SUPPLY AGREEMENT

Supply Agreement

You are currently viewing:

This Supply Agreement involves

DEPOMED INC

. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here.

Title: SUPPLY AGREEMENT
Governing Law: New York Date: 3/16/2006
Industry: Biotechnology and Drugs Law Firm: Heller Ehrman LLP Sector: Healthcare

Exhibit 10.22

CONFIDENTIAL TREATMENT REQUESTED

EXECUTION COPY

SUPPLY AGREEMENT

(Extended Release Metformin Formulations – U.S.A.)

DEPOMED, INC.
a company organized under the laws of California, USA
with offices at
1360 O’Brien Drive
Menlo Park,
California, 94025

AND :

BIOVAIL LABORATORIES INTERNATIONAL SRL
a Barbados society with restricted liability organized under the laws of Barbados
whose head office is
Chelston Park
Building 2, Collymore Rock
St. Michael BH1
Barbados, West Indies

Biovail – Depomed Supply Agreement (1000mg Glumetza)

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

CONFIDENTIAL TREATMENT REQUESTED

Contents

1.		DEFINITIONS	2

2.		DEVELOPMENT	6

	WORK PLAN		6
	PROTOCOLS AND METHODS		7
	BLS FACILITIES AND EMPLOYEES		7
	SUPPLEMENTAL NDA		7
	ADDITIONAL DEVELOPMENT		8

3.		PRODUCT DEVELOPMENT COSTS	9

4.		PURCHASE OF 1000MG PRODUCT	9

5.		FORECASTS	10

	PLANNING FORECAST		10
	LAUNCH FORECAST		10
	SUPPLY FORECAST		10
	FIRST THREE MONTHS FIRM		11
	PERMITTED MODIFICATIONS TO FORECASTS		11

6.		PURCHASE ORDERS	12

	FORMS		13

7.		DELIVERY AND SHIPPING TERMS	13

	DELIVERY		13
	VARIANCE IN QUANTITIES DELIVERED		14
	SHIPPING TERMS		14
	LOSSES IN TRANSPORT		16

8.		PRICES AND PAYMENTS	17

	DEPOMED SALES		17
	DISTRIBUTOR SALES		17
	SUPPLY PRICES IF NO VALID CLAIM		17
	SAMPLE PRICE		18

CONFIDENTIAL TREATMENT REQUESTED

	INVOICING		18
	PAYMENT TERMS		18
	RECONCILIATION		19
	PRICE ADJUSTMENTS		20
	TAXES		21

9.		RECORD KEEPING; AUDIT	22

	RECORDS		22
	AUDIT		22

10.		MODIFIED SPECIFICATIONS	23

	CHANGES MANDATED BY GOVERNMENTAL AUTHORITY		23
	OTHER CHANGES		24

11.		QUALITY CONTROL	24

12.		FACILITY INSPECTION	25

13.		ACCEPTANCE AND REJECTION	26

	ACCEPTANCE TESTING		26
	DISCREPANT TEST RESULTS		26
	CONFIRMATION		27
	RETURN OR DESTRUCTION OF REJECTED SHIPMENTS		27
	REFUND; REPLACEMENT		27
	EXCEPTIONS		28

14.		SUPPLY OF 500MG PRODUCT	28

	PACKAGING AND BATCH RELEASE SERVICES		30

15.		CONTRACT MANUFACTURERS	30

16.		INABILITY TO SUPPLY	31

	NOTICE		31
	DEPOMED’S RIGHTS ON BLS FAILURE TO SUPPLY		31

17.		MATERIAL SAFETY	33

CONFIDENTIAL TREATMENT REQUESTED

18.		MARKETING OF THE 1000MG PRODUCT; GLUMETZA WEBSITE	33

19.		REGULATORY AFFAIRS	34

	REGULATORY RESPONSIBILITY		34
	ADVERSE REACTION REPORTS		36
	WITHDRAWAL OF REGULATORY APPROVAL		36

20.		LIMITED WARRANTIES; RECALL	37

	REPRESENTATIONS AND WARRANTIES BY BLS		37
	MUTUAL REPRESENTATIONS AND WARRANTIES		38
	PRODUCT RECALL.		39

21.		TECHNOLOGY TRANSFER TO DEPOMED	40

22.		INDEMNIFICATION	40

	BY BLS		40
	BY DEPOMED		41
	COSTS AND EXPENSES		41
	PROCEDURE		41

23.		CONFIDENTIALITY	42

24.		TERM; TERMINATION	43

	TERM		43
	TERMINATION FOR CAUSE		43
	TECHNOLOGY TRANSFER		44
	SURVIVAL		44

25.		PUBLICITY	45

26.		ASSIGNABILITY	45

	ASSIGNMENT		45
	LIABILITY		46

27.		NOTICES	46

	NOTICES		46

iii

CONFIDENTIAL TREATMENT REQUESTED

	RECEIPT		47

28.		FORCE MAJEURE	47

	FORCE MAJEURE EVENT		47

	PERFORMANCE		48

29.		MISCELLANEOUS	48

	ENFORCEABILITY		48

	ENTIRE AGREEMENT		49

	WAIVER		49

	GOVERNING LAW		49

	INDEPENDENT CONTRACTORS		49

	COUNTERPARTS		49

	INCONSISTENCY		50

	ARBITRATION		50

CONFIDENTIAL TREATMENT REQUESTED

SUPPLY AGREEMENT

(Extended Release Metformin Formulations – U.S.A.)

