Limited Liability Company Agreement

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 req ...