exv10w1






Exhibit 10.1




$25,000,000 CREDIT FACILITY




CREDIT AGREEMENT




Dated as of January 7, 2009




by and among




AKORN, INC. and AKORN (NEW JERSEY), INC.,




as Borrowers,




THE OTHER PERSONS PARTY HERETO THAT ARE

DESIGNATED AS CREDIT PARTIES




GENERAL ELECTRIC CAPITAL CORPORATION

for itself, as a Lender, as L/C Issuer, Swingline Lender and as the Agent for all

Lenders,




THE OTHER FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY

HERETO




as Lenders,




and




GE CAPITAL MARKETS, INC.,

as Sole Lead Arranger and Bookrunner




 









 





TABLE OF CONTENTS




	 	 	 	 	 
	ARTICLE I. THE CREDITS
	 	 	1	 
	 
	 	 	 	 
	1.1 Amounts and Terms of Commitments
	 	 	1	 
	1.2 Notes
	 	 	8	 
	1.3 Interest
	 	 	8	 
	1.4 Loan Accounts
	 	 	10	 
	1.5 Procedure for Revolving Credit Borrowing
	 	 	11	 
	1.6 Conversion and Continuation Elections
	 	 	12	 
	1.7 Optional Prepayments and Revolving Loan Commitment Reductions
	 	 	12	 
	1.8 Mandatory Prepayments of Loans
	 	 	13	 
	1.9 Fees
	 	 	14	 
	1.10 Payments by the Borrowers
	 	 	16	 
	1.11 Payments by the Lenders to the Agent; Settlement
	 	 	17	 
	1.12 Eligible Accounts
	 	 	19	 
	1.13 Eligible Inventory
	 	 	19	 
	1.14 Eligible Equipment
	 	 	20	 
	1.15 Eligible Real Estate
	 	 	20	 
	1.16 Incremental Commitments
	 	 	20	 
	1.17 Borrower Representative
	 	 	21	 
	 
	 	 	 	 
	ARTICLE II. CONDITIONS PRECEDENT
	 	 	22	 
	 
	 	 	 	 
	2.1 Conditions of Initial Loans
	 	 	22	 
	2.2 Conditions to All Borrowings
	 	 	23	 
	 
	 	 	 	 
	ARTICLE III. REPRESENTATIONS AND WARRANTIES
	 	 	24	 
	 
	 	 	 	 
	3.1 Corporate Existence and Power
	 	 	24	 
	3.2 Corporate Authorization; No Contravention
	 	 	24	 
	3.3 Governmental Authorization
	 	 	25	 
	3.4 Binding Effect
	 	 	25	 
	3.5 Litigation
	 	 	25	 
	3.6 No Default
	 	 	26	 
	3.7 ERISA Compliance
	 	 	26	 
	3.8 Use of Proceeds; Margin Regulations
	 	 	27	 
	3.9 Title to Properties
	 	 	27	 
	3.10 Taxes
	 	 	27	 
	3.11 Financial Condition
	 	 	27	 
	3.12 Environmental Matters
	 	 	28	 
	3.13 Regulated Entities
	 	 	29	 
	3.14 Solvency
	 	 	29	 
	3.15 Labor Relations
	 	 	29	 
	3.16 Intellectual Property
	 	 	29	 
	3.17 Subsidiaries
	 	 	30	 






i









 






	 	 	 	 	 
	3.18 Brokers’ Fees; Transaction Fees
	 	 	30	 
	3.19 Insurance
	 	 	30	 
	3.20 Full Disclosure
	 	 	30	 
	3.21 Foreign Assets Control Regulations and Anti-Money Laundering
	 	 	30	 
	3.22 FDA Regulatory Compliance
	 	 	31	 
	3.23 Healthcare Regulatory Compliance
	 	 	32	 
	3.24 Reimbursement Coding
	 	 	33	 
	3.25 HIPAA
	 	 	33	 
	3.26 Subordinated Indebtedness
	 	 	34	 
	 
	 	 	 	 
	ARTICLE IV. AFFIRMATIVE COVENANTS
	 	 	34	 
	 
	 	 	 	 
	4.1 Financial Statements
	 	 	34	 
	4.2 Certificates; Other Information
	 	 	35	 
	4.3 Notices
	 	 	38	 
	4.4 Preservation of Corporate Existence, Etc
	 	 	40	 
	4.5 Maintenance of Property
	 	 	41	 
	4.6 Insurance
	 	 	41	 
	4.7 Payment of Obligations
	 	 	42	 
	4.8 Compliance with Laws
	 	 	42	 
	4.9 Inspection of Property and Books and Records
	 	 	43	 
	4.10 Use of Proceeds
	 	 	44	 
	4.11 Cash Management Systems
	 	 	44	 
	4.12 Landlord Agreements
	 	 	44	 
	4.13 Further Assurances
	 	 	44	 
	4.14 Subordinated Note
	 	 	45	 
	4.15 Licensor Consents
	 	 	46	 
	4.16 Post-Closing Covenants
	 	 	46	 
	 
	 	 	 	 
	ARTICLE V. NEGATIVE COVENANTS
	 	 	46	 
	 
	 	 	 	 
	5.1 Limitation on Liens
	 	 	46	 
	5.2 Disposition of Assets
	 	 	48	 
	5.3 Consolidations and Mergers
	 	 	49	 
	5.4 Loans and Investments
	 	 	49	 
	5.5 Limitation on Indebtedness
	 	 	50	 
	5.6 Transactions with Affiliates
	 	 	50	 
	5.7 Reserved
	 	 	50	 
	5.8 Use of Proceeds
	 	 	50	 
	5.9 Contingent Obligations
	 	 	51	 
	5.10 Compliance with ERISA
	 	 	51	 
	5.11 Restricted Payments
	 	 	51	 
	5.12 Change in Business
	 	 	52	 
	5.13 Change in Structure
	 	 	52	 
	5.14 Accounting Changes
	 	 	52	 
	5.15 Amendments to Material Agreements and Subordinated Indebtedness
	 	 	52	 






ii









 






	 	 	 	 	 
	5.16 No Negative Pledges
	 	 	53	 
	5.17 OFAC
	 	 	53	 
	5.18 Press Release and Related Matters
	 	 	53	 
	5.19 Sale-Leasebacks
	 	 	54	 
	5.20 Hazardous Materials
	 	 	54	 
	 
	 	 	 	 
	ARTICLE VI. FINANCIAL COVENANTS
	 	 	54	 
	 
	 	 	 	 
	6.1 Fixed Charge Coverage Ratio
	 	 	54	 
	6.2 Minimum EBITDA
	 	 	54	 
	6.3 Minimum Liquidity
	 	 	55	 
	6.4 Capital Expenditures
	 	 	55	 
	 
	 	 	 	 
	ARTICLE VII. EVENTS OF DEFAULT
	 	 	55	 
	 
	 	 	 	 
	7.1 Event of Default
	 	 	55	 
	7.2 Remedies
	 	 	58	 
	7.3 Rights Not Exclusive
	 	 	59	 
	7.4 Cash Collateral for Letters of Credit
	 	 	59	 
	 
	 	 	 	 
	ARTICLE VIII. THE AGENT
	 	 	59	 
	 
	 	 	 	 
	8.1 Appointment and Duties
	 	 	59	 
	8.2 Binding Effect
	 	 	61	 
	8.3 Use of Discretion
	 	 	61	 
	8.4 Delegation of Rights and Duties
	 	 	61	 
	8.5 Reliance and Liability
	 	 	61	 
	8.6 Agent Individually
	 	 	63	 
	8.7 Lender Credit Decision
	 	 	63	 
	8.8 Expenses; Indemnities
	 	 	63	 
	8.9 Resignation of Agent or L/C Issuer
	 	 	64	 
	8.10 Release of Collateral or Guarantors
	 	 	65	 
	8.11 Additional Secured Parties
	 	 	65	 
	 
	 	 	 	 
	ARTICLE IX. MISCELLANEOUS
	 	 	66	 
	 
	 	 	 	 
	9.1 Amendments and Waivers
	 	 	66	 
	9.2 Notices
	 	 	67	 
	9.3 Electronic Transmissions
	 	 	68	 
	9.4 No Waiver; Cumulative Remedies
	 	 	69	 
	9.5 Costs and Expenses
	 	 	69	 
	9.6 Indemnity
	 	 	70	 
	9.7 Marshaling; Payments Set Aside
	 	 	71	 
	9.8 Successors and Assigns
	 	 	71	 
	9.9 Assignments and Participations; Binding Effect
	 	 	71	 
	9.10 Confidentiality
	 	 	74	 
	9.11 Set-off; Sharing of Payments
	 	 	75	 
	9.12 Counterparts
	 	 	76	 






iii









 







	 	 	 	 	 
	9.13 Severability; Facsimile Signature
	 	 	76	 
	9.14 Captions
	 	 	76	 
	9.15 Independence of Provisions
	 	 	76	 
	9.16 Interpretation
	 	 	76	 
	9.17 No Third Parties Benefited
	 	 	77	 
	9.18 Governing Law and Jurisdiction
	 	 	77	 
	9.19 Waiver of Jury Trial
	 	 	77	 
	9.20 Entire Agreement; Release; Survival
	 	 	78	 
	9.21 Patriot Act
	 	 	79	 
	9.22 Replacement of Lender
	 	 	79	 
	9.23 Joint and Several
	 	 	79	 
	9.24 Creditor-Debtor Relationship
	 	 	79	 
	9.25 Location of Closing
	 	 	80	 
	 
	 	 	 	 
	ARTICLE X. TAXES, YIELD PROTECTION AND ILLEGALITY
	 	 	80	 
	 
	 	 	 	 
	10.1 Taxes
	 	 	80	 
	10.2 Illegality
	 	 	82	 
	10.3 Increased Costs and Reduction of Return
	 	 	83	 
	10.4 Funding Losses
	 	 	84	 
	10.5 Inability to Determine Rates
	 	 	85	 
	10.6 Reserves on LIBOR Rate Loans
	 	 	85	 
	10.7 Certificates of Lenders
	 	 	85	 
	 
	 	 	 	 
	ARTICLE XI. DEFINITIONS
	 	 	85	 
	 
	 	 	 	 
	11.1 Defined Terms
	 	 	86	 
	11.2 Other Interpretive Provisions
	 	 	107	 
	11.3 Accounting Terms and Principles
	 	 	108	 
	11.4 Payments
	 	 	108	 
	 
	 	 	 	 
	ARTICLE XII. CROSS-GUARANTY
	 	 	109	 
	 
	 	 	 	 
	12.1 Cross-Guaranty
	 	 	109	 
	12.2 Waivers by Borrowers
	 	 	110	 
	12.3 Benefit of Guaranty
	 	 	110	 
	12.4 Subordination of Subrogation, Etc
	 	 	110	 
	12.5 Election of Remedies
	 	 	110	 
	12.6 Limitation
	 	 	111	 
	12.7 Contribution with Respect to Guaranty Obligations
	 	 	111	 
	12.8 Liability Cumulative
	 	 	112	 






iv









 






SCHEDULES




	 	 	 
	Schedule 1.1(b)

	 	Revolving Loan Commitments
	Schedule 3.2

	 	Capitalization
	Schedule 3.5

	 	Litigation
	Schedule 3.7

	 	ERISA
	Schedule 3.12

	 	Environmental
	Schedule 3.15

	 	Labor Relations
	Schedule 3.18

	 	Brokers’ and Transaction Fees
	Schedule 3.22

	 	Recalls
	Schedule 5.1

	 	Liens
	Schedule 5.4

	 	Investments
	Schedule 5.5

	 	Indebtedness
	Schedule 5.9

	 	Contingent Obligations
	Schedule 11.1

	 	Prior Indebtedness






EXHIBITS




	 	 	 
	Exhibit 1.1(c)

	 	Form of L/C Request
	Exhibit 1.1(d)

	 	Form of Swing Loan Request
	Exhibit 1.6

	 	Form of Notice of Conversion/Continuation
	Exhibit 2.1

	 	Closing Checklist
	Exhibit 4.2(b)

	 	Compliance Certificate
	Exhibit 4.11

	 	Cash Management System
	Exhibit 11.1(a)

	 	Form of Assignment
	Exhibit 11.1(b)

	 	Borrowing Base Certificate
	Exhibit 11.1(c)

	 	Notice of Borrowing
	Exhibit 11.1(d)

	 	Revolving Note
	Exhibit 11.1(e)

	 	Form of Swingline Note
	Exhibit 11.1(f)

	 	Eligible Accounts
	Exhibit 11.1(g)

	 	Eligible Inventory






v









 






CREDIT AGREEMENT




     This CREDIT AGREEMENT (including all exhibits and schedules hereto, as the same may be
amended, modified and/or restated from time to time, this “Agreement”) is entered into as of
January 7, 2009, by and among Akorn, Inc., a Louisiana corporation (“Akorn”), Akorn (New Jersey),
Inc., an Illinois corporation (“Akorn NJ”; together with Akorn, each a “Borrower” and together the
“Borrowers”), the other Persons party hereto that are now or hereafter designated as a “Credit
Party”, General Electric Capital Corporation, a Delaware corporation (in its individual capacity,
“GE Capital”), as Agent for the several financial institutions from time to time party to this
Agreement (collectively, the “Lenders” and individually each a “Lender”) and for itself as a Lender
(including as Swingline Lender) and L/C Issuer, and such Lenders.



WITNESSETH:




     WHEREAS, the Borrowers have requested, and the Lenders have agreed to make available to the
Borrowers, a revolving credit facility (including a letter of credit subfacility) upon and subject
to the terms and conditions set forth in this Agreement to (a) refinance Prior Indebtedness, (b)
provide for working capital and other general corporate purposes of the Borrowers and (c) fund
certain fees and expenses associated with the funding of the Loans;



     WHEREAS, the Borrowers desire to secure all of their Obligations under the Loan Documents by
granting to Agent, for the benefit of the Secured Parties, a security interest in and lien upon
substantially all of their personal and real property;



     WHEREAS, subject to the terms hereof, each of the Borrowers’ Subsidiaries is willing to
guarantee all of the Obligations of Borrowers and to grant to Agent, for the benefit of the Secured
Parties, a security interest in and lien upon substantially all of its personal and real property;



     NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained
herein, the parties hereto agree as follows:



ARTICLE I.

THE CREDITS




     1.1 Amounts and Terms of Commitments.



          (a) Reserved.




          (b) The Revolving Credit. Subject to the terms and conditions of this Agreement and
in reliance upon the representations and warranties of the Credit Parties contained herein, each
Revolving Lender severally and not jointly agrees to make Loans to the Borrowers (each such Loan, a
“Revolving Loan”) from time to time on any Business Day during the period from the Closing Date to
the Revolving Termination Date, in an aggregate amount not to exceed at any time outstanding the
amount set forth opposite such Lender’s name in Schedule 1.1(b) under the heading
“Revolving Loan



 









 






Commitment” (such amount as the same may be reduced or increased from time to time pursuant to
Section 1.16 or as a result of one or more assignments pursuant to Section 9.9, being referred to
herein as such Lender’s “Revolving Loan Commitment”); provided, however, that, after giving effect
to any Borrowing of Revolving Loans, the aggregate principal amount of the outstanding Revolving
Credit Exposure shall not exceed the Maximum Revolving Loan Balance. Subject to the other terms
and conditions hereof, amounts borrowed under this subsection 1.1(b) may be repaid and reborrowed
from time to time. The “Maximum Revolving Loan Balance” from time to time will be the lesser of:




               (i) the (y) Borrowing Base in effect from time to time minus (z) such Reserves as may
be imposed by Agent in its reasonable credit judgment but not reflected in such Borrowing Base
Certificate, or



               (ii) the Aggregate Revolving Loan Commitment then in effect;


less, in either case, $5,500,000 at all times on or prior to March 31, 2010;
provided, however, that until Agent has received Control Agreements with respect to
all deposit, securities, commodity and similar accounts maintained by the Borrowers (other than any
payroll account so long as such payroll account is a zero balance account and withholding tax and
fiduciary accounts), the Maximum Revolving Loan Balance shall not exceed $5,000,000.



If at any time the then outstanding principal balance of Revolving Credit Exposure exceeds the
Maximum Revolving Loan Balance, then the Borrowers shall immediately prepay outstanding Swing
Loans, and then outstanding Revolving Loans, in an amount sufficient to eliminate such excess.




               (iii) If the Borrowers request that Revolving Lenders make, or permit to remain outstanding
Revolving Loans in excess of the Borrowing Base (any such excess Revolving Loan is herein referred
to as an “Overadvance”), Agent may, in its sole discretion, elect to make, or permit to remain
outstanding such Overadvance; provided, however, that Agent may not cause Revolving Lenders to
make, or permit to remain outstanding, (A) aggregate Revolving Loans in excess of the Aggregate
Revolving Loan Commitment less the sum of outstanding Swing Loans plus the aggregate amount of
Letter of Credit Obligations or (B) an Overadvance in an aggregate amount in excess of 10% of the
Aggregate Revolving Loan Commitment. If an Overadvance is made, or permitted to remain
outstanding, pursuant to the preceding sentence, then all Revolving Lenders shall be bound to make,
or permit to remain outstanding, such Overadvance based upon their respective Commitment
Percentages of the Aggregate Revolving Loan Commitment in accordance with the terms of this
Agreement. If an Overadvance remains outstanding for more than ninety (90) days during any one
hundred eighty (180) day period, Revolving Loans must be repaid immediately in an amount sufficient
to eliminate all of such Overadvance. Furthermore, Required Lenders may prospectively revoke
Agent’s ability to make or permit Overadvances by written notice to Agent. All Overadvances shall
constitute Base Rate Loans and shall bear interest at the Base Rate plus the Applicable Margin for
Revolving



2









 







Loans; provided, however that if not repaid within five (5) Business Days such
Overadvances shall, commencing on the following day, bear interest at the default rate under
Section 1.3(c).



          (c) Letters of Credit. (i) Commitment and Conditions. On the terms and
subject to the conditions contained herein, each L/C Issuer agrees to Issue, at the request of the
Borrower Representative, in accordance with such L/C Issuer’s usual and customary business
practices, and for the account of the Borrowers (or, as long as the Borrowers remain responsible
for the payment in full of all amounts drawn thereunder and related fees, costs and expenses, for
the account of any Subsidiary of a Borrower), Letters of Credit (denominated in Dollars) from time
to time on any Business Day during the period from the Closing Date through the earlier of the
Revolving Termination Date and 7 days prior to the date specified in clause (a) of the definition
of Revolving Termination Date; provided, however, that such L/C Issuer shall not be under any
obligation to Issue any Letter of Credit if, after giving effect to such Issuance:





     (A) (i) the aggregate outstanding principal balance of Revolving
Credit Exposure would exceed the Maximum Revolving Loan Balance or (ii)
the Letter of Credit Obligations for all Letters of Credit would exceed
$5,000,000 (the “L/C Sublimit”);




     (B) the expiration date of such Letter of Credit (i) is not a
Business Day, (ii) is more than one year after the date of issuance
thereof or (iii) is later than 7 days prior to the date specified in
clause (a) of the definition of Revolving Termination Date; provided,
however, that any Letter of Credit with a term not exceeding one year may
provide for its renewal for additional periods not exceeding one year as
long as (x) such L/C Issuer has the option to prevent such renewal before
the expiration of such term or any such period and (y) such L/C Issuer
shall not permit any such renewal to extend such expiration date beyond
the date set forth in clause (iii) above; or




     (C) (i) any fee due in connection with, and on or prior to, such
Issuance has not been paid, (ii) such Letter of Credit is requested to be
issued in a form that is not acceptable to such L/C Issuer or (iii) such
L/C Issuer shall not have received, each in form and substance reasonably
acceptable to it and duly executed by the Borrowers or the Borrower
Representative on their behalf (and, if such Letter of Credit is issued
for the account of any Subsidiary of a Borrower, such Person), the
documents that such L/C Issuer generally uses in the ordinary course of
its business for the Issuance of letters of credit of the type of such
Letter of Credit (collectively, the “L/C Reimbursement Agreement”).



3









 




For each such Issuance, the applicable L/C Issuer may, but shall not be required to, determine
that, or take notice whether, the conditions precedent set forth in Section 2.2 have been satisfied
or waived in connection with the Issuance of any Letter of Credit; provided, however, that no
Letter of Credit shall be Issued during the period starting on the first Business Day after the
receipt by such L/C Issuer of notice from the Agent or the Required Lenders that any condition
precedent contained in Section 2.2 is not satisfied and ending on the date all such conditions are
satisfied or duly waived.





     (ii) Notice of Issuance. The Borrower Representative shall give the
relevant L/C Issuer and the Agent a notice of any requested Issuance of any Letter
of Credit, which shall be effective only if received by such L/C Issuer and the
Agent not later than 11:00 a.m. (New York time) on the third Business Day prior to
the date of such requested Issuance. Such notice may be made in a writing
substantially in the form of Exhibit 1.1(c) duly completed or in a writing
in any other form acceptable to such L/C Issuer (an “L/C Request”) or by telephone
if confirmed promptly, but in any event within one Business Day and prior to such
Issuance, with such an L/C Request.




     (iii) Reporting Obligations of L/C Issuers. Each L/C Issuer agrees to
provide the Agent (which, after receipt, the Agent shall provide to each Revolving
Lender), in form and substance satisfactory to the Agent, each of the following on
the following dates: (A) (i) on or prior to any Issuance of any Letter of Credit by
such L/C Issuer, (ii) immediately after any drawing under any such Letter of Credit
or (iii) immediately after any payment (or failure to pay when due) by the
Borrowers of any related L/C Reimbursement Obligation, notice thereof, which shall
contain a reasonably detailed description of such Issuance, drawing or payment; (B)
upon the request of the Agent (or any Revolving Lender through the Agent), copies
of any Letter of Credit Issued by such L/C Issuer and any related L/C Reimbursement
Agreement and such other documents and information as may reasonably be requested
by the Agent; and (C) upon the request of Agent or any Revolving Lender, but in no
case more frequently than once in any calendar month, a schedule of the Letters of
Credit Issued by such L/C Issuer, in form and substance reasonably satisfactory to
the Agent, setting forth the Letter of Credit Obligations for such Letters of
Credit outstanding on the last Business Day of the previous calendar week.




     (iv) Acquisition of Participations. Upon any Issuance of a Letter of
Credit in accordance with the terms of this Agreement resulting in any increase in
the Letter of Credit Obligations, each Revolving Lender shall be deemed to have
acquired, without recourse or warranty, an undivided interest and participation in
such Letter of Credit and the related Letter of Credit Obligations in an amount
equal to its Commitment Percentage of such Letter of Credit Obligations.



4









 






     (v) Reimbursement Obligations of the Borrowers. The Borrowers agree
to pay to the L/C Issuer of any Letter of Credit each L/C Reimbursement Obligation
owing with respect to such Letter of Credit no later than the first Business Day
after the Borrowers or the Borrower Representative receive notice from such L/C
Issuer that payment has been made under such Letter of Credit or that such L/C
Reimbursement Obligation is otherwise due (the “L/C Reimbursement Date”) with
interest thereon computed as set forth in clause (A) below. In the event that any
L/C Issuer incurs any L/C Reimbursement Obligation not repaid by the Borrowers as
provided in this clause (v) (or any such payment by the Borrowers is rescinded or
set aside for any reason), such L/C Issuer shall promptly notify the Agent of such
failure (and, upon receipt of such notice, the Agent shall forward a copy to each
Revolving Lender) and, irrespective of whether such notice is given, such L/C
Reimbursement Obligation shall be payable on demand by the Borrowers with interest
thereon computed (A) from the date on which such L/C Reimbursement Obligation arose
to the L/C Reimbursement Date, at the interest rate applicable during such period
to Revolving Loans that are Base Rate Loans and (B) thereafter until payment in
full, at the interest rate applicable during such period to past due Revolving
Loans that are Base Rate Loans.




     (vi) Reimbursement Obligations of the Revolving Credit Lenders. Upon
receipt of the notice described in clause (v) above from the Agent, each Revolving
Lender shall pay to the Agent for the account of such L/C Issuer its Commitment
Percentage of such L/C Reimbursement Obligation. By making such payment (other
than during the continuation of an Event of Default under subsection 7.1(f) or
7.1(g)), such Lender shall be deemed to have made a Revolving Loan to the
Borrowers, which, upon receipt thereof by such L/C Issuer, the Borrowers shall be
deemed to have used in whole to repay such L/C Reimbursement Obligation. Any such
payment that is not deemed a Revolving Loan shall be deemed a funding by such
Lender of its participation in the applicable Letter of Credit and the related
Letter of Credit Obligations. Such participation shall not otherwise be required
to be funded. Upon receipt by any L/C Issuer of any payment from any Lender
pursuant to this clause (vi) with respect to any portion of any L/C Reimbursement
Obligation, such L/C Issuer shall promptly pay over to such Lender all payments
received by such L/C Issuer after such payment by such Lender with respect to such
portion.




     (vii) Obligations Absolute. The obligations of the Borrowers and the
Revolving Lenders pursuant to clauses (iv), (v) and (vi) above shall be absolute,
unconditional and irrevocable and performed strictly in accordance with the terms
of this Agreement irrespective of (A) (i) the invalidity or unenforceability of any
term or provision in any Letter of Credit, any document transferring or purporting
to transfer a Letter of



5









 







Credit, any Loan Document (including the sufficiency of any such instrument),
or any modification to any provision of any of the foregoing, (ii) any document
presented under a Letter of Credit being forged, fraudulent, invalid, insufficient
or inaccurate in any respect or failing to comply with the terms of such Letter of
Credit or (iii) any loss or delay, including in the transmission of any document,
(B) the existence of any setoff, claim, abatement, recoupment, defense or other
right that any Person (including any Credit Party) may have against the beneficiary
of any Letter of Credit or any other Person, whether in connection with any Loan
Document or any other Contractual Obligation or transaction, or the existence of
any other withholding, abatement or reduction, (C) in the case of the obligations
of any Revolving Lender, (i) the failure of any condition precedent set forth in
Section 2.2 to be satisfied (each of which conditions precedent the Revolving
Lenders hereby irrevocably waive) or (ii) any adverse change in the condition
(financial or otherwise) of any Credit Party and (D) any other act or omission to
act or delay of any kind of Agent, any Lender or any other Person or any other
event or circumstance whatsoever, whether or not similar to any of the foregoing,
that might, but for the provisions of this subsection 1.1(c)(vii), constitute a
legal or equitable discharge of any obligation of the Borrowers or any Revolving
Lender hereunder; provided, however, that the foregoing shall not be
construed to excuse Agent or any L/C Issuer from liability to Borrower to the
extent of damages suffered by Borrower that are caused solely by Agent or such L/C
Issuer’s gross negligence or willful misconduct (as finally determined by a court
of competent jurisdiction) in connection with its review of documents presented in
connection with draws under any Letter of Credit.



          (d) Swing Loans. (i) Availability. Subject to the terms and conditions of
this Agreement and in reliance upon the representations and warranties of the Credit Parties
contained herein, the Swingline Lender may, in its sole discretion, make Loans (each a “Swing
Loan”) available to the Borrowers under the Revolving Loan Commitments from time to time on any
Business Day during the period from the Closing Date until the Revolving Termination Date in an
aggregate principal amount at any time outstanding not to exceed its Swingline Commitment;
provided, however, that the Swingline Lender may not make any Swing Loan (x) to the extent that
after giving effect to such Swing Loan, the aggregate principal amount of the Revolving Credit
Exposure would exceed the Maximum Revolving Loan Balance and (y) during the period commencing on
the first Business Day after it receives notice from the Agent or the Required Revolving Lenders
that one or more of the conditions precedent contained in Section 2.2 are not satisfied and ending
when such conditions are satisfied or duly waived. In connection with the making of any Swing
Loan, the Swingline Lender may but shall not be required to determine that, or take notice whether,
the conditions precedent set forth in Section 2.2 have been satisfied or waived. Each Swing Loan
shall be a Base Rate Loan and must be repaid in full on the earliest of (x) the funding date of any
Borrowing of Revolving Loans and (y) the Revolving Termination Date. Within the



6









 






limits set forth in the first sentence of this clause (i), amounts of Swing Loans repaid may
be reborrowed under this clause (i).





     (ii) Borrowing Procedures. In order to request a Swing Loan, the
Borrower Representative shall give to the Agent a notice to be received not later
than 1:00 p.m. (New York time) on the day of the proposed Borrowing, which may be
made in a writing substantially in the form of Exhibit 1.1(d) duly completed (a
“Swingline Request”) or by telephone if confirmed promptly but, in any event, prior
to such Borrowing, with such a Swingline Request. In addition, if any Notice of
Borrowing of Revolving Loans requests a Borrowing of Base Rate Loans (other than a
Borrowing to refinance outstanding Swing Loans), the Swingline Lender may,
notwithstanding anything else to the contrary herein, make a Swing Loan available
to the Borrowers in an aggregate amount not to exceed such proposed Borrowing, and
the aggregate amount of the corresponding proposed Borrowing shall be reduced
accordingly by the principal amount of such Swing Loan. The Agent shall promptly
notify the Swingline Lender of the details of the requested Swing Loan. Upon
receipt of such notice and subject to the terms of this Agreement, the Swingline
Lender may make a Swing Loan available to the Borrowers by making the proceeds
thereof available to the Agent and, in turn, the Agent shall make such proceeds
available to the Borrowers on the date set forth in the relevant Swingline Request
or Notice of Borrowing.




     (iii) Refinancing Swing Loans. The Swingline Lender or, subject to
subsection 1.5(a), Borrower Representative, may at any time forward a demand to the
Agent (which the Agent shall, upon receipt, forward to each Revolving Lender) that
each Revolving Lender pay to the Agent, for the account of the Swingline Lender,
such Revolving Lender’s Commitment Percentage of all or a portion of the
outstanding Swing Loans. Each Revolving Lender shall pay such Commitment
Percentage to the Agent for the account of the Swingline Lender if the notice or
demand therefor was received by such Lender prior to 12:00 p.m. (New York time) on
any Business Day, on such Business Day and (B) otherwise, on the Business Day
following such receipt. Payments received by the Administrative Agent after 2:00
p.m. (New York time) shall be deemed to be received on the next Business Day. Upon
receipt by the Agent of such payment (other than during the continuation of any
Event of Default under subsection 7.1(f) or 7.1(g)), such Revolving Lender shall be
deemed to have made a Revolving Loan to the Borrowers, which, upon receipt of such
payment by the Swingline Lender from the Agent, the Borrowers shall be deemed to
have used in whole to refinance such Swing Loan. In addition, regardless of
whether any such demand is made, upon the occurrence of any Event of Default under
subsection 7.1(f) or 7.1(g), each Revolving Lender shall be deemed to have
acquired, without recourse or warranty, an undivided interest and participation in
each Swing Loan in an amount equal to such Lender’s Commitment Percentage of such
Swing



7









 







Loan. If any payment made by any Revolving Lender as a result of any such
demand is not deemed a Revolving Loan, such payment shall be deemed a funding by
such Lender of such participation. Such participation shall not be otherwise
required to be funded. Upon receipt by the Swingline Lender of any payment from
any Revolving Lender pursuant to this clause (iii) with respect to any portion of
any Swing Loan in which a Revolving Lender has purchased a participation, the
Swingline Lender shall promptly pay over to such Revolving Lender all payments of
principal (to the extent received after such payment by such Lender) and interest
(to the extent accrued with respect to periods after such payment) received by the
Swingline Lender with respect to such portion.




     (iv) Obligation to Fund Absolute. Each Revolving Lender’s obligations
pursuant to clause (iii) above shall be absolute, unconditional and irrevocable and
shall be performed strictly in accordance with the terms of this Agreement under
any and all circumstances whatsoever, including (A) the existence of any setoff,
claim, abatement, recoupment, defense or other right that such Lender, any
Affiliate thereof or any other Person may have against the Swingline Lender, the
Agent, any other Lender or L/C Issuer or any other Person, (B) the failure of any
condition precedent set forth in Section 2.2 to be satisfied or the failure of the
Borrower Representative to deliver a Notice of Borrowing (each of which
requirements the Revolving Lenders hereby irrevocably waive) and (C) any adverse
change in the condition (financial or otherwise) of any Credit Party.



     1.2 Notes.



          (a) The Revolving Loans made by each Revolving Lender shall be evidenced by this Agreement
and, if requested by such Lender, a Revolving Note payable to the order of such Lender in an amount
equal to such Lender’s Revolving Loan Commitment.




          (b) Swing Loans made by the Swingline Lender shall be evidenced by this Agreement and, if
requested by such Lender, a Swingline Note in an amount equal to the Swingline Commitment.




     1.3 Interest.



          (a) Subject to subsections 1.3(c) and 1.3(d), each Loan shall bear interest on the outstanding
principal amount thereof from the date when made at a rate per annum equal to the LIBOR or the Base
Rate, as the case may be, plus the Applicable Margin; provided Swing Loans may not be LIBOR
Rate Loans. Each determination of an interest rate by the Agent shall be conclusive and binding on
each Borrower and the Lenders in the absence of manifest error. All computations of fees and
interest payable under this Agreement shall be made on the basis of a 360-day year and actual days



8









 






elapsed. Interest and fees shall accrue during each period during which interest or such fees
are computed from the first day thereof to the last day thereof.




          (b) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest
shall also be paid on the date of any payment or prepayment of Loans in full.




          (c) At the election of the Agent or the Required Lenders while any Event of Default exists (or
automatically while any Event of Default under subsection 7.1(f) or 7.1(g) exists), the Borrowers
shall pay interest (after as well as before entry of judgment thereon to the extent permitted by
law) on the Obligations under the Loan Documents from and after the date of occurrence of such
Event of Default, at a rate per annum which is determined by adding two percent (2.0%) per annum to
the Applicable Margin then in effect for such Loans (plus the LIBOR or Base Rate, as the case may
be) and, in the case of Obligations under the Loan Documents not subject to an Applicable Margin
(other than the fees described in subsection 1.9(c)), at a rate per annum equal to the rate per
annum applicable to Revolving Loans which are Base Rate Loans (including the Applicable Margin with
respect thereto) plus two percent (2.0%). All such interest shall be payable on demand of the
Agent or the Required Lenders.




          (d) Anything herein to the contrary notwithstanding, the obligations of the Borrowers
hereunder shall be subject to the limitation that payments of interest shall not be required, for
any period for which interest is computed hereunder, to the extent (but only to the extent) that
contracting for or receiving such payment by the respective Lender would be contrary to the
provisions of any law applicable to such Lender limiting the highest rate of interest which may be
lawfully contracted for, charged or received by such Lender, and in such event the Borrowers shall
pay such Lender interest at the highest rate permitted by applicable law (“Maximum Lawful Rate”);
provided, however, that if at any time thereafter the rate of interest payable
hereunder is less than the Maximum Lawful Rate, Borrowers shall continue to pay interest hereunder
at the Maximum Lawful Rate until such time as the total interest received by Agent, on behalf of
Lenders, is equal to the total interest that would have been received had the interest payable
hereunder been (but for the operation of this paragraph) the interest rate payable since the
Closing Date as otherwise provided in this Agreement.




          (e) If the Agent or the Required Lenders shall have determined in good faith that for any
reason LIBOR applicable pursuant to subsection 1.3(a) for any requested Interest Period with
respect to any proposed or existing LIBOR Rate Loan, or Base Rate with respect to any proposed or
existing Base Rate Loan, does not adequately and fairly reflect the cost to the Lenders of funding
or maintaining such Loan, the Agent or the Required Lenders will forthwith give notice of such
determination to the Borrowers and each Lender. Thereafter, LIBOR or Base Rate, as applicable
shall be adjusted to such higher rate as the Agent or Required Lenders, as applicable, may from
time to time designate to Borrowers (and in the case of Required Lenders, to Agent and Borrowers)
as the rate necessary to adequately and fairly reflect the cost to Lenders of funding or
maintaining such Loan until such time as the Agent or the Required Lenders notifies the Borrowers
and each Lender that LIBOR or Base Rate, as the case may be,



9









 






adequately and fairly reflects the cost to the Lenders of funding or maintaining such Loan.
Upon receipt of such notice that LIBOR or Base Rate does not adequately and fairly reflect the cost
to the Lenders of funding or maintaining such Loan, the Borrowers may revoke any Notice of
Borrowing or Notice of Conversion/Continuation then submitted by the Borrower Representative on
behalf of the Borrowers. If the Borrowers do not revoke such notice, the Lenders shall make,
convert or continue the Loans, as proposed by the Borrowers, in the amount specified in the
applicable notice submitted by the Borrower Representative on behalf of the Borrowers, but at the
LIBOR or Base Rate so determined and set by the Agent or Required Lenders, as the case may be.




     1.4 Loan Accounts.



          (a) The Agent, on behalf of the Lenders, shall record on its books and records the amount of
each Loan made, the interest rate applicable, all payments of principal and interest thereon and
the principal balance thereof from time to time outstanding. The Agent shall deliver to the
Borrower Representative on a monthly basis a loan statement setting forth such record for the
immediately preceding month. Such record shall, absent manifest error, be conclusive evidence of
the amount of the Loans made by the Lenders to the Borrowers and the interest and payments thereon.
Any failure to so record or any error in doing so, or any failure to deliver such loan statement
shall not, however, limit or otherwise affect the obligation of the Borrowers hereunder (and under
any Note) to pay any amount owing with respect to the Loans or provide the basis for any claim
against the Agent.




          (b) The Agent, acting as agent of the Borrowers solely for tax purposes and solely with
respect to the actions described in this subsection 1.4(b), shall establish and maintain at its
address referred to in Section 9.2 (or at such other address as the Agent may notify the Borrower
Representative) (A) a record of ownership (the “Register”) in which the Agent agrees to register by
book entry the interests (including any rights to receive payment hereunder) of the Agent, each
Lender and each L/C Issuer in the Revolving Loans, Swing Loans and Letter of Credit Obligations,
each of their obligations under this Agreement to participate in each Loan, Letter of Credit and
L/C Reimbursement Obligations, and any assignment of any such interest, obligation or right and (B)
accounts in the Register in accordance with its usual practice in which it shall record (1) the
names and addresses of the Lenders and the L/C Issuers (and each change thereto pursuant to
Sections 9.9 and 9.22), (2) the Commitment of each Lender, (3) the amount of each Loan and each
funding of any participation described in clause (A) above, for LIBOR Rate Loans, the Interest
Period applicable thereto, (4) the amount of any principal or interest due and payable or paid, (5)
the amount of the L/C Reimbursement Obligations due and payable or paid in respect of Letters of
Credit and (6) any other payment received by the Agent from a Borrower and its application to the
Obligations.




          (c) Notwithstanding anything to the contrary contained in this Agreement, the Loans (including
any Notes evidencing such Loans and the corresponding obligations to participate in Letter of
Credit Obligations and Swing Loans) and the L/C Reimbursement Obligations are registered
obligations, and the right, title and



10









 






interest of the Lenders and the L/C Issuers and their assignees in and to such Loans or L/C
Reimbursement Obligations, as the case may be, shall be transferable only upon notation of such
transfer in the Register and no assignment thereof shall be effective until recorded therein. This
Section 1.4 and Section 9.9 shall be construed so that the Loans and L/C Reimbursement Obligations
are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2)
and 881(c)(2) of the Code.




          (d) The Credit Parties, the Agent, the Lenders and the L/C Issuers shall treat each Person
whose name is recorded in the Register as a Lender or L/C Issuer, as applicable, for all purposes
of this Agreement. Information contained in the Register with respect to any Lender or any L/C
Issuer shall be available for access by the Borrowers, the Borrower Representative, the Agent, such
Lender or such L/C Issuer at any reasonable time and from time to time upon reasonable prior
notice. No Lender or L/C Issuer shall, in such capacity, have access to or be otherwise permitted
to review any information in the Register other than information with respect to such Lender or L/C
Issuer unless otherwise agreed by the Agent.




     1.5 Procedure for Revolving Credit Borrowing.



          (a) Each Borrowing of a Revolving Loan shall be made upon the Borrower Representative’s
irrevocable (subject to Sections 1.3(e) and 10.5 hereof) written notice delivered to the Agent in
the form of a Notice of Borrowing, which notice must be received by the Agent prior to 1:00 p.m.
(New York time) (i) on the requested Borrowing date in the case of each Base Rate Loan equal to or
less than $5,000,000 and in the case of the initial Loans to be made on the Closing Date, (ii) on
the date which is one (1) Business Day prior to the requested Borrowing date of each Base Rate Loan
in excess of $5,000,000 and (iii) on the day which is three (3) Business Days prior to the
requested Borrowing date in the case of each LIBOR Rate Loan. Such Notice of Borrowing shall
specify:




               (i) the amount of the Borrowing (which shall be in an aggregate minimum principal amount of
$100,000 and multiples of $50,000 in excess thereof);



               (ii) the requested Borrowing date, which shall be a Business Day;



               (iii) whether the Borrowing is to be comprised of LIBOR Rate Loans or Base Rate Loans; and



               (iv) if the Borrowing is to be LIBOR Rate Loans, the Interest Period applicable to such Loans.



          (b) Upon receipt of a Notice of Borrowing, the Agent will promptly notify each Revolving
Lender of such Notice of Borrowing and of the amount of such Lender’s Commitment Percentage of the
Borrowing.




11









 










          (c) Unless the Agent is otherwise directed in writing by the Borrower Representative, the
proceeds of each requested Borrowing after the Closing Date will be made available to the Borrowers
by the Agent by wire transfer of such amount to the Borrowers pursuant to the wire transfer
instructions specified on the signature page hereto.




     1.6 Conversion and Continuation Elections.



          (a) Borrowers shall have the option to (i) request that any Revolving Loan be made as a LIBOR
Rate Loan, (ii) convert at any time all or any part of outstanding Loans (other than Swing Loans)
from Base Rate Loans to LIBOR Rate Loans, (iii) convert any LIBOR Rate Loan to a Base Rate Loan,
subject to Section 10.4 if such conversion is made prior to the expiration of the Interest
Period applicable thereto, or (iv) continue all or any portion of any Loan as a LIBOR Rate Loan
upon the expiration of the applicable Interest Period. Any Loan or group of Loans having the same
proposed Interest Period to be made or continued as, or converted into, a LIBOR Rate Loan must be
in a minimum amount of $5,000,000 and integral multiples of $500,000 in excess of such amount.
Any such election must be made by Borrower Representative by 1:00 p.m. (New York time) on the 3rd
Business Day prior to (1) the date of any proposed Revolving Loan which is to bear interest at
LIBOR, (2) the end of each Interest Period with respect to any LIBOR Rate Loans to be continued as
such, or (3) the date on which Borrowers wish to convert any Base Rate Loan to a LIBOR Rate Loan
for an Interest Period designated by Borrower Representative in such election. If no election is
received with respect to a LIBOR Rate Loan by 1:00 p.m. (New York time) on the 3rd Business Day
prior to the end of the Interest Period with respect thereto, that LIBOR Rate Loan shall be
converted to a Base Rate Loan at the end of its Interest Period. Borrower Representative must make
such election by notice to Agent in writing, by fax or overnight courier (or by telephone, to be
confirmed in writing on such day). In the case of any conversion or continuation, such election
must be made pursuant to a written notice (a “Notice of Conversion/Continuation”) in the form of
Exhibit 1.6. No Loan shall be made, converted into or continued as a LIBOR Rate Loan, if
an Event of Default has occurred and is continuing and Agent or Required Lenders have determined
not to make or continue any Loan as a LIBOR Rate Loan as a result thereof.




          (b) Upon receipt of a Notice of Conversion/Continuation, the Agent will promptly notify each
Lender thereof. In addition, the Agent will, with reasonable promptness, notify the Borrower
Representative and the Lenders of each determination of LIBOR; provided that any failure to
do so shall not relieve any Borrower of any liability hereunder or provide the basis for any claim
against the Agent. All conversions and continuations shall be made pro rata according to the
respective outstanding principal amounts of the Loans held by each Lender with respect to which the
notice was given.




          (c) Notwithstanding any other provision contained in this Agreement, after giving effect to
any Borrowing, or to any continuation or conversion of any Loans, there shall not be more than
seven (7) different Interest Periods in effect.



      1.7 Optional Prepayments and Revolving Loan Commitment Reductions.




12









 





          (a) The Borrowers may at any time upon at least two (2) Business Days’ prior written notice by
Borrower Representative to the Agent, prepay the Loans in whole or in part in an amount greater
than or equal to $100,000 (other than Swing Loans for which prior written notice is not required
and for which no minimum shall apply), in each instance, without penalty or premium except as
provided in Section 10.4.




          (b) The notice of any prepayment shall not thereafter be revocable by the Borrowers or
Borrower Representative and the Agent will promptly notify each Lender thereof and of such Lender’s
Commitment Percentage of such prepayment. The payment amount specified in such notice shall be due
and payable on the date specified therein. Together with each prepayment under this Section 1.7,
the Borrowers shall pay any amounts required pursuant to Section 10.4.




