Exhibit 10.2
*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
SETTLEMENT AGREEMENT
     THIS SETTLEMENT AND AGREEMENT (the “Settlement Agreement”) is made
effective as of April 15, 2009 (“Effective Date”), by and between AKORN, INC., a
Louisiana corporation, having a principal place of business located at 2500
Millbrook Drive, Buffalo Grove, IL 60089 (“Akorn”), and Massachusetts Biologic
Laboratories of the University of Massachusetts Medical School, having a
principal place of business located at 460 Walk Hill Street, Boston, MA 02126
(“MBL”). Akorn and MBL are sometimes referred to herein individually as “Party,”
or collectively, as the “Parties.”
RECITALS
     WHEREAS, the Parties entered into that certain Exclusive Distribution
Agreement, dated March 22, 2007, pursuant to which Akorn became the exclusive
distributor in the United States and Puerto Rico of Tetanus-Diphtheria vaccine
(the “Product”) manufactured by MBL (the “Exclusive Distribution Agreement”);
     WHEREAS, by an Amendment with an effective date of July 3, 2008, an
Amendment with an effective date of July 30, 2008, and an Amendment with an
effective date of August 1, 2008 (the “Third Amendment”), MBL and Akorn amended
the Exclusive Distribution Agreement for certain purposes (the “Pre-Settlement
Modified Agreement”);
     WHEREAS, since the effective date of the Third Amendment, a dispute arose
between the Parties whereby MBL claimed that Akorn was and continued to be in
breach of the Pre-Settlement Modified Agreement for failure to timely make
payments and take delivery of the Product as required by the Pre-Settlement
Modified Agreement (the “Dispute”);
     WHEREAS, the Parties entered into a binding letter agreement (the “Letter
Agreement”) on March 27, 2009 under which, among other points (i) Akorn
acknowledged its outstanding past due payment obligations to MBL in the amount
of $5,750,000 (the “Past Due Amount”) and its failure to take delivery of
required doses of Product on March 11, 2009 (collectively, the “Specified
Defaults”); and (ii) the Parties agreed to the resolution of the Dispute as set
forth below;
     WHEREAS, on April 13, 2009, Akorn paid to MBL $1,000,000 of the Past Due
Amount (the “April $1 Million Payment”);
     WHEREAS, pursuant to the Letter Agreement, the Parties resolved the Dispute
subject to the terms and conditions set forth therein, including the following:
(a) the amendments to the Pre-Settlement Modified Agreement immediately taking
effect as of

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

1

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
the execution and delivery of the Letter Agreement including the conversion of
the Pre-Settlement Modified Agreement into a non-exclusive agreement and the
suspension of Akorn’s obligation to make any further minimum purchases of
Product and to otherwise comply with the delivery schedule set out in the
Pre-Settlement Modified Agreement through the LOC Delivery Date (as defined in
the Letter Agreement); and (b) in exchange for such amendments and the other
amendments contemplated therein, an obligation to pay MBL the sum of (Y) the
Past Due Amount (less the April $1 Million Payment) and (Z) $4,750,000
(collectively, the “Settlement Payment”), which obligation shall be secured by a
letter of credit in the amount of $10,500,000;
     WHEREAS, but for the amendments to the Pre-Settlement Modified Agreement
set forth in the Letter Agreement, the liability of Akorn thereunder would
greatly exceed the Settlement Payment plus the April $1 Million Payment;
     WHEREAS, as required under the Letter Agreement the Parties are entering
into this Settlement Agreement as necessary to implement the settlement of the
Dispute.
     NOW, THEREFORE, in consideration of the mutual promises, terms, conditions,
provisions and covenants described herein, which consideration is hereby
acknowledged by the Parties, the Parties hereby agree as follows:
AGREEMENT
     1. Recitals. The recitals set forth above are incorporated into this
Settlement Agreement.
     2. Settlement Payment Schedule. The Settlement Payment shall be paid by
Akorn by wire transfer to MBL according to the following schedule (the
“Settlement Payment Schedule”):

