JAPAN BOTOX(R) SUPPLY AGREEMENT

 

<PAGE>

                                                                   Exhibit 10.56

 

                         JAPAN BOTOX(R) SUPPLY AGREEMENT

 

                                 BY AND BETWEEN

 

                               GLAXO GROUP LIMITED

 

                                        AND

 

                        ALLERGAN PHARMACEUTICALS IRELAND

 

                               SEPTEMBER 30, 2005

 

<PAGE>

 

                         JAPAN BOTOX(R) SUPPLY AGREEMENT

 

     THIS JAPAN BOTOX(R) SUPPLY AGREEMENT (this "SUPPLY AGREEMENT") is made and

entered into effective as of September 30, 2005 (the "EFFECTIVE DATE"), by and

between ALLERGAN PHARMACEUTICALS IRELAND, a Cayman Islands corporation, having

its principal place of business at Carrowberg, Castlebar Road, Westport, County

Mayo, Ireland ("ALLERGAN") and GLAXO GROUP LIMITED, a company incorporated in

England, having its principal place of business at Glaxo Wellcome House,

Berkeley Avenue, Greenford, Middlesex, UB6 0NN, England ("GSK"). ALLERGAN and

GSK are hereinafter collectively referred to as the "parties" or individually as

a "party."

 

                                    RECITALS

 

     WHEREAS, Allergan, Inc. and Allergan Sales, LLC, Affiliates of ALLERGAN,

and GSK have entered into a separate License Agreement of even date herewith

pursuant to which GSK and its Affiliates have received, among other things, a

license to import, develop, promote, sell and distribute BOTOX(R) in Japan; and

 

     WHEREAS, Allergan, Inc. and Allergan Sales, LLC agreed in the License

Agreement to procure from ALLERGAN the supply of BOTOX(R)to GSK and its

Affiliates; and

 

     WHEREAS, GSK desires to purchase and ALLERGAN desires to sell to GSK all of

GSK's requirements of BOTOX(R), subject to the terms and conditions set forth

herein.

 

                                    AGREEMENT

 

     NOW, THEREFORE, in consideration of the mutual covenants and agreements

contained herein and for other good and valuable consideration, the receipt and

adequacy of which are hereby acknowledged, the parties agree as follows:

 

1.    DEFINITIONS

 

     1.1 Active Pharmaceutical Ingredient (API). "Active Pharmaceutical

Ingredient" or "API" means Botulinum Toxin Type A Manufactured by ALLERGAN to

the registered specifications at the API Manufacturing Facilities which is

intended to cause pharmacological activity or other direct effect in the

diagnosis, cure, treatment or prevention of disease or to affect the structure

or function of the body of human or animal.

 

     1.2 Affiliate. An "Affiliate" of a person or entity means any individual,

sole proprietorship, firm, partnership, corporation, trust, joint venture or

other entity, whether de jure or de facto, which, directly or indirectly,

controls, is controlled by or is under common control with such person or

entity. As used in this definition, "control" means the possession, directly or

indirectly, of the power to direct or cause the direction of the policies and

management of a person or entity, whether by the ownership of stock, by contract

or otherwise.

 

***   Certain confidential information contained in this document, marked with 3

     asterisks, has been omitted and filed separately with the Securities and

     Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act

     of 1934, as amended.

 

 

                                        1

 

<PAGE>

 

     1.3 Certificate of Analysis and Compliance. "Certificate of Analysis and

Compliance" means a document in the form set forth in Exhibit A (as may be

changed from time to time with the mutual agreement of the Parties), signed by

ALLERGAN's designated quality manager and provided by ALLERGAN to GSK, that sets

forth the analytical test results against the Specifications for a specified Lot

of Product and that certifies that each batch or Lot of Product was produced and

tested in compliance with the Specifications, cGMPs, the master batch record and

all applicable Marketing Authorizations and Manufacturing Authorizations.

 

     1.4 Change Control. "Change Control" means the process by which changes may

be made to the Product, as set forth in Section 2.5.

 

     1.5 cGMPs. "cGMPs" means all applicable standards relating to manufacturing

practices for fine chemicals, intermediates, bulk products or finished

pharmaceutical products. For purposes of this Supply Agreement, cGMPs shall mean

(i) the principles detailed in the Japanese Pharmaceutical Affairs Law and

Japanese Ministerial Ordinance 136, ICH Q7a, U.S. cGMP 21CFR Parts 210 & 211 and

The Rules Governing Medicinal Products in the European Community, Volume IV Good

Manufacturing Practice for Medicinal Products as each may be amended from time

to time or (ii) legislation or regulations or guidance documents (including but

not limited to advisory opinions, compliance policy guides and guidelines)

promulgated by any Regulatory Authority having jurisdiction over the Manufacture

of the Products, subject to any arrangements, additions or clarifications agreed

to from time to time by the parties.