          (c) The Borrowers may at any time upon at least five (5) Business Days’ prior written notice
by Borrower Representative to the Agent, permanently reduce or terminate the Revolving Loan
Commitments; provided that (1) the Revolving Loan Commitments shall not be reduced to an
amount less than the Revolving Credit Exposure then outstanding, unless (A) the Revolving Loan
Commitments are being terminated, (B) all Loans and other Obligations are immediately paid in full
and (C) all L/C Reimbursement Obligations are cash collateralized in accordance with Section 7.4
(as if an Event of Default had occurred) and (2) Borrower complies with Section 1.9(d).
Any such reduction or termination of the Revolving Loan Commitments must be accompanied by the
payment of the Fee required by Section 1.9(d), if any. Upon any such reduction or
termination of the Revolving Loan Commitments, Borrower’s right to request Loans, or request that
Letter of Credit Obligations be incurred on its behalf, shall simultaneously be permanently reduced
or terminated, as the case may be; provided that a permanent reduction of the Revolving
Loan Commitments below $5,000,000 shall require a corresponding dollar for dollar reduction in the
L/C Sublimit and the Swingline Commitment.




     1.8 Mandatory Prepayments of Loans.



          (a) Reserved.




          (b) Revolving Loan. The Borrowers shall repay to the Lenders in full on the date
specified in clause (a) of the definition of “Revolving Termination Date” the aggregate principal
amount of the Revolving Loans and Swing Loans outstanding on the Revolving Termination Date.




          (c) Asset Dispositions. If a Borrower or any Subsidiaries of a Borrower shall at any
time or from time to time:




               (i) make or agree to make a Disposition; or



               (ii) suffer an Event of Loss;



13









 




and the aggregate amount of the Net Proceeds received by the Borrowers and their Subsidiaries in
connection with such Disposition or Event of Loss and all other Dispositions and Events of Loss
occurring during the fiscal year exceeds $100,000, then (A) the Borrower Representative shall
promptly notify the Agent of such proposed Disposition or Event of Loss (including the amount of
the estimated Net Proceeds to be received by a Borrower and/or such Subsidiary in respect thereof)
and (B) promptly upon receipt by a Borrower and/or such Subsidiary of the Net Proceeds of such
Disposition or Event of Loss, the Borrowers shall deliver, or cause to be delivered, such Net
Proceeds to the Agent for distribution to the Lenders as a prepayment of the Loans, which
prepayment shall be applied in accordance with subsection 1.8(e) hereof.




          (d) Issuance of Securities. Immediately upon the receipt by any Credit Party or any
Subsidiary of any Credit Party of the Net Issuance Proceeds of the issuance of Stock or Stock
Equivalents (including any capital contribution other than a capital contribution to a Wholly-Owned
Subsidiary which is, or within 15 Business Days after such capital contribution becomes, a Credit
Party) or debt securities (other than Net Issuance Proceeds from the issuance of (i) debt
securities in respect of Indebtedness permitted hereunder, and (ii) Excluded Equity Issuances), the
Borrowers shall deliver, or cause to be delivered, to the Agent for application to the Loans in
accordance with subsection 1.8(e) an amount equal to (y) one hundred percent (100%) of such Net
Issuance Proceeds with respect to the issuance of any debt securities and (z) fifty percent (50%)
of such Net Issuance Proceeds with respect to the issuance of any Stock or Stock Equivalents
(including any capital contribution).




          (e) Application of Prepayments. Subject to subsection 1.10(c), any prepayments
pursuant to Section 1.7 and any prepayments pursuant to subsection 1.8(c) (other than prepayments
of Swing Loans as set forth therein) or 1.8(d) shall be applied first to prepay outstanding
Swing Loans and second to prepay outstanding Revolving Loans, effective as of the date that
such prepayment is made, without permanent reduction of the Revolving Loan Commitments. Amounts
prepaid shall be applied first to any Base Rate Loans then outstanding and then to outstanding
LIBOR Rate Loans with the shortest Interest Periods remaining. Together with each prepayment under
this Section 1.8, the Borrowers shall pay any amounts required pursuant to Section 10.4 hereof.




     1.9 Fees.



          (a) Agent’s Fees. The Borrowers shall pay to the Agent, for the Agent’s own account,
fees in the amounts and at the times set forth in that certain letter agreement among the Borrowers
and the Agent dated of even date herewith (as amended from time to time, the “Fee Letter”).




          (b) Unused Commitment Fee. The Borrowers shall pay to the Agent, for the ratable
benefit of the Revolving Lenders, a fee (the “Unused Commitment Fee”) per annum in an
amount equal to




               (i) the Aggregate Revolving Loan Commitment, less



14









 





               (ii) the sum of (x) the average daily balance of all Revolving Loans outstanding plus (y) the
average daily amount of Letter of Credit Obligations, in each case, during the preceding month,


multiplied by one-half of one percent (0.50%). Such fee shall be payable monthly in arrears on the
first day of the month following the date hereof and the first day of each month thereafter. The
Unused Commitment Fee provided in this subsection 1.9(b) shall accrue at all times from and after
mutual execution and delivery of this Agreement until the Revolving Termination Date.




          (c) Letter of Credit Fee. The Borrowers agree to pay to Agent for the ratable benefit
of the Revolving Lenders, as compensation to such Lenders for Letter of Credit Obligations incurred
hereunder, (i) without duplication of costs and expenses otherwise payable to Agent or Lenders
hereunder or fees otherwise paid by the Borrowers, all reasonable costs and expenses incurred by
Agent or any Lender on account of such Letter of Credit Obligations, and (ii) for each month during
which any Letter of Credit Obligation shall remain outstanding, a fee (the “Letter of Credit
Fee”) per annum in an amount equal to the product of the average daily undrawn face amount of
all Letters of Credit issued, guaranteed or supported by risk participation agreements multiplied
by a rate equal to the Applicable Margin with respect to Revolving Loans which are LIBOR Rate
Loans; provided, however, at Agent’s or Required Lenders’ option, while an Event of Default exists
(or automatically while an Event of Default under subsection 7.1(f) or 7.1(g) exists), such rate
shall be increased by two percent (2.00%). Such fee shall be paid to Agent for the benefit of the
Revolving Lenders in arrears, on the first day of each calendar month and on the Revolving
Termination Date. In addition, the Borrowers shall pay to any L/C Issuer, on demand, such
reasonable fees, without duplication of fees otherwise payable hereunder (including all per annum
fees), charges and expenses of such L/C Issuer in respect of the issuance, negotiation, acceptance,
amendment, transfer and payment of such Letter of Credit or otherwise payable pursuant to the
application and related documentation under which such Letter of Credit is issued.




          (d) Revolver Reduction Fee. If the Borrowers reduce or terminate the Revolving Loan
Commitments, whether voluntarily or involuntarily and whether before or after acceleration of the
Obligations, the Borrowers agree to pay to the Agent for the ratable benefit of the Revolving
Lenders as liquidated damages and compensation for the costs of being prepared to make funds
available hereunder an amount equal to the Applicable Percentage (as defined below) multiplied by
the sum of the amount of the reduction of the Revolving Loan Commitments. As used herein, the term
“Applicable Percentage” shall mean (x) one percent (1.00%), in the case of any reduction
or termination of the Revolving Loan Commitments on or prior to July 7, 2009, (y) one-half of one
percent (0.50%), in the case of any reduction or termination of the Revolving Loan Commitments made
after July 7, 2009 but on or prior to January 7, 2010, and (z) zero percent (0%), in the case of
any reduction or termination of the Revolving Loan Commitments after January 7, 2010. The
Borrowers agree that the Applicable Percentages are a reasonable calculation of the lost profits of
the Lenders in view of the



15









 






difficulties and impracticality of determining actual damages from an early termination of the
Revolving Loan Commitments.




     1.10 Payments by the Borrowers.



          (a) All payments (including prepayments) to be made by each Credit Party on account of
principal, interest, fees and other amounts required hereunder shall be made without set-off,
recoupment, counterclaim or deduction of any kind, shall, except as otherwise expressly provided
herein, be made to the Agent (for the ratable account of the Persons entitled thereto) at the
address for payment specified in the signature page hereof in relation to the Agent (or such other
address as the Agent may from time to time specify in accordance with Section 9.2), and shall be
made in Dollars and in immediately available funds, no later than 2:00 p.m. (New York time) on the
date due. For purposes of computing interest and Fees and determining Availability as of any
date, all payments shall be deemed received on the first Business Day following the Business Day on
which immediately available funds therefor are received in the Collection Account prior to 2:00
p.m. New York time. Any payment which is received by the Agent later than 2:00 p.m. (New York
time) shall be deemed to have been received on the immediately succeeding Business Day and any
applicable interest or fee shall continue to accrue. Each Borrower and each other Credit Party
hereby irrevocably waives the right to direct the application during the continuance of an Event of
Default of any and all payments in respect of any Obligation and any proceeds of Collateral. Each
Borrower hereby authorizes the Agent and each Lender to make a Revolving Loan (which shall be a
Base Rate Loan and which may be a Swing Loan) to pay (i) interest, principal (including Swing
Loans), agent fees, Unused Commitment Fees and Letter of Credit Fees, in each instance, on the date
due, or (ii) after five (5) days prior notice to the Borrower Representative, other fees, costs or
expenses payable by a Borrower or any of its Subsidiaries hereunder or under the other Loan
Documents.




          (b) Subject to the provisions set forth in the definition of “Interest Period” herein, if any
payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension of time shall in such case be
included in the computation of interest or fees, as the case may be.




          (c) During the continuance of an Event of Default, the Agent may, and shall upon the direction
of Required Lenders apply any and all payments in respect of any Obligation in accordance with
clauses first through sixth below. Notwithstanding any provision herein to the contrary, all
amounts collected or received by the Agent after any or all of the Obligations have been
accelerated (so long as such acceleration has not been rescinded) and all proceeds received by the
Agent as a result of the exercise of its remedies under the Collateral Documents after the
occurrence and during the continuance of an Event of Default shall be applied as follows:




     first, to payment of costs and expenses, including Attorney Costs, of the Agent
payable or reimbursable by the Credit Parties under the Loan Documents;



16









 





     second, to payment of Attorney Costs of Lenders payable or reimbursable by the
Borrowers under this Agreement;



     third, to payment of all accrued unpaid interest on the Obligations and fees owed to
the Agent, Lenders, and L/C Issuers;



     fourth, to payment of principal of the Obligations including, without limitation, L/C
Reimbursement Obligations then due and payable, any Obligations under any Secured Rate Contract and
cash collateralization of L/C Reimbursement Obligations to the extent not then due and payable;



     fifth, to payment of any other amounts owing constituting Obligations; and



     sixth, any remainder shall be for the account of and paid to whoever may be lawfully
entitled thereto.



     In carrying out the foregoing, (i) amounts received shall be applied in the numerical order
provided until exhausted prior to the application to the next succeeding category and (ii) each of
the Lenders or other Persons entitled to payment shall receive an amount equal to its pro rata
share of amounts available to be applied pursuant to clauses third, fourth and fifth above.



     1.11 Payments by the Lenders to the Agent; Settlement.



          (a) Agent may, on behalf of Lenders, disburse funds to the Borrowers for Loans requested.
Each Lender shall reimburse Agent on demand for all funds disbursed on its behalf by Agent, or if
Agent so requests, each Lender will remit to Agent its Commitment Percentage of any Loan before
Agent disburses same to the Borrowers. If Agent elects to require that each Lender make funds
available to Agent prior to disbursement by Agent to the Borrowers, Agent shall advise each Lender
by telephone or fax of the amount of such Lender’s Commitment Percentage of the Loan requested by
the Borrower Representative no later than 1:00 p.m. (New York time) on the scheduled Borrowing date
applicable thereto, and each such Lender shall pay Agent such Lender’s Commitment Percentage of
such requested Loan, in same day funds, by wire transfer to Agent’s account on such scheduled
Borrowing date. If any Lender fails to pay its Commitment Percentage within one (1) Business Day
after Agent’s demand, Agent shall promptly notify the Borrower Representative, and the Borrowers
shall immediately repay such amount to Agent. Any repayment required pursuant to this subsection
1.11(a) shall be without premium or penalty. Nothing in this subsection 1.11(a) or elsewhere in
this Agreement or the other Loan Documents, including the remaining provisions of Section 1.11,
shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender
from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Agent,
Swingline Lender or Borrowers may have against any Lender as a result of any default by such Lender
hereunder.




          (b) At least once each calendar week or more frequently at Agent’s election (each, a
“Settlement Date”), Agent shall advise each Lender by telephone or fax of the amount of such
Lender’s Commitment Percentage of principal, interest and Fees



17









 






paid for the benefit of Lenders with respect to each applicable Loan. Provided that each
Lender has funded all payments required to be made by it and funded all purchases of participations
required to be funded by it under this Agreement and the other Loan Documents as of such Settlement
Date, Agent shall pay to each Lender such Lender’s Commitment Percentage of principal, interest and
fees paid by the Borrowers since the previous Settlement Date for the benefit of such Lender on the
Loans held by it. Such payments shall be made by wire transfer to such Lender) not later than 2:00
p.m. (New York time) on the next Business Day following each Settlement Date. To the extent that
any Lender (a “Non-Funding Lender”) has failed to fund all such payments or failed to fund the
purchase of all such participations required to be funded by such Lender pursuant to this
Agreement, Agent shall be entitled to set off the funding shortfall against that Non-Funding
Lender’s Commitment Percentage of all payments received from the Borrowers.




          (c) Availability of Lender’s Commitment Percentage. Agent may assume that each
Revolving Lender will make its Commitment Percentage of each Revolving Loan available to Agent on
each Borrowing date. If such Commitment Percentage is not, in fact, paid to Agent by such
Revolving Lender when due, Agent will be entitled to recover such amount on demand from such
Revolving Lender without setoff, counterclaim or deduction of any kind. If any Revolving Lender
fails to pay the amount of its Commitment Percentage forthwith upon Agent’s demand, Agent shall
promptly notify the Borrower Representative and the Borrowers shall immediately repay such amount
to Agent. Nothing in this subsection 1.11(c) or elsewhere in this Agreement or the other Loan
Documents shall be deemed to require Agent to advance funds on behalf of any Revolving Lender or to
relieve any Revolving Lender from its obligation to fulfill its Commitments hereunder or to
prejudice any rights that the Borrowers may have against any Revolving Lender as a result of any
default by such Revolving Lender hereunder. To the extent that Agent advances funds to the
Borrowers on behalf of any Revolving Lender and is not reimbursed therefor on the same Business Day
as such advance is made, Agent shall be entitled to retain for its account all interest accrued on
such advance until reimbursed by the applicable Revolving Lender.




          (d) Return of Payments.




               (i) If Agent pays an amount to a Lender under this Agreement in the belief or expectation that
a related payment has been or will be received by Agent from the Borrowers and such related payment
is not received by Agent, then Agent will be entitled to recover such amount from such Lender on
demand without setoff, counterclaim or deduction of any kind.



               (ii) If Agent determines at any time that any amount received by Agent under this Agreement
must be returned to any Credit Party or paid to any other Person pursuant to any insolvency law or
otherwise, then, notwithstanding any other term or condition of this Agreement or any other Loan
Document, Agent will not be required to distribute any portion thereof to any Lender. In addition,
each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to
such Lender,



18









 




together with interest at such rate, if any, as Agent is required to pay to any Borrower or
such other Person, without setoff, counterclaim or deduction of any kind.




          (e) Non-Funding Lenders. The failure of any Non-Funding Lender to make any Revolving
Loan or any payment required by it hereunder, or to fund any purchase of any participation to be
made or funded by it on the date specified therefor shall not relieve any other Lender (each such
other Revolving Lender, an “Other Lender”) of its obligations to make such loan or fund the
purchase of any such participation on such date, but neither any Other Lender nor Agent shall be
responsible for the failure of any Non-Funding Lender to make a loan, fund the purchase of a
participation or make any other payment required hereunder. Notwithstanding anything set forth
herein to the contrary, a Non-Funding Lender shall not have any voting or consent rights under or
with respect to any Loan Document or constitute a “Lender” or a “Revolving Lender” (or be included
in the calculation of “Required Lenders” hereunder) for any voting or consent rights under or with
respect to any Loan Document, and Non-Funding Lender shall not be entitled to receive any Unused
Commitment Fee. Notwithstanding anything set forth herein to the contrary, if any Lender is a
Non-Funding Lender, neither the Swingline Lender nor any L/C Issuer shall be required to make any
Swing Loans or issue any Letters of Credit until the Swingline Lender or such L/C Issuer have
entered into arrangements satisfactory to it and the Borrower to eliminate the Swingline Lender’s
risk or the L/C Issuer’s risk, as the case may be, with respect to the interest and participation
of the Non-Funding Lender in the Swing Loans or Letter of Credit Obligations, including by cash
collateralizing such Non-Funding Lender’s interest and participation in the Swing Loans or Letter
of Credit Obligations, as the case may be.




     1.12 Eligible Accounts. All of the Accounts owned by Borrowers and properly reflected
as “Eligible Accounts” in the most recent Borrowing Base Certificate delivered by the Borrower
Representative to Agent shall be “Eligible Accounts” for purposes of this Agreement. Agent
shall have the right to establish, modify or eliminate Reserves against Eligible Accounts from time
to time in its reasonable credit judgment. In addition, Agent reserves the right, at any time and
from time to time after the Closing Date, to adjust any of the applicable criteria, to establish
new criteria and to adjust advance rates with respect to Eligible Accounts, in its reasonable
credit judgment, subject to the approval of Required Lenders in the case of adjustments, new
criteria or changes in advance rates which have the effect of making more credit available.



     1.13 Eligible Inventory



     All of the Inventory owned by the Borrowers and properly reflected as “Eligible Inventory” in
the most recent Borrowing Base Certificate delivered by the Borrower Representative to Agent shall
be “Eligible Inventory”, as applicable for purposes of this Agreement. Agent shall have the right
to establish, modify, or eliminate Reserves against Eligible Inventory from time to time in its
reasonable credit judgment. In addition, Agent reserves the right, at any time and from time to
time after the Closing Date, to adjust any of the applicable criteria, to establish new criteria
and to adjust advance rates with respect to Eligible Inventory in its reasonable credit judgment,
subject to the approval of



19









 







Required Lenders in the case of adjustments, new criteria or changes in advance rates which
have the effect of making more credit available.



     1.14 Eligible Equipment



     All of the Equipment owned by the Borrowers and properly reflected as “Eligible Equipment” in
the most recent Borrowing Base Certificate delivered by the Borrower Representative to Agent shall
be “Eligible Equipment”, as applicable for purposes of this Agreement. Agent shall have the right
to establish, modify, or eliminate Reserves against Eligible Equipment from time to time in its
reasonable credit judgment. In addition, Agent reserves the right, at any time and from time to
time after the Closing Date, to adjust any of the applicable criteria, to establish new criteria
and to adjust advance rates with respect to Eligible Equipment in its reasonable credit judgment,
subject to the approval of Required Lenders in the case of adjustments, new criteria or changes in
advance rates which have the effect of making more credit available.



     1.15 Eligible Real Estate



     Agent shall have the right to establish, modify, or eliminate Reserves against Eligible Real
Estate from time to time in its reasonable credit judgment. In addition, Agent reserves the right,
at any time and from time to time after the Closing Date, to adjust any of the applicable criteria,
to establish new criteria and to adjust advance rates with respect to Eligible Real Estate in its
reasonable credit judgment, subject to the approval of Required Lenders in the case of adjustments,
new criteria or changes in advance rates which have the effect of making more credit available.



     1.16 Incremental Commitments.



          (a) At any time prior to January 7, 2011 Borrowers may from time to time, upon written notice
to the Agent (who shall promptly provide a copy of such notice to each Lender), propose to increase
the Commitments by an aggregate amount not to exceed Ten Million Dollars ($10,000,000) (the
“Incremental Revolver”), such that the Aggregate Revolving Loan Commitments after giving effect to
such increase are no greater than Thirty-Five Million Dollars ($35,000,000). Each Lender shall
have the right for a period of fifteen (15) days following receipt of such notice, to elect by
written notice to the Borrower Representative and the Agent, to commit to establish all or a
portion of such Incremental Revolver. Final allocations of the Incremental Revolver shall be
determined by the Agent after consultation with Borrowers. No Lender (or any successor thereto)
shall have any obligation to establish all or any portion of such Incremental Revolver or to
increase any other obligations under this Agreement and the other Loan Documents, and any decision
by a Lender to establish all or any portion of such Incremental Revolver shall be made in its sole
discretion independently from any other Lender.




          (b) If the Lenders do not commit to establish the entire Incremental Revolver pursuant to
subsection (a) of this Section 1.16, the Borrowers may designate another bank or
other financial institution (which may be, but need not be, one or more of



20









 







the existing Lenders), provided, however that if such Person is not an
existing Lender, such Person must be reasonably acceptable to the Agent and join this Agreement as
a Lender (an “Additional Lender”).




          (c) In the event that the Borrowers desire to increase the Commitments by the Incremental
Revolver, the Borrowers will enter into an amendment with the Agent, those Lenders providing the
Incremental Revolver and Additional Lenders, if any (which shall upon execution thereof become
Lenders hereunder if not theretofore Lenders) to provide for such Incremental Revolver, which
amendment shall set forth any terms and conditions of the Incremental Revolver not covered by this
Agreement as agreed by the Borrowers, Agent and such Lenders, and shall provide for the issuance of
promissory notes to evidence the Incremental Revolver if requested by such Lenders (which notes
shall constitute Notes for purposes of this Agreement), such amendment to be in form and substance
reasonably acceptable to Agent and consistent with the terms of this Section 1.16(c) and of
the other provisions of this Agreement. No consent of any Lender not committing to the Incremental
Revolver is required to permit the Incremental Revolver contemplated by and otherwise complying
with this Section 1.16(c) or the aforesaid amendment to effectuate the Incremental
Revolver. This clause (c) shall supersede any provisions contained in this Agreement, including,
without limitation, Section 9.1.




          (d) The increase of the Commitments by the Incremental Revolver will be subject to the
satisfaction of the following conditions precedent: (i) after giving pro forma effect to such
increase, no Default or Event of Default shall have occurred and be continuing and Borrowers will
be in pro forma compliance with the covenants set forth in Article VI, (ii) execution of
the amendment hereto referenced in clause (c) above by Agent, the Lenders and Additional Lenders
providing the Incremental Revolver and the Credit Parties, (iii) delivery to Agent of a certificate
of the Secretary or an Assistant Secretary of each Credit Party, in form and substance reasonably
satisfactory to Agent, certifying the resolutions of such Person’s board of directors (or
equivalent governing body) approving and authorizing the Incremental Revolver (if not previously
delivered to Agent), and certifying that none of the organizational documents of such Credit Party
delivered to the Agent prior thereto have been modified or altered in any way (or if modifications
have occurred, certifying new copies of such organizational documents), (iv) delivery to Agent of
an opinion of counsel to the Credit Parties in form and substance and from counsel reasonably
satisfactory to the Agent, addressed to Agent and Lenders extending the Incremental Revolver and
covering such matters as the Agent may reasonably request, (v) receipt by Agent of such new Notes
and reaffirmations of guaranties and Liens, as Agent may reasonably request, together with
amendments to any Mortgages reflecting that the Incremental Revolver is secured pari passu with the
Revolving Loan, and such endorsements to title policies or additional title searches as the Agent
may reasonably request and (vi) the Incremental Revolver shall be provided on the same terms and
conditions as the existing Revolving Loan Commitments (including without limitation as to fees,
absence of original issue discount, interest rates and maturity).



      1.17 Borrower Representative.




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     Each Borrower hereby designates and appoints Akorn as its representative and agent on its
behalf (the “Borrower Representative”) for the purposes of issuing Notices of Borrowings, Notices
of Conversion/Continuation, L/C Requests, delivering certificates including Compliance
Certificates, giving instructions with respect to the disbursement of the proceeds of the Loans,
selecting interest rate options, giving and receiving all other notices and consents hereunder or
under any of the other Loan Documents and taking all other actions (including in respect of
compliance with covenants) on behalf of any Borrower or Borrowers under the Loan Documents.
Borrower Representative hereby accepts such appointment. Agent and each Lender may regard any
notice or other communication pursuant to any Loan Document from Borrower Representative as a
notice or communication from all Borrowers. Each warranty, covenant, agreement and undertaking
made on behalf of a Borrower by Borrower Representative shall be deemed for all purposes to have
been made by such Borrower and shall be binding upon and enforceable against such Borrower to the
same extent as if the same had been made directly by such Borrower.



ARTICLE II.

CONDITIONS PRECEDENT




     2.1 Conditions of Initial Loans. The obligation of each Lender to make its initial
Loans and of each L/C Issuer to Issue, or cause to be Issued, the initial Letters of Credit
hereunder is subject to satisfaction of the following conditions:



          (a) Loan Documents. The Agent shall have received on or before the Closing Date all
of the agreements, documents, instruments and other items set forth on Exhibit 2.1 (the
“Closing Checklist”), each in form and substance reasonably satisfactory to the Agent;




          (b) Availability. After giving effect to the payment of all costs and expenses in
connection therewith, funding of the initial Loans and issuance of the initial Letters of Credit,
Availability shall be not less than $10,000,000;




          (c) Due Diligence. The Agent shall have completed its business, tax and legal due
diligence, including a review of existing and potential contracts with Serum for trials related to
an ANDA for Hepatitis B, a review of background checks on significant related parties, insurance
review, customer and supplier calls, satisfactory regulatory review and satisfactory review of all
material pending and threatened litigation or proceedings in court or any administrative forum, all
with results satisfactory to Agent.




          (d) Parexel Audit. Agent and its counsel shall have completed their review of the
October 2008 Parexel audit of the Borrowers as to FDA compliance status, with results satisfactory
to Agent, and Agent shall have received confirmation that Borrowers have no additional FDA issues
since the audited period.




          (e) Structure; Joint Ventures; Other Indebtedness. The ownership, capital, corporate,
tax, organizational and legal structure of the Borrowers and their






22









 






subsidiaries, the equity structure of all joint venture arrangements of the Borrowers and the
terms and conditions of all other Indebtedness of each Credit Party, including without limitation
subordination provisions, shall be acceptable to Agent in its sole discretion.




          (f) Approvals. Agent shall have received (i) satisfactory evidence that the Credit
Parties have obtained all material consents and approvals of all Persons including all requisite
Governmental Authorities, to the execution, delivery and performance of this Agreement and the
other Loan Documents and the Related Transactions, which consents and approvals shall be final and
non-appealable, or (ii) an officer’s certificate in form and substance reasonably satisfactory to
Agent affirming that no such consents or approvals are required.




          (g) Fees and Expenses. Borrowers shall have paid the Fees required to be paid on the
Closing Date pursuant to the terms of this Agreement and the Fee Letter, and shall have reimbursed
Agent for all fees, costs and expenses of closing presented as of the Closing Date.




          (h) EBITDA. The Borrowers shall have delivered evidence to the satisfaction of the
Agent demonstrating that EBITDA of the Borrowers for the five-month period ending November 30, 2008
shall be not less than $5,750,000.




     2.2 Conditions to All Borrowings. Except as otherwise expressly provided herein, no
Lender or L/C Issuer shall be obligated to fund any Loan or incur any Letter of Credit Obligation,
if, as of the date thereof:



          (a) except as may be waived in writing by the Required Lenders, any representation or warranty
by any Credit Party contained herein or in any other Loan Document is untrue or incorrect in any
material respect (without duplication of any materiality qualifier contained therein) as of such
date, except to the extent that such representation or warranty expressly relates to an earlier
date (in which event such representations and warranties were untrue or incorrect as of such
earlier date), and Agent or Required Lenders have determined not to make such Loan or incur such
Letter of Credit Obligation as a result of the fact that such warranty or representation is untrue
or incorrect;




          (b) any Default or Event of Default has occurred and is continuing or would result after
giving effect to any Loan (or the incurrence of any Letter of Credit Obligation), and Agent or
Required Lenders shall have determined not to make any Loan or incur any Letter of Credit
Obligation as a result of that Default or Event of Default;




          (c) after giving effect to any Loan (or the incurrence of any Letter of Credit Obligations),
the aggregate outstanding amount of the Revolving Credit Exposure would exceed the Maximum
Revolving Loan Balance (except as provided in Section 1.1(b)); or




          (d) after giving effect to such Loan and the application of the proceeds thereof on the date
of funding (including depositing such funds in a Disbursement



23









 






Account so long as cash in such Disbursement Account would not exceed (x) checks outstanding
against such Disbursement Account as of that date, plus (y) amounts necessary to meet
minimum balance requirements for such Disbursement Account), the aggregate cash and Cash
Equivalents of Borrowers and their Subsidiaries will not exceed $5,000,000.



The request by Borrower Representative and acceptance by Borrowers of the proceeds of any Loan or
the incurrence of any Letter of Credit Obligations shall be deemed to constitute, as of the date
thereof, (i) a representation and warranty by Borrowers that the conditions in this Section 2.2
have been satisfied and (ii) a reaffirmation by each Credit Party of the granting and continuance
of Agent’s Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.




ARTICLE III.

REPRESENTATIONS AND WARRANTIES




     The Credit Parties, jointly and severally, represent and warrant to the Agent and each Lender
that the following are true, correct and complete:



     3.1 Corporate Existence and Power. Each Credit Party and each of their respective
Subsidiaries:



          (a) is a corporation, limited liability company or limited partnership, as applicable, duly
organized, validly existing and in good standing under the laws of the jurisdiction of its
incorporation, organization or formation, as applicable;




          (b) has the power and authority and all Permits to own its assets, carry on its business and
execute, deliver, and perform its obligations under, the Loan Documents and the Related Agreements
to which it is a party;




          (c) is duly qualified as a foreign corporation, limited liability company or limited
partnership, as applicable, and licensed and in good standing, under the laws of each jurisdiction
where its ownership, lease or operation of Property or the conduct of its business requires such
qualification or license; and




          (d) is in compliance with all Requirements of Law;



except, in each case referred to in clause (c) or clause (d), to the extent that the failure to do
so would not reasonably be expected to have, either individually or in the aggregate, a Material
Adverse Effect.




     3.2 Corporate Authorization; No Contravention.



          (a) The execution, delivery and performance by each of the Credit Parties of this Agreement,
and by each of the Credit Parties and each of their respective Subsidiaries of any other Loan
Document and Related Agreement to which such Person is party, have been duly authorized by all
necessary action, and do not and will not:




24









 








               (i) contravene the terms of any of that Person’s Organization Documents;



               (ii) conflict with or result in any material breach or contravention of, or result in the
creation of any Lien under, any document evidencing any material Contractual Obligation to which
such Person is a party or any order, injunction, writ or decree of any Governmental Authority to
which such Person or its Property is subject; or



               (iii) violate any material Requirement of Law in any material respect.



          (b) Schedule 3.2 sets forth the authorized Stock and Stock Equivalents of each of the
Credit Parties and each of their respective Subsidiaries. All issued and outstanding Stock and
Stock Equivalents of each of the Credit Parties and each of their respective Subsidiaries are duly
authorized and validly issued, fully paid, non-assessable, and, except with respect to Stock and
Stock Equivalents of Akorn, free and clear of all Liens other than, with respect to the Stock and
Stock Equivalents of the Borrowers and Subsidiaries of the Borrowers, those in favor of the Agent
for the benefit of the Secured Parties. All such securities were issued in compliance with all
applicable state and federal laws concerning the issuance of securities. As of the Closing Date,
all of the issued and outstanding Stock and Stock Equivalents of the Subsidiaries of Akorn are
owned by the Persons and in the amounts set forth on Schedule 3.2. Except as set forth on
Schedule 3.2, there are no pre-emptive or other outstanding rights, options, warrants,
conversion rights or other similar agreements or understandings for the purchase or acquisition of
any Stock and Stock Equivalents of any Credit Party other than Akorn.




     3.3 Governmental Authorization. No approval, consent, exemption, authorization, or
other action by, or notice to, or filing with, any Governmental Authority is necessary or required
in connection with the execution, delivery or performance (measured as of each date this
representation and warranty is given as if all performance occurred on such date) by, or
enforcement against, any Credit Party or any Subsidiary of any Credit Party of this Agreement, any
other Loan Document or Related Agreement except (a) for recordings and filings in connection with
the Liens granted to the Agent under the Collateral Documents and (b) those obtained or made on or
prior to the Closing Date.



     3.4 Binding Effect. This Agreement and each other Loan Document and Related Agreement
to which any Credit Party or any Subsidiary of any Credit Party is a party constitute the legal,
valid and binding obligations of each such Person which is a party thereto, enforceable against
such Person in accordance with their respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights
generally or by equitable principles relating to enforceability.



     3.5 Litigation. Except as specifically disclosed in Schedule 3.5, there are
no actions, suits, proceedings, claims or disputes pending, or to the best knowledge of each



25









 







Credit Party, threatened in writing or contemplated, at law, in equity, in arbitration or
before any Governmental Authority, against any Credit Party, any Subsidiary of any Credit Party or
any of their respective Properties which:



          (a) purport to affect or pertain to this Agreement, any other Loan Document or Related
Agreement, or any of the transactions contemplated hereby or thereby; or




          (b) would reasonably be expected to result in equitable relief or monetary judgment(s),
individually or in the aggregate, in excess of $50,000.



No injunction, writ, temporary restraining order or any order of any nature has been issued by any
court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or
performance of this Agreement, any other Loan Document or any Related Agreement, or directing that
the transactions provided for herein or therein not be consummated as herein or therein provided.
As of the Closing Date, no Credit Party or any Subsidiary of any Credit Party is the subject of an
audit by the IRS or other Governmental Authority or, to each Credit Party’s knowledge, any review
or investigation by the IRS or other Governmental Authority concerning the violation or possible
violation of any Requirement of Law.




     3.6 No Default. No Default or Event of Default exists or would result from the
incurring of any Obligations by any Credit Party or the grant or perfection of the Agent’s Liens on
the Collateral or the consummation of the transactions contemplated by the Loan Documents. No
Credit Party and no Subsidiary of any Credit Party is in default under or with respect to any
Contractual Obligation in any respect which, individually or together with all such defaults, would
reasonably be expected to have a Material Adverse Effect.



     3.7 ERISA Compliance. Schedule 3.7 sets forth, as of the Closing Date, a
complete and correct list of, and that separately identifies, (a) all Title IV Plans, (b) all
Multiemployer Plans and (c) all material Benefit Plans. Each Benefit Plan, and each trust
thereunder, intended to qualify for tax exempt status under Section 401 or 501 of the Code or other
Requirements of Law so qualifies. Except for those that would not, in the aggregate, have a
Material Adverse Effect, (x) each Benefit Plan is in compliance with applicable provisions of
ERISA, the Code and other Requirements of Law, (y) there are no existing or pending (or to the
knowledge of any Credit Party, threatened in writing) claims (other than routine claims for
benefits in the normal course), sanctions, actions, lawsuits or other proceedings or investigation
involving any Benefit Plan to which any Credit Party incurs or otherwise has or could have an
obligation or any Liability and (z) no ERISA Event is reasonably expected to occur. On the Closing
Date, no ERISA Event has occurred in connection with which obligations and liabilities (contingent
or otherwise) remain outstanding. No ERISA Affiliate would have any Withdrawal Liability as a
result of a complete withdrawal from any Multiemployer Plan on the date this representation is
made.



26









 





     3.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans are intended to be
and shall be used solely for the purposes set forth in and permitted by Section 4.10, and are
intended to be and shall be used in compliance with Section 5.8. No Credit Party and no Subsidiary
of any Credit Party is engaged in the business of purchasing or selling Margin Stock or extending
credit for the purpose of purchasing or carrying Margin Stock. Proceeds of the Loans shall not be
used for the purpose of purchasing or carrying Margin Stock.



     3.9 Title to Properties. Each of the Credit Parties and each of their respective
Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests
in, all real Property, and owns, free of all Liens other than those permitted under Section
5.1, all personal property and valid leasehold interests in all leased personal property, in
each instance, necessary or used in the ordinary conduct of their respective businesses. The
Property of the Credit Parties and its Subsidiaries is subject to no Liens, other than Permitted
Liens. As of the Closing Date, none of the Credit Parties or their Subsidiaries own any Real
Estate in fee simple other than the Eligible Real Estate.



     3.10 Taxes. All federal, state, local and foreign income and franchise and other
material tax returns, reports and statements (collectively, the “Tax Returns”) required to be filed
by any Tax Affiliate have been filed with the appropriate Governmental Authorities in all
jurisdictions in which such Tax Returns are required to be filed, all such Tax Returns are true and
correct in all material respects, and all taxes, charges and other impositions reflected therein or
otherwise due and payable have been paid prior to the date on which any Liability may be added
thereto for non-payment thereof except for those contested in good faith by appropriate proceedings
diligently conducted and for which adequate reserves are maintained on the books of the appropriate
Tax Affiliate in accordance with GAAP. As of the Closing Date, no Tax Return is under audit or
examination by any Governmental Authority and no notice of such an audit or examination or any
assertion of any claim for Taxes has been given or made by any Governmental Authority. Proper and
accurate amounts have been withheld by each Tax Affiliate from their respective employees for all
periods in full and complete compliance with the tax, social security and unemployment withholding
provisions of applicable Requirements of Law and such withholdings have been timely paid to the
respective Governmental Authorities. No Tax Affiliate has participated in a “reportable
transaction” within the meaning of Treasury Regulation Section 1.6011-4(b) or has been a member of
an affiliated, combined or unitary group other than the group of which a Tax Affiliate is the
common parent.



     3.11 Financial Condition.



          (a) Each of (i) the audited consolidated balance sheets of the Borrowers and their
Subsidiaries dated December 31, 2007 and the related audited consolidated statements of income or
operations, shareholders’ equity and cash flows for the fiscal year ended on that date and (ii) the
unaudited interim consolidated balance sheet of the Borrowers and their Subsidiaries dated November
30, 2008 and the related unaudited consolidated statements of income, shareholders’ equity and cash
flows for the eleven months then ended:





27











 






     (x) were prepared in accordance with GAAP consistently applied throughout the
respective periods covered thereby, except as otherwise expressly noted therein, subject
to, in the case of the unaudited interim financial statements, normal year-end adjustments
and the lack of footnote disclosures; and




     (y) present fairly in all material respects the consolidated financial condition of
the Borrowers and their Subsidiaries as of the dates thereof and results of operations for
the periods covered thereby.



          (b) Since December 31, 2007 there has been no Material Adverse Effect.




          (c) The Credit Parties and their Subsidiaries have no Indebtedness other than Indebtedness
permitted pursuant to Section 5.5 and have no Contingent Obligations other than Contingent
Obligations permitted pursuant to Section 5.9.




          (d) All financial performance projections delivered to the Agent represent the Borrowers’ best
good faith estimate of future financial performance and are based on assumptions believed by the
Borrowers to be fair and reasonable in light of current market conditions, it being acknowledged
and agreed by the Agent and Lenders that projections as to future events are not to be viewed as
facts and that the actual results during the period or periods covered by such projections may
differ from the projected results.




     3.12 Environmental Matters. Except as set forth on Schedule 3.12, (a) the
operations of each Credit Party and each Subsidiary of each Credit Party are and have been in
compliance with all applicable Environmental Laws, including obtaining, maintaining and complying
with all Permits required by any applicable Environmental Law, other than non-compliances that, in
the aggregate, would not have a reasonable likelihood of resulting in Material Environmental
Liabilities to all Credit Parties considered as a whole, (b) no Credit Party and no Subsidiary of
any Credit Party is party to, and no Credit Party and no Subsidiary of any Credit Party and no real
property currently (or to the knowledge of any Credit Party previously) owned, leased, subleased,
operated or otherwise occupied by or for any such Person is subject to or the subject of, any
Contractual Obligation or any pending (or, to the knowledge of any Credit Party, threatened) order,
action, investigation, suit, proceeding, audit, claim, demand, dispute or notice of violation or of
potential liability or similar notice relating in any manner to any Environmental Law other than
those that, in the aggregate, are not reasonably likely to result in Material Environmental
Liabilities to all Credit Parties considered as a whole, (c) no Lien in favor of any Governmental
Authority securing, in whole or in part, Environmental Liabilities has attached to any property of
any Credit Party or any Subsidiary of any Credit Party and, to the knowledge of any Credit Party,
no facts, circumstances or conditions exist that could reasonably be expected to result in any such
Lien attaching to any such property, (d) no Credit Party and no Subsidiary of any Credit Party has
caused or suffered to occur a Release of Hazardous Materials at, to or from any real property of
any such Person and each such
real property is free of contamination by any Hazardous Materials except for such Release or
contamination that could not



28









 




reasonably be expected to result, in the aggregate, in Material
Environmental Liabilities to all Credit Parties considered as a whole, (e) no Credit Party and no
Subsidiary of any Credit Party (i) is or has been engaged in, or has permitted any current or
former tenant to engage in, operations or (ii) knows of any facts, circumstances or conditions,
including receipt of any information request or notice of potential responsibility under the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §§ 9601 et seq.) or
similar Environmental Laws, that, in the aggregate, would have a reasonable likelihood of resulting
in Material Environmental Liabilities to all Credit Parties considered as a whole and (f) each
Credit Party has made available to Agent copies of all existing environmental reports, reviews and
audits and all documents pertaining to actual or potential Environmental Liabilities, in each case
to the extent such reports, reviews, audits and documents are in their possession, custody or
control.




     3.13 Regulated Entities. None of any Credit Party, any Person controlling any Credit
Party, or any Subsidiary of any Credit Party, is (a) 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 state public utilities code, or any other Federal or state statute,
rule or regulation limiting its ability to incur Indebtedness, pledge its assets or perform its
Obligations under the Loan Documents.



     3.14 Solvency. Both before and after giving effect to (a) the Loans made and Letters
of Credit Issued on or prior to the date this representation and warranty is made or remade, (b)
the disbursement of the proceeds of such Loans and (c) the payment and accrual of all transaction
costs in connection with the foregoing, both the Credit Parties taken as a whole and each Borrower
individually are Solvent.



     3.15 Labor Relations. There are no strikes, work stoppages, slowdowns or lockouts
existing, pending (or, to the knowledge of any Credit Party, threatened) against or involving any
Credit Party or any Subsidiary of any Credit Party, except for those that would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect. Except as set forth on
Schedule 3.15, as of the Closing Date, (a) there is no collective bargaining or similar
agreement with any union, labor organization, works council or similar representative covering any
employee of any Credit Party or any Subsidiary of any Credit Party, (b) no petition for
certification or election of any such representative is existing or pending with respect to any
employee of any Credit Party or any Subsidiary of any Credit Party and (c) no such representative
has sought certification or recognition with respect to any employee of any Credit Party or any
Subsidiary of any Credit Party.



     3.16 Intellectual Property. Each Credit Party and each Subsidiary of each Credit Party owns, or is licensed to use, all
Intellectual Property necessary to conduct its business as currently conducted except for such
Intellectual Property the failure of which to own or license would not reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect. To the knowledge of each
Credit Party, (a) the conduct and operations of the businesses of each Credit Party and each
Subsidiary of each Credit Party does not infringe, misappropriate, dilute, violate or otherwise
impair any Intellectual Property owned by any other Person and (b) no other Person has contested
any right, title or interest of any Credit Party or any Subsidiary of any Credit



29









 







Party in, or
relating to, any Intellectual Property, other than, in each case, as cannot reasonably be expected
to affect the Loan Documents and the transactions contemplated therein and would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.



     3.17 Subsidiaries. As of the Closing Date, no Credit Party has any Subsidiaries or
equity investments in any other corporation or entity other than those specifically disclosed in
Schedule 3.2.



     3.18 Brokers’ Fees; Transaction Fees. Except as disclosed on Schedule 3.18
and except for fees payable to the Agent and Lenders, none of the Credit Parties or any of their
respective Subsidiaries has any obligation to any Person in respect of any finder’s, broker’s or
investment banker’s fee in connection with the transactions contemplated hereby.



     3.19 Insurance. Each of the Credit Parties and each of their respective Subsidiaries
and their respective Properties are insured with financially sound and reputable insurance
companies which are not Affiliates of the Borrowers, in such amounts, with such deductibles and
covering such risks as are customarily carried by companies engaged in similar businesses and
owning similar Properties in localities where such Person operates. A true and complete listing of
such insurance, including issuers, coverages and deductibles, has been provided to the Agent.



     3.20 Full Disclosure. None of the representations or warranties made by any Credit
Party or any of their Subsidiaries in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in each exhibit, report,
statement or certificate furnished by or on behalf of any Credit Party or any of their Subsidiaries
in connection with the Loan Documents (including the offering and disclosure materials, if any,
delivered by or on behalf of any Credit Party to the Lenders prior to the Closing Date), when taken
as a whole, contains any untrue statement of a material fact or omits any material fact required to
be stated therein or necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or delivered.



     3.21 Foreign Assets Control Regulations and Anti-Money Laundering.



          (a) OFAC. Neither any Credit Party nor any Subsidiary of any Credit Party (i) is a
person whose property or interest in property is blocked or subject to blocking pursuant to Section
1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii)
engages in any dealings or transactions prohibited by Section 2 of such executive order, or is
otherwise associated with any such person in any manner violative of Section 2, or (iii) is a
person on the list of Specially Designated Nationals and Blocked Persons or subject to the
limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets
Control regulation or executive order.




