Exhibit 10.2
 
GUARANTY AND SECURITY AGREEMENT
Dated as of January 7, 2009
among
AKORN, INC.,
AKORN (NEW JERSEY), INC.
and
Each Other Grantor
From Time to Time Party Hereto
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent
 

 

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TABLE OF CONTENTS

              Page  
ARTICLE I DEFINED TERMS
    1  
Section 1.1 Definitions
    1  
Section 1.2 Certain Other Terms
    4  
 
       
ARTICLE II GUARANTY
    6  
Section 2.1 Guaranty
    6  
Section 2.2 Limitation of Guaranty
    6  
Section 2.3 Contribution
    6  
Section 2.4 Authorization; Other Agreements
    7  
Section 2.5 Guaranty Absolute and Unconditional
    7  
Section 2.6 Waivers
    8  
Section 2.7 Reliance
    8  
 
       
ARTICLE III GRANT OF SECURITY INTEREST
    9  
Section 3.1 Collateral
    9  
Section 3.2 Grant of Security Interest in Collateral
    10  
 
       
ARTICLE IV REPRESENTATIONS AND WARRANTIES
    10  
Section 4.1 Title; No Other Liens
    10  
Section 4.2 Perfection and Priority
    10  
Section 4.3 Jurisdiction of Organization; Chief Executive Office
    11  
Section 4.4 Locations of Inventory, Equipment and Books and Records
    11  
Section 4.5 Pledged Collateral
    11  
Section 4.6 Instruments and Tangible Chattel Paper Formerly Accounts
    12  
Section 4.7 Intellectual Property
    12  
Section 4.8 Commercial Tort Claims
    12  
Section 4.9 Specific Collateral
    13  
Section 4.10 Enforcement
    13  
Section 4.11 Representations and Warranties of the Credit Agreement
    13  
 
       
ARTICLE V COVENANTS
    13  
Section 5.1 Maintenance of Perfected Security Interest; Further Documentation
and Consents
    13  
Section 5.2 Changes in Locations, Name, Etc
    14  
Section 5.3 Pledged Collateral
    15  
Section 5.4 Accounts
    15  
Section 5.5 Commodity Contracts
    16  
Section 5.6 Delivery of Instruments and Tangible Chattel Paper and Control of
Investment Property, Letter-of-Credit Rights and Electronic Chattel Paper
    16  
Section 5.7 Intellectual Property
    17  
Section 5.8 Notices
    18  
Section 5.9 Notice of Commercial Tort Claims
    18  
Section 5.10 Controlled Securities Account
    18  

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TABLE OF CONTENTS
(continued)

              Page  
 
       
ARTICLE VI REMEDIAL PROVISIONS
    19  
Section 6.1 Code and Other Remedies
    19  
Section 6.2 Accounts and Payments in Respect of General Intangibles
    22  
Section 6.3 Pledged Collateral
    23  
Section 6.4 Proceeds to be Turned over to and Held by Agent
    24  
Section 6.5 Sale of Pledged Collateral
    24  
Section 6.6 Deficiency
    25  
 
       
ARTICLE VII THE AGENT
    25  
Section 7.1 Agent’s Appointment as Attorney-in-Fact
    25  
Section 7.2 Authorization to File Financing Statements
    27  
Section 7.3 Authority of Agent
    27  
Section 7.4 Duty; Obligations and Liabilities
    27  
 
       
ARTICLE VIII MISCELLANEOUS
    28  
Section 8.1 Reinstatement
    28  
Section 8.2 Release of Collateral
    29  
Section 8.3 Independent Obligations
    29  
Section 8.4 No Waiver by Course of Conduct
    29  
Section 8.5 Amendments in Writing
    30  
Section 8.6 Additional Grantors; Additional Pledged Collateral
    30  
Section 8.7 Notices
    30  
Section 8.8 Successors and Assigns
    30  
Section 8.9 Counterparts
    30  
Section 8.10 Severability
    31  
Section 8.11 Governing Law
    31  
Section 8.12 Waiver of Jury Trial
    31  

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ANNEXES AND SCHEDULES

     
Annex 1
  Form of Pledge Amendment
Annex 2
  Form of Joinder Agreement
Annex 3
  Form of Intellectual Property Security Agreement
 
   
Schedule 1
  Commercial Tort Claims
Schedule 2
  Filings
Schedule 3
  Jurisdiction of Organization; Chief Executive Office
Schedule 4
  Location of Inventory and Equipment
Schedule 5
  Pledged Collateral
Schedule 6
  Intellectual Property

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     GUARANTY AND SECURITY AGREEMENT, dated as of January 7, 2009, by Akorn,
Inc., a Louisiana corporation (“Akorn”), Akorn (New Jersey), Inc., an Illinois
corporation (“Akorn NJ” and, together with Akorn, the “Borrowers”) and each of
the other entities listed on the signature pages hereof or that becomes a party
hereto pursuant to Section 8.6 (together with the Borrowers, the “Grantors”), in
favor of General Electric Capital Corporation (“GE Capital”), as administrative
agent (in such capacity, together with its successors and permitted assigns, the
“Agent”) for the Lenders, the L/C Issuers and each other Secured Party (each as
defined in the Credit Agreement referred to below).
W I T N E S S E T H:
     WHEREAS, pursuant to the Credit Agreement dated as of the date hereof (as
the same may be amended, restated, supplemented or otherwise modified from time
to time, the “Credit Agreement”) among the Borrowers, Akorn, as Borrower
Representative, the other Credit Parties party thereto, the Lenders, the L/C
Issuers from time to time party thereto and GE Capital, as Agent for the Lenders
and the L/C Issuers, the Lenders and the L/C Issuers have severally agreed to
make extensions of credit to the Borrowers upon the terms and subject to the
conditions set forth therein;
     WHEREAS, each Grantor has agreed to guaranty the Obligations (as defined in
the Credit Agreement) of each Borrower (other than itself);
     WHEREAS, each Grantor will derive substantial direct and indirect benefits
from the making of the extensions of credit under the Credit Agreement; and
     WHEREAS, it is a condition precedent to the obligation of the Lenders and
the L/C Issuers to make their respective extensions of credit to the Borrowers
under the Credit Agreement that the Grantors shall have executed and delivered
this Agreement to the Agent;
     NOW, THEREFORE, in consideration of the premises and to induce the Lenders,
the L/C Issuers and the Agent to enter into the Credit Agreement and to induce
the Lenders and the L/C Issuers to make their respective extensions of credit to
the Borrowers thereunder, each Grantor hereby agrees with the Agent as follows:
ARTICLE I
DEFINED TERMS
     Section 1.1 Definitions.
          (a) Capital terms used herein without definition are used as defined
in the Credit Agreement.
GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

 

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          (b) The following terms have the meanings given to them in the UCC and
terms used herein without definition that are defined in the UCC have the
meanings given to them in the UCC (such meanings to be equally applicable to
both the singular and plural forms of the terms defined): “account”, “account
debtor”, “as-extracted collateral”, “certificated security”, “chattel paper”,
“commercial tort claim”, “commodity contract”, “deposit account”, “electronic
chattel paper”, “equipment”, “farm products”, “fixture”, “general intangible”,
“goods”, “health-care-insurance receivable”, “instruments”, “inventory”,
“investment property”, “letter-of-credit right”, “proceeds”, “record”,
“securities account”, “security”, “supporting obligation” and “tangible chattel
paper”.
          (c) The following terms shall have the following meanings:
          “Agreement” means this Guaranty and Security Agreement.
          “Applicable IP Office” means the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency
within or outside the United States.
          “Cash Collateral Account” means a deposit account or securities
account subject, in each instance, to a Control Agreement, other than accounts
established to cash collateralize L/C Reimbursement Obligations.
          “Collateral” has the meaning specified in Section 3.1.
          “Controlled Securities Account” means each securities account
(including all financial assets held therein and all certificates and
instruments, if any, representing or evidencing such financial assets) that is
the subject of an effective Control Agreement.
          “Excluded Equity” means (i) any voting stock in excess of 65% of the
outstanding voting stock of any Foreign Subsidiary, which, pursuant to the terms
of the Credit Agreement, is not required to guaranty the Obligations and
(ii) Akorn’s interest in the Existing JV. For the purposes of this definition,
“voting stock” means, with respect to any issuer, the issued and outstanding
shares of each class of Stock of such issuer entitled to vote (within the
meaning of Treasury Regulations § 1.956-2(c)(2)).
          “Excluded Property” means, collectively, (i) Excluded Equity, (ii) any
permit or license or any Contractual Obligation entered into by any Grantor
(A) that prohibits or requires the consent of any Person other than a Borrower
and its Affiliates which has not been obtained as a condition to the creation by
such Grantor of a Lien on any right, title or interest in such permit, license
or Contractual Obligation or any Stock or Stock Equivalent related thereto or
(B) to the extent that any Requirement of Law applicable thereto prohibits the
creation of a Lien thereon, but only, with respect to the prohibition in (A) and
(B), to the extent, and for as long as, such prohibition is not terminated or
rendered unenforceable or otherwise deemed ineffective by the UCC or any other
Requirement of Law, (iii) Property owned by any Grantor that is subject to a
GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

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purchase money Lien or a Capital Lease permitted under the Credit Agreement if
the Contractual Obligation pursuant to which such Lien is granted (or in the
document providing for such Capital Lease) prohibits or requires the consent of
any Person other than a Borrower and its Affiliates which has not been obtained
as a condition to the creation of any other Lien on such equipment and (iv) any
“intent to use” Trademark applications for which a statement of use has not been
filed (but only until such statement is filed); provided, however, “Excluded
Property” shall not include any proceeds, products, substitutions or
replacements of Excluded Property (unless such proceeds, products, substitutions
or replacements would otherwise constitute Excluded Property).
          “Existing JV” means Akorn-Strides, LLC, a Delaware limited liability
company.
          “Existing Licenses” shall mean (i) that certain License and Supply
Agreement dated as of November 11, 2004 (as amended, modified, supplemented or
restated) by and between Hameln and Akorn, (ii) that certain Sales and Marketing
Agreement dated as of September 22, 2004 (as amended, modified, supplemented or
restated) by and between Akorn and the Existing JV and (iii) that certain
Development and Exclusive Distribution Agreement dated as of November 7, 2006
(as amended, modified, supplemented or restated) by and between Akorn and Serum.
          “Guaranteed Obligations” has the meaning set forth in Section 2.1.
          “Guarantor” means each Grantor, including each Borrower with respect
to the obligations of each other Borrower.
          “Guaranty” means the guaranty of the Guaranteed Obligations made by
the Guarantors as set forth in this Agreement.
          “Hameln” means Hameln Pharmaceuticals GMBH, a company organized and
existing under the laws of Germany.
          “Internet Domain Name” means all right, title and interest (and all
related IP Ancillary Rights) arising under any Requirement of Law in or relating
to Internet domain names.
          “Material Intellectual Property” means Intellectual Property that is
owned by or licensed to a Grantor and material to the conduct of any Grantor’s
business.
          “Pledged Certificated Stock” means all certificated securities and any
other Stock or Stock Equivalent of any Person evidenced by a certificate,
instrument or other similar document (as defined in the UCC), in each case owned
by any Grantor, including all Stock and Stock Equivalents listed on Schedule 5.
Pledged Certificated Stock excludes any Excluded Property and any Cash
Equivalents that are not held in Controlled Securities Accounts to the extent
permitted by Section 5.10 hereof.
GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

