##### 



EXHIBIT
10.1
 FINAL
 CONFIDENTIAL TREATMENT REQUESTED
 Manufacturing Services Agreement
 January 4, 2006




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Table of Contents
 ARTICLE 1
    
    
    1INTERPRETATION
    
    
    11.1
Definitions
    
    
    11.2 Currency
    
    
    61.3 Sections and Headings
    
    
    71.4 Singular Terms
    
    
    71.5 Schedules
    
    
    7ARTICLE 2
    
    
    7PATHEONS MANUFACTURING RESPONSIBILITIES
    
    
    72.1 Manufacturing Services
    
    
    72.2 Active Material Yield
    
    
    11ARTICLE 3
    
    
    13AVANIRS OBLIGATIONS
    
    
    133.1 Payment
    
    
    133.2 Active Materials
    
    
    13ARTICLE 4
    
    
    13CONVERSION FEES AND COMPONENT/PACKAGING MATERIAL COSTS
    
    
    134.1 First Year Pricing
    
    
    134.2 Subsequent Years Pricing
    
    
    134.3 Adjustments to Pricing
    
    
    154.4 Adjustments Due to Technical Changes
    
    
    164.5 Multi-Country Packaging Requirements
    
    
    17ARTICLE 5
    
    
    17ORDERS, SHIPMENT, INVOICING, PAYMENT
    
    
    175.1 Orders and Forecasts
    
    
    175.2 Reliance by Patheon
    
    
    185.3 Minimum Orders
    
    
    195.4 Shipments
    
    
    195.5 Scheduled Shipment Dates and Late Shipments
    
    
    205.6 Invoices and Payment
    
    
    21ARTICLE 6
    
    
    21
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PRODUCT CLAIMS AND RECALLS
    
    
    216.1 Product Claims
    
    
    216.2 Product Recalls and Returns
    
    
    226.3 Patheons Responsibility for Defective and Recalled Products
    
    
    236.4 Disposition of Defective or Recalled Products
    
    
    246.5 Customer Questions and Complaints
    
    
    24ARTICLE 7
    
    
    247.1 Quarterly Review
    
    
    247.2 Governmental Agencies
    
    
    257.3 Records and Accounting by Patheon
    
    
    257.4 Inspections
    
    
    257.5 Access
    
    
    257.6 Reports
    
    
    267.7 FDA Filings
    
    
    267.8 Continuous Improvement
    
    
    277.9 Further Actions
    
    
    277.10 Disaster Recovery Plan
    
    
    27ARTICLE 8
    
    
    28TERM AND TERMINATION
    
    
    288.1 Initial Term
    
    
    288.2 Termination for Cause
    
    
    288.3 Product Discontinuation
    
    
    288.4 Obligations on Termination
    
    
    298.5 Continuation of Performance
    
    
    308.6 Transition Subsequent to Termination
    
    
    30ARTICLE 9
    
    
    31REPRESENTATIONS, WARRANTIES AND COVENANTS
    
    
    319.1 Authority
    
    
    319.2 Avanir Warranties
    
    
    319.3 Patheon Warranties
    
    
    329.4 Debarred Persons
    
    
    339.5 Permits
    
    
    339.6 No Warranty
    
    
    33ARTICLE 10
    
    
    33REMEDIES AND INDEMNITIES
    
    
    3310.1 Consequential Damages
    
    
    3310.2 Maximum Liability
    
    
    33
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10.3 Patheon
    
    
    3410.4 Avanir
    
    
    3410.5 Indemnification Procedure
    
    
    3510.6 Reasonable Allocation of Risk
    
    
    36ARTICLE 11
    
    
    36CONFIDENTIALITY
    
    
    3611.1 Confidentiality
    
    
    3611.2 Confidentiality Exceptions
    
    
    3711.3 Authorized Disclosure
    
    
    3711.4 Return Of Confidential Information
    
    
    3711.5 Equitable Relief
    
    
    38ARTICLE 12
    
    
    38DISPUTE RESOLUTION
    
    
    3812.1 Commercial Disputes
    
    
    3812.2 Technical Dispute Resolution
    
    
    3812.3 Arbitration
    
    
    39ARTICLE 13
    
    
    39MISCELLANEOUS
    
    
    3913.1 Intellectual Property
    
    
    3913.2 Inventions
    
    
    4013.3 Assistance
    
    
    4113.4 Trademarks and Trade Names
    
    
    4113.5 Insurance
    
    
    4113.6 Independent Contractors
    
    
    4213.7 No Waiver
    
    
    4213.8 Assignment
    
    
    4213.9 Force Majeure
    
    
    4313.10 Additional Product
    
    
    4313.11 Notices
    
    
    4313.12 No Publicity
    
    
    4413.13 Severability
    
    
    4513.14 Entire Agreement
    
    
    4513.15 Other Terms
    
    
    4513.16 No Third Party Benefit or Right
    
    
    4513.17 Execution in Counterparts
    
    
    4513.18 Governing Law
    
    
    46
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FINAL
 MANUFACTURING SERVICES AGREEMENT
 THIS MANUFACTURING SERVICES AGREEMENT (the Agreement) th
  PATHEON INC.
 Patheon
  AVANIR PHARMACEUTICALS,
 Avanir
      ARTICLE 1
 INTERPRETATION
 1.1 Definitions




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Active Materials
 Active Material Reimbursement Value
 Affiliate
 (a)
    
    a business entity which owns, directly or indirectly, a controlling interest in
a party to this Agreement, by stock ownership or otherwise; or(b)
    
    a business entity which is controlled by a party to this Agreement, either
directly or indirectly, by stock ownership or otherwise; or(c)
    
    a business entity, the controlling interest of which is directly or indirectly
common to the majority ownership of a party to this Agreement.
  Annual Volume
 Applicable Laws
 - 2 -




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Authority
 Batch
 Business Day
 Certificates Of Compliance
 cGMPs Food and Drug Regulations
 Commencement Date
 Components
 Confidential Information
 - 3 -




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Deficiency Notice
 FDA
 FFDCA
 Firm Orders
 Health Canada
 INDA
 Intellectual Property
 Invention
 Inventory
 Laws
 Manufacturing Services
 - 4 -




