Document:

exv10w3

Exhibit 10.3

*Confidential Treatment Requested Under

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

FOURTH AMENDMENT TO 

EXCLUSIVE DISTRIBUTION AGREEMENT

BETWEEN

AKORN, INC. AND

MASSACHUSETTS BIOLOGICAL LABORATORIES

     THIS FOURTH AMENDMENT (the “Fourth Amendment”) is entered into as of April 15, 2009,
(the “Amendment Effective Date”), by and between Massachusetts Biologic Laboratories of the
University of Massachusetts Medical School (“MBL” or “Seller”) and Akorn, Inc.
(“Akorn” or “Buyer”) (each a “Party” and together the “Parties”).

RECITALS

     WHEREAS, MBL as a manufacturer and Akorn as a distributor entered into an Exclusive
Distribution Agreement for Tetanus-Diphtheria vaccine (“Product”) on March 22, 2007 (the
“Exclusive Distribution Agreement”);

     WHEREAS, by an Amendment with an effective date of July 3, 2008, an Amendment with an
effective date of July 30, 2008, and an Amendment with an effect date of August 1, 2008 (the
“Third Amendment”), MBL and Akorn modified their Exclusive Distribution Agreement for
certain purposes (the “Modified Agreement”);

     WHEREAS, since the effective date of the Third Amendment, a dispute arose between the Parties
whereby MBL claimed that Akorn was and continued to be in breach of the Modified Agreement for
failure to timely make payments and take deliveries of the Product as required by the Modified
Agreement (the “Dispute”);

     WHEREAS, the Parties entered into a binding letter agreement (the “Letter Agreement”)
on March 27, 2009 (the “Letter Agreement Effective Date”) under which, among other points
(i) Akorn acknowledged its outstanding past due payment obligations to MBL, and its failure to take
delivery of required doses of Product; and (ii) the Parties agreed to the resolution of the
Dispute;

     WHEREAS, the Letter Agreement contemplates that the Parties will execute further documents to
formalize the agreement they reached and embodied in the Letter Agreement;

     WHEREAS, Parties have accordingly prepared a settlement agreement signed concurrently herewith
(the “Settlement Agreement”) that, among other provisions, calls for the delivery of a
letter of credit (the “Specified Letter of Credit”), as set out in Section 3 of the
Settlement Agreement; and

     WHEREAS, as provided in the Letter Agreement, the Parties similarly have prepared amendments
to the Modified Agreement as set out below.

     NOW, THEREFORE, the Parties agree to amend the Modified Agreement as follows:

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

1

 

*Confidential Treatment Requested Under

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

AMENDMENT

     1. Consideration. The Parties agree that the consideration for this Fourth Amendment consists
of the mutual benefits arising from the modifications set out below and the rights and obligations
contained in the Settlement Agreement executed concurrently herewith.

     2. Amendments Taking Immediate Effect. The following amendments to the Modified Agreement
shall take effect immediately as of the Letter Agreement Effective Date set forth above:

	 	2.1	 	Amendment to Title. The title of the Modified Agreement is amended as of the
Letter Agreement Effective Date to reflect that the Modified Agreement is a
NON-EXCLUSIVE DISTRIBUTION AGREEMENT.

	 
	 	2.2	 	Amendment to Section 1(a). Section 1(a) is amended as of the Letter Agreement
Effective Date to reflect that Seller appoints Buyer as a non-exclusive distributor,
rather than the exclusive distributor, of the Td Vaccine.

	 
	 	2.3	 	Amendment to Section 1(b). Section 1(b) is amended as of the Letter Agreement
Effective Date to reflect that Buyer shall distribute the Td Vaccine on a non-exclusive
basis, rather than exclusive, within the United States and Puerto Rico.

	 
	 	2.4	 	Amendment to Section 3. The following subsection is added as of the Letter
Agreement Effective Date as section 3(c) to the Modified Agreement:

	 
	 	 	 	If Seller offers more favorable per dose pricing than $[***...***] dose for single
dose vials to Seller’s other distributors (“Reduced Per Dose Pricing”), then
(i) Seller shall notify Buyer, and (ii) during the period of such Reduced Per Dose
Pricing, Seller shall offer the same Reduced Per Dose Pricing to Buyer on orders
Buyer places and takes delivery of during such period.