 

     1.6 For Cause. "For Cause" means (i) an express requirement by the

Regulatory Authority in the Territory to conduct a root cause investigation by

way of an audit or (ii) an adverse event or serious problem in the Territory

that requires a root cause investigation that cannot be finally resolved or

concluded solely by a review of documentation.

 

     1.7 License Agreement. "License Agreement" means the License Agreement for

the Product entered into by GSK and Allergan, Inc. and Allergan Sales, LLC,

relating to the grant of certain rights and licenses under certain intellectual

property for development and/or commercialization of Product in the Territory

entered into on or about the date hereof.

 

     1.8 Lot. "Lot" means each separate and distinct batch or lot of Product

processed under continuous and identical conditions and designated by a unique

batch or lot number and expiration date.

 

     1.9 Manufacture. "Manufacture" or "Manufacturing" means the planning,

purchasing, manufacture, processing, compounding, storage, filling, packaging,

waste disposal, labeling, leafleting, testing, sample retention, stability

testing, release and dispatch of Products and such activities as may be required

for ALLERGAN to manufacture and supply each Product respectively in accordance

with this Supply Agreement.

 

     1.10 Manufacturing Facility. "Manufacturing Facility" or "Manufacturing

Facilities" means ALLERGAN's Westport, Ireland, secondary manufacturing

facility, or such other facility or facilities used by ALLERGAN in the

Manufacture of the Product (including the Active Pharmaceutical Ingredient

facilities), as may be designated from time to time by ALLERGAN in

 

***   Certain confidential information contained in this document, marked with 3

     asterisks, has been omitted and filed separately with the Securities and

      Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act

     of 1934, as amended.

 

 

                                       2

 

<PAGE>

 

accordance with the Change Control procedure. Throughout this Supply Agreement

the term Manufacturing Facilities means both the secondary manufacturing

facility at Westport and the API manufacturing facilities. Each type of facility

will be referred to separately, as necessary, as the "API Manufacturing

Facility" and the "Secondary Manufacturing Facility".

 

     1.11 Manufacturing Authorization. "Manufacturing Authorization" means, with

respect to the Territory, the regulatory authorization required to Manufacture

the Product and the API at the Manufacturing Facilities as granted by the

relevant Regulatory Authority in the Territory or the country of Manufacture, as

the case may be.

 

     1.12 Marketing Authorization. "Marketing Authorization" means the

approvals, licenses, registrations or authorizations (as may be amended or

updated from time to time), including the Shonin, necessary for GSK to import

and sell the Product in the Territory.

 

     1.13 Materials. "Materials" means the raw materials (including API),

components and other ingredients required to Manufacture the Product, each as

specifically identified in the Marketing Authorization.

 

     1.14 Product. "Product" means finished drug product containing the API and

Manufactured by ALLERGAN to the Specifications for supply to GSK under the terms

of this Supply Agreement.

 

     1.15 Product Change. "Product Change" shall have the meaning set forth in

Section 2.4.

 

     1.16 Quality Obligations. "Quality Obligations" means the additional

quality obligations set out at Exhibit F.

 

     1.17 Regulatory Authority. "Regulatory Authority" means the national,

supranational, regional, state or local regulatory agency, department, bureau,

commission, council or other government entity involved in the granting of

Marketing Authorization for the Product in the Territory or Manufacturing

Authorization for the Product or API in the Territory or the country of

manufacture.

 

     1.18 Specifications. "Specifications" means the specifications for the

Product in finished pack form as approved by the Regulatory Authority in the

Territory and as set forth in the Shonin and the form of Certificate of Analysis

and Compliance.

 

     1.19 Standard Cost. "Standard Cost" means ALLERGAN's internal standard

cost, comprising direct and indirect fully allocated costs to Manufacture

Botulinum Toxin Type A at the Manufacturing Facility for supply to GSK or any of

ALLERGAN's other customers (be they Third Parties or Affiliates), including

without limitation the ***, determined in accordance with applicable law and

U.S. generally accepted accounting principles using methodology consistently

applied by ALLERGAN.

 

     1.20 Term. "Term" shall have the meaning set forth in Section 8.1.

 

***   Certain confidential information contained in this document, marked with 3

     asterisks, has been omitted and filed separately with the Securities and

      Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act

     of 1934, as amended.

 

 

                                       3

 

<PAGE>

 

     1.21 Territory. "Territory" means Japan and its territories and

possessions.

 

     1.22 Third Party. "Third Party" means any person or entity other than

ALLERGAN or GSK or either of their Affiliates.

 

     1.23 Unit. "Unit" shall mean each separate stock keeping unit of Product

with a distinct product number or item code.

 

     1.24 VAT & Indirect Taxes. "VAT & Indirect Taxes." means the tax imposed by

the sixth council directive of the European Community and any national

legislation implementing that directive together with legislation supplemental

thereto and in particular, in relation to the United Kingdom, the tax imposed by

the Value Added Tax Act of 1994 or other tax of a similar nature, including

sales taxes, imposed elsewhere instead of or in addition to value added tax.

