Exhibit 10.10
CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
SECOND AMENDED AND RESTATED MANUFACTURING AND SUPPLY AGREEMENT
     THIS SECOND AMENDED AND RESTATED MANUFACTURING AND SUPPLY AGREEMENT (the
“Agreement”) is made effective as of the 20th day of October 2009 (the
“Effective Date”) by and between Santarus, Inc., a Delaware corporation, having
offices at 3721 Valley Centre Drive, Suite 400, San Diego, California 92130,
U.S.A. (“Santarus”) and Patheon Inc., a corporation incorporated under the laws
of Canada, having offices at 2100 Syntex Court, Suite 350, Mississauga, Ontario
L5N 7K9, CANADA (“Patheon”) and replaces in its entirety the Amended and
Restated Manufacturing and Supply Agreement entered into between Santarus and
Patheon on December 19, 2006, and any amendments thereto through the date
hereof. Patheon and Santarus are sometimes referred to herein individually as a
“Party” and collectively as the “Parties.”
RECITALS
     WHEREAS, Santarus is a specialty biopharmaceutical company focused on
acquiring, developing and commercializing products for the prevention and
treatment of gastrointestinal diseases and disorders;
     WHEREAS, Patheon is a leading global provider of outsourced drug
development and manufacturing services to pharmaceutical and biotechnology
companies;
     WHEREAS, Santarus seeks to retain a contract manufacturer to manufacture
and supply commercial quantities of certain of its immediate release omeprazole
pharmaceutical products;
     WHEREAS, Patheon possesses substantial resources, experience, and expertise
in the manufacture of pharmaceutical products; and
     WHEREAS, the Parties mutually desire to enter into an agreement for the
commercial manufacture and supply of certain of Santarus’ products.
     NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth below and in the Quality Agreement and the Capital
Agreement, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
     1.1 “Affiliate” means any individual, corporation, association, or other
business entity, which directly or indirectly controls, is controlled by, or is
under common control with the Party in question. As used in this definition of
“Affiliate,” the term “control” shall mean, as to an entity, (a) direct or
indirect ownership of fifty percent (50%) or more of the voting interests or
other ownership interests in the entity in question; (b) direct or indirect
ownership of fifty percent (50%) or more of the interest in the income of the
entity in question; or (c) possession, directly or indirectly, of the power to
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question (whether through ownership of securities or other ownership interests,
by contract or otherwise).
     1.2 “Annual OME Cap” means a dollar amount not to exceed $[* * *] in any
calendar year.
     1.3 “Applicable Laws” mean all laws, statutes, ordinances, codes, rules,
regulations, guidelines, and procedures enacted or made by a Government
Authority, including, without limitation, the FDA and any applicable Foreign
Regulatory Authority, that are in force during the Term, and in each case only
to the extent applicable to the subject matter of, or the performance by the
Parties of their respective obligations under, this Agreement, including without
limitation, in respect of Patheon and Santarus, the commercial manufacture of
the Finished Product by Patheon and, in respect of Santarus only, the commercial
marketing of the Finished Product in the United States by Santarus. For purposes
of this Agreement, “Applicable Laws” shall include, without limitation, the
FFDCA, the regulations promulgated thereunder (including, without limitation,
those regulations currently contained in Title 21 of the Code of Federal
Regulations), and other rules and regulations promulgated under the FFDCA
relating to the manufacture of pharmaceutical products; and equivalent laws,
regulations and standards promulgated by a Government Authority that may assert
jurisdiction over the Finished Products or any applicable Patheon manufacturing
facilities, including without limitation, the laws of the Province of Ontario
and the laws of Canada applicable therein; cGMP, including the FDA’s Guidance
for Industry, Manufacturing, Processing or Holding Active Pharmaceutical
Ingredients, March 1998, and any updates thereto; and the FDA’s regulations for
drug establishment registration.
     1.4 “Bulk OME” means the bulk form of omeprazole manufactured by a Third
Party manufacturer and provided to Patheon for use in manufacturing the Finished
Products in accordance with the terms and conditions of this Agreement.
     1.5 “Business Day” means any day other than a Saturday, Sunday or statutory
holiday in Ontario, Canada or San Diego, California.
     1.6 “Capital Agreement” has the meaning set forth in Section 14.1.
     1.7 “Certificates of Compliance” means (a) the certificate of analysis
confirming the identity, strength, quality and purity of each batch of Finished
Product to which it pertains (together with any certificate of analysis
pertaining to the Bulk OME and any other active ingredient contained in such
batch), (b) the certificate of compliance confirming that each batch of Finished
Product was manufactured, tested, stored and supplied by Patheon in compliance
with this Agreement, including without limitation the Specifications, cGMP and
Applicable Laws, and (c) such other certificates and confirmations as described
in the Quality Agreement, each such certificate signed by an authorized
signatory of Patheon.
     1.8 “cGMP” means current good manufacturing practices applicable in Canada
and the United States of America as described in:
 

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(a) Division 2 of Part C of the Food and Drug Regulations (Canada); and
(b) Parts 210 and 211 of Title 21 of the United States Code of Federal
Regulations and the requirements imposed thereunder by the FDA, together with
the latest Health Canada and FDA guidance and like documents pertaining to
manufacturing and quality control practice, all as updated, amended and revised
from time to time.
     1.9 “Commencement of Commercial Manufacturing” means for the Powder
Finished Product August 19, 2004 and for the Capsule Finished Product the date
on which Santarus has obtained Regulatory Approval to utilize the Facility for
commercial manufacturing of the Capsule Finished Product.
     1.10 “Deficiency Notice” has the meaning set forth in Section 3.5.1.
     1.11 “Effective Date” has the meaning specified on the first page of this
Agreement.
     1.12 “Existing Line Capacity” has the meaning set forth in Section 2.2.4.
     1.13 “Facility” means Patheon’s facilities located at 111 Consumers Drive,
Whitby, Ontario, Canada, and any other facilities (including facilities utilized
by subcontractors as permitted hereunder) that are used in connection with the
activities performed by Patheon hereunder.
     1.14 “FDA” means the United States Food and Drug Administration, and any
successor thereto.
     1.15 “FFDCA” means the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §
321 et seq., as amended.
     1.16 “Financial Penalty” has the meaning set forth in Section 2.7.2.
     1.17 “Finished Product” means each of (a) Santarus’ immediate-release
omeprazole/sodium bicarbonate Powder for Oral Suspension 20mg/1680mg and
40mg/1680mg (the “Powder Finished Product”); and (b) Santarus’ immediate-release
omeprazole/sodium bicarbonate Capsules 40mg/1100mg (the “Capsule Finished
Product”) (collectively, the “Finished Product” or “Finished Products”), as each
is more particularly described in the Specifications. Finished Product shall
also include such other products as may be added to this Agreement from time to
time, in a form and manner mutually agreed to by the Parties.
     1.18 “Firm Purchase Order” has the meaning set forth in Section 2.2.3.
     1.19 “Forecast” has the meaning set forth in Section 2.2.2.
     1.20 “Foreign Regulatory Authority” means, for each country other than the
United States of America, the authority or authorities having jurisdiction over
the Finished Product that correspond to the FDA.

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     1.21 “Government Authority” means any supra-national, national, regional,
state, provincial or local government, court, governmental agency, authority,
board, bureau, instrumentality or regulatory body having jurisdiction over the
Finished Product.
     1.22 “INDA” means an investigational new drug application.
     1.23 “Invention” means information relating to any invention, innovation,
improvement, development, discovery, computer program, device, trade secret,
method, know-how, process, technique or the like, whether or not written or
otherwise fixed in any form or medium, regardless of the media on which it is
contained and whether or not patentable or copyrightable.
     1.24 “Laws” means all laws, statutes, ordinances, regulations, rules,
by-laws, judgments, decrees or orders of any Government Authority.
     1.25 “Line” has the meaning set forth in Section 2.2.4.
     1.26 “Long Forecast” has the meaning set forth in Section 2.2.2.
     1.27 “Minimum Run Quantity” means the minimum number of batches of Finished
Product to be produced during the same cycle of manufacturing as set forth in
Exhibit A hereto.
     1.28 “NDA” means a New Drug Application filed with the FDA for marketing
approval for a pharmaceutical product.
     1.29 “OME” means the active pharmaceutical ingredient known as omeprazole,
as specified by Chemical Abstract No. 73590-58-6.
     1.30 “OME Reimbursement Value” means the [* * *]
     1.31 “Other Invention” has the meaning set forth in Section 9.1.
     1.32 “Patheon Manufacturing Responsibilities” has the meaning specified in
Section 3.1 of this Agreement.
     1.33 “Patheon Powder Supply Commitment” has the meaning set forth in
Section 2.2.4.
     1.34 “Price” means the price for the manufacture and supply of Finished
Product under this Agreement specified in the applicable mutually agreed written
Commercial Pricing Proposals for the Powder Finished Product and the Capsule
Finished Product, respectively, as may be modified and agreed upon from time to
time in accordance with Section 6.2 of this Agreement.
     1.35 “Product Invention” has the meaning set forth in Section 9.1.
 

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     1.36 “Product Patents” means (i) United States patents 6,645,988,
6,699,885, 6,780,882, 6,489,346, 5,840,737 and 7,399,772 (ii) any other United
States patents or patent applications for an immediate-release buffered proton
pump inhibitor, and (iii) any provisional, converted provisional, continued
prosecution application, continuation, divisional and continuation-in-part
thereof and any substitution, extension, registration, confirmation, reissue,
re-examination, renewal and any like filing thereof, in each case owned by or
licensed to Santarus during the Term.
     1.37 “Quality Agreement” means that certain Quality Agreement initially
dated February 9, 2004, by and between the Parties and as amended from time to
time.
     1.38 “Raw Materials” has the meaning set forth in Section 7.1.
     1.39 “Regulatory Approval” means, with respect to a national or
multinational jurisdiction, (a) any approvals, licenses, registrations, or
authorizations necessary for the manufacture (where relevant), marketing and
sale of the Finished Product in such nation or jurisdiction, and (b) where
relevant, pricing approvals necessary to obtain reimbursement from a Government
Authority.
     1.40 “Responsible Executive” means the President or the Chief Executive
Officer of a Party, or his or her designated representative.
     1.41 “Specifications” means the specifications for the Finished Product set
forth in the Quality Agreement (as amended from time to time) together with
applicable manufacturing protocols, packaging specifications, testing
methodologies and all applicable requirements set forth in regulatory filings
made with the FDA (including INDA’s and NDA’s) for the Finished Product.
     1.42 “Term” has the meaning set forth in Section 11.1.
     1.43 “Territory” means the United States of America, including its
territories and possessions.
     1.44 “Third Party” means any individual or entity other than Patheon or
Santarus or their respective Affiliates.
ARTICLE 2
SUPPLY, STORAGE, AND DELIVERY OF FINISHED PRODUCT
     2.1 Supply of Finished Product.
            2.1.1 During the Term, Patheon shall manufacture and supply, in
accordance with the provisions of this Agreement, the Specifications, cGMP and
Applicable Laws, [* * *]
 