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Manufacturing Site ***
 Minimum Annual Volume
 Minimum Run Quantity
 NDA
 Packaging Materials
 Products
 Quality Agreement
 Recall
 Regulatory Approval
 
 ***
    
    Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the Mark). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Companys Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act. - 5 -




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Specifications
 (a)
    
    specifications for Active Materials and Components;(b)
    
    manufacturing protocols, directions and processes specifications, directions
and processes testing methodologies, environmental, health and safety information
relating to the Product including material safety data sheets;(c)
    
    shipping and storage requirements;(d)
    
    all environmental, health and safety information relating to the Product
including material safety data sheets. and(e)
    
    the finished Product specifications and packaging specifications and shipping
requirements for each Product;(f)
    
    all applicable portions of any regulatory filings made by Avanir with the FDA
(including INDAs and NDAs) for the Product;
  Substantial Efforts
 Technical Dispute
 Territory
 Third Party
 Third Party Rights
 Year
 1.2 Currency
  - 6 -




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1.3 Sections and Headings
 this Agreement hereof herein hereunder
 1.4 Singular Terms
  1.5 Schedules
  Schedule A
    
    -
    
    Procedure for Shipment & Acceptance of Product SpecificationsSchedule B
    
    -
    
    Annual Volume, Run Quantity & FeesSchedule C
    
    -
    
    Stability TestingSchedule D
    
    -
    
    Active MaterialsSchedule E
    
    -
    
    Batch Numbering & Expiration DatesSchedule F
    
    -
    
    Technical Dispute ResolutionSchedule G
    
    -
    
    Quality AgreementSchedule H
    
    -
    
    Shipping Logistics ProtocolSchedule I
    
    -
    
    Active Material Reimbursement ValueSchedule J
    
    -
    
    Quarterly Active Material Inventory ReportSchedule K
    
    -
    
    Report of Annual Active Material Inventory Reconciliation and
Calculation of Actual Annual YieldSchedule L
    
    -
    
    Form of Work Order
 ARTICLE 2
 PATHEONS MANUFACTURING RESPONSIBILITIES
 2.1 Manufacturing Services
  - 7 -




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*** *** *** ***
 (a)
    
    Conversion of Active Materials and Components. Patheon shall convert
Active Materials and Components into Products.(b)
    
    Quality Control and Quality Assurance. Patheon shall perform the
quality control and quality assurance testing specified in the Quality Agreement. Each
time Patheon ships Products to Avanir, it shall provide Avanir with a certificate of
analysis that sets out the test results for each Batch of Products, and that certifies
that such Batch has been evaluated by Patheons Quality Control/Quality Assurance
department and that the Products comply with the Specifications. Patheon will conduct
all such testing in accordance with the procedures and using the analytical testing
methodologies set forth in the Specifications and the Quality Agreement.(c)
    
    Components & Active Materials. Patheon shall purchase and test all
Components (with the exception of those that are supplied by Avanir) at Patheons
expense and the Active Materials at Avanirs expense, in each such case as specified by
the Specifications.(d)
    
    Stability Testing. Patheon shall conduct stability testing on the
Products in accordance with the protocols set out in the Specifications for the
separate fees specified in Schedule C. Patheon shall not make any changes to these
testing protocols without prior written approval from Avanir. In the event that any
Batch of Products fails stability testing, Patheon and Avanir shall jointly determine
the proceedings and methods to be undertaken to investigate the causes of such failure,
including which party shall bear the cost of such investigation, provided that Patheon
shall not be liable for any such costs unless there has been a failure by it to provide
the Manufacturing Services in accordance with the Specifications,
 
 ***
    
    Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the Mark). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Companys Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act. - 8 -




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cGMPs and Applicable Laws. Patheon will provide any and all data and results
relating to the stability testing upon request by Avanir.(e)
    
    Packaging. Patheon shall package the Products with labels, product
inserts and other packaging as set out in the Specifications. In addition, Patheon
shall make arrangements for and implement the imprinting of Batch numbers and
expiration dates for each Product shipped. Such Batch numbers and expiration dates
shall be affixed on the Products and on the shipping carton of each Product as outlined
in the Specifications and as required by cGMPs. The system used by Patheon for Batch
numbering and expiration dates is detailed in Schedule E hereto. Avanir may, in its
sole discretion, make changes to labels, product inserts and other packaging for the
Products, which changes shall be submitted by Avanir to all applicable governmental
agencies and other third parties responsible for the approval of the Products.
Patheons name shall not appear on the label or anywhere else on the Products unless:
(i) required by any Laws; or (ii) Patheon expressly consents to such use of its name in
writing.(f)
    
    Active Materials, Components and Packaging Materials Importing.
Patheon and Avanir will cooperate and provide such assistance and information to each
other as may be reasonably necessary to permit the import of the Active Materials,
Components and Packaging Materials into Canada, including, without limitation, the
value of the Active Materials calculated in accordance with Section 46 of the Customs
Act(Canada). Each party shall ensure that the information provided in connection with
this Section 2.1(f) is accurate and shall bear any costs, expenses and damages
(including, without limitation, any fines and penalties) which the other party may
incur as a result of the inaccuracy of such information. Patheon will conduct chemical
identity testing for all Active Materials received at the Manufacturing Site. Patheon
will conduct full release testing of all Active Materials received at the Manufacturing
Site in accordance with the procedures and using the analytical testing methodologies
set forth in the Specifications and the Quality Agreement. Patheon will promptly notify
Avanir in writing of any failure of the Active Materials to conform to the
Specifications for same, and any other problem it may identify with the Active
Materials detected during the inspection and testing process. All testing required
will be managed by Patheon to meet the production schedules and delivery dates as
determined by Patheons acceptance of Firm Orders submitted by Avanir.(g)
    
    Bill Back Items. The expenses in respect of all third party supplier
fees for the purchase of columns, standards, tooling, PAPR suits (where applicable) and
other project specific items necessary for Patheon to perform the Manufacturing
Services, and which are not included as Components or Packaging Materials, shall be
charged to Avanir at Patheons costs.
 - 9 -




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(h)
    
