Manufacturing and Supply Agreement - Santarus Inc. and Patheon Inc.
MANUFACTURING AND SUPPLY AGREEMENT
THIS MANUFACTURING AND SUPPLY AGREEMENT (the "AGREEMENT") is made
effective as of the 19th day of December, 2003 (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"). 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 ***;
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 ***
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1.3 "API" means the active pharmaceutical ingredient known as ***.
1.4 "API REIMBURSEMENT VALUE" means ***
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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 invoiced 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 the each invoiced 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)
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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 the date on which
Patheon commences to manufacture commercial quantities of Finished Product
pursuant to the first Firm Purchase Order submitted by Santarus under Section
2.2.3.
1.11 "DEFICIENCY NOTICE" has the meaning set forth in Section 3.5.1.
1.12 "EFFECTIVE DATE" has the meaning specified on the first page of this
Agreement.
1.13 "FACILITY" means Patheon's facilities located at 111 Consumers Drive,
Whitby, Ontario, Canada, and any other facilities (including facilities utilized
by subcontractors as permitted hereunder) that are used in connection with the
activities performed by Patheon hereunder.
1.14 "FDA" means the United States Food and Drug Administration, and any
successor thereto.
1.15 "FFDCA" means the Federal Food, Drug, and Cosmetic Act, 21
U.S.C.Section 321 et seq., as amended.
1.16 "FINISHED PRODUCT" means Santarus' SAN-05 immediate-release
omeprazole pharmaceutical product, as more particularly described in the
Specifications.
1.17 "FIRM PURCHASE ORDER" has the meaning set forth in Section 2.2.3.
1.18 "FORECAST" has the meaning set forth in Section 2.2.2.
1.19 "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.
1.20 "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.
1.21 "GOVERNMENT AUTHORITY" means any supra-national, national, regional,
state, provincial or local government, court, governmental agency, authority,
board, bureau, instrumentality or regulatory body having jurisdiction over the
Finished Product.
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1.22 "INDA" means an investigational new drug application.
1.23 "INITIAL PATHEON SUPPLY COMMITMENT" has the meaning set forth in
Section 2.2.4(a).
1.24 "INITIAL TERM" has the meaning set forth in Section 11.1.
1.25 "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.
1.26 "LAWS" means all laws, statutes, ordinances, regulations, rules,
by-laws, judgments, decrees or orders of any Government Authority.
1.27 "LONG FORECAST" has the meaning set forth in Section 2.2.2.
1.28 "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.
1.29 "NDA" means a New Drug Application filed with the FDA for marketing
approval for a pharmaceutical product.
1.30 "OTHER INVENTION" has the meaning set forth in Section 9.1.
1.31 "PATHEON MANUFACTURING RESPONSIBILITIES" has the meaning specified in
Section 3.1 of this Agreement.
1.32 "PATHEON SUPPLY COMMITMENT" has the meaning set forth in Section
2.2.4(b).
1.33 "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.
1.34 "PRODUCT INVENTION" has the meaning set forth in Section 9.1.
1.35 "PRODUCT PATENTS" means (i) United States patents 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.
1.36 "QUALITY AGREEMENT" means that certain quality agreement to be
entered into by and between the Parties, following the Effective Date but
reasonably in advance of the
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Commencement of Commercial Manufacturing, and relating to the obligations of the
Parties regarding procedures to assure the identity, strength, purity and
quality of the Finished Product.
1.37 "RAW MATERIALS" has the meaning set forth in Section 7.1.
1.38 "REGULATORY APPROVAL" means, with respect to a national or
multinational jurisdiction, (a) any approvals, licenses, registrations, or
authorizations necessary for the manufacture (where relevant), marketing and
sale of the Finished Product in such nation or jurisdiction, and (b) where
relevant, pricing approvals necessary to obtain reimbursement from a Government
Authority.
1.39 "RENEWAL TERM" has the meaning set forth in Section 11.1.
1.40 "RESPONSIBLE EXECUTIVE" means the President or the Chief Executive
Officer of a Party, or his or her designated representative.
1.41 "SANTARUS EXCLUSIVITY COMMITMENT" has the meaning set forth in
Section 2.1.
1.42 "SECONDARY PATHEON SUPPLY COMMITMENT" has the meaning set forth in
Section 2.2.4(b).
1.43 "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.
