definiens: shall mean the gross amounts invoiced by GENOMIC, and its Affiliates I 24 pursuant to Section 2.10, arising from the sale, lease or other transfer of a Nucleic Acid 125 Array licensed hereunder ( including without limitation design and gridding fees relating 126 to Custom Arrays ) to an unaffiliated End User, less those of the following actually 127 incurred and invoiced by GENOMIC and its Affiliates as an element of such sales ( such X : I WORKIGenomicSolutionsl 71061 g.doc CONFIDENTIAL 12/28/00 4 [ 28 [ 29 [ 30 [ 31 [ 32 [ 33 [ 34 [ 35 [ 36 [ 37 [ 38 139 140 141 · 142 143 144 145 [ 46 147 148 [ 49 150 151 152 153 154 155 156 157 158 159 160 161 [ 62 163 164 165 166 167 168 169 170 [ 7 [ [ 72 deductions herein being referred to as ): transportation ; special packing and crating charges ; insurance ; custom duties ; returns ; allowances in lieu of actual returned or rejected products ; sales, VAT, use and turnover taxes ( excluding income or franchise taxes of any kind ) ; and adjustments for invoice errors ( such as pricing errors ) that do not involve product returns . For purposes of sales by GENOMIC or its Affiliates to Distributors, shall mean the greater of ( i ) the transfer price charged by GENOMIC or its Affiliate to each Distributor for Nucleic Acid Arrays, or ( ii ) GENOMIC 's average selling price of Nucleic Acid Arrays sold to End Users during the calendar quarter to which the royalty calculation under Section 3 relates ( excluding contract services ) multiplied by the number of Nucleic Acid Arrays sold to such Distributor during such quarter, less any Set Offs . For the avoidance of doubt, GENOMIC shall at all times act in commercially reasonable good faith ( including the use of generally acceptable accounting principles, consistently applied ) and GENOMIC shall not intentionally or knowingly inappropriately or inaccurately apportion amounts invoiced for the purpose or effect of circumventing or depriving [COMPANY] of the benefit of this definition . The value of GENOMIC products transferred by GENOMIC or its Affiliates to unaffiliated End Users or Distributors as free samples or the use of products by GENOMIC or Distributors for sales demonstration purposes or for quality control or other internal, non - revenue generating purposes ( including GENOMIC 's internal research and development to develop Nucleic Acid Arrays ) shall not be included in the calculation of Net Sales providing the total number of non - revenue generating products shall not exceed more than two percent ( 2 % ) of the volume of arrays sold during anyone calendar year . Internal use of Nucleic Acid Arrays for phalTIlaceutical and/or diagnostic research is included in the calculation of Net Sales . In the event a product is sold in combination with other apparatus or products, as part of a kit, or in any other combination, and the licensed product is not sold separately and no list price exists for the product, the Net Sales of the licensed product shall be determined by multiplying the aggregate selling price of the combination by a fraction the numerator of which shall be actual costs for the product and the denominator of which shall be the actual cost for the total combination as determined by generally accepted accounting principals in the quarter of the safe . In the event that both the licensed product and other product have separate list prices but are being sold at a combination price which is less than the total of the separate list prices, then the Net Sales of the licensed product shall be determined by multiplying the invoice price charged for the combination by a fraction, the numerator of which is the list price of the licensed product and the denominator of which is the sum of the list prices of the licensed product and such other products . In the event that licensed products are transferred to unaffiliated End Users or Distributors for non - cash consideration or where no invoice is generated, Net Sales of such licensed products shall be valued by determining the value of similar arrays marketed and sold to unaffiliated End Users for cash . of products licensed hereunder and used internally by GENOMIC or its Affiliates for pharmaceutical or diagnostic research shall be the value of similar arrays marketed to an unaffiliated End User . With respect to any revenues received in currencies other than U.S. Dollars, all amounts shall be converted into U.S. Dollars in accordance with U.S. generally accepted accounting principles, consistently applied, and reported in U.S. Dollars