EXHIBIT 10.39
MANUFACTURING AND SUPPLY AGREEMENT
THIS MANUFACTURING AND SUPPLY AGREEMENT this ("Agreement") is effective as of
June 30, 2002 the ("Effective Date") by and between Allergan, Inc., a Delaware
corporation, on behalf of itself and its Affiliates ("Allergan"), having an
address at 2525 Dupont Drive, Irvine, California 92612 and Advanced Medical
Optics, Inc., a Delaware corporation, on behalf of itself and its affiliates
("AMO").
RECITALS
A. Prior to the date hereof, AMO was a wholly owned subsidiary of Allergan.
B. Pursuant to that certain Contribution and Distribution Agreement, by and
between Allergan and AMO (the "Contribution Agreement"), Allergan by the
effective date hereof, will have spun off AMO by distributing a special dividend
to all of the Allergan stockholders consisting of all of the outstanding shares
of stock of AMO held by Allergan (the "Distribution").
C. Allergan currently manufactures and distributes various optical medical
devices and contact lens care products for AMO, each as more particularly
described in Exhibit "A" attached hereto.
D. AMO desires that Allergan continue, after the Distribution, to manufacture
and supply to AMO the Product(s) (as that term is defined herein) upon the terms
and conditions contained herein and Allergan desires to manufacture and supply
to AMO the Product(s) upon the terms and conditions contained herein.
AGREEMENT
NOW THEREFORE, in consideration of the covenants contained herein, the above
recitals, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions
A. "Affiliates" of a party shall mean any corporation or other business entity
controlling, controlled by, or under common control with such party.
B."Batch" shall mean that predetermined quantity of finished Product(s) listed
on and associated with a Product on Exhibit "A".
C. "CE Mark" shall mean the mark of conformity with one or more applicable
directives of the European Union.
D. "CFR" shall mean the United States Code of Federal Regulations.
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E. "COA" has the meaning given to it in Section 2.4.
F. "Control" (including "controlling", "controlled by" and "under common control
with" of any party, corporation, or other business entity) shall mean the direct
or indirect ownership of more than fifty percent (50%) of the voting or income
interest in such party, corporation, or other business entity, respectively.
G. "Contract Year" shall mean the twelve (12) month period following the
Effective Date of this Agreement and each subsequent twelve (12) month period
during the term of this Agreement.
H. "Cost" shall mean Allergan's cost to manufacture including direct labor,
direct material and overhead. Allergan uses full absorption inventory costing,
which includes all direct and indirect production costs. Direct and indirect
production costs are those costs incident to and necessary for production or
manufacturing operations or processes. Cost shall be consistent with the costing
methodology used by Allergan in determining 2002 prices and will be determined
in accordance with generally accepted accounting principles ("GAAP").
I. "cGMPs" shall mean the standards established by the FDA for current Good
Manufacturing Practices, as specified in 21 CFR Section 820 Quality System
Regulations; 21CFR Section 807 Establishment Registration and Device Listing for
Manufacturers of Devices; 21 CFR Section 803 Medical Device Reporting; 21CFR
Section 801 Labeling; 21CFR Section 810 Medical Devices Recall Authority; 21 CFR
Section 806 Medical Devices Reports of Corrections and Removals; the Federal
Food, Drug and Cosmetic Act, as amended; EN46000, 1 and/or 2; ISO 9001 and/or
9002; and the standards established in the European Union's Council Directive
93/42/EEC of 6/14/93 Concerning Medical Devices (the "MDD").
J. "ECR" (Engineering Change Request) shall mean the master change control form
defined by the Allergan Worldwide Specifications Change Control System used to
document requested changes to Product(s) Specifications or Packaging and
Labeling Specifications.
K. "Ex works" (or "EXW") means that the seller delivers title when it places the
goods at the disposal of the buyer at the seller's premises or another named
place not cleared for export and not loaded on any collecting vehicle, as
defined in the International Chamber of Commerce Incoterms 2000.
L. "Excess Materials" shall mean Raw Materials on hand and ordered consistent
with AMO's forecast at the agreed upon lead times and for which the forecasted
use is in excess of twelve (12) months. This would be a result of cancellations,
reschedules or other changes caused by AMO.
M. "Facilities" shall mean, collectively, the Waco Facility, the Westport
Facility and the Sao Paulo Facility and "Facility" shall refer to any one of
them, as the case maybe.
N. "FCA", as defined in the International Chamber of Commerce Incoterms 2000,
means that the seller delivers the goods, cleared for export, to the carrier
named by the buyer at the named place. The seller is responsible for loading the
goods. If the delivery to the carrier takes place at the buyer's named place,
the seller shall not be responsible for unloading the goods.
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O. "FDA" means the United States Food and Drug Administration.
P. "Lead-time" shall mean the time period that begins on the day Allergan
receives an order for the Product(s) and ends on the day Allergan is to deliver
the Product(s) to AMO.
Q. "Obsolete Inventory" shall mean (i) Raw Materials on hand that are no longer
in the Product(s) bill of material, (ii) Product(s) that are no longer
forecasted, or (iii) filters that are no longer used due to a mutually agreed
manufacturing process change.
R. "Packaging and Labeling Specifications" means the written specifications for
packaging and labeling the Product(s) set forth in Exhibit "B", which may be
amended from time to time by the written agreement of the parties.
S. "Product(s)" shall mean the products listed on Exhibit A hereto, which may be
amended from time to time by written agreement of the parties.
T. "Product(s) in Quarantine" shall have the meaning set forth in Section 4.1 of
this Agreement.