	 
	 	 	 	This Reduced Per Dose Pricing provision shall not apply to any Td Vaccine sold by
Seller under contracts arising from CDC Solicitation 2009-N-11074 Vaccine for
Children and Seller’s pricing under such contracts shall not be affected by Seller’s
relationship with Buyer.

	 
	 	 	 	Notwithstanding anything contained herein to the contrary, Seller and any other party
is entitled to sell Td Vaccine labeled with Buyer’s National Drug Code
(“NDC”), which is currently in Seller’s possession.

	 
	 	2.5	 	Amendment to Sections 2(a)(4) and 2(a)(5). Sections 2(a)(4) and 2(a)(5) are
amended as of the Letter Agreement Effective Date such that (i) Buyer’s obligation to
make any further minimum purchases after the Letter Agreement Effective Date, and (ii)
Buyer’s obligation after the Letter Agreement Effective Date to otherwise comply with
the Td Vaccine delivery schedule set forth in Sections 2(a)(4) and 2(a)(5), are hereby
suspended through the Amendment Effective Date. Such suspension includes suspension of
Buyer’s obligations

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

2

 

*Confidential Treatment Requested Under

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

	 	 	 	concerning the delivery of [***...***] doses scheduled for March 11, 2009 and the
delivery of [***...***] doses scheduled for April 2009.

	 
	 	2.6	 	Amendment to Section 2(d). Section 2(d) is amended as of the Letter Agreement
Effective Date such that for all orders placed on or after the Letter Agreement
Effective Date, Buyer shall pay in full and in cash upon placing the order with Seller.

	 
	 	2.7	 	Additional Provision. The following provision is added as Section 14 to the
Modified Agreement as of the Letter Agreement Effective Date:

	 	14.	 	Information. For the remaining duration of the Modified
Agreement, Buyer will deliver to Seller, by the fifth business day of each
month: (i) a monthly cash forecast for the Td Vaccine expected to be sold under
this Modified Agreement for that month; and (ii) monthly actual inventory and
sales information for the Td Vaccine for the prior calendar month.

	 
	 	 	 	Additionally, Buyer will deliver to Seller quarterly financial reports as, and
when, filed with the Securities and Exchange Commission.

     3. Amendments Taking Effect On the Amendment Effective Date. The following amendments to the
Modified Agreement shall take effect on the Amendment Effective Date:

	 	3.1	 	Amendment to Section 2(a). The minimum purchase requirements set forth in
Section 2(a) and all of its subsections shall no longer apply to purchases of the Td
Vaccine by the Buyer, and, accordingly, Sections 2(a)(4) and 2(a)(5) shall be deleted
in their entirety. Buyer may, subject to mutual agreement by both Parties, purchase Td
Vaccine on an as needed basis in quantities as mutually agreed by the Parties.

	 
	 	3.2	 	Amendment to Section 11. Section 11 shall be deleted in its entirety and
replaced with the following:

	 	11.	 	Termination.

	 	(a)	 	Either Party shall be entitled to terminate this
Modified Agreement for any reason, without penalty, upon ninety (90) days
prior written notice to the other Party.

	 
	 	(b)	 	Either Party shall be entitled to terminate this
Modified Agreement for cause, upon written notice to the other party, if
the other party (i) fails to perform any of its material obligations in
this Agreement and the failure continues for thirty (30) days after
written notice by the other party; or (ii) becomes insolvent, files a
voluntary petition under any law relating to bankruptcy or insolvency, or
becomes unable to pay its debts when due.

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

3

 

*Confidential Treatment Requested Under

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

	 	(c)	 	It is agreed and understood that a termination with
or without cause shall not, under any circumstances, affect Buyer’s
obligations, or Seller’s rights, under the Settlement Agreement or the
Specified Letter of Credit.

