Provision Language
Definitions
“Net Sales” shall mean, with respect to a given calendar quarter, the total amount invoiced by Licensee for sales of Product in the Territory to third parties, less the following deductions calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP): (a) freight, insurance, packing, shipping charges, in each case as actually incurred and included as a specific line item on a bill or invoice to such third party; (b) custom duty of imported components, VAT/Indian excise tax, sales tax, or other governmental charges upon or measured by the production, sale transportation, delivery or use of goods, in each case included as a specific line item on a bill or an invoice to such third party; (c) trade, quantity and cash discounts allowed and taken, refunds, chargebacks and any other allowances given (as determined in accordance with GAAP) and taken which effectively reduce the gross amounts billed or invoiced; in each of (a) through (c) to the extent consistently applied across all products of Licensee. Net Sales on Combination Products shall be calculated based on the portion of product Net Sales attributable to Licensed API, as set forth in Section 4.2.
4. Consideration/Payment Terms/Audit
4.1 Royalty. As consideration for the licenses granted in Section 2, Licensee shall pay Gilead the following royalties on Net Sales of Product in the Territory for the duration of the Royalty Term:
(a) 3% of TDF Product Net Sales in the TDF–TAF Territory.
(b) 5% of TAF Product Net Sales in the TDF–TAF Territory.
(c) (i) 3% of the portion of TDF Combination Product Net Sales attributable to the TDF component of such TDF Combination Product in the TDF–TAF Territory and (ii) 5% of the portion of TAF Combination Product Net Sales attributable to the TAF component of such TAF Combination Product in the TDF–TAF Territory, in each case as determined in accordance with Section 4.2.
(d) (i) 3% of the portion of TDF Quad Net Sales attributable to the TDF component of the TDF Quad in the EVG–Quad Territory as determined in accordance with Section 4.2; (ii) 5% of the portion of TAF Quad Net Sales attributable to the TAF component of the TAF Quad in the EVG–Quad Territory as determined in accordance with Section 4.2; and (iii) 5% of the portion of Quad Product Net Sales attributable to the EVG and COBI components of the Quad Product in the EVG–Quad Territory as determined in accordance with Section 4.2.
(e) 5% of EVG Product Net Sales in the EVG–Quad Territory.
(f) 5% of the portion of EVG Combination Product (which, for clarity excludes any Quad Product) Net Sales attributable to the EVG component of such EVG Combination Product in the EVG–Quad Territory as determined in accordance with Section 4.2. In addition, (i) to the extent any such EVG Combination Product also contains TDF, Licensee will also pay Gilead 3% of the portion of EVG Combination Product (which, for clarity, excludes Quad Product) Net Sales attributable to the TDF component of such EVG Combination Product in the EVG–Quad Territory as determined in accordance with Section 4.2, (ii) to the extent any such EVG Combination Product also contains TAF, Licensee will also pay Gilead 5% of the portion of EVG Combination Product (which, for clarity, excludes Quad Product) Net Sales attributable to the TAF component of such EVG Combination Product in the EVG–Quad Territory as determined in accordance with Section 4.2 and (iii) to the extent any such EVG Combination Product also contains COBI, Licensee will also pay Gilead 5% of the portion of EVG Combination Product (which, for clarity, excludes Quad Product) Net Sales attributable to the COBI component of such EVG Combination Product in the EVG–Quad Territory as determined in accordance with Section 4.2.
(g) 5% of COBI Product Net Sales in the COBI Territory.
(h) 5% of the portion of COBI Combination Product (which, for clarity, excludes Quad Product) Net Sales attributable to the COBI component of such COBI Combination Product in the COBI Territory, as determined in accordance with Section 4.2. In addition, (i) to the extent any such COBI Combination Product also contains TDF, Licensee will also pay Gilead 3% of the portion of COBI Combination Product (which, for clarity, excludes Quad Product) Net Sales attributable to the TDF component of such COBI Combination Product in the COBI Territory, as determined in accordance with Section 4.2 and (ii) to the extent any such COBI Combination Product also contains TAF, Licensee will also pay Gilead 5% of the portion of COBI Combination Product (which, for clarity, excludes Quad Product) Net Sales attributable to the TAF component of such COBI Combination Product in the COBI Territory, as determined in accordance with Section 4.2.
(i) No royalties will be owed on Pediatric Formulations developed and sold by Licensee in accordance with Section 6.2(e).
(j) No royalties will be owed on the emtricitabine component of any Combination Product.