    Manufacturing Equipment. Except as otherwise agreed to by the parties
in writing, Patheon shall be solely responsible for all costs associated with (a)
purchasing and maintaining the equipment used by Patheon at the Manufacturing Site to
manufacture the Products (the Manufacturing Equipment); and (b) hiring personnel to
maintain the Manufacturing Equipment necessary to comply with its obligations under
this Agreement.(i)
    
    Storage. Patheon will store the Active Materials at Patheons storage
facility at the Manufacturing Site with due care and attention to the requirements set
forth in the Specifications and in accordance with GMP and Applicable Laws so as to
protect such Active Materials from loss or damage. Patheon shall maintain adequate
storage for the Active Materials while at the Manufacturing Site and Patheon shall not
store finished Products with Active Materials or Components on the same pallet.
Patheon will ensure that, while Active Materials and finished Products are in storage,
they do not become subject to any lien or other security interest securing any
obligation owed or alleged to be owed by Patheon to any person or entity. Subject to
Patheons liability for loss of Active Materials as set forth in Section 2.2(d), and
Patheons maximum liability set forth in Sections 10.1, 10.2, Patheon shall be
responsible for any loss or damage to the finished Product while stored at the
Manufacturing Site prior to shipment of such Products to Avanir in accordance with
Section 5.4. Patheon will notify Avanir in writing if an amount in excess
*** of Active Materials is damaged, lost or otherwise rendered
unusable at any one time during storage as soon as practicable following such incident.(j)
    
    Manufacturing Site. Patheon will manufacture Product at the
Manufacturing Site. Patheon will not manufacture any Product in any other facility
without first obtaining Avanirs prior written consent.(k)
    
    Validation Batches. Patheon shall manufacture validation batches of
Product for Avanir as described and agreed to by the parties in a work order
substantially in the form attached hereto as Schedule L, which shall include the fees
payable by Avanir for such services. Avanir agrees that provided Patheon has
manufactured the validation batches in accordance with the Specifications, cGMPs and
Applicable Laws, (i) Avanir shall have no right to reject any Product from a validation
batch under Section 6.1, and (ii) Avanir shall assume all risk, liability and
responsibility for such Product, including, without limitation, financial and
regulatory liability, and full responsibility for any recall thereof.
 
 ***
    
    Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the Mark). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Companys Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act. - 10 -




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2.2 Active Material Yield
 Reporting.
 Quantity Received:
 Quantity Dispensed:
 Quantity Converted:
 Actual Annual Yield AAY
 Quantity Converted during the Year
 - 11 -




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Shortfall Calculation ***
    1)
    
    For commercial Batches manufactured by Patheon in the first Year of this
Agreement, the Target Yield shall be equal to the average yield of all Batches of
Product manufactured by Patheon in the first Year.2)
    
    For commercial Batches manufactured by Patheon in the second Year and each
Year thereafter, the Target Yield shall be mutually agreed upon by the parties after
Patheon has produced a minimum of twenty-five commercial production Batches of
Product (collectively, the Target Yield Determination Batches) pursuant to this
Agreement; provided, however, that the Target Yield Determination Batches shall not
include any batches that, in the parties mutual and reasonable judgment, were
produced in production runs that were adversely affected by technical difficulties or
involving an extraordinary loss of Active Material. Thereafter, Patheon shall strive
to maintain Actual Annual Yield levels for each Product above the applicable Target
Yield.
 Reimbursement
 Liability for Active Materials and Maximum Reimbursement Value
 
 ***
    
    Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the Mark). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Companys Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act. - 12 -




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No Material Breach
 ARTICLE 3
 AVANIRS OBLIGATIONS
 3.1 Payment
  3.2 Active Materials
  ARTICLE 4
 CONVERSION FEES AND COMPONENT/PACKAGING MATERIAL COSTS
 4.1 First Year Pricing
  4.2 Subsequent Years Pricing
  (a)
    
    Manufacturing, Component and Packaging Material Costs. On each Yearly
anniversary of this Agreement, Patheon shall be entitled to request an adjustment to
the fees (i) for Manufacturing Services in respect of the Products to reflect inflation
in accordance with the procedures below; and (ii) for Component or Packaging Material
costs to pass on the actual amount of any increase or decrease in such costs.
 - 13 -




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(b)
    
    Annual Forecast. To the extent that Patheon reasonably determines that
the projections contained in the rolling forecast provided pursuant to Section 5.1(a)
necessitate that an adjustment be made to the Manufacturing Services fees in respect of
any Product for such Year, Patheon shall be entitled to request an appropriate price
adjustment.(c)
    
    Pricing Basis. Avanir acknowledges that the fee for Manufacturing
Services in respect of a Product in any Year is quoted based upon the Minimum Run
Quantity and Annual Volume per Product specified in Schedule B or thereafter specified
in the forecast provided pursuant to clause (b) of this Section 4.2 for the Year and is
subject to change if the specified Minimum Run Quantity changes or if the Annual Volume
is not met. For greater certainty, if Patheon and Avanir agree that the Minimum Run
Quantity in respect of a Product shall be reduced whether as a result of a decrease in
estimated annual volume or otherwise and, as a result of such reduction, Patheons fees
for services relating to such Product on a per unit basis, then Patheon shall be
entitled to an increase in the fee for Manufacturing Services in respect of such
Product by an amount sufficient to absorb such increase.(d)
    
    In connection with a fee adjustment pursuant to clause (a) of this Section 4.2,
Patheon shall deliver to Avanir by not later than October 1st of each Year a
revised Schedule B in draft form and a statement outlining the percentage increase in
the US Producer Price Index for Industry: Pharmaceutical Preparations Series ID:
PCU2834# (N), as published by the U.S. Department of Labor, Bureau of Labor Statistics
at http://www.bls.gov/news.release/ppiupon which such fee adjustment is based;
provided that any fee adjustment will not be more than (1) the increase in the most
recent calendar year Producer Price Index, Industry: Pharmaceutical Preparations or (2)
[ ***]% per Year. In connection with all fee adjustment requests
pursuant to clauses (b) and (c) of this Section 4.2 and subject to Section 4.3(d),
Patheon shall deliver to Avanir by not later than October 1st of each Year a
revised Schedule B in draft form. Upon delivery of such a request, each of Avanir and
Patheon shall forthwith use all reasonable efforts to agree on a revised fee for the
Manufacturing Services in respect of each affected Product and Schedule B shall be
amended accordingly. Such revised fee shall be effective with respect to any Product
delivered after the end of the then current Year.
 
