVATE AND CONFIDENTIAL

Andrew Kelley

39 London Road,

Marlborough, Wilts

SN8 2AA

Dear Andy:

Patheon UK Limited (“Patheon”) is pleased to offer you a temporary assignment in your newly promoted position as Senior Vice President, Commercial Operations, Europe & Asia Pacific and will be based in the European Commercial Headquarters of Patheon International AG in Zug (Switzerland). This offer letter (“Offer”) describes the terms and conditions of your assignment and once signed by you shall serve as an addendum to the employment agreement between you and Patheon. Your assignment is scheduled to begin on February 1, 2009. This assignment will be for a fixed term of two years, and may be renewed thereafter at the sole discretion of Patheon for an additional year. The initial term will have an end date on January 31, 2011.

This offer is conditional upon you successfully obtaining and maintaining a valid and subsisting Residence and Work Permit (and Visa, if necessary), and any renewal thereof. As a point of clarification, it is understood and agreed that the issuance of an initial Work Permit and any renewals thereof cannot be guaranteed and Patheon makes no representations, warranties or inducements to you in this regard.

You acknowledge that as part of the position as Senior Vice President, Commercial Operations, Europe & Asia Pacific, you will be required to temporarily relocate to the Zug area and you agree to consent to such relocation as Patheon deems such relocation necessary, in its sole discretion. Further, in the event that you are permanently required to relocate to Switzerland, it is understood and agreed that the issuance of the appropriate Swiss immigration documents, including work authorization, and any renewals thereof, necessary to enable you to work in this position cannot be guaranteed and Patheon makes no representations, warranties or inducements to you in this regard.

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1. RESPONSIBILITIES AND DUTIES

As Senior Vice President, Commercial Operations, Europe & Asia Pacific, your responsibilities will encompass all PDS and commercial manufacturing sales, marketing and business development activities in the European and Asia Pacific regions. You will report directly to Aldo Braca, President, Europe.

2. COMPENSATION AND BENEFITS

2.1 Base Cash Salary

Your base salary level will be determined by the “home” country. Base salary will continue to be aligned with the salary policy of home country to reinforce the temporary aspect of the assignment and to facilitate smoother repatriation. You will receive a promotion base salary adjustment to £175,000, as a Swiss Franc Equivalent per year, less applicable deductions based on the amount of tax and mandatory government benefit contribution equivalent to what you would have had deducted had you remained in the UK based on company generated income only, in accordance with Section 2.14 Tax Equalization, noted below and Patheon CH payroll practices (“Base Salary”). Increases to Base Salary, if any, are at the sole discretion of Patheon and are based on performance. Patheon CH shall deduct from your Base Salary any applicable taxes and source deductions that Patheon CH is required or authorized to withhold or make. The company will review the foreign exchange rate periodically and determine if any adjustments are warranted due to significant fluctuations.

2.2 Performance Incentive Plan

You will continue to be eligible to participate in Patheon’s performance incentive plan (the “Performance Incentive Plan”) established for your position and your target will remain the same at 40%.

2.3 Cost of Living Allowance

The Cost of Living Allowance takes into consideration the cost differential (not the full cost) for goods and services. This amount is provided to you to maintain your purchasing power in the host location. The Cost of Living Allowance represents the differential of £9,800 for goods and services in Zug. Details of the International Assignment Allowance are covered in the Patheon International Assignment Policy (Annex A). This allowance will be provided to you as a Swiss Franc Equivalent. This allowance is calculated by an external third party provider who specializes in cost of living data. The company will review your allowance periodically and determine if any adjustments are warranted due to significant exchange rate fluctuations. Please keep in mind that in an effort to avoid any taxable event to you, Patheon will also enter into any leasing arrangement for housing on your behalf.

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2.4 Pension Contribution

In order to preserve your entitlement under the UK employer sponsored retirement scheme, and to the extent possible, you will continue to be covered under the UK retirement plan. Any required contribution will continue to be withheld at source, and any employer contributions will be maintained. In this instance, you will not be provided with any additional pension arrangements by Patheon CH during your tenure in Switzerland. However, Patheon UK and Patheon CH have agreed that, in the event: (i) you return to employment with Patheon UK after your tenure in Switzerland; or (ii) you voluntarily leave or are made redundant from Patheon during your tenure in Switzerland then the pension contributions payable between the time you left the employment of Patheon UK to your return (or leaving Patheon) shall be paid up by Patheon CH to Patheon UK to provide you with the same pension benefit you would have accrued had you remained in the employment of Patheon UK. The employee will be responsible for providing the employee contribution element of such accrual which can either: (i) be deducted at source during your tenure; or (ii) be paid for by you at the relevant time. However, in the event that your employment with Patheon is terminated due to your misconduct or gross misconduct then Patheon CH shall not be liable to make such pension payments and you hereby agree to forfeit all and any rights in relation to such augmentation. Furthermore, any such payments and related accruals shall be limited by the earnings cap and any other restrictions that may be in force, or come into force, in relation to the Patheon UK Pension Fund. You will receive payments to your UK pension plan retrospectively at the end of your assignment in accordance with the plan provisions.

2.5 Employee Benefits Plan

Patheon will provide you with a comprehensive international benefits package based on the available global markets that offer such coverage. Benefits are based on regulatory requirements which may change from time to time and that which private employers typically offer. Specifically, your benefits package includes Life insurance for yourself and your dependent spouse and children, Accidental Death and Dismemberment, Long Term Disability, Health Care including coverage for hospital, drugs, paramedical practitioners, vision care and travel insurance for you and your dependents, Dental Care including major and orthodontic services for you and your dependents. A summary of your international benefits is attached as Annex B. In addition to the benefits outlined in Annex B, Patheon is prepared to top up your life insurance benefit to represent 4x your annual salary in consideration of your current UK benefits arrangements.

Patheon reserves the right to change, alter, modify the applicable benefit, pension, allowance, relocation and general insurances in its sole discretion subject to reasonable notice to the employee of such changes.