 

2.    MANUFACTURE AND SUPPLY

 

     2.1 General. During the Term, and subject to the terms and conditions of

this Supply Agreement, GSK agrees to purchase all of its clinical trial and

commercial requirements of Product for the Territory exclusively from ALLERGAN,

and ALLERGAN agrees to sell to GSK and relevant GSK Affiliates all of GSK's

requirements of Product for the Territory. ALLERGAN shall be the exclusive

supplier of Product to GSK, its Affiliates and any permitted sublicensees or

assignees for the Territory.

 

     2.2 Manufacturing.

 

          (a) ALLERGAN shall only Manufacture the Product at the Secondary

Manufacturing Facilities and the API at the API Manufacturing Facilities. ***,

all Product shall be supplied to GSK from ALLERGAN's Secondary Manufacturing

Facility***. GSK acknowledges that ALLERGAN intends to add, within the next

three years, an additional production line at the Secondary Manufacturing

Facility at Westport, Ireland, ("CORE 3") and an additional API Manufacturing

Facility. If ALLERGAN wishes to change the facility at which ALLERGAN

Manufactures Product or API or add additional facilities at which ALLERGAN

Manufactures Product or API, ALLERGAN shall provide GSK with prior written

notice to that effect in order to allow GSK to comply with its regulatory and

legal obligations and obtain any necessary approvals from a Regulatory Authority

of amendments to Marketing Authorizations in relation to such a change. Any

changes to the Manufacturing Facilities that cause a Product Change will be

dealt with in accordance with the Change Control procedure set out in Section

2.5. Notwithstanding the foregoing, ALLERGAN shall supply GSK with Product

pursuant to Marketing Authorizations for the Territory, and ALLERGAN shall

maintain sufficient supplies of approved Product to supply GSK its requirements

for the Territory until approvals from a Regulatory Authority of amendments to

Marketing Authorization in the Territory is obtained for any changes to the

Manufacturing Facilities. ALLERGAN shall obtain any necessary Manufacturing

Authorizations from the Regulatory Authority in the country of Manufacture prior

to any modifications to the API Manufacturing Facilities or Secondary

Manufacturing Facilities. ALLERGAN will be solely responsible for obtaining

necessary Manufacturing Authorizations in

 

***   Certain confidential information contained in this document, marked with 3

     asterisks, has been omitted and filed separately with the Securities and

     Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act

     of 1934, as amended.

 

 

                                        4

 

<PAGE>

 

the country of Manufacture for Manufacturing the Product at any Secondary

Manufacturing Facility and the API at any API Manufacturing Facility. GSK shall

obtain (with reasonable assistance from ALLERGAN) any necessary Marketing

Authorizations from the Regulatory Authority in the Territory prior to any

modifications to the API Manufacturing Facilities or Secondary Manufacturing

Facilities. GSK shall be diligent in its efforts to obtain approvals from a

Regulatory Authority of amendments to Marketing Authorizations in the Territory

to any Product Changes, with the support of ALLERGAN, in order to ensure that

ALLERGAN may implement such Product Changes as soon as possible. ALLERGAN shall

be diligent in its efforts to obtain Manufacturing Authorization in the country

of Manufacture to any Product Changes, with the support of GSK, in order to

ensure that ALLERGAN may implement such Product Changes as soon as possible.

 

          (b) ALLERGAN shall be solely responsible for ordering the relevant

quantities of Materials and for the timely delivery of such Materials. ALLERGAN

shall purchase and use only Materials in the Manufacture of the Product which

comply with the requirements of cGMP, the Manufacturing Authorizations and

Marketing Authorization, and which have been tested in accordance with the

Marketing Authorisation and applicable law in the Territory. Any changes to the

suppliers of Materials that cause a Product Change will be dealt with in

accordance with the Change Control procedure set out in Section 2.5. ALLERGAN

shall at all times store and warehouse all Materials and Products Manufactured

by ALLERGAN pursuant to this Supply Agreement in premises that are secure and

clean.

 

          (c) ***.

 

     2.3 Product Packaging & Labeling.

 

          (a) Each Unit of Product will be packaged and labeled by ALLERGAN with

Territory-specific language, indications, labeling and regulatory disclosures in

accordance with the Specifications. The parties shall design the packaging and

labeling, as set out in Section 2.3(b) below, to the greatest extent possible,

to prevent the Product from being distributed and sold outside the Territory.

Each Unit of Product shall bear a label and be contained in an outer package

and/or carton and, if applicable, be accompanied by a package insert, which

label, outer package and/or carton and/or package insert shall comply with all

applicable regulatory requirements in the Territory and shall carry a legend

clearly indicating that the Product was licensed from ALLERGAN.

