Document:

exv10w1

 

Exhibit 10.1

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.

AMENDED AND RESTATED MANUFACTURING AND SUPPLY AGREEMENT

     THIS AMENDED AND RESTATED MANUFACTURING AND SUPPLY AGREEMENT (the “Agreement”) is made
effective as of the 19th day of December, 2006 (the “Effective Date”) by and between Santarus,
Inc., a Delaware corporation, having offices at 10590 West Ocean Air Drive, Suite 200, San Diego,
California 92130, U.S.A. (“Santarus”) and Patheon Inc., a corporation incorporated under the laws
of Canada, having offices at 7070 Mississauga Road, Suite 350, Mississauga, Ontario L5N 7J8, CANADA
(“Patheon”) and replaces in its entirety the Manufacturing and Supply Agreement entered into
between Santarus and Patheon on December 19, 2003, 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 pharmaceutical 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 its SAN-05 immediate release omeprazole pharmaceutical product;

     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 Santarus’ SAN-05 product.

     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 [***] or more of the voting interests or other
ownership interests in the entity in question; (b) direct or indirect ownership of [***] 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).

 

			
	 
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     1.2
“Annual API Cap” means a dollar amount not to exceed $[***] in any calendar year.

     1.3 “API” means the active pharmaceutical ingredient known as omeprazole (Chemical Abstract
No. 73590-58-6).

     1.4 “API Reimbursement Value” means [***].

     1.5 “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 Product or any applicable Patheon manufacturing facilities,
including without limitation, the laws of the Province of Ontario and the laws of Canada applicable
therein; GMP, 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.

     1.6 “Bulk API” means the bulk form of API manufactured by a Third Party manufacturer and
provided to Patheon for use in manufacturing the Finished Product in accordance with the terms and
conditions of this Agreement.

     1.7 “Business Day” means any day other than a Saturday, Sunday or statutory holiday in
Ontario, Canada or San Diego, California.

     1.8 “Capital Agreement” has the meaning set forth in Section 14.1.

     1.9 “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 API 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, GMP 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.

     1.10 “Commencement of Commercial Manufacturing” means August 19, 2004.

     1.11 “Deficiency Notice” has the meaning set forth in Section 3.5.1.

 

			
	 
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     1.12 “Effective Date” has the meaning specified on the first page of this Agreement.

     1.13 “Existing Lines Capacity” has the meaning set forth in Section 2.2.4.

     1.14 “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.

     1.15 “FDA” means the United States Food and Drug Administration, and any successor thereto.

     1.16 “FFDCA” means the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 321 et seq., as
amended.

     1.17 “Financial Penalty” has the meaning set forth in Section 2.7.

     1.18 “Finished Product” means Santarus’ SAN-05 immediate-release omeprazole pharmaceutical
product, as more particularly described in the Specifications.

     1.19 “Firm Purchase Order” has the meaning set forth in Section 2.2.3.

     1.20 “Forecast” has the meaning set forth in Section 2.2.2.

     1.21 “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.

     1.22 “GMP” means current good manufacturing practices applicable in Canada and the United
States of America as described in:

(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.

     1.23 “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.

     1.24 “INDA” means an investigational new drug application.

     1.25 “Initial Term” has the meaning set forth in Section 11.1.

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     1.26 “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.

     1.27 “Laws” means all laws, statutes, ordinances, regulations, rules, by-laws, judgments,
decrees or orders of any Government Authority.

     1.28 “Lines” has the meaning set forth in Section 2.2.4.

     1.29 “Long Forecast” has the meaning set forth in Section 2.2.2.

     1.30 “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.

     1.31 “NDA” means a New Drug Application filed with the FDA for marketing approval for a
pharmaceutical product.

     1.32 “Other Invention” has the meaning set forth in Section 9.1.

     1.33 “Patheon Manufacturing Responsibilities” has the meaning specified in Section 3.1 of this
Agreement.

     1.34 “Patheon Supply Commitment” has the meaning set forth in Section 2.2.4.

     1.35 “Price” means the price for the manufacture and supply of Finished Product under this
Agreement specified in the pricing structure set forth in Exhibit B, as may be amended from time to
time in accordance with Section 6.2 of this Agreement.

     1.36 “Product Invention” has the meaning set forth in Section 9.1.

     1.37 “Product Patents” means (i) United States patents 6,645,988, 6,699,885, 6,780,882,
6,489,346 and 5,840,737, (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.

     1.38 “Quality Agreement” means that certain Quality Agreement dated February 9, 2004, by and
between the Parties.

     1.39 “Raw Materials” has the meaning set forth in Section 7.1.

     1.40 “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

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jurisdiction, and (b) where relevant, pricing approvals necessary to obtain reimbursement from
a Government Authority.

