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adjusted at year end to account for manufacturing
variances, which shall be calculated pursuant to the
terms of this Section 9.
The Processing Fee shall be determined in two
steps. First, on or before December 31 of each year,
Alcon [P.R.] shall determine the estimated Processing
Cost for the coming year. Processing Costs shall be
composed of Standard Cost less the cost of raw
materials owned by MedChem [P.R.] and supplied to Alcon
[P.R.] for processing and the depreciation on machinery
and equipment owned by MedChem [P.R.] and used in the
Conversion Process. Standard Cost shall consist of the
sum of estimated direct labor, direct materials,
variable overhead, fixed overhead, and quality
assurance cost, and is defined in * * * [a referenced
schedule]. Standard Cost shall not include costs
associated with insurance provided by MedChem [P.R.],
freight or shipping costs which shall be separately
billed to MedChem [P.R.] by third parties. Standard
Cost also shall not include any direct labor costs
incurred by MedChem [P.R.] in connection with the
provision of services by MedChem [P.R.] employees at
the Humacao Plant. Such estimated Processing Cost plus
10% will then be used as the estimated Processing Fee
throughout the year for purposes of billing MedChem
[P.R.] for the quantity of Avitene produced each month.
Second, at the end of each year the parties shall
determine any manufacturing and/or processing variances
by comparing the Processing Cost for such year with the
actual cost and volumes of Avitene during such year.
If the variances indicate that the cost to Alcon [P.R.]
to process the Avitene was greater than the Processing
Cost, then MedChem [P.R.] shall pay to Alcon [P.R.] an
amount of money equal to the total amount of such
variance plus 10% within 30 days of MedChem[ P.R.]’s
receipt of written notice setting forth the amount of
such variance. If the variance indicates that the cost
to Alcon [P.R.] was less than the Processing Cost, then
MedChem [P.R.] shall receive from Alcon [P.R.] an
amount of money equal to the total amount of such
variance plus 10% within 30 days of the end of the
year. * * * MedChem [P.R.] shall have the right to
engage an independent auditor, upon reasonable written
notice, to examine the relevant books and records of
Alcon [P.R.] in order to confirm the accurate
calculation of Processing Cost.
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