THIS SUPPLY AGREEMENT (this “ Agreement ”) is made this 13 ^th day of December, 2005 (the “ Effective Date ”), by and between

DEPOMED, INC.
a company organized under the laws of California, USA
with offices at
1360 O’Brien Drive
Menlo Park,
California, 94025

(Hereinafter referred to as “ Depomed ”)

AND:

BIOVAIL LABORATORIES INTERNATIONAL SRL
a Barbados society with restricted liability organized under the laws of Barbados,
whose head office is
Chelston Park
Building 2, Collymore Rock
St. Michael BH1
Barbados, West Indies

(Hereinafter referred to as “ BLS ”)

BLS and Depomed are sometimes referred to herein individually as a “ Party ” and collectively as the “ Parties .”

CONFIDENTIAL TREATMENT REQUESTED

Recitals

A. BLS is the owner of original processes, a patent application and know-how for the development and manufacture of, and has plans to seek Regulatory Approval for the 1000mg Product in the Territory, as contemplated by this Agreement.

B. BLS and Depomed have entered into an exclusive Manufacturing Transfer Agreement providing for the grant by BLS to Depomed of exclusive marketing rights to the 1000mg Product in the Territory (the “ Manufacturing Transfer Agreement ”).

C. BLS desires to sell 1000mg Product to Depomed, and Depomed desires to purchase 1000mg Product from BLS, in accordance with the terms and conditions contained herein.

It is therefore agreed as follows:

Agreement

1. DEFINITIONS.

For the purposes of this Agreement, the terms hereunder shall have the meanings as defined below:

1.1 “ 1000mg Product ” shall mean a once daily oral tablet formulation of 1000 mg of the Active Ingredient using proprietary BLS drug delivery technology to be developed pursuant to this Agreement.

1.2 “ 500mg Product ” shall mean the once-daily oral formulation of 500mg of the Active Ingredient in combination with the AcuForm Delivery Technology that is the subject of NDA No. 21-748 filed with the FDA on April 27, 2004 (as such NDA may be amended or supplemented subsequent to the Effective Date).

1.3 “ Affiliate ” means any corporation or other entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the designated Party but only for so long as such relationship exists. For the purposes of this section, “ Control ” mean ownership of at least fifty percent (or such lesser percent as may be the maximum that may be owned by foreign interests pursuant to the laws of the country of incorporation) of the shares of stock entitled to vote for directors in the case of

CONFIDENTIAL TREATMENT REQUESTED

a corporation and at least fifty percent (or such lesser percent as may be the maximum that may be owned by foreign interests pursuant to the laws of the country of domicile) of the interests in profits in the case of a business entity other than a corporation.

1.4 “ Applicable Laws ” means all federal, state and local laws, statutes, rules, regulations and ordinances as in effect on the Effective Date, applicable to each Party’s activities hereunder, including, without limitation, the applicable regulations and guidelines of any Governmental Authority including the FDA and foreign counterparts and all applicable cGMPs together with amendments thereto.

1.5 “ Application for Regulatory Approval ” shall mean an application made to a Regulatory Authority in any country for permission to Market a pharmaceutical product in that country.

1.6 “ Batch Size ” shall mean:

(a) With respect to the 500mg Product, [***] tablets; and

(b) With respect to the 1000mg Product, [***] tablets,

and a Batch shall have a corresponding meaning.

1.7 “ Canadian Agreement ” shall mean the Amended and Restated License Agreement providing for, inter alia, the grant by Depomed to BLS of exclusive marketing rights to the 500mg Product in Canada.

1.8 “ cGMP ” means the then-current Good Manufacturing Practices as promulgated under the United States Federal Food, Drug and Cosmetic Act, as amended at 21 CFR (chapters 210 and 211), as the same may be amended or re-enacted from time to time and as interpreted in accordance with then-current industry standards and FDA policies.

1.9 “ Depomed Revenues ” shall mean for any calendar quarter, the aggregate of all amounts received, or receivable in future periods, by Depomed or its Affiliates and assigns in respect of sales of 1000mg Product by Distributors made in that calendar quarter, including without limitation supply prices, royalties, trademark license fees, handling fees and commissions, less the following deductions actually allowed and taken and not

CONFIDENTIAL TREATMENT REQUESTED

otherwise recovered by or reimbursed to Depomed or its Affiliates and assigns in respect of such amounts: (i) rebates, credits or other reimbursements actually paid; and (ii) amounts repaid or credited by reason of rejections, defects or returns or because of retroactive price reductions. Depomed Revenues shall not include amounts in respect of sales of 1000mg Product between or among Depomed or its Affiliates or assigns.

1.10 “ Develop ” shall mean to perform all of the work set out in the Work Plan and this Agreement, and “ Developed ” and “ Development ” have corresponding meanings.

1.11 “ Distributor ” shall mean an entity designated by Depomed to perform its distribution and Marketing activities with respect to the 1000mg Product in the Territory, in accordance with the terms of this Agreement.

