Exhibit 10.1
 
EXECUTION COPY

 

--------------------------------------------------------------------------------

 
AKORN, INC.,

AKORN (NEW JERSEY), INC.,

AVR BUSINESS TRUST,

OAK PHARMCEUTICALS, INC.,

ADVANCED VISION RESEARCH, INC.,

ADVANCED VISION PHARMACEUTICALS, LLC, AND

AKORN OPHTHALMICS, INC.,

as Borrowers

______________________________________________________________________________

LOAN AND SECURITY AGREEMENT

Dated as of October __, 2011

$20,000,000

______________________________________________________________________________

CERTAIN FINANCIAL INSTITUTIONS,

as Lenders

and

BANK OF AMERICA, N.A.,

as Agent

 
 
 

--------------------------------------------------------------------------------

 
 
TABLE OF CONTENTS
 
 Page

Section 1.
DEFINITIONS; RULES OF CONSTRUCTION
1
 
1.1.
Definitions
1
 
1.2.
Accounting Terms
23
 
1.3.
Uniform Commercial Code
23
 
1.4.
Certain Matters of Construction
23
Section 2.
CREDIT FACILITIES
24
 
2.1.
Commitment
24
 
2.2.
Letter of Credit Facility
25
Section 3.
INTEREST, FEES AND CHARGES
27
 
3.1.
Interest
28
 
3.2.
Fees
29
 
3.3.
Computation of Interest, Fees, Yield Protection
29
 
3.4.
Reimbursement Obligations
29
 
3.5.
Illegality
30
 
3.6.
Inability to Determine Rates
30
 
3.7.
Increased Costs; Capital Adequacy
30
 
3.8.
Mitigation
31
 
3.9.
Funding Losses
31
 
3.10.
Maximum Interest
32
Section 4.
LOAN ADMINISTRATION
32
 
4.1.
Manner of Borrowing and Funding Loans
32
 
4.2.
Defaulting Lender
33
 
4.3.
Number and Amount of LIBOR Loans; Determination of Rate
34
 
4.4.
Borrower Agent
34
 
4.5.
One Obligation
34
 
4.6.
Effect of Termination
34
Section 5.
PAYMENTS
35
 
5.1.
General Payment Provisions
35
 
5.2.
Repayment of Loans
35
 
5.3.
Payment of Other Obligations
35
 
5.4.
Marshaling; Payments Set Aside
36
 
5.5.
Post-Default Allocation of Payments
36
 
5.6.
Application of Payments
37
 
5.7.
Loan Account; Account Stated
37
 
5.8.
Taxes
37
 
5.9.
Lender Tax Information
37
 
5.10.
Nature and Extent of Each Borrower’s Liability
38
Section 6.
CONDITIONS PRECEDENT
40
 
6.1.
Conditions Precedent to Initial Loans
40
 
6.2.
Conditions Precedent to All Credit Extensions
42
Section 7.
COLLATERAL
42
 
7.1.
Grant of Security Interest
42
 
7.2.
Lien on Deposit Accounts; Cash Collateral
43
 
7.3.
Collateral Assignment of Leases
43
 
7.4.
Other Collateral
43
 
7.5.
No Assumption of Liability
44
 
7.6.
Further Assurances
44
 
7.7.
Foreign Subsidiary Stock
44
 
7.8.
Aciex Stock
44

 
 
 

--------------------------------------------------------------------------------

 
 
Section 8.
COLLATERAL ADMINISTRATION
44
 
8.1.
Borrowing Base Certificates
44
 
8.2.
Administration of Accounts
44
 
8.3.
Administration of Inventory
45
 
8.4.
Administration of Equipment
46
 
8.5.
Administration of Deposit Accounts
46
 
8.6.
General Provisions
47
 
8.7.
Power of Attorney
48
Section 9.
REPRESENTATIONS AND WARRANTIES
48
 
9.1.
General Representations and Warranties
48
 
9.2.
Complete Disclosure
53
Section 10.
COVENANTS AND CONTINUING AGREEMENTS
53
 
10.1.
Affirmative Covenants
53
 
10.2.
Negative Covenants
56
 
10.3.
Financial Covenants
59
Section 11.
EVENTS OF DEFAULT; REMEDIES ON DEFAULT
59
 
11.1.
Events of Default
59
 
11.2.
Remedies upon Default
60
 
11.3.
License
61
 
11.4.
Setoff
61
 
11.5.
Remedies Cumulative; No Waiver
62
Section 12.
AGENT
62
 
12.1.
Appointment, Authority and Duties of Agent
62
 
12.2.
Agreements Regarding Collateral and Field Examination Reports
63
 
12.3.
Reliance By Agent
64
 
12.4.
Action Upon Default
64
 
12.5.
Ratable Sharing
64
 
12.6.
Indemnification
64
 
12.7.
Limitation on Responsibilities of Agent
64
 
12.8.
Successor Agent and Co-Agents
65
 
12.9.
Due Diligence and Non-Reliance
65
 
12.10.
Remittance of Payments and Collections
66
 
12.11.
Agent in its Individual Capacity
66
 
12.12.
Agent Titles
66
 
12.13.
Bank Product Providers
67
 
12.14.
No Third Party Beneficiaries
67
Section 13.
BENEFIT OF AGREEMENT; ASSIGNMENTS
67
 
13.1.
Successors and Assigns
67
 
13.2.
Participations
67
 
13.3.
Assignments
68
 
13.4.
Replacement of Certain Lenders
68
Section 14.
MISCELLANEOUS
69
 
14.1.
Consents, Amendments and Waivers
69
 
14.2.
Indemnity
69
 
14.3.
Notices and Communications
70
 
14.4.
Performance of Borrowers’ Obligations
70
 
14.5.
Credit Inquiries
70
 
14.6.
Severability
70
 
14.7.
Cumulative Effect; Conflict of Terms
71
 
14.8.
Counterparts
71
 
14.9.
Entire Agreement
71

 
 
(ii)

--------------------------------------------------------------------------------

 
 

 
14.10.
Relationship with Lenders
71
 
14.11.
No Advisory or Fiduciary Responsibility
71
 
14.12.
Confidentiality
71
 
14.13.
Certifications Regarding Indentures
72
 
14.14.
GOVERNING LAW
72
 
14.15.
Consent to Forum
72
 
14.16.
Waivers by Borrowers
72
 
14.17.
Patriot Act Notice
73

 
LIST OF EXHIBITS AND SCHEDULES
 
Exhibit A
Note
Exhibit B
Assignment and Acceptance
Exhibit C
Assignment Notice

 
Schedule 1.1
Commitments of Lenders
Schedule 8.5
Deposit Accounts
Schedule 8.6.1
Business Locations
Schedule 9.1.4
Names and Capital Structure
Schedule 9.1.11
Patents, Trademarks, Copyrights and Licenses
Schedule 9.1.14
Environmental Matters
Schedule 9.1.15
Restrictive Agreements
Schedule 9.1.16
Litigation
Schedule 9.1.18
Pension Plans
Schedule 9.1.20
Labor Contracts
Schedule 10.2.2
Existing Liens
Schedule 10.2.16
Existing Affiliate Transactions

 
 
 
(iii)

--------------------------------------------------------------------------------

 
 
LOAN AND SECURITY AGREEMENT
 
THIS LOAN AND SECURITY AGREEMENT (the “Agreement”) is dated as of October __,
2011, among AKORN, INC., a Louisiana corporation (“Akorn”), AKORN (NEW JERSEY),
INC., an Illinois corporation (“Akorn NJ”), AVR BUSINESS TRUST, a Massachusetts
business trust (“AVR BT”), OAK PHARMACEUTICALS, INC., a Delaware corporation
(“Oak Pharma”), ADVANCED VISION RESEARCH, INC., a Massachusetts corporation
(“AVR”), ADVANCED VISION PHARMACEUTICALS, LLC, a Delaware limited liability
company (“AVP”), AKORN OPHTHALMICS, INC., a Delaware corporation (“Akorn
Ophthalmics”), the Subsidiaries of Akorn who from time to time become party to
this Agreement by joinder (such Subsidiaries, together with Akorn, Akorn NJ, AVR
BT, Oak Pharma, AVR, AVP, and Akorn Ophthalmics, collectively, “Borrowers”), the
financial institutions party to this Agreement from time to time as lenders
(collectively, “Lenders”), and BANK OF AMERICA, N.A., a national banking
association, as agent for the Lenders (“Agent”).

R E C I T A L S:

Borrowers have requested that Lenders provide a credit facility to Borrowers to
finance their mutual and collective business enterprise.  Lenders are willing to
provide the credit facility on the terms and conditions set forth in this
Agreement.
 
NOW, THEREFORE, for valuable consideration hereby acknowledged, the parties
agree as follows:
 
SECTION 1.           DEFINITIONS; RULES OF CONSTRUCTION
 
1.1.           Definitions.  As used herein, the following terms have the
meanings set forth below:
 
Account: as defined in the UCC, including all rights to payment for goods sold
or leased, or for services rendered.
 
Account Debtor: a Person who is obligated under an Account, Chattel Paper or
General Intangible.
 
Accounts Formula Amount: 85% of the Value of Eligible Accounts.
 
Acquisition: any transaction or series of related transactions for the direct or
indirect (a) acquisition of all or substantially all of the Property or business
of any Person, or of any business unit, line of business or division of any
Person or Property constituting a business unit, line of business or division of
any other Person, (b) acquisition of in excess of 50% of the Equity Interests of
any Person or otherwise causing a person to become a subsidiary of the acquiring
Person, (c) merger, consolidation or amalgamation, whereby a Person becomes a
subsidiary of the acquiring Person, or any other consolidation with any Person,
whereby a Person becomes a subsidiary of the acquiring Person, or (d)
acquisition or purchase of licenses and rights to manufacture pharmaceuticals
for or on behalf of a third Person.
 
Affiliate: with respect to any Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified.  “Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability
to exercise voting power, by contract or otherwise.  “Controlling” and
“Controlled” have correlative meanings.
 
Agent Indemnitees: Agent and its officers, directors, employees, Affiliates,
agents and attorneys.
 
 
 

--------------------------------------------------------------------------------

 
 
Agent Professionals: attorneys, accountants, appraisers, auditors, business
valuation experts, environmental engineers or consultants, turnaround
consultants, and other professionals and experts retained by Agent.
 
Akorn-Strides, LLC: Akorn-Strides, LLC, a Delaware limited liability company in
which Akorn owns 50% of its issued and outstanding membership interests.
 
Allocable Amount: as defined in Section 5.10.3.
 
Anti-Terrorism Laws: any laws relating to terrorism or money laundering,
including the Patriot Act.
 
Applicable Law: all laws, rules, regulations and governmental guidelines
applicable to the Person, conduct, transaction, agreement or matter in question,
including all applicable statutory law, common law and equitable principles, and
all provisions of constitutions, treaties, statutes, rules, regulations, orders
and decrees of Governmental Authorities.
 
Applicable Margin: with respect to any Type of Loan, the margin set forth below,
as determined by the Fixed Charge Coverage Ratio as of the end of the applicable
Fiscal Quarter:
 
 
Level
 
 
Ratio
Base Rate
Loans
LIBOR
Loans
I
> 2.50
0.00%
1.50%
II
> 2.00 < 2.50
0.25%
1.75%
III
> 1.50 < 2.00
0.50%
2.00%
IV
< 1.50
0.75%
2.25%

 
Until December 31, 2011, margins shall be determined as if Level III were
applicable.  Thereafter, the margins shall be subject to increase or decrease
upon receipt by Agent pursuant to Section 10.1.2 of the financial statements and
corresponding Compliance Certificate for each Fiscal Quarter beginning with the
Fiscal Quarter ending December 31, 2011, which change shall be effective on the
first day of the calendar month following receipt.  If, by the first day of a
month, any financial statement or Compliance Certificate due in the preceding
month has not been received, then, at the option of Agent or Required Lenders,
the margins shall be determined as if Level IV were applicable, from such day
until the first day of the calendar month following actual receipt.
 
Approved Fund: any Person (other than a natural person) that is engaged in
making, purchasing, holding or otherwise investing in commercial loans and
similar extensions of credit in its ordinary course of activities, and is
administered or managed by a Lender, an entity that administers or manages a
Lender, or an Affiliate of either.
 
Asset Disposition: a sale, lease, license, consignment, transfer or other
disposition of Property of an Obligor, including a disposition of Property in
connection with a sale-leaseback transaction or synthetic lease.
 
Assignment and Acceptance: an assignment agreement between a Lender and Eligible
Assignee, in the form of Exhibit B.
 
Availability: the Borrowing Base minus the principal balance of all Loans.
 
 
-2-

--------------------------------------------------------------------------------

 
 
Availability Reserve: the sum (without duplication) of (a) the Inventory
Reserve; (b) the Rent and Charges Reserve; (c) the LC Reserve; (d) the Bank
Product Reserve; (e) all accrued Royalties, whether or not then due and payable
by a Borrower; (f) the aggregate amount of liabilities secured by Liens upon
Collateral that are senior to Agent’s Liens (but imposition of any such reserve
shall not waive an Event of Default arising therefrom); and (g) such additional
reserves, in such amounts and with respect to such matters, as Agent in its
reasonable credit determination may elect to impose from time to time
(including, without limitation, any additional reserves relating to chargebacks,
rebates and returns and any reserves relating to payment of trustee expenses
under the Indenture).
 
Bank of America: Bank of America, N.A., a national banking association, and its
successors and assigns.
 
Bank of America Indemnitees: Bank of America and its officers, directors,
employees, Affiliates, agents and attorneys.
 
Bank Product: any of the following products, services or facilities extended to
any Borrower or Subsidiary by a Lender or any of its Affiliates: (a) Cash
Management Services; (b) products under Hedging Agreements; (c) commercial
credit card and merchant card services; and (d) leases and other banking
products or services as may be requested by any Borrower or Subsidiary, other
than Letters of Credit.
 
Bank Product Debt: Debt and other obligations of an Obligor relating to Bank
Products.
 
Bank Product Reserve: the aggregate amount of reserves established by Agent from
time to time in its reasonable credit determination in respect of Secured Bank
Product Obligations.
 
Bankruptcy Code: Title 11 of the United States Code.
 
Base Rate: for any day, a per annum rate equal to the greater of (a) the Prime
Rate for such day; (b) the Federal Funds Rate for such day, plus 0.50%; or (c)
LIBOR for a 30 day interest period as determined on such day, plus 1.0%.
 
Base Rate Loan: any Loan that bears interest based on the Base Rate.
 
Board of Governors: the Board of Governors of the Federal Reserve System.
 
Borrowed Money: with respect to any Obligor, without duplication, its (a) Debt
that (i) arises from the lending of money by any Person to such Obligor, (ii) is
evidenced by notes, drafts, bonds, debentures, credit documents or similar
instruments, (iii) accrues interest or is a type upon which interest charges are
customarily paid (excluding trade payables owing in the Ordinary Course of
Business), or (iv) was issued or assumed as full or partial payment for
Property; (b) Capital Leases; (c) reimbursement obligations with respect to
letters of credit; and (d) guaranties of any Debt of the foregoing types owing
by another Person.
 
Borrower Agent: as defined in Section 4.4.
 
Borrowing: a group of Loans of one Type that are made on the same day or are
converted into Loans of one Type on the same day.
 
Borrowing Base: on any date of determination, an amount equal to the lesser of
(a) the aggregate amount of Commitments as of such date of determination, minus
the LC Reserve; or (b) the sum of the Accounts Formula Amount, plus the
Inventory Formula Amount, plus the Fixed Asset Sublimit, minus the Availability
Reserve.
 
 
-3-

--------------------------------------------------------------------------------

 
 
Borrowing Base Certificate: a certificate, in form and substance satisfactory to
Agent, by which Borrowers certify calculation of the Borrowing Base.
 
Business Day: any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the laws of, or are in fact
closed in, North Carolina and Illinois, and if such day relates to a LIBOR Loan,
any such day on which dealings in Dollar deposits are conducted between banks in
the London interbank Eurodollar market.
 
Capital Expenditures: all liabilities incurred or expenditures made by a
Borrower or Subsidiary for the acquisition of fixed assets, or any improvements,
replacements, substitutions or additions thereto with a useful life of more than
one year (provided that Capital Expenditures shall not include any acquisition
or purchase of licenses and rights to manufacture pharmaceuticals for or on
behalf of a third Person).
 
Capital Lease: any lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
 
Cash Collateral: cash, and any interest or other income earned thereon, that is
delivered to Agent to Cash Collateralize any Obligations.
 
Cash Collateral Account: a demand deposit, money market or other account
established by Agent at such financial institution as Agent may select in its
discretion, which account shall be subject to Agent’s Liens for the benefit of
Secured Parties.
 
Cash Collateralize: the delivery of cash to Agent, as security for the payment
of Obligations, in an amount equal to (a) with respect to LC Obligations, 105%
of the aggregate LC Obligations, and (b) with respect to any inchoate,
contingent or other Obligations (including Secured Bank Product Obligations),
Agent’s good faith estimate of the amount due or to become due, including all
fees and other amounts relating to such Obligations.  “Cash Collateralization”
has a correlative meaning.
 
Cash Equivalents: (a) marketable obligations issued or unconditionally
guaranteed by, and backed by the full faith and credit of, the United States
government, maturing within 12 months of the date of acquisition; (b)
certificates of deposit, time deposits and bankers’ acceptances maturing within
12 months of the date of acquisition, and overnight bank deposits, in each case
which are issued by Bank of America or a commercial bank organized under the
laws of the United States or any state or district thereof, rated A-1 (or
better) by S&P or P-1 (or better) by Moody’s at the time of acquisition, and
(unless issued by a Lender) not subject to offset rights; (c) repurchase
obligations with a term of not more than 30 days for underlying investments of
the types described in clauses (a) and (b) entered into with any bank described
in clause (b); (d) commercial paper issued by Bank of America or rated A-1 (or
better) by S&P or P-1 (or better) by Moody’s, and maturing within nine months of
the date of acquisition; and (e) shares of any money market fund that has
substantially all of its assets invested continuously in the types of
investments referred to above, has net assets of at least $500,000,000 and has
the highest rating obtainable from either Moody’s or S&P.
 
Cash Management Services: any services provided from time to time by Bank of
America or any of its Affiliates to any Borrower or Subsidiary in connection
with operating, collections, payroll, trust, or other depository or disbursement
accounts, including automated clearinghouse, e-payable, electronic funds
transfer, wire transfer, controlled disbursement, overdraft, depository,
information reporting, lockbox and stop payment services.
 
CERCLA: the Comprehensive Environmental Response Compensation and Liability Act
(42 U.S.C. § 9601 et seq.).
 
 
-4-

--------------------------------------------------------------------------------

 
 
Change in Law: the occurrence, after the date hereof, of (a) the adoption,
taking effect or phasing in of any law, rule, regulation or treaty; (b) any
change in any law, rule, regulation or treaty or in the administration,
interpretation or application thereof; or (c) the making, issuance or
application of any request, guideline, requirement or directive (whether or not
having the force of law) by any Governmental Authority.
 
Change of Control: (a) Akorn ceases to own and control, beneficially and of
record, directly or indirectly, all Equity Interests in all Borrowers (other
than Akorn) unless pursuant to a Permitted Reorganization; (b) a change in the
majority of directors of Akorn within any twelve-month period, unless approved
by the then majority of directors; or (c) all or substantially all of a
Borrower’s assets are sold or transferred, other than sale or transfer to
another Borrower.
 
Claims: all claims, liabilities, obligations, losses, damages, penalties,
judgments, proceedings, interest, costs and expenses of any kind (including
remedial response costs, reasonable attorneys’ fees and Extraordinary Expenses)
at any time (including after Full Payment of the Obligations or replacement of
Agent or any Lender) incurred by any Indemnitee or asserted against any
Indemnitee by any Obligor or other Person, in any way relating to (a) any Loans,
Letters of Credit, Loan Documents, or the use thereof or transactions relating
thereto, (b) any action taken or omitted in connection with any Loan Documents,
(c) the existence or perfection of any Liens, or realization upon any
Collateral, (d) exercise of any rights or remedies under any Loan Documents or
Applicable Law, or (e) failure by any Obligor to perform or observe any terms of
any Loan Document, in each case including all costs and expenses relating to any
investigation, litigation, arbitration or other proceeding (including an
Insolvency Proceeding or appellate proceedings), whether or not the applicable
Indemnitee is a party thereto.
 
Closing Date: as defined in Section 6.1.
 
Code: the Internal Revenue Code of 1986.
 
Collateral: all Property described in Section 7.1, all Property described in any
Security Documents as security for any Obligations, and all other Property that
now or hereafter secures (or is intended to secure) any Obligations.
 
Commitment: for any Lender, its obligation to make Loans and to participate in
LC Obligations up to the maximum principal amount shown on Schedule 1.1, as
hereafter modified pursuant to Section 2.1.7 or an Assignment and Acceptance to
which it is a party.  “Commitments” means the aggregate amount of such
commitments of all Lenders.
 
Commitment Termination Date: the earliest to occur of (a) the Revolver
Termination Date; (b) the date on which Borrowers terminate the Commitments
pursuant to Section 2.1.4; or (c) the date on which the Commitments are
terminated pursuant to Section 11.2.
 
Compliance Certificate: a certificate, in form and substance satisfactory to
Agent, by which Borrowers certify compliance with Section 10.3, and calculate
the applicable Level for the Applicable Margin, the Availability, and the Fixed
Charge Coverage Ratio.
 
Contingent Obligation: any obligation of a Person arising from a guaranty,
indemnity or other assurance of payment or performance of any Debt, lease,
dividend or other obligation (“primary obligations”) of another obligor
(“primary obligor”) in any manner, whether directly or indirectly, including any
obligation of such Person under any (a) guaranty, endorsement, co-making or sale
with recourse of an obligation of a primary obligor; (b) obligation to make
take-or-pay or similar payments regardless of nonperformance by any other party
to an agreement; and (c) arrangement (i) to purchase any primary obligation or
security therefor, (ii) to supply funds for the purchase or payment of any
primary obligation, (iii) to maintain or assure working capital, equity capital,
net worth or solvency of the primary obligor, (iv) to purchase Property or
services for the purpose of assuring the ability of the primary obligor to
perform a primary obligation, or (v) otherwise to assure or hold harmless the
holder of any primary obligation against loss in respect thereof.  The amount of
any Contingent Obligation shall be deemed to be the stated or determinable
amount of the primary obligation (or, if less, the maximum amount for which such
Person may be liable under the instrument evidencing the Contingent Obligation)
or, if not stated or determinable, the maximum reasonably anticipated liability
with respect thereto.
 
 
-5-

--------------------------------------------------------------------------------

 
 
CWA: the Clean Water Act (33 U.S.C. §§ 1251 et seq.).
 
Debt: as applied to any Person, without duplication, (a) all items that would be
included as liabilities on a balance sheet in accordance with GAAP, including
Capital Leases, but excluding trade payables incurred and being paid in the
Ordinary Course of Business; (b) all Contingent Obligations; (c) all
reimbursement obligations in connection with letters of credit issued for the
account of such Person; and (d) in the case of a Borrower, the Obligations.  The
Debt of a Person shall include any recourse Debt of any partnership in which
such Person is a general partner or joint venturer.
 
Default: an event or condition that, with the lapse of time or giving of notice,
would constitute an Event of Default.
 
Default Rate: for any Obligation (including, to the extent permitted by law,
interest not paid when due), 2% plus the interest rate otherwise applicable
thereto.
 
Defaulting Lender: any Lender that, as determined by Agent, (a) has failed to
perform any funding obligations hereunder, and such failure is not cured within
three Business Days; (b) has notified Agent or any Borrower that such Lender
does not intend to comply with its funding obligations hereunder or has made a
public statement to the effect that it does not intend to comply with its
funding obligations hereunder or under any other credit facility; (c) has
failed, within three Business Days following request by Agent, to confirm in a
manner satisfactory to Agent that such Lender will comply with its funding
obligations hereunder; or (d) has, or has a direct or indirect parent company
that has, become the subject of an Insolvency Proceeding or taken any action in
furtherance thereof; provided, however, that a Lender shall not be a Defaulting
Lender solely by virtue of a Governmental Authority’s ownership of an equity
interest in such Lender or parent company.
 
Deposit Account Control Agreements: the Deposit Account control agreements to be
executed by each institution maintaining a Deposit Account for a Borrower, in
favor of Agent, for the benefit of Secured Parties, as security for the
Obligations.
 
Distribution: any declaration or payment of a distribution, interest or dividend
on any Equity Interest (other than payment-in-kind); any distribution, advance
or repayment of Debt (other than any payment-in-kind permitted hereunder) to a
holder of Equity Interests; or any purchase, redemption, or other acquisition or
retirement for value of any Equity Interest.
 
Dollars: lawful money of the United States.
 
Dominion Account: a special account established by Borrowers at Bank of America
or another bank acceptable to Agent, over which Agent has exclusive control for
withdrawal purposes during any Trigger Period.
 
EBITDA: determined on a consolidated basis for Borrowers and Subsidiaries, net
income, calculated before interest expense, provision for income taxes,
depreciation and amortization expense, gains or losses arising from the sale of
capital assets, gains arising from the write-up of assets, any extraordinary
gains, non-cash expenses attributed to stock-based compensation grants, non-cash
write-offs of deferred financing expenses, gains arising from the sale of the
assets of Akorn-Strides and non-cash expenses relating to the GAAP reevaluation
of inventory of AVR (in each case, to the extent included in determining net
income).
 
 
-6-

--------------------------------------------------------------------------------

 
 
Eligible Account: an Account owing to a Borrower that arises in the Ordinary
Course of Business from the sale of goods or rendition of services, is payable
in Dollars and is deemed by Agent, in its reasonable credit determination, to be
an Eligible Account.  Without limiting the foregoing, no Account shall be an
Eligible Account if (a) it is unpaid for more than 60 days after the original
due date, or more than 90 days after the original invoice date; (b) 20% or more
of the Accounts owing by the Account Debtor are not Eligible Accounts under the
foregoing clause; (c) (i) in the case of Accounts owing by Cardinal Health and
any of its Affiliates, when aggregated with other Accounts owing by Cardinal
Health and any of its Affiliates, it exceeds 40% of the aggregate Eligible
Accounts (or such higher percentage as Agent may establish for such Account
Debtor from time to time), provided that any ineligibility based on this clause
(i) shall be limited to that portion of Accounts in excess of 40% of the
aggregate Eligible Accounts (or such higher percentage as Agent may establish
for such Account Debtor from time to time), (ii) in the case of Accounts owing
by AmerisourceBergen and any of its Affiliates, when aggregated with other
Accounts owing by AmerisourceBergen and any of its Affiliates, it exceeds 40% of
the aggregate Eligible Accounts (or such higher percentage as Agent may
establish for such Account Debtor from time to time), provided that any
ineligibility based on this clause (ii) shall be limited to that portion of
Accounts in excess of 40% of the aggregate Eligible Accounts (or such higher
percentage as Agent may establish for such Account Debtor from time to time),
(iii) in the case of Accounts owing by McKesson Corporation and any of its
Affiliates, when aggregated with other Accounts owing by McKesson Corporation
and any of its Affiliates, it exceeds 40% of the aggregate Eligible Accounts (or
such higher percentage as Agent may establish for such Account Debtor from time
to time), provided that any ineligibility based on this clause (iii) shall be
limited to that portion of Accounts in excess of 40% of the aggregate Eligible
Accounts (or such higher percentage as Agent may establish for such Account
Debtor from time to time), or (iv) in the case of all Accounts owing by an
Account Debtor other than Cardinal Health, AmerisourceBergen, or McKesson
Corporation and any of their Affiliates, when aggregated with other Accounts
owing by Account Debtors other than Cardinal Health, AmerisouceBergen, and
McKesson Corporation and any of their Affiliates, it exceeds 20% of the
aggregate Eligible Accounts (or such higher percentage as Agent may establish
for the applicable Account Debtor(s) from time to time), provided that any
ineligibility based on this clause (iv) shall be limited to that portion of
Accounts in excess of 20% of the aggregate Eligible Accounts (or such higher
percentage as Agent may establish for the applicable Account Debtor(s) from time
to time); (d) it does not conform with a covenant or representation herein; (e)
it is owing by a creditor or supplier, or is otherwise subject to a potential
offset, counterclaim, dispute, deduction, discount, recoupment, reserve,
defense, chargeback, credit or allowance (but ineligibility shall be limited to
the amount thereof); (f) an Insolvency Proceeding has been commenced by or
against the Account Debtor; or the Account Debtor has failed, has suspended or
ceased doing business, is liquidating, dissolving or winding up its affairs, or
is not Solvent; or the Borrower is not able to bring suit or enforce remedies
against the Account Debtor through judicial process; (g) the Account Debtor is
organized or has its principal offices or assets outside the United States or
Canada; (h) it is owing by a Governmental Authority, unless the Account Debtor
is the United States or any department, agency or instrumentality thereof and
the Account has been assigned to Agent in compliance with the federal Assignment
of Claims Act; (i) it is not subject to a duly perfected, first priority Lien in
favor of Agent, or is subject to any other Lien; (j) the goods giving rise to it
have not been delivered to the Account Debtor, the services giving rise to it
have not been accepted by the Account Debtor, or it otherwise does not represent
a final sale; (k) it is evidenced by Chattel Paper or an Instrument of any kind,
or has been reduced to judgment; (l) its payment has been extended or the
Account Debtor has made a partial payment; (m) it arises from a sale to an
Affiliate, from a sale on a cash-on-delivery, bill-and-hold, sale-or-return,
sale-on-approval, consignment, or other repurchase or return basis, or from a
sale for personal, family or household purposes; (n) it represents a progress
billing or retainage, or relates to services for which a performance, surety or
completion bond or similar assurance has been issued; or (o) it includes a
billing for interest, fees or late charges, but ineligibility shall be limited
to the extent thereof.  In calculating delinquent portions of Accounts under
clauses (a) and (b), credit balances more than 90 days old will be excluded.
 
 
-7-

--------------------------------------------------------------------------------

 
 
Eligible Assignee: a Person that is (a) a Lender, U.S.-based Affiliate of a
Lender or Approved Fund; (b) any other financial institution approved by Agent
and Borrower Agent (which approval by Borrower Agent shall not be unreasonably
withheld or delayed, and shall be deemed given if no objection is made within
two Business Days after notice of the proposed assignment), that is organized
under the laws of the United States or any state or district thereof, has total
assets in excess of $5 billion, extends asset-based lending facilities in its
ordinary course of business and whose becoming an assignee would not constitute
a prohibited transaction under Section 4975 of the Code or any other Applicable
Law; and (c) during the continuation of any Event of Default, any Person
acceptable to Agent in its discretion.
 
Eligible Inventory: Inventory owned by a Borrower that Agent, in its reasonable
credit determination, deems to be Eligible Inventory.  Without limiting the
foregoing, no Inventory shall be Eligible Inventory unless it (a) is finished
goods, and not work-in-process, packaging or shipping materials (other than
component packaging materials), labels, samples, display items, bags,
replacement parts or manufacturing supplies; (b) is not held on consignment, nor
subject to any deposit or down payment; (c) is in new and saleable condition, is
FDA-approved (if subject to FDA approval), and is not quarantined, damaged,
defective, shopworn or otherwise unfit for sale; (d) is not slow-moving,
perishable, obsolete or unmerchantable, and does not constitute returned or
repossessed goods; (e) meets all standards imposed by any Governmental
Authority, and does not constitute hazardous materials under any Environmental
Law; (f) conforms with the covenants and representations herein; (g) is subject
to Agent’s duly perfected, first priority Lien, and no other Lien; (h) is within
the continental United States or Canada, is not in transit except between
locations of Borrowers, and is not consigned to any Person; (i) is not subject
to any warehouse receipt or negotiable Document; (j) is not subject to any
License or other arrangement that restricts such Borrower’s or Agent’s right to
dispose of such Inventory, unless Agent has received an appropriate Lien Waiver;
and (k) is not located on leased premises or in the possession of a
warehouseman, processor, repairman, mechanic, shipper, freight forwarder or
other Person, unless the lessor or such Person has delivered a Lien Waiver or an
appropriate Rent and Charges Reserve has been established; and (l) is reflected
in the details of a current perpetual inventory report.
 
Eligible Raw Materials: Raw Materials consisting of chemicals and components
that Agent, in its reasonable credit determination, deems to be Eligible Raw
Materials.  Without limiting the foregoing, no Raw Materials shall be Eligible
Raw Materials unless they (a) are not held on consignment, nor subject to any
deposit or down payment; (b) are in new and unused condition, are FDA-approved
if subject to FDA approval, and are not quarantined, damaged, defective,
shopworn or otherwise unfit for use; (c) are not slow-moving, perishable,
obsolete or unmerchantable, and do not constitute returned or repossessed raw
materials; (d) meets all standards imposed by any applicable Governmental
Authority, and do not constitute hazardous materials under any Environmental
Law; (e) conform with the covenants and representations herein; (f) are subject
to Agent’s duly perfected, first priority Lien, and no other Lien; (g) are
within the continental United States or Canada, are not in transit except
between locations of Borrowers, and are not consigned to any Person; (h) are not
subject to any warehouse receipt or negotiable Document; (i) are not subject to
any License or other arrangement that restricts such Borrower’s or Agent’s right
to dispose of such Raw Materials, unless Agent has received an appropriate Lien
Waiver; and (j) are not located on leased premises or in the possession of a
warehouseman, processor, repairman, mechanic, shipper, freight forwarder or
other Person, unless the lessor or such Person has delivered a Lien Waiver or an
appropriate Rent and Charges Reserve has been established; and (k) are reflected
in the details of a current perpetual inventory report.
 
 
-8-

--------------------------------------------------------------------------------

 
 
Enforcement Action: any action to enforce any Obligations (other than Secured
Bank Product Obligations) or Loan Documents or to exercise any rights or
remedies relating to any Collateral (whether by judicial action, self-help,
notification of Account Debtors, exercise of setoff or recoupment, exercise of
any right to vote or act in an Obligor’s Insolvency Proceeding, or otherwise).
 
