Exhibit 10.3
SALES AND MARKETING AGREEMENT
This Sales and Marketing
Agreement, (“Agreement”) is made and entered into as of
September 22, 2004 (“Effective Date”), by and
between Akorn-Strides, LLC, a Delaware limited liability company
having a principal place of business at 2500 Millbrook Drive,
Buffalo Grove, Illinois 60089-4694 (“A-S”), and Akorn,
Inc., a Louisiana corporation having a principal place of business
at 2500 Millbrook Drive, Buffalo Grove, Illinois 60089-4694
(“Akron”), (each a “Party” and collectively
the “Parties”).
RECITALS
A. A-S is a
new entity formed by Akorn and Strides Arcolab Limited, a company
organized under the laws of India having a principal place of
business at Strides House, Bilekahalli, Bannerghatta Road,
Bangalore 560 076, India (“Strides”), to engage in the
development and marketing of generic drug products;
B. Pursuant
to the Limited Liability Company Agreement of even date between
Strides and Akorn, A-S desires to have Akorn assist it by providing
certain sales, marketing and administrative services with respect
to Products in the United States (as such term is defined below),
and Akorn desires to assist A-S by providing certain sales,
marketing and administrative services with respect to Products in
the United States, pursuant to the terms and conditions of this
Agreement.
NOW, THEREFORE, in
consideration of the mutual promises, covenants and obligations
contained herein, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1
Affiliate. The term “Affiliate” means with respect to
any Party, any party controlling, controlled by or under common
control with any such Party. For purposes hereof,
“control” and its derivatives means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Party, whether
through the ownership of voting securities or voting interests, by
contract or otherwise.
1.2
cGMP. The term “cGMP” means current Good Manufacturing
Practices as established by the FDA as the same may be amended from
time to time.
1.3
Commission. The term “Commission” has the meaning
ascribed to it in Section 5.1.
1.4
Commission Schedule. The term “Commission Schedule” has
the meaning ascribed to it in Section 5.1.
1.5
Commission Statement. The term “Commission Statement”
has the meaning ascribed to it in Section 5.3.
1.6
Epidemic Failure. The term “Epidemic Failure” means
Product deficiencies resulting from defects in material,
workmanship and/or manufacturing process that are in excess of one
percent (1%) of the total number of Products shipped during any
rolling six (6) month period.
1.7
FDA. The term “FDA” means the United States Food and
Drug Administration.
1.8
Minimum Sales Requirement. The term “Minimum Sales
Requirement” means, with respect to each separate Product,
(i) to the extent that four (4) or more competitive
products offering the same specific active pharmaceutical
ingredient are approved by the FDA and commercially released and
available in a Measurement Period in the Territory, a market share
of five percent (5%) or greater in such Measurement Period with
respect to such specific active pharmaceutical ingredient, as
reported by IMS Health Incorporated; or (ii) to the extent
that two (2) or three (3) competitive products offering
the same specific active pharmaceutical ingredient are approved by
the FDA and commercially released and available in a Measurement
Period in the Territory, a market share of ten percent (10%) or
greater in such Measurement Period with respect to such specific
active pharmaceutical ingredient, as reported by IMS Health
Incorporated; or (iii) to the extent that only one
(1) competitive product offering the same specific active
pharmaceutical ingredient is approved by the FDA and commercially
released and available in a Measurement Period in the Territory, a
market share of fifteen percent (15%) or greater in such
Measurement Period with respect to such specific active
pharmaceutical ingredient, as reported by IMS Health
Incorporated.
1.9
Intellectual Property Rights. The term “Intellectual Property
Rights” means all United States and worldwide trademarks,
service marks, trade dress, logos, copyrights, rights of
authorship, inventions, patents, rights of inventorship, moral
rights, rights of publicity and privacy, trade secrets, rights
under unfair competition and unfair trade practices laws, and all
other intellectual and industrial property rights related
thereto.
1.10 Measurement
Period. The term “Measurement Period” means with
respect to each Product, the period beginning with the date that
the Product is first delivered to Akorn in production quantities,
following approval of the applicable ANDA (as defined in the OEM
Agreement ) by the FDA, or an annual anniversary thereof, and
ending in each case twelve (12) months thereafter.