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2.6 Social Security

In order to preserve your ongoing entitlements under the UK Social Security or government sponsored benefit programs, and to the extent possible, all efforts will be made to keep you in the programs of the UK. Under agreements between various countries this is often feasible and as such, you will be exempt from contributions to the programs in Switzerland. If, however, it is not possible to maintain coverage in the UK, you will be placed into the mandatory government programs in Switzerland. Patheon will adjust your compensation accordingly to reflect any difference in Social Security and or mandatory benefit costs.

2.7 Payroll

As the majority of your day to day expenses will be incurred in Switzerland, you will be placed onto the Swiss payroll.

2.8 Stock Options

If you have received stock options prior to your assignment to Switzerland, or receive options during your tenure in Switzerland, you must notify Patheon Corporate Human Resources prior to any decision to exercise options and/or sell any shares of Patheon stock.

2.9 Car Lease & Transportation Expenses

Patheon will continue your car lease arrangement in the UK and are pleased to inform you that your car and petrol allowance will be increased to £15,000 per annum gross paid as a Swiss Franc equivalent which will be subject to tax and any other appropriate payroll deductions. While in Zug, Patheon will pay for any Transportation expenses you incur while travelling on Company business.

2.10 Expenses and Representation Allowance

The Company shall cover all reasonable expenses above CHF 50 (including travelling and hotel expenses, expenses for invitations etc.) which arise in connection with the Employee’s activities for the Company.

In addition, the Company shall pay the Employee a non-taxable representation allowance in the amount of CHF 6,000 per year, payable in 12 monthly instalments at the end of each month which is intended to cover all reasonable expenses below CHF 50. Notwithstanding anything to the contrary herein, this Section 2.10, paragraph shall be subject to approval by the competent tax authorities.

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2.11 International Relocation Incentive

In addition to the compensation elements noted above, an additional allowance equal to 20% of your gross base salary subject to the required statutory deductions, will be provided during your assignment to Switzerland. This will be paid in lump sum instalments with 25% paid upon signing and the balance to be paid at the completion of the first 12 months. Further, an additional lump sum payment equal to 20% of your gross base salary will be paid to you following 24 months of your assignment to Switzerland. These payments will be made to you conditional upon your ongoing active employment at that time and would be made in addition to any other payments, including bonus payments, to which you may be entitled. These International Relocation Incentives will cease after your completion of your two year assignment to Switzerland.

2.12 Language Familiarization

Patheon recognizes that you will better integrate into the new Swiss culture by becoming familiar with the local Swiss language. Therefore, where language training is deemed necessary by Patheon, the Company will pay for a pre-determined amount of training. This benefit is not transferable to others.

2.13 Equity Compensation and Stock Options

You will be eligible to participate in the Corporation’s Stock Option Plan, and awarded options from time to time in accordance with the terms of such plan. As a promotion grant subject to approval of the Compensation and Human Resources Committee (the “Committee”) of the Board of Directors at a meeting following the Effective Date of this agreement, you would receive a stock option grant of 50,000 options under the terms of the Patheon Stock Option Plan. As per securities regulatory requirements, options may not be issued when the Company is in possession of material undisclosed information. The options shall vest as to one-third per year over the first three years. The subscription price for the shares under option will be the market price (as defined in the Patheon Stock Option Plan) on the day the grant is approved by the Committee. As you know, we are under an extended blackout relating to the potential JLL Bid and Special Committee process and accordingly options cannot be granted until such blackout is lifted. At the conclusion of this process, should the ability to provide options not be available, the Company will provide an alternative long term incentive (“LTI”) to replace the option benefit so described above.

2.14 Tax Equalization

Tax laws vary widely from country to country. Therefore, Patheon has established guidelines and procedures (Tax equalization) to ensure that the international assignee’s tax liability is similar to what you would have incurred in the UK, subject to certain limitations. Under Patheon’s tax equalization approach, you will be responsible for contributing to the cost of taxation to an amount similar to or equivalent to what you would have paid in the UK. This may or may not reflect your actual tax burden. As such, it is often referred to as a “hypothetical tax” amount, and this will be withheld from pay on a regular basis. The hypothetical tax includes income tax, Social Security

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contributions, mandatory government withholdings and other amounts that would have been required in the UK. Any difference between the hypothetical amount withheld and the actual tax owning will be the responsibility of Patheon.

Before your departure you will be asked to participate in a tax assessment and tax planning session.

Professional tax advice will be made available to you at Patheon’s expense, as well as assistance with the preparation and filing of both UK and Swiss tax returns for the tax years while you are on assignment. As this is a highly specialized area of tax, you are required to utilize the tax advisory firm selected by Patheon for this purpose.

3. TERMINATION OF ASSIGNMENT

At the end of your temporary assignment you will either return to your current position at our offices in Swindon or be assigned permanently to our regional office in Zug upon mutual consent.

4. REPATRIATION ARRANGEMENTS

If repatriated at the end of the assignment all of the assignment related payments and allowances would cease being paid. The cost of the trip to your origin location as well as the shipment of your household goods will be paid on your behalf or reimbursed to you provided you are still an employee of Patheon at the time of repatriation.

5. PERMANENT EMPLOYMENT

Should you be offered permanent employment in the Zug area, you will enter into a new agreement as a full-time Swiss employee and be subject to the terms and conditions as other permanent employees at your level. At that time, you will review with Patheon, the Permanent International Relocation Policy benefits that may apply to you.

Patheon reserves the right to cancel, replace or amend this expatriate agreement where appropriated relating to the needs of the business with 30 days notice.

6. TERM AND TERMINATION

Your employment under this agreement may be terminated in compliance with the UK employment regulations. The termination provisions of your UK employment agreement will remain in force until such time that you become permanently employed in Switzerland at which time you will be subject to Swiss regulatory provisions as it relates to termination of employment.