Environmental Laws: all Applicable Laws (including all programs, permits and
guidance promulgated by regulatory agencies), relating to public health (but
excluding occupational safety and health, to the extent regulated by OSHA) or
the protection or pollution of the environment, including CERCLA, RCRA and CWA.
 
Environmental Notice: a notice (whether written or oral) from any Governmental
Authority or other Person of any possible noncompliance with, investigation of a
possible violation of, litigation relating to, or potential fine or liability
under any Environmental Law, or with respect to any Environmental Release,
environmental pollution or hazardous materials, including any complaint,
summons, citation, order, claim, demand or request for correction, remediation
or otherwise.
 
Environmental Release: a release as defined in CERCLA or under any other
Environmental Law.
 
Equity Interest: the ownership interest of any (a) shareholder in a corporation;
(b) partner in a partnership (whether general, limited, limited liability or
joint venture); (c) member in a limited liability company; or (d) other Person
having any other form of equity security or ownership interest.
 
ERISA: the Employee Retirement Income Security Act of 1974.
 
ERISA Affiliate: any trade or business (whether or not incorporated) under
common control with an Obligor within the meaning of Section 414(b) or (c) of
the Code (and Sections 414(m) and (o) of the Code for purposes of provisions
relating to Section 412 of the Code).
 
ERISA Event: (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by any Obligor or ERISA Affiliate from a Pension Plan subject to
Section 4063 of ERISA during a plan year in which it was a substantial employer
(as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by any Obligor or ERISA Affiliate from a Multiemployer Plan
or notification that a Multiemployer Plan is in reorganization; (d) the filing
of a notice of intent to terminate, the treatment of a Plan amendment as a
termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e)
any Obligor or ERISA Affiliate fails to meet any funding obligations with
respect to any Pension Plan or Multiemployer Plan, or requests a minimum funding
waiver; (f) an event or condition which constitutes grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Pension Plan or Multiemployer Plan; or (g) the imposition of any liability
under Title IV of ERISA, other than for PBGC premiums due but not delinquent
under Section 4007 of ERISA, upon any Obligor or ERISA Affiliate.
 
Event of Default: as defined in Section 11.
 
Excluded Tax: with respect to Agent, any Lender, Issuing Bank or any other
recipient of a payment to be made by or on account of any Obligation, (a) taxes
imposed on or measured by its overall net income (however denominated), and
franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction
(or any political subdivision thereof) under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable Lending Office is located; (b) any branch
profits taxes imposed by the United States or any similar tax imposed by any
other jurisdiction in which Borrower Agent is located; (c) any backup
withholding tax required by the Code to be withheld from amounts payable to a
Lender that has failed to comply with Section 5.9; (d) in the case of a Foreign
Lender, any United States withholding tax that is (i) required pursuant to laws
in force at the time such Lender becomes a Lender (or designates a new Lending
Office) hereunder, or (ii) attributable to such Lender’s failure or inability
(other than as a result of a Change in Law) to comply with Section 5.9, except
to the extent that such Foreign Lender (or its assignor, if any) was entitled,
at the time of designation of a new Lending Office (or assignment), to receive
additional amounts from Borrowers with respect to such withholding tax; and (e)
taxes imposed on it by reason of Section 1471 or 1472 of the Code.
 
 
-9-

--------------------------------------------------------------------------------

 
 
Extraordinary Expenses: all costs, expenses or advances that Agent may incur
during a Default or Event of Default, or during the pendency of an Insolvency
Proceeding of an Obligor, including those relating to (a) any audit, inspection,
repossession, storage, repair, appraisal, insurance, manufacture, preparation or
advertising for sale, sale, collection, or other preservation of or realization
upon any Collateral; (b) any action, arbitration or other proceeding (whether
instituted by or against Agent, any Lender, any Obligor, any representative of
creditors of an Obligor or any other Person) in any way relating to any
Collateral (including the validity, perfection, priority or avoidability of
Agent’s Liens with respect to any Collateral), Loan Documents, Letters of Credit
or Obligations, including any lender liability or other Claims; (c) the
exercise, protection or enforcement of any rights or remedies of Agent in, or
the monitoring of, any Insolvency Proceeding; (d) settlement or satisfaction of
any taxes, charges or Liens with respect to any Collateral; (e) any Enforcement
Action; (f) negotiation and documentation of any modification, waiver, workout,
restructuring or forbearance with respect to any Loan Documents or Obligations;
and (g) Protective Advances.  Such costs, expenses and advances include transfer
fees, Other Taxes, storage fees, insurance costs, permit fees, utility
reservation and standby fees, legal fees, appraisal fees, brokers’ fees and
commissions, auctioneers’ fees and commissions, accountants’ fees, environmental
study fees, wages and salaries paid to employees of any Obligor or independent
contractors in liquidating any Collateral, and travel expenses.
 
Federal Funds Rate: (a) the weighted average of interest rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers on the applicable Business Day (or on the preceding
Business Day, if the applicable day is not a Business Day), as published by the
Federal Reserve Bank of New York on the next Business Day; or (b) if no such
rate is published on the next Business Day, the average rate (rounded up, if
necessary, to the nearest 1/8 of 1%) charged to Bank of America on the
applicable day on such transactions, as determined by Agent.
 
Fee Letter: the fee letter agreement between Agent and Borrowers.
 
Fiscal Quarter: each period of three months during each Fiscal Year, commencing
on the first day of a Fiscal Year.
 
Fiscal Year: the fiscal year of Borrowers and Subsidiaries for accounting and
tax purposes, ending on December 31 of each year.
 
Fixed Asset Sublimit: an amount equal to $4,629,000, which amount shall decrease
by $77,150 each month.
 
Fixed Charge Coverage Ratio: the ratio, determined on a consolidated basis for
Borrowers and Subsidiaries for the most recent four Fiscal Quarters, of (a)
EBITDA minus Capital Expenditures (except those financed with Borrowed Money
other than Loans) and minus cash taxes paid, to (b) Fixed Charges, provided
that, at all times prior to the initial advance of any Loans under this
Agreement, the Fixed Charge Coverage Ratio will not include (either as a Capital
Expenditure or as a Fixed Charge) up to $10,000,000 of any Investments in,
Distributions to, or other payments that are acquisitions, advances, capital
contributions or other investments in Akorn India Private Limited, an India
corporation.
 
 
-10-

--------------------------------------------------------------------------------

 
 
Fixed Charges: the sum of interest expense (other than non-cash or other
payment-in-kind interest expense), principal payments made on Borrowed Money
(other than principal payments made on Loans under this Agreement and other than
non-cash consideration paid in connection with the conversion of Debt issued
pursuant to the Indenture), Distributions made, and Foreign Ongoing Working
Capital Investments made (provided that (a) Fixed Charges shall not include any
Acquisition of any Subsidiary or any Investments in, Distributions to, or other
payments that are acquisitions, advances, capital contributions or other
investments in any Subsidiary for the sole purpose of acquiring or establishing
such Subsidiary, (b) for purposes of clarity, amounts that are included as
Foreign Ongoing Working Capital Investments shall not include any amounts that
are included as Capital Expenditures in clause (a) of the definition of the term
“Fixed Charge Coverage Ratio”, and (c) Fixed Charges shall not include principal
or interest amounts paid by any Obligor in December 2010 to repay Debt owed by
an Obligor to The John N. Kapoor Trust dated September 20, 1989).
 
FLSA: the Fair Labor Standards Act of 1938.
 
Foreign Lender: any Lender that is organized under the laws of a jurisdiction
other than the laws of the United States, or any state or district thereof.
 
Foreign Plan: any employee benefit plan or arrangement (a) maintained or
contributed to by any Obligor or Subsidiary that is not subject to the laws of
the United States; or (b) mandated by a government other than the United States
for employees of any Obligor or Subsidiary.
 
Foreign Subsidiary: a Subsidiary that is a “controlled foreign corporation”
under Section 957 of the Code, such that a guaranty by such Subsidiary of the
Obligations or a Lien on the assets of such Subsidiary to secure the Obligations
may result in material tax liability to Borrowers.
 
Foreign Ongoing Working Capital Investment: any Permitted Foreign Investment
constituting an advance or capital contribution to or other investment in a
Foreign Subsidiary, other than an initial advance or initial capital
contribution to acquire or establish such Foreign Subsidiary.
 
Fronting Exposure: a Defaulting Lender’s Pro Rata share of LC Obligations or
Swingline Loans, as applicable, except to the extent allocated to other Lenders
under Section 4.2.
 
Full Payment: with respect to any Obligations, (a) the full and indefeasible
cash payment thereof, including any interest, fees and other charges accruing
during an Insolvency Proceeding (whether or not allowed in the proceeding); (b)
if such Obligations are LC Obligations or inchoate or contingent in nature, Cash
Collateralization thereof (or delivery of a standby letter of credit acceptable
to Agent in its discretion, in the amount of required Cash Collateral); and (c)
a release of any Claims of Obligors against Agent, Lenders and Issuing Bank
arising on or before the payment date.  No Loans shall be deemed to have been
paid in full until all Commitments related to such Loans have expired or been
terminated.
 
GAAP: generally accepted accounting principles in effect in the United States
from time to time.
 
Governmental Approvals: all authorizations, consents, approvals, licenses and
exemptions of, registrations and filings with, and required reports to, all
Governmental Authorities.
 
Governmental Authority: any federal, state, local, foreign or other  agency,
authority, body, commission, court, instrumentality, political subdivision, or
other entity or officer exercising executive, legislative, judicial, regulatory
or administrative functions for any governmental, judicial, investigative,
regulatory or self-regulatory authority.
 
Guarantor Payment: as defined in Section 5.10.3.
 
Guarantors: each Person, if any, who guarantees payment or performance of any
Obligations.
 
 
-11-

--------------------------------------------------------------------------------

 
 
Guaranty: each guaranty agreement (if any) executed by a Guarantor in favor of
Agent.
 
Hedging Agreement: an agreement relating to any swap, cap, floor, collar,
option, forward, cross right or obligation, or combination thereof or similar
transaction, with respect to interest rate, foreign exchange, currency,
commodity, credit or equity risk.
 
Indemnified Taxes: Taxes other than Excluded Taxes.
 
Indemnitees: Agent Indemnitees, Lender Indemnitees, Issuing Bank Indemnitees and
Bank of America Indemnitees.
 
Indenture: that certain Indenture dated as of June 1, 2011, by and between Akorn
and Wells Fargo Bank, National Association, as trustee, relating to 3.50%
Convertible Senior Notes due 2016.
 
Insolvency Proceeding: any case or proceeding commenced by or against a Person
under any state, federal or foreign law for, or any agreement of such Person to,
(a) the entry of an order for relief under the Bankruptcy Code, or any other
insolvency, debtor relief or debt adjustment law; (b) the appointment of a
receiver, trustee, liquidator, administrator, conservator or other custodian for
such Person or any part of its Property; or (c) an assignment or trust mortgage
for the benefit of creditors.
 
Insurance Assignment: each collateral assignment (if any) of insurance pursuant
to which an Obligor assigns to Agent, for the benefit of Secured Parties, such
Obligor’s rights under business interruption or other insurance policies as
Agent deems appropriate, as security for the Obligations.
 
Intellectual Property: all intellectual and similar Property of a Person,
including inventions, designs, patents, copyrights, trademarks, service marks,
trade names, trade secrets, confidential or proprietary information, customer
lists, know-how, software and databases; all embodiments or fixations thereof
and all related documentation, applications, registrations and franchises; all
licenses or other rights to use any of the foregoing; and all books and records
relating to the foregoing.
 
Intellectual Property Claim: any claim or assertion (whether in writing, by suit
or otherwise) that a Borrower’s or Subsidiary’s ownership, use, marketing, sale
or distribution of any Inventory, Equipment, Intellectual Property or other
Property violates another Person’s Intellectual Property.
 
Interest Period: as defined in Section 3.1.3.
 
Inventory: as defined in the UCC, including all goods intended for sale, lease,
display or demonstration; all work in process; and all Raw Materials.
 
Inventory Formula Amount: the lesser of (i) 65% of the Value of Eligible
Inventory and (ii) 85% of the NOLV Percentage of the Value of Eligible Inventory
plus the lesser of (x) 65% of the Value of Eligible Raw Materials and (y) 85% of
the NOLV Percentage of the Value of Eligible Raw Materials.
 
Inventory Reserve: reserves established by Agent in its reasonable credit
determination to reflect factors that are reasonably likely to negatively impact
the Value of Inventory, including change in salability, obsolescence,
seasonality, theft, shrinkage, imbalance, change in composition or mix,
markdowns and vendor chargebacks.
 
Investment: any acquisition of all or substantially all assets of a Person; any
acquisition of record or beneficial ownership of any Equity Interests of a
Person; or any advance or capital contribution to or other investment in a
Person.
 
IRS: the United States Internal Revenue Service.
 
 
-12-

--------------------------------------------------------------------------------

 
 
Issuing Bank: Bank of America or any Affiliate of Bank of America, or any
replacement issuer appointed pursuant to Section 2.2.4.
 
Issuing Bank Indemnitees: Issuing Bank and its officers, directors, employees,
Affiliates, agents and attorneys.
 
LC Application: an application by Borrower Agent to Issuing Bank for issuance of
a Letter of Credit, in form and substance satisfactory to Issuing Bank.
 
LC Conditions: the following conditions necessary for issuance of a Letter of
Credit: (a) each of the conditions set forth in Section 6; (b) after giving
effect to such issuance, total LC Obligations do not exceed the Letter of Credit
Subline, no Overadvance exists and, if no Loans are outstanding, the LC
Obligations do not exceed the Borrowing Base (without giving effect to the LC
Reserve for purposes of this calculation); (c) the expiration date of such
Letter of Credit is (i) no more than 365 days from issuance, in the case of
standby Letters of Credit, and (ii) no more than 120 days from issuance, in the
case of documentary Letters of Credit; (d) the Letter of Credit and payments
thereunder are denominated in Dollars; and (e) the purpose and form of the
proposed Letter of Credit is satisfactory to Agent and Issuing Bank in their
discretion.
 
LC Documents: all documents, instruments and agreements (including LC Requests
and LC Applications) delivered by Borrowers or any other Person to Issuing Bank
or Agent in connection with any Letter of Credit.
 
LC Obligations: the sum (without duplication) of (a) all amounts owing by
Borrowers for any drawings under Letters of Credit; and (b) the stated amount of
all outstanding Letters of Credit.
 
LC Request: a request for issuance of a Letter of Credit, to be provided by
Borrower Agent to Issuing Bank, in form satisfactory to Agent and Issuing Bank.
 
LC Reserve: the aggregate of all LC Obligations, other than those that have been
Cash Collateralized by Borrowers.
 
Lender Indemnitees: Lenders and their officers, directors, employees,
Affiliates, agents and attorneys.
 
Lenders: as defined in the preamble to this Agreement, including Agent in its
capacity as a provider of Swingline Loans and any other Person who hereafter
becomes a “Lender” pursuant to an Assignment and Acceptance.
 
Lending Office: the office designated as such by the applicable Lender at the
time it becomes party to this Agreement or thereafter by notice to Agent and
Borrower Agent.
 
Letter of Credit: any standby or documentary letter of credit issued by Issuing
Bank for the account of a Borrower, or any indemnity, guarantee, exposure
transmittal memorandum or similar form of credit support issued by Agent or
Issuing Bank for the benefit of a Borrower.
 
Letter of Credit Subline: $2,000,000.
 
LIBOR: for any Interest Period with respect to a LIBOR Loan, the per annum rate
of interest (rounded up, if necessary, to the nearest 1/8th of 1%), determined
by Agent at approximately 11:00 a.m. (London time) two Business Days prior to
commencement of such Interest Period, for a term comparable to such Interest
Period, equal to (a) the British Bankers Association LIBOR Rate (“BBA LIBOR”),
as published by Reuters (or other commercially available source designated by
Agent); or (b) if BBA LIBOR is not available for any reason, the interest rate
at which Dollar deposits in the approximate amount of the LIBOR Loan would be
offered by Bank of America’s London branch to major banks in the London
interbank Eurodollar market.  If the Board of Governors imposes a Reserve
Percentage with respect to LIBOR deposits, then LIBOR shall be the foregoing
rate, divided by 1 minus the Reserve Percentage.
 
 
-13-

--------------------------------------------------------------------------------

 
 
LIBOR Loan: each set of Loans that bears interest based on LIBOR having a common
length and commencement of Interest Period.
 
License: any license or agreement under which an Obligor is authorized to use
Intellectual Property in connection with any manufacture, marketing,
distribution or disposition of Collateral, any use of Property or any other
conduct of its business.
 
Licensor: any Person from whom an Obligor obtains the right to use any
Intellectual Property.
 
Lien: any Person’s interest in Property securing an obligation owed to, or a
claim by, such Person, whether such interest is based on common law, statute or
contract, including liens, security interests, pledges, hypothecations,
statutory trusts, reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Property.
 
Lien Waiver: an agreement, in form and substance satisfactory to Agent, by which
(a) for any material Collateral located on leased premises, the lessor waives or
subordinates any Lien it may have on the Collateral, and agrees to permit Agent
to enter upon the premises and remove the Collateral or to use the premises to
store or dispose of the Collateral; (b) for any Collateral held by a
warehouseman, processor, shipper, customs broker or freight forwarder, such
Person waives or subordinates any Lien it may have on the Collateral, agrees to
hold any Documents in its possession relating to the Collateral as agent for
Agent, and agrees to deliver the Collateral to Agent upon request; (c) for any
Collateral held by a repairman, mechanic or bailee, such Person acknowledges
Agent’s Lien, waives or subordinates any Lien it may have on the Collateral, and
agrees to deliver the Collateral to Agent upon request; and (d) for any
Collateral subject to a Licensor’s Intellectual Property rights, the Licensor
grants to Agent the right, vis-à-vis such Licensor, to enforce Agent’s Liens
with respect to the Collateral, including the right to dispose of it with the
benefit of the Intellectual Property, whether or not a default exists under any
applicable License.
 
Loan: a loan made pursuant to Section 2.1, and any Swingline Loan, Overadvance
Loan or Protective Advance.
 
Loan Account: the loan account established by each Lender on its books pursuant
to Section 5.7.
 
Loan Documents: this Agreement, Other Agreements and Security Documents.
 
Loan Year: each 12 month period commencing on the Closing Date and on each
anniversary of the Closing Date.
 
Margin Stock: as defined in Regulation U of the Board of Governors.
 
Material Adverse Effect: the effect of any event or circumstance that, taken
alone or in conjunction with other events or circumstances, (a) has or could be
reasonably expected to have a material adverse effect on the business,
operations, assets, Properties, liabilities, prospects or condition (financial
or otherwise) of any Obligor, on the value of any material Collateral, on the
enforceability of any Loan Documents, or on the validity or priority of Agent’s
Liens on any Collateral; (b) impairs the ability of an Obligor to perform its
obligations under the Loan Documents, including repayment of any Obligations; or
(c) otherwise impairs the ability of Agent or any Lender to enforce or collect
any Obligations or to realize upon any Collateral.
 
 
-14-

--------------------------------------------------------------------------------

 
 
Material Contract: any agreement or arrangement to which a Borrower or
Subsidiary is party (other than the Loan Documents) (a) that is deemed to be a
material contract under any securities law applicable to such Obligor, including
the Securities Act of 1933; (b) for which breach, termination, nonperformance or
failure to renew could reasonably be expected to have a Material Adverse Effect;
or (c) that relates to Subordinated Debt, or Debt in an aggregate amount of
$500,000 or more.
 
Moody’s: Moody’s Investors Service, Inc., and its successors.
 
Multiemployer Plan: any employee benefit plan of the type described in Section
4001(a)(3) of ERISA, to which any Obligor or ERISA Affiliate makes or is
obligated to make contributions, or during the preceding five plan years, has
made or been obligated to make contributions.
 
Net Proceeds: with respect to an Asset Disposition, proceeds (including, when
received, any deferred or escrowed payments) received by a Borrower or
Subsidiary in cash from such disposition, net of (a) reasonable and customary
costs and expenses actually incurred in connection therewith, including legal
fees and sales commissions; (b) amounts applied to repayment of Debt secured by
a Permitted Lien senior to Agent’s Liens on Collateral sold; (c) transfer or
similar taxes; and (d) reserves for indemnities, until such reserves are no
longer needed.
 
NOLV Percentage: the net orderly liquidation value of Inventory, expressed as a
percentage, expected to be realized at an orderly, negotiated sale held within a
reasonable period of time, net of all liquidation expenses, as determined from
the most recent appraisal of Borrowers’ Inventory performed by an appraiser and
on terms satisfactory to Agent.  The initial NOLV Percentage as of the Closing
Date is (i) 145.4% for Inventory consisting of finished goods, (ii) 50.3% for
Inventory consisting of raw material chemicals, and (iii) 37.7% for Inventory
consisting of raw material components.
 
Notes: each promissory note executed by Borrowers in favor of a Lender in the
form of Exhibit A, in the amount of such Lender’s Commitment or other promissory
note executed by a Borrower to evidence any Obligations.
 
Notice of Borrowing: a Notice of Borrowing to be provided by Borrower Agent to
request a Borrowing of Loans, in form satisfactory to Agent.
 
Notice of Conversion/Continuation: a Notice of Conversion/Continuation to be
provided by Borrower Agent to request a conversion or continuation of any Loans
as LIBOR Loans, in form satisfactory to Agent.
 
Noticed Hedge: Secured Bank Product Obligations arising under a Hedging
Agreement.
 
Obligations: all (a) principal of and premium, if any, on the Loans, (b) LC
Obligations and other obligations of Obligors with respect to Letters of Credit,
(c) interest, expenses, fees, indemnification obligations, Extraordinary
Expenses and other amounts payable by Obligors under Loan Documents, (d) Secured
Bank Product Obligations, and (e) other Debts, obligations and liabilities of
any kind owing by Obligors pursuant to the Loan Documents, whether now existing
or hereafter arising, whether evidenced by a note or other writing, whether
allowed in any Insolvency Proceeding, whether arising from an extension of
credit, issuance of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, and whether direct or indirect, absolute or
contingent, due or to become due, primary or secondary, or joint or several.
 
Obligor: each Borrower, Guarantor, or other Person that is liable for payment of
any Obligations or that has granted a Lien in favor of Agent on its assets to
secure any Obligations.
 
 
-15-

--------------------------------------------------------------------------------

 
 
Ordinary Course of Business: the ordinary course of business of any Borrower or
Subsidiary, consistent with past practices and undertaken in good faith.
 
Organic Documents: with respect to any Person, its charter, certificate or
articles of incorporation, bylaws, articles of organization, limited liability
agreement, operating agreement, members agreement, shareholders agreement,
partnership agreement, certificate of partnership, certificate of formation,
voting trust agreement, or similar agreement or instrument governing the
formation or operation of such Person.
 
OSHA: the Occupational Safety and Hazard Act of 1970.
 
Other Agreement: each Note; LC Document; Fee Letter; Lien Waiver; Borrowing Base
Certificate, Compliance Certificate, financial statement or report delivered
hereunder; or other document, instrument or agreement (other than this Agreement
or a Security Document) now or hereafter delivered by an Obligor or other Person
to Agent or a Lender in connection with any transactions relating hereto.
 
Other Taxes: all present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising from any payment
made under any Loan Document or from the execution, delivery or enforcement of,
or otherwise with respect to, any Loan Document.
 
Overadvance: as defined in Section 2.1.5.
 
Overadvance Loan: a Base Rate Loan made when an Overadvance exists or is caused
by the funding thereof.
 
Participant: as defined in Section 13.2.
 
Patent Assignment: a patent collateral assignment agreement in which an Obligor
assigns its interest in patents to Agent, for the benefit of Secured Parties, as
security for the Obligations.
 
Patriot Act: the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No.
107-56, 115 Stat. 272 (2001).
 
Payment Item: each check, draft or other item of payment payable to a Borrower,
including those constituting proceeds of any Collateral.
 
PBGC: the Pension Benefit Guaranty Corporation.
 
Pension Plan: any employee pension benefit plan (as such term is defined in
Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to
Title IV of ERISA and is sponsored or maintained by any Obligor or ERISA
Affiliate or to which the Obligor or ERISA Affiliate contributes or has an
obligation to contribute, or in the case of a multiple employer or other plan
described in Section 4064(a) of ERISA, has made contributions at any time during
the preceding five plan years.
 
Permitted Acquisitions:  each Acquisition with respect to which:
 
(a)           the Obligors and their Subsidiaries and any such newly created or
acquired Subsidiary shall comply with the requirements of Section 7.4.2;
 
(b)           the lines of business of the Person to be (or the property and
assets of which are to be) so purchased or otherwise acquired shall be similar,
related, ancillary or complementary businesses to the principal businesses of
Akorn and its Subsidiaries;
 
 
-16-

--------------------------------------------------------------------------------

 
 
(c)           such Acquisition shall be approved by the board of directors of
the Person (or similar governing body if such Person is not a corporation) which
is the subject of such Acquisition or such Person does not otherwise oppose such
Acquisition;
 
(d)           such Acquisition constitutes a Permitted Transaction;
 
(e)           the Borrower Agent shall have delivered to Agent at least five (5)
Business Days prior to the date on which any such Acquisition is to be
consummated, a certificate of a Senior Officer, in form and substance reasonably
satisfactory to Agent, (i) certifying that all of the requirements set forth
above will be satisfied on or prior to the consummation of such purchase or
other Acquisition and (ii) a reasonably detailed calculation evidencing
compliance with item (d)  above (and such certificate shall be updated as
necessary to make it accurate as of the date the purchase or other Acquisition
is consummated); and
 
(f)           none of the Accounts or Inventory so purchased or otherwise
acquired shall be included in the calculation of the Borrowing Base until Agent
has conducted field exams and appraisals reasonably required by it with results
reasonably satisfactory to Agent and the Person owning such Accounts or
Inventory shall be a (directly or indirectly) wholly-owned Subsidiary of Akorn
and have become a Borrower;
 
provided, however, that, notwithstanding clauses (a) through (f) above, any
Acquisition shall constitute a “Permitted Acquisition” hereunder if at the time
of such Acquisition, (i) there are no Loans or other Obligations outstanding
under this Agreement and (ii) Borrowers have at least $5,000,000 in cash or Cash
Equivalents (both before and after giving effect to such Acquisition) in deposit
accounts or security accounts over which Agent has a perfected security interest
in such accounts and the deposits therein through control under the UCC.
 
Permitted Asset Disposition: as long as no Default or Event of Default exists
and all Net Proceeds are remitted to Agent (to the extent required by this
Agreement), an Asset Disposition that is (a) a sale of Inventory in the Ordinary
Course of Business; (b) a disposition of Equipment that, in the aggregate during
any 12 month period, has a fair market or book value (whichever is more) of
$500,000 or less; (c) a disposition of Inventory that is obsolete,
unmerchantable or otherwise unsalable in the Ordinary Course of Business; (d)
termination of a lease of real or personal Property that is not necessary for
the Ordinary Course of Business, could not reasonably be expected to have a
Material Adverse Effect and does not result from an Obligor’s default; or (e)
approved in writing by Agent and Required Lenders.
 
Permitted Contingent Obligations: Contingent Obligations (a) arising from
endorsements of Payment Items for collection or deposit in the Ordinary Course
of Business; (b) arising from Hedging Agreements permitted hereunder; (c)
existing on the Closing Date, and any extension or renewal thereof that does not
increase the amount of such Contingent Obligation when extended or renewed; (d)
incurred in the Ordinary Course of Business with respect to surety, appeal or
performance bonds, or other similar obligations; (e) arising from customary
indemnification obligations in favor of purchasers in connection with
dispositions of Equipment permitted hereunder; (f) arising under the Loan
Documents; or (g) in an aggregate amount of $250,000 or less at any time.
 
Permitted Foreign Investment: each Investment in a Foreign Subsidiary with
respect to which:
 
(a)           the Obligors and their Subsidiaries and any newly created or
acquired Foreign Subsidiary shall comply with the requirements of Section 7.7;
 
(b)           the lines of business of the Foreign Subsidiary to be the subject
of such Investment shall be similar, related, ancillary or complementary
businesses to the principal business of Akorn and its Subsidiaries;
 
 
-17-

--------------------------------------------------------------------------------

 
 
(c)           such Investment shall be approved by the Board of Directors (or
similar governing body) of the Person which is the subject of such Investment or
such Person does not otherwise oppose such Investment;
 
(d)           if, at the time of such Investment, the aggregate amount of
Investments made in a Foreign Subsidiary by any Borrower or Subsidiary during
the preceding twelve (12) month period (but excluding any period prior to the
Closing Date and without giving effect to such contemplated Investment) is less
than $10,000,000, (i) no Event of Default then exists and is continuing or would
arise immediately as a result thereof, (ii) the Fixed Charge Coverage Ratio
(measured as of the last day of the month ended immediately prior to the month
during which the Investment occurs, both before and after giving effect to such
Investment on a pro forma basis) shall not be less than 1.1 to 1.0, and (iii)
Availability under this Agreement shall be an amount that is at least the
greater of (i) $7,500,000 or (ii) 37.5% of the Commitments hereunder at such
time;
 
(e)           if, at the time of such Investment, the aggregate amount of
Investments made in a Foreign Subsidiary by any Borrower or Subsidiary during
the preceding twelve (12) month period (but excluding any period prior to the
Closing Date and without giving effect to such contemplated Investment) is
$10,000,000 or more but less than $20,000,000, (i) no Event of Default then
exists and is continuing or would arise immediately as a result thereof, (ii)
the Fixed Charge Coverage Ratio (measured as of the last day of the month ended
immediately prior to the month during which the Investment occurs, both before
and after giving effect to such Investment on a pro forma basis) is not less
than 2.5 to 1.0, and (iii) Availability under this Agreement is at least equal
to the greater of (i) $7,500,000 or (ii) 37.5% of the Commitments hereunder at
such time; and
 
(f)           the Borrower Agent shall have delivered to Agent at least five (5)
Business Days prior to the date on which any such Investment is to be made, a
certificate of a Senior Officer, in form and substance reasonably satisfactory
to Agent, (i) certifying that all of the requirements set forth above will be
satisfied on or prior to the date of such Investment and (ii) a reasonably
detailed calculation evidencing compliance with either item (d) or item (e)
above, as may be applicable (and such certificate shall be updated as necessary
to make it accurate as of the date the Investment is made);
 
provided, however, that notwithstanding clauses (a) – (f) above, any Investment
in a Foreign Subsidiary shall constitute a “Permitted Foreign Investment”
hereunder if at the time of such Investment (i) there are no Loans or other
Obligations outstanding under this Agreement and (ii) Borrowers have at least
$10,000,000 in cash or Cash Equivalents (both before and after giving effect to
such Investment) in deposit accounts over which Agent has a perfected security
interest in such accounts and the deposits therein through control under the
UCC.
 
Permitted Lien: as defined in Section 10.2.2.
 
Permitted Purchase Money Debt: Purchase Money Debt of Borrowers and Subsidiaries
that is unsecured or secured only by a Purchase Money Lien, as long as the
aggregate amount does not exceed $250,000 at any time.
 
Permitted Reorganization:  (a) The merger, consolidation or amalgamation of AVR
and/or AVP into one another, (b) the merger of the AVR BT into AVR, and/or (c)
the reincorporation of Akorn in the State of Delaware, so long as (i) AVR or AVP
is the successor entity in the merger, consolidation or amalgamation
contemplated by (a) above, (ii) Akorn continues to own and control, beneficially
and of record, directly or indirectly, all Equity Interests in all Borrowers in
existence upon consummation of the transactions contemplated by (a) and (b)
above and (iii) Akorn gives Agent no less than thirty (30) days prior written
notice of any transaction described above.
 
 
-18-

--------------------------------------------------------------------------------

 
 
Permitted Transactions: an Acquisition or a Distribution if, at the time of such
Acquisition or Distribution, the Borrower Agent has delivered not less than five
(5) Business Days prior thereto a certificate demonstrating (a) no Event of
Default then exists and is continuing or would arise immediately as a result
thereof, (b) the Fixed Charge Coverage Ratio (measured as of the last day of the
month ended immediately prior to the month during which the Acquisition or
Distribution occurs, both before and after giving effect to such Acquisition or
Distribution on a pro forma basis) is greater than 1.1 to 1.0, and (c)
Availability under this Agreement (which Availability shall include an amount
attributable to Suppressed Availability of no more than the greater of (i)
$2,500,000 or (ii) 12.5% of Commitments hereunder at such time), after giving
effect to such Acquisition or Distribution, is at least equal to the greater of
(i) $7,500,000 or (ii) 37.5% of the Commitments hereunder at such time.
 
Person: any individual, corporation, limited liability company, partnership,
joint venture, joint stock company, land trust, business trust, unincorporated
organization, Governmental Authority or other entity.
 
Plan: any employee benefit plan (as such term is defined in Section 3(3) of
ERISA) established by an Obligor or, with respect to any such plan that is
subject to Section 412 of the Code or Title IV of ERISA, an ERISA Affiliate.
 
Prime Rate: the rate of interest announced by Bank of America from time to time
as its prime rate.  Such rate is set by Bank of America on the basis of various
factors, including its costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans, which
may be priced at, above or below such rate.  Any change in such rate announced
by Bank of America shall take effect at the opening of business on the day
specified in the public announcement of such change.
 
Pro Rata: with respect to any Lender, a percentage (rounded to the ninth decimal
place) determined (a) while Commitments are outstanding, by dividing the amount
of such Lender’s Commitment by the aggregate amount of all Commitments
outstanding at such time; and (b) at any other time, by dividing the amount of
such Lender’s Loans and LC Obligations by the aggregate amount of all
outstanding Loans and LC Obligations.
 
