definiens: means the gross sales for Licensed Products, less the following amounts directlychargeable to such Licensed Products : ( 1 ) trade, quantity or cash discounts and retroactive pricereductions or rebates actually allowed and taken ( including price adjustments related to commercialprograms ), allowances ( including reasonable bad debt allowances ) and wholesaler charge - backsallowed and taken, but in any of the foregoing cases only in amounts consistent with reasonable andcustomary industry standards ; ( 2 ) amounts repaid or credited to customers on account of rejectionsor returns ; ( 3 ) freight, handling and other transportation costs, including insurance charges,(4 ) commissions to persons other than affiliates ; ( 5 ) import, export, excise, sales or use taxes, valueadded taxes, and other taxes, tariffs or duties, and other governmental charges based directly onsales, turnover or delivery of such Licensed Products and actually paid or allowed by LICENSEE andits Affiliates or any Sublicensee, but not state, federal or foreign income taxes . For Licensed Productsconsumed by LICENSEE, its Affiliates or any Sublicensee, the price used to calculate Net Salesshall be equal to the average of the sales price of the same or a substantially similar LicensedProduct, whichever is relevant, sold to the consumer ’s three largest customers during the same timeperiod . If LICENSEE or a Sublicensee or Affiliates of either of them include a Licensed Product aspart of selling a service, licensing a method of use or other means of deriving commercial benefitfrom Licensed Products, the parties agree to negotiate in good faith to determine a method ofcalculating a running royalty equivalent to the running royalty set out in this Agreement on Net Sales