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7. MANDATORY SWISS EMPLOYMENT LAW PROVISIONS

This secondment is subject to the provisions of the Federal Act Federal on the minimal working and salary conditions for employees seconded to Switzerland and the respective Ordinance (Bundesgesetz fiber die in die Schweiz entsandten Arbeitnehmerinnnen and Arbeitnehmer, SR 823.20 and 823.201).

It is understood and agreed that in consideration of the above, you will be required to execute the UK Non-Competition Undertaking attached as Annex C. All other terms and conditions of your employment will remain the same.

Andy, congratulations on your promotion and the opportunity to take on this exciting assignment. I look forward to working with you in this new capacity.

If the contents of this letter including annexes are acceptable to you, please confirm your acceptance by signing below and returning this letter to Patheon.

Yours truly,

/s/ Roy Wieschkowski Date: January 31, 2009

Roy Wieschkowski

Senior VP, Human Resources

For and on behalf of Patheon UK Limited

I, Andrew Kelley, have read, understood and agree to the terms in this Offer, and accept this Offer according to the terms described in this letter.

/s/ A.J. Kelley	Date   2nd February 2009
Andrew Kelley

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PATHEON UK LIMITED

ADDENDUM TO STATEMENT OF MAIN TERMS OF EMPLOYMENT

AGREEMENT ON OBLIGATIONS DURING AND AFTER EMPLOYMENT

(1) For the purpose of this Agreement, the Company shall mean Patheon UK Limited and any of its affiliates.

The following obligations shall form part of the Contract of Employment between you and the Company and shall be rigorously observed. Each of these clauses and sub-clauses shall be construed as an entirely separate obligation and the enforceability of any one or more of the clauses or sub-clauses shall not in any way be affected by the unenforceability of any other clause or sub-clause.

Should any provision of this Agreement or any part of any provision be rendered void or unenforceable, then that provision or that part of that provision shall be deleted (or, in the case of the period of application, be modified as necessary to make it valid) and, as far as the context allows, all other provisions shall be unaffected.

(2) During the course of your employment with the Company you will have dealings with customers of the Company. In order to safeguard the Company’s goodwill and commercial interests, you agree that you will not, at any time during the 12 months immediately following the termination of your employment, whether on your own account or on behalf of any other person, firm or company, directly or indirectly, in connection with any business similar to or in competition with the Company, solicit or endeavour to entire away any person, firm or company who was a customer of the Company at the time that your employment with the Company terminated and with whom you have personally conducted business, through the subsequent provision of any products or services similar to those provided by you on behalf of the Company during the last 12 months of your employment.

(3) You agree that you shall not at any time, whether during the continuance of this Agreement nor a period of 12 months after its termination, employ, solicit, hire, induce, entice or endeavour to entice away from the Company, whether on your own account or on behalf of any other person, firm or company, any person who was still an employee of the Company immediately prior to the termination of your employment with the Company.

(4) You agree that you shall not for a period of 12 months after the termination of your employment (without the previous consent in writing of the Company) directly or indirectly be engaged, concerned or interested (whether as employee, agent, consultant or otherwise) in any business or company which invents, manufacturers, or sells products or services which are in competition with the business carried on by the Company at the end of your employment. As compensation for Employee’s agreement not to compete and not to hire employees of the Company and/or its affiliates in accordance with this agreement on obligations during and after employment and in addition to any other payment required to be made by the Company under this Employment Agreement, the Company hereby agrees to pay the Employee a monthly payment in an amount equal to his/her last monthly salary prior to termination for the twelve month period after termination of the Employment Agreement. For the avoidance of doubt, an employee of the Company shall include any person who has discontinued his/her relationship with the Company in the 12 month period preceding the start of the new employement.

In case of violation of this non-competition clause, the Employee shall pay to the Company liquidated damages in the full amount of the Employees’ last yearly gross salary amount for each instance of violation. The payment of liquidated damages shall not discharge the Employee from observing this non-competition and no hire undertaking. In addition to the payment of liquidated damages and further damages incurred by the Company, the Company shall have the right to request the termination of any of the Employee’s activities which violate this non-competition and no hire agreement.

In signing below, you confirm that you understand, accept and agree to be bound by this Agreement, and that it supersedes any previous such Agreement.

Signed by the employee /s/ A.J. Kelley Date 2^nd February 2009

Signed on behalf of the Company	/s/ Roy Wieschkowski	Date January 31, 2009
	Roy Wieschkowski

EX-10.40

Exhibit 10.40

[PATHEON]

Patheon Inc

PO Box 110145

Research Triangle Park, NC 27709

Phone: 919-226-3200

January 28, 2011

PRIVATE AND CONFIDENTIAL

Andrew Kelley

39 London Road

Marlborough, Wilts

SN8 2AA

Dear Andy:

Patheon UK LTD (“Patheon”) is pleased to offer a continuation of your temporary assignment in Zug, Switzerland.

This letter shall serve to revise and amend certain terms and conditions of your assignment offer letter as executed by you on 2 February 2009.

1. RESPONSIBILITIES AND DUTIES

As Senior Vice President, Commercial Operations, Europe & Asia Pacific, your responsibilities will encompass all PDS and commercial manufacturing sales, marketing and business development activities in European and Asia Pacific regions. This assignment shall terminate on July 31, 2011 at which time you shall be repatriated to the UK.

2. COMPENSATION AND BENEFITS

2.1 Base Cash Salary

Your Base salary will continue to be aligned with the salary policy of home country to reinforce the temporary aspect of the assignment and to facilitate smoother repatriation. Your base salary will be £180,822, less applicable deductions based on the amount of tax and mandatory government benefit contribution equivalent to what you would have had deducted had you remained in the UK based on company generated income only, in accordance with Section 2.14 Tax Equalization, noted below and Patheon CH payroll practices (“Base Salary”). Increases to Base Salary, if any, are at the sole discretion of Patheon and are based on performance. Patheon CH shall deduct from your Base Salary any applicable taxes and source deductions that Patheon CH is required or authorized to withhold or make.

