Provision Language
Definitions
“Net Sales” means the gross amount billed by SIIL and its Affiliates, excluding distributors and wholesalers, for any Product sold to Third Parties other than sublicensees as determined in accordance with SIIL’s accounting standards as consistently applied, less a deduction of the following, in each case, to the extent actually accrued, discounted or credited, as applicable, and without duplication:
(a) customary trade, quantity, or cash discounts to the extent actually allowed and taken;
(b) amounts repaid or credited by reason of defects, rejections, recalls or returns;
(c) to the extent separately stated on purchase orders, invoices, or other documents of sale, any taxes or other governmental charges levied on the production, sale, transportation, delivery, or use of a Product which is paid by or on behalf of SIIL;
(d) outbound transportation costs prepaid or allowed and costs of insurance in transit;
(e) rebates and chargebacks to customers and third parties;
(f) sales, transfers or other dispositions of Product for test marketing, sampling, promotional, charitable, compassionate use (or similar programs), donations (for example, to non-profit institutions or government agencies), pre-clinical, clinical or regulatory purposes; and
(g) amounts provided or credited to customers through coupons and other discount programs.
Net Sales shall occur on the earlier of the receipt of payment or ninety (90) days after the date of billing for a Product. If a Product is distributed at a discounted price that is substantially lower than the customary price charged by SIIL (taking into account customary pricing for a governmental entity), or distributed for non-cash consideration (whether or not at a discount), Net Sales shall be calculated based on the non-discounted amount of the Product charged to an independent Third Party during the same Calendar Quarter or, in the absence of such sales, on the fair market value of the Product.
Non-monetary consideration shall be valued based on the fair market value of such non-monetary consideration, including all relevant and material elements of such consideration, as agreed by the Parties in good faith.
Net Sales shall be calculated only once with respect to each Product sold by SIIL or its Affiliates, even if such Product is sold more than once in the course of its transfer to the ultimate end-user. The foregoing notwithstanding, Net Sales shall not include transfers among SIIL and any Affiliate unless the recipient does not intend to further sell or transfer the Product and is the end user thereof.
ARTICLE 4. PRODUCT DEVELOPMENT
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4.5. Development Costs. As between the Parties, SIIL shall bear all costs and out-of-pocket expenses for the Development of the Product in the Field in the Licensed Territory as indicated in the Development Plan. SIIL shall reimburse Visterra for the costs of all employees and contractors dedicated to the performance of activities under the Research and Development Plan (such costs to be reimbursed at a rate to be set forth in the Research and Development Plan) and the out-of-pocket expenses incurred by Visterra in conducting such activities. Visterra shall supply to SIIL all Licensed Antibody and Product requested by SIIL, and SIIL shall reimburse Visterra for any Licensed Antibody or Product supplied to SIIL by Visterra, in each case, under and in accordance with the Research and Development Plan, at the Transfer Price. For purposes of this Section 4.5, “Transfer Price” shall mean a price equal to the cost incurred by Visterra in Manufacturing the Licensed Antibody or Product (including the production of the active ingredient and the fill and finish of the Product) supplied to SIIL under this Agreement and transporting such Product to the airport(s) where such Product will be exported to SIIL, including material costs, labor costs and overhead costs (including allocated facility costs, testing costs and delivery costs); provided that if Visterra engages any Third Party contract manufacturer for the manufacture and supply of the Product, the Transfer Price shall be equal to Visterra’s costs actually incurred in such engagement, the procurement of such Product from such Third Party and transporting such Product to such airport(s). Visterra shall provide a reasonably detailed invoice to SIIL for any amounts owed under this Section 4.5 after the end of each Calendar Quarter in which such amounts were incurred. SIIL shall pay undisputed amounts set forth in each such invoice within forty-five (45) days after its receipt thereof.
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ARTICLE 8. FINANCIAL PROVISIONS
8.1. Upfront Fee. Within ten (10) Business Days after the Effective Date, SIIL shall pay to Visterra a one-time, non-refundable and non-creditable upfront fee of Five Million US Dollars ($5,000,000).