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          “Pledged Collateral” means, collectively, the Pledged Stock and the
Pledged Debt Instruments.
          “Pledged Debt Instruments” means all right, title and interest of any
Grantor in instruments evidencing any Indebtedness owed to such Grantor or other
obligations, including all Indebtedness described on Schedule 5, issued by the
obligors named therein. Pledged Debt Instruments excludes any Cash Equivalents
that are not held in Controlled Securities Accounts to the extent permitted by
Section 5.10 hereof.
          “Pledged Investment Property” means any investment property of any
Grantor, other than any Pledged Stock or Pledged Debt Instruments. Pledged
Investment Property excludes any Cash Equivalents that are not held in
Controlled Securities Accounts to the extent permitted by Section 5.10 hereof.
          “Pledged Stock” means all Pledged Certificated Stock and all Pledged
Uncertificated Stock.
          “Pledged Uncertificated Stock” means any Stock or Stock Equivalent of
any Person that is not Pledged Certificated Stock, including all right, title
and interest of any Grantor as a limited or general partner in any partnership
not constituting Pledged Certificated Stock or as a member of any limited
liability company, all right, title and interest of any Grantor in, to and under
any Organization Document of any partnership or limited liability company to
which it is a party, including in each case those interests set forth on
Schedule 5, to the extent such interests are not certificated. Pledged
Certificated Stock excludes any Excluded Property and any Cash Equivalents that
are not held in Controlled Securities Accounts to the extent permitted by
Section 5.10 hereof.
          “Software” means (a) all computer programs, including source code and
object code versions, (b) all data, databases and compilations of data, whether
machine readable or otherwise, and (c) all documentation, training materials and
configurations related to any of the foregoing.
          “UCC” means the Uniform Commercial Code as from time to time in effect
in the State of New York; provided, however, that, in the event that, by reason
of mandatory provisions of any applicable Requirement of Law, any of the
attachment, perfection or priority of the Agent’s or any other Secured Party’s
security interest in any Collateral is governed by the Uniform Commercial Code
of a jurisdiction other than the State of New York, “UCC” shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such attachment, perfection or priority and for
purposes of the definitions related to or otherwise used in such provisions.
          “Vehicles” means all vehicles covered by a certificate of title law of
any state.
Section 1.2 Certain Other Terms.
GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

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          (a) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. The terms
“herein”, “hereof” and similar terms refer to this Agreement as a whole and not
to any particular Article, Section or clause in this Agreement. References
herein to an Annex, Schedule, Article, Section or clause refer to the
appropriate Annex or Schedule to, or Article, Section or clause in this
Agreement. Where the context requires, provisions relating to any Collateral
when used in relation to a Grantor shall refer to such Grantor’s Collateral or
any relevant part thereof.
          (b) Other Interpretive Provisions.
          (i) Defined Terms. Unless otherwise specified herein or therein, all
terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto.
          (ii) The Agreement. The words “hereof”, “herein”, “hereunder” and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
          (iii) Certain Common Terms. The term “including” is not limiting and
means “including without limitation.”
          (iv) Performance; Time. Whenever any performance obligation hereunder
(other than a payment obligation) shall be stated to be due or required to be
satisfied on a day other than a Business Day, such performance shall be made or
satisfied on the next succeeding Business Day. In the computation of periods of
time from a specified date to a later specified date, the word “from” means
“from and including”; the words “to” and “until” each mean “to but excluding”,
and the word “through” means “to and including.” If any provision of this
Agreement refers to any action taken or to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be interpreted to
encompass any and all means, direct or indirect, of taking, or not taking, such
action.
          (v) Contracts. Unless otherwise expressly provided herein, references
to agreements and other contractual instruments, including this Agreement and
the other Loan Documents, shall be deemed to include all subsequent amendments,
thereto, restatements and substitutions thereof and other modifications and
supplements thereto which are in effect from time to time, but only to the
extent such amendments and other modifications are not prohibited by the terms
of any Loan Document.
          (vi) Laws. References to any statute or regulation are to be construed
as including all statutory and regulatory provisions related thereto or
GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

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consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
ARTICLE II
GUARANTY
      Section 2.1 Guaranty. To induce the Lenders to make the Loans and the L/C
Issuers to Issue Letters of Credit and each other Secured Party to make credit
available to or for the benefit of one or more Grantors, each Guarantor hereby,
jointly and severally, absolutely, unconditionally and irrevocably guarantees,
as primary obligor and not merely as surety, the full and punctual payment when
due, whether at stated maturity or earlier, by reason of acceleration, mandatory
prepayment or otherwise in accordance with any Loan Document, of all the
Obligations of each Borrower whether existing on the date hereof or hereinafter
incurred or created (the “Guaranteed Obligations”). This Guaranty by each
Guarantor hereunder constitutes a guaranty of payment and not of collection.
      Section 2.2 Limitation of Guaranty. Any term or provision of this Guaranty
or any other Loan Document to the contrary notwithstanding, the maximum
aggregate amount for which any Guarantor shall be liable hereunder shall not
exceed the maximum amount for which such Guarantor can be liable without
rendering this Guaranty or any other Loan Document, as it relates to such
Guarantor, subject to avoidance under applicable Requirements of Law relating to
fraudulent conveyance or fraudulent transfer (including the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act and Section 548 of title 11
of the United States Code or any applicable provisions of comparable
Requirements of Law) (collectively, “Fraudulent Transfer Laws”). Any analysis of
the provisions of this Guaranty for purposes of Fraudulent Transfer Laws shall
take into account the right of contribution established in Section 2.3 and, for
purposes of such analysis, give effect to any discharge of intercompany debt as
a result of any payment made under the Guaranty.
      Section 2.3 Contribution. To the extent that any Guarantor shall be
required hereunder to pay any portion of any Guaranteed Obligation exceeding the
greater of (a) the amount of the value actually received by such Guarantor and
its Subsidiaries from the Loans and other Obligations and (b) the amount such
Guarantor would otherwise have paid if such Guarantor had paid the aggregate
amount of the Guaranteed Obligations (excluding the amount thereof repaid by a
Borrower that received the benefit of the funds advanced that constituted
Guaranteed Obligations) in the same proportion as such Guarantor’s net worth on
the date enforcement is sought hereunder bears to the aggregate net worth of all
the Guarantors on such date, then such Guarantor shall be reimbursed by such
other Guarantors for the amount of such excess, pro rata, based on the
respective net worth of such other Guarantors on such date.
GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

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      Section 2.4 Authorization; Other Agreements. The Secured Parties are
hereby authorized, without notice to or demand upon any Guarantor and without
discharging or otherwise affecting the obligations of any Guarantor hereunder
and without incurring any liability hereunder, from time to time, to do each of
the following:
          (a) (i) subject to compliance, if applicable, with Section 9.1 of the
Credit Agreement, modify, amend, supplement or otherwise change, (ii) accelerate
or otherwise change the time of payment or (iii) waive or otherwise consent to
noncompliance with, any Guaranteed Obligation or any Loan Document;
          (b) apply to the Guaranteed Obligations any sums by whomever paid or
however realized to any Guaranteed Obligation in such order as provided in the
Loan Documents;
          (c) refund at any time any payment received by any Secured Party in
respect of any Guaranteed Obligation;
          (d) (i) sell, exchange, enforce, waive, substitute, liquidate,
terminate, release, abandon, fail to perfect, subordinate, accept, substitute,
surrender, exchange, affect, impair or otherwise alter or release any Collateral
for any Guaranteed Obligation or any other guaranty therefor in any manner,
(ii) receive, take and hold additional Collateral to secure any Guaranteed
Obligation, (iii) add, release or substitute any one or more other Guarantors,
makers or endorsers of any Guaranteed Obligation or any part thereof and
(iv) otherwise deal in any manner with a Borrower and any other Guarantor, maker
or endorser of any Guaranteed Obligation or any part thereof; and
          (e) settle, release, compromise, collect or otherwise liquidate the
Guaranteed Obligations.
      Section 2.5 Guaranty Absolute and Unconditional. Each Guarantor hereby
waives and agrees not to assert any defense, whether arising in connection with
or in respect of any of the following or otherwise, and hereby agrees that its
obligations under this Guaranty are irrevocable, absolute and unconditional and
shall not be discharged as a result of or otherwise affected by any of the
following (which, the maximum extent permitted by law, may not be pleaded and
evidence of which may not be introduced in any proceeding with respect to this
Guaranty, in each case except in connection with a compulsory counterclaim or as
otherwise agreed in writing by the Agent):
          (a) the invalidity or unenforceability of any obligation of any other
Borrower or any other Guarantor under any Loan Document or any other agreement
or instrument relating thereto (including any amendment, consent or waiver
thereto), or any security for, or other guaranty of, any Guaranteed Obligation
or any part thereof, or the lack of perfection or continuing perfection or
failure of priority of any security for the Guaranteed Obligations or any part
thereof;
GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

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          (b) the absence of (i) any attempt to collect any Guaranteed
Obligation or any part thereof from any other Borrower or any other Guarantor or
other action to enforce the same or (ii) any action to enforce any Loan Document
or any Lien thereunder;
          (c) the failure by any Person to take any steps to perfect and
maintain any Lien on, or to preserve any rights with respect to, any Collateral;
          (d) any workout, insolvency, bankruptcy proceeding, reorganization,
arrangement, liquidation or dissolution by or against a Borrower, any other
Guarantor or any of a Borrower’s other Subsidiaries or any procedure, agreement,
order, stipulation, election, action or omission thereunder, including any
discharge or disallowance of, or bar or stay against collecting, any Guaranteed
Obligation (or any interest thereon) in or as a result of any such proceeding;
          (e) any foreclosure, whether or not through judicial sale, and any
other sale or other disposition of any Collateral or any election following the
occurrence of an Event of Default by any Secured Party to proceed separately
against any Collateral in accordance with such Secured Party’s rights under any
applicable Requirement of Law; or
          (f) any other defense, setoff, counterclaim or any other circumstance
that might otherwise constitute a legal or equitable discharge of a Borrower,
any other Guarantor or any other Subsidiary of a Borrower, in each case other
than the payment in full of the Guaranteed Obligations.
      Section 2.6 Waivers. Each Guarantor hereby unconditionally and irrevocably
waives and agrees not to assert any claim, defense, setoff or counterclaim based
on diligence, promptness, presentment, requirements for any demand or notice
hereunder including any of the following: (a) any demand for payment or
performance and protest and notice of protest; (b) any notice of acceptance;
(c) any presentment, demand, protest or further notice or other requirements of
any kind with respect to any Guaranteed Obligation (including any accrued but
unpaid interest thereon) becoming immediately due and payable; and (d) any other
notice in respect of any Guaranteed Obligation or any part thereof, and any
defense arising by reason of any disability or other defense of a Borrower or
any other Guarantor. Each Guarantor further unconditionally and irrevocably
agrees not to (x) enforce or otherwise exercise any right of subrogation or any
right of reimbursement or contribution or similar right against a Borrower or
any other Guarantor by reason of any Loan Document or any payment made
thereunder or (y) assert any claim, defense, setoff or counterclaim it may have
against any other Credit Party or set off any of its obligations to such other
Credit Party against obligations of such Credit Party to such Guarantor. No
obligation of any Guarantor hereunder shall be discharged other than by complete
performance.
      Section 2.7 Reliance. Each Guarantor hereby assumes responsibility for
keeping itself informed of the financial condition of each Borrower, each other
Guarantor
GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