1.11 Net Sales.
The term “Net Sales” means the total amounts charged
for A-S’ sale of Products, less applicable sales and use
taxes, insurance and freight charges, Product returns and similar
Product defect credits, and customary allowances and trade
discounts, provided that such adjustments related to Product
returns, defects and customary allowances and trade discounts are
detailed in the applicable Commission Statement pursuant to
Section 5.3 below and shall not exceed eight percent (8%) of
A-S’ gross sales for Products in any calendar year, and
provided that if A-S resells any returned Products, such sales will
be included in Net Sales subject to a Commission in the quarter in
which the returned Products are resold. The amounts for returned
Products shall be deducted in the quarter when A-S actually
receives the returned Products. No other deductions shall be made
from Net Sales. Notwithstanding anything else to the contrary, Net
Sales shall not include any amounts charged for A-S’ sale of
specific Products (i) for which Akorn failed to meet the
Minimum Sales Requirement in a Measurement Period; (ii) for
which
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such third party service provider
was engaged by A-S within thirty (30) calendar days of such failure
for the purpose of providing sales, marketing and administrative
services for such Product; (iii) which are attributable to the
efforts of such third party service provider; and (iv) which
such third party service provider actually fulfills and is paid a
commission by A-S.
1.12 OEM
Agreement. The term “OEM Agreement” means the OEM
Agreement of even date between Strides and A-S.
1.13 Products. The
term “Products” means the A-S products manufactured by
Strides pursuant to the OEM Agreement.
1.14 Services. The
term “Services” means the sales, marketing and
administrative services more fully set forth in ARTICLE 3
below.
1.15 Strides. The
term “Strides” has the meaning ascribed to it in
Recital A.
1.16 Term. The
term “Term” has the meaning ascribed to it in
Section 8.1.
1.17 Territory.
The term “Territory” means the United
States.
1.18 Trademarks.
The term “Trademarks” has the meaning ascribed to it in
Section 4.1.
ARTICLE 2
APPOINTMENT OF
AKORN
2.1
Appointment of Akorn. A-S hereby appoints Akorn for the Term as its
exclusive provider of Services for the Territory. Akorn hereby
accepts this appointment and agrees to perform the Services within
the Territory during the Term in accordance with the terms and
conditions of this Agreement.
2.2
Failure to Attain Minimum Sales Requirement. Notwithstanding
anything else to the contrary, should Akorn fail to meet the
Minimum Sales Requirement in a Measurement Period with respect to
any Product, then the appointment of Akorn set forth in
Section 2.1 above shall, with respect to such specific Product
only for which the Minimum Sales Requirement was not achieved,
become non-exclusive and A-S shall have the option, within thirty
(30) calendar days of such failure, to retain a third party
service provider for the purpose of providing on a non-exclusive
basis sales, marketing and administrative services for such
Product. A-S shall exercise such option by notifying Akorn in
writing, within thirty (30) calendar days of the end of the
applicable Measurement Period, of the non-exclusive appointment of
the third party service provider for the purpose of providing
sales, marketing and administrative services for such Product.
Notwithstanding any appointment by A-S of such third party service
provider, Akorn shall retain the non-exclusive right to provide
Services for such Product for the Territory, and shall continue to
receive Commissions for all Net Sales of such Product as more fully
provided herein.
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ARTICLE 3
SCOPE OF SERVICES
3.1
Product Marketing. During the Term Akorn shall use commercially
reasonable efforts to solicit orders for, and to promote and
market, the Products in the Territory. Akorn shall use
mutually-approved marketing materials in its marketing efforts for
the Products. The Parties shall use commercially reasonable efforts
to mutually develop a marketing plan for the Products in the
Territory. If the Parties are unable to mutually develop such a
marketing plan, then Akorn shall propose a marketing plan to A-S.
Akorn’s proposed separate marketing plan must be approved by
A-S before Akorn implements the same, and A-S’ approval will
not be unreasonably withheld.
3.2
Advertising. Akorn shall advertise and promote the Products in the
Territory in a manner that will enhance the goodwill associated
with the Products and with the Trademarks.
3.3
Pricing and Terms of Purchase. A-S shall have the absolute right to
establish and change the prices charged and terms governing the
sale of the Products in the Territory. All sales of Product in the
Territory shall be subject to A-S’ standard sales order terms
and conditions, as may be amended from time to time by
A-S.