 ***
    
    Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the Mark). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Companys Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act. - 14 -




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4.3 Adjustments to Pricing
  (a)
    
    Volume Reduction & Increases.If at any time, and from time to time, Patheon determines (but no more than once per
Year), acting reasonably, and based on the forecasts and Firm Orders received from
Avanir, that the current Minimum Run Quantities (including, without limitation, any
permanent reductions in volumes) relating to a specific Product will constitute less
than the Minimum Annual Volume for that Product specified in Schedule B hereto or,
if applicable, any revised Minimum Annual Volume hereinafter agreed to by the
parties, then Patheon shall be entitled to request an adjustment to the fee for
Manufacturing Services in respect of that Product to reflect the increased costs
that Patheon will incur as a result of the reduced volumes. To the extent that the
fee for Manufacturing Services in respect of a Product has been previously adjusted
pursuant to this clause (a) to reflect reduced volumes, the adjustment provided in
this clause (a) shall operate based on the fees attributed to such Product at the
time the last of such adjustments were made.(b)
    
    Extraordinary Increases in Component or Packaging Material Costs. If at
any time market conditions result in Patheons cost of Components or Packaging
Materials being materially greater than normal forecasted increases, then Patheon shall
be entitled to an adjustment to the fee for Manufacturing Services in respect of any
affected Product to compensate it for such increased Component or Packaging Material
costs. For the purposes of this clause (b), changes materially greater than normal
forecasted increases shall be considered to have occurred if: (i) the cost of a
Component or Packaging Material increases by [ ***]% of the cost
for that Component or Packaging Material upon which the most recent fee quote was
based; or (ii) the aggregate cost for all Components and Packaging Materials required
to manufacture a Product increases by [***]% of the total Component and
Packaging Material costs for such Product upon which the most recent fee quote was
based. To the extent that Component and Packaging Material costs have been previously
adjusted pursuant to Section 4.2 or this clause (b) to reflect an increase in the cost
of one or more Components or Packaging Materials, the adjustments provided for in (i)
and (ii) above shall operate based only on the
 
 ***
    
    Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the Mark). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Companys Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act. - 15 -




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actual materiel costs attributed to such Component(s) or Packaging Material(s) since
the time the last of such adjustments were made.(c)
    
    In connection with a fee adjustment request pursuant to this Section 4.3 and
subject to subsection (d), Patheon shall deliver to Avanir a revised Schedule B. Upon
delivery of such a request, each of Avanir and Patheon shall forthwith use all
Substantial Efforts to agree on a revised fee for the Manufacturing Services in respect
of each affected Product and Schedule B shall be amended accordingly. If the parties
are unable to reach agreement concerning adjustments to the Price, such dispute will be
resolved in accordance with Article 12. Until such time as dispute is resolved the
price per Product will be the most current mutually agreed upon Price.(d)
    
    Patheon shall make available to Avanir such budgetary pricing information or
other supporting documentation reasonably sufficient to demonstrate that a price
adjustment pursuant to Section 4.2(b) or (c) or Section 4.3 is justified. If such
information is subject to confidentiality obligations which prevents disclosure
directly to Avanir, Patheon shall make such information available to Avanirs external
auditors who shall (i) maintain such information in confidence pursuant to a
confidentiality agreement to be entered into directly with Patheon, and (ii) provided
the auditors mandate is limited to providing confirmation of the accuracy of the
information provided by Patheon in support of its requested fee adjustment.
 4.4 Adjustments Due to Technical Changes
  - 16 -




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4.5 Multi-Country Packaging Requirements.
  ARTICLE 5
 ORDERS, SHIPMENT, INVOICING, PAYMENT
 5.1 Orders and Forecasts
 Rolling Forecasts th
 Firm Orders Firm Orders
 - 17 -




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Three Year Forecast th
 Launch Period .
 5.2 Reliance by Patheon
  - 18 -




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5.3 Minimum Orders
  5.4 Shipments
 (a)
    
    Shipments of Products shall be made in accordance with Schedule H unless
otherwise mutually agreed. Risk of loss or of damage to Products shall remain with
Patheon until Products are loaded onto the carriers vehicle by Patheon for shipment at
the shipping point at which time risk of loss or damage shall transfer to Avanir.
Patheon shall, in accordance with Avanirs instructions and as agent for Avanir, (i)
arrange for shipping to be paid by Avanir and (ii) at Avanirs risk and expense, obtain
any export license or other official authorization necessary to export the Products.
Avanir shall arrange for insurance and shall select the freight carrier used by Patheon
to ship Products and may monitor Patheons shipping and freight practices as they
pertain to this Agreement. Products shall be transported in accordance with the
Specifications.(b)
    
    Firm Orders shall specify the requested shipment dates for the Product and
Patheon shall use commercially reasonable efforts to meet those dates and quantities,
subject to Avanir satisfying its obligations in respect of such Firm Orders including,
without limitation, providing the Active Materials. If Patheon learns that there may
be a late shipment, Patheon shall promptly notify Avanir, and Patheon and Avanir shall
cooperate to ensure that such late shipment is completed as soon as possible following
the requested shipment date. Patheon may, at its sole discretion, produce Product up
to, but not beyond sixty (60) days prior to the requested shipment date in order to
accommodate fluctuations in production demands, provided that Patheon shall be
responsible for the
 - 19 -




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##### 



warehousing of such Product until the shipment date specified in the applicable Firm
Order.(c)
    
    Upon completion of manufacturing, packaging and testing of Product pursuant to
each purchase order, Patheon will deliver to Avanir by electronic means quality
documentation for such Product manufactured pursuant to such purchase order as
specified in the Quality Agreement, including without limitation, the Certificates of
Compliance in respect of such purchase order and, if requested by Avanir, completed
Batch production records (collectively, the Pre-shipping Documentation). Patheon
acknowledges and agrees that Avanir will be responsible, at all times, for the final
release of the Product, which Avanir shall perform in accordance with the terms and
timelines set out in the Quality Agreement. Patheon will not ship any Product until
Avanir has notified Patheon in writing that it has completed its final release.
Concurrent with the shipment of each purchase order of Product, Patheon will deliver to
Avanir any applicable 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.
 5.5 Scheduled Shipment Dates and Late Shipments
 (a)
    