U. "Product(s) Specifications" shall mean the specifications set forth in
Exhibit "C", which may be amended from time to time by written agreement of the
parties.
V. "Quality Control" means the testing, other than clinical evaluation and on
going stability testing, associated with the manufacturing of the Product(s),
including but not limited to incoming component and Raw Material testing, in
process testing, and final testing, in accordance with cGMPs and the Product
Specifications.
W. "Quarantine Period" shall be sixteen (16) days.
X. "Raw Materials" shall mean all raw chemicals, packaging, labeling, filters,
components and work in process required to produce the Product(s).
Y. "Regulatory Approvals" means the approvals obtained through meeting the
requirements of the Federal Food, Drug and Cosmetic Act, as amended, and its
attendant regulations in addition to any approvals, licenses, registrations or
authorizations of any federal, state, local, or foreign regulatory agency,
department, bureau or other government entity, necessary for the manufacture,
storage, or export of Product(s) in the Territory.
Z. "Sao Paulo Facility" means the manufacturing plant operated by Allergan in
Sao Paulo Brazil as of the Effective date.
AA. "Territory" means the entire world.
BB. "Waco Facility" means the manufacturing plant operated by Allergan in Waco
Texas as of the Effective Date.
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CC. "Westport Facility" means the manufacturing plant operated by Allergan in
Westport Ireland as of the Effective Date.
Section 2. Manufacture and Sale of Product(s)
2.1 Subject to the terms of this Agreement and in compliance with cGMP's,
Allergan shall manufacture and sell to AMO and AMO shall purchase from
Allergan all Product(s) that AMO desires during the term of this Agreement
in accordance with the Product(s) Specifications set out in Exhibit "C" and
the Packaging and Labeling Specifications set out in Exhibit "B". Allergan
will not make substantial changes to the manufacturing capabilities,
processes or locations of the Facilities associated with the manufacture of
Products for AMO without the prior written consent of AMO, including
changes in significant subcontractors, suppliers or Raw Materials.
2.2 For any Product(s) with an expiration date, Allergan shall deliver those
Product(s) with no less than seventy five percent (75%) of the original
expiration date remaining, except that Vitrax shall be delivered with no
less than fourteen (14) months of the expiration period remaining. Allergan
will use its commercially reasonable efforts to (a) ensure that Product(s)
are delivered with the maximum shelf life remaining and (b) ship Product(s)
using the "first to expire shall be the first to ship" method. Allergan
shall provide AMO with monthly written notice of all Product(s) in
inventory with its expiration date. For the purpose of this Agreement, the
expiration period ends on the last day of the month indicated on the label.
2.3 Allergan will manufacture all products in a good and workmanlike manner and
will comply with and maintain all applicable federal, state, local, and
environmental laws, ordinances and regulations, including but not limited
to ISO 9002 and EN 46002 standards, as amended, and the Federal Food, Drug
and Cosmetic Act as amended, including regulations relating thereto,
pertinent to the services it performs relative to the manufacture of the
Product(s).
2.4 Allergan shall test the Product(s) and provide the results for each Batch
of Product(s) to AMO in the form of a certificate of analysis ("COA") as
set forth in Exhibit "D".
2.5 Allergan and AMO operations management personnel shall meet quarterly to
review and discuss operations, including but not limited to performance,
quality of Product(s), delivery timeliness, forecast accuracy, and cost
analysis.
Section 3. Forecast and Purchase Orders
3.1 AMO shall send purchase orders to Allergan Facilities on the following
basis:
(a) Waco Facility: AMO shall send purchase orders to the Waco facility on
a (i) weekly basis for all Product(s) that are to be shipped in the
United States and (ii) on a
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monthly basis, on the second Tuesday of each month, for all orders of
Product(s) that are to be shipped outside the United States;
(b) Westport Facility: AMO shall send purchase orders to the Westport
Facility on a monthly basis, on the second Tuesday of each month,
except for orders of "A" Product(s) identified on Exhibit "H", which
orders shall be provided on a weekly basis; and
(c) Sao Paulo Facility: AMO shall send purchase orders to the Sao Paulo
Facility on a monthly basis on the second Tuesday of each month.
The minimum information required on all purchase orders shall be part
number, description, quantity, price and delivery date. The purchase order
quantities must be in multiples of the Batch quantities indicated in
Exhibit "A", and the combined total purchase order quantities must consume
manufacturing batch quantities indicated in Exhibit "C".
3.2 Allergan shall acknowledge AMO's purchase orders within ten (10) working
days of receipt, and shall deliver the Product(s) as indicated on the
purchase order. Allergan is allowed a delivery quantity tolerance of plus
or minus ten percent (10%) of the quantity requested. Except as provided in
Section 13, AMO shall provide Lead-time on the shipment of Product(s) from
the Allergan Facilities as follows:
(a) Waco Facility: AMO shall provide Lead-time of no less than fifty-six
(56) calendar days for Product(s) to be distributed in the U.S. and no
less than eighty (80) days for other Product(s). Lead-times for
Product(s) distributed in the U.S. do not include the Quarantine
Period.
(b) Sao Paulo Facility: AMO shall provide Lead-time of no less than
seventy-seven (77) calendar days. Sao Paulo Lead-time includes the
Quarantine Period; and
(c) Westport Facility: AMO shall provide Lead-time of no less than
forty-two (42) calendar days for "A" Product(s) identified on Exhibit
H shipped to Europe, and between fifty-six (56) and eighty (80)
calendar days for all other Product(s). Westport Lead-times for "A"
Product(s) include the Quarantine Period.
(d) The terms for delivery shall be FCA, Allergan's Facility.