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and any other guarantor, maker or endorser of any Guaranteed Obligation or any
part thereof, and of all other circumstances bearing upon the risk of nonpayment
of any Guaranteed Obligation or any part thereof that diligent inquiry would
reveal, and each Guarantor hereby agrees that no Secured Party shall have any
duty to advise any Guarantor of information known to it regarding such condition
or any such circumstances. In the event any Secured Party, in its sole
discretion, undertakes at any time or from time to time to provide any such
information to any Guarantor, such Secured Party shall be under no obligation to
(a) undertake any investigation not a part of its regular business routine,
(b) disclose any information that such Secured Party, pursuant to accepted or
reasonable commercial finance or banking practices, wishes to maintain
confidential or (c) make any future disclosures of such information or any other
information to any Guarantor.
ARTICLE III
GRANT OF SECURITY INTEREST
      Section 3.1 Collateral. For the purposes of this Agreement, all of the
following property now owned or at any time hereafter acquired by a Grantor or
in which a Grantor now has or at any time in the future may acquire any right,
title or interest is collectively referred to as the “Collateral”:
          (a) all accounts, chattel paper, documents (as defined in the UCC),
equipment, general intangibles, instruments, inventory, investment property,
letter of credit rights and any supporting obligations related to any of the
foregoing;
          (b) all deposit accounts, securities accounts and other bank accounts;
          (c) the commercial tort claims described on Schedule 1 and on any
supplement thereto received by the Agent pursuant to Section 5.9;
          (d) all books and records pertaining to the other property described
in this Section 3.1;
          (e) all property of such Grantor held by any Secured Party, including
all property of every description, in the custody of or in transit to such
Secured Party for any purpose, including safekeeping, collection or pledge, for
the account of such Grantor or as to which such Grantor may have any right or
power (but excluding property held in trust), including but not limited to cash;
          (f) all other goods (including but not limited to fixtures) and
personal property of such Grantor, whether tangible or intangible and wherever
located; and
          (g) to the extent not otherwise included, all proceeds of the
foregoing;
provided, however, that “Collateral” shall exclude all Excluded Property.
GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