          Payment Due Date   Amount of Payment
May 13, 2009
  $ 1,500,000.00  
June 13, 2009
  $ 2,000,000.00  
July 13, 2009
  $ 1,500,000.00  
August 13, 2009
  $ 1,500,000.00  
September 13, 2009
  $ 1,500,000.00  
June 30, 2010
  $ 1,500,000.00  

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

2

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
Each such amount shall be paid regardless of the termination of the
Pre-Settlement Modified Agreement, as amended by the Letter Agreement and by the
Amendment (as defined below), and as may be further amended and modified (the
“Modified Agreement”). Notwithstanding anything to the contrary contained in
this Settlement Agreement, the execution and delivery of this Settlement
Agreement does not constitute a novation, payment or termination of the
obligations of Akorn under the Pre-Settlement Modified Agreement, as amended by
the Letter Agreement, giving rise to the Settlement Payment.
Wire transfer instructions for each such payment by Akorn are as follows:
Bank of America, N.A.
ABA Routing Number: [***...***]
Account Number: [***...***]
Checking Account
Bank Phone Number: 800-432-1000
     3. Standby Irrevocable Letter of Credit. As security for, among other
things, the timely payment by Akorn of the Settlement Payment in accordance with
the Settlement Payment Schedule, Akorn or its designee shall deliver to MBL on
or before the Effective Date the letter of credit described in the Letter
Agreement (including draw, reduction and expiration terms, as may be extended or
replaced from time to time, the “Letter of Credit”).
     4. Draws under Letter of Credit. MBL agrees that it only shall be permitted
to draw on the Letter of Credit upon the occurrence of any of the following:
               (i) if any required payment in respect of the Settlement Payment
is not timely paid according to the Settlement Payment Schedule and such payment
has not, at the time of the draw under the Letter of Credit, been paid to MBL by
Akorn by wire transfer;
               (ii) if any payment by Akorn to MBL of the Settlement Payment or
any portion thereof, or the payment by Akorn to MBL of the $1 Million Payment
(as defined in the Letter Agreement) or any portion thereof, or the payment by
Akorn to MBL of the April $1 Million Payment or any portion thereof, is avoided,
set aside, recovered or otherwise required to be repaid by MBL; and/or
               (iii) if (A) Akorn is the debtor in a bankruptcy or other
insolvency proceeding (whether voluntary or involuntary) (an “Insolvency
Proceeding”) and such proceeding commenced on or before October 5, 2010 and
(B) no Replacement Letter of Credit has been issued to and received by MBL on or
before the fifth business day prior to the expiration date of the Letter of
Credit or a Replacement Letter of Credit, if applicable.