     1.41 “Renewal Term” has the meaning set forth in Section 11.1.

     1.42 “Responsible Executive” means the President or the Chief Executive Officer of a Party, or
his or her designated representative.

     1.43 “Santarus Exclusivity Commitment” has the meaning set forth in Section 2.1.

     1.44 “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.

     1.45 “Term” means the Initial Term and the Renewal Term.

     1.46 “Territory” means the United States of America.

     1.47 “Third Party” means any individual or entity other than Patheon or Santarus or their
respective Affiliates.

     1.48
“unit”, in reference to Finished Product, means a single packet/dose of such Finished
Product.

ARTICLE 2

SUPPLY, STORAGE, AND DELIVERY OF FINISHED PRODUCT

     2.1 Supply of Finished Product. During the Term, subject to the Patheon Supply Commitment (as
defined in Section 2.2.4), Patheon shall manufacture and supply, in accordance with the provisions
of this Agreement, the Specifications, GMP and Applicable Laws, [***].

     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
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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 June 30 in each calendar year, Santarus shall provide Patheon with a written
non-binding three-year forecast (the “Long Forecast”) (broken down by quarters for the second and
third years of the forecast) of the volume of Finished Product Santarus then anticipates will be
required to be produced and delivered by Patheon to Santarus during the three-year 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, consistent with Patheon’s Supply Commitment.

          2.2.4 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 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
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 Products. Santarus may select the freight carrier used by Patheon to ship
Finished Products and may monitor Patheon’s shipping and freight practices as they pertain to this
Agreement. Finished Products shall be transported in accordance with the Specifications, GMP 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

 

			
	 
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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 Products and risk of loss or of damage to Finished Products shall
remain with Patheon until Finished Products 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 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 API 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. Subject to the Patheon Supply Commitment, 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

 

			
	 
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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 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 [***]. 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 [***]:

	 	(i)	 	[***];
	 
	 	(ii)	 	[***];
	 
	 	(iii)	 	[***];
	 
	 	(iv)	 	[***];
	 
	 	(v)	 	[***]; or
	 
	 	(vi)	 	[***].

     2.8 Key Performance Indicators.

          2.8.1 For each [***] period during the Term, Patheon shall meet or exceed the 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 current KPIs are set
forth in Exhibit C, and the parties mutually agree to 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 site director and the Director of Contracting of Santarus shall meet within
[***] days of the determination of the sustained failure in order to establish a procedure to
address the problem (the “Remediation Plan”). If such meeting 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;

 

			
	 
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               (ii) Patheon’s Senior Vice President, Canadian Operations and Santarus’ Senior Vice President,
Product Development and Manufacturing will meet within [***] days of the Stage 1 Failure in order
to establish a Remediation Plan. If such meeting 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 meet 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:

     (i) Santarus’ failure to have delivered to Patheon adequate supplies of Bulk API;

     (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 API Reconciliation and Yield.

 

			
	 
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          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 monthly
basis the inventory of Bulk API held by Patheon and Patheon shall provide Santarus with a monthly
inventory report (within [***] Business Days following the last day of the applicable month) of the
Bulk API held by Patheon, which shall contain the following information for such month:

Quantity Received: The total quantity of Bulk API that complies with the Specifications and
is received at the Facility during the applicable period.

Quantity Dispensed: The total quantity of Bulk API dispensed is calculated by adding the
Quantity Received to the inventory of Bulk API that complies with the Specifications and is
held at the beginning of the applicable period, less the inventory of Bulk API that complies
with the Specifications at the end of the applicable period.

Quantity Converted: The total quantity of Bulk API contained within Finished Product
batches released and shipped during the applicable period.

          2.11.2 Quarterly Physical Inventory. In addition, Patheon shall reconcile the
physical inventory of Bulk API and Finished Product held by Patheon on a quarterly basis to the
quarter-end inventory status reports and shall provide a report to Santarus concerning such
reconciliation within [***] Business Days following the end of the applicable calendar quarter.

          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 D for each of the following Finished Product sku’s, 20 mg 30’s, 40 mg 3’s, 40mg 5’s
and 40mg 30’s (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 API calculated in accordance with this Section 2.11.3 in a year
shall not exceed, in the aggregate, the Annual API 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 API Losses.

(i) Patheon shall notify Santarus in writing in the event that an amount of [***]
kilograms or more of Bulk API is damaged, lost or otherwise rendered unusable at any
one time (a “Significant API Loss”) as soon as practicable following such incident.
In addition, and notwithstanding any provision in this Section 2.11 to

 
 

			
	 
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the contrary, Patheon shall reimburse Santarus for such Bulk API at the API
Reimbursement Value within [***] days after discovery of the Significant API Loss.
For clarity, amounts paid for Significant API Loss must be counted towards Annual
API Cap, however for the purposes of calculating the Annual Average Yield under
Section 2.11.3, all API reimbursed to Santarus pursuant to this Section shall be
removed from the Quantity Received and Quantity Dispensed totals.