2.2 Performance Incentive Plan

You will continue to be eligible to participate in Patheon’s performance incentive plan (the “Performance Incentive Plan”) established for your position and your target will remain the same at 40%.

2.3 Cost of Living Allowance; Housing on Assignment

You will continue to receive a cost of living allowance. The Cost of Living Allowance takes into consideration the cost differential (not the full cost) for goods and services. This amount is provided to you to maintain your purchasing power in the host location. The current Cost of Living Allowance (£9,800) represents the differential for goods and services in Zug. Details of the International Assignment Allowance are covered in the Patheon International Assignment Policy. This allowance is calculated by an external third party provider who specializes in cost of living data. The company will review your allowance periodically and determine if any adjustments are warranted due to exchange rate fluctuations. Patheon will also enter into a lease arrangement for your housing while on assignment in Zug. Such housing arrangements will be made for your sole occupancy during the assignment and will be structured so as to avoid the creation of taxable income to you.

2.4 Pension Contribution

In order to preserve your entitlement under the UK employer sponsored retirement scheme, and to the extent possible, you will continue to be covered under the UK retirement plan. Any required contribution will continue to be withheld at source, and any employer contributions will be maintained. In this instance, you will not be provided with any additional pension arrangements by Patheon CH during your tenure in Switzerland. However, Patheon UK and Patheon CH have agreed that, in the event: (i) you return to employment with Patheon UK after your tenure in Switzerland (ii) you voluntarily leave or are made redundant from Patheon during tour tenure in Switzerland then the pension contributions payable between the time you left the employment of Patheon UK to your return (or leaving Patheon) shall be paid up by Patheon CH to Patheon UK to provide you with the same pension benefit you would have accrued had you remained in the employment of Patheon UK. You will be responsible for providing the employee contribution element of such accrual which can either: (i) be deducted at source during your tenure; or (ii) be paid for by you at the relevant time. However, in the event that your employment with Patheon is terminated due to your misconduct or gross misconduct then Patheon CH shall not be liable to make such pension payments and you hereby agree to forfeit all and any rights in relation to such augmentation. Furthermore, any such payments and related accruals shall be limited by the earnings cap and any other restrictions that may be in force, or come into force, in relation to Patheon UK Pension Fund. You will receive payments to your UK pension plan retrospectively at the end of your assignment in accordance with the plan provisions.

2.5 Employee Benefits Plan

Patheon will provide you with a comprehensive international benefits packaged based on the available global markets that offer such coverage. Benefits are based on regulatory requirements which may change from time to time and that which private employers typically offer. Specifically, your benefits package currently includes Life insurance equal to four times annual base salary for yourself and life insurance coverage for your dependent spouse and children, Accidental Death and Dismemberment, Long Term Disability, Health Care including coverage for hospital, drugs, paramedical practitioners, vision care and travel insurance for you and your dependents, Dental Care including major and orthodontic services for you and your dependents.

Patheon reserves the right to change, alter, modify the applicable benefit, pension, allowance, relocation and general insurances in its sole discretion subject to reasonable notice to the employee of such changes.

2.6 Social Security

In order to preserve your ongoing entitlements under the UK Social Security or government sponsored benefit programs, and to the extent possible, all efforts will be made to keep you in the programs of the UK. Under agreements between various countries this is often feasible and as such, you will be exempt from contributions to the programs in Switzerland. If, however, it is not possible to maintain coverage in the UK, you will be placed into the mandatory government programs in Switzerland. Patheon will adjust your compensation accordingly to reflect any difference in Social Security and or mandatory benefit costs.

2.7 Payroll

As the majority of your day to day expenses will be incurred in Switzerland, you will continue to be placed onto the Swiss payroll.

2.8 Stock Options

If you have received stock options prior to your assignment to Switzerland, or receive options during your tenure in Switzerland, you must notify Patheon Corporate Human Resources prior to any decision to exercise options and/or sell any shares of Patheon stock.

2.9 Car Lease & Transportation Expenses

Patheon will continue your car and petrol allowance in the UK of £15,000. This will be subject to tax and any other appropriate payroll deductions. While in Zug, Patheon will pay for any Transportation expenses you incur while travelling on Company business. The amount provided under the car lease program is subject to change in accordance with company policy.

2.10 Expenses and Representation Allowance

The Company shall continue to cover all reasonable expenses above CHF 50 (including travelling and hotel expenses, expenses for invitations, etc.) which arise in connection with the Employee’s activities for the Company.

In addition, the Company shall continue to pay a non-taxable representation allowance in the amount equal to CHF 6,000 per year, payable in 12 monthly installments at the end of each month in the currency of your choice and which is intended to cover all reasonable expenses below CHF 50. Notwithstanding anything to the contrary herein, this Section 2.10, paragraph shall be subject to approval by the competent tax authorities.

2.11 International Assignment Incentive

In addition to the compensation elements noted above, you will receive an additional assignment incentive equal to 25% of one year of base salary. This assignment incentive will be divided into and paid in monthly distributions through July 31, 2011 and is subject to the required statutory deductions. As this is a special incentive being provided to you for this

assignment, should you voluntarily terminate your employment with Patheon within the first twelve months after signing this agreement, you will be required to repay to Patheon the total amount received in the form of this assignment incentive.

2.12 Language Familiarization

Patheon recognizes that you will better integrate into the new Swiss culture by becoming familiar with the local Swiss language. Therefore, where language training is deemed necessary by Patheon, the Company will pay for a pre-determined amount of training. This benefit is not transferable to others.

2.13 Equity Compensation and Stock Options

You will continue to be eligible to participate in the Corporation’s Stock Option Plan, and awarded options from time to time in accordance with the terms of such plan.