30









 








          (b) Patriot Act. Each of the Credit Parties and each of their respective Subsidiaries
are in compliance, in all material respects, with the Patriot Act. No part of the proceeds of the
Loans will be used, directly or indirectly, for any payments to any governmental official or
employee, political party, official of a political party, candidate for political office, or anyone
else acting in an official capacity, in order to obtain, retain or direct business or obtain any
improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as
amended.




     3.22 FDA Regulatory Compliance.



          (a) Each of the Credit Parties and their Subsidiaries have all Registrations from FDA or other
Governmental Authority required to conduct their respective businesses as currently conducted.
Each of the Registrations is valid and subsisting in full force and effect. To the knowledge of
the Credit Parties and their Subsidiaries, the FDA is not considering limiting, suspending, or
revoking such Registrations or changing the marketing classification or labeling of the products of
the Credit Parties and their Subsidiaries. To the knowledge of the Credit Parties and their
Subsidiaries, there is no false or misleading information or significant omission in any product
application or other submission to FDA or any comparable Governmental Authority. The Credit
Parties and their Subsidiaries have fulfilled and performed their obligations under each
Registration, and no event has occurred or condition or state of facts exists which would
constitute a breach or default or would cause revocation or termination of any such Registration.
To the knowledge of the Credit Parties and their Subsidiaries, any third party that is a
manufacturer or contractor for the Credit Parties and their Subsidiaries is in compliance with all
Registrations from the FDA or comparable Governmental Authority insofar as they pertain to the
manufacture of product components or products marketed or distributed by the Credit Parties and
their Subsidiaries.




          (b) All products developed, manufactured, tested, distributed or marketed by or on behalf of
the Credit Parties and their Subsidiaries that are subject to the jurisdiction of the FDA or
comparable Governmental Authority have been and are being developed, tested, manufactured,
distributed and marketed in compliance with the FDA Laws or any other applicable Requirement of
Law, including, without limitation, product approval, good manufacturing practices, labeling,
advertising, record-keeping, and adverse event reporting, and have been and are being tested,
investigated, distributed, marketed, and sold in compliance with FDA Laws or any other applicable
Requirement of Law.




          (c) The Credit Parties and their Subsidiaries are not subject to any obligation arising under
an administrative or regulatory action, FDA inspection, FDA warning letter, FDA notice of violation
letter, or other notice, response or commitment made to or with the FDA or any comparable
Governmental Authority. The Credit Parties and their Subsidiaries have made all notifications,
submissions, and reports required by any such obligation, and all such notifications, submissions
and reports were true, complete, and correct in all material respects as of the date of submission
to FDA or any comparable Governmental Authority.




31









 








          (d) No product has been seized, withdrawn, recalled, detained, or subject to a suspension of
manufacturing, except as set forth on Schedule 3.22, and there are no facts or
circumstances reasonably likely to cause (i) the seizure, denial, withdrawal, recall, detention,
public health notification, safety alert or suspension of manufacturing relating to any product;
(ii) a change in the labeling of any product; or (iii) a termination, seizure or suspension of
marketing of any product. No proceedings in the United States or any other jurisdiction seeking
the withdrawal, recall, suspension, import detention, or seizure of any product are pending or
threatened against the Credit Parties and their Subsidiaries.




     3.23 Healthcare Regulatory Compliance.



          (a) None of the Credit Parties or their Subsidiaries, nor any officer, director, managing
employee or agent (as those terms are defined in 42 C.F.R. § 1001.1001) thereof, is a party to, or
bound by, any order, individual integrity agreement, corporate integrity agreement or other formal
or informal agreement with any Governmental Authority concerning compliance with Federal Health
Care Program Laws.




          (b) None of the Credit Parties or their Subsidiaries, nor any officer, director, managing
employee or agent (as those terms are defined in 42 C.F.R. § 1001.1001) thereof: (i) has been
charged with or convicted of any criminal offense relating to the delivery of an item or service
under any Federal Health Care Program; (ii) has been debarred, excluded or suspended from
participation in any Federal Health Care Program; (iii) has had a civil monetary penalty assessed
against it, him or her under Section 1128A of the SSA; (iv) is currently listed on the General
Services Administration
published list of parties excluded from federal procurement programs and non-procurement
programs; or (v) to the knowledge of the Borrowers, is the target or subject of any current or
potential investigation relating to any Federal Health Care Program-related offense.




          (c) None of the Credit Parties or their Subsidiaries, nor any officer, director, managing
employee or agent (as those terms are defined in 42 C.F.R. § 1001.1001): (i) has engaged in any
activity that is in violation of the federal Medicare or federal or state Medicaid statutes,
Sections 1128, 1128A, 1128B, 1128C or 1877 of the SSA (42 U.S.C. §§ 1320a-7, 1320a-7a, 1320a-7b,
1320a-7c and 1395nn), the federal TRICARE statute (10 U.S.C. § 1071 et seq.), the civil False
Claims Act of 1863 (31 U.S.C. § 3729 et seq.), criminal false claims statutes (e.g., 18 U.S.C. §§
287 and 1001), the Program Fraud Civil Remedies Act of 1986 (31 U.S.C. § 3801 et seq.), the
anti-fraud and related provisions of the Health Insurance Portability and Accountability Act of
1996 (e.g., 18 U.S.C. §§ 1035 and 1347), or related regulations or other federal or state laws and
regulations (collectively, “Federal Health Care Program Laws”), including the following:





     (i) knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or payment;



32









 






     (ii) knowingly and willfully making or causing to be made a false statement or
representation of a material fact for use in determining rights to any benefit or
payment;




     (iii) knowingly and willfully soliciting or receiving any remuneration
(including any kickback, bribe, or rebate), directly or indirectly, overtly or
covertly, in cash or kind (1) in return for referring an individual to a person for
the furnishing or arranging for the furnishing of any item or service for which
payment may be made in whole or in part under any Federal Health Care Program; or
(2) in return for purchasing, leasing, or ordering, or arranging, or arranging for
or recommending purchasing, leasing, or ordering any good, facility, service or
item for which payment may be made in whole or in part under any Federal Health
Care Program;




     (iv) knowingly and willfully offering or paying any remuneration (including
any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in
cash or in kind, to any person to induce such person (1) to refer an individual to
a person for the furnishing or arranging for the furnishing of any item or service
for which payment may be made in whole or in part under a Federal Health Care
Program; or (2) to purchase, lease, order or arrange for or recommend purchasing,
leasing or ordering any good, facility, service or item for which payment may be
made in whole or in part under a Federal Health Care Program; or




     (v) any other activity that violates any state or federal law relating to
prohibiting fraudulent, abusive or unlawful practices connected in any way with the
provision of health care items or services or the billing for such items or
services provided to a beneficiary of any Federal Health Care Program.



          (d) To the knowledge of the Borrowers, no person has filed or has threatened (in writing) to
file against any Credit Party or any of their Subsidiaries an action under any federal or state
whistleblower statute, including without limitation, under the False Claims Act of 1863 (31 U.S.C.
§ 3729 et seq.).




     3.24 Reimbursement Coding. To the extent the Credit Parties or any of their
Subsidiaries provide to their customers or any other Persons reimbursement coding or billing advice
regarding products offered for sale by the Credit Parties and their Subsidiaries, such advice is
complete and accurate, conforms to the applicable American Medical Association’s Current Procedural
Terminology (CPT), the International Classification of Disease, Ninth Revision, Clinical
Modification (ICD 9 CM), and other applicable coding systems, and the advice can be relied upon to
create accurate claims for reimbursement by federal, state and commercial payors.



     3.25 HIPAA. Each of the Credit Parties and their Subsidiaries is in compliance, in
all material respects, with the provisions of all business associate



33









 







agreements (as such term is
defined by HIPAA) to which it is a party and has implemented adequate policies, procedures and
training designed to assure continued compliance and to detect non-compliance.



     3.26 Subordinated Indebtedness. The Subordination Agreement is enforceable against
the holders of the Subordinated Indebtedness by the Agent and the Lenders. All Obligations
constitute “Senior Debt” under the Subordination Agreement, entitled to all benefits thereof.
Borrowers acknowledge that the Agent and each Lender are entering into this Agreement and are
extending the Commitments and making the Loans in reliance upon the Subordination Agreement and
this Section 3.26.



ARTICLE IV.

AFFIRMATIVE COVENANTS




     Each Credit Party covenants and agrees that, so long as any Lender shall have any Commitment
hereunder, or any Loan or other Obligation (other than contingent indemnification Obligations to
the extent no claim giving rise thereto has been asserted) shall remain unpaid or unsatisfied:



     4.1 Financial Statements. Each Credit Party shall maintain, and shall cause each of
its Subsidiaries to maintain, a system of accounting established and administered in accordance
with sound business practices to permit the preparation of financial statements in conformity with
GAAP (provided that monthly financial statements shall not be required to have footnote disclosures
and are subject to normal year-end adjustments). The Borrowers shall deliver to the Agent and each
Lender in electronic form and in detail reasonably satisfactory to the Agent and the Required
Lenders:



          (a) as soon as available, but not later than ninety (90) days after the end of each fiscal
year, a copy of the audited consolidated and consolidating balance sheets of the Borrowers and each
of their Subsidiaries as at the end of such year and the related consolidated and consolidating
statements of income or operations, shareholders’ equity and cash flows for such fiscal year,
setting forth in each case in comparative form the figures for the previous fiscal year, and
accompanied by the unqualified opinion of any “Big Four” or other nationally-recognized independent
public accounting firm reasonably acceptable to the Agent which report shall state that such
consolidated financial statements present fairly in all material respects the financial position
for the periods indicated in conformity with GAAP applied on a basis consistent with prior years;
and




          (b) as soon as available, but not later than forty-five (45) days after the end of each fiscal
quarter of each year, a copy of the unaudited consolidated and consolidating balance sheets of the
Borrowers and each of their Subsidiaries, and the related consolidated and consolidating statements
of income, shareholders’ equity and cash flows as of the end of such quarter and for the portion of
the fiscal year then ended, all certified on behalf of the Borrowers by an appropriate Responsible
Officer of the Borrower Representative as being complete and correct, in all material respects, and
fairly presenting, in all material respects, in accordance with GAAP, the financial




34









 




position and
the results of operations of the Borrowers and their Subsidiaries, subject to normal year-end
adjustments and absence of footnote disclosures.




          (c) as soon as available, but not later than thirty (30) days after the end of each of the
first two fiscal months of each fiscal quarter of each year, a copy of the unaudited consolidated
and consolidating balance sheets of the Borrowers and each of their Subsidiaries, and the related
consolidated and consolidating statements of income, shareholders’ equity and cash flows as of the
end of such month and for the portion of the fiscal year then ended, all certified on behalf of the
Borrowers by an appropriate Responsible Officer of the Borrower Representative as being complete
and correct, in all material respects, and fairly presenting, in all material respects, in
accordance with GAAP, the financial position and the results of operations of the Borrowers and
their Subsidiaries, subject to normal year-end adjustments and absence of footnote disclosures.




     4.2 Certificates; Other Information. The Borrowers shall furnish in electronic form,
to the Agent and each Lender:



          (a) concurrently with each delivery of financial statements pursuant to subsections 4.1(a) and
4.1(b), a management report, in reasonable detail, signed by the chief financial officer of the
Borrower Representative, describing the operations and financial condition of the Credit Parties
and their Subsidiaries for the quarter and the portion of the fiscal year then ended (or for the
fiscal year then ended in the case of annual financial statements) and discussing the reasons for
any significant variations from the corresponding periods or projections;




          (b) concurrently with the delivery of the financial statements referred to in subsections
4.1(a), 4.1(b) and 4.1(c) above, (i) a report setting forth in comparative form the corresponding
figures for the corresponding periods of the previous fiscal year and the corresponding figures
from the most recent projections for the current fiscal year delivered pursuant to subsection
4.2(f), and (ii) a fully and properly completed certificate in the form of Exhibit 4.2(b)
(a “Compliance Certificate”) certified on behalf of the Borrowers by a Responsible Officer of the
Borrower Representative;




          (c) promptly after the same are sent, copies of all financial statements and reports which any
Credit Party sends to its shareholders (except with respect to financial statements and reports
sent by Wholly-Owned Subsidiaries of a Borrower to a Borrower) or other equity holders, as
applicable, generally and promptly after the same are filed, copies of all financial statements and
regular, periodic or special reports which such Person may make to, or file with, the SEC or any
successor or similar Governmental Authority;




          (d) as soon as available and in any event within fifteen (15) days after the end of each
calendar month, and at such other times as the Agent may reasonably require, a Borrowing Base
Certificate, certified on behalf of the Borrowers by a Responsible Officer of the Borrower
Representative, setting forth the Borrowing Base as at the end of the most-recently ended fiscal
month or as at such other date as the Agent may reasonably require;




35









 








          (e) concurrently with the delivery of the Borrowing Base Certificate, with respect to Credit
Parties, a summary of Inventory by location and type with a supporting perpetual Inventory report,
in each case accompanied by such supporting detail and documentation as shall be requested by Agent
in its reasonable discretion;




          (f) concurrently with the delivery of the Borrowing Base Certificate, with respect to Credit
Parties, a monthly trial balance showing Accounts outstanding aged from invoice date as follows: 1
to 30 days, 31 to 60 days, 61 to 90 days and 91 days or more, accompanied by such supporting detail
and documentation as shall be requested by Agent in its reasonable discretion;




          (g) on a monthly basis or at such more frequent intervals (but no more frequently than once
per week unless a Default or Event of Default has occurred and is continuing) as Agent may request
from time to time (together with a copy of all or any part of such delivery requested by any Lender
in writing after the Closing Date), collateral reports with respect to Borrowers, including all
additions and reductions (cash
and non-cash) with respect to Accounts of Borrowers, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its reasonable discretion
each of which shall be prepared by the Borrower Representative as of the last day of the
immediately preceding week or the date 2 days prior to the date of any request;




          (h) at the time of delivery of each of the monthly or quarterly financial statements delivered
pursuant to Section 4.1(b) or Section 4.1(c);




               (i) a reconciliation of the most recent Borrowing Base, general ledger and month-end Inventory
reports of Borrowers to Borrowers’ consolidated general ledger and monthly or quarterly financial
statements delivered pursuant to Section 4.1(b) or Section 4.1(c), as applicable,
in each case accompanied by such supporting detail and documentation as shall be requested by Agent
in its reasonable discretion;



               (ii) a reconciliation of the perpetual inventory by location to Borrowers’ most recent
Borrowing Base Certificate, general ledger and monthly or quarterly financial statements delivered
pursuant to Section 4.1(b) or Section 4.1(c), as applicable, in each case
accompanied by such supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;



               (iii) an aging of accounts receivable and accounts payable and a reconciliation of that
accounts receivable and accounts payable aging to Borrowers’ general ledger and monthly or
quarterly financial statements delivered pursuant to Section 4.1(b) or Section
4.1(c), as applicable, in each case accompanied by such supporting detail and documentation as
shall be requested by Agent in its reasonable discretion;



               (iv) a reconciliation of the outstanding Loans as set forth in the monthly loan account
statement provided by Agent to Borrowers’ general ledger and monthly or quarterly financial
statements delivered pursuant to Section 4.1(b) or
Section



36









 




4.1(c), as applicable,
in each case accompanied by such supporting detail and documentation as shall be requested by Agent
in its reasonable discretion;




          (i) at the time of delivery of the quarterly financial statements delivered pursuant to
Section 4.1(b) for each quarterly period, (i) a list of any applications for the
registration of any Patent, Trademark or Copyright filed by any Credit Party with the United States
Patent and Trademark Office, the United States Copyright Office or any similar office or agency in
the prior Fiscal Quarter and (ii) a report listing all new filings, and the status of all existing
filings, with the FDA;




          (j) at the time of delivery of each of the annual financial statements delivered pursuant to
Section 4.1(a), a listing of government contracts of Borrowers subject to the Federal
Assignment of Claims Act of 1940;




          (k) upon the request of the Agent, at any time if an Event of Default shall have occurred and
be continuing but otherwise not more often than once a year, the Borrowers will obtain and deliver
to the Agent a report of an independent collateral
auditor satisfactory to the Agent with respect to the Accounts and Inventory of the Credit
Parties;




          (l) as soon as available and in any event no later than the last day of each fiscal year of
the Borrower Representative (beginning with the 2009 fiscal year), board-approved projections of
the Credit Parties (and their Subsidiaries’) consolidated and consolidating financial performance
for the forthcoming three fiscal years on a year by year basis, and for the forthcoming fiscal year
on a month by month basis;




          (m) promptly upon receipt thereof, copies of any reports submitted by the certified public
accountants in connection with each annual, interim or special audit or review of any type of the
financial statements or internal control systems of any Credit Party made by such accountants,
including any comment letters submitted by such accountants to management of any Credit Party in
connection with their services;




          (n) from time to time, if the Agent determines that obtaining appraisals is necessary in order
for the Agent or any Lender to comply with applicable laws or regulations, and at any time if a
Default or an Event of Default shall have occurred and be continuing, the Agent may, or may require
the Borrowers to, in either case at the Borrowers’ expense, obtain appraisals in form and substance
and from appraisers reasonably satisfactory to the Agent stating the then current fair market value
of all or any portion of the real or personal property of any Credit Party or any Subsidiary of any
Credit Party;




          (o) promptly upon request of Agent, copies of any compliance assessment or similar reports
conducted by third parties on behalf of the Borrowers; and




          (p) promptly, such additional business, financial, corporate affairs, perfection certificates
and other information as the Agent may from time to time reasonably request.




37









 








     4.3 Notices. The Borrowers shall notify promptly the Agent and each Lender of each of
the following (and in no event later than three (3) Business Days) after a Responsible Officer
becoming aware thereof:



          (a) the occurrence or existence of any Default or Event of Default, or any event or
circumstance that foreseeably will become a Default or Event of Default pursuant to Sections
7.1(c) or 7.1(l) hereof;




          (b) any breach or non-performance of, or any default under, any Contractual Obligation of any
Credit Party or any Subsidiary of any Credit Party, or any violation of, or non-compliance with,
any Requirement of Law, which would reasonably be expected to result, either individually or in the
aggregate, in a Material Adverse Effect, including a description of such breach, non-performance,
default, violation or non-compliance and the steps, if any, such Person has taken, is taking or
proposes to take in respect thereof;




          (c) the commencement of, or any material development in, any dispute, litigation,
investigation, proceeding or suspension which may exist at any time between any Credit Party or any
Subsidiary of any Credit Party and any Governmental Authority which would reasonably be expected to
result, either individually or in the aggregate, in a Material Adverse Effect or which alleges
potential violations of the securities laws, the Federal Health Care Program Laws or the FDA Laws;




          (d) any written notice that the FDA or other similar Governmental Authority is limiting,
suspending or revoking any Registration, changing the market classification or labeling of the
products of the Credit Parties and their Subsidiaries, or considering any of the foregoing;




          (e) any Credit Party or any of its Subsidiaries becoming subject to any administrative or
regulatory action, FDA inspection, Form FDA 483 observation, FDA warning letter, FDA notice of
violation letter, or other notice, response or commitment made to or with the FDA or any comparable
Governmental Authority, or any product of any Credit Party or any of its Subsidiaries being seized,
withdrawn, recalled, detained, or subject to a suspension of manufacturing, or the commencement of
any proceedings in the United States or any other jurisdiction seeking the withdrawal, recall,
suspension, import detention, or seizure of any product are pending or threatened against the
Credit Parties and their Subsidiaries;




          (f) the commencement of, or any material development in, any litigation or proceeding
affecting any Credit Party or any Subsidiary of any Credit Party (i) in which the amount of damages
claimed is $1,000,000 (or its equivalent in another currency or currencies) or more, (ii) in which
injunctive or similar relief is sought and which, if adversely determined, would reasonably be
expected to have a Material Adverse Effect, or (iii) in which the relief sought is an injunction or
other stay of the performance of this Agreement, any Loan Document or any Related Agreement;




38









 








          (g) (i) the receipt by any Credit Party of any notice of violation of or potential liability
or similar notice under Environmental Law, (ii)(A) unpermitted Releases, (B) the existence of any
condition that could reasonably be expected to result in violations of or liabilities under, any
Environmental Law or (C) the commencement of, or any material change to, any action, investigation,
suit, proceeding, audit, claim, demand, dispute alleging a violation of or liability under any
Environmental Law, that, for each of clauses (A), (B) and (C) above (and, in the case of clause
(C), if adversely determined), in the aggregate for each such clause, could reasonably be expected
to result in Environmental Liabilities in excess of $500,000, (iii) the receipt by any Credit Party
of notification that any property of any Credit Party is subject to any Lien in favor of any
Governmental Authority securing, in whole or in part, Environmental Liabilities and (iv) any
proposed acquisition or lease of real property, if such acquisition or lease would have a
reasonable likelihood of resulting in aggregate Environmental Liabilities in excess of $500,000;




          (h) (i) on or prior to any filing by any ERISA Affiliate of any notice of intent to terminate
any Title IV Plan, a copy of such notice and (ii) promptly, and in any
event within 10 days, after any officer of any ERISA Affiliate knows that a request for a
minimum funding waiver under Section 412 of the Code has been filed with respect to any Title IV
Plan or Multiemployer Plan, a notice (which may be made by telephone if promptly confirmed in
writing) describing such waiver request and any action that any ERISA Affiliate proposes to take
with respect thereto, together with a copy of any notice filed with the PBGC or the IRS pertaining
thereto;




          (i) any Material Adverse Effect subsequent to the date of the most recent audited financial
statements delivered to the Agent and Lenders pursuant to this Agreement;




          (j) any material change in accounting policies or financial reporting practices by any Credit
Party or any Subsidiary of any Credit Party;




          (k) any labor controversy resulting in or threatening to result in any strike, work stoppage,
boycott, shutdown or other labor disruption against or involving any Credit Party or any Subsidiary
of any Credit Party if the same would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect;




          (l) the creation, establishment or acquisition of any Subsidiary;




          (m) the issuance by or to any Credit Party of any Stock or Stock Equivalent; provided,
however, that no notice shall be required for issuances of up to 2,500,000 shares of common stock
of Akorn, or stock options for such shares, during any calendar year pursuant to the Akorn Stock
Plans;




          (n) (i) the creation, or filing with the IRS or any other Governmental Authority, of any
Contractual Obligation or other document extending, or having the effect of extending, the period
for assessment or collection of any taxes with respect to any Tax Affiliate and (ii) the creation
of any Contractual Obligation of any Tax Affiliate,




39









 




or the receipt of any request directed to any
Tax Affiliate, to make any adjustment under Section 481(a) of the Code, by reason of a change in
accounting method or otherwise, which would have a Material Adverse Effect;




          (o) the receipt of any notices of default, acceleration or institution of any other right or
remedy under the Subordinated Note Documents received from any holder or trustee of, under or with
respect to any Subordinated Notes or in connection with the Related Transactions;




          (p) Borrower becomes aware that the Accounts owing by any Account Debtor and its Affiliates
(other than AmerisourceBergen Corporation, McKesson Drug Company or Cardinal Health, Inc.) to the
Borrowers and their Subsidiaries exceed twenty percent (20%) of all Accounts owing by all Account
Debtors as of any date;




          (q) the execution and delivery by any Borrower after the Closing Date of any agreement or
license that grants either Borrower the right to sell or market Inventory, or to use patents,
trademarks or other intellectual property of third parties in connection with selling Inventory;
and




          (r) the termination or expiration of the MBL Exclusive Distribution Agreement.



Each notice pursuant to this Section shall be in electronic form accompanied by (i) a statement by
a Responsible Officer of the Borrower Representative, on behalf of the Borrowers, setting forth
details of the occurrence referred to therein, and stating what action the Borrowers or other
Person proposes to take with respect thereto and at what time and (ii) with respect to clauses (e),
(g) or (n), copies of any response or correspondence related thereto sent or received by the
Borrowers. Each notice under subsection 4.3(a) shall describe with particularity any and all
clauses or provisions of this Agreement or other Loan Document that have been breached or violated.




     4.4 Preservation of Corporate Existence, Etc. Each Credit Party shall, and shall
cause each of its Subsidiaries to:



          (a) preserve and maintain in full force and effect its organizational existence and good
standing under the laws of its jurisdiction of incorporation, organization or formation, as
applicable, except, with respect to the Borrowers’ Subsidiaries, in connection with transactions
permitted by Section 5.3;




          (b) preserve and maintain in full force and effect all rights, privileges, qualifications,
permits, licenses and franchises necessary in the normal conduct of its business except in
connection with transactions permitted by Section 5.3 and sales of assets permitted by Section 5.2
and except as would not reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect;




          (c) use its reasonable efforts, in the Ordinary Course of Business, to preserve its business
organization and preserve the goodwill and business of the customers, suppliers and others having
material business relations with it; and




40









 








          (d) preserve or renew all of its registered trademarks, trade names and service marks, the
non-preservation of which would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.




     4.5 Maintenance of Property. Each Credit Party shall maintain, and shall cause each
of its Subsidiaries to maintain, and preserve all its Property which is used or useful in its
business in good working order and condition, ordinary wear and tear excepted and shall make all
necessary repairs thereto and renewals and replacements thereof except where the failure to do so
would not reasonably be expected to have, either individually or in the aggregate, a Material
Adverse Effect.



     4.6 Insurance.



          (a) Each Credit Party shall, and shall cause each of its Subsidiaries to, (i) maintain or
cause to be maintained in full force and effect all policies of insurance of any kind with respect
to the property and businesses of the Credit Parties and such Subsidiaries (including policies of
life, fire, theft, product liability, public liability, property damage, other casualty, employee
fidelity, workers’ compensation, business interruption and employee health and welfare insurance)
with financially sound and reputable insurance companies or associations (in each case that are not
Affiliates of Borrowers) of a nature and providing such coverage as is sufficient and as is
customarily carried by businesses of the size and character of the business of the Credit Parties
and (ii) cause all such insurance relating to any property or business of any Credit Party to name
Agent as additional insured or loss payee, as appropriate. All policies of insurance on real and
personal property of the Credit Parties will contain an endorsement, in form and substance
acceptable to Agent, showing loss payable to Agent (Form CP 12 18 ISO or its equivalent) and extra
expense and business interruption endorsements. Such endorsement, or an independent instrument
furnished to Agent, will provide that the insurance companies will give Agent at least 30 days’
prior written notice before any such policy or policies of insurance shall be altered or canceled
and that no act or default of Borrowers or any other Person shall affect the right of Agent to
recover under such policy or policies of insurance in case of loss or damage. Each Credit Party
shall direct all present and future insurers under its “All Risk” policies of insurance to pay all
proceeds payable thereunder directly to Agent. If any insurance proceeds are paid by check, draft
or other instrument payable to any Credit Party and Agent jointly, Agent may endorse such Credit
Party’s name thereon and do such other things as Agent may deem advisable to reduce the same to
cash, and so long as no Default or Event of Default has occurred and is continuing, shall promptly
notify Borrower Representative of such receipt and endorsement. Agent reserves the right at any
time, upon review of each Credit Party’s risk profile, to require, in Agent’s commercially
reasonable discretion, additional forms and limits of insurance.




          (b) Unless the Borrowers provide the Agent with evidence of the insurance coverage required by
this Agreement within three Business Days after Agent’s request therefor, the Agent may purchase
insurance at the Credit Parties’ expense to protect the Agent’s and Lenders’ interests in the
Credit Parties’ and their Subsidiaries’ properties. This insurance may, but need not, protect the
Credit Parties’ and their




41









 




Subsidiaries’ interests. The coverage that the Agent purchases may
exclude coverage for claims that any Credit Party or any Subsidiary of any Credit Party makes or
any claim that is made against such Credit Party or any Subsidiary in connection with said
Property. The Borrowers may later cancel any insurance purchased by the Agent, but only after
providing the Agent with evidence that there has been obtained insurance as required by this
Agreement. If the Agent purchases insurance, the Credit Parties will be responsible for the costs
of that insurance, including interest and any other reasonable charges the Agent may impose in
connection with the placement of insurance, until the effective date of the cancellation or
expiration of the insurance. The costs of the insurance shall be added to the Obligations. The
costs of the insurance may be more than the cost of insurance the Borrowers may be able to obtain
on their own.




     4.7 Payment of Obligations. Such Credit Party shall, and shall cause each of its Subsidiaries to, pay, discharge and
perform as the same shall become due and payable or required to be performed, all their respective
obligations and liabilities, including:



          (a) all tax liabilities, assessments and governmental charges or levies upon it or its
properties or assets, unless the same are being contested in good faith by appropriate proceedings
diligently prosecuted which stay the enforcement of any Lien and for which adequate reserves in
accordance with GAAP are being maintained by such Person;




          (b) all lawful claims which, if unpaid, would by law become a Lien upon its Property unless
the same are being contested in good faith by appropriate proceedings diligently prosecuted which
stay the imposition or enforcement of the Lien and for which adequate reserves in accordance with
GAAP are being maintained by such Person;




          (c) all Indebtedness having an aggregate principal amount (including undrawn committed or
available amounts and including amounts owing to all creditors under any combined or syndicated
credit arrangement) of more than $200,000, as and when due and payable, but subject to any
subordination provisions contained herein and/or in any instrument or agreement evidencing such
Indebtedness; and




          (d) the performance of all obligations under any Contractual Obligation to such Credit Party
or any of its Subsidiaries is bound, or to which it or any of its properties is subject, including
the Related Agreements, except where the failure to perform would not reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect.




     4.8 Compliance with Laws.



          (a) Each Credit Party shall, and shall cause each of its Subsidiaries to, comply with all
Requirements of Law of any Governmental Authority having jurisdiction over it or its business,
except where the failure to comply would not reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect.




42









 








          (b) Without limiting the generality of the foregoing, each Credit Party shall, and shall cause
each of its Subsidiaries to, comply with, and maintain its real property, whether owned, leased,
subleased or otherwise operated or occupied, in compliance with, all applicable Environmental Laws
(including by implementing any Remedial Action necessary to achieve such compliance or that is
required by orders and directives of any Governmental Authority) except for failures to comply that
would not, in the aggregate, have a Material Adverse Effect. Without limiting the foregoing, if an
Event of Default is continuing or if Agent at any time has a reasonable basis to believe that there
exist violations of Environmental Laws by any Credit Party or any Subsidiary of any Credit Party or
that there exist any Environmental Liabilities, in each case, that would have, in the aggregate, a
Material Adverse Effect, then each Credit Party shall,
promptly upon receipt of request from Agent, cause the performance of, and allow Agent and its
Related Persons access to such real property for the purpose of conducting, such environmental
audits and assessments, including subsurface sampling of soil and groundwater, and cause the
preparation of such reports, in each case as Agent may from time to time reasonably request. Such
audits, assessments and reports, to the extent not conducted by Agent or any of its Related
Persons, shall be conducted and prepared by reputable environmental consulting firms reasonably
acceptable to Agent and shall be in form and substance reasonably acceptable to Agent, and copies
thereof shall be provided to Borrower promptly upon request.




          (c) Without limiting the generality of the foregoing, each Credit Party shall, and shall cause
each of its Subsidiaries to, comply with all applicable statutes, rules, regulations, standards,
guidelines, policies and orders administered or issued by FDA (“FDA Laws”) or any comparable
Governmental Authority. All products developed, manufactured, tested, distributed or marketed by
or (to the extent within the control of a Credit Party or its Subsidiary) on behalf of the Credit
Parties and their Subsidiaries that are subject to the jurisdiction of the FDA or comparable
Governmental Authority shall be developed, tested, manufactured, distributed and marketed in
compliance with the FDA Laws or any other Requirement of Law, including, without limitation,
product approval, good manufacturing practices, labeling, advertising, record-keeping, and adverse
event reporting.




     4.9 Inspection of Property and Books and Records. Each Credit Party shall maintain
and shall cause each of its Subsidiaries to maintain proper books of record and account, in which
full, true and correct entries in conformity with GAAP consistently applied shall be made of all
financial transactions and matters involving the assets and business of such Person. Each Credit
Party shall, and shall cause each of its Subsidiaries to, with respect to each owned, leased, or
controlled property, during normal business hours and upon reasonable advance notice (unless an
Event of Default shall have occurred and be continuing, in which event no notice shall be required
and Agent shall have access at any and all times during the continuance thereof): (a) provide
access to such property in connection with this Agreement to Agent and any of its Related Persons
as frequently as Agent determines to be appropriate; (b) permit Agent and any of its Related
Persons to inspect, audit and make extracts and copies (or take originals if reasonably necessary)
from all of such Credit Party’s books and records; (c) permit Agent and its Related Persons to
perform a compliance assessment not more frequently than



43









 




once in any twelve-month period at Agent’s
expense, unless a compliance assessment has otherwise been performed by a third party auditor
acceptable to Agent during the most recently ended twelve-month period; and (d) permit Agent and
its Related Persons to inspect, review, evaluate and make physical verifications and appraisals of
all Accounts, Inventory, Eligible Equipment, Eligible Real Estate and other Collateral in any
manner and through any medium that Agent considers advisable, in each instance, at the Credit
Parties’ expense provided the Credit Parties shall not be responsible for costs and expenses,
unless an Event of Default has occurred and is continuing, more than (i) four (4) times per year
with respect to Inventory Appraisals, (ii) four (4) times per year with respect to field
examinations of Accounts and Inventory and (iii) one (1) time per year with respect to
Equipment Appraisals and Real Estate Appraisals. Any Lender may accompany Agent in connection with
any inspection at such Lender’s expense.




     4.10 Use of Proceeds. The Borrowers shall use the proceeds of the Loans solely as
follows: (a) first, to refinance on the Closing Date, Prior Indebtedness and then (b) to pay costs
and expenses required to be paid pursuant to Section 2.1, and (c) for working capital and other
general corporate purposes not in contravention of any Requirement of Law and not in violation of
this Agreement.



     4.11 Cash Management Systems. On or prior to the Closing Date, Borrowers will
establish and will maintain until the Revolving Termination Date, the cash management systems
described in Exhibit 4.11 (the “Cash Management Systems”).



     4.12 Landlord Agreements. Each Credit Party shall, and shall cause each of its
Domestic Subsidiaries to, use commercially reasonable efforts to obtain a landlord agreement or
bailee or mortgagee waivers, as applicable, from the lessor of each leased property, bailee in
possession of any Collateral or mortgagee of any owned property with respect to each location where
any Collateral is stored or located, which agreement shall be reasonably satisfactory in form and
substance to Agent. Agent may, in its discretion, exclude from the Borrowing Base, or impose
Reserves with respect to, Inventory at each such location where a landlord agreement or bailee or
mortgagee wavier is not obtained.



     4.13 Further Assurances.



          (a) Each Credit Party shall ensure that all written information, exhibits and reports
furnished to the Agent or the Lenders, taken as a whole, do not and will not contain any untrue
statement of a material fact and do not and will not omit to state any material fact or any fact
necessary to make the statements contained therein not misleading in light of the circumstances in
which made, and will promptly disclose to the Agent and the Lenders and correct any defect or error
that may be discovered therein or in any Loan Document or in the execution, acknowledgement or
recordation thereof.




          (b) Promptly upon request by the Agent, the Credit Parties shall (and, subject to the
limitations hereinafter set forth, shall cause each of their Subsidiaries to) take such additional
actions as the Agent may reasonably require from time to time in order (i) to carry out more
effectively the purposes of this Agreement or any other Loan Document, (ii) to subject to the Liens
created by any of the Collateral Documents any of




44









 




the Properties, rights or interests covered by
any of the Collateral Documents, (iii) to perfect and maintain the validity, effectiveness and
priority of any of the Collateral Documents and the Liens intended to be created thereby, and (iv)
to better assure, convey, grant, assign, transfer, preserve, protect and confirm to the Secured
Parties the
rights granted or now or hereafter intended to be granted to the Secured Parties under any
Loan Document or under any other document executed in connection therewith. Without limiting the
generality of the foregoing and except as otherwise approved in writing by Required Lenders, the
Credit Parties shall cause each of their Domestic Subsidiaries and, to the extent no 956 Impact
exists, Foreign Subsidiaries to guaranty the Obligations and to cause each such Subsidiary to grant
to the Agent, for the benefit of the Secured Parties, a security interest in, subject to the
limitations hereinafter set forth, all of such Subsidiary’s Property to secure such guaranty.
Furthermore and except as otherwise approved in writing by Required Lenders, each Credit Party
shall, and shall cause (x) each of its Domestic Subsidiaries to, pledge all of the Stock and Stock
Equivalents of each of its Domestic Subsidiaries and First Tier Foreign Subsidiaries (provided that
with respect to any First Tier Foreign Subsidiary, if a 956 Impact exists such pledge shall be
limited to sixty-five percent (65%) of such Foreign Subsidiary’s outstanding voting Stock and Stock
Equivalents and one hundred percent (100%) of such Foreign Subsidiary’s outstanding non-voting
Stock and Stock Equivalents) and (y) to the extent no 956 Impact exists, each of its Foreign
Subsidiaries to, pledge all of the Stock and Stock Equivalent of each of its Subsidiaries, in each
instance, to the Agent, for the benefit of the Secured Parties, to secure the Obligations. In
connection with each pledge of Stock and Stock Equivalents, the Credit Parties shall deliver, or
cause to be delivered, to the Agent, irrevocable proxies and stock powers and/or assignments, as
applicable, duly executed in blank. In the event any Credit Party or any Domestic Subsidiary or,
to the extent no 956 Impact exists, any Foreign Subsidiary of any Credit Party acquires any real
Property, simultaneously with such acquisition, such Person shall execute and/or deliver, or cause
to be executed and/or delivered, to the Agent, (x) a fully executed Mortgage, in form and substance
reasonably satisfactory to the Agent together with an A.L.T.A. lender’s title insurance policy
issued by a title insurer reasonably satisfactory to the Agent, in form and substance and in an
amount reasonably satisfactory to the Agent insuring that the Mortgage is a valid and enforceable
first priority Lien on the respective property, free and clear of all defects, encumbrances and
Liens, (y) then current A.L.T.A. surveys, certified to the Agent by a licensed surveyor sufficient
to allow the issuer of the lender’s title insurance policy to issue such policy without a survey
exception and (z) an environmental site assessment prepared by a qualified firm reasonably
acceptable to the Agent, in form and substance satisfactory to the Agent. A “956 Impact” will be
deemed to exist to the extent the issuance of a guaranty by, grant of a Lien by, or pledge of
greater than two-thirds of the voting Stock and Stock Equivalents of, a Foreign Subsidiary, could
reasonably be expected to result in material incremental income tax liability under Section 956 of
the Code, taking into account actual anticipated repatriation of funds, foreign tax credits and
other relevant factors.




     4.14 Subordinated Note. No later than July 28, 2009, the Borrowers shall have either
(a) repaid in full the Subordinated Note (including all interest accrued and added to the principal
amount thereof), subject to compliance with Section 5.11, or




45









 




(b) obtained a written
extension of the maturity of the Subordinated Note (and all interest accrued and added to the
principal amount thereof) to a date no earlier than July 7, 2013.




     4.15 Licensor Consents. With respect to any agreements or licenses executed by the
Borrowers after the Closing Date that would restrict the ability of Agent
or its successors and assigns to sell Inventory, or to use any patents, trademarks or other
intellectual property in connection with the sale of Inventory, without the consent of the licensor
or other third party, the Borrowers shall use their commercially reasonable efforts to obtain
written consents (in form reasonably satisfactory to Agent) from such licensors or third parties.




     4.16 Post-Closing Covenants.




          (a) No later than fifteen (15) days after the Closing Date, or such later date as Agent may in
its discretion agree in writing, the Borrowers shall have complied with their obligations under
paragraph (a) of Exhibit 4.11.




          (b) No later than fifteen (15) days after the Closing Date, or such later date as Agent may in
its discretion agree in writing, the Borrowers shall have delivered to Agent the final zoning
reports, to be substantially in the same form as the draft zoning reports delivered to Agent prior
to the Closing Date.




          (c) No later than March 31, 2009, or such later date as Agent may in its discretion agree in
writing, the Borrowers shall have completed all action items described in the Akorn Response to all
“Observations (Major)” set forth in the Parexel Report.




ARTICLE V.

NEGATIVE COVENANTS




     Each Credit Party covenants and agrees that, so long as any Lender shall have any Commitment
hereunder, or any Loan or other Obligation (other than contingent indemnification Obligations to
the extent no claim giving rise thereto has been asserted) shall remain unpaid or unsatisfied:



     5.1 Limitation on Liens. No Credit Party shall, and no Credit Party shall suffer or
permit any of its Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer to
exist any Lien upon or with respect to any part of its Property, whether now owned or hereafter
acquired, other than the following (“Permitted Liens”):



          (a) any Lien existing on the Property of a Credit Party or a Subsidiary of a Credit Party on
the Closing Date and set forth in Schedule 5.1 securing Indebtedness outstanding on such
date and permitted by subsection 5.5(c), including replacement Liens on the Property currently
subject to such Liens securing Indebtedness permitted by Section 5.5(c);




          (b) any Lien created under any Loan Document;




46









 








          (c) Liens for taxes, fees, assessments or other governmental charges (i) which are not
delinquent or remain payable without penalty, or (ii) the non-payment of which is permitted by
Section 4.7;




          (d) carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s, repairmen’s or other
similar Liens arising in the Ordinary Course of Business which are not delinquent for more than
ninety (90) days or remain payable without penalty or which are being contested in good faith and
by appropriate proceedings diligently prosecuted, which proceedings have the effect of preventing
the forfeiture or sale of the Property subject thereto and for which adequate reserves in
accordance with GAAP are being maintained;




          (e) Liens (other than any Lien imposed by ERISA) consisting of pledges or deposits required in
the Ordinary Course of Business in connection with workers’ compensation, unemployment insurance
and other social security legislation or to secure the performance of tenders, statutory
obligations, surety, stay, customs and appeals bonds, bids, leases, governmental contract, trade
contracts, performance and return of money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money) or to secure liability to insurance carriers;




          (f) Liens consisting of judgment or judicial attachment liens, provided that the enforcement
of such Liens is effectively stayed and all such Liens secure claims in the aggregate at any time
outstanding for the Credit Parties and their Subsidiaries not exceeding $500,000;




          (g) easements, rights-of-way, zoning and other restrictions, minor defects or other
irregularities in title, and other similar encumbrances incurred in the Ordinary Course of Business
which, either individually or in the aggregate, are not substantial in amount, and which do not in
any case materially detract from the value of the Property subject thereto or interfere in any
material respect with the ordinary conduct of the businesses of any Credit Party or any Subsidiary
of any Credit Party;




          (h) Liens on any Property acquired or held by any Credit Party or any Subsidiary of any Credit
Party securing Indebtedness incurred or assumed for the purpose of financing (or refinancing) all
or any part of the cost of acquiring such Property and permitted under subsection 5.5(d);
provided that (i) any such Lien attaches to such Property concurrently with or
within twenty (20) days after the acquisition thereof, (ii) such Lien attaches solely to the
Property so acquired in such transaction, and (iii) the principal amount of the debt secured
thereby does not exceed 100% of the cost of such Property;




          (i) Liens securing Capital Lease Obligations permitted under subsection 5.5(d);




          (j) any interest or title of a lessor or sublessor under any lease permitted by this
Agreement;




47









 





          (k) Liens arising from precautionary uniform commercial code financing statements filed under
any lease permitted by this Agreement;




          (l) licenses, sublicenses, leases or subleases granted to third parties in the Ordinary Course
of Business not interfering with the business of the Credit Parties or any of their Subsidiaries;




          (m) Liens in favor of collecting banks arising under Section 4-210 of the UCC;




          (n) Liens (including the right of set-off) in favor of a bank or other depository institution
arising as a matter of law encumbering deposits;




          (o) Liens arising out of consignment or similar arrangements for the sale of goods entered
into by a Borrower or any Subsidiary of a Borrower in the Ordinary Course of Business; and




          (p) Liens in favor of customs and revenue authorities arising as a matter of law which secure
payment of customs duties in connection with the importation or exportation of goods in the
Ordinary Course of Business.




     5.2 Disposition of Assets. No Credit Party shall, and no Credit Party shall suffer or
permit any of its Subsidiaries to, directly or indirectly, sell, assign, lease, convey, transfer or
otherwise dispose of (whether in one or a series of transactions) any Property (including accounts
and notes receivable, with or without recourse) or enter into any agreement to do any of the
foregoing, except:



          (a) dispositions of inventory, or used, worn-out or surplus equipment, all in the Ordinary
Course of Business;




          (b) dispositions not otherwise permitted hereunder which are made for fair market value and
the mandatory prepayment in the amount of the Net Proceeds of such disposition is made if and to
the extent required by Section 1.8; provided, that (i) at the time of any disposition, no
Event of Default shall exist or shall result from such disposition, (ii) not less than 50% of the
aggregate sales price from such disposition shall be paid in cash, (iii) the aggregate fair market
value of all assets so sold by the Credit Parties and their Subsidiaries, together, shall not
exceed in any fiscal year $500,000 and (iv) after giving effect to such disposition, the Credit
Parties are in compliance on a pro forma basis with the covenants set forth in Article VI,
recomputed for the most recent month for which financial statements have been delivered;




          (c) dispositions of Cash Equivalents; and




          (d) licenses, sublicenses, leases or subleases granted to third parties in the Ordinary Course
of Business not interfering with the business of the Credit Parties or any of their Subsidiaries.