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

3

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
               (iv) As used herein, “Replacement Letter of Credit” means either
an amendment extending the expiration of the Letter of Credit (or a previous
Replacement Letter of Credit, if applicable) or a letter of credit issued for
the benefit of MBL by a United States commercial bank reasonably acceptable to
MBL in an amount not less than the sum of all payments made by Akorn to MBL
pursuant to this Settlement Agreement during the 95 day period preceding the
commencement of an Insolvency Proceeding, which amendment or letter of credit,
as applicable, is in form and substance reasonably satisfactory to MBL.
     5. Amendment to Pre-Settlement Modified Agreement. As required by the
Letter Agreement, the Parties agree to simultaneously herewith execute and
deliver the amendment to the Pre-Settlement Modified Agreement, as amended by
the Letter Agreement, in the form attached hereto as Exhibit A (the
“Amendment”).
     6. Waiver of Specified Defaults. Upon the execution and delivery of this
Settlement Agreement by Akorn, and MBL’s receipt of the Letter of Credit, the
Specified Defaults automatically shall be waived.
     7. Release.
     7.1 AKORN (IN ITS OWN RIGHT AND ON BEHALF OF ITS RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, INDEPENDENT CONTRACTORS, ATTORNEYS AND AGENTS), RELEASES,
ACQUITS, AND FOREVER DISCHARGES MBL AND ITS DIRECTORS, OFFICERS, EMPLOYEES,
INDEPENDENT CONTRACTORS, ATTORNEYS AND AGENTS (COLLECTIVELY, THE “MBL RELEASED
PARTIES”), TO THE FULLEST EXTENT PERMITTED BY APPLICABLE STATE AND FEDERAL LAW,
FROM ANY AND ALL ACTS AND OMISSIONS OF THE MBL RELEASED PARTIES, AND FROM ANY
AND ALL CLAIMS, CAUSES OF ACTION, COUNTERCLAIMS, DEMANDS, CONTROVERSIES, COSTS,
DEBTS, SUMS OF MONEY, ACCOUNTS, RECKONINGS, BONDS, BILLS, DAMAGES, OBLIGATIONS,
LIABILITIES, OBJECTIONS, AND EXECUTIONS OF ANY NATURE, TYPE, OR DESCRIPTION
WHICH AKORN HAS AGAINST THE MBL RELEASED PARTIES AND WHICH AROSE PRIOR TO THE
EFFECTIVE DATE, IN CONNECTION WITH OR RELATED TO THE PRE-SETTLEMENT MODIFIED
AGREEMENT, AS AMENDED BY THE LETTER AGREEMENT, AT LAW OR IN EQUITY, IN CONTRACT
IN TORT, OR OTHERWISE, KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED (COLLECTIVELY,
THE “MBL RELEASED CLAIMS”), PROVIDED, HOWEVER, IN NO EVENT SHALL THE MBL
RELEASED CLAIMS INCLUDE MBL’S OBLIGATIONS UNDER THIS SETTLEMENT AGREEMENT AND/OR
THE MODIFIED AGREEMENT ON AND AFTER THE EFFECTIVE DATE.
     7.2 UPON MBL’S RECEIPT OF THE LETTER OF CREDIT, MBL (IN ITS OWN RIGHT AND
ON BEHALF OF ITS RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, INDEPENDENT
CONTRACTORS, ATTORNEYS AND AGENTS),

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

4

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
RELEASES, ACQUITS, AND FOREVER DISCHARGES AKORN AND ITS DIRECTORS, OFFICERS,
EMPLOYEES, INDEPENDENT CONTRACTORS, ATTORNEYS AND AGENTS (COLLECTIVELY, THE
“AKORN RELEASED PARTIES”), TO THE FULLEST EXTENT PERMITTED BY APPLICABLE STATE
AND FEDERAL LAW, FROM ANY AND ALL ACTS AND OMISSIONS OF THE AKORN RELEASED
PARTIES, AND FROM ANY AND ALL CLAIMS, CAUSES OF ACTION, COUNTERCLAIMS, DEMANDS,
CONTROVERSIES, COSTS, DEBTS, SUMS OF MONEY, ACCOUNTS, RECKONINGS, BONDS, BILLS,
DAMAGES, OBLIGATIONS, LIABILITIES, OBJECTIONS, AND EXECUTIONS OF ANY NATURE,
TYPE, OR DESCRIPTION WHICH MBL HAS AGAINST THE AKORN RELEASED PARTIES AND WHICH
AROSE PRIOR TO THE EFFECTIVE DATE, IN CONNECTION WITH OR RELATED TO THE
PRE-SETTLEMENT MODIFIED AGREEMENT, INCLUDING, BUT NOT LIMITED TO THE SPECIFIED
DEFAULTS, AT LAW OR IN EQUITY, IN CONTRACT IN TORT, OR OTHERWISE, KNOWN OR
UNKNOWN, SUSPECTED OR UNSUSPECTED (COLLECTIVELY, THE “AKORN RELEASED CLAIMS”),
PROVIDED, HOWEVER, IN NO EVENT SHALL THE AKORN RELEASED CLAIMS INCLUDE THE
OBLIGATIONS OF AKORN UNDER THIS SETTLEMENT AGREEMENT AND/OR THE MODIFIED
AGREEMENT ON AND AFTER THE EFFECTIVE DATE.
     8. Representations and Warranties (Akorn). To induce MBL to enter into this
Settlement Agreement, Akorn represents and warrant to MBL as follows:
               (i) Authority. The execution, delivery and performance of this
Settlement Agreement and the Amendment hereby have been duly authorized by all
requisite action on the part of Akorn and do not and will not violate the
articles of incorporation or bylaws, partnership agreement, or other governance
document or agreement of Akorn, any other material agreement to which Akorn is a
party, or any law, rule or regulation, or any order of any court, governmental
authority or arbitrator by which Akorn or any of its respective properties is
bound.
     9. Representation and Warranty (MBL). To induce Akorn to enter into this
Settlement Agreement, MBL represents and warrant to Akorn as follows:
               (i) Authority. The execution, delivery and performance of this
Settlement Agreement and the Amendment have been duly authorized by all
requisite action on the part of MBL and do not and will not violate the
governance document or agreement of MBL, any other material agreement to which
MBL is a party, or any law, rule or regulation, or any order of any court,
governmental authority or arbitrator by which MBL or any of its respective
properties is bound.
     10. Information. For the remaining duration of the Modified Agreement,
Akorn will deliver to MBL by the fifth business day of each month (i) a monthly
cash forecast for the Product to be sold pursuant to the Modified Agreement, and
(ii) monthly