(ii) Patheon shall notify Santarus in writing in the event that a batch of
intermediate or Finished Product is potentially nonconforming as soon as practical,
and in any event, within [***] days following discovery thereof. Upon discovery of
such potentially nonconforming product, Patheon shall initiate an investigation to
reach a final determination. If the investigation results in a determination that
such product is nonconforming, Patheon shall reimburse Santarus for the Bulk API in
such product at the API Reimbursement Value within [***] days of the determination.
If there is a disagreement between the Parties as to whether product is
nonconforming, the Parties shall follow the procedures outlined in Section 3.5.2 for
submitting the product to an independent laboratory for final determination.
Notwithstanding the foregoing, a final determination of whether product is
nonconforming shall be made within [***] days of discovering potentially
nonconforming product and if a final determination is not made within such time
period for reasons within Patheon’s control, Patheon shall immediately reimburse
Santarus for any Bulk API in such potentially nonconforming product at the API
Reimbursement Value.

     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, GMP, Applicable Laws and 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.”

 

			
	 
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     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
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 API received at the Facility within [***] days of such receipt. Further, Patheon shall
conduct full release testing of all Bulk API 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 API to conform to the Specifications for same, and any other
problem it may identify with the Bulk API 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 API and Raw Materials to perform at
least full duplicate quality control testing. Retained repository samples of all shipped Finished
Product, Bulk API and Raw Materials shall be maintained in a suitable storage facility until one
(1) year after expiry 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 GMP 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
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 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.

     3.5 Acceptance Procedures.

          3.5.1 Finished Product Claims. Santarus has the right to reject any portion of any
shipment of Finished Products that deviates from the Patheon Manufacturing

 

			
	 
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Responsibilities, without invalidating any remainder of such shipment. Santarus or its agent
shall visually inspect the Finished Products manufactured by Patheon upon receipt thereof and shall
give Patheon written notice (a “Deficiency Notice”) of all claims for Finished Products 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 the Santarus’
receipt of Patheon’s notice as to whether any Finished Products identified in the Deficiency Notice
deviate from the Patheon Manufacturing Responsibilities, then the Parties shall mutually select an
independent laboratory to evaluate if the Finished Products deviate from the Patheon Manufacturing
Responsibilities. Such evaluation shall be binding on the Parties, and if such evaluation
certifies that any Finished Products deviate from the Patheon Manufacturing Responsibilities,
Santarus may reject those Finished Products in the manner contemplated in this Section 3.5. If
such evaluation does not so certify in respect of any such Finished Products, then Santarus shall
be deemed to have accepted delivery of such Finished Products 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 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. In the event Santarus rejects Finished Products in
accordance with this Section 3.5 and the rejected Finished Product is determined not to conform to
the Patheon Manufacturing Responsibilities, Patheon will credit Santarus’ account for Patheon’s
invoice price to Santarus for such non-conforming Finished Products. If Santarus shall have
previously paid for such defective Finished Products, Patheon shall promptly, at Santarus’
election, either: (i) refund the invoice price for such defective Finished Products; (ii) offset
such amount against other amounts due to Patheon hereunder; or (iii) replace such Finished Products
with conforming Finished Products as soon as reasonably possible without Santarus being liable for
payment therefor under Section 6.3, contingent upon the receipt from Santarus of all API required
for the manufacture of such replacement Finished Products. Further, Patheon shall reimburse
Santarus for all reasonable shipping, handling and storage charges incurred in association with
such non-conforming Finished Product and for the Bulk API utilized in such non-conforming Finished
Product in accordance with Section 2.11.4. Nothing in this Section 3.5.3 shall be construed to
limit the rights and remedies available to Santarus at law or in equity.

 

			
	 
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     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
GMP, 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 specified in Exhibit B necessitated by any such amendment. 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 Products 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 GMP 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.

     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

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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 GMP, at all times during the Term and, without limiting the generality of the foregoing,
maintain a quality control program consistent with GMP 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 API 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 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.

15

 

     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 GMP 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, and Santarus’
comments and suggestions shall, in Patheon’s reasonable discretion, be incorporated into such
response.

          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 GMP 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 (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

 
 

			
	 
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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.

ARTICLE 5

ADVERSE EVENTS; RECALL

     5.1 Adverse Experience Reporting. Patheon shall notify Santarus promptly and not later than
[***] hours 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
nation or jurisdiction. Further and without limiting the foregoing, Patheon shall notify Santarus
by telephone and facsimile within [***] hours 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 [***] hours 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
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or other removal from the market of Finished Product, such Party shall transmit such
information to the other Party within [***] hours of receipt.