3.3 On a monthly basis AMO shall also provide Allergan with an eighteen (18)
month forecast by month of its orders for all Product. Such forecast will
be provided to Waco on the second Friday of each month and to Westport and
Sao Paulo on the second Tuesday of each month. Allergan shall review such
forecasts provided by AMO and advise AMO by the last calendar day of each
month if Allergan anticipates any manufacturing capacity or raw material
constraint that would make Allergan unable to achieve the requested
volumes. Allergan shall use commercially reasonable efforts to maintain
capacity to achieve the forecasted volumes.
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The following forecast period for the Facilities shall be deemed firm
purchase orders for the Product(s):
(a) Waco Facility: The first eight (8) weeks of each eighteen (18) month
forecast;
(b) Westport Facility: The first three (3) months of each eighteen (18)
month forecast; and
(c) Sao Paulo Facilities: The first eleven (11) weeks of each eighteen
(18) month forecast.
For "A" Product(s) identified in Exhibit "H", month three (3) of the
forecast will be used by Allergan to manufacture Product(s) and AMO will
take delivery of these Product(s) over the following two (2) months.
3.4 The following forecast period for the Facilities shall be binding for the
purpose of Allergan purchasing Raw Materials and will also be used to plan
manufacturing resource requirements:
(a) Waco Facility: The first four (4) months of each eighteen (18) month
forecast;
(b) Westport Facility: The first six (6) months of each eighteen (18)
month forecast; and
(c) Sao Paulo Facility: The first six (6) months of each eighteen (18)
month forecast.
A firm purchase order quantity for a specific Product may not vary by more
than twenty-five percent (25%) from the forecasted quantity provided to
Allergan three (3) months previous to the purchase order for the Westport
and Sao Paulo facilities and two (2) months previous to the purchase order
for the Waco facility.
Example:
In January AMO submits a forecast for Product X of 10,000 units to be
delivered in June. In April AMO's firm order for Product X for delivery in
June cannot be less than 7,500 units or more than 12,500 units. Subsequent
forecasts for Product X must reflect the preceding firm order variability
constraints.
Section 4. Quarantine Shipments
4.1 AMO is responsible for the Quality Control release of Product(s) into the
commercial marketplace once Allergan has released Product(s) to AMO. Except
as provided below, Allergan shall be responsible for the timely performance
of all Quality Control procedures which shall occur before the release of
Product to AMO or its named carrier and Quality Control release of
Product(s) to AMO or its named carrier. Allergan may deliver to AMO or its
named carrier for shipment to an AMO warehouse or location,
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which has been previously approved by AMO for such quarantine shipments,
Product(s) that has been manufactured in its Waco or Westport facilities
that has not yet been Quality Control released to AMO ("Products in
Quarantine"). It is AMO's obligation to ensure that it has qualified AMO
warehouses or locations that can accept Products in Quarantine and the
parties anticipate that most Products in Quarantine will be held at an AMO
warehouse or location. For such Products in Quarantine, Allergan shall
provide a COA to AMO when such Products in Quarantine have successfully
passed Quality Control. Allergan may not deliver any Products in Quarantine
to an AMO distributor or customer. For deliveries by Allergan of Products
in Quarantine for shipment to a pre-approved AMO warehouse or location, AMO
shall be responsible for quarantine storage of Product(s) and shall ensure
that the Product(s) does not enter the commercial market until Allergan has
provided AMO with a COA.
4.2 AMO or its warehouse agents shall have appropriate physical or electronic
systems that prevent the delivery of Products in Quarantine to customers
until Allergan has provided a COA to AMO.
4.3 Any indirect and direct incremental costs associated with holding inventory
at Allergan locations until Quality Control release is obtained, that has
not already been included in the cost of the Products(s) shall be charged
to AMO in the amount of the actual such costs plus ten percent (10%).
Section 5. Pricing and Payment
5.1 The initial pricing for the Product(s) shall be as set forth in Exhibit
"A".
5.2 The parties agree to adjust prices once per year, as necessary, to reflect
changes in Cost and currency exchange rates so that pricing of the
Product(s) equals Cost plus an additional ten percent (10%). The adjusted
pricing will utilize unit volume for AMO Product(s) submitted to Allergan
on the second Tuesday of October each calendar year. The volume forecasted
for January through December will be the "Base Units" and used to develop
pricing. Once the pricing is developed, Allergan will communicate the new
pricing to AMO by the following November 15. New prices will be effective
for Product(s) shipped on or after the following January 1.
5.3 On an annual basis, a pricing "true up" calculation will be made during the
beginning of the first calendar quarter immediately following the cut off
for year-end shipments. This pricing "true up" calculation will be made
based on the actual volume of Product(s) shipped during the pricing period
versus the volume submitted by AMO on the second Tuesday of October that
was used to calculate the invoiced prices. The volume to be utilized for
the 2002 calendar year pricing "true up" will be the July through December
2002 shipped units for each Allergan facility as identified in Exhibit "F".
The result of this true up will either be invoiced or credited to AMO no
later than March 31 following the true up period.
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5.4 The pricing "true up" calculation will be equal to the actual units shipped
less Base Units, multiplied by the Product's current overhead cost
multiplied by the Product's fixed cost factor, multiplied by one hundred
ten (110%) percent: i.e., [(Actual units shipped - Base Units) * (Product's
current overhead cost * Product's fixed cost factor)] * 110%.
The fixed cost factors for the term of the agreement are as follows:
Vitrax - Sixty-five (65%) percent
All other products - Seventy-five (75%) percent
For calculation purposes the unit volume will be adjusted in the event that
Allergan is unable to ship a significant quantity of Product(s) ordered by
AMO in accordance with the terms of this Agreement.