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     2.2 Commercial Supply.
          2.2.1 Supply Obligations. Patheon shall manufacture and supply to
Santarus, and Santarus agrees to purchase from Patheon, such quantities of
Finished Product specified by Santarus in accordance with this Agreement at the
Price. [* * *]
          2.2.2 Forecasts.
                  (i) Santarus shall use commercially reasonable efforts to
determine its estimated requirements for Finished Product from Patheon and shall
deliver to Patheon a written, non-binding, rolling [* * *] month forecast, by
month, of such estimated requirements (the “Forecast”). Santarus shall, in
accordance with the terms of this Agreement, update and revise the Forecast on a
monthly basis. Santarus shall provide each updated Forecast not less than [* *
*] calendar days prior to the beginning of the next month. Patheon shall use the
Forecast for planning purposes and make available the production capacity and
associated testing and release capacity required to manufacture and supply the
forecasted quantities of Finished Product within the time frames specified in
each Forecast; and
                  (ii) On or before [* * *] in each calendar year, Santarus
shall provide Patheon with a [* * *] (the “Long Forecast”) [* * *] of the volume
of Finished Product Santarus then anticipates will be required to be produced
and delivered by Patheon to Santarus during the [* * *] period.
          2.2.3 Firm Purchase Orders. Santarus shall submit to Patheon a firm,
written purchase order (the “Firm Purchase Order”) for the purchase of Finished
Product at least [* * *] calendar days prior to the specified delivery date.
Santarus shall submit Firm Purchase Orders on a monthly basis and acknowledges
that quantities of Finished Product ordered in any single Firm Purchase Order
will not be less than the Minimum Run Quantity. Each Firm Purchase Order shall
specify the quantity or, if more than one shipment is requested, quantities of
Finished Product ordered, the requested delivery date or dates, the delivery
address(es) and any applicable shipping information. Patheon shall manufacture
and supply the Finished Product in the quantities and by the delivery dates set
forth in the applicable Firm Purchase Order, and in the case of the Powder
Finished Product consistent with the Patheon Powder Supply Commitment.
          2.2.4 Patheon Powder Supply Commitment. Patheon shall, subject to
Santarus’ Firm Purchase Order requirements, supply to Santarus (to the extent
ordered by Santarus on any Firm Purchase Order) amounts of Powder Finished
Product [* * *]
          2.2.5 Firm Purchase Order Amendments. Santarus may amend a Firm
Purchase Order by submitting an amended Firm Purchase Order, as follows: (i) at
least [* * *] days before the originally scheduled delivery date specified in
the Firm Purchase Order, Santarus may amend the Firm Purchase Order to delay the
delivery date to a date within [* * *] days of the originally scheduled delivery
date; or (ii) at least [* * *] days before the originally scheduled delivery
date specified in the Firm Purchase Order, Santarus may increase the quantity of
Finished Product
 

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ordered and/or accelerate the delivery date to a date within [* * *] days of the
originally scheduled delivery date, subject to the Patheon Supply Commitment and
all commercially reasonable efforts of Patheon to meet these amended Firm
Purchase Orders.
     2.3 Shipping and Delivery of Finished Product. Patheon shall as agent for
Santarus, (i) arrange for shipping and insurance so that the Finished Product
will be delivered to the delivery address on the delivery date set forth in the
applicable Firm Purchase Order, at Santarus’ expense, and (ii) at Santarus’ risk
and expense, obtain any export license or other official authorization and, in
accordance with Santarus’ instructions, carry out all customs formalities
necessary to export the Finished Product. Santarus may select the freight
carrier used by Patheon to ship Finished Product and may monitor Patheon’s
shipping and freight practices as they pertain to this Agreement. Finished
Product shall be transported in accordance with the Specifications, cGMP and
Applicable Laws. Patheon shall notify Santarus in writing at the time of
shipment as to the quantity of Finished Product shipped, the identity of the
carrier and the anticipated delivery date. If any order is delayed and is not
likely to be delivered on time, Patheon shall immediately notify Santarus and
Santarus may direct Patheon to ship such order by expedited means of
transportation as designated by Santarus. To the extent that any such delay is
due to any action or failure to act of Patheon or otherwise due to matters
within Patheon’s control, Patheon shall bear the expense of any difference in
cost for the expedited means of transportation.
     2.4 Title and Risk of Loss. Patheon shall deliver the Finished Product to
the carrier selected by Santarus at Patheon’s shipping point unless otherwise
mutually agreed in writing. Such title as Patheon has in Finished Product and
risk of loss or of damage to Finished Product shall remain with Patheon until
Finished Product are loaded onto the carrier’s vehicle by Patheon for shipment
at Patheon’s shipping point at which time title and risk of loss or damage shall
transfer to Santarus. Except as expressly provided otherwise in this Agreement,
Santarus shall be responsible for all charges associated with shipping of
Finished Product.
     2.5 Documentation and Customs. Upon completion of manufacturing, packaging
and testing of Finished Product pursuant to each Firm Purchase Order, Patheon
shall deliver to Santarus by electronic means quality documentation for such
Finished Product manufactured pursuant to such Firm Purchase Order as specified
in the Quality Agreement, including without limitation, the Certificates of
Compliance in respect of such Firm Purchase Order and, if requested by Santarus,
completed batch production records (collectively, the “Pre-shipping
Documentation”). Patheon acknowledges and agrees that Santarus shall be
responsible, at all times, for the final release of the Finished Product and
accordingly, Patheon shall not ship any Finished Product until Santarus has
notified Patheon in writing that it has completed its final release. Concurrent
with the shipment of each Firm Purchase Order of Finished Product, Patheon shall
deliver to Santarus the customs documentation corresponding to such shipment and
such other documentation and information as may be necessary or desirable for
complying with import, export, and customs laws, regulations and like
requirements, as applicable. All Finished Product, including its packaging,
shall meet all applicable export and customs laws, regulations and like
requirements for Canada and, in respect of the United States, shall be in
accordance with the instructions of Santarus in respect of all applicable import
and customs laws, regulations and
 

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like requirements for the United States. Patheon and Santarus will cooperate and
provide such assistance to each other as may be reasonably necessary to permit
the import of the Bulk OME into Canada.
     2.6 Invoices. Patheon may proceed to invoice Santarus for any order on the
earlier of [* * *]
     2.7 Late Delivery/Shortages and Overages.
               2.7.1 If a shipment of Finished Product ordered by Santarus under
this Agreement has not been delivered at the shipping point within [* * *]
Business Days after the scheduled delivery date (any delivery that is more than
[* * *] Business Days after the scheduled delivery date stated on the
corresponding Firm Purchase Order is hereinafter referred to as a “Late
Shipment”), or if the shipment received by Santarus contains less than [* * *]
of the quantity specified in the corresponding Firm Purchase Order (a “Short
Shipment”), Santarus shall notify Patheon promptly upon such discovery and, in
any event, not later than [* * *] days after receipt of, or failure to receive,
such ordered Finished Product. Patheon shall use its best efforts to deliver the
quantity of Finished Product it had failed to ship in the case of a Late
Shipment or the quantity by which the shipment is short of the quantity ordered
in the case of a Short Shipment, as soon as possible after notification of such
shortage, by expedited means of transportation at Patheon’s expense in respect
of any difference in cost for such expedited means of transportation relative to
regular delivery costs. If any shipment contains [* * *] more than the quantity
ordered, Santarus may elect either to: (a) return to Patheon, at Patheon’s
expense, the excess of the quantity ordered, or (b) accept any excess quantity
ordered and reserve the right to deduct such excess from future orders. Santarus
shall have no obligation to receive any quantity of Finished Product in excess
of that ordered.
               2.7.2 In the event that there is a Late Shipment of Powder
Finished Product solely as a result of Patheon [* * *], the following additional
provisions shall apply: (a) Santarus shall have the right, in its sole
discretion and effective upon written notice, to require Patheon to [* * *], and
(b) a financial penalty shall be imposed against Patheon (the “Financial
Penalty”). The Financial Penalty shall be calculated as follows: [* * *]
Notwithstanding provision (b) above, the imposition of a Financial Penalty
pursuant to provision (b) shall not apply upon a Late Shipment if:
(i)        [* * *]
(ii)       [* * *]
(iii)      [* * *]
(iv)      [* * *]
 

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(v)       [* * *]
(vi)      [* * *]
     2.8 Key Performance Indicators.
          2.8.1 For each [* * *] period during the Term, Patheon shall meet or
exceed the written key performance indicators established in good faith by
Patheon and Santarus for such [* * *] period (collectively, as established with
respect to the applicable [* * *] period, the “KPIs”). The KPIs shall be
mutually agreed to from time to time by the Parties and the Parties shall review
such KPIs at each [* * *] review meeting contemplated by Section 2.12 with the
intention of amending, if necessary, the KPIs in respect of the forthcoming [* *
*] period. If no such amendments are necessary or if amendments are not agreed,
the KPIs in respect of such forthcoming [* * *] period shall be at least as
beneficial to Santarus as the KPIs for the then current [* * *] period.
          2.8.2 In the event that Patheon fails to meet one or more of the KPIs
at any time during the term of this Agreement, then Patheon and Santarus shall
work diligently to address such failure including, without limitation, the
following:
                  (i) Patheon’s business director and the Director of Contract
Manufacturing of Santarus shall discuss within [* * *] days of the determination
of the sustained failure in order to establish a procedure to address the
problem (the “Remediation Plan”). If such discussion does not occur within such
[* * *] days or if there is no agreement as to the Remediation Plan (a “Stage 1
Failure”), then clause (ii) shall apply;
                  (ii) Patheon’s Site Director and Santarus’ Senior Vice
President, Product Development and Manufacturing will discuss within [* * *]
days of the Stage 1 Failure in order to establish a Remediation Plan. If such
discussion does not occur within such [* * *] days or if there is no agreement
as to the Remediation Plan (a “Stage 2 Failure”), then clause (iii) shall apply;
and
                  (iii) Patheon’s President and Santarus’ President shall
discuss within [* * *] days of the Stage 2 Failure in order to establish a
Remediation Plan.
If the Remediation Plan is either not mutually agreed upon or is not, in the
reasonable judgment of Santarus, implemented satisfactorily, then Patheon shall
be deemed to be in material breach of its obligations hereunder. The Parties may
mutually agree to extend any of the time periods referenced in this Section 2.8.
          2.8.3 Notwithstanding anything to the contrary in this Section 2.8,
Patheon shall not be responsible for the failure to achieve the KPIs to the
extent caused by any of the following events:
 

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  (i)   Santarus’ failure to have delivered to Patheon adequate supplies of Bulk
OME;     (ii)   Santarus’ failure to deliver Forecasts in accordance with
Section 2.2.2;     (iii)   Santarus’ failure to timely deliver amended
Specifications in the event that the Specifications are amended pursuant to
Section 3.6.1 or 3.6.2;     (iv)   Santarus’ failure to deliver the Firm
Purchase Orders in accordance with Sections 2.2.3 and 2.2.5; or     (v)  
Santarus’ failure to timely complete the final release of the Finished Product
in the absence of any production or quality issues.

     2.9 Storage of Finished Product. Until Finished Product is shipped, Patheon
shall store all Finished Product identifiably distinct from any other raw
material and finished or filled product stocks and shall comply with all storage
requirements set forth in the Specifications. Patheon shall assume
responsibility for any loss or damage to such Finished Product while stored by
Patheon.
     2.10 Multi-Country Packaging Requirements. If and when Santarus decides
that it wishes to have Patheon manufacture the Finished Product for countries in
addition to the Territory, then Santarus shall inform Patheon of the packaging
requirements for each new country and Patheon shall prepare a quotation for
consideration by Santarus of the additional Raw Material costs, if any, and the
Price for the Finished Product destined for such new country. The agreed
additional packaging requirements and related packaging costs and Price shall be
set out in a written amendment to this Agreement or otherwise recorded in a
writing signed by the Parties.
     2.11 OME Reconciliation and Yield.
          2.11.1 Inventory Reports. Patheon shall promptly (and in any event no
later than [* * *] Business Days after Santarus’ request) provide an inventory
status report to Santarus from time to time as reasonably requested by Santarus.
In addition, Patheon shall monitor on a [* * *] basis the inventory of Bulk OME
held by Patheon and Patheon shall provide Santarus with a [* * *] inventory
report (within [* * *] Business Days following the last day of the applicable [*
* *]) of the Bulk OME held by Patheon, which shall contain the following
information for such [* * *]:
Quantity Received: The total quantity of Bulk OME that complies with the
Specifications and is received at the Facility during the applicable period.
Quantity Dispensed: The total quantity of Bulk OME dispensed is calculated by
adding the Quantity Received to the inventory of Bulk OME that complies with the
Specifications and is held at the beginning of the applicable period, less the
inventory of Bulk OME that complies with the Specifications at the end of the
applicable period.
 

