THAT PHS DEEMS NECESSARY TO
UNDERTAKE SUCH RESPONSIBILITIES. IF PHS ELECTS TO ASSUME CONTROL OF THE
PREPARATION, FILING, PROSECUTION, AND MAINTENANCE OF ANY AND ALL PATENT
APPLICATIONS OR PATENTS INCLUDED IN THE LICENSED PATENT RIGHTS FOR A REASON
OTHER THAN LICENSEE'S FAILURE TO PERFORM UNDER THIS AGREEMENT, PHS SHALL BE
RESPONSIBLE FOR ALL COSTS ASSOCIATED WITH TRANSFERRING PATENT PROSECUTION
RESPONSIBILITIES TO AN ATTORNEY OR AGENT OF PHS'S CHOICE.
7.04
EACH PARTY SHALL PROMPTLY INFORM THE OTHER AS 10 ALL MATTERS THAT
COME TO ITS ATTENTION THAT MAY AFFECT THE PREPARATION, FILING. PROSECUTION, OR
MAINTENANCE OF THE LICENSED PATENT RIGHTS AND PERMIT EACH OTHER TO PROVIDE
COMMENTS AND SUGGESTIONS WITH RESPECT TO THE PREPARATION, FILING, AND
PROSECUTION OF LICENSED PATENT RIGHTS, WHICH COMMENTS AND SUGGESTIONS SHALL BE
CONSIDERED BY THE OTHER PARTY.
8.
RECORD KEEPING
8.01
LICENSEE AGREES TO KEEP ACCURATE AND CORRECT RECORDS OF LICENSED
PRODUCTS MADE, USED, OR SOLD AND LICENSED PROCESSES PRACTICED UNDER THIS
AGREEMENT APPROPRIATE TO DETERMINE THE AMOUNT OF ROYALTIES DUE PHS. SUCH RECORDS
SHALL BE RETAINED FOR AT LEAST FIVE (5) YEARS FOLLOWING A GIVEN REPORTING
PERIOD. THEY SHALL BE AVAILABLE DURING NORMAL BUSINESS HOURS FOR INSPECTION AT
THE EXPENSE OF PHS BY AN ACCOUNTANT OR OTHER DESIGNATED AUDITOR SELECTED BY PHS
FOR THE SOLE PURPOSE OF VERIFYING REPORTS AND PAYMENTS HEREUNDER. THE ACCOUNTANT
OR AUDITOR SHALL ONLY DISCLOSE TO PHS INFORMATION RELATING TO THE ACCURACY OF
REPORTS AND PAYMENTS MADE UNDER THIS AGREEMENT. IF AN INSPECTION SHOWS AN
UNDERREPORTING OR UNDERPAYMENT IN EXCESS OF FIVE PERCENT (5%) FOR ANY TWELVE
(12) MONTH PERIOD, THEN LICENSEE SHALL REIMBURSE PHS FOR THE COST OF THE
INSPECTION AT THE TIME LICENSEE PAYS THE UNREPORTED ROYALTIES, INCLUDING ANY
LATE CHARGES AS REQUIRED BY PARAGRAPH 9.08 OF THIS AGREEMENT. ALL PAYMENTS
REQUIRED UNDER THIS PARAGRAPH SHALL BE DUE WITHIN THIRTY (30) DAYS OF THE DATE
PHS PROVIDES LICENSEE NOTICE OF THE PAYMENT DUE.
8.02
LICENSEE AGREES TO CONDUCT AN INDEPENDENT AUDIT OF SALES AND
ROYALTIES AT LEAST EVERY TWO YEARS IF ANNUAL SALES OF THE LICENSED PRODUCT OR
LICENSED PROCESSES ARE OVER TWO (2) MILLION DOLLARS.
THE AUDIT MAY BE CONDUCTED
IN CONJUNCTION WITH THE ANNUAL AUDIT PERFORMED ON BEHALF OF LICENSEE. THE AUDIT
SHALL ADDRESS, AT A
E-7
MINIMUM, THE AMOUNT OF GROSS SALES BY OR ON BEHALF OF LICENSEE DURING THE AUDIT
PERIOD, THE AMOUNT OF FUNDS OWED TO THE GOVERNMENT UNDER THIS AGREEMENT, AND
WHETHER THE AMOUNT OWED HAS BEEN PAID TO THE GOVERNMENT AND IS REFLECTED IN THE
RECORDS OF THE LICENSEE. A REPORT BY THE AUDITOR SHALL BE SUBMITTED PROMPTLY TO
PHS ON COMPLETION. LICENSEE SHALL PAY FOR THE ENTIRE COST OF THE AUDIT.
9.
REPORTS ON PROGRESS. BENCHMARKS. SALES. AND PAYMENTS
9.01
PRIOR TO SIGNING THIS AGREEMENT, LICENSEE HAS PROVIDED TO PHS THE
COMMERCIAL DEVELOPMENT PLAN AT APPENDIX F, UNDER WHICH LICENSEE INTENDS TO BRING
THE SUBJECT MATTER OF THE LICENSED PATENT RIGHTS TO THE POINT OF PRACTICAL
APPLICATION. THIS COMMERCIAL DEVELOPMENT PLAN IS HEREBY INCORPORATED BY
REFERENCE INTO THIS AGREEMENT. BASED