48









 








     5.3 Consolidations and Mergers. No Credit Party shall, and no Credit Party shall
suffer or permit any of its Subsidiaries to, merge, consolidate with or into, or convey, transfer,
lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any
Person, except upon not less than five (5) Business Days prior written notice to the Agent, (a)
any Subsidiary of Akorn may merge with, or dissolve or liquidate into, a Borrower or a Wholly-Owned
Subsidiary of a Borrower which is a Domestic Subsidiary, provided that a Borrower or such
Wholly-Owned Subsidiary which is a Domestic Subsidiary shall be the continuing or surviving entity
and (b) any Foreign Subsidiary may merge with or dissolve or liquidate into another Foreign
Subsidiary provided if a First Tier Foreign Subsidiary is a constituent entity in such merger,
dissolution or liquidation, such First Tier Foreign Subsidiary shall be the continuing or surviving
entity.



     5.4 Loans and Investments. No Credit Party shall and no Credit Party shall suffer or
permit any of its Subsidiaries to (i) purchase or acquire, or make any commitment to purchase or
acquire any Stock or Stock Equivalents, or any obligations or other securities of, or any interest
in, any Person, including the establishment or creation of a Subsidiary, or (ii) make or commit to
make any Acquisitions, or any other acquisition of all or substantially all of the assets of
another Person, or of any business or division of any Person, including without limitation, by way
of merger, consolidation or other combination or (iii) make or commit to make any advance, loan,
extension of credit or capital contribution to or any other investment in, any Person including any
Affiliate of a Borrower or any Subsidiary of a Borrower (the items described in clauses (i), (ii)
and (iii) are referred to as “Investments”), except for:



          (a) Investments in cash and Cash Equivalents;




          (b) extensions of credit by any Credit Party to any other Credit Party if such extensions of
credit are evidenced by notes; such notes shall be pledged to the Agent, for the benefit of the
Secured Parties, and have such terms as the Agent may reasonably require;




          (c) Investments received as the non-cash portion of consideration received in connection with
transactions permitted pursuant to Section 5.2(b);




          (d) Investments acquired in connection with the settlement of delinquent Accounts in the
Ordinary Course of Business or in connection with the bankruptcy or reorganization of suppliers or
customers;




          (e) transfers of Inventory by any Borrower to any other Borrower;




          (f) contributions to the capital of any Wholly-Owned Subsidiary which is, or within 15
Business Days after such capital contribution becomes, a Credit Party; and




          (g) Investments existing on the Closing Date and set forth on Schedule 5.4.





49









 








     5.5 Limitation on Indebtedness. No Credit Party shall, and no Credit Party shall
suffer or permit any of its Subsidiaries to, create, incur, assume, permit to exist, or otherwise
become or remain directly or indirectly liable with respect to, any Indebtedness, except:



          (a) Indebtedness incurred pursuant to this Agreement;




          (b) Indebtedness consisting of Contingent Obligations described in clause (i) of the
definition thereof and permitted pursuant to Section 5.9;




          (c) Indebtedness existing on the Closing Date and set forth in Schedule 5.5 including
extensions and refinancings thereof which do not increase the principal amount of such Indebtedness
as of the date of such extension or refinancing;




          (d) Indebtedness not to exceed $3,000,000 in the aggregate at any time outstanding, consisting
of Capital Lease Obligations or secured by Liens permitted by subsection 5.1(h);




          (e) unsecured intercompany Indebtedness permitted pursuant to subsection 5.4(b); and




          (f) Subordinated Indebtedness evidenced by the Subordinated Note in an aggregate principal
amount not to exceed the sum of $5,000,000 plus all accrued interest added thereto in accordance
with the terms of the Subordinated Note.




     5.6 Transactions with Affiliates. No Credit Party shall, and no Credit Party shall
suffer or permit any of its Subsidiaries to, enter into any transaction with any Affiliate of a
Borrower or of any such Subsidiary, except:



          (a) as expressly permitted by this Agreement;




          (b) in the Ordinary Course of Business and pursuant to the reasonable requirements of the
business of such Credit Party or such Subsidiary provided that, in the case of this clause (b),
such transaction is upon fair and reasonable terms no less favorable to such Credit Party or such
Subsidiary than would be obtained in a comparable arm’s length transaction with a Person not an
Affiliate of a Borrower or such Subsidiary and which are disclosed in writing to the Agent; or




          (c) issuances of Stock or Stock Equivalents of Akorn.




     5.7 Reserved.



     5.8 Use of Proceeds. No Credit Party shall, and no Credit Party shall suffer or
permit any of its Subsidiaries to, use any portion of the Loan proceeds, directly or indirectly, to
purchase or carry Margin Stock or repay or otherwise refinance Indebtedness of any Credit Party or
others incurred to purchase or carry Margin Stock, or otherwise in any manner which is in
contravention of any Requirement of Law or in violation of this Agreement.



50









 





     5.9 Contingent Obligations. No Credit Party shall, and no Credit Party shall suffer
or permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Contingent
Obligations except in respect of the Obligations and except:



          (a) endorsements for collection or deposit in the Ordinary Course of Business;




          (b) Rate Contracts entered into in the Ordinary Course of Business for bona fide hedging
purposes and not for speculation with the Agent’s prior written consent, not to be unreasonably
withheld;




          (c) Contingent Obligations of the Credit Parties and their Subsidiaries existing as of the
Closing Date and listed in Schedule 5.9, including extension and renewals thereof which do
not increase the amount of such Contingent Obligations as of the date of such extension or renewal;




          (d) Contingent Obligations incurred in the Ordinary Course of Business with respect to surety
and appeal bonds, performance bonds and other similar obligations;




          (e) Contingent Obligations arising under indemnity agreements to title insurers to cause such
title insurers to issue to the Agent title insurance policies;




          (f) Contingent Obligations arising with respect to customary indemnification obligations in
favor of (i) sellers in connection with Acquisitions permitted hereunder, (ii) purchasers in
connection with dispositions permitted under subsection 5.2(b), (iii) directors and officers of any
Borrower or its Subsidiaries and (iv) other parties to transactions entered into in the Ordinary
Course of Business with any Credit Party or any of their Subsidiaries;




          (g) Contingent Obligations arising under Letters of Credit; and




          (h) Contingent Obligations arising under guarantees made in the Ordinary Course of Business of
obligations of any Credit Party, which obligations are otherwise permitted hereunder; provided that
if such obligation is subordinated to the Obligations, such guarantee shall be subordinated to the
same extent.




     5.10 Compliance with ERISA. No ERISA Affiliate shall cause or suffer to exist (a) any
event that could result in the imposition of a Lien on any asset of a Credit Party or a Subsidiary
of a Credit Party with respect to any Title IV Plan or Multiemployer Plan or (b) any other ERISA
Event, that would, in the aggregate, have a Material Adverse Effect. No Credit Party shall cause
or suffer to exist any event that could result in the imposition of a Lien with respect to any
Benefit Plan.



     5.11 Restricted Payments. No Credit Party shall, and no Credit Party shall suffer or
permit any of its Subsidiaries to, (i) declare or make any dividend payment or other distribution
of assets, properties, cash, rights, obligations or securities on account of any Stock or Stock
Equivalent, (ii) purchase, redeem or otherwise acquire for value any



51









 







Stock or Stock Equivalent now
or hereafter outstanding or (iii) make any payment or prepayment of principal of, premium, if any,
interest, fees, redemption, exchange, purchase, retirement, defeasance, sinking fund or similar
payment with respect to, Subordinated Indebtedness (the items described in clauses (i), (ii) and
(iii) above are referred to as “Restricted Payments”); except that:



          (a) any Wholly-Owned Subsidiary of a Borrower may declare and pay dividends to a Borrower or
any Wholly-Owned Subsidiary of a Borrower




          (b) Akorn may declare and make dividend payments or other distributions payable solely in its
Stock or Stock Equivalents; and




          (c) Akorn may repay the Subordinated Note and all accrued interest thereon so long as (i) no
Default or Event of Default shall have occurred and be continuing, or would arise as a result of
such repayment and (ii) such repayment occurs on or before July 28, 2009.




     5.12 Change in Business. No Credit Party shall, and no Credit Party shall permit any
of its Subsidiaries to, engage in any material line of business substantially different from those
lines of business carried on by it on the date hereof.



     5.13 Change in Structure. Except as expressly permitted under Section 5.3, no Credit
Party shall, and no Credit Party shall permit any of its Subsidiaries to, make any material changes
in its equity capital structure (including in the terms of its outstanding Stock or Stock
Equivalents), or amend any of its Organization Documents in any material respect or in any respect
adverse to the Agent or Lenders.



     5.14 Accounting Changes. No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries
to, make any significant change in accounting treatment or reporting practices, except as required
by GAAP, or change the fiscal year or method for determining fiscal quarters of any Credit Party or
of any consolidated Subsidiary of any Credit Party.



     5.15 Amendments to Material Agreements and Subordinated Indebtedness.



          (a) No Credit Party shall and no Credit Party shall permit any of its Subsidiaries, to (i)
amend, supplement, waive or otherwise modify any provision of, any Material Agreement (other than
the Subordinated Note Documents) in a manner adverse to the Agent or Lenders or which would
reasonably be expected to have a Material Adverse Effect, or (ii) take or fail to take any action
under any Material Agreement that would reasonably be expected to have a Material Adverse Effect.




          (b) No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries directly
or indirectly to, change or amend the terms of any (i) Subordinated Note Documents except to the
extent permitted by the Subordination Agreement or (ii) any other Subordinated Indebtedness if,
with respect to this clause (ii), the effect of such amendment is to: (A) increase the interest
rate on such Indebtedness; (B) shorten the dates upon which payments of principal or interest are
due on such Indebtedness; (C) add




52









 




or change in a manner adverse to any Borrower any event of
default or add or make more restrictive any covenant with respect to such Indebtedness; (D) change
in a manner adverse to any Borrower the prepayment provisions of such Indebtedness; (E) change the
subordination provisions thereof (or the subordination terms of any guaranty thereof); or (F)
change or amend any other term if such change or amendment would materially increase the
obligations of the obligor or confer additional material rights on the holder of such Indebtedness
in a manner adverse to any Borrower, any of their Subsidiaries, the Agent or Lenders.




     5.16 No Negative Pledges. No Credit Party shall, and no Credit Party shall permit any
of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual restriction or encumbrance of any kind on the ability of any such
Subsidiary to pay dividends or make any other distribution on any of such Subsidiary’s Stock or
Stock Equivalents or to pay fees, including management fees, or make other payments and
distributions to a Borrower or any of its Subsidiaries. No Credit Party shall, and no Credit Party
shall permit any of its Subsidiaries to, directly or indirectly, enter into, assume or become
subject to any Contractual Obligation prohibiting or otherwise restricting the existence of any
Lien upon any of its assets in favor of the Agent, whether now owned or hereafter acquired except
(i) in connection with any document or instrument governing Liens permitted pursuant to subsections
5.1(h) and (i) provided that any such restriction contained therein relates only to the asset or
assets subject to such permitted Liens and (ii) customary provisions in leases and other contracts
restricting the assignment thereof.



     5.17 OFAC. No Credit Party shall, and no Credit Party shall permit any of its
Subsidiaries to (i) become a person whose property or interests in property are blocked or subject
to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property
and Prohibiting Transactions With Persons Who Commit, Threaten to Commit or Support Terrorism (66
Fed. Reg. 49079(2001), (ii) engage in any dealings or transactions prohibited by Section 2 of such
executive order, or be otherwise associated with any such person in any manner violative of
Section 2, or (iii) otherwise become a person on the list of Specially Designated Nationals and
Blocked Persons or subject to the limitations or prohibitions under any other OFAC regulation or
executive order.



     5.18 Press Release and Related Matters. No Credit Party shall, and no Credit Party
shall permit any of its Affiliates to, issue any press release or other public disclosure (other
than any document filed with any Governmental Authority relating to a public offering of securities
of any Credit Party) using the name, logo or otherwise referring to GE Capital or of any of its
Affiliates, the Loan Documents or any transaction contemplated therein to which the Agent is party
without the prior consent of GE Capital except to the extent required to do so under applicable
Requirements of Law or requirements of exchanges on which the Stock or Stock Equivalents of a
Credit Party is listed, and then only after consulting with GE Capital prior thereto.



53









 





     5.19 Sale-Leasebacks. No Credit Party shall, and no Credit Party shall permit any of
its Subsidiaries to, engage in a sale leaseback, synthetic lease or similar transaction involving
any of its assets.



     5.20 Hazardous Materials. No Credit Party shall, and no Credit Party shall permit any
of its Subsidiaries to, cause or suffer to exist any Release of any Hazardous Material at, to or
from any real property owned, leased, subleased or otherwise operated or occupied by any Credit
Party or any Subsidiary of any Credit Party that would violate any Environmental Law, form the
basis for any Environmental Liabilities or otherwise adversely affect the value or marketability of
any real property (whether or not owned by any Credit Party or any Subsidiary of any Credit Party),
other than such violations, Environmental Liabilities and effects that would not, in the aggregate,
have a Material Adverse Effect.



ARTICLE VI.

FINANCIAL COVENANTS




     Each Credit Party covenants and agrees that, so long as any Lender shall have any Commitment
hereunder, or any Loan or other Obligation (other than contingent
indemnification Obligations to the extent no claim giving rise thereto has been asserted)
shall remain unpaid or unsatisfied:



     6.1 Fixed Charge Coverage Ratio. The Credit Parties shall not permit the Fixed Charge
Coverage Ratio for the nine-month period ending March 31, 2009 or the twelve month period ending on
any other date set forth below to be less than the minimum ratio set forth in the table below
opposite such date:



	 	 	 
	Date	 	Minimum Fixed Charge Ratio
	March 31, 2009, June 30, 2009, September 30,
2009

	 	1.00:1.00
	December 31, 2009, March 31, 2010, June 30,
2010, and September 30, 2010

	 	1.10:1.00
	December 31, 2010, March 31, 2011, June 30,
2011, and September 30, 2011

	 	1.20:1.00
	Last day of each fiscal quarter thereafter

	 	1.25:1.00





“Fixed Charge Coverage Ratio” shall be calculated in the manner set forth in Exhibit
4.2(b).




     6.2 Minimum EBITDA. The Credit Parties shall not permit EBITDA for the nine-month
period ending March 31, 2009 or the twelve month period ending on any other date set forth below to
be less than the minimum amount set forth in the table below opposite such date:



	 	 	 
	Date	 	Minimum EBITDA
	March 31, 2009
	 	$7,563,000
	June 30, 2009
	 	$9,585,000






54









 






	 	 	 
	Date	 	Minimum EBITDA
	September 30, 2009
	 	$8,498,000
	December 31, 2009
	 	$8,087,000
	March 31, 2010
	 	$12,243,000
	June 30, 2010
	 	$15,681,000
	September 30, 2010
	 	$19,402,000
	December 31, 2010
	 	$21,840,000
	March 31, 2011
	 	$24,297,000
	June 30, 2011
	 	$27,368,000
	September 30, 2011
	 	$31,054,000
	December 31, 2011
	 	$34,125,000
	March 31, 2012
	 	$33,846,000
	June 30, 2012
	 	$33,497,000
	September 30, 2012
	 	$33,079,000
	December 31, 2012
	 	$32,730,000





“EBITDA” shall be calculated in the manner set forth in Exhibit 4.2(b).




     6.3 Minimum Liquidity. The Credit Parties shall maintain Liquidity in the aggregate of at
least (x) $3,500,000 at all times through and including March 31, 2010 and (y) $2,500,000 at all
times thereafter. “Liquidity” shall be calculated in the manner set forth in Exhibit
4.2(b).



     6.4 Capital Expenditures. The Credit Parties shall not make or commit to make Capital
Expenditures for any fiscal year (or shorter period) set forth below in excess of the amount set
forth in the table below with respect to such fiscal year (or shorter period):



	 	 	 
	Fiscal Period	 	Capital Expenditure Limitation
	2009
	 	$10,000,000
	2010
	 	$7,500,000
	2011
	 	$5,000,000
	2012
	 	$5,000,000





; provided, however, in the event the Credit Parties do not expend the entire Capital Expenditure
Limitation in any fiscal year, the Credit Parties may carry forward the unutilized portion to the
immediately succeeding fiscal year. All Capital Expenditures shall first be applied to reduce the
applicable Capital Expenditure Limitation and then to reduce the carry-forward from the previous
fiscal year, if any. “Capital Expenditures” shall be calculated in the manner set forth in
Exhibit 4.2(b).




ARTICLE VII.

EVENTS OF DEFAULT




     7.1 Event of Default. Any of the following shall constitute an “Event of Default”:



55









 





          (a) Non-Payment. Any Credit Party fails (i) to pay when and as required to be paid
herein, any amount of principal of any Loan, including after maturity of the Loans, or to pay any
L/C Reimbursement Obligation or (ii) to pay within three (3) Business Days after the same shall
become due, interest on any Loan, any fee or any other amount payable hereunder or pursuant to any
other Loan Document; or




          (b) Representation or Warranty. Any representation, warranty or certification by or
on behalf of any Credit Party or any of its Subsidiaries made or deemed made herein, in any other
Loan Document, or which is contained in any certificate, document or financial or other statement
by any such Person, or their
respective Responsible Officers, furnished at any time under this Agreement, or in or under
any other Loan Document, shall prove to have been incorrect in any material respect on or as of the
date made or deemed made; or




          (c) Specific Defaults. Any Credit Party fails to perform or observe any term,
covenant or agreement contained in any of Sections 4.1, 4.2(b), 4.2(d), 4.3(a), 4.3(r), 4.6, 4.9,
4.14, 4.16, Article V or Article VI hereof or the Fee Letter; or




          (d) Other Defaults. Any Credit Party or Subsidiary of any Credit Party fails to
perform or observe any other term, covenant or agreement contained in this Agreement or any other
Loan Document, and such default shall continue unremedied for a period of thirty (30) days after
the earlier to occur of (i) the date upon which a Responsible Officer of any Credit Party becomes
aware of such default and (ii) the date upon which written notice thereof is given to the Borrower
Representative by the Agent or Required Lenders; or




          (e) Cross-Default. Any Credit Party or any Subsidiary of any Credit Party (i) fails
to make any payment in respect of any Indebtedness (other than the Obligations) or Contingent
Obligation having an aggregate principal amount (including undrawn committed or available amounts
and including amounts owing to all creditors under any combined or syndicated credit arrangement)
of more than $200,000 when due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise) and such failure continues after the applicable grace or notice period, if
any, specified in the document relating thereto on the date of such failure; or (ii) fails to
perform or observe any other condition or covenant, or any other event shall occur or condition
exist, under any agreement or instrument relating to any such Indebtedness or Contingent
Obligation, if the effect of such failure, event or condition is to cause, or to permit the holder
or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee
or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such
Indebtedness to be declared to be due and payable prior to its stated maturity (without regard to
any subordination terms with respect thereto), or such Contingent Obligation to become payable or
cash collateral in respect thereof to be demanded; or




          (f) Insolvency; Voluntary Proceedings. A Borrower, individually, ceases or fails, or
the Credit Parties and their Subsidiaries on a consolidated basis, cease or fail, to be Solvent, or
any Credit Party or any Subsidiary of any Credit Party: (i)




56









 




generally fails to pay, or admits in
writing its inability to pay, its debts as they become due, subject to applicable grace periods, if
any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business in
the ordinary course; (iii) commences any Insolvency Proceeding with respect to itself; or (iv)
takes any action to effectuate or authorize any of the foregoing; or




          (g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is commenced
or filed against any Credit Party or any Subsidiary of any Credit Party, or any writ, judgment,
warrant of attachment, execution or similar process, is issued or levied against a substantial part
of any such Person’s Properties, and any such
proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment,
execution or similar process shall not be released, vacated or fully bonded within sixty (60) days
after commencement, filing or levy; (ii) any Credit Party or any of its Subsidiary of any Credit
Party admits the material allegations of a petition against it in any Insolvency Proceeding, or an
order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or
(iii) any Credit Party or any Subsidiary of any Credit Party acquiesces in the appointment of a
receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor),
or other similar Person for itself or a substantial portion of its Property or business; or




          (h) Monetary Judgments. One or more judgments, non-interlocutory orders, decrees or
arbitration awards shall be entered against any one or more of the Credit Parties or any of their
respective Subsidiaries involving in the aggregate a liability (to the extent not covered by
independent third-party insurance) as to any single or related series of transactions, incidents or
conditions, of $500,000 or more, and the same shall remain unsatisfied, unvacated and unstayed
pending appeal for a period of thirty (30) consecutive days after the entry thereof; or




          (i) Non-Monetary Judgments. One or more non-monetary judgments, orders or decrees
shall be rendered against any one or more of the Credit Parties or any of their respective
Subsidiaries which has or would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect, and there shall be any period of ten (10) consecutive days
during which a stay of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or




          (j) Collateral. Any material provision of any Loan Document shall for any reason
cease to be valid and binding on or enforceable against any Credit Party or any Subsidiary of any
Credit Party party thereto or any Credit Party or any Subsidiary of any Credit Party shall so state
in writing or bring an action to limit its obligations or liabilities thereunder; or any Collateral
Document shall for any reason (other than pursuant to the terms thereof) cease to create a valid
security interest in the Collateral purported to be covered thereby or such security interest shall
for any reason (other than the failure of the Agent to take any action within its control) cease to
be a perfected and first priority security interest subject only to Permitted Liens; or




          (k) Control. Any of the following occurs: (a) any person or group of persons (within
the meaning of the Exchange Act), excluding Dr. John N. Kapoor, the




57









 




Kapoor Trust and Pequot
Capital, shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the SEC under the Exchange Act) of 30% or more of the issued and outstanding shares of capital
Stock of Akorn having the right to vote for the election of directors of Akorn under ordinary
circumstances; (b) either (i) Dr. John N. Kapoor and the Kapoor Trust together or (ii) Pequot
Capital shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the SEC under the Exchange Act) of 50% or more of the issued and outstanding shares of capital
Stock of Akorn having the right to vote for the election of directors of Akorn under ordinary
circumstances; (c) during any period of twelve consecutive calendar months, individuals who at the
beginning of such period constituted the board of directors of Akorn (together
with any new directors whose election by the board of directors of Akorn or whose nomination
for election by the Stockholders of Akorn was approved by a vote of at least a majority of the
directors then still in office who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any reason other than
death or disability to constitute a majority of the directors then in office; or (d) any Borrower
ceases to own and control all of the economic and voting rights associated with all of the
outstanding capital Stock of any of its Subsidiaries; or




          (l) Government Authorities. FDA or any other Governmental Authority initiates
enforcement action against any Credit Party or any Subsidiary of any Credit Party that causes such
Credit Party or Subsidiary to discontinue marketing any of its products and could reasonably be
expected to have a Material Adverse Effect; the FDA or any other Governmental Authority issues a
warning letter with respect to any manufacturing issue to any Credit Party or any Subsidiary of any
Credit Party which could reasonably be expected to have a Material Adverse Effect; or any Credit
Party or any Subsidiary of any Credit Party conducts a recall which could reasonably be expected to
have a Material Adverse Effect; or any Credit Party or any of its Subsidiaries enters into a
settlement agreement with a Governmental Authority that results in aggregate liability as to any
single or related series of transactions, incidents or conditions, of $750,000 or more, or could
reasonably be expected to have a Material Adverse Effect; or




          (m) Material Adverse Effect. A Material Adverse Effect occurs; or




          (n) Invalidity of Subordination Provisions. The subordination provisions of the
Subordination Agreement or any agreement or instrument governing any Subordinated Indebtedness
shall for any reason be revoked or invalidated, or otherwise cease to be in full force and effect,
or any Person shall contest in any manner the validity or enforceability thereof or deny that it
has any further liability or obligation thereunder, or the Obligations, for any reason shall not
have the priority contemplated by this Agreement or such subordination provisions.




     7.2 Remedies. Upon the occurrence and during the continuance of any Event of Default,
the Agent may, and shall at the request of the Required Lenders:




58












 





          (a) declare all or any portion of the Commitment of each Lender to make Loans or of the L/C
Issuer to issue Letters of Credit to be terminated, whereupon such Commitments shall forthwith be
terminated;




          (b) declare all or any portion of the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any
other Loan Document to be immediately due and payable; without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by each Credit Party; and/or




          (c) exercise on behalf of itself and the Lenders all rights and remedies available to it and
the Lenders under the Loan Documents or applicable law;



provided, however, that upon the occurrence of any event specified in subsections
7.1(f) or 7.1(g) above (in the case of clause (i) of subsection 7.1(g) upon the expiration of the
sixty (60) day period mentioned therein), the obligation of each Lender to make Loans and the
obligation of the L/C Issuer to issue Letters of Credit shall automatically terminate and the
unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable without further act of the Agent, any Lender or the L/C
Issuer.




     7.3 Rights Not Exclusive. The rights provided for in this Agreement and the other
Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by law or in equity, or under any other instrument, document or agreement now
existing or hereafter arising.



     7.4 Cash Collateral for Letters of Credit. If an Event of Default has occurred and is
continuing or this Agreement (or the Revolving Loan Commitment) shall be terminated for any reason,
then the Agent may, and upon request of Required Lenders, shall, demand (which demand shall be
deemed to have been delivered automatically upon any acceleration of the Loans and other
obligations hereunder pursuant to Section 7.2 hereof), and the Borrowers shall thereupon deliver to
the Agent, to be held for the benefit of the L/C Issuer, Agent and the Lenders entitled thereto, an
amount of cash equal to 105% of the amount of Letter of Credit Obligations as additional collateral
security for Obligations in respect of any outstanding Letter of Credit. The Agent may at any time
apply any or all of such cash and cash collateral to the payment of any or all of the Credit
Parties’ Obligations in respect of any Letters of Credit. Pending such application, the Agent may
(but shall not be obligated to) invest the same in an interest bearing account in the Agent’s name,
for the benefit of the Agent, Lenders, and L/C Issuers, entitled thereto, under which deposits are
available for immediate withdrawal, at such bank or financial institution as the L/C Issuer and
Agent may, in their discretion, select.


ARTICLE VIII.

THE AGENT




     8.1 Appointment and Duties.



59









 







          (a) Appointment of Agent. Each Lender and each L/C Issuer hereby appoints GE Capital
(together with any successor Agent pursuant to Section 8.9) as the Agent hereunder and authorizes
the Agent to (i) execute and deliver the Loan Documents
and accept delivery thereof on its behalf from any Credit Party, (ii) take such action on its
behalf and to exercise all rights, powers and remedies and perform the duties as are expressly
delegated to the Agent under such Loan Documents and (iii) exercise such powers as are reasonably
incidental thereto.




          (b) Duties as Collateral and Disbursing Agent. Without limiting the generality of
clause (a) above, the Agent shall have the sole and exclusive right and authority (to the exclusion
of the Lenders and L/C Issuers), and is hereby authorized, to (i) act as the disbursing and
collecting agent for the Lenders and the L/C Issuers with respect to all payments and collections
arising in connection with the Loan Documents (including in any proceeding described in subsection
7.1(g) or any other bankruptcy, insolvency or similar proceeding), and each Person making any
payment in connection with any Loan Document to any Secured Party is hereby authorized to make such
payment to the Agent, (ii) file and prove claims and file other documents necessary or desirable to
allow the claims of the Secured Parties with respect to any Obligation in any proceeding described
in subsection 7.1(g) or any other bankruptcy, insolvency or similar proceeding (but not to vote,
consent or otherwise act on behalf of such Person), (iii) act as collateral agent for each Secured
Party for purposes of the perfection of all Liens created by such agreements and all other purposes
stated therein, (iv) manage, supervise and otherwise deal with the Collateral, (v) take such other
action as is necessary or desirable to maintain the perfection and priority of the Liens created or
purported to be created by the Loan Documents, (vi) except as may be otherwise specified in any
Loan Document, exercise all remedies given to the Agent and the other Secured Parties with respect
to the Collateral, whether under the Loan Documents, applicable Requirements of Law or otherwise
and (vii) execute any amendment, consent or waiver under the Loan Documents on behalf of any Lender
that has consented in writing to such amendment, consent or waiver; provided, however, that the
Agent hereby appoints, authorizes and directs each Lender and L/C Issuer to act as collateral
sub-agent for the Agent, the Lenders and the L/C Issuers for purposes of the perfection of all
Liens with respect to the Collateral, including any deposit account maintained by a Credit Party
with, and cash and Cash Equivalents held by, such Lender or L/C Issuer, and may further authorize
and direct the Lenders and the L/C Issuers to take further actions as collateral sub-agents for
purposes of enforcing such Liens or otherwise to transfer the Collateral subject thereto to the
Agent, and each Lender and L/C Issuer hereby agrees to take such further actions to the extent, and
only to the extent, so authorized and directed.




          (c) Limited Duties. Under the Loan Documents, the Agent (i) is acting solely on
behalf of the Lenders and the L/C Issuers (except to the limited extent provided in subsection
1.4(b) with respect to the Register), with duties that are entirely administrative in nature,
notwithstanding the use of the defined term “Agent”, the terms “agent”, “Agent” and “collateral
agent” and similar terms in any Loan Document to refer to the Agent, which terms are used for
title purposes only, (ii) is not assuming any obligation under any Loan Document other than as
expressly set forth therein or any role as agent, fiduciary or trustee of or for any Lender, L/C
Issuer or any other Person and (iii)




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shall have no implied functions, responsibilities, duties,
obligations or other liabilities under any Loan Document, and each Lender and L/C Issuer hereby
waives and agrees not
to assert any claim against the Agent based on the roles, duties and legal relationships
expressly disclaimed in clauses (i) through (iii) above.




     8.2 Binding Effect. Each Lender and each L/C Issuer agrees that (i) any action taken
by the Agent or the Required Lenders (or, if expressly required hereby, a greater proportion of the
Lenders) in accordance with the provisions of the Loan Documents, (ii) any action taken by the
Agent in reliance upon the instructions of Required Lenders (or, where so required, such greater
proportion) and (iii) the exercise by the Agent or the Required Lenders (or, where so required,
such greater proportion) of the powers set forth herein or therein, together with such other powers
as are reasonably incidental thereto, shall be authorized and binding upon all of the Secured
Parties.



     8.3 Use of Discretion.



          (a) No Action without Instructions. The Agent shall not be required to exercise any
discretion or take, or to omit to take, any action, including with respect to enforcement or
collection, except any action it is required to take or omit to take (i) under any Loan Document or
(ii) pursuant to instructions from the Required Lenders (or, where expressly required by the terms
of this Agreement, a greater proportion of the Lenders).




          (b) Right Not to Follow Certain Instructions. Notwithstanding clause (a) above, the
Agent shall not be required to take, or to omit to take, any action (i) unless, upon demand, the
Agent receives an indemnification satisfactory to it from the Lenders (or, to the extent applicable
and acceptable to the Agent, any other Person) against all Liabilities that, by reason of such
action or omission, may be imposed on, incurred by or asserted against the Agent or any Related
Person thereof or (ii) that is, in the opinion of the Agent or its counsel, contrary to any Loan
Document or applicable Requirement of Law.




     8.4 Delegation of Rights and Duties. The Agent may, upon any term or condition it
specifies, delegate or exercise any of its rights, powers and remedies under, and delegate or
perform any of its duties or any other action with respect to, any Loan Document by or through any
trustee, co-agent, employee, attorney-in-fact and any other Person (including any Secured Party).
Any such Person shall benefit from this Article VIII to the extent provided by the Agent.



     8.5 Reliance and Liability.



          (a) The Agent may, without incurring any liability hereunder, (i) treat the payee of any Note
as its holder until such Note has been assigned in accordance with Section 9.9, (ii) rely on the
Register to the extent set forth in Section 1.4, (iii) consult
with any of its Related Persons and, whether or not selected by it, any other advisors,
accountants and other experts (including advisors to, and accountants and experts engaged by, any
Credit Party) and (iv) rely and act upon any document and information (including those transmitted
by Electronic Transmission) and any telephone message or




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conversation, in each case believed by it
to be genuine and transmitted, signed or otherwise authenticated by the appropriate parties.




          (b) None of the Agent and its Related Persons shall be liable for any action taken or omitted
to be taken by any of them under or in connection with any Loan Document, and each Lender, L/C
Issuer, each Borrower and each other Credit Party hereby waive and shall not assert (and each of
the Borrowers shall cause each other Credit Party to waive and agree not to assert) any right,
claim or cause of action based thereon, except to the extent of liabilities resulting primarily
from the gross negligence or willful misconduct of the Agent or, as the case may be, such Related
Person (each as determined in a final, non-appealable judgment by a court of competent
jurisdiction) in connection with the duties expressly set forth herein. Without limiting the
foregoing, the Agent:




               (i) shall not be responsible or otherwise incur liability for any action or omission taken in
reliance upon the instructions of the Required Lenders or for the actions or omissions of any of
its Related Persons selected with reasonable care (other than employees, officers and directors of
the Agent, when acting on behalf of the Agent);



               (ii) shall not be responsible to any Lender, L/C Issuer or other Person for the due execution,
legality, validity, enforceability, effectiveness, genuineness, sufficiency or value of, or the
attachment, perfection or priority of any Lien created or purported to be created under or in
connection with, any Loan Document;



               (iii) makes no warranty or representation, and shall not be responsible, to any Lender, L/C
Issuer or other Person for any statement, document, information, representation or warranty made or
furnished by or on behalf of any Credit Party or any Related Person of any Credit Party in
connection with any Loan Document or any transaction contemplated therein or any other document or
information with respect to any Credit Party, whether or not transmitted or (except for documents
expressly required under any Loan Document to be transmitted to the Lenders) omitted to be
transmitted by the Agent, including as to completeness, accuracy, scope or adequacy thereof, or for
the scope, nature or results of any due diligence performed by the Agent in connection with the
Loan Documents; and



               (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of
any provision of any Loan Document, whether any condition set forth in any Loan Document is
satisfied or waived, as to the financial condition of any Credit Party or as to the existence or
continuation or possible occurrence or continuation of any Default or Event of Default and shall
not be deemed to have notice or knowledge of such occurrence or continuation unless it has received
a notice from the Borrower Representative, any Lender or L/C Issuer describing such Default or
Event of
Default clearly labeled “notice of default” (in which case the Agent shall promptly give
notice of such receipt to all Lenders);


and, for each of the items set forth in clauses (i) through (iv) above, each Lender, L/C Issuer and
the Borrowers hereby waive and agree not to assert (and each of the Borrowers


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shall cause each
other Credit Party to waive and agree not to assert) any right, claim or cause of action it might
have against the Agent based thereon.




     8.6 Agent Individually. The Agent and its Affiliates may make loans and other
extensions of credit to, acquire Stock and Stock Equivalents of, engage in any kind of business
with, any Credit Party or Affiliate thereof as though it were not acting as Agent and may receive
separate fees and other payments therefor. To the extent the Agent or any of its Affiliates makes
any Loan or otherwise becomes a Lender hereunder, it shall have and may exercise the same rights
and powers hereunder and shall be subject to the same obligations and liabilities as any other
Lender and the terms “Lender”, “Revolving Lender”, “Required Lender” and any similar terms shall,
except where otherwise expressly provided in any Loan Document, include, without limitation, the
Agent or such Affiliate, as the case may be, in its individual capacity as Lender, Revolving Lender
or as one of the Required Lenders.



     8.7 Lender Credit Decision. Each Lender and each L/C Issuer acknowledges that it
shall, independently and without reliance upon the Agent, any Lender or L/C Issuer or any of their
Related Persons or upon any document (including any offering and disclosure materials in connection
with the syndication of the Loans) solely or in part because such document was transmitted by the
Agent or any of its Related Persons, conduct its own independent investigation of the financial
condition and affairs of each Credit Party and make and continue to make its own credit decisions
in connection with entering into, and taking or not taking any action under, any Loan Document or
with respect to any transaction contemplated in any Loan Document, in each case based on such
documents and information as it shall deem appropriate. Except for documents expressly required by
any Loan Document to be transmitted by the Agent to the Lenders or L/C Issuers, the Agent shall not
have any duty or responsibility to provide any Lender or L/C Issuer with any credit or other
information concerning the business, prospects, operations, property, financial and other condition
or creditworthiness of any Credit Party or any Affiliate of any Credit Party that may come in to
the possession of the Agent or any of its Related Persons.



     8.8 Expenses; Indemnities.



          (a) Each Lender agrees to reimburse the Agent and each of its Related Persons (to the extent
not reimbursed by any Credit Party) promptly upon demand, severably and ratably, of any costs and
expenses (including fees, charges and
disbursements of financial, legal and other advisors and Other Taxes paid in the name of, or
on behalf of, any Credit Party) that may be incurred by the Agent or any of its Related Persons in
connection with the preparation, syndication, execution, delivery, administration, modification,
consent, waiver or enforcement (whether through negotiations, through any work-out, bankruptcy,
restructuring or other legal or other proceeding or otherwise) of, or legal advice in respect of
its rights or responsibilities under, any Loan Document.




          (b) Each Lender further agrees to indemnify the Agent and each of its Related Persons (to the
extent not reimbursed by any Credit Party), severably and ratably,




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from and against Liabilities
(including taxes, interests and penalties imposed for not properly withholding or backup
withholding on payments made to on or for the account of any Lender) that may be imposed on,
incurred by or asserted against the Agent or any of its Related Persons in any matter relating to
or arising out of, in connection with or as a result of any Loan Document, any Related Document or
any other act, event or transaction related, contemplated in or attendant to any such document, or,
in each case, any action taken or omitted to be taken by the Agent or any of its Related Persons
under or with respect to any of the foregoing; provided, however, that no Lender shall be liable to
the Agent or any of its Related Persons to the extent such liability has resulted primarily from
the gross negligence or willful misconduct of the Agent or, as the case may be, such Related
Person, as determined by a court of competent jurisdiction in a final non-appealable judgment or
order.




     8.9 Resignation of Agent or L/C Issuer.



          (a) The Agent may resign at any time by delivering notice of such resignation to the Lenders
and the Borrower Representative, effective on the date set forth in such notice or, if no such date
is set forth therein, upon the date such notice shall be effective. If the Agent delivers any such
notice, the Required Lenders shall have the right to appoint a successor Agent. If, within 30 days
after the retiring Agent having given notice of resignation, no successor Agent has been appointed
by the Required Lenders that has accepted such appointment, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent from among the Lenders. Each appointment under this
clause (a) shall be subject to the prior consent of the Borrowers, which may not be unreasonably
withheld but shall not be required during the continuance of an Event of Default.




          (b) Effective immediately upon its resignation, (i) the retiring Agent shall be discharged
from its duties and obligations under the Loan Documents, (ii) the Lenders shall assume and perform
all of the duties of the Agent until a successor Agent shall have accepted a valid appointment
hereunder, (iii) the retiring Agent and its Related Persons shall no longer have the benefit of any
provision of any Loan Document other than with respect to any actions taken or omitted to be taken
while such retiring Agent was, or because such Agent had been, validly acting as Agent under the
Loan Documents and (iv) subject to its rights under Section 8.3, the retiring Agent shall take such
action as
may be reasonably necessary to assign to the successor Agent its rights as Agent under the
Loan Documents. Effective immediately upon its acceptance of a valid appointment as Agent, a
successor Agent shall succeed to, and become vested with, all the rights, powers, privileges and
duties of the retiring Agent under the Loan Documents.




          (c) Any L/C Issuer may resign at any time by delivering notice of such resignation to the
Agent, effective on the date set forth in such notice or, if no such date is set forth therein, on
the date such notice shall be effective. Upon such resignation, the L/C Issuer shall remain an L/C
Issuer and shall retain its rights and obligations in its capacity as such (other than any
obligation to Issue Letters of Credit but including the right to receive fees or to have Lenders
participate in any L/C Reimbursement Obligation thereof) with respect to Letters of Credit issued
by such L/C Issuer prior to the date of




64









 







such resignation and shall otherwise be discharged from all
other duties and obligations under the Loan Documents.




     8.10 Release of Collateral or Guarantors. Each Lender and L/C Issuer hereby consents
to the release and hereby directs the Agent to release (or, in the case of clause (b)(ii) below,
release or subordinate) the following:



          (a) any Subsidiary of a Borrower from its guaranty of any Obligation if all of the Stock and
Stock Equivalents of such Subsidiary owned by any Credit Party are sold or transferred in a
transaction permitted under the Loan Documents (including pursuant to a waiver or consent), to the
extent that, after giving effect to such transaction, such Subsidiary would not be required to
guaranty any Obligations pursuant to Section 4.13; and




          (b) any Lien held by the Agent for the benefit of the Secured Parties against (i) any
Collateral that is sold, transferred, conveyed or otherwise disposed of by a Credit Party in a
transaction permitted by the Loan Documents (including pursuant to a valid waiver or consent), to
the extent all Liens required to be granted in such Collateral pursuant to Section 4.13 after
giving effect to such transaction have been granted, (ii) any property subject to a Lien permitted
hereunder in reliance upon subsection 5.1(h) or (i) and (iii) all of the Collateral and all Credit
Parties, upon (A) termination of the Revolving Loan Commitments, (B) payment and satisfaction in
full of all Loans, all L/C Reimbursement Obligations and all other Obligations under the Loan
Documents (other than surviving indemnity obligations as to which no claim is then pending) and all
Obligations arising under Secured Rate Contracts, that the Agent has theretofore been notified in
writing by the holder of such Obligation are then due and payable, (C) deposit of cash collateral
with respect to all contingent Obligations (or, in the case of any Letter of Credit Obligation,
receipt by Agent of a back-up letter of credit) in amounts and on terms and conditions and with
parties satisfactory to the Agent and each Indemnitee that is, or may be, owed such Obligations and
(D) to the extent requested by the Agent, receipt by Agent and the Secured Parties of liability
releases from the Credit Parties each in form and substance acceptable to the Agent.



Each Lender and L/C Issuer hereby directs the Agent, and the Agent hereby agrees, upon receipt of
reasonable advance notice from the Borrower Representative, to execute and deliver or file such
documents and to perform other actions reasonably necessary to release the guaranties and Liens
when and as directed in this Section 8.10.




     8.11 Additional Secured Parties. The benefit of the provisions of the Loan Documents
directly relating to the Collateral or any Lien granted thereunder shall extend to and be available
to any Secured Party that is not a Lender or L/C Issuer party hereto as long as, by accepting such
benefits, such Secured Party agrees, as among the Agent and all other Secured Parties, that such
Secured Party is bound by (and, if requested by the Agent, shall confirm such agreement in a
writing in form and substance acceptable to the Agent) this Article VIII, Section 9.3, Section 9.9,
Section 9.10, Section 9.11, Section 9.17, Section 9.24, and Section 10.1 and the decisions and
actions of the Agent and the Required Lenders (or, where expressly required by the terms of this
Agreement, a greater



65









 




proportion of the Lenders or other parties hereto as required herein) to the
same extent a Lender is bound; provided, however, that, notwithstanding the foregoing, (a) such
Secured Party shall be bound by Section 8.8 only to the extent of Liabilities, costs and expenses
with respect to or otherwise relating to the Collateral held for the benefit of such Secured Party,
in which case the obligations of such Secured Party thereunder shall not be limited by any concept
of pro rata share or similar concept, (b) each of the Agent, the Lenders and the L/C Issuers party
hereto shall be entitled to act at its sole discretion, without regard to the interest of such
Secured Party, regardless of whether any Obligation to such Secured Party thereafter remains
outstanding, is deprived of the benefit of the Collateral, becomes unsecured or is otherwise
affected or put in jeopardy thereby, and without any duty or liability to such Secured Party or any
such Obligation and (c) except as otherwise set forth herein, such Secured Party shall not have any
right to be notified of, consent to, direct, require or be heard with respect to, any action taken
or omitted in respect of the Collateral or under any Loan Document.




ARTICLE IX.

