Document:

exv4w2

 

Exhibit 4.2

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED
BY SUCH SECURITIES.

AKORN, INC.

WARRANT

      

			
	Warrant No. [   ]
	 	Date of Original Issuance: August [   ], 2004

     Akorn, Inc., a Louisiana corporation (the “Company”), hereby certifies
that, for value received,                      or its registered assigns (the
"Holder”), is entitled to purchase from the Company up to a total of [     ]
shares of common stock, no par value per share (the “Common Stock”), of the
Company (each such share, a “Warrant Share” and all such shares, the “Warrant
Shares”) at an exercise price equal to $3.50 per share (as adjusted from time
to time as provided in Section 9, the “Exercise Price”), at any time and from
time to time from and after the date hereof and through and including August
[     ], 2009 (the “Expiration Date”), and subject to the following terms and
conditions:

     1. Definitions. In addition to the terms defined elsewhere in this
Warrant, capitalized terms that are not otherwise defined herein shall have the
meanings given to such terms in the Subscription Agreement of even date
herewith to which the Company and the original Holder are parties (the
"Purchase Agreement”).

     2. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent actual notice to
the contrary.

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     3. Registration of Transfers. The Company shall register the transfer of
any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed,
to the Company at its address specified herein. Upon any such registration or
transfer, a new Warrant to purchase Common Stock, in substantially the form of
this Warrant (any such new Warrant, a “New Warrant”), evidencing the portion of
this Warrant so transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant
by the transferee thereof shall be deemed the acceptance by such transferee of
all of the rights and obligations of a holder of a Warrant.

     4. Exercise and Duration of Warrants. This Warrant shall be exercisable
by the registered Holder at any time and from time to time on or after the date
hereof to and including the Expiration Date. At 6:30 p.m., New York City time
on the Expiration Date, the portion of this Warrant not exercised prior thereto
shall be and become void and of no value. The Company may not call or redeem
all or any portion of this Warrant without the prior written consent of the
Holder.

     5. Delivery of Warrant Shares.

          (a) To effect exercises hereunder, the Holder shall not be required to
physically surrender this Warrant unless the aggregate Warrant Shares
represented by this Warrant is being exercised. Upon delivery of the Exercise
Notice to the Company (with the attached Warrant Shares Exercise Log) at its
address for notice set forth herein and upon payment of the Exercise Price
multiplied by the number of Warrant Shares that the Holder intends to purchase
hereunder, the Company shall promptly (but in no event later than three
business days after the Date of Exercise (as defined herein)) issue and deliver
to the Holder, a certificate for the Warrant Shares issuable upon such
exercise, which, unless otherwise required by the Purchase Agreement, shall be
free of restrictive legends. The Company shall, upon request of the Holder and
subsequent to the date on which a registration statement covering the resale of
the Warrant Shares has been declared effective by the Securities and Exchange
Commission, use its best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions, if available, provided,
that, the Company may, but will not be required to change its transfer agent if
its current transfer agent cannot deliver Warrant Shares electronically through
the Depository Trust Corporation. A “Date of Exercise” means the date on which
the Holder shall have delivered to Company: (i) the Exercise Notice (with the
Warrant Exercise Log attached to it), appropriately completed and duly signed
and (ii) if such Holder is not utilizing the cashless exercise provisions set
forth in this Warrant, payment of the Exercise Price for the number of Warrant
Shares so indicated by the Holder to be purchased.

          (b) If by the third business day after a Date of Exercise the Company
fails to deliver the required number of Warrant Shares in the manner required
pursuant to Section 5(a), then the Holder will have the right to rescind such
exercise. The Company shall indemnify and reimburse the Holder for all losses
and damages arising as a result of or related to any breach of the terms of
this Warrant by the Company or its agent, including costs and expenses
(including legal fees) incurred by such Holder in connection with the
enforcement of its rights hereunder.

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          (c) The Company’s obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and unconditional, irrespective
of any action or inaction by the Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or
any violation or alleged violation of law by the Holder or any other Person,
and irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of
Warrant Shares. Nothing herein shall limit a Holder’s right to pursue any
other remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief
with respect to the Company’s failure to timely deliver certificates
representing shares of Common Stock upon exercise of the Warrant as required
pursuant to the terms hereof.

     6. Charges, Taxes and Expenses. Issuance and delivery of certificates for
shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares or Warrants in a name other than that of the
Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.