1.12 “ FDA ” means the United States Food and Drug Administration or any successor entity thereto.

1.13 “ First Commercial Sale ” means the date of the first commercial sale of the 1000mg Product in the Territory by Depomed or a Distributor.

1.14 “ Governmental Authority ” means any regulatory agency, department, bureau, or other governmental entity, including without limitation the FDA, which is responsible for issuing approvals, licenses, registrations, clearances, or authorizations necessary for the manufacture, use, storage, import, transport, marketing or sale of pharmaceutical products in a country in the Territory and having jurisdiction over any activity of a Party under this Agreement.

1.15 “ Manufacturing Transfer Agreement ” shall mean the Manufacturing Transfer Agreement, dated as of the Effective Date, by and between Depomed and BLS providing for the grant to Depomed of exclusive Marketing rights in the United States to the 1000mg Product, and for the grant of Manufacturing rights in the United States to the 1000mg Product.

1.16 “ Net Sales ” shall mean the total of all amounts invoiced by Depomed, its Affiliates, its Distributors, its licensees and assigns for 1000mg Product (other than samples) sold to independent, unrelated third parties in the Territory in bona fide arms-length transactions, less the following deductions actually allowed and taken by such third parties and not

CONFIDENTIAL TREATMENT REQUESTED

otherwise recovered by or reimbursed to Depomed its Affiliates, or its Distributors: (i) trade, cash and quantity discounts in such amounts as are customary in the trade; (ii) rebates, credits or other reimbursements actually paid; (iii) taxes on sales (such as sales or use taxes) to the extent added to the sales price and set forth separately as such in the total amount invoiced; (iv) value added taxes when included as part of the sales price and not refunded to the payor; (v) freight, insurance, and other transportation charges to the extent added to the sales price and set forth separately as such in the total amount invoiced; and (vi) amounts repaid or credited by reason of rejections, defects or returns or because of retroactive price reductions. Net Sales shall not include sales of 1000mg Product between or among Depomed, its Affiliates, Distributors, licensees or assigns.

1.17 “ Net Selling Price ” shall mean, with respect to any calendar quarter, the Net Sales of the 1000mg Product for that calendar quarter divided by the number of tablets of the 1000mg Product (other than samples) sold by Depomed, its Affiliates and its Distributors in that calendar quarter (excluding any sales between or among Depomed, its Affiliates, Distributors, licensees or assigns).

1.18 “ Supplemental NDA ” has the meaning set forth in the Manufacturing Transfer Agreement.

1.19 “ PPI Increase ” shall mean, with respect to any twelve month period, the percentage increase in the producer price index for the pharmaceutical manufacturing industry over that twelve month period, as reported by the United States Bureau of Labor Statistics.

1.20 “ Patent Rights ” has the meaning set forth in the Manufacturing Transfer Agreement.

1.21 “ Proprietary Information ” means any and all scientific, clinical, regulatory, marketing, financial and commercial information or data, whether communicated in writing, orally or by any other means, which is owned and under the protection of one Party and is provided by that Party to the other Party in connection with this Agreement.

1.22 “ Regulatory Approval ” shall mean the permission or consent granted by any relevant Regulatory Authority for the Marketing of the 1000mg Product in the Territory, including the approval of the manufacturing facility of BLS, its Affiliate or any contract

CONFIDENTIAL TREATMENT REQUESTED

manufacturer at which BLS intends to manufacture or have manufactured, commercial quantities of the 1000mg Product, and includes all of the contents of the Application for Regulatory Approval as approved by that Regulatory Authority, and any Drug Master File referenced by that Application for Regulatory Approval.

1.23 “ Specifications ” means the specifications for as to manufacturing, packaging, labelling and testing of packaged, finished 1000mg Product ready for commercial sale set forth in Exhibit A attached hereto, as such specifications may be amended from time to time pursuant to Article 10 below.

1.24 “ Supply Price ” shall mean each of the prices that Depomed shall pay to BLS for the 1000mg Product as set out in Schedules 8.1, 8.2, 8.4, 8.5 and for the 500mg Product, as set out in Schedule 14.6.

1.25 “ Territory ” shall mean the United States and its possessions, including Puerto Rico.

1.26 “ Valid Claim ” shall mean a claim of (a) an unexpired issued patent falling within Patent Rights, which claim shall not have been withdrawn, cancelled, disclaimed or held invalid by a court, tribunal, arbitrator or governmental agency of competent jurisdiction in a final or unappealed or unappealable decision or (b) of any patent application that has not been cancelled, withdrawn or abandoned, or has been pending for more than seven years.

1.27 “ Work Plan ” shall mean the work plan related to the development of the 1000mg Product attached as Schedule 1.27 to this Agreement.

2. DEVELOPMENT

Work Plan

2.1 BLS shall, at its own expense, use diligent efforts (i) to carry out its obligations under this Agreement and the Work Plan to Develop, and assist Depomed in obtaining Regulatory Approval for, the 1000mg Product, and (ii) to the extent specified in the Work Plan, to design and undertake any required analytical testing and clinical studies. BLS shall use diligent efforts to carry out such obligations in accordance with the time limits set out in

CONFIDENTIAL TREATMENT REQUESTED

the Work Plan. The Parties recognize that the time frames in the Work Plan include “target dates” and “assumptions” and may be dependent on FDA actions.

