SUBORDINATION AND INTERCREDITOR AGREEMENT

Exhibit 10.2

EXECUTION COPY

SUBORDINATION AND INTERCREDITOR AGREEMENT

     THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this “Agreement”) is entered into as of July 28, 2008, by and among THE JOHN N. KAPOOR TRUST DATED SEPTEMBER 20, 1989 (“Subordinated Creditor), AKORN, INC., a Louisiana corporation (“Akorn”), AKORN (NEW JERSEY), INC., an Illinois corporation (“Akorn New Jersey” and together with Akorn, the “Companies” and each a “Company”), and LASALLE BANK NATIONAL ASSOCIATION, as Administrative Agent for all Senior Lenders party to the Senior Credit Agreement described below.

R E C I T A L S

     A. The Companies, Administrative Agent and Senior Lenders (as hereinafter defined) have entered into a Credit Agreement, dated as of October 7, 2003 (as the same has been and may be further amended, supplemented or otherwise modified from time to time, the “Senior Credit Agreement”) pursuant to which, among other things, Senior Lenders have agreed, subject to the terms and conditions set forth in the Senior Credit Agreement, to make certain loans and financial accommodations to the Companies. All of the Companies’ obligations to Administrative Agent and Senior Lenders under the Senior Credit Agreement and the other Senior Debt Documents (as hereinafter defined) are secured by liens on and security interests in substantially all of the now existing and hereafter acquired real and personal property of the Companies (the “Collateral”).

     B. Subordinated Creditor is extending credit to the Company as evidenced by a Subordinated Promissory Note of even date herewith in the principal amount of $5,000,000.00 (the “Subordinated Note”).

     C. As one of the conditions precedent to the agreement of Administrative Agent and Senior Lenders to consent to the incurrence of the Debt evidenced by the Subordination Note, Administrative Agent and Senior Lenders have required the execution and delivery of this Agreement by Subordinated Creditor and the Companies in order to set forth the relative rights and priorities of Administrative Agent, Senior Lenders and Subordinated Creditor under the Senior Debt Documents and the Subordinated Debt Documents (as hereinafter defined).

     NOW, THEREFORE, in order to induce Administrative Agent and Senior Lenders to consent to the incurrence of the Debt evidenced by the Subordination Note, and for other good and valuable consideration, the receipt, and sufficiency of which hereby are acknowledged, the parties hereto hereby agree as follows:

1.  Definitions . The following terms shall have the following meanings in this Agreement:

     “ Administrative Agent ” shall mean LaSalle Bank National Association, as Administrative Agent for the Senior Lenders, or any other Person appointed by the holders of the Senior Debt as administrative Agent for purposes of the Senior Debt Documents and this Agreement.

     “ Bankruptcy Code ” shall mean Chapter 11 of Title 11 of the United States Code, as amended from time to time and any successor statute and all rules and regulations promulgated thereunder.

     “ Distribution ” means, with respect to any indebtedness, obligation or security, (a) any payment or distribution by any Person of cash, securities, or other property (other than payments in kind (but not in cash) of interest on the Subordinated Debt in accordance with the terms of the Subordinated Debt Documents and the issuance of the warrants or capital stock of Akorn), by set-off or otherwise, on account of such indebtedness, obligation or security, (b) any redemption, purchase or other acquisition of such indebtedness, obligation or security by any Person or (c) the granting of any lien or security interest to or for the benefit of the holders of such indebtedness, obligation or security in or upon any property of any Person.

     “ Enforcement Action ” shall mean (a) to take from or for the account of either Company or any guarantor of the Subordinated Debt, by set-off or in any other manner, the whole or any part of any moneys which may now or hereafter be owing by the Company or any such guarantor with respect to the Subordinated Debt, (b) to sue for payment of, or to initiate or participate with others in any suit, action or proceeding against either Company or any such guarantor to (i) enforce payment of or to collect the whole or any part of the Subordinated Debt or (ii) commence judicial enforcement of any of the rights and remedies under the Subordinated Debt Documents or applicable law with respect to the Subordinated Debt, (c) to accelerate the Subordinated Debt (but excluding any acceleration occurring by operation of law in connection with bankruptcy proceedings), (d) to exercise any put option or to cause either Company or any such guarantor to honor any redemption or mandatory prepayment obligation under any Subordinated Debt Document or (e) to take any action under the provisions of any state or federal law, including, without limitation, the Uniform Commercial Code, or under any contract or agreement, to enforce, foreclose upon, take possession of or sell any property or assets of the Company or any such guarantor.

     “ LaSalle Loan Documents ” shall mean the Senior Credit Agreement and all other agreements, documents and instruments executed from time to time in connection therewith, including without limitation any agreements, documents and instruments evidencing “Obligations” as such term is defined in the Senior Credit Agreement, in each case, as the same may be amended, supplemented or otherwise modified from time to time.

     “ Person ” means any natural person, corporation, general or limited partnership, limited liability company, firm, trust, association, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity.

     “ Proceeding ” shall mean any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or any other proceeding for the liquidation, dissolution or other winding up of a Person.