	 	3.3	 	Additional Provision. The following provision is added as Section 15 of the
Modified Agreement:

	 	15.	 	Survival. The Parties’ rights and obligations under the
Settlement Agreement shall survive any termination or expiration of this
Agreement, and no termination of expiration of this Agreement shall modify any
of the Parties’ rights and obligations under the Settlement Agreement.

     4. Confidentiality. The Parties understand and agree that the terms and conditions of this
Fourth Amendment are and shall at all times remain confidential, unless this Fourth Amendment or
its contents become Public Information. Neither Party shall disclose this Fourth Amendment or its
contents, except that a Party may disclose this Fourth Amendment or its contents: (i) to a Party’s
attorneys for purposes of enforcement; (ii) to any other person or entity, if the failure to make
such disclosure would constitute a breach of, or default under, an agreement between a Party and
such other person or entity; (iii) if required or reasonably necessary in connection with any Legal
Proceeding; or (iv) pursuant to any applicable laws, ordinances, judgments, decrees, injunctions,
writs, rules, regulations, orders, interpretations, licenses, permits and orders of any court of
competent jurisdiction, arbitration or Governmental Authority in any relevant jurisdiction to the
extent that such Party may reasonably consider necessary to protect its interests.

     5. Effect of Settlement Agreement. The Parties agree that, in the event of any conflict
between the terms of this Fourth Amendment and the Settlement Agreement executed concurrently
herewith, the terms of the Settlement Agreement shall control.

     6. Effect of Amendment. Nothing in this Fourth Amendment is intended to modify, alter, reduce
or change the rights or obligations of Akorn and MBL in the Modified Agreement except as expressly
stated in this Fourth Amendment. In the event there is any conflict between the terms of this
Fourth Amendment and the terms of the Modified Agreement, the terms of this Fourth Amendment shall
control.

     7. Continued Effectiveness. Unless specifically modified or amended by the terms of this
Fourth Amendment, all the terms, conditions, liabilities and obligations of the Modified Agreement
shall be and remain applicable, in effect, valid, and enforceable between the parties and
applicable to this Fourth Amendment; all in accordance with the terms of the Modified Agreement.

     8. Additional Defined Terms. Capitalized terms used herein and not otherwise defined shall
have the meaning ascribed to such terms in the Modified Agreement, if any.

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

4

 

*Confidential Treatment Requested Under

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

     9. Execution in Counterparts. This Fourth Amendment may be executed in one or more
counterparts, each of which when so executed will be deemed to be an original, and all such
counterparts together will constitute but one and the same instrument.

[Signature page follows]

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

5

 

*Confidential Treatment Requested Under

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

     IN WITNESS WHEREOF, the Parties have caused this Fourth Amendment to be executed by their duly
authorized representatives.

	 	 	 	 	 
	 	AKORN INC.

 	 
	 	By:  	/s/ Jeffrey A. Whitnell
 	 
	 	 	Name:  	Jeffrey A. Whitnell 	 
	 	 	Title:  	CFO 	 
	 
	 	MASSACHUSETTS BIOLOGIC LABORATORIES OF THE
UNIVERSITY OF MASSACHUSETTS MEDICAL SCHOOL

 	 
	 	By:  	/s/ Donna M. Ambrosino
 	 
	 	 	Donna M. Ambrosino, M.D. 	 
	 	 	Title:  	Director 	 
	 

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

6EX-10.1

Exhibit 10.1

Annual Incentive Plan

Fiscal Year 2010

Effective April 1, 2009 — March 31, 2010

 

 

Contents

	 	 	 
	 
	 	 
	I.

	 	Purpose of the Plan
	 
	 	 
	II.

	 	Eligibility
	 
	 	 
	III.

	 	Administration
	 
	 	 
	IV.

	 	Plan Design
	 
	 	 
	V.

	 	Financial Objectives
	 
	 	 
	VI.

	 	Individual Objectives
	 
	 	 
	VII.

	 	Incentive Payments
	 
	 	 
	VIII.

	 	Amendment, Suspension and Termination
	 
	 	 
	IX.

	 	Unfunded Plan
	 
	 	 
	X.