2.14 Tax Equalization

Tax laws vary widely from country to country. Therefore, Patheon has established guidelines and procedures (Tax equalization) to ensure that the international assignee’s tax liability is similar to what you would have incurred in the UK, subject to certain limitations. Under Patheon’s tax equalization approach, you will be responsible for contributing to the cost of taxation to an amount similar to or equivalent to what you would have paid in the UK. This may or may not reflect your actual tax burden. As such, it is often referred to as “hypothetical tax” amount, and this will be withheld from pay on a regular basis. The hypothetical tax includes income tax, Social Security contributions, mandatory government withholdings and other amounts that would have been required in the UK. Any difference between the hypothetical amount withheld and the actual tax owed will be the responsibility of Patheon.

Professional tax advice will be made available to you at Patheon’s expense, as well as assistance with the preparation and filing of both UK and Swiss tax returns for the years while you are on assignment. As this is a highly specialized area of tax, you are required to utilize the tax advisory firm selected by Patheon for this purpose. Professional tax advice will be provided to you for a period of two years after the completion of this assignment and repatriation to the UK. Such services will be provided without regard to your ongoing employment by Patheon.

3. TERMINATION OF ASSIGNMENT

At the end of your temporary assignment you will either return to a position at our offices in the UK or will be assigned to our other operating locations upon mutual consent.

4. REPATRIATION ARRANGEMENTS

If and when you are repatriated at the end of the assignment, all of the assignment related payments and allowances will cease being paid. The cost of the trip to your origin location as well as the shipment of your household goods will be paid on your behalf or reimbursed to you provided you are still an employee of Patheon at the time repatriation.

5. PERMANENT EMPLOYMENT

Should you be offered permanent employment in the Zug area, you will enter into a new agreement as a full-time Swiss employee and be subject to the terms and conditions as other permanent employees at your level. At that time, you will review with Patheon, the Permanent International Relocation Policy benefits that may apply to you.

6. TERM AND TERMINATION

Your employment under this agreement may be terminated in compliance with the UK employment regulations. The termination provisions of your UK employment agreement will remain in force until such time that you become permanently employed in Switzerland at which time you will be subject to Swiss regulatory provisions as it relates to termination of employment.

7. MANDATORY SWISS EMPLOYMENT LAW PROVISIONS

This secondment is subject to the provisions of the Federal Act on the minimal working and salary conditions for employees seconded to Switzerland and the respective Ordinance (Bundesgesetz uber die in die Schweiz entsandten Arbeitnehmerinnnen und Arbeitnehmer, SR 823.20 and 823.201).

It is understood and agreed that in consideration of the above, you are required to and have executed the UK Non-Competition Undertaking. All other terms and conditions of your employment will remain the same.

Andy, I truly appreciate your willingness to continue further in your assignment. I look forward to continue to working with you.

If the contents of this letter are acceptable to you, please confirm your acceptance by signing below and returning this letter to Patheon.

Yours truly,

/s/ Geoff Glass	Date:	1/31/11
Geoff Glass
Executive Vice President, Strategy, Sales & Marketing

I, Andrew Kelley, have read, understood and agree to the terms in this Offer, and accept this Offer according to the terms described in this letter.

/s/ A. J. Kelley Date: 31-01-11

EX-10.41

Exhibit 10.41

September 3, 2001

Gentile Dott.ssa

Antonella Mancuso

Following our meetings we would like to inform you that with effect, from November 1^, 2001, you will be hired by our company (hereinafter “the Company”) upon the following terms and conditions.

1. Position and Duties

You will be appointed within our staff as a manager (“Dirigente”) under and for the effects of the National Bargaining Agreement (“CCNL”) currently in force of employees of chemical industries in Italy (hereinafter “the National Agreement”), to carry out the duties of Production Director.

2. Term of Employment

Your employment under this Agreement shall be for an indefinite term and may be terminated by yourself and/or by the Company in compliance with the provisions of the National Agreement.

3. Place of Work and Residence

You will carry out the above duties at our Monza plant, at 110, Viale G.B. Stucchi, Monza (MI) and/or at any other place where the performance of your duties may be necessary or deemed to be necessary by the Company.

4. Remuneration and Other Benefits

4.1 Fixed remuneration. For your work as manager your gross annual remuneration shall be €. 72.303,97 (seventytwothousand threehundredandthree/97), gross of tax withholdings and social security contributions. This amount is comprehensive of any entitlements included in the art. 10 of current Dirigenti C.C.N.L. for Industry (“transfers and missions”).

Such remuneration includes all elements of remuneration under the National Agreement.

4.2 Variable remuneration. Furthermore, you will be entitled to receive an incentive bonus. This bonus may vary, as a whole, up to a maximum of 15 per cent of your fixed gross annual remuneration referred to under 4.1 above, according to the total or partial attainment of annual targets that will be decided by the Company.

4.3 Company car. The Company will place at your disposal a company car of appropriate level according to the Company’s policy. The use of such car for private purposes shall be subject to tax and social security contributions, according to the applicable provisions of law.

4.4 Stock Options. You will be eligible to participate in Patheon’s Incentive Stock Option Plan.

4.5 House. The Company will place at your disposal an apartment of appropriate level according to the Company’s policy for 24 months from your employment date. Should you find a proper accommodation before the end of this period, the Company will reimburse a monthly allowance of € 516,46 (fivehundredandsixteen/46) until the end of the 24 months.

4.6 Flights. The Company will pay the cost of 1 (one) flight ticket a month for you to reach your residence.

5. Health Insurance

In addition to any applicable provision of law and of the National Agreement, you shall be entitled to benefit from the extra health insurance coverage provided specifically for managers (“Dirigenti”) in compliance with the Company’s policy.

6. Trial Period

Your trial period will be equal to six (6) working months as provided for by “National Agreement”.

7. Termination

Your employment under this Agreement is for an indefinite term and may be terminated in compliance with the provisions of the “National Agreement”.

By signing and returning copy of this letter you accept and agree to the terms and conditions of this agreement.

