10,000,000 CREDIT FACILITY AMENDED AND RESTATED CREDIT AGREEMENT

Exhibit 10.1

EXECUTION COPY

$10,000,000 CREDIT FACILITY

AMENDED AND RESTATED CREDIT AGREEMENT

Dated as of August 17, 2009

by and among

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

as Borrowers,

THE OTHER PERSONS PARTY HERETO THAT ARE
DESIGNATED AS CREDIT PARTIES

EJ FUNDS LP
for itself, as a Lender and as the Agent for all Lenders,

THE OTHER FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO

as Lenders

(amending and restating the Credit Agreement
dated as of January 7, 2009)

Table of Contents

SCHEDULES

EXHIBITS

AMENDED AND RESTATED CREDIT AGREEMENT

     This AMENDED AND RESTATED 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 August 17, 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”, EJ Funds LP, a Delaware limited partnership (successor to General Electric Capital Corporation, a Delaware corporation (“GE Capital”) and herein, in its individual capacity, “EJ Funds”) 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, and such Lenders.

WITNESSETH:

     WHEREAS, Borrowers and GE Capital, as agent and a lender, entered into a Credit Agreement dated as of January 7, 2009 (as amended by the Modification Agreement, the “Original Credit Agreement”), pursuant to which, (a) the Borrowers requested, and the lenders 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 the Original Credit Agreement to (i) refinance Prior Indebtedness (as defined in the Original Credit Agreement), (ii) provide for working capital and other general corporate purpose of the Borrowers and (iii) fund certain fees and expenses associated with the Loans (as defined in the Original Credit Agreement), (b) the Borrowers secured all of their Obligations (as defined in the Original Credit Agreement) by granting a security interest in and lien upon substantially all of their personal and real property to the agent for the benefit of the lenders and (c) each of the Borrowers’ Subsidiaries guaranteed all of the Obligations (as defined in the Original Credit Agreement) of the Borrowers and granted a security interest in and lien upon substantially all of their personal and real property to the agent for the benefit of the lenders;

     WHEREAS, pursuant to an Assignment Agreement dated as of March 31, 2009 between GE Capital and EJ Funds, EJ Funds became the agent and lender to Borrowers under the Original Credit Agreement;

     WHEREAS, on April 13, 2009, Borrower entered into a Modification, Warrant and Investor Rights Agreement (the “Modification Agreement”) with EJ Funds that, among other things, modified certain provisions of the Original Credit Agreement and reduced the Aggregate Revolving Loan Commitment from $25,000,000 to $5,650,000 and provided EJ Funds with certain other rights as set forth therein;

     WHEREAS, on April 13, 2009, pursuant to the Modification Agreement, Akorn issued to EJ Funds a common stock purchase warrant (the “Modification Warrant”) to purchase 1,939,639 shares of Common Stock of Akorn, subject to certain registration rights set forth in the Modification Agreement;

     WHEREAS, the Agent and each of the Lenders have agreed to renew, amend and restate the credit facilities set forth in the Original Credit Agreement, in the manner set forth in this

Agreement to, among other things, increase the Aggregate Revolving Loan Commitment from $5,650,000 to $10,000,000, eliminate the letter of credit subfacility, temporarily suspend the financial covenants to the extent reflected herein and to otherwise reflect that EJ Funds is currently the sole lender and agent, and it has been agreed by the parties that the Revolving Loan Exposure as of the Restatement Effective Date, the accrued but unpaid balance thereon and any and all other “Obligations” under (and as defined in) the Original Credit Agreement as of the Restatement Effective Date shall be governed by and deemed to be outstanding under this Agreement, with the intent that the terms of this Agreement shall supersede the terms of the Original Credit Agreement as of the Restatement Effective Date, provided that (a) the grants of security interests, Mortgages and Liens under and pursuant to the Loan Documents (as such term is defined in the Original Credit Agreement) shall continue unaltered and remain in full force and effect with no novation of any obligations secured thereby or arising thereunder, (b) each Loan Document (as such term is defined in the Original Credit Agreement) other than the Original Credit Agreement shall continue in full force and effect in accordance with its terms except as expressly amended thereby or hereby, and the parties hereby ratify and confirm the terms thereof as being in full force and effect and unaltered by this Agreement, and (c) this Agreement does not constitute a novation, satisfaction, payment or reborrowing of the Revolving Loan Exposure as of the Restatement Effective Date, all accrued but unpaid interest thereon or any other obligation under any the Original Credit Agreement or any other Loan Document (as such term is defined in the Original Credit Agreement), nor does it operate as a waiver of any right, power or remedy of any Lender, any Agent or any other Person under any Loan Document (as such term is defined in the Original Credit Agreement)other than the Original Credit Agreement; and

     WHEREAS, in connection with this Agreement, Akorn is issuing to EJ Funds a common stock purchase warrant (the “Restatement Warrant”) to purchase an aggregate of 1,650,806 shares of Common Stock of Akorn, subject to registration and other rights set forth in a Registration Rights Agreement dated as of the date hereof between Akorn and EJ Funds (the “Registration Rights Agreement”).

