Provision Language
III. CONSIDERATION
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3.2 Royalties
3.2.3 Payment and Reports.
(a) LICENSEE will pay to Council, in United States dollars, not later than forty-five (45) calendar days after the end of each Quarter the royalties owed to Council under the terms of Section 3.2 Each royalty payment will be accompanied by a report in writing (the “Royalty Report”) specifying the Quarter to which such royalty payment applies and detailing the calculation of the royalties due to Council for such Quarter, including details as to: gross sales of the Licensed Product; units sold of the Licensed Product; sales and similar taxes paid; refunds made; credits provided; freight and distribution fees paid; other allowable deductions taken; reconciliation, if any, of estimated to actual sales due to timing of financial reporting; computation of Net Sales; computation of royalties; reasonable documentation regarding any amounts deducted pursuant to Section 4.2.2. Except as otherwise expressly permitted in Section 3.4 with respect to taxes, all payments by LICENSEE will be made without set-off or deduction of any kind.
3.2.4 Records. LICENSEE will keep, and will require any Affiliates and sublicensees selling the Licensed Product to keep, for three (3) years from the date of each payment of royalties, complete and accurate records of Net Sales and net units sold of the Licensed Product in sufficient detail to allow the royalties to be determined accurately. Council will have the right for a period of three (3) years after receiving any report or statement with respect to royalties due and payable to appoint an independent Certified Public Accountant reasonably acceptable to LICENSEE to inspect the relevant records solely for the purpose of verifying such report or statement. LICENSEE will make its records and the records of its Affiliates available for inspection by such independent certified public accountant during regular business hours on a reasonably mutually agreed-upon date and at such place or places where such records are customarily kept, upon reasonable notice from Council, to verify the accuracy of the reports and payments. Such inspection right will not be exercised more than once in any calendar year except that, following any audit that reveals an underpayment sufficient to shift the cost of the audit to Licensee, until such time as two consecutive audits show no such discrepancy, Council will have the right to have such audit performed on a quarterly basis. Council will bear all of its and the auditor’s costs and expenses associated with an audit conducted pursuant to this Section 3.2.4, provided, however, that if the designated auditor discovers an underpayment at of least the lesser of (i) twenty thousand United States dollars (US $20,000) and (ii) five percent (5%), for any Quarter between the amount of royalties LICENSEE has paid under this Agreement and the amount of royalties actually owed to Council under this Agreement, then LICENSEE will bear all costs and expenses associated with such audit and, for the avoidance of doubt, such underpayment will be considered a late payment subject to interest pursuant to the terms of Section 14.12. Council agrees to treat all information learned in the course of any audit or inspection as Confidential Information of LICENSEE except to the extent necessary for Council to (i) reveal such information in order to enforce its rights under this Agreement, or (ii) if disclosure is required by law. The results of each inspection, if any, will be binding on both Parties. LICENSEE will include substantially the same audit rights in any sublicense it grants in order to verify the correctness of payments due hereunder.