MISCELLANEOUS




     9.1 Amendments and Waivers.



          (a) No amendment or waiver of any provision of this Agreement or any other Loan Document, and
no consent with respect to any departure by any Credit Party therefrom, shall be effective unless
the same shall be in writing and signed by the Required Lenders (or by the Agent with the consent
of the Required Lenders), the Borrowers and acknowledged by the Agent, and then such waiver shall
be effective only in the specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in writing and signed by all the
Lenders directly affected thereby (or by the Agent with the consent of all the Lenders
directly affected thereby), in addition to the Required Lenders (or by the Agent with the consent
of the Required Lenders), the Borrowers and acknowledged by the Agent, do any of the following:




               (i) increase or extend the Commitment of any Lender (or reinstate any Commitment terminated
pursuant to subsection 7.2(a));



               (ii) postpone or delay any date fixed for, or waive, any scheduled installment of principal or
any payment of interest, fees or other amounts due to the Lenders (or any of them) or L/C Issuer
hereunder or under any other Loan Document;



               (iii) reduce the principal of, or the rate of interest specified herein or the amount of
interest payable in cash specified herein on any Loan, or of any fees or other amounts payable
hereunder or under any other Loan Document, including L/C Reimbursement Obligations;



66









 





               (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of
the Loans which shall be required for the Lenders or any of them to take any action hereunder;



               (v) amend this Section 9.1 or the definition of Required Lenders or any provision providing
for consent or other action by all Lenders; or



               (vi) discharge any Credit Party from its respective payment Obligations under the Loan
Documents, or release all or substantially all of the Collateral, except as otherwise may be
provided in this Agreement or the other Loan Documents;




it being agreed that all Lenders shall be deemed to be directly affected by an
amendment or waiver of the type described in the preceding clauses (iv), (v) and
(vi).



          (b) No amendment, waiver or consent shall, unless in writing and signed by the Agent, the
Swingline Lender or the L/C Issuer, as the case may be, in addition to the Required Lenders or all
Lenders directly affected thereby as the case may be (or by the Agent with the consent of the
Required Lenders or all the Lenders directly affected thereby, as the case may be), affect the
rights or duties of the Agent, the Swingline Lender or the L/C Issuer, as applicable, under this
Agreement or any other Loan Document. No amendment, modification or waiver of this Agreement or
any Loan Document altering the ratable treatment of Obligations arising under Secured Rate
Contracts resulting in such Obligations being junior in right of payment to principal on the Loans
or resulting in Obligations owing to any Secured Swap Provider becoming unsecured (other than
releases of Liens permitted in accordance with the terms hereof), in each case in a manner adverse
to any Secured Swap Provider, shall be effective without the written consent of such Secured Swap
Provider or, in the case of a Secured Rate Contract provided or arranged by GE Capital or an
Affiliate of GE Capital, GE Capital.




     9.2 Notices.



          (a) Addresses. All notices, demands, requests, directions and other communications
required or expressly authorized to be made by this Agreement shall, whether or not specified to be
in writing but unless otherwise expressly specified to be given by any other means, be given in
writing and (i) addressed to the address set forth on the applicable signature page hereto, (ii)
posted to Intralinks® (to the extent such system is available and set up by or at the direction of
the Agent prior to posting) in an appropriate location by uploading such notice, demand, request,
direction or other communication to www.intralinks.com, faxing it to 866-545-6600 with an
appropriate bar-code fax coversheet or using such other means of posting to Intralinks® as may be
available and reasonably acceptable to the Agent prior to such posting, (iii) posted to any other
E-System set up by or at the direction of Agent or (iv) addressed to such other address as shall be
notified in writing (A) in the case of the Borrowers, the Agent and the Swingline Lender, to the
other parties hereto and (B) in the case of all other parties, to the Borrower Representative and
the Agent. Transmission by electronic mail (including E-




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Fax, even if transmitted to the fax
numbers set forth above) shall not be sufficient or effective to transmit any such notice under
this clause (a) unless such transmission is an available means to post to any E-System.




          (b) Effectiveness. All communications described in clause (a) above and all
other notices, demands, requests and other communications made in connection with this Agreement
shall be effective and be deemed to have been received (i) if delivered by hand, upon personal
delivery, (ii) if delivered by overnight courier service, 1 Business Day after delivery to such
courier service, (iii) if delivered by mail, three Business Days after being deposited in the
mails, (iv) if delivered by facsimile (other than to post to an E-System pursuant to clause (a)(ii)
or (a)(iii) above), upon sender’s receipt of confirmation of proper transmission, and (v) if
delivered by posting to any E-System, on the later of (A) the date of such posting if posted before
6pm New York time, otherwise the following date and (B) the date access to such posting is given to
the recipient thereof in accordance with the standard procedures applicable to such E-System if
such access is given prior to 6pm, otherwise the following date; provided, however,
that no communications to Agent pursuant to Article I shall be effective until received by Agent.




          (c) Each Lender shall notify the Agent in writing of any changes in the address to which
notices to such Lender should be directed, of addresses of its Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such other administrative
information as the Agent shall reasonably request.




     9.3 Electronic Transmissions.



          (a) Authorization. Subject to the provisions of Section 9.2(a), each of Agent,
Lenders, each Credit Party and each of their Related Persons, is authorized (but not required) to
transmit, post or otherwise make or communicate, in its sole discretion, Electronic Transmissions
in connection with any Loan Document and the transactions contemplated therein. Each Credit Party
and each Secured Party hereto acknowledges and agrees that the use of Electronic Transmissions is
not necessarily secure and that there are risks associated with such use, including risks of
interception, disclosure and abuse and each indicates it assumes and accepts such risks by hereby
authorizing the transmission of Electronic Transmissions.




          (b) Signatures. Subject to the provisions of Section 9.2(a), (i)(A) no posting to any
E-System shall be denied legal effect merely because it is made electronically, (B) each
E-Signature on any such posting shall be deemed sufficient to satisfy any requirement for a
“signature” and (C) each such posting shall be deemed sufficient to satisfy any requirement for a
“writing” or a “record”, in each case including pursuant to any Loan Document, any applicable
provision of any UCC, the federal Uniform Electronic Transactions Act, the Electronic Signatures in
Global and National Commerce Act and any substantive or procedural Requirement of Law governing
such subject matter, (ii) each such posting that is not readily capable of bearing either a
signature or a reproduction of a signature may be signed, and shall be deemed signed, by attaching
to, or logically associating with such posting, an E-Signature, upon which




68









 







Agent, each Secured
Party and each Credit Party, provided that it is acting in good faith, may rely and assume the
authenticity thereof, (iii) each such posting containing a signature, a reproduction of a signature
or an E-Signature shall, for all intents and purposes, have the same effect and weight as a signed
paper original and (iv) each party hereto or beneficiary hereof agrees not to contest the validity
or enforceability of any posting on any E-System or E-Signature on any such posting under the
provisions of any applicable Requirement of Law requiring certain documents to be in writing or
signed; provided, however, that nothing herein shall limit such party’s or
beneficiary’s right to contest whether any posting to any E-System or E-Signature has been altered
after transmission.




          (c) Separate Agreements. All uses of an E-System shall be governed by and subject to,
in addition to Section 9.2 and this Section 9.3, separate terms and conditions posted or referenced
in such E-System and related Contractual Obligations executed by Agent and Credit Parties in
connection with the use of such E-System.




          (d) LIMITATION OF LIABILITY. ALL E-SYSTEMS AND ELECTRONIC TRANSMISSIONS SHALL BE
PROVIDED “AS IS” AND “AS AVAILABLE”. NONE OF AGENT, ANY LENDER OR ANY OF THEIR RELATED PERSONS
WARRANTS THE ACCURACY, ADEQUACY OR COMPLETENESS OF ANY E-SYSTEMS OR ELECTRONIC TRANSMISSION AND
DISCLAIMS ALL LIABILITY FOR ERRORS OR OMISSIONS THEREIN. NO WARRANTY OF ANY KIND IS MADE BY AGENT,
ANY LENDER OR ANY OF THEIR RELATED PERSONS IN CONNECTION WITH ANY E-SYSTEMS OR ELECTRONIC
COMMUNICATION, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT OF THIRD-
PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS. Each Borrower, each other Credit
Party executing this Agreement and each Secured Party agrees that Agent has no responsibility for
maintaining or providing any equipment, software, services or any testing required in connection
with any Electronic Transmission or otherwise required for any E-System.




     9.4 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. No course of dealing between any Credit
Party, any Affiliate of any Credit Party, the Agent or any Lender shall be effective to amend,
modify or discharge any provision of this Agreement or any of the other Loan Documents.



     9.5 Costs and Expenses. Any action taken by any Credit Party under or with respect to
any Loan Document, even if required under any Loan Document or at the request of Agent or Required
Lenders, shall be at the expense of such Credit Party, and neither Agent nor any Secured Party
shall be required under any Loan Document to reimburse any Credit Party or any Subsidiary of any
Credit Party therefor except as expressly provided therein. In addition, the Borrowers agree to
pay or reimburse upon



69









 







demand (a) the Agent for all reasonable out-of-pocket costs and expenses
incurred by it or any of its Related Persons in connection with the investigation, development,
preparation, negotiation, syndication, execution, interpretation or administration of, any
modification of any term of or termination of, any Loan Document, any commitment or proposal letter
therefor, any other document prepared in connection therewith or the consummation and
administration of any transaction contemplated therein, in each case including Attorney Costs to
the Agent, (b) the Agent for all reasonable costs and expenses incurred by it or any of its Related
Persons in connection with internal audit reviews, field examinations and Collateral examinations
(which shall be reimbursed, in addition to the out-of-pocket costs and expenses of such examiners,
at the per diem rate per individual regularly charged by the Agent for its examiners), (c) each of
the Agent, its Related Persons, and L/C Issuer for all costs and expenses incurred in connection
with (i) any refinancing or restructuring of the credit arrangements provided hereunder in the
nature of a “work-out”, (ii) the enforcement or preservation of any right or remedy under any Loan
Document, any Obligation, with respect to the Collateral or any other related right or remedy or
(iii) the commencement, defense, conduct of, intervention in, or the taking of any other action
with respect to, any proceeding (including any bankruptcy or insolvency proceeding) related to any
Credit Party, any Subsidiary of any Credit Party, Loan Document, Obligation or Related Transaction
(or the response to and preparation for any subpoena or request for document production relating
thereto), including Attorney Costs and (d) fees and disbursements of Attorney Costs of one law firm
on behalf of all Lenders (other than Agent) incurred in connection with any of the matters referred
to in clause (c) above.



     9.6 Indemnity.



          (a) Each Credit Party agrees to indemnify, hold harmless and defend Agent, each Lender, each
L/C Issuer and each of their respective Related Persons (each such Person being an “Indemnitee”)
from and against all Liabilities (including brokerage commissions, fees and other compensation)
that may be imposed on, incurred by or asserted against any such Indemnitee in any matter relating
to or arising out of, in connection with or as a result of (i) any Loan Document, any Related
Agreement, any Obligation (or the repayment thereof), any Letter of Credit, the use or intended use
of the proceeds of any Loan or the use of any Letter of Credit or any securities filing of, or with
respect to, any Credit Party, (ii) any commitment letter, proposal letter or term sheet with any
Person or any Contractual Obligation, arrangement or understanding with any broker, finder or
consultant, in each case entered into by or on behalf of any Credit Party or any Affiliate of any
of them in connection with any of the foregoing and any Contractual Obligation entered into in
connection with any E-Systems or other Electronic Transmissions, (iii) any actual or prospective
investigation, litigation or other proceeding, whether or not brought by any such Indemnitee or any
of its Related Persons, any holders of securities or creditors (and including attorneys’ fees in
any case), whether or not any such Indemnitee, Related Person, holder or creditor is a party
thereto, and whether or not based on any securities or commercial law or regulation or any other
Requirement of Law or theory thereof, including common law, equity, contract, tort or otherwise or
(iv) any other act, event or transaction related, contemplated in or attendant to any of the
foregoing (collectively, the “Indemnified Matters”); provided, however, that no Credit



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Party shall
have any liability under this Section 9.6 to any Indemnitee with respect to any Indemnified Matter,
and no Indemnitee shall have any liability with respect to any Indemnified Matter other than (to
the extent otherwise liable), to the extent such liability has resulted primarily from the gross
negligence or willful misconduct of such Indemnitee, as determined by a court of competent
jurisdiction in a final non-appealable judgment or order. Furthermore, to the extent permitted by
law, each Borrower and each other Credit Party executing this Agreement waives and agrees not to
assert against any Indemnitee, and shall cause each other Credit Party to waive and not assert
against any Indemnitee, any right of contribution with respect to any Liabilities that may be
imposed on, incurred by or asserted against any Related Person.




          (b) Without limiting the foregoing, “Indemnified Matters” includes all Environmental
Liabilities, including those arising from, or otherwise involving, any property of any Credit Party
or any Related Person of any Credit Party or any actual, alleged or prospective damage to property
or natural resources or harm or injury alleged to have resulted from any Release of Hazardous
Materials on, upon or into such property or natural resource or any property on or contiguous to
any real property of any Credit Party or any Related Person or any Credit Party, whether or not,
with respect to any such Environmental Liabilities, any Indemnitee is a mortgagee pursuant to any
leasehold mortgage, a mortgagee in possession, the successor-in-interest to any Credit Party or any
Related Person of any Credit Party or the owner, lessee or operator of any property of any Related
Person through any foreclosure action, in each case except to the extent such
Environmental Liabilities (i) are incurred solely following foreclosure by Agent or following
Agent or any Lender having become the successor-in-interest to any Credit Party or any Related
Person of any Credit Party and (ii) are attributable solely to acts of such Indemnitee.




     9.7 Marshaling; Payments Set Aside. No Secured Party shall be under any obligation to
marshal any property in favor of any Credit Party or any other Person or against or in payment of
any Obligation. To the extent that any Secured Party receives a payment from a Borrower, from any
other Credit Party, from the proceeds of the Collateral, from the exercise of its rights of setoff,
any enforcement action or otherwise, and such payment is subsequently, in whole or in part,
invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a
trustee, receiver or any other party, then to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be
revived and continued in full force and effect as if such payment had not occurred.



     9.8 Successors and Assigns. The provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors and assigns;
provided that any assignment by any Lender shall be subject to the provisions of Section 9.9
hereof, and provided further that no Borrower may assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of the Agent and each Lender.



     9.9 Assignments and Participations; Binding Effect.



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          (a) This Agreement shall become effective when it shall have been executed by the Borrowers,
the other Credit Parties signatory hereto and the Agent and when the Agent shall have been notified
by each Lender and the initial L/C Issuer that such Lender or L/C Issuer has executed it.
Thereafter, it shall be binding upon and inure to the benefit of, but only to the benefit of, the
Borrowers, the other Credit Parties hereto (in each case except for Article VIII, except as
provided in Section 8.9(a)), the Agent, each Lender and L/C Issuer party hereto and, to the
extent provided in Section 8.11, each other Secured Party and, in each case, their respective
successors and permitted assigns. Except as expressly provided in any Loan Document (including in
Section 8.9), none of any Borrower, any other Credit Party, any L/C Issuer or the Agent shall have
the right to assign any rights or obligations hereunder or any interest herein.




          (b) Each Lender may sell, transfer, negotiate or assign (a “Sale”) all or a portion of its
rights and obligations hereunder (including all or a portion of its Commitments and its rights and
obligations with respect to Loans and Letters of Credit) to (i) any existing Lender or (ii) any
other Person acceptable (which acceptance shall not be unreasonably withheld or delayed) to the
Agent and, as long as no Event of Default is continuing, the Borrower Representative;
provided, however, that (x) such Sales must be
ratable among the obligations owing to and owed by such Lender with respect to the Revolving
Loans and (y) for each Loan, the aggregate outstanding principal amount (determined as of the
effective date of the applicable Assignment) of the Loans, Commitments and Letter of Credit
Obligations subject to any such Sale shall be in a minimum amount of $1,000,000, unless such Sale
is made to an existing Lender or an Affiliate of any existing Lender, is of the assignor’s
(together with its Affiliates) entire interest in such Facility or is made with the prior consent
of the Borrower Representative and the Agent.




          (c) The parties to each Sale made in reliance on clause (b) above (other than those described
in clause (e) or (f) below) shall execute and deliver to the Agent an Assignment via an electronic
settlement system designated by the Agent (or, if previously agreed with the Agent, via a manual
execution and delivery of the Assignment) evidencing such Sale, together with any existing Note
subject to such Sale (or any affidavit of loss therefor acceptable to the Agent), any tax forms
required to be delivered pursuant to Section 10.1 and payment of an assignment fee in the amount of
$3,500, provided that (1) if a Sale by a Lender is made to an Affiliate of such assigning Lender,
then no assignment fee shall be due in connection with such Sale, and (2) if a Sale by a Lender is
made to an assignee that is not an Affiliate of such assignor Lender, and concurrently to one or
more Affiliates of such Assignee, then only one assignment fee of $3,500 shall be due in connection
with such Sale. Upon receipt of all the foregoing, and conditioned upon such receipt and, if such
Assignment is made in accordance with Section 9.9(b)(iii), upon the Agent (and the Borrowers, if
applicable) consenting to such Assignment (if required), from and after the effective date
specified in such Assignment, the Agent shall record or cause to be recorded in the Register the
information contained in such Assignment.




          (d) Subject to the recording of an Assignment by the Agent in the Register pursuant to Section
1.4(b), (i) the assignee thereunder shall become a party




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hereto and, to the extent that rights and
obligations under the Loan Documents have been assigned to such assignee pursuant to such
Assignment, shall have the rights and obligations of a Lender, (ii) any applicable Note shall be
transferred to such assignee through such entry and (iii) the assignor thereunder shall, to the
extent that rights and obligations under this Agreement have been assigned by it pursuant to such
Assignment, relinquish its rights (except for those surviving the termination of the Commitments
and the payment in full of the Obligations) and be released from its obligations under the Loan
Documents, other than those relating to events or circumstances occurring prior to such assignment
(and, in the case of an Assignment covering all or the remaining portion of an assigning Lender’s
rights and obligations under the Loan Documents, such Lender shall cease to be a party hereto).




          (e) In addition to the other rights provided in this Section 9.9, each Lender may grant a
security interest in, or otherwise assign as collateral, any of its rights under this Agreement,
whether now owned or hereafter acquired (including rights to payments of principal or interest on
the Loans), to (A) any federal reserve bank (pursuant to Regulation A of the Federal Reserve
Board), without notice to the Agent or (B) any holder of, or trustee for the benefit of the holders
of, such Lender’s Indebtedness or
equity securities, by notice to the Agent; provided, however, that no such
holder or trustee, whether because of such grant or assignment or any foreclosure thereon (unless
such foreclosure is made through an assignment in accordance with clause (b) above), shall be
entitled to any rights of such Lender hereunder and no such Lender shall be relieved of any of its
obligations hereunder.




          (f) In addition to the other rights provided in this Section 9.9, each Lender may, (x) with
notice to the Agent, grant to an SPV the option to make all or any part of any Loan that such
Lender would otherwise be required to make hereunder (and the exercise of such option by such SPV
and the making of Loans pursuant thereto shall satisfy the obligation of such Lender to make such
Loans hereunder) and such SPV may assign to such Lender the right to receive payment with respect
to any Obligation and (y) without notice to or consent from the Agent or the Borrowers, sell
participations to one or more Persons in or to all or a portion of its rights and obligations under
the Loan Documents (including all its rights and obligations with respect to the Revolving Loans
and Letters of Credit); provided, however, that, whether as a result of any term of
any Loan Document or of such grant or participation, (i) no such SPV or participant shall have a
commitment, or be deemed to have made an offer to commit, to make Loans hereunder, and, except as
provided in the applicable option agreement, none shall be liable for any obligation of such Lender
hereunder, (ii) such Lender’s rights and obligations, and the rights and obligations of the Credit
Parties and the Secured Parties towards such Lender, under any Loan Document shall remain unchanged
and each other party hereto shall continue to deal solely with such Lender, which shall remain the
holder of the Obligations in the Register, except that (A) each such participant and SPV shall be
entitled to the benefit of Article X, but, with respect to Section 10.1, only to the extent
such participant or SPV delivers the tax forms such Lender is required to collect pursuant to
subsection 10.1(f) and then only to the extent of any amount to which such Lender would be entitled
in the absence of any such grant or participation and (B) each such SPV may receive other payments
that would otherwise be made to such Lender with respect to




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Loans funded by such SPV to the extent
provided in the applicable option agreement and set forth in a notice provided to the Agent by such
SPV and such Lender, provided, however, that in no case (including pursuant to
clause (A) or (B) above) shall an SPV or participant have the right to enforce any of the terms of
any Loan Document, and (iii) the consent of such SPV or participant shall not be required (either
directly, as a restraint on such Lender’s ability to consent hereunder or otherwise) for any
amendments, waivers or consents with respect to any Loan Document or to exercise or refrain from
exercising any powers or rights such Lender may have under or in respect of the Loan Documents
(including the right to enforce or direct enforcement of the Obligations), except for those
described in clauses (ii) and (iii) of subsection 9.1(a) with respect to amounts, or dates fixed
for payment of amounts, to which such participant or SPV would otherwise be entitled and, in the
case of participants, except for those described in clause (vi) of subsection 9.1(a). No party
hereto shall institute (and each Borrower shall cause each other Credit Party not to institute)
against any SPV grantee of an option pursuant to this clause (f) any bankruptcy, reorganization,
insolvency, liquidation or similar proceeding, prior to the date that is one year and one day after
the payment in full of all outstanding commercial paper of such SPV; provided, however, that each
Lender having designated an SPV as such agrees to indemnify each Indemnitee against any Liability
that may be
incurred by, or asserted against, such Indemnitee as a result of failing to institute such
proceeding (including a failure to get reimbursed by such SPV for any such Liability). The
agreement in the preceding sentence shall survive the termination of the Commitments and the
payment in full of the Obligations.




     9.10 Confidentiality. Each Lender, L/C Issuer and the Agent agree to use all
reasonable efforts to maintain, in accordance with its customary practices, the confidentiality of
information obtained by it pursuant to any Loan Document and designated in writing by any Credit
Party as confidential (the “Confidential Information”) for a period of three (3) years following
the date on which this Agreement terminates in accordance with the terms hereof, except that such
information may be disclosed (i) with the Borrower Representative’s consent, (ii) to Related
Persons of such Lender, L/C Issuer or the Agent, as the case may be, or to any Person that any L/C
Issuer causes to issue Letters of Credit hereunder, that are advised of the confidential nature of
the Confidential Information and are instructed to keep the Confidential Information confidential,
(iii) to the extent the Confidential Information presently is or hereafter becomes available to
such Lender, L/C Issuer or the Agent, as the case may be, on a non-confidential basis from a source
other than any Credit Party, (iv) to the extent disclosure is required by applicable Requirements
of Law or other legal process or requested or demanded by any Governmental Authority, (v) to the
extent necessary or customary for inclusion in league table measurements or in any tombstone or
other advertising materials (and the Credit Parties consent to the publication of such tombstone or
other advertising materials by the Agent, any Lender, any L/C Issuer or any of their Related
Persons), (vi) (A) to the National Association of Insurance Commissioners or any similar
organization, any examiner or any nationally recognized rating agency or (B) otherwise to the
extent consisting of general portfolio information that does not identify borrowers, (vii) to
current or prospective assignees, SPVs (including the investors therein) or participants, direct or
contractual counterparties to any Secured Rate Contracts and to their respective Related Persons,
in each case to the extent such assignees, investors, participants,



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counterparties or Related
Persons agree to be bound by provisions substantially similar to the provisions of this Section
9.10 and (viii) in connection with the exercise of any remedy under any Loan Document. The Agent,
L/C Issuer and each Lender agrees that upon the expiration of the three (3) year period noted
above, the Agent, L/C Issuer or such Lender shall destroy or return to the Borrowers the
Confidential Information; provided, however that the Agent, L/C Issuer or such Lender shall
be permitted to retain a copy of the Confidential Information pursuant to its record retention
policy. The Agent, L/C Issuer and each Lender hereby agree to use commercially reasonable efforts
to notify the Borrower promptly upon the Agent, L/C Issuer or such Lender obtaining knowledge of
any unauthorized use or disclosure of the Confidential Information; provided, however that
the Agent, L/C Issuer or such Lender shall not be liable for any damages as a result of failing to
provide such notice. In the event of any conflict between the terms of this Section 9.10 and those
of any other Contractual Obligation entered into with any Credit Party (whether or not a Loan
Document), the terms of this Section 9.10 shall govern.


Each Credit Party consents to the publication by Agent or any Lender of advertising material
relating to the financing transactions contemplated by this Agreement using Borrowers’ or any other
Credit Party’s name, product photographs, logo or trademark. Agent or such Lender shall provide a
draft of any advertising material to Borrowers for review and comment prior to the publication
thereof.




     9.11 Set-off; Sharing of Payments.



          (a) Right of Setoff. Each of the Agent, each Lender, each L/C Issuer and each Control
Affiliate (including each branch office thereof) of any of them is hereby authorized, without
notice or demand (each of which is hereby waived by each Credit Party), at any time and from time
to time during the continuance of any Event of Default and to the fullest extent permitted by
applicable Requirements of Law, to set off and apply any and all deposits (whether general or
special, time or demand, provisional or final) at any time held and other Indebtedness, claims or
other obligations at any time owing by the Agent, such Lender, such L/C Issuer or any of their
respective Control Affiliates to or for the credit or the account of the Borrowers or any other
Credit Party against any Obligation of any Credit Party now or hereafter existing, whether or not
any demand was made under any Loan Document with respect to such Obligation and even though such
Obligation may be unmatured. Each of the Agent, each Lender and each L/C Issuer agrees promptly to
notify the Borrower Representative and the Agent after any such setoff and application made by such
Lender or its Control Affiliates; provided, however, that the failure to give such notice shall not
affect the validity of such setoff and application. The rights under this Section 9.11 are in
addition to any other rights and remedies (including other rights of setoff) that the Agent, the
Lenders, and the L/C Issuers, their Control Affiliates and the other Secured Parties may have.




          (b) Sharing of Payments, Etc. If any Lender, directly or through an Control Affiliate
or branch office thereof, obtains any payment of any Obligation of any Credit Party (whether
voluntary, involuntary or through the exercise of any right of setoff or the receipt of any
Collateral or “proceeds” (as defined under the applicable UCC) of Collateral) other than pursuant
to Article X and such payment exceeds the amount such




75









 







Lender would have been entitled to receive if
all payments had gone to, and been distributed by, the Agent in accordance with the provisions of
the Loan Documents, such Lender shall purchase for cash from other Lenders such participations in
their Obligations as necessary for such Lender to share such excess payment with such Lenders to
ensure such payment is applied as though it had been received by the Agent and applied in
accordance with this Agreement (or, if such application would then be at the discretion of the
Borrowers, applied to repay the Obligations in accordance herewith); provided, however, that (a) if
such payment is rescinded or otherwise recovered from such Lender or L/C Issuer in whole or in
part, such purchase shall be rescinded and the purchase price therefor shall be returned to such
Lender or L/C Issuer without interest and (b) such Lender shall, to the fullest extent permitted by
applicable Requirements of Law, be able to exercise all its rights of payment (including the right
of setoff) with respect to such
participation as fully as if such Lender were the direct creditor of the applicable Credit
Party in the amount of such participation.




     9.12 Counterparts. This Agreement may be executed in any number of counterparts and
by different parties in separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same agreement. Signature
pages may be detached from multiple separate counterparts and attached to a single counterpart.
Delivery of an executed signature page of this Agreement by facsimile transmission or Electronic
Transmission shall be as effective as delivery of a manually executed counterpart hereof.



     9.13 Severability; Facsimile Signature. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder shall not in any way
affect or impair the legality or enforceability of the remaining provisions of this Agreement or
any instrument or agreement required hereunder. Any Loan Document, or other agreement, document or
instrument, delivered by facsimile transmission shall have the same force and effect as if the
original thereof had been delivered.



     9.14 Captions. The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.



     9.15 Independence of Provisions. The parties hereto acknowledge that this Agreement
and other Loan Documents may use several different limitations, tests or measurements to regulate
the same or similar matters, and that such limitations, tests and measurements are cumulative and
must each be performed, except as expressly stated to the contrary in this Agreement.



     9.16 Interpretation. This Agreement is the result of negotiations among and has been
reviewed by counsel to the Agent, each Lender and other parties hereto, and is the product of all
parties hereto. Accordingly, this Agreement and the other Loan Documents shall not be construed
against the Lenders or the Agent merely because of the Agent’s or Lenders’ involvement in the
preparation of such documents and agreements.



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     9.17 No Third Parties Benefited. This Agreement is made and entered into for the sole
protection and legal benefit of the Borrowers, the other Credit Parties, the Lenders, the L/C
Issuer, the Agent, and subject to the provisions of Section 8.11 hereof, each other Secured Party,
and their permitted successors and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in connection with,
this Agreement or any of the other Loan Documents. Neither the Agent nor any Lender shall have any
obligation to any Person not a party to this Agreement or the other Loan Documents.



     9.18 Governing Law and Jurisdiction.



          (a) Governing Law. The laws of the State of New York shall govern all matters arising
out of, in connection with or relating to this Agreement, including, without limitation, its
validity, interpretation, construction, performance and enforcement.




          (b) Submission to Jurisdiction. Any legal action or proceeding with respect to any
Loan Document may be brought in the courts of the State of New York located in the City of New
York, Borough of Manhattan, or of the United States of America for the Southern District of New
York and, by execution and delivery of this Agreement, each Borrower and each other Credit Party
executing this Agreement hereby accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The parties hereto (and, to the extent
set forth in any other Loan Document, each other Credit Party) hereby irrevocably waive any
objection, including any objection to the laying of venue or based on the grounds of forum non
conveniens, that any of them may now or hereafter have to the bringing of any such action or
proceeding in such jurisdictions.




          (c) Service of Process. Each Credit Party hereby irrevocably waives personal service
of any and all legal process, summons, notices and other documents and other service of process of
any kind and consents to such service in any suit, action or proceeding brought in the United
States of America with respect to or otherwise arising out of or in connection with any Loan
Document by any means permitted by applicable Requirements of Law, including by the mailing thereof
(by registered or certified mail, postage prepaid) to the address of Borrowers specified herein
(and shall be effective when such mailing shall be effective, as provided therein). Each Credit
Party agrees that a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.




          (d) Non-Exclusive Jurisdiction. Nothing contained in this Section 9.18 shall affect
the right of Agent or any Lender to serve process in any other manner permitted by applicable
Requirements of Law or commence legal proceedings or otherwise proceed against any Credit Party in
any other jurisdiction.




     9.19 Waiver of Jury Trial. THE PARTIES HERETO, TO THE EXTENT PERMITTED BY LAW, WAIVE
ALL RIGHT TO TRIAL BY JURY IN ANY



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ACTION, SUIT, OR PROCEEDING ARISING OUT OF, IN CONNECTION WITH OR
RELATING TO,
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ANY OTHER TRANSACTION CONTEMPLATED HEREBY AND
THEREBY. THIS WAIVER APPLIES TO ANY ACTION, SUIT OR PROCEEDING WHETHER SOUNDING IN TORT, CONTRACT
OR OTHERWISE.



     9.20 Entire Agreement; Release; Survival.



          (a) THE LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDE ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS RELATING TO THE SUBJECT MATTER THEREOF AND ANY PRIOR LETTER OF
INTEREST, COMMITMENT LETTER, CONFIDENTIALITY AND SIMILAR AGREEMENTS INVOLVING ANY CREDIT PARTY AND
ANY OF LENDER OR ANY L/C ISSUER OR ANY OF THEIR RESPECTIVE AFFILIATES RELATING TO A FINANCING OF
SUBSTANTIALLY SIMILAR FORM, PURPOSE OR EFFECT OTHER THAN THE FEE LETTER. IN THE EVENT OF ANY
CONFLICT BETWEEN THE TERMS OF THIS AGREEMENT AND ANY OTHER LOAN DOCUMENT, THE TERMS OF THIS
AGREEMENT SHALL GOVERN (UNLESS SUCH TERMS OF SUCH OTHER LOAN DOCUMENTS ARE NECESSARY TO COMPLY WITH
APPLICABLE REQUIREMENTS OF LAW, IN WHICH CASE SUCH TERMS SHALL GOVERN TO THE EXTENT NECESSARY TO
COMPLY THEREWITH).




          (b) Execution of this Agreement by the Credit Parties constitutes a full, complete and
irrevocable release of any and all claims which each Credit Party may have at law or in equity in
respect of all prior discussions and understandings, oral or written, relating to the subject
matter of this Agreement and the other Loan Documents. In no event shall any Indemnitee be liable
on any theory of liability for any special, indirect, consequential or punitive damages (including
any loss of profits, business or anticipated savings). Each Borrower and each other Credit Party
signatory hereto hereby waives, releases and agrees (and shall cause each other Credit Party to
waive, release and agree) not to sue upon any such claim for any special, indirect, consequential
or punitive damages, whether or not accrued and whether or not known or suspected to exist in its
favor.




          (c) (i) Any indemnification or other protection provided to any Indemnitee pursuant to Article
VIII (The Agent), Section 9.5 (Costs and Expenses), Section 9.6 (Indemnity), this Section 9.20, and
Article X (Taxes, Yield Protection and Illegality) of this Agreement, (ii) solely for the two (2)
year time period specified therein, the provisions of Section 9.10 of this Agreement and (iii) the
provisions of Section 8.1 of the Guaranty and Security Agreement, in each case, shall (x) survive
the termination of the Commitments and the payment in full of all other Obligations and (y) with
respect to clause (i) hereof, inure to the benefit of any Person that at any time held a right
thereunder (as an Indemnitee or otherwise) and, thereafter, its successors and permitted assigns.




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     9.21 Patriot Act. Each Lender that is subject to the Patriot Act hereby notifies the
Borrowers that pursuant to the requirements of the Patriot Act, it is required to obtain, verify
and record information that identifies each Borrower, which information includes the name and
address of each Borrower and other information that will allow such Lender to identify each
Borrower in accordance with the Patriot Act.



     9.22 Replacement of Lender. Within forty-five days after: (i) receipt by the
Borrower Representative of written notice and demand from any Lender (an “Affected Lender”) for
payment of additional costs as provided in Sections 10.1, 10.3 and/or 10.6; (ii) any default by a
Lender in its obligation to make Loans hereunder after all conditions thereto have been satisfied
or waived in accordance with the terms hereof, provided such default shall not have been cured; or
(iii) any failure by any Lender to consent to a requested amendment, waiver or modification to any
Loan Document in which Required Lenders have already consented to such amendment, waiver or
modification but the consent of each Lender (or each Lender directly affected thereby, as
applicable) is required with respect thereto, the Borrowers may, at their option, notify the Agent
and such Affected Lender (or such defaulting or non-consenting Lender, as the case may be) of the
Borrowers’ intention to obtain, at the Borrowers’ expense, a replacement Lender (“Replacement
Lender”) for such Affected Lender (or such defaulting or non-consenting Lender, as the case may
be), which Replacement Lender shall be reasonably satisfactory to the Agent. In the event the
Borrowers obtain a Replacement Lender within forty-five (45) days following notice of its intention
to do so, the Affected Lender (or defaulting or non-consenting Lender, as the case may be) shall
sell and assign its Loans and Commitments to such Replacement Lender, at par, provided that the
Borrowers have reimbursed such Affected Lender for its increased costs for which it is entitled to
reimbursement under this Agreement through the date of such sale and assignment. In the event that
a replaced Lender does not execute an Assignment pursuant to Section 9.9 within five (5) Business
Days after receipt by such replaced Lender of notice of replacement pursuant to this Section 9.22
and presentation to such replaced Lender of an Assignment evidencing an assignment pursuant to this
Section 9.22, the Borrowers shall be entitled (but not obligated) to execute such an Assignment on
behalf of such replaced Lender, and any such Assignment so executed by the Borrowers, the
Replacement Lender and the Agent, shall be effective for purposes of this Section 9.22 and Section
9.9. Upon any such assignment and payment and compliance with the other provisions of Section 9.9,
such replaced Lender shall no longer constitute a “Lender” for purposes hereof; provided, any
rights of such replaced Lender to indemnification hereunder shall survive as to such replaced
Lender.



     9.23 Joint and Several. The obligations of the Credit Parties hereunder and under the
other Loan Documents are joint and several.



     9.24 Creditor-Debtor Relationship. The relationship between Agent, each Lender and the L/C Issuer, on the one hand, and the
Credit Parties, on the other hand, is solely that of creditor and debtor. No Secured Party has any
fiduciary relationship or duty to any Credit Party arising out of or in connection with, and there
is no agency, tenancy or joint venture relationship between the Secured Parties and the Credit
Parties by virtue of, any Loan Document or any transaction contemplated therein.



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     9.25 Location of Closing. Each Lender acknowledges and agrees that it has delivered,
with the intent to be bound, its executed counterparts of this Agreement to the Agent, c/o King &
Spalding LLP, 1185 Avenue of the Americas, New York, New York 10036. Each Borrower acknowledges
and agrees that it has delivered, with the intent to be bound, its executed counterparts of this
Agreement and each other Loan Document, together with all other documents, instruments, opinions,
certificates and other items required under Section 2.1, to the Agent, c/o King & Spalding LLP,
1185 Avenue of the Americas, New York, New York 10036. All parties agree that closing of the
transactions contemplated by this Credit Agreement has occurred in New York.



ARTICLE X.

TAXES, YIELD PROTECTION AND ILLEGALITY




     10.1 Taxes.



          (a) Except as otherwise provided in this Section 10.1, each payment by any Credit Party under
any Loan Document shall be made free and clear of all present or future taxes, levies, imposts,
deductions, charges or withholdings and all liabilities with respect thereto (and without deduction
for any of them) (collectively, but excluding the taxes set forth in clauses (i) and (ii) below,
the “Taxes”) other than for (i) taxes measured by net income (including branch profits taxes) and
franchise taxes imposed in lieu of net income taxes, in each case imposed on any Secured Party as a
result of a present or former connection between such Person and the jurisdiction of the
Governmental Authority imposing such tax or any political subdivision or taxing authority thereof
or therein (other than such connection arising solely from any Secured Party having executed,
delivered or performed its obligations or received a payment under, or enforced, any Loan Document)
or (ii) taxes that are directly attributable to the failure (other than as a result of a change in
any Requirement of Law) by Agent or any Lender to deliver the documentation required to be
delivered pursuant to clause (f) below.




          (b) If any Taxes shall be required by law to be deducted from or in respect of any amount
payable under any Loan Document to any Secured Party (i) such amount shall be increased as
necessary to ensure that, after all required deductions for Taxes are made (including deductions
applicable to any increases to any amount under this Section 10.1), such Secured Party receives the
amount it would have received had no
such deductions been made, (ii) the relevant Credit Party shall make such deductions, (iii)
the relevant Credit Party shall timely pay the full amount deducted to the relevant taxing
authority or other authority in accordance with applicable Requirements of Law and (iv) within 30
days after such payment is made, the relevant Credit Party shall deliver to the Agent an original
or certified copy of a receipt evidencing such payment; provided, however, that no such increase
shall be made with respect to, and no Credit Party shall be required to indemnify any Secured Party
pursuant to clause (d) below for, withholding taxes to the extent that the obligation to withhold
amounts existed on the date that such Person became a Secured Party under this Agreement in the
capacity under which such Person makes a claim under this clause (b), except in each case to the
extent such Person is a direct or indirect assignee (other than pursuant to Section 9.22) of any
other Secured




80









 







Party that was entitled, at the time the assignment to such Person became effective,
to receive additional amounts under this clause (b).




          (c) In addition, Borrowers agree to pay, and authorize the Agent to pay in their name, any
stamp, documentary, excise or property tax, charges or similar levies imposed by any applicable
Requirement of Law or Governmental Authority and all Liabilities with respect thereto (including by
reason of any delay in payment thereof), in each case arising from the execution, delivery or
registration of, or otherwise with respect to, any Loan Document or any transaction contemplated
therein (collectively, “Other Taxes”). The Swingline Lender may, without any need for notice,
demand or consent from the Borrowers, by making funds available to the Agent in the amount equal to
any such payment, make a Swing Loan to the Borrowers in such amount, the proceeds of which shall be
used by the Agent in whole to make such payment. Within 30 days after the date of any payment of
Taxes or Other Taxes by any Credit Party, the Borrowers shall furnish to the Agent, at its address
referred to in Section 9.2, the original or a certified copy of a receipt evidencing payment
thereof.




          (d) Borrowers shall reimburse and indemnify, within 30 days after receipt of demand therefor
(with copy to the Agent), each Secured Party for all Taxes and Other Taxes (including any Taxes and
Other Taxes imposed by any jurisdiction on amounts payable under this Section 10.1) paid by such
Secured Party and any Liabilities arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. A certificate of the Secured Party (or of
the Agent on behalf of such Secured Party) claiming any compensation under this clause (d), setting
forth the amounts to be paid thereunder and delivered to the Borrower Representative with copy to
the Agent, shall be conclusive, binding and final for all purposes, absent manifest error. In
determining such amount, the Agent and such Secured Party may use any reasonable averaging and
attribution methods.




          (e) Any Lender claiming any additional amounts payable pursuant to this Section 10.1 shall use
its reasonable efforts (consistent with its internal policies and Requirements of Law) to change
the jurisdiction of its lending office if such a change would reduce any such additional amounts
(or any similar amount that may thereafter accrue) and would not, in the sole determination of such
Lender, be otherwise disadvantageous to such Lender.




          (f) (i) Each Non-U.S. Lender Party that, at any of the following times, is entitled to an
exemption from United States withholding tax or, after a change in any Requirement of Law, is
subject to such withholding tax at a reduced rate under an applicable tax treaty, shall (w) on or
prior to the date such Non-U.S. Lender Party becomes a “Non-U.S. Lender Party” hereunder, (x) on or
prior to the date on which any such form or certification expires or becomes obsolete, (y) after
the occurrence of any event requiring a change in the most recent form or certification previously
delivered by it pursuant to this clause (i) and (z) from time to time if requested by the Borrower
Representative or the Agent (or, in the case of a participant or SPV, the relevant Lender), provide
the Agent and the Borrower Representative (or, in the case of a participant or SPV, the relevant
Lender) with two completed originals of each of the following, as




81









 







applicable: (A) Forms W-8ECI
(claiming exemption from U.S. withholding tax because the income is effectively connected with a
U.S. trade or business), W-8BEN (claiming exemption from, or a reduction of, U.S. withholding tax
under an income tax treaty) and/or W-8IMY or any successor forms, (B) in the case of a Non-U.S.
Lender Party claiming exemption under Sections 871(h) or 881(c) of the Code, Form W-8BEN (claiming
exemption from U.S. withholding tax under the portfolio interest exemption) or any successor form
and a certificate in form and substance acceptable to the Agent that such Non-U.S. Lender Party is
not (1) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (2) a “10 percent
shareholder” of the Borrowers within the meaning of Section 881(c)(3)(B) of the Code or (3) a
“controlled foreign corporation” described in Section 881(c)(3)(C) of the Code or (C) any other
applicable document prescribed by the IRS certifying as to the entitlement of such Non-U.S. Lender
Party to such exemption from United States withholding tax or reduced rate with respect to all
payments to be made to such Non-U.S. Lender Party under the Loan Documents. Unless the Borrower
Representative and the Agent have received forms or other documents satisfactory to them indicating
that payments under any Loan Document to or for a Non-U.S. Lender Party are not subject to United
States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty,
the Credit Parties and the Agent shall withhold amounts required to be withheld by applicable
Requirements of Law from such payments at the applicable statutory rate.




          (ii) Each U.S. Lender Party shall (A) on or prior to the date such U.S. Lender Party becomes a
“U.S. Lender Party” hereunder, (B) on or prior to the date on which any such form or certification
expires or becomes obsolete, (C) after the occurrence of any event requiring a change in the most
recent form or certification previously delivered by it pursuant to this clause (f) and (D) from
time to time if requested by the Borrower Representative or the Agent (or, in the case of a
participant or SPV, the relevant Lender), provide the Agent and the Borrower Representative (or, in
the case of a participant or SPV, the relevant Lender) with two completed originals of Form W-9
(certifying that such U.S. Lender Party is entitled to an exemption from U.S. backup withholding
tax) or any successor form.




          (iii) Each Lender having sold a participation in any of its Obligations or identified an SPV
as such to the Agent shall collect from such participant or SPV the documents described in this
clause (f) and provide them to the Agent.




     10.2 Illegality. If after the date hereof any Lender shall determine that the
introduction of any Requirement of Law, or any change in any Requirement of Law or in the
interpretation or administration thereof, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for any Lender or its Lending Office to
make LIBOR Rate Loans, then, on notice thereof by such Lender to the Borrowers through the Agent,
the obligation of that Lender to make LIBOR Rate Loans shall be suspended until such Lender shall
have notified the Agent and the Borrower Representative that the circumstances giving rise to such
determination no longer exists.



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          (a) Subject to clause (c) below, if any Lender shall determine that it is unlawful to maintain
any LIBOR Rate Loan, the Borrowers shall prepay in full all LIBOR Rate Loans of such Lender then
outstanding, together with interest accrued thereon, either on the last day of the Interest Period
thereof if such Lender may lawfully continue to maintain such LIBOR Rate Loans to such day, or
immediately, if such Lender may not lawfully continue to maintain such LIBOR Rate Loans, together
with any amounts required to be paid in connection therewith pursuant to Section 10.4.




          (b) If the obligation of any Lender to make or maintain LIBOR Rate Loans has been terminated,
the Borrowers may elect, by giving notice to such Lender through the Agent, that all Loans which
would otherwise be made by any such Lender as LIBOR Rate Loans shall be instead Base Rate Loans.