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      Section 3.2 Grant of Security Interest in Collateral. Each Grantor, as
collateral security for the prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of the Obligations of
such Grantor (the “Secured Obligations”), hereby mortgages, pledges and
hypothecates to the Agent for the benefit of the Secured Parties, and grants to
the Agent for the benefit of the Secured Parties a Lien on and security interest
in, all of its right, title and interest in, to and under the Collateral of such
Grantor; provided, however, notwithstanding the foregoing, no Lien or security
interest is hereby granted on any Excluded Property; provided, further, that if
and when any property shall cease to be Excluded Property, a Lien on and
security in such property shall be deemed granted therein. Each Grantor hereby
represents and warrants that the Excluded Property, with the exception of the
Existing JV, when taken as a whole, is not material to the business operations
or financial condition of the Grantors, taken as a whole.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
     To induce the Lenders, the L/C Issuers and the Agent to enter into the Loan
Documents, each Grantor hereby represents and warrants each of the following to
the Agent, the Lenders, the L/C Issuers and the other Secured Parties:
      Section 4.1 Title; No Other Liens. Except for the Lien granted to the
Agent pursuant to this Agreement and other Permitted Liens (except for those
Permitted Liens not permitted to exist on any Collateral) under any Loan
Document (including Section 4.2), such Grantor owns each item of the Collateral
pledged by such Grantor free and clear of any and all Liens or claims of others.
Such Grantor (a) is the record (to the extent applicable) and beneficial owner
of the Collateral pledged by it hereunder constituting instruments or
certificates and (b) has rights in or the power to transfer each other item of
Collateral in which a Lien is granted by it hereunder, free and clear of any
other Lien other than Permitted Liens.
      Section 4.2 Perfection and Priority. The security interest granted
pursuant to this Agreement constitutes a valid and continuing perfected security
interest in favor of the Agent in all Collateral in which such Grantor holds an
interest subject, for the following Collateral, to the occurrence of the
following: (i) in the case of all Collateral in which a security interest may be
perfected by filing a financing statement under the UCC, the completion of the
filings specified on Schedule 2 (which, in the case of all filings referred to
on such schedule, have been duly authorized by such Grantor), (ii) with respect
to any deposit account, the execution of Control Agreements, (iii) in the case
of all Copyrights, Trademarks and Patents for which UCC filings are
insufficient, all appropriate filings having been made with the United States
Copyright Office or the United States Patent and Trademark Office, as
applicable, (iv) in the case of letter-of-credit rights that are not supporting
obligations of Collateral, the execution of a Contractual Obligation granting
control to the Agent over such letter-of-credit rights, (v)
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in the case of electronic chattel paper, the completion of all steps necessary
to grant control to the Agent over such electronic chattel paper and (vi) in the
case of Vehicles, the actions required under Section 5.1(e). Such security
interest shall be prior to all other Liens on the Collateral pledged by such
Grantor except for Permitted Liens having priority over the Agent’s Lien by
operation of law or permitted pursuant to subsections 5.1(e), (g), (h), (i) or
(k) of the Credit Agreement upon (i) in the case of all Pledged Certificated
Stock, Pledged Debt Instruments and Pledged Investment Property, the delivery
thereof to the Agent of such Pledged Certificated Stock, Pledged Debt
Instruments and Pledged Investment Property consisting of instruments and
certificated securities, in each case properly endorsed for transfer to the
Agent or in blank, (ii) in the case of all Pledged Investment Property not in
the form of certificated securities, the execution of Control Agreements with
respect to such investment property and (iii) in the case of all other
instruments and tangible chattel paper that are not Pledged Certificated Stock,
Pledged Debt Instruments or Pledged Investment Property, the delivery thereof to
the Agent of such instruments and tangible chattel paper. Except as set forth in
this Section 4.2, all actions by each Grantor necessary to perfect the Lien
granted hereunder on the Collateral have been duly taken.
      Section 4.3 Jurisdiction of Organization; Chief Executive Office. Such
Grantor’s jurisdiction of organization, legal name and organizational
identification number, if any, and the location of such Grantor’s chief
executive office or sole place of business, in each case as of the date hereof,
is specified on Schedule 3 and such Schedule 3 also lists all jurisdictions of
incorporation, legal names and locations of such Grantor’s chief executive
office or sole place of business for the five years preceding the date hereof.
      Section 4.4 Locations of Inventory, Equipment and Books and Records. On
the date hereof, such Grantor’s inventory and equipment (other than inventory or
equipment in transit) and books and records concerning the Collateral are kept
at the locations listed on Schedule 4.
      Section 4.5 Pledged Collateral.
          (a) The Pledged Stock pledged by such Grantor hereunder (a) is listed
on Schedule 5 and constitutes that percentage of the issued and outstanding
equity of all classes of each issuer thereof as set forth on Schedule 5 and
(b) has been duly authorized, validly issued and is fully paid and nonassessable
(other than Pledged Stock in limited liability companies and partnerships).
          (b) As of the Closing Date, all Pledged Collateral (other than Pledged
Uncertificated Stock) and all Pledged Investment Property consisting of
instruments and certificated securities pledged by such Grantor hereunder have
been delivered to the Agent in accordance with Section 5.3(a).
          (c) Upon the occurrence and during the continuance of an Event of
Default, the Agent shall be entitled to exercise all of the rights of such
Grantor granting
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the security interest in any Pledged Stock, and a transferee or assignee of such
Pledged Stock in a foreclosure sale held in compliance with applicable law shall
become a holder of such Pledged Stock to the same extent as such Grantor and be
entitled to participate in the management of the issuer of such Pledged Stock
and, upon the transfer of the entire interest of such Grantor, such Grantor
shall, by operation of law, cease to be a holder of such Pledged Stock.
      Section 4.6 Instruments and Tangible Chattel Paper Formerly Accounts. No
amount payable to such Grantor under or in connection with any account is
evidenced by any instrument or tangible chattel paper that has not been
delivered to the Agent, properly endorsed for transfer, to the extent delivery
is required by Section 5.6(a).
      Section 4.7 Intellectual Property
          (a) Schedule 6 sets forth a true and complete list of the following
Intellectual Property such Grantor owns, licenses or otherwise has the right to
use: (i) Intellectual Property that is registered or subject to applications for
registration, (ii) Internet Domain Names and (iii) Material Intellectual
Property and material Software, separately identifying that owned and licensed
to such Grantor and including for each of the foregoing items (1) the owner,
(2) the title, (3) the jurisdiction in which such item has been registered or
otherwise arises or in which an application for registration has been filed,
(4) as applicable, the registration or application number and registration or
application date and (5) any IP Licenses or other rights (including franchises)
granted by the Grantor with respect thereto.
          (b) On the Closing Date, all Material Intellectual Property owned by
such Grantor is valid, in full force and effect, subsisting, unexpired and
enforceable, and no Material Intellectual Property has been abandoned. No breach
or default of any material IP License shall be caused by any of the following,
and none of the following shall limit or impair the ownership, use, validity or
enforceability of, or any rights of such Grantor in, any Material Intellectual
Property: (i) the consummation of the transactions contemplated by any Loan
Document or (ii) as of the Closing Date, any holding, decision, judgment or
order rendered by any Governmental Authority. There are no pending (or, to the
knowledge of such Grantor, threatened in writing) actions, investigations,
suits, proceedings, audits, claims, demands, orders or disputes challenging the
ownership, use, validity, enforceability of, or such Grantor’s rights in, any
Material Intellectual Property of such Grantor. To such Grantor’s knowledge, no
Person has been or is infringing, misappropriating, diluting, violating or
otherwise impairing any Intellectual Property of such Grantor, in any such case,
that could reasonably be expected to have a Material Adverse Effect. Such
Grantor, and to such Grantor’s knowledge each other party thereto, is not in
material breach or default of any material IP License.
      Section 4.8 Commercial Tort Claims. To such Grantor’s knowledge, the only
commercial tort claims of any Grantor in respect of which the claims of such
Grantor could reasonably be expected to exceed $100,000 existing on the date
hereof (regardless of whether the amount, defendant or other material facts can
be determined and
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regardless of whether such commercial tort claim has been asserted, threatened
or has otherwise been made known to the obligee thereof or whether litigation
has been commenced for such claims) are those listed on Schedule 1, which sets
forth such information separately for each Grantor.
      Section 4.9 Specific Collateral. None of the Collateral is or is proceeds
or products of farm products, as-extracted collateral, health-care-insurance
receivables or timber to be cut.
      Section 4.10 Enforcement. No Permit, notice to or filing with any
Governmental Authority or any other Person or any consent from any Person is
required for the exercise by the Agent of its rights (including voting rights)
provided for in this Agreement or the enforcement of remedies in respect of the
Collateral pursuant to this Agreement, including the transfer of any Collateral,
except (i) as may be required in connection with the disposition of any portion
of the Pledged Collateral by laws affecting the offering and sale of securities
generally or (ii) any approvals that may be required to be obtained from any
bailees or landlords to collect the Collateral, or (iii) any approvals or
consents that would be required under the Existing Licenses.
      Section 4.11 Representations and Warranties of the Credit Agreement. The
representations and warranties as to such Grantor and its Subsidiaries made in
Article III (Representations and Warranties) of the Credit Agreement are true
and correct on each date to the extent required by Section 2.2 of the Credit
Agreement.
ARTICLE V
COVENANTS
     Each Grantor agrees with the Agent to the following, as long as any
Obligation or Commitment remains outstanding (other than contingent
indemnification Obligations to the extent no claim giving rise thereto has been
asserted):
      Section 5.1 Maintenance of Perfected Security Interest; Further
Documentation and Consents.
          (a) Generally. Such Grantor shall (i) not use or permit any Collateral
to be used unlawfully or in violation of any provision of any Loan Document, any
Related Agreement, any Requirement of Law or any policy of insurance covering
the Collateral and (ii) not enter into any Contractual Obligation or undertaking
restricting the right or ability of such Grantor or the Agent to sell, assign,
convey or transfer any Collateral if such restriction would reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect.
          (b) Such Grantor shall maintain the security interest created by this
Agreement as a perfected security interest having at least the priority
described in
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Section 4.2 and shall defend such security interest and such priority against
the claims and demands of all Persons.
          (c) Such Grantor shall furnish to the Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other documents in connection with the Collateral as the Agent may
reasonably request, all in reasonable detail and in form and substance
satisfactory to the Agent.
          (d) At any time and from time to time, upon the written request of the
Agent, such Grantor shall, for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
(i) promptly and duly execute and deliver, and have recorded, such further
documents, including an authorization to file (or, as applicable, the filing) of
any financing statement or amendment under the UCC (or other filings under
similar Requirements of Law) in effect in any jurisdiction with respect to the
security interest created hereby and (ii) take such further action as the Agent
may reasonably request, including (A) using its best efforts to secure all
approvals necessary or appropriate for the assignment to or for the benefit of
the Agent of any Contractual Obligation, including any IP License, held by such
Grantor and to enforce the security interests granted hereunder and
(B) executing and delivering any Control Agreements with respect to deposit
accounts and securities accounts.
          (e) If requested by the Agent, the Grantor shall arrange for the
Agent’s first priority security interest to be noted on the certificate of title
of each Vehicle and shall file any other necessary documentation in each
jurisdiction that the Agent shall deem advisable to perfect its security
interests in any Vehicle.
          (f) To ensure that a Lien and security interest is granted on any of
the Excluded Property set forth in clause (ii) of the definition of “Excluded
Property” other than the Existing JV, such Grantor shall use its best efforts to
obtain any required consents from any Person other than a Borrower and its
Affiliates with respect to any permit or license or any Contractual Obligation
with such Person entered into by such Grantor that requires such consent as a
condition to the creation by such Grantor of a Lien on any right, title or
interest in such permit, license or Contractual Obligation or any Stock or Stock
Equivalent related thereto except with respect to the Existing Licenses.
      Section 5.2 Changes in Locations, Name, Etc. Except upon 30 days’ prior
written notice to the Agent and delivery to the Agent of (a) all documents
reasonably requested by the Agent to maintain the validity, perfection and
priority of the security interests provided for herein and (b) if applicable, a
written supplement to Schedule 4 showing any additional locations at which
inventory or equipment shall be kept, such Grantor shall not do any of the
following:
          (i) permit any inventory or equipment to be kept at a location other
than those listed on Schedule 4, except for inventory or equipment in transit;
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          (ii) change its jurisdiction of organization or its location, in each
case from that referred to in Section 4.3; or
          (iii) change its legal name or organizational identification number,
if any, or corporation, limited liability company, partnership or other
organizational structure to such an extent that any financing statement filed in
connection with this Agreement would become misleading.
      Section 5.3 Pledged Collateral.
          (a) Delivery of Pledged Collateral. Such Grantor shall (i) deliver to
the Agent, in suitable form for transfer and in form and substance satisfactory
to the Agent, (A) all Pledged Certificated Stock, (B) all Pledged Debt
Instruments with a fair market value of $50,000 or more and (C) all certificates
and instruments evidencing Pledged Investment Property with a fair market value
of $50,000 or more and (ii) other than property not required to be delivered
under subclause (B) or (C) of the preceding clause (i), maintain all other
Pledged Investment Property in a Controlled Securities Account.
          (b) Event of Default. During the continuance of an Event of Default,
the Agent shall have the right, at any time in its discretion and without notice
to the Grantor, to (i) transfer to or to register in its name or in the name of
its nominees any Pledged Collateral or any Pledged Investment Property and
(ii) exchange any certificate or instrument representing or evidencing any
Pledged Collateral or any Pledged Investment Property for certificates or
instruments of smaller or larger denominations.
          (c) Cash Distributions with respect to Pledged Collateral. Except as
provided in Article VI and subject to the limitations set forth in the Credit
Agreement, such Grantor shall be entitled to receive all cash distributions paid
in respect of the Pledged Collateral.
          (d) Voting Rights. Except as provided in Article VI, such Grantor
shall be entitled to exercise all voting, consent and corporate, partnership,
limited liability company and similar rights with respect to the Pledged
Collateral; provided, however, that no vote shall be cast, consent given or
right exercised or other action taken by such Grantor that would impair the
Collateral or be inconsistent with or result in any violation of any provision
of any Loan Document.
      Section 5.4 Accounts.
          (a) Such Grantor shall not, other than in the Ordinary Course of
Business, (i) grant any extension of the time of payment of any account,
(ii) compromise or settle any account for less than the full amount thereof,
(iii) release, wholly or partially, any Person liable for the payment of any
account, (iv) allow any credit or discount on any account or (v) amend,
supplement or modify any account in any manner that could adversely affect the
value thereof.
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          (b) In connection with periodic audits conducted by Agent and at any
time when an Event of Default is continuing, the Agent shall have the right to
make test verifications of the Accounts in any manner and through any medium
that it reasonably considers advisable, and such Grantor shall furnish all such
assistance and information as the Agent may reasonably require in connection
therewith. At any time and from time to time, upon the Agent’s reasonable
request, such Grantor shall cause independent public accountants or others
reasonably satisfactory to the Agent to furnish to the Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the
accounts; provided, however, that unless an Event of Default shall be
continuing, the Agent shall request no more than four such reports during any
calendar year.
      Section 5.5 Commodity Contracts. Such Grantor shall not have any commodity
contract unless subject to a Control Agreement.
      Section 5.6 Delivery of Instruments and Tangible Chattel Paper and Control
of Investment Property, Letter-of-Credit Rights and Electronic Chattel Paper.
          (a) If any amount in excess of $100,000 payable under or in connection
with any Collateral owned by such Grantor shall be or become evidenced by an
instrument or tangible chattel paper other than such instrument delivered in
accordance with Section 5.3(a) and in the possession of the Agent, such Grantor
shall mark all such instruments and tangible chattel paper with the following
legend: “This writing and the obligations evidenced or secured hereby are
subject to the security interest of General Electric Capital Corporation, as
Agent” and, at the request of the Agent, shall promptly deliver such instrument
or tangible chattel paper to the Agent, duly indorsed in a manner reasonably
satisfactory to the Agent.
          (b) Such Grantor shall not grant “control” (within the meaning of such
term under Article 9-106 of the UCC) over any investment property to any Person
other than the Agent.
          (c) If such Grantor is or becomes the beneficiary of a letter of
credit that is (i) not a supporting obligation of any Collateral and (ii) in
excess of $100,000, such Grantor shall promptly, and in any event within 5
Business Days after becoming a beneficiary, notify the Agent thereof and use
commercially reasonable efforts to enter into a Contractual Obligation with the
Agent, the issuer of such letter of credit or any nominated person with respect
to the letter-of-credit rights under such letter of credit. Such Contractual
Obligation shall assign such letter-of-credit rights to the Agent and such
assignment shall be sufficient to grant control for the purposes of
Section 9-107 of the UCC (or any similar section under any equivalent UCC). Such
