exv10w1



 





Exhibit 10.1




LIMITED LIABILITY COMPANY AGREEMENT

FOR

AKORN-STRIDES, LLC

A DELAWARE LIMITED LIABILITY COMPANY




     THIS LIMITED LIABILITY COMPANY AGREEMENT (“Agreement”) is made as of
September 22, 2004 (“Effective Date”), by and among Akorn, Inc., a Louisiana
corporation (“Akorn”), Strides Arcolab Limited, a company organized under the
laws of India (“Strides”), and each of those Persons who become a Company
Member and/or Manager in accordance with the terms of this Agreement.



RECITAL:




     The Members formed the Company as a joint venture for the purpose of
developing and marketing Grandfathered, Patent Challenging and ANDA Products
for the U.S. hospital and retail markets.



     The Members intend the Company to outsource from Strides manufacturing
facility in India, the development and manufacturing of certain Grandfathered
Products, Patent Challenging Products and ANDA Products under the terms of the
OEM Agreement (defined below).



     The Members further intend Akorn to provide sales, marketing, operation
and distribution services to the Company pursuant to the terms of this
Agreement.



     The Members desire to enter into this Agreement for the Company to
delineate their rights and liabilities as members, to provide for the Company’s
management, and to provide for certain other matters, all as permitted under
the Delaware Limited Liability Company Act.



AGREEMENT:




     NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES, COVENANTS AND
UNDERTAKINGS HEREIN SPECIFIED AND FOR OTHER GOOD AND VALUABLE CONSIDERATION,
THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, WITH THE INTENT
TO BE OBLIGATED LEGALLY AND EQUITABLY, THE PARTIES HERETO AGREE AS FOLLOWS:



ARTICLE I

DEFINITIONS




     Capitalized terms used in this Agreement shall have the meanings specified
below or elsewhere in this Agreement and when not so defined shall have the
meanings specified in Delaware Limited Liability Company Act, 6 Del. C. §
18-101 (such terms are equally applicable to both the singular and plural
derivations of the terms defined):



     1.1 “Act” shall mean the Delaware Limited Liability Company Act, 6 Del. C.
§ 18-101, as the same may be amended from time to time.



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     1.2 “Administrative Committee” shall have the meaning set forth in Section
5.5.



     1.3 “Affiliate” of a Member or Manager shall mean any Person, directly or
indirectly, through one or more intermediaries, controlling, controlled by, or
under common control with a Member or Manager, as applicable. The term
“control,” as used in the immediately preceding sentence, shall mean with
respect to a corporation or limited liability company the right to exercise,
directly or indirectly, more than fifty percent (50%) of the voting rights
attributable to the controlled corporation or limited liability company, and,
with respect to any individual, partnership, trust, other entity or
association, the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of the controlled entity.



     1.4 “Akorn Draw Down Note” shall have the meaning set forth in Section
3.1B(ii)(a).



     1.5 “Agreement” shall mean this Limited Liability Company Agreement, as
originally executed and as amended from time to time.



     1.6 “ANDA” shall have the meaning set forth in the OEM Agreement.



     1.7 “ANDA Materials” shall have the meaning set forth in the OEM Agreement.



     1.8 “ANDA Product” shall have the meaning set forth in the OEM Agreement.



     1.9 “ANDA Schedule” shall have the meaning set forth in the OEM Agreement.



     1.10 “Approved Facility” shall have the meaning set forth in the OEM Agreement.



     1.11 “Assignee” shall mean the owner of an Economic Interest who has not
been admitted as a substitute Member in accordance with Article VIII.



     1.12 “Bankruptcy” shall mean: (a) the filing of an application by a Member
for, or his or her consent to, the appointment of a trustee, receiver, or
custodian of his or her other assets; (b) the entry of an order for relief with
respect to a Member in proceedings under the United States Bankruptcy Code, as
amended or superseded from time to time; (c) the making by a Member of a
general assignment for the benefit of creditors; (d) the entry of an order,
judgment, or decree by any court of competent jurisdiction appointing a
trustee, receiver, or custodian of the assets of a Member unless the
proceedings and the person appointed are dismissed within ninety (90) days; or
(e) the failure by a Member generally to pay his or her debts as the debts
become due within the meaning of Section 303(h)(1) of the United States
Bankruptcy Code, as determined by the Bankruptcy Court, or the admission in
writing of his or her inability to pay his or her debts as they become due.



     1.13 “Budget” shall meant the budget of the Company, which shall be
prepared and approved by the Managers each year pursuant to Section 5.3A.



     1.14 “Capital Account” shall mean with respect to any Member the capital
account which the Company establishes and maintains for such Member pursuant to
Section 3.3A.



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     1.15 “Capital Contribution” shall mean the total amount of cash and fair
market value of property contributed and/or services rendered or to be rendered
to the Company by Members.



     1.16 “Certificate” shall mean the Certificate of Formation for the Company
originally filed with the Secretary of State and as amended from time to time.



     1.17 “Code” shall mean the Internal Revenue Code of 1986, as amended from
time to time, the provisions of succeeding law, and to the extent applicable,
the Regulations.



     1.18
“Company” shall mean Akorn-Strides, LLC, a Delaware limited liability
company.



     1.19 “Company Minimum Gain” shall have the meaning ascribed to the term
“Partnership Minimum Gain” in the Regulations Section 1.704-2(d).



     1.20 “Corporations Code” shall mean the Delaware General Corporation Law,
as amended from time to time, and the provisions of succeeding law.



     1.21 “Dissolution Event” shall have the meaning ascribed to that term in
Section 11.1.



     1.22 “Distributable Cash” shall mean the amount of cash which the Managers
deem available for distribution to the Members, taking into account all debts,
liabilities, and obligations of the Company then due, and working capital and
other amounts which the Managers deem necessary for the Company’s business or
to place into reserves for customary and usual claims with respect to such
business.



     1.23 “Economic Interest” shall mean the right to receive distributions of
the Company’s assets and allocations of income, gain, loss, deduction, credit
and similar items from the Company pursuant to this Agreement and the Act, but
shall not include any other rights of a Member, including, without limitation,
the right to vote or participate in the management of the Company, any right to
information concerning the business and affairs of the Company.



     1.24 “Effective Date” shall have the meaning ascribed to that term in
Section 2.1.



     1.25 “Event of Default” shall mean the Company’s failure to perform any of
its obligations under Sections 3.4 or 11.4A of this Agreement.



     1.26 “FDA” shall mean the U.S. Food and Drug Administration.



     1.27 “Fiscal Year” shall mean the Company’s fiscal year, which shall be
the calendar year.



     1.28 “Forecast” shall have the meaning set forth in the OEM Agreement.



     1.29 “Former Member” shall have the meaning ascribed to it in Section 9.2.



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     1.30
“Former Member’s Interest” shall have the meaning ascribed to it in
Section 9.2.



     1.31
“Grandfathered Product” shall have the meaning set forth in the OEM
Agreement.



     1.32
“Letter of Credit” shall have the meaning set forth in the OEM
Agreement.



     1.33
“Majority Interest” shall mean those Members who hold a majority of
the Percentage Interests which all Members hold.



     1.34
“Manager” shall mean each of Arthur S. Przybyl and Arun Kumar, or any
other persons that succeed any of them as a manager of the Company.



     1.35
“Member” shall mean each Person who (a) is an initial signatory to
this Agreement, has been admitted to the Company as a Member in accordance with
the Certificate or this Agreement or is an Assignee who has become a Member in
accordance with Article VIII, and (b) has not ceased to be a Member in
accordance with Article IX or for any other reason.



     1.36
“Member Nonrecourse Debt” shall have the meaning ascribed to the term
“Partner Nonrecourse Debt” in Regulations Section 1.704-2(b)(4).



     1.37
“Member Nonrecourse Deductions” shall mean items of Company loss,
deduction, or Code Section 705(a)(2)(B) expenditures which are attributable to
Member Nonrecourse Debt.



     1.38
“Net Price” shall have the meaning set forth in the OEM Agreement.



     1.39
“Net Profits” and “Net Losses” shall mean the income, gain, loss and
deductions of the Company in the aggregate or separately stated, as
appropriate, determined in accordance with the method of accounting at the
close of each Fiscal Year on the Company’s information tax return filed for
federal income tax purposes.



     1.40
“Net Sales” shall mean all income resulting from the sale of Products
less an allowance for returns and discounts as determined by the Managers.



     1.41
“Nonrecourse Liability” shall have the meaning set forth in
Regulations Section 1.752-1(a)(2).



     1.42
“OEM Agreement” shall mean the OEM Agreement of even date herewith
between the Company and Strides, a copy of which is attached hereto as Exhibit
D.



     1.43
“Optional Purchase Event” shall have the meaning set forth in Section
9.1.



     1.44
“Patent Challenging Product” shall have the meaning set forth in the
OEM Agreement.



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     1.45
“Percentage Interest” shall mean the percentage of a Member set forth
opposite the name of such Member under the column “Member’s Percentage
Interest” in Exhibit A hereto, as such percentage may be adjusted from time to
time pursuant to the terms of this Agreement.



     1.46
“Permitted Transfer” shall have the meaning ascribed to that term in
Section 8.4.



     1.47
“Person” shall mean an individual, partnership, limited partnership,
limited liability company, corporation, trust, estate, association or any other
entity.



     1.48
“Prime Rate” as of a particular date shall mean the prime rate of
interest as published on that date in the Wall Street Journal, and generally
defined therein as “the base rate on corporate loans posted by at least 75% of
the nation’s 30 largest banks.” If the Wall Street Journal is not published on
a date for which the Prime Rate must be determined, the Prime Rate shall be the
prime rate published in the Wall Street Journal on the nearest-preceding date
on which the Wall Street Journal was published.



     1.49
“Product” shall have the meaning set forth in the OEM Agreement.



     1.50
“Purchase Orders” shall have the meaning set forth in the OEM
Agreement.



     1.51
“Registration Advance” shall have the meaning set forth in the OEM
Agreement.



     1.52
“Registration Threshold” shall have the meaning set forth in the OEM
Agreement.



     1.53
“Regulations” shall, unless the context clearly indicates otherwise,
mean the regulations in force as final or temporary that have been issued by
the U.S. Department of Treasury pursuant to its authority under the Code, and
any successor regulations.



     1.54
“Remaining Members” shall have the meaning ascribed to it in Section
9.2.



     1.55
“Sales and Marketing Agreement” shall mean the Sales and Marketing
Agreement of even date herewith between the Company and Akorn, a copy of which
is attached hereto as Exhibit “E.”



     1.56
“Satisfactory cGMP Inspection” shall have the meaning set forth in
the OEM Agreement.



     1.57
“Secretary of State” shall mean the Delaware Secretary of State.



     1.58
“Strides Capital Contribution Agreements” shall have the meaning set
forth in Section 3.1B(ii)(b).



     1.59
“Tax Matters Partner” (as defined in Code Section 6231) shall be
Akorn or its successor as designated pursuant to Section 10.8.



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     1.60 “Threshold Period” shall have the meaning set forth in the OEM
Agreement.



     1.61 “Territory” shall have the meaning set forth in the Sales and
Marketing Agreement.



     1.62 “Transfer” or “Transferred” shall mean any sale, assignment,
transfer, conveyance, pledge, hypothecation, or other disposition voluntarily
or involuntarily, by operation of law, with or without consideration, or
otherwise (including, without limitation, by way of intestacy, will, gift,
bankruptcy, receivership, levy, execution, charging order or other similar sale
or seizure by legal process) of all or any portion of any Membership Interest.



     Without limiting the generality of the foregoing, the sale or exchange of
at least fifty percent (50%) of the voting stock of a Member, if a Member is a
corporation, or the Transfer of an interest or interests of at least fifty
percent (50%) in the capital or profits of a Member (whether accomplished by
the sale or exchange of interests or by the admission of new partners or
members), if a Member is a partnership or limited liability company, or the
cumulative Transfer of such interests in a Member which effectively equal the
foregoing (including Transfer of interests followed by the incorporation of a
Member and subsequent stock Transfers, or Transfers of stock followed by the
liquidation of a Member and subsequent Transfers of interests) will be deemed
to constitute a Transfer of the Member’s entire Membership Interest.



ARTICLE II

ORGANIZATIONAL MATTERS




     2.1 Formation. The Members have formed a Delaware limited liability company by
filing the Certificate with the Secretary of State and entering into this
Agreement. This Agreement shall be deemed effective as of the Effective Date.
The rights and liabilities of the Members shall be determined pursuant to the
Act and this Agreement. To the extent that the rights or obligations of any
Member are different because of any provision of this Agreement than those
rights or obligations would be in the absence of such provision, this Agreement
shall control to the extent permitted by the Act.



     2.2 Name. The name of the Company is “Akorn-Strides, LLC.” The business of the
Company may be conducted under that name or, upon compliance with applicable
laws, any other name that the Managers deem appropriate or advisable. The
Managers shall file any fictitious name certificates and similar filings, and
any amendments thereto, that the Managers consider appropriate or advisable.
The Company’s name shall be the exclusive property of the Company, and no
Member shall have any rights in the name or any derivation thereof.



     2.3 Term. The Company’s existence commenced on the date of filing the
Certificate with the Secretary of State and shall continue until terminated as
hereinafter provided.



     2.4 Registered Office and Agent. The Company shall continuously maintain a
registered office (“Office”)and registered agent (“Agent”) in the State of
Delaware. The Office shall be that of the Agent. The Agent shall be as stated
in the Certificate or as otherwise determined by the Managers. If the Agent
ceases to act as such for any reason or the Company changes the Office’s
location, the Managers shall designate promptly a replacement Agent and/or
notify the Secretary of State of the new Office location on the form prescribed
by the



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Secretary of State (“Notification”). If the Managers fail to designate
a replacement Agent or notify the Secretary of State of the new Office
location, the Members may, acting together, file the Notification with the
Secretary of State specifying the Agent and/or Office, as the case may be.




     2.5 Principal Place of Business. The Company’s principal place of business
shall be 2500 Millbrook Drive, Buffalo Grove, Illinois 60089-4694, or as the
Managers may determine. The Company may also have such offices, anywhere
within and without the State of Delaware, as the Managers may determine from
time to time, or the business of the Company may require.



     2.6 Member and Manager Information. The name, address, taxpayer identification
number and Percentage Interest of each Member and Manager are set forth on
Exhibit A. A Member may change his or her address in the Company’s books and
records upon notice thereof to the Managers.



     2.7 Purpose and Business of the Company. The purpose of the Company is to
engage in any lawful activity for which a limited liability company may be
organized under the Act. Notwithstanding the foregoing, without the consent of
all of the Members, the Company shall not engage in any business other than the
following:



          A. The business of developing, manufacturing and marketing Grandfathered
Products, Patent Challenging Products and ANDA Products for the U.S. hospital
and retail markets; and



          B. Such other activities directly related to and in furtherance of the
foregoing business as may be necessary, advisable, or appropriate, in the
reasonable opinion of the Managers.



     2.8 Tax Classification. The Members acknowledge that pursuant to Regulation
Section 301.7701-3, the Company shall be classified as a partnership for
federal income tax purposes until the effective date of any election
(“Election”) to change its classification on IRS Form 8832, Entity
Classification Election. The Members agree the Managers shall have the
authority to file and make the Election on behalf of the Company and each
Member at such time as the Managers, acting together, determine such a change
is in the Company’s best interests.



     2.9 No State-Law Partnership. The Company’s classification as a partnership
will apply only for federal (and, as appropriate, state and local) income tax
purposes. This characterization does not create or imply a general
partnership, limited partnership or joint venture among the Members for state
law or any other purpose. Instead, the Members acknowledge the Company’s
status as a limited liability company formed under the Act.



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ARTICLE III

CAPITAL CONTRIBUTIONS




     3.1 Initial Capital Contribution.



          A. Akorn’s Initial Capital Contribution.



          (i) Akorn shall contribute:



                    (a) services in the formation, organization and operation of the Company,



                    (b) One Million Two Hundred Fifty Thousand United States Dollars
($1,250,000) in Capital Contributions within thirty (30) days of execution of
this Agreement, and



                    (c) up to One Million Two Hundred Fifty Thousand United States Dollars
($1,250,000) in Capital Contributions, if and as called by all of the Managers
pursuant to Section 5.3A, upon Strides achieving the Registration Threshold
under the OEM Agreement.



          (ii) Akorn shall make such Capital Contributions in immediately available
funds by wire transfer to the Company within the period required under this
Section 3.1A.



          B. Strides’ Initial Capital Contributions.



          (i) Strides shall contribute:



                    (a) services in the organization and operation of the Company,



                    (b) One Million Two Hundred Fifty Thousand United States Dollars
($1,250,000) in Capital Contributions within thirty (30) days of execution of
this Agreement, and



                    (c) up to One Million Two Hundred Fifty Thousand United States Dollars
($1,250,000) in Capital Contributions, if and as called by all of the Managers
pursuant to Section 5.3A, upon Strides achieving the Registration Threshold
under the OEM Agreement.



          (ii) Strides’ Capital Contributions under Sections 3.1B(i)(b) and (c)
shall be contributed as follows:



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                    (a) At such time as each of Strides’ Capital Contributions is required to
be made pursuant to Sections 3.1B(i)(b) and (c), Akorn shall loan to the
Company an amount equal to the Strides’ Capital Contribution then due, up to an
aggregate of Two Million Five Hundred Thousand United States Dollars
($2,500,000), and the obligation of the Company to repay such advances made by
Akorn shall be evidenced by the promissory note executed by the Company in
favor of Akorn, a copy of which is attached hereto as Exhibit B (the “Akorn
Draw Down Note”); and



                    (b) On each such occasion set forth above in Section 3.1B(i)(b) and (c),
the Company shall then immediately advance to Strides an amount equal to the
funds borrowed from Akorn, by contributing such amount as a Capital
Contribution on Strides’ behalf in compliance with this Section 3.1B, Strides’
obligation to repay such advances made by the Company shall be evidenced by (i)
the contribution agreement in the amount of One Million Two Hundred Fifty
Thousand United States Dollars ($1,250,000) with respect to the advance in
Section 3.1B(i)(b); and (ii) the contribution agreement in an amount of up to
One Million Two Hundred Fifty Thousand United States Dollars ($1,250,000) with
respect to the advance in Section 3.1B(i)(c); each of which shall be executed
in the form attached hereto as Exhibit C by Strides in favor of the Company,
(collectively the “Strides Capital Contribution Agreements”).



          (iii) Immediately upon receipt by the Company of any amount drawn under
the Letter of Credit, such amount shall be applied to amounts due under the
Strides Capital Contribution Agreements.



     3.2 Additional Capital Contributions. No Member shall be required to make any
additional Capital Contributions. To the extent unanimously approved by the
Managers, from time to time, the Members may be permitted to make additional
Capital Contributions if and to the extent they so desire, and if the Managers
determine that such additional Capital Contributions are necessary or
appropriate for the conduct of the Company’s business, including without
limitation, expansion or diversification. In that event, the Members shall
have the opportunity, but not the obligation, to participate in such additional
Capital Contributions on a pro rata basis in accordance with their Percentage
Interests. Each Member shall receive a credit to his or her Capital Account in
the amount of any additional capital which it contributes to the Company.
Immediately following such Capital Contributions, the Percentage Interests
shall be adjusted by the Managers to reflect the new relative proportions of
the Capital Accounts of the Members.



     3.3 Capital Accounts.



          A. Maintenance. The Company shall maintain a separate Capital Account for each
Member. The Capital Account of each Member shall be credited with the Member’s
Initial Capital Contribution, increased by (i) any other cash contributed after
the date hereof by such Member to the Company; (ii) the fair market value, as
determined by the Managers, of any property contributed
after the date hereof by such Member to the Company (net of liabilities that
are secured by such contributed property or that the Company or any other
Member is considered to assume or take subject to under Code Section 752);
(iii) allocations to such Member of Net Profit pursuant to Article VI; and (iv)
other additions allocated to such Member in accordance with the Code; and
decreased by (i) the amount of cash distributed to such Member by the



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Company; (ii) allocations to such Member of Net Loss pursuant to Article VI; (iii) the
fair market value, as determined by the Managers, of property distributed to
such Member by the Company (net of liabilities that are secured by such
distributed property or that such Member is considered to assume or take
subject to under Code Section 752); and (iv) other deductions allocated to such
Member in accordance with the Code.




          B. Compliance with Treasury Regulations. The foregoing provisions and the
other provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Code Section 704(b) and Regulations
Section 1.704-1(b)(2)(iv), and shall be interpreted and applied in a manner
consistent with such regulations.



          C. Assignment. On the Transfer of all or any part of a Member’s Membership
Interest as permitted by this Agreement, the Capital Account of the transferor,
or portion thereof that is attributable to the Transferred interest, shall
carry over to the transferee as prescribed in Regulations Section
1.704-1(b)(2)(iv).



          D. Revaluation. At such times as may be required or permitted by Code Section
704 and any Regulations thereunder, the Capital Accounts shall be revalued and
adjusted to reflect the then fair market value of the Company’s property. The
Capital Accounts shall be maintained in compliance with Regulation Section
1.704-1(b)(2)(iv)(f). All allocations of gain resulting from such revaluation
shall be made consistently with regulation Section 1.704-1(b)(2)(iv)(f) and, to
the extent not inconsistent therewith, provisions of Section 6.1 on the
allocation of Net Profit.



     3.4 Withdrawal and Return of Capital. Except as specifically provided in this
Agreement, no Member shall be entitled to withdraw or to demand the return of
any or all of that Member’s Capital Contribution.



     3.5 No Interest. No Member shall be entitled to receive interest on that
Member’s Capital Contributions or the balance of that Member’s Capital Account
without the Managers’ prior written consent.



     3.6 No Priority Return. Except as otherwise provided in this Agreement, no Member shall have
priority over any other Member regarding the return of a Capital Contribution;
provided, however, that until all amounts due and payable under the Strides
Capital Contribution Agreements and the Akorn Draw Down Note have been paid in
full, any return of a Capital Contribution which Strides is eligible to receive
under this Agreement shall be applied first to the repayment of the Strides
Capital Contribution Agreements. In accordance with the terms of this Section
3.6 and Section 7.2A below, Strides hereby irrevocably authorizes and instructs
the Company to apply any return of a Capital Contribution to which Strides is
eligible to receive under this Agreement to the repayment of the Strides
Capital Contribution Agreements, until paid in full.



     3.7 Member Loans.



          A. Any Member or an Affiliate of a Member may lend money to the Company
with both of the Managers’ prior written consent. The loan shall not be
treated as a Capital Contribution by that Member or entitle the Member to an
increase in that Member’s



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Percentage Interest. Except as otherwise set forth
in Section 3.7C and the Akorn Draw Down Note, the loan amount shall be a debt
due from the Company, repayable out of the Company’s assets, bear interest at
the lower of the Prime Rate or the maximum rate permitted by law, and shall be
on such other terms as the Company and the Member agree. Notwithstanding the
foregoing, no Member shall be required to make any loans to the Company or
guaranty the payment or performance of any Company obligation.




          B. The Members acknowledge that any Member, Manager or Affiliate of a
Member or Manager (each, a “Lender”) who loans money to the Company pursuant to
this Section 3.7 shall have rights (“Rights”), the exercise of which will be in
conflict with the Company’s best interests. In that regard, the Members hereby
authorize, agree and consent to the Lender’s exercise of any of Lender’s Rights
under any promissory note, security agreement or other loan document, even
though the Lender’s exercise of those rights may be detrimental to the Company
or the Company’s business. Further, the Members agree that any Lender’s proper
exercise of the Rights shall not be deemed a breach of that Lender’s fiduciary
duties (if any) to the Company.



          C. The Akorn Draw Down Note shall have priority of repayment over any and
all Lender loans to the Company. Immediately upon each receipt by the Company
of any amount in full or partial payment of the Strides Capital Contribution
Agreements, including amounts received under the Letter of Credit, such amount
shall be paid to Akorn to be applied to amounts due under the Akorn Draw Down
Note, until the Akorn Draw Down Note is paid in full.



ARTICLE IV

MEMBERS




     4.1 Limited Liability. Except as expressly set forth in this Agreement or
required by law, no Member shall be personally liable for any debt, obligation,
or liability of the Company, whether that liability or obligation arises in
contract, tort, or otherwise.



     4.2 Admission of Additional Members. The Managers may admit to the
Company additional Members, from time to time, subject to the following:



          A. All of the Managers and all of the Members must consent to the
admission;



          B. The additional Member shall make a Capital Contribution in such amount
and on such terms as the Managers determine to be appropriate based upon the
needs of the Company, the net value of the Company’s assets, the Company’s
financial condition, and the benefits anticipated to be realized by the
additional Member;



          C. No additional Member shall be admitted if the effect of such admission
would be to terminate the Company within the meaning of Code Section 708(b);
and



          D. The additional Member agrees to be bound by the terms of this
Agreement.



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     Notwithstanding the foregoing, Assignees may only be admitted as
substitute Members in accordance with Article VIII. The Managers shall amend
Exhibit A on the admission of additional Members to set forth the Members’
names, addresses, taxpayer identification numbers, Capital Contributions and
Percentage Interests.



     4.2 Withdrawals or Resignations. No Member may withdraw, resign or retire from
the Company.



     4.3 Termination of Membership Interest. Effective immediately, upon (a) the
Transfer of a Member’s Membership Interest in violation of Article VIII, (b)
the occurrence of an Optional Purchase Event as to such Member, (c) the
withdrawal, resignation or retirement of a Member in violation of Section 4.2,
(d) the default by Strides under the Strides Capital Contribution Agreements,
or (e) the Company becoming eligible to receive any amount under the Letter of
Credit pursuant to the terms of the OEM Agreement, the Membership Interest of a
Member (in the case of subsections (d) and (e) hereof, Strides’ Membership
Interest) shall be terminated by the Managers (provided that, for purposes of
subsection (d) and (e), only the Manager appointed by Akorn, in such Manager’s
sole discretion, shall have the authority to terminate Strides’ Membership
Interest), and thereafter that Member shall be an Assignee only unless such
Membership Interest shall be purchased by the Company and/or the remaining
Members as provided in Article IX. Each Member acknowledges and agrees that
such termination or purchase of a Membership Interest upon the occurrence of
any of the foregoing events is not unreasonable under the circumstances
existing as of the date hereof.



     4.4 Competing Activities. The Members and their directors, shareholders,
partners, members, managers, agents, employees and Affiliates may engage or
invest in, independently or with others, any business activity of any type or
description, including without limitation those that might be the same as
or similar to the Company’s business and that might be in direct or indirect
competition with the Company. Neither the Company nor any Member shall have
any right in or to such other ventures or activities or to the income or
proceeds derived therefrom. The Members shall not be obligated to present any
investment opportunity or prospective economic advantage to the Company, even
if the opportunity is of the character that, if presented to the Company, could
be taken by the Company. The Members shall have the right to hold any
investment opportunity or prospective economic advantage for their own account
or to recommend such opportunity to Persons other than the Company. Each
Member acknowledges that the other Members and their Affiliates own and/or
manage other businesses, including businesses that may compete with the Company
and for the Members’ time. Each Member hereby waives any and all rights and
claims which they may otherwise have against the other Members and their
directors, shareholders, partners, members, managers, agents, employees, and
Affiliates as a result of any of such activities.



