exv10w10





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 direct or cause the direction of management or policies of
the entity in













 




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.



3









 





     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 such



15









 




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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and filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.




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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,



24









 




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




25









 








          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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28









 









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:



29









 





          (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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33









 










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






34









 






	 	 	 	 	 
	 

	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 held to be invalid or



35









 




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.



36









 





     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










37









 








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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