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

5

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
inventory and sales information for Product. Additionally Akorn will deliver to
MBL quarterly financial results as and when filed with the United States
Securities and Exchange Commission.
     11. No Implied Waivers. No failure or delay on the part of MBL in
exercising, and no course of dealing with respect to, any right, power or
privilege under this Settlement Agreements, the Modified Agreement, the Letter
of Credit or any other document shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege under this
Settlement Agreement, the Modified Agreement, the Letter of Credit or any other
document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
     12. ENTIRE AGREEMENT; AMENDMENT, ETC. THIS SETTLEMENT AGREEMENT, THE
MODIFIED AGREEMENT, AND THE LETTER OF CREDIT HEREBY EMBODY THE FINAL, ENTIRE
AGREEMENT BETWEEN THE PARTIES HERETO REGARDING MBL’S FORBEARANCE WITH RESPECT TO
ITS RIGHTS AND REMEDIES ARISING AS A RESULT OF THE SPECIFIED DEFAULTS AND
SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES. THERE ARE NO ORAL
AGREEMENTS AMONG THE PARTIES. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by Akorn and MBL. Nothing in this
Settlement Agreement, expressed or implied, shall be construed to confer upon
any person or entity (other than the Parties and their respective successors and
assigns) any legal or equitable right, remedy or claim under or by reason of
this Settlement Agreement, except that the John N. Kapoor Trust DTD 9/20/89
shall be an intended beneficiary of Section 4.
     13. Confidentiality. The Parties understand and agree that the terms and
conditions of this Settlement Agreement are and shall at all times remain
confidential, unless this Settlement Agreement or its contents become Public
Information. Neither Party shall disclose this Settlement Agreement or its
contents, except that a Party may disclose this Settlement Agreement or its
contents: (i) to a Party’s attorneys, accountants and other advisors; (ii) to
any other person or entity, if the failure to make such disclosure would
constitute a breach of, or default under, an agreement between a Party and such
other person or entity; (iii) if required or reasonably necessary in connection
with any Legal Proceeding; or (iv) pursuant to any applicable laws, ordinances,
judgments, decrees, injunctions, writs, rules, regulations, orders,
interpretations, licenses, permits and orders of any court of competent
jurisdiction, arbitration or Governmental Authority in any relevant jurisdiction
to the extent that such