     7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary
and reasonable indemnity (which shall not include a surety bond), if requested.
Applicants for a New Warrant under such circumstances shall also comply with
such other reasonable regulations and procedures and pay such other reasonable
third-party costs as the Company may prescribe. If a New Warrant is requested
as a result of a mutilation of this Warrant, then the Holder shall deliver such
mutilated Warrant to the Company as a condition precedent to the Company’s
obligation to issue the New Warrant.

     8. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of persons other than the Holder (taking into
account the adjustments and restrictions of Section 9). The Company covenants
that all Warrant Shares so issuable and deliverable shall, upon issuance and
the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable
and free from all taxes, liens, claims and encumbrances.

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     9. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.

          (a) Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, or (iii) combines outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of
this paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination. If any event requiring an adjustment under this
paragraph occurs during the period that an Exercise Price is calculated
hereunder, then the calculation of such Exercise Price shall be adjusted
appropriately to reflect such event.

          (b) Fundamental Transactions. If, at any time while this Warrant is
outstanding, (1) the Company effects any merger or consolidation of the Company
with or into another Person, (2) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (3)
any tender offer or exchange offer (whether by the Company or another Person)
is completed pursuant to which holders of Common Stock are permitted to tender
or exchange their shares for other securities, cash or property, or (4) the
Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (in any such case, a
"Fundamental Transaction”), then the Holder shall have the right thereafter to
receive, upon exercise of this Warrant, the same amount and kind of securities,
cash or property as it would have been entitled to receive upon the occurrence
of such Fundamental Transaction if it had been, immediately prior to such
Fundamental Transaction, the holder of the number of Warrant Shares then
issuable upon exercise in full of this Warrant (the “Alternate Consideration”).
For purposes of any such exercise, the determination of the Exercise Price
shall be appropriately adjusted to apply to such Alternate Consideration based
on the amount of Alternate Consideration issuable in respect of one share of
Common Stock in such Fundamental Transaction, and the Company shall apportion
the Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction. At the Holder’s option and request, any successor to the Company
or surviving entity in such Fundamental Transaction shall, either (1) issue to
the Holder a new warrant substantially in the form of this Warrant and
consistent with the foregoing provisions and evidencing the Holder’s right to
purchase the Alternate Consideration for the aggregate Exercise Price upon
exercise thereof, or (2) purchase the Warrant from the Holder for a purchase
price, payable in cash within five Business days after

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such request (or, if later, on the effective date of the Fundamental
Transaction), equal to the Black Scholes value of the remaining unexercised
portion of this Warrant on the date of such request. The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the provisions
of this paragraph (c) and insuring that the Warrant (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.

          (c) Number of Warrant Shares. Simultaneously with any adjustment to the
Exercise Price pursuant to paragraph (a) of this Section, the number of Warrant
Shares that may be purchased upon exercise of this Warrant shall be increased
or decreased proportionately, so that after such adjustment the aggregate
Exercise Price payable hereunder for the adjusted number of Warrant Shares
shall be the same as the aggregate Exercise Price in effect immediately prior
to such adjustment.

          (d) Calculations. All calculations under this Section 9 shall be made to
the nearest cent or the nearest 1/100th of a share, as applicable. The number
of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company, and the disposition
of any such shares shall be considered an issue or sale of Common Stock.

          (e) Notice of Adjustments. Upon the occurrence of each adjustment
pursuant to this Section 9, the Company at its expense will promptly compute
such adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment, including a statement of the
adjusted Exercise Price and adjusted number or type of Warrant Shares or other
securities issuable upon exercise of this Warrant (as applicable), describing
the transactions giving rise to such adjustments and showing in detail the
facts upon which such adjustment is based. Upon written request, the Company
will promptly deliver a copy of each such certificate to the Holder and to the
Company’s transfer agent.

          (f) Notice of Corporate Events. If the Company (i) declares a dividend or
any other distribution of cash, securities or other property in respect of its
Common Stock, including without limitation any granting of rights or warrants
to subscribe for or purchase any capital stock of the Company or any
Subsidiary, (ii) authorizes or approves, enters into any agreement
contemplating or solicits stockholder approval for any Fundamental Transaction
or (iii) authorizes the voluntary dissolution, liquidation or winding up of the
affairs of the Company, then the Company shall deliver to the Holder a notice
describing the material terms and conditions of such transaction, at least 20
calendar days prior to the applicable record or effective date on which a
Person would need to hold Common Stock in order to participate in or vote with
respect to such transaction, and the Company will take all steps reasonably
necessary in order to insure that the Holder is given the practical opportunity
to exercise this Warrant prior to such time so as to participate in or vote
with respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the
corporate action required to be described in such notice.

