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Akorn Strides LLC Agreement 09-22-2004
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. a7
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. a7 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.
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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
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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
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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.
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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.
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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.
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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
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(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.
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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.
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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.
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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.
34
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 JAMSENDISPUTE (" 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
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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.
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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:
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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.
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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,
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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.
D-3
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.
D-4
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
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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.
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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
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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
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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.
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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
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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.
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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.
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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.
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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.
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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
JAMSENDISPUTE (" 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.
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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
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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:
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* Confidential Treatment Requested Under
17 C.F.R. a7a7 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. a7a7 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
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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
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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
JAMSENDISPUTE (" 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
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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 $5,000,000For
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 $5,000,0001-10,000,000For 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 $10,000,0001-30,000,000For 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