Contractual Obligation shall also direct all payments thereunder to a Cash
Collateral Account. The provisions of the Contractual Obligation shall be in
form and substance reasonably satisfactory to the Agent.
          (d) If any amount in excess of $100,000 payable under or in connection
with any Collateral owned by such Grantor shall be or become evidenced by
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electronic chattel paper, such Grantor shall take all steps necessary to grant
the Agent control of all such electronic chattel paper for the purposes of
Section 9-105 of the UCC (or any similar section under any equivalent UCC) and
all “transferable records” as defined in each of the Uniform Electronic
Transactions Act and the Electronic Signatures in Global and National Commerce
Act.
      Section 5.7 Intellectual Property.
          (a) At the time of the delivery of the quarterly financial statements
by the Borrowers required under Section 4.1(b) of the Credit Agreement, such
Grantor shall provide (i) the Agent notification of any change to Schedule 6 and
(ii) the short-form intellectual property agreements and assignments as
described in this Section 5.7 and other documents that the Agent reasonably
requests with respect thereto.
          (b) Such Grantor shall (and shall cause all its licensees to) (i)
(1) continue to use each Trademark included in the Material Intellectual
Property in order to maintain such Trademark in full force and effect with
respect to each class of goods for which such Trademark is currently used, free
from any claim of abandonment for non-use, (2) maintain at least the same
standards of quality of products and services offered under such Trademark as
are currently maintained, (3) use such Trademark with the appropriate notice of
registration and all other notices and legends required by applicable
Requirements of Law, (4) not adopt or use any other Trademark that is
confusingly similar or a colorable imitation of such Trademark unless the Agent
shall obtain a perfected security interest in such other Trademark pursuant to
this Agreement and (ii) not do any act or omit to do any act whereby (w) such
Trademark (or any goodwill associated therewith) could reasonably be expected to
become destroyed, invalidated, impaired or harmed in any way, (x) any Patent
included in the Material Intellectual Property could reasonably be expected to
become forfeited, misused, unenforceable, abandoned or dedicated to the public,
(y) any portion of the Copyrights included in the Material Intellectual Property
could reasonably be expected to become invalidated, otherwise impaired or fall
into the public domain or (z) any Trade Secret that is Material Intellectual
Property could reasonably be expected to become publicly available or otherwise
unprotectable.
          (c) Such Grantor shall notify the Agent promptly if it knows, or has
reason to know, that any application or registration relating to any Material
Intellectual Property may become forfeited, misused, unenforceable, abandoned or
dedicated to the public, or of any adverse determination or development
regarding the validity or enforceability or such Grantor’s ownership of,
interest in, right to use, register, own or maintain any Material Intellectual
Property (including the institution of, or any such determination or development
in, any proceeding relating to the foregoing in any Applicable IP Office). Such
Grantor shall take all actions that are necessary or reasonably requested by the
Agent to maintain and pursue each application (and to obtain the relevant
registration or recordation) and to maintain each registration and recordation
included in the Material Intellectual Property.
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          (d) Such Grantor shall not knowingly do any act or omit to do any act
to infringe, misappropriate, dilute, violate or otherwise impair the
Intellectual Property of any other Person. In the event that any Material
Intellectual Property of such Grantor is or has been infringed, misappropriated,
violated, diluted or otherwise impaired by a third party, such Grantor shall
take such action as it reasonably deems appropriate under the circumstances in
response thereto, which may include, if commercially reasonable to do so,
promptly bringing suit and recovering all damages therefor.
          (e) Such Grantor shall execute and deliver to the Agent in form and
substance reasonably acceptable to the Agent and suitable for (i) filing in the
Applicable IP Office the short-form intellectual property security agreements in
the form attached hereto as Annex 3 for all Copyrights (if registered),
Trademarks, Patents and IP Licenses (in each case to the extent recordable) of
such Grantor and (ii) recording with the appropriate Internet domain name
registrar, a duly executed form of assignment for all Internet Domain Names of
such Grantor (together with appropriate supporting documentation as may be
requested by the Agent).
      Section 5.8 Notices. Such Grantor shall promptly notify the Agent in
writing of its acquisition of any interest hereafter in property that is of a
type where a security interest or lien must be or may be registered, recorded or
filed under, or notice thereof given under, any federal statute or regulation.
      Section 5.9 Notice of Commercial Tort Claims. Such Grantor agrees that, if
it shall acquire any interest in any commercial tort claim which could
reasonably be expected to exceed $100,000 (whether from another Person or
because such commercial tort claim shall have come into existence), (a) such
Grantor shall, promptly after becoming aware of such acquisition, deliver to the
Agent, in each case in form and substance reasonably satisfactory to the Agent,
a notice of the existence and nature of such commercial tort claim and a
supplement to Schedule 1 containing a specific description of such commercial
tort claim, (b) Section 3.1 shall apply to such commercial tort claim and
(c) such Grantor shall execute and deliver to the Agent, in each case in form
and substance satisfactory to the Agent, any document, and take all other
action, deemed by the Agent to be reasonably necessary or appropriate for the
Agent to obtain, on behalf of the Lenders, a perfected security interest having
at least the priority set forth in Section 4.2 in such commercial tort claim.
Any supplement to Schedule 1 delivered pursuant to this Section 5.9 shall, after
the receipt thereof by the Agent, become part of Schedule 1 for all purposes
hereunder other than in respect of representations and warranties made prior to
the date of such receipt.
      Section 5.10 Controlled Securities Account. Each Grantor shall deposit all
of its Cash Equivalents in securities accounts that are Controlled Securities
Accounts or deliver such Cash Equivalents to Agent pursuant to Section 5.3. So
long as no Event of Default has occurred and is continuing and no Loans are
outstanding, upon the request of such Grantor the Agent shall promptly return
any Cash Equivalents delivered to it hereunder to such Grantor to be used for
any purpose permitted under the Loan Documents.
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ARTICLE VI
REMEDIAL PROVISIONS
      Section 6.1 Code and Other Remedies.
          (a) UCC Remedies. During the continuance of an Event of Default, the
Agent may exercise, in addition to all other rights and remedies granted to it
in this Agreement and in any other instrument or agreement securing, evidencing
or relating to any Secured Obligation, all rights and remedies of a secured
party under the UCC or any other applicable law.
          (b) Disposition of Collateral. Without limiting the generality of the
foregoing, the Agent may, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), during the continuance of any Event of Default (personally or through
its agents or attorneys), (i) enter upon the premises where any Collateral is
located, without any obligation to pay rent, through self-help, without judicial
process, without first obtaining a final judgment or giving any Grantor or any
other Person notice or opportunity for a hearing on the Agent’s claim or action,
(ii) collect, receive, appropriate and realize upon any Collateral and
(iii) sell, assign, convey, transfer, grant option or options to purchase and
deliver any Collateral (enter into Contractual Obligations to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker’s board or office of any Secured Party or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. The Agent shall have the right, upon any such public sale or sales
and, to the extent permitted by the UCC and other applicable Requirements of
Law, upon any such private sale, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption of any Grantor,
which right or equity is hereby waived and released.
          (c) Management of the Collateral. Each Grantor further agrees, that,
during the continuance of any Event of Default, (i) at the Agent’s request, it
shall assemble the Collateral and make it available to the Agent at places that
the Agent shall reasonably select, whether at such Grantor’s premises or
elsewhere, (ii) without limiting the foregoing, the Agent also has the right to
require that each Grantor store and keep any Collateral pending further action
by the Agent and, while any such Collateral is so stored or kept, provide such
guards and maintenance services as shall be necessary to protect the same and to
preserve and maintain such Collateral in good condition, (iii) until the Agent
is able to sell, assign, convey or transfer any Collateral, the Agent shall have
the right to hold or use such Collateral to the extent that it deems appropriate
for the purpose of preserving the Collateral or its value or for any other
purpose deemed appropriate by the Agent and (iv) the Agent may, if it so elects,
seek the appointment of a receiver or keeper to take possession of any
Collateral and to enforce any of the Agent’s remedies (for the
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benefit of the Secured Parties), with respect to such appointment without prior
notice or hearing as to such appointment, except as required by law. The Agent
shall not have any obligation to any Grantor to maintain or preserve the rights
of any Grantor as against third parties with respect to any Collateral while
such Collateral is in the possession of the Agent.
          (d) Application of Proceeds. The Agent shall apply the cash proceeds
of any action taken by it pursuant to this Section 6.1, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or
incidental to the care or safekeeping of any Collateral or in any way relating
to the Collateral or the rights of the Agent and any other Secured Party
hereunder, including reasonable attorneys’ fees and disbursements, to the
payment in whole or in part of the Secured Obligations, as set forth in the
Credit Agreement, and only after such application and after the payment by the
Agent of any other amount required by any Requirement of Law, need the Agent
account for the surplus, if any, to any Grantor.
          (e) Direct Obligation. Neither the Agent nor any other Secured Party
shall be required to make any demand upon, or pursue or exhaust any right or
remedy against, any Grantor, any other Credit Party or any other Person with
respect to the payment of the Obligations or to pursue or exhaust any right or
remedy with respect to any Collateral therefor or any direct or indirect
guaranty thereof. All of the rights and remedies of the Agent and any other
Secured Party under any Loan Document shall be cumulative, may be exercised
individually or concurrently and not exclusive of any other rights or remedies
provided by any Requirement of Law. To the extent it may lawfully do so, each
Grantor absolutely and irrevocably waives and relinquishes the benefit and
advantage of, and covenants not to assert against the Agent or any Lender, any
valuation, stay, appraisement, extension, redemption or similar laws and any and
all rights or defenses it may have as a surety, now or hereafter existing,
arising out of the exercise by them of any rights hereunder. If any notice of a
proposed sale or other disposition of any Collateral shall be required by law,
such notice shall be deemed reasonable and proper if given at least 10 days
before such sale or other disposition.
          (f) Commercially Reasonable. To the extent that applicable
Requirements of Law impose duties on the Agent to exercise remedies in a
commercially reasonable manner, each Grantor acknowledges and agrees that it is
not commercially unreasonable for the Agent to do any of the following:
          (i) fail to incur significant costs, expenses or other Liabilities
reasonably deemed as such by the Agent to prepare any Collateral for disposition
or otherwise to complete raw material or work in process into finished goods or
other finished products for disposition;
          (ii) fail to obtain Permits, or other consents, for access to any
Collateral to sell or for the collection or sale of any Collateral, or, if not
required by other Requirements of Law, fail to obtain Permits or other consents
for the collection or disposition of any Collateral;
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          (iii) fail to exercise remedies against account debtors or other
Persons obligated on any Collateral or to remove Liens on any Collateral or to
remove any adverse claims against any Collateral;
          (iv) advertise dispositions of any Collateral through publications or
media of general circulation, whether or not such Collateral is of a specialized
nature, or to contact other Persons, whether or not in the same business as any
Grantor, for expressions of interest in acquiring any such Collateral;
          (v) exercise collection remedies against account debtors and other
Persons obligated on any Collateral, directly or through the use of collection
agencies or other collection specialists, hire one or more professional
auctioneers to assist in the disposition of any Collateral, whether or not such
Collateral is of a specialized nature, or, to the extent deemed appropriate by
the Agent, obtain the services of other brokers, investment bankers, consultants
and other professionals to assist the Agent in the collection or disposition of
any Collateral, or utilize Internet sites that provide for the auction of assets
of the types included in the Collateral or that have the reasonable capacity of
doing so, or that match buyers and sellers of assets to dispose of any
Collateral;
          (vi) dispose of assets in wholesale rather than retail markets;
          (vii) disclaim disposition warranties, such as title, possession or
quiet enjoyment; or
          (viii) purchase insurance or credit enhancements to insure the Agent
against risks of loss, collection or disposition of any Collateral or to provide
to the Agent a guaranteed return from the collection or disposition of any
Collateral.
Each Grantor acknowledges that the purpose of this Section 6.1 is to provide a
non-exhaustive list of actions or omissions that are commercially reasonable
when exercising remedies against any Collateral and that other actions or
omissions by the Secured Parties shall not be deemed commercially unreasonable
solely on account of not being indicated in this Section 6.1. Without limitation
upon the foregoing, nothing contained in this Section 6.1 shall be construed to
grant any rights to any Grantor or to impose any duties on the Agent that would
not have been granted or imposed by this Agreement or by applicable Requirements
of Law in the absence of this Section 6.1.
          (g) IP Licenses. For the purpose of enabling the Agent to exercise
rights and remedies under this Section 6.1 (including in order to take
possession of, collect, receive, assemble, process, appropriate, remove, realize
upon, sell, assign, convey, transfer or grant options to purchase any
Collateral) at such time as the Agent shall be lawfully entitled to exercise
such rights and remedies, each Grantor hereby grants to the Agent, for the
benefit of the Secured Parties, (i) an irrevocable, nonexclusive,
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worldwide license (exercisable without payment of royalty or other compensation
to such Grantor), including in such license the right to sublicense, use and
practice any Intellectual Property now owned or hereafter acquired by such
Grantor and access to all media in which any of the licensed items may be
recorded or stored and to all Software and programs used for the compilation or
printout thereof and (ii) an irrevocable license (without payment of rent or
other compensation to such Grantor) to use, operate and occupy all real Property
owned, operated, leased, subleased or otherwise occupied by such Grantor.
      Section 6.2 Accounts and Payments in Respect of General Intangibles.
          (a) In addition to, and not in substitution for, any similar
requirement in the Credit Agreement, if required by the Agent at any time during
the continuance of an Event of Default, any payment of accounts or payment in
respect of general intangibles, when collected by any Grantor, shall be promptly
(and, in any event, within 2 Business Days) deposited by such Grantor in the
exact form received, duly indorsed by such Grantor to the Agent, in a Cash
Collateral Account, subject to withdrawal by the Agent as provided in
Section 6.4. Until so turned over, such payment shall be held by such Grantor in
trust for the Agent, segregated from other funds of such Grantor. Each such
deposit of proceeds of accounts and payments in respect of general intangibles
shall be accompanied by a report identifying in reasonable detail the nature and
source of the payments included in the deposit.
          (b) At any time during the continuance of an Event of Default:
          (i) each Grantor shall, upon the Agent’s request, deliver to the Agent
all original and other documents evidencing, and relating to, the Contractual
Obligations and transactions that gave rise to any account or any payment in
respect of general intangibles, including all original orders, invoices and
shipping receipts and notify account debtors that the accounts or general
intangibles have been collaterally assigned to the Agent and that payments in
respect thereof shall be made directly to the Agent;
          (ii) the Agent may, without notice, at any time during the continuance
of an Event of Default, limit or terminate the authority of a Grantor to collect
its accounts or amounts due under general intangibles or any thereof and, in its
own name or in the name of others, communicate with account debtors to verify
with them to the Agent’s satisfaction the existence, amount and terms of any
account or amounts due under any general intangible. In addition, the Agent may
at any time enforce such Grantor’s rights against such account debtors and
obligors of general intangibles; and
          (iii) each Grantor shall take all actions, deliver all documents and
provide all information necessary or reasonably requested by the Agent to ensure
any Internet Domain Name is registered.
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          (c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each account and each payment in respect of general
intangibles to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise thereto. No Secured Party shall have any obligation or
liability under any agreement giving rise to an account or a payment in respect
of a general intangible by reason of or arising out of any Loan Document or the
receipt by any Secured Party of any payment relating thereto, nor shall any
Secured Party be obligated in any manner to perform any obligation of any
Grantor under or pursuant to any agreement giving rise to an account or a
payment in respect of a general intangible, to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by it or as
to the sufficiency of any performance by any party thereunder, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts that may have been assigned to it or to which it may be
entitled at any time or times.
      Section 6.3 Pledged Collateral.
          (a) Voting Rights. During the continuance of an Event of Default, upon
notice by the Agent to the relevant Grantor or Grantors, the Agent or its
nominee may exercise (A) any voting, consent, corporate and other right
pertaining to the Pledged Collateral at any meeting of shareholders, partners or
members, as the case may be, of the relevant issuer or issuers of Pledged
Collateral or otherwise and (B) any right of conversion, exchange and
subscription and any other right, privilege or option pertaining to the Pledged
Collateral as if it were the absolute owner thereof (including the right to
exchange at its discretion any Pledged Collateral upon the merger, amalgamation,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate or equivalent structure of any issuer of Pledged Stock, the right
to deposit and deliver any Pledged Collateral with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Agent may determine), all without liability except to account