8.2. Milestone Payments. SIIL shall make the following one-time, non-refundable and non-creditable milestone payments to Visterra within thirty (30) days after the first achievement of each milestone event for a Product as set forth in this Section 8.2 by SIIL or its Affiliates (or with respect to Regulatory Milestone #2 set forth below, by Visterra or its Affiliates, licensees, collaborators or contractors). Each milestone payment by SIIL to Visterra hereunder shall be payable only once, regardless of the number of times achieved by the Products. For clarity, it is possible for both sales milestones to be achieved in the same four(4) consecutive Calendar Quarters. If the regulatory milestone set forth in item 2 of the below table is achieved with respect to a Product prior to the achievement of the regulatory milestone set forth in item 1 of the below table for such Product, then the milestone payments due and payable for the earlier milestone shall be due and payable simultaneously with the payment for achievement of the later milestone event.
[Table of regulatory and sales milestones redacted]
8.3. Royalties.
(a) Royalty Rates. SIIL shall pay to Visterra non-refundable, non-creditable royalties on annual Net Sales of Products in the Licensed Territory, as follows:
[Redacted table of royalty rates tiered by annual Net Sales value]
(b) Royalty Term. Royalties under Section 8.3(a) shall be due, on a country-by-country basis and Product-by-Product basis, during the period beginning on the First Commercial Sale of the Product in such country, and ending upon the later of (i) the expiration of the last-to-expire Valid Claim in the country covering the Product sold in such country; (ii) the expiration of Regulatory Exclusivity covering the Product sold in such country, where such Regulatory Exclusivity is provided under the law; and (iii) the tenth (10th ) anniversary after the First Commercial Sale of the Product in such country (the “Royalty Term”).
(c) Know-How Royalty. If a Product is generating Net Sales in a country in the Licensed Territory during the Royalty Term at a time when there is no Valid Claim covering the Product in such country, then the royalty rates applicable to Net Sales of such Product during the Royalty Term in such country pursuant to Section 8.3(a) shall be reduced by [**] percent ([**]%).
(d) Third Party Licenses. Visterra covenants that it takes full responsibility for the timely payment of all payments due and payable under the MIT Agreement, including any in relation to activities contemplated by this Agreement. If SIIL determines, on the advice of patent counsel, that it is necessary to obtain one or more licenses under Patents or Know-how of Third Parties in order to make, have made, use, sell, have sold, offer for sale or import a Product in a country in the Licensed Territory (“Third Party Patent Licenses”), [**] percent ([**]%) of the royalties actually paid to Third Parties under such Third Party Patent Licenses by SIIL for the sale of such Product in such country for a Calendar Quarter shall be creditable against the royalty payments due Visterra by SIIL with respect to Net Sales of such Product in such country for such Calendar Quarter; provided,however, that in no event shall the royalties otherwise owed by SIIL to Visterra for such Calendar Quarter be reduced by more than[**] percent ([**]%) as a result of any and all such offsets in the aggregate. Any portion of the royalties paid to Third Parties under such Third Party Patent Licenses with respect to such Product in such country that SIIL would, but for the foregoing limitation on royalty reductions, be entitled to deduct under this Section 8.3(d) shall be carried over and applied against royalties payable to Visterra in respect of such Product in subsequent Calendar Quarters until the full deduction is taken, subject to the foregoing proviso.
(e) Royalty Payments and Reports. Within thirty (30) days after the end of each Calendar Quarter, SIIL shall deliver to Visterra a report containing the following information for the just-ended Calendar Quarter: (i) the number of Products sold or distributed by SIIL or its Affiliates to independent Third Parties in each country; (ii) the gross sales associated with each Product sold by SIIL or its Affiliates; (iii) a calculation of Net Sales of Products that are sold by SIIL or its Affiliates in each country, including a listing of applicable deductions; and (iv) a calculation of payments due to Visterra in Dollars with respect to sales of Products during the relevant Calendar Quarter, together with the exchange rates used for conversion, the current Product price lists as well as any projected price adjustments for Products during the subsequent Calendar Quarter. Simultaneously with the delivery of such report, SIIL shall remit to Visterra any payment due for the applicable Calendar Quarter. If no royalties are due to Visterra for such reporting period, the report shall so state.