Common use of Calculation of Royalty Clause in Contracts

Calculation of Royalty. In consideration of the rights and licenses granted herein with respect to use of the Marks by or on behalf of Licensee, solely in the event that Licensor and its Affiliates own or control, in the aggregate, less than thirty percent (30%) of the total equity in Licensee, Licensee shall pay to Licensor during the Term an annual royalty (the “Royalty” or “Royalties”) equal to (a) two percent (2%) of Gross Sales (as such term is defined below) from the sale of goods manufactured by or for Licensee (and its Subsidiaries and sublicensees) and (b) one percent (1%) of Gross Sales from the sale of goods distributed by Licensee (and its Subsidiaries and sublicensees) but not manufactured by or for Licensee (or its Subsidiaries or sublicensees). For clarity, Gross Sales from the sale of goods distributed by any Subsidiary shall be included in the computation of the Royalties regardless of whether any such Subsidiary is party to any sublicense granted under the terms and conditions of Section 1.2. Such Royalties shall accrue from and after the effective date of any transaction or other occurrence resulting Licensor and its Affiliates owning or controlling less than thirty percent (30%) of the total equity in Licensee. All Royalty payments, if any, shall be due and payable to Licensor not later than sixty (60) days following the end of each applicable calendar year during the Term; provided, however, that, in the event that, during any applicable period during which Royalties were accrued, Licensee did not realize a Net Profit (as such term is defined below), Licensee’s obligation to pay such Royalties shall be held in abeyance until the earlier of (y) sixty (60) days following the end of any subsequent calendar year in which Licensee realizes a Net Profit or (z) an initial public offering of Licensee. As used herein, the term “Gross Sales” means all revenue recorded in accordance with GAAP and/or Chinese GAAP (as such terms are defined in the Formation Agreement) by Licensee and its Subsidiaries and sublicensees during any applicable period, whether or not Licensee or any such Subsidiary used the Marks in connection with the products, goods, services or other offerings from which such revenue was derived, but excluding revenue solely from Excluded Operations (as defined below) but only to