2.2 BLS shall be responsible for obtaining, at its own expense, all materials, supplies and resources required for the Development of the 1000mg Product in accordance with the Work Plan.

Protocols and Methods

2.3 To the extent specified in the Work Plan, BLS shall develop all of the analytical and clinical protocols that have not already been developed and that are required for Regulatory Approval of the Supplemental NDA, or for the manufacture of the 1000mg Product.

2.4 To the extent specified in the Work Plan, BLS shall use diligent efforts to develop and validate all necessary analytical methods not already developed for the 1000mg Product .

BLS Facilities and Employees

2.5 BLS shall use commercially reasonable efforts to ensure that any facilities at which all or part of the Development of the 1000mg Product is conducted complies with all required cGMP Standards.

2.6 BLS shall use commercially reasonable efforts to ensure that any employee or sub-contractor of BLS to whom any Development work is assigned or sub-contracted is competent to perform the tasks assigned or sub-contracted at the time of such assignment or sub-contract.

2.7 BLS shall bear the cost of any Development work that must be repeated because the facilities at which the work was conducted did not comply with all required cGMP standards, or because the work was assigned or sub-contracted to persons who were not competent to do that work.

Supplemental NDA

2.8 Provided that BLS has complied in all material respects with its obligations under of this Agreement, and that all of the other data and information required for that purpose are

CONFIDENTIAL TREATMENT REQUESTED

available to Depomed in the form required for an Application for Regulatory Approval in respect of the Supplemental NDA, Depomed shall use commercially reasonable efforts to file, as soon as reasonably possible, in the name of Depomed, or any Affiliate or sub-licensee of Depomed, the Supplemental NDA and any amendments or supplements thereto contemplated by the Work Plan. BLS shall reimburse Depomed for any FDA fees incurred by Depomed in filing the Supplemental NDA.

2.9 Each Party shall use diligent efforts to cause the Regulatory Approval for the 1000mg Product to be obtained on or before June 30, 2007 (consistent with the Parties’ respective obligations with respect to the Development of the 1000mg Product).

Additional Development

2.10 If the FDA does not approve the Supplemental NDA notwithstanding the Parties’ compliance with their respective obligations hereunder in respect of the Development and Regulatory Approval of the 1000mg Product, then the Parties shall continue to develop and seek Regulatory Approval for the 1000mg Product, and, in connection therewith, shall incur no more than [***] of additional costs and expenses (or such other amount as agreed in writing by the Parties) calculated in a manner consistent with other research and development cost allocations by BLS for other similar projects. BLS shall be responsible for the [***] of such costs and expenses. The [***] of expenses shall be shared equally by the Parties.

2.11 If the Parties have agreed, notwithstanding the provisions of Section 2.10, not to incur any additional costs and expenses for the Development of the 1000mg Product, or if, following any actions taken by the Parties pursuant to Section 2.10, the FDA does not approve the Supplemental NDA, then, unless otherwise agreed in writing by the Parties, neither Party shall have any additional obligations in respect of the development or Regulatory Approval of the 1000mg Product.

2.12 If one Party elects to continue with the Development of the 1000mg Product, and the other Party does not wish to continue with that Development, then:

CONFIDENTIAL TREATMENT REQUESTED

(a) If BLS elects to continue with the Development of the 1000mg Product, and if Regulatory Approval of the 1000mg Product is granted, BLS shall notify Depomed of that election, and within thirty (30) days after that notice Depomed shall either (i) agree to market the 1000mg Product in accordance with its obligations under this Agreement or (ii) permit BLS to terminate this Agreement with respect to 1000mg Product, and itself Market the 1000mg Product in the Territory, upon reimbursement to Depomed of all regulatory and other fees associated with transfer of the 1000mg Product to BLS;

(b) If Depomed elects to continue with the Development of the 1000mg Product, Depomed may use the rights granted to it by this Agreement and the Manufacturing Transfer Agreement to do so, and may offset against any amounts due to BLS under this Agreement the costs incurred by Depomed in obtaining such approval in excess of those specified in Section 2.10.

3. PRODUCT DEVELOPMENT COSTS

3.1 In consideration of the entering into of this Agreement by Depomed, and the agreement by Depomed to acquire its requirements for the 1000mg Product from BLS, BLS agrees to carry out its obligations under this Agreement and the Work Plan for the Development of the 1000mg Product after the Effective Date.

4. PURCHASE OF 1000MG PRODUCT

4.1 Depomed agrees that it will purchase 1000mg Product exclusively from BLS and, other than as may be set forth herein, that it will not manufacture (or have manufactured on its behalf) 1000mg Product directly without BLS’s prior written consent or as provided in Section 16.2 hereof, and BLS agrees that it will produce (or have produced for it) and sell to Depomed one hundred percent of Depomed’s requirements for 1000mg Product, during the term of, and subject to the provisions of, this Agreement.

4.2 BLS shall use commercially reasonable efforts to maintain a production capacity sufficient to supply Depomed with [***] of the 1000mg Product per calendar month.

