“Distributor” shall mean a third party wholesaler or distributor that is not a Gilead Distributor and that is operating under an agreement with Licensee for the distribution and sale of Product in the Territory.
“Gilead Distributor” shall mean any third party distributor that is operating under an agreement with Gilead for the distribution and sale of Gilead’s branded product in the Territory. Gilead will provide Licensee with a list, which may be updated by Gilead from time to time, of the identity of the Gilead Distributors and their licensed territories.
“Improvement” means all improvements, methods, modifications and other know-how developed by or on behalf of Licensee and relating to API or a Product.
“Licensed Product Supplier” shall mean (a) an entity located in India (other than Licensee) that is licensed by Gilead, directly or through a sublicense from MPP, to (i) make Product in India and (ii) use, sell, have sold, offer for sale and export such Product in the Field in the Territory; (b) an entity located in China that is licensed by Gilead, directly or through a sublicense from MPP, to (1) make Product in China and (2) use, sell, have sold, offer for sale and export such Product in the Field in the Territory; or (c) an entity located in South Africa that is licensed by Gilead, directly or through a sublicense from MPP, to (x) make Product in South Africa and (y) use, sell, have sold, offer for sale and export such Product in the Field in the Territory.
“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.
“Third Party Resellers” shall mean Licensed Product Suppliers, Distributors and Gilead Distributors.
4. Consideration/Payment Terms/Audit
4.3 Reports. Within ten (10) business days after the end of each calendar quarter, Licensee shall (a) provide each of Gilead and MPP with a detailed report of amounts of API and Product produced, API and Product on stock, total invoiced sales, Net Sales, the deductions used to determine Net Sales, number of units of Product sold, each of which shall be reported on the smallest unit, pack size and value of sales in US dollars on a Product-by-Product, country-by-country, month-by-month and purchaser-by-purchaser basis, adjustments for Combination Products (pursuant to Section 4.2) including calculations showing the Net Sales of the EVG component of any EVG Combination Product or Quad Product, total royalties owed for the calendar quarter on a country-by-country basis, the Third Party Resellers, if any, to which Licensee has provided Product and in what quantities, and Net Sales by each Third Party Reseller, and, in the case of the sale of any API to third-party manufacturers of Product, the identity of such third parties and quantities of API sold to each such third party (the “Quarterly Report”); (b) provide each of Gilead and MPP with a written certification of the accuracy of the contents of the Quarterly Report, signed by an appropriate Licensee senior officer; and (c) pay royalties due to Gilead for the calendar quarter on a Product-by-Product and country-by-country basis. Additionally, together with each Quarterly Report, Licensee shall provide Gilead and MPP with a Regulatory Report as set forth in Section 6.3. Licensee shall provide Quarterly Reports and Regulatory Reports to Gilead and MPP at the addresses listed below. Licensee shall pay royalties to Gilead by wire transfer to the bank account indicated by Gilead from time to time. To the extent such Quarterly Reports relate to EVG, EVG Product, EVG Combination Product, or Quad Product, Gilead will have the right to share such Quarterly Reports with Japan Tobacco. Failure to provide timely reports as required under this Section and under Section 6.3 shall constitute a breach of this Agreement and shall provide MPP with the right to terminate this Agreement pursuant to Section 10.2.
[Added by Amendment 1] In each Quarterly Report, Licensee shall provide Gilead with the following information (in addition to the information described in Section 4.3 of the Agreement): (i) any Drug Controller General of India export permits obtained by the Licensee for Product, including the quantity of Product exported, the final destination of the Product and the recipient of the Product; and (ii) any Central Drugs Standard Control Organization (CDSCO) No Objection Certificates (NOC) obtained by third parties for Product for which Licensee provided assistance, including the quantity of Product exported, the final destination of the Product and the recipient of the Product.
4.5 Records. Licensee shall keep complete and accurate records of API and Product produced and sold in sufficient detail to enable Licensee to determine the amount of royalties due, the parties to whom Product or API was sold, and the countries in which sales occurred.
4.6 Audit. Gilead and MPP have the right to engage an independent public accountant to perform, on no less than thirty (30) days’ advance notice to Licensee, an audit, conducted in accordance with generally accepted auditing standards, of such books and records of Licensee that are deemed necessary by such public accountant to report amounts of API and Product produced, gross sales, Net Sales for the periods requested and accrued royalties. Gilead or MPP (as appropriate) will bear the full cost of any such audit unless such audit discloses a difference of more than five percent (5%) from the amount of royalties due. In such case, Licensee shall promptly pay Gilead any underpayment and shall bear the full cost of such audit. To the extent relevant to EVG, EVG Product, EVG Combination Product, or Quad Product, Gilead will have the right to disclose such audit results to Japan Tobacco.
5. Intellectual Property
5.2. Reporting of Improvements. Licensee shall provide Gilead and MPP with an annual report, in writing and in reasonable detail that sets forth any Improvements, including any patent applications claiming Improvements. Licensee shall transfer to Gilead and/or MPP, upon request by Gilead and/or MPP and at Gilead’s and/or MPP’s expense (as appropriate), any know-how owned or controlled by Licensee relating to such Improvements. Any failure to report any such Improvements to Gilead or MPP in accordance with the terms of this Agreement shall constitute a breach of this Agreement and shall provide Gilead and/or MPP with the right to terminate this Agreement pursuant to Section 10.2. Gilead shall not transfer any Improvements obtained from Licensee to any third party, provided, however, that (a) Gilead may transfer Improvements to Gilead’s own Affiliates and suppliers, provided such Affiliates and suppliers utilize such Improvements solely for the benefit of Gilead and/or Japan Tobacco, and (b) Gilead may transfer Improvements relating to EVG, EVG Product, EVG Combination Product, or Quad Product to Japan Tobacco in accordance with the Japan Tobacco Agreement for use solely for the benefit of Japan Tobacco, including the transfer and use of such Improvements to Japan Tobacco’s suppliers for the benefit of Japan Tobacco. MPP shall not transfer any Improvements to any third party, provided, however, that should MPP desire to do so, MPP and Licensee will enter into good-faith negotiations regarding the terms of such transfer.