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

6

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
Party may reasonably consider necessary to protect its interests. For purposes
hereof, the following terms shall have the following meanings:
               (i) “Governmental Authority” means any federal, state, municipal,
national or other government, governmental department, commission, board,
bureau, court, agency or instrumentality or political subdivision thereof or any
entity or officer exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to any government or any court, in
each case whether associated with a state of the United States, the United
States, or a foreign entity or government.
               (ii) “Legal Proceeding” means any action, suit, audit,
investigation or proceeding of any nature, in law or in equity, pending or
threatened, by or before any court, tribunal, arbitrator or other Governmental
Authority.
               (iii) “Public Information” means information that is or becomes
public knowledge other than as a direct or indirect result of any breach of this
Agreement.
     14. Notices. All notices to be given under this Settlement Agreement shall
be in writing and shall be delivered personally, by facsimile machine with a
copy mailed by certified mail, or by certified mail postage prepaid, to the
following addresses:

  If to Akorn:  
Akorn, Inc.
150 S. Wyckles Road
Decatur, IL 62522
Facsimile No.: (847) 279-6123
Attention: John N. Kapoor, P.H.d.

  If to MBL:  
Massachusetts Biologic Laboratories
University of Massachusetts Medical School
460 Walk Hill Street
Boston, MA 02126
Facsimile No.: (617) 474-3240
Attention: Donna M. Ambrosino, M.D.

Notices shall be effective upon receipt if personally delivered; on the first
business day following the date of facsimile transmission; or on the third
business day following the date of mailing. A Party may change the address for
notices by notifying the other Party of such change in accordance with this
Section.
     15. Litigation. The Parties agree to bear their own costs, attorneys’ fees
and all other expenses associated with the Dispute between the Parties described
herein. In

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

7

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
the event any litigation or contested proceeding arises between or among the
Parties relating to this Settlement Agreement, the prevailing Party shall be
entitled to recover as costs, in addition to all costs provided by law, all
actual costs and expenses incurred, including attorneys’ fees.
     16. Choice of Law and Venue: Jury Trial Waiver.
               (i) THE VALIDITY OF THIS SETTLEMENT AGREEMENT, THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO
WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
COMMONWEALTH OF MASSACHUSETTS.
               (ii) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE MODIFIED AGREEMENT MAY BE TRIED AND
LITIGATED IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF SUFFOLK,
COMMONWEALTH OF MASSACHUSETTS. AKORN WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 16(ii).
               (iii) AKORN HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS SETTLEMENT AGREEMENT, THE
MODIFIED AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. AKORN REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
     17. Independent Judgment. The Parties agree and pledge that in making this
Settlement Agreement, they rely on their own respective judgment, belief and
knowledge, and not on any representations or statements made by any other Party,
or any other Party’s officers, agents, representatives, or counsel, except as
specifically set forth herein. The Parties acknowledge that they have had the
opportunity to consult with counsel of their choosing concerning the terms and
conditions of this Settlement Agreement, and that the execution thereof is the
free act and deed of each Party.

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

8

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
     18. Construction of Settlement Agreement. The language of all parts of this
Settlement Agreement shall in all cases be construed as a whole, according to
its fair meaning, and not strictly for or against either Party. Neither Party
shall be deemed to be the drafting party of this Settlement Agreement for
purposes of construction and interpretation.
     19. Successors and Assigns. This Settlement Agreement shall be binding upon
and inure to the benefit of the Parties and each of their respective legal
representatives, successors and assigns.
     20. Severability. If any provision of this Settlement Agreement, or any
part thereof, is declared by a court of competent jurisdiction to be invalid,
void or unenforceable, each and every other provision of this Settlement
Agreement, or any part thereof, shall nevertheless continue in full force and
effect.
     21. Execution in Counterparts. This Settlement Agreement may be executed in
several counterparts that together shall be originals and constitute one and the
same instrument.
[Signature page follows]

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

9

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
     IN WITNESS WHEREOF, the Parties have entered into this Settlement Agreement
as of the date first above written.