CONFIDENTIAL TREATMENT REQUESTED

5. FORECASTS

Planning Forecast

5.1 On the date that the first Supply Forecast is delivered pursuant to Section 5.3, and within one hundred twenty (120) days before the end of each Calendar Year thereafter, Depomed shall deliver to BLS a non-binding forecast, by Calendar month, of the quantities of 1000mg Product, by SKU (including samples), that Depomed expects to order from BLS for Marketing in the Territory, for the following eighteen (18) calendar months (the “ Planning Forecast ”). No less than once per Calendar Year, the Parties shall meet to review the then effective Planning Forecast of Depomed to compare the yearly requirements of 1000mg Product which Depomed expects would be necessary to fulfill the sales forecast provided in such Planning Forecast, projecting the highest level of sales of the 1000mg Product in the Territory.

Launch Forecast

5.2 Promptly following the date of Regulatory Approval for the 1000mg Product in the Territory, Depomed shall deliver to BLS a non-binding (except as otherwise provided in this Section 5.2), forecast setting forth, by calendar month, the quantities of 1000mg Product, including all quantities of 1000mg Product required for stocking the trade in the Territory (the “ Launch Forecast ”) and for samples that Depomed expects BLS to deliver to Depomed during the twelve (12) calendar months period after Launch. Depomed shall include in that Launch Forecast Depomed’s good faith estimates of the Net Selling Price of the 1000mg Product upon Launch. Quantities of 1000mg Product identified in the Launch Forecast shall be in whole multiples of the Batch Size. The anticipated quantities for the first [***] covered by the Launch Forecast shall be a binding commitment by Depomed to purchase the quantities of Product set out in the Launch Forecast for such [***] period.

Supply Forecast

5.3 Commencing in the first full Calendar month following Launch, Depomed shall deliver to BLS, on or before the fifteenth (15th) day of each calendar month, a rolling eighteen

CONFIDENTIAL TREATMENT REQUESTED

(18) calendar month Supply Forecast setting forth, by calendar month, the quantities of Product (including samples) that Depomed expects BLS to deliver to Depomed during each calendar month of the next eighteen (18) calendar month period for the Territory. Quantities of 1000mg Product identified in each Supply Forecast shall be in whole multiples of the Batch Size. BLS shall notify Depomed within fifteen (15) days after BLS’s receipt of any Supply Forecast of any inability of BLS to supply to Depomed any quantities of 1000mg Product that BLS is expected to deliver to Depomed pursuant to any such Supply Forecast in excess of the quantities set out in Section 4.2.

First [***] Firm

5.4 The 1000mg Product quantity stated for the first [***] of each Supply Forecast shall be a binding commitment by Depomed to purchase and, subject to the provisions of Sections 5.5 to 5.7, binding commitment by BLS to deliver, the quantities of 1000mg Product set forth in such Supply Forecast for those [***] . The estimated requirements for each succeeding calendar month in each Supply Forecast shall be Depomed’s good faith estimates of Depomed’s requirements for 1000mg Product in each such calendar month, and may be varied only to the extent set out in Sections 5.5 to 5.7.

Permitted Modifications to Forecasts

5.5 The forecast for any calendar month in the tenth (10th) through the eighteenth (18th) calendar months of any Supply Forecast may be varied from the forecast made for the same calendar month in the previous Supply Forecast by any reasonable percentage consistent with Depomed’s good faith estimates for its requirements for that calendar month, provided that quantities set out in each month in each Supply Forecast are in whole multiples of Batch Size.

5.6 The forecast for the seventh (7th) through ninth (9th) calendar months of any Supply Forecast vary from the forecast made for that calendar month when it was the tenth (10 ^th ) calendar month in a Supply Forecast, by an amount that does not exceed the greater of fifty (50%) of the forecast for that calendar month when it was the tenth (10 ^th ) calendar

CONFIDENTIAL TREATMENT REQUESTED

month in a Supply Forecast or one Batch Size. provided that quantities set out in each month in each Supply Forecast are in whole multiples of Batch Size.

5.7 The forecast for any of the fourth (4 ^th ) through sixth (6th) calendar months of any Supply Forecast may vary from the forecast made for that calendar month when it was the seventh (7 ^th ) calendar month in a Supply Forecast, by an amount that does not exceed the greater of twenty five per cent (25%) of the forecast for that calendar month when it was the seventh (7 ^th ) calendar month in a Supply Forecast or one Batch Size, provided that quantities set out in each month in each Supply Forecast are in whole multiples of Batch Size.

5.8 Notwithstanding the above, from time to time, due to unforeseen circumstances, Depomed may deliver to BLS a Supply Forecast for 1000mg Product volumes in excess of those specified in any prior Supply Forecast and/or in excess of the percentage variances permitted by Sections 5.5 to 5.7, provided that quantities set out in each month in each Supply Forecast are in whole multiples of Batch Size. BLS shall provide written notification to Depomed as soon as reasonably possible after the delivery of such Supply Forecast of the amount of any such excess that BLS determines it will be able to deliver to Depomed, and shall use commercially reasonable efforts to deliver that amount of 1000mg Product in addition to the amounts otherwise properly included in such Supply Forecast.