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Quantity Converted: The total quantity of Bulk OME contained within Finished
Product batches released and shipped during the applicable period.
          2.11.2 [* * *] Physical Inventory. In addition, Patheon shall
reconcile the physical inventory of Bulk OME and Finished Product held by
Patheon on a [* * *] basis to the [* * *] inventory status reports and shall
provide a report to Santarus concerning such reconciliation within [* * *]
Business Days following the end of the applicable calendar [* * *].
          2.11.3 Annual Average Yield. In addition, within [* * *] Business Days
of the end of each calendar year, Patheon shall calculate the Annual Average
Yield (AAY) for the Finished Product released and shipped during the calendar
year and compare it to the target yield specified in Exhibit B for each of the
Finished Products (the “Target Yield”). The AAY shall be calculated by dividing
the Quantity Converted by the Quantity Dispensed during the calendar year.
Patheon shall strive to maintain AAY levels for each Finished Product above the
applicable Target Yield. If the AAY falls more than [* * *] percentage points
([* * *]%) below the respective Target Yield in any calendar year, then Patheon
shall reimburse Santarus for the cost of the shortfall within [* * *] days of
the end of each calendar year. The following calculation shall be used to
determine reimbursement value, provided that Patheon’s liability for Bulk OME
calculated in accordance with this Section 2.11.3 in a year shall not exceed, in
the aggregate, the Annual OME Cap:
[* * *]
It shall not constitute a material breach of this Agreement by Patheon if the
AAY is less than the Target Yield.
          2.11.4 Other OME Losses.
          [* * *]
     2.12 Cooperation and [* * *] Review. Each Party shall forthwith upon
execution of this Agreement designate those of its employees to be part of the
team responsible for managing the relationship between the parties (the
“Relationship Team”). The Relationship Team from each Party shall meet in person
or by telephone or video conference not less than [* * *] to review the current
status of the business relationship (including performance against the KPIs as
well as any additional manufacturing performance indicators established by the
Parties) and address any issues that have arisen.
ARTICLE 3
STANDARDS OF MANUFACTURE
     3.1 Finished Product. Patheon hereby covenants that all Finished Product
manufactured and supplied to Santarus under this Agreement: (a) shall have been
manufactured, packaged, tested and stored in compliance with the Specifications,
cGMP, Applicable Laws and
 

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the terms and conditions of this Agreement and the Quality Agreement; (b) shall
not be adulterated, or misbranded within the meaning of the FFDCA or other
Applicable Laws as of the time that the Finished Product is transferred to the
carrier at Patheon’s shipping point; and (c) will have been shipped to Santarus
not later than [* * *] days after the date of its manufacture (unless any delay
in shipment beyond such [* * *] day period is due solely to a delay by Santarus
in conducting its review for the final release of the Finished Product). The
foregoing obligations are referred to in this Agreement as the “Patheon
Manufacturing Responsibilities.”
     3.2 Manufacturing Facility. Patheon will manufacture Finished Product at
the Facility. Patheon shall not manufacture any Finished Product in any other
facility without first obtaining the appropriate Regulatory Approval and
Santarus’ prior written consent, such consent not to be unreasonably withheld.
     3.3 Testing and Release by Patheon. Patheon shall conduct chemical identity
testing for all Bulk OME received at the Facility within [* * *] days of such
receipt. Further, Patheon shall conduct full release testing of all Bulk OME
received at the Facility not later than [* * *] months after the date of receipt
in accordance with the procedures and using the analytical testing methodologies
set forth in the Specifications and the Quality Agreement. Patheon shall
promptly (and in any event within [* * *] days following completion of the
applicable testing) notify Santarus in writing of any failure of the Bulk OME to
conform to the Specifications for same, and any other problem it may identify
with the Bulk OME detected during the inspection and testing process. Prior to
shipping (or temporarily storing, if requested by Santarus) any order, Patheon
shall test each batch of Finished Product manufactured under this Agreement, and
Raw Materials used for such batch, for conformity with the Specifications
(“Patheon Release Testing”). Patheon shall conduct all such Patheon Release
Testing in accordance with the procedures and using the analytical testing
methodologies set forth in the Specifications and the Quality Agreement. Patheon
shall retain sufficient quantities of all shipped Finished Product, Bulk OME and
Raw Materials to perform at least full duplicate quality control testing.
Retained repository samples of all shipped Finished Product, Bulk OME and Raw
Materials shall be maintained in a suitable storage facility until one (1) year
after expiry of the Finished Product lot in which the material was used or such
longer period as may be required by Applicable Laws. If materials are used in
several lots of Finished Product, retained repository samples shall be
maintained as set forth above until one (1) year after expiry of the last
Finished Product lot in which such material was incorporated, or such longer
period as may be required by Applicable Laws. All such samples shall be
available for inspection and testing by Santarus at reasonable intervals upon
reasonable notice. Santarus shall be responsible, at all times, for the final
release of the Finished Product, and Patheon shall not ship any Finished Product
until Santarus has completed its final release. Patheon may arrange for
subcontractors to perform specific testing services for Raw Materials arising
under this Agreement without the consent of Santarus; provided that (a) Patheon
shall notify Santarus in writing prior to utilizing any subcontractor (which
original notice shall suffice for future similar uses of the same
subcontractor); (b) all such subcontractors shall be duly qualified by Patheon
under cGMP and Applicable Laws to perform such testing; (c) Patheon shall at all
times remain fully responsible to Santarus for the performance of all
obligations hereunder
 

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related to such subcontracted testing services; and (d) no subcontractors shall
be utilized in connection with release testing of the Finished Product.
     3.4 Stability Studies. Patheon shall conduct stability studies on each of
the Finished Products according to the Specifications therefor, as required by
the FDA or Foreign Regulatory Authorities as advised by Santarus or as requested
by Santarus, and in any case on at least one batch of Finished Product from the
Facility at least once per calendar year following Commencement of Commercial
Manufacturing or more frequently as may be specified in the Quality Agreement.
Patheon shall provide to Santarus a report of all results and data obtained from
such stability studies annually or more frequently as may be specified in the
Quality Agreement. The Parties agree that they will discuss on at least an
annual basis a quote and pricing for conducting such stability studies.
     3.5 Acceptance Procedures.
          3.5.1 Finished Product Claims. Santarus has the right to reject any
portion of any shipment of Finished Product that deviates from the Patheon
Manufacturing Responsibilities, without invalidating any remainder of such
shipment. Santarus or its agent shall visually inspect the Finished Product
manufactured by Patheon upon receipt thereof and shall give Patheon written
notice (a “Deficiency Notice”) of all claims for Finished Product that deviate
from the Patheon Manufacturing Responsibilities within [* * *] days after
Santarus’ receipt thereof (or, in the case of any defects not reasonably
susceptible to discovery upon receipt by visual inspection of the Finished
Product, including those requiring laboratory analysis, within [* * *] days
after discovery thereof by Santarus, but in no event after the expiration date
of the Finished Product). Should Santarus fail to provide Patheon with the
Deficiency Notice within the applicable [* * *]–day period, then the delivery
shall be deemed to have been accepted by Santarus on the [* * *] day after
delivery or discovery, as applicable. Patheon shall have no liability under
Section 3.5.3 for any deviations for which it has not received notice within the
applicable [* * *]-day period.
          3.5.2 Determination of Deficiency. Upon receipt of a Deficiency
Notice, Patheon shall have [* * *] days to advise Santarus by notice in writing
that it disagrees with the contents of such Deficiency Notice. If Santarus and
Patheon fail to agree within [* * *] days after Santarus’ receipt of Patheon’s
notice as to whether any Finished Product identified in the Deficiency Notice
deviates from the Patheon Manufacturing Responsibilities, then the Parties shall
mutually select an independent laboratory to evaluate if the Finished Product
deviates from the Patheon Manufacturing Responsibilities. Such evaluation shall
be binding on the Parties, and if such evaluation certifies that any Finished
Product deviates from the Patheon Manufacturing Responsibilities, Santarus may
reject such Finished Product in the manner contemplated in this Section 3.5. If
such evaluation does not so certify in respect of any such Finished Product,
then Santarus shall be deemed to have accepted delivery of such Finished Product
on the [* * *] day after delivery (or, in the case of any defects not reasonably
susceptible to discovery upon receipt by visual inspection of the Finished
Product, including those requiring laboratory analysis, on the [* * *] day after
discovery thereof by Santarus, but in no event after the expiration date of the
 

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Finished Product). The expenses of such testing shall be borne by Patheon if the
non-conformity with the Patheon Manufacturing Responsibilities is confirmed, and
otherwise by Santarus. The Parties mutually agree that they shall resolve all
determinations of deficiencies as quickly as possible, and in any event, within
[* * *] days of a Deficiency Notice.
          3.5.3 Patheon Responsibility. [* * *]
     3.6 Specification Amendments.
          3.6.1 Cooperation. Subject to Section 3.6.4, the Parties shall
cooperate with each other to amend or supplement the Specifications to the
extent necessary to comply with changes in cGMP, Applicable Laws or other
requirements of Government Authorities. If an amendment to the Specifications
requires FDA approval and/or the approval of a Foreign Regulatory Authority,
Patheon shall not implement such change unless and until the necessary approval
has been obtained by Santarus in writing. In no event shall Patheon implement
any other modification or addition to the Specifications, including without
limitation, changes in raw materials, equipment or methods of production or
testing for the Finished Product, without the prior written consent of Santarus,
which consent may be withheld for any or no reason.
          3.6.2 Santarus’ Request for Change. Subject to Section 3.6.4, Santarus
shall have the right to amend the Specifications from time to time.
          3.6.3 Patheon’s Request for Change. Subject to Section 3.6.4, if
Patheon wishes to make any change to the Specifications, Patheon shall notify
Santarus, and such notice shall describe the proposed change and the impact of
such change on the manufacturing process, including details of any changes in
manufacturing costs. Santarus may accept or reject, in its sole and absolute
discretion, any such change proposed by Patheon.
          3.6.4 Price Adjustments. Amendments to the Specifications or the
Quality Agreement requested by Santarus will only be implemented following a
technical and cost review in good faith by Patheon and are subject to Santarus
and Patheon reaching agreement as to revisions, if any, to the Price. If
Santarus accepts a proposed Price change, the proposed change in the
Specifications shall be implemented, and the Price change shall become effective
only with respect to those orders of Finished Product that are manufactured in
accordance with the revised Specifications. In addition, Santarus agrees to
reimburse Patheon for the cost of Raw Materials in accordance with, and under
the circumstances described in, Section 7.3.
     3.7 Records. Patheon shall maintain all records necessary to comply with
all cGMP and Applicable Laws relating to the manufacture, packaging, testing,
storage and shipment of Finished Product. All such records shall be maintained
for such period as may be required by Applicable Laws; provided, however, that
all records relating to the manufacture, stability and quality control of each
batch of Finished Product shall be retained until the Parties agree in writing
to dispose of such records.
 