Properly Contested: with respect to any obligation of an Obligor, (a) the
obligation is subject to a bona fide dispute regarding amount or the Obligor’s
liability to pay; (b) the obligation is being properly contested in good faith
by appropriate proceedings promptly instituted and diligently pursued; (c)
appropriate reserves have been established in accordance with GAAP; (d)
non-payment would not have a Material Adverse Effect, nor result in forfeiture
or sale of any assets of the Obligor; (e) no Lien is imposed on assets of the
Obligor, unless bonded and stayed to the satisfaction of Agent; and (f) if the
obligation results from entry of a judgment or other order, such judgment or
order is stayed pending appeal or other judicial review.
 
Property: any interest in any kind of property or asset, whether real, personal
or mixed, or tangible or intangible.
 
Protective Advances: as defined in Section 2.1.6.
 
Purchase Money Debt: (a) Debt (other than the Obligations) for payment of any of
the purchase price of fixed assets; (b) Debt (other than the Obligations)
incurred within 10 days before or after acquisition of any fixed assets, for the
purpose of financing any of the purchase price thereof; and (c) any renewals,
extensions or refinancings (but not increases) thereof.
 
 
-19-

--------------------------------------------------------------------------------

 
 
Purchase Money Lien: a Lien that secures Purchase Money Debt, encumbering only
the fixed assets acquired with such Debt and constituting a Capital Lease or a
purchase money security interest under the UCC.
 
Raw Materials: all materials and supplies of any kind that are or could be used
in connection with the manufacture, printing, packing, shipping, advertising,
sale, lease or furnishing of such goods, or otherwise used or consumed in a
Borrower’s business (but excluding Equipment).
 
RCRA: the Resource Conservation and Recovery Act (42 U.S.C. §§ 6991-6991i).
 
Real Estate: all right, title and interest (whether as owner, lessor or lessee)
in any real Property or any buildings, structures, parking areas or other
improvements thereon.
 
Refinancing Conditions: the following conditions for Refinancing Debt:  (a) it
is in an aggregate principal amount that does not exceed the principal amount of
the Debt being extended, renewed or refinanced; (b) it has a final maturity no
sooner than, a weighted average life no less than, and an interest rate no
greater than, the Debt being extended, renewed or refinanced; (c) it is
subordinated to the Obligations at least to the same extent as the Debt being
extended, renewed or refinanced; (d) the representations, covenants and defaults
applicable to it are no less favorable to Borrowers than those applicable to the
Debt being extended, renewed or refinanced; (e) no additional Lien is granted to
secure it; (f) no additional Person is obligated on such Debt; and (g) upon
giving effect to it, no Default or Event of Default exists.
 
Refinancing Debt: Borrowed Money that is the result of an extension, renewal or
refinancing of Debt permitted under Section 10.2.1(b) or (d).
 
Reimbursement Date: as defined in Section 2.2.2.
 
Rent and Charges Reserve: the aggregate of (a) all past due rent and other
amounts owing by an Obligor to any landlord, warehouseman, processor, repairman,
mechanic, shipper, freight forwarder, broker or other Person who possesses any
Collateral or could assert a Lien on any Collateral; and (b) a reserve at least
equal to three months rent and other charges that could be payable to any such
Person, unless it has executed a Lien Waiver.
 
Report: as defined in Section 12.2.3.
 
Reportable Event: any of the events set forth in Section 4043(c) of ERISA, other
than events for which the 30 day notice period has been waived.
 
Required Lenders: Lenders (subject to Section 4.2) from time to time having (a)
Commitments in excess of 50% of the then aggregate Commitments; and (b) if the
Commitments have terminated, Loans in excess of 50% of all outstanding Loans;
provided, however, that the Commitments and Loans of any Defaulting Lender shall
be excluded from such calculation.
 
Reserve Percentage: the reserve percentage (expressed as a decimal, rounded up
to the nearest 1/8th of 1%) applicable to member banks under regulations issued
by the Board of Governors for determining the maximum reserve requirement for
Eurocurrency liabilities.
 
Restricted Investment: any Investment by a Borrower or Subsidiary, other than
(a) Investments in Subsidiaries to the extent existing on the Closing Date; (b)
Investments of the proceeds of Borrowed Money under the Indenture in accordance
with Borrowers’ investment guidelines that are, to the extent required under
Section 7.6 hereunder, subject to Agent’s control pursuant to documentation in
form and substance satisfactory to Agent; (c) Cash Equivalents that are subject
to Agent’s Lien and control, pursuant to documentation in form and substance
satisfactory to Agent; and (d) loans and advances permitted under Section
10.2.6.
 
 
-20-

--------------------------------------------------------------------------------

 
 
Restrictive Agreement: an agreement (other than a Loan Document) that conditions
or restricts the right of any Borrower, Subsidiary or other Obligor to incur or
repay Borrowed Money, to grant Liens on any assets, to declare or make
Distributions, to modify, extend or renew any agreement evidencing Borrowed
Money, or to repay any intercompany Debt.
 
Revolver Termination Date: March 1, 2016.
 
Royalties: all royalties, fees, expense reimbursement and other amounts payable
by a Borrower under a License.
 
S&P: Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., and its successors.
 
Secured Bank Product Obligations: Bank Product Debt owing to a Secured Bank
Product Provider, up to the maximum amount (in the case of any Secured Bank
Product Provider other than Bank of America and its Affiliates) specified by
such provider in writing to Agent, which amount may be established or increased
(by further written notice to Agent from time to time) as long as no Default or
Event of Default exists and no Overadvance would result from establishment of a
Bank Product Reserve for such amount and all other Secured Bank Product
Obligations.
 
Secured Bank Product Provider: (a) Bank of America or any of its Affiliates; and
(b) any other Lender or Affiliate of a Lender that is providing a Bank Product,
provided such provider delivers written notice to Agent, in form and substance
satisfactory to Agent, by the later of the Closing Date or 10 days following
creation of the Bank Product, (i) describing the Bank Product and setting forth
the maximum amount to be secured by the Collateral and the methodology to be
used in calculating such amount, and (ii) agreeing to be bound by Section 12.13.
 
Secured Parties: Agent, Issuing Bank, Lenders and Secured Bank Product
Providers.
 
Security Documents: the Guaranties, Patent Assignments, Trademark Security
Agreements, Insurance Assignments (if any), Deposit Account Control
Agreements, and all other documents, instruments and agreements now or hereafter
securing (or given with the intent to secure) any Obligations.
 
Senior Officer: the president, chief executive officer, chief financial officer
or vice president of finance of a Borrower or, if the context requires, an
Obligor.
 
Settlement Report: a report summarizing Loans and participations in LC
Obligations outstanding as of a given settlement date, allocated to Lenders on a
Pro Rata basis in accordance with their Commitments.
 
Solvent: as to any Person, such Person (a) owns Property whose fair salable
value is greater than the amount required to pay all of its debts (including
contingent, subordinated, unmatured and unliquidated liabilities); (b) owns
Property whose present fair salable value (as defined below) is greater than the
probable total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of such Person as they become absolute and matured;
(c) is able to pay all of its debts as they mature; (d) has capital that is not
unreasonably small for its business and is sufficient to carry on its business
and transactions and all business and transactions in which it is about to
engage; (e) is not “insolvent” within the meaning of Section 101(32) of the
Bankruptcy Code; and (f) has not incurred (by way of assumption or otherwise)
any obligations or liabilities (contingent or otherwise) under any Loan
Documents, or made any conveyance in connection therewith, with actual intent to
hinder, delay or defraud either present or future creditors of such Person or
any of its Affiliates.  “Fair salable value” means the amount that could be
obtained for assets within a reasonable time, either through collection or
through sale under ordinary selling conditions by a capable and diligent seller
to an interested buyer who is willing (but under no compulsion) to purchase.
 
 
-21-

--------------------------------------------------------------------------------

 
 
Subordinated Debt: Debt incurred by a Borrower that is expressly subordinate and
junior in right of payment to Full Payment of all Obligations, and is on terms
(including maturity, interest, fees, repayment, covenants and subordination)
satisfactory to Agent.
 
Subsidiary: any entity more than 50% of whose voting securities or Equity
Interests is owned by a Borrower or any combination of Borrowers (including
indirect ownership by a Borrower through other entities in which the Borrower
directly or indirectly owns more than 50% of the voting securities or Equity
Interests).
 
Suppressed Availability: on any date of determination, an amount equal to the
difference between (a) the sum of the Accounts Formula Amount, plus the
Inventory Formula Amount, plus the Fixed Asset Sublimit as of such date of
determination, minus the Availability Reserve, and (b) the Commitments hereunder
(provided that such difference is not less than zero for purposes of this
calculation).
 
Swingline Loan: any Borrowing of Base Rate Loans funded with Agent’s funds,
until such Borrowing is settled among Lenders or repaid by Borrowers.
 
Taxes: all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Authority, including any interest, additions to tax
or penalties applicable thereto.
 
Trademark Security Agreement: a trademark security agreement in which an Obligor
grants a Lien on its interests in trademarks to Agent, for the benefit of
Secured Parties, as security for the Obligations.
 
Transferee: any actual or potential Eligible Assignee, Participant or other
Person acquiring an interest in any Obligations.
 
Trigger Period: (a) with respect to the Borrowers’ obligation to comply with
Section 10.3, the period (i) commencing on the day that an Event of Default
occurs, or Availability is less than 15% of the Commitments hereunder at any
time, and (ii) continuing until no Event of Default has existed and Availability
has been greater than 17.5% of the Commitments hereunder on each day during the
preceding 60 consecutive days, and (b) with respect to the Borrowers’ obligation
to comply with all other Sections of this Agreement, the period (i) commencing
on the day that an Event of Default occurs, or Availability is less than 20% of
the Commitments hereunder at any time and (ii) continuing until no Event of
Default has existed and Availability has been greater than 22.5% of the
Commitments hereunder during the preceding 60 consecutive days, provided that,
in any event, Borrowers may not exit a Trigger Period more than two (2) times in
any calendar year with respect to clause (a) or more than two (2) times in any
calendar year with respect to clause (b).
 
Type: any type of a Loan (i.e., Base Rate Loan or LIBOR Loan) that has the same
interest option and, in the case of LIBOR Loans, the same Interest Period.
 
UCC: the Uniform Commercial Code as in effect in the State of Illinois or, when
the laws of any other jurisdiction govern the perfection or enforcement of any
Lien, the Uniform Commercial Code of such jurisdiction.
 
 
-22-

--------------------------------------------------------------------------------

 
 
Unfunded Pension Liability: the excess of a Pension Plan’s benefit liabilities
under Section 4001(a)(16) of ERISA, over the current value of that Pension
Plan’s assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
 
Unused Line Fee Rate: a per annum rate equal to 0.250%.
 
Upstream Payment: a Distribution by a Subsidiary of a Borrower to such Borrower.
 
Value: (a) for Inventory, its value determined on the basis of the lower of cost
or market, calculated on a first-in, first-out basis, and excluding any portion
of cost attributable to intercompany profit among Borrowers and their
Affiliates; and (b) for an Account, its face amount, net of any returns,
rebates, discounts (calculated on the shortest terms), credits, allowances or
Taxes (including sales, excise or other taxes) that have been or could be
claimed by the Account Debtor or any other Person.
 
1.2.           Accounting Terms.  Under the Loan Documents (except as otherwise
specified herein), all accounting terms shall be interpreted, all accounting
determinations shall be made, and all financial statements shall be prepared, in
accordance with GAAP applied on a basis consistent with the most recent audited
financial statements of Borrowers delivered to Agent before the Closing Date and
using the same inventory valuation method as used in such financial statements,
except for any change required or permitted by GAAP if Borrowers’ certified
public accountants concur in such change, the change is disclosed to Agent, and
Section 10.3 is amended in a manner satisfactory to Required Lenders to take
into account the effects of the change.
 
1.3.           Uniform Commercial Code.  As used herein, the following terms are
defined in accordance with the UCC in effect in the State of Illinois from time
to time:  “Chattel Paper,” “Commercial Tort Claim,” “Deposit Account,”
“Document,” “Equipment,” “General Intangibles,” “Goods,” “Instrument,”
“Investment Property,” “Letter-of-Credit Right” and “Supporting Obligation.”
 
1.4.           Certain Matters of Construction.  The terms “herein,” “hereof,”
“hereunder” and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision.  Any pronoun used
shall be deemed to cover all genders.  In the computation of periods of time
from a specified date to a later specified date, “from” means “from and
including,” and “to” and “until” each mean “to but excluding.”  The terms
“including” and “include” shall mean “including, without limitation” and, for
purposes of each Loan Document, the parties agree that the rule of ejusdem
generis shall not be applicable to limit any provision.  Section titles appear
as a matter of convenience only and shall not affect the interpretation of any
Loan Document.  All references to (a) laws or statutes include all related
rules, regulations, interpretations, amendments and successor provisions; (b)
any document, instrument or agreement include any amendments, waivers and other
modifications, extensions or renewals (to the extent permitted by the Loan
Documents); (c) any section mean, unless the context otherwise requires, a
section of this Agreement; (d) any exhibits or schedules mean, unless the
context otherwise requires, exhibits and schedules attached hereto, which are
hereby incorporated by reference; (e) any Person include successors and assigns;
(f) time of day mean time of day at Agent’s notice address under Section 14.3.1;
or (g) discretion of Agent, Issuing Bank or any Lender mean the sole and
absolute discretion of such Person.  All calculations of Value, fundings of
Loans, issuances of Letters of Credit and payments of Obligations shall be in
Dollars and, unless the context otherwise requires, all determinations
(including calculations of Borrowing Base and financial covenants) made from
time to time under the Loan Documents shall be made in light of the
circumstances existing at such time.  Borrowing Base calculations shall be
consistent with historical methods of valuation and calculation, and otherwise
satisfactory to Agent (and not necessarily calculated in accordance with
GAAP).  Borrowers shall have the burden of establishing any alleged negligence,
misconduct or lack of good faith by Agent, Issuing Bank or any Lender under any
Loan Documents.  No provision of any Loan Documents shall be construed against
any party by reason of such party having, or being deemed to have, drafted the
provision.  Whenever the phrase “to the best of Borrowers’ knowledge” or words
of similar import are used in any Loan Documents, it means actual knowledge of a
Senior Officer, or knowledge that a Senior Officer would have obtained if he or
she had engaged in good faith and diligent performance of his or her duties,
including reasonably specific inquiries of employees or agents and a good faith
attempt to ascertain the matter to which such phrase relates.
 
 
-23-

--------------------------------------------------------------------------------

 
 
SECTION 2.           CREDIT FACILITIES
 
2.1.           Commitment.
 
2.1.1.           Loans.  Each Lender agrees, severally on a Pro Rata basis up to
its Commitment, on the terms set forth herein, to make Loans to Borrowers from
time to time through the Commitment Termination Date.  The Loans may be repaid
and reborrowed as provided herein.  In no event shall Lenders have any
obligation to honor a request for a Loan if the unpaid balance of Loans
outstanding at such time (including the requested Loan) would exceed the
Borrowing Base.
 
2.1.2.           Notes.  The Loans made by each Lender and interest accruing
thereon shall be evidenced by the records of Agent and such Lender.  At the
request of any Lender, Borrowers shall deliver a Note to such Lender.
 
2.1.3.           Use of Proceeds.  The proceeds of Loans shall be used by
Borrowers solely (a) to satisfy existing Debt; (b) to pay fees and transaction
expenses associated with the closing of this credit facility; (c) to pay
Obligations in accordance with this Agreement; (d) to issue standby or
commercial letters of credit; (e) to make Permitted Acquisitions, and (e) for
working capital and other lawful corporate purposes of Borrowers, provided that
the proceeds of Loans hereunder shall not be used by Borrowers to redeem or
repurchase notes under or relating to the Indenture or otherwise to discharge
obligations under the Indenture.
 
2.1.4.           Termination of Commitments.  The Commitments shall terminate on
the Revolver Termination Date, unless sooner terminated in accordance with this
Agreement.  Upon at least 90 days prior written notice to Agent at any time
after the first Loan Year, Borrowers may, at their option, terminate the
Commitments and this credit facility.  Any notice of termination given by
Borrowers shall be irrevocable.  On the termination date, Borrowers shall make
Full Payment of all Obligations.
 
2.1.5.           Overadvances.  If the aggregate Loans exceed the Borrowing Base
(“Overadvance”) at any time, the excess amount shall be payable by Borrowers on
demand by Agent, but all such Loans shall nevertheless constitute Obligations
secured by the Collateral and entitled to all benefits of the Loan
Documents.  Agent may require Lenders to honor requests for Overadvance Loans
and to forbear from requiring Borrowers to cure an Overadvance, (a) when no
other Event of Default is known to Agent, as long as (i) the Overadvance does
not continue for more than 30 consecutive days (and no Overadvance may exist for
at least five consecutive days thereafter before further Overadvance Loans are
required), and (ii) the Overadvance is not known by Agent to exceed 5% of the
Borrowing Base; and (b) regardless of whether an Event of Default exists, if
Agent discovers an Overadvance not previously known by it to exist, as long as
from the date of such discovery the Overadvance (i) is not increased by more
than $250,000, and (ii) does not continue for more than 30 consecutive days.  In
no event shall Overadvance Loans be required that would cause the outstanding
Loans and LC Obligations to exceed the aggregate Commitments.  Any funding of an
Overadvance Loan or sufferance of an Overadvance shall not constitute a waiver
by Agent or Lenders of the Event of Default caused thereby.  In no event shall
any Borrower or other Obligor be deemed a beneficiary of this Section nor
authorized to enforce any of its terms.
 
 
-24-

--------------------------------------------------------------------------------

 
 
2.1.6.           Protective Advances.  Agent shall be authorized, in its
discretion, at any time that any conditions in Section 6 are not satisfied, and
without regard to the aggregate Commitments, to make Base Rate Loans
(“Protective Advances”) (a) up to an aggregate amount of $1,000,000 outstanding
at any time, if Agent deems such Loans necessary or desirable to preserve or
protect Collateral, or to enhance the collectibility or repayment of
Obligations; or (b) to pay any other amounts chargeable to Obligors under any
Loan Documents, including costs, fees and expenses.  Each Lender shall
participate in each Protective Advance on a Pro Rata basis.  Required Lenders
may at any time revoke Agent’s authority to make further Protective Advances
under clause (a) by written notice to Agent.  Absent such revocation, Agent’s
determination that funding of a Protective Advance is appropriate shall be
conclusive.
 
2.1.7.           Increase in Commitments. Borrowers may request an increase in
Commitments from time to time upon notice to Agent, as long as (a) the requested
increase is in a minimum amount of $5,000,000 and is offered on the same terms
as existing Commitments, except for a closing fee agreed to by Borrowers for the
requested increase, (b) increases under this Section do not exceed $15,000,000
in the aggregate and no more than three (3) increases are made, and (c) no
Default or Event of Default has occurred and is continuing or would result from
the requested increase.  Agent shall promptly notify Lenders of the requested
increase and, within 10 Business Days thereafter, each Lender shall notify Agent
if and to what extent such Lender commits to increase its Commitment.  Any
Lender not responding within such period shall be deemed to have declined an
increase.  If Lenders fail to commit to the full requested increase, Eligible
Assignees may issue additional Commitments and become Lenders hereunder.  Agent
may allocate, in its discretion, the increased Commitments among committing
Lenders and, if necessary, Eligible Assignees.  Provided the conditions set
forth in Section 6.2 are satisfied, total Commitments shall be increased by the
requested amount (or such lesser amount committed by Lenders and Eligible
Assignees) on a date agreed upon by Agent and Borrower Agent, but no later than
45 days following Borrowers’ increase request.  Agent, Borrowers, and new and
existing Lenders shall execute and deliver such documents and agreements as
Agent deems appropriate to evidence the increase in and allocations of
Commitments.  On the effective date of an increase, all outstanding Loans, LC
Obligations and other exposures under the Commitments shall be reallocated among
Lenders, and settled by Agent if necessary, in accordance with Lenders’ adjusted
shares of such Commitments.
 
2.2.           Letter of Credit Facility.
 
2.2.1.           Issuance of Letters of Credit.  Issuing Bank shall issue
Letters of Credit from time to time until 30 days prior to the Revolver
Termination Date (or until the Commitment Termination Date, if earlier), on the
terms set forth herein, including the following:
 
(a)           Each Borrower acknowledges that Issuing Bank’s issuance of any
Letter of Credit is conditioned upon Issuing Bank’s receipt of a LC Application
with respect to the requested Letter of Credit, as well as such other
instruments and agreements as Issuing Bank may customarily require for issuance
of a letter of credit of similar type and amount.  Issuing Bank shall have no
obligation to issue any Letter of Credit unless (i) Issuing Bank receives a LC
Request and LC Application at least three Business Days prior to the requested
date of issuance; (ii) each LC Condition is satisfied; and (iii) if a Defaulting
Lender exists, such Lender or Borrowers have entered into arrangements
satisfactory to Agent and Issuing Bank to eliminate any Fronting Exposure
associated with such Lender.  If, in sufficient time to act, Issuing Bank
receives written notice from Required Lenders that a LC Condition has not been
satisfied, Issuing Bank shall not issue the requested Letter of Credit.  Prior
to receipt of any such notice, Issuing Bank shall not be deemed to have
knowledge of any failure of LC Conditions.
 
 
-25-

--------------------------------------------------------------------------------

 
 
(b)           Letters of Credit may be requested by a Borrower to support
obligations incurred in the Ordinary Course of Business, or as otherwise
approved by Agent.  The renewal or extension of any Letter of Credit shall be
treated as the issuance of a new Letter of Credit, except that delivery of a new
LC Application shall be required at the discretion of Issuing Bank.
 
(c)           Borrowers assume all risks of the acts, omissions or misuses of
any Letter of Credit by the beneficiary.  In connection with issuance of any
Letter of Credit, none of Agent, Issuing Bank or any Lender shall be responsible
for the existence, character, quality, quantity, condition, packing, value or
delivery of any goods purported to be represented by any Documents; any
differences or variation in the character, quality, quantity, condition,
packing, value or delivery of any goods from that expressed in any Documents;
the form, validity, sufficiency, accuracy, genuineness or legal effect of any
Documents or of any endorsements thereon; the time, place, manner or order in
which shipment of goods is made; partial or incomplete shipment of, or failure
to ship, any goods referred to in a Letter of Credit or Documents; any deviation
from instructions, delay, default or fraud by any shipper or other Person in
connection with any goods, shipment or delivery; any breach of contract between
a shipper or vendor and a Borrower; errors, omissions, interruptions or delays
in transmission or delivery of any messages, by mail, cable, telegraph, telex,
telecopy, e-mail, telephone or otherwise; errors in interpretation of technical
terms; the misapplication by a beneficiary of any Letter of Credit or the
proceeds thereof; or any consequences arising from causes beyond the control of
Issuing Bank, Agent or any Lender, including any act or omission of a
Governmental Authority, but excluding any loss directly arising from the gross
negligence or willful misconduct of the Agent, Issuing Lender or any
Lender.  The rights and remedies of Issuing Bank under the Loan Documents shall
be cumulative.  Issuing Bank shall be fully subrogated to the rights and
remedies of each beneficiary whose claims against Borrowers are discharged with
proceeds of any Letter of Credit.
 
(d)           In connection with its administration of and enforcement of rights
or remedies under any Letters of Credit or LC Documents, Issuing Bank shall be
entitled to act, and shall be fully protected in acting, upon any certification,
documentation or communication in whatever form believed by Issuing Bank, in
good faith, to be genuine and correct and to have been signed, sent or made by a
proper Person.  Issuing Bank may consult with and employ legal counsel,
accountants and other experts to advise it concerning its obligations, rights
and remedies, and shall be entitled to act upon, and shall be fully protected in
any action taken in good faith reliance upon, any advice given by such
experts.  Issuing Bank may employ agents and attorneys-in-fact in connection
with any matter relating to Letters of Credit or LC Documents, and shall not be
liable for the negligence or misconduct of agents and attorneys-in-fact selected
with reasonable care.
 
2.2.2.           Reimbursement; Participations.
 
(a)           If Issuing Bank honors any request for payment under a Letter of
Credit, Borrowers shall pay to Issuing Bank, on the same day (“Reimbursement
Date”), the amount paid by Issuing Bank under such Letter of Credit, together
with interest at the interest rate for Base Rate Loans from the Reimbursement
Date until payment by Borrowers.  The obligation of Borrowers to reimburse
Issuing Bank for any payment made under a Letter of Credit shall be absolute,
unconditional, irrevocable, and joint and several, and shall be paid without
regard to any lack of validity or enforceability of any Letter of Credit or the
existence of any claim, setoff, defense or other right that Borrowers may have
at any time against the beneficiary.  Whether or not Borrower Agent submits a
Notice of Borrowing, Borrowers shall be deemed to have requested a Borrowing of
Base Rate Loans in an amount necessary to pay all amounts due Issuing Bank on
any Reimbursement Date and each Lender agrees to fund its Pro Rata share of such
Borrowing whether or not the Commitments have terminated, an Overadvance exists
or is created thereby, or the conditions in Section 6 are satisfied.
 
 
-26-

--------------------------------------------------------------------------------

 
 
(b)           Upon issuance of a Letter of Credit, each Lender shall be deemed
to have irrevocably and unconditionally purchased from Issuing Bank, without
recourse or warranty, an undivided Pro Rata interest and participation in all LC
Obligations relating to the Letter of Credit.  If Issuing Bank makes any payment
under a Letter of Credit and Borrowers do not reimburse such payment on the
Reimbursement Date, Agent shall promptly notify Lenders and each Lender shall
promptly (within one Business Day) and unconditionally pay to Agent, for the
benefit of Issuing Bank, the Lender’s Pro Rata share of such payment.  Upon
request by a Lender, Issuing Bank shall furnish copies of any Letters of Credit
and LC Documents in its possession at such time.
 
(c)           The obligation of each Lender to make payments to Agent for the
account of Issuing Bank in connection with Issuing Bank’s payment under a Letter
of Credit shall be absolute, unconditional and irrevocable, not subject to any
counterclaim, setoff, qualification or exception whatsoever, and shall be made
in accordance with this Agreement under all circumstances, irrespective of any
lack of validity or unenforceability of any Loan Documents; any draft,
certificate or other document presented under a Letter of Credit having been
determined to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect; or the
existence of any setoff or defense that any Obligor may have with respect to any
Obligations.  Issuing Bank does not assume any responsibility for any failure or
delay in performance or any breach by any Borrower or other Person of any
obligations under any LC Documents.  Issuing Bank does not make to Lenders any
express or implied warranty, representation or guaranty with respect to the
Collateral, LC Documents or any Obligor.  Issuing Bank shall not be responsible
to any Lender for any recitals, statements, information, representations or
warranties contained in, or for the execution, validity, genuineness,
effectiveness or enforceability of any LC Documents; the validity, genuineness,
enforceability, collectibility, value or sufficiency of any Collateral or the
perfection of any Lien therein; or the assets, liabilities, financial condition,
results of operations, business, creditworthiness or legal status of any
Obligor.
 
(d)           No Issuing Bank Indemnitee shall be liable to any Lender or other
Person for any action taken or omitted to be taken in connection with any LC
Documents except as a result of its actual gross negligence or willful
misconduct.  Issuing Bank shall not have any liability to any Lender if Issuing
Bank refrains from any action under a Letter of Credit or LC Documents until it
receives written instructions from Required Lenders.
 
2.2.3.           Cash Collateral.  If any LC Obligations, whether or not then
due or payable, shall for any reason be outstanding at any time (a) that an
Event of Default exists, (b) that Availability is less than zero, (c) after the
Commitment Termination Date, or (d) within 20 Business Days prior to the
Revolver Termination Date, then Borrowers shall, at Issuing Bank’s or Agent’s
request, Cash Collateralize the stated amount of all outstanding Letters of
Credit and pay to Issuing Bank the amount of all other LC
Obligations.  Borrowers shall, on demand by Issuing Bank or Agent from time to
time, Cash Collateralize the Fronting Exposure of any Defaulting Lender.  If
Borrowers fail to provide any Cash Collateral as required hereunder, Lenders may
(and shall upon direction of Agent) advance, as Loans, the amount of the Cash
Collateral required (whether or not the Commitments have terminated, an
Overadvance exists or the conditions in Section 6 are satisfied).
 
2.2.4.           Resignation of Issuing Bank.  Issuing Bank may resign at any
time upon notice to Agent and Borrowers.  On the effective date of such
resignation, Issuing Bank shall have no further obligation to issue, amend,
renew, extend or otherwise modify any Letter of Credit, but shall continue to
have all rights and obligations of an Issuing Bank hereunder, including under
Sections 2.2, 12.6 and 14.2, relating to any Letter of Credit issued prior to
such date.  Agent shall promptly appoint a replacement Issuing Bank, which, as
long as no Default or Event of Default exists, shall be reasonably acceptable to
Borrowers.
 
 
-27-

--------------------------------------------------------------------------------

 
 
SECTION 3.           INTEREST, FEES AND CHARGES
 
3.1.           Interest.
 
3.1.1.           Rates and Payment of Interest.
 
(a)           The Obligations shall bear interest (i) if a Base Rate Loan, at
the Base Rate in effect from time to time, plus the Applicable Margin; (ii) if a
LIBOR Loan, at LIBOR for the applicable Interest Period, plus the Applicable
Margin; and (iii) if any other Obligation (including, to the extent permitted by
law, interest not paid when due), at the Base Rate in effect from time to time,
plus the Applicable Margin for Base Rate Loans.  Interest shall accrue from the
date the Loan is advanced or the Obligation is incurred or payable, until paid
by Borrowers.  If a Loan is repaid on the same day made, one day’s interest
shall accrue.
 
(b)           During an Insolvency Proceeding with respect to any Borrower, or
during any other Event of Default if Agent or Required Lenders in their
discretion so elect, Obligations shall bear interest at the Default Rate
(whether before or after any judgment).  Each Borrower acknowledges that the
cost and expense to Agent and Lenders due to an Event of Default are difficult
to ascertain and that the Default Rate is a fair and reasonable estimate to
compensate Agent and Lenders for this.
 
(c)           Interest accrued on the Loans shall be due and payable in arrears,
(i) on the first day of each month; (ii) on any date of prepayment, with respect
to the principal amount of Loans being prepaid; and (iii) on the Commitment
Termination Date.  Interest accrued on any other Obligations shall be due and
payable as provided in the Loan Documents and, if no payment date is specified,
shall be due and payable on demand.  Notwithstanding the foregoing, interest
accrued at the Default Rate shall be due and payable on demand.
 
3.1.2.           Application of LIBOR to Outstanding Loans.
 
(a)           Borrowers may on any Business Day, subject to delivery of a Notice
of Conversion/Continuation, elect to convert any portion of the Base Rate Loans
to, or to continue any LIBOR Loan at the end of its Interest Period as, a LIBOR
Loan.  During any Default or Event of Default, Agent may (and shall at the
direction of Required Lenders) declare that no Loan may be made, converted or
continued as a LIBOR Loan.
 
(b)           Whenever Borrowers desire to convert or continue Loans as LIBOR
Loans, Borrower Agent shall give Agent a Notice of Conversion/Continuation, no
later than 11:00 a.m. at least three Business Days before the requested
conversion or continuation date.  Promptly after receiving any such notice,
Agent shall notify each Lender thereof.  Each Notice of Conversion/Continuation
shall be irrevocable, and shall specify the amount of Loans to be converted or
continued, the conversion or continuation date (which shall be a Business Day),
and the duration of the Interest Period (which shall be deemed to be 30 days if
not specified).  If, upon the expiration of any Interest Period in respect of
any LIBOR Loans, Borrowers shall have failed to deliver a Notice of
Conversion/Continuation, they shall be deemed to have elected to convert such
Loans into Base Rate Loans.
 
3.1.3.           Interest Periods.  In connection with the making, conversion or
continuation of any LIBOR Loans, Borrowers shall select an interest period
(“Interest Period”) to apply, which interest period shall be 30, 60, or 90 days;
provided, however, that:
 
(a)           the Interest Period shall commence on the date the Loan is made or
continued as, or converted into, a LIBOR Loan, and shall expire on the
numerically corresponding day in the calendar month at its end;
 
 
-28-

--------------------------------------------------------------------------------

 
 
(b)           if any Interest Period commences on a day for which there is no
corresponding day in the calendar month at its end or if such corresponding day
falls after the last Business Day of such month, then the Interest Period shall
expire on the last Business Day of such month; and if any Interest Period would
expire on a day that is not a Business Day, the period shall expire on the next
Business Day; and
 
(c)           no Interest Period shall extend beyond the Revolver Termination
Date.
 
3.1.4.           Interest Rate Not Ascertainable.  If Agent shall determine that
on any date for determining LIBOR, due to any circumstance affecting the London
interbank market, adequate and fair means do not exist for ascertaining such
rate on the basis provided herein, then Agent shall immediately notify Borrowers
of such determination.  Until Agent notifies Borrowers that such circumstance no
longer exists, the obligation of Lenders to make LIBOR Loans shall be suspended,
and no further Loans may be converted into or continued as LIBOR Loans.
 
3.2.           Fees.
 
3.2.1.           Unused Line Fee.  Borrowers shall pay to Agent, for the Pro
Rata benefit of Lenders, a fee equal to the Unused Line Fee Rate times the
amount by which the Commitments exceed the average daily balance of Loans and
stated amount of Letters of Credit during any month.  Such fee shall be payable
in arrears, on the first day of each month and on the Commitment Termination
Date.
 
3.2.2.           LC Facility Fees.  Borrowers shall pay (a) to Agent, for the
Pro Rata benefit of Lenders, a fee equal to the Applicable Margin in effect for
LIBOR Loans times the average daily stated amount of Letters of Credit, which
fee shall be payable monthly in arrears, on the first day of each month; (b) to
Agent, for its own account, a fronting fee equal to 0.125% per annum on the
stated amount of each Letter of Credit, which fee shall be payable monthly in
arrears, on the first day of each month; and (c) to Issuing Bank, for its own
account, all customary charges associated with the issuance, amending,
negotiating, payment, processing, transfer and administration of Letters of
Credit, which charges shall be paid as and when incurred.  During an Event of
Default, the fee payable under clause (a) shall be increased by 2% per annum.
 
