Manufacturing Agreement Dated June 30, 2002

EXHIBIT 10.9


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 ...