BY THE OTHER PARTY AND REASONABLY ACCEPTABLE TO THE PARTY WHOSE
RECORDS ARE TO BE EXAMINED. THE INDEPENDENT AUDITOR WILL ONLY EXAMINE SUCH BOOKS
AND RECORDS DURING BUSINESS HOURS BUT NOT MORE THAN ONCE EACH FISCAL YEAR WHILE
THIS AGREEMENT REMAINS IN EFFECT AND FOR THREE YEARS THEREAFTER IN ORDER TO
VERIFY, IN THE CASE OF DEPOMED, ONE OR MORE OF THE ITEMS SET FORTH IN SECTION
7.1(B)(I)-(VII) AND SECTION 7.4, AND, IN THE CASE OF WATSON, P1 DETAILS, P2
DETAILS AND P3 DETAILS (IF APPLICABLE) COMPLETED BY THE WATSON SALES FORCE. SUCH
INDEPENDENT AUDITOR SHALL KEEP CONFIDENTIAL ANY INFORMATION OBTAINED DURING SUCH
EXAMINATION AND SHALL REPORT ONLY THE AMOUNTS WHICH THE INDEPENDENT AUDITOR
BELIEVES TO BE DUE AND PAYABLE HEREUNDER. THE FEES AND EXPENSES OF THE
INDEPENDENT AUDITOR PERFORMING SUCH VERIFICATION EXAMINATION SHALL BE BORNE BY
THE PARTY CONDUCTING THE VERIFICATION; PROVIDED, HOWEVER, THAT IF ANY
VERIFICATION REVEALS THAT THE AUDITED PARTY HAS REPORTED INCORRECTLY, AND THE
AMOUNT OF SUCH DISCREPANCY IS AT LEAST FIVE PERCENT (5%) OF THE AGGREGATE AMOUNT
THAT SHOULD HAVE BEEN REPORTED FOR THE PERIOD EXAMINED, THEN THE AUDITED PARTY
SHALL PAY THE ENTIRE AMOUNT OF THE FEES AND EXPENSES FOR SUCH VERIFICATION.
(B)
EACH PARTY SHALL HAVE THE RIGHT, UPON FIVE (5) BUSINESS DAYS'
PRIOR WRITTEN NOTICE, TO AUDIT ALL APPLICABLE RECORDS OF THE OTHER PARTY (OTHER
THAN RECORDS DESCRIBED IN SECTION 7.2(A)) FOR THE PURPOSE OF DETERMINING THE
AUDITED PARTY'S COMPLIANCE WITH THE OBLIGATIONS SET FORTH IN THIS AGREEMENT,
INCLUDING WITH RESPECT TO TRAINING PROGRAMS AND CERTIFICATIONS AND RECORDS
REPORTS FOR THE SAMPLES. THE AUDIT WILL BE CONDUCTED DURING NORMAL BUSINESS
HOURS, AT CONVENIENT TIMES. ANY SUCH AUDIT MAY BE CONDUCTED NO MORE THAN ONCE
EACH FISCAL YEAR. THE FEES AND EXPENSES OF THE AUDITING PARTY SHALL BE BORNE BY
SUCH PARTY. THIS RIGHT TO AUDIT SHALL EXTEND THROUGHOUT THE TERM OF THIS
AGREEMENT AND FOR ONE YEAR AFTER EXPIRATION OR TERMINATION OF THIS AGREEMENT.
(C)
WHENEVER IN THIS AGREEMENT A PARTY IS REQUIRED TO REPORT ITS
COSTS, OR IS ENTITLED TO RECEIVE OR OBLIGATED TO MAKE A PAYMENT BASED ON ITS
COSTS, SUCH COSTS SHALL BE DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES AS APPLIED IN THE UNITED STATES ("GAAP"), CONSISTENT WITH
THE TERMS OF THIS AGREEMENT, EXCEPT AS SET FORTH IN SECTION 7.2(D) WITH RESPECT
TO COGS. THE TERM "OUT-OF-POCKET" COSTS OR EXPENSES MEANS COST OR EXPENSES PAID
TO THIRD PARTIES AND SHALL NOT INCLUDE ANY FIXED COSTS OR EXPENSES, PERSONNEL
COSTS OR EXPENSES, OVERHEAD COSTS OR EXPENSES, OR OTHER COSTS OR EXPENSES OF A
SIMILAR NATURE.
2
(D)
COGS SHALL BE DETERMINED IN ACCORDANCE WITH GAAP, EXCEPT THAT COGS
SHALL IN NO EVENT INCLUDE LABOR OF MORE THAN ONE FULL-TIME EQUIVALENT DEPOMED
EMPLOYEE FOR ANY PERIOD FOR WHICH COGS IS CALCULATED UNDER THIS AGREEMENT.
SECTION 7.3
PAYMENTS. ANY PAYMENTS REQUIRED TO BE MADE BY EITHER
PARTY UNDER THIS AGREEMENT SHALL BE MADE IN UNITED STATES DOLLARS VIA WIRE
TRANSFER OF IMMEDIATELY AVAILABLE FUNDS TO SUCH BANK ACCOUNT AS