definiens: means any bona fide transaction for which consideration is received orexpected by Company or its Affiliate or sublicensee for the sale, use, lease, transfer or other disposition of a LicensedProduct or Other Licensed Product, as the case may be, to a third party, but excluding any sales for test marketing, pre - clinical or clinical studies, compassionate use, or disposition of samples in customary quantities . A Sale isdeemed completed at the time that Company or its Affiliate or sublicensee receives payment for a Licensed Productor Other Licensed Product . The term means each three - month period beginning on January 1, April 1, July 1and October 1 . The term means the consideration received or expected from or, in the case ofconsideration other than cash, the fair market value attributable to such non - cash consideration, less Qualifying Coststhat are directly attributable to a Sale, specifically identified on an invoice or other documentation and actually borneby Company or its Affiliates or sublicensees . For purposes of determining Net Sales, the words mean the cash consideration that Company or its Affiliates or sublicensees would realize from an unrelated buyer inan arm ’s length sale of an identical item sold in the same quantity and at the time and place of the transaction . Theterm means, on a non - duplicative basis, actual costs and expenses incurred and indefeasibly paidto third parties net of any refunds or offsets specific to Licensed Products : ( a ) trade, cash and quantity discounts(e.g ., discounts for prompt or timely payment ), ( b ) inventory management fees paid to wholesalers and distributors, not to exceed [ * * ] % of Net Sales ; ( c ) credits, chargebacks, retroactive price reductions, rebates, refunds, or returnsthat do not exceed the original invoice amount ; ( d ) outbound transportation and insurance expenses ; ( e ) sales and usetaxes, tariffs, customs duties, excises and other taxes and fees imposed by a governmental agency on the sale, transportation or delivery of Licensed Product or Other Licensed Product ( other than taxes on income ) ; ( f ) negotiatedpayments made to private sector and government third party payors ( e.g., PBMs, HMOs and PPOS ) andpurchasers / providers ( e.g., staff model HMOs, hospitals and - 9 -EXECUTION COPY clinics ), regardless of the payment mechanism, including without limitation rebate, chargeback and creditmechanisms ; ( g ) discounts under discount prescription drug programs and reductions for coupon and voucherprograms ; and ( h ) Bad debts calculated in accordance with GAAP consistently applied ( any reductions to bad debtspreviously deducted from Net Sales will become an add back to Net Sales in the quarter when reduction in bad debt isrecognized ) . In the event that the Licensed Product is Sold in combination with one or more other active ingredients(as such, a ), Net Sales from such Combination Product, for the purpose of determining royaltypayments hereunder, shall be determined by multiplying the Net Sales of the Combination Product during theapplicable royalty reporting period, by the fraction, A / A+B, where A is [ * * ] the Licensed Product when sold separatelyin finished form, and B is [ * * ] other active ingredients included in the Combination Product when sold separately infinished form, in each case during the applicable royalty reporting period or, if sales of both the Licensed Product andthe other active ingredients did not occur in such period, then in the most recent royalty reporting period in whichsales of both occurred . In the event that such [ * * ] be determined for both the Licensed Product and the other activeingredients included in the Combination Product, Net Sales for purposes of determining royalty payments hereundershall be calculated by multiplying Net Sales of the Combination Product by the fraction of C / C+D, where C is [ * * ] Licensed Product and D is [ * * ] all other active ingredients included in the Combination Product . In such event, Company shall in good faith make a determination of the [ * * ] of the Licensed Product and the other active ingredientsincluded in the Combination Product, and shall notify Penn of such determination and provide Penn with the datasupporting such determination . Penn shall have the right to review such determination and supporting data, and tonotify Company if Penn disagrees with such determination within [ * * ] days of Company ’s notification thereof ( provided, that, if no notice is given by Penn within such [ * * ] day period, Penn shall be deemed to have accepted Company’sdetermination of such respective fair market values hereunder ) . If Penn notifies Company of its disagreement withinsuch [ * * ] day period, then such matter shall be submitted for resolution pursuant to Section 13.10