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     3.8 Audit. Upon reasonable prior notice and at reasonable intervals,
Patheon shall allow Santarus and its representatives to inspect Patheon’s books
and records relating to the manufacture of the Finished Product and permit
Santarus to access Patheon’s facilities used to manufacture the Finished Product
for the purposes of (a) making quality assurance audits of the facilities and of
the procedures and processes used by Patheon in manufacturing, packaging,
testing, storing and shipping Finished Product, and (b) confirming Patheon’s
compliance with this Agreement, provided that a Patheon representative is
present during any such inspection. Santarus, or its representative(s), shall
conduct such audit during normal business hours at a time on which the Parties
have mutually agreed, and in such a manner that does not unreasonably interfere
with Patheon’s normal business activities.
ARTICLE 4
REGULATORY MATTERS AND QUALITY CONTROL
     4.1 Compliance by Patheon. Patheon shall remain in compliance with all
Applicable Laws, including cGMP, at all times during the Term and, without
limiting the generality of the foregoing, maintain a quality control program
consistent with cGMP as required by the FDA, and to the extent the parties have
reached agreement pursuant to Section 2.10 with respect to countries in addition
to the Territory, the applicable Foreign Regulatory Authorities.
     4.2 Santarus’ Regulatory Responsibility. Santarus shall be responsible for
obtaining and maintaining all regulatory filings and approvals (excluding the
overall licensure and permitting of the Facility) for the manufacture and
marketing of the Finished Product, including without limitation all INDA’s and
NDA’s for the Finished Product. Santarus shall control and own all such filings
and approvals. Patheon will supply to Santarus from time to time, all such data
relating to the Finished Product, including release test results, complaint test
results, all investigations (in manufacturing, testing and storage), and the
like, that Santarus reasonably requires in order to complete any such filing or
approval, including any annual product review report that Santarus is required
to file with the FDA and as provided in the Quality Agreement. At Santarus’
request and subject to an additional fee to be agreed by the Parties, Patheon
may prepare annual product review reports on behalf of Santarus and in
accordance with Santarus’ instructions.
     4.3 Manufacturing Process. If any process event occurs during the
manufacturing of any Finished Product, which event is likely materially to
affect the safety, efficacy or regulatory status of the Finished Product, then
Patheon shall promptly notify Santarus. Further, Patheon shall fully and
appropriately investigate and report to Santarus on all complaints and notices
of quality issues concerning the Finished Products from the FDA, any Foreign
Regulatory Authority or Government Authority of which Santarus shall have given
Patheon notice. Santarus and Patheon shall consult with each other as to the
disposition of all affected batches of such Finished Product. Patheon shall
report to Santarus in writing any other atypical process event that is unlikely
to materially affect the safety, efficacy or regulatory status of the Finished
Product within a reasonable time after occurrence. No Bulk OME or Finished
Product may be reprocessed without the prior written consent of Santarus.
     4.4 Communications. Each party may communicate with the FDA or any Foreign
Regulatory Authority or Government Authority regarding the Finished Products if
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communication is necessary to comply with the terms of this Agreement or the
requirements of any Applicable Law, governmental order or regulation; provided,
however, in the event such requirement applies to Patheon, Patheon shall notify
Santarus in writing of the requirement and pending communication and, unless
there is a legal prohibition against doing so, Patheon shall permit Santarus to
accompany Patheon and take part in any communications with the FDA or any
Foreign Regulatory Authority or Government Authority, and to receive copies of
all such communications to and from the FDA or any Foreign Regulatory Authority
or Government Authority.
     4.5 Government Inspection.
          4.5.1 Patheon shall make its internal practices, books and records
relating to its manufacture of the Finished Product available and allow access
to all facilities used for manufacturing the Finished Product to the FDA, any
Foreign Regulatory Authority and any other Government Authority having
jurisdiction over the manufacture of the Finished Product for the purposes of
determining Patheon’s compliance with cGMP and Applicable Laws.
          4.5.2 Patheon agrees to advise Santarus by telephone and facsimile
immediately of any proposed or announced visit or inspection, and as soon as
possible but in any case within [* * *] hours after any unannounced visit or
inspection, by the FDA, any Foreign Regulatory Authority or any other Government
Authority relating to the Finished Product. Patheon shall provide Santarus with
a reasonable description in writing of each such visit or inspection promptly
(but in no event later than [* * *] calendar days) thereafter, and with copies
of any letters, reports or other documents (including form 483’s) issued by any
such authorities that relate to the Finished Product. Santarus may review
Patheon’s responses to any such reports and communications prior to Patheon
submitting any response to the FDA, or any Government Authority, and Santarus’
comments and suggestions shall, in Patheon’s reasonable discretion, be
incorporated into such response. In no event shall Patheon commit to any changes
to the manufacturing process, equipment, tests and/or specifications concerning
the Finished Product, without Santarus’ prior approval.
          4.5.3 If the FDA or any other Foreign Regulatory Authority or any
other Government Authority conducts an inspection of the Facility in
circumstances that are not related to the manufacturing of the Finished Product
(as contemplated by subsection 4.5.2 above) and issues a 483 observation,
inspection report or other formal or informal document in respect of such
inspection which questions Patheon’s compliance with critical or major cGMP
standards relating to operations at the Facility which is otherwise could have
an adverse impact on the Finished Product then Patheon shall notify Santarus
promptly (but in no event later than [* * *] calendar days) after Patheon
receives a written copy of such observation, report or document.
          4.5.4 Patheon shall keep Santarus informed of (i) the remediation plan
Patheon adopts to alleviate any concerns raised by the FDA or any other Foreign
Regulatory Authority contemplated by Sections 4.5.2 or 4.5.3, (ii) progress in
implementing the remediation plan and
 

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(iii) the formal responses of the FDA or applicable Foreign Regulatory Authority
to such remediation plan and its implementation.
     4.6 Environmental and Other Laws and Regulations. In carrying out its
obligations under this Agreement, Patheon shall comply with all applicable
environmental and health and safety laws (current or as amended or added), and
shall be solely responsible for determining how to comply with same in carrying
out these obligations. Notwithstanding the foregoing, nothing provided to
Patheon by Santarus, by way of materials, specifications, processing information
or otherwise, is meant to diminish Patheon’s responsibility for such compliance.
Patheon shall obtain and maintain all necessary licenses, permits and
governmental approvals (except for product-related Regulatory Approvals such as
NDA’s) required to perform its manufacturing and supply services hereunder,
including licensure and permitting of its manufacturing facilities by the FDA
and Foreign Regulatory Authorities. Patheon shall promptly notify Santarus of
any circumstances, including the receipt of any notice, warning, citation,
finding, report or service of process or the occurrence of any release, spill,
upset, or discharge of hazardous substances (as may be defined under Applicable
Laws) relating to Patheon’s compliance with this Section 4.6 and which relates
to the manufacture of Finished Product. Santarus reserves the right to conduct
an environmental inspection of the Facility, at reasonable intervals during
normal business hours and with reasonable advance notice, for the purpose of
determining compliance with this Section 4.6. Such inspection shall not relieve
Patheon of its obligation to comply with all applicable environmental and health
and safety laws and does not constitute a waiver of any right otherwise
available to Santarus.
     4.7 End-User Inquiries and Complaints. Subject to Patheon’s obligation to
report certain information on a more expedited basis in respect of Adverse
Experiences as described in Section 5.1 below, Patheon shall notify and refer to
Santarus, within three (3) Business Days after receipt, all communications from
end-users of the Finished Product, including without limitation, inquiries
regarding the Finished Product and its uses, and complaints, comments and
suggestions regarding the Finished Product and its effects on users. Santarus
shall have the sole right to respond to all such communications and Patheon
shall provide to Santarus reasonable cooperation and assistance in effecting
such responses.
     4.8 Quality Agreement. [* * *]
ARTICLE 5
ADVERSE EVENTS; RECALL
     5.1 Adverse Experience Reporting. Patheon shall notify Santarus promptly
and not later than [* * *] after it becomes aware of (a) any information
concerning any potentially serious or unexpected side effect, injury, toxicity
or sensitivity reaction or any unexpected incidence or other adverse experience
(an “Adverse Experience”) and the severity thereof associated with the use of
the Finished Product, whether or not determined to be attributable to the
Finished Product; or (b) any information regarding any pending or threatened
action which may affect the safety or efficacy claims of the Finished Product or
the continued marketing of the Finished Product in any
 

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nation or jurisdiction. Further and without limiting the foregoing, Patheon
shall notify Santarus by telephone and facsimile within [* * *] after Patheon
first becomes aware of any serious Adverse Experience that gives cause for
concern or is unexpected or that is fatal, life-threatening (as it occurred),
permanently disabling, requires (or prolongs) inpatient hospitalization,
represents a significant hazard, or is a cancer or a congenital anomaly or
represents an overdose, or any other circumstance that might necessitate a
recall, expedited notification of FDA or any other relevant Government
Authorities or a significant change in the label of the Finished Product,
including, without limitation, information concerning any incident that causes
Finished Product shipped to Santarus or its labeling to be mistaken for or,
applied to, another product, information concerning any bacteriological
contamination, or any significant chemical, physical, or other change or
deterioration in the Finished Product shipped to Santarus, or any failure of one
or more batches of Finished Product shipped to Santarus to meet Specifications
or to conform with Applicable Laws, and any deviation from the specified
environmental conditions for shipping or storage of the Finished Product. To the
extent that Santarus becomes aware of any Adverse Experience that appears to be
related to the manufacture of Finished Product, Santarus shall notify Patheon
promptly and not later than [* * *] after Santarus becomes aware of such Adverse
Experience. In connection with any such Adverse Experience, each Party shall
make such reports as are necessary to comply with Applicable Laws, at its sole
expense. Further, in the event a Party (or its Affiliates) receives a
communication or directive from a Government Authority commencing or threatening
seizure of Finished Product, or other removal from the market of Finished
Product, such Party shall transmit such information to the other Party within [*
* *] of receipt.
     5.2 Notification and Recall. The handling of recalls and withdrawals of
Finished Product shall be within the sole discretion of Santarus, unless
otherwise required by Applicable Laws. If any Government Authority issues or
requests a recall or takes similar action in connection with Finished Product,
or if Santarus determines that an event, incident or circumstance has occurred
which may reasonably result in the need for a recall or market withdrawal
(collectively, “Recalls”), Santarus shall, within [* * *], advise Patheon
thereof by telephone or facsimile, after which the Parties shall promptly
discuss and work together to effect an appropriate course of action.
Notification to FDA (or such other Foreign Regulatory Authority or Government
Authority) and conducting such Recall shall be the responsibility of Santarus.
Patheon shall (a) cooperate fully with Santarus in the event of any such Recall,
withdrawal and/or related disposition of any affected Finished Product in
Patheon’s possession and (b) provide such assistance in connection therewith as
Santarus may reasonably request.
     5.3 Recall Expense. [* * *] Nothing in this Section 5.3 shall be construed
to limit the rights and remedies available to Santarus at law or in equity.
ARTICLE 6
COMPENSATION; PAYMENT
     6.1 Price of Finished Product. The Price for each Finished Product includes
all Raw Materials, manufacturing, packaging, testing and temporary storing costs
associated with manufacturing and supplying the Finished Product, and includes
the costs of such quality control
 

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measures as required by the Specifications and the Quality Agreement. The cost
of the Bulk OME shall form no part of the Price. The costs of shipping,
handling, insurance and freight will be borne by Santarus and form no part of
the Price. [* * *]
     6.2 Changes in Price of Finished Product. Any changes to the Price for each
Finished Product shall be determined in accordance with the following:

  (a)   Annual Review. On or about [* * *] of each year Patheon and Santarus
will meet (in person or by telephone or video conference) to consider whether
any adjustment to the Price in respect of the Finished Product upward or
downward is appropriate to account for increases or decreases in the cost of
manufacture and/or the cost of Raw Materials. In considering whether a change in
the Price is justified, the Parties may consider all published economic data,
including without limitation, price indices that are demonstrated to have a
rational connection to the cost of Raw Materials or Patheon’s cost of
manufacturing the Finished Product.     (b)   Extraordinary Changes in Raw
Material Costs. If at any time market conditions result in Patheon’s cost of Raw
Materials being materially greater than normal forecasted increases, then
Patheon shall be entitled to request an adjustment to the Price to compensate it
for such increased Raw Material costs. If at any time market conditions result
in Patheon’s cost of Raw Materials being materially lesser than anticipated,
then Santarus shall be entitled to request an adjustment to the Price to
compensate it for such reduced Raw Material costs. For the purposes of this
Section 6.2(b), changes materially greater than normal forecasted increases or
materially lesser than anticipated shall be considered to have occurred if:
(i) the cost of a Raw Material increases or decreases, as applicable, by [* * *]
or more of the cost for that Raw Material upon which the Price then in effect
was based; or (ii) the aggregate cost for all Raw Materials required to
manufacture the Finished Product increases or decreases, as applicable, by [* *
*] or more of the total Raw Material costs for the Finished Product upon which
the Price then in effect was based. To the extent that the Price has been
previously adjusted pursuant to this Section 6.2(b) to reflect an increase or
decrease in the cost of one or more Raw Materials, the adjustments provided for
in (i) and (ii) above shall operate based on the costs attributed to such Raw
Material (or Raw Materials) at the time the last such adjustments were made.