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     10. Payment of Exercise Price. The Holder may pay the Exercise Price in
one of the following manners:

          (a) Cash Exercise. The Holder may deliver immediately available funds; or

          (b) Cashless Exercise. The Holder may notify the Company in an Exercise
Notice of its election to utilize cashless exercise, in which event the Company
shall issue to the Holder the number of Warrant Shares determined as follows:

	 	 	 	 	 
	

	 	 	 	X = Y [(A-B)/A]
	 
	 	 	 	 
	

	 	where:	 	 
	 
	 	 	 	 
	

	 	 	 	X = the number of Warrant Shares to be issued to the
Holder.
	 
	 	 	 	 
	

	 	 	 	Y = the number of Warrant Shares with respect to which
this Warrant is being exercised.
	 
	 	 	 	 
	

	 	 	 	A = the average of the closing prices for the five
business days immediately prior to (but not including)
the Exercise Date.
	 
	 	 	 	 
	

	 	 	 	B = the Exercise Price.

For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued.

     11. No Fractional Shares. No fractional shares of Warrant Shares will be
issued in connection with any exercise of this Warrant. In lieu of any
fractional shares which would, otherwise be issuable, the Company shall pay
cash equal to the product of such fraction multiplied by the closing price of
one Warrant Share as reported by the OTC Bulletin Board® or such other
automated quotation system or national exchange on which the Common Stock is
then traded.

     12. Notices. Any and all notices or other communications or deliveries
hereunder (including, without limitation, any Exercise Notice) shall be in
writing and shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number specified in this Section prior to 6:30 p.m. (New York
City time) on a business day, (ii) the next business day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a business day
or later than 6:30 p.m. (New York City time) on any business day, (iii) the
business day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom
such notice is required to be given. The addresses for such communications
shall be: (i) if to the Company, to Akorn, Inc., Attn: Chief Financial
Officer, Facsimile No.: (847) 279-6123, or (ii) if to the Holder, to the
address or facsimile number appearing on the Warrant Register or such

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other address or facsimile number as the Holder may provide to the Company
in accordance with this Section.

     13. Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon 30 days’ notice to the Holder, the Company may appoint a new
warrant agent. Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder’s
last address as shown on the Warrant Register.

     14. Registration Rights. The Holder is entitled to the benefit of such
registration rights in respect of the Warrant Shares as are set forth in the
Purchase Agreement, including the right to assign such rights to certain
assignees, as set forth therein.

     15. Miscellaneous.

          (a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns, including, in the
case of the Company, any entity succeeding to the Company by merger,
consolidation, or acquisition of all or substantially all of the Company’s
assets. Subject to the preceding sentence, nothing in this Warrant shall be
construed to give to any Person other than the Company and the Holder any legal
or equitable right, remedy or cause of action under this Warrant. This Warrant
may be amended only in writing signed by the Company and the Holder and their
successors and assigns.

          (b) All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard
to the principles of conflicts of law thereof.

          (c) The headings herein are for convenience only, do not constitute a part
of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.

          (d) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.

	 	 	 	 	 
	

	 	AKORN, INC.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	 
	 	 	 	 
	

	 	Name:	 	 
	

	 	 	 	
 
	 
	 	 	 	 
	

	 	Title:	 	 
	

	 	 	 	
 

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AKORN, INC.

WARRANT ORIGINALLY ISSUED AUGUST [ ], 2004

WARRANT NO. [ ]

EXERCISE NOTICE

To AKORN, INC.:

	 	 	 
	o

	 	The undersigned hereby irrevocably elects to exercise the above
captioned Warrant to purchase                                         shares of Common Stock
and encloses herewith $                     in cash, certified or official bank
check or checks or other immediately available funds, which sum
represents the aggregate Exercise Price (as defined in the Warrant)
for the number of shares of Common Stock to which this Exercise
Notice relates, together with any applicable taxes payable by the
undersigned pursuant to the Warrant.
	 
	 	 
	o

	 	The undersigned hereby elects to convert       percent (     %) of the
value of the Warrant pursuant to the provisions of Section 10(b) of
the Warrant.