3.2.3.           Closing Fee.  On the Closing Date, Borrowers shall pay to
Agent, for the Pro Rata benefit of Lenders, a closing fee of $30,000.
 
3.2.4.           Agent Fees.  Borrowers shall pay to Agent, for its own account,
the fees described in the Fee Letter.
 
3.3.           Computation of Interest, Fees, Yield Protection.  All interest,
as well as fees and other charges calculated on a per annum basis, shall be
computed for the actual days elapsed, based on a year of 360 days.  Each
determination by Agent of any interest, fees or interest rate hereunder shall be
final, conclusive and binding for all purposes, absent manifest error.  All fees
shall be fully earned when due and shall not be subject to rebate, refund or
proration.  All fees payable under Section 3.2 are compensation for services and
are not, and shall not be deemed to be, interest or any other charge for the
use, forbearance or detention of money.  A certificate as to amounts payable by
Borrowers under Section 3.4, 3.6, 3.7, 3.9 or 5.8, submitted to Borrower Agent
by Agent or the affected Lender, as applicable, shall be final, conclusive and
binding for all purposes, absent manifest error, and Borrowers shall pay such
amounts to the appropriate party within 10 days following receipt of the
certificate.
 
 
-29-

--------------------------------------------------------------------------------

 
 
3.4.           Reimbursement Obligations.  Borrowers shall reimburse Agent for
all Extraordinary Expenses.  Borrowers shall also reimburse Agent for all legal,
accounting, appraisal, consulting, examination, audit and other fees, costs and
expenses incurred by it in connection with (a) negotiation and preparation of
any Loan Documents, including any amendment or other modification thereof; (b)
administration of and actions relating to any Collateral, Loan Documents and
transactions contemplated thereby, including any actions taken to perfect or
maintain priority of Agent’s Liens on any Collateral, to maintain any insurance
required hereunder or to verify Collateral; and (c) subject to the limits of
Section 10.1.1(b), each inspection, audit or appraisal with respect to any
Obligor or Collateral, whether prepared by Agent’s personnel or a third
party.  All legal, accounting and consulting fees shall be charged to Borrowers
by Agent’s professionals at their hourly rates charged to Agent for this
transaction, regardless of any reduced or alternative fee billing arrangements
that Agent, any Lender or any of their Affiliates may have with such
professionals with respect to this or any other transaction.  If, for any reason
(including inaccurate reporting on financial statements or a Compliance
Certificate), it is determined that a higher Applicable Margin should have
applied to a period than was actually applied, then the proper margin shall be
applied retroactively and Borrowers shall immediately pay to Agent, for the Pro
Rata benefit of Lenders, an amount equal to the difference between the amount of
interest and fees that would have accrued using the proper margin and the amount
actually paid.  All amounts payable by Borrowers under this Section shall be due
within three (3) Business Days after Agent’s demand.
 
3.5.           Illegality.  If any Lender determines that any Applicable Law has
made it unlawful, or that any Governmental Authority has asserted that it is
unlawful, for any Lender or its applicable Lending Office to make, maintain or
fund LIBOR Loans, or to determine or charge interest rates based upon LIBOR, or
any Governmental Authority has imposed material restrictions on the authority of
such Lender to purchase or sell, or to take deposits of, Dollars in the London
interbank market, then, on notice thereof by such Lender to Agent, any
obligation of such Lender to make or continue LIBOR Loans or to convert Base
Rate Loans to LIBOR Loans shall be suspended until such Lender notifies Agent
that the circumstances giving rise to such determination no longer exist.  Upon
delivery of such notice, Borrowers shall prepay or, if applicable, convert all
LIBOR Loans of such Lender to Base Rate Loans, either on the last day of the
Interest Period therefor, if such Lender may lawfully continue to maintain such
LIBOR Loans to such day, or immediately, if such Lender may not lawfully
continue to maintain such LIBOR Loans.  Upon any such prepayment or conversion,
Borrowers shall also pay accrued interest on the amount so prepaid or converted.
 
3.6.           Inability to Determine Rates.  If Required Lenders notify Agent
for any reason in connection with a request for a Borrowing of, or conversion to
or continuation of, a LIBOR Loan that (a) Dollar deposits are not being offered
to banks in the London interbank Eurodollar market for the applicable amount and
Interest Period of such Loan, (b) adequate and reasonable means do not exist for
determining LIBOR for the requested Interest Period, or (c) LIBOR for the
requested Interest Period does not adequately and fairly reflect the cost to
such Lenders of funding such Loan, then Agent will promptly so notify Borrower
Agent and each Lender.  Thereafter, the obligation of Lenders to make or
maintain LIBOR Loans shall be suspended until Agent (upon instruction by
Required Lenders) revokes such notice.  Upon receipt of such notice, Borrower
Agent may revoke any pending request for a Borrowing of, conversion to or
continuation of a LIBOR Loan or, failing that, will be deemed to have submitted
a request for a Base Rate Loan.
 
3.7.           Increased Costs; Capital Adequacy.
 
3.7.1.           Change in Law.  If any Change in Law shall:
 
(a)           impose, modify or deem applicable any reserve, special deposit,
compulsory loan, insurance charge or similar requirement against assets of,
deposits with or for the account of, or credit extended or participated in by,
any Lender (except any reserve requirement reflected in LIBOR) or Issuing Bank;
 
(b)           subject any Lender or Issuing Bank to any Tax with respect to any
Loan, Loan Document, Letter of Credit or participation in LC Obligations, or
change the basis of taxation of payments to such Lender or Issuing Bank in
respect thereof (except for Indemnified Taxes or Other Taxes covered by Section
5.8 and the imposition of, or any change in the rate of, any Excluded Tax
payable by such Lender or Issuing Bank); or
 
 
-30-

--------------------------------------------------------------------------------

 
 
(c)           impose on any Lender, Issuing Bank or interbank market any other
condition, cost or expense affecting any Loan, Loan Document, Letter of Credit,
participation in LC Obligations, or Commitment;
 
and the result thereof shall be to increase the cost to such Lender of making or
maintaining any Loan or Commitment, or to increase the cost to such Lender or
Issuing Bank of participating in, issuing or maintaining any Letter of Credit,
or to reduce the amount of any sum received or receivable by such Lender or
Issuing Bank hereunder (whether of principal, interest or any other amount)
then, upon request of such Lender or Issuing Bank, Borrowers will pay to such
Lender or Issuing Bank, as applicable, such additional amount or amounts as will
compensate such Lender or Issuing Bank, as applicable, for such additional costs
incurred or reduction suffered.
 
3.7.2.           Capital Adequacy.  If any Lender or Issuing Bank determines
that any Change in Law affecting such Lender or Issuing Bank or any Lending
Office of such Lender or such Lender’s or Issuing Bank’s holding company, if
any, regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender’s, Issuing Bank’s or holding company’s capital as
a consequence of this Agreement, or such Lender’s or Issuing Bank’s Commitments,
Loans, Letters of Credit or participations in LC Obligations, to a level below
that which such Lender, Issuing Bank or holding company could have achieved but
for such Change in Law (taking into consideration such Lender’s, Issuing Bank’s
and holding company’s policies with respect to capital adequacy), then from time
to time Borrowers will pay to such Lender or Issuing Bank, as the case may be,
such additional amount or amounts as will compensate it or its holding company
for any such reduction suffered.
 
3.7.3.           Compensation.  Failure or delay on the part of any Lender or
Issuing Bank to demand compensation pursuant to this Section shall not
constitute a waiver of its right to demand such compensation, but Borrowers
shall not be required to compensate a Lender or Issuing Bank for any increased
costs incurred or reductions suffered more than nine months prior to the date
that the Lender or Issuing Bank notifies Borrower Agent of the Change in Law
giving rise to such increased costs or reductions and of such Lender’s or
Issuing Bank’s intention to claim compensation therefor (except that, if the
Change in Law giving rise to such increased costs or reductions is retroactive,
then the nine-month period referred to above shall be extended to include the
period of retroactive effect thereof).
 
3.8.           Mitigation.  If any Lender gives a notice under Section 3.5 or
requests compensation under Section 3.7, or if Borrowers are required to pay
additional amounts with respect to a Lender under Section 5.8, then such Lender
shall use reasonable efforts to designate a different Lending Office or to
assign its rights and obligations hereunder to another of its offices, branches
or Affiliates, if, in the judgment of such Lender, such designation or
assignment (a) would eliminate the need for such notice or reduce amounts
payable or to be withheld in the future, as applicable; and (b) would not
subject the Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to it or unlawful.  Borrowers shall pay all reasonable costs
and expenses incurred by any Lender in connection with any such designation or
assignment.
 
3.9.           Funding Losses.  If for any reason (other than default by a
Lender) (a) any Borrowing of, or conversion to or continuation of, a LIBOR Loan
does not occur on the date specified therefor in a Notice of Borrowing or Notice
of Conversion/Continuation (whether or not withdrawn), (b) any repayment or
conversion of a LIBOR Loan occurs on a day other than the end of its Interest
Period, (c) Borrowers fail to repay a LIBOR Loan when required hereunder, or (d)
a Lender (other than a Defaulting Lender) is required to assign a LIBOR Loan
prior to the end of its Interest Period pursuant to Section 13.4, then Borrowers
shall pay to Agent its customary administrative charge and to each Lender all
resulting losses and expenses, including loss of anticipated profits and any
loss or expense arising from liquidation or redeployment of funds or from fees
payable to terminate deposits of matching funds.  Lenders shall not be required
to purchase Dollar deposits in any interbank or offshore Dollar market to fund
any LIBOR Loan, but this Section shall apply as if each Lender had purchased
such deposits.
 
 
-31-

--------------------------------------------------------------------------------

 
 
3.10.           Maximum Interest.  Notwithstanding anything to the contrary
contained in any Loan Document, the interest paid or agreed to be paid under the
Loan Documents shall not exceed the maximum rate of non-usurious interest
permitted by Applicable Law (“maximum rate”).  If Agent or any Lender shall
receive interest in an amount that exceeds the maximum rate, the excess interest
shall be applied to the principal of the Obligations or, if it exceeds such
unpaid principal, refunded to Borrowers.  In determining whether the interest
contracted for, charged or received by Agent or a Lender exceeds the maximum
rate, such Person may, to the extent permitted by Applicable Law, (a)
characterize any payment that is not principal as an expense, fee or premium
rather than interest; (b) exclude voluntary prepayments and the effects thereof;
and (c) amortize, prorate, allocate and spread in equal or unequal parts the
total amount of interest throughout the contemplated term of the Obligations
hereunder.
 
SECTION 4.           LOAN ADMINISTRATION
 
4.1.           Manner of Borrowing and Funding Loans.
 
4.1.1.           Notice of Borrowing.
 
(a)           Whenever Borrowers desire funding of a Borrowing of Loans,
Borrower Agent shall give Agent a Notice of Borrowing.  Such notice must be
received by Agent no later than 11:00 a.m. (i) on the Business Day of the
requested funding date, in the case of Base Rate Loans, and (ii) at least three
Business Days prior to the requested funding date, in the case of LIBOR
Loans.  Notices received after 11:00 a.m. shall be deemed received on the next
Business Day.  Each Notice of Borrowing shall be irrevocable and shall specify
(A) the amount of the Borrowing, (B) the requested funding date (which must be a
Business Day), (C) whether the Borrowing is to be made as Base Rate Loans or
LIBOR Loans, and (D) in the case of LIBOR Loans, the duration of the applicable
Interest Period (which shall be deemed to be 30 days if not specified).
 
(b)           Unless payment is otherwise timely made by Borrowers, the becoming
due of any Obligations (whether principal, interest, fees or other charges,
including Extraordinary Expenses, LC Obligations, Cash Collateral and Secured
Bank Product Obligations) shall be deemed to be a request for Base Rate Loans on
the due date, in the amount of such Obligations.  The proceeds of such Loans
shall be disbursed as direct payment of the relevant Obligation.  In addition,
Agent may, at its option, charge such Obligations against any operating,
investment or other account of a Borrower maintained with Agent or any of its
Affiliates.
 
(c)           If Borrowers establish a controlled disbursement account with
Agent or any Affiliate of Agent, then the presentation for payment of any check,
ACH or electronic debit, or other payment item at a time when there are
insufficient funds to cover it shall be deemed to be a request for Base Rate
Loans on the date of such presentation, in the amount of such payment item.  The
proceeds of such Loans may be disbursed directly to the controlled disbursement
account or other appropriate account.
 
4.1.2.           Fundings by Lenders.  Each Lender shall timely honor its
Commitment by funding its Pro Rata share of each Borrowing of Loans that is
properly requested hereunder.  Except for Borrowings to be made as Swingline
Loans, Agent shall endeavor to notify Lenders of each Notice of Borrowing (or
deemed request for a Borrowing) by 12:00 noon on the proposed funding date for
Base Rate Loans or by 3:00 p.m. at least two Business Days before any proposed
funding of LIBOR Loans.  Each Lender shall fund to Agent such Lender’s Pro Rata
share of the Borrowing to the account specified by Agent in immediately
available funds not later than 2:00 p.m. on the requested funding date, unless
Agent’s notice is received after the times provided above, in which case Lender
shall fund its Pro Rata share by 11:00 a.m. on the next Business Day.  Subject
to its receipt of such amounts from Lenders, Agent shall disburse the proceeds
of the Loans as directed by Borrower Agent.  Unless Agent shall have received
(in sufficient time to act) written notice from a Lender that it does not intend
to fund its Pro Rata share of a Borrowing, Agent may assume that such Lender has
deposited or promptly will deposit its share with Agent, and Agent may disburse
a corresponding amount to Borrowers.  If a Lender’s share of any Borrowing or of
any settlement pursuant to Section 4.1.3(b) is not received by Agent, then
Borrowers agree to repay to Agent on demand the amount of such share, together
with interest thereon from the date disbursed until repaid, at the rate
applicable to the Borrowing.
 
 
-32-

--------------------------------------------------------------------------------

 
 
4.1.3.           Swingline Loans; Settlement.
 
(a)           Agent may, but shall not be obligated to, advance Swingline Loans
to Borrowers, up to an aggregate outstanding amount of $1,000,000, unless the
funding is specifically required to be made by all Lenders hereunder.  Each
Swingline Loan shall constitute a Loan for all purposes, except that payments
thereon shall be made to Agent for its own account.  The obligation of Borrowers
to repay Swingline Loans shall be evidenced by the records of Agent and need not
be evidenced by any promissory note.
 
(b)           Settlement of Swingline Loans and other Loans among Lenders and
Agent shall take place on a date determined from time to time by Agent (but at
least weekly),  in accordance with the Settlement Report delivered by Agent to
Lenders.  Between settlement dates, Agent may in its discretion apply payments
on Loans to Swingline Loans, regardless of any designation by Borrower or any
provision herein to the contrary.  Each Lender’s obligation to make settlements
with Agent is absolute and unconditional, without offset, counterclaim or other
defense, and whether or not the Commitments have terminated, an Overadvance
exists or the conditions in Section 6 are satisfied.  If, due to an Insolvency
Proceeding with respect to a Borrower or otherwise, any Swingline Loan may not
be settled among Lenders hereunder, then each Lender shall be deemed to have
purchased from Agent a Pro Rata participation in such Loan and shall transfer
the amount of such participation to Agent, in immediately available funds,
within one Business Day after Agent’s request therefor.
 
4.1.4.           Notices.  Borrowers may request, convert or continue Loans,
select interest rates and transfer funds based on telephonic or e-mailed
instructions to Agent.  Borrowers shall confirm each such request by prompt
delivery to Agent of a Notice of Borrowing or Notice of Conversion/Continuation,
if applicable, but if it differs materially from the action taken by Agent or
Lenders, the records of Agent and Lenders shall govern.  Neither Agent nor any
Lender shall have any liability for any loss suffered by a Borrower as a result
of Agent or any Lender acting upon its understanding of telephonic or e-mailed
instructions from a person believed in good faith by Agent or any Lender to be a
person authorized to give such instructions on a Borrower’s behalf.
 
4.2.           Defaulting Lender.
 
4.2.1.           Reallocation of Pro Rata Share; Amendments.  For purposes of
determining Lenders’ obligations to fund or participate in Loans or Letters of
Credit, Agent may exclude the Commitments and Loans of any Defaulting Lender(s)
from the calculation of Pro Rata shares.  A Defaulting Lender shall have no
right to vote on any amendment, waiver or other modification of a Loan Document,
except as provided in Section 14.1.1(c).
 
 
-33-

--------------------------------------------------------------------------------

 
 
4.2.2.           Payments; Fees.   Agent may, in its discretion, receive and
retain any amounts payable to a Defaulting Lender under the Loan Documents, and
a Defaulting Lender shall be deemed to have assigned to Agent such amounts until
all Obligations owing to Agent, non-Defaulting Lenders and other Secured Parties
have been paid in full.  Agent may apply such amounts to the Defaulting Lender’s
defaulted obligations, use the funds to Cash Collateralize such Lender’s
Fronting Exposure, or readvance the amounts to Borrowers hereunder.  A Lender
shall not be entitled to receive any fees accruing hereunder during the period
in which it is a Defaulting Lender, and the unfunded portion of its Commitment
shall be disregarded for purposes of calculating the unused line fee under
Section 3.2.1.  If any LC Obligations owing to a Defaulted Lender are
reallocated to other Lenders, fees attributable to such LC Obligations under
Section 3.2.2 shall be paid to such Lenders.  Agent shall be paid all fees
attributable to LC Obligations that are not reallocated.
 
4.2.3.           Cure.   Borrowers, Agent and Issuing Bank may agree in writing
that a Lender is no longer a Defaulting Lender.  At such time, Pro Rata shares
shall be reallocated without exclusion of such Lender’s Commitments and Loans,
and all outstanding Loans, LC Obligations and other exposures under the
Commitments shall be reallocated among Lenders and settled by Agent (with
appropriate payments by the reinstated Lender) in accordance with the readjusted
Pro Rata shares.  Unless expressly agreed by Borrowers, Agent and Issuing Bank,
no reinstatement of a Defaulting Lender shall constitute a waiver or release of
claims against such Lender.  The failure of any Lender to fund a Loan, to make a
payment in respect of LC Obligations or otherwise to perform its obligations
hereunder shall not relieve any other Lender of its obligations, and no Lender
shall be responsible for default by another Lender.
 
4.3.           Number and Amount of LIBOR Loans; Determination of Rate.  Each
Borrowing of LIBOR Loans when made shall be in a minimum amount of $1,000,000,
plus any increment of $500,000 in excess thereof.
 
No more than five (5) Borrowings of LIBOR Loans may be outstanding at any time,
and all LIBOR Loans having the same length and beginning date of their Interest
Periods shall be aggregated together and considered one Borrowing for this
purpose.
 
Upon determining LIBOR for any Interest Period requested by Borrowers, Agent
shall promptly notify Borrowers thereof by telephone or electronically and, if
requested by Borrowers, shall confirm any telephonic notice in writing.
 
4.4.           Borrower Agent.  Each Borrower hereby designates Akorn (“Borrower
Agent”) as its representative and agent for all purposes under the Loan
Documents, including requests for Loans and Letters of Credit, designation of
interest rates, delivery or receipt of communications, preparation and delivery
of Borrowing Base and financial reports, receipt and payment of Obligations,
requests for waivers, amendments or other accommodations, actions under the Loan
Documents (including in respect of compliance with covenants), and all other
dealings with Agent, Issuing Bank or any Lender.  Borrower Agent hereby accepts
such appointment.  Agent and Lenders shall be entitled to rely upon, and shall
be fully protected in relying upon, any notice or communication (including any
notice of borrowing) delivered by Borrower Agent on behalf of any
Borrower.  Agent and Lenders may give any notice or communication with a
Borrower hereunder to Borrower Agent on behalf of such Borrower.  Each of Agent,
Issuing Bank and Lenders shall have the right, in its discretion, to deal
exclusively with Borrower Agent for any or all purposes under the Loan
Documents.  Each Borrower agrees that any notice, election, communication,
representation, agreement or undertaking made on its behalf by Borrower Agent
shall be binding upon and enforceable against it.
 
4.5.           One Obligation.  The Loans, LC Obligations and other Obligations
constitute one general obligation of Borrowers and are secured by Agent’s Lien
on all Collateral; provided, however, that Agent and each Lender shall be deemed
to be a creditor of, and the holder of a separate claim against, each Borrower
to the extent of any Obligations jointly or severally owed by such Borrower.
 
 
-34-

--------------------------------------------------------------------------------

 
 
4.6.           Effect of Termination.  On the effective date of any termination
of the Commitments, all Obligations shall be immediately due and payable, and
any Lender may terminate its and its Affiliates’ Bank Products (including, only
with the consent of Agent, any Cash Management Services).  All undertakings of
Borrowers contained in the Loan Documents shall survive any termination, and
Agent shall retain its Liens in the Collateral and all of its rights and
remedies under the Loan Documents until Full Payment of the
Obligations.  Notwithstanding Full Payment of the Obligations, Agent shall not
be required to terminate its Liens in any Collateral unless, with respect to any
damages Agent may incur as a result of the dishonor or return of Payment Items
applied to Obligations, Agent receives (a) a written agreement satisfactory to
Agent, executed by Borrowers and any Person whose advances are used in whole or
in part to satisfy the Obligations, indemnifying Agent and Lenders from such
damages; and (b) such Cash Collateral as Agent, in its discretion, deems
appropriate to protect against such damages.  Sections 2.2, 3.4, 3.6, 3.7, 3.9,
5.4, 5.8, 5.9, 12, 14.2 and this Section, and the obligation of each Obligor and
Lender with respect to each indemnity given by it in any Loan Document, shall
survive Full Payment of the Obligations and any release relating to this credit
facility.
 
SECTION 5.           PAYMENTS
 
5.1.           General Payment Provisions.  All payments of Obligations shall be
made in Dollars, without offset, counterclaim or defense of any kind, free of
(and without deduction for) any Taxes, and in immediately available funds, not
later than 12:00 noon on the due date.  Any payment after such time shall be
deemed made on the next Business Day.  Any payment of a LIBOR Loan prior to the
end of its Interest Period shall be accompanied by all amounts due under Section
3.9.  Any prepayment of Loans shall be applied first to Base Rate Loans and then
to LIBOR Loans.
 
5.2.           Repayment of Loans.
 
5.2.1.           Repayments.  Loans shall be due and payable in full on the
Revolver Termination Date, unless payment is sooner required hereunder.  Loans
may be prepaid from time to time, without penalty or premium.  If any Asset
Disposition includes the disposition of Accounts or Inventory, and any Loans or
other Obligations are outstanding hereunder, then Net Proceeds equal to the
greater of (a) the net book value of such Accounts and Inventory, or (b) the
reduction in the Borrowing Base upon giving effect to such disposition, shall be
applied to the Loans (but not in excess of the amount of the Loans or other
Obligations outstanding hereunder).  Notwithstanding anything herein to the
contrary, if an Overadvance exists, Borrowers shall, on the sooner of Agent’s
demand or the first Business Day after any Borrower has knowledge thereof, repay
the outstanding Loans in an amount sufficient to reduce the principal balance of
Loans to the Borrowing Base.
 
5.2.2.           Limitations on Cash and Cash Equivalents.  In addition to the
foregoing, at any time when (i) Loans or other Obligations are outstanding
hereunder and (ii) a Default or Event of Default has occurred or when a Trigger
Period is in effect, subject to the following sentence of this Section 5.2.2,
the Borrowers shall not retain more than $5,000,000 (in the aggregate) in cash
or Cash Equivalents in any of their accounts (whether or not such accounts are
subject to a perfected security interest in favor of Agent).  At such time, the
Borrowers shall make mandatory prepayments of any Loans or other Obligations
outstanding hereunder (but not exceeding the aggregate outstanding balance
thereof) such that either (x) such Loans and other Obligations are repaid in
full or (y) the Borrowers shall not retain more than $5,000,000 (in the
aggregate) in cash or Cash Equivalents in any of their accounts (whether or not
such accounts are subject to a perfected security interest in favor of
Agent).  Such prepayments shall be subject to the payment of any additional fees
and payments required pursuant to Section 3 (including, without limitation
Section 3.9 contained therein) and other applicable provisions contained herein.
 
5.3.           Payment of Other Obligations.  Obligations other than Loans,
including LC Obligations and Extraordinary Expenses, shall be paid by Borrowers
as provided in the Loan Documents or, if no payment date is specified, within
three (3) Business days of Agent’s demand.
 
 
-35-

--------------------------------------------------------------------------------

 
 
5.4.           Marshaling; Payments Set Aside.  None of Agent or Lenders shall
be under any obligation to marshal any assets in favor of any Obligor or against
any Obligations.  If any payment by or on behalf of Borrowers is made to Agent,
Issuing Bank or any Lender, or Agent, Issuing Bank or any Lender exercises a
right of setoff, and such payment or the proceeds of such setoff or any part
thereof is subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by
Agent, Issuing Bank or such Lender in its discretion) to be repaid to a trustee,
receiver or any other Person, then to the extent of such recovery, the
Obligation originally intended to be satisfied, and all Liens, rights and
remedies relating thereto, shall be revived and continued in full force and
effect as if such payment had not been made or such setoff had not occurred.
 
5.5.           Post-Default Allocation of Payments.
 
5.5.1.           Allocation.  Notwithstanding anything herein to the contrary,
during an Event of Default, monies to be applied to the Obligations, whether
arising from payments by Obligors, realization on Collateral, setoff or
otherwise, shall be allocated as follows:
 
(a)           first, to all costs and expenses, including Extraordinary
Expenses, owing to Agent;
 
(b)           second, to all amounts owing to Agent on Swingline Loans;
 
(c)           third, to all amounts owing to Issuing Bank;
 
(d)           fourth, to all Obligations constituting fees (other than Secured
Bank Product Obligations);
 
(e)           fifth, to all Obligations constituting interest (other than
Secured Bank Product Obligations);
 
(f)           sixth, to Cash Collateralization of LC Obligations;
 
(g)           seventh, to all Loans and Noticed Hedges, including Cash
Collateralization of Noticed Hedges; and
 
(h)           last, to all other Obligations.
 
Amounts shall be applied to each category of Obligations set forth above until
Full Payment thereof and then to the next category.  If amounts are insufficient
to satisfy a category, they shall be applied on a pro rata basis among the
Obligations in the category.  Amounts distributed with respect to any Secured
Bank Product Obligations shall be the lesser of the maximum Secured Bank Product
Obligations last reported to Agent or the actual Secured Bank Product
Obligations as calculated by the methodology reported to Agent for determining
the amount due.  Agent shall have no obligation to calculate the amount to be
distributed with respect to any Secured Bank Product Obligations, and may
request a reasonably detailed calculation of such amount from the applicable
Secured Party.  If a Secured Party fails to deliver such calculation within five
days following request by Agent, Agent may assume the amount to be distributed
is zero.  The allocations set forth in this Section are solely to determine the
rights and priorities of Agent and Secured Parties as among themselves, and may
be changed by agreement among them without the consent of any Obligor.  This
Section is not for the benefit of or enforceable by any Borrower.
 
5.5.2.           Erroneous Application.  Agent shall not be liable for any
application of amounts made by it in good faith and, if any such application is
subsequently determined to have been made in error, the sole recourse of any
Lender or other Person to which such amount should have been made shall be to
recover the amount from the Person that actually received it (and, if such
amount was received by any Lender, such Lender hereby agrees to return it).
 
 
-36-

--------------------------------------------------------------------------------

 
 
5.6.           Application of Payments.  During any Trigger Period, the ledger
balance in the main Dominion Account as of the end of a Business Day shall be
applied to the Obligations at the beginning of the next Business Day.  If, as a
result of such application, a credit balance exists, the balance shall not
accrue interest in favor of Borrowers and shall be made available to Borrowers
as long as no Default or Event of Default exists.  Each Borrower irrevocably
waives the right to direct the application of any payments or Collateral
proceeds, and agrees that Agent shall have the continuing, exclusive right to
apply and reapply same against the Obligations, in such manner as Agent deems
advisable.
 
5.7.           Loan Account; Account Stated.
 
5.7.1.           Loan Account.  Agent shall maintain in accordance with its
usual and customary practices an account or accounts (“Loan Account”) evidencing
the Debt of Borrowers resulting from each Loan or issuance of a Letter of Credit
from time to time.  Any failure of Agent to record anything in the Loan Account,
or any error in doing so, shall not limit or otherwise affect the obligation of
Borrowers to pay any amount owing hereunder.  Agent may maintain a single Loan
Account in the name of Borrower Agent, and each Borrower confirms that such
arrangement shall have no effect on the joint and several character of its
liability for the Obligations.
 
5.7.2.           Entries Binding.  Entries made in the Loan Account shall
constitute presumptive evidence of the information contained therein.  If any
information contained in the Loan Account is provided to or inspected by any
Person, then such information shall be conclusive and binding on such Person for
all purposes absent manifest error, except to the extent such Person notifies
Agent in writing within 30 days after receipt or inspection that specific
information is subject to dispute.
 
5.8.           Taxes.
 
5.8.1.           Payments Free of Taxes.  All payments by Obligors of
Obligations shall be free and clear of and without reduction for any Taxes.  If
Applicable Law requires any Obligor or Agent to withhold or deduct any Tax
(including backup withholding or withholding Tax), the withholding or deduction
shall be based on information provided pursuant to Section 5.9 and Agent shall
pay the amount withheld or deducted to the relevant Governmental Authority.  If
the withholding or deduction is made on account of Indemnified Taxes or Other
Taxes, the sum payable by Borrowers shall be increased so that Agent, Lender or
Issuing Bank, as applicable, receives an amount equal to the sum it would have
received if no such withholding or deduction (including deductions applicable to
additional sums payable under this Section) had been made.  Without limiting the
foregoing, Borrowers shall timely pay all Other Taxes to the relevant
Governmental Authorities.
 
5.8.2.           Payment.  Borrowers shall indemnify, hold harmless and
reimburse (within 10 days after demand therefor) Agent, Lenders and Issuing Bank
for any Indemnified Taxes or Other Taxes (including those attributable to
amounts payable under this Section) withheld or deducted by any Obligor or
Agent, or paid by Agent, any Lender or Issuing Bank, with respect to any
Obligations, Letters of Credit or Loan Documents, whether or not such Taxes were
properly asserted by the relevant Governmental Authority, and including all
penalties, interest and reasonable expenses relating thereto, as well as any
amount that a Lender or Issuing Bank fails to pay indefeasibly to Agent under
Section 5.9.  A certificate as to the amount of any such payment or liability
delivered to Borrower Agent by Agent, or by a Lender or Issuing Bank (with a
copy to Agent), shall be conclusive, absent manifest error.  As soon as
practicable after any payment of Taxes by a Borrower, Borrower Agent shall
deliver to Agent a receipt from the Governmental Authority or other evidence of
payment satisfactory to Agent.
 
 
-37-

--------------------------------------------------------------------------------

 
 
5.9.           Lender Tax Information.
 
5.9.1.           Status of Lenders.  Each Lender shall deliver documentation and
information to Agent and Borrower Agent, at the times and in form required by
Applicable Law or reasonably requested by Agent or Borrower Agent, sufficient to
permit Agent or Borrowers to determine (a) whether or not payments made with
respect to Obligations are subject to Taxes, (b) if applicable, the required
rate of withholding or deduction, and (c) such Lender’s entitlement to any
available exemption from, or reduction of, applicable Taxes for such payments or
otherwise to establish such Lender’s status for withholding tax purposes in the
applicable jurisdiction.
 
5.9.2.           Documentation.  If a Borrower is resident for tax purposes in
the United States, any Lender that is a “United States person” within the
meaning of section 7701(a)(30) of the Code shall deliver to Agent and Borrower
Agent IRS Form W-9 or such other documentation or information prescribed by
Applicable Law or reasonably requested by Agent or Borrower Agent to determine
whether such Lender is subject to backup withholding or information reporting
requirements.  If any Foreign Lender is entitled to any exemption from or
reduction of withholding tax for payments with respect to the Obligations, it
shall deliver to Agent and Borrower Agent, on or prior to the date on which it
becomes a Lender hereunder (and from time to time thereafter upon request by
Agent or Borrower Agent, but only if such Foreign Lender is legally entitled to
do so), (a) IRS Form W-8BEN claiming eligibility for benefits of an income tax
treaty to which the United States is a party; (b) IRS Form W-8ECI; (c) IRS Form
W-8IMY and all required supporting documentation; (d) in the case of a Foreign
Lender claiming the benefits of the exemption for portfolio interest under
section 881(c) of the Code, IRS Form W-8BEN and a certificate showing such
Foreign Lender is not (i) a “bank” within the meaning of section 881(c)(3)(A) of
the Code, (ii) a “10 percent shareholder” of any Obligor within the meaning of
section 881(c)(3)(B) of the Code, or (iii) a “controlled foreign corporation”
described in section 881(c)(3)(C) of the Code; or (e) any other form prescribed
by Applicable Law as a basis for claiming exemption from or a reduction in
withholding tax, together with such supplementary documentation necessary to
allow Agent and Borrowers to determine the withholding or deduction required to
be made.
 
5.9.3.           Lender Obligations.  Each Lender and Issuing Bank shall
promptly notify Borrowers and Agent of any change in circumstances that would
change any claimed Tax exemption or reduction.  Each Lender and Issuing Bank
shall indemnify, hold harmless and reimburse (within 10 days after demand
therefor) Borrowers and Agent for any Taxes, losses, claims, liabilities,
penalties, interest and expenses (including reasonable attorneys’ fees) incurred
by or asserted against a Borrower or Agent by any Governmental Authority due to
such Lender’s or Issuing Bank’s failure to deliver, or inaccuracy or deficiency
in, any documentation required to be delivered by it pursuant to this
Section.  Each Lender and Issuing Bank authorizes Agent to set off any amounts
due to Agent under this Section against any amounts payable to such Lender or
Issuing Bank under any Loan Document.
 