 

          (b) ALLERGAN and GSK shall jointly design and agree upon any changes

to the packaging and labeling for the Product sold in the Territory, and shall

use reasonable efforts to design such packaging and labeling to prevent the

Product manufactured for sale in the Territory from being distributed and sold

outside the Territory. If either party desires to change the packaging or

labeling for the Product, it shall submit the proposed change to the other party

for review and approval. The party receiving the proposed change shall promptly

review the proposal and respond in writing with its approval or disapproval

(together with its reasons for such disapproval). Any disputes regarding the

design of labeling or packaging shall be resolved in accordance with the dispute

resolution procedures specified in Section 10.9 of this Supply Agreement. GSK

shall be responsible for ensuring that the design of the packaging and labeling

is

 

***   Certain confidential information contained in this document, marked with 3

     asterisks, has been omitted and filed separately with the Securities and

     Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act

     of 1934, as amended.

 

 

                                        5

 

<PAGE>

 

compliant with applicable law in the Territory. ALLERGAN's review and approval

of the design of any packaging or labeling shall not cause ALLERGAN to be liable

or otherwise responsible for the compliance of the design of the packaging and

labeling with applicable laws, provided that ALLERGAN shall not unreasonably

withhold approval of any design or proposal which is necessary (in GSK's

opinion) for legal or regulatory compliance purposes. For the avoidance of

doubt, nothing in this Section 2.3(b) shall limit or exclude ALLERGAN's

liability attributable to the Manufacture of the Product.

 

     2.4 Product Changes. All modifications to the Product (including changes to

Material suppliers), API, their Specifications or changes to the Manufacturing

process of the Product or API which may effect the legal or regulatory

obligations of GSK in the Territory (including the Marketing Authorizations) or

the Product's quality, efficacy or safety (together known as "PRODUCT CHANGE"),

shall be made in accordance with the Change Control procedure set out in Section

2.5 below. For the avoidance of doubt the Change Control Procedure, set out at

Section 2.5 below, shall not apply to modifications that do not effect the legal

or regulatory obligations of GSK in the Territory, or the Product's quality,

efficacy or safety.

 

     2.5 Change Control Procedure.

 

          (a) GSK shall provide ALLERGAN with written notice of any Product

Changes directed or recommended by the Regulatory Authority in the Territory as

soon as reasonably practicable and ALLERGAN shall promptly determine how best to

implement such Product Changes. If ALLERGAN determines that the Product Changes

directed or recommended by the Regulatory Authority in the Territory will

involve implementation costs of greater than ***, the parties will conduct good

faith negotiations to determine how best to implement the Product Changes.

 

          (b) ALLERGAN shall provide GSK with written notice of any proposed

Product Changes instigated by ALLERGAN at its discretion or by GSK in accordance

with Section 2.5(a) as soon as reasonably practicable.

 

          (c) GSK shall promptly review the proposal for Product Change and

respond in writing on whether the proposed Product Change requires any

notification to, or request for pre-approval from, the Regulatory Authority in

the Territory.

 

          (d) Where GSK determines that the proposed Product Change requires

notification or pre-approval from the Regulatory Authority in the Territory,

ALLERGAN will provide appropriate information to support GSK's submission to the

Regulatory Authority and shall maintain sufficient supplies of approved Product

to supply GSK its requirements for the Territory until approvals from a

Regulatory Authority of amendments to the Marketing Authorization in the

Territory is obtained for any Product Changes.

 

          (e) Any disagreement between the parties regarding Product Changes or

that arises during this Change Control procedure shall be discussed by the

party's relevant technical or operational representatives in good faith and in a

consultative manner and escalate the matter

 

***   Certain confidential information contained in this document, marked with 3

     asterisks, has been omitted and filed separately with the Securities and

     Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act

     of 1934, as amended.

 

 

                                        6

 

<PAGE>

 

within their internal lines of reporting as may be necessary. Where the parties

are unable to resolve a disagreement in relation to the legal obligations of

either party it will be resolved in accordance with the dispute resolution

procedures set out in Section 10.9 of this Supply Agreement.

 

     2.6 Lead Contacts. Each party shall appoint a lead contact (who for

ALLERGAN shall be a senior manufacturing manager of ALLERGAN or Allergan, Inc.

and for GSK shall be a senior manufacturing manager of the Procurement &

Contract Manufacturing department of GSK's Global Manufacturing and Supply

Division) for the activities contemplated by this Supply Agreement. The lead

contact for each party shall be identified to the other party not later than ten

(10) days after the Effective Date. Either party may change its lead contact

upon written notice to the other party. In an endeavor to promote efficient and

effective sales and operations planning, the appropriate personnel from each

party shall meet in person or by telephone at mutually convenient times/places

on a regular basis to discuss, consider and, if seen fit, implement such sales

and operations planning measures as they consider appropriate to promote the

objects of this Supply Agreement. The Lead Contacts will also discuss, on a

regular basis, the strategies that ALLERGAN has in place to manage any risks

relating to interruption to supply.