     The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of

	 
	PLEASE INSERT SOCIAL SECURITY OR TAX

	IDENTIFICATION NUMBER

(Please print name and address)

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Warrant Shares Exercise Log

	 	 	 	 	 	 	 
	 	 	Number of Warrant	 	 	 	Number of Warrant
	 	 	Shares Available to	 	Number of Warrant	 	Shares Remaining to
	Date
	 	be Exercised
	 	Shares Exercised
	 	be Exercised

	 

	 	 
	 	 
	 	 

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AKORN, INC.

WARRANT ORIGINALLY ISSUED AUGUST [ ], 2004

WARRANT NO. [ ]

FORM OF ASSIGNMENT

     [To be completed and signed only upon transfer of Warrant]

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto                                          the right represented by the
above-captioned Warrant to purchase                     shares of Common Stock to
which such Warrant relates and appoints                      attorney to transfer
said right on the books of the Company with full power of substitution in the
premises.

Dated:                     ,      

	 	 	 
	

	 	

(Signature must conform in all respects to
name
of holder as specified on the face of the
Warrant)
	 
	 	 
	

	 	

Address of Transferee
	 
	 	 
	 
	 	 
	

	 	

	 
	 	 
	 
	 	 
	

	 	

	 
	 	 
	

	 	   

In the presence of:

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The foregoing Warrant, dated August 18, 2004, was issued by Akorn, Inc. to each
of the following investors and for the following Warrant Shares (as defined in
the Warrant):

	 	 	 	 	 
	Investor
	 	 	Warrant Shares
	 
	Baystar Capital II, LP
	 	 	555,556	 
	Merlin BioMed Offshore Fund
	 	 	77,778	 
	Merlin BioMed Long Term Appreciation, L.P.
	 	 	33,333	 
	Millennium Partners, L.P.
	 	 	166,667	 
	Morgan Stanley & Co.
	 	 	111,111	 
	Pequot Healthcare Fund, L.P.
	 	 	228,367	 
	Pequot Healthcare Offshore Fund, Inc.
	 	 	291,622	 
	Premium Series PCC Limited Call C32
	 	 	35,567	 
	Sigma Capital Associates, LLC
	 	 	66,667exv10w1

 

Exhibit 10.1

August 5, 2004

Leerink Swann & Company

One Federal Street, 37th Floor

Boston, MA 02110

Re:      Placement Agent Services

Ladies and Gentlemen:

This letter will confirm the understanding concerning placement agent services
to be provided by Leerink Swann & Company (“Leerink”) to Akorn, Inc. (“Akorn”).
Leerink is being engaged by Akorn to help Akorn on a “best efforts” basis to
market to accredited investors a proposed investment in Akorn’s capital stock
and warrants, or other instruments deemed appropriate by Akorn, in a “PIPE”
transaction or other private placement (the “Transaction”).

Leerink agrees to assist in structuring the Transaction, in cooperation with
Akorn’s officers, directors, attorneys and accountants. Leerink’s assistance
shall include, but not be limited to: (i) assisting Akorn in determining the
price at which shares of capital stock should be offered for sale; (ii)
evaluating the advantages and disadvantages of offering warrants as a “package
deal” with the shares of capital stock sold, including a study of the various
pricing options available; (iii) collaborating with Akorn’s legal counsel in
the preparation of the subscription documents; and (iv) directing Akorn and its
officers in the sales effort prior to the actual commencement of the offering.
It is understood that execution of this agreement does not assure the
successful completion of the Transaction.

In consideration for Leerink’s services in connection with the Transaction,
Akorn shall pay Leerink six percent (6%) of the gross cash proceeds received by
Akorn from the Transaction (the “Placement Agent Fee”), payable upon the
consummation of the Transaction. If the Transaction is consummated by means of
more than one closing, Leerink shall be entitled to the fees provided herein
with respect to each such closing. Any proceeds received by Akorn upon the
exercise or conversion of any securities that are issued to investors in
connection with the Transaction shall not be included for purposes of
calculating the Placement Agent Fee and Leerink shall not be entitled to any
additional payments upon the exercise or conversion of such securities. In
addition and regardless of whether the Transaction is consummated, upon request
by Leerink from time to time, Akorn shall reimburse Leerink for all reasonable
out-of-pocket expenses incurred by Leerink in connection with its engagement
hereunder, including reasonable fees and expenses of its counsel, up to
$25,000.00 in the aggregate.