for property actually received by it; provided, however, that the Agent shall
have no duty to any Grantor to exercise any such right, privilege or option and
shall not be responsible for any failure to do so or delay in so doing.
          (b) Proxies. In order to permit the Agent to exercise the voting and
other consensual rights that it may be entitled to exercise pursuant hereto and
to receive all dividends and other distributions that it may be entitled to
receive hereunder, (i) each Grantor shall promptly execute and deliver (or cause
to be executed and delivered) to the Agent all such proxies, dividend payment
orders and other instruments as the Agent may from time to time reasonably
request and (ii) without limiting the effect of clause (i) above, such Grantor
hereby grants to the Agent an irrevocable proxy to vote all or any part of the
Pledged Collateral and to exercise all other rights, powers, privileges and
remedies to which a holder of the Pledged Collateral would be entitled
(including giving or withholding written consents of shareholders, partners or
members, as the case may be, calling special meetings of shareholders, partners
or members, as the case may be, and voting at such meetings), which proxy shall
be effective, automatically and without the
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necessity of any action (including any transfer of any Pledged Collateral on the
record books of the issuer thereof) by any other person (including the issuer of
such Pledged Collateral or any officer or agent thereof) during the continuance
of an Event of Default and which proxy shall only terminate upon the payment in
full of the Secured Obligations (other than contingent indemnification
obligations to the extent no claim giving rise thereto has been asserted).
          (c) Authorization of Issuers. Each Grantor hereby expressly
irrevocably authorizes and instructs, without any further instructions from such
Grantor, each issuer of any Pledged Collateral pledged hereunder by such Grantor
to (i) comply with any instruction received by it from the Agent in writing that
states that an Event of Default is continuing and is otherwise in accordance
with the terms of this Agreement and each Grantor agrees that such issuer shall
be fully protected from Liabilities to such Grantor in so complying and (ii) if
so directed by Agent, pay any dividend or make any other payment with respect to
the Pledged Collateral directly to the Agent.
      Section 6.4 Proceeds to be Turned over to and Held by Agent. Unless
otherwise expressly provided in the Credit Agreement or this Agreement, upon the
occurrence and during the continuation of an Event of Default, all proceeds of
any Collateral received by any Grantor hereunder in cash or Cash Equivalents
shall be held by such Grantor in trust for the Agent and the other Secured
Parties, segregated from other funds of such Grantor, and shall, promptly upon
receipt by any Grantor, be turned over to the Agent in the exact form received
(with any necessary endorsement). All such proceeds of Collateral and any other
proceeds of any Collateral received by the Agent in cash or Cash Equivalents
shall be held by the Agent in a Cash Collateral Account. All proceeds being held
by the Agent in a Cash Collateral Account (or by such Grantor in trust for the
Agent) shall continue to be held as collateral security for the Secured
Obligations and shall not constitute payment thereof until applied as provided
in the Credit Agreement.
      Section 6.5 Sale of Pledged Collateral.
          (a) Each Grantor recognizes that the Agent may be unable to effect a
public sale of any Pledged Collateral by reason of certain prohibitions
contained in the Securities Act and applicable state or foreign securities laws
or otherwise or may determine that a public sale is impracticable, not desirable
or not commercially reasonable and, accordingly, may resort to one or more
private sales thereof to a restricted group of purchasers that shall be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Agent shall be
under no obligation to delay a sale of any Pledged Collateral for the period of
time necessary to permit the issuer thereof to register such securities for
public sale under
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the Securities Act or under applicable state securities laws even if such issuer
would agree to do so.
          (b) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of any
portion of the Pledged Collateral pursuant to Section 6.1 and this Section 6.5
valid and binding and in compliance with all applicable Requirements of Law.
Each Grantor further agrees that a breach of any covenant contained herein will
cause irreparable injury to the Agent and other Secured Parties, that the Agent
and the other Secured Parties have no adequate remedy at law in respect of such
breach and, as a consequence, that each and every covenant contained herein
shall be specifically enforceable against such Grantor, and such Grantor hereby
waives and agrees not to assert any defense against an action for specific
performance of such covenants except for a defense that no Event of Default has
occurred under the Credit Agreement. Each Grantor waives any and all rights of
contribution or subrogation upon the sale or disposition of all or any portion
of the Pledged Collateral by Agent.
      Section 6.6 Deficiency. Each Grantor shall remain liable for any
deficiency if the proceeds of any sale or other disposition of any Collateral
are insufficient to pay the Secured Obligations and the fees and disbursements
of any attorney employed by the Agent or any other Secured Party to collect such
deficiency.
ARTICLE VII
THE AGENT
      Section 7.1 Agent’s Appointment as Attorney-in-Fact.
          (a) Each Grantor hereby irrevocably constitutes and appoints the Agent
and any Related Person thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name,
for the purpose of carrying out the terms of the Loan Documents, to take any
appropriate action and to execute any document or instrument that may be
necessary or desirable to accomplish the purposes of the Loan Documents, and,
without limiting the generality of the foregoing, each Grantor hereby gives the
Agent and its Related Persons the power and right, on behalf of such Grantor,
without notice to or assent by such Grantor, to do any of the following when an
Event of Default shall be continuing:
          (i) in the name of such Grantor, in its own name or otherwise, take
possession of and indorse and collect any check, draft, note, acceptance or
other instrument for the payment of moneys due under any account or general
intangible or with respect to any other Collateral and file any claim or take
any other action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Agent for the purpose of collecting any such moneys due under
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any account or general intangible or with respect to any other Collateral
whenever payable;
          (ii) in the case of any Intellectual Property owned by or licensed to
the Grantors, execute, deliver and have recorded any document that the Agent may
request to evidence, effect, publicize or record the Agent’s security interest
in such Intellectual Property and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby;
          (iii) pay or discharge taxes and Liens levied or placed on or
threatened against any Collateral, effect any repair or pay any insurance called
for by the terms of the Credit Agreement (including all or any part of the
premiums therefor and the costs thereof);
          (iv) execute, in connection with any sale provided for in Section 6.1
or Section 6.5, any document to effect or otherwise necessary or appropriate in
relation to evidence the sale of any Collateral; or
          (v) (A) direct any party liable for any payment under any Collateral
to make payment of any moneys due or to become due thereunder directly to the
Agent or as the Agent shall direct, (B) ask or demand for, and collect and
receive payment of and receipt for, any moneys, claims and other amounts due or
to become due at any time in respect of or arising out of any Collateral,
(C) sign and indorse any invoice, freight or express bill, bill of lading,
storage or warehouse receipt, draft against debtors, assignment, verification,
notice and other document in connection with any Collateral, (D) commence and
prosecute any suit, action or proceeding at law or in equity in any court of
competent jurisdiction to collect any Collateral and to enforce any other right
in respect of any Collateral, (E) defend any actions, suits, proceedings,
audits, claims, demands, orders or disputes brought against such Grantor with
respect to any Collateral, (F) settle, compromise or adjust any such actions,
suits, proceedings, audits, claims, demands, orders or disputes and, in
connection therewith, give such discharges or releases as the Agent may deem
appropriate, (G) assign any Intellectual Property owned by the Grantors or any
IP Licenses of the Grantors throughout the world on such terms and conditions
and in such manner as the Agent shall in its sole discretion determine,
including the execution and filing of any document necessary to effectuate or
record such assignment and (H) generally, sell, assign, convey, transfer or
grant a Lien on, make any Contractual Obligation with respect to and otherwise
deal with, any Collateral as fully and completely as though the Agent were the
absolute owner thereof for all purposes and do, at the Agent’s option, at any
time or from time to time, all acts and things that the Agent deems necessary to
protect, preserve or realize upon any Collateral and the Secured Parties’
security interests therein and to effect the intent of the Loan Documents, all
as fully and effectively as such Grantor might do.
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          (vi) If any Grantor fails to perform or comply with any Contractual
Obligation contained herein, the Agent, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such Contractual Obligation.
          (b) The expenses of the Agent incurred in connection with actions
undertaken as provided in this Section 7.1, together with interest thereon at a
rate set forth in subsection 1.3(c) of the Credit Agreement, from the date of
payment by the Agent to the date reimbursed by the relevant Grantor, shall be
payable by such Grantor to the Agent on demand.
          (c) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue of this Section 7.1. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the security
interests created hereby are released as described in Section 8.2.
      Section 7.2 Authorization to File Financing Statements. Each Grantor
authorizes the Agent and its Related Persons, at any time and from time to time,
to file or record financing statements, amendments thereto, and other filing or
recording documents or instruments with respect to any Collateral in such form
and in such offices as the Agent reasonably determines appropriate to perfect
the security interests of the Agent under this Agreement, and such financing
statements and amendments may described the Collateral covered thereby as “all
assets of the debtor”, but, with respect to Akorn, shall expressly exclude the
Existing JV. A photographic or other reproduction of this Agreement, where
permitted by applicable law, shall be sufficient as a financing statement or
other filing or recording document or instrument for filing or recording in any
jurisdiction. Such Grantor also hereby ratifies its authorization for the Agent
to have filed any initial financing statement or amendment thereto under the UCC
(or other similar laws) in effect in any jurisdiction if filed prior to the date
hereof.
      Section 7.3 Authority of Agent. Each Grantor acknowledges that the rights
and responsibilities of the Agent under this Agreement with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as between the Agent
and the other Secured Parties, be governed by the Credit Agreement and by such
other agreements with respect thereto as may exist from time to time among them,
but, as between the Agent and the Grantors, the Agent shall be conclusively
presumed to be acting as agent for the Secured Parties with full and valid
authority so to act or refrain from acting, and no Grantor shall be under any
obligation or entitlement to make any inquiry respecting such authority.
      Section 7.4 Duty; Obligations and Liabilities.
          (a) Duty of Agent. The Agent’s sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession shall
be to deal
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with it in the same manner as the Agent deals with similar property for its own
account. The powers conferred on the Agent hereunder are solely to protect the
Agent’s interest in the Collateral and shall not impose any duty upon the Agent
to exercise any such powers. The Agent shall be accountable only for amounts
that it receives as a result of the exercise of such powers, and neither it nor
any of its Related Persons shall be responsible to any Grantor for any act or
failure to act hereunder, except for their own gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction. In
addition, the Agent shall not be liable or responsible for any loss or damage to
any Collateral, or for any diminution in the value thereof, by reason of the act
or omission of any warehousemen, carrier, forwarding agency, consignee or other
bailee if such Person has been selected by the Agent in good faith.
          (b) Obligations and Liabilities with respect to Collateral. No Secured
Party and no Related Person thereof shall be liable for failure to demand,
collect or realize upon any Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to any Collateral. The powers conferred on the Agent
hereunder shall not impose any duty upon any other Secured Party to exercise any
such powers. The other Secured Parties shall be accountable only for amounts
that they actually receive as a result of the exercise of such powers, and
neither they nor any of their respective officers, directors, employees or
agents shall be responsible to any Grantor for any act or failure to act
hereunder, except for their own gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction.
ARTICLE VIII
MISCELLANEOUS
      Section 8.1 Reinstatement. Each Grantor agrees that, if any payment made
by any Credit Party or other Person and applied to the Secured Obligations is at
any time annulled, avoided, set aside, rescinded, invalidated, declared to be
fraudulent or preferential or otherwise required to be refunded or repaid, or
the proceeds of any Collateral are required to be returned by any Secured Party
to such Credit Party, its estate, trustee, receiver or any other party,
including any Grantor, under any bankruptcy law, state or federal law, common
law or equitable cause, then, to the extent of such payment or repayment, any
Lien or other Collateral securing such liability shall be and remain in full
force and effect, as fully as if such payment had never been made. If, prior to
any of the foregoing, (a) any Lien or other Collateral securing such Grantor’s
liability hereunder shall have been released or terminated by virtue of the
foregoing or (b) any provision of the Guaranty hereunder shall have been
terminated, cancelled or surrendered, such Lien, other Collateral or provision
shall be reinstated in full force and effect and such prior release,
termination, cancellation or surrender shall not diminish, release, discharge,
impair or otherwise affect the obligations of any such Grantor in
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respect of any Lien or other Collateral securing such obligation or the amount
of such payment.
      Section 8.2 Release of Collateral.
          (a) At the time provided in subsection 8.1(b)(iii) of the Credit
Agreement, the Collateral shall be released from the Lien created hereby and
this Agreement and all obligations (other than those expressly stated to survive
such termination) of the Agent and each Grantor hereunder shall terminate, all
without delivery of any instrument or performance of any act by any party, and
all rights to the Collateral shall revert to the Grantors. Each Grantor is
hereby authorized to file UCC amendments at such time evidencing the termination
of the Liens so released. At the request of any Grantor following any such
termination, the Agent shall deliver to such Grantor any Collateral of such
Grantor held by the Agent hereunder and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination.
          (b) If the Agent shall be directed or permitted pursuant to subsection
8.10(b) of the Credit Agreement to release any Lien or any Collateral, such
Collateral shall be released from the Lien created hereby to the extent provided
under, and subject to the terms and conditions set forth in, such subsection. In
connection therewith, the Agent, at the request of any Grantor, shall execute
and deliver to such Grantor such documents as such Grantor shall reasonably
request to evidence such release.
          (c) At the time provided in subsection 8.10(b) of the Credit Agreement
and at the request of the Borrower Representative, a Grantor shall be released
from its obligations hereunder in the event that all the Stock and Stock
Equivalents of such Grantor shall be sold to any Person that is not an Affiliate
of a Borrower or the Subsidiaries of a Borrower in a transaction permitted by
the Loan Documents.
      Section 8.3 Independent Obligations. The obligations of each Grantor
hereunder are independent of and separate from the Secured Obligations and the
Guaranteed Obligations. If any Secured Obligation or Guaranteed Obligation is
not paid when due, or upon any Event of Default, the Agent may, at its sole
election, proceed directly and at once, without notice, against any Grantor and
any Collateral to collect and recover the full amount of any Secured Obligation
or Guaranteed Obligation then due, without first proceeding against any other
Grantor, any other Credit Party or any other Collateral and without first
joining any other Grantor or any other Credit Party in any proceeding.
      Section 8.4 No Waiver by Course of Conduct. No Secured Party shall by any
act (except by a written instrument pursuant to Section 8.6), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default. No failure to exercise,
nor any delay in exercising, on the part of any Secured Party, any right, power
or privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege
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hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by any Secured Party of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy that such Secured Party would otherwise have on any future
occasion.
      Section 8.5 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 9.1 of the Credit Agreement; provided, however, that
annexes to this Agreement may be supplemented (but no existing provisions may be
modified and no Collateral may be released) through Pledge Amendments and
Joinder Agreements, in substantially the form of Annex 1 and Annex 2,
respectively, in each case duly executed by the Agent and each Grantor directly
affected thereby.
      Section 8.6 Additional Grantors; Additional Pledged Collateral.
          (a) Joinder Agreements. If, at the option of a Borrower or as required
pursuant to Section 4.13 of the Credit Agreement, a Borrower shall cause any
Subsidiary that is not a Grantor to become a Grantor hereunder, such Subsidiary
shall execute and deliver to the Agent a Joinder Agreement substantially in the
form of Annex 2 and shall thereafter for all purposes be a party hereto and have
the same rights, benefits and obligations as a Grantor party hereto on the
Closing Date.
          (b) Pledge Amendments. To the extent any Pledged Collateral has not
been delivered as of the Closing Date, such Grantor shall deliver a pledge
amendment duly executed by the Grantor in substantially the form of Annex 1
(each, a “Pledge Amendment”). Such Grantor authorizes the Agent to attach each
Pledge Amendment to this Agreement.
      Section 8.7 Notices. All notices, requests and demands to or upon the
Agent or any Grantor hereunder shall be effected in the manner provided for in
Section 9.2 of the Credit Agreement; provided, however, that any such notice,
request or demand to or upon any Grantor shall be addressed to the Borrowers’
notice address set forth in such Section 9.2.
      Section 8.8 Successors and Assigns. This Agreement shall be binding upon
the successors and assigns of each Grantor and shall inure to the benefit of
each Secured Party and their successors and assigns; provided, however, that no
Grantor may assign, transfer or delegate any of its rights or obligations under
this Agreement without the prior written consent of the Agent.
      Section 8.9 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Signature pages may be
detached from multiple separate counterparts and attached to a single
counterpart. Delivery of an executed signature page
GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

