Document:

exv10w3

 

Exhibit 10.3

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 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

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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

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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,

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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

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:  

	/s/ Arun Kumar
	 	By:  
	/s/ Arthur S. Przybyl
	

	
 
	 	 	
 
	Name:  Arun Kumar

	 	Name:  Arthur S. Przybyl

	 
	 	 	 	 
	Its:

	Manager
	 	Its:
	President and CEO

12

 

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 $30,000,001exv10w4

 

Exhibit 10.4

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.

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

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.

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:  /s/ Arun Kumar

	

	

	 	

	

	
Name:  Arun Kumar

	

	

Title:  Manager

4

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