Akorn acknowledges and agrees that Leerink has been retained solely to provide
the advice or services set forth in this agreement. Leerink shall act as an
independent contractor, and any duties of Leerink arising out of its engagement
hereunder shall be owed solely to Akorn. As Leerink will be acting on your
behalf in such capacity, it is our firm practice to be indemnified in
connection with engagements of this type and Akorn agrees to the
indemnification agreement attached hereto as Exhibit A. Any advice, written or
oral, provided by Leerink pursuant to this agreement will be treated by Akorn
as confidential, will be solely for the information and

 

 

assistance of Akorn in connection with the Transaction and may not be quoted,
nor will any such advice or the name of Leerink be referred to, in any report,
document, release or other communication, whether written or oral, prepared,
issued or transmitted by Akorn or any affiliate, director, officer, employee,
agent or representative of any thereof, without, in each instance, Leerink ‘s
prior written consent.

Leerink represents and warrants that it shall comply with all rules and
regulations applicable to it in connection with the Transaction and that it is
licensed or registered as it is required to be to perform its obligations in
connection with the Transaction and agrees to maintain the effectiveness of
such license or registration throughout the term of the Transaction.

If this accurately reflects your understanding, then please execute two copies
of this agreement and return them in the envelope provided. We look forward to
working with Leerink in the successful completion of this transaction.

Sincerely,

/s/ Jeffrey A. Whitnell

Jeffrey A. Whitnell, Chief Financial Officer

	 	 	 	 	 
	Acknowledged and accepted:

	 	Leerink Swann & Company
	 
	 	 	 	 
	

	 	By:
	 	/s/ Stuart Barich
	

	 	 	 	
 
	

	 	Its:
	 	Managing Director
	

	 	 	 	
 

 

 

EXHIBIT A

     This Exhibit A is entered into pursuant to, and is made a part of, the
attached agreement (the “Agreement”) between Leerink and Akorn (the “Company”).
Capitalized terms used and not defined in this Exhibit A shall have the
meanings assigned them in the attached Agreement.

     The Company agrees to indemnify and hold harmless Leerink, its affiliates,
and each of its partners, directors, officers, consultants, employees,
advisors, representatives and controlling persons (each an “Indemnified
Person”) from and against any claims, losses, damages, expenses or liabilities
(collectively, “Losses”), including without limitation any time spent by
Leerink’s professional and legal advisors (subject to the limitations set forth
below), incurred in connection with investigating, preparing, defending,
paying, settling or compromising any action, claim or proceeding to which any
Indemnified Person may become subject and which is related to or arises out of
the engagement set forth in the Agreement or the transactions contemplated
thereby. The Company will not, however, be responsible to an Indemnified
Person with respect to any Losses to the extent that a court of competent
jurisdiction shall have determined by a final judgment not subject to further
appeal that such Losses resulted substantially from actions taken or omitted to
be taken by such or any other Indemnified Person due to the Indemnified
Person’s or any other Indemnified Person’s gross negligence, bad faith,
violation of law or willful misconduct.

     The Company will reimburse each Indemnified Person for Losses as such
Losses are incurred or paid, notwithstanding the absence of judicial
determination as to the propriety or enforceability of the Company’s obligation
to reimburse such Indemnified Person for such Losses and the possibility that
such payments might later be held by a court of competent jurisdiction to have
been improper. To the extent that any such reimbursement is so held to have
been improper, the Indemnified Person shall promptly return it to the Company,
together with interest, compounded annually, equal to the prevailing prime rate
as published from time to time by The Wall Street Journal.

     If the indemnification provided for herein should be, for any reason
whatsoever, unenforceable, unavailable or otherwise insufficient to hold each
Indemnified Person harmless, the Company shall pay to or on behalf of each
Indemnified Person contributions for Losses so that the Indemnified Person
ultimately bears only a portion of such Losses as is appropriate (i) to reflect
the relative benefits received by such Indemnified Person on the one hand and
the Company on the other hand in connection with this engagement and any
transactions contemplated hereby or (ii) if the allocation on the basis set
forth in the immediately preceding clause (i) is not permitted by applicable
law, to reflect not only the relative benefits referred to in such clause (i)
but also the relative fault of the Indemnified Person and the Company as well
as any other relevant equitable considerations; provided, however, that in no
event shall the aggregate contribution of all Indemnified Persons to all Losses
exceed the amount of the fees actually received by Leerink pursuant to the
Agreement. The respective relative benefits received by all Indemnified
Persons and the Company shall be deemed to be in the same proportion as the
aggregate fee paid to Leerink pursuant to the Agreement bears to the total
consideration paid or contemplated to be paid to, or received by, the Company
or its stockholders, as the case may be, in connection with transactions
contemplated by the Agreement, whether or not such transactions are
consummated. The relative fault of each Indemnified Person and the Company
shall be determined by reference to, among other things, whether the actions or
failures to act were by such Indemnified Person or the Company, and the
parties’ relative intent, knowledge, access to information and opportunity to

