APPENDIX A Pre-Sec. 936(a)(2)(B) Test Period (1987 to Aug. 31, 1989) Dec. 18, 1987 Feb. 29, 1988 June 21, 1989 Petitioners buy the Avitene business from Alcon MedChem P.R. hires Mr. Perez and establishes MedChem P.R. purchases land for the construction Sec. 936(a)(2)(B) Test Period (Sept. 1, 1989, to Aug. 31, 1992) Feb. 2, 1990 Feb. 28, 1990 June 30, 1990 July 1, 1990 December 1990 March 1991 April 1992 August 1992 District Court issues preliminary injunction as MedChem U.S.A. initiates plans to locate an Petitioners move their bulk nonwoven web manu- FDA audits the Avitene manufacturing process and Post-Sec. 936(a)(2)(B) Period (Aug. 31, 1992, to Apr. 1994) October 1992 July 1993 April 1994 MedChem U.S.A. starts manufacturing Avitene in MedChem U.S.A. begins constructing a new Avitene APPENDIX B PROCESSING AGREEMENT PROCESSING AGREEMENT dated as of December 18, 1987 by and between MEDCHEM PUERTO RICO, INC. ("MedChem [P.R.]"), a Delaware corporation, and ALCON (PUERTO RICO) INC. ("Alcon [P.R.]"), a Delaware corporation. In consideration of the mutual covenants and agreements contained in this Agreement, MedChem [P.R.] and Alcon [P.R.] covenant and agree as follows: 1. Definitions. As used in this Agreement, the following terms have the meanings set forth below: 1.1 Acceptance Tests-chemical, physical and performance tests conducted in accordance with the analytical procedures described in * * [a referenced schedule], to be applied to Avitene in order to determine whether Avitene conforms to the Product Specifications. 1.4 Conversion Process-the manufacturing process by which raw materials are converted into the finished Avitene product. 1.6 Delivery-the delivery by Alcon [P.R.] of Avitene processed under this Agreement. 1.7 Equipment-the machinery and equipment owned by MedChem [P.R.] and required for the processing of Avitene. 1.8 Humacao Plant-Alcon [P.R.]'s Avitene processing facility in Humacao, Puerto Rico. 1.10 Order-a writing from MedChem [P.R.] authorizing or directing Alcon [P.R.] to process and Deliver Avitene. 1.11 Product Specifications-the specifications for Avitene set forth *** [in a referenced schedule]. 1.12 Proprietary Information-all patents, trademarks, trade secrets, copyrights, inventions, designs, logos, and any other proprietary rights owned by MedChem [P.R.] which relate to the production and processing of Avitene. 1.13 Processing Fee and Option C Processing Fee-the fees paid by MedChem [P.R.] to Alcon [P.R.] for each Order filled by Alcon [P.R.] pursuant to Section 9. 2. Processing. 2.1 In General. Subject to the provisions of Section 5, and in return for a Processing Fee as defined in Section 9, Alcon [P.R.] agrees to process from raw materials owned and supplied by MedChem [P.R.] all of MedChem [P.R.]'s requirements of Avitene for sale by MedChem [P.R.] to third parties. The raw materials used in the Conversion Process as well as the finished Avitene Product will remain the sole property of MedChem [P.R.] throughout Alcon [P.R.J's physical possession thereof. Alcon [P.R.] agrees to commit its Humacao Plant for the processing of Avitene to satisfy MedChem [P.R.]'s requirements, subject to the provisions of Section 5. In the event that MedChem [P.R.]'s requirements of Avitene ever exceed the capacity of the Humacao Plant as of the date hereof, MedChem [P.R.] shall, at its expense, obtain such additional Equipment as is necessary to increase production capacity at the Humacao Plant, or shall use reasonable efforts to obtain access elsewhere to additional production capacity in order to meet the requirements that the Humacao Plant is unable to satisfy. 2.2 Specifications. Alcon [P.R.] agrees to process Avitene in accordance with the Product Specifications and Good Manufacturing Practices as defined by applicable laws and regulations ***. 2.3 Processing Method. To assist Alcon [P.R.] in satisfying its obligations under this Agreement, MedChem [P.R.] shall grant to Alcon [P.R.] pursuant to the terms of Section 4 the right to use the Equipment, without charge therefor. Alcon [P.R.] shall furnish all labor, variable and fixed overhead and quality assurance required for the processing of Avitene hereunder. MedChem [P.R.] will employ a plant manager and other appropriate personnel who will inspect, advise and make corrections when appropriate with respect to the Conversion Process; however, MedChem [P.R.] employees will not participate in the Alcon [P.R.] management process. Alcon [P.R.] shall be responsible for all maintenance of the Equipment used in the Conversion Process and for the compliance of such Equipment with applicable regulations of governmental agencies, including but not limited to regulations promulgated by the U.S. Food and Drug Administration and the Environmental Protection Agency; the cost of such maintenance and compliance shall be borne initially by Alcon [P.R.] but shall be included in the Processing Cost (as such term is defined in Section 9). Alcon [P.R.] shall also be responsible for required validation studies on devices, formulae or processes used in the Conversion Process. In the event that Alcon [P.R.] is required by a regulatory authority to perform additional validation studies for purposes of validating new devices, new manufacturing procedures and/or new raw material and finished product assay procedures in order to continue lawfully to engage in the processing of Avitene for MedChem [P.R.] (and MedChem [P.R.], after notice from Alcon that such additional validation studies are required, directs Alcon [P.R.] to continue such processing), all expenses borne by Alcon [P.R.] in the conduct of any such validation studies shall be paid by Alcon [P.R.] and shall be included in the Processing Cost. To the extent that MedChem [P.R.] makes direct expenditures (not described in the preceding sentence) with regard to (a) the purchase of machinery or equipment, (b) the compliance of existing machinery or equipment with all applicable laws and regulations or (c) the performance of validation studies or any matter relating to the Conversion Process, such expenditures shall not be included in the Processing Cost. 3. License. 