    Patheon shall notify Avanir within five (5) days of receipt of Avanirs
purchase order for Products if the delivery date stipulated by Avanir in such purchase
order needs to change before it can be accepted by Patheon. The delivery date
ultimately agreed to by the parties (the Scheduled Shipment Date) shall be reflected
on the purchase order accepted by Patheon.(b)
    
    If Patheon anticipates that a Batch of Products will not be shipped on its
Scheduled Shipment Date, Patheon shall immediately notify Avanir and the parties shall
confer by telephone, as soon as possible, but no later than ten (10) days after such
notification to discuss the facts surrounding the missed delivery date and any issues
which may need to be addressed to avoid further missed delivery dates.(c)
    
    In the event that Patheon fails to ship *** shipments of
Products within a *** period on a timely basis in accordance with the Scheduled
Shipment Date (Late Shipments), for any reason (other than a force majeure), then
Avanir may, at its option, require that a meeting be immediately scheduled between
Patheon and
 
 ***
    
    Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the Mark). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Companys Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act. - 20 -




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Avanirs senior operating management to adopt a mutually agreeable plan to prevent
any further Late Shipments. If senior operating management is unable to agree on a
plan within fifteen (15) days from their initial meeting, the matter shall be
escalated to Patheon and Avanirs senior management for resolution. If the parties
are unable to arrive at a mutually acceptable resolution to the issue of Late
Shipments within a further fifteen (15) day period, Avanir will no longer be bound
by the purchase requirements of Section 2.1.
 5.6 Invoices and Payment
  ARTICLE 6
 PRODUCT CLAIMS AND RECALLS
 6.1 Product Claims
 Product Claims Deficiency Notice th
 Determination of Deficiency
 - 21 -




---



##### 



th th
 Shortages
 6.2 Product Recalls and Returns
 Records and Notice
 Recalls
 Product Returns
 - 22 -




---



##### 



6.3 Patheons Responsibility for Defective and Recalled Products.
    - 23 -




---



##### 



6.4 Disposition of Defective or Recalled Products
  6.5 Customer Questions and Complaints
  6.6 Sole Remedy
  ARTICLE 7
 CO-OPERATION
 7.1 Quarterly Review
  - 24 -




---



##### 



7.2 Governmental Agencies
  7.3 Records and Accounting by Patheon
  7.4 Inspections
  7.5 Access
  - 25 -




---



##### 



7.6 Reports
 (a)
    
    Patheon will supply on an annual basis all Product data, including release test
results, complaint test results, all investigations (in manufacturing, testing and
storage), and the like, that Avanir reasonably requires in order to complete any filing
under any applicable regulatory regime, including any annual report that Avanir is
required to file with the FDA.(b)
    
    At Avanirs request and subject to an additional fee to be agreed by the
parties, Patheon may prepare annual product reports on behalf of Avanir and in
accordance with Avanirs instructions.(c)
    
    Patheon will provide Avanir with electronic work-in-process reports (WIP
Reports) on a monthly basis. The WIP Reports will include at a minimum: (i) the type,
quantity and Batch number of Products at each stage of production, (ii) the remaining
number of Products ready for shipment (by purchase order number and invoice) and (iii)
delivery dates. The format of the WIP Reports will be determined in good faith by the
parties.
 7.7 FDA Filings
 FDA Filings
 Verification of Data
 Verification of CMC CMC NDA ANDA
 - 26 -




---



##### 



Communications
 7.8 Continuous Improvement
  7.9 Further Actions
  7.10 Disaster Recovery Plan
 IT Business Continuity Planning Guidelines, .
 - 27 -




---



##### 



ARTICLE 8
 TERM AND TERMINATION
 8.1 Initial Term
 Initial Term
 8.2 Termination for Cause
 Remediation Period Breach Notice
   8.3 Product Discontinuation
  - 28 -




---



##### 



8.4 Obligations on Termination
  (a)
    
    Avanir shall take delivery of and pay for all undelivered Products that are
manufactured and/or packaged pursuant to a Firm Order, at the price in effect at the
time the Firm Order was placed;(b)
    
    Avanir shall purchase, at Patheons cost (including all costs incurred by
Patheon in connection with the purchase and handling of such Inventory), the Inventory
applicable to the Products which was purchased, produced or maintained by Patheon in
contemplation of filling Firm Orders or in accordance with Section 5.2 prior to notice
of termination being given;(c)
    
    if the termination was for a reason other than for Patheons breach, Avanir
shall satisfy the purchase price payable pursuant to Patheons orders with suppliers of
Components and Packaging Materials, provided such orders were made by Patheon in
reliance on Firm Orders or in compliance with Section 5.2;(d)
    
    Patheon shall return to Avanir all unused Active Materials (with shipping and
related expenses, if any, to be borne by Avanir);(e)
    
    Patheon will cooperate with Avanir and assist in the transfer to Avanir of all
relevant legal and technical documents concerning the Active Materials and 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 Avanir to source Products
from other qualified Third Parties;(f)
    
    Avanir will surrender to Patheon, or, at Patheons sole option and expense,
Avanir will destroy and provide Patheon with a certificate signed by a Responsible
Executive of Avanir attesting to the destruction of, all copies of any Confidential
Information of Patheon in its possession) subject to Avanirs right to maintain copies
of such Confidential Information to the extent required to be maintained by Avanir
pursuant to Applicable Laws or this Agreement; and(g)
    
    Patheon will surrender to Avanir, or, at Avanirs sole option and expense,
Patheon will destroy and provide Avanir with a certificate signed by a Responsible
Executive of Patheon attesting to the destruction of, all copies of any Confidential
Information provided by Avanir pursuant to this Agreement (except to the extent
required to be maintained by Patheon pursuant to Applicable Laws or this Agreement).
 - 29 -