	 	Other Benefit and Compensation Programs
	 
	 	 
	XI.

	 	Governing Law

Exhibit I: Apportionment of Bonus Plan Objectives

Page 2 of 7

 

I. Purpose of the Plan

The purpose of the Annual Incentive Plan is to align all participants with the business objectives
of Navarre Corporation and its subsidiaries (the “Company”) by motivating, rewarding and
recognizing participants for their achievements and contribution to the Company’s success.

II. Eligibility

Most management-level employees of the Company are eligible to participate in the Plan. New hires
must be employed prior to October 1st to be eligible for a pro-rata incentive payment for that
fiscal year. Participants that terminate from the company, for any reason, prior to the date of
the incentive payment, will lose their eligibility to receive an incentive payment.

III. Administration

The Plan is administered by the Compensation Committee of the Company’s Board of Directors (the
“Compensation Committee”). The Chief Executive Officer of the Company (the “CEO”) will make
recommendations to the Compensation Committee regarding participation, level of awards, changes to
the Plan, financial objectives, and other aspects of the Plan’s administration. The Compensation
Committee has the authority to interpret the Plan, and, subject to the Plan’s provisions, to make
and amend rules and to make all other decisions necessary for the Plan’s administration. Any
decision of the Compensation Committee in the interpretation and administration of the Plan shall
lie within its sole and absolute discretion and shall be final, conclusive and binding on all
parties concerned. Specifically, the Compensation Committee has the authority to approve payout
percentages and to approve individual awards, including discretionary awards, for the executive
officers. The CEO has the authority to approve individual awards, including discretionary awards,
for other participants consistent with the Plan.

IV. Plan Design

The Annual Incentive Plan has two components:

	 	•	 	Financial Objectives
	 
	 	•	 	Individual Objectives

The potential bonus payout is based on a participant’s level and type of position and is determined
as a percentage of the participant’s base salary apportioned between the two components. That
apportionment is summarized in Exhibit I.

The annual “Incentive Pool” is the amount of money available for payout of bonuses as determined by
the Compensation Committee based upon the aggregate bonus potential of all participants and the
extent to which the Financial Objectives and Individual Objectives have been achieved.

Page 3 of 7

 

V. Financial Objectives

The following Financial Objectives are measured based on attainment of specific levels of
performance of the Company (or of a subsidiary, division, or department thereof):

	 	•	 	Consolidated EBITDA target of $20.2 million (inclusive of the Incentive Pool accrual).
The Incentive Pool will be reduced to ensure attainment of the Consolidated EBITDA target.
In the event that the Incentive Pool is not fully funded, Participants will generally share
in the reduced Incentive Pool on a pro-rata basis.
	 
	 	•	 	For participants that are employees of a subsidiary of Navarre Corporation, the EBITDA
component will be based upon a subsidiary specific target. For subsidiary performance
above threshold but below target, the bonus payout will be reduced proportionately.
	 
	 	•	 	If funding any portion of the Incentive Pool will cause the Company to fail to achieve
the Consolidated EBITDA target, no bonus payout will occur. Additionally, for participants
that are employees of a subsidiary of Navarre Corporation, the applicable subsidiary must
attain 80% of budgeted EBITDA target in order for those subsidiary participants to earn a
bonus.

Growth Multiplier

If Consolidated EBITDA exceeds the EBITDA target, the Incentive Pool will be increased by 25% of
the amount that Consolidated EBITDA exceeds the EBITDA target (the “Growth Multiplier”).
Participants will share in the enhanced Incentive Pool on a pro-rata basis, subject to the maximum
payment provision in Paragraph VII herein. This provides an enhanced incentive payout opportunity
to participants which would be funded through improvement in Consolidated EBITDA beyond targeted
amounts.

VI. Individual Objectives

Goal Setting

Plan participants and their managers will share accountability for establishing annual goals for
the Individual Objectives component of the incentive plan. Generally, participants will have a
number of specific and measurable goals which may be weighted or prioritized. These goals should
tie directly to the overall company, subsidiary, or department goals. Joint agreement on goals
will be confirmed with signatures of the participant and his/her manager. These goals must be
provided to Human Resources within two months of becoming eligible for the Annual Incentive Plan.