     In connection with a Price review pursuant to clause (a) of this
Section 6.2, Patheon shall deliver to Santarus reasonably detailed documentation
concerning increases or decreases in the cost of Raw Materials or Patheon’s cost
of manufacturing to facilitate the discussion. In connection with all fee
adjustment requests pursuant to clause (b) of this Section 6.2, Patheon shall
deliver to Santarus a proposed Commercial Pricing Proposal for the respective
Finished Product and such budgetary pricing information or other documentation
reasonably sufficient to demonstrate that a Price adjustment is justified,
provided that Patheon shall have no obligation to provide any supporting
documents to the extent such documents are subject to obligations of
 

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confidentiality between Patheon and its suppliers. Each of Santarus and Patheon
shall forthwith use all reasonable efforts to agree on a revised Price in
respect of each affected Finished Product. In the event the Parties are unable
to reach agreement concerning adjustments to the Price, such dispute shall be
resolved in accordance with Article 13. Until such time as dispute is resolved
the price per Finished Product shall be the most current mutually agreed upon
Price adjusted by an amount equal to the actual increase in that portion of the
Price that relates to Patheon’s labor costs as reasonably demonstrated by
Patheon; provided, however, that following resolution of any dispute regarding
Price, the Price agreed upon as part of the dispute resolution shall be applied
retroactively for any applicable periods.
[* * *]
[* * *]
     6.3 Payment Terms. Santarus shall pay Patheon for the Finished Product
shipped to Santarus within thirty (30) days of the date of the invoices issued
pursuant to Section 2.6. Patheon shall send all invoices by email or facsimile
to the email address or facsimile number of the accounts payable personnel
designated by Santarus from time to time. All invoices shall be dated as of the
date of the email or facsimile as noted in the foregoing sentence, and not any
earlier date. Patheon’s invoice shall reference the Firm Purchase Order number
and be sent to the “Bill to” address of Santarus specified on the Firm Purchase
Order, and Patheon’s packing list must reference the Firm Purchase Order number
and be sent to the applicable “Ship to” address on the Firm Purchase Order.
Santarus may withhold a portion of any invoice that it disputes in good faith
pending resolution of such dispute.
     6.4 Form of Payment. Each Party shall make all payments due the other Party
under this Agreement in U.S. Dollars by check made payable to the order of the
other Party or by wire transfer of immediately available funds to such account
notified by the receiving Party from time to time to the other Party in writing.
     6.5 Taxes. If any sales or value added taxes are payable under the laws of
the United States of America, Canada, or any other country, state, territory or
jurisdiction having taxing authority, such taxes shall be the responsibility of
Santarus. Santarus shall withhold from any payment to Patheon under this
Agreement any taxes required to be withheld by Santarus under the applicable
laws of the United States of America, Canada or any other country, state,
territory or jurisdiction. Upon request, Santarus shall provide Patheon with
authority for the withholding obligation, documentation of such withholding and
payment in a manner that is satisfactory for purposes of such taxing authority.
Any withholdings paid when due hereunder shall be for the account of Patheon.
     6.6 Disputed Invoices. In the event that Santarus disputes any amounts
under any invoice for Finished Product supplied by Patheon, such dispute shall
be resolved in accordance with Section 3.5 (with respect to non-conformance of
Finished Product) or otherwise under Article 13. Pending resolution of such
dispute, Santarus shall be obligated to pay any amounts
 

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under such invoice that are not in dispute. Upon resolution of any such dispute
in favor of Patheon, Santarus shall pay all remaining amounts owing under such
invoice within the later of ten (10) Business Days after such resolution or
thirty (30) days after the date of such invoice.
ARTICLE 7
RAW MATERIALS
     7.1 Purchase of Raw Materials. Except for the Bulk OME which will be
supplied to Patheon by Santarus, Patheon shall purchase all packaging components
(including labels, product inserts and other labeling for the Finished Product),
raw materials and other ingredients for the manufacture of the Finished Product
(collectively, “Raw Materials”).
     7.2 Storage of Bulk OME and Raw Materials. [* * *]
     7.3 Responsibility for Cost of Raw Materials.
          7.3.1 Patheon understands and acknowledges that Santarus has engaged
Patheon, in its capacity as a contract manufacturer, to be responsible for
purchasing and maintaining adequate and reasonable inventories of Raw Materials
to satisfy Firm Purchase Orders. Santarus understands and acknowledges that
Patheon will rely solely on Firm Purchase Orders submitted pursuant to Section
2.2.3 in ordering the Raw Materials required to meet such Firm Purchase Orders
and agrees that Patheon may make such other purchases of Raw Materials to meet
production requirements during such longer periods as may be agreed to in
writing from time to time by Santarus at the request of Patheon or Santarus. For
clarity, prior to making any purchases of Raw Materials based on Firm Purchase
Orders provided by Santarus pursuant to Section 2.2.3, Patheon shall reconcile
the forecasted Firm Purchase Order requirements against existing inventories of
Raw Materials. Santarus’ liability for the costs of Raw Materials ordered
pursuant to the terms of this Section shall [* * *] In the event that Patheon
desires to purchase Raw Materials in excess of the Firm Purchase Orders, the
Parties agree that they will negotiate in advance of such purchase how excess
quantities, if any, will be utilized and how the cost of such excess materials
will be borne by the Parties in the event the excess materials are not consumed.
          7.3.2 Subject to Patheon’s obligations set forth in Section 7.3.3,
Santarus shall reimburse Patheon for Raw Materials, including Patheon’s out of
pocket expenses actually incurred in connection therewith, to the extent that:
(a) the Raw Materials are no longer useable in the manufacturing process due to
(i) a change in the Specifications pursuant to Section 3.6, or (ii) a change in
label copy or artwork; (b) [* * *]
          7.3.3 Before requesting reimbursement from Santarus pursuant to
Section 7.3.2, Patheon shall first use its commercially reasonable efforts to
cover the cost of [* * *] Raw Materials by: (a) returning such Raw Materials to
the vendor, (b) utilizing such Raw Materials in manufacturing products for its
other customers to the extent possible, and (c) implementing other reasonable
measures to mitigate the loss [* * *]
 

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          7.3.4 In the event such Raw Materials are incorporated into Finished
Product subsequently purchased by Santarus or into third party products
manufactured by Patheon and subsequently purchased by a third party, Santarus
will receive credit for any costs of such Raw Materials previously paid to
Patheon by Santarus pursuant to Section 7.3.2 as follows: (a) at the time of
invoice if Raw Materials are incorporated into Finished Product or (b) within
thirty (30) days if Raw Materials are incorporated into third party products.
          7.3.5 In the event Raw Materials expire or become obsolete or are
otherwise no longer useable in the manufacturing process for the Finished
Product because (a) Patheon failed to manufacture and supply the quantities
ordered by Santarus pursuant to a Firm Purchase Order, (b) quantities of such
Raw Materials are in excess of the limits of Santarus’ liability set forth in
Section 7.3.2, or (c) Patheon failed to store Raw Materials as required by the
applicable Specifications or under Section 7.2, then Patheon shall bear all
responsibility for the cost of such Raw Materials.
     7.4 Disposal of Raw Materials. Patheon may dispose of Raw Materials upon
Santarus prior written approval [* * *]
ARTICLE 8
CONFIDENTIALITY
     8.1 Confidentiality; Exceptions. The Parties agree that, for the Term and
for ten (10) years thereafter (other than for trade secrets, for which the
confidentiality obligations set forth herein shall last as long as trade secret
law shall allow), all non-public, proprietary or “confidential” disclosures,
know-how, data, and technical, financial and other information of any nature
whatsoever (collectively, “Confidential Information”), disclosed or submitted,
either orally or in writing (including, without limitation, by electronic means)
or through observation, by one Party (the “Disclosing Party”) to the other Party
(the “Receiving Party”) hereunder, including, without limitation, the terms of
this Agreement, shall be received and maintained by the Receiving Party in
strict confidence, shall not be used for any purpose other than the purposes
expressly contemplated by this Agreement, and shall not be disclosed to any
Third Party (including, without limitation, in connection with any publications,
presentations or other disclosures). Notwithstanding the foregoing, (a) Santarus
may disclose on a need-to-know basis the existence of this Agreement and the
terms hereof to any bona fide potential acquirers, corporate partners, investors
or financial advisors; (b) Patheon may disclose on a need-to-know basis the
existence of this Agreement and the terms hereof to its financial advisors; and
(c) Patheon may disclose the fact that Santarus is a client of Patheon but shall
not disclose any other information relating to any product for which Patheon
provides services to Santarus. The Receiving Party will promptly notify the
Disclosing Party upon discovery of any unauthorized use or disclosure of the
Disclosing Party’s Confidential Information. Confidential Information belongs to
and shall remain the property of the Disclosing Party.
     8.2 Exceptions. The provisions of this Article 8 shall not apply to any
information of the Disclosing Party which can be shown by competent evidence by
the Receiving Party:
 

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          8.2.1 To have been known to or in the possession of the Receiving
Party prior to the date of its actual receipt from the Disclosing Party;
          8.2.2 To be or to have become readily available to the public other
than through any act or omission of any Party in breach of any confidentiality
obligations owed to the Disclosing Party;
          8.2.3 To have been disclosed to the Receiving Party, other than under
an obligation of confidentiality, by a Third Party which had no obligation to
the Disclosing Party not to disclose such information to others; or
          8.2.4 To have been subsequently independently developed by the
Receiving Party without use of or reference or access to the Disclosing Party’s
Confidential Information.
     8.3 Authorized Disclosure. The Receiving Party may disclose the Disclosing
Party’s Confidential Information hereunder solely to the extent (a) approved by
the Disclosing Party; or (b) the Receiving Party is legally required to disclose
such Confidential Information, provided, however, that prior to any such
required disclosure, the Receiving Party will, except where impracticable, give
reasonable advance notice to the Disclosing Party of such disclosure (so that
the Disclosing Party may seek a protective order and or other appropriate remedy
or waive compliance with the confidentiality provisions of this Article) and
will use its reasonable efforts to secure confidential treatment of such
Confidential Information required to be disclosed.
     8.4 Return of Confidential Information. The Receiving Party shall keep the
Disclosing Party’s Confidential Information in appropriately secure locations.
Upon the expiration or termination of this Agreement or at any time upon the
Disclosing Party’s request, the Receiving Party shall destroy or return to the
Disclosing Party, at the Disclosing Party’s written request, all Confidential
Information belonging to the Disclosing Party possessed by the Receiving Party,
or its officers, directors, employees, agents and consultants; provided however
that a Receiving Party may retain one (1) copy of the Disclosing Party’s
Confidential Information in an appropriately secure location, which by
Applicable Laws it must retain, for so long as such Applicable Laws require such
retention but thereafter shall dispose of such retained Confidential Information
in accordance with Applicable Laws or this Section 8.4.
     8.5 Equitable Relief. The Receiving Party agrees that, due to the unique
nature of the Confidential Information, the unauthorized disclosure or use of
the Confidential Information of the Disclosing Party may cause irreparable harm
and significant injury to the Disclosing Party, the extent of which may be
difficult to ascertain and for which there may be no adequate remedy at law.
Accordingly, the Receiving Party agrees that the Disclosing Party, in addition
to any other available remedies, shall have the right to seek an immediate
injunction and other equitable relief enjoining any breach or threatened breach
of this Agreement. The Receiving Party shall notify the Disclosing Party in
writing immediately upon the Receiving Party’s becoming aware of any such breach
or threatened breach.