     4.5 Transactions With The Company. Subject to any limitations set forth in
this Agreement and with the prior approval of the Managers, a Member or an
Affiliate of a Member may transact business with the Company so long as the
transaction is not expressly prohibited by this Agreement and so long as the
terms and conditions of such transaction, on an overall basis, are fair and
reasonable to the Company and are at least as favorable to the Company as those
terms and conditions that are generally available in similar transactions from
Persons operating at arm’s length and, in the case of services, from Persons
capable of performing similar services.



12









 





Subject to other applicable laws, such
Member has the same rights and obligations with respect thereto as a Person who
is not a Member.




     4.6 Remuneration To Members. Except as otherwise specifically provided in this
Agreement or pursuant to a transaction permitted by Section 4.5, no Member or
an Affiliate of a Member is entitled to remuneration for services rendered or
goods provided to, or on behalf of, the Company.



     4.7 Members Are Not Agents. Pursuant to Section 5.1 and the Certificate, the
management of the Company is vested in the Managers. The Members shall have no
power to participate in the management of the Company except as expressly
authorized by this Agreement or the Certificate and except as expressly
required by the Act. No Member, acting solely in the capacity of a Member, is
an agent of the Company nor does any Member, unless expressly and duly
authorized in writing to do so by a Manager or Managers, have any power or
authority to (a) bind or act on behalf of the Company in any way, (b) pledge
its credit, (c) execute any instrument on its behalf, or (d) render it liable
for any purpose.



     Each Member shall indemnify, defend and hold harmless the Company and the
other Members from and against any and all loss, cost, expense, liability or
damage arising from or relating to any action by such Member in contravention
of this Section 4.7.



     4.8 Voting Rights. Except as expressly provided in this Agreement, the Certificate or required
by law, Members shall have no voting, approval or consent rights, and, to the
extent permitted by applicable law, each Member waives that Member’s right to
vote on any matters other than those set forth in this Section 4.8.



     4.9 Member Meetings. No annual or regular meetings of the Members are
required. However, if such meetings are held, meeting notices and procedures
shall be in accordance with Corporations Code Section 18-302(c) or any
applicable successor statue. The members present at a duly called or held
meeting at which quorum is present may not continue to transact business upon
the loss of a quorum. Any action that may be taken by Members under this
Agreement may be taken by a unanimous written consent executed by all of the
Members having not less than the aggregate Percentage Interests that would be
necessary to take that action at a meeting at which all Members entitled to
vote thereon were present and voted. Written consent shall be governed by
Corporations Code Section 18-302(d), except that notwithstanding anything to
the contrary in Corporations Code Section 18-302(d), action taken by written
consent shall be effective as of the date set forth in the consent.



     4.10 Certificate of Membership Interest.



          A. Certificate. A Membership Interest may be represented by a certificate
of membership. Subject to applicable law, the form and content of the
certificate of membership shall be determined by the Managers.



          B. Cancellation of Certificate. Except as herein provided with respect to
lost, stolen, or destroyed certificates, no new certificates of membership
shall be issued in lieu of previously issued certificates of membership until
former certificates for a like number of



13









 





Membership Interests shall have been
surrendered and cancelled. All certificates of membership surrendered to the
Company for transfer shall be cancelled.




          C. Replacement of Lost, Stolen, or Destroyed Certificate. Any Member
claiming that its certificate of membership is lost, stolen, or destroyed may
make an affidavit or affirmation of that fact and request a new certificate.
Upon the giving of a satisfactory indemnity to the Company as reasonably
required by the Managers, a new certificate may be issued of the same tenor and
representing the same Percentage Interest of membership as was represented by
the certificate alleged to be lost, stolen, or destroyed.



ARTICLE V

MANAGEMENT AND CONTROL OF THE COMPANY




     5.1 Management of the Company by Managers.



          A. Exclusive Management by Managers. The business, property and affairs
of the Company shall be managed exclusively by the Managers, acting together.
Except for situations in which the approval of the Members is expressly
required by the Certificate or this Agreement, the Managers, acting together,
shall have full, complete and exclusive authority, power, and discretion to
manage and control the business, property and affairs of the Company,
to make all decisions regarding those matters and to perform any and all
other acts or activities customary or incident to the management of the
Company’s business, property and affairs.



          B. Meetings of Managers. Meetings of the Managers may be called by any
Manager. All meetings shall be held upon four (4) days notice by mail or
forty-eight (48) hours notice (or upon such shorter notice period if necessary
under the circumstances) delivered personally or by telephone, telegraph,
electronic transmission or facsimile. A notice need not specify the purpose of
any meeting. Notice of a meeting need not be given to any Manager who signs a
waiver of notice or a consent to holding the meeting (which waiver or consent
need not specify the purpose of the meeting) or an approval of the minutes
thereof, whether before or after the meeting, or who attends the meeting
without protesting, prior to its commencement, the lack of notice to such
Manager. All such waivers, consents and approvals shall be filed with the
Company records or made a part of the minutes of the meeting. A majority of
the Managers present, whether or not a quorum is present, may adjourn any
meeting to another time and place. If the meeting is adjourned for more than
twenty-four (24) hours, notice of any adjournment shall be given prior to the
time of the adjourned meeting to the Managers who are not present at the time
of the adjournment. Meetings of the Managers may be held at any place within
or without the State of Delaware which has been designated in the notice of the
meeting or at such place as may be approved by the Managers. Managers may
participate in a meeting through use of conference telephone or similar
communications equipment, so long as all Managers participating in such meeting
can hear one another. Participation in a meeting in such manner constitutes a
presence in person at such meeting. A majority of the authorized number of
Managers constitutes a quorum of the Managers for the transaction of business.
Except to the extent that this Agreement expressly requires the approval of all
Managers, every act or decision done or made by a majority of the Managers
present at a meeting duly held at which a quorum is present is the act of the
Managers. A meeting at which a quorum is initially present may



14









 





continue to
transact business notwithstanding the withdrawal of Managers, if any action
taken is approved by at least a majority of the required quorum for such
meeting.




     Any action required or permitted to be taken by the Managers may be taken
by the Managers without a meeting, if a majority of the Managers individually
or collectively consent in writing to such action, unless the action requires
the unanimous vote of the Managers, in which case all Managers must consent in
writing. Such action by written consent shall have the same force and effect
as a majority vote or unanimous vote, as applicable, of such Managers.



     The provisions of this Section 5.1B govern meetings of the Managers if the
Managers elect, in their discretion, to hold meetings. However, nothing in
this Section 5.1B or in this Agreement is intended to require that meetings of
Managers be held, it being the intent of the Members that meetings of Managers
are not required.



     5.2 Election of Managers.



          A. Number, Term, and Qualifications. The Company shall initially have two
(2) Managers: Arthur S. Przybyl and Arun Kumar. Each Member may appoint one
(1) Manager. Unless he resigns or is removed, each Manager shall hold office
until a successor shall have been appointed by the Member that originally
appointed such Manager. A Manager need
not be a Member, an individual, a resident of the State of Delaware, or a
citizen of the United States.



          B. Resignation. Any Manager may resign at any time by giving written
notice to the Members and remaining Managers without prejudice to the rights,
if any, of the Company under any contract to which the Manager is a party. The
resignation of any Manager shall take effect upon receipt of that notice or at
such later time as shall be specified in the notice. Unless otherwise
specified in the notice, the acceptance of the resignation shall not be
necessary to make it effective. The resignation of a Manager who is also a
Member shall not (i) affect the Manager’s rights as a Member, (ii) constitute a
withdrawal of a Member, or (iii) affect any rights a Manager or a Manager’s
Affiliate may have under any written agreement with the Company.



          C. Removal. Any Manager may be removed at any time, with or without cause,
by the Member which appointed such Manager. Any removal shall be without
prejudice to the rights, if any, of the Manager under any employment contract
and, if the Manager is also a Member, shall not affect the Manager’s rights as
a Member or constitute a withdrawal of a Member. For purpose of this Section,
“cause” shall mean fraud, gross negligence, willful misconduct, embezzlement or
a breach of such Manager’s obligations under this Agreement or any employment
contract with the Company. Notwithstanding the foregoing, the Manager
appointed by Strides shall be automatically removed, with no action required by
the Company or any other Member or other Manager immediately upon the
occurrence of (i) a default by Strides under the Strides Capital Contribution
Agreements, or (ii) the Company becoming eligible to receive any amount under
the Letter of Credit pursuant to the terms of the OEM Agreement.



          D. Vacancies. Any vacancy occurring for any reason in the number of
Managers may be filled by the Member who originally appointed the Manager who’s
resignation or removal created such vacancy.




15










 





     5.3 Powers of Managers.



          A. Powers of Managers. Without limiting the generality of Section 5.1,
but subject to Sections 5.3B and 5.3C and to the express limitations set forth
elsewhere in this Agreement, the Managers shall, when acting together, have all
necessary powers to manage and carry out the purposes, business, property, and
affairs of the Company, including, without limitation, the power to exercise on
behalf and in the name of the Company all of the powers described in
Corporations Code Section 18-106, including, without limitation, the power to:



          (i) Acquire, purchase, renovate, improve, alter, rebuild, demolish,
replace, and own real property and any other property or assets that the
Managers determine is necessary or appropriate or in the interest of the
business of the Company, and to acquire options for the purchase of any such
property;



          (ii) Sell, exchange, lease, or otherwise dispose of the real property and
other property and assets owned by the Company, or any part thereof, or any
interest therein;



          (iii) Borrow money from any party including the Managers and their
Affiliates, issue evidences of indebtedness in connection therewith, refinance,
increase the amount of, modify, amend, or change the terms of, or extend the
time for the payment of any indebtedness or obligation of the Company, and secure such indebtedness by mortgage,
deed of trust, pledge, security interest, or other lien on Company assets;



          (iv) Guarantee the payment of money or the performance of any contract or
obligation of any Person;



          (v) Sue on, defend, or compromise any and all claims or liabilities in
favor of or against the Company; submit any or all such claims or liabilities
to arbitration; and confess a judgment against the Company in connection with
any litigation in which the Company is involved;



          (vi) Retain legal counsel, auditors, and other professionals in connection
with the Company business and to pay therefor such remuneration as the Managers
may determine;



          (vii) Approve the Company’s Budget;



          (viii) Incur debt or liability of more than One Hundred Thousand United
States Dollars ($100,000) as set forth in the Budget and approved by the
Managers pursuant to this Section 5.3A;



          (ix) Pay any funds from the Company’s bank accounts;



          (x) Make calls for Capital Contributions as set forth in Section 3.1A(ii),
provided that the obligation of Strides to make the Capital Contributions
required by Section 3.1B(ii) shall only require the approval of the Manager
appointed by Akorn;



          (xi) Take any of the following actions under the Sales and Marketing
Agreement:



16









 





                    (a) Adopt standard sales order terms and conditions;



                    (b) Develop a marketing plan for the Products in the Territory;



                    (c) Set sales pricing for Products in the Territory; or



                    (d) Adopt sales standards for Products in the Territory.



          (xii) Alter or amend the terms of the Akorn Draw Down Note or Strides
Capital Contribution Agreements; and



          (xiii) Take any of the following actions under the OEM Agreement:



                    (a) Approve the development and/or manufacturing of any Product by Strides
under the OEM Agreement;



                    (b) Approve the ANDA Schedule;



                    (c) Approve any Purchase Orders;



                    (d) Approve any Forecast;



                    (e) Approve any Net Price;



                    (f) Approve payment of any Registration Advance;



                    (g) Accept Products for purposes of Sections 5.2 of the OEM Agreement; or



                    (h) Approve an extension of the Threshold Period.



     Notwithstanding any other provisions of this Agreement, any action of any
Manager under this Section 5.3A shall require the prior written approval of all
Managers.



          B. Enforcement of Strides Capital Contribution Agreements and Letter of
Credit. Notwithstanding any other provisions of this Agreement, the Manager
appointed by Akorn shall have the sole and exclusive power and authority,
acting alone, to manage and carry out the purposes, business, property, and
affairs of the Company with respect to (i) the Company’s rights and interests
in and under the Strides Capital Contribution Agreements and the Letter of
Credit, including any enforcement, modification, waiver, compromise, transfer
and other dealings of any kind with respect thereto, and (ii) all matters
incident thereto, including without limitation the retention of counsel, the
incurring and payment of costs (including attorneys’ fees), the giving of
notices, the making of demands and draws, the commencement and prosecution of
actions, and the collection, application and disposition of funds. No other
Manager shall have power or authority in connection therewith.



          C. Limitations on Power of Managers. The Managers shall not have
authority hereunder to cause the Company to engage in the following
transactions without first obtaining the unanimous vote or written consent of
all of the Members:



17









 





          (i) The sale, exchange or other disposition of all, or substantially all,
of the Company’s assets occurring as part of a single transaction or plan, or
in multiple transactions over a twelve (12) month period, except in the orderly
liquidation and winding up of the business of the Company upon its duly
authorized dissolution, shall require the unanimous vote or written consent of
Members;



          (ii) The conversion of the Company into, or the merger of the Company
with, another limited liability company or limited partnership shall require
the unanimous vote or written consent of Members;



          (iii) The merger of the Company with, or conversion into, a corporation or
a general partnership or other Person shall require the unanimous vote or
written consent of all Members;



          (iv) The establishment of different classes of Members;



          (v) An alteration of the primary purpose or business of the Company as set
forth in Section 2.7;



          (vi) Without limiting subsection (vi), the lending of money by the Company
to any Manager or Member;



          (vii) Any act which would make it impossible to carry on the ordinary
business of the Company.



          (viii) The filing of a bankruptcy petition on behalf of the Company; and



          (ix) Any other transaction described in this Agreement as requiring the
vote, consent, or approval of the Members.



     5.4 Devotion of Time.



          The Managers are not obligated to devote all of their time or business
efforts to the affairs of the Company. The Managers shall devote whatever
time, effort, and skill as they deem appropriate for the operation of the
Company.



     5.5 Appointment of Committees. The Managers shall have the authority to
appoint one or more committees as follows:



          A. Administrative Committee. The Managers may appoint an Administrative
Committee to assist the Managers in handling certain administrative matters of
the Company, including without limitation compiling and reporting monthly
accounts and financial statements; provided, however, that such committee shall
(i) only perform such duties as may be prescribed in writing by all of the
Managers; (ii) report all finished product to the Managers for final approval
prior to any distribution to the Members thereof; and (iii) not have, nor shall
it be delegated, any of the power or authority of the Managers.



18









 





          B. Other Committees. The Managers may also, from time to time, appoint such
committees to assist in the management and affairs of the Company as may be
permitted by law. Such other committees appointed by the Managers shall
consist of a number of members, and shall have such powers and perform such
duties, as may be prescribed in writing by all of the Managers; but in no event
shall any such committee have, nor shall it be delegated, any of the power or
authority of the Managers.



          C. Term, Number and Members. Committees established by the Managers under this
Section 5.5 shall have a duration and number of members as shall be agreed upon
in writing by the Managers prior to formation. Members of such committees
shall be appointed jointly by the Managers.



     5.6 Transactions between the Company and the Managers. The Managers shall have
the authority to appoint one or more committees as follows:



          Notwithstanding that it may constitute a conflict of interest, the
Managers may, and may cause their Affiliates to, engage in any transaction
(including, without limitation, the purchase, sale, lease, or exchange of any
property or the rendering of any service, or the establishment of any salary,
other compensation, or other terms of employment with the Company so long as
such transaction is not expressly prohibited by this Agreement and so long as
the terms and conditions of such transaction, on an overall basis, are fair and
reasonable to the Company and are at least as favorable to the Company as those
terms and conditions that are generally available in similar transactions from
Persons operating at arm’s length and, in the case of services, from Persons
capable of performing similar services.



     5.7 Payments to Managers. Except as specified in this Agreement, no Manager or
Affiliate of a Manager is entitled to remuneration for services rendered or
goods provided to the Company.



          A. Services Performed by Managers or Affiliates. The Company shall pay
the Managers, Affiliates of the Managers, or members of the Administrative
Committee (or other committee appointed by the Managers) for services rendered
or goods provided to the Company and approved by the Managers.



          B. Expenses. The Company shall reimburse the Managers and their
Affiliates for the actual cost of materials used for or by the Company and
approved by all Managers in writing. The Company shall also pay or reimburse
the Managers or their Affiliates for organizational expenses (including,
without limitation, legal and accounting fees and costs) incurred to form the
Company and approved by all Managers in writing and prepare and file the
Certificate and this Agreement. Except as otherwise provided herein, the
Managers and their Affiliates shall not be reimbursed by the Company for the
following expenses: (i) salaries, compensation or fringe benefits of directors
or employees of the Managers or their Affiliates, and (ii) overhead expenses of
the Managers or their Affiliates, including, without limitation, rent and
general office expenses.



19









 





     5.8 Fiduciary Duties. The only fiduciary duties a Manager owes to the Company
and the Members are the duty of loyalty and the duty of care set forth in
subsections (i) and (ii) below:



          (i) A Manager’s duty of loyalty to the Company and the Members is limited
to the following:



                    (a) To account to the Company and hold as trustee for the Company any
property, profit, or benefit derived by the Manager in the conduct or winding
up of the Company’s business or derived from any use by the Manager of Company
property, including the appropriation of a Company opportunity, without the
consent of the Members; and



                    (b) To refrain from dealing with the Company in the conduct or winding up
of the Company business as or on behalf of a party having an interest adverse
to the Company without the consent of the Members.



          (ii) A Manager’s duty of care to the Company and the Members in the
conduct and winding up of the Company’s business is limited to refraining from
engaging in grossly negligent or reckless conduct, intentional misconduct, or a
knowing violation of law by the Manager.



     5.9 Limitation of Liability.



          A. Liability of Manager Limited to Manager’s Assets. Under no
circumstances will any director, shareholder, member, manager, partner,
employee, agent or Affiliate of any Manager have any personal responsibility
for any liability or obligation of the Manager (whether on a theory of alter
ego, piercing the corporate veil, or otherwise).



          B. Limited For Company Obligations. No Person who is a Manager shall be
personally liable under any judgment of a court, or in any other manner, for
any debt, obligation, or liability of the Company, whether that liability or
obligation arises in contract, tort, or otherwise, solely by reason of being a
Manager.



ARTICLE VI

ALLOCATIONS OF NET PROFITS AND NET LOSSES




     6.1 Allocations of Net Profit and Net Loss.



          A. Net Loss. Net Loss shall be allocated to the Members in proportion to
their Percentage Interests.



          B. Net Profit. Net Profit shall be allocated to the Members in proportion
to their Percentage Interests.



          C. Reallocations. Notwithstanding anything to the contrary in Section
6.1A, Net Loss allocations to a Member shall be made only to the extent that
such loss allocations will not create a deficit Capital Account balance for
that Member in excess of an amount, if any, equal to such Member’s share of
Company Minimum Gain. Any Net Loss not allocated to a



20









 







Member because of the
foregoing provision shall be allocated to the other Members (to the extent the
other Members are not limited in respect of the allocation of losses under this
Section 6.1C). Any loss reallocated under this Section 6.1A shall be taken
into account in computing subsequent allocations of income and losses pursuant
to this Article VI, so that the net amount of any item so allocated and the
income and losses allocated to each Member pursuant to this Article VI, to the
extent possible, shall be equal to the net amount that would have been
allocated to each such Member pursuant to this Article VI if no reallocation of
losses had occurred under this Section 6.1C.



     6.2 Special Allocations. Notwithstanding Section 6.1:



          A. Minimum Gain Chargeback. If there is a net decrease in Company Minimum
Gain during any Fiscal Year, each Member shall be specially allocated items of
Company income and gain for such Fiscal Year (and, if necessary, in subsequent
fiscal years) in an amount equal to the portion of such Member’s share of the
net decrease in Company Minimum Gain that is allocable to the disposition of
Company property subject to a Nonrecourse Liability, which share of such net
decrease shall be determined in accordance with Regulations Section
1.704-2(g)(2). Allocations pursuant to this Section 6.2A shall be made in
proportion to the amounts required to be allocated to each Member under this
Section 6.2A. The items to be so allocated shall be determined in accordance
with Regulations Section 1.704-2(f). This Section 6.2A is intended to comply
with the minimum gain chargeback requirement contained in Regulations Section
1.704-2(f) and shall be interpreted consistently therewith.



          B. Chargeback of Minimum Gain Attributable to Member Nonrecourse Debt. If
there is a net decrease in Company Minimum Gain attributable to a Member
Nonrecourse Debt, during any Fiscal Year, each member who has a share of the
Company Minimum Gain attributable to such Member Nonrecourse Debt (which share
shall be determined in accordance with Regulations Section 1.704-2(i)(5)) shall
be specially allocated items of Company income and gain for such Fiscal Year
(and, if necessary, in subsequent Fiscal Years) in an amount equal to that
portion of such Member’s share of the net decrease in Company Minimum Gain
attributable to such Member Nonrecourse Debt that is allocable to the
disposition of Company property subject to such Member Nonrecourse Debt (which
share of such net decrease shall be determined in accordance with Regulations
Section 1.704-2(i)(5)). Allocations pursuant to this Section 6.2B shall be
made in proportion to the amounts required to be allocated to each Member under
this Section 6.2B. The items to be so allocated shall be determined in
accordance with Regulations Section 1.704-2(i)(4). This Section 6.2B is
intended to comply with the minimum gain chargeback requirement contained in
Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.



          C. Nonrecourse Deductions. Any nonrecourse deductions (as defined in
Regulations Section 1.704-2(b)(1)) for any Fiscal Year or other period shall be
specially allocated to the Members in proportion to their Percentage Interests.



          D. Member Nonrecourse Deductions. Those items of Company loss, deduction,
or Code Section 705(a)(2)(B) expenditures which are attributable to Member
Nonrecourse Debt for any Fiscal Year or other period shall be specially
allocated to the Member



21









 







who bears the economic risk of loss with respect to the
Member Nonrecourse Debt to which such items are attributable in accordance with
Regulations Section 1.704-2(i).



          E. Qualified Income Offset. If a Member unexpectedly receives any
adjustments, allocations, or distributions described in Regulations Section
1.704- 1(b)(2)(ii)(d)(4), (5) or (6), or any other event creates a deficit
balance in such Member’s Capital Account in excess of such Member’s share of
Company Minimum Gain, items of Company income and gain shall be specially
allocated to such Member in an amount and manner sufficient to eliminate such
excess deficit balance as quickly as possible. Any special allocations of
items of income and gain pursuant to this Section 6.2E shall be taken into
account in computing subsequent allocations of income and gain pursuant to this
Article VI so that the net amount of any item so allocated and the income,
gain, and losses allocated to each Member pursuant to this Article VI to the extent possible, shall be equal to the net amount that
would have been allocated to each such Member pursuant to the provisions of
this Section 6.2E if such unexpected adjustments, allocations, or distributions
had not occurred.



     6.3 Section 754 Adjustments. Regulations Section 1.704-1(b)(2)(iv)(m) may
require the Company to adjust the Members’ Capital Accounts if the Company
adjusts the tax bases of its assets pursuant to Code Sections 734(b) or 743(b)
following an election pursuant to Code Section 754. Any such adjustment shall
be treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis). Such gain or loss
shall be specially allocated among the Members in a manner consistent with the
manner in which their Capital Accounts are required to be adjusted. Such gain
or loss shall also be included in any calculation of the aggregate Net Profit
or Net Loss allocated to a Member for the purpose of determining the amount of
any subsequent allocation that Member is to receive pursuant to this Agreement.



     6.4 Member Services; Interest Payments. Notwithstanding any other provision of
this Agreement, if a final determination, assessment, or adjudication is made
or conceded to on behalf of the Company that any amount paid to a Member or an
Affiliate of a Member for services authorized to be rendered by such Person, or
interest authorized to be paid to such Person, under this Agreement is not
deductible for income tax purposes during any Fiscal Year of the Company, the
Company shall specially allocate items of income and gain, for that Fiscal Year
or subsequent Fiscal Years as necessary, to the Member in the amount of the
disallowed payment. Notwithstanding any other provision of this Agreement,
such items of income and gain shall not be included in any calculation of the
aggregate amount of Net Profit and Net Loss allocated to such Member.



     6.5 Curative Allocations. The allocations set forth in this Agreement are
intended to comply with certain requirements of Regulation Section 1.704-1(b).
Because it is not possible to foresee every possible future event during the
term of the Company, the Allocations might not be consistent with the manner in
which the Members intend to share Company distributions in all situations.
Accordingly, the Managers may allocate income, gain, loss and deductions among
the Members in a manner to prevent the allocations from distorting the manner
in which Company distributions are intended to be shared among the Members.
The Managers shall have the discretion to accomplish this result in any
reasonable manner.



22









 





     6.6 Other Allocation Rules.



          A. Unless otherwise herein expressly provided to the contrary, all
allocations to the Members pursuant to this Article VI shall be divided among
the Members in proportion to their respective Percentage Interests.



          B. For purposes of determining Net Profit, Net Loss, or any other items
allocable to any period, Net Profit, Net Loss, and any such other items shall
be determined on a daily, monthly, or other basis, as determined by the Tax Matters Partner
using any permissible method under Section 706 of the Code and the Treasury
Regulations thereunder.



          C. Solely for purposes of determining a Member’s proportionate share of
the “excess nonrecourse liabilities” of the Company within the meaning of
Section 1.752-3(a)(3) of the Regulations, the Members’ interests in Net Profit
shall be in accordance with their respective Percentage Interests.



          D. Notwithstanding any other provision in this Article VI, in accordance
with Code Section 704(c) and the Regulations promulgated thereunder, income,
gain, loss, and deduction with respect to any property contributed to the
capital of the Company shall, solely for tax purposes, be allocated among the
Members so as to take account of any variation between the adjusted basis of
such property to the Company for federal income tax purposes and its fair
market value on the date of contribution. Allocations pursuant to this Section
6.6 are solely for purposes of federal, state and local taxes. As such, they
shall not affect or in any way be taken into account in computing a Member’s
Capital Account or share of profits, losses, or other items of distributions
pursuant to any provision of this Agreement.



     6.7 Allocation of Net Profits And Losses And Distributions in Respect of a
Transferred Interest. If any Economic Interest is transferred, or is increased
or decreased by reason of the admission of a new Member or otherwise, during
any Fiscal Year of the Company, Net Profit or Net Loss for such Fiscal Year
shall be assigned pro rata to each day in the particular period of such Fiscal
Year to which such item is attributable (i.e., the day on or during which it is
accrued or otherwise incurred) and the amount of each such item so assigned to
any such day shall be allocated to the Member or Assignee based upon his or her
respective Economic Interest at the close of such day.



     However, for the purpose of accounting convenience and simplicity, the
Company shall treat a transfer of, or an increase or decrease in, an Economic
Interest which occurs at any time during a semi-monthly period (commencing with
the semi-monthly period including the date hereof) as having been consummated
on the last day of such semi-monthly period, regardless of when during such
semi-monthly period such transfer, increase, or decrease actually occurs (i.e.,
sales and dispositions made during the first fifteen (15) days of any month
will be deemed to have been made on the 15th day of the month).



     Notwithstanding any provision above to the contrary, gain or loss of the
Company realized in connection with a sale or other disposition of any of the
assets of the Company shall be allocated solely to the parties owning Economic
Interests as of the date such sale or other disposition occurs.



23









 





     6.8 Obligations Of Members To Report Allocations. The Members are aware of the
income tax consequences of the allocations made by this Article VI and hereby
agree to be bound by the provisions of this Article VI in reporting their
shares of Company income and loss for income tax purposes.