     5.2 Notification and Recall. The handling of recalls and withdrawals of Finished Products
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 [***] hours, 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 Products 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 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 measures as required by the
Specifications and the Quality Agreement. The cost of the Bulk API 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. The Price during any period after the first
anniversary of the Commencement of Commercial Manufacturing shall be determined in accordance with
the following:

	 	(a)	 	Annual Review. On or about December 1st 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 Products 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
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	 	 	 	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 revised Exhibit B 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 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 labour 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 [***] 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.

 
 

			
	 
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     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 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 [***] Business Days after such
resolution or [***] days after the date of such invoice.

ARTICLE 7

RAW MATERIALS

     7.1 Purchase of Raw Materials. Except for the Bulk API 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 API and Raw Materials. Patheon shall store the Bulk API and Raw Materials
at Patheon’s storage facility at the Facility with due care and attention to the requirements set
forth in the Specifications and in accordance with GMP and Applicable Laws so as to protect such
materials from loss or damage. While the Bulk API and the Raw Materials are in storage, Patheon
shall assume the risk of loss or damage to such materials from any cause whatsoever. Patheon shall
ensure that, while such Bulk API and Raw Materials are in storage, such materials do not become
subject to any lien or other security interest securing any obligation owed or alleged to be owed
by Patheon to any person or entity.

     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
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existing inventories of Raw Materials. Santarus’ liability for the costs of Raw Materials
ordered pursuant to the terms of this Section shall [***]. For clarity, while Patheon shall
purchase Raw Materials in quantities only to satisfy the requirements of a Firm Purchase Order,
there will be, in some cases, minimum order quantities stipulated by a vendor that will result in
an excess quantity of certain Raw Materials after the completion of a manufacturing campaign. In
such cases, Patheon shall attempt to utilize such excess quantities, subject to the provisions of
Section 7.3.2 below, for subsequent Firm Purchase Orders. However, if the excess materials are not
consumed within [***] months of the date of purchase, Santarus shall reimburse Patheon for it’s
cost of such excess materials within [***] days of the date of an invoice for said quantity, in
accordance with the provisions of Section 7.3.6 and Exhibit E.

          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 usuable 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) the Raw Materials have not been utilized to fulfill Firm
Purchase Orders issued by Santarus within [***] months following the date of purchase of the Raw
Materials (collectively, the “Obsolete/Excess Raw Materials”). Notwithstanding the foregoing,
Obsolete/Excess Raw Materials shall not include any Raw Materials purchased by Patheon in excess of
the Firm Purchase Order to which they relate, unless otherwise mutually agreed by the parties in a
signed writing. In no event shall Santarus be liable (y) for Raw Materials purchased prior to
January 1, 2006, or (z) to third-party suppliers of Raw Materials purchased by Patheon hereunder.

          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 Obsolete/Excess 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 due to such excess Raw Materials. To the extent that
Patheon is unable to off-set such loss fully, Santarus shall reimburse Patheon in accordance with
Section 7.3.1 and 7.3.2.

          7.3.4 In the event such Raw Materials are incorporated into Finished Products 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.

 
 

			
	 
	***	 	Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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          7.3.6 Attached as Exhibit E is a Raw Material Purchasing Summary setting out Patheon’s
purchasing plan for Raw Materials, based on Firm Purchase Orders, on an agreed manufacturing
campaign (of lots per campaign), and including any vendor stipulated minimum order quantity for
each material. Exhibit E indicates the maximum financial exposure Santarus shall have at any one
time for Raw Materials under this Agreement at the conclusion of each manufacturing campaign.
Exhibit E shall be updated prior to the commencement of each Year of this Agreement, starting in
2008.

     7.4 Disposal of Raw Materials. Patheon may dispose of Raw Materials upon Santarus prior
written approval and Santarus shall reimburse Patheon for the cost of disposal of such Raw
Materials which (a) Patheon purchased subsequent to January 1, 2006, and (b) meet the requirements
of Section 7.3 above.

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:

          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;

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          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.

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) Santarus’ SAN-05 immediate release omeprazole pharmaceutical product, the
Specifications therefor and the uses thereof; and (b) any composition of matter, method of
manufacture or use covered by the Product Patents, regardless of whether such Invention was

23

 

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 Products to Santarus) to manufacture and have manufactured the Finished
Products 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 Products
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, 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

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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

          10.1.4 in connection with its performance under this Agreement, it shall comply with all
Applicable Laws.

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     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 API and Raw Materials and the manufacturing, packaging,
testing and storage of the Finished Products 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 GMP;

          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 API 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.