     “ Refinancing Senior Debt Documents ” shall mean any financing documentation which replaces the LaSalle Loan Documents and pursuant to which the Senior Debt under the LaSalle Loan Documents are refinanced, as such financing documentation may be amended, supplemented or otherwise modified from time to time in compliance with this Agreement.

     “ Senior Debt ” shall mean all obligations, liabilities and indebtedness of every nature of the Company from time to time owed to Administrative Agent or any Senior Lender under the Senior Debt Documents, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest, all “Obligations” as such term is defined in the Senior Credit Agreement and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of a Proceeding under the Bankruptcy Code together with (a) any amendments, modifications, renewals or extensions thereof to the extent not prohibited by the terms of this Agreement and (b) any interest accruing thereon after the commencement of a Proceeding, without regard to whether or not such interest is an allowed claim. Senior Debt shall be considered to be outstanding whenever any loan commitment under the Senior Debt Document is outstanding.

     “ Senior Debt Documents ” shall mean the LaSalle Loan Documents and, after any refinancing of the Senior Debt under the LaSalle Loan Documents, the Refinancing Senior Debt Documents.

     “ Senior Default ” shall mean any “Event of Default” under the Senior Debt Documents, or any condition or event that, after notice or lapse of time or both, would constitute such an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period set forth therein.

     “ Senior Lenders ” shall mean the holders of the Senior Debt.

     “ Subordinated Debt ” shall mean all of the obligations of the Companies to Subordinated Creditor evidenced by or incurred pursuant to the Subordinated Debt Documents.

     “ Subordinated Debt Documents ” shall mean the Subordinated Note and all other documents, agreements and instruments now existing or hereinafter entered into evidencing or pertaining to all or any portion of the Subordinated Debt.

     “ Subordinated Debt Default ” shall mean a default in the payment of the Subordinated Debt or in the performance of any term, covenant or condition contained in the Subordinated Debt Documents or any other occurrence permitting Subordinated Creditor to accelerate the payment of all or any portion of the Subordinated Debt.

     “ Subordinated Debt Default Notice ” shall mean a written notice from Subordinated Creditor or either Company to Administrative Agent pursuant to which Administrative Agent is notified of the occurrence of a Subordinated Debt Default, which notice incorporates a reasonably detailed description of such Subordinated Debt Default and which notice expressly states that it is a “Subordinated Debt Default Notice” hereunder.

2. Subordination .

     2.1 Subordination of Subordinated Debt to Senior Debt . Each Company covenants and agrees, and Subordinated Creditor by its acceptance of the Subordinated Debt Documents (whether upon original issue or upon transfer or assignment) likewise covenants and agrees, notwithstanding anything to the contrary contained in any of the Subordinated Debt Documents, that the payment of any and all of the Subordinated Debt shall be subordinate and subject in right and time of payment, to the extent and in the manner hereinafter set forth, to the prior indefeasible payment in full in cash of all Senior Debt. Each holder of Senior Debt, whether such Senior Debt is now outstanding or hereafter created, incurred, assumed or guaranteed, shall be deemed to have acquired Senior Debt in reliance upon the provisions contained in this Agreement.

     2.2 Liquidation, Dissolution, Bankruptcy . In the event of any Proceeding involving the Company:

     (a) All Senior Debt shall first be indefeasibly paid in full in cash and all commitments to lend under the Senior Debt Documents shall be terminated before any Distribution, whether in cash, securities or other property, shall be made to Subordinated Creditor on account of any Subordinated Debt.

     (b) Any Distribution, whether in cash, securities or other property which would otherwise, but for the terms hereof, be payable or deliverable in respect of the

Subordinated Debt shall be paid or delivered directly to Administrative Agent (to be held and/or applied by Administrative Agent in accordance with the terms of the Senior Debt Documents) until all Senior Debt is indefeasibly paid in full in cash and all commitments to lend under the Senior Debt Documents shall have been terminated. Subordinated Creditor irrevocably authorizes, empowers and directs any debtor, debtor in possession, receiver, trustee, liquidator, custodian, conservator or other Person having authority, to pay or otherwise deliver all such Distributions to Administrative Agent. Subordinated Creditor also irrevocably authorizes and empowers Administrative Agent, in the name of Subordinated Creditor, to demand, sue for, collect and receive any and all such Distributions.

     (c) Subordinated Creditor agrees not to initiate, prosecute, or participate in any claim, action, or other proceeding challenging the enforceability, validity, perfection, or priority of the Senior Debt or any liens and security interests securing the Senior Debt.

     (d) Subordinated Creditor agrees to execute, verify, deliver and file any proofs of claim in respect of the Subordinated Debt requested by Administrative Agent in connection with any such Proceeding and hereby irrevocably authorizes, empowers and appoints Administrative Agent its Administrative Agent and attorney-in-fact to (i) execute, verify, deliver and file such proofs of claim upon the failure of Subordinated Creditor promptly to do so prior to 30 days before the expiration of the time to file any such pr