          (c) Before giving any notice to the Agent pursuant to this Section 10.2, the affected Lender
shall designate a different Lending Office with respect to its LIBOR Rate Loans if such designation
will avoid the need for giving such notice or making such demand and will not, in the judgment of
the Lender, be illegal or otherwise disadvantageous to the Lender.




     10.3 Increased Costs and Reduction of Return.



          (a) If any Lender or L/C Issuer shall determine that, due to either (i) the introduction of,
or any change in, or in the interpretation of, any law or regulation or (ii) the compliance with
any guideline or request from any central bank or other Governmental Authority (whether or not
having the force of law), in the case of either clause (i) or (ii) subsequent to the date hereof,
there shall be any increase in the cost to such Lender or L/C Issuer of agreeing to make or making,
funding or maintaining any LIBOR Rate Loans or of issuing or maintain any Letter of Credit, then
the Borrowers shall be liable for, and shall from time to time, within thirty (30) days of demand
therefor by such Lender or L/C Issuer (with a copy of such demand to the Agent), pay to the Agent
for the account of such Lender or L/C Issuer, additional amounts as are sufficient to compensate
such Lender or L/C Issuer for such increased costs; provided, that the Borrowers shall not be
required to compensate any Lender or L/C Issuer pursuant to this Section for any increased costs
incurred more than 180 days prior to the date that such
Lender or L/C Issuer notifies the Borrower Representative, in writing of the increased costs
and of such Lender’s or L/C Issuer’s intention to claim compensation thereof; provided, further,
that if the circumstance giving rise to such increased costs is retroactive, then the 180-day
period referred to above shall be extended to include the period of retroactive effect thereof.




          (b) If any Lender or L/C Issuer shall have determined that:




               (i) the introduction of any Capital Adequacy Regulation;



               (ii) any change in any Capital Adequacy Regulation;



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               (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by
any central bank or other Governmental Authority charged with the interpretation or administration
thereof; or



               (iv) compliance by such Lender or L/C Issuer (or its Lending Office) or any entity controlling
the Lender or L/C Issuer pursuant to the order of any Governmental Authority issued after the date
hereof, with any Capital Adequacy Regulation;


affects the amount of capital required or expected to be maintained by such Lender or L/C Issuer or
any entity controlling such Lender or L/C Issuer and (taking into consideration such Lender’s or
such entities’ policies with respect to capital adequacy and such Lender’s or L/C Issuer’s desired
return on capital) determines that the amount of such capital is increased as a consequence of its
Commitment(s), loans, credits or obligations under this Agreement, then, within thirty (30) days of
demand of such Lender or L/C Issuer (with a copy to the Agent), the Borrowers shall pay to such
Lender or L/C Issuer, from time to time as specified by such Lender or L/C Issuer, additional
amounts sufficient to compensate such Lender or L/C Issuer (or the entity controlling the Lender or
L/C Issuer) for such increase; provided, that the Borrowers shall not be required to compensate
any Lender or L/C Issuer pursuant to this Section for any amounts incurred more than 180 days prior
to the date that such Lender or L/C Issuer notifies the Borrower Representative, in writing of the
amounts and of such Lender’s or L/C Issuer’s intention to claim compensation thereof; provided,
further, that if the event giving rise to such increase is retroactive, then the 180-day period
referred to above shall be extended to include the period of retroactive effect thereof.




     10.4 Funding Losses. The Borrowers agree to reimburse each Lender and to hold each
Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence
of:



          (a) the failure of the Borrowers to make any payment or mandatory prepayment of principal of
any LIBOR Rate Loan (including payments made after any acceleration thereof);




          (b) the failure of the Borrowers to borrow, continue or convert a Loan after the Borrower
Representative has given (or is deemed to have given) a Notice of Borrowing or a Notice of
Conversion/Continuation;




          (c) the failure of the Borrowers to make any prepayment after the Borrowers have given a
notice in accordance with Section 1.7;




          (d) the prepayment (including pursuant to Section 1.8) of a LIBOR Rate Loan on a day which is
not the last day of the Interest Period with respect thereto; or




          (e) the conversion pursuant to Section 1.6 of any LIBOR Rate Loan to a Base Rate Loan on a day
that is not the last day of the applicable Interest Period;




84









 







including any such loss or expense arising from the liquidation or reemployment of funds obtained
by it to maintain its LIBOR Rate Loans hereunder or from fees payable to terminate the deposits
from which such funds were obtained. Solely for purposes of calculating amounts payable by the
Borrowers to the Lenders under this Section 10.4 and under subsection 10.3(a): each LIBOR Rate Loan
made by a Lender (and each related reserve, special deposit or similar requirement) shall be
conclusively deemed to have been funded at the LIBOR used in determining the interest rate for such
LIBOR Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a
comparable amount and for a comparable period, whether or not such LIBOR Rate Loan is in fact so
funded.




     10.5 Inability to Determine Rates. If the Agent shall have determined in good faith
that for any reason adequate and reasonable means do not exist for ascertaining the LIBOR for any
requested Interest Period with respect to a proposed LIBOR Rate Loan, the Agent will forthwith give
notice of such determination to the Borrower Representative and each Lender. Thereafter, the
obligation of the Lenders to make or maintain LIBOR Rate Loans hereunder shall be suspended until
the Agent revokes such notice in writing. Upon receipt of such notice, the Borrower Representative
may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it. If
the Borrower Representative does not revoke such notice, the Lenders shall make, convert or
continue the Loans, as proposed by the Borrower Representative, in the amount specified in the
applicable notice submitted by the Borrower Representative, but such Loans shall be made, converted
or continued as Base Rate Loans.



     10.6 Reserves on LIBOR Rate Loans. The Borrowers shall pay to each Lender, as long as
such Lender shall be required under regulations of the Federal Reserve Board to maintain reserves
with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits
(currently known as “Eurocurrency liabilities”), additional costs on the unpaid principal amount of
each LIBOR Rate Loan equal to actual costs of such reserves allocated to such Loan by such Lender
(as determined by such Lender in good faith, which determination shall be conclusive absent
manifest error), payable on each date on which interest is payable on
such Loan provided the Borrower Representative shall have received at least fifteen (15) days’
prior written notice (with a copy to the Agent) of such additional interest from the Lender. If a
Lender fails to give notice fifteen (15) days prior to the relevant Interest Payment Date, such
additional interest shall be payable fifteen (15) days from receipt of such notice.



     10.7 Certificates of Lenders. Any Lender claiming reimbursement or compensation
pursuant to this Article X shall deliver to the Borrower Representative (with a copy to the Agent)
a certificate setting forth in reasonable detail the amount payable to such Lender hereunder and
such certificate shall be conclusive and binding on the Borrowers in the absence of manifest error.




ARTICLE XI.

DEFINITIONS




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     11.1 Defined Terms. The following terms are defined in the Sections or subsections
referenced opposite such terms:



	 	 	 
	“956 Impact”
	 	4.13(b)
	“Additional Lender”
	 	1.16(b)
	“Affected Lender”
	 	9.22
	“Akorn”
	 	Preamble
	“Akorn NJ”
	 	Preamble
	“Borrower” and “Borrowers”
	 	Preamble
	“Borrower Representative”
	 	1.17
	“Capital Expenditures”
	 	Exhibit 4.2(b)
	“Cash Management Systems”
	 	4.11
	“Closing Checklist”
	 	2.1(a)
	“Compliance Certificate”
	 	4.2(b)
	“Concentration Account”
	 	Exhibit 4.11
	“Concentration Limit”
	 	Exhibit 11.1(f)
	“Confidential Information”
	 	9.10
	“Disbursement Account” and “Disbursement Accounts” 
	 	Exhibit 4.11
	“EBITDA”
	 	Exhibit 4.2(b)
	“Eligible Accounts”
	 	Exhibit 11.1(f)
	“Eligible Inventory”
	 	Exhibit 11.1(g)
	“Event of Default”
	 	7.1
	“Exchange Act”
	 	3.26
	“FDA Laws”
	 	4.8(c)
	“Federal Healthcare Program Laws”
	 	3.23(c)
	“Fee Letter”
	 	1.9(a)
	“Fixed Charge Coverage Ratio”
	 	Exhibit 4.2(b
	“Guaranteed Obligations”
	 	12.1
	“Incremental Revolver”
	 	1.16(a)
	“Indemnified Matters”
	 	9.5
	“Indemnitee”
	 	9.5
	“L/C Reimbursement Agreement”
	 	1.1(c)
	“L/C Reimbursement Date”
	 	1.1(c)
	“L/C Request”
	 	1.1(c)
	“L/C Sublimit”
	 	1.1(c)
	“Lender”
	 	Preamble
	“Letter of Credit Fee”
	 	1.9(c)
	“Lock Box”
	 	Exhibit 4.11
	“Lock Box Account”
	 	Exhibit 4.11
	“Lock Box Bank”
	 	Exhibit 4.11
	“Maximum Lawful Rate”
	 	1.3(d)
	“Maximum Revolving Loan Balance”
	 	1.1(b)
	“Non-Funding Lender”
	 	1.11(b)
	“Notice of Conversion/Continuation”
	 	1.6(a)
	“Other Lender”
	 	1.11(e)
	“Other Taxes”
	 	10.1(b)
	“Permitted Liens”
	 	5.1






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	“Relationship Bank”
	 	Exhibit 4.11
	“Register”
	 	1.4(b)
	“Restricted Payments”
	 	5.11
	“Replacement Lender”
	 	9.22
	“Revolving Loan Commitment”
	 	1.1(b)
	“Revolving Loan”
	 	1.1(b)
	“Sale”
	 	9.9(a)
	“SEC”
	 	3.26
	“Settlement Date”
	 	1.11(b)
	“Taxes”
	 	10.1(a)
	“Unused Commitment Fee”
	 	1.9(b)





In addition to the terms defined elsewhere in this Agreement, the following terms have the
following meanings:




     “Account” means, as at any date of determination, any “account” (as such term is defined in
the UCC) of any Borrower or any of its Subsidiaries, including, without limitation, the unpaid
portion of the obligation of a customer of a Borrower or any of its Subsidiaries in respect of
Inventory purchased by and shipped to such customer and/or the rendition of services by a Borrower
or such Subsidiary, as stated on the respective invoice of a Borrower or such Subsidiary, net of
any credits, rebates or offsets owed to such customer.



     “Account Debtor” means the customer of a Borrower or any of its Subsidiaries who is obligated
on or under an Account.



     “Acquisition” means any transaction or series of related transactions for the purpose of or
resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets
of a Person, or of any business, product line or division of a Person, (b) the acquisition of in
excess of fifty percent (50%) of the Stock and Stock Equivalents of any Person or otherwise causing
any Person to become a Subsidiary of a Borrower, or (c) a merger or consolidation or any other
combination with another Person.



     “Affiliate” means, as to any Person, any other Person which, directly or indirectly, is in
control of, is controlled by, or is under common control with, such Person. A Person shall be
deemed to control another Person if the controlling Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract or otherwise. Without limitation, any
director, executive officer or beneficial owner of five percent (5%) or more of the Stock (either
directly or through ownership of Stock Equivalents) of a Person shall for the purposes of this
Agreement, be deemed to control the other Person. Notwithstanding the foregoing, neither the Agent
nor any Lender shall be deemed an “Affiliate” of any Credit Party or of any Subsidiary of any
Credit Party.



     “Agent” means GE Capital in its capacity as administrative agent for the Lenders hereunder,
and any successor administrative agent.




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     “Aggregate Revolving Loan Commitment” means the combined Revolving Loan Commitments of the
Lenders, which shall initially be in the amount of $25,000,000, as such amount may be reduced from
time to time pursuant to this Agreement.



     “Akorn Response” shall mean the response from Akorn, Inc. to the Parexel Report delivered to
Agent prior to closing.



     “Akorn Stock Plans” shall mean the (a) Amended and Restated Akorn, Inc. 1988 Incentive
Compensation Program, (b) Amended and Restated 1991 Akorn, Inc. Stock Option Plan for Directors,
(c) Amended and Restated Akorn, Inc. 2003 Stock Option Plan and (d) Amended and Restated Akorn,
Inc. Employee Stock Purchase Plan, each as amended, modified or restated and as in effect as of the
Closing Date.



     “ANDA” means Abbreviated New Drug Application with respect to applications to the FDA for
approval of certain generic drugs.



     “Applicable Margin” means:



     (a) for the period commencing on the Closing Date through April 14, 2009, (i) (x) if a Base
Rate Loan, four percent (4%) per annum and (y) if a LIBOR Rate Loan, five percent (5%) per annum;
and



     (b) thereafter, the Applicable Margin shall equal the applicable LIBOR margin or Base Rate
margin in effect from time to time determined as set forth below based upon the applicable Average
Unused Commitment Percentage for the most recently ended fiscal quarter of Akorn, Inc. pursuant to
the appropriate column under the table below:



	 	 	 	 	 	 	 	 	 
	Average Unused	 	 	 	 
	Commitment Percentage	 	LIBOR Margin	 	Base Rate Margin
	Less than 33.3333%
	 	 	4.75	%	 	 	3.75	%
	Greater than or equal to 33.3333% but
less than 66.6666%
	 	 	5.00	%	 	 	4.00	%
	Greater than or equal to 66.6666%
	 	 	5.25	%	 	 	4.25	%





The Applicable Margin shall be adjusted on the fifteenth day after the end of each fiscal quarter,
commencing on April 15, 2009, based upon the Average Unused Commitment Percentage for such fiscal
quarter. Notwithstanding anything herein to the contrary, Swing Loans may not be LIBOR Rate Loans.




     “Approved Bank” means any commercial bank that is (a) organized under the laws of the United
States, any state thereof or the District of Columbia, (b) “adequately capitalized” (as defined in
the regulations of its primary federal banking regulators) and (c) has Tier 1 capital (as defined
in such regulations) in excess of $250,000,000.



88









 





     “Assignment” means an assignment agreement entered into by a Lender, as assignor, and any
Person, as assignee, pursuant to the terms and provisions of Section 9.9 (with the consent of any
party whose consent is required by Section 9.9), accepted by the Agent, in substantially the form
of Exhibit  11.1(a) or any other form approved by the Agent.



     “Attorney Costs” means and includes all reasonable fees and disbursements of any law firm or
other external counsel.



     “Availability” means, as of any date of determination, the amount by which (a) the Maximum
Revolving Loan Balance, exceeds (b) the aggregate outstanding principal balance of the Revolving
Credit Exposure.



     “Average Unused Commitment Percentage” means, for any period, (a) the average outstanding
Revolving Credit Exposure for such period, divided by (b) the Aggregate Revolving Loan Commitment
as of the last day of such period.



     “Bankruptcy Code” means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101, et
seq.), as amended and in effect from time to time and the regulations issued from time to time
thereunder.



     “Base Rate” means, at any time, a rate per annum equal to the highest of (a) the rate last
quoted by the print version of The Wall Street Journal as the “base rate on corporate loans
posted by at least 75% of the nation’s largest banks” in the United States or, if the print version
of The Wall Street Journal ceases to quote such rate, the highest per annum interest rate
published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected
Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any
similar rate quoted therein (as determined by Agent) or any similar release by the Federal Reserve
Board (as determined by Agent), (b) the sum of 0.5% per annum and the Federal Funds Rate, and (c)
the sum of 1.0% and LIBOR determined on a daily basis for a one-month Interest Period at such time
(or if such day is not a Business Day, the immediately preceding Business Day); provided, however,
that Base Rate shall be subject to adjustment as contemplated in Section 1.3(e). Any change in the
Base Rate due to a change in any of the foregoing shall be effective on the effective date of such
change in the “bank prime loan” rate or the Federal Funds Rate.



     “Base Rate Loan” means a Loan that bears interest based on the Base Rate.



     “Benefit Plan” means any employee benefit plan as defined in Section 3(3) of ERISA (whether
governed by the laws of the United States or otherwise) to which any Credit Party incurs or
otherwise has any obligation or liability, contingent or otherwise.



     “Borrowing” means a borrowing hereunder consisting of Loans made to or for the benefit of the
Borrowers on the same day by the Lenders pursuant to Article I.



     “Borrowing Base” means, as of any date of determination by Agent, from time to time, an amount
equal to the sum at such time of (a) 85% of the book value of Eligible Accounts; plus (b) the least
of (1) 50% of the book value of Eligible Inventory valued at



89









 







the lower of cost (determined on an
average cost basis) or market, (2) 85% of the Net Orderly Liquidation Value of Eligible Inventory,
(3) an amount such that no more than 75% of the value of the Borrowing Base is attributable to
Eligible Inventory and (4) 75% of the Aggregate Revolving Loan Commitments; plus (c) 85% of the Net
Orderly Liquidation Value of Eligible Equipment; plus (d) 50% of the Distressed Value of Eligible
Real Estate, less (e) any Reserves established by Agent at such time.



     “Borrowing Base Certificate” means a certificate of the Borrowers, in substantially the form
of Exhibit 11.1(b) hereto, duly completed as of a date acceptable to the Agent in its sole
discretion.



     “Business Day” means any day other than a Saturday, Sunday or other day on which commercial
banks in New York, New York are authorized or required by law to close and, if the
applicable Business Day relates to any LIBOR Rate Loan, a day on which dealings are carried on in
the London interbank market.



     “Capital Adequacy Regulation” means any guideline, request or directive of any central bank or
other Governmental Authority, or any other law, rule or regulation, whether or not having the force
of law, in each case, regarding capital adequacy of any Lender or of any corporation controlling a
Lender.



     “Capital Lease” means any leasing or similar arrangement which, in accordance with GAAP, is
classified as a capital lease.



     “Capital Lease Obligations” means all monetary obligations of any Credit Party or any
Subsidiary of any Credit Party under any Capital Leases.



     “Cash Equivalents” means: (a) securities issued or fully guaranteed or insured by the United
States Government or any agency thereof having maturities of not more than six (6) months from the
date of acquisition; (b) certificates of deposit, time deposits, repurchase agreements, reverse
repurchase agreements, or bankers’ acceptances, having in each case a tenor of not more than six
(6) months, issued by any Lender, or by any U.S. commercial bank or any branch or agency of a
non-U.S. bank licensed to conduct business in the U.S. having combined capital and surplus of not
less than $250,000,000; (c) commercial paper of an issuer rated at least A-1 by Standard & Poor’s
Corporation or P-1 by Moody’s Investors Service Inc. and in either case having a tenor of not more
than three (3) months and (d) money market funds provided that substantially all of the assets of
such fund are comprised of securities of the type described in clauses (a) through (c).



     “Closing Date” means the date on which all conditions precedent set forth in Section 2.1 are
satisfied or waived by the Agent and all Lenders.



     “Code” means the Internal Revenue Code of 1986, and regulations promulgated thereunder.



     “Collateral” means all Property and interests in Property and proceeds thereof now owned or
hereafter acquired by any Credit Party, any of their respective Subsidiaries and any other Person
who has granted a Lien to the Agent, in or upon which a Lien now



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or hereafter exists in favor of
any Lender or the Agent for the benefit of the Agent, Lenders and other Secured Parties, whether
under this Agreement or under any other documents executed by any such Persons and delivered to the
Agent.



     “Collateral Access Agreement” means an agreement in form and substance reasonably satisfactory
to the Agent, executed by a landlord or mortgagee of real property on which Collateral is stored or
otherwise located, or a warehouseman, processor or other bailee of Inventory, Equipment or other
property owned by any Credit Party.



     “Collateral Documents” means, collectively, the Guaranty and Security Agreement, the
Mortgages, the Control Agreements, the Collateral Access Agreements and all other security
agreements, pledge agreements, patent and trademark security agreements, lease assignments,
guarantees and other similar agreements, and all amendments, restatements, modifications or
supplements thereof or thereto, by or between any one or more of any Credit Party, any of their
respective Subsidiaries or any other Person pledging or granting a lien on Collateral or
guaranteeing the payment and
performance of the Obligations, and any Lender or the Agent for the benefit of the Agent,
Lenders and other Secured Parties now or hereafter delivered to the Lenders or the Agent pursuant
to or in connection with the transactions contemplated hereby, and all financing statements (or
comparable documents now or hereafter filed in accordance with the UCC or comparable law) against
any such Person as debtor in favor of any Lender or the Agent for the benefit of the Agent, Lenders
and the other Secured Parties, as secured party, as any of the foregoing may be amended, restated
and/or modified from time to time.



     “Collection Account” means that certain account of Agent, account number 50271079 in the name
of Agent at Deutsche Bank Trust Company Americas in New York, New York, ABA No. 021-001-033, or
such other account as may be specified in writing by Agent as the “Collection Account.”



     “Commitment” means, for each Lender, its Revolving Loan Commitment.



     “Commitment Percentage” means, as to any Lender, the percentage equivalent of such Lender’s
Revolving Loan Commitment divided by the Aggregate Revolving Loan Commitment.



     “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent
or otherwise, of that Person: (a) with respect to any Indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance to the obligee of such liability
that such liability will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto; (b) with respect to any letter of credit issued for the account
of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (c)
under any Rate Contracts; (d) to make take-or-pay or similar payments if required regardless of
nonperformance by any other party or parties to an agreement; or (e) for the obligations of another
Person through any agreement to purchase, repurchase or otherwise acquire such obligation or any



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Property constituting security therefor, to provide funds for the payment or discharge of such
obligation or to maintain the solvency, financial condition or any balance sheet item or level of
income of another Person. The amount of any Contingent Obligation shall be equal to the amount of
the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the
maximum amount so guaranteed or supported.



     “Contractual Obligations” means, as to any Person, any provision of any security issued by
such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other
instrument, document or agreement to which such Person is a party or by which it or any of its
Property is bound.



     “Control Affiliate” means any Affiliate without giving effect to the third sentence of the
definition of Affiliate.



     “Control Agreement” means a tri-party deposit account, securities account or commodities
account control agreement by and among the applicable Credit Party, Agent
and the depository, securities intermediary or commodities intermediary, and each in form and
substance reasonably satisfactory in all respects to Agent and in any event providing to Agent
“control” of such deposit account, securities or commodities account within the meaning of Articles
8 and 9 of the UCC.



     “Conversion Date” means any date on which the Borrowers convert a Base Rate Loan to a LIBOR
Rate Loan or a LIBOR Rate Loan to a Base Rate Loan.



     “Copyrights” means all rights, title and interests (and all related IP Ancillary Rights)
arising under any Requirement of Law in or relating to copyrights and all mask work, database and
design rights, whether or not registered or published, all registrations and recordations thereof
and all applications in connection therewith.



     “Credit Parties” means each Borrower and each other Person (a) which executes this Agreement
as a “Credit Party,” (b) which executes a guaranty of the Obligations, (c) which grants a Lien on
all or substantially all of its assets to secure payment of the Obligations and (d) all of the
Stock of which is pledged to Agent for the benefit of the Secured Parties.



     “Default” means any event or circumstance which, with the giving of notice, the lapse of time,
or both, would (if not cured or otherwise remedied during such time) constitute an Event of
Default.



     “Disposition” means (a) the sale, lease, conveyance or other disposition of Property, other
than sales or other dispositions expressly permitted under subsection 5.2(a), 5.2(c) and 5.2(d),
and (b) the sale or transfer by a Borrower or any Subsidiary of a Borrower of any Stock or Stock
Equivalent issued by any Subsidiary of a Borrower and held by such transferor Person.



     “Distressed Value” shall mean, with respect to Eligible Real Estate, the “Go-Dark” liquidation
value of the Eligible Real Estate expected to be realized assuming a three to six month sale
thereof.



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     “Dollars”, “dollars” and “$” each mean lawful money of the United States of America.



     “Domestic Subsidiary” means, with respect to any Person, a Subsidiary of such Person, which
Subsidiary is incorporated or otherwise organized under the laws of a state of the United States of
America.



     “Electronic Transmission” means each document, instruction, authorization, file, information
and any other communication transmitted, posted or otherwise made or communicated by e-mail or
E-Fax, or otherwise to or from an E-System or other equivalent service.



     “Eligible Equipment” shall mean all machinery and equipment owned by the Borrowers and subject
to the most recent Equipment Appraisal delivered to the Agent.



     “Eligible Real Estate” shall mean the Real Estate owned by the Borrowers in fee simple located
in Decatur, Illinois consisting of two parcels located at 150 South Wyckles Road and 1222 West
Grand Avenue; provided, however, that (i) no Real Estate subject to any proceedings,
instituted or threatened, seeking condemnation or a taking by eminent domain or like process shall
constitute “Eligible Real Estate” hereunder and (ii) no Real Estate shall constitute “Eligible Real
Estate” hereunder until the Junior Mortgage (including Security Agreement, Assignment of Rents and
Leases, and Fixture Filing, dated March 21, 2001), executed by Akorn, Inc. to The Northern Trust
Company, filed on May 7, 2001 in the real estate records of Macon County, Illinois at Book 3056
Page 544 as document no. 1563431 (the “Northern Trust Mortgage”) has been terminated and each title
policy has been endorsed to remove the Northern Trust Mortgage as an exception thereto, all to the
satisfaction of Agent.



     “Environmental Laws” means all present and future Requirements of Law and Permits imposing
liability or standards of conduct for or relating to the regulation and protection of human health,
safety, the environment and natural resources, and including public notification requirements and
environmental transfer of ownership, notification or approval statutes.



     “Environmental Liabilities” means all Liabilities (including costs of Remedial Actions,
natural resource damages and costs and expenses of investigation and feasibility studies) that may
be imposed on, incurred by or asserted against any Credit Party or any Subsidiary of any Credit
Party as a result of, or related to, any claim, suit, action, investigation, proceeding or demand
by any Person, whether based in contract, tort, implied or express warranty, strict liability,
criminal or civil statute or common law or otherwise, arising under any Environmental Law or in
connection with any environmental, health or safety condition or with any Release and resulting
from the ownership, lease, sublease or other operation or occupation of property by any Credit
Party or any Subsidiary of any Credit Party, whether on, prior or after the date hereof.



     “Equipment Appraisal” means the appraisal of the Eligible Equipment of the Borrowers delivered
to the Agent specifying the Net Orderly Liquidation Value of such



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Eligible Equipment and performed
by an independent appraiser acceptable to the Agent; if more than one such Equipment Appraisal has
been conducted, then the Net Orderly Liquidation Value on any date for the Eligible Equipment of
the Borrowers shall be the value determined from the most recent Equipment Appraisal that is
conducted pursuant to this Agreement and the report of which is satisfactory to the Agent. The
initial Equipment Appraisal shall mean the appraisal of the Eligible Equipment dated as of
September 5, 2008 and performed by AccuVal Associates, Incorporated.



     “ERISA” means the Employee Retirement Income Security Act of 1974.



     “ERISA Affiliate” means, collectively, any Credit Party and any Person under common control or
treated as a single employer with, any Credit Party, within the meaning of Section 414(b), (c), (m)
or (o) of the Code.



     “ERISA Event” means any of the following: (a) a reportable event described in Section 4043(b)
of ERISA (or, unless the 30-day notice requirement has been duly waived under the applicable
regulations, Section 4043(c) of ERISA) with respect to a Title IV Plan; (b) the withdrawal of any
ERISA Affiliate from a Title IV 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; (c) the complete or
partial withdrawal of any ERISA Affiliate from any Multiemployer Plan; (d) with respect to any
Multiemployer Plan, the filing of a notice of reorganization, insolvency or termination (or
treatment of a plan amendment as termination) under Section 4041A of ERISA; (e) the filing of a
notice of intent to terminate a Title IV Plan (or treatment of a plan amendment as termination)
under Section 4041 of ERISA; (f) the institution of proceedings to terminate a Title IV Plan or
Multiemployer Plan by the PBGC; (g) the failure to make any required contribution to any Title IV
Plan or Multiemployer Plan when due; (h) the imposition of a lien under Section 412 or 430(k) of
the Code or Section 302, 303(k) or 4068 of ERISA on any property (or rights to property, whether
real or personal) of any ERISA Affiliate or a violation of Section 436 of the Code with respect to
a Title IV Plan; (i) the failure of a Benefit Plan or any trust thereunder intended to qualify for
tax exempt status under Section 401 or 501 of the Code or other Requirements of Law to qualify
thereunder; and (j) any other event or condition that might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Title IV Plan or Multiemployer Plan or for the imposition of any liability upon any
ERISA Affiliate under Title IV of ERISA other than for PBGC premiums due but not delinquent.



     “Event of Loss” means, with respect to any Property, any of the following: (a) any loss,
destruction or damage of such Property; (b) any pending or threatened (in writing) institution of
any proceedings for the condemnation or seizure of such Property or for the exercise of any right
of eminent domain; or (c) any actual condemnation, seizure or taking, by exercise of the power of
eminent domain or otherwise, of such Property, or confiscation of such Property or the requisition
of the use of such Property.



     “Excluded Equity Issuance” means the issuance of (a) Stock or Stock Equivalents by a
Wholly-Owned Subsidiary of a Borrower to a Borrower or another Wholly-Owned



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subsidiary of a
Borrower constituting an Investment permitted hereunder and (b) Stock or Stock Equivalents by a
Foreign Subsidiary of such Foreign Subsidiary to qualify directors where required pursuant to a
Requirement of Law or to satisfy other requirements of applicable law, in each instance, with
respect to the ownership of Stock of Foreign Subsidiaries.



     “E-Fax” means any system used to receive or transmit faxes electronically.



     “E-Signature” means the process of attaching to or logically associating with an Electronic
Transmission an electronic symbol, encryption, digital signature or process (including the name or
an abbreviation of the name of the party transmitting the Electronic Transmission) with the intent
to sign, authenticate or accept such Electronic Transmission.



     “E-System” means any electronic system, including Intralinks® and ClearPar® and any other
Internet or extranet-based site, whether such electronic system is owned, operated or hosted by
Agent, any of its Related Persons or any other Person, providing for access to data protected by
passcodes or other security system.



     “FDA” means the United States Food and Drug Administration and any successor thereto.



     “Federal Funds Rate” means, for any day, the rate per annum (rounded upward to the nearest
1/100th of 1%) equal to the weighted average of the rates on overnight Federal Funds transactions
with members of the Federal Reserve System arranged by Federal Funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next succeeding such day,
provided that if no such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to the Agent on such day on such
transactions as determined by the Agent in a commercially reasonable manner.



     “Federal Health Care Program” has the meaning specified in Section 1128B(f) of the SSA and
includes the Medicare, Medicaid and TRICARE programs.



     “Federal Reserve Board” means the Board of Governors of the Federal Reserve System, or any
entity succeeding to any of its principal functions.



     “Fees” means any and all fees payable to Agent or any Lender pursuant to the Agreement or any
of the other Loan Documents.



     “First Tier Foreign Subsidiary” means a Foreign Subsidiary more than fifty percent (50%) of
the voting Stock (directly or through ownership of Stock Equivalents) of which are held directly by
a Borrower or indirectly by a Borrower through one or more Domestic Subsidiaries.



     “Foreign Subsidiary” means, with respect to any Person, a Subsidiary of such Person, which
Subsidiary is not a Domestic Subsidiary.



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     “GAAP” means generally accepted accounting principles set forth from time to time in the
opinions and pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature and authority within the
accounting profession), which are applicable to the circumstances as of the date of determination.



     “Governmental Authority” means any nation or government, any state or other political
subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any
entity exercising executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.



     “Guaranty and Security Agreement” means that certain Guaranty and Security Agreement, dated as
of even date herewith, in form and substance reasonably acceptable to the Agent and Borrowers, made
by the Credit Parties in favor of the Agent, for the benefit of the Secured Parties, as the same
may be amended, restated and/or modified from time to time.



     “Hazardous Materials” means any substance, material or waste that is classified, regulated or
otherwise characterized under any Environmental Law as hazardous, toxic, a contaminant or a
pollutant or by other words of similar meaning or regulatory effect, including petroleum or any
fraction thereof, asbestos, polychlorinated biphenyls and radioactive substances.



     “HIPAA” means the Health Insurance Portability and Accountability Act of 1996.



     “Indebtedness” of any Person means, without duplication: (a) all indebtedness for borrowed
money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of Property
or services (other than trade payables entered into in the Ordinary Course of Business); (c) the
face amount of all letters of credit issued for the account of such Person and without duplication,
all drafts drawn thereunder and all reimbursement or payment obligations with respect to letters of
credit, surety bonds and other similar instruments issued by such Person; (d) all obligations
evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of Property, assets or businesses; (e) all indebtedness
created or arising under any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to Property acquired by the Person (even though the rights
and remedies of the seller or bank under such agreement in the event of default are limited to
repossession or sale of such Property); (f) all Capital Lease Obligations, the principal amount of
which shall be the principal component thereof determined in accordance with GAAP; (g) the
principal balance outstanding under any synthetic lease, off-balance sheet loan or similar off
balance sheet financing product; (h) all obligations, whether or not contingent, to purchase,
redeem, retire, defease or otherwise acquire for value any of its own Stock or Stock Equivalents
(or any Stock or Stock Equivalent of a direct or indirect parent entity thereof) prior to the date
that is 180



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days after the date set forth in clause (a) of the definition of Revolving Termination
Date, valued at, in the case of redeemable preferred Stock, the greater of the voluntary
liquidation preference and the involuntary liquidation preference of such Stock plus accrued and
unpaid dividends; (i) all indebtedness referred to in clauses (a) through (h) above secured by (or
for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in Property (including accounts and contracts rights) owned by such
Person, even though such Person has not assumed or become liable for the payment of such
indebtedness; and (j) all Contingent Obligations described in clause (i) of the definition thereof
in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through
(i) above.



     “Insolvency Proceeding” means (a) any case, action or proceeding before any court or other
Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation,
receivership, dissolution, winding-up or relief of debtors, or (b) any general
assignment for the benefit of creditors, composition, marshaling of assets for creditors, or
other, similar arrangement in respect of its creditors generally or any substantial portion of its
creditors; in each case in (a) and (b) above, undertaken under U.S. Federal, state or foreign law,
including the Bankruptcy Code.



     “Intellectual Property” means all rights, title and interests in or relating to intellectual
property (including, without limitation, industrial property) arising under any Requirement of Law
and all IP Ancillary Rights relating thereto, including all Copyrights, Patents, Trademarks,
Internet domain names, Trade Secrets and IP Licenses.



     “Interest Payment Date” means, (a) with respect to any LIBOR Rate Loan, the last day of each
Interest Period applicable to such Loan and (b) with respect to Base Rate Loans (including Swing
Loans) the first day of each calendar month.



     “Interest Period” means, with respect to any LIBOR Rate Loan, the period commencing on the
Business Day such Loan is disbursed or continued or on the Conversion Date on which a Base Rate
Loan is converted to the LIBOR Rate Loan and ending on the date one, two or three months
thereafter, as selected by the Borrower Representative in its Notice of Borrowing or Notice of
Conversion/Continuation; provided that:



     (a) if any Interest Period pertaining to a LIBOR Rate Loan would otherwise end on a day which
is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day
unless the result of such extension would be to carry such Interest Period into another calendar
month, in which event such Interest Period shall end on the immediately preceding Business Day;



     (b) any Interest Period pertaining to a LIBOR Rate Loan that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and



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     (c) no Interest Period for any Revolving Loan shall extend beyond the Revolving Termination
Date.



     “Inventory” means “inventory” (as such term is defined in the UCC) of any Borrower or any of
its Subsidiaries, including, but not limited to, all merchandise, raw materials, parts, supplies,
work-in-process and finished goods intended for sale, together with containers, packing, packaging,
shipping and similar materials related thereto, and including such inventory as is temporarily out
of a Borrower’s or such Subsidiary’s custody or possession, including inventory on the premises of
others and items in transit.



     “Inventory Appraisal” means the appraisal of the Eligible Inventory of the Borrowers delivered
to the Agent specifying the Net Orderly Liquidation Value of such Eligible Inventory and performed
by an independent appraiser acceptable to the Agent; if more than one such Inventory Appraisal has
been conducted, then the Net Orderly Liquidation Value on any date for the Eligible Inventory of
the Borrowers shall be the value determined from the most recent Inventory Appraisal that is
conducted pursuant to
this Agreement and the report of which is satisfactory to the Agent. The initial Inventory
Appraisal shall mean the appraisal of the Eligible Inventory dated as of July 31, 2008 and
performed by AccuVal Associates, Incorporated.



     “IP Ancillary Rights” means, with respect to any other Intellectual Property, as applicable,
all foreign counterparts to, and all divisionals, reversions, continuations, continuations-in-part,
reissues, reexaminations, renewals and extensions of, such Intellectual Property and all income,
royalties, proceeds and Liabilities at any time due or payable or asserted under or with respect to
any of the foregoing or otherwise with respect to such Intellectual Property, including all rights
to sue or recover at law or in equity for any past, present or future infringement,
misappropriation, dilution, violation or other impairment thereof, and, in each case, all rights to
obtain any other IP Ancillary Right.



     “IP License” means all Contractual Obligations (and all related IP Ancillary Rights), whether
written or oral, granting any right, title and interest in or relating to any Intellectual
Property.



     “IRS” means the Internal Revenue Service of the United States and any successor thereto.



     “Issue” means, with respect to any Letter of Credit, to issue, extend the expiration date of,
renew (including by failure to object to any automatic renewal on the last day such objection is
permitted), increase the face amount of, or reduce or eliminate any scheduled decrease in the face
amount of, such Letter of Credit, or to cause any Person to do any of the foregoing. The terms
“Issued” and “Issuance” have correlative meanings.



     “L/C Issuer” means GE Capital or a Subsidiary thereof or a bank or other legally authorized
Person selected by or acceptable to Agent in its sole discretion, in such Person’s capacity as an
issuer of Letters of Credit hereunder.



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     “L/C Reimbursement Obligation” means, for any Letter of Credit, the obligation of the
Borrowers to the L/C Issuer thereof, as and when matured, to pay all amounts drawn under such
Letter of Credit.



     “Lending Office” means, with respect to any Lender, the office or offices of such Lender
specified as its “Lending Office” beneath its name on the applicable signature page hereto, or such
other office or offices of such Lender as it may from time to time notify the Borrower
Representative and the Agent.



     “Letter of Credit” means documentary or standby letters of credit issued for the account of
the Borrowers by L/C Issuers, and bankers’ acceptances issued by a Borrower, for which Agent and
Lenders have incurred Letter of Credit Obligations.



     “Letter of Credit Obligations” means all outstanding obligations incurred by Agent and Lenders
at the request of the Borrowers or the Borrower Representative, whether direct or indirect,
contingent or otherwise, due or not due, in connection with the issuance of Letters of Credit by
L/C Issuers or the purchase of a participation as set forth
in Section 1.1(c) with respect to any Letter of Credit. The amount of such Letter of
Credit Obligations shall equal the maximum amount that may be payable by Agent and Lenders
thereupon or pursuant thereto.



     “Liabilities” means all claims, actions, suits, judgments, damages, losses, liability,
obligations, responsibilities, fines, penalties, sanctions, costs, fees, taxes, commissions,
charges, disbursements and expenses, in each case of any kind or nature (including interest accrued
thereon or as a result thereto and fees, charges and disbursements of financial, legal and other
advisors and consultants), whether joint or several, whether or not indirect, contingent,
consequential, actual, punitive, treble or otherwise.



     “Liquidity Factor” shall mean (i) total cash collections divided by (ii) (A) gross revenue
minus (B) dilution, calculated as of a trailing twelve month period, as determined by Agent based
on the most recent field examination obtained by Agent.



     “LIBOR” means, for each Interest Period, the offered rate per annum for deposits of Dollars
for the applicable Interest Period that appears on Reuters Screen LIBOR01 Page as of 11:00 A.M.
(London, England time) two (2) Business Days prior to the first day in such Interest Period. If no
such offered rate exists, such rate will be the rate of interest per annum, as determined by the
Agent (rounded upwards, if necessary, to the nearest 1/100 of 1%) at which deposits of Dollars in
immediately available funds are offered at 11:00 A.M. (London, England time) two (2) Business Days
prior to the first day in such Interest Period by major financial institutions reasonably
satisfactory to the Agent in the London interbank market for such Interest Period for the
applicable principal amount on such date of determination; provided, however, that in no event
shall LIBOR be less than 2.75% per annum; provided, further, however, that LIBOR shall be subject
to adjustment as contemplated in Section 1.3(e).



     “LIBOR Rate Loan” means a Loan that bears interest based on LIBOR.



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     “Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit
arrangement intended as security, encumbrance, lien (statutory or otherwise) for security or other
security interest of any kind or nature whatsoever (including those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the interest of a lessor
under a Capital Lease, any financing lease having substantially the same economic effect as any of
the foregoing, or the filing of any financing statement naming the owner of the asset to which such
lien relates as debtor, under the UCC or any comparable law) and any contingent or other agreement
to provide any of the foregoing, but not including the interest of a lessor under a lease which is
not a Capital Lease.



     “Loan” means an extension of credit by a Lender to the Borrowers pursuant to Article I hereof,
and may be a Base Rate Loan or a LIBOR Rate Loan.



     “Loan Documents” means this Agreement, the Notes, the Fee Letter, the Collateral Documents,
the Subordination Agreement and all documents delivered to the Agent and/or any Lender in
connection with any of the foregoing.



     “Margin Stock” means “margin stock” as such term is defined in Regulation T, U or X of the
Federal Reserve Board.



     “Material Adverse Effect” means: (a) a material adverse change in, or a material adverse
effect upon, the operations, business, Properties, condition (financial or otherwise) or prospects
of any Credit Party or the Credit Parties and the Subsidiaries taken as a whole; (b) a material
impairment of the ability of any Credit Party, any Subsidiary of any Credit Party or any other
Person (other than the Agent or Lenders) to perform in any material respect its obligations under
any Loan Document; or (c) a material adverse effect upon (i) the legality, validity, binding effect
or enforceability of any Loan Document, or (ii) the perfection or priority of any Lien granted to
the Lenders or to the Agent for the benefit of the Secured Parties under any of the Collateral
Documents.



     “Material Environmental Liabilities” means Environmental Liabilities exceeding $500,000 in the
aggregate.



     “MBL Exclusive Distribution Agreement” means that certain Exclusive Distribution Agreement
dated as of March 22, 2007 between Akorn and the University of Massachusetts, as represented by the
Massachusetts Biological Laboratories and as amended, modified or supplemented from time to time.



     “Mortgage” means any deed of trust, leasehold deed of trust, mortgage, leasehold mortgage,
deed to secure debt, leasehold deed to secure debt or other document creating a Lien on real
Property or any interest in real Property.



     “Multiemployer Plan” means any multiemployer plan, as defined in Section 4001(a)(3) of ERISA,
as to which any ERISA Affiliate incurs or otherwise has any obligation or liability, contingent or
otherwise.



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     “Net Issuance Proceeds” means, in respect of any issuance of debt or equity, cash proceeds
(including cash proceeds as and when received in respect of non-cash proceeds received or
receivable in connection with such issuance), net of underwriting discounts and reasonable
out-of-pocket costs and expenses paid or incurred in connection therewith in favor of any Person
not an Affiliate of a Borrower.



     “Net Orderly Liquidation Value,” with respect to (a) any Inventory of the Borrowers on any
date, means the orderly liquidation value of such Inventory expected to be realized at an orderly,
negotiated sale held within a reasonable period of time, net of all reasonable liquidation
expenses, as determined from the Inventory Appraisal and (b) any Eligible Equipment of the
Borrowers on any date, means the orderly liquidation value of such Eligible Equipment expected to
be realized at an orderly, negotiated sale held within a reasonable period of time, net of all
reasonable liquidation expenses, as determined from the Equipment Appraisal.



     “Net Proceeds” means proceeds in cash, checks or other cash equivalent financial instruments
(including Cash Equivalents) as and when received by the Person making a Disposition and insurance
proceeds received on account of an Event of Loss, net of: (a) in the event of a Disposition (i) the
direct costs relating to such Disposition excluding amounts payable to a Borrower or any Affiliate
of a Borrower, (ii) sale, use or other transaction taxes paid or payable as a result thereof, and
(iii) amounts required to be applied to repay principal, interest and prepayment premiums and
penalties on Indebtedness secured by a Lien on the asset which is the subject of such Disposition
and (b) in the event of an Event of Loss, (i) all money actually applied to repair or reconstruct
the damaged Property or Property affected by the condemnation or taking, (ii) all of the costs and
expenses reasonably incurred in connection with the collection of such proceeds, award or other
payments, and (iii) any amounts retained by or paid to parties having superior rights to such
proceeds, awards or other payments.



     “Non-U.S. Lender Party” means each of the Agent, each Lender, each L/C Issuer, each SPV and
each participant, in each case that is not a United States person under and as defined in Section
7701(a)(30) of the Code.



     “Note” means any Revolving Note or Swingline Note and “Notes” means all such Notes.



     “Notice of Borrowing” means a notice given by the Borrower Representative to the Agent
pursuant to Section 1.5, in substantially the form of Exhibit 11.1(c) hereto.



     “Obligations” means all Loans, and other Indebtedness, advances, debts, liabilities,
obligations, covenants and duties owing by any Credit Party to any Lender, the Agent, any L/C
Issuer, any Secured Swap Provider or any other Person required to be indemnified, that arises under
any Loan Document or any Secured Rate Contract, whether or not for the payment of money, whether
arising by reason of an extension of credit, loan, guaranty, indemnification or in any other
manner, whether direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and however acquired.