     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:

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          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 API 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 until August 19, 2009, unless earlier terminated in accordance with the terms and conditions
of this Article 11 (the “Initial Term”). After the Initial Term, this Agreement shall continue in
force for an indefinite duration (the “Renewal Term”); provided that either Party may terminate
this Agreement at any time during the Renewal Term beginning on August 19, 2009, by providing the
other Party with eighteen (18) months prior written notice of termination.

     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.

     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

27

 

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 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 the Finished Product or withdraw any license
required by Patheon to manufacture the 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 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 the Finished Product or otherwise makes
such activity unlawful.

     11.6 Termination for Discontinuation. Santarus may terminate this Agreement if at any time it
decides to no longer market the 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 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 unused API (with shipping and related expenses, if any, to be borne 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 applicable to the 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 API and Finished Products,
including master batch records,

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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 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:

          (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;

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          (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 API 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 (a) the failure to manufacture, package and
test the Finished Product in accordance with the Specifications, GMP, Applicable Laws and the
Patheon Manufacturing Responsibilities; (b) the failure to store the Finished Product, Bulk API or
Raw Materials in accordance with the Specifications, GMP and Applicable Laws; (c) the negligence
or willful misconduct of Patheon, its Affiliates, or their directors, officers, agents, employees
or consultants in the performance of their obligations under this Agreement, (d) a material breach
by Patheon of any provision of this Agreement, the Quality Agreement or the Capital Agreement; or
(e) a breach of any of Patheon’s representations, warranties, or covenants set forth in this
Agreement, the Quality Agreement or the Capital Agreement; provided, however, that Patheon shall
not be obligated to indemnify Santarus under this Section 12.3 to the extent that such Claim
results from or arises out of any act or omission for which Santarus is obligated to indemnify
Patheon pursuant to Sections 12.1or 12.2 above.

     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 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.

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          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) $5,000,000 for each occurrence, and (ii)
$5,000,000 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

31

 

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 API 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 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.

 
 

			
	 
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32

 

          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 to the performance of
this Agreement shall be as set forth in the Capital Reimbursement Agreement between the Parties and
dated as of December 19, 2003 (the “Capital Agreement”).

     14.2 Manufacturing Tools. Except as set forth in the Capital Agreement, 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.

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,

33

 

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.
	 

	 	 	 	7070 Mississauga Road, Suite 350
	 

	 	 	 	Mississauga, Ontario
	 

	 	 	 	Canada L5N 7J8
	 
	 

	 	 	 	Attn: President
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Patheon Inc.
	 

	 	 	 	7070 Mississauga Road, Suite 350
	 

	 	 	 	Mississauga, Ontario
	 

	 	 	 	Canada L5N 7J8
	 
	 	 	 	 
	 

	 	 	 	Attn: General Counsel
	 
	 	 	 	 
	 

	 	If to Santarus
	 	Santarus, Inc.
	 

	 	 	 	10590 West Ocean Air Drive, Suite 200
	 

	 	 	 	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.
	 

	 	 	 	10590 West Ocean Air Drive, Suite 200
	 

	 	 	 	San Diego CA 92130

34

 

	 	 	 	 	 
	 

	 	 	 	Phone: 858-314-5700
	 

	 	 	 	Fax: 858-314-5701
	 

	 	 	 	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 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 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

35

 

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.

     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/ Riccardo Trecroce	 	 	 	By:	 	/s/ Gerald T. Proehl	 	 
	Name:
	 	 
Riccardo Trecroce	 	 	 	Name:	 	 
Gerald T. Proehl
	 	 
	Title:
	 	Chief Executive Officer	 	 	 	Title:	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 	 	 

36

 

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

Pricing Information for Finished Product

Zegerid Powder for Oral Suspension

20 mg and 40 mg

[***]

 
 

			
	 
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EXHIBIT C

KEY PERFORMANCE INDICATORS

[***]

 
 

			
	 
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EXHIBIT D

TARGET API YIELDS

The “Target API Yields” are mutually agreed upon targets that are used for determining
quarterly and annual average yields as specified in Section 2.11 API Yield.

	–	 	Zegerid® Trade Product Target API Yield is [***]%

 

			
	 
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EXHIBIT E

2007 Raw Material (including Packaging Components) Purchase Plan

[***]

 

			
	 
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Exhibit 10.1

December 16, 2006

BCE Inc.

1000, de la Gauchetiere West

Suite 3700

Montreal, QC H3B 4Y7

Attention: Andrew Smith, Director M&A

Ladies and Gentlemen:

     Reference is hereby made to that certain Share Purchase Agreement, dated as of the date hereof
(as amended in accordance with its terms, the “Purchase Agreement”), between 4363213 Canada
Inc., a corporation existing under the laws of Canada (the “Company”), BCE Inc., a
corporation existing under the laws of Canada (the “Seller”), and Telesat Canada, a
corporation existing under the laws of Canada, pursuant to which the Company has agreed to purchase
from the Seller all of the issued and outstanding shares (the “Purchased Shares”) of
Telesat. Capitalized, undefined terms used herein shall have the respective meanings ascribed to
them in the Purchase Agreement.