Your sincerely,

PATHEON ITALIA S.p.A.

II Legale Rappresentante

/s/ Fulvio Smaldone

For Acceptance and receipt

/s/ Antonella Mancuso

EX-10.42

Exhibit 10.42

PATHEON INC.

[            ], 20[    ]

[                    ]

Dear [                    ],

Indemnity Agreement

In consideration of your service or continued service in any of the following capacities:

• as a director of Patheon Inc. (the “Corporation”); or

• as an officer of the Corporation; or

• as a director of any other entity to the extent that you are serving in such capacity at the request of the Corporation; or

• as an officer of any other entity to the extent that you are serving in such capacity at the request of the Corporation,

such capacities referred to herein as the “Indemnified Capacities”, the Corporation with full power and authority to grant an indemnity valid and binding upon and enforceable against it in the terms hereinafter contained, hereby agrees to indemnify you to the full extent contemplated by this Agreement.

1. Scope of Indemnity

Subject to the limitation contained in Section 6, the Corporation shall indemnify and hold you harmless for the full amount of any Cost (as hereinafter defined) reasonably incurred by you in connection with any Proceeding (as hereinafter defined) that may be made or asserted against or affect you or in which you are required by law to participate or in which you participate at the request of the Corporation or in which you choose to participate (based on your reasonable belief that you may be subsequently named in that Proceeding or any Proceeding related to it) if it relates to, arises from or is based on your service in an Indemnified Capacity, whether the alleged act or omission occurred before or after the date of this Agreement, in any case whether or not you have been named therein (an “Indemnified Claim”). The Corporation shall also indemnify and hold you harmless for the full amount of any other Cost reasonably incurred by you or to which you are subject (including, without restriction, where you are made a witness or participant in any other respect in any action, proceeding or investigation) if it relates to your service in an Indemnified Capacity or any other matters claimed against you solely by reason of you having acted in an Indemnified Capacity (an “Other Indemnified Matter”). Any

amount which the Corporation is obliged to pay pursuant hereto, including without limitation any advance or reimbursement payment made under Section 7 or tax gross-up payment made under Section 9, is referred to as an “Indemnified Amount”.

For the purposes of this Agreement:

“Cost” means all injury, liability, loss, damage, charge, cost, expense, taxes (other than taxes on any fees or salary or other form of compensation), fine or settlement amount whatsoever which you may reasonably incur, suffer or be required to pay (including, without limitation, all legal and other professional fees as well as all out-of-pocket expenses for attending discoveries, trials, hearings and meetings).

“Proceeding” means any civil, criminal, administrative, investigative or other claim, action, suit, application, litigation, charge, complaint, prosecution, assessment, reassessment, investigation, inquiry, hearing or proceeding of any nature or kind whatsoever, and, without limiting the generality of the foregoing, shall include any and every claim for any liability and/or any legal, regulatory or investigative action or proceeding by any governmental or regulatory authority or any person, firm, corporation or other entity whatsoever, whether such action, proceeding or investigation be pending, anticipated or threatened and including without limitation any and every claim by or on behalf of the Corporation, or by or on behalf of Canada or any other country, or any political subdivision thereof.

2. Procedure for Making a Claim

(a) If you become aware of any Indemnified Claim or Other Indemnified Matter or reasonably expect that an Indemnified Claim will be made or an Other Indemnified Matter will arise, you shall give notice in writing as soon as reasonably practicable to the Corporation of such Indemnified Claim or Other Indemnified Matter or potential Indemnified Claim or Other Indemnified Matter, including copies of any documents served on you in connection with a Proceeding or any other relevant documents in your possession, provided, however, that failure to give notice in a timely fashion shall not disentitle you to the right to indemnity under this Agreement except to the extent the Corporation suffers prejudice by reason of a delay.

(b) If you wish to make any claim for payment of an Indemnified Amount to you by the Corporation hereunder, you shall give written notice of such claim to the Corporation (such written notice referred to herein as an “Indemnification Notice”). Such Indemnification Notice shall contain reasonable details and supporting documentation with respect to the claim referred to therein. Subject to Section 6, the Corporation shall pay all Indemnified Amounts arising in connection with the matters described in the Indemnification Notice to you (or as you may direct) no later than thirty (30) days after the date on which you deliver any invoice or account in respect of any such Indemnified Amount to the Corporation.

(c) If the Corporation becomes aware of any Indemnified Claim or Other Indemnified Matter or reasonably expects that an Indemnified Claim will be made or an Other Indemnified Matter will arise, the Corporation will give you notice in writing promptly of such Indemnified Claim or Other Indemnified Matter or potential Indemnified Claim or potential Other Indemnified Matter.

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3. Defence of Action

(a) By Corporation The Corporation (or its insurer(s)) shall at its expense and in a timely manner contest and defend you against any Indemnified Claim and take all such steps as may be necessary or proper therein to prevent the resolution thereof in a manner adverse to you, including the taking of such appeals as counsel to the Corporation (or its insurer(s)) may advise are likely to succeed in the circumstances. In this regard, the Corporation will keep you fully informed on a timely basis of all steps and developments relating to the foregoing. The Corporation shall not agree to any settlement on your behalf without your written consent unless the terms of such settlement require only the payment of money (by persons or entities other than you) and do not require you to admit any wrongdoing or take or refrain from taking any action.

(b) By Director or Officer Notwithstanding Section 3(a), you will be entitled to assume carriage of your own defence relating to any Indemnified Claim (and for greater certainty, the full amount of any reasonable expense you incur in connection with such defence shall be an Indemnified Amount subject to the provisions of Section 6) if:

(i) the Corporation (or its insurer(s)) does not in a timely manner:

(A) undertake appropriate action in respect of an Indemnification Notice delivered pursuant to Section 2; or

(B) take such legal steps as may be from time to time required to properly defend against any such Indemnified Claim;

(ii) in the reasonable opinion of your counsel (which opinion shall be in writing and a copy thereof provided to the Corporation), your interests in respect of the relevant matter conflict with the interests of the Corporation in respect of such matter or with the interests of any other director or officer of the Corporation in respect of whose defence the Corporation has carriage; or

(iii) the Proceeding is initiated by the Corporation or any of its subsidiaries.