 

3.    PRICE AND PAYMENT

 

     3.1 Purchase Price.

 

          3.1.1 Supply Price. For each Unit of Product supplied to GSK

hereunder, GSK shall pay ALLERGAN a price per Unit of Product equal to

ALLERGAN's Standard Cost per Unit in the Calendar Year in which the delivery

date specified by GSK occurs, as such Standard Cost is determined in accordance

with this Supply Agreement, plus *** (the "PRICE"). The Standard Cost as of the

Effective Date is *** per Unit, and the Price to be paid by GSK per Unit as of

the Effective Date is therefore ***. ALLERGAN may, though it shall not be

obliged to, use the assistance and expertise of GSK to identify and target

potential areas of reduction to its Standard Cost.

 

          3.1.2 Amendments to Supply Price. ALLERGAN shall recalculate the

Standard Cost once during the fourth quarter of each calendar year (either

upward or downwards as the case may be) (the "RECALCULATED STANDARD COST") to

become effective 1 January of the succeeding year. ALLERGAN shall provide GSK

with written notice detailing each Recalculated Standard Cost promptly after its

determination. Subject to the reconciliation process set out in Section 3.1.4

below, the Price paid by GSK from 1 January in each succeeding year during the

Term shall be the Recalculated Standard Cost for that year plus ***.

 

          3.1.3 Maximum Increase. For the purposes of the reconciliation process

set out in Section 3.1.4 below, (A) the maximum allowable increase to the

Standard Cost for calendar years through the end of *** shall be ***and (B) the

maximum allowable increase to the Standard Cost for calendar years from and

after *** shall be *** (the "ALLOWABLE STANDARD COST"). When calculating the

Allowable Standard Cost for each Calendar Year after the first Calendar Year,

the

 

***   Certain confidential information contained in this document, marked with 3

     asterisks, has been omitted and filed separately with the Securities and

     Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act

     of 1934, as amended.

 

 

                                       7

 

<PAGE>

 

'Standard Cost' referred to in this Section 3.1.3 shall be the lower of

Recalculated Standard Cost or the Allowable Standard Cost for the immediately

preceding Calendar Year.

 

          3.1.4 Reconciliation Process. In circumstances where the Recalculated

Standard Cost exceeds the Allowable Standard Cost, ALLERGAN will give a credit

to GSK to be used against the royalty payable under the License Agreement in an

amount equal to the difference between (A) the Recalculated Standard Cost plus

*** and (B) the Allowable Standard Costs plus***, multiplied by the number of

Units purchased by GSK during the given year. A working example of this

reconciliation process is set forth in Exhibit G.

 

     3.2 Invoices. ALLERGAN shall invoice GSK or GSK's nominated Affiliate for

all Product purchased by GSK upon shipment in accordance with the delivery terms

and the requirements of Section 4.4 and such invoices shall be paid by GSK

within sixty (60) days of the date of the invoice. All amounts shall be invoiced

and paid in U.S. Dollars. Each invoice issued by ALLERGAN hereunder shall

specify: (a) the price in respect of the Product delivered; (b) the quantity of

the Product delivered; and (c) the amount of tax due in respect of the Product

delivered (if any).

 

     3.3 Taxes. All amounts in this Supply Agreement are stated exclusive of VAT

and Indirect Taxes. GSK is responsible for the payment of all such appropriately

levied taxes to ALLERGAN. ALLERGAN will provide to GSK within thirty (30) days

of the receipt of any consideration, valid VAT invoice if appropriate. Should

such amounts of VAT be refunded subsequently by the fiscal authorities to

ALLERGAN, ALLERGAN will refund these monies to GSK within thirty (30) days of

receipt.

 

     3.4 Wire Transfers. All payments hereunder shall be made to ALLERGAN by

bank wire transfer in immediately available funds to ALLERGAN in accordance with

the wire instructions set forth in Exhibit E, which may be changed only by

written notice to GSK from the Chief Financial Officer of ALLERGAN under Section

10.7 (Notices).

 

     3.5 Late Payments. Subject to the other terms of this Supply Agreement,

payments not made to ALLERGAN within the time period set forth in this Article 3

shall bear interest at an annual rate equal to *** per month. The payment of

such interest shall not limit ALLERGAN from exercising any other rights it may

have under this Supply Agreement as a consequence of the lateness of any

payment.

 

     3.6 Financial Audit Rights. ALLERGAN shall permit its independent

registered public accounting firm, who as of the Effective Date is Ernst & Young

LLP, acting for GSK, to have access, no more than once in each calendar year

during the term of this Supply Agreement, during regular business hours and upon

at least thirty (30) days' written notice, to ALLERGAN's records and books only

to the extent necessary to determine the accuracy of the Standard Cost or

Recalculated Standard Cost (as the case may be). Any report provided by

ALLERGAN's company appointed auditors to GSK shall, unless mutually agreed

between the parties, be limited to:

 

***   Certain confidential information contained in this document, marked with 3

     asterisks, has been omitted and filed separately with the Securities and

     Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act

     of 1934, as amended.