     This letter confirms in writing the agreement of Loral Space & Communications Inc., a Delaware
corporation (“Loral”), Public Sector Pension Investment Board, a Canadian federal Special
Act corporation (“PSP” and, together with Loral, the “Sponsors”), and the Seller,
for itself and the other Releasors (as hereinafter defined), regarding the following matters:

     A. In the event that (i) the Purchase Agreement is terminated pursuant to Section 6.2(b) or
6.3(c) thereof and the Company is required to pay the Break-Up Fee to the Seller (a “Break-Up
Fee Termination”), (ii) the conditions set forth in Section 5.1 of the Purchase Agreement are
satisfied and the Company fails to consummate the Closing as provided in the Purchase Agreement, or
(iii) the Company defaults under, or otherwise breaches, the provisions of the Purchase Agreement
such that the Seller shall have the right to terminate the Purchase Agreement in accordance with
its terms and the Seller exercises such right to terminate (each such termination described in the
preceding clause (ii) and this clause (iii), a “Breach Termination”), the Sponsors shall
severally, but not jointly, pay or cause the Company (or an affiliate thereof) to pay, to the
Seller: (A) in the event of a Break-Up Fee Termination, the aggregate amount of the Break-Up Fee
by wire transfer of immediately available funds, provided that, notwithstanding anything to
the contrary contained in this letter agreement, the Purchase Agreement, those certain letters,
dated December 4, 2006 and December 14, 2006, respectively, in each case as superseded by that
certain letter, dated December 16, 2006 (such letters, collectively, the “Loral Commitment
Letter”), from Loral to 4363205 Canada Inc., a corporation existing under the laws of Canada
and the sole

 

 

BCE Inc.

December 16, 2006

Page 2

shareholder of the Company (“Holdings”), those certain letters, dated December
4, 2006 and
December 14, 2006, respectively, in each case as superseded by that certain letter, dated
December 16, 2006 (such letters, together, with the Loral Commitment Letter, the “Equity
Commitment Letters”), or any other documents or instruments delivered in connection herewith or
therewith, Loral shall be responsible for 64% (the “Loral Break-Up Fee Cap”), and PSP shall
be responsible for 36% (together with the Loral Break-Up Fee Cap, the “Sponsor Break-Up Fee
Cap”), of the aggregate amount of the Break-Up Fee payable for, upon or by reason of any matter
that arises out of or relates in any way to any such Break-Up Fee Termination; and (B) in the event
of a Breach Termination, the damages actually incurred by the Seller and for which the Company is
liable to the Seller under the terms of the Purchase Agreement, after a final and non-appealable
judgment in respect thereof, by wire transfer of immediately available funds (the “Termination
Damages”), provided that, notwithstanding anything to the contrary contained in this
letter agreement, the Purchase Agreement, any Equity Commitment Letter or any other documents or
instruments delivered in connection herewith or therewith, (x) Loral shall be responsible for 64%
(the “Loral Termination Damages Cap”), and PSP shall be responsible for 36% (together with
the Loral Termination Damages Cap, and, subject to the proviso in clause (y) below, the
“Sponsor Termination Damages Cap”), of the aggregate amount of the Termination Damages
payable for, upon or by reason of any matter that arises out of or relates in any way to any such
Breach Termination, and (y) under no circumstances shall (I) the Seller be entitled to Damages (as
hereinafter defined) in excess of C$200,000,000 in the aggregate, (II) Loral be responsible for
Damages in excess of C$128,000,000 in the aggregate, (III) PSP be responsible for Termination
Damages in excess of C$72,000,000 in the aggregate or (IV) PSP or the Company be responsible for
any Loral Breach Damages (as hereinafter defined). In the event that Loral defaults under, or
otherwise breaches, its representations and warranties under paragraph D hereof (any such default
or breach, a “Loral Breach”), subject to the proviso in clause (y) above, Loral shall pay
to the Seller the damages actually incurred by the Seller as a result of any such Loral Breach,
after a final and non-appealable judgment in respect thereof, by wire transfer of immediately
available funds (such damages, subject to the proviso in clause (y) above, the “Loral Breach
Damages” and, together with the Termination Damages, the “Damages”). As used in this
letter agreement: (a) “Sponsor Cap” shall mean, (1) with respect to any Break-Up Fee
Termination, the Sponsor Break-Up Fee Cap, (2) with respect to any Breach Termination, the Sponsor
Termination Damages Cap and (3) with respect to any Loral Breach, C$128,000,000 in the aggregate
(subject to the proviso in clause (y) above); and (b) “Applicable Amount” shall mean, (1)
with respect to any Break-Up Fee Termination, the Break-Up Fee, (2) with respect to any Breach
Termination, the Termination Damages and (3) with respect to any Loral Breach, the Loral Breach
Damages.

