Medchem (P.R.), Inc. - Page 66




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               Alcon [P.R.] in writing of, the failure of any sample,                 
               shipment or lot of Avitene to meet in any material                     
               respect the Product Specifications.  MedChem [P.R.]                    
               shall return to Alcon [P.R.] any such rejected sample,                 
               shipment or lot of Avitene, at Alcon[ P.R.]’s expense.                 
               Alcon [P.R.], at its expense, shall replace any                        
               properly rejected sample, shipment or lot of Avitene.                  
               Alcon [P.R.] shall also reimburse MedChem [P.R.] for                   
               any inventory loss due to warehouse damage, damage                     
               resulting from the failure of the Conversion Process                   
               (except for damage resulting from changes in the                       
               Conversion Process requested by MedChem [P.R.] and                     
               instituted by Alcon [P.R.]) or the expiration of the                   
               expiration date of any Avitene products stored by                      
               MedChem [P.R.] in warehouse space provided by Alcon                    
               [P.R.], provided that such expiration of the expiration                
               date is as a result of actions or omissions by Alcon                   
               [P.R.] with respect to the management of the inventory.                
               Alcon [P.R.] will not be responsible for inventory                     
               losses due to product obsolescence.                                    
                                                                                     
                         8.6  Product Recalls.  If any Avitene product                
               is subjected to a recall by a governmental agency, or                  
               in the event MedChem [P.R.], after notification to and                 
               consultation with Alcon [P.R.], elects to make such a                  
               recall based on MedChem[ P.R.]’s good faith belief that                
               such Avitene is defective or not in conformity with                    
               Alcon[ P.R.]’s warranties, Alcon [P.R.] shall pay the                  
               actual out-of-pocket costs in connection with such                     
               recall, including without limitation the replacement of                
               recalled Avitene.  The payment of such costs by Alcon                  
               [P.R.] shall not be included in the computation of the                 
               Processing Fee pursuant to Section 9 hereof.  However,                 
               if Alcon [P.R.] was not in breach of its warranties,                   
               MedChem [P.R.] shall hold Alcon [P.R.] harmless and                    
               shall bear all costs and expenses in connection with                   
               such recall.                                                           
                    9.  Payment.                                                      
                         9.1  Processing Cost.  In return for the                     
               processing services performed by Alcon [P.R.] for                      
               MedChem [P.R.], MedChem [P.R.] shall pay to Alcon                      
               [P.R.] a Processing Fee in connection with each Order                  
               for Avitene Delivered pursuant to this Agreement.  The                 
               Processing Fee shall be equal to Alcon[ P.R.]’s                        
               Processing Cost (as such term is defined below) plus                   
               ten percent (10%).  However, the Processing Fee will be                





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