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     “Ordinary Course of Business” means, in respect of any transaction involving any Credit Party
or any Subsidiary of any Credit Party, the ordinary course of such Person’s business, as conducted
by any such Person in accordance with past practice or otherwise on a commercially reasonable basis
and undertaken by such Person in good faith and not for purposes of evading any covenant or
restriction in any Loan Document.



     “Organization Documents” means, (a) for any corporation, the certificate or articles of
incorporation, the bylaws, any certificate of determination or instrument relating to the rights of
preferred shareholders of such corporation, any shareholder rights agreement, (b) for any
partnership, the partnership agreement and, if applicable, certificate of limited partnership, (c)
for any limited liability company, the operating agreement and articles or certificate of formation
or (d) any other document setting forth the manner of election or duties of the officers,
directors, managers or other similar
persons, or the designation, amount or relative rights, limitations and preference of the
Stock of a Person.



     “Parexel” shall mean PAREXEL International LLC.



     “Parexel Report” shall mean the Compliance Assessment Report Executive Summary prepared by
Parexel with respect to its assessment of Akorn’s Decatur, IL sterile drug manufacturing operations
on October 6-10, 2008.



     “Patents” means all rights, title and interests (and all related IP Ancillary Rights) arising
under any Requirement of Law in or relating to letters patent and applications therefor.



     “Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, P.L. 107-56, as amended.



     “PBGC” means the United States Pension Benefit Guaranty Corporation or any successor thereto.



     “Pequot Capital” shall mean Pequot Capital Management, Inc. and any fund controlled or managed
by Pequot Capital Management, Inc.



     “Permits” means, with respect to any Person, any permit, approval, authorization, license,
registration, certificate, concession, grant, franchise, variance or permission from, and any other
Contractual Obligations with, any Governmental Authority, in each case whether or not having the
force of law and applicable to or binding upon such Person or any of its property or to which such
Person or any of its property is subject.



     “Person” means an individual, partnership, corporation, limited liability company, business
trust, joint stock company, trust, unincorporated association, joint venture or Governmental
Authority.



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     “Pledged Collateral” has the meaning specified in the Guaranty and Security Agreement and
shall include any other Collateral required to be delivered to Agent pursuant to the terms of any
Collateral Document.



     “Prior Indebtedness” means the Indebtedness and obligations specified on Schedule 11.1
hereto.



     “Property” means any interest in any kind of property or asset, whether real, personal or
mixed, and whether tangible or intangible.



     “Rate Contracts” means swap agreements (as such term is defined in Section 101 of the
Bankruptcy Code) and any other agreements or arrangements designed to provide protection against
fluctuations in interest or currency exchange rates.



     “Real Estate Appraisal” means the most recent appraisal of the Eligible Real Estate of the
Borrowers specifying the Distressed Value of such Eligible Real Estate and performed by an
independent appraiser acceptable to the Agent. The initial Real Estate Appraisals shall mean the
appraisals of the Eligible Real Estate dated as of August 29, 2008 and performed by Cushman &
Wakefield of Illinois, Inc.



     “Registrations” means authorizations, approvals, licenses, permits, certificates, or
exemptions issued by any Governmental Authority (including pre-market approval applications,
pre-market notifications, investigational device exemptions, product recertifications,
manufacturing approvals and authorizations, CE Marks, pricing and reimbursement approvals, labeling
approvals or their foreign equivalent) held by the Credit Parties or their Subsidiaries immediately
prior to the Closing Date, that are required for the research, development, manufacture,
distribution, marketing, storage, transportation, use and sale of the products of the Credit
Parties and their Subsidiaries.



     “Related Agreements” means the Subordinated Note Documents.



     “Related Persons” means, with respect to any Person, each Affiliate of such Person and each
director, officer, employee, agent, trustee, representative, attorney, accountant and each
insurance, environmental, legal, financial and other advisor (including those retained in
connection with the satisfaction or attempted satisfaction of any condition set forth in Article
II) and other consultants and agents of or to such Person or any of its Affiliates.



     “Related Transactions” means the transactions contemplated by the Related Agreements.



     “Releases” means any release, threatened release, spill, emission, leaking, pumping, pouring,
emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Material into or through the environment.



     “Remedial Action” means all actions required to (a) clean up, remove, treat or in any other
way address any Hazardous Material in the indoor or outdoor environment,
(b)



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prevent or minimize
any Release so that a Hazardous Material does not migrate or endanger or threaten to endanger
public health or welfare or the indoor or outdoor environment or (c) perform pre remedial studies
and investigations and post-remedial monitoring and care with respect to any Hazardous Material.



     “Required Lenders” means at any time (a) Lenders then holding more than fifty percent (50%) of
the Aggregate Revolving Loan Commitment then in effect, or (b) if the Aggregate Revolving Loan
Commitments have terminated, Lenders then having more than fifty percent (50%) of the sum of the
aggregate unpaid principal amount of Loans (other than Swing Loans) then outstanding, outstanding
Letter of Credit Obligations, amounts of participations in Swing Loans and the principal amount of
unparticipated portions of Swing Loans.



     “Requirement of Law” means, as to any Person, any law (statutory or common), ordinance,
treaty, rule, regulation, order, policy, other legal requirement or determination of an arbitrator
or of a Governmental Authority, in each case applicable to or binding upon such Person or any of
its Property or to which such Person or any of its Property is subject, including without
limitation the FDA Laws and the Federal Health Care Program Laws.



     “Reserves” means, with respect to the Borrowing Base (a) reserves established by Agent from
time to time against Eligible Accounts and Eligible Inventory pursuant to Exhibit 11.1(b),
and (b) such other reserves against Eligible Accounts, Eligible Inventory or Availability that
Agent may, in its reasonable credit judgment, establish from time to time. Without limiting the
generality of the foregoing, Reserves established with respect to past due credit balances,
dilution, rent and allowance for doubtful accounts and to ensure the payment of accrued interest
expenses or Indebtedness shall be deemed to be a reasonable exercise of Agent’s credit judgment,
provided the amount of any such Reserve shall be determined in the Agent’s reasonable credit
judgment.



     “Responsible Officer” means the chief executive officer, chief financial officer or the
president of a Borrower or Borrower Representative, as applicable, or any other officer having
substantially the same authority and responsibility; or, with respect to compliance with financial
covenants or delivery of financial information, the chief financial officer or the treasurer of a
Borrower or Borrower Representative, as applicable, or any other officer having substantially the
same authority and responsibility; or, with respect to Notices of Borrowing, Notices of
Conversion/Continuation, Swingline Requests and LC Requests, the controller.



     “Revolving Credit Exposure” means, as of any date, the aggregate principal amount of Revolving
Loans, Swing Loans and Letter of Credit Obligations outstanding on such date.



     “Revolving Lender” means each Lender with a Revolving Loan Commitment (or if the Revolving
Loan Commitments have terminated, who hold Revolving Loans or participations in Swing Loans and L/C
Reimbursement Obligations.)



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     “Revolving Note” means a promissory note of the Borrowers payable to the order of a Lender in
substantially the form of Exhibit 11.1(d) hereto, evidencing Indebtedness of the Borrowers
under the Revolving Loan Commitment of such Lender.



     “Revolving Termination Date” means the earlier to occur of: (a) January 7, 2013; and (b) the
date on which the Aggregate Revolving Loan Commitment shall terminate in accordance with the
provisions of this Agreement.



     “Secured Party” means the Agent, each Lender, each L/C Issuer, each other Indemnitee and each
other holder of any Obligation of a Credit Party.



     “Secured Rate Contract” means any Rate Contract between Borrower and the counterparty thereto,
which (a) has been provided or arranged by GE Capital or an
Affiliate of GE Capital, or (b) the Agent has acknowledged in writing constitutes a “Secured
Rate Contract” hereunder.



     “Secured Swap Provider” means (a) a Lender or an Affiliate of a Lender (or a Person who was a
Lender or an Affiliate of a Lender at the time of execution and delivery of a Rate Contract) who
has entered into a Secured Rate Contract with Borrower, or (b) a Person with whom Borrower has
entered into a Secured Rate Contract provided or arranged by GE Capital or an Affiliate of GE
Capital, and any assignee thereof.



     “Serum” shall mean Serum Institute of India, Ltd.



     “Solvent” means, with respect to any Person as of any date of determination, that, as of such
date, (a) the value of the assets of such Person (both at fair value and present fair saleable
value) is greater than the total amount of liabilities (including contingent and unliquidated
liabilities) of such Person, (b) such Person is able to pay all liabilities of such Person as such
liabilities mature and (c) such Person does not have unreasonably small capital. In computing the
amount of contingent or unliquidated liabilities at any time, such liabilities shall be computed at
the amount that, in light of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability.



     “SPV” means any special purpose funding vehicle identified as such in a writing by any Lender
to the Agent.



     “SSA” means the Social Security Act of 1935, codified at Title 42, Chapter 7, of the United
States Code.



     “Stock” means all shares of capital stock (whether denominated as common stock or preferred
stock), equity interests, beneficial, partnership or membership interests, joint venture interests,
participations or other ownership or profit interests in or equivalents (regardless of how
designated) of or in a Person (other than an individual), whether voting or non-voting.



     “Stock Equivalents” means all securities convertible into or exchangeable for Stock or any
other Stock Equivalent and all warrants, options or other rights to purchase,



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subscribe for or
otherwise acquire any Stock or any other Stock Equivalent, whether or not presently convertible,
exchangeable or exercisable.



     “Subordinated Indebtedness” means the Indebtedness of any Credit Party or any Subsidiary of
any Credit Party which is subordinated in right of payment to the Obligations, which shall be on
terms and conditions, including subordination provisions, acceptable to the Agent, including
without limitation the Indebtedness evidenced by the Subordinated Note.



     “Subordinated Lender” means the John N. Kapoor Trust dated September 20, 1989.



     “Subordinated Note Documents” means the Subordinated Note and all other documents, agreements
and instruments executed in connection therewith.



     “Subordinated Note” means that certain Subordinated Promissory Note dated July 28, 2008 in the
initial principal amount of $5,000,000 payable by Akorn in favor of the Subordinated Lender.



     “Subordination Agreement” means that certain Subordination Agreement dated as of even date
herewith by and among the Agent, the Credit Parties and the Subordinated Lenders, as the same may
be amended, restated and/or modified from time to time in accordance with the terms thereof.



     “Subsidiary” of a Person means any corporation, association, limited liability company,
partnership, joint venture or other business entity of which more than fifty percent (50%) of the
voting Stock (in the case of Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination
thereof.



     “Swingline Commitment” means $5,000,000.



     “Swingline Lender” means, each in its capacity as Swingline Lender hereunder, GE Capital or,
upon the resignation of GE Capital as Agent hereunder, any Lender (or Affiliate of any Lender) that
agrees, with the approval of the Agent (or, if there is no such successor Agent, the Required
Lenders) and the Borrower, to act as the Swingline Lender hereunder.



     “Swingline Note” means a promissory note of the Borrower payable to the order of the Swingline
Lender, in substantially the form of Exhibit 11.1(e), evidencing the Indebtedness of the
Borrower to the Swingline Lender resulting from the Swing Loans made to the Borrower by the
Swingline Lender.



     “Swingline Request” has the meaning specified in subsection 1.1(d)(ii).



     “Swing Loan” has the meaning specified in subsection 1.1(d)(i).



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     “Tax Affiliate” means, (a) each Borrower and its Subsidiaries and (b) any Affiliate of a
Borrower with which such Borrower files or is eligible to file consolidated, combined or unitary
tax returns.



     “Title IV Plan” means a pension plan subject to Title IV of ERISA, other than a Multiemployer
Plan, to which any ERISA Affiliate incurs or otherwise has any obligation or liability, contingent
or otherwise.



     “Trade Secrets” means all right, title and interest (and all related IP Ancillary Rights)
arising under any Requirement of Law in or relating to trade secrets.



     “Trademark” means all rights, title and interests (and all related IP Ancillary Rights)
arising under any Requirement of Law in or relating to trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers and, in each case, all goodwill
associated therewith, all registrations and recordations thereof and all applications in connection
therewith.



     “UCC” means the Uniform Commercial Code as in effect from time to time in the State of New
York.



     “United States” and “U.S.” each means the United States of America.



     “U.S. Lender Party” means each of the Agent, each Lender, each L/C Issuer, each SPV and each
participant, in each case that is a United States person under and as defined in Section
7701(a)(30) of the Code.



     “Wholly-Owned Subsidiary” means any Subsidiary in which (other than directors’ qualifying
shares required by law) one hundred percent (100%) of the Stock and Stock Equivalents, at the time
as of which any determination is being made, is owned, beneficially and of record, by any Credit
Party, or by one or more of the other Wholly-Owned Subsidiaries, or both.



     “Withdrawal Liabilities” means, at any time, any liability incurred (whether or not assessed)
by any ERISA Affiliate and not yet satisfied or paid in full at such time with respect to any
Multiemployer Plan pursuant to Section 4201 of ERISA.



     11.2 Other Interpretive Provisions.



          (a) Defined Terms. Unless otherwise specified herein or therein, all terms defined in
this Agreement or in any other Loan Document shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto. The meanings of defined terms
shall be equally applicable to the singular and plural forms of the defined terms. Terms
(including uncapitalized terms) not otherwise defined herein and that are defined in the UCC shall
have the meanings therein described.




          (b) The Agreement. The words “hereof”, “herein”, “hereunder” and words of similar
import when used in this Agreement or any other Loan Document shall




107









 







refer to this Agreement or such
other Loan Document as a whole and not to any particular provision of this Agreement or such other
Loan Document; and subsection, section, schedule and exhibit references are to this Agreement or
such other Loan Documents unless otherwise specified.




          (c) Certain Common Terms. The term “documents” includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings, however evidenced.
The term “including” is not limiting and means “including without limitation.”




          (d) Performance; Time. Whenever any performance obligation hereunder or under any
other Loan Document (other than a payment obligation) shall be stated to be due or required to be
satisfied on a day other than a Business Day, such performance shall be made or satisfied on the
next succeeding Business Day. In the computation of periods of time from a specified date to a
later specified date, the word “from” means “from and including”; the words “to” and “until” each
mean “to but excluding”, and the word “through” means “to and including.” If any provision of this
Agreement or any other Loan Document refers to any action taken or to be taken by any Person, or
which such Person is prohibited from taking, such provision shall be interpreted to encompass any
and all means, direct or indirect, of taking, or not taking, such action.




          (e) Contracts. Unless otherwise expressly provided herein or in any other Loan
Document, references to agreements and other contractual instruments, including this Agreement and
the other Loan Documents, shall be deemed to include all subsequent amendments, thereto,
restatements and substitutions thereof and other modifications and supplements thereto which are in
effect from time to time, but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document.




          (f) Laws. References to any statute or regulation are to be construed as including
all statutory and regulatory provisions related thereto or consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.




     11.3 Accounting Terms and Principles. All accounting determinations required to be
made pursuant hereto shall, unless expressly otherwise provided herein, be made in accordance with
GAAP. No change in the accounting principles used in the preparation of any financial statement
hereafter adopted by Borrowers shall be given effect for purposes of measuring compliance with any
provision of Article V or VI unless the Borrowers, the Agent and the Required Lenders agree to
modify such provisions to reflect such changes in GAAP and, unless such provisions are modified,
all financial statements, Compliance Certificates and similar documents provided hereunder shall be
provided together with a reconciliation between the calculations and amounts set forth therein
before and after giving effect to such change in GAAP.



     11.4 Payments. The Agent may set up standards and procedures to determine or
redetermine the equivalent in Dollars of any amount expressed in any currency other



108









 







than Dollars
and otherwise may, but shall not be obligated to, rely on any determination made by any Credit
Party or any L/C Issuer. Any such determination or redetermination by the Agent shall be
conclusive and binding for all purposes, absent manifest error. No determination or
redetermination by any Secured Party or any Credit Party and no other currency conversion shall
change or release any obligation of any Credit Party or of any Secured Party (other than the Agent
and its Related Persons) under any Loan Document, each of
which agrees to pay separately for any shortfall remaining after any conversion and payment of
the amount as converted. The Agent may round up or down, and may set up appropriate mechanisms to
round up or down, any amount hereunder to nearest higher or lower amounts and may determine
reasonable de minimis payment thresholds.



ARTICLE XII.

CROSS-GUARANTY




          12.1 Cross-Guaranty. Each Borrower hereby agrees that such Borrower is jointly
and severally liable for, and hereby absolutely and unconditionally guarantees to Agent and
Lenders and their respective successors and assigns, the full and prompt payment (whether at
stated maturity, by acceleration or otherwise) and performance of, all Obligations owed or
hereafter owing to Agent and Lenders by each other Borrower (“Guaranteed Obligations”). Each
Borrower agrees that its guaranty obligation hereunder is a continuing guaranty of payment and
performance and not of collection, that its obligations under this Section 12 shall
not be discharged until payment and performance, in full, of the Obligations has occurred, and
that its obligations under this Section 12 shall be absolute and unconditional,
irrespective of, and unaffected by,




          (a) the genuineness, validity, regularity, enforceability or any future amendment of, or
change in, this Agreement, any other Loan Document or any other agreement, document or
instrument to which any Borrower is or may become a party;




          (b) the absence of any action, against any Person other than such Borrower, to enforce
this Agreement (including this Section 12) or any other Loan Document or the waiver or
consent by Agent and Lenders with respect to any of the provisions thereof;




          (c) the existence, value or condition of, or failure to perfect its Lien against, any
security for the Obligations or any action, or the absence of any action, by Agent and Lenders
in respect thereof (including the release of any such security);




          (d) the insolvency of any Credit Party; or




          (e) any other action or circumstances that might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor.




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Each Borrower shall be regarded, and shall be in the same position, as principal debtor with
respect to the Guaranteed Obligations.




          12.2 Waivers by Borrowers. Each Borrower expressly waives all rights it may have
now or in the future under any statute, or at common law, or at law or in equity, or
otherwise, to compel Agent or Lenders to marshal assets or to proceed in respect of the
Obligations guaranteed hereunder against any other Credit Party, any other party or against
any security for the payment and performance of the Guaranteed Obligations before proceeding
against, or as a condition to proceeding against, such Borrower. It is agreed among each
Borrower, Agent and Lenders that the foregoing waivers are of the essence of the transaction
contemplated by this Agreement and the other Loan Documents and that, but for the provisions
of this Section 12 and such waivers, Agent and Lenders would decline to enter into
this Agreement.




          12.3 Benefit of Guaranty. Each Borrower agrees that the provisions of this
Section 12 are for the benefit of Agent and Lenders and their respective successors,
transferees, endorsees and assigns, and nothing herein contained shall impair, as between any
other Borrower and Agent or Lenders, the obligations of such other Borrower under the Loan
Documents.




          12.4 Subordination of Subrogation, Etc. Notwithstanding anything to the contrary
in this Agreement or in any other Loan Document, and except as set forth in
Section 12.7, each Borrower hereby expressly and irrevocably subordinates to payment
of the Obligations any and all rights at law or in equity to subrogation, reimbursement,
exoneration, contribution, indemnification or set off and any and all defenses available to a
surety, guarantor or accommodation co-obligor until the Obligations are paid in full in cash
and the applicable preference period has passed. Each Borrower acknowledges and agrees that
this subordination is intended to benefit Agent and Lenders and shall not limit or otherwise
affect such Borrower’s liability hereunder or the enforceability of this Section 12,
and that Agent, Lenders and their respective successors and assigns are intended third party
beneficiaries of the waivers and agreements set forth in this Section 12.4.




          12.5 Election of Remedies. If Agent or any Lender may, under applicable law,
proceed to realize its benefits under any of the Loan Documents giving Agent or such Lender a
Lien upon any Collateral, whether owned by any Borrower or by any other Person, either by
judicial foreclosure or by non-judicial sale or enforcement, Agent or any Lender may, at its
sole option, determine which of its remedies or rights it may pursue without affecting any of
its rights and remedies under this Section 12. If, in the exercise of any of its
rights and remedies, Agent or any Lender shall forfeit any of its rights or remedies,
including its right to enter a deficiency judgment against any Borrower or any other Person,
whether because of any applicable laws pertaining to “election of
remedies” or the like, each Borrower hereby consents to such action by Agent or such
Lender and waives any claim based upon such action, even if such action by Agent or such
Lender shall result in a full or partial loss of any rights of subrogation that such Borrower
might otherwise have had



110









 






but for such action by Agent or such Lender. Any election of
remedies that results in the 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. In the event Agent or any Lender shall bid at any
foreclosure or trustee’s sale or at any private sale permitted by law or the Loan Documents,
Agent or such Lender may bid all or less than the amount of the Obligations and the amount of
such bid need not be paid by Agent or such Lender but shall be credited against the
Obligations. The amount of the successful bid at any such sale, whether Agent, Lender or any
other party 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 12, notwithstanding that any present or future law or court decision or
ruling 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.




          12.6 Limitation. Notwithstanding any provision herein contained to the contrary,
each Borrower’s liability under this Section 12 (which liability is in any event in
addition to amounts for which such Borrower is primarily liable under Section 1) shall
be limited to an amount not to exceed as of any date of determination the greater of:




          (a) the net amount of all Loans advanced to any other Borrower under this Agreement and
then re-loaned or otherwise transferred to, or for the benefit of, such Borrower; and




          (b) the amount that could be claimed by Agent and Lenders from such Borrower under this
Section 12 without rendering such claim voidable or avoidable under Section 548 of
Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer
Act, Uniform Fraudulent Conveyance Act or similar statute or common law after taking into
account, among other things, such Borrower’s right of contribution and indemnification from
each other Borrower under Section 12.7.




          12.7 Contribution with Respect to Guaranty Obligations.




          (a) To the extent that any Borrower shall make a payment under this Section 12 of
all or any of the Obligations (other than Loans made to that Borrower for which it is
primarily liable) (a “Guarantor Payment”) that, taking into account all other Guarantor
Payments then 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
Payment in the same proportion that such Borrower’s “Allocable Amount” (as defined below)
(as determined immediately prior to such Guarantor Payment) bore to the aggregate Allocable
Amounts of each of the Borrowers as determined immediately prior to the making of such
Guarantor Payment, then, following payment in full in cash of the Obligations, termination of
the Commitments and the passage of the



111









 






applicable preference period, such Borrower shall be
entitled to receive contribution and indemnification payments from, and 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.




          (b) As of any date of determination, the “Allocable Amount” of any Borrower shall be
equal to the maximum amount of the claim that could then be recovered from such Borrower under
this Section 12 without rendering such claim voidable or avoidable under Section 548
of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer
Act, Uniform Fraudulent Conveyance Act or similar statute or common law.




          (c) This Section 12.7 is intended only to define the relative rights of Borrowers
and nothing set forth in this Section 12.7 is intended to or shall impair the
obligations of Borrowers, jointly and severally, to pay any amounts as and when the same
shall become due and payable in accordance with the terms of this Agreement, including
Section 12.1. Nothing contained in this Section 12.7 shall limit the
liability of any Borrower to pay the Loans made directly or indirectly to that Borrower and
accrued interest, Fees and expenses with respect thereto for which such Borrower shall be
primarily liable.




          (d) The parties hereto acknowledge that the rights of contribution and indemnification
hereunder shall constitute assets of the Borrower to which such contribution and
indemnification is owing.




          (e) The rights of the indemnifying Borrowers against other Credit Parties under this
Section 12.7 shall be exercisable upon the full and payment of the Obligations, the
termination of the Commitments and the passage of the applicable preference period.




          12.8 Liability Cumulative. The liability of Borrowers under this Section
12 is in addition to and shall be cumulative with all liabilities of each Borrower to
Agent and Lenders under this Agreement and the other Loan Documents to which such Borrower is
a party or in respect of any Obligations or obligation of the other Borrower, without any
limitation as to amount, unless the instrument or agreement evidencing or creating such other
liability specifically provides to the contrary.




[Balance of page intentionally left blank; signature page follows.]




112









 






     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered by their duly authorized officers as of the day and year first above written.



	 	 	 	 	 	 	 
	 	 	AKORN, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Jeffrey A. Whitnell	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	CFO	 	 
	 

	 	 	 	 	 	 
	 	 	FEIN: 72-0717400	 	 
	 
	 	 	 	 	 	 
	 	 	Address for notices:	 	 
	 
	 	 	 	 	 	 
	 	 	1925 West Field Court 


Suite 300	 	 
	 	 	Lake Forest, Illinois 60045	 	 
	 	 	Attn: Jeff Whitnell	 	 
	 	 	Facsimile: (847) 353-4936	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Wire Transfers:	 	 
	 
	 	 	 	 	 	 
	 	 	Bank of America	 	 
	 	 	135 South LaSalle Street

Chicago, IL 60603

ABA# 026009593

Account #5800508409

Account Name: Akorn, Inc.	 	 






[SIGNATURE PAGE TO CREDIT AGREEMENT]




 









 





     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered by their duly authorized officers as of the day and year first above written.



	 	 	 	 	 	 	 
	 	 	AKORN (NEW JERSEY), INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Jeffrey A. Whitnell	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	CFO	 	 
	 

	 	 	 	 	 	 
	 	 	FEIN: 36-4301474	 	 
	 
	 	 	 	 	 	 
	 	 	Address for notices:	 	 
	 
	 	 	 	 	 	 
	 	 	72 Veronica Avenue	 	 
	 	 	Somerset, New Jersey 08873	 	 
	 

	 	Attn:	 	Jeffrey Whitnell	 	 
	 

	 	 	 	 	 	 
	 

	 	Facsimile:
  (847) 353-4936	 
	 

	 	 	 	 
	 	 





[SIGNATURE PAGE TO CREDIT AGREEMENT]




 









 





     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered by their duly authorized officers as of the day and year first above written.



	 	 	 	 	 	 	 
	 	 	GENERAL ELECTRIC CAPITAL
 CORPORATION, as the
Agent, L/C Issuer,

 Swingline Lender and as a
Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Dennis Cloud	 	 
	 

	 	 	 	 

	 	 
	 	 	Title: Its Duly Authorized Signatory	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notices:	 	 
	 
	 	 	 	 	 	 
	 	 	General Electric Capital Corporation

500 West Monroe

Chicago, IL 60661-3671

Attn: Akorn Account Manager

Facsimile: (866) 388-3572	 	 
	 
	 	 	 	 	 	 
	 	 	With a copy to:	 	 
	 
	 	 	 	 	 	 
	 	 	General Electric Capital Corporation

2 Bethesda Metro Center Suite 600

Bethesda, MD 20814

Attn: Maryanne Courtney, Internal Counsel

Facsimile: (866) 358-1754	 	 
	 
	 	 	 	 	 	 
	 	 	And	 	 
	 
	 	 	 	 	 	 
	 	 	King & Spalding

1180 Peachtree St NE

Atlanta, GA 30309

Attn: Carolyn Alford, Esq.

Facsimile: (404) 572-5128	 	 
	 
	 	 	 	 	 	 
	 	 	Address for payments:	 	 
	 
	 	 	 	 	 	 
	 	 	ABA No.: 021-001-033

Account Number: 50271079

Deutsche Bank Trust Company Americas

New York, NY	 	 
	 	 	Account Name: HH Cash Flow Collections

Reference: Akorn, Inc. (HFS3010)	 	 






[SIGNATURE PAGE TO CREDIT AGREEMENT]





 









 








Schedule 1.1(b)




Revolving Loan Commitments




	 	 	 	 	 	 	 	 	 
	General Electric Capital Corporation
	 	 	—	 	 	$	25,000,000	 






Schedule 1.1(b)





 









 








EXHIBIT 1.1(c)

TO

CREDIT AGREEMENT




FORM OF LETTER OF CREDIT REQUEST




GENERAL ELECTRIC CAPITAL CORPORATION,

as Agent under the Credit Agreement referred to below

500 West Monroe Street

Chicago, Illinois 60661

Attn: Portfolio Manager — Akorn, Inc.




                                        
            ,
           




     Re: Akorn, Inc. and certain of its Subsidiaries (the “Borrowers”)



     Reference is made to the Credit Agreement, dated as of January 7, 2009 (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among the Borrowers, Akorn, Inc., as the Borrower Representative, the other Credit
Parties party thereto, the Lenders and L/C Issuers party thereto and General Electric Capital
Corporation, as agent for the Lenders and L/C Issuers. Capitalized terms used herein without
definition are used as defined in the Credit Agreement.



     The Borrower Representative, on behalf of the Borrowers, hereby gives you notice, irrevocably,
pursuant to Section 1.1(c) of the Credit Agreement, of its request for your Issuance of a
Letter of Credit, in the form attached hereto, for the benefit of [Name of Beneficiary], in the
amount of $                    , to be issued on                     ,                      (the “Issue Date”) with an expiration
date of                     ,                     .



     The undersigned hereby certifies that, except as set forth on Schedule A attached
hereto, the following statements are true on the date hereof and will be true on the Issue Date,
both before and after giving effect to the Issuance of the Letter of Credit requested above and any
Loan to be made or any other Letter of Credit to be Issued on or before the Issue Date:




     (a) except as otherwise waived in writing by the Required Lenders, the representations
and warranties set forth in Article III of the Credit Agreement and elsewhere in the
Loan Documents are true and correct in all material respects (without duplication of any
materiality qualifier contained therein), except to the extent such representations and
warranties expressly relate to an earlier date, in which case such representations and
warranties were true and correct as of such date;




     (b) no Default or Event of Default has occurred and is continuing; and




     (c) the aggregate outstanding amount of the Revolving Credit Exposure does not exceed
the Maximum Revolving Loan Balance.



	 	 	 	 	 	 	 
	 	 	AKORN, INC., as Borrower Representative	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 







1












 





EXHIBIT 1.1(d)




TO




CREDIT AGREEMENT




Form of Swing Loan Request




GENERAL ELECTRIC CAPITAL CORPORATION,

as Agent under the Credit Agreement referred to below

500 West Monroe Street

Chicago, Illinois 60661

Attn: Portfolio Manager – Akorn, Inc.




                          ,           




     Re: Akorn, Inc. and certain of its Subsidiaries (the “Borrowers”)



     Reference is made to the Credit Agreement, dated as of January 7, 2009 (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among the Borrowers, Akorn, Inc. as Borrower Representative, each other “Credit
Party” that is a party thereto, the Lenders, L/C Issuer party thereto and General Electric Capital
Corporation, as agent for the Lenders. Capitalized terms used herein but not otherwise defined
herein shall have the respective meanings ascribed to such terms in the Credit Agreement.



     The Borrower Representative on behalf of the Borrowers hereby gives you irrevocable notice
pursuant to Section 1.1(e) of the Credit Agreement that it requests Swing Loans under the
Credit Agreement (the “Proposed Advance”) and, in connection therewith, sets for the
following information:




     A. The date of the Proposed Advance is                     , ___(the “Funding Date”).




     B. The aggregate principal amount of Proposed Advance is $                    .



          The undersigned hereby certifies that, except as set forth on Schedule A attached hereto, the
following statements are true on the date hereof both before and after giving effect to the
Proposed Advance and any other Loan to be made or Letter of Credit to be issued on or before the
Funding Date:





     (i) except as otherwise waived in writing by the Required Lenders, the representations
and warranties set forth in Article III of the Credit Agreement and elsewhere in the
Loan Documents are true and correct in all material respects (without duplication of any
materiality qualifier contained therein) with the same effect as though



 









 







made on and as of such Funding Date, except to the extent such representations and
warranties expressly relate to an earlier date, in which case such representations and
warranties were true and correct in all material respects (without duplication of any
materiality qualifier contained therein) as of such date;




     (ii) no Default or Event of Default has occurred and is continuing;




     (iii) the aggregate outstanding amount of the Revolving Credit Exposure will not exceed
the Maximum Revolving Loan Balance; and




     (iv) after giving effect to such Loan and the application of the proceeds thereof on
the date of funding (including depositing such funds in a Disbursement Account so long as
cash in such Disbursement Account would not exceed (x) checks outstanding against such
Disbursement Account as of that date, plus (y) amounts necessary to meet minimum
balance requirements for such Disbursement Account), the aggregate cash and Cash Equivalents
of Borrowers and their Subsidiaries will not exceed $5,000,000.



	 	 	 	 	 	 	 
	 	 	Sincerely,	 	 
	 
	 	 	 	 	 	 
	 	 	AKORN, INC., as the Borrower Representative
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 
 
	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:
	 	 	 	 
	 

	 	 	 	 	 	 






 









 








EXHIBIT 1.6

TO

CREDIT AGREEMENT




FORM OF NOTICE OF CONVERSION OR CONTINUATION




GENERAL ELECTRIC CAPITAL CORPORATION

as Agent under the Credit Agreement referred to below




                          ,           




Attention:




     Re: Akorn, Inc. and its Subsidiaries (the “Borrowers”)



     Reference is made to the Credit Agreement, dated as of January 7, 2009 (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among the Borrowers, Akorn, Inc., as Borrower Representative, the other Credit
Parties party thereto, the Lenders and L/C Issuers party thereto and General Electric Capital
Corporation, as administrative agent for the Lenders and L/C Issuers. Capitalized terms used
herein and not otherwise defined herein are used herein as defined in the Credit Agreement.



     The Borrower Representative, on behalf of Borrowers, hereby gives you irrevocable notice,
pursuant to Section 1.6 of the Credit Agreement of its request for the following:




     (a) a continuation, on                     , ___, as LIBOR Rate Loans having an Interest Period
of ___ months of Revolving Loans in an aggregate outstanding principal amount of
$                     having an Interest Period ending on the proposed date for such continuation;




     (b) a conversion, on                     , ___, to LIBOR Rate Loans having an Interest Period of
___ months of Revolving Loans in an aggregate outstanding principal amount of $___;
and1




     (c) a conversion, on                     , ___, to Base Rate Loans, of Revolving Loans in an
aggregate outstanding principal amount of $                    .





 




			
	1	 	Cannot be used prior to the Syndication Completion
Date.




 









 










     In connection herewith, the undersigned hereby certifies that, except as set forth on Schedule
A attached hereto, no Default or Event of Default has occurred and is continuing on the date
hereof, both before and after giving effect to any Loan to be made or Letter of Credit to be Issued
on or before any date for any proposed conversion or continuation set forth above.



	 	 	 	 	 
	 	AKORN, INC., as the Borrower Representative

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



[SIGNATURE PAGE TO NOTICE OF CONVERSION/CONTINUATION DATED                      ___, ____]




 









 








EXHIBIT 2.1

TO

CREDIT AGREEMENT




CLOSING CHECKLIST





     The Agent shall have received on or prior to the Closing Date each of the following, each
dated the Closing Date unless otherwise agreed by the Agent, in form and substance satisfactory to
the Agent and each Lender:



     1. this Agreement duly executed by the Borrowers;



     2. a Revolving Note for each applicable Lender and a Swingline Note for the Swingline Lender,
each dated as of the Closing Date and duly executed by the Borrowers;



     3. the Guaranty and Security Agreement, duly executed by each Credit Party, together with (A)
copies of UCC, Patent, Trademark, Copyright and other appropriate search reports and of all
effective prior filings listed therein, together with evidence of the termination of such prior
filings and other documents with respect to the priority of the security interest of the Agent in
the Collateral, in each case as may be reasonably requested by the Agent, (B) all documents
representing all securities being pledged pursuant to such Guaranty and Security Agreement and
related undated powers or endorsements duly executed in blank, (C) a perfection certificate duly
executed by the Borrowers, and (D) duly executed Collateral Access Agreements with respect to any
Real Estate on which Collateral is stored or otherwise located, except to the extent that Agent
takes a rent Reserve with respect to such Real Estate;



     4. Mortgages, duly executed by the applicable Borrower, covering all of the Eligible Real
Estate, together with: (A) title insurance policies, current as-built surveys, zoning letters,
flood insurance certifications and certificates of occupancy, in each case reasonably satisfactory
in form and substance to Agent, in its sole discretion; (B) evidence that counterparts of the
Mortgages have been recorded in all places to the extent necessary or desirable, in the judgment of
Agent, to create a valid and enforceable first priority lien (subject to Permitted Liens) on the
Eligible Real Estate in favor of Agent for the benefit of itself and Lenders (or in favor of such
other trustee as may be required or desired under local law); and (C) an opinion of counsel in each
state in which any Eligible Real Estate is located from counsel reasonably satisfactory to Agent;



     5. Trademark Security Agreements and Patent Security Agreements, each dated the Closing Date
and signed by each Credit Party that owns Trademarks and/or Patents, as applicable;



     6. a copy of each Organization Document of each Credit Party that is on file with any
Governmental Authority in any jurisdiction, certified as of a recent date by such Governmental
Authority, together with, if applicable, certificates attesting to the good standing of such Credit
Party in such jurisdiction and each other jurisdiction where such



1









 







Credit Party is qualified to do business as a foreign entity or where such qualification is
necessary (and, if appropriate in any such jurisdiction, related tax certificates);



     7. a certificate of the secretary or other officer of each Credit Party in charge of
maintaining books and records of such Credit Party certifying as to (A) the names and signatures of
each officer of such Credit Party authorized to execute and deliver any Loan Document, (B) the
Organization Documents of such Credit Party attached to such certificate are complete and correct
copies of such Organization Documents as in effect on the date of such certification (or, for any
such Organization Document delivered pursuant to clause (v) above, that there have been no
changes from such Organization Document so delivered) and (C) the resolutions of such Credit
Party’s board of directors or other appropriate governing body approving and authorizing the
execution, delivery and performance of each Loan Document to which such Credit Party is a party;



     8. duly executed opinions of counsel for the Credit Parties, together with any local counsel
opinions reasonably requested by Agent, dated the Closing Date;



     9. a certificate of a Responsible Officer of the Borrower Representative to the effect that
(A) each condition set forth in Section 2.2 has been satisfied, (B) there has been no
material adverse change in the industry in which Borrowers operate; (C) no order, injunction or
pending litigation exits in which there is a reasonable possibility of a decision that would have a
Material Adverse Effect or could challenge any of the transactions contemplated by the Agreement
and the other Loan Documents; and (D) each Credit Party is Solvent after giving effect to the
initial Loans and Letters of Credit, the application of the proceeds thereof in accordance with
this Agreement and the payment of all estimated legal, accounting and other fees and expenses
related hereto and thereto;



     10. an initial Borrowing Base Certificate duly executed by the Borrower Representative, dated
the Closing Date, reflecting information concerning Eligible Accounts, Eligible Inventory, Eligible
Equipment and Eligible Real Estate of Borrowers as of a date not more than 15 days after the last
day of the month that ends at least 45 days before the Closing Date.



     11. a limited scope field examination performed by the Agent verifying the information on the
Borrowing Base Certificate delivered pursuant to paragraph 10 above;



     12. audited financial statements for the Borrowers and their Subsidiaries for the fiscal year
ending December 31, 2007 and unaudited financial statements for the Borrowers and their
Subsidiaries for the eleven months ending November 30, 2008;



     13. a pro forma balance sheet of the Borrowers and their Subsidiaries as of December 31, 2008
which gives effect to: (A) the Loans made on the Closing Date, (B) all Related Transactions and (C)
any fees or expenses payable by the Borrowers or their Subsidiaries in connection therewith;



2









 





     14. the Subordination Agreement, duly executed by the Borrowers and the holder of the
Subordinated Notes, together with certified copies of all Subordinated Note Documents;



     15. insurance certificates demonstrating that the insurance policies required by
Section 4.6 are in full force and effect and have all endorsements required by such
Section 4.6;



     16. Phase I Environmental Site Assessment Reports, consistent with American Society of Testing
and Materials (ASTM) Standard E 1527-00 (or the current ASTM standard for Phase I environmental
site assessment reports), and applicable state requirements, on all of the Real Estate, dated no
more than six months prior to the Closing Date, prepared by environmental engineers reasonably
satisfactory to Agent; together with such environmental review and audit reports, including Phase
II reports, with respect to the Real Estate of any Credit Party as Agent shall have requested, and
letters executed by the environmental firms preparing such environmental reports authorizing Agent
and Lenders to rely on such reports;



     17. a Notice of Borrowing for the initial Revolving Loan, together with a letter of direction
with respect to the disbursement on the Closing Date of the proceeds of the Revolving Loan, each
duly executed by the Borrower Representative;



     18. a payoff letter regarding the payment in full of all Prior Indebtedness, together with
releases and terminations of all Liens covering the Collateral other than Permitted Liens, or the
agreement of the holder thereof, reasonably acceptable to Agent, to deliver such releases and
terminations promptly following receipt of the amount stated therein;



     19. a certified copy of the Akorn Response to the Parexel Report; and



     20. such other certificates, documents and agreements respecting any Credit Party as Agent may
reasonably request.




3









 








EXHIBIT 4.2(b)

COMPLIANCE CERTIFICATE

Akorn, Inc.




Date:                     , 20___




     This Compliance Certificate (this “Certificate”) is given by Akorn, Inc., a Louisiana
corporation (the “Borrower Representative”), pursuant to subsection 4.2(b) of that certain Credit
Agreement dated as of January 7, 2009 among Borrower Representative, Akorn (New Jersey), Inc.
(together with Borrower Representative, the “Borrowers”), the other Credit Parties party thereto,
General Electric Capital Corporation, as administrative agent (in such capacity, “Agent”), as L/C
Issuer and as a Lender, and the additional Lenders party thereto (as such agreement may be amended,
restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).
Capitalized terms used herein without definition shall have the meanings set forth in the Credit
Agreement.



     The officer executing this Certificate is a Responsible Officer of the Borrower Representative
and as such is duly authorized to execute and deliver this Certificate on behalf of Borrowers.
By executing this Certificate, such officer hereby certifies to Agent, Lenders and L/C Issuer, on
behalf of Borrowers, that:



          (a) the financial statements delivered with this Certificate in accordance with subsection
4.1(a), 4.1(b) and/or 4.1(c) of the Credit Agreement are correct and complete in all material
respects and fairly present, in all material respects, in accordance with GAAP, the financial
position and the results of operations of Borrowers and their Subsidiaries as of the dates of and
for the periods covered by such financial statements (subject, in the case of interim financial
statements, to normal year-end adjustments and the absence of footnote disclosure);




          (b) to the best of such officer’s knowledge, each Credit Party and each of their Subsidiaries,
during the period covered by such financial statements, has observed and performed all of their
respective covenants and other agreements in the Credit Agreement and the other Loan Documents to
be observed, performed or satisfied by them, and such officer had not obtained knowledge of any
Default or Event of Default [except as specified on the written attachment hereto];




          (c) Exhibit A hereto is a correct calculation of each of the financial covenants contained in
Article VI of the Credit Agreement; and




          (d) since the Closing Date and except as disclosed in prior Compliance Certificates delivered
to Agent, no Credit Party and no Subsidiary of any Credit Party has:




               (i) changed its legal name, identity, jurisdiction of incorporation, organization or formation
or organizational structure or formed or acquired any Subsidiary except as follows:
                                                            ;



 









 





               (ii) acquired the assets of, or merged or consolidated with or into, any Person, except as
follows:                                                   ; or



               (iii) changed its address or otherwise relocated, acquired fee simple title to any real
property or entered into any real property leases, except as follows:                                         
                                                            .



     IN WITNESS WHEREOF, Borrower Representative has caused this Certificate to be executed by one
of its Responsible Officers this ___ day of                     , 20___.



	 	 	 	 	 	 	 
	 	 	AKORN, INC., as Borrower Representative	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Its:
	 	 
 
 
	 	 
	 

	 	 	 	 	 	 




Note: Unless otherwise specified, all financial covenants are calculated for Borrowers and their
Subsidiaries on a consolidated basis in accordance with GAAP and all calculations are without
duplication.





