“Know-How Product” means a Licensed Product, for use in the Field, that incorporates or otherwise utilizes, whether in its manufacture, use or otherwise, the Know-How, but for which its making, using, selling or importation would not directly or indirectly infringe a Valid Claim in the country in which the product is made, used, sold or imported even in the absence of the license granted herein.
“Related Entity” means Licensee, any Affiliate of Licensee, any Sublicensee and any Affiliate of a Sublicensee.
“Net Sales” means the gross amount billed or invoiced by or on behalf of any Related Entity on sales, leases or other transfers of Licensed Products, less the following to the extent applicable with respect to such sales, leases or other transfers and not previously deducted from the gross invoice price: (a) customary trade, quantity or cash discounts to the extent actually allowed and taken; (b) amounts actually repaid or credited by reason of rejection or return of any previously sold, leased or otherwise transferred Licensed Products; (c) customer freight charges that are paid by or on behalf of the Related Entity; and (d) to the extent separately stated on purchase orders, invoices or other documents of sale, any sales, value added or similar taxes, custom duties or other similar governmental charges levied directly on the production, sale, transportation, delivery or use of a Licensed Product that are paid by or on behalf of the Related Entity, but not including any tax levied with respect to income provided that:
(i) in any transfers of Licensed Products between any Related Entity and another Related Entity not for the purpose of resale by such other Related Entity, Net Sales will be equal to the fair market value of the Licensed Products so transferred, assuming an arm’s length transaction made in the ordinary course of business;
(ii) in the event that any Related Entity receives non-cash consideration for any Licensed Products or in the case of transactions not at arm’s length with a non-Affiliate of a Related Entity, Net Sales will be calculated based on the fair market value of such consideration or transaction, assuming an arm’s length transaction made in the ordinary course of business; and
(iii) sales of Licensed Products by a Related Entity to another Related Entity for resale by such otherRelated Entity will not be deemed Net Sales. Instead, Net Sales will be determined based on the gross amount billed or invoiced by such other Related Entity upon resale of suchLicensed Products to a third-party purchaser.
“Non-Royalty Sublicense Income” means any payments or other consideration, including non-cash consideration, that Licensee or any of its Affiliates receives in connection with a Sublicense, other than royalties based on Net Sales. If (a) Licensee or its Affiliate receives non-cash consideration in connection with a Sublicense or (b) Licensee or its Affiliate is involved in a transaction not at arm’s length, Non-Royalty Sublicense Income will be calculated, respectively, based on the fair market value of such consideration or transaction calculated at the time of the transaction and assuming an arm’s length transaction made in the ordinary course of business.
4. Consideration for Grant of License
4.1 Funding. Licensee shall raise no less than [####] in equity financing on or before [####].
4.2 License Maintenance Fee. Licensee shall pay Elkurt a license maintenance fee of [####] within 45 days of achieving the funding provided in Section 4.1, or by [####], whichever shall first occur, and [####] every year thereafter on the anniversary of the Effective Date. Beginning on the anniversary date which is seven years from the Effective Date, and every year thereafter said annual License Maintenance Fee shall be [####].
4.3. Other Payments.
4.3.1. Royalties. Licensee shall pay Elkurt an amount equal to [####] of Net Sales.
4.3.2. Non-Royalty Sublicense Income. Licensee will pay Elkurt an amount equal to (a) [####] of all Non-Royalty Sublicense Income for any Sublicense executed prior to the First Commercial Sale and (b) [####] of all Non-Royalty Sublicense Income for any Sublicense executed after the First Commercial Sale.
4.3.3. Patent Challenge. If Licensee, its Affiliate, a Sublicensee or an Affiliate of a Sublicensee commences an action in which it challenges the validity, enforceability or scope of any of the Patent Rights (a “Challenge Proceeding”), Licensee will first provide Elkurt with at [####] days’ prior written notice that it intends so to do before filing such a challenge. Following the giving of such notice, Licensee will pay to Elkurt the amounts due under Sections 4.2.1 and 4.2.2 at the rate of two times the applicable rate during the pendency of such Challenge Proceeding. Should the outcome of such Challenge Proceeding determine that any claim of a patent challenged by Licensee is valid and/or infringed and/or enforceable, as applicable, Licensee will thereafter pay to Elkurt the amounts due under Sections 4.2.1 and 4.2.2 at the rate of three times the applicable rate for all Licensed Products sold that would infringe such claim and/or transactions that include a grant of rights to such claim. Such increased amounts reflect the increased value of the Patent Rights upheld in such action. In the event that a Challenge Proceeding is partially or entirely successful, Licensee will have no right to recoup any amounts paid to Elkurt before or during the period of the challenge. Additionally, Licensee agrees to disburse any and all proceeds received from any Sublicense of the applicable Patent Rights throughout the duration of any such challenge to Elkurt, and agrees to reimburse Elkurt for all costs actually incurred by Elkurt in connection with the Challenge Proceeding. In the event that all or any portion of this Section 4.2.3 is invalid, illegal or unenforceable, then the parties will use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, gives effect to the intent of this Section 4.2.3.
4.3.4. Know-How Products. To the extent that Net Sales or Non-Royalty Sublicense Income are generated from Know-How Products, the amounts otherwise due under Sections 4.2.1 and 4.2.2 shall be reduced by [####].