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ARTICLE 9
INTELLECTUAL PROPERTY MATTERS
     9.1 Ownership of Intellectual Property.
          Patheon agrees that Santarus shall own all right, title and interest
in and to all Inventions, and any intellectual property rights (including patent
rights and trade secret rights) therein, covering: (a) one or more Finished
Products or uses thereof; or (b) any composition of matter, method of
manufacture or use covered by the Product Patents, regardless of whether such
Invention was conceived, reduced to practice or created solely by employees or
agents of Patheon or its Affiliates or jointly by the employees or agents of
Santarus or its Affiliates with the employees or agents of Patheon or its
Affiliates (collectively, the “Product Inventions”). As to all Inventions other
than Product Inventions, including without limitation, those Inventions relating
to manufacturing process innovations that are generally applicable to the
manufacture of drug compounds and not solely to the manufacture of the Finished
Product (collectively, the “Other Inventions”), the parties agree that the
following shall apply:
          (i) All Other Inventions, which are conceived, reduced to practice, or
created solely by employees or agents of Patheon or its Affiliates in the course
of performing the services under this Agreement (including any pre-existing
technology of Patheon which Patheon so employs), shall be owned by Patheon.
Patheon shall and hereby does grant to Santarus and its Affiliates a perpetual,
royalty-free, exclusive, worldwide, irrevocable license, to use and practice all
such Patheon-owned Other Inventions (which are used by Patheon hereunder to
supply Finished Product to Santarus) to manufacture and have manufactured the
Finished Product and to use, import, offer to sell, and sell the same, with full
right to sublicense to any Third Party in connection with the manufacture, sale
or distribution of the Finished Product.
          (ii) All Other Inventions which are conceived, reduced to practice, or
created by employees or agents of Santarus or its Affiliates (including any
pre-existing technology of Santarus which Santarus shares with Patheon
hereunder), shall be owned by Santarus. Santarus shall and hereby does grant to
Patheon and its Affiliates a royalty-free, non-exclusive license during the
Term, without the right to sublicense, to use and practice all such
Santarus-owned Other Inventions solely to manufacture the Finished Product
hereunder.
          (iii) All Other Inventions which are conceived, reduced to practice,
or created jointly by: (i) employees or agents of Santarus or its Affiliates;
and by (ii) employees or agents of Patheon or its Affiliates, pursuant to this
Agreement, shall be owned by Santarus, unless the parties have agreed in writing
to a different arrangement in another consulting or services agreement which is
more specific to the services provided by Patheon in connection with such Other
Invention. Santarus shall and hereby does grant to Patheon and its Affiliates a
perpetual, royalty-free, non-exclusive, worldwide, irrevocable license to use
and practice all such Santarus-owned Other Inventions, with the right to
sublicense to any Third Party.
     9.2 Assignment. Each Party agrees to disclose promptly in writing to the
other all Product Inventions and Other Inventions to be owned by the other
pursuant to Section 9.1 and hereby irrevocably transfers, conveys and assigns,
and agrees to transfer, convey and assign, to the other, its successors and
assigns, without reservation or additional consideration, all of its right,
title and interest (anywhere in the world) in, to, and under the Product
Inventions and Other Inventions, whether currently existing or created or
developed later, including, without limitation,

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all copyrights, trademarks, trade secrets, patent rights, industrial rights and
all other intellectual property and proprietary rights related thereto,
including all rights to protect, enforce (whether for past, present or future
infringement), defend and exploit such Product Inventions and Other Inventions
and collect and retain all proceeds therefrom, effective immediately upon the
inception, conception, creation or development thereof.
     9.3 Assistance. Each Party shall have the first right to file and prosecute
patent applications in respect of those Inventions it is to own pursuant to
Section 9.1 and such Party shall be solely responsible for the costs of filing,
prosecution and maintenance of such patents and patent applications. Each Party
agrees to cooperate with the other or its designee(s), both during and after the
Term, in applying for, obtaining, perfecting, evidencing, sustaining and
enforcing the other’s right, title and interest in and to the Product Inventions
and Other Inventions, including, without limitation, executing such written
instruments as may be prepared by the other and doing such other acts as may be
necessary in the opinion of the other to obtain a patent, register a copyright,
or otherwise enforce the other’s rights in such Product Inventions and Other
Inventions (and each Party hereby irrevocably appoints the other and any of its
officers and agents as its attorney in fact to act for and on the other’s behalf
and instead of it, with the same legal force and effect as if executed by it).
Each Party hereby represents, warrants, and covenants that all employees,
consultants and agents performing services for it hereunder have assigned in
writing all of their right, title and interest in, to and under any and all
Product Inventions and Other Inventions to such Party. All Product Inventions
and Other Inventions and embodiments thereof shall be deemed to be Confidential
Information of the Party to own such Invention pursuant to Section 9.1, and the
other Party shall be subject to the obligations of nonuse and nondisclosure
under Article 8 with respect thereto.
ARTICLE 10
REPRESENTATIONS, WARRANTIES AND COVENANTS
     10.1 Representations and Warranties of the Parties. Each Party represents,
warrants and covenants to the other Party that:
          10.1.1 Such Party is duly organized and validly existing and in good
standing under the laws of the jurisdiction of its formation;
          10.1.2 Such Party has the full corporate power and is duly authorized
to enter into, execute and deliver this Agreement, and to carry out and
otherwise perform its obligations thereunder;
          10.1.3 This Agreement has been duly executed and delivered by, and is
a legal and valid obligation binding upon such Party and the entry into, the
execution and delivery of, and the carrying out and other performance of its
obligations under this Agreement by such Party (a) does not conflict with, or
contravene or constitute any default under, any agreement, instrument or
understanding, oral or written, to which it is a party, including, without
limitation, its certificate of incorporation or by-laws, and (b) does not
violate Applicable Law or any judgment, injunction, order or decree of any
Government Authority having jurisdiction over it; and

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          10.1.4 In connection with its performance under this Agreement, it
shall comply with all Applicable Laws.
     10.2 Additional Representations, Warranties and Covenants of Patheon. In
addition to representations and warranties set forth elsewhere in this
Agreement, Patheon further represents, warrants to, and covenants with, Santarus
that:
          10.2.1 At all times during the Term, all parts of the Facility that
are directly associated with the testing and storage of the Bulk OME and Raw
Materials and the manufacturing, packaging, testing and storage of the Finished
Product shall remain in compliance with all Applicable Laws, and all other parts
of the Facility shall remain, in all material respects, in compliance with all
Applicable Laws.
          10.2.2 Patheon shall obtain and maintain all necessary licenses,
permits or approvals required by Applicable Laws in connection with the
manufacture, packaging, testing and storage of the Finished Product, including,
without limitation, permits related to manufacturing facilities;
          10.2.3 Patheon’s manufacturing facilities are in compliance with cGMP;
          10.2.4 Patheon has disclosed to Santarus any and all form 483’s,
warning letters or similar notices relating to its Facility and import alerts
for any other products manufactured in such Facility issued during the last five
(5) years;
          10.2.5 Title to all the Finished Product sold hereunder, upon payment
thereof by Santarus as provided herein, shall pass to Santarus free and clear of
any security interest, lien or other encumbrance;
          10.2.6 Throughout the Term, Patheon has, and shall maintain,
sufficient facilities, resources, and a work force suitably qualified and
trained to meet its obligations to supply the Finished Product to Santarus
pursuant to this Agreement;
          10.2.7 The contributions of Patheon to the manufacture of the Finished
Product in accordance with this Agreement do not infringe any Third Party rights
(including, without limitation, any intellectual property rights) anywhere in
the world; provided, however, that Patheon does not warrant against infringement
attributable to the OME or Raw Materials or Finished Product which, when used
together with Patheon’s manufacturing processes, results in a claim for
infringement;
          10.2.8 Patheon is not aware of any pending or threatened claims
against Patheon asserting that any of the activities of Patheon relating to the
manufacture, import, use, or sale of pharmaceutical products, or the conduct of
the activities contemplated herein by Santarus, infringe, misappropriate, or
violate the rights of any Third Party; and
          10.2.9 All employees, consultants, subcontractors and agents
performing services for Patheon hereunder have assigned in writing to Patheon
all of their right, title and interest in, to and under any and all Product
Inventions and Other Inventions.

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     10.3 Additional Representations, Warranties and Covenants of Santarus. In
addition to the representations and warranties set forth elsewhere in this
Agreement, Santarus further represents, warrants to and covenants with, Patheon
that:
          10.3.1 The Specifications for each of the Finished Products are its or
its Affiliate’s property and that Santarus may lawfully disclose the
Specifications to Patheon;
          10.3.2 Santarus is not aware of any actions or other legal proceedings
against Santarus, the subject of which is the infringement of Third Party rights
related to any of the Specifications, or any of the OME and the Raw Materials,
or the sale, use or other disposition of any Finished Product made in accordance
with the Specifications; and
          10.3.3 On or before the commercial launch of the Finished Product in
the Territory, the Specifications shall have been approved by all applicable
Government Authorities.
     10.4 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE
PARTIES MAKE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EITHER
EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF MERCHANTABILITY, WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, OR
WARRANTY OF NON-INFRINGEMENT.
ARTICLE 11
TERM AND TERMINATION
     11.1 Term. This Agreement shall commence as of the Effective Date and shall
continue in full force for a period of five (5) years (the “Initial Term”),
unless earlier terminated in accordance with the terms and conditions of this
Article 11. After the Initial Term, this Agreement shall continue in effect;
provided that either Party may terminate this Agreement at the end of the
Initial Term or during the Renewal Term, by providing the other Party with
eighteen (18) months prior written notice of termination. The Initial Term and
the Renewal Term are collectively referred to herein as the “Term.”
     11.2 Termination for Cause. In the event that either party has failed to
remedy a material breach of any of its representations, warranties or other
obligations under this Agreement within ninety (90) days (the “Remediation
Period”) following receipt of a written notice thereof (the “Breach Notice”)
from the other party that expressly states that it is a notice under this
Section 11.2, the non-breaching party may terminate this Agreement upon written
notice to the other party (the “Termination Notice”). The Termination Notice may
provide for a termination date that is as of any date within eighteen
(18) months following the date of the Termination Notice. If the non-breaching
party does not provide a Termination Notice within one hundred eighty (180) days
after the receipt of the Breach Notice by the breaching party, then the
non-breaching party shall be deemed to have waived its right to terminate the
Agreement for such breach (but shall not have waived any other rights that may
have accrued as a result of such breach). For the avoidance of doubt, a material
breach of the Quality Agreement or the Capital Agreement shall be deemed to be a
breach of this Agreement for the purpose of determining the rights of the
Parties to terminate this Agreement.