5.10.           Nature and Extent of Each Borrower’s Liability.
 
5.10.1.               Joint and Several Liability.  Each Borrower agrees that it
is jointly and severally liable for, and absolutely and unconditionally
guarantees to Agent and Lenders the prompt payment and performance of, all
Obligations and all agreements under the Loan Documents.  Each Borrower agrees
that its guaranty obligations hereunder constitute a continuing guaranty of
payment and not of collection, that such obligations shall not be discharged
until Full Payment of the Obligations, and that such obligations are absolute
and unconditional, irrespective of (a) the genuineness, validity, regularity,
enforceability, subordination or any future modification of, or change in, any
Obligations or Loan Document, or any other document, instrument or agreement to
which any Obligor is or may become a party or be bound; (b) the absence of any
action to enforce this Agreement (including this Section) or any other Loan
Document, or any waiver, consent or indulgence of any kind by Agent or any
Lender with respect thereto; (c) the existence, value or condition of, or
failure to perfect a Lien or to preserve rights against, any security or
guaranty for the Obligations or any action, or the absence of any action, by
Agent or any Lender in respect thereof (including the release of any security or
guaranty); (d) the insolvency of any Obligor; (e) any election by Agent or any
Lender in an Insolvency Proceeding for the application of Section 1111(b)(2) of
the Bankruptcy Code; (f) any borrowing or grant of a Lien by any other Borrower,
as debtor-in-possession under Section 364 of the Bankruptcy Code or otherwise;
(g) the disallowance of any claims of Agent or any Lender against any Obligor
for the repayment of any Obligations under Section 502 of the Bankruptcy Code or
otherwise; or (h) any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
except Full Payment of all Obligations.
 
 
-38-

--------------------------------------------------------------------------------

 
 
5.10.2.               Waivers.
 
(a)           Each Borrower expressly waives all rights that it may have now or
in the future under any statute, at common law, in equity or otherwise, to
compel Agent or Lenders to marshal assets or to proceed against any Obligor,
other Person or security for the payment or performance of any Obligations
before, or as a condition to, proceeding against such Borrower.  Each Borrower
waives all defenses available to a surety, guarantor or accommodation co-obligor
other than Full Payment of all Obligations.  It is agreed among each Borrower,
Agent and Lenders that the provisions of this Section 5.10 are of the essence of
the transaction contemplated by the Loan Documents and that, but for such
provisions, Agent and Lenders would decline to make Loans and issue Letters of
Credit.  Each Borrower acknowledges that its guaranty pursuant to this Section
is necessary to the conduct and promotion of its business, and can be expected
to benefit such business.
 
(b)           Agent and Lenders may, in their discretion, pursue such rights and
remedies as they deem appropriate, including realization upon Collateral or any
Real Estate by judicial foreclosure or non-judicial sale or enforcement, without
affecting any rights and remedies under this Section 5.10.  If, in taking any
action in connection with the exercise of any rights or remedies, Agent or any
Lender shall forfeit any other rights or remedies, including the right to enter
a deficiency judgment against any Borrower or other Person, whether because of
any Applicable Laws pertaining to “election of remedies” or otherwise, each
Borrower consents to such action and waives any claim based upon it, even if the
action may result in loss of any rights of subrogation that any Borrower might
otherwise have had.  Any election of remedies that results in denial or
impairment of the right of Agent or any Lender to seek a deficiency judgment
against any Borrower shall not impair any other Borrower’s obligation to pay the
full amount of the Obligations.  Each Borrower waives all rights and defenses
arising out of an election of remedies, such as nonjudicial foreclosure with
respect to any security for the Obligations, even though that election of
remedies destroys such Borrower’s rights of subrogation against any other
Person.  Agent may bid all or a portion of the Obligations at any foreclosure or
trustee’s sale or at any private sale, and the amount of such bid need not be
paid by Agent but shall be credited against the Obligations.  The amount of the
successful bid at any such sale, whether Agent or any other Person is the
successful bidder, shall be conclusively deemed to be the fair market value of
the Collateral, and the difference between such bid amount and the remaining
balance of the Obligations shall be conclusively deemed to be the amount of the
Obligations guaranteed under this Section 5.10, notwithstanding that any present
or future law or court decision may have the effect of reducing the amount of
any deficiency claim to which Agent or any Lender might otherwise be entitled
but for such bidding at any such sale.
 
5.10.3.               Extent of Liability; Contribution.
 
(a)           Notwithstanding anything herein to the contrary, each Borrower’s
liability under this Section 5.10 shall be limited to the greater of (i) all
amounts for which such Borrower is primarily liable, as described below, and
(ii) such Borrower’s Allocable Amount.
 
 
-39-

--------------------------------------------------------------------------------

 
 
(b)           If any Borrower makes a payment under this Section 5.10 of any
Obligations (other than amounts for which such Borrower is primarily liable) (a
“Guarantor Payment”) that, taking into account all other Guarantor Payments
previously or concurrently made by any other Borrower, exceeds the amount that
such Borrower would otherwise have paid if each Borrower had paid the aggregate
Obligations satisfied by such Guarantor Payments in the same proportion that
such Borrower’s Allocable Amount bore to the total Allocable Amounts of all
Borrowers, then such Borrower shall be entitled to receive contribution and
indemnification payments from, and to be reimbursed by, each other Borrower for
the amount of such excess, pro rata based upon their respective Allocable
Amounts in effect immediately prior to such Guarantor Payment.  The “Allocable
Amount” for any Borrower shall be the maximum amount that could then be
recovered from such Borrower under this Section 5.10 without rendering such
payment voidable under Section 548 of the Bankruptcy Code or under any
applicable state fraudulent transfer or conveyance act, or similar statute or
common law.
 
(c)           Nothing contained in this Section 5.10 shall limit the liability
of any Borrower to pay Loans made directly or indirectly to that Borrower
(including Loans advanced to any other Borrower and then re-loaned or otherwise
transferred to, or for the benefit of, such Borrower), LC Obligations relating
to Letters of Credit issued to support such Borrower’s business, and all accrued
interest, fees, expenses and other related Obligations with respect thereto, for
which such Borrower shall be primarily liable for all purposes hereunder.  Agent
and Lenders shall have the right, at any time in their discretion, to condition
Loans and Letters of Credit upon a separate calculation of borrowing
availability for each Borrower and to restrict the disbursement and use of such
Loans and Letters of Credit to such Borrower.
 
5.10.4.               Joint Enterprise.  Each Borrower has requested that Agent
and Lenders make this credit facility available to Borrowers on a combined
basis, in order to finance Borrowers’ business most efficiently and
economically.  Borrowers’ business is a mutual and collective enterprise, and
the successful operation of each Borrower is dependent upon the successful
performance of the integrated group.  Borrowers believe that consolidation of
their credit facility will enhance the borrowing power of each Borrower and ease
administration of the facility, all to their mutual advantage.  Borrowers
acknowledge that Agent’s and Lenders’ willingness to extend credit and to
administer the Collateral on a combined basis hereunder is done solely as an
accommodation to Borrowers and at Borrowers’ request.
 
5.10.5.               Subordination.  Each Borrower hereby subordinates any
claims, including any rights at law or in equity to payment, subrogation,
reimbursement, exoneration, contribution, indemnification or set off, that it
may have at any time against any other Obligor, howsoever arising, to the Full
Payment of all Obligations.
 
SECTION 6.           CONDITIONS PRECEDENT
 
6.1.           Conditions Precedent to Initial Loans.  In addition to the
conditions set forth in Section 6.2, Lenders shall not be required to fund any
requested Loan, issue any Letter of Credit, or otherwise extend credit to
Borrowers hereunder, until the date (“Closing Date”) that each of the following
conditions has been satisfied:
 
(a)           Notes shall have been executed by Borrowers and delivered to each
Lender that requests issuance of a Note.  Each other Loan Document shall have
been duly executed and delivered to Agent by each of the signatories thereto,
and each Obligor shall be in compliance with all terms thereof.
 
(b)           Agent shall have received acknowledgments of all filings or
recordations necessary to perfect its Liens in the Collateral, as well as UCC
and Lien searches and other evidence satisfactory to Agent that such Liens are
the only Liens upon the Collateral, except Permitted Liens.
 
(c)           [Reserved.]
 
(d)           Agent shall have received duly executed agreements establishing
each Dominion Account and related lockbox, in form and substance, and with
financial institutions, satisfactory to Agent.
 
 
-40-

--------------------------------------------------------------------------------

 
 
(e)           Agent shall have received certificates, in form and substance
satisfactory to it, from a knowledgeable Senior Officer of the Borrower Agent
certifying (on behalf of each of the Borrowers) that, after giving effect to the
initial Loans and transactions hereunder, (i) each Borrower is Solvent; (ii) no
Default or Event of Default exists; (iii) the representations and warranties set
forth in Section 9 are true and correct; and (iv) each Borrower has complied
with all agreements and conditions to be satisfied by it under the Loan
Documents.
 
(f)           Agent shall have received a certificate of a duly authorized
officer of each Obligor, certifying (i) that attached copies of such Obligor’s
Organic Documents are true and complete, and in full force and effect, without
amendment except as shown; (ii) that an attached copy of resolutions authorizing
execution and delivery of the Loan Documents is true and complete, and that such
resolutions are in full force and effect, were duly adopted, have not been
amended, modified or revoked, and constitute all resolutions adopted with
respect to this credit facility; and (iii) to the title, name and signature of
each Person authorized to sign the Loan Documents.  Agent may conclusively rely
on this certificate until it is otherwise notified by the applicable Obligor in
writing.
 
(g)           Agent shall have received a written opinion of Bryan Cave LLP, as
well as any local counsel to Borrowers or Agent, in form and substance
satisfactory to Agent.
 
(h)           Agent shall have received copies of the charter documents of each
Obligor, certified by the Secretary of State or other appropriate official of
such Obligor’s jurisdiction of organization.  Agent shall have received good
standing certificates for each Obligor, issued by the Secretary of State or
other appropriate official of such Obligor’s jurisdiction of organization and
each jurisdiction where such Obligor’s conduct of business or ownership of
Property necessitates qualification.
 
(i)           Agent shall have received copies of policies or certificates of
insurance for the insurance policies carried by Borrowers, all in compliance
with the Loan Documents and in form and substance acceptable to Agent.
 
(j)           Agent shall have received copies of financial projections of the
Borrowers, showing the Borrowers’ ability to comply with the financial covenants
set forth in this Agreement, and interim financial statements of the Borrowers
on consolidated and consolidating bases as of June 30, 2011, in each case in
form and substance acceptable to Agent.
 
(k)           Agent shall have received an appraisal of Borrowers’ Equipment and
Inventory and Agent shall have completed its business, financial and legal due
diligence of Obligors, including collateral reviews, audits, appraisals,
assessments, a roll-forward of its previous field examination, in each case with
results satisfactory to Agent.  No material adverse change in the financial
condition of any Obligor or in the quality, quantity or value of any Collateral
shall have occurred since June 30, 2011.
 
(l)           Borrowers shall have paid all fees and expenses to be paid to
Agent and Lenders on the Closing Date.
 
(m)           Agent shall have received a Borrowing Base Certificate prepared as
of August 31, 2011.  Upon giving effect to the initial funding of Loans and
issuance of Letters of Credit, and the payment by Borrowers of all fees and
expenses incurred in connection herewith as well as any payables stretched
beyond their customary payment practices, Availability shall be at least
$10,000,000.
 
(n)           Agent shall have received duly executed third party and/or
governmental consents and approvals as may be appropriate or necessary for the
Borrowers’ execution and performance of the Loan Documents and the transactions
contemplated thereunder.
 
 
-41-

--------------------------------------------------------------------------------

 
 
(o)           There shall not have been any material disruption of or material
adverse change in the conditions in the financial, banking or capital markets
since June 30, 2011.
 
6.2.           Conditions Precedent to All Credit Extensions.  Agent, Issuing
Bank and Lenders shall not be required to fund any Loans, arrange for issuance
of any Letters of Credit or grant any other accommodation to or for the benefit
of Borrowers, unless the following conditions are satisfied:
 
(a)           No Default or Event of Default shall exist at the time of, or
result from, such funding, issuance or grant;
 
(b)           The representations and warranties of each Obligor in the Loan
Documents shall be true and correct on the date of, and upon giving effect to,
such funding, issuance or grant (except for representations and warranties that
expressly relate to an earlier date);
 
(c)           All conditions precedent in any other Loan Document shall be
satisfied;
 
(d)           No event shall have occurred or circumstance exist that has or
could reasonably be expected to have a Material Adverse Effect; and
 
(e)           With respect to issuance of a Letter of Credit, the LC Conditions
shall be satisfied.
 
Each request (or deemed request) by Borrowers for funding of a Loan, issuance of
a Letter of Credit or grant of an accommodation shall constitute a
representation by Borrowers that the foregoing conditions are satisfied on the
date of such request and on the date of such funding, issuance or grant.  As an
additional condition to any funding, issuance or grant, Agent shall have
received such other information, documents, instruments and agreements as it
deems appropriate in connection therewith.
 
SECTION 7.           COLLATERAL
 
7.1.           Grant of Security Interest.  To secure the prompt payment and
performance of all Obligations, each Borrower hereby grants to Agent, for the
benefit of Secured Parties, a continuing security interest in and Lien upon all
personal Property of such Borrower, including all of the following Property,
whether now owned or hereafter acquired, and wherever located:
 
(a)           all Accounts;
 
(b)           all Chattel Paper, including electronic chattel paper;
 
(c)           all Commercial Tort Claims, including those shown on Schedule
9.1.16;
 
(d)           all Deposit Accounts;
 
(e)           all Documents;
 
(f)            all General Intangibles, including Intellectual Property;
 
(g)           all Goods, including Inventory, Equipment and fixtures;
 
(h)           all Instruments;
 
(i)             all Investment Property;
 
 
-42-

--------------------------------------------------------------------------------

 
 
(j)            all Letter-of-Credit Rights;
 
(k)           all Supporting Obligations;
 
(l)            all monies, whether or not in the possession or under the control
of Agent, a Lender, or a bailee or Affiliate of Agent or a Lender, including any
Cash Collateral;
 
(m)           all accessions to, substitutions for, and all replacements,
products, and cash and non-cash proceeds of the foregoing, including proceeds of
and unearned premiums with respect to insurance policies, and claims against any
Person for loss, damage or destruction of any Collateral; and
 
(n)           all books and records (including customer lists, files,
correspondence, tapes, computer programs, print-outs and computer records)
pertaining to the foregoing.
 
7.2.           Lien on Deposit Accounts; Cash Collateral.
 
7.2.1.           Deposit Accounts.  To further secure the prompt payment and
performance of all Obligations, each Borrower hereby grants to Agent, for the
benefit of Secured Parties, a continuing security interest in and Lien upon all
amounts credited to any Deposit Account of such Borrower, including any sums in
any blocked or lockbox accounts or in any accounts into which such sums are
swept.  Each Borrower hereby authorizes and directs each bank or other
depository to deliver to Agent, upon request, all balances in any Deposit
Account maintained by such Borrower, without inquiry into the authority or right
of Agent to make such request.
 
7.2.2.           Cash Collateral.  Any Cash Collateral may be invested, at
Agent’s discretion (and with the consent of Borrowers, as long as no Event of
Default exists), but Agent shall have no duty to do so, regardless of any
agreement or course of dealing with any Borrower, and shall have no
responsibility for any investment or loss.  Each Borrower hereby grants to
Agent, for the benefit of Secured Parties and as security for the Obligations, a
security interest in all Cash Collateral held from time to time and all proceeds
thereof, whether held in a Cash Collateral Account or otherwise.  Agent may
apply Cash Collateral to the payment of Obligations as they become due, in such
order as Agent may elect.  Each Cash Collateral Account and all Cash Collateral
shall be under the sole dominion and control of Agent, and no Borrower or other
Person shall have any right to any Cash Collateral, until Full Payment of all
Obligations.
 
7.2.3.           Cap on Cash and Cash Equivalents Collateral.  At any time when
(i) Loans or other Obligations are outstanding hereunder and (ii) a Default or
Event of Default has occurred or when a Trigger Period is in effect, the
Borrowers shall either (x) make a mandatory prepayment of all Loans and other
Obligations outstanding hereunder or (y) not retain more than $5,000,000 (in the
aggregate) in cash or Cash Equivalents in any of their accounts and shall, to
the extent not otherwise in place, cause each of their accounts to be subject to
a perfected security interest in favor of Agent through control under the UCC.
 
7.3.           Collateral Assignment of Leases. To further secure the prompt
payment and performance of all Obligations, each Borrower hereby transfers and
assigns to Agent, for the benefit of Secured Parties, all of such Borrower’s
right, title and interest in, to and under all now or hereafter existing leases
of real Property to which such Borrower is a party, whether as lessor or lessee,
and all extensions, renewals, modifications and proceeds thereof.
 
7.4.           Other Collateral.
 
7.4.1.           Commercial Tort Claims.  Borrowers shall promptly notify Agent
in writing if any Borrower has a Commercial Tort Claim (other than, as long as
no Default or Event of Default exists, a Commercial Tort Claim for less than
$100,000), shall promptly amend Schedule 9.1.16 to include such claim, and shall
take such actions as Agent deems appropriate to subject such claim to a duly
perfected, first priority Lien in favor of Agent (for the benefit of Secured
Parties).
 
 
-43-

--------------------------------------------------------------------------------

 
 
7.4.2.           Certain After-Acquired Collateral.  Borrowers shall promptly
notify Agent in writing if, after the Closing Date, any Borrower obtains any
interest in any Collateral consisting of Deposit Accounts, Chattel Paper,
Documents, Instruments, Intellectual Property, Investment Property or
Letter-of-Credit Rights and, upon Agent’s request, shall promptly take such
actions as Agent deems appropriate to effect Agent’s duly perfected, first
priority Lien upon such Collateral, including obtaining any appropriate
possession, control agreement or Lien Waiver.  If any Collateral is in the
possession of a third party, at Agent’s request, Borrowers shall obtain an
acknowledgment that such third party holds the Collateral for the benefit of
Agent.
 
7.5.           No Assumption of Liability.  The Lien on Collateral granted
hereunder is given as security only and shall not subject Agent or any Lender
to, or in any way modify, any obligation or liability of Borrowers relating to
any Collateral.
 
7.6.           Further Assurances.  Promptly upon request, Borrowers shall
deliver such instruments, assignments, title certificates, or other documents or
agreements, and shall take such actions, as Agent deems appropriate under
Applicable Law to evidence or perfect its Lien on any Collateral, or otherwise
to give effect to the intent of this Agreement; provided, however, that (subject
to Section 5.2 hereof) Borrowers shall not be required to subject the proceeds
of Borrowed Money received by Akorn pursuant to the Indenture to a perfected
security interest in favor of Agent, through control under the UCC, unless a
Default or Event of Default has occurred or unless a Trigger Period is in
effect.  Each Borrower authorizes Agent to file any financing statement that
indicates the Collateral as “all assets” or “all personal property” of such
Borrower, or words to similar effect, and ratifies any action taken by Agent
before the Closing Date to effect or perfect its Lien on any Collateral.
 
7.7.           Foreign Subsidiary Stock.  Notwithstanding Section 7.1, the
Collateral shall include only 65% of the voting stock of any Foreign Subsidiary.
 
7.8.           Aciex Stock.  As long as any Commitments or Obligations are
outstanding, Borrowers shall not grant any lien on or security interest in any
Equity Interests of Aciex Therapeutics, Inc. to any Person other than to
Agent.  Notwithstanding any provisions of Section 7.1 to the contrary, Borrowers
shall not be required to pledge the Equity Interests of Aciex Therapeutics, Inc.
to Agent unless and until Borrowers’ aggregate ownership of Equity Interests in
Aciex Therapeutics, Inc., equals 50% or more of all of the Equity Interests of
Aciex Therapeutics, Inc.
 
SECTION 8.           COLLATERAL ADMINISTRATION
 
8.1.           Borrowing Base Certificates.  By the 15th day of each month,
Borrowers shall deliver to Agent (and Agent shall promptly deliver same to
Lenders) a Borrowing Base Certificate prepared as of the close of business of
the previous month, and at such other times as Agent may request.  All
calculations of Availability in any Borrowing Base Certificate shall originally
be made by Borrowers and certified by a Senior Officer, provided that Agent may
from time to time review and adjust any such calculation (a) to reflect its
reasonable estimate of declines in value of any Collateral, due to collections
received in the Dominion Account or otherwise; (b) to adjust advance rates to
reflect changes in dilution, quality, mix and other factors affecting
Collateral; and (c) to the extent the calculation is not made in accordance with
this Agreement or does not accurately reflect the Availability Reserve.
 
 
-44-

--------------------------------------------------------------------------------

 
 
8.2.           Administration of Accounts.
 
8.2.1.           Records and Schedules of Accounts.  Each Borrower shall keep
accurate and complete records of its Accounts, including all payments and
collections thereon, and shall submit to Agent sales, collection, reconciliation
and other reports in form satisfactory to Agent, on such periodic basis as Agent
may request.  Each Borrower shall also provide to Agent, on or before the 15th
day of each month, a detailed aged trial balance of all Accounts as of the end
of the preceding month, specifying each Account’s Account Debtor name and
address, amount, invoice date and due date, showing any discount, allowance,
credit, authorized return or dispute, and including such proof of delivery,
copies of invoices and invoice registers, copies of related documents, repayment
histories, status reports and other information as Agent may reasonably
request.  If Accounts in an aggregate face amount of $250,000 or more cease to
be Eligible Accounts, Borrowers shall notify Agent of such occurrence promptly
(and in any event within one Business Day) after any Borrower has knowledge
thereof.
 
8.2.2.           Taxes.  If an Account of any Borrower includes a charge for any
Taxes, Agent is authorized, in its discretion, to pay the amount thereof to the
proper taxing authority for the account of such Borrower and to charge Borrowers
therefor; provided, however, that neither Agent nor Lenders shall be liable for
any Taxes that may be due from Borrowers or with respect to any Collateral.
 
8.2.3.           Account Verification.  Whether or not a Default or Event of
Default exists, Agent shall have the right at any time, in the name of Agent,
any designee of Agent or any Borrower, to verify the validity, amount or any
other matter relating to any Accounts of Borrowers by mail, telephone or
otherwise.  Borrowers shall cooperate fully with Agent in an effort to
facilitate and promptly conclude any such verification process.
 
8.2.4.           Maintenance of Dominion Account.  Borrowers shall maintain
Dominion Accounts pursuant to lockbox or other arrangements acceptable to
Agent.  Borrowers shall obtain an agreement (in form and substance satisfactory
to Agent) from each lockbox servicer and Dominion Account bank, establishing
Agent’s control over and Lien in the lockbox or Dominion Account, which control
may be exercised by Agent during any Trigger Period, requiring immediate deposit
of all remittances received in the lockbox to a Dominion Account during such
Trigger Period, and waiving offset rights of such servicer or bank, except for
customary administrative charges.  If a Dominion Account is not maintained with
Bank of America, Agent may require immediate transfer, during any Trigger
Period, of all funds in such account to a Dominion Account maintained with Bank
of America.  Agent and Lenders assume no responsibility to Borrowers for any
lockbox arrangement or Dominion Account, including any claim of accord and
satisfaction or release with respect to any Payment Items accepted by any bank.
 
8.2.5.           Proceeds of Collateral.  Subject to Section 5.2 and 7.6,
Borrowers shall request in writing and otherwise take all necessary steps to
ensure that all payments on Accounts or otherwise relating to Collateral are
made directly to a Dominion Account (or a lockbox relating to a Dominion
Account).  If any Borrower or Subsidiary receives cash or Payment Items with
respect to any Collateral, it shall hold same in trust for Agent and, subject to
Section 5.2 and 7.6, promptly (not later than the next Business Day) deposit
same into a Dominion Account.
 
8.3.           Administration of Inventory.
 
8.3.1.           Records and Reports of Inventory.  Each Borrower shall keep
accurate and complete records of its Inventory, including costs and daily
withdrawals and additions, and shall submit to Agent inventory and
reconciliation reports in form satisfactory to Agent, on or before the 15th day
of each month (or such other periodic basis as Agent may request).  Each
Borrower shall conduct a physical inventory at least once per calendar year (and
on a more frequent basis if requested by Agent when an Event of Default exists)
and periodic cycle counts consistent with historical practices, and shall
provide to Agent a report based on each such inventory and count promptly upon
completion thereof, together with such supporting information as Agent may
request.  Agent may participate in and observe each physical count.
 
 
-45-

--------------------------------------------------------------------------------

 
 
8.3.2.           Returns of Inventory.  No Borrower shall return any Inventory
to a supplier, vendor or other Person, whether for cash, credit or otherwise,
unless (a) such return is in the Ordinary Course of Business; (b) no Default,
Event of Default or Overadvance exists or would result therefrom; (c) Agent is
promptly notified if the aggregate Value of all Inventory returned in any month
exceeds $250,000; and (d) any payment received by a Borrower for a return is
promptly remitted to Agent for application to the Obligations.
 
8.3.3.           Acquisition, Sale and Maintenance.  No Borrower shall acquire
or accept any Inventory on consignment or approval, and shall take all steps to
assure that all Inventory is produced in accordance with Applicable Law,
including the FLSA.  No Borrower shall sell any Inventory on consignment or
approval or any other basis under which the customer may return or require a
Borrower to repurchase such Inventory.  Borrowers shall use, store and maintain
all Inventory with reasonable care and caution, in accordance with applicable
standards of any insurance and in conformity with all Applicable Law, and shall
make current rent payments (within applicable grace periods provided for in
leases) at all locations where any Collateral is located.
 
8.4.           Administration of Equipment.
 
8.4.1.           Records and Schedules of Equipment.  Each Borrower shall keep
accurate and complete records of its Equipment, including kind, quality,
quantity, cost, acquisitions and dispositions thereof, and shall submit to
Agent, on such periodic basis as Agent may request, a current schedule thereof,
in form satisfactory to Agent.  Promptly upon request, Borrowers shall deliver
to Agent evidence of their ownership or interests in any Equipment.
 
8.4.2.           Dispositions of Equipment.  No Borrower shall sell, lease or
otherwise dispose of any Equipment, without the prior written consent of Agent,
other than (a) a Permitted Asset Disposition; and (b) replacement of Equipment
that is worn, damaged or obsolete with Equipment of like function and value, if
the replacement Equipment is acquired substantially contemporaneously with such
disposition and is free of Liens.
 
8.4.3.           Condition of Equipment.  The Equipment is in good operating
condition and repair, and all necessary replacements and repairs have been made
so that the value and operating efficiency of the Equipment is preserved at all
times, reasonable wear and tear excepted.  Each Borrower shall ensure that the
Equipment is mechanically and structurally sound, and capable of performing the
functions for which it was designed, in accordance with manufacturer
specifications.  No Borrower shall permit any Equipment to become affixed to
real Property unless any landlord or mortgagee delivers a Lien Waiver.
 
8.5.           Administration of Deposit Accounts.  Schedule 8.5 sets forth all
Deposit Accounts maintained by Borrowers, including all Dominion Accounts.  Each
Borrower shall take all actions necessary to establish Agent’s control of each
such Deposit Account (other than (i) an account exclusively used for payroll,
payroll taxes or employee benefits, (ii) for a period of six (6) months after
the Closing Date, accounts of AVR or AVP containing not more than $250,000
individually or in the aggregate, or (iii) any other account containing not more
that $10,000 at any time).  Each Borrower shall be the sole account holder of
each Deposit Account and shall not allow any other Person (other than Agent) to
have control over a Deposit Account or any Property deposited therein.  Each
Borrower shall promptly notify Agent of any opening or closing of a Deposit
Account and, with the consent of Agent, will amend Schedule 8.5 to reflect same.
 
 
-46-

--------------------------------------------------------------------------------

 
 
8.6.           General Provisions.
 
8.6.1.           Location of Collateral.  All tangible items of Collateral,
other than Inventory in transit, shall at all times be kept by Borrowers at the
business locations set forth in Schedule 8.6.1, except that Borrowers may (a)
make sales or other dispositions of Collateral in accordance with Section
10.2.5; and (b) move Collateral to another location in the United States, upon
30 Business Days prior written notice to Agent.
 
8.6.2.           Insurance of Collateral; Condemnation Proceeds.
 
(a)           Each Borrower shall maintain insurance with respect to the
Collateral, covering casualty, hazard, theft, malicious mischief, flood and
other risks, in amounts, with endorsements and with insurers (with a Best’s
Financial Strength Rating of at least A_ VII, unless otherwise approved by
Agent) satisfactory to Agent, as Agent’s interest may appear.  All proceeds
under each policy shall be payable to Agent.  From time to time upon request,
Borrowers shall deliver to Agent the originals or certified copies of its
insurance policies and updated flood plain searches.  Unless Agent shall agree
otherwise, each policy shall include satisfactory endorsements (i) showing Agent
as loss payee; (ii) requiring 10 days prior written notice to Agent (via
electronic mail) in the event of cancellation of the policy for nonpayment of
premiums and 30 days prior written notice to Agent in the event of cancellation
of the policy for any other reason whatsoever; and (iii) specifying that the
interest of Agent shall not be impaired or invalidated by any act or neglect of
any Borrower or the owner of the Property, nor by the occupation of the premises
for purposes more hazardous than are permitted by the policy.  If any Borrower
fails to provide and pay for any insurance, Agent may, at its option, but shall
not be required to, procure the insurance and charge Borrowers therefor.  Each
Borrower agrees to deliver to Agent, promptly as rendered, copies of all reports
made to insurance companies.  While no Event of Default exists, Borrowers may
settle, adjust or compromise any insurance claim, as long as the proceeds are
delivered to Agent.  If an Event of Default exists, only Agent shall be
authorized to settle, adjust and compromise such claims.
 
(b)           Any proceeds of insurance (other than proceeds from workers’
compensation, automobile or management liability) and any awards arising from
condemnation of any Collateral shall be paid to Agent.  Any such proceeds or
awards that relate to Inventory shall be applied to payment of the Loans, and
then to any other Obligations outstanding.  Subject to clause (c) below, any
proceeds or awards that relate to Equipment or Real Estate shall be applied
first to Loans and then to other Obligations.
 
(c)           If requested by Borrowers in writing within 15 days after Agent’s
receipt of any insurance proceeds or condemnation awards relating to any loss or
destruction of Equipment or Real Estate, Borrowers may use such proceeds or
awards to repair or replace such Equipment or Real Estate (and until so used,
the proceeds shall be held by Agent as Cash Collateral) as long as (i) no
Default or Event of Default exists; (ii) such repair or replacement is promptly
undertaken and concluded, in accordance with plans satisfactory to Agent; (iii)
replacement buildings are constructed on the sites of the original casualties
and are of comparable size, quality and utility to the destroyed buildings; (iv)
the repaired or replaced Property is free of Liens, other than Permitted Liens
that are not Purchase Money Liens; (v) Borrowers comply with disbursement
procedures for such repair or replacement as Agent may reasonably require; and
(vi) the aggregate amount of such proceeds or awards from any single casualty or
condemnation does not exceed $250,000.
 
8.6.3.           Protection of Collateral.  All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping any Collateral, all
Taxes payable with respect to any Collateral (including any sale thereof), and
all other payments required to be made by Agent to any Person to realize upon
any Collateral, shall be borne and paid by Borrowers.  Agent shall not be liable
or responsible in any way for the safekeeping of any Collateral, for any loss or
damage thereto (except for reasonable care in its custody while Collateral is in
Agent’s actual possession), for any diminution in the value thereof, or for any
act or default of any warehouseman, carrier, forwarding agency or other Person
whatsoever, but the same shall be at Borrowers’ sole risk.
 
 
-47-

--------------------------------------------------------------------------------

 
 
8.6.4.           Defense of Title to Collateral.  Each Borrower shall at all
times defend its title to Collateral and Agent’s Liens therein against all
Persons, claims and demands whatsoever, except Permitted Liens.
 
8.7.           Power of Attorney.  Each Borrower hereby irrevocably constitutes
and appoints Agent (and all Persons designated by Agent) as such Borrower’s true
and lawful attorney (and agent-in-fact) for the purposes provided in this
Section.  Agent, or Agent’s designee, may, without notice and in either its or a
Borrower’s name, but at the cost and expense of Borrowers:
 
(a)           Endorse a Borrower’s name on any Payment Item or other proceeds of
Collateral (including proceeds of insurance) that come into Agent’s possession
or control; and
 
(b)           During an Event of Default, (i) notify any Account Debtors of the
assignment of their Accounts, demand and enforce payment of Accounts by legal
proceedings or otherwise, and generally exercise any rights and remedies with
respect to Accounts; (ii) settle, adjust, modify, compromise, discharge or
release any Accounts or other Collateral, or any legal proceedings brought to
collect Accounts or Collateral; (iii) sell or assign any Accounts and other
Collateral upon such terms, for such amounts and at such times as Agent deems
advisable; (iv) collect, liquidate and receive balances in Deposit Accounts or
investment accounts, and take control, in any manner, of proceeds of Collateral;
(v) prepare, file and sign a Borrower’s name to a proof of claim or other
document in a bankruptcy of an Account Debtor, or to any notice, assignment or
satisfaction of Lien or similar document; (vi) receive, open and dispose of mail
addressed to a Borrower, and notify postal authorities to deliver any such mail
to an address designated by Agent; (vii) endorse any Chattel Paper, Document,
Instrument, bill of lading, or other document or agreement relating to any
Accounts, Inventory or other Collateral; (viii) use a Borrower’s stationery and
sign its name to verifications of Accounts and notices to Account Debtors; (ix)
use information contained in any data processing, electronic or information
systems relating to Collateral; (x) make and adjust claims under insurance
policies; (xi) take any action as may be necessary or appropriate to obtain
payment under any letter of credit, banker’s acceptance or other instrument for
which a Borrower is a beneficiary; and (xii) take all other actions as Agent
deems appropriate to fulfill any Borrower’s obligations under the Loan
Documents.
 