ARTICLE VII

INTERIM DISTRIBUTIONS




     7.1 Minimum Distribution To Pay Tax Liabilities. The Company shall distribute
to each Member an amount of cash equal to 40.4% of the net profit allocated to
that Member with respect to each tax year of the Company. The foregoing
percentage is based on the current highest marginal income tax rates under
Federal and Illinois law, after taking into account the deductibility of
Illinois income taxes from Federal taxable income. Such percentage shall be
readjusted to account for any change in the tax laws that would affect such
percentage.



     7.2 Discretionary Distributions. Subject to applicable law and any limitations
contained elsewhere in this Agreement, the Managers may elect from time to time
to distribute Distributable Cash to the Members, which distributions shall be
made as follows:



          A. First, in an amount equal to any and all unreturned Capital
Contributions of each Member, less any distributions made to such Member
(provided, however, that until all amounts due and payable under the Strides
Capital Contribution Agreements and the Akorn Draw Down Note have been paid in
full, any return of a Capital Contribution which Strides is eligible to receive
under this Agreement shall be applied first to the repayment of the Strides
Capital Contribution Agreements); and



          B. Second, in proportion to the Members’ Percentage Interests.



     All such distributions shall be made only to the Persons who, according to
the books and records of the Company, are the holders of record of the Economic
Interests on the actual date of distribution. Neither the Company nor any
Manager shall incur any liability for making distributions in accordance with
this Section 7.2. No distributions shall be made without the prior written
consent of all Managers.



     7.3 Form of Distribution. A Member, regardless of the nature of the Member’s
Capital Contribution, has no right to demand and receive any distribution from
the Company in any form other than money. Except as provided in Section 11.4,
no Member may be compelled to accept from the Company (a) a distribution of any
asset in kind in lieu of a proportionate distribution of money being made to
other Members, or (b) a distribution of any asset in kind.



     7.4 Restriction on Distribution.



          A. No distribution shall be made if, after giving effect to the
distribution:



          (i) The Company would not be able to pay its debts as they become due in
the usual course of business; or



24









 





          (ii) The Company’s total assets would be less than the sum of its total
liabilities plus, unless this Agreement provides otherwise, the amount that
would be needed, if the Company were to be dissolved at the time of the
distribution, to satisfy the preferential rights of other Members, if any, upon
dissolution that are superior to the rights of the Member receiving the
distribution.



          B. The Managers may base a determination that a distribution is not
prohibited on any of the following:



          (i) Financial statements prepared on the basis of accounting practices and
principles that are reasonable in the circumstances;



          (ii) A fair valuation; or



          (iii) Any other method that is reasonable in the circumstances.



          C. Notwithstanding any other provision of this Agreement, including
Sections 7.4A and 7.4B, no distribution shall be made until after the second
anniversary of this Agreement, unless otherwise agreed to by all of the
Managers in writing.



     7.5 Return of Distributions. Members and Assignees who receive distributions
made in violation of the Act or this Agreement shall return such distributions
to the Company. Except for those distributions made in violation of the Act or
this Agreement, no Member or Assignee shall be obligated to return any
distribution to the Company or pay the amount of any distribution for the
account of the Company or to any creditor of the Company. The amount of any
distribution returned to the Company by a Member or Assignee or paid by a
Member or Assignee for the account of the Company or to a creditor of the
Company shall be added to the account or accounts from which it was subtracted
when it was distributed to the Member or Assignee.



     7.6 Tax Withholding. If any federal, foreign, state or local jurisdiction
requires the Company to withhold taxes or other amounts with respect to any
Member’s allocable share of Net Profits, taxable income or any portion thereof,
or with respect to distributions, the Company shall withhold from distributions
or other amounts then due to such Member (or shall pay to the relevant taxing
authority with respect to amounts allocable to such Member) an amount necessary
to satisfy the withholding responsibility. In such a case, the Member for whom
the Company has paid the withholding tax shall be deemed to have received the
withheld distribution or other amount so paid, and to have paid the withholding
tax directly.



     If it is anticipated that at the due date of the Company’s withholding
obligation the Member’s share of cash distributions or other amounts due is
less than the amount of the withholding obligation, the Member to which the
withholding obligation applies shall have the option to pay to the Company the
amount of such shortfall. In the event a Member fails to make such payment and
the Company nevertheless pays the full amount to be withheld, the amount paid
by the Company shall be deemed a nonrecourse loan from the Company to such
Member bearing interest at the lower of the Prime Rate or the maximum rate
permitted by law, and the Company shall apply all distributions or payments
that would otherwise be made to such



25









 




Member toward payment of the loan and
interest, which payments or distributions shall be applied first to interest
and then to principal until the loan is repaid in full.




     Each Member agrees to cooperate fully with the Company’s efforts to comply
with the Company’s tax withholding and information reporting obligations and
agrees to provide the Company with such information as the Company may
reasonably request from time to time in connection with such obligations.



ARTICLE VIII

TRANSFER OF INTERESTS




     8.1 Restrictions on Transfer. No Member shall Transfer all or any part of that
Member’s Membership Interest except (i) with the prior written consent of the
Managers and all Members, which consent may be given or withheld, conditioned
or delayed (as allowed by this Agreements or the Act), as the Managers and the
Members may determine in their sole and absolute discretion, and (ii) to a
successor entity resulting from either a (x) merger of such Member with another
entity or (y) the closing of a sale of all of the Member’s assets or shares of
stock; provided, however, that any attempt by a Member to transfer it’s
Membership Interest under subsections (ii)(x) and (y) of this Section 8.1 shall
be ineffective unless and until any and all obligations of such Member as of
the date of the proposed transfer under this Agreement and any agreement
contemplated hereby shall have been met in full, including any obligation of
repayment by Strides under the Strides Capital Contribution Agreement(s).
Transfers in violation of this Article VIII shall be effective only to the
extent set forth in Section 8.7. After the consummation of any Transfer of any
part of a Membership Interest, the Membership Interest so Transferred shall
continue to be subject to the terms and provisions of this Agreement and any
further Transfers shall be required to comply with all the terms and provisions
of this Agreement.



     8.2 Further Restrictions on Transfer of Interests. In addition to other
restrictions found in this Agreement, no Member shall Transfer all or any part
of that Member’s Membership Interest: (i) without compliance with applicable
securities laws, (ii) if the Transfer would cause the Company’s tax termination
within the meaning of Code Section 708(b)(1)(B), or (iii) if the Transfer would
cause the Company to be treated as a corporation pursuant to Code Section 7704
or Regulations Section 1.7704-1.



     8.3 Substitution of Members. An Assignee of a Membership Interest shall have the right to become a
substitute Member only if (i) the requirements of Sections 8.1 and 8.2 are met,
(ii) the Managers have consented to such substitution in their sole and
absolute discretion, (iii) the Assignee executes an instrument satisfactory to
the Managers accepting and adopting the terms and provisions of this Agreement,
and (iii) the Assignee pays any reasonable expenses in connection with such
Assignee’s admission as a new Member. The admission of an Assignee as a
substitute Member shall not result in the release of the Member who assigned
the Membership Interest from any liability that such Member may have to the
Company.



     8.4 Permitted Transfers. Subject to compliance with Section 8.2, a Member may
Transfer that Member’s Membership Interest to any Affiliate of the Member so
long as that Member remains in voting control of the Affiliate, and at such
time as the Member is no longer



26









 







in voting control of such Affiliate, a
“Transfer” shall be deemed to have occurred (each, a “Permitted Transfer”).



     8.5 Effective Date of Transfers. Any Transfer of all or any portion of an
Economic Interest which complies with this Article VIII shall be effective as
of the date provided in Section 6.7 following the date upon which the
requirements of Sections 8.1, 8.2 and 8.3 (collectively, “Transfer
Requirements”) have been met. The Company shall provide the Members with
written notice of such Transfer as promptly as possible after the Transfer
Requirements have been met. Any transferee of a Membership Interest shall take
subject to the restrictions on Transfer imposed by this Agreement.



     8.6 Rights of Legal Representatives. If a Member is a corporation, trust, or
other entity and is dissolved or terminated, the powers of that Member may be
exercised by its legal representative or successor.



     8.7 No Effect to Transfers in Violation of Agreement. Upon any Transfer of a
Membership Interest in violation of this Article VIII, the transferee shall
have no right to vote or participate in the management of the business,
property and affairs of the Company or to exercise any rights of a Member.
Such transferee shall only be entitled to become an Assignee and thereafter
shall only receive the share of one or more of the Company’s Net Profits, Net
Losses and distributions of the Company’s assets to which the transferor of
such Economic Interest would otherwise be entitled. Notwithstanding the
immediately preceding sentences, if, in the determination of the Company’s
legal counsel, a Transfer in violation of this Article VIII would cause the
Company to (a) be treated as a corporation pursuant to Code Section 7704 or
Regulations Section 1.7704-1, or (b) be terminated for tax purposes under IRC
Section 708(b)(1)(B), the Transfer shall be null and void and the purported
transferee shall not become either a Member or an Assignee.



     Except as otherwise provided in Section 8.4, on and contemporaneously with
any Transfer of a Member’s Economic Interest which does not at the same time
Transfer the balance of the rights associated with the Membership Interest
Transferred by the Member (including, without limitation, the rights of the Member to vote or participate in the
management of the business, property and affairs of the Company), the Company
shall purchase from the Member, and the Member shall sell to Company for a
purchase price of One Hundred United States Dollars ($100), all remaining
rights and interests retained by the Member (including voting and inspection
rights) that immediately before the Transfer were associated with the
Transferred Economic Interest. Such purchase and sale shall not, however,
result in the release of the Member from any liability to the Company as a
Member.



     Each Member acknowledges and agrees that the right of the Company to
purchase such remaining rights and interests from a Member who Transfers a
Membership Interest in violation of this Article VIII is not unreasonable under
the circumstances existing as of the date hereof.



27









 





ARTICLE IX

OPTIONAL PURCHASE EVENTS AND

TERMINATION OF MEMBERSHIP INTEREST




     9.1 Optional Purchase Event Defined. As used in this Article IX, “Optional
Purchase Event” means, with respect to any Member, the occurrence of any of the
following events:



          A. The withdrawal, resignation, Bankruptcy or dissolution of a Member;



          B. The occurrence of any other event that is, or that would cause, a
Transfer in contravention of this Agreement; or



          C. The filing by a Member of an action seeking a decree of judicial
dissolution pursuant to Code Section 18-802.



     9.2 Optional Purchase Event. Upon the occurrence of an Optional Purchase Event
that is not a Permitted Transfer, the Company and/or the remaining members
(“Remaining Members”) shall have the option to purchase, and if such option is
exercised, the Member whose actions or conduct resulted in the Optional
Purchase Event (“Former Member”) or such Former Member’s legal representative
shall sell, the Former Member’s Membership Interest (“Former Member’s
Interest”) as provided in this Article IX. Each Former Member agrees to give
prompt notice of the Optional Purchase Event to the Managers.



     9.3 Purchase Price. The purchase price for the Former Member’s Interest shall
be the fair market value of the Former Member’s Interest as determined by an
independent appraiser jointly selected by the Former Member (or the Former
Member’s legal representative) and the Manager.



     If the Former Member (or the Former Member’s legal representative) and the
Managers are unable to agree on the selection of an appraiser within thirty
(30) days after the Optional Purchase Event, each shall select an independent
appraiser within twenty (20) days after expiration of the thirty (30) day period. The two (2) appraisers so
selected shall each independently appraise the Former Members’ Interest and, as
long as the difference in the two (2) appraisals does not exceed five (5)
percent of the lower of the two (2) appraisals, the fair market value shall be
conclusively deemed to equal the average of the two (2) appraisals. The
determination of such appraisers shall be binding on the parties. If either
party fails to select an independent appraiser within the time required by this
Section 9.3, the fair market value of the Former Member’s Interest shall be
conclusively deemed to equal the appraisal of the independent appraiser timely
selected by the other.



     If the difference between the two (2) appraisals referred to above exceeds
five (5) percent of the lower of the two (2) appraisals, the two (2) appraisers
selected shall select a third (3rd) appraiser who shall also independently
appraise the Former Member’s Interest. In such case the fair market value of
the Former Member’s Interest shall be the average of the two closest
appraisals. The determination of such appraisers shall be binding on the
parties. The Company and the Former Member shall each pay one-half (1/2) of
the cost of the third (3rd) appraisal.





28









 





     In determining the fair market value, the appraisers appointed under this
Agreement shall consider all opinions and relevant evidence submitted to them
by the parties, or otherwise obtained by them, and shall set forth their
determination in writing together with their opinions and the considerations on
which the opinions are based, with a signed counterpart to be delivered to each
party, within sixty (60) days after commencing the appraisal.


     Notwithstanding the foregoing, if the Optional Purchase Event results from
a breach of this Agreement by the Former Member, the purchase price shall be
reduced by an amount equal to the damages suffered by the Company or the
Remaining Members as a result of such breach.



     9.4 Notice of Intent to Purchase. Within fifteen (15) days after the purchase
price of the Former Member’s Interest is determined in accordance with Section
9.3, the Manager shall notify each Remaining Member of such price. Within
thirty (30) days after the Managers have notified the Remaining Members as to
the purchase price of the Former Member’s Interest determined in accordance
with Section 9.3, each Remaining Member shall notify the Managers in writing of
his or her desire to purchase a portion of the Former Member’s Interest. The
failure of any Remaining Member to submit a notice within the applicable period
shall constitute an election on the part of the Member not to purchase any of
the Former Member’s Interest. Each Remaining Member so electing to purchase
shall be entitled to purchase a portion of the Former Member’s Interest in the
same proportion that the Percentage Interest of the Remaining Member bears to
the aggregate of the Percentage Interests of all of the Remaining Members
electing to purchase the Former Member’s Interest.



     9.5 Closing of Purchase of Former Member’s Interest. Unless court approval is
required, the closing (“Closing”) for the sale of a Former Member’s Interest
pursuant to this Article IX shall be held at 10:00 a.m. at the principal office
of Company no later than sixty (60) days after the determination of the
purchase price, except that if the Closing date falls on a Saturday, Sunday, or
Illinois legal holiday, then the Closing shall be held on the next succeeding business day. If court approval is required, (i) the
Closing of the sale of a Former Member’s Interest shall occur not later that
five (5) business days after entry of the order approving such sale, (ii) the
Former Member or such Former Member’s legal representative shall file the
application seeking court approval within thirty (30) days following the
determination of the purchase price, and (iii) the parties to the court
proceeding shall make every effort to obtain the court’s approval in an
expeditious manner. At the Closing, the Former Member or such Former Member’s
legal representative shall deliver to the Company and/or the Remaining Members
an instrument of Transfer (containing warranties of title and no encumbrances)
conveying the Former Member’s Interest. The Former Member or such Former
Member’s legal representative, the Company and the Remaining Members shall do
all things and execute and deliver all papers as may be necessary to consummate
fully such sale and purchase in accordance with the terms and provisions of
this Agreement.



     9.6 Purchase Terms Varied by Agreement. Nothing contained herein is intended
to prohibit Members from agreeing upon other terms and conditions for the
purchase by the Company or any Member of the Membership Interest of any Member
in the Company desiring to retire, withdraw or resign, in whole or in part, as
a Member.



29









 





ARTICLE X

ACCOUNTING, RECORDS AND REPORTS




     10.1 Books and Records. The accounting records of the Company shall be kept,
and the financial position and the results of its operations recorded, in
accordance with the accounting methods followed for federal income tax
purposes. The books and records of the Company shall reflect all the Company
transactions and shall be appropriate and adequate for the Company’s business.
The Company shall maintain at its principal office in Illinois all of the
following:



          A. A current list of the full name and last known business or residence
address of each Member and Assignee set forth in alphabetical order, together
with the Capital Contributions, Capital Account and Percentage Interest of each
Member and Assignee;



          B. A current list of the full name and business or residence address of
each Manager;



          C. A copy of the Certificate and any and all amendments thereto together
with executed copies of any powers of attorney pursuant to which the
Certificate or any amendments thereto have been executed;



          D. Copies of the Company’s federal, state, and local income tax or
information returns and reports, if any, for the six (6) most recent taxable
years;



          E. A copy of this Agreement and any and all amendments thereto together
with executed copies of any powers of attorney pursuant to which this Agreement
or any amendments thereto have been executed;



          F. Copies of the financial statements of the Company, if any, for the six
(6) most recent Fiscal Years; and



          G. The Company’s books and records as they relate to the internal affairs
of the Company for at least the current and past four (4) Fiscal Years.



     10.2 Delivery to Members and Inspection.



          A. Upon the request of any Member or Assignee for purposes reasonably
related to the interest of that Person as a Member or Assignee, the Managers
shall promptly deliver to the requesting Member or Assignee, at the expense of
the Company, a copy of the information required to be maintained under Sections
10.1 A, B and D, and a copy of this Agreement.



          B. Each Member, Manager and Assignee has the right, upon reasonable
request for purposes reasonably related to the interest of the Person as
Member, Manager or Assignee, to:



          (i) inspect and copy during normal business hours any of the Company
records described in Sections 10.1A through G; and



30









 





          (ii) obtain from the Managers, promptly after their becoming available, a
copy of the Company’s federal, state, and local income tax or information
returns for each Fiscal Year.



          C. Each Member may make a written request to the Managers for an income
statement of the Company for the initial three-month, six-month, or nine-month
period of the current Fiscal Year ended more than thirty (30) days prior to the
date of the request, and a balance sheet of the Company as of the end of that
period. Such statement shall be accompanied by the report thereon, if any, of
the independent accountants engaged by the Company or, if there is no report,
the certificate of a Manager that the statement was prepared without audit from
the books and records of the Company. If so requested, the statement shall be
delivered or mailed to the Members within 30 days thereafter.



          D. Any request, inspection or copying by a Member or Assignee under this
Section 10.2 may be made by that Person or that Person’s agent or attorney.



          E. The Managers shall promptly furnish to a Member a copy of any amendment
to the Certificate or this Agreement executed by a Manager pursuant to a power
of attorney from the Member.



     10.3 Annual Statements. The Managers shall cause to be prepared at least
annually, at Company expense, information necessary for the preparation of the
Members’ and Assignees’ federal and state income tax returns. The Managers
shall send or cause to be sent to each Member or Assignee within ninety (90)
days after the end of each taxable year such information as is necessary to
complete federal and state income tax or information returns, and, if the
Company has thirty-five (35) or fewer Members, a copy of the Company’s federal, state, and local income tax or
information returns for that year.



     10.4 Financial and Other Information. The Managers shall provide such
financial and other information relating to the Company or any other Person in
which the Company owns, directly or indirectly, an equity interest, as a Member
may reasonably request. The Managers shall distribute to the Members, promptly
after the preparation or receipt thereof by the Managers, any financial or
other information relating to any Person in which the Company owns, directly or
indirectly, an equity interest, including any filings by such Person under the
Securities Exchange Act of 1934, as amended, that is received by the Company
with respect to any equity interest of the Company in such Person.



     10.5 Filings. The Managers, at Company expense, shall cause the income tax
returns for the Company to be prepared and timely filed with the appropriate
authorities. The Managers, at Company expense, shall also cause to be prepared
and timely filed, with appropriate federal and state regulatory and
administrative bodies, amendments to, or restatements of, the Certificate and
all reports required to be filed by the Company with those entities under the
Act or other then current applicable laws, rules, and regulations. If a
Manager required by the Act to execute or file any document fails, after
demand, to do so within a reasonable period of time or refuses to do so, any
other Manager or Member may prepare, execute and file that document with the
Delaware Secretary of State.



31









 





     10.6 Bank Accounts. The Managers shall maintain the funds of the Company in
one or more separate bank accounts in the name of the Company, and shall not
permit the funds of the Company to be commingled in any fashion with the funds
of any other Person.



     10.7 Accounting Decisions and Reliance on Others. All decisions as to
accounting matters, except as otherwise specifically set forth herein, shall be
made by the Managers. The Managers may rely upon the advice of their
accountants as to whether such decisions are in accordance with accounting
methods followed for federal income tax purposes.



     10.8 Tax Matters for the Company Handled by Managers and Tax Matters Partner.
The Managers shall from time to time cause the Company to make such tax
elections as they deem to be in the best interests of the Company and the
Members. The Tax Matters Partner shall represent the Company (at the Company’s
expense) in connection with all examinations of the Company’s affairs by tax
authorities, including resulting judicial and administrative proceedings, and
shall expend the Company funds for professional services and costs associated
therewith. The Tax Matters Partner shall oversee the Company tax affairs in
the overall best interests of the Company. If for any reason the Tax Matters
Partner can no longer serve in that capacity or ceases to be a Member or Manager, as the case may be, the Managers shall
unanimously designate another to be Tax Matters Partner.



ARTICLE XI

DISSOLUTION AND WINDING UP




     11.1 Dissolution. The Company shall dissolve, its assets disposed of, and its
affairs wound up on the first to occur of the following (each, a “Dissolution
Event”):



          A. Upon the entry of a decree of judicial dissolution pursuant to Act
Section 18-802;



          B. Upon the unanimous vote of Members;



          C. The sale of all or substantially all of the assets of Company; or



          D. The happening of any event that makes it unlawful or impossible to
carry on the business of the Company.



     11.2 Articles of Dissolution. As soon as possible following the occurrence of
a Dissolution Event, the Managers who have not wrongfully dissolved the Company
or, if none, the Members, shall execute a Articles of Dissolution in such form
as shall be prescribed by the Delaware Secretary of State and file the Articles
of Dissolution as required by the Act.



     11.3 Winding Up. Upon the occurrence of a Dissolution Event, the Company shall
continue solely for the purpose of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors. The
Managers who have not wrongfully dissolved the Company or, if none, the
Members, shall be responsible for overseeing the winding up and liquidation of
Company, shall take full account of the liabilities of Company and assets,
shall either cause its assets to be sold or distributed, and if sold shall
cause the proceeds therefrom, to the extent sufficient therefor, to be applied
and distributed as provided in



32









 







Section 11.5. The Persons winding up the
affairs of the Company shall give written notice of the commencement of winding
up by mail to all known creditors and claimants whose addresses appear on the
records of the Company.



     11.4 Distributions in Kind. Any non-cash asset distributed to one or more
Members, including the ANDAs and ANDA Materials, shall first be valued at its
fair market value to determine the Net Profit or Net Loss that would have
resulted if such asset were sold for such value, such Net Profit or Net Loss
shall then be allocated pursuant to Article VI, and the Members’ Capital
Accounts shall be adjusted to reflect such allocations. The amount distributed
and charged to the Capital Account of each Member receiving an interest in such
distributed asset shall be the fair market value of such interest (net of any liability secured by such asset that such Member assumes
or takes subject to). The fair market value of such asset shall be determined
by the Managers or by the Members or if any Member objects by an independent
appraiser (any such appraiser must be recognized as an expert in valuing the
type of asset involved) selected by the Manager or liquidating trustee and
approved by the Members.



     11.5 Order of Payment Upon Dissolution.



          A. After determining that all known debts and liabilities of the Company,
including, without limitation, debts and liabilities to Members who are
creditors of the Company, have been paid or adequately provided for, the
remaining assets shall be distributed to the Members in accordance with their
positive Capital Account balances, after taking into account income and loss
allocations for the Company’s taxable year during which liquidation occurs.
Such liquidating distributions shall be made by the end of the Company’s
taxable year in which the Company is liquidated, or, if later, within ninety
(90) days after the date of such liquidation.



          B. The payment of a debt or liability, whether the whereabouts of the
creditor is known or unknown, has been adequately provided for if the payment
has been provided for by either of the following means:



          (i) Payment thereof has been assumed or guaranteed in good faith by one or
more financially responsible persons or by the United States government or any
agency thereof, and the provision, including the financial responsibility of
the Person, was determined in good faith and with reasonable care by the
Members or Managers to be adequate at the time of any distribution of the
assets pursuant to this Section.



          (ii) Other adequate means as provided in Corporations Code Section 18-804.



     This Section 11.5B shall not prescribe the exclusive means of making
adequate provision for debts and liabilities.



     11.6 Limitations on Payments Made in Dissolution. Except as otherwise
specifically provided in this Agreement, each Member shall only be entitled to
look solely at the assets of the Company for the return of his or her positive
Capital Account balance and shall have no recourse for his or her Capital
Contribution and/or share of Net Profits (upon dissolution or otherwise)
against the Managers or any other Member.



33









 





     11.7 No Action for Dissolution. Except as expressly permitted in this
Agreement, a Member shall not take any voluntary action that directly causes a
Dissolution Event. The Members acknowledge that irreparable damage would be
done to the goodwill and reputation of the Company if any Member should bring
an action in court to dissolve the Company under circumstances where
dissolution is not required by Section 11.1. This Agreement has been drawn
carefully to provide fair treatment of all parties and equitable payment in
liquidation of the Economic Interests. Accordingly, except where the Managers
have failed to liquidate the Company as required by this Article X, each Member
hereby waives and renounces his or her right to initiate legal action to seek
the appointment of a receiver or trustee to liquidate the Company or to seek a decree of judicial
dissolution of the Company on the ground that (a) it is not reasonably
practicable to carry on the business of the Company in conformity with the
Certificate or this Agreement, or (b) dissolution is reasonably necessary for
the protection of the rights or interests of the complaining Member. Damages
for breach of this Section 11.7 shall be monetary damages only (and not
specific performance), and the damages may be offset against distributions by
the Company to which such Member would otherwise be entitled.



ARTICLE XII

INDEMNIFICATION AND INSURANCE




     12.1 Indemnification of Agents. The Company shall defend and indemnify any
Member or Manager and may indemnify any other Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding by reason of the fact that it is or was a Member,
Manager, employee or other agent of the Company or that, being or having been
such a Member, Manager, employee or agent, it is or was serving at the request
of the Company as a manager, director, employee or other agent of another
limited liability company, corporation, partnership, joint venture, trust or
other enterprise (all such persons being referred to hereinafter as an
“agent”), to the fullest extent permitted by applicable law in effect on the
date hereof and to such greater extent as applicable law may hereafter from
time to time permit. The Managers shall be authorized, on behalf of the
Company, to enter into indemnity agreements from time to time with any Person
entitled to be indemnified by the Company hereunder, upon such terms and
conditions as the Managers deem appropriate in their business judgment.



     12.2 Insurance. The Company shall have the power to purchase and maintain
insurance on behalf of any Person who is or was an agent of the Company against
any liability asserted against such Person and incurred by such Person in any
such capacity, or arising out of such Person’s status as an agent, whether or
not the Company would have the power to indemnify such Person against such
liability under the provisions of Section 12.1 or under applicable law. The
Company shall maintain product liability insurance in an amount sufficient to
protect any and all agents under Article XII.



     12.3 Successful Defense. Notwithstanding any other provision of this
Agreement, to the extent that a Manager has been successful on the merits or
otherwise in defense of any Proceeding referred to in Section 12.2, or in
defense of any claim, issue or matter therein, such Manager shall be
indemnified against Expenses actually and reasonably incurred in connection
therewith.



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     12.4 Determination of Conduct. Any indemnification under Section 12.1 (unless
ordered by a court as referred to in such Section) shall be made by the Company
only as authorized in the specific case upon a determination that
indemnification of the Manager is proper in the circumstances because such
Manager has met the applicable standard of conduct set forth in Section 12.1.
Such determination shall be made (i) by the Managers by a majority vote of a
quorum consisting of Managers who were not parties to such Proceeding, or (ii)
if such quorum is not obtainable or, even if obtainable, a quorum of such
disinterested Managers so directs, by independent legal counsel in a written
opinion, or (iii) by the Members by a vote of a majority-in-interest of
Members, whether or not constituting a quorum, who were not parties to such
Proceeding.