            AKORN, INC.
      By:   /s/ Jeffrey A. Whitnell         Name:   Jeffrey A. Whitnell       
Title:   CFO        MASSACHUSETTS BIOLOGIC LABORATORIES OF THE
UNIVERSITY OF MASSACHUSETTS MEDICAL SCHOOL
      By:   /s/ Donna M. Ambrosino         Donna M. Ambrosino, M.D.       
Title:   Director     

[Signature Page to Settlement Agreement]

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
EXHIBIT A
[See Attached]

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

     
(MassBiologics LOGO) [c50612bc5061201.gif]
  MassBiologics
University of Massachusetts Medical School
460 Walk Hill Street, Boston, MA 02126

Telephone: 617-474-3000 Facsimile: 617-474-3240

March 27, 2009
Via Email And FedEx
John N. Kapoor, Ph.D., Chairman
Akorn, Inc.
1925 West Field Court, Suite 300
Lake Forest, IL 60045
jkapoor@ejfinancial.com

Re:  
Distribution Agreement — Revised Proposal

Dear John:
I write with respect to resolving various issues arising under the Exclusive
Distribution Agreement, dated as of March 22, 2007, between Akorn, Inc.
(“Akorn”) and the Massachusetts Biologic Laboratories of the University of
Massachusetts (“MBL”) (as amended, our “Distribution Agreement”). MBL makes
Akorn the following offer to resolve the parties’ outstanding issues, and to
amend the Distribution Agreement accordingly (the “Offer”):
     1. Amount Owed. Giving effect to Akorn’s payment of $1,000,000 on March 13,
2009 (the “$1 Million Payment"), Akorn currently owes MBL $5,750,000 million for
Td vaccine shipments delivered and accepted (the “Amount Owed”). Payment of the
Amount Owed is past due.
     2. Failure to Pick-Up. Akorn acknowledges its failure to take delivery of
the shipment of [***...***] doses of Td vaccine scheduled for Akorn’s pick-up on
March 11, 2009, as required under the Distribution Agreement.
     3. Total Amount Owed. In exchange for the Distribution Agreement amendments
set out in Section 6 (Distribution Provisions), Akorn hereby agrees to pay to
MBL the additional amount of $4,750,000 (such amount together with the Amount
Owed, the “Total Amount”). The Total Amount, therefore, equals $10,500,000.00.
     4. Pay-Off. Akorn shall pay the remaining Total Amount by wire transfer in
accordance with the payment schedule attached as Exhibit A (“Payment Schedule”).
Wire transfer instructions are as follows:

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
BANK OF AMERICA, N.A.
ABA Routing [***...***]
Account [***...***]
Checking Account
Bank Phone # (800) 432-1000
     5. Standby Irrevocable Letter of Credit. As security for the timely payment
by Akorn of the Total Amount in accordance with the Payment Schedule, and to
reimburse MBL in the event any such payment (or any portion thereof) and/or the
$1 Million Payment (or any portion thereof) is avoided, set aside, or otherwise
required to be repaid by MBL (whether pursuant to or in connection with a
bankruptcy or similar proceeding involving Akorn or otherwise), Akorn or its
designee shall provide to MBL on or before April 13, 2009 (the “LOC Delivery
Date”) an irrevocable transferable standby letter of credit that meets the
following three criteria: the letter of credit shall be (i) in form and
substance reasonably satisfactory to MBL (provided that MBL shall not make
unreasonable modifications to the bank’s form letter of credit); (ii) in the
amount of $10,500,000.00, and (iii) confirmed by a United States bank acceptable
to MBL (the “Letter of Credit”). Provided (x) on or before April 6, 2009, Akorn
delivers to the issuing bank all documents and materials (other than funding),
needed by the bank to issue a Letter of Credit meeting the requirements of the
previous sentence, (y) Akorn does not request changes to this Letter of Credit
after April 6, 2009 (unless the request is objectively based on clear and
convincing justification), and (z) the Letter of Credit is funded by Akorn as of
April 13, 2009, then the LOC Delivery Date shall be extended on a day for day
basis for each day of negotiations between MBL and the issuing bank over the
form and substance of the Letter of Credit which continue subsequent to
April 13, 2009. MBL will be able to draw on such Letter of Credit but, in each
case, only in the amount not so paid or so avoided, set aside, or repaid, at
such time (a) that any required payment in respect of the Total Amount is not
timely paid according to the Payment Schedule, or (b) that any such payment (or
any portion thereof) is avoided, is set aside, recovered or is otherwise
required to be repaid by MBL, or (c) that the $1 Million Payment (or any portion
thereof) is avoided, set aside, recovered or is otherwise required to be repaid
by MBL. Provided that no bankruptcy, receivership or other similar proceeding is
filed by or against Akorn within the 95 day period immediately subsequent to
each payment of the Total Amount in accordance with the Payment Schedule, then
the amount of the Letter of Credit shall be reduced by the amount of such
payment, and such reduction shall take place 95 days after each associated
payment. The Letter of Credit shall not expire until 95 days after the sooner to
occur of payment in full in immediately available funds of the Total Amount or
June 30, 2010, provided, however in the event that prior to the expiration of
such 95 day period, a bankruptcy, receivership or other similar proceeding is
filed by or against Akorn, the Letter of Credit shall not expire until all
applicable time limitation periods (including under Section 546 of the
Bankruptcy Code) relating to the avoidance, setting aside, recovery or repayment
of any payments made by Akorn to MBL in respect of the Total Amount or the $1
Million Payment shall have expired and no action, litigation or other proceeding
in respect thereof shall have been commenced against MBL or, if any such action,
litigation or other proceeding shall have been so commenced, the same shall have
been resolved by a final order of a court of competent jurisdiction and 5 days
from the entry of such order shall have passed.