5.9 Notwithstanding any forecast delivered by Depomed to BLS pursuant to the provisions of Article 5, BLS shall have no obligation to supply to Depomed quantities of the 1000mg Product in excess of the quantities specified in Section 4.2.

6. PURCHASE ORDERS

6.1 Depomed shall deliver to BLS, concurrently with the delivery of the Launch Forecast delivered pursuant to Section 5.2, a firm Purchase Order for the quantities of 1000mg Product (including samples) required by Depomed for the first [***] of the Launch Forecast, specifying in such Purchase Order the required Delivery Date within each such month for the quantities so ordered. Each Purchase Order shall be in whole multiples of

CONFIDENTIAL TREATMENT REQUESTED

the Batch Size. The Delivery Date specified in any such Purchase Order shall not be less than ninety (90) days after the date of delivery of the Launch Forecast. The Purchase Order may be delivered electronically or by other means to such location, as BLS shall designate.

6.2 Depomed shall deliver to BLS, with each Supply Forecast delivered pursuant to Section 5.3, a firm Purchase Order for the quantities of 1000mg Product required by Depomed for the third (3 ^rd ) month of such Supply Forecast. Each Purchase Order shall be in whole multiples of the Batch Size, and shall specify the required Delivery Date within such month for the quantities so ordered. The Delivery Date specified shall not be less than ninety (90) days after the date of such Purchase Order. The Purchase Order may be delivered electronically or by other means to such location, as BLS shall designate.

6.3 Notwithstanding any Purchase Orders delivered by Depomed to BLS pursuant to the provisions of section 6.1, BLS shall have no obligation to supply to Depomed quantities of the 1000mg Product in excess of the quantities specified in Section 4.2.

Forms

6.4 In ordering or delivering 1000mg Product, each of Depomed and BLS may use its respective standard forms, provided that nothing in those forms shall be construed to modify or amend the terms and conditions of this Agreement. In the event of any conflict between the terms and conditions of any such form and the terms and conditions of this Agreement, the terms and conditions of this Agreement shall control.

7. DELIVERY AND SHIPPING TERMS

Delivery

7.1 The quantities of 1000mg Product ordered in each Purchase Order shall be delivered no more than ten (10) business days before or after the Delivery Date specified in the relevant Purchase Order. In the event that BLS expects delivery of quantities of 1000mg Product ordered by Depomed to be delayed due to unforeseen transportation difficulties, BLS shall notify Depomed not later than ten (10) business days before the Delivery Date

CONFIDENTIAL TREATMENT REQUESTED

specified in the relevant Purchase Order, and shall inform Depomed of the expected delayed Delivery Date.

Variance in Quantities Delivered

7.2 Quantities (in tablets) of 1000mg Product actually delivered by BLS may vary from the quantities specified in a Purchase Order by [***] . Depomed shall be invoiced only for the quantities of 1000mg Product actually delivered to Depomed.

Shipping Terms

7.3 In the case of delivery of the 1000mg Product by BLS from BLS’s manufacturing facility in Puerto Rico, all 1000mg Product shall be delivered FCA (INCOTERMS 2000) to Depomed’s designated warehouse in the Territory, but outside Puerto Rico. Title to, ownership of and risk of loss of, the 1000mg Product shall transfer at the location that is immediately after the 1000mg Product leaves Puerto Rico and enters international waters while the 1000mg Product is in transit from BLS’s facility in Puerto Rico to Depomed’s designated warehouse in the Territory, but outside Puerto Rico.

7.4 In the case of delivery of the 1000mg Product by BLS from a manufacturing site in Canada, all Product shipped to Depomed shall be delivered, Delivered Duty Paid (DDP) (INCOTERMS 2000) at the U.S. Customs port designated by Depomed, in accordance with Section 7.5 below, immediately after the 1000mg Product has cleared U.S. Customs (such location shall be the “ Delivery Point ”), except that Depomed shall, at Depomed’s determination, either pay the freight costs directly to the shipping company or reimburse BLS for the freight charges to the Delivery Point. Title to, ownership of, and risk of loss of the 1000mg Product shall pass from BLS to Depomed immediately after the 1000mg Product has cleared U.S. Customs. BLS shall be responsible for the payment of all duties, tariffs, taxes and other charges payable for the exportation of the 1000mg Product, and BLS shall be the importer of record of the 1000mg Product and be responsible for the payment of U.S. Customs’ duties and all other taxes, charges and administrative costs applicable to the U.S. Customs clearance of the 1000mg Product into the United States.

CONFIDENTIAL TREATMENT REQUESTED

BLS shall adhere to Depomed’s import policies and practices, and BLS and Depomed shall agree on a freight forwarder to use for delivery of the 1000mg Product to Depomed.

7.5 BLS and Depomed shall cooperate with and assist each other in all aspects of the shipment, importation and delivery process in order to ensure the expeditious delivery of the 1000mg Product to the Delivery Point referred to in Section 7.4, including assisting in obtaining any documents that may be required. BLS shall consult with Depomed with regard to any communications with U.S. government agencies, including the FDA. Upon the request of Depomed, BLS’s customs broker shall provide information to Depomed regarding customs clearance and any issues related thereto. In the case of delivery of the 1000mg Product by BLS from a manufacturing site in Canada, Depomed shall designate the U.S. Customs entry points used by Depomed or Depomed’s designated customs broker that are on a reasonably direct route from the manufacturing facility to Depomed’s designated delivery facility.