3.1 Grant. MedChem [P.R.] shall grant to Alcon [P.R.] a royalty-free nonexclusive, nontransferable license to use the Proprietary Information solely in connection with the processing of Avitene for MedChem [P.R.] pursuant to this Agreement. 3.2 Ownership. Title to, and ownership of, the Proprietary Information shall at all times remain solely and exclusively with MedChem [P.R.], and Alcon [P.R.] shall not take any action inconsistent with such title and ownership. 3.3 Protection. Alcon [P.R.] hereby covenants to hold such Proprietary Information in confidence. Alcon [P.R.] shall not, without the prior written consent of MedChem [P.R.], disclose or otherwise make available such Proprietary Information in any form to any person, except to Alcon[ P.R.]'s employees. *** 3.4 Equitable Relief; Indemnification. Since an unauthorized use or transfer of the Proprietary Information will substantially diminish the value to MedChem [P.R.] of its rights with respect thereto, if Alcon [P.R.] breaches any of its obligations under this Section 3, MedChem [P.R.] shall (without limiting its other rights or remedies) be entitled to equitable relief (including but not limited to injunctive relief) to protect its interests. Alcon [P.R.] shall indemnify and hold MedChem [P.R.] harmless for any losses or damages which MedChem [P.R.] may suffer as a result of any unauthorized use, transfer or disclosure of the Proprietary Information caused by the acts or omission of Alcon [P.R.]. 4. Machinery and Equipment. For the duration of this Agreement, MedChem [P.R.] shall grant to Alcon [P.R.] the right to use, free of charge, all Equipment owned by MedChem [P.R.] and required in the Conversion Process, provided that Alcon [P.R.] shall use such Equipment solely for the purpose of processing Avitene pursuant to this Agreement. Title to and ownership of the Equipment shall remain at all times solely and exclusively with MedChem [P.R.]. Alcon[ P.R.]'s rights with respect to the use of the Equipment shall be nontransferable. Alcon [P.R.] shall take reasonable precautions to preserve the physical condition of the Equipment, and upon the termination of this Agreement pursuant to Section 12, shall return the Equipment to MedChem [P.R.] in good working order and in the same condition (taking into account normal wear and tear) as it was initially provided to Alcon [P.R.]. In the event of any damage to the Equipment covered by insurance maintained by MedChem [P.R.], MedChem [P.R.] shall be obligated to apply any proceeds received in respect of such insurance, and Alcon [P.R.] shall be relieved from liability to the extent of such proceeds. 5. Ordering Procedure. 5.1 Initial Annual Forecast. MedChem [P.R.] shall be responsible for directing the quantity and types of Avitene processed by Alcon [P.R.]. In that regard, MedChem [P.R.] shall, within 60 days of the date of this Agreement, deliver to Alcon [P.R.] an annual forecast (the "Initial Forecast Amount") of MedChem [P.R.]'s projected requirements for each Avitene product for each calendar quarter or fraction thereof during the period commencing on the date of this Agreement and ending on December 31, 1988. * * * 5.2 Subsequent Annual Forecast. No later than August 15, 1988 and 1989, MedChem [P.R.] shall submit to Alcon [P.R.] its preliminary annual forecast of its quarterly requirements of Avitene for the next calendar year (the "Current Annual Forecast Amount"). Such preliminary annual forecast shall be updated on November 30, 1988 and 1989. 5.3 Annual Commitment. MedChem [P.R.] shall order at least 80% of the Initial Forecast Amount or the Current Annual Forecast Amount and Alcon [P.R.] shall be required to process up to 250% of the Initial Forecast Amount or the Current Annual Forecast Amount. In this regard, Alcon [P.R.] shall be given a reasonable amount of time to meet any increases over the Initial Forecast Amount. Alcon [P.R.] agrees, upon reasonable notice, to act in good faith to meet any such increases. In addition, in connection with MedChem [P.R.]'s efforts to establish the MedChem [P.R.] Plant pursuant to Section 13, Alcon [P.R.] agrees, upon reasonable notice to use good faith efforts to process such reasonable amounts in excess of 250% of the Current Annual Forecast Amount during the ninety (90) day period prior to the effective termination of this Agreement so that MedChem [P.R.] may maintain sufficient inventory to continue normal sales activity while it commences operation at the MedChem [P.R.] Plant. * * * 5.4 Orders and Quarterly Updates. Within a reasonable time after the date of this Agreement, and at least 15 days prior to January 1, April 1, July 1 and October 1 of each year thereafter, MedChem [P.R.] shall furnish to Alcon [P.R.] (i) a binding order for Avitene to be processed and Delivered by Alcon [P.R.] on a date of Delivery specified by MedChem [P.R.], which will allow Alcon [P.R.] at least 30 days from the date of receipt of such Order before such Delivery is required, and (ii) a forecast of MedChem [P.R.J's projected requirements of Avitene for the three calendar months following the calendar quarter covered by the relevant Order ***. Alcon [P.R.] shall Deliver the specified quantity and type of Avitene within not more than seven days after the Delivery date specified in the Order. It is understood and agreed that in the event Alcon [P.R.] is unable or unwilling through no fault of MedChem [P.R.] to process Avitene ordered by MedChem [P.R.] in the amount forecast and/or ordered, MedChem [P.R.] is free, without thereby restricting any rights or remedies it may have against Alcon [P.R.] as a result of such nonperformance hereunder, to seek the contract services of third parties to process the |