     12.5 Payment of Expenses in Advance. Expenses incurred by a Manager in
connection with a Proceeding (“Expenses”) shall be paid by the Company in
advance of the final disposition of such Proceeding upon receipt of a written
undertaking by or on behalf of such Manager to repay such amount if it shall
ultimately be determined that such Manager is not entitled to be indemnified by
the Company as authorized in this Article XII.



     12.6 Indemnification of Other Agents. The Company may, but shall not be
obligated to, indemnify any Person (other than a Manager) who was or is a party
or is threatened to be made a party to, or otherwise becomes involved in, any
Proceeding (including any Proceeding by or in the right of the Company) by
reason of the fact that such Person is or was an agent of the Company
(including Members who are not Managers of the Company), against all Expenses,
amounts paid in settlement, judgments, fines, penalties and ERISA excise taxes
actually and reasonably incurred by such Person in connection with such
Proceeding under the same circumstances and to the same extent as is provided
for or permitted in this Article XII with respect to a Manager.



     12.7 Indemnity Not Exclusive. The indemnification and advancement of Expenses
provided by, or granted pursuant to, the provisions of this Article XII, shall
not be deemed exclusive of any other rights to which any Person seeking
indemnification or advancement of Expenses may be entitled under any agreement,
vote of Managers or Members, or otherwise, both as to action in such Person’s
capacity as an agent of the Company and as to action in another capacity while
serving as an agent. All rights to indemnification under this Article XII
shall be deemed to be provided by a contract between the Company and each
Manager who serves in such capacity at any time while this Agreement and
relevant provisions of the Act and other applicable law, if any, are in effect.
Any repeal or modification hereof or thereof shall not affect any such rights
then existing.



     12.8 Insurance. The Company shall have the power to purchase and maintain
insurance on behalf of any Person who is or was an agent of the Company against
any liability asserted against such Person and incurred by such Person in any
such capacity, or arising out of such Person’s status as an agent, whether or
not the Company would have the power to indemnify such Person against such
liability under the provisions of this Article XII or of Section 18-108 of the
Act. In the event a Person shall receive payment from any insurance carrier or
from the plaintiff in any action against such Person with respect to
indemnified amounts after payment on account of all or part of such indemnified
amounts having been made by the Company pursuant to this Article XII,
such Person shall reimburse the Company for the



35









 







amount, if any, by which the
sum of such payment by such insurance carrier or such plaintiff and payments by
the Company to such Person exceeds such indemnified amounts; provided, however,
that such portions, if any, of such insurance proceeds that are required to be
reimbursed to the insurance carrier under the terms of its insurance policy
shall not be deemed to be payments to such Person hereunder. In addition, upon
payment of indemnified amounts under the terms and conditions of this
Agreement, the Company shall be subrogated to such Person’s rights against any
insurance carrier with respect to such indemnified amounts (to the extent
permitted under such insurance policies). Such right of subrogation shall be
terminated upon receipt by the Company of the amount to be reimbursed by such
Person pursuant to the first sentence of this Section 12.8.



     12.9 Heirs, Executors and Administrators. The indemnification and advancement
of Expenses provided by, or granted pursuant to, this Article XII shall, unless
otherwise provided when authorized or ratified, continue as to a Person who has
ceased to be an agent of the Company and shall inure to the benefit of such
Person’s heirs, executors and administrators.



     12.10 Right to Indemnification Upon Application.



          A. Any indemnification or advance under Section 12.1 or Section 12.5 shall
be made promptly, and in no event later than sixty (60) days, after the
Company’s receipt of the written request of a Manager of the Company therefor,
unless, in the case of an indemnification, a determination shall have been made
as provided in Section 12.4 that such Manager has not met the relevant standard
for indemnification set forth in Section 12.1.



          B. The right of a Person to indemnification or an advance of Expenses as
provided by this Article XII shall be enforceable in any court of competent
jurisdiction. Neither the failure by the Managers or Members of the Company or
its independent legal counsel to have made a determination that indemnification
or an advance is proper in the circumstances, nor any actual determination by
the Managers or Members of the Company or its independent legal counsel that
indemnification or an advance is not proper, shall be a defense to the action
or create a presumption that the relevant standard of conduct has not been met.
The burden of proving that indemnification or an advance is not proper shall
be on such Person. In any such action, the Person seeking indemnification or
advancement of Expenses shall be entitled to recover from the Company any and
all expenses of the types described in the definition of Expenses in Section
12.4 of this Agreement actually and reasonably incurred by such Person in such
action, but only if it prevails therein.



     12.11 Limitations on Indemnification. No payments pursuant to this Agreement
shall be made by the Company:



          A. To indemnify or advance funds to any Person with respect to a
Proceeding initiated or brought voluntarily by such Person and not by way of
defense, except as provided in Section 12.10B with respect to a Proceeding
brought to establish or enforce a right to indemnification under this
Agreement, otherwise than as required under Delaware or Illinois law, but indemnification or advancement of Expenses may be provided by the
Company in specific cases if a determination is made in the manner provided in
Section 12.4 that it is appropriate;



36









 





          B. To indemnify or advance funds to any Person under this Article XII to
defend a Proceeding which directly resulted from the gross negligence of such
Person; or



          C. If a court of competent jurisdiction finally determines that any
indemnification or advance of Expenses hereunder is unlawful.



     12.12 Partial Indemnification. If a Person is entitled under any provision of
this Article XI to indemnification by the Company for a portion of Expenses,
amounts paid in settlement, judgments, fines, penalties or ERISA excise taxes
incurred by such Person in any Proceeding but not, however, for the total
amount thereof, the Company shall nevertheless indemnify such Person for the
portion of such Expenses, amounts paid in settlement, judgments, fines,
penalties or ERISA excise taxes to which such Person is entitled.



ARTICLE XIII

INVESTMENT REPRESENTATIONS




     Each Member hereby represents and warrants to, and agrees with, the
Managers, the other Members, and the Company as follows:



     13.1 Accredited Investor. It is an “accredited investor” as defined in Rule
501(a) of Regulation D promulgated by the Securities and Exchange Commission
(the “SEC”) under the Securities Act of 1933, as amended (“Securities Act”).



     13.2 Purpose of Entity. The Member was not organized for the specific purpose
of acquiring the Membership Interest.



     13.3 Economic Risk. It is financially able to bear the economic risk of an
investment in the Membership Interest, including the total loss thereof.



     13.4 No Registration of Membership Interest. It acknowledges that the
Membership Interest has not been registered under the Securities Act of 1933,
as amended (the “Securities Act”), or qualified under the securities laws of
the State of Delaware, or any other applicable blue sky laws in reliance, in
part, on its representations, warranties, and agreements herein.



     13.5 Membership Interest in Restricted Security. It understands that the Membership Interest is a “restricted security” under
the Securities Act in that the Membership Interest will be acquired from the
Company in a transaction not involving a public offering, and that the
Membership Interest may be resold without registration under the Securities Act
only in certain limited circumstances and that otherwise the Membership
Interest must be held indefinitely. In this connection, it understands the
resale limitations imposed by the Securities Act and is familiar with SEC Rule
144, as presently in effect, and the conditions which must be met in order for
that Rule to be available for resale of “restricted securities,” including the
requirement that the securities must be held for at least two years after
purchase thereof from the Company prior to resale (three years in the absence
of publicly available information about the Company) and the condition that
there be available to the public current information about the Company under
certain circumstances. It understands that the Company has not made such
information available to the public and has no present plans to do so.



37









 





     13.6 No Obligation to Register. It represents, warrants, and agrees that the
Company and the Managers are under no obligation to register or qualify the
Membership Interest under the Securities Act or under any state securities law,
or to assist it in complying with any exemption from registration and
qualification.



     13.7 No Disposition in Violation of Law. Without limiting the representations
set forth above, and without limiting Article VIII of this Agreement, it will
not make any disposition of all or any part of the Membership Interest which
will result in the violation by it or by the Company of the Securities Act, the
securities laws of the State of Delaware, or any other applicable securities
laws. Without limiting the foregoing, it agrees not to make any disposition of
all or any part of the Membership Interest unless and until:



          A. There is then in effect a registration statement under the Securities
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement and any applicable requirements of
state securities laws; or



          B. (i) It has notified the Company of the proposed disposition and has
furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and (ii) if reasonably requested by the
Managers, it has furnished the Company with a written opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of any securities under the Securities Act or the consent of or a
permit from appropriate authorities under any applicable state securities law.



          C. In the case of any disposition of all or any part of the Membership
Interest pursuant to SEC Rule 144, in addition to the matters set forth in
Section 13.7B, it shall promptly forward to the Company a copy of any Form 144
filed with the SEC with respect to such disposition and a letter from the
executing broker satisfactory to the Company evidencing compliance with SEC
Rule 144. If SEC Rule 144 is amended or if the SEC’s interpretations thereof
in effect at the time of any such disposition have changed from its present
interpretations thereof, it shall provide the Company with such additional
documents as the Managers may reasonably require.



     13.8 Legends. It understands that the certificates (if any) evidencing the
Membership Interest may bear one or all of the following legends:



          A. “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED
AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN
THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND
REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS, AND
CONDITIONS WHICH ARE SET FORTH HEREIN IN THE COMPANY’S OPERATING AGREEMENT, A
COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.



38









 





          B. Any legend required by applicable state securities laws.



     13.9 Investment Risk. It acknowledges that the Membership Interest is a
speculative investment which involves a substantial degree of risk of loss by
it of its entire investment in the Company, that it understands and takes full
cognizance of the risk factors related to the purchase of the Membership
Interest, and that the Company is newly organized and has no financial or
operating history.



     13.10 Investment Experience. It is an experienced investor in unregistered and
restricted securities of speculative and high-risk ventures. This
representation shall not be applicable to any Person that provides the Managers
with such written information as the Managers deem necessary to substantiate
that the Member engaged and designated a Professional Advisor to assist the
Member in evaluating the risks and merits of an investment in the Company.



     13.11 Restrictions on Transferability. It acknowledges that there are
substantial restrictions on the transferability of the Membership Interest
pursuant to this Agreement, that there is no public market for the Membership
Interest and none is expected to develop, and that, accordingly, it may not be
possible for it to liquidate its investment in the Company.



     13.12 No Representations By Company. Neither any Manager, any agent or
employee of the Company or of any Manager, or any other Person has at any time
expressly or implicitly represented, guaranteed, or warranted to it that it may
freely transfer the Membership Interest, that a percentage of profit and/or
amount or type of consideration will be realized as a result of an investment
in the Membership Interest, that past performance or experience on the part of the Managers or their Affiliates or
any other person in any way indicates the predictable results of the ownership
of the Membership Interest or of the overall Company business, that any cash
distributions from Company operations or otherwise will be made to the Members
by any specific date or will be made at all, or that any specific tax benefits
will accrue as a result of an investment in the Company.



     13.13 Tax Consequences. It acknowledges that the discussion of the tax
consequences arising from this investment set forth in the Private Placement
Memorandum is general in nature and the tax consequences to its of investing in
the Company will depend on its particular circumstances, and neither the
Company, the Managers, the Members, nor the partners, shareholders, members,
managers, agents, directors, employees, Affiliates, or consultants of any of
them will be responsible or liable for the tax consequences to it of an
investment in the Company. It will look solely to, and rely upon, its own
advisers with respect to the tax consequences of this investment.



     13.14 No Assurance of Tax Benefits. It acknowledges that there can be no
assurance that the Code or the Regulations will not be amended or interpreted
in the future in such a manner so as to deprive the Company and the Members of
some or all of the tax benefits they might now receive, nor that some of the
deductions claimed by the Company or the allocations of items of income, gain,
loss, deduction, or credit among the Members may not be challenged by the
Internal Revenue Service.



39









 





     13.15 Indemnity. It shall defend, indemnify and hold harmless the Company,
participating broker-dealers, each and every Manager, each and every other
Member, and any directors, shareholders, managers, members, employees,
partners, agents, attorneys, registered representatives, and control persons of
any such entity who was or is a party or is threatened to be made a party to
any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, by reason of or arising from
any misrepresentation or misstatement of facts or omission to represent or
state facts made by it including, without limitation, the information in this
Agreement, against losses, liabilities, and expenses of the Company, each and
every Manager, each and every other Member, and any directors, shareholders,
managers, members, employees, partners, attorneys, accountants, agents,
registered representatives, and control persons of any such Person (including
attorneys’ fees, judgments, fines, and amounts paid in settlement, payable as
incurred) incurred by such Person in connection with such action, suit,
proceeding, or the like.



ARTICLE XIV

MISCELLANEOUS




     14.1 Counsel to the Company. Counsel to the Company may also be counsel to any
Manager or any Affiliate of a Manager. The Managers may execute on behalf of
the Company and the Members any consent to the representation of the Company
that counsel may request pursuant to the California Rules of
Professional Conduct or similar rules in any other jurisdiction (“Rules”). The
Company has initially selected Luce, Forward, Hamilton & Scripps LLP (“Company
Counsel”) as legal counsel to the Company. Each Member acknowledges that
Company Counsel does not represent any Member in the absence of a clear and
explicit written agreement to such effect between the Member and Company
Counsel, and that in the absence of any such agreement Company Counsel shall
owe no duties directly to a Member. Notwithstanding any adversity that may
develop, in the event any dispute or controversy arises between any Members and
the Company, or between any Members or the Company, on the one hand, and a
Manager (or Affiliate of a Manager) that Company Counsel represents, on the
other hand, then each Member agrees that Company Counsel may represent either
the Company or such Manager (or his or her Affiliate), or both, in any such
dispute or controversy to the extent permitted by the Rules, and each Member
hereby consents to such representation. Each Member further acknowledges that:
(a) Company Counsel has represented the interests of Akorn in connection with
the formation of the Company and the preparation and negotiation of this
Agreement and (b) while communications with Company Counsel concerning the
formation of the Company, its Members and Managers may be confidential with
respect to third parties, no Member has any expectation that such
communications are confidential with respect to Akorn.



     14.2 Complete Agreement. This Agreement and the Certificate constitute the
complete and exclusive statement of agreement among the Members and Managers
with respect to the subject matter herein and therein and replace and supersede
all prior written and oral agreements or statements by and among the Members
and Managers or any of them, including without limitation the Memo of
Understanding dated April 16, 2004 between Akorn and Strides. No
representation, statement, condition or warranty not contained in this
Agreement or the Certificate will be binding on the Members or Managers or have
any force or effect whatsoever. To the extent that any provision of the
Certificate conflict with any provision of this Agreement, the Certificate
shall control.



40









 





     14.3 Binding Effect. Subject to the provisions of this Agreement relating to
transferability, this Agreement will be binding upon and inure to the benefit
of the Members, and their respective successors and assigns.



     14.4 Parties in Interest. Except as expressly provided in the Act, nothing in
this Agreement shall confer any rights or remedies under or by reason of this
Agreement on any Persons other than the Members and Managers and their
respective successors and assigns nor shall anything in this Agreement relieve
or discharge the obligation or liability of any third person to any party to
this Agreement, nor shall any provision give any third person any right of
subrogation or action over or against any party to this Agreement.



     14.5 Pronouns; Statutory References. All pronouns and all variations thereof
shall be deemed to refer to the masculine, feminine, or neuter, singular or
plural, as the context in which they are used may require. Any reference to
the Code, the Regulations, the Act, Corporations Code or other statutes or laws
will include all amendments, modifications, or replacements of the specific
sections and provisions concerned.



     14.6 Headings. All headings herein are inserted only for convenience and ease
of reference and are not to be considered in the construction or interpretation
of any provision of this Agreement.



     14.7 Interpretation. In the event any claim is made by any Member relating to
any conflict, omission or ambiguity in this Agreement, no presumption or burden
of proof or persuasion shall be implied by virtue of the fact that this
Agreement was prepared by or at the request of a particular Member or his or
her counsel.



     14.8 References to this Agreement. Numbered or lettered articles, sections and
subsections herein contained refer to articles, sections and subsections of
this Agreement unless otherwise expressly stated.



     14.9 Governing Law; Jurisdiction. This Agreement is governed by and shall be
construed in accordance with the law of the State of Delaware, excluding any
conflict-of-laws rule or principle that might refer the governance or the
construction of this Agreement to the law of another jurisdiction. Each Member
hereby consents to the exclusive jurisdiction of the state and federal courts
sitting in New York in any action on a claim arising out of, under or in
connection with this Agreement or the transactions contemplated by this
Agreement, provided such claim is not required to be arbitrated pursuant to
Section 14.10. Each Member further agrees that personal jurisdiction over him
or her may be effected by service of process by registered or certified mail
addressed as provided in Section 14.14 of this Agreement, and that when so made
shall be as if served upon him or her personally within the State of New York.



     14.10 Mediation and Arbitration. The parties shall, before the
commencement of arbitration proceedings, attempt in good faith to settle their
dispute by mediation.



          A. Arbitration. Except as otherwise provided in this Agreement, any
dispute, controversy or claim arising out of or relating to this Agreement, or
any breach thereof, including without limitation any claim that this Agreement,
or any part hereof, is invalid, illegal or otherwise voidable or void, shall be
submitted, at the request of the Company or any Member, to



41









 







binding arbitration
by a JAMS\ENDISPUTE (“JAMS”) arbitrator, or such other arbitrator as may be
agreed upon by the parties. Hearings on such arbitration shall be conducted in
New York, New York. A single arbitrator shall arbitrate any such controversy.
The arbitrator shall hear and determine the controversy in accordance with
applicable law and the intention of the parties as expressed in this Agreement,
upon the evidence produced at an arbitration hearing scheduled at the request
of either party. Such pre-arbitration discovery shall be permitted to the fullest extent permitted by New York law applicable to arbitration
proceedings, including, without limitation, the provisions of the New York
Civil Practice Law and Rules. The arbitrator shall decide all discovery
disputes. Judgment on the award of the arbitrator may be entered in any court
having jurisdiction thereof.



          B. Provisional Remedy. Each of the parties reserves the right to file
with a court of competent jurisdiction an application for temporary or
preliminary injunctive relief, writ of attachment, writ of possession,
temporary protective order and/or appointment of a receiver on the grounds that
the arbitration award to which the applicant may be entitled may be rendered
ineffectual in the absence of such relief.



          C. Consolidation. Any arbitration hereunder may be consolidated by JAMS
with the arbitration of any other dispute arising out of or relating to the
same subject matter when the arbitrator determines that there is a common issue
of law or fact creating the possibility of conflicting rulings by more than one
arbitrator. Any disputes over which arbitrator or panel of arbitrators shall
hear any consolidated matter shall be resolved by JAMS.



          D. Power And Authority Of Arbitrator. The arbitrator shall not have any
power to alter, amend, modify or change any of the terms of this Agreement nor
to grant any remedy which is either prohibited by the terms of this Agreement,
or not available in a court of law.



          E. Governing Law. All questions in respect of procedure to be followed in
conducting the arbitration as well as the enforceability of this Agreement to
arbitrate which may be resolved by state law shall be resolved according to the
laws of the State of New York.



          F. Costs. The costs of the arbitration, including any JAMS administration
fee, the arbitrator’s fee, and costs for the use of facilities during the
hearings, shall be borne equally by the parties to the arbitration. Attorneys’
fees may be awarded to the prevailing or most prevailing party at the
discretion of the arbitrator.



     14.11 Exhibits. All Exhibits attached to this Agreement are incorporated and
shall be treated as if set forth herein.



     14.12 Severability. If any provision of this Agreement or the application of
such provision to any person or circumstance shall be held invalid, the
remainder of this Agreement or the application of such provision to persons or
circumstances other than those to which it is held invalid shall not be
affected thereby.



     14.13 Specific Performance. The Members agree that irreparable damage will
result if this Agreement is not performed in accordance with its terms, and the
Members agree that any damages available at law for a breach of this Agreement
would not be an adequate remedy.



42









 







Therefore, the provisions hereof and the
obligations of the Members hereunder shall be enforceable in a court of equity,
or other tribunal with jurisdiction, by a decree of specific performance, and
appropriate injunctive relief may be applied for and granted in connection
therewith. Such remedies and all other remedies provided for in this Agreement
shall, however, be cumulative and not exclusive and shall be in addition to any
other remedies that a Member may have under this Agreement, at law or in
equity.



     14.14 Additional Documents and Acts. Each Member agrees to execute and deliver
such additional documents and instruments and to perform such additional acts
as may be necessary or appropriate to effectuate, carry out and perform all of
the terms, provisions, and conditions of this Agreement and the transactions
contemplated hereby.



     14.15 Notices. Any notice, demand, consent, election, offer, approval,
request, or other communication (collectively, “Notice”) given under this
Agreement shall be in writing and shall be served personally or delivered by
first class, registered or certified, return receipt requested U.S. mail,
postage prepaid. Notices may also be given by transmittal over electronic
transmitting devices such as Telex, facsimile or telecopy machine, if the party
to whom the notice is being sent has such a device in its office, provided a
complete copy of any notice so transmitted shall also be mailed in the same
manner as required for a mailed notice. Notices shall be deemed received at
the earlier of actual receipt or three (3) days following deposit in U.S. mail,
postage prepaid. Notices shall be directed to the Company at the Company’s
principal place of business as specified in Section 2.5 of this Agreement, and
to at the addresses shown on Exhibit A provided a Member may change such
Member’s address for notice by giving written notice to all other Members in
accordance with this Section 14.15.



     14.16 Amendments. Except as otherwise expressly provided in this Agreement,
all amendments to this Agreement will be in writing and signed by all of the
Members.



     14.17 Reliance on Authority of Person Signing Agreement. If a Member is not a
natural person, neither the Company nor any Member will (a) be required to
determine the authority of the individual signing this Agreement to make any
commitment or undertaking on behalf of such entity or to determine any fact or
circumstance bearing upon the existence of the authority of such individual or
(b) be responsible for the application or distribution of proceeds paid or
credited to individuals signing this Agreement on behalf of such entity.



     14.18 No Interest in Company Property. No Member or Assignee has any interest
in specific property of the Company.



     14.19 Multiple Counterparts. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument. Any counterpart of this Agreement that has attached to it separate
signature pages which altogether contain the signatures of all Manager or
Members or their attorneys-in-fact shall for all purposes be deemed a fully
executed instrument.



     14.20 Attorney Fees. In the event that any dispute between the Company and the
Members or among the Members should result in litigation or arbitration, the
prevailing party in such dispute shall be entitled to recover from the other
party all reasonable fees, costs and



43









 







expenses of enforcing any right of the
prevailing party, including without limitation, reasonable attorneys’ fees and
expenses, all of which shall be deemed to have accrued upon the commencement of
such action and shall be paid whether or not such action is prosecuted to
judgment. Any judgment or order entered in such action shall contain a
specific provision providing for the recovery of attorney fees and costs
incurred in enforcing such judgment and an award of prejudgment interest from
the date of the breach at the maximum rate of interest allowed by law. For the
purposes of this Section: (a) attorney fees shall include, without limitation,
fees incurred in the following: (1) postjudgment motions; (2) contempt
proceedings; (3) garnishment, levy, and debtor and third party examinations;
(4) discovery; and (5) bankruptcy litigation and (b) prevailing party shall
mean the party who is determined in the proceeding to have prevailed or who
prevails by dismissal, default or otherwise.



     14.21 Remedies Cumulative. The remedies under this Agreement are cumulative
and shall not exclude any other remedies to which any person may be lawfully
entitled.



     14.22 Special Power of Attorney.



          A. Attorney in Fact. Each Member grants the Managers a special power of
attorney irrevocably making, constituting, and appointing the Managers as the
Member’s attorney in fact, with all power and authority to act in the Member’s
name and on the Member’s behalf to execute, acknowledge and deliver and swear
to in the execution, acknowledgement, delivery and filing of the following
documents:



          (i) An amendment to this Agreement;



          (ii) Assignments of Membership Interests or other documents of transfer to
be delivered in connection with the purchase of a Membership Interest pursuant
to Section 8.7 or Article IX;



          (iii) Any other instrument or document that may be reasonably required by
the Managers in connection with any of the foregoing or to reflect any
reduction in the Member’s Capital Account or Percentage Interest pursuant to
Section 3.3; and



          (iv) Any consent to the representation of the Company by counsel selected
by the Managers.



          B. Irrevocable Power. The special power granted in Section 14.22A: (i) is
irrevocable, (ii) is coupled with an interest and (iii) shall survive a
Member’s death, incapacity or dissolution.



          C. Signatures. The Managers may exercise the special power of attorney granted
in Section 14.22A by a signature of all Managers, whether original or
facsimile.



     14.23 Estoppel Certificate. Each Member shall, within ten (10) days after
written request by any Manager, deliver to the requesting Person a certificate
stating, to the Member’s knowledge, that: (a) this Agreement is in full force
and effect; (b) this Agreement has not been modified except by any instrument
or instruments identified in the certificate; and (c) there is no default
hereunder by such Member, or if there is a default, the nature or extent
thereof.



44









 





     14.24 Waiver. No waiver by any party to this Agreement of any breach of, or
default under, this Agreement by any other party shall be construed or deemed a
waiver of any other breach of or default under this Agreement, and shall not
preclude any party from exercising or asserting any rights under the Agreement
with respect to any other breach or default.



     14.25 Confidentiality. Each Member agrees not to disclose the provisions of
this Agreement to any Person not a signatory to this Agreement, except as
otherwise approved by the Manager in writing. However, nothing herein shall
preclude the Parties from (i) complying with any legal or judicial process that
compels disclosure of the provisions of this Agreement, (ii) complying with the
terms of any securities exchange on which its shares are listed, or with any
relevant securities laws; (iii) commencing legal action to enforce the
provisions of this Agreement, (iv) discussing the Agreement with their
respective attorneys, accountants or financial planners, as long as the parties
clearly advise and instruct such individual that all information regarding the
terms and conditions of the Agreement is disclosed in strict confidence and
must not be repeated or disclosed to others, or (v) complying with the requests
of federal, state or local taxing authorities.



     IN WITNESS WHEREOF, the parties have signed this Agreement on the date
first written above and each of the individuals signing below warrants that it
has the authority to sign for and on behalf of the respective parties.



	 	 	 
	

	 	MEMBER:
	 
	 	 
	

	 	AKORN, INC., a Louisiana corporation
	 
	 	 
	

	 	/s/ Arthur S. Przybyl


Arthur S. Przybyl, President
	 
	 	 
	

	 	MEMBER:
	 
	 	 
	

	 	STRIDES ARCOLAB LIMITED, a company

organized under the laws of India;
	 
	 	 
	

	 	/s/ Arun Kumar



Arun Kumar, CEO







45









 






EXHIBIT A




CAPITAL CONTRIBUTION OF MEMBERS AND

ADDRESSES OF MEMBERS AND MANAGERS AS OF




	 	 	 	 	 	 	 	 	 	 	 
	Member’s Name	 	 	 	Member’s Capital	 	Member’s Percentage
	and Taxpayer I.D.
	 	Member’s Address
	 	Contribution
	 	Interest

	Akorn, Inc.
	 	Akorn, Inc.	 	$	1,2500,000	 	 	 	50	%
	 
	 	2500 Millbrook Drive	 	 	 	 	 	 	 	 
	 
	 	Buffalo Grove, IL  60089-4694	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Strides Arcolab Limited
	 	Strides House	 	$	1,2500,000	 	 	 	50	%
	 
	 	Bilekahalli	 	 	 	 	 	 	 	 
	 
	 	Bannerghatta Road	 	 	 	 	 	 	 	 
	 
	 	Bangalore 560 076	 	 	 	 	 	 	 	 
	 
	 	India	 	 	 	 	 	 	 	 

















 





EXHIBIT B




PROMISSORY NOTE

(Akorn Draw Down Note)




	 	 	 	 	 
	Buffalo Grove, Illinois

	 	$	2,500,000.00	 
	September 22, 2004
	 	 	 	 







     For value received, the undersigned (“Borrower”) promises to pay to the
order of AKORN, INC., a Louisiana corporation (“Lender”), at 2500 Millbrook
Drive, Buffalo Grove, Illinois 60089-4694, or at such other place as the holder
of this Note (“Holder”) may from time to time designate in writing, in lawful
money of the United States, the principal sum of Two Million Five Hundred
Thousand Dollars ($2,500,000.00), or so much thereof as may be advanced, with
interest and due and payable all as set forth below.