 

 

                                        8

 

<PAGE>

 

          (i)   a statement to verify that the Standard Cost is consistent or

                equivalent with ALLERGAN's internal standard cost; and

 

          (ii) in circumstances where the Standard Cost or Recalculated Standard

               Cost charged by ALLERGAN has been determined by the auditor to

               have been higher than ALLERGAN's internal standard cost,

               disclosure of the actual standard cost.

 

     If such examination results in a determination that the Standard Cost or

Recalculated Standard Cost has been overstated, amounts overpaid by GSK shall be

refunded by ALLERGAN promptly. The fees and expenses of ALLERGAN's company

appointed auditors for conducting the services set out in this Section 3.6 shall

be paid by GSK unless the examination results in a determination that Standard

Cost or Recalculated Standard Cost have been overstated, or that amounts have

been overpaid by GSK, by more than *** for the period examined, in which case

ALLERGAN shall pay all reasonable costs and expenses of such auditor.

 

4.    FORECASTS, ORDERS AND SHIPMENT

 

     4.1 Rolling Forecasts. Prior to the beginning of each calendar quarter

during the Term, GSK shall provide ALLERGAN with a written forecast of GSK's

expected requirements for Product during the following eighteen (18) months

broken down by months (M1 through M18), and which shall include projected order

dates, quantities and shipping dates ("ROLLING FORECASTS"). The initial Rolling

Forecast shall be delivered to ALLERGAN by GSK within two (2) weeks after the

Effective Date. As pertains for each Rolling Forecast, the Units of Product set

forth in the first three (3) months designated M1-M3 shall be firm orders

binding on GSK, and the forecast for the second three (3) months designated

M4-M6 may only be increased or decreased by up to *** in the aggregate from the

original forecast for such months as the forecast is rolled forward at the

beginning of the next quarter (but in no event shall any order be for less than

*** Units), unless otherwise agreed to by ALLERGAN. Except as set forth in this

Section 4.1, the Rolling Forecasts shall be non-binding.

 

     4.2 Purchase Orders. Products shall be ordered by GSK by written or

electronic purchase order (or by any other means agreed to by the parties), the

initial form of which is attached as Exhibit B ("PURCHASE ORDER"). The initial

Purchase Order of Product by GSK to cover the balance of the calendar quarter in

which the Effective Date falls, which may account for a reasonable build of

stock for inventory purposes, shall be provided before or with the initial

Rolling Forecast. Prior to the beginning of each calendar quarter, but at least

thirty (30) days prior to the earliest desired date of delivery, GSK shall place

binding Purchase Orders for Product for M1-M3 as specified in the Rolling

Forecast to begin delivery in M1 of that calendar quarter, and shall be

consistent with the forecast provided for such calendar quarter in that Rolling

Forecast. Each Purchase Order must be for a minimum order of *** Units. Purchase

Orders placed by GSK may not be changed without ALLERGAN's prior written

consent. For the avoidance of doubt, the minimum order quantity for each

Purchase Order set out in this Section 4.2 does not represent a minimum annual

volume commitment by GSK. To the extent of any conflict or inconsistency between

this Supply Agreement and any Purchase Order, purchase order release,

confirmation,

 

***   Certain confidential information contained in this document, marked with 3

     asterisks, has been omitted and filed separately with the Securities and

     Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act

     of 1934, as amended.

 

 

                                       9

 

<PAGE>

 

acceptance or any similar document pertaining to the supply of Product for sale

in the Territory, the terms of this Supply Agreement shall govern.

 

     4.3 Manufacture and Shipment. ALLERGAN shall deliver to GSK the number of

Units of Product specified in each Purchase Order no later than the dates

specified therein. ALLERGAN shall exercise the same diligence in meeting GSK's

requirements of Product as it exercises with respect to its own requirements.

 

     4.4 Delivery Terms. Shipments of Product to GSK shall be made FCA

Manufacturing Facility, Westport, Ireland, INCOTERMS 2000 (as defined by the

International Chamber of Commerce (ICC)). Delivery will not be complete unless

each shipment is accompanied by a valid Certificate of Analysis and Compliance

and any required export documentation.

 

     4.5 Manufacturing Capacity. ALLERGAN undertakes to ensure that it has at

all times sufficient Manufacturing capacity at the Manufacturing Facilities to

satisfy GSK's Product requirements set out in the Rolling Forecasts.

 

          (a) ALLERGAN shall routinely monitor the Manufacturing capacity

available to GSK at the Manufacturing Facilities, such that ALLERGAN shall make

appropriate changes to its utilization of such capacity to satisfy GSK's

requirements of Product in accordance with this Supply Agreement.

 

          (b) GSK and ALLERGAN shall review and discuss the Manufacturing

capacity available at the Manufacturing Facilities in relation to the Rolling

Forecast as part of the regular review meetings pursuant to Section 2.6.

 

          (c) In the event of a break or fault in production that can reasonably

be foreseen to affect supply of Product to GSK, ALLERGAN shall notify GSK

promptly if such fault cannot be remedied within five (5) business days and,

following such notification, will keep GSK apprised of the status of the

remedial action to be taken by ALLERGAN. ALLERGAN shall in any event use its

best endeavors to ensure a return to production as soon as possible.