1.44 "TERM" means the Initial Term and the Renewal Term.
1.45 "TERRITORY" means the United States of America.
1.46 "THIRD PARTY" means any individual or entity other than Patheon or
Santarus or their respective Affiliates.
1.47 "UNIT", in reference to Finished Product, means one sachet of such
Finished Product.
ARTICLE 2
SUPPLY, STORAGE, AND DELIVERY OF FINISHED PRODUCT
2.1 SUPPLY OF FINISHED PRODUCT. During the Term, subject to Section 2.2.4,
Patheon shall manufacture and supply, in accordance with the provisions of this
Agreement, the Specifications, GMP and Applicable Laws, ***
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2.2 COMMERCIAL SUPPLY.
2.2.1 Supply Obligations. Patheon shall manufacture and supply to
Santarus, and Santarus agrees to purchase from Patheon, such quantities of
Finished Product specified by Santarus in accordance with this Agreement at the
Price. ***
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2.2.2 Forecasts.
(a) 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
deliver the first Forecast to Patheon (the "INITIAL FORECAST") as soon as
reasonably practicable following the execution of this Agreement. After
delivery of the Initial Forecast, Santarus shall, in accordance with the
terms of this Agreement, update and revise the Forecast on a monthly
basis. Santarus shall provide each updated Forecast not less than ***
calendar days prior to the beginning of the next month. Patheon shall use
the Forecast for planning purposes and make available the production
capacity and associated testing and release capacity required to
manufacture and supply the forecasted quantities of Finished Product
within the time frames specified in each Forecast; and
(b) On or before August 31 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 (if different from that
specified in Section 2.3). 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.
(a) Until such time ***
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(b) ***
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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 up to the Patheon Supply Commitment of the quantity of the Firm Purchase
Order 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
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
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
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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 ***
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2.7 LATE DELIVERY/SHORTAGES AND OVERAGES.
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 date of delivery that is more than *** Business
Days after the scheduled delivery date is hereinafter referred to as a "LATE
DELIVERY DATE") stated on the corresponding Firm Purchase Order (a "LATE
SHIPMENT"), or if the shipment received by Santarus contains less than 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 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.
2.8 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 preliminary categories of KPIs in
respect of the first *** period following Commencement of Commercial
Manufacturing are set forth in EXHIBIT C, and the parties mutually agree to
refine such KPIs reasonably in advance of the Commencement of Commercial
Manufacturing. Thereafter, the KPIs will be reviewed by Patheon and Santarus at
each ***
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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 Manufacturing
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;
(ii) Patheon's Executive Vice President, Operations and the
Vice President, Manufacturing and Product Development of Santarus shall 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 agreed to extend any of the time periods referenced in this Section
2.8.
2.8.3 Notwithstanding anything to the contrary in this Section 2.7,
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 issues.
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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 YIELD.
2.11.1 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 at the
Facility during the applicable period. The Quantity 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 and is held at the end of such period. The Quantity
Dispensed shall only include Bulk API received and dispensed in connection
with commercial manufacturing of Finished Product and, for certainty,
shall not include any Bulk API received or dispensed in connection with
technical transfer activities or development activities during the
applicable period, including, without limitation, any regulatory,
stability, validation or test batches manufactured during the applicable
period.
QUANTITY CONVERTED: The total amount of Bulk API contained in the Finished
Products produced with the Quantity Dispensed, delivered by Patheon, and
not rejected or returned in accordance with Section 3.5 or recalled under
Article 5 as a result of a failure by Patheon to manufacture Finished
Product that conforms to the Patheon Manufacturing Responsibilities.
2.11.2 In addition, Patheon shall reconcile the inventory of Bulk
API held by Patheon on a quarterly basis and shall provide a report to Santarus
concerning such reconciliation within *** days following the end of the
applicable calendar quarter. Within *** days of the
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end of each calendar year after the Commencement of Commercial Manufacturing,
Patheon shall calculate the "ACTUAL ANNUAL YIELD" or "AAY" for the Finished
Product during the year, which AAY is the percentage of the Quantity Dispensed
that was converted to Finished Products and is calculated as follows:
Quantity Converted during the year
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Quantity Dispensed during the year
2.11.3 After Patheon has produced a minimum of *** batches of
Finished Product and has produced batches for at least *** months pursuant to
this Agreement, the Parties will mutually agree on the target yield (each, a
"TARGET YIELD"). Thereafter, Patheon shall strive to maintain Actual Annual
Yield levels for each Finished Product above the applicable Target Yield. If the
Actual Annual Yield 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 based on the following calculation, provided that
Patheon's liability for Bulk API calculated in accordance with this Section 2.11
in a year shall not exceed, in the aggregate, the Annual API Cap:
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It shall not constitute a material breach of this Agreement by Patheon if the
Actual Annual Yield is less than the Target Yield.