     This Promissory Note (the “Note”) is made pursuant to that certain
“Limited Liability Company Agreement for Akorn-Strides, LLC, a Delaware Limited
Liability Company,” dated September 22, 2004 (the “LLC Agreement”), and is the
“Akorn Draw Down Note” referred to therein. Terms used with capital letters in
this Note and not otherwise defined herein shall have the meanings set forth in
the LLC Agreement. This Note evidences Borrower’s obligation to repay advances
to be made by Lender to Borrower as provided in Section 3.1(B)(ii)(a) of the
LLC Agreement.



ARTICLE 1. INTEREST AND PAYMENTS




     1.1 Interest. This Note shall bear no interest.



     1.2 Payments. Immediately upon each receipt by Borrower of any amount in
full or partial payment of the Strides Capital Contribution Note or the Advance
Note, an equal amount shall become due and payable under this Note, until this
Note paid in full.



     1.3 Prepayments. Borrower may prepay all or any part of the principal
balance at any time without charge or premium.



ARTICLE 2. ADDITIONAL TERMS AND CONDITIONS




     2.1 Application of Payments. All payments received, irrespective of how
they may be designated by Borrower, shall be applied in this order: first, to
amounts other than interest and principal, if any, owing under this Note,
second, to principal; except that, after the occurrence and during the
continuation of any Event of Default, all amounts received shall be applied in such order as
Holder, in its sole discretion, may elect. Borrower waives the application of
any statute or rule of law that would otherwise direct, or permit Borrower to
direct, the order of application of payments made by Borrower or amounts
otherwise received by Holder.



B-1









 





     2.2 No Waiver By Acceptance of Overdue or Partial Payments. If Holder
accepts payment of any overdue amount, or partial payment of an amount due and
the remainder of such amount is unpaid, such acceptance shall in no event: (a)
constitute a cure or waiver of Borrower’s default with respect to such overdue
or unpaid amount; (b) prevent Holder from exercising any of its rights and
remedies with respect to Borrower’s default; or (c) constitute a waiver of
Holder’s right to require full and timely payment of amounts becoming due
thereafter or to exercise any of Holder’s rights and remedies for any failure
to so pay.



     2.3 Default. Each of the following events (“Events of Default”)
constitutes a default under this Note:



          2.3.1 a default in the payment when due of any amount hereunder; and



          2.3.2 Borrower (a) voluntarily suspends the transaction of business; (b)
becomes insolvent or unable to pay its debts as they mature; (c) makes an
assignment for the benefit of creditors; (d) becomes the subject of a
bankruptcy, reorganization or similar debtor-relief proceeding unless, in the
case of an involuntary petition filed against Borrower, the petition is
dismissed within sixty (60) days; (e) becomes, or any of its property becomes,
the subject of appointment of a receiver, trustee, or conservator, unless, in
the case of such appointment without Borrower’s consent, the appointment is
vacated within sixty (60) days; (f) has any of its property become subject to
any attachment, execution, sequestration or other judicial seizure not
discharged within sixty (60) days; (g) fails to pay or discharge any judgment
against it, singly or in the aggregate, in excess of $15,000.00, or to appeal
such judgment(s) and obtain a stay thereof within ten (10) days of entry; or
(h) is dissolved or terminated;



          2.3.3 a default by Strides Arcolab Limited under the Promissory Note dated
of even date herewith and referred to as the “Strides Capital Contribution
Note” in the LLC Agreement; and



          2.3.4 a default by Strides Arcolab Limited under the Advance Note dated of
even date herewith and referred to as the “Advance Note” in the LLC Agreement.



     2.4 Acceleration Upon Default. Upon the occurrence of an Event of
Default, Holder may, at its election, declare the entire balance of principal
and accrued interest immediately due and payable. A delay by Holder in
exercising any right of acceleration after an Event of Default shall not
constitute a waiver of the Event of Default or of the right of acceleration or
any other right or remedy for such Event of Default. The failure by Holder to
exercise any right of acceleration as a result of an Event of Default shall not
constitute a waiver of the right of acceleration or any other right or remedy
with respect to any other Event of Default, whenever occurring.



     2.5 Enforcement Fees and Costs. Borrower shall immediately reimburse
Holder for all fees and costs, including reasonable attorneys’ fees and
experts’ fees and costs, incurred by Holder for: (a) enforcement of this Note
or any of its terms, or the exercise of any rights or remedies hereunder and/or
at law, in equity or otherwise, whether or not any action or proceeding is
filed; (b) representation of Holder in any bankruptcy, insolvency,
reorganization or other debtor-relief or similar proceeding of or relating to
Borrower, to any person liable (by way



B-2









 





of guaranty, assumption, endorsement or
otherwise) upon any of the obligations of this Note, or to any property now or
hereafter securing this Note; or (c) representation of Holder in any action or
proceeding relating to such property, whether commenced by Holder or any other
person, including foreclosure, receivership, lien or stop-notice enforcement,
bankruptcy, eminent domain and probate actions or proceedings.




     2.6 Waivers By Maker and Other Parties. The makers, endorsers, guarantors
and sureties of this Note hereby waive diligence, demand, presentment, notice
of non-payment, notice of dishonor, protest and notice of protest, agree that
the time for performance of any obligation under this Note may be extended from
time to time without notice, consent to the release without notice of any party
liable hereon or herefor, consent to the addition without notice of parties
liable hereon or herefor, and consent to the acceptance without notice of
further security for this Note, including other types of security, all without
in any way affecting their liability, and waive the right to plead any and all
statutes of limitations as a defense to this Note, any guaranty hereof or any
agreement to pay the obligations hereof, to the full extent permitted by law.



     2.7 Full Payment. All amounts payable under this Note shall be paid in
full without setoff, deduction or counterclaim. All amounts payable under this
Note shall be free and clear of and without any deduction or withholding for or
on account of any taxes, levies, duties, charges, fees, restrictions or
conditions of any nature now or hereafter imposed by any federal, state,
country or local government or any political subdivision or taxing authority
thereof or therein. Borrower shall indemnify Holder against any such taxes,
levies, imposts, duties, charges and fees (other than taxes on the income of
Holder imposed by any taxing authority) which may be assessed against Holder or
claimed or demanded from Holder in respect of any amount payable by Borrower
hereunder, and against any costs, charges, expenses or liability arising out of
or in respect of such assessment, claim or demand, to the full extent permitted
by law.



     2.8 Time of the Essence. Time is of the essence with respect to the
payment and performance of the obligations of this Note.



     2.9 No Oral Waivers or Modifications. No provision of this Note may be
waived or modified orally, but only in a writing signed by Holder.



     2.10 Governing Law. This Note shall be governed by and construed under
the internal laws of the State of New York, without regard to conflict of law
provisions.



     2.11 Severability. Every provision of this Note is intended to be
several. If any provision of this Note is determined by a court of competent
jurisdiction to be illegal, invalid or unenforceable, such illegality,
invalidity or unenforceability shall not affect the other provisions hereof,
which shall remain binding and enforceable.



B-3









 





     2.12 Limitation Upon Interest. All agreements between the Borrower and
Holder, now existing or hereafter arising, are hereby expressly limited so that
in no event whatsoever shall the amount paid or agreed to be paid to Holder
hereof for the use, forbearance or detention of money to be loaned hereunder or
otherwise, or for the performance or payment of any covenant or obligation
contained herein, exceed the maximum amount permissible under applicable law.
If from any circumstance whatsoever fulfillment of any provision hereof exceeds
the limit of validity prescribed by law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if from any such
circumstance Holder hereof shall ever receive as interest under this Note or
otherwise an amount that would exceed the highest lawful rate, such amount that
would be excessive interest shall be applied to the reduction of the principal
amount owing hereunder (without charge for prepayment) and not to the payment
of interest, or if such excessive interest exceeds the unpaid balance of
principal, such excess shall be refunded to Borrower.



     2.13 Headings. Headings herein are used for convenience of reference only
and do not define or limit the scope of provisions of this Note.



     2.14 Successors and Assigns. This Note binds Borrower and its successors,
assigns, heirs, administrators and executors, and inures to the benefit of
Holder and its successors, assigns, participants, heirs, administrators and
executors.



	 	 	 
	BORROWER:

	 	AKORN-STRIDES, LLC,
	

	 	a Delaware limited liability company
	 
	 	 
	

	 	By:                                      
	

	 	Name:                                      
	

	 	Title:                                      








B-4










 





EXHIBIT C




STRIDES CAPITAL CONTRIBUTION AGREEMENT




	 	 	 	 	 
	Buffalo Grove, Illinois

	 	$	1,250,000.00	 
	September 22, 2004
	 	 	 	 







     For value received, STRIDES ARCOLAB LIMITED, a company organized under the
laws of India (“Strides”), promises to pay to the order of AKORN-STRIDES, LLC,
a Delaware limited liability company (“A-S”), at 2500 Millbrook Drive, Buffalo
Grove, Illinois 60089-4694, or at such other place as the holder of this
Agreement (“Holder”) may from time to time designate in writing, in lawful
money of the United States, the principal sum of One Million Two Hundred Fifty
Thousand Dollars ($1,250,000.00), or so much thereof as may be advanced, with
interest and due and payable all as set forth below.



     This Strides Capital Contribution Agreement (the “Agreement”) is made
pursuant to that certain “Limited Liability Company Agreement for
Akorn-Strides, LLC, a Delaware Limited Liability Company,” dated September 22,
2004 (the “LLC Agreement”), and is one of the two “Strides Capital Contribution
Agreements” referred to therein. Terms used with capital letters in this
Agreement and not otherwise defined herein shall have the meanings set forth in
the LLC Agreement. This Agreement evidences Strides’ obligation to repay
advances to be made by A-S to Strides as provided in Section 3.1(B)(ii) of the
LLC Agreement.



ARTICLE 1. INTEREST AND PAYMENTS




     1.1 Interest. This Agreement shall bear no interest.



     1.2 Payments. Until this Agreement paid in full:



          1.2.1 Immediately on the date of Strides’ acceptance of a Purchase Order,
as defined under that certain “OEM Agreement” dated September 22, 2004 (the
“OEM Agreement”), an amount equal to thirty five percent (35%) of the invoice
amount for such Purchase Order (“Agreement Repayment Amount”) shall become due
and payable under this Agreement. Strides shall immediately, in each case, (i)
apply thirty five percent (35%) of the amount due by A-S under such invoice
under the OEM Agreement in satisfaction of the Agreement Repayment Amount; and
(ii) credit the applicable invoice by an amount equal to the Agreement
Repayment Amount.



          1.2.2 Immediately upon each occurrence of Strides becoming entitled to any
amount as a return of Capital Contribution, an equal amount shall become due
and payable under this Agreement.



     1.3 Prepayments. Strides may prepay all or any part of the principal
balance at any time without charge or premium.



C-1









 





ARTICLE 2. ADDITIONAL TERMS AND CONDITIONS




     2.1 Application of Payments. All payments received, irrespective of how
they may be designated by Strides, shall be applied in this order: first, to
amounts other than interest and principal, if any, owing under this Agreement,
second, to principal; except that, after the occurrence and during the
continuation of any Event of Default, all amounts received shall be applied in
such order as Holder, in its sole discretion, may elect. Strides waives the
application of any statute or rule of law that would otherwise direct, or
permit Strides to direct, the order of application of payments made by Strides
or amounts otherwise received by Holder.



     2.2 No Waiver By Acceptance of Overdue or Partial Payments. If Holder
accepts payment of any overdue amount, or partial payment of an amount due and
the remainder of such amount is unpaid, such acceptance shall in no event: (a)
constitute a cure or waiver of Strides’ default with respect to such overdue or
unpaid amount; (b) prevent Holder from exercising any of its rights and
remedies with respect to Strides’ default; or (c) constitute a waiver of
Holder’s right to require full and timely payment of amounts becoming due
thereafter or to exercise any of Holder’s rights and remedies for any failure
to so pay.



     2.3 Default. Each of the following events (“Events of Default”)
constitutes a default under this Agreement:



          2.3.1 a default in the payment when due of any amount hereunder;



          2.3.2 Strides (a) voluntarily suspends the transaction of business; (b)
becomes insolvent or unable to pay its debts as they mature; (c) makes an
assignment for the benefit of creditors; (d) becomes the subject of a
bankruptcy, reorganization or similar debtor-relief proceeding unless, in the
case of an involuntary petition filed against Strides, the petition is
dismissed within sixty (60) days; (e) becomes, or any of its property becomes,
the subject of appointment of a receiver, trustee, or conservator, unless, in
the case of such appointment without Strides’ consent, the appointment is
vacated within sixty (60) days; (f) has any of its property become subject to
any attachment, execution, sequestration or other judicial seizure not
discharged within sixty (60) days; (g) fails to pay or discharge any judgment
against it, singly or in the aggregate, in excess of $15,000.00, or to appeal
such judgment(s) and obtain a stay thereof within ten (10) days of entry; or
(h) is dissolved or terminated; and



          2.3.3 a termination of the OEM Agreement.



     2.4 Acceleration Upon Default. Upon the occurrence of an Event of Default, Holder may, at its election,
declare the entire balance of principal and accrued interest immediately due
and payable. A delay by Holder in exercising any right of acceleration after
an Event of Default shall not constitute a waiver of the Event of Default or of
the right of acceleration or any other right or remedy for such Event of
Default. The failure by Holder to exercise any right of acceleration as a
result of an Event of Default shall not constitute a waiver of the right of
acceleration or any other right or remedy with respect to any other Event of
Default, whenever occurring.



C-2









 





     2.5 Enforcement Fees and Costs. Strides shall immediately reimburse
Holder for all fees and costs, including reasonable attorneys’ fees and
experts’ fees and costs, incurred by Holder for: (a) enforcement of this
Agreement or any of its terms, or the exercise of any rights or remedies
hereunder and/or at law, in equity or otherwise, whether or not any action or
proceeding is filed; (b) representation of Holder in any bankruptcy,
insolvency, reorganization or other debtor-relief or similar proceeding of or
relating to Strides, to any person liable (by way of guaranty, assumption,
endorsement or otherwise) upon any of the obligations of this Agreement, or to
any property now or hereafter securing this Agreement; or (c) representation of
Holder in any action or proceeding relating to such property, whether commenced
by Holder or any other person, including foreclosure, receivership, lien or
stop-notice enforcement, bankruptcy, eminent domain and probate actions or
proceedings.



     2.6 Waivers By Maker and Other Parties. The makers, endorsers, guarantors
and sureties of this Agreement hereby waive diligence, demand, presentment,
notice of non-payment, notice of dishonor, protest and notice of protest, agree
that the time for performance of any obligation under this Agreement may be
extended from time to time without notice, consent to the release without
notice of any party liable hereon or herefor, consent to the addition without
notice of parties liable hereon or herefor, and consent to the acceptance
without notice of further security for this Agreement, including other types of
security, all without in any way affecting their liability, and waive the right
to plead any and all statutes of limitations as a defense to this Agreement,
any guaranty hereof or any agreement to pay the obligations hereof, to the full
extent permitted by law.



     2.7 Full Payment. All amounts payable under this Agreement shall be paid
in full without setoff, deduction or counterclaim. All amounts payable under
this Agreement shall be free and clear of and without any deduction or
withholding for or on account of any taxes, levies, duties, charges, fees,
restrictions or conditions of any nature now or hereafter imposed by any
federal, state, country or local government or any political subdivision or
taxing authority thereof or therein. Strides shall indemnify Holder against
any such taxes, levies, imposts, duties, charges and fees (other than taxes on
the income of Holder imposed by any taxing authority) which may be assessed
against Holder or claimed or demanded from Holder in respect of any amount
payable by Strides hereunder, and against any costs, charges, expenses or
liability arising out of or in respect of such assessment, claim or demand, to
the full extent permitted by law.



     2.8 Time of the Essence. Time is of the essence with respect to the
payment and performance of the obligations of this Agreement.



     2.9 No Oral Waivers or Modifications. No provision of this Agreement may
be waived or modified orally, but only in a writing signed by Holder.



     2.10 Governing Law. This Agreement shall be governed by and construed
under the internal laws of the State of New York, without regard to conflict of
law provisions.



     2.11 Severability. Every provision of this Agreement is intended to be
several. If any provision of this Agreement is determined by a court of
competent jurisdiction to be illegal, invalid or unenforceable, such
illegality, invalidity or unenforceability shall not affect the other
provisions hereof, which shall remain binding and enforceable.



C-3









 





     2.12 Limitation Upon Interest. All agreements between Strides and Holder,
now existing or hereafter arising, are hereby expressly limited so that in no
event whatsoever shall the amount paid or agreed to be paid to Holder hereof
for the use, forbearance or detention of money to be advanced hereunder or
otherwise, or for the performance or payment of any covenant or obligation
contained herein, exceed the maximum amount permissible under applicable law.
If from any circumstance whatsoever fulfillment of any provision hereof exceeds
the limit of validity prescribed by law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if from any such
circumstance Holder hereof shall ever receive as interest under this Agreement
or otherwise an amount that would exceed the highest lawful rate, such amount
that would be excessive interest shall be applied to the reduction of the
principal amount owing hereunder (without charge for prepayment) and not to the
payment of interest, or if such excessive interest exceeds the unpaid balance
of principal, such excess shall be refunded to Strides.



     2.13 Headings. Headings herein are used for convenience of reference only
and do not define or limit the scope of provisions of this Agreement.



     2.14 Successors and Assigns. This Agreement binds Strides and its
successors, assigns, heirs, administrators and executors, and inures to the
benefit of Holder and its successors, assigns, participants, heirs,
administrators and executors.



	 	 	 	 	 
	STRIDES:	 	STRIDES ARCOLAB LIMITED, a
	 	 	company organized under the laws of India
	 
	 	 	 	 
	 	 	By:                                      
	

	 	 	Arun Kumar,                   








C-4










 





EXHIBIT D




OEM AGREEMENT




This OEM Agreement, (“Agreement”) is made and entered into as of September 22,
2004 (“Effective Date”), by and between Akorn-Strides, LLC, a Delaware limited
liability company having a principal place of business at 2500 Millbrook Drive,
Buffalo Grove, Illinois 60089-4694, United States of America (“A-S”), and
Strides Arcolab Limited, a company organized under the laws of India having a
principal place of business at Strides House, Bilekahalli, Bannerghatta Road,
Bangalore 560 076, India (“Strides”), (each a “Party” and collectively the
“Parties”).




RECITALS




     A. A-S is a new entity formed by Strides and Akorn, Inc., a Louisiana
corporation (“Akorn”), to engage in the development and marketing of generic
drug products;



     B. A-S desires to have Strides assist it in the preparation of ANDAs for
the sale of certain Products by A-S and to manufacture such Products for sale
to A-S exclusively in the Exclusive Market (as those terms are defined below),
and Strides desires to assist A-S in the preparation of ANDAs for the sale of
certain Products by A-S and to manufacture such Products for sale to A-S
exclusively in the United States, pursuant to the terms and conditions of this
Agreement.



NOW, THEREFORE, in consideration of the mutual promises, covenants and
obligations contained herein, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:



ARTICLE 1



DEFINITIONS




     1.1 Act. The term “Act” means the United States Federal Food, Drug, and
Cosmetic Act.



     1.2 Affiliate. The term “Affiliate” means with respect to any Party, any
party controlling, controlled by or under common control with any such Party.
For purposes hereof, “control” and its derivatives means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Party, whether through the ownership of voting
securities or voting interests, by contract or otherwise.



     1.3 Akorn. The term “Akorn” has the meaning ascribed to it in Recital A.



     1.4 ANDA. The term “ANDA” means an abbreviated new drug application filed
with the FDA to provide for the review and ultimate approval of a generic drug
product.



     1.5 ANDA Materials. The term “ANDA Materials” means ANDAs prepared
pursuant to ARTICLE 2 below, and all content thereof, and supporting
documentation and official correspondence related thereto.



 









 





     1.6 ANDA Product. The term “ANDA Product” means a generic drug active
pharmaceutical ingredient in finished dosage form, (injectable, lyophilized,
powder fill, soft gel capsule or tablet), approved by the FDA for sale in the
United States pursuant to an ANDA, but excluding specifically Patent
Challenging Products.



     1.7 ANDA Schedule. The term “ANDA Schedule” has the meaning ascribed to
it in Section 2.1, as may be amended by mutual agreement of the Parties from
time to time.



     1.8 Antidumping Laws. The term “Antidumping Laws” means the United States
antidumping laws set forth in Title VII of the Tariff Act of 1930, as amended
(19 U.S.C. 1673 et seq.).



     1.9 Approved Facility. The term “Approved Facility” means the Strides
facility that is approved in writing by A-S for the manufacturing of Products
under this Agreement.



     1.10 A-S Indemnitees. The term “A-S Indemnitees” has the meaning ascribed
to it in Section 8.1.1.



     1.11 A-S Materials. The term “A-S Materials” means any Property (i) owned
or possessed by A-S as of the Effective Date; (ii) later made, acquired or
developed by A-S during the term of this Agreement; or (iii) that are derived
from materials provided by A-S to Strides, including, but not limited to, any
of the above A-S Materials, A-S Confidential Information and any other
materials provided to Strides in connection with this Agreement.



     1.12 Certificate of Analysis. The term “Certificate of Analysis” means a
certificate of analysis conforming in content and method with the requirements
of the Act.



     1.13 cGMP. The term “cGMP” means current Good Manufacturing Practices as
established by the FDA as the same may be amended from time to time.



     1.14 Components. The term “Components” means raw materials, such as media
and columns, approved in advance by A-S for use in manufacturing of Products
by Strides.



     1.15 Confidential Information. The term “Confidential Information” means
all confidential information of a Party relating to any designs, know-how,
inventions, technical data, ideas, uses, processes, methods, formulae, research
and development activities, work in process, or any scientific, engineering,
manufacturing, marketing, business or financial information relating to the
disclosing Party, its present or future products, sales, suppliers, customers,
employees, investors or business, whether in oral, written, graphic or
electronic form disclosed by the Parties prior to or during this Agreement
(which is marked confidential or acknowledged as being confidential prior to
disclosure). If the Confidential Information is disclosed orally or visually,
it shall be identified as such at the time of disclosure and confirmed in
writing by the disclosing party within thirty (30) days of disclosure.
Confidential Information shall also include any other information in oral,
written, graphic or electronic form which, given the circumstances surrounding
such disclosure, would be considered confidential. This Agreement shall be
deemed Confidential Information.



D-2









 





     1.16 Cost of Production. The term “Cost of Production” means the cost of
producing a Product, which is the sum of (i) material, fabrication, and other
processing costs; (ii) selling, general, and administrative expenses; and (iii)
the cost of containers and other packing expenses.



     1.17 Derived. The term “Derived” or “derived” means obtained, developed,
created, synthesized, designed, derived or resulting from, based upon or
otherwise generated (whether directly or indirectly, or in whole or in part).



     1.18 Epidemic Failure. The term “Epidemic Failure” means Product
deficiencies resulting from defects in material, workmanship and/or
manufacturing process that are in excess of one percent (1%) of the total
number of Products shipped during any rolling six (6) month period.



     1.19 Exclusive Market. The term “Exclusive Market” means the sale of
Products to United States hospitals, medical clinics, physician groups and
other wholesale drug markets in the United States.



     1.20 FDA. The term “FDA” means the United States Food and Drug
Administration.



     1.21 Forecast. The term “Forecast” is defined in Section 4.2.1.



     1.22 Grandfathered Product. The term “Grandfathered Product” refers to a
generic drug active pharmaceutical ingredient in finished dosage form,
(injectable, lyophilized, powder fill, soft gel capsule or tablet), (i) that
has not had any changes in formulation, dosage form, potency, route of
administration, indication or intended patient population since 1938 and that
thereby does not qualify as a “new drug” under Section 321 of the Act; or (ii)
that has not had any changes in formulation, dosage form, potency, route of
administration, indication or intended patient population since 1962, and that,
prior to 1962, was (X) used or sold commercially in the United States, (Y) not
a new drug as defined by the Act at that time, and (Z) not covered by an
effective application.



     1.23 Insignia. The term “Insignia” means trademarks, trade names, logos,
symbols, badges, labels, decorative designs, packaging designs or similar trade
dress.



     1.24 Intellectual Property Rights. The term “Intellectual Property
Rights” means all United States and worldwide trademarks, service marks, trade
dress, logos, copyrights, rights of authorship, inventions, patents, rights of
inventorship, moral rights, rights of publicity and privacy, trade secrets,
rights under unfair competition and unfair trade practices laws, and all other
intellectual and industrial property rights related thereto.



     1.25 Letter of Credit. The term “Letter of Credit” means an irrevocable
letter of credit in the amount of One Million Two Hundred Fifty Thousand United
States Dollars (US $1,250,000), issued by Strides’ Indian bank, acceptable to
A-S acting reasonably, and confirmed by a United States Bank selected by A-S,
as more fully set forth in Section 3.8.



     1.26 Net Price. The term “Net Price” means the price for Products as
calculated pursuant to Section 4.3.



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     1.27 Non-Exclusive Market. The term “Non-Exclusive Market” means the sale
of Products in United States retail markets direct to consumer or physician and
specifically excluding the Exclusive Market.



     1.28 Normal Value. The term “Normal Value” means, (i) if an adequate
volume of the Product is sold in the country in which the Approved Facility is
located for home consumption, the home market prices; (ii) if home market sales
of the Product do not exist or are too few to provide an adequate comparison,
the price at which the Product is sold for exportation to third countries; or
(iii) if neither home market sales nor third country sales form an adequate
basis of comparison, then normal value is based on the constructed value of the
Products as calculated pursuant to the Antidumping Laws.



     1.29 Patent Challenging Product. The term “Patent Challenging Product”
means a generic drug active pharmaceutical ingredient in finished dosage form,
(injectable, lyophilized, powder fill, soft gel capsule or tablet), approved by
the FDA for sale in the United States pursuant to an ANDA, (i) that specified
brand-name patents that were successfully challenged, or not defended by the
applicable brand-name manufacturer; and (ii) that successfully demonstrated
bioequivalence to the FDA.



     1.30 Products. The term “Products” means those ANDA Products,
Grandfathered Products and Patent Challenging Products set forth on Exhibit A,
attached hereto and incorporated herein, as may be amended by mutual agreement
of the Parties from time to time, to be (i) subject (with the exception for
Grandfathered Products) to an ANDA on behalf of A-S; and (ii) to be
manufactured by Strides pursuant to this Agreement.