5.5 If a Product(s) Specification or Packaging and Labeling change results in a
cost change, Allergan will adjust the price as soon as the change becomes
effective.
5.6 Terms of payment shall be net forty-five (45) days from the date of
delivery to AMO's specified carrier, provided however, that payment shall
be net sixty (60) days for any shipments to Asia and Australia, and
provided further that payment shall be extended an extra day for each day
Quality Control exceeds the Quarantine Period. All Product(s) shall be
shipped FCA, Allergan's Facility. Allergan will not be responsible for
damage caused to Product(s) while in transit to AMO. Any storage and
freight fees are in addition to the Product(s) prices contained within
Exhibit "A".
Section 6. Ongoing Stability Testing and Reference Standards
6.1 Allergan shall perform all on-going stability testing of the Product(s)
according to ICH guidelines then in effect as long as Allergan is
manufacturing and supplying the specific Product(s) to AMO. During the
period Allergan manufactures the Product(s) for which stability testing is
being performed, the cost of such stability testing is included in the
prices set forth in Exhibit "A".
6.2 On the earlier of (i) the expiration or termination date of this Agreement
or (ii) six months after Allergan has delivered to AMO its final order for
a discontinued Product(s) to AMO, AMO will be solely responsible for all
on-going stability testing of the Product(s). It is the responsibility of
AMO to select the laboratory that AMO will use and the physical storage
location for stability and retained samples. Allergan will ship Ex works
all stability and retained samples to AMO's designated storage location no
later than the earlier of (i) six months after Allergan had delivered its
final order for that Product(s) or (ii) the expiration or termination date
of this Agreement.
6.3 It is the sole responsibility of AMO to transfer all analytical and
stability testing technology to a new site or sites of its choice. Allergan
will provide its existing written methods for these tests to AMO to assist
AMO in this effort. Additionally, Allergan will permit AMO to send not more
than two (2) AMO representatives to Allergan's European
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Technical Center for one three-day period for each Product not currently
manufactured (as of the Effective Date) by AMO in its Hangzhou
manufacturing facility to observe technology associated with such
formulation. By way of example, the Product Total(R) is manufactured in the
Westport Facility but not in AMO's Hangzhou manufacturing facility, and
thus AMO may request a three-day period for this Product. On the other
hand, Complete(R) brand Multipurpose Solution is manufactured in AMO's
Hangzhou manufacturing facility and thus no three-day period is available
for this Product.
In the event AMO wishes a three-day period of observation for a formula, it
shall make such request in writing. Allergan's European Technical Center
shall accommodate that request at the next regularly scheduled test period
for that Product formula. During that three-day period, AMO's
representatives may observe Allergan's analysts as they perform the testing
and may reasonably ask questions concerning testing procedures and
practices, which Allergan's analysts will attempt to answer in good faith.
6.4 Allergan will provide to AMO its existing written procedures which are used
to establish the chemical reference standards necessary to release and
perform stability testing on Product(s). Until Product(s) are discontinued
under the terms of this Agreement, Allergan will supply to AMO the
reference standards that it requires to maintain its production in
Hangzhou. Once AMO discontinues a Product under the terms of this
Agreement, all chemical reference standards associated with that Product
shall be the sole responsibility of AMO.
6.5 On-going stability testing costs incurred by Allergan on Products that AMO
has discontinued from being manufactured by Allergan are the responsibility
of AMO. The direct and indirect costs associated with that testing plus ten
(10%) percent will be charged to AMO separately. Allergan will invoice AMO
for on-going stability related to these Product(s) on a quarterly basis
which will be payable by AMO within thirty (30) days.
Section 7. Product(s) Specifications and Documentation
AMO, by means of an ECR submitted to Allergan, may make changes to the Packaging
and Labeling Specifications from time to time. Allergan will make all changes to
the Packaging and Labeling Specifications requested by AMO on the ECR if the
parties agree on the applicable price and material terms associated with the
change. All terms and conditions regarding such change shall be negotiated in
good faith by the parties. AMO agrees to pay all third party supplier fees
charged to Allergan for set up, plus ten percent (10%), including charges for
printing plates, artwork and tooling. AMO must approve amounts in excess of
$1,200 before such amounts are incurred. Allergan will issue AMO an invoice for
all related costs with payment due within thirty (30) days of invoice receipt.
If the ECR change affects an open purchase order, Allergan will advise AMO of
the impact on delivery date. Unused Raw Materials as a result of the ECR will be
considered Obsolete Inventory and dispositioned as provided in Section 9.
Section 8. Long Lead Time Raw Materials
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8.1 AMO authorizes Allergan to purchase the (i) long lead time Raw Materials,
(ii) minimum buy items and (iii) economic order quantities of Raw
Materials, listed in Exhibit E, in accordance with AMO's forecast
requirements. These materials may be in excess of six (6) months supply.
8.2 AMO further authorizes Allergan to purchase minimum buy items or economic
order quantities of Raw Materials not listed in Exhibit E as reasonably
necessary to support material requirements planning which may exceed
authorized forecasts and purchase orders, subject to AMO written approval
for all purchases ordered in excess of six (6) months forecast for Westport
and Sao Paulo facilities or four (4) months for the Waco facility.
Section 9. Excess Materials and Obsolete Inventory
9.1 All Raw Materials in Allergan's possession and on order on the Effective
Date of this Agreement shall be considered to have been purchased to
support AMO's future purchase orders to Allergan and any Excess Material or
Obsolete Inventory associated with these Raw Materials is the
responsibility of AMO. Allergan will use commercially reasonable efforts to
return Raw Material for credit and cancel open orders if it is determined
that the Raw Material is Excess Material or Obsolete Inventory.