2.11.4 Patheon shall notify Santarus in writing in the event that an
amount in excess of *** of Bulk API is damaged, lost or otherwise rendered
unusable (including to the extent contained in any non-conforming Finished
Product) 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 the contrary, Patheon shall reimburse Santarus for such Bulk API
within *** days after discovery of the Significant API Loss.
2.11.5 For the purposes of clarity, any Bulk API damaged, lost or
otherwise rendered unusable in connection with the Significant API Loss shall be
included in the calculation of the Quantity Dispensed and any amount paid by
Patheon in accordance with subsection 2.11.4 shall be credited against the
amount, if any, to be paid by Patheon to Santarus pursuant to subsection 2.11.3.
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
Parites) and address any issues that have arisen.
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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."
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 *** 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 *** 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
shall conduct all such 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 *** 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.
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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 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 *** 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 *** 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 *** 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 *** period.
3.5.2 Determination of Deficiency. Upon receipt of a Deficiency
Notice, Patheon shall have *** 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 *** 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.
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
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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 2.10. Nothing in this Section 3.5.3 shall be
construed to limit the rights and remedies available to Santarus at law or in
equity.
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
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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 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.
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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.
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.
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4.6 ENVIRONMENTAL AND OTHER LAWS AND REGULATIONS. In carrying out
its obligations under this Agreement, Patheon shall comply with all applicable
environmental and health and safety laws (current or as amended or added), and
shall be solely responsible for determining how to comply with same in carrying
out these obligations. Notwithstanding the foregoing, nothing provided to
Patheon by Santarus, by way of materials, specifications, processing information
or otherwise, is meant to diminish Patheon's responsibility for such compliance.
Patheon shall obtain and maintain all necessary licenses, permits and
governmental approvals (except for product-related Regulatory Approvals such as
NDA's) required to perform its manufacturing and supply services hereunder,
including licensure and permitting of its manufacturing facilities by the FDA
and Foreign Regulatory Authorities. Patheon shall promptly notify Santarus of
any circumstances, including the receipt of any notice, warning, citation,
finding, report or service of process or the occurrence of any release, spill,
upset, or discharge of hazardous substances (as may be defined under Applicable
Laws) relating to Patheon's compliance with this Section 4.6 and which relates
to the manufacture of Finished Product. Santarus reserves the right to conduct
an environmental inspection of the Facility, at reasonable intervals during
normal business hours and with reasonable advance notice, for the purpose of
determining compliance with this Section 4.6. Such inspection shall not relieve
Patheon of its obligation to comply with all applicable environmental and health
and safety laws and does not constitute a waiver of any right otherwise
available to Santarus.
4.7 END-USER INQUIRIES AND COMPLAINTS. Subject to Patheon's
obligation to report certain information on a more expedited basis in respect of
Adverse Experiences as described in Section 5.1 below, Patheon shall notify and
refer to Santarus, within *** 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
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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 threatening seizure of Finished Product, or other
removal from the market of Finished Product, such Party shall transmit such
information to the other Party within *** 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. ***
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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.
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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 each yearly anniversary of this Agreement
following Commencement of Commercial Manufacturing, 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
market conditions result in Patheon's cost of Raw Materials being
materially lesser than anticipated, then Santarus shall be entitled
to request an adjustment to the Price to compensate it for such
reduced Raw Material costs. For the purposes of this Section 6.2(b),
changes materially greater than normal forecasted increases or
materially lesser than anticipated shall be considered to have
occurred if: (i) the cost of a Raw Material increases or decreases,
as applicable, by *** or more of the cost for that Raw Material upon
which the Price then in effect was based; or (ii) the aggregate cost
for all Raw Materials required to manufacture the Finished Product
increases or decreases, as applicable, by *** or more of the total
Raw Material costs for the Finished Product upon which the Price
then in effect was based. To the extent that the Price has been
previously adjusted pursuant to this Section 6.2(b) to reflect an
increase or decrease in the cost of one or more Raw Materials, the
adjustments provided for in (i) and (ii) above shall operate based
on the costs attributed to such Raw Material (or Raw Materials) at
the time the last such adjustments were made.
