Oem Agreement

Exhibit 10.2

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.

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

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

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

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

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

1.21 Forecast. The term " Forecast" is defined in Section 4.2.1.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1.43 Term. The term " Term" is defined in Section 9.1.

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

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

ARTICLE 2 ANDA PROCESS

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

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

2.3 Funding of Registration Costs.

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

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

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

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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' co ...