9.2 Allergan shall provide to AMO a monthly written report identifying all Raw
Materials on hand for which the forecasted use is in excess of six (6)
months. Allergan will notify AMO of Excess Materials and Obsolete Inventory
and associated costs on a quarterly basis. At Allergan's discretion, AMO
shall purchase, via purchase order, all Excess Inventory and Obsolete
Inventory at Allergan's Cost. Terms will be FCA.
Section 10. New Product(s)
10.1 In the event that AMO desires to commercialize and Allergan agrees to
manufacture items not contained in Exhibit "A", both parties may amend
Exhibit "A" in writing to reflect the new Product(s). AMO agrees to bear
all direct and indirect costs associated with new product validations, as
submitted to AMO in a cost quotation. Further, AMO acknowledges that while
a validation is intended to challenge the design of a new Product, Allergan
will not be held liable for the outcome, provided Allergan has performed
its activities, as defined in mutually approved protocols.
10.2 In the event AMO desires to conduct new Product validations during the term
of this Agreement, AMO will submit to Allergan a Master Validation Plan and
required validation protocols for approval, which shall not be unreasonably
withheld. Mutual approval is required, as indicated by the signatures of
both parties on the Master Validation Plan, as well as the required
protocols. Following approval, Allergan will provide a cost quotation to
AMO listing all Allergan costs associated with the validation including
clinical supplies. Upon approval of such costs, AMO will submit a purchase
order to Allergan reflecting the costs as detailed in AMO's cost quotation.
Allergan will
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invoice AMO upon completion of each validation activity detailed in the
cost quotation which shall be payable by AMO within thirty (30) days of
invoice receipt.
10.3 The Lead-time for new Product(s) launches will be stipulated by a project
plan as agreed to in writing by both parties. The project plan will include
forecast requirements for the new Product(s) and define lead time for the
initial deliveries of Product. In the event that the Raw Material is
purchased pursuant to the Master Validation Plan and such Raw Material is
unusable upon completion of the project, the Raw Material will be treated
as Obsolete Inventory. Upon completion of the validation project,
subsequent purchase requirements will follow the purchase order and
forecast process contained within Section 3 of this Agreement.
10.4 Allergan will provide AMO with cost estimates for the remaining portion of
any validations in progress as of the Effective Date. Upon approval of such
costs, AMO will submit a purchase order to Allergan for the remaining
costs, to be invoiced by Allergan upon completion of each validation
activity. If AMO elects to cancel any validation in progress, Allergan will
invoice all unpaid costs incurred to date, payable by AMO within thirty
(30) days of receipt.
Section 11. Miscellaneous
Allergan and AMO recognize and agree that following the Effective Date it may be
necessary or desirable for AMO to provide to Allergan Raw Materials or other
goods to facilitate the performance by Allergan of its obligations under this
Agreement. To the extent that AMO provides such Raw Materials or other goods to
Allergan without payment of consideration by Allergan and such Raw Materials or
other goods are used to manufacture products for AMO, the parties agree that the
value of such Raw Materials or goods will not be included in Allergan's fully
allocated cost to manufacture Product(s) for AMO under this Agreement. For
administrative convenience, Allergan will remove the value of such AMO provided
Raw Material or other goods from invoices to AMO by providing AMO with a credit
during the first three months of this Agreement in the amount of the value of
the Raw Material or other goods plus ten percent (10%). Allergan will supply to
AMO those items listed in Exhibit "G" in accordance with the terms of this
Agreement except as modified in Exhibit "G".
Section 12. Term and Termination
12.1 The Term of this Agreement shall begin on the Effective Date and end at
midnight on the day prior to the three (3) year anniversary of the
Effective Date.
12.2 This Agreement may be immediately terminated by either of the parties for
cause by giving written notice to the other upon the occurrence of any of
the following events:
(a) The other party breaches any material provision of this Agreement and
fails to substantially cure such breach within thirty (30) days
following the receipt from the
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non-breaching party of a written notice of such breach; which notice
reasonably specifies the extent and nature of such breach.
(b) The other party (i) commences a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to
its debts under any bankruptcy, insolvency, or other similar law now
or hereafter in effect; (ii) makes a general assignment for the
benefit of creditors, (iii) becomes insolvent, (iv) ceases doing
business, and/or (v) takes any corporate action to authorize any of
the foregoing.
12.3 AMO shall have the right to terminate this Agreement in its entirety at any
time upon providing twelve (12) months written notice to Allergan. AMO may
also discontinue the manufacture of any individual Product upon providing
twelve (12) months written notice to Allergan. AMO shall send firm purchase
orders to Allergan six (6) months prior to expiration or termination of
this Agreement for all Product(s) AMO desires Allergan to deliver during
the six (6) month period prior to termination. Allergan agrees to review
these orders by the last calendar day of the month and advise AMO that it
will be able, or unable, to achieve the requested volumes with either (i)
confirmation of the purchase order(s) or (ii) notice of specific
feasibility issues. Allergan shall use commercially reasonable efforts to
maintain capacity in order to achieve the requested volumes.
12.4 Upon expiration or termination of this Agreement, the rights and
obligations of the parties pursuant to this Agreement shall cease, except
as follows: (i) Obligations of confidentiality and use of information under
Section 16 of this Agreement shall survive such expiration or termination;
(ii) the indemnity obligations under Section 17 shall survive such
expiration or termination; and (iii) expiration or termination of this
Agreement for any reason by a party shall not relieve the parties of any
obligation accruing prior to such expiration or termination.