Page 4 of 7

 

Goal Monitoring

Participants will normally meet with their managers at least quarterly to review progress on the
established goals.

Goal Modification

Goals may be modified during the plan year if the business or the individual’s position requires
the change.

Goal Measurement

Plan participants and their managers will discuss the participant’s goal achievement on their
Individual Objectives and managers must submit the achievement to HR for approval in a timely
manner. The Compensation Committee will evaluate and determine achievement of the CEO’s individual
performance and review the achievement for the other executive officers.

VII. Incentive Payments

Results and Adjustments

Actual business results for the fiscal year will be provided by the Chief Financial Officer and
approved by the Compensation Committee. The Compensation Committee may approve adjustments to
actual business results to reflect organizational, operational, or other changes which have
occurred during the year, e.g., acquisitions, dispositions, expansions, contractions, material
non-recurring items of income or loss, extraordinary items, effects of accounting changes or other
events.

Discretionary Pool

The Compensation Committee has determined that a discretionary pool should also be established to
reward participants in the plan with exemplary performance. The maximum amount of the
discretionary pool is $500,000, which may or may not be awarded in whole or in part.

Payments

Payments under the Plan will normally be paid within 45 days of the conclusion of the Company’s
annual audit by its certified public accountants. Payment will be made for the number of full
months that the participant held a qualifying position during the plan year and amounts paid will
be taxed in compliance with Internal Revenue Service guidelines for bonuses. Checks for bonus
payments will normally be hand delivered in one-on-one meetings by the participant’s manager.

Page 5 of 7

 

Maximum Payment

Notwithstanding anything to the contrary provided in this Plan, payouts to any one participant will
not exceed 150% of the participant’s target bonus.

Communication

After year-end closing, managers should meet individually with each participant to communicate the
final achievement on specific goals and communicate the incentive payment amount. Human Resources
will prepare a communication document to assist managers to effectively communicate this
information.

VII. Amendment, Suspension and Termination

The Compensation Committee or the Board of Directors may at any time, and without prior notice,
terminate, suspend, amend or modify this Plan or any incentive payments under the Plan not yet
paid. No payments pursuant under this Plan will be made during any suspension of the Plan or after
its termination.

VIII. Unfunded Plan

The Plan is unfunded and the Company shall not be required to segregate any assets for incentive
payments under the Plan.

IX. Other Benefit and Compensation Programs

Payments received by a participant under this Plan shall not be deemed a part of a participant’s
regular, recurring compensation for purposes of the termination, indemnity or severance pay law of
any state and shall not be included in, nor have any effect on, the determination of benefits under
any other employee benefit plan, contract or similar arrangement provided by the Company unless
expressly so provided by such other plan, contract or arrangement. Nothing in the Plan shall be
construed as a contractual payment obligation or guarantee of employment for any participant.

X. Governing Law

To the extent that Federal laws do not otherwise control, the Plan and all determinations made and
actions taken pursuant to the Plan shall be governed by the laws of Minnesota and construed
accordingly.

Page 6 of 7

 

Exhibit I

Apportionment of Bonus Plan

Financial Objectives / Individual Objectives

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Consolidated	 	Subsidiary	 	Individual
	Participant	 	EBITDA	 	EBITDA	 	Objectives
	Corporate CEO & CFO
	 	 	90	%	 	 	 	 	 	 	10	%
	Subsidiary President
	 	 	 	 	 	 	80	%	 	 	20	%
	Corporate VP
	 	 	80	%	 	 	 	 	 	 	20	%
	Subsidiary VP
	 	 	 	 	 	 	80	%	 	 	20	%
	Corporate Director
	 	 	70	%	 	 	 	 	 	 	30	%
	Subsidiary Director
	 	 	 	 	 	 	70	%	 	 	30	%
	Corporate Manager
	 	 	70	%	 	 	 	 	 	 	30	%
	Subsidiary Manager
	 	 	 	 	 	 	70	%	 	 	30	%

Page 7 of 7

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