“Net Sales” means, with respect to any Licensed Product, the gross amounts invoiced for sales or other dispositions of such Licensed Product by or on behalf of GARDP or any Sublicensee, as applicable, to Third Parties less the following deductions to the extent included in the gross invoiced sales price for such Licensed Product or otherwise directly paid or incurred by GARDP or any Sublicensee, as applicable, with respect to the sale or other disposition of such Licensed Product:
(i) normal and customary trade and quantity discounts actually allowed and properly taken directly with respect to sales of such Licensed Product (provided that such discounts are not applied disproportionately to such Licensed Product when compared to the other products of GARDP or the Sublicensee, as applicable);
(ii) credits or allowances given or made for rejection of or return of previously sold Licensed Product or for retroactive price reductions and billing errors;
(iii) rebates and chargeback payments granted to managed health care organizations, pharmacy benefit managers (or equivalents thereof), national, state/provincial, local, and other governments, their agencies and purchasers and reimbursers, or to trade customers; (iv) costs of freight, insurance, and other transportation charges directly related to the distribution of such Licensed Product; (v) taxes, duties, customs duties or other governmental charges (including any tax such as a value added or similar tax, other than any taxes based on income) levied on or measured by the billing amount for such Licensed Product, as adjusted for rebates and refunds; and
(vi) the lesser of (a) ten percent (10.0%) of the aggregate gross amount billed or invoiced on sales of a Licensed Product in the relevant country (provided the amount deducted is consistent with generally accepted accounting practices in the relevant country), or (b) the actual amount of any write–offs for bad debt relating to such sales during the period in which GARDP has the obligation to pay a Cost Recoupment Fee.
Upon any sale or other disposition of any Licensed Product that should be included within Net Sales for any consideration other than exclusively monetary consideration on bona fide arm’s–length terms, then for purposes of calculating Net Sales under this License Agreement, such Licensed Product shall be deemed to be sold exclusively for money at the average sales price during the applicable reporting period generally achieved for such Licensed Product in the country in which such sale or other disposition occurred when such Licensed Product is sold alone and not with other products.
In no event will any particular amount, identified above, be deducted more than once in calculating Net Sales. Sales of Licensed Product between GARDP and any Sublicensee for resale shall be excluded from the computation of Net Sales, but the subsequent resale of such Licensed Product to a Third Party shall be included within the computation of Net Sales. Any free–of–charge disposal or use of a Licensed Product for development, regulatory or marketing purposes, such as clinical trials, compassionate use or indigent patient programs, shall not be deemed a sale or disposition for purposes of calculating Net Sales.
In the event of changes to a Party’s or a Sublicensee’s accounting rules as the result of merger or by operation of law, or should the above not be consistent with a Sublicensee’s accounting rules, the Parties will engage in good faith negotiations with respect to possible amendments to the definition of Net Sales as applicable to such Party or Sublicensee. For the avoidance of doubt, any change to the definition of Net Sales must be made by a written amendment to this License Agreement signed by both Parties.
3. RECOUPMENT OF COSTS
3.1 In consideration of the rights and licenses granted under this License Agreement, GARDP shall pay Shionogi a fee (Cost Recoupment Fee) equal to a percentage of all Net Sales of the Licensed Product within the Territory by or on behalf of all Sublicensees as follows, which fee is intended to reimburse Shionogi for its costs of implementation and maintenance related to the activities conducted pursuant to this License Agreement and/or the Collaboration Agreement:
(a) High Income Countries (as identified in Schedule C): nine percent (9%) with no minimum threshold of sales (inclusive of royalties that may be due by Shionogi to Third Parties i.e. Shionogi shall remain responsible for paying such royalties).
(b) Upper Middle Income Countries (as identified in Schedule C): five percent (5%) with no minimum threshold of sales (inclusive of royalties that may be due by Shionogi to Third Parties i.e. Shionogi shall remain responsible for paying such royalties).
(c) Low Middle Income Countries and Low Income Countries (as identified in Schedule C): no Cost Recoupment Fees.
Cost Recoupment Fees are payable to Shionogi until the later of, on a country by country basis: (i) the expiration of the last–to–expire patent set forth on Schedule B in the country (if any) that covers the Licensed Product, and (ii) twelve (12) years from the first sale of Licensed Product in the relevant country in the Territory (Cost Recoupment Period). After the expiration of this period in any given country, the Sublicense granted to the Sublicensee shall survive on a fully–paid up basis for so long as the applicable Sublicense Agreement is valid and in effect, after which such Sublicense shall immediately terminate.