12.5 It is AMO's sole responsibility to transfer the technology required to
manufacture Product(s) from Allergan to other manufacturers upon the
expiration or termination of this Agreement. Allergan's assistance in such
transfer will be provided at either the Waco Facility, Westport Facility or
Sao Paulo Facility, as applicable, under the same conditions, both in terms
of duration and substantive assistance, as the analytical technology
transfer assistance described in Section 6.3.
12.6 Upon expiration of this Agreement, or in the event this Agreement is
terminated for any reason including force majeure, AMO shall purchase all
Raw Materials and Product(s) existing at the time of expiration or
termination at Cost, provided that such Raw Materials and Product(s) were
produced or purchased pursuant to Section 3 or Section 8 in response to
actual purchase orders and forecasts submitted by AMO. Payment is due
within thirty (30) days of invoice receipt from Allergan.
12.7 Upon expiration or termination of the Agreement, AMO has the option to
purchase from Allergan, at Allergan's depreciated book value, production
assets used by Allergan solely to manufacture Product(s), for AMO. Allergan
will provide a list of these production
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assets to AMO twelve (12) months prior to the expiration of the Agreement.
AMO must submit purchase orders for these assets at least six (6) months
prior to the termination of the Agreement. AMO will be responsible for
removal, crate and freight on this equipment.
12.8 Upon expiration or termination of this Agreement, AMO shall assume sole
responsibility for all reference standards and ongoing stability testing of
the Product(s). All stability and retained samples will be shipped by
Allergan EXW to the physical storage location of AMO's choice at AMO's
request, but no later than six (6) months from the expiration or
termination of the Agreement. Allergan will cooperate with AMO in the
stability testing technology transfer to a new site, to the extent provided
in Section 6.3.
Section 13. Rejections and Claims
13.1 Once the Product(s) is Quality Control released by Allergan, Allergan will
not accept any claims for rework or rejection of the Product(s) unless the
Product(s) is determined by both Allergan and AMO to fail to meet the
Packaging and Labeling Specifications in Exhibit "B" or the Product(s)
Specifications in Exhibit "C". Upon such a rejection or upon the request
and requirement by Allergan that a Product in Quarantine be returned to
Allergan because it cannot be Quality Control released and without
prejudice to any of AMO's other rights under this Agreement, Allergan will
have the sole discretion to rework or replace the Product(s) with
conforming Product(s) as soon as possible thereafter. In addition, Allergan
will reimburse AMO for the rejected Product(s) shipping and storage costs,
and disposal fees within thirty (30) days from notification by AMO of such
costs and fees.
13.2 Allergan and AMO agree that in the event of a disagreement regarding
whether the Product meets the specifications, they shall first attempt to
resolve disputes by mutual agreement of the parties. If any dispute is not
resolved within thirty (30) days following written notification, both
parties agree to submit the rejected unit to a mutually acceptable
independent test facility. Further, both Allergan and AMO shall accept the
results of the testing performed by that facility as binding with regard to
that Batch. The expense of such testing shall be borne by the losing party.
Section 14. Product Warranty
Allergan warrants that the Product(s) supplied under this Agreement shall, when
they leave Allergan's possession and control, conform with the Packaging and
Labeling Specifications in Exhibit "B" and the Product(s) Specifications in
Exhibit "C",
Section 15. Regulatory
15.1 AMO will be responsible for obtaining and maintaining all worldwide
Regulatory Approvals and any amendments or supplements as required in order
for AMO to sell or distribute the Product(s) worldwide. Allergan shall
provide routine and customary information and data to AMO for the purpose
of seeking or transferring Regulatory
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Approvals. AMO will be responsible for maintaining Product complaint files
and for submitting reports to Allergan, the FDA and all other regulatory
agencies as appropriate. AMO shall, in a timely manner, provide to Allergan
trend reports of Product(s) complaints and summaries of material
correspondence or conversations with the FDA or other government agencies
regarding the quality of the Product(s).
15.2 AMO, at AMO's expense, shall be responsible for handling all complaints,
inquiries and any medical or non-medical device reporting requirements
related to the Product(s) manufactured hereunder, including the expense of
any related investigation and Product(s) testing performed by AMO. At the
written request of AMO, Allergan will investigate manufacturing related
complaints at Allergan's cost. A written report will be provided to AMO
within forty-five (45) days following Allergan's receipt of the
nonconforming product. If Allergan receives any information regarding real
or potential adverse reactions or defects of the Product(s) or any
information that might otherwise constitute a complaint about the
Product(s), Allergan shall promptly provide to AMO all information that it
has concerning the same. AMO shall have responsibility to comply with all
federal, state and local laws and their foreign counterparts regarding the
reporting of such medical and non-medical device reports and complaints.
AMO shall promptly provide Allergan with trend reports summarizing any
medical or non-medical reports or complaints. Each party shall reasonably
cooperate with the other in sharing information that may constitute a
medical or non-medical device complaint related to Product(s) and shall
designate a representative responsible for the exchange of such information
and all other regulatory information required to be shared under this
Agreement.
15.3 AMO shall have the right, at AMO's expense, to declare any recall of, or
field corrective action to, any Product(s) manufactured by Allergan for AMO
after consultation with Allergan. Allergan agrees to indemnify AMO for that
portion of the expenses in any such recall directly attributable to a
breach by Allergan of its obligations under Section 2.3 or any of the
warranties provided in this Agreement.