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
     6. Distribution Provisions
          6.1 Provisions Taking Immediate Effect. The following amendments to
the Distribution Agreement shall become effective as of Akorn’s acceptance of
this Offer:
               6.1.1 Non-Exclusive Distribution. Akorn will no longer act as
MBL’s exclusive distributor under the Distribution Agreement and the
Distribution Agreement will be amended to become non-exclusive. Specifically,
Akorn will be one of MBL’s, but not the sole, FDA authorized distributors.
               6.1.2 Pricing; Reduced Pricing. Pricing to Akorn for Td Vaccine
shall be as set out in the Distribution Agreement; provided, however, that if
MBL offers more favorable per dose pricing to MBL’s other distributors (“Reduced
Per Dose Pricing”), then (i) MBL shall notify Akorn, and (ii) during the period
of such Reduced Per Dose Pricing, MBL shall offer the same Reduced Per Dose
Pricing to Akorn on orders that Akorn places and takes delivery on, during such
period. These Reduced Per Dose Pricing provisions shall not apply to any Td
Vaccine sold by MBL under contracts arising from CDC Solicitation Number
2009-N-11074 Vaccine for Children, and MBL’s pricing under such contracts shall
not be effected by MBL’s relationship with Akorn. MBL and others will be
entitled to sell to others MBL’s Td Vaccines product labeled with Akorn’s NDC
currently in MBL’s possession.
               6.1.3 Suspension of Minimum Purchase Obligations. Akorn’s
obligation to make any further minimum purchases of Td vaccine products and to
otherwise comply with the delivery schedule set out in the Distribution
Agreement is hereby suspended through the LOC Delivery Date.
          6.2 Provisions Taking Effect upon Delivery of LOC. On the strict
condition that, in compliance with the terms of this Offer, MBL receives the
Letter of Credit on or before the LOC Delivery Date (the “Required Condition”),
the following amendments to the Distribution Agreement will go into effect as of
the LOC Delivery Date:
               6.2.1 Removal of Minimum Purchase Obligation. Upon fulfillment of
the Required Condition (and under no other circumstances), the Distribution
Agreement shall be amended such that Akorn will not be obligated to make any
minimum purchases of Td vaccine products and will purchase on an as needed basis
with the quantity to be mutually agreed.
               6.2.2 Resale on Termination; Termination without Cause. Upon
fulfillment of the Required Condition (and under no other circumstances), the
Distribution Agreement will also be amended to include a revised termination
provision eliminating the prohibition on the resale of product in the event of a
termination for cause and giving either party the right to terminate the
agreement for any reason without penalty on 90 days written notice; provided,
however, that such right to terminate without cause shall not affect Akorn’s
obligations under sections 1, 3, and 4, above, or MBL’s rights hereunder
(including under Section 5, above) or under the Letter of Credit or the
Documents. Until termination thereof, Akorn would remain subject to all other
provisions of the Distribution Agreement (except as such provisions are
expressly amended in accordance with this proposal).