SECTION 9.           REPRESENTATIONS AND WARRANTIES
 
9.1.           General Representations and Warranties.  To induce Agent and
Lenders to enter into this Agreement and to make available the Commitments,
Loans and Letters of Credit, each Borrower represents and warrants that:
 
9.1.1.           Organization and Qualification.  Each Borrower and Subsidiary
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization.  Each Borrower and Subsidiary is duly
qualified, authorized to do business and in good standing as a foreign
corporation in each jurisdiction where failure to be so qualified could
reasonably be expected to have a Material Adverse Effect.
 
9.1.2.           Power and Authority.  Each Obligor is duly authorized to
execute, deliver and perform its Loan Documents.  The execution, delivery and
performance of the Loan Documents have been duly authorized by all necessary
action, and do not (a) require any consent or approval of any holders of Equity
Interests of any Obligor, other than those already obtained; (b) contravene the
Organic Documents of any Obligor; (c) violate or cause a default under any
Applicable Law or Material Contract; or (d) result in or require the imposition
of any Lien (other than Permitted Liens) on any Property of any Obligor.
 
 
-48-

--------------------------------------------------------------------------------

 
 
9.1.3.           Enforceability.  Each Loan Document is a legal, valid and
binding obligation of each Obligor party thereto, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors’ rights generally.
 
9.1.4.           Capital Structure.  Schedule 9.1.4 shows, for each Borrower and
Subsidiary, its name, its jurisdiction of organization, its authorized and
issued Equity Interests, the holders of 10% or more of its Equity Interests, and
all agreements binding on such holders with respect to their Equity
Interests.  Except as disclosed on Schedule 9.1.4, in the five years preceding
the Closing Date, no Borrower or Subsidiary has acquired any substantial assets
from any other Person nor been the surviving entity in a merger or
combination.  Each Borrower has good title to its Equity Interests in its
Subsidiaries, subject only to Agent’s Lien, and all such Equity Interests are
duly issued, fully paid and non-assessable.  Except as disclosed on Schedule
9.1.4, there are no outstanding purchase options, warrants, subscription rights,
agreements to issue or sell, convertible interests, phantom rights or powers of
attorney relating to Equity Interests of any Borrower or Subsidiary other than
conversion rights of holders of notes issued under the Indenture.
 
9.1.5.           Title to Properties; Priority of Liens.  Each Borrower and
Subsidiary has good and marketable title to (or valid leasehold interests in)
all of its Real Estate, and good title to all of its personal Property,
including all Property reflected in any financial statements delivered to Agent
or Lenders, in each case free of Liens except Permitted Liens.  Each Borrower
and Subsidiary has paid and discharged all lawful claims that, if unpaid, could
become a Lien on its Properties, other than Permitted Liens.  All Liens of Agent
in the Collateral are duly perfected, first priority Liens, subject only to
Permitted Liens that are expressly allowed to have priority over Agent’s Liens.
 
9.1.6.           Accounts.  Agent may rely, in determining which Accounts are
Eligible Accounts, on all statements and representations made by Borrowers with
respect thereto.  Borrowers warrant, with respect to each Account at the time it
is shown as an Eligible Account in a Borrowing Base Certificate, that:
 
(a)           it is genuine and in all respects what it purports to be, and is
not evidenced by a judgment;
 
(b)           it arises out of a completed, bona fide sale and delivery of goods
or rendition of services in the Ordinary Course of Business, and substantially
in accordance with any purchase order, contract or other document relating
thereto;
 
(c)           it is for a sum certain, maturing as stated in the invoice
covering such sale or rendition of services, a copy of which has been furnished
or is available to Agent on request;
 
(d)           it is not subject to any offset, Lien (other than Agent’s Lien),
deduction, defense, dispute, counterclaim or other adverse condition except as
arising in the Ordinary Course of Business and disclosed to Agent; and it is
absolutely owing by the Account Debtor, without contingency in any respect;
 
(e)           no purchase order, agreement, document or Applicable Law restricts
assignment of the Account to Agent (regardless of whether, under the UCC, the
restriction is ineffective), and the applicable Borrower is the sole payee or
remittance party shown on the invoice;
 
 
-49-

--------------------------------------------------------------------------------

 
 
(f)           no extension, compromise, settlement, modification, credit,
deduction or return has been authorized with respect to the Account, except
discounts or allowances granted in the Ordinary Course of Business for prompt
payment that are reflected on the face of the invoice related thereto and in the
reports submitted to Agent hereunder; and
 
(g)           to the best of Borrowers’ knowledge, (i) there are no facts or
circumstances that are reasonably likely to impair the enforceability or
collectibility of such Account; (ii) the Account Debtor had the capacity to
contract when the Account arose, continues to meet the applicable Borrower’s
customary credit standards, is Solvent, is not contemplating or subject to an
Insolvency Proceeding, and has not failed, or suspended or ceased doing
business; and (iii) there are no proceedings or actions threatened or pending
against any Account Debtor that could reasonably be expected to have a material
adverse effect on the Account Debtor’s financial condition.
 
9.1.7.           Financial Statements.  The consolidated and consolidating
balance sheets, and related statements of income, cash flow and shareholder’s
equity, of Borrowers and Subsidiaries that have been and are hereafter delivered
to Agent and Lenders, are prepared in accordance with GAAP, and fairly present
the financial positions and results of operations of Borrowers and Subsidiaries
at the dates and for the periods indicated.  All projections delivered from time
to time to Agent and Lenders have been prepared in good faith, based on
reasonable assumptions in light of the circumstances at such time.  Since June
30, 2011, there has been no change in the business, assets, Properties,
liabilities, operations, prospects or condition, financial or otherwise, of any
Borrower or Subsidiary that could reasonably be expected to have a Material
Adverse Effect.  No financial statement delivered to Agent or Lenders at any
time contains any untrue statement of a material fact, nor fails to disclose any
material fact necessary to make such statement not materially misleading.  Each
Borrower and Subsidiary is Solvent.
 
9.1.8.           Surety Obligations.  No Borrower or Subsidiary is obligated as
surety or indemnitor under any bond or other contract that assures payment or
performance of any obligation of any Person, except as permitted hereunder.
 
9.1.9.           Taxes.  Each Borrower and Subsidiary has filed all federal,
state and local tax returns and other reports that it is required by law to
file, and has paid, or made provision for the payment of, all Taxes upon it, its
income and its Properties that are due and payable, except to the extent being
Properly Contested.  The provision for Taxes on the books of each Borrower and
Subsidiary is adequate for all years not closed by applicable statutes, and for
its current Fiscal Year.
 
9.1.10.               Brokers.  There are no brokerage commissions, finder’s
fees or investment banking fees payable in connection with any transactions
contemplated by the Loan Documents.
 
9.1.11.               Intellectual Property. Each Borrower and Subsidiary owns
or has the lawful right to use all Intellectual Property necessary for the
conduct of its business, without conflict with any rights of others.  There is
no pending or, to any Borrower’s knowledge, threatened Intellectual Property
Claim with respect to any Borrower, any Subsidiary or any of their Property
(including any Intellectual Property).  Except as disclosed on Schedule 9.1.11,
no Borrower or Subsidiary pays or owes any Royalty or other compensation to any
Person with respect to any Intellectual Property.  All Intellectual Property
owned, used or licensed by, or otherwise subject to any interests of, any
Borrower or Subsidiary is shown on Schedule 9.1.11.
 
9.1.12.               Governmental Approvals.  Each Borrower and Subsidiary has,
is in compliance with, and is in good standing with respect to, all Governmental
Approvals necessary to conduct its business and to own, lease and operate its
Properties.  All necessary import, export or other licenses, permits or
certificates for the import or handling of any goods or other Collateral have
been procured and are in effect, and Borrowers and Subsidiaries have complied
with all foreign and domestic laws with respect to the shipment and importation
of any goods or Collateral, except where noncompliance could not reasonably be
expected to have a Material Adverse Effect.
 
 
-50-

--------------------------------------------------------------------------------

 
 
9.1.13.               Compliance with Laws.  Each Borrower and Subsidiary has
duly complied, and its Properties and business operations are in compliance, in
all material respects with all Applicable Law, except where noncompliance could
not reasonably be expected to have a Material Adverse Effect.  There have been
no citations, notices or orders of material noncompliance issued to any Borrower
or Subsidiary under any Applicable Law.  No Inventory has been produced in
violation of the FLSA.
 
9.1.14.               Compliance with Environmental Laws.  Except as disclosed
on Schedule 9.1.14, no Borrower’s or Subsidiary’s past or present operations,
Real Estate or other Properties are subject to any federal, state or local
investigation to determine whether any remedial action is needed to address any
environmental pollution, hazardous material or environmental clean-up.  No
Borrower or Subsidiary has received any Environmental Notice.  No Borrower or
Subsidiary has any contingent liability with respect to any Environmental
Release, environmental pollution or hazardous material on any Real Estate now or
previously owned, leased or operated by it.
 
9.1.15.               Burdensome Contracts.  No Borrower or Subsidiary is a
party or subject to any contract, agreement or charter restriction that could
reasonably be expected to have a Material Adverse Effect.  No Borrower or
Subsidiary is party or subject to any Restrictive Agreement, except as shown on
Schedule 9.1.15.  No such Restrictive Agreement prohibits the execution,
delivery or performance of any Loan Document by an Obligor.
 
9.1.16.               Litigation.  Except as shown on Schedule 9.1.16, there are
no actions, suits, litigation, proceedings or investigations pending or, to any
Borrower’s knowledge, threatened against any Borrower or Subsidiary, or any of
their businesses, operations, assets, Properties, liabilities, prospects or
conditions, that (a) relate to any Loan Documents or transactions contemplated
thereby; or (b) could reasonably be expected to have a Material Adverse Effect
if determined adversely to any Borrower or Subsidiary, and any of their
businesses, operations, assets, Properties, liabilities, prospects or
conditions.  Except as shown on such Schedule, no Obligor has a Commercial Tort
Claim (other than, as long as no Default or Event of Default exists, a
Commercial Tort Claim for less than $100,000).  No Borrower or Subsidiary is in
default with respect to any order, injunction or judgment of any Governmental
Authority.
 
9.1.17.               No Defaults.  No event or circumstance has occurred or
exists that constitutes a Default or Event of Default.  No Borrower or
Subsidiary is in default, and no event or circumstance has occurred or exists
that with the passage of time or giving of notice would constitute a default,
under any Material Contract or in the payment of any Borrowed Money.  There is
no basis upon which any party (other than a Borrower or Subsidiary) could
terminate a Material Contract prior to its scheduled termination date.
 
9.1.18.               ERISA.  Except as disclosed on Schedule 9.1.18:
 
(a)           Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code, and other federal and state
laws.  Each Plan that is intended to qualify under Section 401(a) of the Code
has received a favorable determination letter from the IRS or an application for
such a letter is currently being processed by the IRS with respect thereto and,
to the knowledge of Borrowers, nothing has occurred which would prevent, or
cause the loss of, such qualification.  Each Obligor and ERISA Affiliate has
made all required contributions to each Plan subject to Section 412 of the Code,
and no application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Code has been made with respect to any
Plan.
 
 
-51-

--------------------------------------------------------------------------------

 
 
(b)           There are no pending or, to the knowledge of Borrowers, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan that could reasonably be expected to have a Material Adverse
Effect.  There has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan that has resulted in or could
reasonably be expected to have a Material Adverse Effect.
 
(c)           (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) no Obligor
or ERISA Affiliate has incurred, or reasonably expects to incur, any liability
under Title IV of ERISA with respect to any Pension Plan (other than premiums
due and not delinquent under Section 4007 of ERISA); (iv) no Obligor or ERISA
Affiliate has incurred, or reasonably expects to incur, any liability (and no
event has occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Section 4201 or 4243 of ERISA with respect
to a Multiemployer Plan; and (v) no Obligor or ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
 
(d)           With respect to any Foreign Plan, (i) all employer and employee
contributions required by law or by the terms of the Foreign Plan have been
made, or, if applicable, accrued, in accordance with normal accounting
practices; (ii) the fair market value of the assets of each funded Foreign Plan,
the liability of each insurer for any Foreign Plan funded through insurance, or
the book reserve established for any Foreign Plan, together with any accrued
contributions, is sufficient to procure or provide for the accrued benefit
obligations with respect to all current and former participants in such Foreign
Plan according to the actuarial assumptions and valuations most recently used to
account for such obligations in accordance with applicable generally accepted
accounting principles; and (iii) it has been registered as required and has been
maintained in good standing with applicable regulatory authorities.
 
9.1.19.               Trade Relations.  There exists no actual or threatened
termination, limitation or modification of any business relationship between any
Borrower or Subsidiary and any customer or supplier, or any group of customers
or suppliers, who individually or in the aggregate are material to the business
of such Borrower or Subsidiary.  There exists no condition or circumstance that
could reasonably be expected to impair the ability of any Borrower or Subsidiary
to conduct its business at any time hereafter in substantially the same manner
as conducted on the Closing Date.
 
9.1.20.               Labor Relations.  Except as described on Schedule 9.1.20,
no Borrower or Subsidiary is party to or bound by any collective bargaining
agreement, management agreement or consulting agreement.  There are no material
grievances, disputes or controversies with any union or other organization of
any Borrower’s or Subsidiary’s employees, or, to any Borrower’s knowledge, any
asserted or threatened strikes, work stoppages or demands for collective
bargaining.
 
9.1.21.               Payable Practices.  No Borrower or Subsidiary has made any
material change in its historical accounts payable practices from those in
effect on the Closing Date.
 
9.1.22.               Not a Regulated Entity.  No Obligor is (a) an “investment
company” or a “person directly or indirectly controlled by or acting on behalf
of an investment company” within the meaning of the Investment Company Act of
1940; or (b) subject to regulation under the Federal Power Act, the Interstate
Commerce Act, any public utilities code or any other Applicable Law regarding
its authority to incur Debt.
 
9.1.23.               Margin Stock.  No Borrower or Subsidiary is engaged,
principally or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock.  No Loan
proceeds or Letters of Credit will be used by Borrowers to purchase or carry, or
to reduce or refinance any Debt incurred to purchase or carry, any Margin Stock
or for any related purpose governed by Regulations T, U or X of the Board of
Governors.
 
 
-52-

--------------------------------------------------------------------------------

 
 
9.2.           Complete Disclosure.  No Loan Document contains any untrue
statement of a material fact, nor fails to disclose any material fact necessary
to make the statements contained therein not materially misleading.  There is no
fact or circumstance that any Obligor has failed to disclose to Agent in writing
that could reasonably be expected to have a Material Adverse Effect.
 
SECTION 10.         COVENANTS AND CONTINUING AGREEMENTS
 
10.1.         Affirmative Covenants.  As long as any Commitments or Obligations
are outstanding, each Borrower shall, and shall cause each Subsidiary to:
 
10.1.1.               Inspections; Appraisals.
 
(a)           Permit Agent from time to time, subject (except when a Default or
Event of Default exists) to reasonable notice and normal business hours, to
visit and inspect the Properties of any Borrower or Subsidiary, inspect, audit
and make extracts from any Borrower’s or Subsidiary’s books and records, and
discuss with its officers, employees, agents, advisors and independent
accountants such Borrower’s or Subsidiary’s business, financial condition,
assets, prospects and results of operations.  Lenders may participate in any
such visit or inspection, at their own expense.  Neither Agent nor any Lender
shall have any duty to any Borrower to make any inspection, nor to share any
results of any inspection, appraisal or report with any Borrower.  Borrowers
acknowledge that all inspections, appraisals and reports are prepared by Agent
and Lenders for their purposes, and Borrowers shall not be entitled to rely upon
them.
 
(b)           Reimburse Agent for all charges, costs and expenses of Agent in
connection with (i) examinations of any Obligor’s books and records or any other
financial or Collateral matters as Agent deems appropriate; and (ii) appraisals
of Inventory and Equipment.  Borrowers agree to pay Agent’s then standard
charges for examination activities, including the standard charges of Agent’s
internal examination and appraisal groups, as well as the charges of any third
party used for such purposes, but Borrowers’ reimbursement obligations shall be
limited to charges, costs and expenses of one inspection or audit per year
unless either (x) (A) a Default or Event of Default has occurred or (B) a
Trigger Period is in effect or (y) Borrowers have requested such inspections,
audits or appraisals for purposes of clause (f) of the definition of the term
“Permitted Acquisitions.”
 
10.1.2.               Financial and Other Information.  Keep adequate records
and books of account with respect to its business activities, in which proper
entries are made in accordance with GAAP reflecting all financial transactions;
and furnish to Agent and Lenders:
 
(a)           as soon as available, and in any event within 90 days after the
close of each Fiscal Year, balance sheets as of the end of such Fiscal Year and
the related statements of income, cash flow and shareholders’ equity for such
Fiscal Year, on consolidated and consolidating bases for Borrowers and
Subsidiaries, which consolidated statements shall be audited and certified
(without qualification) by a firm of independent certified public accountants of
recognized standing selected by Borrowers and acceptable to Agent, and shall set
forth in comparative form corresponding figures for the preceding Fiscal Year
and other information acceptable to Agent;
 
(b)           as soon as available, and in any event within 45 days after the
end of each Fiscal Quarter (but within 60 days after the last Fiscal Quarter in
a Fiscal Year), unaudited balance sheets as of the end of such Fiscal Quarter
and the related statements of income and cash flow for such Fiscal Quarter and
for the portion of the Fiscal Year then elapsed, on consolidated and
consolidating bases for Borrowers and Subsidiaries, setting forth in comparative
form corresponding figures for the preceding Fiscal Year and certified by the
chief financial officer of Borrower Agent as prepared in accordance with GAAP
and fairly presenting the financial position and results of operations for such
Fiscal Quarter and period, subject to normal year-end adjustments and the
absence of footnotes;
 
 
-53-

--------------------------------------------------------------------------------

 
 
(c)           as soon as available, and in any event within 30 days after the
end of each month (but within 60 days after the last month in a Fiscal Year),
unaudited balance sheets as of the end of such month and the related statements
of income and cash flow for such month and for the portion of the Fiscal Year
then elapsed, on consolidated and consolidating bases for Borrowers and
Subsidiaries, setting forth in comparative form corresponding figures for the
preceding Fiscal Year and certified by the chief financial officer of Borrower
Agent as prepared in accordance with GAAP and fairly presenting the financial
position and results of operations for such month and period, subject to normal
year-end adjustments and the absence of footnotes;
 
(d)           concurrently with delivery of financial statements under clauses
(a), (b) and (c) above, or more frequently if requested by Agent while a Default
or Event of Default exists, a Compliance Certificate executed by the chief
financial officer of Borrower Agent;
 
(e)           concurrently with delivery of financial statements under clause
(a) above, copies of all management letters and other material reports submitted
to Borrowers by their accountants in connection with such financial statements;
 
(f)           not later than the end of each Fiscal Year, projections of
Borrowers’ consolidated balance sheets, results of operations, cash flow and
Availability for the next Fiscal Year, month by month and for the next three
Fiscal Years, year by year;
 
(g)           at Agent’s request, a listing of each Borrower’s trade payables,
specifying the trade creditor and balance due, and a detailed trade payable
aging, all in form satisfactory to Agent;
 
(h)           promptly after the sending or filing thereof, copies of any proxy
statements, financial statements or reports that any Borrower has made generally
available to its shareholders; copies of any regular, periodic and special
reports or registration statements or prospectuses that any Borrower files with
the Securities and Exchange Commission or any other Governmental Authority, or
any securities exchange; and copies of any press releases or other statements
made available by a Borrower to the public concerning material changes to or
developments in the business of such Borrower;
 
(i)           promptly after the sending or filing thereof, copies of any annual
report to be filed in connection with each Plan or Foreign Plan;
 
(j)           such other reports and information (financial or otherwise) as
Agent may reasonably request from time to time in connection with any Collateral
or any Borrower’s, Subsidiary’s or other Obligor’s financial condition or
business; and
 
(k)           as soon as available, and in any event within 120 days after the
close of each Fiscal Year, financial statements for each Guarantor, in form and
substance satisfactory to Agent.
 
Simultaneously with retaining accountants for their annual audit, Borrowers
shall send a letter to the accountants, with a copy to Agent and Lenders,
notifying the accountants that one of the primary purposes for retaining their
services and obtaining audited financial statements is for use by Agent and
Lenders.  Agent is authorized to send such notice if Borrowers fail to do so for
any reason.
 
10.1.3.           Notices.  Notify Agent and Lenders in writing, promptly after
a Borrower’s obtaining knowledge thereof, of any of the following that affects
an Obligor:  (a) the threat or commencement of any proceeding or investigation,
whether or not covered by insurance, if an adverse determination could have a
Material Adverse Effect; (b) any pending or threatened labor dispute, strike or
walkout, or the expiration of any material labor contract; (c) any default under
or termination of a Material Contract; (d) the existence of any Default or Event
of Default; (e) any judgment in an amount exceeding $100,000; (f) the assertion
of any Intellectual Property Claim, if an adverse resolution could have a
Material Adverse Effect; (g) any violation or asserted violation of any
Applicable Law (including ERISA, OSHA, FLSA, or any Environmental Laws), if an
adverse resolution could have a Material Adverse Effect; (h) any Environmental
Release by an Obligor or on any Property owned, leased or occupied by an
Obligor; or receipt of any Environmental Notice; (i) the occurrence of any ERISA
Event; (j) the discharge of or any withdrawal or resignation by Borrowers’
independent accountants; or (k) any opening of a new office or place of
business, at least 30 days prior to such opening.
 
 
-54-

--------------------------------------------------------------------------------

 
 
10.1.4.           Landlord and Storage Agreements.  Upon request, provide Agent
with copies of all existing agreements, and promptly after execution thereof
provide Agent with copies of all future agreements, between an Obligor and any
landlord, warehouseman, processor, shipper, bailee or other Person that owns any
premises at which any Collateral may be kept or that otherwise may possess or
handle any Collateral.
 
10.1.5.           Compliance with Laws.  Comply with all Applicable Laws,
including ERISA, Environmental Laws, FLSA, OSHA, Anti-Terrorism Laws, and laws
regarding collection and payment of Taxes, and maintain all Governmental
Approvals necessary to the ownership of its Properties or conduct of its
business, unless failure to comply (other than failure to comply with
Anti-Terrorism Laws) or maintain could not reasonably be expected to have a
Material Adverse Effect.  Without limiting the generality of the foregoing, if
any Environmental Release occurs at or on any Properties of any Borrower or
Subsidiary, it shall act promptly and diligently to investigate and report to
Agent and all appropriate Governmental Authorities the extent of, and to make
appropriate remedial action to eliminate, such Environmental Release, whether or
not directed to do so by any Governmental Authority.
 
10.1.6.           Taxes.  Pay and discharge all Taxes prior to the date on which
they become delinquent or penalties attach, unless such Taxes are being Properly
Contested.
 
10.1.7.           Insurance.  In addition to the insurance required hereunder
with respect to Collateral, maintain insurance with insurers (with a Best Rating
of at least A7, unless otherwise approved by Agent) satisfactory to Agent with
respect to the Properties and business of Borrowers and Subsidiaries of such
type (including product liability, business interruption insurance, workers’
compensation, larceny, embezzlement, or other criminal misappropriation
insurance), in such amounts, with such coverages and deductibles as are
customary for companies similarly situated, and with loss payee and other
endorsements (as applicable) reasonably acceptable to the Agent; provided that
the Borrowers’ commercial property policy shall include coverage in an aggregate
amount of not less than $100,000,000 at all times.
 
10.1.8.           Licenses.  Keep each License affecting any Collateral
(including the manufacture, distribution or disposition of Inventory) or any
other material Property of Borrowers and Subsidiaries in full force and effect;
promptly notify Agent of any proposed modification to any such License, or entry
into any new License, in each case at least 30 days prior to its effective date;
pay all Royalties when due; and notify Agent of any default or breach asserted
by any Person to have occurred under any License.
 
10.1.9.           Future Subsidiaries.  Promptly notify Agent upon any Person
becoming a Subsidiary and, if such Person is not a Foreign Subsidiary, cause it
to become a Borrower hereunder in a manner satisfactory to Agent, and to execute
and deliver such joinders, documents, instruments and agreements and to take
such other actions as Agent shall require to evidence and perfect a Lien in
favor of Agent (for the benefit of Secured Parties) on all assets of such
Person, including delivery of such legal opinions, in form and substance
satisfactory to Agent, as it shall deem appropriate.
 
 
-55-

--------------------------------------------------------------------------------

 
 
10.1.10.         Banking Relationships.  Maintain substantially all operating
and depository accounts, investment accounts, lockbox administration and
services, funds transfer services, information reporting services, and all other
Cash Management Services with Bank of America at all times; provided, however,
that, notwithstanding the foregoing, Borrowers may establish and maintain
securities and other investment accounts with other financial institutions or
securities intermediaries selected by Akorn, in its reasonable discretion,
provided that Borrowers maintain at least $10,000,000 in the aggregate in
account balances with Bank of America or its Affiliates at all times, and
provided further that the Borrowers may not establish or maintain securities or
other investment accounts with financial institutions or securities
intermediaries other than Bank of America or its Affiliates at any time when
Borrowers’ account balances with Bank of America or its Affiliates are less than
$10,000,000 in the aggregate.  For purposes of this Section 10.1.10,
“substantially all” shall mean substantially all of such applicable accounts and
services based on the value and amount of deposits and assets held in such
accounts or covered by such services.
 
10.1.11.         Insurance Endorsements.  Obtain and deliver, within 45 days of
the date hereof, copies of endorsements to the insurance policies of the
Borrowers, which endorsements shall cover (i) Agent as loss payee and additional
insured on the Borrowers’ property and liability policies and (ii) notice and
other insurance requirements as noted in Section 8.6.2 herein, in each case in
form and substance acceptable to Agent.
 
10.2.           Negative Covenants.  As long as any Commitments or Obligations
are outstanding, each Borrower shall not, and shall cause each Subsidiary not
to:
 
10.2.1.           Permitted Debt.  Create, incur, guarantee or suffer to exist
any Debt, except:
 
(a)           the Obligations;
 
(b)           Subordinated Debt;
 
(c)           Permitted Purchase Money Debt;
 
(d)           Borrowed Money (other than the Obligations, Subordinated Debt and
Permitted Purchase Money Debt), but only to the extent outstanding on the
Closing Date and not satisfied with proceeds of the initial Loans;
 
(e)           Bank Product Debt;
 
(f)            Permitted Contingent Obligations;
 
(g)           Refinancing Debt as long as each Refinancing Condition is
satisfied;
 
(h)           Debt under the Indenture or notes issued under the Indenture; and
 
(i)            Debt that is not included in any of the preceding clauses of this
Section, is not secured by a Lien and does not exceed $250,000 in the aggregate
at any time.
 
10.2.2.           Permitted Liens.  Create or suffer to exist any Lien upon any
of its Property, except the following (collectively, “Permitted Liens”),
provided that any such Permitted Liens listed below shall not be permitted if
Section 7.8 applies to the applicable Property:
 
(a)           Liens in favor of Agent;
 
(b)           Purchase Money Liens securing Permitted Purchase Money Debt;
 
 
-56-

--------------------------------------------------------------------------------

 
 
(c)           Liens for Taxes not yet due or being Properly Contested;
 
(d)           statutory Liens (other than Liens for Taxes or imposed under
ERISA) arising in the Ordinary Course of Business, but only if (i) payment of
the obligations secured thereby is not yet due or is being Properly Contested,
and (ii) such Liens do not materially impair the value or use of the Property or
materially impair operation of the business of any Borrower or Subsidiary;
 
(e)           Liens incurred or deposits made in the Ordinary Course of Business
to secure the performance of tenders, bids, leases, contracts (except those
relating to Borrowed Money), statutory obligations and other similar
obligations, or arising as a result of progress payments under government
contracts, as long as such Liens are at all times junior to Agent’s Liens;
 
(f)            Liens arising in the Ordinary Course of Business that are subject
to Lien Waivers;
 
(g)           Liens arising by virtue of a judgment or judicial order against
any Borrower or Subsidiary, or any Property of a Borrower or Subsidiary, as long
as such Liens are (i) in existence for less than 20 consecutive days or being
Properly Contested, and (ii) at all times junior to Agent’s Liens;
 
(h)           easements, rights-of-way, restrictions, covenants or other
agreements of record, and other similar charges or encumbrances on Real Estate,
that do not secure any monetary obligation and do not interfere with the
Ordinary Course of Business;
 
(i)            normal and customary rights of setoff upon deposits in favor of
depository institutions, and Liens of a collecting bank on Payment Items in the
course of collection;
 
(j)            Liens in favor of the trustee under Section 7.06 of the
Indenture; and
 
(k)           existing Liens shown on Schedule 10.2.2.
 
10.2.3.          Distributions; Upstream Payments.  Declare or make any
Distributions, except Upstream Payments, Distributions that are Permitted
Transactions, or other payments specifically permitted pursuant to exceptions
set forth in Section 10.2.7(b) below; or create or suffer to exist any
encumbrance or restriction on the ability of a Subsidiary to make any Upstream
Payment, except for restrictions under the Loan Documents, under Applicable Law
or in effect on the Closing Date as shown on Schedule 9.1.15.
 
10.2.4.          Restricted Investments.  Make any Restricted Investment
(including any Restricted Investment in Akorn-Strides other than to the extent
in existence on the Closing Date), other than a Permitted Acquisition or a
Permitted Foreign Investment.
 
10.2.5.          Disposition of Assets.  Make any Asset Disposition, except a
Permitted Asset Disposition, a disposition of Equipment under Section 8.4.2, or
a transfer of Property by a Subsidiary or Obligor to a Borrower.
 
10.2.6.          Loans.  Make any loans or other advances of money to any
Person, except (a) advances to an officer or employee for salary, travel
expenses, commissions and similar items in the Ordinary Course of Business; (b)
prepaid expenses and extensions of trade credit made in the Ordinary Course of
Business; (c) deposits with financial institutions permitted hereunder; and (d)
as long as no Default or Event of Default exists, intercompany loans by a
Borrower to another Borrower.
 
 
-57-

--------------------------------------------------------------------------------

 
 
10.2.7.          Restrictions on Payment of Certain Debt.  Make any payments
(whether voluntary or mandatory, or a prepayment, redemption, retirement,
defeasance or acquisition) with respect to any (a) Subordinated Debt, except
regularly scheduled payments of principal, interest and fees, but only to the
extent permitted under any subordination agreement relating to such Debt (and a
Senior Officer of Borrower Agent shall certify to Agent, not less than five
Business Days prior to the date of payment, that all conditions under such
agreement have been satisfied); or (b) Borrowed Money (other than the
Obligations) prior to its due date under the agreements evidencing such Debt as
in effect on the Closing Date (or as amended thereafter with the consent of
Agent) except that the foregoing shall not prohibit, limit or restrict Akorn’s
right to make (x) any mandatory payment (whether a prepayment, conversion,
exchange or redemption, and whether in cash or by delivery of Equity Interests
of Akorn) under the Indenture or otherwise satisfy any mandatory obligation in
respect of Borrowed Money created or issued pursuant to the Indenture or (y) any
voluntary payment (whether a prepayment, conversion, exchange or redemption, and
whether in cash or by delivery of Equity Interests of Akorn) under the Indenture
so long as (i) in the case of clause (y) and as a precondition thereto, no
Default or Event of Default shall exist at the time of such voluntary payment or
would result therefrom and no Trigger Period shall exist at the time of such
voluntary payment or would result therefrom and (ii) in the case of clauses (x)
and (y), in no event shall proceeds of Loans hereunder be used by Borrowers to
redeem or repurchase notes under or relating to the Indenture or otherwise to
discharge obligations or make any other mandatory or voluntary payment under the
Indenture.
 
10.2.8.          Fundamental Changes.  Except for any Permitted Reorganization,
merge, combine or consolidate with any Person, or liquidate, wind up its affairs
or dissolve itself, in each case whether in a single transaction or in a series
of related transactions, except for mergers or consolidations of a wholly-owned
Subsidiary with another wholly-owned Subsidiary or into a Borrower; change its
name or conduct business under any fictitious name; change its tax, charter or
other organizational identification number; or change its form or state of
organization.
 
10.2.9.          Subsidiaries.  Form or acquire any Subsidiary after the Closing
Date, except in accordance with Sections 10.1.9 and 10.2.4; or permit any
existing Subsidiary to issue any additional Equity Interests except director’s
qualifying shares.
 
10.2.10.        Organic Documents.  Amend, modify or otherwise change any of its
Organic Documents as in effect on the Closing Date (except to the extent
necessary in connection with a Permitted Reorganization).
 
10.2.11.        Tax Consolidation.  File or consent to the filing of any
consolidated income tax return with any Person other than Borrowers and
Subsidiaries.
 
10.2.12.        Accounting Changes.  Make any material change in accounting
treatment or reporting practices, except as required by GAAP and in accordance
with Section 1.2; or change its Fiscal Year.
 
10.2.13.        Restrictive Agreements.  Become a party to any Restrictive
Agreement, except a Restrictive Agreement (a) in effect on the Closing Date; (b)
relating to secured Debt permitted hereunder, as long as the restrictions apply
only to collateral for such Debt; or (c) constituting customary restrictions on
assignment in leases and other contracts.
 
10.2.14.        Hedging Agreements.  Enter into any Hedging Agreement, except to
hedge risks arising in the Ordinary Course of Business and not for speculative
purposes.
 
10.2.15.        Conduct of Business.  Engage in any business, other than its
business as conducted on the Closing Date, or any similar, related, ancillary or
complementary businesses to the principal business of Akorn and its Subsidiaries
as conducted on the Closing Date, and any activities incidental thereto.
 
 
-58-

--------------------------------------------------------------------------------

 
 
10.2.16.        Affiliate Transactions.  Enter into or be party to any
transaction with an Affiliate, except (a) transactions contemplated by the Loan
Documents; (b) payment of reasonable compensation to officers and employees for
services actually rendered, and loans and advances permitted by Section 10.2.6;
(c) payment of customary directors’ fees and indemnities; (d) transactions
solely among Borrowers; (e) transactions with Affiliates that were consummated
prior to the Closing Date, as shown on Schedule 10.2.16; and (f) transactions
with Affiliates in the Ordinary Course of Business, upon fair and reasonable
terms fully disclosed to Agent and no less favorable than would be obtained in a
comparable arm’s-length transaction with a non-Affiliate.
 