     B. The Seller, for itself and its affiliates (collectively, the “Releasors”), hereby
agrees that, subject to the applicable Sponsor Cap, payment of the Applicable Amount as set forth
in this letter agreement shall be the sole and exclusive right and remedy of any Releasor

 

 

BCE Inc.

December 16, 2006

Page 3

against
the Sponsors, the Company and their respective affiliates and each of their respective
shareholders, partners, officers, directors (or Persons in similar positions), successors,
assigns, agents and representatives (collectively, the “Releasees”), and, from and after
such payment, no Claims (as hereinafter defined), whether based on contract, tort or otherwise
shall be asserted against any Releasee for, upon or by reason of any Claim or matter that arises
out of or relates in any way to this letter agreement, the Purchase Agreement, any Equity
Commitment Letter or any of the transactions contemplated hereby or thereby. In addition, the
Seller (for itself and the other Releasors) hereby agrees that upon payment by or on behalf of the
Sponsors to the Seller of the Applicable Amount (subject to the applicable Sponsor Cap), without
any further action by any other Person, each Releasee shall be released and forever discharged by
each Releasor from any and all actions, liabilities, obligations, suits, debts, sums of money,
agreements, promises, damages, judgments, executions, claims and demands, of every nature
whatsoever, whether known or unknown, in law or equity, which any Releasor ever had, now has or
hereafter can, shall or may have against any Releasee (collectively “Claims”) for, upon or
by reason of any matter that arises out of or relates in any way to this letter agreement, the
Purchase Agreement, any Equity Commitment Letter or any of the transactions contemplated hereby or
thereby. Notwithstanding the foregoing, the limitations on the liability of Loral and PSP set
forth in this letter agreement shall not apply to: (i) with respect to Loral, any fraud or willful
misconduct on the part of Loral; and (ii) with respect to PSP, any fraud or willful misconduct on
the part of PSP.

     C. Notwithstanding anything to the contrary that may be expressed or implied in this letter
agreement, the Seller (for itself and the other Releasors), by its acceptance hereof, acknowledges
and agrees that (i) no recourse hereunder or under any documents or instruments delivered in
connection herewith or with the Purchase Agreement or any Equity Commitment Letter may be had
against any director (or Person in a similar position), officer, agent, employee or affiliate
(other than the Company) of any Sponsor or any director (or Person in a similar position), officer,
employee, partner, affiliate (other than the Company), assignee or representative of the foregoing
(any such Person, a “Sponsor Representative”), whether by the enforcement of any judgment
or assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or
other applicable law, and (ii) no personal liability whatsoever will attach to, be imposed on or
otherwise be incurred by any Sponsor Representative under this letter agreement or any documents or
instruments delivered in connection herewith or with the Purchase Agreement or any Equity
Commitment Letter for any claim based on, in respect of or by reason of any obligations hereunder
or under any such documents or instruments or by the creation of any such obligations;
provided, however, that, the limitations on the liability of a Sponsor
Representative set forth in this paragraph C shall not apply to any fraud or willful misconduct on
the part of such Sponsor Representative.

     D. Loral hereby represents and warrants to the Seller that:

 

 

BCE Inc.

December 16, 2006

Page 4

	 	1.	 	The proposed transfer by Loral, either directly or indirectly,
of all of the capital stock or substantially all of the assets of Loral Skynet
Corporation (“Skynet”) to the Company (or an Affiliate thereof) at or
after the Closing and the consummation of the transactions contemplated by, or
required to be consummated to give effect to, such transfer (the “Skynet
Transfer”) will not:

	 	a.	 	constitute or result in (i) a breach or
violation of, or a default under, the articles, by-laws or the
comparable governing instruments of Loral, Skynet or any of their
respective Subsidiaries, (ii) a breach or violation of, a default
under, the triggering of any payment or other material obligation
pursuant to, or the acceleration of (with or without the giving of
notice or the lapse of time) any provision of any material Contract to
which Loral, Skynet or any of their respective Affiliates is a party
other than the outstanding 14% Senior Secured Notes due 2015 of Skynet,
or (iii) a breach or violation of any Law to which any of Loral, Skynet
or any of their respective Affiliates is subject, except in the case of
each of the immediately preceding clauses (i), (ii) and (iii),
violations, defaults, accelerations or changes that, alone or in the
aggregate, would not reasonably be expected to prevent or materially
delay or impair the consummation of the transactions contemplated by
the Skynet Transfer;
	 
	 	b.	 	require that any consent, approval or
authorization be obtained by Loral from the shareholders of Loral under
applicable Law or from any Person (other than any Governmental Entity)
except any such consent, approval or authorization the failure of which
to obtain, either alone or in the aggregate, would not reasonably be
expected to prevent or materially delay or impair the consummation of
the transactions contemplated by the Skynet Transfer;
	 
	 	c.	 	trigger rights in favor of any third party
under any written or oral Contract or option, or any right or privilege
(whether by Law, pre-emptive or contractual) capable of becoming a
Contract or option, for the purchase or acquisition by any third party
of the capital stock or assets of Skynet which are to be transferred to
the Purchaser as part of the Skynet Transfer, and

 

 

BCE Inc.