 









 








EXHIBIT A TO EXHIBIT 4.2(b)

COMPLIANCE CERTIFICATE




Covenant 6.1 Fixed Charge Coverage




Fixed Charge Coverage is defined as follows:




	 	 	 	 	 
	EBITDA (as defined below) for the applicable period of measurement
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	Fixed Charges is defined as the sum of the following, without
duplication:
	 	 	 	 
	 
	 	 	 	 
	Cash Interest Expense:
	 	 	 	 
	 
	 	 	 	 
	Gross interest expense for such period paid or
required to be paid in cash (including all
commissions, discounts, fees and other charges in
connection with letters of credit and similar
instruments and net amounts paid or payable and/or
received or receivable under permitted Rate Contracts
in respect of interest rates) for the Borrowers and
their Subsidiaries on a consolidated basis
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	Plus: Scheduled principal payments of Indebtedness during such
period, including without limitation with respect to any Capital
Leases, but excluding the repayment of the Prior Indebtedness and
the repayment of the Subordinated Note to the extent permitted
under Section 5.11(c).
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Plus: Taxes on or measured by income paid or payable in cash
during such period
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Plus: Other Restricted Payments paid in cash during such period
(excluding dividends from Subsidiaries of the Borrowers to the
Borrowers or other Subsidiaries of the Borrowers)
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Plus: The aggregate of all expenditures and other obligations
for the applicable period ending on the last day of the month
covered by such financial statements which should be capitalized
under GAAP (“Capital Expenditures”), excluding Capital
Expenditures financed by third parties, but including Capital
Expenditures financed by drawings under the Revolving Loan
Commitments.
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Fixed Charges for the applicable period of measurement:
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	Fixed Charge Coverage (EBITDA divided by Fixed Charges)
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Required Fixed Charge Coverage
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	In Compliance
	 	Yes/No






A-1









 






Covenant 6.2 Minimum EBITDA




EBITDA is defined as follows:




	 	 	 	 	 
	Net income (or loss) for the applicable period of measurement
of Borrowers and their Subsidiaries on a consolidated basis
determined in accordance with GAAP, but excluding: (a) the
income (or loss) of any Person which is not a Subsidiary of a
Borrower, except to the extent of the amount of dividends or
other distributions actually paid to a Borrower or any of its
Subsidiaries in cash by such Person during such period and
the payment of dividends or similar distributions by that
Person is not at the time prohibited by operation of the
terms of its charter or of any agreement, instrument,
judgment, decree, order, statute, rule or governmental
regulation applicable to that Person; (b) the income (or
loss) of any Person accrued prior to the date it becomes a
Subsidiary of a Borrower or is merged into or consolidated
with a Borrower or any of a Borrower’s Subsidiaries or that
Person’s assets are acquired by a Borrower or a Borrower’s
Subsidiaries; (c) the proceeds of any life insurance policy;
(d) gains or losses from the sale, exchange, transfer or
other disposition of Property or assets not in the Ordinary
Course of Business of the Borrowers and their Subsidiaries,
and related tax effects in accordance with GAAP; and (e) any
other extraordinary or non-recurring gains or losses of the
Borrowers or their Subsidiaries, and related tax effects in
accordance with GAAP;
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	Less: To the extent not previously deducted in the
calculation of Net Income, all research and development
expenditures, including without limitation all payments made
or required to be made under development funding agreements
or similar agreements with third parties
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Plus: All amounts deducted in calculating net income (or
loss) for depreciation or amortization for such period
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Plus: Interest expense (less interest income) deducted in
calculating net income (or loss) for such period
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Plus: All accrued taxes on or measured by income to the
extent deducted in calculating net income (or loss) for such
period
	 	 	 	 
	 
	 	 	 





A-2









 






	 	 	 	 	 
	Plus: All non-cash losses or expenses (or minus non-cash
income or gain) included or deducted in calculating net
income (or loss) for such period, including, without
limitation, any non-cash loss or expense due to the
application of FAS No. 106 regarding post-retirement
benefits, FAS No. 133 regarding hedging activity, FAS No. 142
regarding impairment of good will, FAS No. 150 regarding
accounting for financial instruments with debt and equity
characteristics and non-cash expenses deducted as a result of
any grant of Stock or Stock Equivalents to employees,
officers or directors, but excluding any non-cash loss or
expense (a) that is an accrual of a reserve for a cash
expenditure or payment to be made, or anticipated to be made,
in a future period or (b) relating to a write-down, write off
or reserve with respect to Accounts and Inventory,
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Plus: Fees and expenses paid to Agent and Lenders in
connection with the Loan Documents, to the extent deducted in
calculating net income (or loss) for such period
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	EBITDA for the applicable period of measurement:
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	Required Minimum EBITDA
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	In Compliance
	 	Yes/No







A-3









 








Covenant 6.3 Minimum Liquidity




For purposes of Covenant 6.3, Liquidity is defined as follows:




	 	 	 	 	 
	The “Borrowing Base” (as calculated pursuant to the Borrowing
Base Certificate) then in effect from time to time
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	Less: Such Reserves as may be imposed by Agent in its
reasonable credit judgment but not reflected in the Borrowing
Base Certificate
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	Plus: Available cash and Cash Equivalents in bank accounts
and investment accounts in which the Agent has a first
priority perfected Lien
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	Less: The aggregate outstanding principal amount of the
Revolving Credit Exposure:
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	Liquidity as of the date of measurement
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	Required Minimum Liquidity
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	In Compliance
	 	Yes/No







A-2









 








Covenant 6.4 Maximum Capital Expenditures




For purposes of Covenant 6.4, Capital Expenditures are
defined as follows:




	 	 	 	 	 
	The aggregate of all expenditures and obligations, for the
relevant test period set forth in Section 6.4 of the Credit
Agreement, which should be capitalized under GAAP
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	Less: Net Proceeds from Dispositions and/or Events of Loss
which Borrower is permitted to reinvest pursuant to
subsection 1.8(c) and which are included above
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Less: To the extent included above, expenditures financed
with cash proceeds from Excluded Equity Issuances
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Capital Expenditures
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Permitted Capital Expenditures (including carry forward of
$______ from prior period)
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	In Compliance
	 	Yes/No
	 
	 	 	 





A-3









 






EXHIBIT B TO EXHIBIT 4.2(b)

COMPLIANCE CERTIFICATE




Calculation of Cash Flow




	 	 	 	 	 
	EBITDA for the applicable period of measurement
	 	$	 	 
	 
	 	 	 
	 
	 	 	 	 
	Less: Unfinanced Capital Expenditures, which is defined as
follows:
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	The aggregate of all expenditures and other obligations for the
twelve month period ending on the last day of the month covered
by such financial statements which should be capitalized under
GAAP (“Capital Expenditures”)
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Less: To the extent included above, expenditures financed with
cash proceeds from Excluded Equity Issuances
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Capital Expenditures
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Less: Portion of Capital Expenditures financed under Capital
Leases or other Indebtedness (Indebtedness, for this
purpose, does not include drawings under the Revolving
Loan Commitment)
	 	 	 	 
	 
	 	 	 	 
	Unfinanced Capital Expenditures (used in calculation of Cash Flow)
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Cash Flow (used in calculation of Fixed Charge Coverage)
	 	$	 	 
	 
	 	 	 






B-1









 








EXHIBIT 4.11




CASH MANAGEMENT SYSTEM




     The Borrowers shall, and shall cause its Subsidiaries to, establish and maintain the Cash
Management Systems described below:



     (a) Each Credit Party shall, and shall cause each depository to, and each Borrower shall, and
shall cause each securities intermediary or commodities intermediary, to enter into Control
Agreements with respect to each deposit, securities, commodity or similar account maintained by
such Person, as the case may be (other than any payroll account so long as such payroll account is
a zero balance account and withholding tax and fiduciary accounts) not later than fifteen days
after the Closing Date, or such later date as Agent may in its discretion agree in writing, with
respect to such accounts maintained as of the Closing Date and upon formation with respect to any
such account opened after the Closing Date. Each Credit Party shall deliver to Agent with such
Control Agreements such legal opinions and other diligence as Agent shall reasonably request.



     (b) On or before the Closing Date, Borrowers shall have established a concentration account in
their name into which the proceeds of the Lockbox Account will be transferred (the “Concentration
Account”) at an Approved Bank. On or before the Closing Date and thereafter, until the Revolving
Termination Date, Borrowers shall establish and maintain a lock box (a “Lock Box”) and an
associated lockbox account (each a “Lockbox Account”) with an Approved Bank (the “Lockbox Bank”),
subject to the provisions of this Agreement and shall execute with the Lockbox Bank a lockbox
agreement in such form as may be reasonably acceptable to Agent. Borrowers shall direct their
respective Account Debtors to make payments on all Accounts into such Lock Box for deposit into
such Lockbox Account, and Borrowers shall cause all funds deposited into such Lockbox Account to be
immediately transferred (but in all events within two (2) Business Days of such deposit) to the
Concentration Account or to such other deposit account maintained by Agent as determined by Agent
in its sole discretion by written notice to Borrowers and the Lockbox Bank.



     (c) Borrowers shall deposit, and cause their respective Subsidiaries to deposit or cause to be
deposited, promptly, and in any event no later than the first Business Day after the date of
receipt thereof, all cash, checks, drafts or other similar items of payment relating to or
constituting payments made or received in respect of any Collateral that have not been delivered to
a Lock Box (without implying that such is permitted under the Credit Agreement) into the
Concentration Account.



     (d) From and after the Closing Date, each Borrower may maintain, in such Borrower’s name, an
account (each a “Disbursement Account” and collectively, the “Disbursement Accounts”) at an
Approved Bank into which Agent shall, from time to time, deposit proceeds of Revolving Loans made
to such Borrower pursuant to Section 1.1 for use by such Borrower in accordance with the
provisions of Section 4.10.



1









 





     (e) Unless otherwise agreed by Agent, each Control Agreement for the Concentration Account and
each Disbursement Account shall provide, among other things, that (i) all items of payment
deposited in such account and proceeds thereof deposited in the applicable deposit account are held
by such bank as agent or bailee-in-possession for Agent, on behalf of itself and Lenders, (ii) the
bank executing such agreement has no rights of setoff or recoupment or any other claim against such
deposit account, as the case may be, other than for payment of its service fees and other charges
directly related to the administration of such account and for returned checks or other items of
payment, and (iii) (A) with respect to banks at which a Lockbox Account is maintained, such bank
agrees to forward immediately all amounts in each Lockbox Account to the Concentration Account and
(B) with respect to the Concentration Account, the applicable bank agrees to forward all amounts
received in the Concentration Account to the Collection Account through sweeps from the
Concentration Account on each Business Day into the Collection Account. So long as any Loan
remains outstanding, Borrowers shall not, and shall not cause or permit any Subsidiary thereof to,
accumulate or maintain cash in Disbursement Accounts or payroll accounts for (10) consecutive days
(or if an Event of Default exists, at any date of determination) in excess of checks outstanding
against such deposit accounts as of that date, plus amounts necessary to meet minimum
balance requirements for such deposit accounts.



     (f) So long as no Event of Default has occurred and is continuing, Borrowers may add or
replace a Lockbox Account, Concentration Account or any Disbursement Account with an Approved Bank,
provided that concurrently with the opening of such account or Lock Box, Borrowers and such
Approved Bank shall have executed and delivered to Agent a Control Agreement. Borrowers shall
close any of its deposit accounts (and establish replacement deposit accounts in accordance with
the foregoing sentence) promptly following the date on which any bank at which a deposit account is
located that is, or is required to be, subject to a Control Agreement first fails to constitute an
Approved Bank.



     (g) The Lock Boxes, Lockbox Accounts, Disbursement Accounts and the Concentration Account
shall be cash collateral accounts, with all cash, checks and other similar items of payment in such
accounts securing payment of the Loans and all other Obligations, and in which, Borrowers and each
Subsidiary thereof shall have granted a Lien to Agent, on behalf of itself and the other Secured
Parties, pursuant to the Guaranty and Security Agreement.



     (h) All amounts transferred to the Collection Account shall be deemed received by Agent in
accordance with Section 1.10 and if applicable, the Fee Letter and shall be applied (and
allocated) by Agent in accordance with Sections 1.10 and 1.11. In no event shall
any amount be so applied unless and until such amount shall have been credited in immediately
available funds to the Collection Account. After application of any amounts transferred to the
Collection Account in accordance with Sections 1.10 and 1.11, excess amounts shall
be returned to the Disbursement Account.




2









 








EXHIBIT 11.1(a)

TO

CREDIT AGREEMENT




FORM OF ASSIGNMENT




     This ASSIGNMENT, dated as of the Effective Date, is entered into between                      (“the
Assignor”) and                      (“the Assignee”).



     The parties hereto hereby agree as follows:



	 	 	 
	Borrowers:

	 	Akorn, Inc., a Louisiana corporation and Akorn (New
Jersey), Inc., an Illinois corporation (the “Borrowers”)
	 
	 	 
	Agent:

	 	General Electric Capital Corporation, as agent for the
Lenders and L/C Issuers (in such capacity and together
with its successors and permitted assigns, the “Agent”)
	 
	 	 
	Credit Agreement:

	 	Credit Agreement, dated as of January 7, 2009, among the
Borrowers, the other Credit Parties party thereto, the
Lenders and L/C Issuers party thereto and the Agent (as
the same may be amended, restated, supplemented or
otherwise modified from time to time, the “Credit
Agreement”; capitalized terms used herein without
definition are used as defined in the Credit Agreement)
	 
	 	 
	[Trade Date:

	 	                    , ___]2
	 
	 	 
	Effective Date:

	 	                    , ___3








 




			
	2	 	Insert for informational purposes only if needed to
determine other arrangements between the assignor and the assignee.
	 
	3	 	To be filled out by Agent upon entry in the Register.




1









 










	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Aggregate amount of	 	 	Aggregate amount of	 	 	 	 
	Revolving Loan/	 	Commitments or	 	 	Commitments4 or	 	 	 	 
	Commitment	 	principal amount of	 	 	principal amount of	 	 	 	 
	Assigned	 	Loans for all Lenders5	 	 	Loans Assigned5	 	 	Percentage Assigned6	 
	 
	 	$	 	 	 	$	 	 	 	 	__.____	%
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	$	 	 	 	$	 	 	 	 	__.____	%
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	$	 	 	 	$	 	 	 	 	__.____	%
	 
	 	 	 	 	 	 	 	 	 	 





[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]






 




			
	4	 	Include Revolving Loans and interests, participations
and obligations to participate in Letter of Credit Obligations.
	 
	5	 	Amount to be adjusted by the counterparties to take into
account any payments or prepayments made between the Trade Date and the
Effective Date. The aggregate amounts are inserted for informational purposes
only to help in calculating the percentages assigned which, themselves, are for
informational purposes only.
	 
	6	 	Set forth, to at least 9 decimals, the Assigned Interest
as a percentage of the aggregate Commitment or Loans in the Facility. This
percentage is set forth for informational purposes only and is not intended to
be binding. The assignments are based on the amounts assigned not on the
percentages listed in this column.





ASSIGNMENT

FOR AKORN, INC. CREDIT AGREEMENT





2









 








     Section 1. Assignment. Assignor hereby sells and assigns to Assignee, and
Assignee hereby purchases and assumes from Assignor, Assignor’s rights and obligations in its
capacity as Lender under the Credit Agreement (including Liabilities owing to or by Assignor
thereunder) and the other Loan Documents, in each case to the extent related to the amounts
identified above (the “Assigned Interest”).



     Section 2. Representations, Warranties and Covenants of Assignors. Assignor
(a) represents and warrants to Assignee and the Agent that (i) it has full power and authority, and
has taken all actions necessary for it, to execute and deliver this Assignment and to consummate
the transactions contemplated hereby and (ii) it is the legal and beneficial owner of its Assigned
Interest and that such Assigned Interest is free and clear of any Lien and other adverse claims and
(iii) by executing signing and delivering this assignment via ClearPar® or any other electronic
settlement system designated by the Agent, the Person signing, executing and delivering this
Assignment on behalf of the Assignor is a duly authorized signatory for the Assignor and is
authorized to execute, sign and deliver this agreement, (b) makes no other representation or
warranty and assumes no responsibility, including with respect to the aggregate amount of the Loans
and Commitments, the percentage of the Loans and Commitments represented by the amounts assigned,
any statements, representations and warranties made in or in connection with any Loan Document or
any other document or information furnished pursuant thereto, the execution, legality, validity,
enforceability or genuineness of any Loan Document or any document or information provided in
connection therewith and the existence, nature or value of any Collateral, (c) assumes no
responsibility (and makes no representation or warranty) with respect to the financial condition of
any Credit Party or the performance or nonperformance by any Credit Party of any obligation under
any Loan Document or any document provided in connection therewith and (d) attaches any Notes held
by it evidencing at least in part the Assigned Interest of such Assignor (or, if applicable, an
affidavit of loss or similar affidavit therefor) and requests that the Agent exchange such Notes
for new Notes in accordance with Section 1.2 of the Credit Agreement.



     Section 3. Representations, Warranties and Covenants of Assignees. Assignee
(a) represents and warrants to Assignor and the Agent that (i) it has full power and authority, and
has taken all actions necessary for Assignee, to execute and deliver this Assignment and to
consummate the transactions contemplated hereby, (ii) it is [not] an Affiliate of ___, a Lender
and (iii) it is sophisticated with respect to decisions to acquire assets of the type represented
by the Assigned Interest assigned to it hereunder and either Assignee or the Person exercising
discretion in making the decision for such assignment is experienced in acquiring assets of such
type, (iv) by executing, signing and delivering this Assignment via ClearPar® or any other
electronic settlement system designated by the Agent, the Person signing, executing and delivering
this Assignment on behalf of the Assignor is a duly authorized signatory for the Assignor and is
authorized to execute, sign and deliver this Agreement (b) appoints and authorizes the Agent to
take such action as administrative agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto, (c) shall perform in accordance with their terms all obligations
that, by the terms of the Loan Documents, are required to be performed by it as a Lender,
(d) confirms it has received such documents and information as it has deemed



ASSIGNMENT

FOR AKORN, INC. CREDIT AGREEMENT





3









 







appropriate to make its own credit analysis and decision to enter into this Assignment and
shall continue to make its own credit decisions in taking or not taking any action under any Loan
Document independently and without reliance upon Agent, any L/C Issuer, any Lender or any other
Indemnitee and based on such documents and information as it shall deem appropriate at the time,
(e) acknowledges and agrees that, as a Lender, it may receive material non-public information and
confidential information concerning the Credit Parties and their Affiliates and their Stock and
agrees to use such information in accordance with Section 9.10 of the Credit Agreement,
(f) specifies as its applicable lending offices (and addresses for notices) the offices at the
addresses set forth beneath its name on the signature pages hereof, (g) shall pay to the Agent an
assignment fee in the amount of $3,500 to the extent such fee is required to be paid under
Section 9.9 of the Credit Agreement and (h) to the extent required pursuant to
Section 10.2(f) of the Credit Agreement, attaches two completed originals of Forms W-8ECI,
W-8BEN, W-8IMY or W-9 and, if applicable, a portfolio interest exemption certificate.




     Section 4. Determination of Effective Date; Register. Following the due
execution and delivery of this Assignment by Assignor, Assignee and, to the extent required by
Section 9.9 of the Credit Agreement, the Borrowers, this Assignment (including its
attachments) will be delivered to the Agent for its acceptance and recording in the Register. The
effective date of this Assignment (the “Effective Date”) shall be the later of (i) the
acceptance of this Assignment by the Agent and (ii) the recording of this Assignment in the
Register. The Agent shall insert the Effective Date when known in the space provided therefor at
the beginning of this Assignment.



     Section 5. Effect. As of the Effective Date, (a) Assignee shall be a party to
the Credit Agreement and, to the extent provided in this Assignment, have the rights and
obligations of a Lender under the Credit Agreement and (b) Assignor shall, to the extent provided
in this Assignment, relinquish its rights (except those surviving the termination of the
Commitments and payment in full of the Obligations) and be released from its obligations under the
Loan Documents other than those obligations relating to events and circumstances occurring prior to
the Effective Date.



     Section 6. Distribution of Payments. On and after the Effective Date, the
Agent shall make all payments under the Loan Documents in respect of each Assigned Interest (a) in
the case of amounts accrued to but excluding the Effective Date, to Assignor and (b) otherwise, to
Assignee.



     Section 7. Miscellaneous. (a) The parties hereto, to the extent permitted by
law, waive all right to trial by jury in any action, suit, or proceeding arising out of, in
connection with or relating to, this Assignment and any other transaction contemplated hereby.
This waiver applies to any action, suit or proceeding whether sounding in tort, contract or
otherwise.



     (b) On and after the Effective Date, this Assignment shall be binding upon, and inure to the
benefit of, the Assignor, Assignee, the Agent and their Related Persons and their successors and
assigns.



     (c) This Assignment shall be governed by, and be construed and interpreted in accordance with,
the law of the State of New York.



ASSIGNMENT

FOR AKORN, INC. CREDIT AGREEMENT






4









 








     (d) This Assignment may be executed in any number of counterparts and by different parties in
separate counterparts, each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.



     (e) Signature pages may be detached from multiple separate counterparts and attached to a
single counterpart. Delivery of an executed signature page of this Assignment by facsimile
transmission or Electronic Transmission shall be as effective as delivery of a manually executed
counterpart of this Assignment.



ASSIGNMENT

FOR AKORN, INC. CREDIT AGREEMENT






5









 








     IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be executed by their
respective officers thereunto duly authorized, as of the date first above written.



	 	 	 	 	 
	 	[NAME OF ASSIGNOR]

             as Assignor

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	[NAME OF ASSIGNEE]

            as Assignee

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	Lending Office for Eurodollar Rate Loans:




[Insert Address (including contact name, fax number

and e-mail address)]




Lending Office (and address for notices)

            for any other purpose:




[Insert Address (including contact name, fax number

and e-mail address)]

 	 



[SIGNATURE PAGE FOR ASSIGNMENT FOR AKORN, INC. CREDIT AGREEMENT]





 









 








ACCEPTED and AGREED

this ___ day of ___:




GENERAL ELECTRIC CAPITAL CORPORATION

as Agent




	 	 	 	 	 
	By:

	 	 
 

Name:
	 	 
	 

	 	Title:	 	 
	 
	 	 	 	 
	AKORN, INC.7	 	 
	 
	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 
	 
	 	 	 	 
	AKORN (NEW JERSEY), INC.7	 	 
	 
	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 








 




			
	7	 	Include only if required pursuant to Section
9.9 of the Credit Agreement.
	 
	7	 	Include only if required pursuant to Section
9.9 of the Credit Agreement.





[SIGNATURE PAGE FOR ASSIGNMENT FOR AKORN, INC. CREDIT AGREEMENT]




 









 








EXHIBIT 11.1(b)

FORM OF BORROWING BASE CERTIFICATE





	 	 	 	 	 
	Accounts Receivable per Aging as of XX/XX/XX
	 	 	—	 
	Ineligibles
	 	 	 	 
	Payments in-transit (Unapplied Cash)
	 	 	—	 
	Cash Discounts reserve
	 	 	—	 
	Chargebacks reserve
	 	 	—	 
	Rebates/Distribution Fee reserve
	 	 	—	 
	Special Pricing Reserve
	 	 	—	 
	Foreign A/R
	 	 	—	 
	Government A/R
	 	 	—	 
	Deduct for Customer A/P due (Contra)
	 	 	—	 
	Past Due balance > 60 days
	 	 	—	 
	Cross-age (>50% past due)
	 	 	—	 
	AR Balance Exceeding Concentration Limit
	 	 	—	 
	Other
	 	 	—	 
	 
	 	 	 	 
	Total Ineligibles
	 	 	—	 
	 
	 	 	 	 
	Preliminary Eligible AR
	 	 	—	 
	Liquidity Factor
	 	 	 	 
	 
	 	 	 	 
	Adjusted Eligible Accounts Receivable
	 	 	—	 
	Advance Rate
	 	 	85.0	%
	 
	 	 	 	 
	Adjusted Eligible Accounts Receivable
	 	 	—	 
	Past Due Credit Balances
	 	 	—	 
	 
	 	 	 	 
	Available Accounts Receivable
	 	 	—	 
	 
	 	 	 	 
	Inventory per balance sheet as of XX/XX/XX
	 	 	—	 
	Reconciling Items
	 	 	 	 
	N/A
	 	 	—	 
	 
	 	 	 	 
	TOTAL
	 	 	—	 
	Inventory per GL sheet as of XX/XX/XX
	 	 	—	 
	Reconciling Items
	 	 	 	 
	WIP
	 	 	—	 
	Inventory in-transit
	 	 	—	 
	Other
	 	 	—	 
	 
	 	 	 	 
	TOTAL
	 	 	—	 
	Inventory per perpetual as of XX/XX/XX
	 	 	—	 
	Ineligibles
	 	 	 	 
	Components
	 	 	—	 
	Akron Strides Inventory — JV Inventory
	 	 	—	 
	Raw Materials
	 	 	—	 
	Expired Products
	 	 	—	 
	Product with Expiration < 6 months
	 	 	—	 
	FG Under Quarantine
	 	 	—	 
	Obsolete/Slow Moving
	 	 	—	 
	Product Net Realizable Value Reserve
	 	 	—	 
	Inventory Without License Consent
	 	 	—	 
	Other
	 	 	—	 
	 
	 	 	 	 
	Total Ineligible
	 	 	—	 
	 
	 	 	 	 
	Eligible Inventory
	 	 	—	 
	NOLV %
	 	 	66.0	%
	 
	 	 	 	 
	NOLV of Eligible Inventory
	 	 	—	 
	Advance Rate
	 	 	85.0	%
	 
	 	 	 	 
	Available Inventory
	 	 	—	 
	 
	 	 	 	 
	 
	 	OR	 
	Eligible Inventory
	 	 	—	 
	Advance Rate
	 	 	50.0	%
	 
	 	 	 	 
	Available Inventory
	 	 	—	 
	 
	 	 	 	 
	 
	 	 	 	 
	Lesser of NOLV @ 85% or 50% Advance Rate
(Capped @ 75% of Total Availability)
	 	 	—	 
	Less: Three-Month Rent Reserve (if applicable)
	 	 	—	 
	 
	 	 	 	 
	Net Available Inventory
	 	 	—	 
	 
	 	 	 	 
	 
	 	 	 	 
	NOLV M&E
	 	 	—	 
	Advance Rate
	 	 	85.0	%
	 
	 	 	 	 
	Available M&E
	 	 	—	 
	 
	 	 	 	 
	 
	 	 	 	 
	Real Estate
	 	 	—	 
	Advance Rate
	 	 	50.0	%
	 
	 	 	 	 
	Available Real Estate
	 	 	—	 
	 
	 	 	 	 
	 
	 	 	 	 
	Borrowing Base
	 	 	—	 
	Lesser of Borrowing Base or Aggregate Revolving Loan Commitment
	 	 	—	 
	Availability Block through March 31, 2010
	 	 	5,500	 
	Maximum Revolving Loan Balance(1)
	 	 	—	 
	Less Outstanding Revolver as of XX/XX/XX
	 	 	—	 
	 
	 	 	 	 
	Excess Availability Before Loan Request
	 	 	—	 
	 
	 	 	 	 
	Borrower Requests a Loan in the Amount of
	 	 	—	 
	New Loan Balance
	 	 	—	 
	 
	 	 	 	 
	Remaining Availability
	 	 	—	 
	 
	 	 	 	 










 




			
	(1)	 	Limited to $5MM until receipt of Control Agreement(s) per Section 1.1 of Credit Agreement




This certificate is given by the undersigned, being the Chief Financial Officer of Akorn, Inc., a
Louisiana corporation (“Borrower Representative”), pursuant to Section 4.2(d) of that certain
Credit Agreement, dated as of January 7, 2009, among the Borrowers, the financial institutions
party thereto from time to time as Lenders and General Electric Capital Corporation, a Delaware
corporation, as Agent, L/C Issuer, and as a Lender (as amended, restated, supplemented or
otherwise modified from time to time the “Credit Agreement”). Capitalized terms used herein
without definition shall have the meanings set forth in the Credit Agreement.



I am the Chief Financial Officer and a Responsible Officer of the Borrower Representative and as
such am duly authorized to execute and deliver this certificate on behalf of the Borrowers. By
executing this certificate I hereby certify, in my capacity as Chief Financial Officer, to Agent
and Lenders that:



(a) Provided herein is a calculation of the Borrowing Base for the Borrowers as of the above date;



(b) based on the Borrowing Base, Availability as of the above date is:
$                    



IN WITNESS WHEREOF, the undersigned has executed and delivered this Certificate as of
this ___ day of ___, 20___.




Signature:                                                             

Name:                                                             

Title:                                                             





 









 








EXHIBIT 11.1(c)

TO

CREDIT AGREEMENT




FORM OF NOTICE OF BORROWING




GENERAL ELECTRIC CAPITAL CORPORATION

as Agent under the Credit Agreement referred to below




                          ,           




Attention:




     Re: Akorn, Inc. and certain of its Subsidiaries (the “Borrowers”)



     Reference is made to the Credit Agreement, dated as of January 7, 2009 (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among the Borrowers, Akorn, Inc. as Borrower Representative, the other Credit
Parties, the Lenders and L/C Issuers party thereto and General Electric Capital Corporation, as
agent for such Lenders and L/C Issuers. Capitalized terms used herein without definition are used
as defined in the Credit Agreement.



     The Borrower Representative, on behalf of Borrowers, hereby gives you irrevocable notice,
pursuant to Section 1.5 of the Credit Agreement of its request of a Borrowing (the
“Proposed Borrowing”) under the Credit Agreement and, in that connection, sets forth the
following information:




     THE DATE OF THE PROPOSED BORROWING IS                     , ___(THE “FUNDING DATE”).




     THE AGGREGATE PRINCIPAL AMOUNT OF REQUESTED REVOLVING LOANS IS $                    , OF WHICH
$                     CONSISTS OF BASE RATE LOANS AND $                     CONSISTS OF LIBOR RATE LOANS HAVING AN
INITIAL INTEREST PERIOD OF                      MONTHS.



     The undersigned hereby certifies that, except as set forth on Schedule A attached
hereto, the following statements are true on the date hereof and will be true on the Funding Date,
both before and after giving effect to the Proposed Borrowing and any other Loan to be made or
Letter of Credit to be Issued on or before the Funding Date:




     1. except as otherwise waived in writing by the Required Lenders, the representations
and warranties set forth in Article III of the Credit Agreement and elsewhere in
the Loan Documents are true and correct in all material respects (without duplication of
any materiality qualifier contained therein), except to the extent such representations and
warranties expressly relate to an earlier date, in which case such representations and
warranties were true and correct as of such date;



 









 






     2. no Default or Event of Default has occurred and is continuing;




     3. the aggregate outstanding amount of the Revolving Credit Exposure will not exceed
the Maximum Revolving Loan Balance; and




     4. after giving effect to such Loan and the application of the proceeds thereof on the
date of funding (including depositing such funds in a Disbursement Account so long as cash
in such Disbursement Account would not exceed (x) checks outstanding against such
Disbursement Account as of that date, plus (y) amounts necessary to meet minimum
balance requirements for such Disbursement Account), the aggregate cash and Cash
Equivalents of Borrowers and their Subsidiaries will not exceed $5,000,000.



	 	 	 	 	 
	 	AKORN, INC., as the Borrower Representative

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



 









 








EXHIBIT 11.1(d)

TO

CREDIT AGREEMENT




FORM OF REVOLVING LOAN NOTE




			
	     	 	 
	Lender: [NAME OF LENDER]

Principal Amount: $                    
	 	New York, New York

                    , 20___






     FOR VALUE RECEIVED, the undersigned, AKORN, INC., a Louisiana corporation and AKORN (NEW
JERSEY), INC. (the “Borrowers”), hereby promise to pay to the order of the Lender set forth
above (the “Lender”) the Principal Amount set forth above, or, if less, the aggregate
unpaid principal amount of all Revolving Loans (as defined in the Credit Agreement referred to
below) of the Lender to the Borrowers, payable at such times and in such amounts as are specified
in the Credit Agreement.



     The Borrowers promise to pay interest on the unpaid principal amount of the Revolving Loans
from the date made until such principal amount is paid in full, payable at such times and at such
interest rates as are specified in the Credit Agreement. Demand, diligence, presentment, protest
and notice of non-payment and protest are hereby waived by the Borrowers.



     Both principal and interest are payable in Dollars to General Electric Capital Corporation, as
Agent, at the address set forth in the Credit Agreement, in immediately available funds.



     This Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit
Agreement, dated as of January 7, 2009 (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among the Borrowers, the
other Credit Parties party thereto, the Lenders and the L/C Issuers party thereto and General
Electric Capital Corporation, as administrative agent for the Lenders and L/C Issuers. Capitalized
terms used herein without definition are used as defined in the Credit Agreement.



     The Credit Agreement, among other things, (a) provides for the making of Revolving Loans by
the Lender to the Borrowers in an aggregate amount not to exceed at any time outstanding the
Principal Amount set forth above, the indebtedness of the Borrowers resulting from such Revolving
Loans being evidenced by this Note and (b) contains provisions for acceleration of the maturity of
the unpaid principal amount of this Note upon the happening of certain stated events and also for
prepayments on account of the principal hereof prior to the maturity hereof upon the terms and
conditions specified therein.



     This Note is a Loan Document, is entitled to the benefits of the Loan Documents and is subject
to certain provisions of the Credit Agreement, including Sections 9.18(b) (Submission
to Jurisdiction), 9.20 (Waiver of Jury Trial) and 11.2 (Other
Interpretive Provisions) thereof.



     This Note is a registered obligation, transferable only upon notation in the Register, and no
assignment hereof shall be effective until recorded therein.



1









 





     This Note shall be governed by, and construed and interpreted in accordance with, the law of
the State of New York.



[$                    ] REVOLVING LOAN NOTE

OF AKORN, INC. FOR THE BENEFIT OF [NAME OF LENDER]




2









 








     IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed and delivered by its
duly authorized officer as of the day and year and at the place set forth above.



	 	 	 	 	 
	 

	 	AKORN, INC.	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 
	 
	 	 	 	 
	 

	 	AKORN (NEW JERSEY), INC.	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 
	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 







 









 








EXHIBIT 11.1(e)

TO

CREDIT AGREEMENT




FORM OF SWINGLINE NOTE




New York, New York




			
	     	 	 
	Swingline Lender: General Electric Capital Corporation 

Principal Amount: $5,000,000
	 	
                    , 2009






     FOR VALUE RECEIVED, the undersigned, AKORN, INC., a Louisiana corporation and AKORN (NEW
JERSEY), INC., an Illinois corporation (the “Borrowers”), hereby promise to pay to the
order of the Swingline Lender set forth above (the “Swingline Lender”) the Principal Amount
set forth above, or, if less, the aggregate unpaid principal amount of all Swingline Loans (as
defined in the Credit Agreement referred to below) of the Swingline Lender to the Borrowers,
payable at such times and in such amounts as are specified in the Credit Agreement.



     The Borrowers promise to pay interest on the unpaid principal amount of the Swingline Loans
from the date made until such principal amount is paid in full, payable at such times and at such
interest rates as are specified in the Credit Agreement. Demand, diligence, presentment, protest
and notice of non-payment and protest are hereby waived by the Borrowers.



     Both principal and interest are payable in Dollars to General Electric Capital Corporation, as
Agent, at the address set forth in the Credit Agreement, in immediately available funds.



     This Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit
Agreement, dated as of January 7, 2009 (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among the Borrowers, the
other Credit Parties party thereto, the Lenders, the L/C Issuer, the Swingline Lender and General
Electric Capital Corporation, as administrative agent for the Lenders and L/C Issuer. Capitalized
terms used herein without definition are used as defined in the Credit Agreement.



     The Credit Agreement, among other things, (a) provides for the making of Swing Line Loans by
the Swingline Lender to the Borrowers in an aggregate amount not to exceed at any time outstanding
the Principal Amount set forth above, the indebtedness of the Borrowers resulting from such
Swingline Loans being evidenced by this Note and (b) contains provisions for acceleration of the
maturity of the unpaid principal amount of this Note upon the happening of certain stated events
and also for prepayments on account of the principal hereof prior to the maturity hereof upon the
terms and conditions specified therein.



     This Note is a Loan Document, is entitled to the benefits of the Loan Documents and is subject
to certain provisions of the Credit Agreement, including Sections 9.18(b) (Submission
to Jurisdiction), 9.19 (Waiver of Jury Trial) and 11.2 (Other
Interpretive Provisions) thereof.



 









 





     This Note is a registered obligation, transferable only upon notation in the Register, and no
assignment hereof shall be effective until recorded therein.



     This Note shall be governed by, and construed and interpreted in accordance with, the law of
the State of New York.



[Remainder of page intentionally left blank;

signature page follows]




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     IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed and delivered by its
duly authorized officer as of the day and year and at the place set forth above.



	 	 	 	 	 	 	 
	 	 	AKORN, INC., a Louisiana corporation
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 
 
	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:
	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	AKORN (NEW JERSEY), INC., an Illinois corporation
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 






 









 








EXHIBIT 11.1(f)




ELIGIBLE ACCOUNTS




     “Eligible Accounts” shall mean all Accounts of the Borrowers reflected as accounts
receivable on the Borrowers’ balance sheet (as of the date above), but solely to the
extent of the unpaid portion of the obligations stated on the respective invoices issued
to a customer of a Borrower with respect to inventory sold and shipped or services
performed in the ordinary course of business, net of any credits, rebates, distribution
fees, cash discounts, offsets, special pricing or chargebacks owed by such Borrower to the
respective customer, excluding all Ineligible Accounts, multiplied by the Liquidity Factor




“Ineligible Accounts” shall mean, without duplication,




(a) Accounts that do not arise from the sale of goods or the performance of services by
Borrowers in the ordinary course of their business or accounts arising from the sale of
goods that have been returned;




(b) Accounts (i) upon which a Borrower’s right to receive payment is not absolute or is
contingent upon the fulfillment of any condition whatsoever or (ii) as to which a Borrower
is not able to bring suit or otherwise enforce its remedies against the Account Debtor
through judicial process, or (iii) if the Account represents a progress billing consisting
of an invoice for goods sold or used or services rendered pursuant to a contract under
which the Account Debtor’s obligation to pay that invoice is subject to a Borrower’s
completion of further performance under such contract or is subject to the equitable lien
of a surety bond issuer;




(c) Any Account to the extent that any defense, counterclaim, setoff or dispute is
asserted as to such Account, to the extent of the amount disputed;




(d) Accounts that are not true and correct statements of bona fide indebtedness incurred
in the amount of such Account for product sold to or services rendered and accepted by the
applicable Account Debtor;




(e) Accounts with respect to which an invoice, in Borrowers’ standard form previously
approved by Agent or in another form reasonably acceptable to Agent in form and substance,
has not been sent to the applicable Account Debtor;




(f) Accounts that (i) are not owned by a Borrower or (ii) are subject to any right, claim,
security interest or other interest of any other Person, other than Liens in favor of
Agent, on behalf of itself and Lenders;



 









 






(g) Accounts that arise from a sale to any director, officer, other employee or Affiliate
of any Credit Party, or to any entity that has any common officer or director with any
Credit Party;




(h) Accounts that are the obligation of an Account Debtor that is the United States
government or a political subdivision thereof, or any state, county or municipality or
department, agency or instrumentality thereof unless Agent, in its sole discretion, has
agreed to the contrary in writing and Borrowers, if necessary or desirable, have complied
with respect to such obligation with the Federal Assignment of Claims Act of 1940, or any
applicable state, county or municipal law restricting the assignment thereof with respect
to such obligation;




(i) Accounts that are the obligations of an Account Debtor located in a foreign country
other than Canada unless payment thereof is assured by a letter of credit assigned and
delivered to Agent, satisfactory to Agent as to form, amount and issuer, or Agent has
otherwise waived in writing the requirement to deliver a letter of credit with respect to
such Account;




(j) Accounts to the extent any Borrower or any Subsidiary thereof is liable for goods sold
or services rendered by the applicable Account Debtor to any Borrower or any Subsidiary
thereof but only to the extent of the potential offset;




(k) Accounts that arise with respect to goods that are delivered on a bill-and-hold,
cash-on-delivery basis or placed on consignment, guaranteed sale or other terms by reason
of which the payment by the Account Debtor is or may be conditional;




(l) Accounts that are in default; provided, that, without limiting the generality of the
foregoing, an Account shall be deemed in default upon the occurrence of any of the
following:




	 	(i)	 	the Account is not paid within the earlier of: 60 days following its due date or 90
days following its original invoice date;
	 
	 	(ii)	 	the Account Debtor obligated upon such Account suspends business, makes a general
assignment for the benefit of creditors or fails to pay its debts generally as they come
due; or
	 
	 	(iii)	 	a petition is filed by or against any Account Debtor obligated upon such Account
under any bankruptcy law or any other federal, state or foreign (including any
provincial) receivership, insolvency relief or other law or laws for the relief of
debtors;





(m) Accounts that are the obligations of an Account Debtor if 50% or more of the Dollar
amount of all Accounts owing by that Account Debtor are ineligible under the other
criteria set forth in this Exhibit 11.1(f);



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(n) Accounts as to which Agent’s Lien thereon, on behalf of itself and Lenders, is not a
first priority perfected Lien;



(o) Accounts as to which any of the representations or warranties in the Loan Documents
are untrue;



(p) Accounts that are evidenced by a judgment, Instrument or Chattel Paper;



(q) Accounts to the extent such Account exceeds any credit limit established by Agent, in
its reasonable credit judgment, following prior notice of such limit by Agent to
Borrowers;



(r) Accounts to the extent that such Account, together with all other Accounts owing to
such Account Debtor and its Affiliates as of any date of determination exceed 10% of all
Eligible Accounts (the “Concentration Limit”); provided, however, that so long as any of
the following Account Debtors have a credit rating of at least BB+/Ba1, or such other
level as Agent may agree in writing from time to time, from S&P or Moody’s assigned to
their senior, unsecured long-term debt securities, the Concentration Limit for such
Account Debtor shall be as set forth below;



	 	 	 
	 	 	Concentration
	Account Debtor	 	Limit
	AmerisourceBergen Corporation

	 	 25% of all Eligible Accounts
	McKesson Drug Company

	 	 25% of all Eligible Accounts
	Cardinal Health, Inc.

	 	 30% of all Eligible Accounts







provided, further, however, that so long as Henry Schein, Inc. owns at least 51% of GIV
and either (i) the trailing four quarter profit of Henry Schein, Inc. is at least
$50,000,000 or (ii) GIV has no past due Accounts, then the Concentration Limit for GIV
shall be 30% of all Eligible Accounts.




(s) Accounts that are payable in any currency other than Dollars; or




(t) Accounts that are otherwise unacceptable to Agent in its reasonable credit judgment of
which Borrower has been provided written notice.




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EXHIBIT 11.1(g)




ELIGIBLE INVENTORY




     “Eligible Inventory” shall mean Inventory owned by a
Borrower and located in the United States of America
(as of the date above, including adequate reserves for
obsolete, slow-moving or excess quantities), excluding
all Ineligible Inventory.




“Ineligible Inventory” shall mean, without duplication,


(a) Inventory that is not owned by a Borrower free and
clear of all Liens and rights of any other Person
(including the rights of a purchaser that has made
progress payments and the rights of a surety that has
issued a bond to assure such Borrower’s performance
with respect to that Inventory), except the Liens in
favor of Agent, on behalf of itself and Lenders;




(b) Inventory that (i) is not located on premises
owned, leased or rented by Borrowers and set forth on
Schedule IV to the Guaranty and Security Agreement,
(ii) is stored at a leased location, unless Agent has
given its prior consent thereto and unless (x) a
reasonably satisfactory landlord waiver has been
delivered to Agent, or (y) Reserves satisfactory to
Agent have been established with respect thereto,
(iii) is stored with a bailee or warehouseman unless a
reasonably satisfactory, acknowledged bailee letter
has been received by Agent or Reserves reasonably
satisfactory to Agent have been established with
respect thereto, or (iv) is located at an owned
location subject to a mortgage in favor of a lender
other than Agent, unless a reasonably satisfactory
mortgagee waiver has been delivered to Agent, or (v)
is located at any site if the aggregate book value of
Inventory at any such location is less than $100,000;




(c) Inventory that is placed on consignment or is in
transit, except Inventory in transit between domestic
locations of Borrowers as to which Agent’s Liens have
been perfected at origin and destination;




(d) Inventory that is covered by a negotiable document of title, unless such document has been delivered
to Agent with all necessary endorsements, free and clear of all Liens except those in favor of Agent and
Lenders;




(e) Inventory that is slow moving, excess, discontinued, quarantined, expired, shopworn, seconds,
damaged, obsolete, unmerchantable, defective, used, unfit for sale, having an expiration of less than six
months, not salable at prices approximating at least the cost of such Inventory in the ordinary course of
business or unacceptable due to age, type, category, quantity, and/or failure to meet applicable customer
specifications or acceptance procedures; or which does not comply with the rules or regulations of the
United States Food and Drug Administration or any similar regulatory body located in the jurisdiction in
which such Inventory is held for sale; or which is the subject of a recall;



 









 






(f) Inventory that consists of display items or packing or shipping materials, manufacturing supplies,
work-in-process Inventory, raw materials or replacement parts;




(g) Inventory that consists of goods which have been returned by the buyer;




(h) Inventory that is not of a type held for sale in the ordinary course of business of Borrowers;




(i) Inventory that is not subject to a first priority lien in favor of Agent on behalf of itself and
Lenders subject to Permitted Liens;




(j) Inventory that breaches any of the representations or warranties pertaining to Inventory set forth in
the Loan Documents;




(k) Inventory that consists of any costs associated with “freight-in” charges;




(l) Inventory that consists of Hazardous Materials or goods that can be transported or sold only with
licenses that are not readily available;




(m) Inventory that is not covered by casualty insurance maintained in accordance with the Loan Documents;




(n) Inventory that is otherwise unacceptable to Agent in its reasonable credit judgment; or




(o) Inventory subject to any licensing, trademark, trade name or copyright agreements with any third
parties which would require any consent of any third party for the sale or disposition of that Inventory
(which consent has not been obtained) or the payment of any monies to any third party upon such sale or
other disposition (to the extent of such monies).




2