10.2.17.        Plans.  Become party to any Multiemployer Plan or Foreign Plan,
other than any in existence on the Closing Date.
 
10.2.18.        Amendments to Subordinated Debt or Indenture.  Amend, supplement
or otherwise modify the Indenture or any notes relating thereto or amend,
supplement or otherwise modify any other document, instrument or agreement
relating to any Subordinated Debt, if such modification (a) increases the
principal balance of such Subordinated Debt, or increases any required payment
of principal or interest; (b) accelerates the date on which any installment of
principal or any interest is due, or adds any additional redemption, put or
prepayment provisions; (c) shortens the final maturity date or otherwise
accelerates amortization; (d) increases the interest rate; (e) increases or adds
any fees or charges; (f) modifies any covenant in a manner or adds any
representation, covenant or default that is more onerous or restrictive in any
material respect for any Borrower or Subsidiary, or that is otherwise materially
adverse to any Borrower, any Subsidiary or Lenders; or (g) results in the
Obligations not being fully benefited by the subordination provisions thereof.
 
10.3.        Financial Covenants.  As long as any Commitments or Obligations are
outstanding, Borrowers shall maintain a Fixed Charge Coverage Ratio of at least
1.1 to 1.0 for each period of four Fiscal Quarters ending during any Trigger
Period and for the period of four Fiscal Quarters most recently ended before any
such Trigger Period.
 
SECTION 11.        EVENTS OF DEFAULT; REMEDIES ON DEFAULT
 
11.1.        Events of Default.  Each of the following shall be an “Event of
Default” hereunder, if the same shall occur for any reason whatsoever, whether
voluntary or involuntary, by operation of law or otherwise:
 
(a)           A Borrower fails to pay any Obligations when due (whether at
stated maturity, on demand, upon acceleration or otherwise);
 
(b)           Any representation, warranty or other written statement of an
Obligor made in connection with any Loan Documents or transactions contemplated
thereby is incorrect or misleading in any material respect when given;
 
(c)           A Borrower breaches or fail to perform any covenant contained in
Section 7.2, 7.3, 7.4, 7.6, 8.1, 8.2.4, 8.2.5, 8.6.2, 10.1.1, 10.1.2, 10.2 or
10.3;
 
(d)           An Obligor breaches or fails to perform any other covenant
contained in any Loan Documents, and such breach or failure is not cured within
15 days after a Senior Officer of such Obligor has knowledge thereof or receives
notice thereof from Agent, whichever is sooner; provided, however, that such
notice and opportunity to cure shall not apply if the breach or failure to
perform is not capable of being cured within such period or is a willful breach
by an Obligor;
 
 
-59-

--------------------------------------------------------------------------------

 
 
(e)           A Guarantor repudiates, revokes or attempts to revoke its
Guaranty; an Obligor or third party denies or contests the validity or
enforceability of any Loan Documents or Obligations, or the perfection or
priority of any Lien granted to Agent; or any Loan Document ceases to be in full
force or effect for any reason (other than a waiver or release by Agent and
Lenders);
 
(f)           Any breach or default of an Obligor occurs under any Hedging
Agreement, or any document, instrument or agreement to which it is a party or by
which it or any of its Properties is bound, relating to any Debt (other than the
Obligations) in excess of $500,000 (including, without limitation, the
Indenture), if the maturity of or any payment with respect to such Debt may be
accelerated or demanded due to such breach;
 
(g)           Any judgment or order for the payment of money is entered against
an Obligor in an amount that exceeds, individually or cumulatively with all
unsatisfied judgments or orders against all Obligors, $250,000 (net of any
insurance coverage therefor acknowledged in writing by the insurer), unless a
stay of enforcement of such judgment or order is in effect, by reason of a
pending appeal or otherwise;
 
(h)           A loss, theft, damage or destruction occurs with respect to any
Collateral if the amount not covered by insurance exceeds $500,000;
 
(i)           An Obligor is enjoined, restrained or in any way prevented by any
Governmental Authority from conducting any material part of its business; an
Obligor suffers the loss, revocation or termination of any material license,
permit, lease or agreement necessary to its business; there is a cessation of
any material part of an Obligor’s business for a material period of time; any
material Collateral or Property of an Obligor is taken or impaired through
condemnation; an Obligor agrees to or commences any liquidation, dissolution or
winding up of its affairs; or an Obligor is not Solvent;
 
(j)           An Insolvency Proceeding is commenced by an Obligor; an Obligor
makes an offer of settlement, extension or composition to its unsecured
creditors generally; a trustee is appointed to take possession of any
substantial Property of or to operate any of the business of an Obligor; or an
Insolvency Proceeding is commenced against an Obligor and:  the Obligor consents
to institution of the proceeding, the petition commencing the proceeding is not
timely contested by the Obligor, the petition is not dismissed within 45 days
after filing, or an order for relief is entered in the proceeding;
 
(k)          An ERISA Event occurs with respect to a Pension Plan or
Multiemployer Plan that has resulted or could reasonably be expected to result
in liability of an Obligor to a Pension Plan, Multiemployer Plan or PBGC, or
that constitutes grounds for appointment of a trustee for or termination by the
PBGC of any Pension Plan or Multiemployer Plan; an Obligor or ERISA Affiliate
fails to pay when due any installment payment with respect to its withdrawal
liability under Section 4201 of ERISA under a Multiemployer Plan; or any event
similar to the foregoing occurs or exists with respect to a Foreign Plan;
 
(l)           An Obligor or any of its Senior Officers is criminally indicted or
convicted for (i) a felony committed in the conduct of the Obligor’s business,
or (ii) violating any state or federal law (including the Controlled Substances
Act, Money Laundering Control Act of 1986 and Illegal Exportation of War
Materials Act) that could lead to forfeiture of any material Property or any
Collateral; or
 
(m)         A Change of Control occurs; or any event occurs or condition exists
that has a Material Adverse Effect.
 
11.2.        Remedies upon Default.  If an Event of Default described in Section
11.1(j) occurs with respect to any Borrower, then to the extent permitted by
Applicable Law, all Obligations (other than Secured Bank Product Obligations)
shall become automatically due and payable and all Commitments shall terminate,
without any action by Agent or notice of any kind.  In addition, or if any other
Event of Default exists, Agent may in its discretion (and shall upon written
direction of Required Lenders) do any one or more of the following from time to
time:
 
 
-60-

--------------------------------------------------------------------------------

 
 
(a)          declare any Obligations (other than Secured Bank Product
Obligations) immediately due and payable, whereupon they shall be due and
payable without diligence, presentment, demand, protest or notice of any kind,
all of which are hereby waived by Borrowers to the fullest extent permitted by
law;
 
(b)          terminate, reduce or condition any Commitment, or make any
adjustment to the Borrowing Base;
 
(c)           require Obligors to Cash Collateralize LC Obligations, Secured
Bank Product Obligations and other Obligations that are contingent or not yet
due and payable, and, if Obligors fail promptly to deposit such Cash Collateral,
Agent may (and shall upon the direction of Required Lenders) advance the
required Cash Collateral as Loans (whether or not an Overadvance exists or is
created thereby, or the conditions in Section 6 are satisfied); and
 
(d)          exercise any other rights or remedies afforded under any agreement,
by law, at equity or otherwise, including the rights and remedies of a secured
party under the UCC.  Such rights and remedies include the rights to (i) take
possession of any Collateral; (ii) require Borrowers to assemble Collateral, at
Borrowers’ expense, and make it available to Agent at a place designated by
Agent; (iii) enter any premises where Collateral is located and store Collateral
on such premises until sold (and if the premises are owned or leased by a
Borrower, Borrowers agree not to charge for such storage); and (iv) sell or
otherwise dispose of any Collateral in its then condition, or after any further
manufacturing or processing thereof, at public or private sale, with such notice
as may be required by Applicable Law, in lots or in bulk, at such locations, all
as Agent, in its discretion, deems advisable.  Each Borrower agrees that 10 days
notice of any proposed sale or other disposition of Collateral by Agent shall be
reasonable.  Agent shall have the right to conduct such sales on any Obligor’s
premises, without charge, and such sales may be adjourned from time to time in
accordance with Applicable Law.  Agent shall have the right to sell, lease or
otherwise dispose of any Collateral for cash, credit or any combination thereof,
and Agent may purchase any Collateral at public or, if permitted by law, private
sale and, in lieu of actual payment of the purchase price, may credit bid and
set off the amount of such price against the Obligations.
 
11.3.        License.  Agent is hereby granted an irrevocable, non-exclusive
license or other right to use, license or sub-license (without payment of
royalty or other compensation to any Person) any or all Intellectual Property of
Borrowers, computer hardware and software, trade secrets, brochures, customer
lists, promotional and advertising materials, labels, packaging materials and
other Property, in advertising for sale, marketing, selling, collecting,
completing manufacture of, or otherwise exercising any rights or remedies with
respect to, any Collateral.  Each Borrower’s rights and interests under
Intellectual Property shall inure to Agent’s benefit.
 
11.4.        Setoff.  At any time during an Event of Default, Agent, Issuing
Bank, Lenders, and any of their Affiliates are authorized, to the fullest extent
permitted by Applicable Law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final, in whatever currency) at any
time held and other obligations (in whatever currency) at any time owing by
Agent, Issuing Bank, such Lender or such Affiliate to or for the credit or the
account of an Obligor against any Obligations, irrespective of whether or not
Agent, Issuing Bank, such Lender or such Affiliate shall have made any demand
under this Agreement or any other Loan Document and although such Obligations
may be contingent or unmatured or are owed to a branch or office of Agent,
Issuing Bank, such Lender or such Affiliate different from the branch or office
holding such deposit or obligated on such indebtedness.  The rights of Agent,
Issuing Bank, each Lender and each such Affiliate under this Section are in
addition to other rights and remedies (including other rights of setoff) that
such Person may have.
 
 
-61-

--------------------------------------------------------------------------------

 
 
11.5.        Remedies Cumulative; No Waiver.
 
11.5.1.                  Cumulative Rights.  All agreements, warranties,
guaranties, indemnities and other undertakings of Borrowers under the Loan
Documents are cumulative and not in derogation of each other.  The rights and
remedies of Agent and Lenders are cumulative, may be exercised at any time and
from time to time, concurrently or in any order, and are not exclusive of any
other rights or remedies available by agreement, by law, at equity or
otherwise.  All such rights and remedies shall continue in full force and effect
until Full Payment of all Obligations.
 
11.5.2.                  Waivers.  No waiver or course of dealing shall be
established by (a) the failure or delay of Agent or any Lender to require strict
performance by Borrowers with any terms of the Loan Documents, or to exercise
any rights or remedies with respect to Collateral or otherwise; (b) the making
of any Loan or issuance of any Letter of Credit during a Default, Event of
Default or other failure to satisfy any conditions precedent; or (c) acceptance
by Agent or any Lender of any payment or performance by an Obligor under any
Loan Documents in a manner other than that specified therein.  It is expressly
acknowledged by Borrowers that any failure to satisfy a financial covenant on a
measurement date shall not be cured or remedied by satisfaction of such covenant
on a subsequent date.
 
SECTION 12.        AGENT
 
12.1.        Appointment, Authority and Duties of Agent.
 
12.1.1.                  Appointment and Authority.  Each Secured Party appoints
and designates Bank of America as Agent under all Loan Documents.  Agent may,
and each Secured Party authorizes Agent to, enter into all Loan Documents to
which Agent is intended to be a party and accept all Security Documents, for the
benefit of Secured Parties.  Each Secured Party agrees that any action taken by
Agent or Required Lenders in accordance with the provisions of the Loan
Documents, and the exercise by Agent or Required Lenders of any rights or
remedies set forth therein, together with all other powers reasonably incidental
thereto, shall be authorized by and binding upon all Secured Parties.  Without
limiting the generality of the foregoing, Agent shall have the sole and
exclusive authority to (a) act as the disbursing and collecting agent for
Lenders with respect to all payments and collections arising in connection with
the Loan Documents; (b) execute and deliver as Agent each Loan Document,
including any intercreditor or subordination agreement, and accept delivery of
each Loan Document from any Obligor or other Person; (c) act as collateral agent
for Secured Parties for purposes of perfecting and administering Liens under the
Loan Documents, and for all other purposes stated therein; (d) manage, supervise
or otherwise deal with Collateral; and (e) take any Enforcement Action or
otherwise exercise any rights or remedies with respect to any Collateral under
the Loan Documents, Applicable Law or otherwise.  The duties of Agent shall be
ministerial and administrative in nature, and Agent shall not have a fiduciary
relationship with any Secured Party, Participant or other Person, by reason of
any Loan Document or any transaction relating thereto.  Agent alone shall be
authorized to determine whether any Accounts or Inventory constitute Eligible
Accounts or Eligible Inventory, whether to impose or release any reserve, or
whether any conditions to funding or to issuance of a Letter of Credit have been
satisfied, which determinations and judgments, if exercised in good faith, shall
exonerate Agent from liability to any Lender or other Person for any error in
judgment.
 
12.1.2.                  Duties.  Agent shall not have any duties except those
expressly set forth in the Loan Documents.  The conferral upon Agent of any
right shall not imply a duty to exercise such right, unless instructed to do so
by Lenders in accordance with this Agreement.
 
 
-62-

--------------------------------------------------------------------------------

 
 
12.1.3.                  Agent Professionals.  Agent may perform its duties
through agents and employees.  Agent may consult with and employ Agent
Professionals, and shall be entitled to act upon, and shall be fully protected
in any action taken in good faith reliance upon, any advice given by an Agent
Professional.  Agent shall not be responsible for the negligence or misconduct
of any agents, employees or Agent Professionals selected by it with reasonable
care.
 
12.1.4.                  Instructions of Required Lenders.  The rights and
remedies conferred upon Agent under the Loan Documents may be exercised without
the necessity of joinder of any other party, unless required by Applicable
Law.  Agent may request instructions from Required Lenders or other Secured
Parties with respect to any act (including the failure to act) in connection
with any Loan Documents, and may seek assurances to its satisfaction from
Secured Parties of their indemnification obligations against all Claims that
could be incurred by Agent in connection with any act.  Agent shall be entitled
to refrain from any act until it has received such instructions or assurances,
and Agent shall not incur liability to any Person by reason of so
refraining.  Instructions of Required Lenders shall be binding upon all Secured
Parties, and no Secured Party shall have any right of action whatsoever against
Agent as a result of Agent acting or refraining from acting in accordance with
the instructions of Required Lenders.  Notwithstanding the foregoing,
instructions by and consent of specific parties shall be required to the extent
provided in Section 14.1.1.  In no event shall Agent be required to take any
action that, in its opinion, is contrary to Applicable Law or any Loan Documents
or could subject any Agent Indemnitee to personal liability.
 
12.2.        Agreements Regarding Collateral and Field Examination Reports.
 
12.2.1.                      Lien Releases; Care of Collateral.  Secured Parties
authorize Agent to release any Lien with respect to any Collateral (a) upon Full
Payment of the Obligations; (b) that is the subject of an Asset Disposition
which Borrowers certify in writing to Agent is a Permitted Asset Disposition or
a Lien which Borrowers certify is a Permitted Lien entitled to priority over
Agent’s Liens (and Agent may rely conclusively on any such certificate without
further inquiry); (c) that does not constitute a material part of the
Collateral; or (d) with the written consent of all Lenders.  Secured Parties
authorize Agent to subordinate its Liens to any Purchase Money Lien permitted
hereunder.  Agent shall have no obligation to assure that any Collateral exists
or is owned by a Borrower, or is cared for, protected or insured, nor to assure
that Agent’s Liens have been properly created, perfected or enforced, or are
entitled to any particular priority, nor to exercise any duty of care with
respect to any Collateral.
 
12.2.2.                      Possession of Collateral.  Agent and Secured
Parties appoint each Lender as agent (for the benefit of Secured Parties) for
the purpose of perfecting Liens in any Collateral held or controlled by such
Lender, to the extent such Liens are perfected by possession or control.  If any
Lender obtains possession or control of any Collateral, it shall notify Agent
thereof and, promptly upon Agent’s request, deliver such Collateral to Agent or
otherwise deal with it in accordance with Agent’s instructions.
 
12.2.3.                      Reports.  Agent shall promptly forward to each
Lender, when complete, copies of any field audit, examination or appraisal
report prepared by or for Agent with respect to any Obligor or Collateral
(“Report”).  Each Lender agrees (a) that neither Bank of America nor Agent makes
any representation or warranty as to the accuracy or completeness of any Report,
and shall not be liable for any information contained in or omitted from any
Report; (b) that the Reports are not intended to be comprehensive audits or
examinations, and that Agent or any other Person performing any audit or
examination will inspect only specific information regarding Obligations or the
Collateral and will rely significantly upon Borrowers’ books and records as well
as upon representations of Borrowers’ officers and employees; and (c) to keep
all Reports confidential and strictly for such Lender’s internal use, and not to
distribute any Report (or the contents thereof) to any Person (except to such
Lender’s Participants, attorneys and accountants) or use any Report in any
manner other than administration of the Loans and other Obligations.  Each
Lender shall indemnify and hold harmless Agent and any other Person preparing a
Report from any action such Lender may take as a result of or any conclusion it
may draw from any Report, as well as from any Claims arising as a direct or
indirect result of Agent furnishing a Report to such Lender.
 
 
-63-

--------------------------------------------------------------------------------

 
 
12.3.        Reliance By Agent.  Agent shall be entitled to rely, and shall be
fully protected in relying, upon any certification, notice or other
communication (including those by telephone, telex, telegram, telecopy or
e-mail) believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person, and upon the advice and statements of Agent
Professionals.  Agent shall have a reasonable and practicable amount of time to
act upon any instruction, notice or other communication under any Loan Document,
and shall not be liable for any delay in acting.
 
12.4.        Action Upon Default.  Agent shall not be deemed to have knowledge
of any Default or Event of Default, or of any failure to satisfy any conditions
in Section 6, unless it has received written notice from a Borrower or Required
Lenders specifying the occurrence and nature thereof.  If any Lender acquires
knowledge of a Default, Event of Default or failure of such conditions, it shall
promptly notify Agent and the other Lenders thereof in writing.  Each Secured
Party agrees that, except as otherwise provided in any Loan Documents or with
the written consent of Agent and Required Lenders, it will not take any
Enforcement Action, accelerate Obligations (other than Secured Bank Product
Obligations), or exercise any right that it might otherwise have under
Applicable Law to credit bid at foreclosure sales, UCC sales or other similar
dispositions of Collateral or to assert any rights relating to any Collateral.
 
12.5.        Ratable Sharing.  If any Lender shall obtain any payment or
reduction of any Obligation, whether through set-off or otherwise, in excess of
its share of such Obligation, determined on a Pro Rata basis or in accordance
with Section 5.5.1, as applicable, such Lender shall forthwith purchase from
Agent, Issuing Bank and the other Lenders such participations in the affected
Obligation as are necessary to cause the purchasing Lender to share the excess
payment or reduction on a Pro Rata basis or in accordance with Section 5.5.1, as
applicable.  If any of such payment or reduction is thereafter recovered from
the purchasing Lender, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest.  Notwithstanding
the foregoing, if a Defaulting Lender obtains a payment or reduction of any
Obligation, it shall immediately turn over the amount thereof to Agent for
application under Section 4.2.2 and it shall provide a written statement to
Agent describing the Obligation affected by such payment or reduction.  No
Lender shall set off against any Dominion Account without the prior consent of
Agent.
 
12.6.        Indemnification.  EACH LENDER SHALL INDEMNIFY AND HOLD HARMLESS
AGENT INDEMNITEES AND ISSUING BANK INDEMNITEES, TO THE EXTENT NOT REIMBURSED BY
OBLIGORS, ON A PRO RATA BASIS, AGAINST ALL CLAIMS THAT MAY BE INCURRED BY OR
ASSERTED AGAINST ANY SUCH INDEMNITEE, PROVIDED THAT ANY CLAIM AGAINST AN AGENT
INDEMNITEE RELATES TO OR ARISES FROM ITS ACTING AS OR FOR AGENT (IN THE CAPACITY
OF AGENT).  In Agent’s discretion, it may reserve for any Claims made against an
Agent Indemnitee or Issuing Bank Indemnitee, and may satisfy any judgment, order
or settlement relating thereto, from proceeds of Collateral prior to making any
distribution of Collateral proceeds to Secured Parties.  If Agent is sued by any
receiver, bankruptcy trustee, debtor-in-possession or other Person for any
alleged preference or fraudulent transfer, then any monies paid by Agent in
settlement or satisfaction of such proceeding, together with all interest, costs
and expenses (including attorneys’ fees) incurred in the defense of same, shall
be promptly reimbursed to Agent by each Lender to the extent of its Pro Rata
share.
 
12.7.        Limitation on Responsibilities of Agent.  Agent shall not be liable
to any Secured Party for any action taken or omitted to be taken under the Loan
Documents, except for losses directly and solely caused by Agent’s gross
negligence or willful misconduct.  Agent does not assume any responsibility for
any failure or delay in performance or any breach by any Obligor, Lender or
other Secured Party of any obligations under the Loan Documents.  Agent does not
make any express or implied representation, warranty or guarantee to Secured
Parties with respect to any Obligations, Collateral, Loan Documents or
Obligor.  No Agent Indemnitee shall be responsible to Secured Parties for any
recitals, statements, information, representations or warranties contained in
any Loan Documents; the execution, validity, genuineness, effectiveness or
enforceability of any Loan Documents; the genuineness, enforceability,
collectibility, value, sufficiency, location or existence of any Collateral, or
the validity, extent, perfection or priority of any Lien therein; the validity,
enforceability or collectibility of any Obligations; or the assets, liabilities,
financial condition, results of operations, business, creditworthiness or legal
status of any Obligor or Account Debtor.  No Agent Indemnitee shall have any
obligation to any Secured Party to ascertain or inquire into the existence of
any Default or Event of Default, the observance by any Obligor of any terms of
the Loan Documents, or the satisfaction of any conditions precedent contained in
any Loan Documents.
 
 
-64-

--------------------------------------------------------------------------------

 
 
12.8.        Successor Agent and Co-Agents.
 
12.8.1.                  Resignation; Successor Agent.  Subject to the
appointment and acceptance of a successor Agent as provided below, Agent may
resign at any time by giving at least 30 days written notice thereof to Lenders
and Borrowers.  Upon receipt of such notice, Required Lenders shall have the
right to appoint a successor Agent which shall be (a) a Lender or an Affiliate
of a Lender; or (b) a commercial bank that is organized under the laws of the
United States or any state or district thereof, has a combined capital surplus
of at least $200,000,000 and (provided no Default or Event of Default exists) is
reasonably acceptable to Borrowers.  If no successor agent is appointed prior to
the effective date of the resignation of Agent, then Agent may appoint a
successor agent from among Lenders or, if no Lender accepts such role, Agent may
appoint Required Lenders as successor Agent.  Upon acceptance by a successor
Agent of an appointment to serve as Agent hereunder, or upon appointment of
Required Lenders as successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the powers and duties of the retiring
Agent without further act, and the retiring Agent shall be discharged from its
duties and obligations hereunder but shall continue to have the benefits of the
indemnification set forth in Sections 12.6 and 14.2.  Notwithstanding any
Agent’s resignation, the provisions of this Section 12 shall continue in effect
for its benefit with respect to any actions taken or omitted to be taken by it
while Agent.  Any successor to Bank of America by merger or acquisition of stock
or this loan shall continue to be Agent hereunder without further act on the
part of the parties hereto, unless such successor resigns as provided above.
 
12.8.2.                  Separate Collateral Agent.  It is the intent of the
parties that there shall be no violation of any Applicable Law denying or
restricting the right of financial institutions to transact business in any
jurisdiction.  If Agent believes that it may be limited in the exercise of any
rights or remedies under the Loan Documents due to any Applicable Law, Agent may
appoint an additional Person who is not so limited, as a separate collateral
agent or co-collateral agent.  If Agent so appoints a collateral agent or
co-collateral agent, each right and remedy intended to be available to Agent
under the Loan Documents shall also be vested in such separate agent.  Secured
Parties shall execute and deliver such documents as Agent deems appropriate to
vest any rights or remedies in such agent.  If any collateral agent or
co-collateral agent shall die or dissolve, become incapable of acting, resign or
be removed, then all the rights and remedies of such agent, to the extent
permitted by Applicable Law, shall vest in and be exercised by Agent until
appointment of a new agent.
 
12.9.        Due Diligence and Non-Reliance.  Each Lender acknowledges and
agrees that it has, independently and without reliance upon Agent or any other
Lenders, and based upon such documents, information and analyses as it has
deemed appropriate, made its own credit analysis of each Obligor and its own
decision to enter into this Agreement and to fund Loans and participate in LC
Obligations hereunder.  Each Secured Party has made such inquiries as it feels
necessary concerning the Loan Documents, Collateral and Obligors.  Each Secured
Party acknowledges and agrees that the other Secured Parties have made no
representations or warranties concerning any Obligor, any Collateral or the
legality, validity, sufficiency or enforceability of any Loan Documents or
Obligations.  Each Secured Party will, independently and without reliance upon
any other Secured Party, and based upon such financial statements, documents and
information as it deems appropriate at the time, continue to make and rely upon
its own credit decisions in making Loans and participating in LC Obligations,
and in taking or refraining from any action under any Loan Documents.  Except
for notices, reports and other information expressly requested by a Lender,
Agent shall have no duty or responsibility to provide any Secured Party with any
notices, reports or certificates furnished to Agent by any Obligor or any credit
or other information concerning the affairs, financial condition, business or
Properties of any Obligor (or any of its Affiliates) which may come into
possession of Agent or its Affiliates.
 
 
-65-

--------------------------------------------------------------------------------

 
 
12.10.     Remittance of Payments and Collections.
 
12.10.1.               Remittances Generally.  All payments by any Lender to
Agent shall be made by the time and on the day set forth in this Agreement, in
immediately available funds.  If no time for payment is specified or if payment
is due on demand by Agent and request for payment is made by Agent by 11:00 a.m.
on a Business Day, payment shall be made by Lender not later than 2:00 p.m. on
such day, and if request is made after 11:00 a.m., then payment shall be made by
11:00 a.m. on the next Business Day.  Payment by Agent to any Secured Party
shall be made by wire transfer, in the type of funds received by Agent.  Any
such payment shall be subject to Agent’s right of offset for any amounts due
from such payee under the Loan Documents.
 
12.10.2.               Failure to Pay.  If any Secured Party fails to pay any
amount when due by it to Agent pursuant to the terms hereof, such amount shall
bear interest from the due date until paid at the rate determined by Agent as
customary in the banking industry for interbank compensation.  In no event shall
Borrowers be entitled to receive credit for any interest paid by a Secured Party
to Agent, nor shall any Defaulting Lender be entitled to interest on any amounts
held by Agent pursuant to Section 4.2.
 
12.10.3.               Recovery of Payments.  If Agent pays any amount to a
Secured Party in the expectation that a related payment will be received by
Agent from an Obligor and such related payment is not received, then Agent may
recover such amount from each Secured Party that received it.  If Agent
determines at any time that an amount received under any Loan Document must be
returned to an Obligor or paid to any other Person pursuant to Applicable Law or
otherwise, then, notwithstanding any other term of any Loan Document, Agent
shall not be required to distribute such amount to any Lender.  If any amounts
received and applied by Agent to any Obligations are later required to be
returned by Agent pursuant to Applicable Law, each Lender shall pay to Agent, on
demand, such Lender’s Pro Rata share of the amounts required to be returned.
 
12.11.      Agent in its Individual Capacity.  As a Lender, Bank of America
shall have the same rights and remedies under the other Loan Documents as any
other Lender, and the terms “Lenders,” “Required Lenders” or any similar term
shall include Bank of America in its capacity as a Lender.  Bank of America and
its Affiliates may accept deposits from, lend money to, provide Bank Products
to, act as financial or other advisor to, and generally engage in any kind of
business with, Obligors and their Affiliates, as if Bank of America were not
Agent hereunder, without any duty to account therefor to Lenders.  In their
individual capacities, Bank of America and its Affiliates may receive
information regarding Obligors, their Affiliates and their Account Debtors
(including information subject to confidentiality obligations), and each Secured
Party agrees that Bank of America and its Affiliates shall be under no
obligation to provide such information to any Secured Party, if acquired in such
individual capacity.
 
12.12.      Agent Titles.  Each Lender, other than Bank of America, that is
designated (on the cover page of this Agreement or otherwise) by Bank of America
as an “Agent” or “Arranger” of any type shall not have any right, power,
responsibility or duty under any Loan Documents other than those applicable to
all Lenders, and shall in no event be deemed to have any fiduciary relationship
with any other Lender.
 
 
-66-

--------------------------------------------------------------------------------

 
 
12.13.      Bank Product Providers.  Each Secured Bank Product Provider, by
delivery of a notice to Agent of a Bank Product, agrees to be bound by Section
5.5 and this Section 12.  Each Secured Bank Product Provider shall indemnify and
hold harmless Agent Indemnitees, to the extent not reimbursed by Obligors,
against all Claims that may be incurred by or asserted against any Agent
Indemnitee in connection with such provider’s Secured Bank Product Obligations.
 
12.14.      No Third Party Beneficiaries.  This Section 12 is an agreement
solely among Secured Parties and Agent, and shall survive Full Payment of the
Obligations.  This Section 12 does not confer any rights or benefits upon
Borrowers or any other Person.  As between Borrowers and Agent, any action that
Agent may take under any Loan Documents or with respect to any Obligations shall
be conclusively presumed to have been authorized and directed by Secured
Parties.
 
SECTION 13.        BENEFIT OF AGREEMENT; ASSIGNMENTS
 
13.1.        Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of Borrowers, Agent, Lenders, Secured Parties, and their
respective successors and assigns, except that (a) no Borrower shall have the
right to assign its rights or delegate its obligations under any Loan Documents;
and (b) any assignment by a Lender must be made in compliance with Section
13.3.  Agent may treat the Person which made any Loan as the owner thereof for
all purposes until such Person makes an assignment in accordance with Section
13.3.  Any authorization or consent of a Lender shall be conclusive and binding
on any subsequent transferee or assignee of such Lender.
 
13.2.        Participations.
 
13.2.1.                  Permitted Participants; Effect.  Any Lender may, in the
ordinary course of its business and in accordance with Applicable Law, at any
time sell to a financial institution (“Participant”) a participating interest in
the rights and obligations of such Lender under any Loan Documents.  Despite any
sale by a Lender of participating interests to a Participant, such Lender’s
obligations under the Loan Documents shall remain unchanged, such Lender shall
remain solely responsible to the other parties hereto for performance of such
obligations, such Lender shall remain the holder of its Loans and Commitments
for all purposes, all amounts payable by Borrowers shall be determined as if
such Lender had not sold such participating interests, and Borrowers and Agent
shall continue to deal solely and directly with such Lender in connection with
the Loan Documents.  Each Lender shall be solely responsible for notifying its
Participants of any matters under the Loan Documents, and Agent and the other
Lenders shall not have any obligation or liability to any such Participant.  A
Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 5.8 unless Borrowers agree otherwise in
writing.
 
13.2.2.               Voting Rights.  Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment, waiver or other
modification of any Loan Documents other than that which forgives principal,
interest or fees, reduces the stated interest rate or fees payable with respect
to any Loan or Commitment in which such Participant has an interest, postpones
the Commitment Termination Date or any date fixed for any regularly scheduled
payment of principal, interest or fees on such Loan or Commitment, or releases
any Borrower, Guarantor or substantial portion of the Collateral.
 
13.2.3.               Benefit of Set-Off.  Borrowers agree that each Participant
shall have a right of set-off in respect of its participating interest to the
same extent as if such interest were owing directly to a Lender, and each Lender
shall also retain the right of set-off with respect to any participating
interests sold by it.  By exercising any right of set-off, a Participant agrees
to share with Lenders all amounts received through its set-off, in accordance
with Section 12.5 as if such Participant were a Lender.
 
 
-67-

--------------------------------------------------------------------------------

 
 
13.3.        Assignments.
 
13.3.1.               Permitted Assignments.  A Lender may assign to an Eligible
Assignee any of its rights and obligations under the Loan Documents, as long as
(a) each assignment is of a constant, and not a varying, percentage of the
transferor Lender’s rights and obligations under the Loan Documents and, in the
case of a partial assignment, is in a minimum principal amount of $5,000,000
(unless otherwise agreed by Agent in its discretion) and integral multiples of
$1,000,000 in excess of that amount; (b) except in the case of an assignment in
whole of a Lender’s rights and obligations, the aggregate amount of the
Commitments retained by the transferor Lender is at least $5,000,000 (unless
otherwise agreed by Agent in its discretion); and (c) the parties to each such
assignment shall execute and deliver to Agent, for its acceptance and recording,
an Assignment and Acceptance.  Nothing herein shall limit the right of a Lender
to pledge or assign any rights under the Loan Documents to (i) any Federal
Reserve Bank or the United States Treasury as collateral security pursuant to
Regulation A of the Board of Governors and any Operating Circular issued by such
Federal Reserve Bank, or (ii) counterparties to swap agreements relating to any
Loans; provided, however, that any payment by Borrowers to the assigning Lender
in respect of any Obligations assigned as described in this sentence shall
satisfy Borrowers’ obligations hereunder to the extent of such payment, and no
such assignment shall release the assigning Lender from its obligations
hereunder.
 