---



##### 



8.5 Continuation of Performance
  8.6 Transition Subsequent to Termination
 ***
 
 ***
    
    Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the Mark). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Companys Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act. - 30 -




---



##### 



ARTICLE 9
 REPRESENTATIONS, WARRANTIES AND COVENANTS
 9.1 Authority
  9.2 Avanir Warranties
 Avanir covenants, represents and warrants that:(a)
    
    the Specifications for each of the Products are its or its Affiliates property
and that Avanir may lawfully disclose the Specifications to Patheon;(b)
    
    any Intellectual Property, other than Patheon Intellectual Property, delivered
by Avanir to be utilized by Patheon in connection with the provision of the
Manufacturing Services according to the Specifications (i) is Avanirs or its
Affiliates unencumbered property, (ii) may, to the best of Avanirs knowledge, be
lawfully used as permitted and directed by Avanir, and (iii) such use, to the best of
Avanirs knowledge, does not infringe and will not infringe any Third Party Rights;(c)
    
    the use or other disposition of any Product by Patheon as may be required to
perform its obligations under this Agreement does not and will not , to the best of
Avanirs knowledge, infringe any Third Party Rights;(d)
    
    Avanir has received no notice of any actions or other legal proceedings
asserting the infringement of Third Party Rights related to any of the Specifications,
or any of the Active Materials, or the sale, use or other disposition of any Product
made in accordance with the Specifications;(e)
    
    the Specifications for all Products conform to all applicable cGMPs and
Applicable Laws; and(f)
    
    the Products, if labelled and manufactured in accordance with the
Specifications and in compliance with applicable cGMPs, upon receipt of all necessary
Regulatory Approvals, (i) may be lawfully sold and distributed in every jurisdiction in
which Avanir markets such Products, and (ii) will be safe for human consumption.
 - 31 -




---



##### 



9.3 Patheon Warranties
           - 32 -




---



##### 



9.4 Debarred Persons
 Federal Food, Drug and Cosmetic Act
 9.5 Permits
  9.6 No Warranty
 PATHEON MAKES NO WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED, BY FACT OR LAW, OTHER THAN
THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT. PATHEON MAKES NO WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE OR WARRANTY OF MERCHANTABILITY WITH RESPECT TO THE PRODUCTS.
 ARTICLE 10
 REMEDIES AND INDEMNITIES
 10.1 Consequential Damages
  10.2 Maximum Liability
  - 33 -




---



##### 



Volume of  [***] Bulk [***] Capsules
    
    Maximum Liability Cap0  [***] million capsules
    
    $[***][***]  [***] million capsules
    
    $[***]Over [***] million capsules
    
    $[***]
 10.3 Patheon
  10.4 Avanir
  
 ***
    
    Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the Mark). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Companys Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act. - 34 -




---



##### 



10.5 Indemnification Procedure .
  (a)
    
    The Indemnitee will 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 will also provide such papers and documents
to the Indemnitee. The Indemnitee will reasonably cooperate with the Indemnitor in
defending against any Claims.(b)
    
    The Indemnitor will 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 will promptly notify the Indemnitee in writing (but in no event more
than 30 days after the Indemnitors receipt of notice of the Claim) that the Indemnitor
intends to 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.(c)
    
    If the Indemnitor assumes the defense of the Claim as provided in this
Section10.5, the Indemnitee may participate in such defense with the
Indemnitees own counsel who will be retained, at the Indemnitees sole cost and
expense; provided, however, that neither the Indemnitee nor the Indemnitor will 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 will 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 will have the
right, upon written notice to the Indemnitee within five 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
 - 35 -




---



##### 



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 will cease.(d)
    
    The Indemnitor will 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.
 10.6 Reasonable Allocation of Risk
  ARTICLE 11
 CONFIDENTIALITY
 11.1 Confidentiality
  - 36 -




---



##### 



11.2 Confidentiality Exceptions
  (a)
    
    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, other than as a result of the
Receiving Partys breach of any legal obligation;(b)
    
    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;(c)
    
    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(d)
    
    To have been subsequently independently developed by the Receiving Party
without use of or reference or access to the Disclosing Partys Confidential
Information as evident from the Receiving Partys written records.
 11.3 Authorized Disclosure
  11.4 Return Of Confidential Information
  - 37 -




---



##### 



11.5 Equitable Relief
  ARTICLE 12
 DISPUTE RESOLUTION
 12.1 Commercial Disputes
  12.2 Technical Dispute Resolution
 Technical Dispute
 - 38 -




---



##### 



12.3 Arbitration
 .
 ARTICLE 13
 MISCELLANEOUS
 13.1 Intellectual Property
   - 39 -




---



##### 



13.2 Inventions
  - 40 -




---



##### 



13.3 Assistance
  13.4 Trademarks and Trade Names
  13.5 Insurance
 ***
 
 ***
    
    Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the Mark). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Companys Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act. - 41 -




---



##### 



13.6 Independent Contractors
  13.7 No Waiver
  13.8 Assignment
 (a)
    
    Patheon may not assign this Agreement or any of its rights or obligations
hereunder except with the written consent of Avanir, such consent not to be
unreasonably withheld; provided, however, that upon prior written consent from Avanir,
Patheon may arrange for subcontractors to perform specific testing services for
Products and Components arising under this Agreement; provided that (1) all such
subcontractors will be duly qualified by Patheon under GMP and Applicable Laws to
perform such testing; (2) Patheon will at all times remain fully responsible to Avanir
for the performance of all obligations pursuant to this Agreement related to such
subcontracted testing services; and (3) no subcontractors will be utilized to perform
release testing of the Product.(b)
    
    Subject to Section 8.2(c), Avanir may assign this Agreement or any of its
rights or obligations hereunder without approval from Patheon; provided, however, that
Avanir shall give prior written notice of any assignment to Patheon, any assignee shall
covenant in writing with Patheon to be bound by the terms of this Agreement and Avanir
shall remain liable for its accrued obligations under this Agreement up and until the
effective date of such assignment. Any partial assignment will be subject to a cost
review of the assigned Products by Patheon and is subject to assignee and Patheon
reaching agreement as to revisions, if any,
 - 42 -




---



##### 



to the fees, failing such agreement,
Patheon may terminate this Agreement on twelve (12) months prior written notice to the
assignee.
 (c)
    