4. Presumptions and Settlement

For the purposes of this Agreement, the termination of any Proceeding by judgment, order, settlement (whether with or without court approval) or conviction shall not, of itself, create a presumption that you did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. No settlement shall be undertaken by you in respect of any Proceeding without the consent of the Corporation unless the Corporation and its insurer(s) have indicated that they would not indemnify you according to this Agreement or any applicable directors’ and officers’ liability insurance policy (“D&O Policy”).

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5. Former Directors and Officers and Access to Information

(a) Subject to Section 6, you shall continue to be entitled to indemnification hereunder, even though you may no longer be acting in an Indemnified Capacity.

(b) You and your advisors shall at all times be entitled to review during regular business hours all documents, records and other information with respect to the Corporation or any entity in which you acted in an Indemnified Capacity which are under the Corporation’s control and which may be reasonably necessary in order to defend yourself against any Proceeding that relates to, arises from or is based on your discharge of your duties in an Indemnified Capacity, provided that you shall maintain all such information in strictest confidence except to the extent necessary for your defence. This Section 5(b) shall not apply, however, where the Proceeding is initiated by the Corporation or any of its subsidiaries nor shall it apply where the review by you and/or your advisors of any such documents, records or other information would, in the opinion of legal counsel to the Corporation, cause the Corporation (or any entity in which you acted in an Indemnified Capacity) to lose its entitlement to claim privilege with respect to the disclosure of same in any proceeding in any jurisdiction.

6. Limitation on Obligation of Indemnification

(a) Notwithstanding any other provision in this Agreement, the Corporation shall not indemnify you pursuant to this Agreement unless:

(i) you acted honestly and in good faith with a view to the best interests of the Corporation or, as the case may be, to the best interests of the other entity for which you acted as a director or officer or in a similar capacity at the Corporation’s request; and

(ii) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, you had reasonable grounds for believing that your conduct was lawful.

(b) If and to the extent that the Corporation pays an Indemnified Amount which it is not permitted to pay by law or pursuant to this Agreement, then such amount shall be deemed to have been a loan by the Corporation to you, then you shall repay such amounts to the Corporation within thirty (30) days of a written request by the Corporation for repayment. No interest shall be payable by you with respect to such loan unless such loan is not repaid within such period of thirty (30) days, in which event interest shall be payable thereon at the rate of five percent (5%) per annum, computed from the date which is thirty (30) days following the written request of the Corporation for repayment.

(c) If and to the extent that the Corporation pays an Indemnified Amount in respect of which you have received or subsequently receive indemnification or reimbursement from a source other than the Corporation, including any insurer, then you shall repay such amounts to the Corporation within thirty (30) days of a written request by the Corporation for repayment. If such amounts are not repaid within 30 days of such written request, then interest shall be payable thereon at the rate of five percent (5%) per annum, computed from the date which is thirty (30) days following the written request of the Corporation for repayment. For greater certainty, you

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shall not be entitled to indemnification hereunder to the extent that you receive indemnification under any D&O Policy maintained by the Corporation.

7. Advances

Subject to Section 6, except in respect of a Proceeding initiated by the Corporation or any of its subsidiaries, the Corporation shall periodically reimburse or advance the funds necessary for the payment of Costs reasonably incurred in connection with the investigation, monitoring, defence and appeal of any Proceeding in advance of the final disposition of such Proceeding, within thirty (30) days of any request in writing by you to the Corporation for such reimbursement or advance, accompanied by reasonable details and supporting documentation with respect to the Indemnified Amounts in respect of which such reimbursement or advance is requested.

8. Indemnification for Expenses Incurred in Enforcing Rights

(a) Subject to Section 6, the Corporation shall indemnify you against all Costs that are incurred by you in connection with any action (an “Entitlement Action”) brought by you, the Corporation or a third party to determine whether you are entitled to:

(i) be indemnified by the Corporation under this Agreement, under the Corporation’s by-laws, under any other agreement or under applicable law now or hereafter in effect relating to indemnification of directors and officers; and/or

(ii) recover under any D&O Policy maintained by the Corporation

in respect of Costs incurred by you in connection with a Proceeding (the “Underlying Proceeding”), but only in the event that you are ultimately determined to be entitled to such indemnification or insurance recovery, as the case may be.

(b) Except in respect of an Underlying Proceeding initiated by the Corporation or any of its subsidiaries, the Corporation shall periodically reimburse or advance the funds necessary for the payment of Costs reasonably incurred by you in connection with the investigation, monitoring, defence and appeal of the Entitlement Action in advance of the final disposition thereof, within thirty (30) days of a written request by you.

9. Tax Adjustment

Subject to Section 6, if any Indemnified Amount paid or payable under this Agreement (including, without limitation, an amount paid or payable on account of insurance premiums or made by an insurer under a D&O Policy), constitutes a taxable benefit to you or otherwise subjects you to any tax or levy of any kind, or any taxing authority so alleges, the Corporation will keep you harmless from any such tax or levy and, without limiting the foregoing, shall timely pay to you or on your behalf the amount of any and all such taxes and levies, together with any interest and penalties thereon not arising exclusively from your gross negligence, including any such amounts relating to any payment under this Section 9, so that no such amount will be an unreimbursed expense to you. The Corporation also will reimburse you,

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on a similar after tax basis, for any reasonable costs (including the costs of professional advisors) incurred by you in connection with any payment to which this Section 9 relates or the enforcement by you of your rights hereunder. The amount of any payment hereunder shall be determined without regard to any deductions, credits offsets or similar amounts or adjustments available to you in computing income, taxable income, tax payable or other relevant amounts (except to the extent arising from payments under this Section 9). For clarity, you shall not be obliged to contest any claim that tax, other levy, penalty or interest to which this Section 9 applies is owing, and your rights under this Section 9 are not dependent on the validity of any such claim.