 

     4.6 Minimum Inventory. During the Term, ALLERGAN shall maintain not less

than *** rolling stock of inventory of Product for the Territory (work in

process inventory shall be included in this calculation) and approximately ***

supply of Materials throughout the supply chain ("RESERVE SUPPLY"), excepting

where such Reserve Supply is used to fulfill Purchase Orders, in which case it

shall be replaced within ***. For the avoidance of doubt, the Reserve Supply

shall be Product dedicated to GSK (but not necessarily labelled for GSK) and not

used for any other customers of ALLERGAN or ALLERGAN itself. Within thirty (30)

days after the Effective Date and thereafter during the Term, GSK shall maintain

*** of inventory of Product in the Territory. The amounts of inventory specified

in this Section shall be based on the Rolling Forecast.

 

     4.7 Incomplete Delivery. GSK shall notify ALLERGAN as soon as reasonably

practicable, and in no event later than three (3) business days after receipt of

the delivery at GSK's

 

***   Certain confidential information contained in this document, marked with 3

     asterisks, has been omitted and filed separately with the Securities and

      Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act

     of 1934, as amended.

 

 

                                       10

 

<PAGE>

 

site in Japan, if there is an incomplete delivery in accordance with the terms

of this Supply Agreement. If ALLERGAN is notified of the incomplete delivery by

telephone or in person, then such notification shall be confirmed by GSK in

writing. ALLERGAN shall rectify the incomplete delivery, making it up from the

Reserve Supply if necessary, within fourteen (14) business days after the first

date of notification.

 

     4.8 Failure to Meet Requirements. If ALLERGAN is unable, or anticipates

that it will be unable, to supply at least *** of the Product ordered on any

Purchase Order placed in accordance with Section 4 from its current production

or normal stocks, ALLERGAN shall, promptly after it becomes aware of such fact,

and in any event not less than fourteen (14) days before the due delivery date,

give written notice to GSK of the reasons for the shortfall. ALLERGAN will make

up the shortfall in the next delivery of Product ordered by GSK. GSK's remedies

in the event of any failure of ALLERGAN to supply GSK's requirements under this

Supply Agreement are set forth in the License Agreement. GSK's SOLE AND

EXCLUSIVE REMEDIES FOR FAILURE OF SUPPLY SHALL BE LIMITED TO THE REMEDIES

PROVIDED IN THE LICENSE AGREEMENT.

 

5.    QUALITY AND SAFETY

 

     5.1 Compliance. ALLERGAN shall Manufacture and supply Product, and maintain

and operate the Manufacturing Facilities, in accordance with this Supply

Agreement, the Specifications, all applicable laws and regulations and the

applicable Marketing Authorizations, including any applicable cGMPs, Good

Quality Practices ("GQPS"), Good Vigilance Practices ("GVPS") provisions

promulgated by the Regulatory Authority in the Territory or the country of

Manufacture.

 

     5.2 Inspection by Regulatory Authorities. ALLERGAN shall permit

representatives of appropriate Regulatory Authorities from the Territory or

country of Manufacture to inspect the Manufacturing Facilities to verify the

Product and API is being manufactured and supplied in accordance with cGMPs,

GQPs, GVPs and Product Specifications, API specifications and in accordance with

the Manufacturing Authorizations and Marketing Authorizations. ALLERGAN shall

provide GSK with a copy of any report or deficiency notice arising from such

inspections conducted by Regulatory Authorities from the Territory or country of

Manufacture, appropriately redacted to maintain confidentiality of ALLERGAN's

proprietary trade secrets, however, for the avoidance of doubt, any major or

critical observations of the Regulatory Authority will be disclosed in

un-redacted form. GSK shall have the right to make recommendations to ALLERGAN

regarding corrective action provided that ALLERGAN shall make the final

determination with respect to the corrective action taken. ALLERGAN shall

promptly remedy or cause the remedy of any deficiencies which may be noted in

any such inspection by the Regulatory Authority.

 

     5.3 ***

 

     5.4 Inspections by GSK of the Secondary Manufacturing Facility. GSK may,

subject to Section 9 relating to Confidentiality, conduct routine inspections of

the Secondary Manufacturing

 

***   Certain confidential information contained in this document, marked with 3

     asterisks, has been omitted and filed separately with the Securities and

     Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act

     of 1934, as amended.

 

 

                                       11

 

<PAGE>

 

Facility to verify the Product is being Manufactured and supplied in accordance

with cGMPs, GQPs, GVPs and Product Specifications and in accordance with the

Manufacturing Authorizations and Marketing Authorizations. *** Plant inspections

by GSK shall be conducted during normal business hours on not less than thirty

(30) days advance written notice, and shall occur no more frequently than once

in any twelve (12) consecutive month period, provided that GSK shall have the

right to carry out follow up inspections where it is legally obliged to do so.