     1.31 Product Data. The term “Product Data” means documentation, records,
raw data, specimens, labeling, certificates, specifications, formulae,
procedures, and other work product generated during this Agreement (including
without limitation data relating to the process development, manufacture or
testing of the Products). Notwithstanding anything to the contrary in this
Agreement, all Product Data, but specifically except for ANDA Materials, shall
be deemed Confidential Information of Strides. ANDA Materials shall be deemed
Confidential Information of A-S.



     1.32 Property. The term “Property” means intellectual property or other
property, designs, know-how, inventions, technical data, ideas, uses,
processes, methods, formulae, research and development activities, or any
scientific, engineering, manufacturing, marketing, business or financial
information.



     1.33 Purchase Order. The term “Purchase Order” means an order for
Products which shall specify at least the following: (i) Product quantity;
(ii) delivery date; and (iii) other order terms and conditions as determined by
A-S. Purchase Orders may additionally identify drop shipment destination, and
other matters specific to each separate sale by A-S to a customer.



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     1.34 Registrations. The term “Registrations” means all registrations,
permits, licenses, authorizations, approvals, presentations, notifications or
filings (together with all applications therefor), which are filed with or
granted by the FDA in the United States and with the governing health authority
of any other country, and which are required to develop, make, use, sell,
import or export the Products.



     1.35 Registration Payment. The term “Registration Payment” has the
meaning ascribed to it in Section 2.3.1.



     1.36 Registration Threshold. The term “Registration Threshold” means
collectively: (i) the Approved Facility has received a Satisfactory cGMP
Inspection, which remains current; and (ii) twelve (12) ANDAs for Products
hereunder are submitted to the FDA.



     1.37 Registration Costs. The term “Registration Costs” means all costs
associated with the preparation of the ANDAs set forth in the ANDA Schedule, as
may be amended by mutual agreement of the Parties from time to time.



     1.38 Specifications. The term “Specifications” means the specifications
for each Product as set forth in the applicable ANDA, or in the case of
Grandfathered Products, in the specifications applicable to the original FDA
approved finished dosage form.



     1.39 Strides Capital Contribution Agreements. The term “Strides Capital
Contribution Agreements” means the contribution agreements with respect to the
advances made by A-S to Strides pursuant to Section 3.1B(i)(b) and, to the
extent applicable, Section 3.1B(i)(c) of the Limited Liability Company
Agreement for Akorn-Strides, LLC, of even date between Strides and Akorn.



     1.40 Strides Indemnitees. The term “Strides Indemnitees” has the meaning
ascribed to it in Section 8.2.



     1.41 Strides Materials. The term “Strides Materials” means any Property
(i) owned or possessed by Strides as of the date hereof; or (ii) later made,
acquired or developed by Strides during the term of this Agreement, including
any Property that relates to the ANDA approval process, but, excluding
specifically, (Y) ANDAs prepared pursuant to ARTICLE 2 below, and all content
thereof, and supporting documentation and official correspondence related
thereto; and (Z) any Property derived from materials provided by A-S to
Strides, including, but not limited to, A-S Materials, A-S Confidential
Information and any other materials provided to Strides in connection with this
Agreement.



     1.42 Satisfactory cGMP Inspection. The term “Satisfactory cGMP
Inspection” means a cMGP inspection conducted by the FDA with respect to the
Approved Facility during which (1) no objectionable conditions or practices
were found; or (2) objectionable conditions were found, but corrective action
is left to Strides to take voluntarily and the objectionable conditions do not
justify further administrative or regulatory actions.



     1.43 Term. The term “Term” is defined in Section 9.1.



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     1.44 Territory. The term “Territory” means the territory and possessions
of the United States of America.



     1.45 Threshold Period. The term “Threshold Period” means has the meaning
ascribed to it in Section 3.8.1.



ARTICLE 2



ANDA PROCESS




     2.1 Application Schedule. The Parties will mutually develop a schedule for
the preparation, filing and prosecution ANDAs for the Products, as applicable
pursuant to this Agreement, containing for each Product, timelines, milestones,
and corresponding estimated Registration Costs, which, when mutually accepted
by both Parties in writing, will be attached to this Agreement as Exhibit B as
provided below (“ANDA Schedule”). Notwithstanding anything else to the
contrary, Strides shall use its best efforts to achieve the Registration
Threshold within twelve (12) months from the Effective Date.



     2.2 Changes in ANDA Schedule. A-S shall have the right to make any
changes or modifications to a ANDA Schedule by submitting a change request in
writing. Strides shall promptly implement all such changes or modifications
after they are received from A-S.



     2.3 Funding of Registration Costs.



          2.3.1 Provided that Strides delivers to A-S the Letter of Credit, A-S
shall pay Strides the amount of Two Million Five Hundred Thousand United States
Dollars ($2,500,000) as a payment for Registration Costs (“Registration
Payment”). Strides shall apply and allocate the Registration Payment to the
Registration Costs budgeted in the ANDA Schedule. Upon exhaustion of the
Registration Payment, A-S shall provide Strides with the unpaid remaining
Registration Costs corresponding to the timeline and budgeted amounts set forth
in the ANDA Schedule.



          2.3.2 A-S may, in it sole discretion, and solely to the extent that
additional capital contributions for such purpose are made to A-S by its
members pursuant to Section 5.3A of the Limited Liability Company Agreement for
Akorn-Strides, LLC, of even date between Strides and Akorn, pay Strides an
additional amount of up to Two Million Five Hundred Thousand United States
Dollars ($2,500,000) as a further payment for additional Registration Costs.
Any such further amounts paid under this Section 2.3.2 shall also be deemed
part of the Registration Payment.



     2.4 Product Registrations. A-S shall have the exclusive right to file,
prosecute, seek and obtain all applicable Registrations for Products in the
Territory. Strides shall prepare all information required to allow A-S to
file, prosecute, seek and obtain all applicable Registrations for each Product
in the Territory, including, but not limited to an ANDA, in A-S’ name, within
the time frame mutually agreed by A-S and Strides. Strides shall provide all
required information and documentation, including, but not limited to, a
Chemistry Manufacturing Controls (CMC) section in a format acceptable to the
FDA, and otherwise cooperate as requested by A-S in support of any regulatory
application related to a Product, as part of Strides’ obligations pursuant to
the receipt of Registration Costs paid by A-S. Any such application



D-6









 





related to the Product shall be the sole and exclusive property of A-S. If
requested by A-S and at the sole cost and expense of A-S, Strides shall file
any required amendments to such application to allow manufacturing of the
Product in its facility. Any such applicable Registration related to the
Product in the Territory shall be the sole and exclusive property of A-S. A-S
shall file any required amendments to such application to allow manufacturing
of the Product in the Approved Facility. Each Party shall reasonably cooperate
with the other Party (including without limitation, providing all reasonably
necessary information in its possession, taking all reasonably necessary
actions and executing all reasonably necessary instruments) in connection with
the preparation, filing, prosecution, seeking and obtaining the Registrations.




     2.5 Representatives. Upon execution of this Agreement, Strides and A-S
shall each select one (1) program manager who will be responsible for directing
and overseeing all activities regarding this Agreement and for transmitting and
receiving all communications regarding this Agreement on behalf of its
respective company. Each Party may change its designated program manager at
any time effective upon providing written notice to the other Party.



ARTICLE 3



COVENANTS




     3.1 Strides’ Manufacture.



          3.1.1 Strides shall not commence manufacturing of any Products hereunder
until (i) the Approved Facility shall have received a Satisfactory cGMP
Inspection; and (ii) the Product, except for Grandfathered Products, has been
approved by the FDA for sale in the United States pursuant to an ANDA.



          3.1.2 Strides shall manufacture and sell to A-S the Products ordered by
A-S or its Affiliates under Purchase Orders. No independent contractors shall
be used by Strides to manufacture the Products without A-S’ approval. Strides
shall manufacture all Products under this Agreement in conformity with the
applicable Specifications. Strides will only purchase Components and other raw
materials through vendors approved by the FDA pursuant to the cGMP approval for
the applicable Product.



          3.1.3 Strides’ manufacture shall conform to the requirements of all (i)
applicable laws, regulations and ordinances of any government, agency or public
authority having jurisdiction over the manufacture and delivery of Products in
the country where the Approved Facility is located; (ii) applicable United
States federal and state laws and regulations including, but not limited to,
the Fair Labor Standards Act of 1938 and all applicable Department of Labor
regulations, local and municipal ordinances and the regulations of any agency
or public authority having jurisdiction over the manufacture and delivery of
Products; and (iii) in accordance with cGMP and all applicable laws and
regulations in the United States.



D-7









 





     3.2 Exclusive Supply. Subject to the terms and conditions of this
Agreement, Strides shall manufacture and supply A-S with the Products during
the term of this Agreement. Strides shall not sell Products to any other party
in the Territory that Strides knows or has reason to know is intending to sell,
market or distribute such Products in the Exclusive Market. Any supply
agreement with such other parties in the Territory shall prohibit any sales of
the Products in the Exclusive Market. Strides shall be permitted to sell
Products to any other party in the Territory provided that Strides knows that
such party is intending to sell, market or distribute such Products in the
Non-Exclusive Market only.



     3.3 Notifications.



          3.3.1 Each Party shall promptly advise the other of any safety or toxicity
problem of which either Party becomes aware regarding any Product.



          3.3.2 Strides will, within three (3) business days following notification
to Strides, inform A-S in the event of any FDA or other regulatory inspection
relating to any Product and will immediately notify A-S in writing of any
adverse event relating to a Product.



     3.4 Custody of A-S Materials. In connection with this Agreement, the
Parties agree that Strides will have custody over certain A-S Materials. It is
understood that such A-S Materials is held in trust by Strides for A-S, and
that all such materials will be clearly labeled as belonging to A-S, and that
Strides shall bear the risk of loss for any A-S Materials during the time that
such A-S Materials is in the possession of Strides.



     3.5 Recalls. Each Party promptly shall notify the other if any Product or
device manufactured from Product, is alleged or proven to be the subject of a
recall, market withdrawal or correction. A-S shall be responsible for
coordinating any recall, market withdrawal or field correction of Product, at
the sole cost of Strides. A-S shall provide Strides with a copy of all
documents relating to such recall, market withdrawal or field correction at
Strides’ sole cost and expense. Strides shall cooperate with A-S (including
providing A-S with all data, information and documents requested by A-S) in
connection with such recall, market withdrawal or field correction, at Strides’
sole cost and expense. Strides will bear all reasonable costs associated with
(A) such recall, market withdrawal or field correction (including, but not
limited to costs associated with receiving and administering the recalled
Product and notification of the recall to those persons whom A-S deems
appropriate); and (B) replacement of such recalled Product.



     3.6 Right Of Access/ Inspections. Strides acknowledges that it is
essential for A-S to have periodic access to each Approved Facility for the
purpose of conducting inspections and/or audits under this Agreement,
including, without limitation, audits of Strides’ compliance with cGMPs and
with environmental and other laws. Strides shall make available to A-S all
Product Data, equipment, and facilities relating to this Agreement upon A-S’
request with five (5) days advance notice for inspection by A-S, its
representatives, including authorized third party consultants, or the FDA, at
any time commencing on the Effective Date and expiring on the later of (a) six
months after manufacture of the last Product, or (b) as long as a Product is in
use or undergoing clinical trials, provided that A-S notifies Strides on a
yearly basis that a Product is still undergoing clinical trials. A-S shall
have the right to access the Approved Facility, and all applicable records
related thereto, to oversee production of a Product, to discuss and inspect its



D-8









 





manufacturing processes, and to test the Products and review Strides’
records, provided that the Approved Facility or other client projects are not
unreasonably disrupted during the inspection. If A-S observes or discovers
variances from established standards and methods of production of Products, A-S
shall give written notice thereof to Strides, and upon receipt of any such
notice, Strides promptly shall take all appropriate remedial or corrective
action and give written notice to A-S describing in reasonable detail such
actions taken. If Strides disagrees with any such advice and direction, the
parties shall discuss in good faith an appropriate resolution. Notwithstanding
anything else to the contrary, any such inspections/audits and any testing done
by A-S during them, will not relieve Strides of liability for Products later
found to be defective or for Strides’ failure to meet its obligations under
this Agreement.




     3.7 Interference with Employees. Neither Party shall during the Term and
for a period of twelve (12) months thereafter, directly or indirectly (i)
induce or attempt to induce any employee of the other Party to quit employment
with such other Party; (ii) otherwise interfere with or disrupt the
relationships between the other Party and its employees; (iii) solicit any
employee of the other Party. Notwithstanding the previous sentence, a general
solicitation not specifically targeted at the other Party’s employees shall not
be a breach of the this Section 3.7.



     3.8 Letter of Credit.



          3.8.1 The Letter of Credit shall be opened within five (5) days from the
Effective Date and shall have an initial term of one year and six months. All
bank charges in respect of the Letter of Credit are for the account of Strides.
The Letter of Credit shall provide for payment of the entire Letter of Credit
amount, or One Million Two Hundred Fifty Thousand United States Dollars (US
$1,250,000), to A-S in the event that Strides fails to achieve the
Registration Threshold prior to the lapse of the period beginning with the
Effective Date and ending on the one year anniversary thereof (“Threshold
Period”), and fails to cure such failure within ninety (90) days thereafter.



          3.8.2 Should Strides fail to achieve the Registration Threshold prior to
the lapse of the Threshold Period then A-S may, in its sole discretion, without
notice to Strides, elect to (i) receive payment of the entire Letter of Credit
amount should Strides’ failure to achieve the Registration Threshold not be
cured within ninety (90) days following the lapse of the Threshold Period, or
(ii) negotiate an extension of the Threshold Period with Strides, pursuant to
Section 3.8.3 below, provided that, should the Parties fail to agree in writing
on the terms of such an extension, A-S shall receive payment of the entire
Letter of Credit amount should Strides’ failure to achieve the Registration
Threshold not be cured within ninety (90) days following the lapse of the
Threshold Period.



          3.8.3 Should A-S, in its sole discretion, elect to negotiate an extension
of the Threshold Period, as provided above, then the Parties shall negotiate in
good faith the terms of such an extension, provided that, the term of the
Letter of Credit shall be extended to extend at least six (6) months following
the lapse of the new Threshold Period or a new acceptable Letter of Credit
shall be issued with a term to extend at least six (6) months following the
lapse of the new Threshold Period. The extended Letter of Credit, or
replacement Letter of Credit, as the case may be, shall provide for payment of
the entire Letter of Credit amount, or One Million Two Hundred Fifty Thousand
United States Dollars (US $1,250,000), to A-S in the event that



D-9









 





Strides fails to achieve the Registration Threshold prior to the lapse of
the new Threshold Period, as extended hereby, and fails to cure such failure
within ninety (90) days thereafter. All provisions of this Section 3.8 shall
continue apply in the same manner to the extent that the Threshold Period is
extended hereby.




          3.8.4 The receipt by A-S of funds pursuant to the Letter of Credit shall
not act as a waiver of A-S’ other legal and equitable remedies against Strides
or other third parties, and A-S hereby reserves all rights to such other legal
and equitable remedies.



          3.8.5 Upon Strides’ achieving the Registration Threshold within the
Threshold Period, as such period may be extended pursuant to this Section 3.8,
or within the ninety (90) day cure period provided above, A-S shall return the
Letter of Credit to Strides and Strides shall be permitted to terminate the
Letter of Credit.



ARTICLE 4



PURCHASE OF PRODUCTS




     4.1 Purchase Order.



          4.1.1 This Agreement applies to all Purchase Orders that A-S, and/or any
of its current or future Affiliates, may place with Strides for the purchase of
Products. In this ARTICLE 4 and throughout this Agreement where A-S’ rights
with respect to Products are reference, “A-S” will include A-S’ Affiliates,
other than Strides or Strides’ other Affiliates. The terms and conditions of
this Agreement including those presented in all exhibits hereto shall apply to
any Purchase Order, regardless of whether this Agreement or its terms and
conditions are expressly referenced in that Purchase Order. No inconsistent or
additional term or condition in any Purchase Order or any acknowledgment or
sale document from Strides shall be applicable to orders for Products placed by
A-S during the Term, unless expressly agreed to by the Parties in writing.



          4.1.2 Strides shall acknowledge all Purchase Orders in writing to A-S.



          4.1.3 Strides shall be deemed to have accepted any Purchase Order: (a)
issued pursuant to this Agreement that does not exceed the current Forecast for
the then-current month; or (b) for which Strides does not notify A-S in writing
within one (1) business day after its receipt that Strides cannot meet the
Purchase Order’s terms.



     4.2 Forecasts.



          4.2.1 Each month during the Term, A-S will provide Strides with a twelve
(12) month rolling forecast (“Forecast”) estimating its monthly requirements
for purchases of Products for the subsequent twelve (12) calendar month period.



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          4.2.2 The Forecast is submitted solely to assist Strides in ensuring that
it has adequate Components, capacity and supplies to meet Purchase Orders that
may be issued pursuant to the Forecast. Notwithstanding anything else to the
contrary, A-S will not be obligated to purchase any amounts of Products set
forth in each Forecast. A-S shall use commercially reasonable efforts to issue
a new twelve (12) month Forecast by the first business day of each calendar
month.



          4.2.3 Unless Strides notifies A-S in writing within five (5) calendar days
after receipt of a Forecast that it will not be able to supply the amount of
Products specified in the Forecast, Strides shall be obligated to provide the
quantity of Products consistent with the Forecast upon receipt of A-S’ Purchase
Orders, and will be deemed to have warranted that it has the manufacturing
capacity to supply the Products in accordance with the Forecast. Strides will
at all times maintain a two-month inventory of Components based on A-S’
Forecasts.



     4.3 Pricing. A-S’s purchase price for a Product shall be calculated in
advance prior to A-S placing the first Purchase Orders therefor, pursuant to
this Section 4.3 (“Net Price”). The Net Price for a Product, in each case,
shall be calculated by the Parties as that dollar amount that is the greater of
(i) the Product’s Cost of Production; or (ii) the Product’s Normal Value; or
(iii) a price that would permit A-S to achieve gross margins in its resale and
distribution of the Products, as calculated using United States GAAP and as
measured against the average wholesale pricing of bioequivalent products in the
Territory as the baseline in each case, in the following ranges: (X) ANDA
Products 45-50% gross margin; (Y) Grandfathered Products 30-35% gross margin;
and (Z) Patent Challenging Products 55-60% gross margin. Notwithstanding
anything to the contrary in the prior sentence, the price as calculated under
clause (iii) therein, to the extent it is applicable, shall be adjusted in each
case so that it is not less than the Product’s material, fabrication, and other
processing costs plus twenty percent (20%). The Parties will mutually agree to
the dollar amount of the Net Price for each Product according to this Section
4.3 and such Net Price will remain effective until and unless revised as
necessary to continue to meet the above Net Price calculation test.
NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY, A-S IS FREE TO ESTABLISH ITS OWN
PRICING FOR SALE OF THE PRODUCTS IN THE TERRITORY.



     4.4 Stamp Duty. All duties and charges, including stamp duty or state
government levy, in the country in which the Approved Facility is located and
in the Territory, in respect of or under the Agreement, including any duties,
taxes, VATs or similar charges arising with respect to the manufacture, sale,
shipment and delivery of Products by Strides to A-S, shall be borne and paid by
Strides.



     4.5 Cancellation Of Purchase Orders. All A-S Purchase Orders are firm
orders and once accepted by Strides may not be cancelled by A-S without
Strides’ approval. Any cancellation of accepted Purchase Orders may include
Strides’ reasonable cancellation charges which shall be communicated to A-S in
advance of canceling the Purchase Order and must be approved by A-S. A-S
retains the right to rescind any request to cancel an accepted Purchase if it
does not accept Strides’ cancellation charges.



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     4.6 Rescheduling. A-S may reschedule delivery under a Purchase Order from
its originally scheduled ship date provided that it so informs Strides on or
before the scheduled shipment date stated in the applicable Purchase Order
without any rescheduling or any other charges. Notwithstanding the previous
sentence, A-S shall remain obligated to pay for such rescheduled shipment as if
it had shipped on the originally scheduled shipment date. Any rescheduling
shall not exceed sixty (60) calendar days from the originally scheduled
shipment date without Strides’ prior written approval.



     4.7 Packing and Cartage. All Products ordered by A-S shall be packed for
shipment and storage in accordance with applicable requirements of the Act and
A-S’ instructions. No charge will be allowed for packing, boxing, or cartage,
unless agreed upon at the time of purchase and set forth in the Purchase Order.
Damage to any Products due to packing or cartage will be charged to Strides.
A-S’ order number, part number and quantity shipped shall be marked or tagged
on each package and bill of lading.



     4.8 Shipment.



          4.8.1 Strides shall ship the Products to A-S or drop ship the Products to
A-S’ customers, as set forth in the respective Purchase Orders. Strides shall
deliver Products into the possession of a common carrier designated by A-S.
All Products shall be shipped and delivered CIP A-S’ delivery point (2000
Incoterms). Title to and risk of loss shall pass pursuant to CIP A-S’ delivery
point (2000 Incoterms).



          4.8.2 Upon learning of any potential delivery delays, Strides shall notify
A-S as to the cause of such delays and the actions taken by Strides to resolve
such delays. If Strides fails to make deliveries at the specified time and
such failure is caused by Strides, Strides shall, at no additional cost to A-S,
employ accelerated measures such as material expediting fees, premium
transportation costs, or labor overtime required to meet the specified delivery
schedule or minimize the lateness of deliveries.



     4.9 Payment.



          4.9.1 All A-S Purchase Orders accepted by Strides and Strides’ invoice
therefor shall be paid as follows: (i) (Y) Until all of Strides’ obligations
under the Strides Capital Contribution Agreements are fully satisfied, thirty
five percent (35%) of the amount due by A-S shall be applied as a payment
against Strides’ obligations under the Strides Capital Contribution Agreements
on the date of Strides’ acceptance of the Purchase Order, pursuant to the terms
of the Strides Capital Contribution Agreements; or (Z) Upon satisfaction of
Strides’ obligations under the Strides Capital Contribution Agreements, thirty
five percent (35%) of the amount due by A-S shall be due and payable within
thirty (30) calendar days of Strides’ acceptance of the applicable Purchase
Order; and (ii) the remaining sixty five percent (65%) shall be due and payable
within sixty (60) calendar days after the shipment date for the applicable
Products. A-S shall accept all A-S invoices, not subject to a good faith
dispute, on presentment by Strides.



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          4.9.2 The price for any Products includes the cost of Strides’ usual
packing of good quality so as to sustain (without damages) normal international
air and/or vessel transportation to the Territory and domestic air and/or motor
freight transportation in the Territory to the point of delivery.



ARTICLE 5



DELIVERY AND ACCEPTANCE




     5.1 Deliveries. Failure to deliver Products of the quality and quantity
and by the scheduled shipment date stated in the applicable Purchase Order
shall, at the option of A-S, relieve it of any obligation to accept and pay for
such Products as well as any undelivered shipments if there be any. Any
failure by A-S to exercise its option with respect to any shipment of Products
shall not be deemed to constitute a waiver with respect to subsequent
shipments.



     5.2 Acceptance of Product. Strides will provide A-S with a Certificate of
Analysis required for A-S to determine if a Product meets its applicable
Specifications. A-S will examine such information for compliance with the
Specifications. A-S may reject a Product lot if the lot does not meet
Specifications. A-S shall notify Strides in writing of particular
deficiencies, including any defects in the Products or of any failure of the
Products to comply with their respective Specifications, during the inspection
period which period shall be sixty (60) calendar days immediately following
receipt of the shipment from Strides. Failure to give notice of or
particularize the defects or non-compliance within the sixty (60) calendar day
inspection period shall constitute A-S’ acceptance of such Products. In the
event that A-S rejects a Product lot, then, to the extent that payment therefor
has not been made by A-S, all applicable invoices shall be cancelled by Strides
and no further payment with respect to such shipment shall be due from A-S, and
to the extent payment has already been made, A-S shall be entitled to the
remedies provided under Section 7.2 below.



ARTICLE 6



INTELLECTUAL PROPERTY




     6.1 A-S’ Property Rights.



          6.1.1 A-S shall solely own and have exclusive worldwide right, title and
interest in and to A-S Materials, to all modifications, enhancements and
derivative works thereof, and to all Intellectual Property Rights related
thereto. Strides acknowledges and agrees that title to the A-S Materials shall
always remain with A-S, and that Strides shall not acquire any interest
therein. Strides shall not challenge, contest or otherwise impair A-S’s
ownership of the A-S Materials or the validity or enforceability of A-S’s
Intellectual Property Rights related thereto.



          6.1.2 A-S may disclose, from time to time during the term of this
Agreement, A-S Materials to Strides pursuant to the terms of this Agreement.
All United States rights to ANDA Materials, whether developed solely by A-S or
resulting from the Parties’ joint cooperation, and all modifications,
enhancements and derivative works of the A-S Materials, whether developed
solely by A-S or resulting from the parties’ discussions or joint activities,
belong solely to A-S, and A-S shall retain all Intellectual Property Rights
thereto. As additional consideration for the favorable provisions of this
Agreement, Strides shall assign and hereby



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assigns and conveys to A-S from the moment of creation all of Strides’
United States right, title and interest in and to such ANDA Materials and all
worldwide right, title and interest in and to such modifications, enhancements
and derivative works of the A-S Materials, to all enhancements, improvements
and derivatives thereof, and to all Intellectual Property Rights therein.




     6.2 Strides’ Property Rights. Strides shall solely own and have exclusive
worldwide right, title and interest in and to the Strides Materials, to all
modifications, enhancements and derivative works thereof, (except for United
States rights to ANDA Materials), and to all Intellectual Property Rights
related thereto. A-S acknowledges and agrees that title to the Strides
Materials shall always remain with Strides, and that A-S shall not acquire any
interest therein. A-S shall not challenge, contest or otherwise impair
Strides’ ownership of the Strides Materials or the validity or enforceability
of Strides’ Intellectual Property Rights related thereto.



     6.3 Insignia.



          6.3.1 The Parties do hereby agree that certain Insignia of each of them
will be affixed to the Products and related sales brochures, marketing
materials, and packaging as will be mutually agreed upon in writing by the
Parties. All uses of the Parties’ Insignia shall only be pursuant to this
Section 6.3.3, the uses as attached and incorporated to this Agreement per
Exhibit C, attached hereto and fully incorporated herein, and any further
written agreement of the Parties with respect to each specific use.



          6.3.2 Effective only upon the written agreement of the Parties with
respect to the specific use and all particulars regarding such use with the
Products, A-S grants to Strides during the Term a non-exclusive,
non-transferable, non-assignable, indivisible, revocable and terminable
license, without the right to sublicense, to use the A-S Insignia as set forth
in the applicable written agreement between the Parties, but only to the extent
necessary to label and brand the Products and related sales brochures,
marketing materials, and packaging as mutually agreed upon by the Parties in
such written agreement, and for no other purposes. Such A-S Insignia will not
be affixed, used, or otherwise displayed on the Products or in connection
therewith without the prior written approval of A-S.



          6.3.3 Effective only upon the written agreement of the Parties with
respect to the specific use and all particulars regarding such use with the
Products, Strides grants to A-S during the Term a non-exclusive,
non-transferable, non-assignable, indivisible, revocable and terminable
license, without the right to sublicense, to use the Strides Insignia as set
forth in the applicable written agreement between the Parties, but only to the
extent necessary to label and brand the Products and related sales brochures,
marketing materials, and packaging as mutually agreed upon by the Parties in
such written agreement, and for no other purposes. Such Strides Insignia will
not be affixed, used, or otherwise displayed on the Products or in connection
therewith without the prior written approval of Strides.