In connection with a Price review pursuant to clause (a) of this Section
6.2, Patheon shall deliver to Santarus reasonably detailed documentation
concerning increases or decreases in the cost of Raw Materials or Patheon's cost
of manufacturing to facilitate the discussion. In connection with all fee
adjustment requests pursuant to clause (b) of this Section 6.2, Patheon shall
deliver to Santarus a 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
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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 *** of the date of the invoices issued pursuant to
Section 2.6. Patheon shall send all invoices by email or facsimile to the email
address or facsimile number of the accounts payable personnel designated by
Santarus from time to time. All invoices shall be dated as of the date of the
email or facsimile as noted in the foregoing sentence, and not any earlier date.
Patheon's invoice shall reference the Firm Purchase Order number and be sent to
the "Bill to" address of Santarus specified on the Firm Purchase Order, and
Patheon's packing list must reference the Firm Purchase Order number and be sent
to the applicable "Ship to" address on the Firm Purchase Order. Santarus may
withhold a portion of any invoice that it disputes in good faith pending
resolution of such dispute.
6.4 FORM OF PAYMENT. Each Party shall make all payments due the other
Party under this Agreement in U.S. Dollars by check made payable to the order of
the other Party or by wire transfer of immediately available funds to such
account notified by the receiving Party from time to time to the other Party in
writing.
6.5 TAXES. If any sales or value added taxes are payable under the laws of
the United States of America, Canada, or any other country, state, territory or
jurisdiction having taxing authority, such taxes shall be the responsibility of
Santarus. Santarus shall withhold from any payment to Patheon under this
Agreement any taxes required to be withheld by Santarus under the applicable
laws of the United States of America, Canada or any other country, state,
territory or jurisdiction. Upon request, Santarus shall provide Patheon with
authority for the withholding obligation, documentation of such withholding and
payment in a manner that is satisfactory for purposes of such taxing authority.
Any withholdings paid when due hereunder shall be for the account of Patheon.
6.6 DISPUTED INVOICES. In the event that Santarus disputes any amounts
under any invoice for Finished Product supplied by Patheon, such dispute shall
be resolved in accordance with Section 3.5 (with respect to non-conformance of
Finished Product) or otherwise under Article 13. Pending resolution of such
dispute, Santarus shall be obligated to pay any amounts 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"). Any obligation that Santarus may have under
this Agreement to purchase or reimburse Patheon for expired or
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obsolete Raw Materials shall in no event extend beyond a *** supply of such Raw
Materials based on the most recent Forecast.
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 SANTARUS' RESPONSIBILITY FOR COST OF RAW MATERIALS. If Raw Materials
become obsolete or otherwise no longer useable in the manufacturing process for
the Finished Product because (a) Santarus deviated from the Forecast, or (b) the
Specifications have been changed pursuant to Section 3.6, Patheon shall use its
commercially reasonable efforts to cover the cost of excess Raw Materials by:
(i) returning such Raw Materials to the vendor, (ii) selling such Raw Materials,
(iii) utilizing such Raw Materials in manufacturing products for its other
customers to the extent possible, and (iv) implementing other 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 for such
Raw Materials and its out of pocket expenses but solely to the extent actually
incurred by Patheon and in no event beyond the limit of liability set forth in
Section 7.1.
7.4 PATHEON'S RESPONSIBILITY FOR COST OF RAW MATERIALS. In the event Raw
Materials expire or become obsolete or 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 Order Purchase, (b)
quantities of such Raw Materials are in excess of the limits of Santarus'
liability set forth in Section 7.1, 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.
ARTICLE 8
CONFIDENTIALITY
8.1 CONFIDENTIALITY; EXCEPTIONS. The Parties agree that, for the Term and
for *** 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,
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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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;
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,
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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
*** 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 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
*** Portions of this page have been omitted pursuant to a request for
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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 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;
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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.
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 ***;
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
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Confidential Treatment and filed separately with the Commission.