13.3.2.                  Effect; Effective Date.  Upon delivery to Agent of an
assignment notice in the form of Exhibit C and a processing fee of $3,500
(unless otherwise agreed by Agent in its discretion), the assignment shall
become effective as specified in the notice, if it complies with this Section
13.3.  From such effective date, the Eligible Assignee shall for all purposes be
a Lender under the Loan Documents, and shall have all rights and obligations of
a Lender thereunder.  Upon consummation of an assignment, the transferor Lender,
Agent and Borrowers shall make appropriate arrangements for issuance of
replacement and/or new Notes, as applicable.  The transferee Lender shall comply
with Section 5.9 and deliver, upon request, an administrative questionnaire
satisfactory to Agent.
 
13.3.3.                  Certain Assignees.  No assignment or participation may
be made to a Borrower, Affiliate of a Borrower, Defaulting Lender or natural
person.  In connection with any assignment by a Defaulting Lender, such
assignment shall be effective only upon payment by the Eligible Assignee or
Defaulting Lender to Agent of an aggregate amount sufficient, upon distribution
(through direct payment, purchases of participations or other compensating
actions as Agent deems appropriate), (a) to satisfy all funding and payment
liabilities then owing by the Defaulting Lender hereunder, and (b) to acquire
its Pro Rata share of all Loans and LC Obligations.  If an assignment by a
Defaulting Lender shall become effective under Applicable Law for any reason
without compliance with the foregoing sentence, then the assignee shall be
deemed a Defaulting Lender for all purposes until such compliance occurs.
 
13.4.        Replacement of Certain Lenders.  If a Lender (a) fails to give its
consent to any amendment, waiver or action for which consent of all Lenders was
required and Required Lenders consented, or (b) is a Defaulting Lender, then, in
addition to any other rights and remedies that any Person may have, Agent or
Borrower Agent may, by notice to such Lender within 120 days after such event,
require such Lender to assign all of its rights and obligations under the Loan
Documents to Eligible Assignee(s), pursuant to appropriate Assignment and
Acceptance(s), within 20 days after the notice.  Agent is irrevocably appointed
as attorney-in-fact to execute any such Assignment and Acceptance if the Lender
fails to execute it.  Such Lender shall be entitled to receive, in cash,
concurrently with such assignment, all amounts owed to it under the Loan
Documents, including all principal, interest and fees through the date of
assignment (but excluding any prepayment charge).
 
 
-68-

--------------------------------------------------------------------------------

 
 
SECTION 14.        MISCELLANEOUS
 
14.1.        Consents, Amendments and Waivers.
 
14.1.1.                  Amendment.  No modification of any Loan Document,
including any extension or amendment of a Loan Document or any waiver of a
Default or Event of Default, shall be effective without the prior written
agreement of Agent (with the consent of Required Lenders) and each Obligor party
to such Loan Document; provided, however, that
 
(a)           without the prior written consent of Agent, no modification shall
be effective with respect to any provision in a Loan Document that relates to
any rights, duties or discretion of Agent;
 
(b)           without the prior written consent of Issuing Bank, no modification
shall be effective with respect to any LC Obligations, Section 2.2 or any other
provision in a Loan Document that relates to any rights, duties or discretion of
Issuing Bank;
 
(c)           without the prior written consent of each affected Lender,
including a Defaulting Lender, no modification shall be effective that would (i)
increase the Commitment of such Lender; (ii) reduce the amount of, or waive or
delay payment of, any principal, interest or fees payable to such Lender (except
as provided in Section 4.2); (iii) extend the Revolver Termination Date
applicable to such Lender’s Obligations; or (iv) amend this clause (c);
 
(d)           without the prior written consent of all Lenders (except any
Defaulting Lender), no modification shall be effective that would (i) alter
Section 5.5, 7.1 (except to add Collateral) or 14.1.1; (ii) amend the definition
of Borrowing Base (or any defined term used in such definition), Pro Rata or
Required Lenders; (iii) release Collateral with a book value greater than
$1,000,000 during any calendar year, except as currently contemplated by the
Loan Documents; or (iv) release any Obligor from liability for any Obligations,
if such Obligor is Solvent at the time of the release; and
 
(e)           without the prior written consent of a Secured Bank Product
Provider, no modification shall be effective that affects its relative payment
priority under Section 5.5.
 
14.1.2.                  Limitations.  The agreement of Borrowers shall not be
necessary to the effectiveness of any modification of a Loan Document that deals
solely with the rights and duties of Lenders, Agent and/or Issuing Bank as among
themselves.  Only the consent of the parties to the Fee Letter or any agreement
relating to a Bank Product shall be required for any modification of such
agreement, and any non-Lender that is party to a Bank Product agreement shall
have no right to participate in any manner in modification of any other Loan
Document.  Any waiver or consent granted by Agent or Lenders hereunder shall be
effective only if in writing and only for the matter specified.
 
14.1.3.                  Payment for Consents.  No Borrower will, directly or
indirectly, pay any remuneration or other thing of value, whether by way of
additional interest, fee or otherwise, to any Lender (in its capacity as a
Lender hereunder) as consideration for agreement by such Lender with any
modification of any Loan Documents, unless such remuneration or value is
concurrently paid, on the same terms, on a Pro Rata basis to all Lenders
providing their consent.
 
14.2.        Indemnity.  EACH BORROWER SHALL INDEMNIFY AND HOLD HARMLESS THE
INDEMNITEES AGAINST ANY CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY
INDEMNITEE, INCLUDING CLAIMS ASSERTED BY ANY OBLIGOR OR OTHER PERSON OR ARISING
FROM THE NEGLIGENCE OF AN INDEMNITEE.  In no event shall any party to a Loan
Document have any obligation thereunder to indemnify or hold harmless an
Indemnitee with respect to a Claim that is determined in a final, non-appealable
judgment by a court of competent jurisdiction to result from the gross
negligence or willful misconduct of such Indemnitee.
 
 
-69-

--------------------------------------------------------------------------------

 
 
14.3.        Notices and Communications.
 
14.3.1.                  Notice Address.  Subject to Section 4.1.4, all notices
and other communications by or to a party hereto shall be in writing and shall
be given to any Borrower, at Borrower Agent’s address shown on the signature
pages hereof, and to any other Person at its address shown on the signature
pages hereof (or, in the case of a Person who becomes a Lender after the Closing
Date, at the address shown on its Assignment and Acceptance), or at such other
address as a party may hereafter specify by notice in accordance with this
Section 14.3.  Each such notice or other communication shall be effective only
(a) if given by facsimile transmission, when transmitted to the applicable
facsimile number, if confirmation of receipt is received; (b) if given by mail,
three Business Days after deposit in the U.S. mail, with first-class postage
pre-paid, addressed to the applicable address; or (c) if given by personal
delivery, when duly delivered to the notice address with receipt
acknowledged.  Notwithstanding the foregoing, no notice to Agent pursuant to
Section 2.1.4, 2.2, 3.1.2, or 4.1.1 shall be effective until actually received
by the individual to whose attention at Agent such notice is required to be
sent.  Any written notice or other communication that is not sent in conformity
with the foregoing provisions shall nevertheless be effective on the date
actually received by the noticed party.  Any notice received by Borrower Agent
shall be deemed received by all Borrowers.
 
14.3.2.                  Electronic Communications; Voice Mail.  Electronic mail
and internet websites may be used only for routine communications, such as
financial statements, Borrowing Base Certificates and other information required
by Section 10.1.2, administrative matters, distribution of Loan Documents, and
matters permitted under Section 4.1.4.  Agent and Lenders make no assurances as
to the privacy and security of electronic communications.  Electronic and voice
mail may not be used as effective notice under the Loan Documents.
 
14.3.3.                  Non-Conforming Communications.  Agent and Lenders may
rely upon any notices purportedly given by or on behalf of any Borrower even if
such notices were not made in a manner specified herein, were incomplete or were
not confirmed, or if the terms thereof, as understood by the recipient, varied
from a later confirmation.  Each Borrower shall indemnify and hold harmless each
Indemnitee from any liabilities, losses, costs and expenses arising from any
telephonic communication purportedly given by or on behalf of a Borrower.
 
14.4.        Performance of Borrowers’ Obligations.  Agent may, in its
discretion at any time and from time to time, at Borrowers’ expense, pay any
amount or do any act required of a Borrower under any Loan Documents or
otherwise lawfully requested by Agent to (a) enforce any Loan Documents or
collect any Obligations; (b) protect, insure, maintain or realize upon any
Collateral; or (c) defend or maintain the validity or priority of Agent’s Liens
in any Collateral, including any payment of a judgment, insurance premium,
warehouse charge, finishing or processing charge, or landlord claim, or any
discharge of a Lien.  All payments, costs and expenses (including Extraordinary
Expenses) of Agent under this Section shall be reimbursed to Agent by Borrowers,
on demand, with interest from the date incurred to the date of payment thereof
at the Default Rate applicable to Base Rate Loans.  Any payment made or action
taken by Agent under this Section shall be without prejudice to any right to
assert an Event of Default or to exercise any other rights or remedies under the
Loan Documents.
 
14.5.        Credit Inquiries.  Each Borrower hereby authorizes Agent and
Lenders (but they shall have no obligation) to respond to usual and customary
credit inquiries from third parties concerning any Borrower or Subsidiary.
 
 
-70-

--------------------------------------------------------------------------------

 
 
14.6.        Severability.  Wherever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be valid under Applicable
Law.  If any provision is found to be invalid under Applicable Law, it shall be
ineffective only to the extent of such invalidity and the remaining provisions
of the Loan Documents shall remain in full force and effect.
 
14.7.        Cumulative Effect; Conflict of Terms.  The provisions of the Loan
Documents are cumulative.  The parties acknowledge that the Loan Documents may
use several limitations, tests or measurements to regulate similar matters, and
they agree that these are cumulative and that each must be performed as
provided.  Except as otherwise provided in another Loan Document (by specific
reference to the applicable provision of this Agreement), if any provision
contained herein is in direct conflict with any provision in another Loan
Document, the provision herein shall govern and control.
 
14.8.        Counterparts.  Any Loan Document may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract.  This Agreement shall become effective when
Agent has received counterparts bearing the signatures of all parties
hereto.  Delivery of a signature page of any Loan Document by telecopy or other
electronic means shall be effective as delivery of a manually executed
counterpart of such agreement.
 
14.9.        Entire Agreement.  Time is of the essence of the Loan
Documents.  The Loan Documents constitute the entire contract among the parties
relating to the subject matter hereof, and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof.
 
14.10.     Relationship with Lenders.  The obligations of each Lender hereunder
are several, and no Lender shall be responsible for the obligations or
Commitments of any other Lender.  Amounts payable hereunder to each Lender shall
be a separate and independent debt.  It shall not be necessary for Agent or any
other Lender to be joined as an additional party in any proceeding for such
purposes.  Nothing in this Agreement and no action of Agent, Lenders or any
other Secured Party pursuant to the Loan Documents or otherwise shall be deemed
to constitute Agent and any Secured Party to be a partnership, association,
joint venture or any other kind of entity, nor to constitute control of any
Obligor.
 
14.11.     No Advisory or Fiduciary Responsibility.  In connection with all
aspects of each transaction contemplated by any Loan Document, Borrowers
acknowledge and agree that (a)(i) this credit facility and any related arranging
or other services by Agent, any Lender, any of their Affiliates or any arranger
are arm’s-length commercial transactions between Borrowers and such Person; (ii)
Borrowers have consulted their own legal, accounting, regulatory and tax
advisors to the extent they have deemed appropriate; and (iii) Borrowers are
capable of evaluating, and understand and accept, the terms, risks and
conditions of the transactions contemplated by the Loan Documents; (b) each of
Agent, Lenders, their Affiliates and any arranger is and has been acting solely
as a principal and, except as expressly agreed in writing by the relevant
parties, has not been, is not, and will not be acting as an advisor, agent or
fiduciary for Borrowers, any of their Affiliates or any other Person, and has no
obligation with respect to the transactions contemplated by the Loan Documents
except as expressly set forth therein; and (c) Agent, Lenders, their Affiliates
and any arranger may be engaged in a broad range of transactions that involve
interests that differ from those of Borrowers and their Affiliates, and have no
obligation to disclose any of such interests to Borrowers or their
Affiliates.  To the fullest extent permitted by Applicable Law, each Borrower
hereby waives and releases any claims that it may have against Agent, Lenders,
their Affiliates and any arranger with respect to any breach of agency or
fiduciary duty in connection with any transaction contemplated by a Loan
Document.
 
 
-71-

--------------------------------------------------------------------------------

 
 
14.12.     Confidentiality.  Each of Agent, Lenders and Issuing Bank shall
maintain the confidentiality of all Information (as defined below), except that
Information may be disclosed (a) to its Affiliates, and to its and their
partners, directors, officers, employees, agents, advisors and representatives
(provided such Persons are informed of the confidential nature of the
Information and instructed to keep it confidential); (b) to the extent requested
by any governmental, regulatory or self-regulatory authority purporting to have
jurisdiction over it or its Affiliates; (c) to the extent required by Applicable
Law or by any subpoena or other legal process; (d) to any other party hereto;
(e) in connection with any action or proceeding, or other exercise of rights or
remedies, relating to any Loan Documents or Obligations; (f) subject to an
agreement containing provisions substantially the same as this Section, to any
Transferee or any actual or prospective party (or its advisors) to any Bank
Product; (g) with the consent of Borrower Agent; or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) is available to Agent, any Lender, Issuing Bank or any of
their Affiliates on a nonconfidential basis from a source other than
Borrowers.  Notwithstanding the foregoing, Agent and Lenders may publish or
disseminate general information describing this credit facility, including the
names and addresses of Borrowers and a general description of Borrowers’
businesses, and may use Borrowers’ logos, trademarks or product photographs in
advertising materials.  As used herein, “Information” means all information
received from an Obligor or Subsidiary relating to it or its business that is
identified as confidential when delivered.  Any Person required to maintain the
confidentiality of Information pursuant to this Section shall be deemed to have
complied if it exercises the same degree of care that it accords its own
confidential information.  Each of Agent, Lenders and Issuing Bank acknowledges
that (i) Information may include material non-public information concerning an
Obligor or Subsidiary; (ii) it has developed compliance procedures regarding the
use of material non-public information; and (iii) it will handle such material
non-public information in accordance with Applicable Law, including federal and
state securities laws.
 
14.13.      Certifications Regarding Indentures.  Borrowers certify to Agent and
Lenders that neither the execution or performance of the Loan Documents nor the
incurrence of any Obligations by Borrowers violates the Indenture or any notes
relating thereto. Agent may condition Borrowings, Letters of Credit and other
credit accommodations under the Loan Documents from time to time upon Agent’s
receipt of evidence that the Commitments and Obligations continue to not violate
the Indenture and the notes relating thereto at such time.
 
14.14.      GOVERNING LAW.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, UNLESS
OTHERWISE SPECIFIED, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS,
WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES (BUT GIVING EFFECT TO
FEDERAL LAWS RELATING TO NATIONAL BANKS).
 
14.15.      Consent to Forum.
 
14.15.1.                    Forum.  EACH BORROWER HEREBY CONSENTS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT SITTING IN OR WITH
JURISDICTION OVER CHICAGO, ILLINOIS, IN ANY PROCEEDING OR DISPUTE RELATING IN
ANY WAY TO ANY LOAN DOCUMENTS, AND AGREES THAT ANY SUCH PROCEEDING SHALL BE
BROUGHT BY IT SOLELY IN ANY SUCH COURT.  EACH BORROWER IRREVOCABLY WAIVES ALL
CLAIMS, OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING SUCH COURT’S PERSONAL
OR SUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM.  EACH PARTY HERETO
IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN
SECTION 14.3.1.  Nothing herein shall limit the right of Agent or any Lender to
bring proceedings against any Obligor in any other court, nor limit the right of
any party to serve process in any other manner permitted by Applicable
Law.  Nothing in this Agreement shall be deemed to preclude enforcement by Agent
of any judgment or order obtained in any forum or jurisdiction.
 
 
-72-

--------------------------------------------------------------------------------

 
 
14.16.     Waivers by Borrowers.  To the fullest extent permitted by Applicable
Law, each Borrower waives (a) the right to trial by jury (which Agent and each
Lender hereby also waives) in any proceeding or dispute of any kind relating in
any way to any Loan Documents, Obligations or Collateral; (b) presentment,
demand, protest, notice of presentment, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of any commercial paper, accounts,
documents, instruments, chattel paper and guaranties at any time held by Agent
on which a Borrower may in any way be liable, and hereby ratifies anything Agent
may do in this regard; (c) notice prior to taking possession or control of any
Collateral; (d) any bond or security that might be required by a court prior to
allowing Agent to exercise any rights or remedies; (e) the benefit of all
valuation, appraisement and exemption laws; (f) any claim against Agent, Issuing
Bank or any Lender, on any theory of liability, for special, indirect,
consequential, exemplary or punitive damages (as opposed to direct or actual
damages) in any way relating to any Enforcement Action, Obligations, Loan
Documents or transactions relating thereto; and (g) notice of acceptance
hereof.  Each Borrower acknowledges that the foregoing waivers are a material
inducement to Agent, Issuing Bank and Lenders entering into this Agreement and
that they are relying upon the foregoing in their dealings with Borrowers.  Each
Borrower has reviewed the foregoing waivers with its legal counsel and has
knowingly and voluntarily waived its jury trial and other rights following
consultation with legal counsel.  In the event of litigation, this Agreement may
be filed as a written consent to a trial by the court.
 
14.17.     Patriot Act Notice.  Agent and Lenders hereby notify Borrowers that
pursuant to the requirements of the Patriot Act, Agent and Lenders are required
to obtain, verify and record information that identifies each Borrower,
including its legal name, address, tax ID number and other information that will
allow Agent and Lenders to identify it in accordance with the Patriot
Act.  Agent and Lenders will also require information regarding each personal
guarantor, if any, and may require information regarding Borrowers’ management
and owners, such as legal name, address, social security number and date of
birth.
 
[Remainder of page intentionally left blank; signatures begin on following page]
 
 
 
 
-73-

--------------------------------------------------------------------------------

 
 
 
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the
date set forth above.
 
 

  BORROWERS:          
AKORN, INC.
          By: ________________________   Name:______________________    
Title: _______________________  
Address:  Akorn, Inc.
 
1925 West Field Court, Suite 300
 
Lake Forest, IL 60045
 
Attn: Tim Dick, CFO
 
Telecopy: 847-279-6150
         
AKORN (NEW JERSEY), INC.
          By: _______________________   Name: _____________________  
Title: ______________________   
Address:  c/o Akorn, Inc.
 
1925 West Field Court, Suite 300
 
Lake Forest, IL 60045
 
Attn: Tim Dick, CFO
 
Telecopy: 847-279-6150
         
AVR BUSINESS TRUST
  By:  _______________________   Name: _____________________   
Title:   ______________________   
Address:  c/o Akorn, Inc.
 
1925 West Field Court, Suite 300
 
Lake Forest, IL 60045
 
Attn: Tim Dick, CFO
 
Telecopy: 847-279-6150
       

 
 
 
-74-

--------------------------------------------------------------------------------

 
 
 

         
OAK PHARMACEUTICALS, INC.
          By: __________________________    Name: ________________________  
Title: _________________________  
Address:  c/o Akorn, Inc.
 
1925 West Field Court, Suite 300
 
Lake Forest, IL 60045
 
Attn: Tim Dick, CFO
 
Telecopy: 847-279-6150
         
ADVANCED VISION RESEARCH, INC.
          By:_____________________________   Name:___________________________  
Title:____________________________   
Address:  c/o Akorn, Inc.
 
1925 West Field Court, Suite 300
 
Lake Forest, IL 60045
 
Attn: Tim Dick, CFO
 
Telecopy: 847-279-6150
         
ADVANCED VISION PHARMACEUTICALS, LLC
          By: _____________________________   
Name:____________________________    Title: ____________________________  
Address:  c/o Akorn, Inc.
 
1925 West Field Court, Suite 300
 
Lake Forest, IL 60045
 
Attn: Tim Dick, CFO
 
Telecopy: 847-279-6150
         
AKORN OPHTHALMICS, INC.
          By: ____________________________   Name: __________________________  
Title:___________________________  
Address:  c/o Akorn, Inc.
 
1925 West Field Court, Suite 300
 
Lake Forest, IL 60045
 
Attn: Tim Dick, CFO
 
Telecopy: 847-279-6150
   

 
 
 
 
-75-

--------------------------------------------------------------------------------

 
 
 

 
AGENT AND LENDERS:
     
BANK OF AMERICA, N.A.,
 
as Agent and Lender
          By:____________________   Title:___________________  
Address:________________
           __________________        __________________  
     __________________   Attn:  ___________________  
Telecopy:________________ 

 
 
 
 
-76-

--------------------------------------------------------------------------------

 
 
EXHIBIT A
to
Loan and Security Agreement

NOTE
 
[Date]
[$____________]
Chicago, Illinois

 
AKORN, INC., a Louisiana corporation, AKORN (NEW JERSEY), INC., an Illinois
corporation, AVR BUSINESS TRUST, a Massachusetts business trust, OAK
PHARMACEUTICALS, INC., a Delaware corporation, ADVANCED VISION RESEARCH, INC., a
Massachusetts corporation, ADVANCED VISION PHARMACEUTICALS, LLC, a Delaware
limited liability company, and AKORN OPHTHALMICS, INC., a Delaware corporation
(collectively, “Borrowers”), for value received, hereby unconditionally promise
to pay, on a joint and several basis, to the order of
____________________________ (“Lender”), the principal sum of
______________________________ DOLLARS ($___________), or such lesser amount as
may be advanced by Lender as Loans and owing as LC Obligations from time to time
under the Loan Agreement described below, together with all accrued and unpaid
interest thereon.  Terms are used herein as defined in the Loan and Security
Agreement dated as of October __, 2011, among Borrowers, Bank of America, N.A.,
as Agent, Lender, and certain other financial institutions, as such agreement
may be amended, modified, renewed or extended from time to time (“Loan
Agreement”).
 
Principal of and interest on this Note from time to time outstanding shall be
due and payable as provided in the Loan Agreement.  This Note is issued pursuant
to and evidences Loans and LC Obligations under the Loan Agreement, to which
reference is made for a statement of the rights and obligations of Lender and
the duties and obligations of Borrowers.  The Loan Agreement contains provisions
for acceleration of the maturity of this Note upon the happening of certain
stated events, and for the borrowing, prepayment and reborrowing of amounts upon
specified terms and conditions.
 
The holder of this Note is hereby authorized by Borrowers to record on a
schedule annexed to this Note (or on a supplemental schedule) the amounts owing
with respect to Loans and LC Obligations, and the payment thereof.  Failure to
make any notation, however, shall not affect the rights of the holder of this
Note or any obligations of Borrowers hereunder or under any other Loan
Documents.
 
Time is of the essence of this Note.  Each Borrower and all endorsers, sureties
and guarantors of this Note hereby severally waive demand, presentment for
payment, protest, notice of protest, notice of intention to accelerate the
maturity of this Note, diligence in collecting, the bringing of any suit against
any party, and any notice of or defense on account of any extensions, renewals,
partial payments, or changes in any manner of or in this Note or in any of its
terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.  Borrowers jointly and severally agree
to pay, and to save the holder of this Note harmless against, any liability for
the payment of all costs and expenses (including without limitation reasonable
attorneys’ fees) if this Note is collected by or through an attorney-at-law.
 
In no contingency or event whatsoever shall the amount paid or agreed to be paid
to the holder of this Note for the use, forbearance or detention of money
advanced hereunder exceed the highest lawful rate permitted under Applicable
Law.  If any such excess amount is inadvertently paid by Borrowers or
inadvertently received by the holder of this Note, such excess shall be returned
to Borrowers or credited as a payment of principal, in accordance with the Loan
Agreement.  It is the intent hereof that Borrowers not pay or contract to pay,
and that holder of this Note not receive or contract to receive, directly or
indirectly in any manner whatsoever, interest in excess of that which may be
paid by Borrowers under Applicable Law.
 
 
 

--------------------------------------------------------------------------------

 
 
 
This Note shall be governed by the laws of the State of Illinois, without giving
effect to any conflict of law principles (but giving effect to federal laws
relating to national banks).
 
IN WITNESS WHEREOF, this Note is executed as of the date set forth above.
 

 
Attest:
 
 
_____________________________________
Secretary
 
[Seal]
 
 
 
AKORN, INC.
 
 
 
By__________________________________________
     Title:
Attest:
 
 
_____________________________________
Secretary
 
[Seal]
 
 
 
AKORN (NEW JERSEY), INC.
 
 
 
By__________________________________________
     Title:
Attest:
 
 
_____________________________________
Secretary
 
[Seal]
 
 
 
AVR BUSINESS TRUST
 
 
 
By__________________________________________
     Title:
Attest:
 
 
_____________________________________
Secretary
 
[Seal]
 
 
 
OAK PHARMACEUTICALS, INC.
 
 
 
By__________________________________________
     Title:

 
 
 
-- 2 --
 
 

--------------------------------------------------------------------------------

 
 
 
Attest:
 
 
_____________________________________
Secretary
 
[Seal]
 
 
 
ADVANCED VISION RESEARCH, INC.
 
 
 
By__________________________________________
     Title:
Attest:
 
 
_____________________________________
Secretary
 
[Seal]
 
 
 
ADVANCED VISION PHARMACEUTICALS, LLC
 
 
By__________________________________________
     Title:
Attest:
 
 
_____________________________________
Secretary
 
[Seal]
 
 
 
AKORN OPHTHALMICS, INC.
 
 
 
By__________________________________________
     Title:

 
 
-- 3 --
 
 

--------------------------------------------------------------------------------

 
 
EXHIBIT B
to
Loan and Security Agreement

ASSIGNMENT AND ACCEPTANCE
 
Reference is made to the Loan and Security Agreement dated as of October __,
2011, as amended (“Loan Agreement”), among AKORN, INC. (“Akorn”), AKORN (NEW
JERSEY), INC. (“Akorn NJ”), AVR BUSINESS TRUST (“AVR BT”), OAK PHARMACEUTICALS,
INC. (“Oak Pharma”), ADVANCED VISION RESEARCH, INC. (“AVR”), ADVANCED VISION
PHARMACEUTICALS, LLC (“AVP”), AKORN OPHTHALMICS, INC., a Delaware corporation
(“Akorn Ophthalmics”), the Subsidiaries of Akorn who from time to time become
party to the Loan Agreement by joinder (such Subsidiaries, together with Akorn,
Akorn NJ, AVR BT, Oak Pharma, AVR, AVP, and Akorn Ophthalmics, collectively,
“Borrowers”), BANK OF AMERICA, N.A., as agent (“Agent”) for the financial
institutions from time to time party to the Loan Agreement (“Lenders”), and such
Lenders.  Terms are used herein as defined in the Loan Agreement.
 
______________________________________ (“Assignor”) and
_______________________________________(“Assignee”) agree as follows:
 
1.           Assignor hereby assigns to Assignee and Assignee hereby purchases
and assumes from Assignor (a) a principal amount of $________ of Assignor’s
outstanding Loans and $___________ of Assignor’s participations in LC
Obligations and (b) the amount of $__________ of Assignor’s Commitment (which
represents ____% of the total Commitments) (the foregoing items being,
collectively, the “Assigned Interest”), together with an interest in the Loan
Documents corresponding to the Assigned Interest.  This Agreement shall be
effective as of the date (“Effective Date”) indicated in the corresponding
Assignment Notice delivered to Agent, provided such Assignment Notice is
executed by Assignor, Assignee, Agent and Borrower Agent, if applicable.  From
and after the Effective Date, Assignee hereby expressly assumes, and undertakes
to perform, all of Assignor’s obligations in respect of the Assigned Interest,
and all principal, interest, fees and other amounts which would otherwise be
payable to or for Assignor’s account in respect of the Assigned Interest shall
be payable to or for Assignee’s account, to the extent such amounts accrue on or
after the Effective Date.
 
2.           Assignor (a) represents that as of the date hereof, prior to giving
effect to this assignment, its Commitment is $__________ and the outstanding
balance of its Loans and participations in LC Obligations is $__________; (b)
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Loan Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Agreement or any other instrument
or document furnished pursuant thereto, other than that Assignor is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any adverse claim; and (c) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Borrowers or the performance by Borrowers of their
obligations under the Loan Documents.  [Assignor is attaching the Note[s] held
by it and requests that Agent exchange such Note[s] for new Notes payable to
Assignee [and Assignor].]
 
3.           Assignee (a) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (b) confirms that it has received
copies of the Loan Agreement and such other Loan Documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and Acceptance; (c) agrees that it shall, independently and
without reliance upon Assignor and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Documents; (d) confirms that it is an
Eligible Assignee; (e) appoints and authorizes Agent to take such action as
agent on its behalf and to exercise such powers under the Loan Agreement as are
delegated to Agent by the terms thereof, together with such powers as are
incidental thereto; (f) agrees that it will observe and perform all obligations
that are required to be performed by it as a “Lender” under the Loan Documents;
and (g) represents and warrants that the assignment evidenced hereby will not
result in a non-exempt “prohibited transaction” under Section 406 of ERISA.
 
 
 

--------------------------------------------------------------------------------

 
 
 
4.           This Agreement shall be governed by the laws of the State of
Illinois.  If any provision is found to be invalid under Applicable Law, it
shall be ineffective only to the extent of such invalidity and the remaining
provisions of this Agreement shall remain in full force and effect.
 
5.           Each notice or other communication hereunder shall be in writing,
shall be sent by messenger, by telecopy or facsimile transmission, or by
first-class mail, shall be deemed given when sent and shall be sent as follows:
 
 
(a)
If to Assignee, to the following address (or to such other address as Assignee
may designate from time to time):

 
__________________________
__________________________
__________________________
 
 
(b)
If to Assignor, to the following address (or to such other address as Assignor
may designate from time to time):

__________________________
__________________________
__________________________
__________________________
 
Payments hereunder shall be made by wire transfer of immediately available
Dollars as follows:
 
If to Assignee, to the following account (or to such other account as Assignee
may designate from time to time):
 
______________________________
______________________________
ABA No._______________________
______________________________
Account No.____________________
Reference:  _____________________
 
If to Assignor, to the following account (or to such other account as Assignor
may designate from time to time):
 
______________________________
______________________________
ABA No._______________________
______________________________
Account No.____________________
Reference:  _____________________
 
 
 
-- 2 --
 
 

--------------------------------------------------------------------------------

 
 
 
IN WITNESS WHEREOF, this Assignment and Acceptance is executed as of
_____________.
 
_____________________________________
(“Assignee”)

 
By___________________________________
     Title:
 
_____________________________________
(“Assignor”)

 
By___________________________________
     Title:
 
 
 
 
 
-- 3 --
 
 

--------------------------------------------------------------------------------

 
 
EXHIBIT C
to
Loan and Security Agreement

ASSIGNMENT NOTICE
 
Reference is made to (1) the Loan and Security Agreement dated as of October __,
2011, as amended (“Loan Agreement”), among AKORN, INC. (“Akorn”), AKORN (NEW
JERSEY), INC. (“Akorn NJ”), AVR BUSINESS TRUST (“AVR BT”), OAK PHARMACEUTICALS,
INC. (“Oak Pharma”), ADVANCED VISION RESEARCH, INC. (“AVR”), ADVANCED VISION
PHARMACEUTICALS, LLC (“AVP”), AKORN OPHTHALMICS, INC., a Delaware corporation
(“Akorn Ophthalmics”), the Subsidiaries of Akorn who from time to time become
party to the Loan Agreement by joinder (such Subsidiaries, together with Akorn,
Akorn NJ, AVR BT, Oak Pharma, AVR, AVP, and Akorn Ophthalmics, collectively,
“Borrowers”), BANK OF AMERICA, N.A., as agent (“Agent”) for the financial
institutions from time to time party to the Loan Agreement (“Lenders”), and such
Lenders; and (2) the Assignment and Acceptance dated as of ____________, 201_
(“Assignment Agreement”), between __________________ (“Assignor”) and
____________________ (“Assignee”).  Terms are used herein as defined in the Loan
Agreement.
 
Assignor hereby notifies Borrowers and Agent of Assignor’s intent to assign to
Assignee pursuant to the Assignment Agreement (a) a principal amount of
$________ of Assignor’s outstanding Loans and $___________ of Assignor’s
participations in LC Obligations and (b) the amount of $__________ of Assignor’s
Commitment (which represents ____% of the total Commitments) (the foregoing
items being, collectively, the “Assigned Interest”), together with an interest
in the Loan Documents corresponding to the Assigned Interest.  This Agreement
shall be effective as of the date (“Effective Date”) indicated below, provided
this Assignment Notice is executed by Assignor, Assignee, Agent and Borrower
Agent, if applicable.  Pursuant to the Assignment Agreement, Assignee has
expressly assumed all of Assignor’s obligations under the Loan Agreement to the
extent of the Assigned Interest, as of the Effective Date.
 
For purposes of the Loan Agreement, Agent shall deem Assignor’s Commitment to be
reduced by $_________, and Assignee’s Commitment to be increased by $_________.
 
The address of Assignee to which notices and information are to be sent under
the terms of the Loan Agreement is:
 
________________________
________________________
________________________
________________________
 
The address of Assignee to which payments are to be sent under the terms of the
Loan Agreement is shown in the Assignment and Acceptance.
 
This Notice is being delivered to Borrowers and Agent pursuant to Section 13.3
of the Loan Agreement.  Please acknowledge your acceptance of this Notice by
executing and returning to Assignee and Assignor a copy of this Notice.
 
 
 

--------------------------------------------------------------------------------

 
 
 
IN WITNESS WHEREOF, this Assignment Notice is executed as of
___________________.
 
_____________________________________
(“Assignee”)

 
By___________________________________
     Title:
 
_____________________________________
(“Assignor”)

 
By___________________________________
     Title:
 
ACKNOWLEDGED AND AGREED,
AS OF THE DATE SET FORTH ABOVE:
 
BORROWER AGENT:*
 
_________________________________
 

By_______________________________
     Title:

* No signature required if Assignee is a Lender, U.S.-based Affiliate of a
Lender or Approved Fund, or if an Event of Default exists.
 
BANK OF AMERICA, N.A.,
as Agent
 

By_______________________________
     Title:

 
-- 2 --