    Notwithstanding the foregoing provisions of this Section 13.8, either party may
assign this Agreement to any of its Affiliates or to a successor to or purchaser of all
or substantially all of its business, provided that such assignee executes an
agreement with the non-assigning party hereto whereby it agrees to be bound
hereunder.
 13.9 Force Majeure
  13.10 Additional Product
  13.11 Notices
  - 43 -




---



##### 



13.12 No Publicity
  - 44 -




---



##### 



13.13 Severability
  13.14 Entire Agreement
  13.15 Other Terms
  13.16 No Third Party Benefit or Right
  13.17 Execution in Counterparts
  - 45 -




---



##### 



13.18 Governing Law
   PATHEON INC.by
    
    /s/ STEVEN LIBERTYSteven LibertybyAVANIR PHARMACEUTICALSby
    
    /s/ JAMES. E. BERGJames E. Bergby
 - 46 -




---



##### 



FINAL
 SCHEDULE A
 PROCEDURE FOR PROVISION AND ACCEPTANCE OF PRODUCT SPECIFICATIONS




---



##### 



SCHEDULE B
 ANNUAL VOLUME, RUN QUANTITY AND FEES
 TIERED PRICING SCHEDULE
 ***
 Annual Volume
    
    
    
    Run Quantity
    
    Price per Bulk(million capsules)
    
    Run Quantity (units*)
    
    (Batches**)
    

1000s in USD***
    
    ***
    
    ***
    
    $******
    
    ***
    
    ***
    
    $******
    
    ***
    
    ***
    
    $***Over [***]
    
    ***
    
    ***
    
    $***
 For the purpose of the above chart one unit is equivalent to [
 
  a.
    
    The estimated Batch size is [***] capsules.b.
    
    Quoted prices include all Components, Packaging Materials, and Manufacturing Services
used to produce Products with the exception of Active Materials or bill-back items as
specified in the Manufacturing Services Agreement between the parties.c.
    
    Post-commercial stability cost is not included in these prices
 
 ***
    
    Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the Mark). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Companys Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act. - 2 -




---



##### 



FINAL
 SCHEDULE C
 STABILITY TESTING




---



##### 



FINAL
 SCHEDULE D
 ACTIVE MATERIALS
 Active Material
    
    SupplierDextromethorphan Hydrobromide
    
    Avanir PharmaceuticalsQuinidine Sulfate
    
    Avanir Pharmaceuticals




---



##### 



FINAL
 SCHEDULE E
 BATCH NUMBERING AND EXPIRATION DATES




---



##### 



FINAL
 SCHEDULE F
 TECHNICAL DISPUTE RESOLUTION
  Appointment of Expert
 Conflicts of Interest
 Not Arbitrator Arbitration Act
 Procedure
 (a)
    
    Timing. The expert shall be so appointed on condition that (i) he
promptly fixes a reasonable time and place for receiving representations, submissions
or information from the parties and that he issues such authorizations to the parties
and any relevant Third Party for the proper conduct of his determination and any
hearing and (ii) he renders his decision (with full reasons) within 15 Business Days
(or such other date as the parties and the expert may agree) after receipt of all
information requested by him pursuant to paragraph 4(b) hereof.(b)
    
    Disclosure of Evidence. The parties will provide to any expert all
such evidence and information within their respective possession or control as the
expert may reasonably consider necessary for determining the matter before him which
they shall disclose promptly and in any event within five Business Days of a written
request from the relevant expert to do so.(c)
    
    Advisors. Each party may appoint such counsel, consultants and
advisors as it feels appropriate to assist the expert in his determination and so as to
present their




---



##### 



respective cases so that at all times the parties shall co-operate and
seek to narrow and limit the issues to be determined.
 (d)
    
    Appointment of New Expert. If within the time specified in paragraph
4(a) above the expert shall not have rendered a decision in accordance with his
appointment, a new expert may (at the request of either party) be appointed and the
appointment of the existing expert shall thereupon cease for the purposes of
determining the matter at issue between the parties save that if the existing expert
renders his decision with full reasons prior to the appointment of the new expert, then
such a decision shall have effect and the proposed appointment of the new expert shall
be withdrawn.(e)
    
    Final and Binding. The determination of the expert shall, save in the
event of fraud or manifest error, be final and binding upon the parties.(f)
    
    Costs. Each party shall bear its own costs in connection with any
matter referred to an expert hereunder and, in the absence of express provision in the
Agreement to the contrary, the costs and expenses of the expert shall be shared equally
by the parties.
  - 2 -




---



##### 



SCHEDULE G
 FORM OF QUALITY AGREEMENT




---



##### 



SCHEDULE H
 SHIPPING LOGISTICS PROTOCOL
  Exports of Products from Canada to the United States
 1.
    
    Export terms shall be FCA (as such term is defined in INCOTERMS 2000), the Manufacturing
Site.2.
    
    Avanir, as the importer of record into the United States, shall advise Patheon prior to
export of the Products from Canada of Avanirs designated customs broker and freight forwarder
to enable Patheon to complete all applicable shipping documentation.




---



##### 



[AVANIR LETTERHEAD]
 Form of Logistics Routing Guide
 
 
 1.
    
    Routine Routing/Shipping Instructions
 [PRODUCT NAME] [INSERT
DESTINATION NAME AND ADDRESS].
 AGENTS
 §
    
    Freight forwarder
    
    Contact:
    
    PH: ( )§
    
    Customs broker
    
    Contact:
    
    PH: ( )
 [AVANIR CONTACT INFO].
  §
    
    Pro forma Invoice§
    
    Bill of Lading (B/L)§
    
    Applicable Permits/Declarations§
    
    Packing List§
    
    If eligible, NAFTA Certificate of Origin will be provided in blanket form yearly to
Avanir Pharmaceuticals or Avanir Pharmaceuticalss broker.
  §
    
    [INSERT AVANIR CONTACT FAX OR EMAIL]
 Freight is shipped to:
 [INSERT DESTINATION NAME AND ADDRESS]