7.6 BLS shall notify Depomed that the 1000mg Product is ready for shipment no less than forty eight (48) hours before such time.

7.7 Product ordered by Depomed and delivered by BLS shall be shipped by ground transportation in the case of delivery from a manufacturing facility in Canada, and by ship in the case of delivery from a manufacturing facility in Puerto Rico. Notwithstanding the foregoing, if Depomed has reasonably determined that shipment of the 1000mg Product by air freight is advisable, Depomed shall specify in the relevant Purchase Order that Depomed wishes to have the 1000mg Product which is the subject of such Purchase Order shipped by air freight. BLS shall arrange for such shipment of the 1000mg Product and Depomed shall pay for, or reimburse BLS for, the cost of air freight for the shipment in question. In the event BLS is responsible for any delay in the shipment of the 1000mg Product which would require shipment by air freight to meet the specified Delivery Date in the relevant Purchase Order (giving effect to the provisions of Section 7.1), BLS shall pay for, or reimburse Depomed for, any increase in cost incurred by Depomed occasioned by using air freight for such shipment. Delivery of the 1000mg Product so shipped shall, notwithstanding Sections 7.3 and 7.4 above, be (FCA)

CONFIDENTIAL TREATMENT REQUESTED

(INCOTERMS 2000), and title to, ownership of and risk of loss of, the 1000mg Product shall pass from BLS to Depomed at the location that (i) in the case of 1000mg Product shipped from Canada, is immediately after the 1000mg Product has left the territory of Canada, (including the airspace above international waters over which Canada may exercise rights in respect of the seabed and subsoil, and their natural resources, in accordance with international law and the laws of Canada) while in transit to Depomed’s designated warehouse in the Territory; or (ii) in the case of 1000mg Product shipped from Puerto Rico, is immediately after the 1000mg Product leaves the territory of Puerto Rico and enters the airspace above international waters in transit from Puerto Rico to Depomed’s designated warehouse in the Territory. Such location shall be the Delivery Point. All other terms of this Section 7 shall apply to such shipment.

Losses in Transport

7.8 Depomed shall notify BLS in writing if Depomed determines from the applicable shipping documentation that the quantities of 1000mg Product delivered to Depomed differ from the quantities of 1000mg Product shipped by BLS and invoiced to Depomed, within thirty (30) days following delivery of any such 1000mg Product. Any claim for such a quantitative deficiency which is not made within such thirty (30) days shall be deemed to have been waived by Depomed. If the Parties agree that such quantitative deficiency occurred prior to delivery, BLS shall, at BLS’s option, and as Depomed’s exclusive remedy against BLS for such quantitative deficiency, (a) credit Depomed for the amount invoiced to or paid by Depomed to BLS in excess of the aggregate price for actual quantities delivered or (b) subject to BLS having sufficient 1000mg Product on hand at the time of request by Depomed, promptly deliver the appropriate quantities of 1000mg Product to Depomed sufficient to negate any such deficiency, at no additional cost to Depomed. Any unresolved dispute with respect to any quantitative deficiency asserted by Depomed under this Section 7.8 shall be resolved pursuant to Section 29.8.

CONFIDENTIAL TREATMENT REQUESTED

8. PRICES AND PAYMENTS

Depomed Sales

8.1 BLS shall sell to Depomed, and Depomed shall purchase from BLS, all quantities of the 1000mg Product to be Marketed by Depomed in the Territory at the applicable Supply Price per tablet set out in Schedule 8.1 and corresponding to the Net Selling Price per tablet of the 1000mg Product for that calendar quarter.

Distributor Sales

8.2 BLS shall sell to Depomed and Depomed shall purchase from BLS, all quantities of the 1000mg Product intended for resale by Depomed to a Distributor for Marketing in the Territory by that Distributor, at the applicable Supply Price per tablet set out in Schedule 8.2 and corresponding to the Depomed Revenue per tablet calculated on the Distributor’s Net Sales of the 1000mg Product for that calendar quarter, provided, however, that if the Supply Price set out in Schedule 8.2 is higher than the Supply Price set out in Schedule 8.1 or Schedule 8.4, as applicable, that would be paid based on the Distributor’s Net Selling Price, Depomed shall pay to BLS the Supply Price set out in Schedule 8.1 or Schedule 8.4, whichever is applicable.

8.3 Depomed shall pay to BLS, as an additional supply price, within thirty (30) days after receipt by Depomed, [***] of the value of all consideration not otherwise included in Depomed Revenues or Net Sales and received by Depomed for the right to Market or distribute the 1000mg Product in the Territory under this Agreement or the Manufacturing Transfer Agreement.

Supply Prices if no Valid Claim

8.4 Notwithstanding the provisions of Section 8.1, the Supply Price to paid by Depomed to BLS for each tablet of the 1000mg Product delivered by BLS to Depomed shall be the Supply Price set out in Schedule 8.4 during any calendar quarter when there is no Valid Claim.