 

 

correct or prevent such action or failure to act. Notwithstanding the
foregoing, no Indemnified Person shall have any obligation to investigate or
verify the information provided to Leerink in connection with their providing
financial advisory services under the Agreement, and the Company shall be
solely liable for any Losses related to or arising out of the use of such
information that is inaccurate for any reason.

     The Company also agrees that no Indemnified Person shall have any
liability to the Company or its affiliates, directors, officers, employees,
Leerink, consultants, advisors, representatives, control persons or
stockholders, directly or indirectly, related to or arising out of the
Agreement or any transactions contemplated thereby, in connection with claims
by third parties except Losses incurred by the Company to the extent a court of
competent jurisdiction shall have determined by a final judgment not subject to
further appeal that such Losses resulted primarily from actions taken or the
failure to take actions by such Indemnified Person due to such Indemnified
Person’s gross negligence, bad faith, violation of law or willful misconduct.
In no event, regardless of the legal theory advanced, shall any Indemnified
Person be liable for any consequential, indirect, incidental or special damages
of any nature. Leerink likewise indemnifies the Company in the event of gross
negligence, bad faith, material violation of law or willful misconduct on the
part of any Leerink party, subject to the limit of the fees actually paid to
Leerink hereunder. Leerink will reimburse the Company for Losses related to
the foregoing as such Losses are paid, notwithstanding the absence of judicial
determination as to the propriety or enforceability of Leerink’s obligation to
reimburse the Company for such Losses and the possibility that such payments
might later be held by a court of competent jurisdiction to have been improper.
To the extent that any such reimbursement is so held to have been improper,
the Company shall promptly return it to Leerink, together with interest,
compounded annually, equal to the prevailing prime rate as published from time
to time by The Wall Street Journal.

     In case any proceeding shall be instituted involving any Indemnified
Person, such Indemnified Person shall promptly notify the Company in writing.
The failure of an Indemnified Person to provide such prompt notice shall not
reduce such Indemnified Person’s right to indemnification or contribution
hereunder to the extent that such failure does not materially prejudice the
ability to defend such proceeding. The Company shall retain counsel reasonably
satisfactory to Leerink to represent the Indemnified Persons and any others the
Company may designate in such proceeding, shall have sole control of the
defense of any such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person,
except to the extent that (i) the Company and the Indemnified Person shall have
mutually agreed to the retention of such counsel at the Company’s expense or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the Company or any others the Company may designate and one or
more Indemnified Persons, and representation of the Indemnified Persons and
such other parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. In any case in which one or more
Indemnified Persons are entitled to separate counsel due to such actual or
potential differing interests, the Company shall not be liable for the expenses
of more than one separate counsel, and such counsel shall be designated in
writing by Leerink. The Company shall have sole control of any settlement of
any proceeding for which it is obligated to provide indemnification hereunder.
Notwithstanding the foregoing the Company shall not, without the prior written
consent of the Indemnified Person, effect any settlement of, or consent to the
entry of any judgment in connection with, any pending

 

 

or threatened proceeding in respect of which such Indemnified Person is or
could have been a party and indemnity or contribution could have been sought
hereunder by such Indemnified Person, unless such settlement or judgment
includes an unconditional release of such Indemnified Person from all liability
on claims that are the subject matter of the proceeding.

     The obligations of the Company referred to above shall be in addition to
any rights that any Indemnified Person may otherwise have and shall inure to
the benefit of and be binding upon any successors, assigns, heirs and personal
representatives of any Indemnified Person or the Company.

	 	 	 	 	 
	Leerink Swann & Company

 	 	 
	By:  	/s/ Stuart Barich
 	 	 
	 	Stuart Barich 	 	 
	 	Managing Director

Corporate Finance 	 	 
	 

Agreed to and Accepted:

	 	 	 	 	 
	AKORN, Inc.

 	 	 
	By:  	Jeffrey A. Whitnell
 	 	 
	 	Jeffrey A. Whitnell 	 	 
	 	Chief Financial Officer 	 	 
	 

Date: August 5, 2004

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