30

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of this Agreement by facsimile transmission or by Electronic Transmission shall
be as effective as delivery of a manually executed counterpart hereof.
      Section 8.10 Severability. Any provision of this Agreement being held
illegal, invalid or unenforceable in any jurisdiction shall not affect any part
of such provision not held illegal, invalid or unenforceable, any other
provision of this Agreement or any part of such provision in any other
jurisdiction.
      Section 8.11 Governing Law. This Agreement and the rights and obligations
of the parties hereto shall be governed by, and construed and interpreted in
accordance with, the law of the State of New York.
      Section 8.12 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO, OR
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, ANY LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREIN OR RELATED THERETO (WHETHER
FOUNDED IN CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO OTHER PARTY AND NO RELATED PERSON OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.12.
     EACH GRANTOR AGREES TO BE BOUND BY THE PROVISIONS OF SUBSECTION 9.18(b) AND
(c) OF THE CREDIT AGREEMENT.
[SIGNATURE PAGES FOLLOW]
GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

31

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     IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty and
Security Agreement to be duly executed and delivered as of the date first above
written.

            AKORN, INC.
as Grantor
      By:   /s/ Jeffrey A. Whitnell       Name:   Jeffrey A. Whitnell      
Title:   CFO    

            AKORN (NEW JERSEY), INC.
as Grantor
      By:   /s/ Jeffrey A. Whitnell       Name:   Jeffrey A. Whitnell      
Title:   CFO    

ACCEPTED AND AGREED
as of the date first above written:
GENERAL ELECTRIC CAPITAL CORPORATION
     as Agent

                By:   /s/ Dennis Cloud     Name:   Dennis Cloud     Title:  
Duly Authorized Signatory    

[SIGNATURE PAGE TO GUARANTY AND SECURITY AGREEMENT]

 

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ANNEX 1
TO
GUARANTY AND SECURITY AGREEMENT 1
FORM OF PLEDGE AMENDMENT
     This Pledge Amendment, dated as of                      ___, 20___, is
delivered pursuant to Section 8.6 of the Guaranty and Security Agreement, dated
as of January 7, 2009, by Akorn, Inc., a Louisiana corporation and Akorn (New
Jersey), Inc., an Illinois corporation (together, the “Borrowers”), the
undersigned Grantor and the other Affiliates of the Borrowers from time to time
party thereto as Grantors in favor of General Electric Capital Corporation, as
Agent for the Secured Parties referred to therein (the “Guaranty and Security
Agreement”). Capitalized terms used herein without definition are used as
defined in the Guaranty and Security Agreement.
     The undersigned hereby agrees that this Pledge Amendment may be attached to
the Guaranty and Security Agreement and that the Pledged Collateral listed on
Annex 1-A to this Pledge Amendment shall be and become part of the Collateral
referred to in the Guaranty and Security Agreement and shall secure all
Obligations of the undersigned.
     The undersigned hereby represents and warrants that each of the
representations and warranties contained in Sections 4.1, 4.2, 4.5 and 4.10 of
the Guaranty and Security Agreement is true and correct in all material respects
as of the date hereof as if made on and as of such date.