     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 Restatement Effective 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.

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 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 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 bear interest at the Interest Rate; 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) Reserved .

          (d) Reserved .

     1.2 Notes . 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.

     1.3 Interest .

          (a) Each Loan shall bear interest on the outstanding principal amount thereof from the date when made at a rate per annum equal to ten percent (10%) (the “Interest Rate”). Each calculation of interest 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 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 rate per annum applicable to Revolving Loans. 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 Original Closing Date as otherwise provided in this Agreement.

     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, if there is more than one Lender or if the sole Lender is not the Agent, 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 in the Revolving Loans, each of their obligations under this Agreement to participate in each Loan 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 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, (4) the amount of any principal or interest due and payable or paid, (5) 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) are registered obligations, and the right, title and interest of the Lenders and their assignees in and to such Loans, 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 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 shall treat each Person whose name is recorded in the Register as a Lender, as applicable, for all purposes of this Agreement. Information contained in the Register with respect to any Lender shall be available for access by the Borrowers, the Borrower Representative, the Agent or such Lender at any reasonable time and from time to time upon reasonable prior notice. No Lender 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 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 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) no later than the third Business Day prior to the requested Borrowing date. 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); and

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

          (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.

          (c) Unless the Agent is otherwise directed in writing by the Borrower Representative, the proceeds of each requested Borrowing after the Restatement Effective 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 Reserved .

     1.7 Optional Prepayments and Revolving Loan Commitment Reductions .

          (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 in each instance, without penalty or premium.

          (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.

          (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 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) 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 shall simultaneously be permanently reduced or terminated, as the case may be.

     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 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;

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 . Any prepayments pursuant to Subsection 1.8(c) or 1.8(d) shall be applied to prepay outstanding Revolving Loans, effective as of the date that such prepayment is made, without permanent reduction of the Revolving Loan Commitments. 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 . Except during any period during which EJ Funds and/or any of its Affiliates is/are the sole Lender or Lenders under this Agreement, 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 as of the date of the Original Credit Agreement (as amended from time to time, the “Fee Letter”).

          (b) Unused Commitment Fee . Except during any period during which EJ Funds and/or any of its Affiliates is/are the sole Lender or Lenders under this Agreement, 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

          (ii) the average daily balance of all Revolving Loans outstanding 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 the date on which any Person other than EJ Funds and/or any of its Affiliates becomes a Lender under this Agreement until the Revolving Termination Date.

          (c) Reserved .

          (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-half of one percent (0.50%), in the case of any reduction or termination of the Revolving Loan Commitments made after the Restatement Effective Date but on or prior to January 7, 2010, and (y) 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 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 to pay (i) interest, principal, agent fees, Unused Commitment 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) 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;

      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 and Lenders;

      fourth , to payment of principal of the Obligations;

      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 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 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, 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.

     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 Restatement Effective 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 Restatement Effective 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 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 Restatement Effective 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 Restatement Effective 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, subject to the rights of the Lenders and Agent in their sole and absolute discretion to deny such requests as set forth in this Section 1.16, 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 all or any portion of the Incremental Revolver pursuant to subsection (a) of this Section 1.16 , the Agent may in its sole and absolute discretion (i) designate another bank or other financial institution (which may be, but need not be, one or more of the existing Lenders) (an “Additional Lender”) or (ii) deny all or any portion of the requested Incremental Revolver amount.

          (c) In the event that the Borrowers desire to increase the Commitments by the Incremental Revolver and the Lenders and Agent approve such request in their sole and absolute discretion as set forth in Section 1.16(a) and (b), 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 .

     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, delivering certificates including Compliance Certificates, giving instructions with respect to the disbursement of the proceeds of the Loans, 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 .

     (a) The agreement of each Lender under the Original Credit Agreement to make the initial Loans on the Original Closing Date was subject to satisfaction of conditions precedent set forth in Section 2.1 of the Original Credit Agreement. As of the Restatement Effective Date, there is outstanding $[                      ] in principal amount of Loans, plus accrued but unpaid interest in the amount of $[                      ] thereon.

     (b) This Agreement shall be effective on the Restatement Effective Date, subject to satisfaction of the following conditions:

(i) Loan Documents . The Agent shall have received on or before the Restatement Effective 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;

(ii) Fees and Expenses. Borrowers shall have paid the Fees required to be paid on the Restatement Effective 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 Restatement Effective Date.