3.4
Sales Efforts. Akorn shall transmit or cause to be transmitted to
A-S any order and all inquiries or complaints concerning Products
originating from the Territory. Akorn shall additionally provide,
on request, assistance and advice to customers in the Territory
concerning the handling, storage and use of Products. Such advice
and assistance shall be in accordance with A-S’ published
data sheets and specifications for the Products. All sales of
Products in the Territory, notwithstanding Akorn’s provision
of the Services, shall be solely made by A-S and for the account of
A-S.
3.5
Selling Standards. Akorn shall comply with written selling and
marketing standards established by the mutual written agreement of
the Parties, as may be modified from time to time by the mutual
written agreement of the Parties during the Term.
3.6
Administrative Services. For each Product sold by A-S within the
Territory, Akorn shall generate an invoice made payable to A-S. At
least monthly, Akorn shall provide A-S with a current statement of
account, listing all invoices outstanding and any payments made and
credits given since the date of the previous statement. Any funds
collected by Akorn with respect to Net Sales shall be paid to
A-S.
3.7
Product Fulfillment. Akorn shall ship Product pursuant to purchase
order(s) issued from the Territory. A-S shall ensure that Akorn has
sufficient inventories of Products to properly fulfill Product
orders in the Territory.
3.8
Personnel and Facilities. Akorn shall maintain and be responsible
for, at its sole cost, its own sales, marketing and service
personnel and facilities to enable Akorn to properly perform its
obligations hereunder.
3.9
Compliance with Laws. Akorn will comply with all applicable laws
and regulations that govern its activities under this
Agreement.
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3.10 Akorn
Business Practices. Akorn shall use commercially reasonable efforts
to conduct business in a manner that reflects favorably on the
Products and A-S’ goodwill and reputation.
3.11 Own Account.
Akorn shall conduct its business for its own account, as an
independent contractor, in its own name, and not as an agent,
employee, or partner of A-S or actually, impliedly or ostensibly
hold itself out as such. Except as herein expressly provided, Akorn
shall determine in its own judgment how best to perform its
obligations hereunder, and A-S has no right to control such
matters.
3.12 Expenses. All
expenses incurred by Akorn in connection with the Services pursuant
to this Agreement shall be at the sole cost of Akorn and A-S shall
not be responsible or liable therefor.
ARTICLE 4
TRADEMARKS
4.1
Use of Trademarks. Pursuant to the terms and conditions of this
Agreement and during the Term, A-S hereby grants Akorn an exclusive
license to use the composite proprietary mark
“Akorn-Strides/Arcolab” and associated logos, trade
dress and/or trade names of A-S utilized in association with the
Products (collectively “Trademarks”) only in its
advertising and/or promotional materials for the Products;
provided, however, that A-S reserves all rights of ownership and
control over the Trademarks and the right to restrict any use which
A-S in its sole discretion believes poses a serious threat or could
be detrimental to the Trademarks or A-S’ goodwill or
reputation. Akorn shall not at any time do anything or act in any
way that would or might adversely affect the value or validity of
any Trademarks or other intellectual property belonging to A-S.
Akorn shall immediately notify A-S in writing upon becoming aware
of any intellectual property infringement or imitation of any
intellectual property of A-S or of any facts that Akorn believes
might constitute infringement or imitation. Akorn acknowledges that
all use of the Trademarks by Akorn shall inure to the benefit of
and be on behalf of A-S.
4.2
Use Approval. Prior to using the Trademarks in any advertising
and/or promotional material for the Products that is not provided
by A-S, Akorn shall forward an exemplar of each such advertising
and/or promotional materials to A-S for its advance approval,
consult with and obtain the written approval of A-S for such
materials, which approval shall not be unreasonably
withheld.
4.3
Alteration. Akorn shall not remove, alter or obliterate any
Trademarks or badges or any other tags affixed to the Products, nor
shall it add any other names or marks except with the prior written
consent of A-S.
ARTICLE 5
FINANCIAL
PROVISIONS
5.1
Compensation. As compensation for Services rendered under this
Agreement, A-S shall pay to Akorn a commission on the Net Sales of
Products originatin