            [GRANTOR]
      By:           Name:           Title:        

 

To be used for pledge of Additional Pledged Collateral by existing Grantor.

GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

A1-1

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Annex 1-A
PLEDGED STOCK

                                  NUMBER                 OF                
SHARES,         CERTIFICATE       UNITS OR ISSUER   CLASS   NO(S).   PAR VALUE  
INTERESTS
 
               

PLEDGED DEBT INSTRUMENTS

                      DESCRIPTION OF   CERTIFICATE   FINAL   PRINCIPAL ISSUER  
DEBT   NO(S).   MATURITY   AMOUNT
 
               

GUARANTY AND SECURITY AGREEMENT
AKORN, IN

A1-2

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ACKNOWLEDGED AND AGREED
as of the date first above written:
GENERAL ELECTRIC CAPITAL CORPORATION
     as Agent

                By:         Name:         Title:        

GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

A1-3

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ANNEX 2
TO
GUARANTY AND SECURITY AGREEMENT
FORM OF JOINDER AGREEMENT
     This JOINDER AGREEMENT, dated as of                      ___, 20___, is
delivered pursuant to Section 8.6 of the Guaranty and Security Agreement, dated
as of January 7, 2009, by Akorn, Inc., a Louisiana corporation and Akorn (New
Jersey), Inc., an Illinois corporation (together, the “Borrowers”) and the
Affiliates of the Borrowers from time to time party thereto as Grantors in favor
of the General Electric Capital Corporation, as Agent for the Secured Parties
referred to therein (the “Guaranty and Security Agreement”). Capitalized terms
used herein without definition are used as defined in the Guaranty and Security
Agreement.
     By executing and delivering this Joinder Agreement, the undersigned, as
provided in Section 8.6 of the Guaranty and Security Agreement, hereby becomes a
party to the Guaranty and Security Agreement as a Grantor thereunder with the
same force and effect as if originally named as a Grantor therein and, without
limiting the generality of the foregoing, as collateral security for the prompt
and complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of the Secured Obligations of the undersigned, hereby
mortgages, pledges and hypothecates to the Agent for the benefit of the Secured
Parties, and grants to the Agent for the benefit of the Secured Parties a lien
on and security interest in, all of its right, title and interest in, to and
under the Collateral of the undersigned and expressly assumes all obligations
and liabilities of a Grantor thereunder. The undersigned hereby agrees to be
bound as a Grantor for the purposes of the Guaranty and Security Agreement.
     The information set forth in Annex 1-A is hereby added to the information
set forth in Schedules 1 through 6 to the Guaranty and Security Agreement. By
acknowledging and agreeing to this Joinder Agreement, the undersigned hereby
agree that this Joinder Agreement may be attached to the Guaranty and Security
Agreement and that the Pledged Collateral listed on Annex 1-A to this Joinder
Amendment shall be and become part of the Collateral referred to in the Guaranty
and Security Agreement and shall secure all Secured Obligations of the
undersigned.
     The undersigned hereby represents and warrants that each of the
representations and warranties contained in Article IV of the Guaranty and
Security Agreement applicable to it is true and correct on and as the date
hereof as if made on and as of such date.
GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

A2-1

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     IN WITNESS WHEREOF, THE UNDERSIGNED HAS CAUSED THIS JOINDER AGREEMENT TO BE
DULY EXECUTED AND DELIVERED AS OF THE DATE FIRST ABOVE WRITTEN.

            [Additional Grantor]
      By:           Name:           Title:        

GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

A2-2

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ACKNOWLEDGED AND AGREED
as of the date first above written:
[EACH GRANTOR PLEDGING
ADDITIONAL COLLATERAL]

                By:         Name:         Title:        

GENERAL ELECTRIC CAPITAL CORPORATION
      as Agent

                By:         Name:         Title:        

GUARANTY AND SECURITY AGREEMENT
AKORN, INC.

A2-3

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ANNEX 3
TO
GUARANTY AND SECURITY AGREEMENT
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT1
     THIS [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT, dated as of
January 7, 2009, is made by each of the entities listed on the signature pages
hereof (each a “Grantor” and, collectively, the “Grantors”), in favor of General
Electric Capital Corporation (“GE Capital”), as administrative agent (in such
capacity, together with its successors and permitted assigns, the “Agent”) for
the Lenders and the L/C Issuers (as defined in the Credit Agreement referred to
below) and the other Secured Parties.
W I T N E S S E T H:
     WHEREAS, pursuant to the Credit Agreement, dated as of January 7, 2009 (as
the same may be amended, restated, supplemented or otherwise modified from time
to time, the “Credit Agreement”), among the Borrowers, the Borrower
Representative, the other Credit Parties, the Lenders and the L/C Issuers from
time to time party thereto and GE Capital, as Agent for the Lenders and the L/C
Issuers, the Lenders and the L/C Issuers have severally agreed to make
extensions of credit to the Borrowers upon the terms and subject to the
conditions set forth therein;
     WHEREAS, each Grantor has agreed, pursuant to a Guaranty and Security
Agreement of even date herewith in favor of the Agent (the “Guaranty and
Security Agreement”), to guarantee the Obligations (as defined in the Credit
Agreement) of each Borrower; and
     WHEREAS, all of the Grantors are party to the Guaranty and Security
Agreement pursuant to which the Grantors are required to execute and deliver
this [Copyright] [Patent] [Trademark] Security Agreement;
     NOW, THEREFORE, in consideration of the premises and to induce the Lenders,
the L/C Issuers and the Agent to enter into the Credit Agreement and to induce
the Lenders and the L/C Issuers to make their respective extensions of credit to
the Borrowers thereunder, each Grantor hereby agrees with the Agent as follows:
     Section 1. Defined Terms. Capitalized terms used herein without definition
are used as defined in the Guaranty and Security Agreement.
     Section 2. Grant of Security Interest in [Copyright] [Trademark] [Patent]
Collateral. Each Grantor, as collateral security for the prompt and complete
payment and performance when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations of such Grantor, hereby mortgages, pledges
and hypothecates to the Agent for the benefit of the Secured Parties, and grants
to the Agent for the benefit of the Secured Parties a Lien on and security
interest in, all of its right, title and interest in, to
 

1   Separate agreements should be executed relating to each Grantor’s respective
Copyrights, Patents, and Trademarks.

A3-1

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and under the following Collateral of such Grantor (the “[Copyright] [Patent]
[Trademark] Collateral”):
          (a) [all of its Copyrights and all IP Licenses providing for the grant
by or to such Grantor of any right under any Copyright, including, without
limitation, those referred to on Schedule 1 hereto;
          (b) all renewals, reversions and extensions of the foregoing; and
          (c) all income, royalties, proceeds and Liabilities at any time due or
payable or asserted under and with respect to any of the foregoing, including,
without limitation, all rights to sue and recover at law or in equity for any
past, present and future infringement, misappropriation, dilution, violation or
other impairment thereof.]
or
          (a) [all of its Patents and all IP Licenses providing for the grant by
or to such Grantor of any right under any Patent, including, without limitation,
those referred to on Schedule 1 hereto;
          (b) all reissues, reexaminations, continuations,
continuations-in-part, divisionals, renewals and extensions of the foregoing;
and
          (c) all income, royalties, proceeds and Liabilities at any time due or
payable or asserted under and with respect to any of the foregoing, including,
without limitation, all rights to sue and recover at law or in equity for any
past, present and future infringement, misappropriation, dilution, violation or
other impairment thereof.]
or
          (a) [all of its Trademarks and all IP Licenses providing for the grant
by or to such Grantor of any right under any Trademark, including, without
limitation, those referred to on Schedule 1 hereto;
          (b) all renewals and extensions of the foregoing;
          (c) all goodwill of the business connected with the use of, and
symbolized by, each such Trademark; and
          (d) all income, royalties, proceeds and Liabilities at any time due or
payable or asserted under and with respect to any of the foregoing, including,
without limitation, all rights to sue and recover at law or in equity for any
past, present and future infringement, misappropriation, dilution, violation or
other impairment thereof.]
     Section 3. Guaranty and Security Agreement. The security interest granted
pursuant to this [Copyright] [Patent] [Trademark] Security Agreement is granted
in conjunction with the security interest granted to the Agent pursuant to the
Guaranty and

A3-2

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Security Agreement and each Grantor hereby acknowledges and agrees that the
rights and remedies of the Agent with respect to the security interest in the
[Copyright] [Patent] [Trademark] Collateral made and granted hereby are more
fully set forth in the Guaranty and Security Agreement, the terms and provisions
of which are incorporated by reference herein as if fully set forth herein.
     Section 4. Grantor Remains Liable. Each Grantor hereby agrees that,
anything herein to the contrary notwithstanding, such Grantor shall assume full
and complete responsibility for the prosecution, defense, enforcement or any
other necessary or desirable actions in connection with their [Copyrights]
[Patents] [Trademarks] and IP Licenses subject to a security interest hereunder.
     Section 5. Counterparts. This [Copyright] [Patent] [Trademark] Security
Agreement may be executed in any number of counterparts and by different parties
in separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement. Signature pages may be detached from multiple separate counterparts
and attached to a single counterpart.
     Section 6. Governing Law. This [Copyright] [Patent] [Trademark] Security
Agreement and the rights and obligations of the parties hereto shall be governed
by, and construed and interpreted in accordance with, the law of the State of
New York.
[SIGNATURE PAGES FOLLOW]

A3-3

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     IN WITNESS WHEREOF, each Grantor has caused this [Copyright] [Patent]
[Trademark] Security Agreement to be executed and delivered by its duly
authorized officer as of the date first set forth above.

            Very truly yours,

[GRANTOR]
     as Grantor
      By:           Name:           Title:        

ACCEPTED AND AGREED
as of the date first above written:
GENERAL ELECTRIC CAPITAL CORPORATION
      as Agent

          By:         Name:         Title:        

[SIGNATURE PAGE TO [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT]

A3-4

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ACKNOWLEDGMENT OF GRANTOR

                 
State of
                               )      
 
        )     ss.
County of
                               )      

     On this ___ day of                      ___, 20___ before me personally
appeared                     , proved to me on the basis of satisfactory
evidence to be the person who executed the foregoing instrument on behalf of
                    , who being by me duly sworn did depose and say that he is
an authorized officer of said corporation, that the said instrument was signed
on behalf of said corporation as authorized by its Board of Directors and that
he acknowledged said instrument to be the free act and deed of said corporation.

                                          Notary Public    

[ACKNOWLEDGEMENT OF GRANTOR FOR [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY
AGREEMENT]

A3-5

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SCHEDULE I
TO
[COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT
[Copyright] [Patent] [Trademark] Registrations
     1. REGISTERED [COPYRIGHTS] [PATENTS] [TRADEMARKS]
     [Include Registration Number and Date]
     2. [COPYRIGHT] [PATENT] [TRADEMARK] APPLICATIONS
     [Include Application Number and Date]
     3. IP LICENSES
     [Include complete legal description of agreement (name of agreement,
parties and date)]