D-14









 





          6.3.4 Notwithstanding any of the provisions of this Agreement, the Parties
shall not at any time do anything or act in any way that would or might
adversely affect the value or validity of any Insignia or other intellectual
property belonging to the respective Party. Each Party shall immediately
notify the other in writing upon becoming aware of any intellectual property
infringement or imitation of any intellectual property of A-S or Strides or of
any facts that either Party believes might constitute infringement or
imitation. All uses of a Party’s Insignia shall inure exclusively to such
Party’s sole benefit.



     6.4 Confidentiality. Each Party (i) shall keep the other Party’s
Confidential Information confidential and shall not directly or indirectly,
use, divulge, publish or otherwise disclose or allow to be disclosed any aspect
of such other Party’s Confidential Information, except with the other Party’s
prior written consent and as specifically permitted by this Agreement; and (ii)
shall refrain from any action or conduct which might reasonably or foreseeably
be expected to compromise the confidentiality or proprietary nature of
Confidential Information. Upon request, each of the Parties shall immediately
return to the other the originals and all copies of any Confidential
Information of the other Party. The obligations and restrictions set forth in
this Section 6.4 shall not apply to any Confidential Information that falls
within any of the following exceptions, provided the receiving party produces
credible written evidence to establish that such information:



          6.4.1 is or becomes part of the public domain without breach of this
Agreement by a receiving Party;



          6.4.2 is independently developed by or for a receiving Party completely
apart from the disclosures hereunder;



          6.4.3 is received from a third party who lawfully acquires such
information without restriction, and without breach of this Agreement by a
receiving Party;



          6.4.4 was in a receiving Party’s possession prior to the disclosure by the
other Party; and/or



          6.4.5 is released pursuant to a binding court order or government
regulation, provided that the receiving Party delivers a copy of such order or
action to the other Party and cooperates with the other Party if it elects to
contest such disclosure.



     If a receiving Party wishes to rely on any of the exceptions contained
above, then such receiving Party must demonstrate to the other Party’s
satisfaction the facts underlying why the exception applies within thirty (30)
calendar days of the occurrence of the facts establishing such exception.



ARTICLE 7



WARRANTIES




     7.1 Strides Representations and Warranties. Strides represents, warrants
and covenants: (i) that it has the full power, right and authority to execute
and deliver this Agreement and that it shall use commercially reasonable best
efforts to perform its obligations hereunder; (ii) that it will assign to its
performance of this Agreement professional personnel, qualified to



D-15









 





perform the process procedures consistent with the technical requirements
of this Agreement; (iii) that none of the Strides personnel to be assigned to
this Agreement have or shall have been subject to debarment under the United
States Generic Drug Enforcement Act or any other penalty or sanction by the
FDA; (iv) that it will manufacture the Products in conformity with cGMP, all
applicable FDA regulatory requirements, the procedures and parameters set forth
in this Agreement and generally accepted professional standards; and (v) that
all Product Data will be prepared in accordance with cGMP and all applicable
FDA regulatory requirements.




     7.2 Product Warranties. Strides represents, warrants and covenants: (i)
that the Products shall be free from defects in workmanship and materials; (ii)
that the Products shall meet their applicable Specifications; and (iii) that,
upon delivery of a Product and during such time as such Product was under
Strides’ control, the Product will be in conformity with the Act and shall not
be adulterated, misbranded, misused, contaminated, tampered with or otherwise
altered, mishandled, or subjected to negligence. Strides additionally warrants
that the Products supplied hereunder shall only be built using Components
purchased from vendors approved by the FDA pursuant to cGMP. In the event of a
breach under this Section 7.2, A-S may, at its sole option, (a) replace the
Products, at Strides’ cost, (b) require that the Products be replaced by
Strides, at Strides’ cost, and Strides shall replace such Products, or (c) A-S
may return all of the Products to Strides for a full refund or full credit to
the applicable open invoice, and Strides shall immediately pay A-S a full
refund or credit the applicable open invoice, as the case may be, for such
returned Products. Strides shall maintain a sufficient inventory of Components
to fulfill its warranty obligations hereunder, as well as for other foreseeable
purposes.



     7.3 Epidemic Failure Warranty. Notwithstanding anything else to the
contrary herein, if a Product demonstrates an Epidemic Failure at any time
during the Term, Strides will, in addition to the remedies provided under
Section, reimburse A-S for direct and incidental and consequential costs, as
defined in Section 2715 of the California Commercial Code, associated with the
Epidemic Failure, including without limitation labor costs associated with
implementation of a recovery plan under this Section. A-S will notify Strides
whenever an Epidemic Failure is identified or suspected and work with Strides
to develop a recovery plan, which may include a preventative action plan if
appropriate under the circumstances. The recovery plan actually implemented by
A-S is in A-S’ sole discretion; provided, however that (i) A-S and Strides will
work together to minimize costs associated with A-S’ recovery plan as much as
possible without compromising A-S’ ability to aggressively respond to its
customer’s needs; and (ii) Strides will reimburse A-S for costs incurred by A-S
in implementing that portion of the recovery plan associated with the Epidemic
Failure.



     7.4 Infringement Warranty. Strides warrants that (a) None of the Products
nor any of their elements, nor the use thereof, nor any of Strides
manufacturing processes or methods employed or to be employed at the Approved
Facility violate or will violate or infringe upon the Intellectual Property
Rights of any third party; and (b) there is neither pending nor threatened any
claim, litigation or proceeding in any way contesting Strides’ rights to
manufacture or supply any of the Products or attacking the validity or
enforcement of any Strides Intellectual Property Rights related to its
manufacturing processes or methods employed or to be employed at the Approved
Facility.



D-16









 





ARTICLE 8



INDEMNIFICATION




     8.1 Strides Indemnification Obligations.



          8.1.1 Strides shall indemnify, defend and hold harmless A-S, and its
Affiliates, and their respective officers, directors, shareholders, employees,
agents and representatives (collectively “A-S Indemnitees”) against all
damages, claims, liabilities, losses and other expenses, including without
limitation reasonable attorneys’ fees and costs, whether or not a lawsuit or
other proceeding is filed, that arise out of or relate to (i) any dispute or
claim that the Strides Materials incorporated or to be incorporated in the
Products, the Products, or any Strides manufacturing processes or methods
employed or to be employed at the Approved Facility, infringe or violate any
third party’s Intellectual Property Rights; (ii) product liability claims,
injury to or death of persons or damage to property that may have been caused,
or that may be alleged to have been caused, directly or indirectly, by Strides,
the Strides Materials incorporated or to be incorporated in the Products, the
Products, or any Strides manufacturing processes or methods employed or to be
employed at the Approved Facility, Strides’ employees or agents, or Strides’
affiliates, subcontractors, their employees or agents; (iii) any defect in the
Products, their manufacture, or other failure of the Products to comply with
their respective Specifications, including, but not limited to, any costs
associated with Product recalls; (iv) any negligent act or omission of Strides,
its agents, or subcontractors; (v) a breach of any warranty provided by Strides
under this Agreement; or (vi) Strides’ failure to fully conform to all laws,
ordinances, rules and regulations which affect the Products, their use, or any
part thereof. In the event Strides fails to promptly indemnify and defend such
claims and/or pay A-S’ expenses, as provided above, A-S shall have the right to
defend itself and shall have the right to withhold any further payments due to
Strides under this Agreement, and in that case, Strides shall reimburse A-S
Indemnitees for all of their reasonable attorneys’ fees, costs and damages
incurred in settling or defending such claims within thirty (30) calendar days
of each of A-S’ written requests, provided that any settlement shall only be
with Strides’ prior written approval.



     8.2 A-S’ Indemnification Obligations. A-S shall indemnify, defend and
hold harmless Strides, and its affiliates, and their respective officers,
directors, shareholders, employees, agents and representatives (collectively
“Strides Indemnitees”) against all damages, claims, liabilities, losses and
other expenses, including without limitation reasonable attorneys’ fees and
costs, whether or not a lawsuit or other proceeding is filed, that arise out of
or relate to any negligent act or omission of A-S, its agents, or Affiliates.
In the event A-S fails to promptly indemnify and defend such claims and/or pay
Strides’ expenses, as provided above, Strides shall have the right to defend
itself, and in that case, A-S shall reimburse Strides Indemnitees for all of
their reasonable attorneys’ fees, costs and damages incurred in settling or
defending such claims within thirty (30) calendar days of each of Strides’
written requests, provided that any settlement shall only be with A-S’ prior
written approval.



     8.3 Contrary Intention. The foregoing indemnities shall be payment
obligations and not merely reimbursement obligations, it being understood that
Strides and A-S have a “contrary intention” with respect to the provisions of
paragraph 2 of Section 2778 of the California Civil Code.



D-17









 





     8.4 Insurance.



          8.4.1 Each Party shall obtain, at its expense, property, commercial and
liability insurance covering its obligations hereunder, in each case in amounts
appropriate to the conduct of its business, as determined in its sole and
exclusive judgment. The policies of insurance obtained by the Parties
hereunder must state that the insurer shall notify the other Party at least
thirty (30) days prior to termination, cancellation of, or any material change
in, the coverage provided. Each Party shall make available to the other Party
at such other Party’s request certificates of insurance evidencing satisfaction
of its obligations under this Section 8.4.



          8.4.2 Notwithstanding anything to the contrary in Section 8.4.1, A-S shall
obtain at its sole cost product liability insurance with a United States
insurance company with a Best’s rating of A+ to cover the sale and use of
Products in the United States. A-S’ policy of product liability and the
coverage that it provides shall not affect Strides’ indemnification obligations
hereinabove or any applicable insurer’s rights of subrogation against Strides
for an indemnifiable loss. Notwithstanding anything herein contained to the
contrary, A-S reserves all rights of subrogation or recovery against Strides
for any insurance deductible and for any damage or loss to its property that is
indemnifiable by Strides under Section 8.1, regardless of whether such losses
are covered by the product liability insurance obtained or which should be or
have been obtained pursuant to this Agreement.



     8.5 Limitation of Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY
HEREIN, (I) EXCEPT FOR INDEMNIFICATION OBLIGATIONS PURSUANT TO SECTIONS 8.1 AND
8.2 ABOVE, OR (II) STRIDES’ OBLIGATION TO REIMBURSE A-S FOR ALL INCIDENTAL AND
CONSEQUENTIAL COSTS, AS DEFINED IN SECTION 2715 OF THE CALIFORNIA COMMERCIAL
CODE, IN THE CASE OF AN EPIDEMIC FAILURE, NEITHER PARTY SHALL BE LIABLE FOR ANY
INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES, WHETHER
FORESEEABLE OR NOT, THAT ARE IN ANY WAY RELATED TO THIS AGREEMENT. A-S AND
STRIDES FURTHER AGREE THAT EACH AND EVERY PROVISION OF THIS AGREEMENT THAT
PROVIDES FOR A LIMITATION OF LIABILITY, DISCLAIMER OF WARRANTIES OR EXCLUSION
OF DAMAGES IS EXPRESSLY INTENDED TO BE SEVERABLE AND INDEPENDENT OF ANY OTHER
PROVISION SINCE THOSE PROVISIONS REPRESENT SEPARATE ELEMENTS OF RISK ALLOCATION
BETWEEN THE PARTIES AND SHALL BE SEPARATELY ENFORCED.



ARTICLE 9



TERM AND TERMINATION




     9.1 Term. This Agreement shall commence on the Effective Date and shall
continue for a period of ten (10) years, unless earlier terminated under
Section 9.3 (the “Term”). The Term shall also include any renewal term
pursuant to Section 9.2 below.



     9.2 Renewal Term. The Parties may renew this Agreement for successive
five (5) year terms upon their mutual written agreement prior to the lapse of
the initial ten (10) year term, and thereafter, prior to the lapse of the
then-current five (5) year renewal term, by giving the other Party a six (6)
month prior written notice in each such case.



D-18









 





     9.3 Termination Procedures. This Agreement will terminate in the event of
any of the following:



          9.3.1 On the sixtieth (60th) calendar day after either Party gives written
notice to the other of a material breach by the other of any term or condition
of this Agreement, unless the breach is cured before the sixtieth (60th)
calendar day; or



          9.3.2 Immediately upon the written agreement of both Parties to terminate
this Agreement; or



          9.3.3 Immediately upon the termination of the Limited Liability Company
Agreement for Akorn-Strides, LLC, of even date between Strides and Akorn.



     9.4 Effect of Termination.



          9.4.1 In the event of termination (a) all licenses to Insignia shall
automatically terminate; (b) Strides shall return to A-S all copies of the
Confidential Information previously disclosed by A-S, including without
limitation all A-S Materials and neither Strides nor its Affiliates shall
thereafter retain copies, transcriptions or summaries of any portion of the
foregoing; (c) the Strides Capital Contribution Agreements shall be accelerated
and all principal and accrued interest thereunder shall be immediately due, as
more fully set forth in the Strides Capital Contribution Agreements; (d) any
unused amounts under the Registration Payment (as determined according to the
timeline and budgeted amounts set forth in the ANDA Schedule, and including all
work-in-process and unrecoverable costs towards unmet milestones on the ANDA
Schedule) shall immediately be due and payable to A-S and Strides shall
immediately pay A-S such amount; and (e) all Parties shall remain liable for
each of their respective obligations hereunder that accrued prior to the date
of termination.



          9.4.2 All rights and remedies conferred herein shall be cumulative and in
addition to all of the rights and remedies available to each Party at law,
equity or otherwise.



          9.4.3 Sections 2.4, 3.5, 3.6, 3.7, 4.3, 4.4, 4.9, 6.1, 6.2, 6.4 and 9.4
and all Sections under ARTICLE 1, ARTICLE 7, ARTICLE 8 and ARTICLE 10 shall
survive the termination or expiration of this Agreement.



ARTICLE 10



GENERAL TERMS




     10.1 Relationship of Parties. The relationship between Strides and A-S,
with respect to this Agreement, is only that of independent contractors
notwithstanding any activities set forth in this Agreement or in the Limited
Liability Company Agreement for Akorn-Strides, LLC, of even date between
Strides and Akorn. With respect to this Agreement, no Party is the agent or
legal representative of any other Party, and no Party has the right or
authority to bind any other Party in any way. This Agreement creates no
relationship as partners or a joint venture, and creates no pooling
arrangement.



D-19









 





     10.2 Governing Law and Venue. This Agreement is governed by and shall be
construed in accordance with the law of the State of New York, excluding any
conflict-of-laws rule or principle that might refer the governance or the
construction of this Agreement to the law of another jurisdiction. Each Party
hereby consents to the exclusive jurisdiction of the state and federal courts
sitting in New York in any action on a claim arising out of, under or in
connection with this Agreement or the transactions contemplated by this
Agreement, provided such claim is not required to be arbitrated pursuant to
Section 10.3. Each Party further agrees that personal jurisdiction over it may
be effected by service of process by registered or certified mail addressed as
provided in Section 10.9 of this Agreement, and that when so made shall be as
if served upon it personally within the State of New York.



     10.3 Mediation and Arbitration. The Parties shall, before the
commencement of arbitration proceedings, attempt in good faith to settle their
dispute by mediation.



          10.3.1 Arbitration. Except as otherwise provided in this Agreement, any
dispute, controversy or claim arising out of or relating to this Agreement, or
any breach thereof, including without limitation any claim that this Agreement,
or any part hereof, is invalid, illegal or otherwise voidable or void, shall be
submitted, at the request of any Party, to binding arbitration by a
JAMS\ENDISPUTE (“JAMS”) arbitrator, or such other arbitrator as may be agreed
upon by the Parties. Hearings on such arbitration shall be conducted in New
York, New York. A single arbitrator shall arbitrate any such controversy. The
arbitrator shall hear and determine the controversy in accordance with
applicable law and the intention of the Parties as expressed in this Agreement,
upon the evidence produced at an arbitration hearing scheduled at the request
of either Party. Such pre-arbitration discovery shall be permitted to the
fullest extent permitted by New York law applicable to arbitration proceedings,
including, without limitation, the provisions of the New York Code of Civil
Procedure. The arbitrator shall decide all discovery disputes. Judgment on
the award of the arbitrator may be entered in any court having jurisdiction
thereof.



          10.3.2 Provisional Remedy. Each of the Parties reserves the right to file
with a court of competent jurisdiction an application for temporary or
preliminary injunctive relief, writ of attachment, writ of possession,
temporary protective order and/or appointment of a receiver on the grounds that
the arbitration award to which the applicant may be entitled may be rendered
ineffectual in the absence of such relief.



          10.3.3 Consolidation. Any arbitration hereunder may be consolidated by
JAMS with the arbitration of any other dispute arising out of or relating to
the same subject matter when the arbitrator determines that there is a common
issue of law or fact creating the possibility of conflicting rulings by more
than one arbitrator. Any disputes over which arbitrator or panel of
arbitrators shall hear any consolidated matter shall be resolved by JAMS.



          10.3.4 Power And Authority Of Arbitrator. The arbitrator shall not have
any power to alter, amend, modify or change any of the terms of this Agreement
nor to grant any remedy which is either prohibited by the terms of this
Agreement, or not available in a court of law.



D-20









 





          10.3.5 Governing Law. All questions in respect of procedure to be
followed in conducting the arbitration as well as the enforceability of this
Agreement to arbitrate which may be resolved by state law shall be resolved
according to the laws of the State of New York.



          10.3.6 Costs. The costs of the arbitration, including any JAMS
administration fee, the arbitrator’s fee, and costs for the use of facilities
during the hearings, shall be borne equally by the Parties to the arbitration.
Attorneys’ fees may be awarded to the prevailing or most prevailing Party at
the discretion of the arbitrator.



     10.4 Assignment. A-S acknowledges that the favorable terms of this
Agreement were granted to Strides only because of Strides’ experience, and that
the substitution of any party by Strides would destroy the intent of the
Parties. Accordingly, Strides shall have no right to assign, delegate,
transfer or otherwise encumber this Agreement or any portion thereof without
A-S’ prior written consent.



     10.5 Counterparts. This Agreement may be executed in several counterparts
that together shall be originals and constitute one and the same instrument.



     10.6 Waiver. The failure of any Party to enforce any of its rights
hereunder or at law shall not be deemed a waiver or a continuing waiver of any
of its rights or remedies against another Party, unless such waiver is in
writing and signed by the Party to be charged.



     10.7 Severability. If any provision of this Agreement, or part thereof,
is declared by a court of competent jurisdiction to be invalid, void or
unenforceable, each and every other provision, or part thereof, shall
nevertheless continue in full force and effect.



     10.8 Attorneys’ Fees. In the event that any dispute between the Parties
should result in litigation or arbitration, the prevailing Party in such
dispute shall be entitled to recover from the other Party all reasonable fees,
costs and expenses of enforcing any right of the prevailing Party, including
without limitation, reasonable attorneys’ fees and expenses, all of which shall
be deemed to have accrued upon the commencement of such action and shall be
paid whether or not such action is prosecuted to judgment. Any judgment or
order entered in such action shall contain a specific provision providing for
the recovery of attorney fees and costs incurred in enforcing such judgment and
an award of prejudgment interest from the date of the breach at the maximum
rate of interest allowed by law. For the purposes of this Section: (a)
attorney fees shall include, without limitation, fees incurred in the
following: (1) postjudgment motions; (2) contempt proceedings; (3) garnishment,
levy, and debtor and third party examinations; (4) discovery; and (5)
bankruptcy litigation; and (b) prevailing Party shall mean the party who is
determined in the proceeding to have prevailed or who prevails by dismissal,
default or otherwise.



     10.9 Notice. Any notice, demand, consent, election, offer, approval,
request, or other communication given under this Agreement shall be in writing
and shall be served personally or delivered by first class, registered or
certified, return receipt requested U.S. mail, postage prepaid. Notices may
also be given by transmittal over electronic transmitting devices such as
Telex, facsimile or telecopy machine, if the Party to whom the notice is being
sent has such a device in its office, provided a complete copy of any notice so
transmitted shall also be mailed in



D-21









 





the same manner as required for a mailed notice. Notices shall be deemed
received at the earlier of actual receipt or three (3) days following deposit
in U.S. mail, postage prepaid. Notices shall be directed to Parties at their
addresses as specified on page 1 of this Agreement, provided a Party may change
such Party’s address for notice by giving written notice to the other Party in
accordance with this Section 10.9.




     10.10 Further Assurances. The Parties agree to execute such additional
documents and perform such acts as are reasonably necessary to effectuate the
intent of this Agreement.



     10.11 Entire Agreement. This Agreement constitutes the entire agreement
between the Parties regarding the subject matter hereof, and supersedes all
prior or contemporaneous understandings or agreements regarding the subject
matter hereof, whether oral or written. This Agreement shall be modified or
amended only by a writing signed by both A-S and Strides.



     10.12 Authority. The parties executing this Agreement on behalf of A-S
and Strides represent and warrant that they have the authority from their
respective governing bodies to enter into this Agreement and to bind their
respective companies to all the terms and conditions of this Agreement.



     10.13 Captions. The captions of the Articles and Sections in this
Agreement are for convenience only and shall not be used to interpret the
provisions of this Agreement.



     10.14 Force Majeure. Except for Strides’ obligation to meet the
Registration Threshold before the lapse of the applicable Threshold Period,
neither Party shall be liable for delays in its performance caused by events
beyond its control, such as fires, floods, labor shortages, strikes, epidemics,
computer virus, earthquakes, riots, acts of terror, acts of God, storms, acts
of civil or military authority or similar occurrences, provided the affected
Party gives the other Party written notice of such event within three (3)
business days of its occurrence. Such notice shall state the estimated
duration of such event and the cause thereof and the affected Party shall use
commercially reasonable efforts to work around such event beyond its control.



     10.15 Export. A-S shall not directly or indirectly export or re-export
any of the Products outside of the United States without first notifying
Strides and complying with Strides’ export control procedures. A-S shall
additionally comply with all United States export control laws and regulations
if any Product is exported or re-exported. A-S shall also be responsible for
obtaining all export licenses or other approvals required to export or
re-export the Products outside the United States.



IN WITNESS WHEREOF, and intending to be legally bound, the Parties have
executed this Agreement to be effective as of the Effective Date.




	 	 	 
	Akorn-Strides, LLC

	 	Strides Arcolab Limited
	 
	 	 
	By:                                      

	 	By:                                      
	 
	 	 
	Name:                                      

	 	Name:                                      
	 
	 	 
	Its:                                      

	 	Its:                                      







D-22









 






* Confidential Treatment
Requested Under

17 C.F.R. §§ 200.80(b)(4), 200.83 and 240.24b-2




EXHIBIT A



PRODUCTS




[...*...]










	*   CONFIDENTIAL
TREATMENT REQUESTED – This Exhibit A, consisting of 9 pages,
has been omitted and filed separately with the Securities & Exchange
Commission.




 









 










* Confidential Treatment
Requested Under

17 C.F.R. §§ 200.80(b)(4), 200.83 and 240.24b-2




EXHIBIT B



ANDA SCHEDULE




[...*...]










	*    CONFIDENTIAL
TREATMENT REQUESTED – This Exhibit B, consisting of 2 pages,
has been omitted and filed separately with the Securities & Exchange
Commission.




 









 










EXHIBIT C



INSIGNIA




[Subject to the mutual agreement of the Parties]





 










 





EXHIBIT E




SALES AND MARKETING AGREEMENT




This Sales and Marketing Agreement, (“Agreement”) is made and entered into as
of September 22, 2004 (“Effective Date”), by and between Akorn-Strides, LLC, a
Delaware limited liability company having a principal place of business at 2500
Millbrook Drive, Buffalo Grove, Illinois 60089-4694 (“A-S”), and Akorn, Inc., a
Louisiana corporation having a principal place of business at 2500 Millbrook
Drive, Buffalo Grove, Illinois 60089-4694 (“Akron”), (each a “Party” and
collectively the “Parties”).




RECITALS




     A. A-S is a new entity formed by Akorn and Strides Arcolab Limited, a
company organized under the laws of India having a principal place of business
at Strides House, Bilekahalli, Bannerghatta Road, Bangalore 560 076, India
(“Strides”), to engage in the development and marketing of generic drug
products;



     B. Pursuant to the Limited Liability Company Agreement of even date
between Strides and Akorn, A-S desires to have Akorn assist it by providing
certain sales, marketing and administrative services with respect to Products
in the United States (as such term is defined below), and Akorn desires to
assist A-S by providing certain sales, marketing and administrative services
with respect to Products in the United States, pursuant to the terms and
conditions of this Agreement.



     NOW, THEREFORE, in consideration of the mutual promises, covenants and
obligations contained herein, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:



ARTICLE 1



DEFINITIONS




     1.1 Affiliate. The term “Affiliate” means with respect to any Party, any
party controlling, controlled by or under common control with any such Party.
For purposes hereof, “control” and its derivatives means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Party, whether through the ownership of voting
securities or voting interests, by contract or otherwise.



     1.2 cGMP. The term “cGMP” means current Good Manufacturing Practices as
established by the FDA as the same may be amended from time to time.



     1.3 Commission. The term “Commission” has the meaning ascribed to it in
Section 5.1.



     1.4 Commission Schedule. The term “Commission Schedule” has the meaning
ascribed to it in Section 5.1.



 









 





     1.5 Commission Statement. The term “Commission Statement” has the meaning
ascribed to it in Section 5.3.



     1.6 Epidemic Failure. The term “Epidemic Failure” means Product
deficiencies resulting from defects in material, workmanship and/or
manufacturing process that are in excess of one percent (1%) of the total
number of Products shipped during any rolling six (6) month period.



     1.7 FDA. The term “FDA” means the United States Food and Drug
Administration.



     1.8 Minimum Sales Requirement. The term “Minimum Sales Requirement” means,
with respect to each separate Product, (i) to the extent that four (4) or more
competitive products offering the same specific active pharmaceutical
ingredient are approved by the FDA and commercially released and available in a
Measurement Period in the Territory, a market share of five percent (5%) or
greater in such Measurement Period with respect to such specific active
pharmaceutical ingredient, as reported by IMS Health Incorporated; or (ii) to
the extent that two (2) or three (3) competitive products offering the same
specific active pharmaceutical ingredient are approved by the FDA and
commercially released and available in a Measurement Period in the Territory, a
market share of ten percent (10%) or greater in such Measurement Period with
respect to such specific active pharmaceutical ingredient, as reported by IMS
Health Incorporated; or (iii) to the extent that only one (1) competitive
product offering the same specific active pharmaceutical ingredient is approved
by the FDA and commercially released and available in a Measurement Period in
the Territory, a market share of fifteen percent (15%) or greater in such
Measurement Period with respect to such specific active pharmaceutical
ingredient, as reported by IMS Health Incorporated.



     1.9 Intellectual Property Rights. The term “Intellectual Property Rights”
means all United States and worldwide trademarks, service marks, trade dress,
logos, copyrights, rights of authorship, inventions, patents, rights of
inventorship, moral rights, rights of publicity and privacy, trade secrets,
rights under unfair competition and unfair trade practices laws, and all other
intellectual and industrial property rights related thereto.



     1.10 Measurement Period. The term “Measurement Period” means with respect
to each Product, the period beginning with the date that the Product is first
delivered to Akorn in production quantities, following approval of the
applicable ANDA (as defined in the OEM Agreement ) by the FDA, or an annual
anniversary thereof, and ending in each case twelve (12) months thereafter.