CONFIDENTIAL TREATMENT REQUESTED

Sample Price

8.5 The Supply Price to paid by Depomed to BLS for each tablet of the 1000mg Product delivered by BLS to Depomed packaged as a sample shall be the Supply Price set out in Schedule 8.5. In the event that samples are packaged other than as set forth in the Specifications, the Supply Price applicable to samples shall be adjusted to reflect any incremental increase or decrease in costs associated with sample packaging.

Invoicing

8.6 BLS shall invoice Depomed upon shipment of the 1000mg Product to Depomed an amount for each tablet of the 1000mg Product shipped equal to the applicable Supply Price set out above, provided that, for the purposes of this Section, the Net Selling Price or Depomed Revenues to be used by BLS in preparing its invoices shall be either the estimated Depomed Revenues or estimated Net Selling Price of the 1000mg Product in the Territory as set out in the Launch Forecast, and thereafter the actual Depomed Revenue and Net Selling Price set out in the most recent Quarterly Reports delivered pursuant to Section 8.10 (the “ Estimated Net Selling Price ”).

Payment Terms

8.7 Payment of all invoices issued by BLS to Depomed shall be made within thirty days after the date thereof. The running of such thirty day period shall be suspended during the pendency of any reasonable dispute pursuant to Section 13 below concerning the conformity of a shipment of 1000mg Product to the Specifications. Unpaid balances shall accrue interest, from due date until paid, at a rate equal to the lesser of (a) the prime rate, as reported in The Wall Street Journal , U.S. Edition, on the date such payment is due, plus an additional two percent or (b) the maximum rate permitted under applicable law. If any amount due hereunder and not subject to a reasonable, good-faith dispute by Depomed remains outstanding for more than forty-five days after its due date, BLS may, in addition to any other rights or remedies it may have, refuse to ship 1000mg Product hereunder except upon payment by Depomed in advance.

CONFIDENTIAL TREATMENT REQUESTED

8.8 All prices set out in Schedules 8.1, 8.2, 8.4 and 8.5 are in U.S. dollars, and all payments due to BLS under this Agreement shall be made in U.S. dollars. All payments shall be made by wire transfer in immediately available funds to the account of BLS specified in Schedule 8.8 or such other account of BLS as BLS may indicate to Depomed in writing at least thirty (30) days prior to the date payment is due in accordance with Section 27.1.

Reconciliation

8.9 Within ten (10) days after the end of each calendar month, Depomed shall deliver a report to BLS specifying the quantities of the 1000mg Product sold by Depomed and its Distributors in that calendar month in the Territory.

8.10 Within fifteen (15) days after the end of each calendar quarter, Depomed shall deliver a report to BLS specifying, for such calendar quarter in the Territory:

(a) the quantities of the 1000mg Product sold by Depomed and its Distributors in that calendar quarter;

(b) Net Sales of the 1000mg Product in the Territory by each of Depomed and its Distributors during such calendar quarter, including itemization of all deductions provided for in Section 1.15;

(d) the Depomed Revenues for the 1000mg Product for the calendar quarter, calculated in accordance with United States Generally Accepted Accounting Principles; and

(e) the total amount payable to BLS for all quantities of the 1000mg Product delivered during such calendar quarter calculated in accordance with Sections 8.1, 8.2 and 8.4, using the Depomed Revenues and the Net Selling Price, as applicable, for the 1000mg Product in the Territory for the just-ended calendar quarter.

8.11 Depomed shall pay to BLS, within thirty (30) days after the delivery of such report, the difference, if any, between the aggregate amount invoiced by BLS under Section 8.6 for all quantities of the 1000mg Product delivered by BLS during the calendar quarter for

CONFIDENTIAL TREATMENT REQUESTED

which the report is rendered and the aggregate amount payable by Depomed for those quantities determined pursuant to Sections 8.1, 8.2 and 8.4, as applicable. In the event that calculations made in accordance with the immediately preceding sentence determine that Depomed has overpaid BLS, an amount equal to such overpayment shall be credited to Depomed on the immediately succeeding invoice rendered by BLS.

Price Adjustments

8.12 The Supply Prices in each of Schedules 8.1, 8.2, 8.4 and 8.5 may be increased or decreased effective on the first business day of January in each year during the term, commencing in January 2007, as follows:

(a) subject to subsection (b), each Supply Price in each such Schedule may be increased by the percentage obtained by multiplying the PPI Increase over the most recent period of twelve consecutive months for which the PPI Increase is available by the PPI Multiplier corresponding to such Supply Price set forth on each such Schedule; and

(b) if BLS’s actual cost of manufacturing the 1000mg Product has decreased over the most recent period of twelve consecutive months for which the PPI Increase is available, each such Supply Price shall not be increased for the following calendar year, but shall be decreased by an amount equal to the amount of that decrease in manufacturing cost.

For purposes of illustration of Section 8.12(a) only, with respect to a Supply Price of $1.00, if the PPI Increase were 4.0% and the applicable PPI Multiplier were 0.5, such Supply Price would be increased by 2.0%, from $1.00 to $1.02, and that Supply Price, and the applicable schedule, would be amended accordingly. Each other Sup

SITE SEARCH

AGREEMENTS / CONTRACTS

CLAUSES

Search Contract Clauses >>

Browse Contract Clause Library>>

Get Email Updates