10. Term

This Agreement shall survive until six years after you have ceased to act in an Indemnified Capacity.

11. Approvals

Except in respect of a Proceeding initiated by the Corporation or any of its subsidiaries, where any indemnification sought pursuant to this Agreement is, pursuant to applicable law, subject to or conditional upon the approval or consent of any court or of any governmental body or regulatory authority, the Corporation agrees to make or cause to be made all necessary applications and to use its reasonable best efforts to obtain or assist in obtaining or facilitating the obtaining of such approval or consent, at its expense.

12. Partial Indemnification

If you are entitled under any provision of this Agreement to indemnification by the Corporation for some or a portion of the Costs in respect of a Proceeding, but not for the total amount of such Costs, the Corporation shall nevertheless indemnify you for the portion of such Costs to which you are entitled.

13. Further Assurances

Each of you and the Corporation shall diligently attend to, and assist in the conduct of, the defence of any Proceeding, shall assist in enforcing any right of contribution or indemnity against any person or organization and shall (or in the case of the Corporation, shall cause its appropriate officers, directors, advisors or personnel to) attend hearings and trials and assist in securing and giving evidence and obtaining the attendance of witnesses.

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14. Non-Exclusivity

Your rights under this Agreement shall be in addition to any other rights that you may have under the Corporation’s by-laws or articles, applicable law, or otherwise. Subject to applicable law, your rights under this Agreement shall not be diminished by any present or future provision of the Corporation’s by-laws or articles and shall not diminish any other rights that you now or in the future have against the Corporation.

15. Severability

If any part of this Agreement or the application of such part to any circumstance shall, to any extent, be invalid or unenforceable, such part or the application of such part shall be interpreted and applied to such extent so as to be valid and enforceable in the circumstances, and the remainder of this Agreement, or the application of such part to any other circumstance, shall not be affected thereby and each provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

16. Insurance

(a) The Corporation’s liabilities under the Agreement shall be covered at all times by a D&O Policy that has been approved by the Corporation’s board of directors (subject to the availability of such insurance in the market place) and a copy of such D&O Policy shall be provided to you.

(b) The Corporation will advise you promptly after it becomes aware of any material change in or withdrawal or lapse in coverage of any D&O Policy maintained by the Corporation, details of any claim made under such a policy and the triggering of any extended reporting period applicable to any such policy.

17. Enurement

This Agreement and the benefit of the obligations of the undersigned hereunder shall enure to the benefit of and be binding upon you, your heirs, estate, executors and administrators and shall be binding upon the Corporation’s successors and assigns.

18. Previous Indemnities and Retroactivity

This Agreement supersedes and replaces all prior indemnities entered into between the Corporation and you with respect to the subject matter of this Agreement. This Agreement shall be deemed to have been in effect during all periods that you were acting in an Indemnified Capacity, regardless of the date of this Agreement.

19. Subrogation

In the event of payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of your rights of recovery. All of your actions to assist the Corporation in securing and enforcing its subrogation rights shall themselves be subject to the terms of this Agreement.

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20. Governing Law and Jurisdiction

This Agreement shall be interpreted and enforced in accordance with, and the respective rights and obligations of the parties shall be governed by, the laws of the Province of Ontario and the federal laws of Canada applicable in that province. Each of the parties irrevocably and unconditionally (i) submits to the exclusive jurisdiction of the courts of the Province of Ontario over any action or proceeding arising out of or relating to this Agreement, (ii) waives any objection that it might otherwise be entitled to assert to the jurisdiction of such courts and (iii) agrees not to assert that such courts are not a convenient forum for the determination of any such action or proceeding.

21. Notices

Any notices to be given pursuant hereto shall be given to the Corporation at:

Patheon Pharmaceuticals, Inc.

US Headquarters

4721 Emperor Blvd

Durham, NC 27703

Facsimile No.: 919-226-3202

Attention: Wesley P. Wheeler, Chief Executive Officer

with a copy to the Chairman of the Board of the Corporation:

Claudio F. Bussandri

524 Mount Pleasant Avenue

Westmount, Quebec

H3Y 3H5

Email: claudio@bussandri.org,

and to you at your address on the books and records of the Corporation.

22. Counterpart Execution

This Agreement may be executed in two counterparts, each of which so executed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument.

[Remainder of page intentionally left blank]

DATED this [    ] day of [            ], 20[    ].

PATHEON INC.
by
	Name:
	Title:

The undersigned accepts the foregoing indemnity and agrees to comply with the terms and conditions set out above.

[                    ]

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EX-21.1

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

NAME	JURISDICTION OF INCORPORATION
Patheon Finance LLC	Delaware, U.S.A.
Patheon P.R. LLC	Delaware, U.S.A.
Patheon Pharmaceuticals Inc.	Delaware, U.S.A.
Patheon Pharmaceuticals Services Inc.	Delaware, U.S.A.
Patheon U.S. Holdings Inc.	Delaware, U.S.A.
Patheon U.S. Holdings LLC	Delaware, U.S.A.
Patheon Pension Trustees Ltd.	England
Patheon U.K. Limited	England
Patheon France S.A.S.	France
Patheon Holdings S.A.S.	France
Patheon Italia S.p.A.	Italy
Patheon K.K.	Japan
Patheon B.V.	Netherlands
Patheon International Inc.	Ontario, Canada
CEPH International Corporation	Puerto Rico, U.S.A.
Patheon Puerto Rico Acquisitions Corporation	Puerto Rico, U.S.A.
Patheon Puerto Rico, Inc. (formerly, MOVA Pharmaceutical Corporation)	Puerto Rico, U.S.A.
Patheon International AG	Switzerland