15.4 AMO shall promptly inform Allergan of the existence and substance of any
inquiry, investigation or inspection initiated by any government agency,
department or body relating to the manufacture of the Product(s) during the
term of this Agreement. The existence of any such inquiry, investigation or
inspection shall not alone constitute a breach of this Agreement or excuse
any performance due under this Agreement.
15.5 Allergan shall permit AMO or its agents, once each calendar year, for a
period not to exceed three days, during reasonable business hours and upon
at least 72 hours notice, access to inspect the Facilities where the
Products are manufactured, handled, stored or tested. AMO or its agents may
observe all processes relating to the manufacture, storage, handling, or
testing of the Products and all manufacturing, handling, storage and test
records regarding the Products. Allergan shall provide reasonable and
customary assistance during such inspections.
Allergan shall extend inspection privileges to agents of the FDA or other
governmental authorities, as required. Allergan shall notify AMO within 24
hours of any such
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inspection related to the Product(s). In addition, Allergan shall provide
AMO with copies of any and all inspection reports from the FDA or other
relevant governmental authorities regarding the manufacture of the
Product(s) within three (3) days of receipt of such reports.
Section 16. Confidentiality
The parties acknowledge that it may be necessary or desirable, before or during
the performance of this Agreement, to exchange information in order to
facilitate the manufacture and supply of Product(s), as contemplated hereby.
Allergan possesses proprietary and trade secret information, including, but not
limited to, its manufacturing capabilities, methods and processes and financial
information related thereto, and AMO possesses proprietary and trade secret
information, including, but not limited to, the Product(s), the Product(s)
Specifications, the Packaging and Labeling Specifications and marketing and
financial information related thereto. Each party desires to preserve the
confidential nature of such information and agrees as follows. Confidential
Information of a disclosing party shall be clearly marked "confidential" at the
time of disclosure, or indicated as such in a written memorandum delivered to
the receiving party within thirty (30) days following the date of disclosure. A
party receiving Confidential Information from a disclosing party shall not use
the Confidential Information except in furtherance of this Agreement and shall
not disclose Confidential Information to any third party other than to a
receiving party's employees and agents who agree to be bound by an obligation to
keep such Confidential Information secret and who have a need to know such
information in order to further the purposes of this Agreement. This obligation
shall survive the termination of this Agreement, and shall remain binding on the
parties hereto for a period of five (5) years following the date of such
disclosure. Allergan Confidential Information shall not include intellectual
property or confidential information transferred, assigned or licensed to AMO
under the Intellectual Property Assignment and License Agreement executed by the
parties concurrently herewith. Such intellectual property or confidential
information shall be AMO Confidential Information. This Agreement imposes no
obligation on a receiving party with regard to that portion of the Confidential
Information which a receiving party can demonstrate by written records was known
to it prior to the Effective Date; or which is now generally known to the
public, or becomes generally known in the future other than by breach of this
Agreement by a receiving party; or which is lawfully disclosed to a receiving
party by a third party who is not obligated to the disclosing party to retain
such information in confidence; or which is required to be produced pursuant to
a legal proceeding, provided the receiving party gives the disclosing party
prompt prior written notice of such requirement. Disclosure of Confidential
Information under this Agreement will create no license, right, interest or
ownership in any such information in a receiving party.
Section 17. Indemnification
Each party (the "Indemnitor") shall indemnify the other (the "Indemnitee") for
any and all Liability or Loss (as defined below) it incurs from any and all
claims, suits, demands or proceedings (collectively referred to as "Claims")
brought against it by unrelated third parties for personal injury, death, or
damage to real or personal property arising out of the Indemnitor's negligence,
willful misconduct or breach of warranty under this Agreement. Without limiting
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the foregoing, AMO agrees to indemnify and defend Allergan for any Liability or
Loss Allergan incurs from any Claim brought against Allergan alleging that
Allergan has infringed the intellectual property rights of a third party by
virtue of properly performing its obligations to manufacture Products pursuant
to Packaging and Labeling Specifications and the Product(s) Specifications under
this Agreement. For purposes of indemnification under this section, "Liability"
or "Loss" shall include, but shall not be limited to, all defense costs,
settlement costs, court costs, damages, interests, penalties, judgments,
expenses, and reasonable fees of attorneys and professionals. The parties agree
that the Indemnitee shall only be entitled to such indemnification if: (a) the
Indemnitee had, at its own expense, promptly given the Indemnitor written notice
of such Claims upon their filing or creation; and (b) the Indemnitor had been
granted the right to take control of the settlement and defense of such Claims
with counsel reasonably acceptable to the Indemnitee in exchange for the
Indemnitor's written agreement to accept the defense and all liability for the
claim without reservation. The Indemnitee shall at all times reasonably
cooperate in the settlement and defense of all Claims and shall make available
all records, materials and other relevant matter reasonably requested by the
Indemnitor in connection with such Claims. No party shall have the right to
settle any Claims in a manner that materially diminishes the rights or interests
of the other without that party's prior written consent, which shall not be
unreasonably withheld or delayed. The Indemnitor shall not be liable for any
settlement made without its prior written consent. These indemnification
obligations shall survive the expiration or termination of this Agreement.
Section 18. Notices
Any notices to be given under this Agreement must be in writing and delivered
either in person, by any method of mail (postage prepaid) requiring return
receipt, or by overnight courier, to the party to be notified at its address
given below, or at any address such party has previously designated by prior
written notice to the other. Notice shall be presumptively deemed to be
sufficiently given for all purposes upon the earlier of: (a) the date of actual
receipt; (b) if mailed, three calendar days after the date of postmark; or (c)
if delivered by overnight courier, the next business day the overnight courier
regularly makes deliveries.