---



##### 



Information to be provided on Pro forma Invoice.
 §
    
    Net Quantity§
    
    Patheon Code & Batch Number§
    
    Avanir Batch Number/ Purchase Order (PO)Number§
    
    $ / Unit Including Assist Value (Active Materials Usage) & Toll Manufacturing Charge§
    
    HTS (Harmonize Tariff Schedule)#§
    
    NDC/IND/ANDA§
    
    FDA Product Code§
    
    Ship Date§
    
    Patheon Bill of Lading Number§
    
    Gross Weight§
    
    Number of Pallets
 Assist Values:
 §
    
    [INSERT ACTIVE MATERIALS NAME]$/kg.
 Note:
 Information to be provided on Bill of Lading:
 §
    
    B/L Number§
    
    Carrier§
    
    Origin Point§
    
    Shipper Information§
    
    Consignee§
    
    Consignee Address§
    
    Ship Date§
    
    Number of Pallets§
    
    Gross Weight§
    
    PO Number for each Product/Batch§
    
    Description of Goods Indication PC, Batch Number Quantity§
    
    Seal Number§
    
    Freight Terms (EXW or FCA)§
    
    Carrier Signature
 Information to be provided on Packing List:
 §
    
    Ship date




---



##### 



§
    
    Bill of Lading Number§
    
    Number of Pallets§
    
    Weight§
    
    Product Description§
    
    Patheon Code Number, if applicable§
    
    Patheon Batch Number, if applicable§
    
    Number of Full Cartons (drums if bulk) x Quantity Per Carton§
    
    Number of Partial Cartons (drums if bulk) x Quantity Per Carton§
    
    Total Number of Cartons with Total Quantity Shipped
 2. Non-Routine Routing/Shipping Instructions
   AVANIR PHARMACEUTICALS
 AUTHORIZED SIGNATORY




---



##### 



SCHEDULE I
 ACTIVE MATERIAL REIMBURSEMENT VALUE
  ACTIVE MATERIALREIMBURSEMENT VALUEPRODUCT
    
    ACTIVE MATERIAL
    
    ($USD)**** Bulk [***]
    
    Dextromethorphan
Hydrobromide
    
    $[***] per kilogramQuinidine Sulfate
    
    $[***] per kilogram
 
 *
    
    These prices are subject to change. The parties shall amend this Schedule I to reflect any
change in the price of the Active Materials charged by Avanirs suppliers, provided satisfactory
documentation of such change is provided to and accepted by Patheon.***
    
    Certain confidential
portions of this Exhibit were omitted by means of blackout of the
text (the Mark). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the
Companys Application Requesting Confidential Treatment under Rule
24b-2 under the 1934 Act.




---



##### 



SCHEDULE J
 QUARTERLY ACTIVE MATERIALS INVENTORY REPORT
 TO:
    
    AVANIR PHARMACEUTICALSFROM:
    
    PATHEON INC.RE:
    
    Active Materials quarterly inventory report pursuant to Section
2.2(a) of the Manufacturing Services Agreement dated as of
December 16, 2005 (the Agreement)
 Reporting quarter:Active Materials on hand
at beginning of quarter:
    
    
    
    kg     (A)Active Materials on hand
at end of quarter:
    
    
    
    kg     (B)Quantity Received during quarter:
    
    
    
    kg     (C)Quantity Dispensed1 during quarter:
(A + C  B)
    
    
    
    kgQuantity Converted during quarter:
    
    
    
    kg(total Active Materials in Products produced)
  DATE:PATHEON INC.Per:Name:Title:
 
 1
    
    Excludes any Active Material received or
consumed in connection with technical transfer activities or development
activities, including, without limitation, any regulatory, stability,
validation or test batches manufactured during the month.




---



##### 



FINAL
 SCHEDULE K
 REPORT OF ANNUAL ACTIVE MATERIAL INVENTORY RECONCILIATION AND CALCULATION OF ACTUAL ANNUAL YIELD
 TO:
    
    AVANIR PHARMACEUTICALSFROM:
    
    PATHEON INC.RE:
    
    Active Materials annual inventory reconciliation report and
calculation of Actual Annual Yield pursuant to Section 2.2(a) of
the Manufacturing Services Agreement dated as of December 16,
2005 (the Agreement)
 Reporting Year ending:Active Materials on hand
at beginning of Year:
    
    kg
    
    (A)Active Materials on hand
at end of Year:
    
    kg
    
    (B)Quantity Received during Year:
    
    kg
    
    (C)Quantity Dispensed2 during Year:
(A + C  B)
    
    kg
    
    (D)Quantity Converted during Year:
(total Active Materials in Products produced)
    
    kg
    
    (E)Active Materials Reimbursement Value:
    
    $/ kg
    
    (F)Target Yield:
    
    %
    
    (G)Actual Annual Yield:
(( E / D) * 100)
    
    %
    
    (H)Allowable Loss Factor
    
    %
    
    (I)Shortfall:
(((G  I- H) / 100) * F * D)
    
    $ 
(if a negative number,
    
    (J)insert zero)
 
 2
    
    Excludes any Active Material received or
consumed in connection with technical transfer activities or development
activities, including, without limitation, any regulatory, stability,
validation or test Batches manufactured during the Year.




---



##### 



PATHEON INC.Per:Name:Title:




---



##### 



FINAL
 SCHEDULE L
 FORM OF WORK ORDER
 
 WORK ORDER
UNDER
MANUFACTURING SERVICES AGREEMENT
DATED AS OF DECEMBER 16, 2005
 WORK ORDER # 
 1. Parties:
    
    Patheon Inc. & Avanir Pharmaceuticals2. Product:
    
    3. Contract:
    
    This Work Order is governed by the terms of the
Manufacturing Services Agreement between the parties dated
December 16, 2005.4. Description of Services:
    
    See Project Scope (Part A).5. Payment and Currency:
    
    See Budget Summary (Part B).6. Additional Schedules:7. Effective Date:
    
    , 2008. Term of Work Order:
 Patheon Inc.
    
    
    
    Avanir PharmaceuticalsBy:
    
    
    
    
    
    By:Name:
    
    
    
    
    
    Name:Title:
    
    
    
    
    
    Title:




---



##### 



Part A: Project Scope




---



##### 



Part B: Budget Summary