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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:
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 for a period of five (5) years from the
Commencement of Commercial Manufacturing, 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 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
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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 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
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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: (x) Santarus
shall purchase, at Patheon's cost (including all costs incurred by Patheon in
connection with the purchase and handling of such Raw Materials), the Raw
Materials applicable to the Finished Products which were purchased, produced or
maintained by Patheon in contemplation of filling Firm Purchase Orders prior to
notice of termination being given; and (y) Santarus shall satisfy 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 or
in reliance on any Forecast, but in each case subject to Patheon's obligation to
cover as set forth in Section 7.3 and subject to the limitations on Santarus'
liability set forth in Section 7.1. 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, 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.
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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;
(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.
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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.
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
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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 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 ***
***
***
12.7.2 Recall Expenses. Patheon's maximum liability to Santarus
pursuant to Section 5.3 for expenses associated with a Recall shall be equal to
the greater of (a) $5,000,000 or (b) Patheon's aggregate revenues pursuant to
this Agreement for the *** month period preceding the Recall.
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 *** , 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 *** , 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
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attempted resolution by good faith executive negotiations within *** after such
referral is made. In the event such officers are unable to resolve such dispute
within such *** , 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 *** The award of the arbitrator shall be final and binding. The Parties
waive any right to appeal the arbitration award, to the extent a right to appeal
may be lawfully waived. Each Party retains the right to seek judicial
assistance: (a) to compel arbitration; (b) to obtain interim measures of
protection pending or during arbitration; and (c) to enforce any decision of the
arbitrator, including the final award.
13.2.3 Exceptions. Notwithstanding the provision of this Section
13.2, the Parties agree that certain violations or threatened violations of this
Agreement will result in irrevocable harm to other Party, for which damages
would be an inadequate remedy. In addition to any rights and remedies otherwise
available, either Party, before or during arbitration, may apply to a court
having jurisdiction for a temporary restraining order, preliminary injunction or
other interim or conservatory relief, where such relief is necessary to protect
its interests pending completion of the arbitration proceedings without breach
of this arbitration agreement and without any abridgment of the powers of the
arbitrators.
13.2.4 Continuation of Performance. Except where such area of
performance is the subject of dispute, each Party shall continue to perform its
respective obligations under this Agreement while any dispute is being resolved
in accordance with this Section 13.2 unless and until such obligations are
terminated or expire in accordance with the provisions of this Agreement.
ARTICLE 14
CAPITAL CONTRIBUTIONS
14.1 CAPITAL REIMBURSEMENT AGREEMENT. Each Party's capital contribution to
the performance of this Agreement shall be as set forth in the Capital
Reimbursement Agreement between the Parties and dated as of the date hereof (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").
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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, 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.
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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: Vice President, Manufacturing and
Product Development
With a copy to: SANTARUS, INC.
10590 West Ocean Air Drive, Suite 200
San Diego CA 92130
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
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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 specifically states that it overrides conflicting terms of this
Agreement and is signed by each of the Parties.
15.11 TRADEMARKS AND TRADE NAMES. The Parties hereby acknowledge that
neither Party has, and shall not acquire, any interest in any of the other
Party's trademarks or trade names appearing on the labels or packaging materials
for the Finished Product unless otherwise expressly agreed in writing.
15.12 CONSTRUCTION. This Agreement shall be deemed to have been drafted by
all Parties and, in the event of a dispute, no Party hereto shall be entitled to
claim that any provision should be construed against any other Party by reason
of the fact that it was drafted by one particular Party. The headings used in
this Agreement are for convenience of reference only and are not a part of the
text hereof.
15.13 COUNTERPARTS. This Agreement may be executed in counterparts, by
manual or facsimile signatures, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the Effective Date.
PATHEON INC. SANTARUS, INC.
By: /s/ Riccardo Treeroce By: /s/ Gerald T. Proehl
--------------------------------------------- ----------------------
Name: Riccardo Treeroce Name: Gerald T. Proehl
-------------------------------------------- ---------------------
General Counsel & Senior Vice President
Title:Corporate Administration Title: President & CEO
-------------------------------------------- --------------------
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EXHIBIT A
MINIMUM RUN QUANTITY; ***
***
***
***
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EXHIBIT B
PRICING INFORMATION
FINISHED PRODUCT:
***
***
***
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EXHIBIT C
KEY PERFORMANCE INDICATORS
***
***
***
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