If to AMO:
Advanced Medical Optics, Inc.
1700 East St. Andrew Place
P.O. Box 25162
Santa Ana, California 92799-5162
Attn: Vice President, Operations
Fax:
with a copy to the General Counsel at the same address.
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If to Allergan:
Allergan, Inc.
2525 Dupont Drive
Irvine, California 92612
Attn: Manager of Contracts
Fax: (714) 246-5598
With a copy to the General Counsel at the same address.
Section 19. Force Majeure
Except for the obligation to make payment when due, each party shall be excused
from liability for the failure or delay in performance of any obligation under
this Agreement by reason of any event beyond such party's reasonable control
including but not limited to Acts of God, fire, flood, explosion, earthquake, or
other natural forces, war, civil unrest, accident, destruction or other
casualty, any act, inaction or delay of any government or government agency, any
lack or failure of transportation facilities, any lack or failure of supply of
raw materials, any strike or labor disturbance. Such excuse from liability shall
be effective only to the extent and duration of the event(s) causing the failure
or delay in performance and provided that the party has not caused such event(s)
to occur. Notice of a party's failure or delay in performance due to force
majeure must be given to the other party within three (3) calendar days after
its occurrence. All delivery dates under this Agreement that have been affected
by force majeure shall be tolled for the duration of such force majeure. In no
event shall any party be required to prevent or settle any labor disturbance or
dispute.
Section 20. Assignment
This Agreement is binding upon and inures to the benefit of the parties to it,
and to their successors and assigns. No party may assign or delegate any or all
of its rights or obligations under this Agreement without the prior written
consent of the other party to this Agreement. Any assignment or delegation, or
attempt at the same, made in the absence of such prior written consent shall be
void and without effect. Either party may, however, without notice or consent
and at its sole discretion, assign any or all of its rights and obligations
under this Agreement to an Affiliate of such party.
Section 21. Governing Law
This Agreement shall be construed, and the rights of the parties determined, in
accordance with the laws of the State of California, without regard to that
State's rules regarding choice or conflict of laws.
Section 22. Relationship between the Parties
Following the Effective Date, the parties will have no ownership interest in the
other and their relationship, as established by this Agreement, is solely that
of Buyer and Seller. This Agreement does not create any partnership, joint
venture or similar business relationship between the parties.
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Neither party is a legal representative of the other party, and neither party
can assume or create any obligation, representation, warranty or guarantee,
express or implied, on behalf of the other party for any purpose whatsoever.
Section 23. Intellectual Property
Allergan agrees that AMO individually, or through its Affiliates, is the sole
and exclusive owner of the Product(s) Specifications and/or Packaging and
Labeling Specifications (collectively defined as "Intellectual Property") in the
Territory. No such Intellectual Property is being assigned, licensed or
otherwise transferred to any person or entity hereunder. Allergan further agrees
that it has no rights to the Intellectual Property and that Allergan will not
contest or dispute the validity of or title to any Intellectual Property.
Allergan shall not take or cooperate in any action or threatened action which
might in any way impair or attack the Intellectual Property or the rights or
interests of AMO, its Affiliates, licensees or assignees in the same.
Section 24. Severability
If any provision of this Agreement is adjudged to be invalid, illegal, or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired, and the parties shall
use their best efforts to substitute a valid, legal, and enforceable provision
which, insofar as practical, implements the purposes of this Agreement.
Section 25. Waiver
The failure of either party to enforce, at any time or for any period of time,
the provisions hereof, or the failure of either party to exercise any option
herein shall not be construed as a waiver of such provision or option and shall
in no way affect that party's right to enforce such provisions or exercise such
option. No waiver of any provision hereof shall be deemed a waiver of any
succeeding breach of the same or any other provisions of this Agreement.
Section 26. Modification
This Agreement cannot be changed orally, and no modification of this Agreement
shall be recognized nor have any effect, unless the writing in which it is set
forth is signed by Allergan and AMO, nor shall any waiver of any of the
provisions of this Agreement be effective unless in writing and signed by the
party to be charged therewith.
Section 27. Entire Agreement
This Agreement, the Contribution and Distribution Agreement, the other Ancillary
Agreements, the exhibits, schedules and appendices hereto and thereto and the
specific agreements contemplated herein or thereby contain the sole and entire
understanding of the parties related to its subject matter, and supersedes all
oral or written agreements concerning this subject matter made prior to the date
of this Agreement.
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Section 28. Incorporation of Exhibits
Exhibits A, B, C, D, E, F, G, and H attached hereto are hereby incorporated
herein by this reference.
Section 29. Audit
Audit Rights. AMO, directly or through a third party, may audit the books,
records and operations of Allergan upon reasonable notice and during regular
business hours for the purpose of determining Allergan's compliance with the
terms of this Agreement. Allergan will cooperate with AMO and/or its independent
auditor in any such audit. Allergan shall provide AMO with information
reasonably requested before an on-site audit is to be conducted and shall
provide AMO with all information necessary to accurately complete the audit in a
timely fashion. Any information obtained during any such audit shall be
considered Confidential and shall be used only in connection with determining
compliance with the applicable terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Manufacturing and
Supply Agreement as of the date first written above.
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ALLERGAN, INC., a Delaware corporation ADVANCED MEDICAL OPTICS, INC., a
Delaware corporation
By: /s/ Jacqueline Schiavo By: /s/ James V. Mazzo
------------------------------- ------------------------------------
Name: Jacqueline Schiavo Name: James V. Mazzo
Title: Corporate Vice President, Title: President and Chief Executive
Worldwide Operations Officer
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