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     11.3 Termination for Bankruptcy. Either Party may terminate this Agreement
immediately if the other Party becomes insolvent, makes a general assignment for
the benefit of creditors, suffers or permits the appointment of a receiver for
its business or assets, avails itself of or becomes subject to any petition or
proceeding under any statute of any state or country relating to insolvency or
the protection of the rights of creditors.
     11.4 Regulatory Proceedings. Santarus may terminate this Agreement for one
or more of the Finished Products effective immediately upon written notice to
Patheon should the FDA or a Foreign Regulatory Authority having jurisdiction
impose on the Facility an import ban in respect of such Finished Product or
withdraw any license required by Patheon to manufacture such Finished Product at
the Facility or take other action that is reasonably likely to have a material
adverse impact on Patheon’s ability to perform hereunder.
     11.5 Government Action. Santarus may terminate this Agreement for one or
more of the Finished Products upon thirty (30) days’ written notice to Patheon
in the event that any governmental agency (including without limitation, the FDA
or a Foreign Regulatory Authority) takes any action, or raises any objection,
that prevents Santarus from importing, exporting, purchasing, or selling such
Finished Product or otherwise makes such activity unlawful.
     11.6 Termination for Discontinuation. Santarus may terminate this Agreement
for one or more of the Finished Products if at any time it decides to no longer
market such Finished Product by giving Patheon six (6) months advance written
notice of termination.
     11.7 Effect of Termination. Except as otherwise provided in this
Section 11.7 or elsewhere in this Agreement, in the event this Agreement is
terminated for any reason, (a) subject to Section 11.8, all rights and
obligations of the Parties under this Agreement shall terminate; (b) Santarus
shall surrender to Patheon, or, at Patheon’s sole option and expense, Santarus
shall destroy and provide Patheon with a certificate signed by a Responsible
Executive of Santarus attesting to the destruction of, all copies of any
Confidential Information of Patheon in its possession (excluding all of the
foregoing assigned to Santarus under Article 9 above); (c) Patheon shall
surrender to Santarus, or, at Santarus’ sole option and expense, Patheon shall
destroy and provide Santarus with a certificate signed by a Responsible
Executive of Patheon attesting to the destruction of, all copies of any
Confidential Information provided by Santarus hereunder (except to the extent
required to be maintained by Patheon pursuant to Applicable Laws or this
Agreement); (d) Santarus shall pay for any of the applicable Finished Product
manufactured at any time before the date of termination pursuant to any Firm
Purchase Order delivered to Patheon prior to such termination, and (e) Patheon
shall return to Santarus all applicable unused OME (with shipping and related
expenses, if any, to be borne by Santarus). In addition, in the event Patheon
terminates this Agreement pursuant to Section 11.1 prior to Santarus’ receipt
and utilization of all potential credits contemplated by the last paragraph of
Section 6.2, Patheon shall reimburse Santarus [* * *] less any such credits that
had been previously received and utilized by Santarus. Further, in the event of
termination by Patheon pursuant to Section 11.2 or pursuant to Section 11.3, or
in the event of termination by Santarus pursuant to Sections 11.4, 11.5 or 11.6,
Santarus shall reimburse Patheon for: (x) Raw Materials
 

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applicable to the applicable Finished Product, at Patheon’s cost (including all
costs incurred by Patheon in connection with the purchase and handling of such
Raw Materials), which were ordered, purchased, produced or maintained by Patheon
in contemplation of filling Firm Purchase Orders prior to notice of termination
being given in accordance with the provisions of Article 7, in particular
Section 7.3.1.; and (y) satisfaction of the purchase price payable pursuant to
Patheon’s orders with suppliers of Raw Materials, provided such orders were made
by Patheon in reliance on Firm Purchase Orders; but in each case subject to
Patheon’s obligation to cover as set forth in Section 7.3.3 and subject to the
limitations on Santarus’ liability set forth in Section 7.3.2. Patheon shall
cooperate with Santarus and assist in the transfer to Santarus of all legal and
technical documents concerning applicable OME and Finished Products, including
master batch records, validation reports, stability reports and relevant
manufacturer authorizations, existing retention samples and all such other
documents and materials as may be reasonably necessary or useful for Santarus to
source the applicable Finished Products from other qualified Third Parties.
     11.8 Accrued Rights. Termination, relinquishment, or expiration of this
Agreement for any reason shall be without prejudice to any right which shall
have accrued to the benefit of either Party prior to such termination,
relinquishment, or expiration. Such termination, relinquishment or expiration
shall not relieve either Party from obligations which are expressly indicated to
survive termination or expiration of this Agreement. The provisions of this
Article shall not limit or restrict the rights of any Party to seek remedies or
take measures that may be otherwise available to it at law or equity in
connection with the enforcement and performance of obligations under this
Agreement. Any provision of this Agreement intended by their specific terms or
by necessary implication to survive the expiration or termination of this
Agreement, including without limitation, Articles, 8, 9, 12 and 13, shall so
survive.
ARTICLE 12
INDEMNIFICATION; INSURANCE; LIMITATION OF LIABILITY
     12.1 Indemnification by Santarus. Santarus hereby agrees to defend, at its
expense, indemnify, and hold harmless Patheon, its directors, officers,
employees, agents, and Affiliates, against all Third Party claims, demands,
damages, liabilities, losses, costs and expenses, including, without limitation,
attorney’s fees (collectively, “Claims”) resulting from or arising out of:
(a) the negligence or willful misconduct of Santarus, its Affiliates, or their
directors, officers, agents, employees or consultants in the performance of
their obligations under this Agreement; (b) a material breach by Santarus of any
provision of this Agreement, the Quality Agreement or the Capital Agreement; or
(c) a breach by Santarus of any of its representations or warranties set forth
in this Agreement, the Quality Agreement or the Capital Agreement; provided,
however, that Santarus shall not be obligated to indemnify Patheon under this
Section 12.1 to the extent that such Claim results from or arises out of any act
or omission for which Patheon is obligated to indemnify Santarus pursuant to
Section 12.3 below.
     12.2 Further Indemnification by Santarus. Further, Santarus hereby agrees
to defend, at its expense, indemnify and hold harmless Patheon, its directors,
officers, employees, agents and Affiliates against all Third Party Claims
resulting from or arising out of actions or proceedings where the claimant has
alleged that:

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          (a) the use by Patheon, in connection with its performance under this
Agreement, of the Specifications infringes any Invention or any other
intellectual property rights (including patent rights or trade secret rights) of
any Third Party;
          (b) the provision of the services by Patheon in respect to the
Finished Product pursuant to this Agreement, or use or disposition of any
Finished Product by Patheon as required to perform its obligations under this
Agreement infringes any Invention or any other intellectual property rights
(including patent rights or trade secret rights) of any Third Party;
          (c) the sale or distribution by Santarus in any country of Finished
Product violates any law in such country;
          (d) the Finished Product marketed in any given country by Santarus is
not suitable for the indication for which it has been approved in such country
or is unsafe for human use; or
          (e) the Finished Product contains a defect in the OME that was not
reasonably discoverable by Patheon utilizing the test methods set forth in the
Specifications, provided, however, that Santarus shall not be obligated to
indemnify Patheon under this Section 12.2 to the extent such claim resulted from
or arose out of any act or omission for which Patheon is obligated to indemnify
Santarus pursuant to Section 12.3 below.
     12.3 Indemnification by Patheon. Patheon hereby agrees to defend, at its
expense, indemnify, and hold harmless Santarus, its directors, officers,
employees, agents, and Affiliates against all Third Party Claims resulting from
or arising out of [* * *].
     12.4 Indemnification Procedure. Each indemnified Party (the “Indemnitee”)
agrees to give the indemnifying Party (the “Indemnitor”) prompt written notice
of any Claims or discovery of fact upon which the Indemnitee intends to base a
request for indemnification. Notwithstanding the foregoing, the failure to give
timely notice to the Indemnitor shall not release the Indemnitor from any
liability to the Indemnitee to the extent the Indemnitor is not materially
prejudiced thereby.
          12.4.1 The Indemnitee shall furnish promptly to the Indemnitor copies
of all papers and official documents in the Indemnitee’s possession or control
which relate to any Claims; provided, however, that if the Indemnitee defends or
participates in the defense of any Claims, then the Indemnitor shall also
provide such papers and documents to the Indemnitee. The Indemnitee shall
reasonably cooperate with the Indemnitor in defending against any Claims.
          12.4.2 The Indemnitor shall have the right, by prompt written notice
to the Indemnitee, to assume direction and control of the defense of any Claim,
with counsel reasonably satisfactory to the Indemnitee and at the sole cost of
the Indemnitor, so long as (a) the Indemnitor shall promptly notify the
Indemnitee in writing (but in no event more than thirty (30) days after the
Indemnitor’s receipt of notice of the Claim) that the Indemnitor intends to
 

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indemnify the Indemnitee pursuant to this Article absent the development of
facts that give the Indemnitor the right to claim indemnification from the
Indemnitee, and (b) the Indemnitor diligently pursues the defense of the Claim.
          12.4.3 If the Indemnitor assumes the defense of the Claim as provided
in this Section 12.4, the Indemnitee may participate in such defense with the
Indemnitee’s own counsel who shall be retained, at the Indemnitee’s sole cost
and expense; provided, however, that neither the Indemnitee nor the Indemnitor
shall consent to the entry of any judgment or enter into any settlement with
respect to the Claim without the prior written consent of the other Party, which
consent shall not be unreasonably withheld or delayed. If the Indemnitee
withholds consent in respect of a judgment or settlement involving only the
payment of money by the Indemnitor and which would not involve any stipulation
or admission of liability or result in the Indemnitee becoming subject to
injunctive relief or other relief, the Indemnitor shall have the right, upon
written notice to the Indemnitee within five (5) days after receipt of the
Indemnitee’s written denial of consent, to pay to the Indemnitee, or to a trust
for its or the applicable Third Party’s benefit, such amount established by such
judgment or settlement in addition to all interest, costs or other charges
relating thereto, together with all attorneys’ fees and expenses incurred to
such date for which the Indemnitor is obligated under this Agreement, if any, at
which time the Indemnitor’s rights and obligations with respect to such Claim
shall cease.
          12.4.4 The Indemnitor shall not be liable for any settlement or other
disposition of a Claim by the Indemnitee which is reached without the written
consent of the Indemnitor.
     12.5 No Consequential Damages. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE
RESPONSIBLE OR LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, SPECIAL, EXEMPLARY, PUNITIVE OR OTHER LIKE DAMAGES, OR FOR ANY
LOSS OF PROFITS, LOSS OF REVENUE, LOSS RESULTING FROM INTERRUPTION OF BUSINESS
OR LOSS OF USE OR DATA , EVEN IF SUCH PARTY, OR ANY OF ITS DIRECTORS, OFFICERS,
EMPLOYEES, OR AGENTS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY OF ANY
KIND, UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY, ARISING
OUT OF OR RELATING IN ANY WAY TO THIS AGREEMENT OR ITS IMPLEMENTATION. FOR THE
AVOIDANCE OF DOUBT, NOTHING IN THIS SECTION 12.5 SHALL BE INTERPRETED TO LIMIT
THE INDEMNIFICATION OBLIGATION OF EITHER PARTY IN CONNECTION WITH A PRODUCT
LIABILITY CLAIM WITH RESPECT TO THE CHARACTERIZATION OF DAMAGES OR LOSSES
CLAIMED BY A THIRD PARTY AS BEING INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL,
EXEMPLARY, PUNITIVE OR OTHER LIKE DAMAGES OR LOSSES.
     12.6 Insurance. Each Party shall maintain commercial general liability and
product liability insurance through the term of this Agreement and for a period
of five (5) years thereafter, which insurance shall afford limits of not less
than (i) [* * *] for each occurrence, and (ii) [* * *]
 