December 16, 2006

Page 5

	 	 	 	such capital stock and assets are not subject to any such Contract;
or
	 
	 	d.	 	prevent or materially impair or, to the
knowledge of Loral, delay beyond the Outside Date the consummation of
the transactions contemplated by the Purchase Agreement.

	 	2.	 	Loral is not aware of any reason why the conditions set forth
in the Commitment Letters (including, without limitation, any condition
relating to the delivery of audited consolidated financial statements,
unaudited consolidated financial statements, pro forma financial statements,
forecasts or other financial information of Skynet and its Subsidiaries) would
not be satisfied or on before the Closing Date or such other earlier date as
may be set forth in the Commitment Letters.

     E. The terms of this letter agreement shall remain confidential and the Seller shall not, and
shall cause its affiliates not to, disclose the terms or existence of this letter agreement to any
Person except (i) to the extent required by applicable law or (ii) to the extent necessary to
enforce its rights or obligations under this letter agreement.

     F. This letter agreement contains the entire agreement between the parties hereto in respect
of the subject matter hereof and supersedes any and all prior agreements, arrangements or
understandings (whether written or oral), including, without limitation, each Equity Commitment
Letter (and the provisions thereof pursuant to which the Seller is a third party beneficiary), with
respect to such subject matter. This letter agreement may not be changed, amended, modified, or
altered, except by written agreement signed by Loral, PSP and the Seller.

     G. The parties hereto acknowledge that this letter agreement was drafted jointly by the
parties, and its terms shall not be construed against any party. All references to “C$” herein
shall be to Canadian dollars.

     H. Neither this letter agreement nor any of the rights or obligations hereunder may be
assigned by any of the parties hereto (by operation of law or otherwise) without the prior written
consent of Loral, PSP and the Seller and, nothing contained herein shall confer upon any Person
(other than the Seller, the Releasors and the Releasees) any rights or remedies hereunder.

     I. This letter agreement may be executed in two or more counterparts, each of which shall be
deemed an original (including facsimile signatures) and all of which together shall constitute one
and the same instrument. This letter agreement shall be governed by the laws of the Province of
Ontario and the federal laws of Canada applicable therein (without

 

 

BCE Inc.

December 16, 2006

Page 6

giving effect to the conflicts of law principles thereof). Each party hereto hereby
irrevocably and unconditionally: (i) consents and submits to the exclusive jurisdiction of the
courts of the Province of Ontario for any dispute arising out of or relating to this letter or the
transactions contemplated hereby; (ii) waives any objection to the laying of venue of any such
dispute in such courts; and (iii) waives and agrees not to plead or claim that any such dispute
brought in any such court has been brought in an inconvenient forum.

     J. EACH PARTY HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY DISPUTE DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS LETTER OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

[remainder of page intentionally left blank]

 

 

     If you are in agreement with the terms set forth above, please sign this letter agreement in
the space provided below and return an executed copy to the undersigned.

	 	 	 	 	 
	 	Very truly yours,

PUBLIC SECTOR PENSION INVESTMENT BOARD

 	 
	 	By:  	/s/ Derek Murphy
 	 
	 	 	Name:  	Derek Murphy 	 
	 	 	Title:  	First Vice President, Private Equity 	 
	 
	 	 	 
	 	By:  	                                              /s/ Assunta Di Lorenzo
 	 
	 	 	Name:  	Assunta Di Lorenzo 	 
	 	 	Title:  	First Vice President, General Counsel

and Secretary 	 
	 
	 	LORAL SPACE & COMMUNICATIONS INC.

 	 
	 	By:  	/s/ Michael B. Targoff
 	 
	 	 	Name:  	Michael B. Targoff 	 
	 	 	Title:  	CEO and Vice Chairman of the Board 	 
	 

	 	 	 	 	 
	ACCEPTED AND AGREED:	 	 
	 
	 	 	 	 
	BCE INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Michael J. Sabia	 	 
	 

	 	 	 	 
	 

	 	Name: Michael J. Sabia	 	 
	 

	 	Title: President and Chief Executive Officer

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}]]