GSK shall have the right to carry out inspections For Cause at any time. Any For

Cause inspection will be limited to an investigation of the For Cause issue to

discover the root cause. ALLERGAN and GSK shall meet after each inspection to

discuss the results of the inspection. ALLERGAN shall give due consideration to

observations and recommendations made by GSK at such meetings. Any Product

Changes as a result of the inspection shall be made in accordance with the

Change Control procedure set out in Section 2.5. Any disagreements between the

parties regarding the results of the inspection shall be discussed by the

party's relevant technical or operational representatives in good faith and in a

consultative manner and escalate the matter within their internal lines of

reporting as may be necessary. Where the parties are unable to resolve a

disagreement in relation to the legal obligations of either party it will be

resolved in accordance with the dispute resolution procedures set out in Section

10.9 of this Supply Agreement.

 

     5.5 Shelf Life. The shelf life of the Product is two (2) years. Product

shall have a minimum of *** of shelf life remaining at time of delivery to GSK.

 

     5.6 Specification Testing. ALLERGAN shall test or cause to be tested, in

accordance with the test methods and procedures set forth in Exhibit C, each Lot

sold to GSK before delivery to GSK. ALLERGAN shall provide GSK with a

Certificate of Analysis and Compliance, which shall accompany each Lot delivered

to GSK. In addition, GSK may test or cause to be tested each shipment of Product

received by GSK for the Territory. FOR THE AVOIDANCE OF DOUBT, EXCEPT AS SET OUT

IN SECTION 5.10, ANY TESTING BY GSK SHALL NOT SERVE TO LIMIT OR EXCLUDE

ALLERGAN'S LIABILITY OR RELIEVE ALLERGAN FROM ITS OBLIGATIONS SET OUT IN THIS

SUPPLY AGREEMENT.

 

     5.7 Replacement or Credit for Refund. If GSK rejects any Lot of Product,

GSK shall promptly notify ALLERGAN in writing of the reason(s) for rejection.

Following discussion with GSK and by mutual agreement ALLERGAN shall, either

promptly replace the entire Lot in which the defective Product was found and

deliver it to GSK at ALLERGAN's sole cost and expense or credit to GSK the

invoiced amount of the entire Lot in which the defective Product was found and

credit to GSK the actual cost of transportation and storage of the defective

Product incurred by GSK. After consultation with ALLERGAN, GSK may dispose of

any defective Lot in such reasonable manner as GSK determines in its sole

discretion at ALLERGAN's cost and expense. OTHER THAN THE REMEDIES FOR FAILURE

TO SUPPLY SET OUT IN THE LICENSE AGREEMENT, GSK's SOLE AND EXCLUSIVE REMEDY FOR

REJECTION OF ANY LOT OR ANY UNITS OF ANY LOT SHALL BE LIMITED TO THE REMEDY

PROVIDED IN THIS SECTION.

 

     5.8 Disputes Regarding Defect Claims. In the event of a dispute between the

parties over the validity of a rejection of a Lot of Product, GSK and ALLERGAN

agree to submit samples

 

***   Certain confidential information contained in this document, marked with 3

     asterisks, has been omitted and filed separately with the Securities and

     Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act

     of 1934, as amended.

 

 

                                        12

 

<PAGE>

 

of the rejected Product to an independent test facility to be agreed upon by

both parties, and to accept the results of the testing performed by that

facility as binding with regard to that Lot. The expense of such testing shall

be borne by the losing party. The parties acknowledge that the time period for

accurate testing for the Product could impact the flow of Product to market and

that it may be necessary to send a replacement Lot of Product (which ALLERGAN

shall invoice GSK for in the normal course of business) pending determination or

resolution of the validity of a rejection.

 

     5.9 Adverse Event (AE) and Serious Adverse Event (SAE) Reporting. GSK and

ALLERGAN shall each comply with their obligations in relation to medical event

reporting requirements as set out in the License Agreement.

 

     5.10 Product Recall. If any Regulatory Authority in the Territory orders or

requires the recall of any Product in the Territory, or if in GSK's opinion a

recall is necessary in the Territory, GSK will promptly notify ALLERGAN and

provide such information regarding such recall order or other information as may

be reasonably requested by ALLERGAN. GSK shall, unless prohibited by applicable

law, consult with ALLERGAN on the need for a recall and take all ALLERGAN

submissions into account when making a decision whether to instigate a recall

(such decision not to be unreasonably made). GSK shall be responsible for

conducting any recall of Product in the Territory and ALLERGAN shall co-operate

with GSK by providing all such information and assistance as may be reasonably

required to implement such recall. To the extent that any recall of the Product

is implemented as a result of ALLERGAN's failure to Manufacture Product in

accordance with the terms and conditions of this Supply Agreement, ALLERGAN

shall (i) bear all direct expenses incurred by GSK in connection with such

recall, (ii) shall indemnify the GSK Indemnitees (as defin