(iii) Representations and Warranties . Except as may be waived in writing by the Required Lenders, all representations and warranties by any Credit Party contained herein or in any other Loan Document shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of the Restatement Effective Date, except to the extent that such representation or warranty expressly relates to an earlier date (in which event such representations and warranties shall be true and correct as of such earlier date).

(iv) No Default or Event of Default . No Default or Event of Default shall have occurred and/or be continuing as of the Restatement Effective Date, or would result after giving effect to the making of any Loan to be made on the Restatement Effective Date.

     2.2 Conditions to All Borrowings . Except as otherwise expressly provided herein, no Lender shall be obligated to fund any Loan, 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 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, and Agent or Required Lenders shall have determined not to make any Loan as a result of that Default or Event of Default;

          (c) after giving effect to any Loan, 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 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 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:

          (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 Restatement Effective 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 Original 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 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 each of the Original Closing Date and the Restatement Effective 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 . After giving effect to this Agreement, 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 Restatement Effective 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 each of the Original Closing Date and the Restatement Effective 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.

     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 each of the Original Closing Date and the Restatement Effective 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 each of the Original Closing Date and the Restatement Effective 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, 2008 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 consolidated balance sheet of the Borrowers and their Subsidiaries dated June 30, 2009 and the related unaudited consolidated statements of income, shareholders’ equity and cash flows for the six months then ended:

     (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, 2008, except for certain actions taken by GE Capital which limited availability under the Original Credit Agreement, 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 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 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 each of the Original Closing Date and the Restatement Effective 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 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 each of the Original Closing Date and the Restatement Effective 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 Original 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.

          (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.

          (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;

          (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 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 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;

          (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 Restatement Effective 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 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.

     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;

          (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, 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 Restatement Effective 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

          (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 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.

          (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 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 . On or after the Restatement Effective Date, the Borrowers shall use the proceeds of the Loans solely 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 . Borrowers 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 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 Reserved .

     4.15 Licensor Consents . With respect to any agreements or licenses executed by the Borrowers after the Original 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 . From and after the Restatement Effective 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 .

     4.17 Board Representation .

          (a) In addition to and not in lieu of board representation rights provided for in Section 2(a) of that certain Stock Purchase Agreement dated November 15, 1990 between Akorn and The John N. Kapoor Trust dated September 20, 1989, for so long as EJ Funds and its Affiliates in the aggregate hold shares of Common Stock representing five percent (5%) or more of the issued and outstanding shares of Common Stock of Akorn, EJ Funds shall have the right to designate or nominate (as applicable) two (2) directors (one of whom, Brian Tambi, has been so designated) to serve on Akorn’s Board of Directors (such Persons designated by EJ Funds, together with any successor designee(s) that may be designated by EJ Funds from time to time, the “EJ Funds Designees”).

          (b) With respect to each shareholder election of directors of Akorn after the Restatement Effective Date, including at each annual or special meeting of shareholders of Akorn at which directors are elected, Akorn shall cause its Board of Directors and management to (i) include each of the EJ Funds Designees in the slate of nominees recommended by the Board of Directors to Akorn’s shareholders for election as directors, (ii) recommend to its shareholders that they vote for the EJ Funds Designees as directors of Akorn, (iii) vote all proxies it may hold in favor of the election of the EJ Funds Designees, except as otherwise directed by any shareholder who submits such proxy and (iv) use its best efforts to cause the EJ Funds Designees to be elected as directors.

          (c) Akorn shall take no action that would cause its Board of Directors to exceed fifteen in number without the consent of EJ Funds.

          (d) Notwithstanding the foregoing, Akorn shall not be required to nominate any EJ Funds Designees that may not, by virtue of any state or federal laws or rules of any exchange upon which Akorn’s securities are listed or traded become a director of Akorn.

          (e) Notwithstanding any provision to the contrary contained herein, the provisions of this Section 4.17 shall be personal to Akorn and shall survive the termination of this Agreement or any assignment of this Agreement by EJ Funds.

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 Original 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;

          (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;

          (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;

          (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; and

          (q) Liens securing the Subordinated Note subject to the Subordination Agreement; and

          (r) Liens securing Borrower’s obligations under the Reimbursement and Warrant Agreement dated as of April 15, 2009 among the Borrowers and the John N. Kapoor Trust dated September 20, 1989.

     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.

     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 Original Closing Date and set forth on Schedule 5.4 .

     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 Original 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) this Agreement and 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.

     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 Original 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; and

          (g) 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 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 the stated maturity date of the Subordinated Note.

     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 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 Reserved .

     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

     Commencing on April 1, 2010, each Credit Party covenants and agrees that:

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

     “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 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:

     “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 $2,500,000 at all times on or after April 1, 2010. “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):

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”:

          (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 (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 u