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annual aggregate. In addition, from time to time during the term of this
Agreement, each Party shall increase their levels of insurance coverage if
reasonably deemed prudent by such party in light of the overall activities under
this Agreement. If requested each Party will provide the other with a
certificate of insurance evidencing the above and showing the name of the
issuing company, the policy number, the effective date, the expiration date and
the limits of liability. The insurance certificate shall further provide for a
minimum of 30 days’ written notice to the insured of a cancellation of, or
material change in, the insurance. If a Party is unable to maintain the
insurance policies required under this Agreement through no fault on the part of
such Party, then such Party shall forthwith notify the other Party in writing
and the parties shall in good faith negotiate appropriate amendments to the
insurance provision of this Agreement in order to provide adequate assurances.
     12.7 Limitation of Liability.
          12.7.1 Active Materials. Patheon’s maximum liability for loss or
damage to any quantity of Bulk OME for any reason whatsoever shall be determined
in accordance with Section 2.11.
          12.7.2 Recall Expenses. Patheon’s maximum liability to Santarus
pursuant to Section 5.3 for expenses associated with a Recall shall not exceed
[* * *] in a calendar year.
ARTICLE 13
GOVERNING LAW; DISPUTE RESOLUTION
     13.1 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of New York, without regard to the United Nations
Convention on Contracts for the International Sale of Goods and without giving
effect to any choice of laws rule that would cause the application of the laws
of any jurisdiction other than the internal laws of the State of New York, to
the rights and duties of the Parties.
     13.2 Dispute Resolution/Injunctive Relief. Notwithstanding anything to the
contrary contained in this Agreement, the parties specifically agree to the
following dispute resolution procedure.
          13.2.1 Negotiation Between Responsible Executives. In the event of any
dispute between the Parties arising out of or related to this Agreement, the
Parties shall refer such dispute to the Responsible Executive of Santarus and
the Responsible Executive of Patheon for attempted resolution by good faith
executive negotiations within thirty (30) days after such referral is made. In
the event such officers are unable to resolve such dispute within such thirty
(30) day period, then the Parties will subject themselves to the arbitration
procedures set forth below before seeking any other means of resolving the
dispute.
          13.2.2 Arbitration. Any dispute arising out of or in connection with
this Agreement including any question regarding its existence, validity or
termination, that can not be resolved through negotiation between Responsible
Executives, shall be finally resolved by
 

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arbitration under the Rules of the American Arbitration Association. The
arbitration shall consist of a single arbitrator mutually agreed by the Parties,
or, in the absence of such agreement, each Party shall select an arbitrator and
those two arbitrators shall select a third arbitrator who shall arbitrate the
dispute. Any arbitration shall take place in New York, New York, U.S.A. The
award of the arbitrator shall be final and binding. The Parties waive any right
to appeal the arbitration award, to the extent a right to appeal may be lawfully
waived. Each Party retains the right to seek judicial assistance: (a) to compel
arbitration; (b) to obtain interim measures of protection pending or during
arbitration; and (c) to enforce any decision of the arbitrator, including the
final award.
          13.2.3 Exceptions. Notwithstanding the provision of this Section 13.2,
the Parties agree that certain violations or threatened violations of this
Agreement will result in irrevocable harm to other Party, for which damages
would be an inadequate remedy. In addition to any rights and remedies otherwise
available, either Party, before or during arbitration, may apply to a court
having jurisdiction for a temporary restraining order, preliminary injunction or
other interim or conservatory relief, where such relief is necessary to protect
its interests pending completion of the arbitration proceedings without breach
of this arbitration agreement and without any abridgment of the powers of the
arbitrators.
          13.2.4 Continuation of Performance. Except where such area of
performance is the subject of dispute, each Party shall continue to perform its
respective obligations under this Agreement while any dispute is being resolved
in accordance with this Section 13.2 unless and until such obligations are
terminated or expire in accordance with the provisions of this Agreement.
ARTICLE 14
CAPITAL CONTRIBUTIONS
     14.1 Capital Reimbursement Agreement. Each Party’s capital contribution for
the performance of this Agreement with respect to the Powder Finished Product
shall be as set forth in the Amended and Restated Capital Reimbursement
Agreement between the Parties and dated as of January 17, 2008 (the “Capital
Agreement”). [* * *]
     14.2 Manufacturing Tools. Except as set forth in Section 14.1, Patheon
shall be solely responsible for all costs associated with maintaining the
equipment, tools, technology, and all other items necessary to manufacture,
package, test, store and ship the Finished Product (“Manufacturing Tools”).
     14.3 Personnel. Patheon shall be solely responsible for all costs
associated with hiring personnel to maintain the Manufacturing Tools necessary
to comply with its obligations pursuant to this Agreement.
 

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ARTICLE 15
MISCELLANEOUS
     15.1 Assignment. Patheon may not assign this Agreement or any of its rights
or obligations hereunder) without the written consent of Santarus, such consent
not to be unreasonably withheld. Santarus may not assign this Agreement or any
of its rights or obligations hereunder without the written consent of Patheon,
such consent not to be unreasonably withheld; provided, however, that Patheon’s
consent may be withheld if, in the opinion of Patheon, acting reasonably, the
assignee is not a creditworthy substitute for Santarus. Notwithstanding the
foregoing provisions of this Section 15.1, Santarus may assign this Agreement to
any of its Affiliates or to a successor to or purchaser of all or substantially
all of its business relating to this Agreement, provided that such assignee
executes an agreement with Patheon whereby it agrees to be bound hereunder.
     15.2 Force Majeure. With respect to this Agreement, neither Party shall
lose any rights hereunder or be liable to the other Party for damages or losses
on account of failure of performance by the defaulting Party if the failure is
occasioned by war, fire, explosion, flood, strike, lockout, terrorist attacks,
embargo, act of God, or any other similar cause to the extent beyond the
reasonable control of the defaulting Party, provided that the Party claiming
force majeure shall promptly notify the other Party in writing setting forth the
nature of such force majeure, shall use its best efforts to eliminate, remedy or
overcome such force majeure and shall resume performance of its obligations
hereunder as soon as reasonably practicable after such force majeure ceases.
Notwithstanding the previous sentence, if any force majeure continues for more
than ninety (90) days, the other Party may terminate this Agreement.
     15.3 Further Actions. Each Party agrees to execute, acknowledge and deliver
such further instruments, and to do all such other acts, as may be necessary or
appropriate in order to carry out the purpose and intent of this Agreement.
     15.4 Compliance With Laws. Each Party will comply with all Applicable Laws
in such Party’s exercise of its rights and performance of its obligations under
this Agreement.
     15.5 Notices. All notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed given if delivered personally
or by facsimile transmission receipt verified, mailed by registered or certified
mail return receipt requested, postage prepaid, or sent by express courier
service, to the Parties at the following addresses, or at such other address for
a Party as shall be specified by like notice, provided that notices of a change
of address shall be effective only upon receipt thereof.

         
 
If to Patheon:   Patheon Inc.
 
      2100 Syntex Court
 
      Mississauga, Ontario
 
      Canada L5N 7K9
 
      Attn: President

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With a copy to:   Patheon Inc.
 
      2100 Syntex Court
 
      Mississauga, Ontario
 
      Canada L5N 7K9
 
      Attn: General Counsel
 
       
 
If to Santarus   Santarus, Inc.
 
      3721 Valley Centre Drive, Suite 400
 
      San Diego CA 92130
 
      Phone: 858-314-5700
 
      Fax: 858-314-5701
 
      Attn: Sr. Vice President, Manufacturing and Product Development
 
       
 
With a copy to:   Santarus, Inc.
 
      3721 Valley Centre Drive, Suite 400
 
      San Diego CA 92130
 
      Phone: 858-314-5700
 
      Fax: 858-314-5702
 
      Attn: Legal Affairs

     Unless an earlier date can be proven by competent evidence, the date of
receipt of any notice given under this Agreement, including, without limitation,
any invoice provided by Patheon to Santarus, shall be deemed to be the date
given if delivered personally or by facsimile transmission receipt verified,
seven (7) days after the date mailed, if mailed by registered or certified mail
return receipt requested, postage prepaid, and two (2) days after the date sent
if sent by express courier service.
     15.6 Waiver. No failure of either Party to exercise and no delay in
exercising any right, power or remedy in connection with this Agreement (each a
“Right”) will operate as a waiver thereof, nor will any single or partial
exercise of any Right preclude any other or further exercise of such Right or
the exercise of any other Right. No waiver shall be effective unless made in
writing and signed by the waiving Party.
     15.7 Disclaimer of Agency. The relationship between Patheon and Santarus
established by this Agreement is that of independent contractors, and nothing
contained in herein shall be construed to (i) give either Party the power to
direct or control the day-to-day activities of the other, (ii) constitute the
Parties as the legal representative or agent of the other Party or as partners,
joint venturers, co-owners or otherwise as participants in a joint or common
undertaking, or (iii) allow either Party to create or assume any liability or
obligation of any kind, express or implied, against or in the name of or on
behalf of the other Party for any purpose whatsoever, except as expressly set
forth in this Agreement.
     15.8 Severability. If any term, covenant or condition of this Agreement or
the application thereof to any Party or circumstance shall, to any extent, be
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unenforceable by a court or administrative agency of competent jurisdiction,
then the remainder of this Agreement, or the application of such term, covenant
or condition to Parties or circumstances, other than those as to which it is
held invalid or unenforceable, shall not be affected thereby and each term,
covenant or condition shall be valid and be enforced to the fullest extent
permitted by law.
     15.9 Entire Agreement. This Agreement, including all schedules and exhibits
attached hereto, the Master Services Agreement between Santarus and Patheon
dated April 29, 2004 and any amendments thereto, the Quality Agreement and the
Capital Agreement, which are hereby incorporated herein by reference, set forth
all covenants, promises, agreements, warranties, representations, conditions and
understandings between the Parties hereto with respect to the manufacture and
supply of commercial quantities of Finished Product and supersedes and
terminates all prior and contemporaneous agreements and understandings between
the Parties with respect to such subject matter.
     15.10 Modification. No subsequent alteration, amendment, change or addition
to this Agreement shall be binding upon the Parties hereto unless reduced to
writing and signed by the respective authorized officers of the Parties. In the
event of a conflict between the terms of any Firm Purchase Order, order
acknowledgement, packaging slip or other documentation, and the terms of this
Agreement, the terms of this Agreement shall control, unless such documentation
specifically states that it overrides conflicting terms of this Agreement and is
signed by each of the Parties.
     15.11 Trademarks and Trade names. The Parties hereby acknowledge that
neither Party has, and shall not acquire, any interest in any of the other
Party’s trademarks or trade names appearing on the labels or packaging materials
for the Finished Product unless otherwise expressly agreed in writing.
     15.12 Construction. This Agreement shall be deemed to have been drafted by
all Parties and, in the event of a dispute, no Party hereto shall be entitled to
claim that any provision should be construed against any other Party by reason
of the fact that it was drafted by one particular Party. The headings used in
this Agreement are for convenience of reference only and are not a part of the
text hereof.
     15.13 Counterparts. This Agreement may be executed in counterparts, by
manual or facsimile signatures, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.

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     IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the Effective Date.

              Patheon Inc.     Santarus, Inc.  
By:
  /s/ Eric Evans   By:   /s/ Gerald T. Proehl
 
           
Name:
  Eric Evans   Name:   Gerald T. Proehl
Title:
  Chief Financial Officer   Title:   President & CEO

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EXHIBIT A
MINIMUM RUN QUANTITY
The “Minimum Run Quantity” or the minimum number of batches to be produced
during one cycle of manufacturing shall be:

[* * *]
[* * *]
[* * *]
[* * *]
[* * *]
[* * *]
[* * *]
[* * *]
 

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EXHIBIT B
TARGET OME YIELDS
The “Target OME Yields” are mutually agreed upon targets that are used for
determining [* * *] and annual average yields as specified in Section 2.11 OME
Yield.

[* * *]
[* * *]
 

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