(k) No royalties will be owed on Licensee’s sale of API to other Licensed Product Suppliers, provided such Licensed Product Supplier has executed an agreement with Gilead requiring such Licensed Product Supplier to pay Gilead royalties on finished Product containing such API.
(l) Royalties on sales of Product to Gilead Distributors will be based on Licensee’s invoice price to such Gilead Distributor.
(m) Royalties will only be owed once on each royalty–bearing API of a Combination Product. By means of example, if Licensee pays royalties on TDF Quad pursuant to Section 4.1(d), then Licensee will not also have to pay additional royalties on the TDF component for the sale of TDF Quad under Section 4.1(a) or 4.1(c), the EVG component under Section 4.1(e) or 4.1(f), or the COBI component under Section 4.1(g) or 4.1(h).
Notwithstanding the foregoing, (i) the royalty due on TDF Product Net Sales under Section 4.1(a) and (ii) the royalty due on the portion of Net Sales attributable to the TDF component of a TDF Combination Product, the TDF Quad, an EVG Combination Product or a COBI Combination Product as set forth in Sections 4.1(c), 4.1(d)(i), 4.1(f)(i) and 4.1(h)(i) above, respectively, shall, in all cases, increase from 3% to 5% at such time when a Patent covering the composition of matter of tenofovir disproxil (TD) or of TDF issues in India.
[Added by Amendment 1] Licensee shall pay Gilead the following royalties on Net Sales of BIC Product and BIC Combination Product in the Territory for the duration of the Royalty Term:
a. 5% of BIC Product Net Sales in the BIC Territory.
b. 5% of the portion of BIC Combination Product Net Sales attributable to the BIC component of such BIC Combination Product in the BIC Territory, as determined in accordance with Section 4.2 of the Agreement.
c. To the extent any TAF Combination Product, TDF Combination Product, EVG Combination Product, and/or COBI Combination Product contains BIC, then in addition to royalties due from Licensee to Gilead for each other royalty bearing API in such Combination Product as set forth in Section 4.1(c), (f) and (h) of the Agreement, respectively, Licensee will pay Gilead 5% of the portion of such Combination Products Net Sales attributable to the BIC component of such Combination Product in the Territory applicable to such Combination Product, as determined in accordance with Section 4.2 of the Agreement.
4.2 Adjustment for Combination Products. Solely for the purpose of calculating Net Sales of Combination Products, if Licensee sells Product in the form of a Combination Product containing any Licensed API and one or more other active pharmaceutical ingredients in a particular country, Net Sales of such Combination Product in such country for the purpose of determining the royalty due to Gilead pursuant to Section 4.1 will be calculated by multiplying actual Net Sales of such Combination Product in such country by the fraction A/(A+B), where A is the invoice price of such Product if sold separately in such country, and B is the total invoice price of the other active pharmaceutical ingredient(s) in the combination if sold separately in such country. If, on a country–by–country basis, such other active pharmaceutical ingredient or ingredients in the Combination Product are not sold separately in such country, but the Product component of the Combination Product is sold separately in such country, Net Sales for the purpose of determining royalties due to Gilead for the Combination Product will be calculated by multiplying actual Net Sales of such Combination Product by the fraction A/C, where A is the invoice price of such Product component if sold separately, and C is the invoice price of the Combination Product. If, on a country–by–country basis, such Product component is not sold separately in such country, Net Sales for the purposes of determining royalties due to Gilead for the Combination Product will be D/(D+E), where D is the fair market value of the portion of the Combination Products that contains the Product, and E is the fair market value of the portion of the Combination Products containing the other active pharmaceutical ingredient(s) included in such Combination Product, as such fair market values are determined by mutual agreement of the parties, which shall not be unreasonably withheld.
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4.9 Royalty Term. Royalty payments shall be paid to Gilead by Licensee on a Product–by–Product and country–by–country basis starting on the date of the first commercial sale of a Product in a country and continuing until the last to occur of the following:
(a) the expiration of the last–to–expire Patent containing a valid claim covering the manufacture, use, import, offer for sale or sale of API or the Product in such country; or
(b) the date of expiration of the last–to–expire Patent containing a valid claim covering the manufacture, use, import, offer for sale or sale of API or the Product in the country(ies) in which such Product is manufactured (the “Royalty Term”).
Notwithstanding the foregoing, the Royalty Term for any Product will not extend beyond the date on which all patents and patent applications covering such Product (or the API contained therein) in the United States expire.