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
     7. Payment Terms. For all future orders under the Distribution Agreement,
payment terms will be that Akorn shall pay for the order in full in cash upon
placing the order with MBL.
     8. Amended Cure Period. Akorn agrees that the cure period set out in
Section 11(a) of the Distribution Agreement is hereby amended such that,
notwithstanding anything to the contrary contained in the Distribution
Agreement, (a) Akorn’s ability and right to cure defaults or other breaches of
the Distribution Agreement in existence as of the date of this Offer shall
expire as of the LOC Delivery Date, and (b) the Distribution Agreement
automatically shall terminate if, as of the expiration of the LOC Delivery Date,
Akorn has failed to fulfill the Required Condition.
     9. Information. For the remaining duration of the Distribution Agreement,
Akorn will deliver to MBL by the fifth business day of each month (i) a monthly
cash forecast for the MBL Td Vaccine product to be sold pursuant to the
Distribution Agreement (as amended by this letter agreement); and (ii) monthly
inventory and sales information for the MBL Td Vaccine product. Additionally
Akorn will deliver to MBL quarterly financial results as and when filed with the
SEC.
     10. Documents. Documents necessary to implement, or being delivered in
connection with, this Offer (including a forbearance agreement) (collectively,
the “Documents”), shall conform in all respects to the terms of this Offer, and
shall otherwise be in form and substance mutually reasonably acceptable to Akorn
and MBL, provided. Akorn shall deliver draft Documents to MBL as soon as
practicable and the parties will work together in good faith to execute the
Documents on or before the LOC Delivery Date.
     11. Forbearance. So long as Akorn complies with the terms hereof, the
amended Distribution Agreement, and the Documents, MBL will forebear from
declaring a breach or otherwise acting to terminate the Distribution Agreement,
as amended hereby and in connection herewith.
     12. Binding Effect. All terms material to the parties’ resolution of the
current issues under the Distribution Agreement are contained in this Offer and,
once accepted by Akorn, these terms shall be legally binding and fully
enforceable.
If this Offer meets with your approval, please accept this Offer by signing
below, and then return to me one fully executed copy of this Offer no later than
10:00 p.m., EDT March 27, 2009, after which date this Offer will expire.

            Very truly yours,
Massachusetts Biologic Laboratories of the
University of Massachusetts Medical School
      By:   /s/ Donna M. Ambrosino, M.D.         Name:   Donna M. Ambrosino,
M.D.        Title:   Director     

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
Agreed and Accepted by
     The undersigned hereby agrees to and accepts the Offer, as of March 27,
2009.

            Akorn Inc.
      By:   /s/ John N. Kapoor, P.h.D.         Name:   John N. Kapoor, P.h.D.   
    Title:   Chairman, Duly Authorized     

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

*Confidential Treatment Requested Under
17 C.F.R. §§ 200.80(b)(4) and 240.24b-2
EXHIBIT A
Payment Schedule

                  Payment Date   Amount of Payment   Remaining Balance
Balance Due, March 18, 2009
          $ 10,500,000.00  
April 13, 2009
  $ 1,000,000.00     $ 9,500,000.00  
May 13, 2009
  $ 1,500,000.00     $ 8,000,000.00  
June 13, 2009
  $ 2,000,000.00     $ 6,000,000.00  
July 13, 2009
  $ 1,500,000.00     $ 4,500,000.00  
August 13, 2009
  $ 1,500,000.00     $ 3,000,000.00  
September 13, 2009
  $ 1,500,000.00     $ 1,500,000.00  
June 30, 2010
  $ 1,500,000.00     $ 0.00  

*  
CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed
separately with the Securities and Exchange Commission.