     1.11 Net Sales. The term “Net Sales” means the total amounts charged for
A-S’ sale of Products, less applicable sales and use taxes, insurance and
freight charges, Product returns and similar Product defect credits, and
customary allowances and trade discounts, provided that such adjustments
related to Product returns, defects and customary allowances and trade
discounts are detailed in the applicable Commission Statement pursuant to
Section 5.3 below and shall not exceed eight percent (8%) of A-S’ gross sales
for Products in any calendar year, and provided that if A-S resells any
returned Products, such sales will be included in Net Sales subject to a
Commission in the quarter in which the returned Products are resold. The
amounts for returned Products shall be deducted in the quarter when A-S
actually receives the returned Products. No



E-2









 





other deductions shall be made from Net Sales. Notwithstanding anything
else to the contrary, Net Sales shall not include any amounts charged for A-S’
sale of specific Products (i) for which Akorn failed to meet the Minimum Sales
Requirement in a Measurement Period; (ii) for which such third party service
provider was engaged by A-S within thirty (30) calendar days of such failure
for the purpose of providing sales, marketing and administrative services for
such Product; (iii) which are attributable to the efforts of such third party
service provider; and (iv) which such third party service provider actually
fulfills and is paid a commission by A-S.




     1.12 OEM Agreement. The term “OEM Agreement” means the OEM Agreement of
even date between Strides and A-S.



     1.13 Products. The term “Products” means the A-S products manufactured by
Strides pursuant to the OEM Agreement.



     1.14 Services. The term “Services” means the sales, marketing and
administrative services more fully set forth in ARTICLE 3 below.



     1.15 Strides. The term “Strides” has the meaning ascribed to it in Recital A.



     1.16 Term. The term “Term” has the meaning ascribed to it in Section 8.1.



     1.17 Territory. The term “Territory” means the United States.



     1.18 Trademarks. The term “Trademarks” has the meaning ascribed to it in
Section 4.1.



ARTICLE 2



APPOINTMENT OF AKORN




     2.1 Appointment of Akorn. A-S hereby appoints Akorn for the Term as its
exclusive provider of Services for the Territory. Akorn hereby accepts this
appointment and agrees to perform the Services within the Territory during the
Term in accordance with the terms and conditions of this Agreement.



     2.2 Failure to Attain Minimum Sales Requirement. Notwithstanding anything
else to the contrary, should Akorn fail to meet the Minimum Sales Requirement
in a Measurement Period with respect to any Product, then the appointment of
Akorn set forth in Section 2.1 above shall, with respect to such specific
Product only for which the Minimum Sales Requirement was not achieved, become
non-exclusive and A-S shall have the option, within thirty (30) calendar days
of such failure, to retain a third party service provider for the purpose of
providing on a non-exclusive basis sales, marketing and administrative services
for such Product. A-S shall exercise such option by notifying Akorn in
writing, within thirty (30) calendar days of the end of the applicable
Measurement Period, of the non-exclusive appointment of the third party service
provider for the purpose of providing sales, marketing and administrative
services for such Product. Notwithstanding any appointment by A-S of such
third party service provider, Akorn shall retain the non-exclusive right to
provide Services for such Product for the Territory, and shall continue to
receive Commissions for all Net Sales of such Product as more fully provided
herein.



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ARTICLE 3



SCOPE OF SERVICES




     3.1 Product Marketing. During the Term Akorn shall use commercially
reasonable efforts to solicit orders for, and to promote and market, the
Products in the Territory. Akorn shall use mutually-approved marketing
materials in its marketing efforts for the Products. The Parties shall use
commercially reasonable efforts to mutually develop a marketing plan for the
Products in the Territory. If the Parties are unable to mutually develop such
a marketing plan, then Akorn shall propose a marketing plan to A-S. Akorn’s
proposed separate marketing plan must be approved by A-S before Akorn
implements the same, and A-S’ approval will not be unreasonably withheld.



     3.2 Advertising. Akorn shall advertise and promote the Products in the
Territory in a manner that will enhance the goodwill associated with the
Products and with the Trademarks.



     3.3 Pricing and Terms of Purchase. A-S shall have the absolute right to
establish and change the prices charged and terms governing the sale of the
Products in the Territory. All sales of Product in the Territory shall be
subject to A-S’ standard sales order terms and conditions, as may be amended
from time to time by A-S.



     3.4 Sales Efforts. Akorn shall transmit or cause to be transmitted to A-S
any order and all inquiries or complaints concerning Products originating from
the Territory. Akorn shall additionally provide, on request, assistance and
advice to customers in the Territory concerning the handling, storage and use
of Products. Such advice and assistance shall be in accordance with A-S’
published data sheets and specifications for the Products. All sales of
Products in the Territory, notwithstanding Akorn’s provision of the Services,
shall be solely made by A-S and for the account of A-S.



     3.5 Selling Standards. Akorn shall comply with written selling and
marketing standards established by the mutual written agreement of the Parties,
as may be modified from time to time by the mutual written agreement of the
Parties during the Term.



     3.6 Administrative Services. For each Product sold by A-S within the
Territory, Akorn shall generate an invoice made payable to A-S. At least
monthly, Akorn shall provide A-S with a current statement of account, listing
all invoices outstanding and any payments made and credits given since the date
of the previous statement. Any funds collected by Akorn with respect to Net
Sales shall be paid to A-S.



     3.7 Product Fulfillment. Akorn shall ship Product pursuant to purchase
order(s) issued from the Territory. A-S shall ensure that Akorn has sufficient
inventories of Products to properly fulfill Product orders in the Territory.



     3.8 Personnel and Facilities. Akorn shall maintain and be responsible
for, at its sole cost, its own sales, marketing and service personnel and
facilities to enable Akorn to properly perform its obligations hereunder.



     3.9 Compliance with Laws. Akorn will comply with all applicable laws and
regulations that govern its activities under this Agreement.



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     3.10 Akorn Business Practices. Akorn shall use commercially reasonable
efforts to conduct business in a manner that reflects favorably on the Products
and A-S’ goodwill and reputation.



     3.11 Own Account. Akorn shall conduct its business for its own account, as
an independent contractor, in its own name, and not as an agent, employee, or
partner of A-S or actually, impliedly or ostensibly hold itself out as such.
Except as herein expressly provided, Akorn shall determine in its own judgment
how best to perform its obligations hereunder, and A-S has no right to control
such matters.



     3.12 Expenses. All expenses incurred by Akorn in connection with the
Services pursuant to this Agreement shall be at the sole cost of Akorn and A-S
shall not be responsible or liable therefor.



ARTICLE 4



TRADEMARKS




     4.1 Use of Trademarks. Pursuant to the terms and conditions of this
Agreement and during the Term, A-S hereby grants Akorn an exclusive license to
use the composite proprietary mark “Akorn-Strides/Arcolab” and associated
logos, trade dress and/or trade names of A-S utilized in association with the
Products (collectively “Trademarks”) only in its advertising and/or promotional
materials for the Products; provided, however, that A-S reserves all rights of
ownership and control over the Trademarks and the right to restrict any use
which A-S in its sole discretion believes poses a serious threat or could be
detrimental to the Trademarks or A-S’ goodwill or reputation. Akorn shall not
at any time do anything or act in any way that would or might adversely affect
the value or validity of any Trademarks or other intellectual property
belonging to A-S. Akorn shall immediately notify A-S in writing upon becoming
aware of any intellectual property infringement or imitation of any
intellectual property of A-S or of any facts that Akorn believes might
constitute infringement or imitation. Akorn acknowledges that all use of the
Trademarks by Akorn shall inure to the benefit of and be on behalf of A-S.



     4.2 Use Approval. Prior to using the Trademarks in any advertising and/or
promotional material for the Products that is not provided by A-S, Akorn shall
forward an exemplar of each such advertising and/or promotional materials to
A-S for its advance approval, consult with and obtain the written approval of
A-S for such materials, which approval shall not be unreasonably withheld.



     4.3 Alteration. Akorn shall not remove, alter or obliterate any
Trademarks or badges or any other tags affixed to the Products, nor shall it
add any other names or marks except with the prior written consent of A-S.



ARTICLE 5



FINANCIAL PROVISIONS




     5.1 Compensation. As compensation for Services rendered under this
Agreement, A-S shall pay to Akorn a commission on the Net Sales of Products
originating from the Territory (“Commission”). The calculation and amount of
such Commission is set forth in the



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commission schedule attached hereto as Exhibit A and fully incorporated
herein (“Commission Schedule”).




     5.2 Payment Schedule. Commissions payable to Akorn shall be paid on a
quarterly basis within thirty (30) days following the last day of each calendar
quarter during the Term and shall cover Net Sales by A-S for such calendar
quarter.



     5.3 Commission Statements. A-S shall provide Akorn with a quarterly
statement on or before the thirtieth (30th) day following each calendar quarter
during the Term and on or before the thirtieth (30th) day following the
effective date of any termination or expiration of this Agreement, reporting
the Net Sales of Products for the preceding calendar quarter, and the
calculation of the Commission due (“Commission Statement”). To the extent A-S
claims or makes any adjustments for Product returns or defects as permitted
under Section 1.11 above in determining the Net Sales for the preceding
quarter, the Commission Statement for that quarter must contain detailed
information about the number of Products returned or credited, the monetary
amount of the credit or adjustment, and the calculation of the eight percent
(8%) cap on such credits and adjustments pursuant to Section 1.11 above.



     5.4 Currency. All payments to Akorn shall be in United States Dollars.



ARTICLE 6



REPRESENTATIONS AND WARRANTIES




     6.1 A-S Representations and Warranties. A-S represents, warrants and
covenants: (i) that it has the full power, right and authority to execute and
deliver this Agreement and that it shall use commercially reasonable best
efforts to perform its obligations hereunder; (ii) that it will assign to its
performance of this Agreement professional personnel, qualified to perform the
process procedures consistent with the technical requirements of this
Agreement; (iii) that none of the A-S personnel to be assigned to this
Agreement have or shall have been subject to debarment under the United States
Generic Drug Enforcement Act or any other penalty or sanction by the FDA; (iv)
that the Products have been manufactured in conformity with cGMP, all
applicable FDA regulatory requirements, the procedures and parameters set forth
in the OEM Agreement and generally accepted professional standards.



     6.2 Product Warranties. A-S represents, warrants and covenants: (i) that
the Products shall be free from defects in workmanship and materials; (ii) that
the Products shall meet their applicable specifications; and (iii) that, upon
delivery of a Product and during such time as such Product was under A-S’
control, the Product will be in conformity with the Act and shall not be
adulterated, misbranded, misused, contaminated, tampered with or otherwise
altered, mishandled, or subjected to negligence. A-S additionally warrants
that the Products supplied hereunder shall only be built using components
purchased from vendors approved by the FDA pursuant to cGMP. In the event of a
breach under this Section 6.2, Akorn may, at its sole option, (a) replace the
Products, at A-S’ cost, (b) require that the Products be replaced by A-S, at
A-S’ cost, and A-S shall replace such Products, or (c) Akorn may return all of
the Products to A-S for a full refund or full credit to the applicable open
customer invoice, and A-S shall immediately pay the applicable customer a full
refund or credit the applicable open invoice, as the case may



E-6









 





be, for such returned Products. A-S shall maintain a sufficient inventory
of components to fulfill its warranty obligations hereunder, as well as for
other foreseeable purposes.




     6.3 Epidemic Failure Warranty. Notwithstanding anything else to the
contrary herein, if a Product demonstrates an Epidemic Failure at any time
during the Term, A-S will, in addition to the remedies provided under Section
6.2, reimburse Akorn for direct and incidental and consequential costs, as
defined in Section 2715 of the California Commercial Code, associated with the
Epidemic Failure, including without limitation labor costs associated with
implementation of a recovery plan under this Section. Akorn will notify A-S
whenever an Epidemic Failure is identified or suspected and work with A-S to
develop a recovery plan, which may include a preventative action plan if
appropriate under the circumstances. The recovery plan actually implemented by
Akorn is in Akorn’s sole discretion; provided, however that (i) Akorn and A-S
will work together to minimize costs associated with Akorn’s recovery plan as
much as possible without compromising Akorn’s ability to aggressively respond
to its customer’s needs; and (ii) A-S will reimburse Akorn for costs incurred
by Akorn in implementing that portion of the recovery plan associated with the
Epidemic Failure.



     6.4 Infringement Warranty. A-S warrants that (a) None of the Products nor
any of their elements, nor the use thereof, nor any of A-S manufacturing
processes or methods employed or to be employed at the Product manufacturing
facility violate or will violate or infringe upon the Intellectual Property
Rights of any third party; and (b) there is neither pending nor threatened any
claim, litigation or proceeding in any way contesting A-S’ suppliers’ rights to
manufacture or supply any of the Products or attacking the validity or
enforcement of any A-S or its suppliers’ Intellectual Property Rights related
to its manufacturing processes or methods employed or to be employed at any
Product manufacturing facility.



     6.5 Akorn’s Disclaimer. AKORN EXPRESSLY DISCLAIMS ALL WARRANTIES
REGARDING THE SERVICES WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS, OR BASED ON COURSE OF CONDUCT
OR TRADE CUSTOM OR USAGE.



ARTICLE 7



ALLOCATION OF LIABILITIES




     7.1 A-S Indemnity. A-S shall indemnify, defend and hold harmless Akorn,
and its Affiliates, and their respective officers, directors, shareholders,
employees, agents and representatives (collectively “Akorn Indemnitees”)
against all damages, claims, liabilities, losses and other expenses, including
without limitation reasonable attorneys’ fees and costs, whether or not a
lawsuit or other proceeding is filed, that arise out of or relate to (i) any
dispute or claim that the Products, or any manufacturing processes or methods
employed or to be employed at the Product manufacturing facility, infringe or
violate any third party’s Intellectual Property Rights; (ii) product liability
claims, injury to or death of persons or damage to property that may have been
caused, or that may be alleged to have been caused, directly or indirectly, by
A-S or its suppliers, the Products, or any manufacturing processes or methods
employed or to be employed at the Product manufacturing facility, A-S’
employees or agents, or A-S’ affiliates,



E-7









 





subcontractors, their employees or agents; (iii) any defect in the
Products, their manufacture, or other failure of the Products to comply with
their respective specifications, including, but not limited to, any costs
associated with Product recalls; (iv) any negligent act or omission of A-S, its
agents, or subcontractors; (v) a breach of any warranty provided by A-S under
this Agreement; or (vi) A-S’ failure to fully conform to all laws, ordinances,
rules and regulations which affect the Products, their use, or any part
thereof. In the event A-S fails to promptly indemnify and defend such claims
and/or pay Akorn’s expenses, as provided above, Akorn shall have the right to
defend itself and in that case, A-S shall reimburse Akorn Indemnitees for all
of their reasonable attorneys’ fees, costs and damages incurred in settling or
defending such claims within thirty (30) calendar days of each of Akorn’s
written requests, provided that any settlement shall only be with A-S’ prior
written approval.




     7.2 Akorn’s Indemnification Obligations. Akorn shall indemnify, defend
and hold harmless A-S, and its affiliates, and their respective officers,
directors, shareholders, employees, agents and representatives (collectively
“A-S Indemnitees”) against all damages, claims, liabilities, losses and other
expenses, including without limitation reasonable attorneys’ fees and costs,
whether or not a lawsuit or other proceeding is filed, that arise out of or
relate to any negligent act or omission of Akorn, its agents, or Affiliates.
In the event Akorn fails to promptly indemnify and defend such claims and/or
pay A-S’ expenses, as provided above, A-S shall have the right to defend
itself, and in that case, Akorn shall reimburse A-S Indemnitees for all of
their reasonable attorneys’ fees, costs and damages incurred in settling or
defending such claims within thirty (30) calendar days of each of A-S’ written
requests, provided that any settlement shall only be with Akorn’ prior written
approval.



     7.3 Contrary Intention. The foregoing indemnities shall be payment
obligations and not merely reimbursement obligations, it being understood that
Akorn and A-S have a “contrary intention” with respect to the provisions of
paragraph 2 of Section 2778 of the California Civil Code.



     7.4 Limitation of Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY
HEREIN, EXCEPT FOR INDEMNIFICATION OBLIGATIONS PURSUANT TO SECTIONS 7.1 AND 7.2
ABOVE, OR (II) A-S’ OBLIGATION TO REIMBURSE AKORN FOR ALL INCIDENTAL AND
CONSEQUENTIAL COSTS, AS DEFINED IN SECTION 2715 OF THE CALIFORNIA COMMERCIAL
CODE, IN THE CASE OF AN EPIDEMIC FAILURE, NEITHER PARTY SHALL BE LIABLE FOR ANY
INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES, WHETHER
FORESEEABLE OR NOT, THAT ARE IN ANY WAY RELATED TO THIS AGREEMENT. A-S AND
AKORN FURTHER AGREE THAT EACH AND EVERY PROVISION OF THIS AGREEMENT THAT
PROVIDES FOR A LIMITATION OF LIABILITY, DISCLAIMER OF WARRANTIES OR EXCLUSION
OF DAMAGES IS EXPRESSLY INTENDED TO BE SEVERABLE AND INDEPENDENT OF ANY OTHER
PROVISION SINCE THOSE PROVISIONS REPRESENT SEPARATE ELEMENTS OF RISK ALLOCATION
BETWEEN THE PARTIES AND SHALL BE SEPARATELY ENFORCED.



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ARTICLE 8



TERM AND TERMINATION




     8.1 Term. This Agreement shall commence on the Effective Date and shall
continue for a period of ten (10) years, unless earlier terminated under
Section 8.3 (the “Term”). The Term shall also include any renewal term
pursuant to Section 8.2 below.



     8.2 Renewal Term. The Parties may renew this Agreement for successive
five (5) year terms upon their mutual written agreement prior to the lapse of
the initial ten (10) year term, and thereafter, prior to the lapse of the
then-current five (5) year renewal term, by giving the other Party a six (6)
month prior written notice in each such case.



     8.3 Termination Procedures. This Agreement will terminate in the event of
any of the following:



          8.3.1 On the sixtieth (60th) calendar day after either Party gives written
notice to the other of a material breach by the other of any material term or
condition of this Agreement, unless the breach is cured before the sixtieth
(60th) calendar day; or



          8.3.2 Immediately upon the written agreement of both Parties to terminate
this Agreement; or



          8.3.3 Immediately upon the termination of the Limited Liability Company
Agreement for A-S, of even date between Strides and Akorn.



     8.4 Effect of Termination.



          8.4.1 In the event of termination (a) all licenses to the Trademarks shall
automatically terminate; and (b) all Parties shall remain liable for each of
their respective obligations hereunder that accrued prior to the date of
termination.



          8.4.2 All rights and remedies conferred herein shall be cumulative and in
addition to all of the rights and remedies available to each Party at law,
equity or otherwise.



          8.4.3 Section 8.4 and all Sections under ARTICLE 1, ARTICLE 6, ARTICLE 7
and ARTICLE 9 shall survive the termination or expiration of this Agreement.



ARTICLE 9



GENERAL PROVISIONS




     9.1 Relationship of Parties. The relationship between Akorn and A-S, with
respect to this Agreement, is only that of independent contractors
notwithstanding any activities set forth in this Agreement or in the Company
Agreement. With respect to this Agreement, no Party is the agent or legal
representative of any other Party, and no Party has the right or authority to
bind any other Party in any way. This Agreement creates no relationship as
partners or a joint venture, and creates no pooling arrangement.



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     9.2 Governing Law and Venue. This Agreement is governed by and shall be
construed in accordance with the law of the State of New York, excluding any
conflict-of-laws rule or principle that might refer the governance or the
construction of this Agreement to the law of another jurisdiction. Each Party
hereby consents to the exclusive jurisdiction of the state and federal courts
sitting in New York in any action on a claim arising out of, under or in
connection with this Agreement or the transactions contemplated by this
Agreement, provided such claim is not required to be arbitrated pursuant to
Section 9.3. Each Party further agrees that personal jurisdiction over it may
be effected by service of process by registered or certified mail addressed as
provided in Section 9.9 of this Agreement, and that when so made shall be as if
served upon it personally within the State of New York.



     9.3 Mediation and Arbitration. The Parties shall, before the commencement
of arbitration proceedings, attempt in good faith to settle their dispute by
mediation.



          9.3.1 Arbitration. Except as otherwise provided in this Agreement, any
dispute, controversy or claim arising out of or relating to this Agreement, or
any breach thereof, including without limitation any claim that this Agreement,
or any part hereof, is invalid, illegal or otherwise voidable or void, shall be
submitted, at the request of any Party, to binding arbitration by a
JAMS\ENDISPUTE (“JAMS”) arbitrator, or such other arbitrator as may be agreed
upon by the Parties. Hearings on such arbitration shall be conducted in New
York, New York. A single arbitrator shall arbitrate any such controversy. The
arbitrator shall hear and determine the controversy in accordance with
applicable law and the intention of the Parties as expressed in this Agreement,
upon the evidence produced at an arbitration hearing scheduled at the request
of either Party. Such pre-arbitration discovery shall be permitted to the
fullest extent permitted by New York law applicable to arbitration proceedings,
including, without limitation, the provisions of the New York Code of Civil
Procedure. The arbitrator shall decide all discovery disputes. Judgment on
the award of the arbitrator may be entered in any court having jurisdiction
thereof.



          9.3.2 Provisional Remedy. Each of the Parties reserves the right to file
with a court of competent jurisdiction an application for temporary or
preliminary injunctive relief, writ of attachment, writ of possession,
temporary protective order and/or appointment of a receiver on the grounds that
the arbitration award to which the applicant may be entitled may be rendered
ineffectual in the absence of such relief.



          9.3.3 Consolidation. Any arbitration hereunder may be consolidated by
JAMS with the arbitration of any other dispute arising out of or relating to
the same subject matter when the arbitrator determines that there is a common
issue of law or fact creating the possibility of conflicting rulings by more
than one arbitrator. Any disputes over which arbitrator or panel of
arbitrators shall hear any consolidated matter shall be resolved by JAMS.



          9.3.4 Power And Authority Of Arbitrator. The arbitrator shall not have
any power to alter, amend, modify or change any of the terms of this Agreement
nor to grant any remedy which is either prohibited by the terms of this
Agreement, or not available in a court of law.



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          9.3.5 Governing Law. All questions in respect of procedure to be followed
in conducting the arbitration as well as the enforceability of this Agreement
to arbitrate which may be resolved by state law shall be resolved according to
the laws of the State of New York.



          9.3.6 Costs. The costs of the arbitration, including any JAMS
administration fee, the arbitrator’s fee, and costs for the use of facilities
during the hearings, shall be borne equally by the Parties to the arbitration.
Attorneys’ fees may be awarded to the prevailing or most prevailing Party at
the discretion of the arbitrator.



     9.4 Assignment. A-S acknowledges that the favorable terms of this
Agreement were granted to Strides only because of Strides’ experience, and that
the substitution of any party by Strides would destroy the intent of the
Parties. Accordingly, Strides shall have no right to assign, delegate,
transfer or otherwise encumber this Agreement or any portion thereof without
A-S’ prior written consent.



     9.5 Counterparts. This Agreement may be executed in several counterparts
that together shall be originals and constitute one and the same instrument.



     9.6 Waiver. The failure of any Party to enforce any of its rights
hereunder or at law shall not be deemed a waiver or a continuing waiver of any
of its rights or remedies against another Party, unless such waiver is in
writing and signed by the Party to be charged.



     9.7 Severability. If any provision of this Agreement, or part thereof, is
declared by a court of competent jurisdiction to be invalid, void or
unenforceable, each and every other provision, or part thereof, shall
nevertheless continue in full force and effect.



     9.8 Attorneys’ Fees. In the event that any dispute between the Parties
should result in litigation or arbitration, the prevailing Party in such
dispute shall be entitled to recover from the other Party all reasonable fees,
costs and expenses of enforcing any right of the prevailing Party, including
without limitation, reasonable attorneys’ fees and expenses, all of which shall
be deemed to have accrued upon the commencement of such action and shall be
paid whether or not such action is prosecuted to judgment. Any judgment or
order entered in such action shall contain a specific provision providing for
the recovery of attorney fees and costs incurred in enforcing such judgment and
an award of prejudgment interest from the date of the breach at the maximum
rate of interest allowed by law. For the purposes of this Section: (a)
attorney fees shall include, without limitation, fees incurred in the
following: (1) postjudgment motions; (2) contempt proceedings; (3) garnishment,
levy, and debtor and third party examinations; (4) discovery; and (5)
bankruptcy litigation; and (b) prevailing Party shall mean the party who is
determined in the proceeding to have prevailed or who prevails by dismissal,
default or otherwise.



     9.9 Notice. Any notice, demand, consent, election, offer, approval,
request, or other communication given under this Agreement shall be in writing
and shall be served personally or delivered by first class, registered or
certified, return receipt requested U.S. mail, postage prepaid. Notices may
also be given by transmittal over electronic transmitting devices such as
Telex, facsimile or telecopy machine, if the Party to whom the notice is being
sent has such a device in its office, provided a complete copy of any notice so
transmitted shall also be mailed in



E-11









 





the same manner as required for a mailed notice. Notices shall be deemed
received at the earlier of actual receipt or three (3) days following deposit
in U.S. mail, postage prepaid. Notices shall be directed to Parties at their
addresses as specified on page 1 of this Agreement, provided a Party may change
such Party’s address for notice by giving written notice to the other Party in
accordance with this Section 9.9.




     9.10 Further Assurances. The Parties agree to execute such additional
documents and perform such acts as are reasonably necessary to effectuate the
intent of this Agreement.



     9.11 Entire Agreement. This Agreement constitutes the entire agreement
between the Parties regarding the subject matter hereof, and supersedes all
prior or contemporaneous understandings or agreements regarding the subject
matter hereof, whether oral or written. This Agreement shall be modified or
amended only by a writing signed by both A-S and Strides.



     9.12 Authority. The parties executing this Agreement on behalf of A-S and
Strides represent and warrant that they have the authority from their
respective governing bodies to enter into this Agreement and to bind their
respective companies to all the terms and conditions of this Agreement.



     9.13 Captions. The captions of the Articles and Sections in this
Agreement are for convenience only and shall not be used to interpret the
provisions of this Agreement.



IN WITNESS WHEREOF, and intending to be legally bound, the Parties have
executed this Agreement to be effective as of the Effective Date.




	 	 	 	 	 	 	 	 	 
	Akorn-Strides, LLC	 	 	 	Akorn, Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 
	

	 	

	 	 	 	 	 	

	Name:

	 	 	 	 	 	Name:	 	 
	

	 	

	 	 	 	 	 	

	Its:

	 	 	 	 	 	Its:	 	 
	

	 	

	 	 	 	 	 	








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EXHIBIT A



COMMISSION SCHEDULE




	 	 	 
	Net Sales (as measured per calendar year)
	 	Commission Percentage

	For Net Sales between $0 to $5,000,000, A-S
shall pay to Akorn a commission equal to:

	 	20% of such Net Sales
between $0 to $5,000,000
	For Net Sales between $5,000,0001-10,000,000,
A-S shall pay to Akorn a commission equal to:

	 	15% of such Net Sales
between
$5,000,0001-10,000,000
	For Net Sales between $10,000,0001-30,000,000,
A-S shall pay to Akorn a commission equal to:

	 	10% of such Net Sales
between
$10,000,0001-30,000,000
	For Net Sales of $30,000,001 and above, A-S
shall pay to Akorn a commission equal to:

	 	7.5% of such Net Sales
above $30,000,001