6. Prices, Royalties and Payments
6.5 Royalty Payments and Reports. Royalties under Section 6.4 shall be calculated and reported for each Quarter and shall be paid within forty-five (45) days of the end of the Quarter. Within five (5) Business Days after the end of each Quarter, Customer shall deliver a written report to Dynavax with Customer’s preliminary good faith estimate of Net Sales, Units Sold, Net Sales Per Unit and royalties for such Quarter. In addition, within ten (10) Business Days after the end of each Quarter, Customer shall deliver to Dynavax a report of Net Sales, Units Sold, and Net Sales Per Unit in the applicable Quarter in sufficient detail to permit confirmation of the accuracy of the payment due or made, including, on a Customer Product-by-Customer Product and country-by-country basis (for sales of Customer Product(s) that are made to specific country(ies)), the number of each type of Customer Product(s) sold, gross sales, Net Sales and itemized deductions from gross sales (by major category as set forth in the definition of Net Sales), the royalties payable, and the exchange rate used.
(a) Customer shall keep, and shall cause its affiliates and Licensees to keep, complete and accurate records pertaining to the sale of Customer Product(s) in sufficient detail to permit Dynavax to confirm(i) the country in which each Unit of Customer Product(s) is Disposed of (if sales are made to a specific country); and (ii) the accuracy of all royalties paid hereunder; in each case, for at least three (3) full calendar years following the end of the calendar year to which they pertain. Dynavax shall have the right, once annually, to cause an independent, certified public accountant of international standing and reasonably acceptable to Customer to audit such records to confirm Additional Amounts, Net Sales, Units Sold, Net Sales Per Unit, Adjusted Net Sales per Unit and royalties for a period covering not more than the preceding three (3) full calendar years. No calendar year shall be subject to audit under this section more than once. Such audits may be exercised during normal business hours upon ten (10) days prior written notice to Customer. The auditor will execute a reasonable written confidentiality agreement with Customer and will disclose to Dynavax only such information as is reasonably necessary to provide Dynavax with information regarding any discrepancies between (i) amounts reported and actually paid, and (ii) amounts payable under the Supply Agreement. The auditor will send a copy of the report to Customer at the same time it is sent to Dynavax. The report sent to both Parties will include the methodology and calculations used to determine the results. If such audit reveals that Customer has failed to accurately report information pursuant to Section 6.3 or Section 6.5 or to make any Additional Amount or royalty payment (or portion thereof) when due under the Supply Agreement, then Customer, within thirty (30) days after receipt of the final audit report, shall pay to Dynavax any underpaid amounts due under the SupplyAgreement, together with interest on such underpaid or late amounts calculated in accordance with Section 6.6. Dynavax shall bear the full cost of such audit unless such audit discloses an underpayment by Customer of more than 5% of the amount due for any calendar year under the Supply Agreement, in which case Customer shall bear the full cost of such audit. If such audit discloses an overpayment by Customer, then Dynavax, within thirty (30) days after receipt of the final audit report, shall pay to Customer any overpaid amounts under the Supply Agreement.
(b) Dynavax shall keep (or shall cause to be kept, as applicable) appropriate and complete records relating to the manufacture of the Dynavax Adjuvant supplied under the Supply Agreement as required for compliance with Applicable Laws. Customer and/or its authorized representative, shall be entitled once a year, upon twenty (20) days’ notice to Dynavax, during normal business hours to audit the applicable documentation, to ensure compliance with Applicable Laws. Dynavax shall provide all reasonable assistance to Customer and/or its authorized representative to have access to the applicable documentation. In the event that Customer has reasonable cause to suspect a breach of the Supply Agreement by Dynavax, Customer shall only be required to give forty-eight (48) hours’ notice to conduct such an audit and such audit may be in addition to the once a year audit limitation mentioned above.