definiens: means any bona fide transaction for which conside ration is received or expected by Company or its Affiliate or sublicensee for the sale, use, lease, transfer or other disposition of a Licensed Product or Other Licensed Product, as the case may be, to a third party, but excluding any sales for test marketing, pre - clinical or clini cal studies, compassionate use, or disposition of s amples in customary quantities . A Sale is deemed completed at the time that Company or its Affiliate or sublicen see receives payment for a Licensed Product or Other Li censed Product . The term means each three - month period beginning on January 1, April 1, July 1 and October 1 . The term means the consideration received or expected from or, in the case of consideration other than cash, the fair mar ket value attributable to, such non - cash consideration, less Qualifying Costs that are directly attributable to a Sale, specifically identified on an invoice or other docu mentation and actually borne by Company or its Affi liates or sublicensees . For purposes of determining Net Sales, the words means the cash consideration that Company or its Affiliates or sublicensees woul d realize from an unrelated buyer in an arms length sale of an identical item sold in the same quantity and at the time and place of the transaction . The term means on a non - duplicative basis, actual costs and expenses incurred net of any refunds 6 Execution Copy 03/28/2008 or offsets specific to Licensed Products : ( a ) trade cash and quantity discounts ( e.g. discounts, for p rompt or timely payment ), ( b ) inventory management fees paid to wholesalers and distributors, not to exceed [ * * ] % of Net Sales ; ( c ) credits, chargebacks, retroactive pr ice reductions, rebates, refunds or returns that do not exceed the original invoice amount ; ( d ) outbound transportatio n and insurance expenses ; ( e ) sales and use taxes, tariffs, customs duties, excises and other taxes and fees i m posed by, and indefeasibly paid to, a governmental agency on the sale, transportation or delivery of Licensed Pr oduct or Other Licensed Product ( other than taxes o n income ) ; ( f ) negotiated payments made to private sector and government third party payors ( e.g., PBMs, HMOs and PPOs ) and purchasers / providers ( e.g., staff model H MOs, hospitals and clinics ), regardless of the paym ent mechanism, including without limitation rebate, cha rgeback and credit mechanisms ; ( g ) discounts under discount prescription drug programs and reductions for coupo n and voucher programs ; and ( h ) Bad debts calculate d in accordance with GAAP consistently applied ( any redu ctions to bad debts previously deducted from Net Sa les will become an add back to Net Sales in the quarter when reduction in bad debt is recognized ) . In the event that the Licensed Product is Sold in combination with on e or more other active ingredients ( as such, a ), Net Sales from such Combination Product, for th e purpose of determining royalty payments hereunder, shall be determined by multiplying the N et Sales of the Combination Product during the appl icable royalty reporting period, by the fraction, A / A+B, w here A is [ * * ] the Licensed Product when sold separ ately in finished form, and B is [ * * ] other active ingredien ts included in the Combination Product when sold se parately in finished form, in each case during the applicabl e royalty reporting period or, if sales of both the Licensed Product and the other active ingredients did not oc cur in such period, then in the most recent royalty reporting period in which sales of both occurred . In the even t that such [ * * ] be determined for both the License d Product and the other active ingredients included in the Co mbination Product, Net Sales for purposes of determ ining royalty payments hereunder shall be calculated by m ultiplying 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 include d in the Combination Product . In such event, Company shall i n good faith make a determination of the [ * * ] of th e Licensed Product and the other active ingredients i ncluded in the Combination Product, and shall notif y Penn in writing, of such determination and provide Penn wit h the data supporting such determination . Penn shal l have the right to review such determination and supporti ng data, and to notify Company if Penn disagrees wi th such determination within [ * * ] days of Company ’s notific ation to Penn in writing thereof ( provided, that, i f no notice is given by Penn within such [ * * ] day period, Penn s hall be deemed to have accepted Company ’s determina tion of such respective fair market values hereunder ) . I f Penn notifies Company of its disagreement within such [ * * ] day period, then such matter shall be submitted for resolution pursuant to Section 13.10