SUBORDINATED PROMISSORY
NOTE
THIS
INSTRUMENT AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE
SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT
CERTAIN SUBORDINATION AND INTERCREDITOR AGREEMENT (THE
“SUBORDINATION AGREEMENT”) DATED AS OF JULY 28, 2008,
AMONG THE JOHN N. KAPOOR TRUST DATED SEPTEMBER 20, 1989, AKORN,
INC. (“AKORN”), AKORN (NEW JERSEY), INC., (“AKORN
NEW JERSEY” AND TOGETHER WITH AKORN, THE
“COMPANIES”, AND EACH A “COMPANY”) AND
LASALLE BANK NATIONAL ASSOCIATION (“ADMINISTRATIVE
AGENT”), TO THE INDEBTEDNESS (INCLUDING INTEREST) OWED BY THE
COMPANIES PURSUANT TO THAT CERTAIN CREDIT AGREEMENT DATED AS OF
OCTOBER 7, 2003 AMONG THE COMPANIES, ADMINISTRATIVE AGENT AND THE
LENDERS FROM TIME TO TIME PARTY THERETO, AS SUCH CREDIT AGREEMENT
HAS BEEN AND HEREAFTER MAY BE AMENDED, SUPPLEMENTED OR OTHERWISE
MODIFIED FROM TIME TO TIME AND TO INDEBTEDNESS REFINANCING THE
INDEBTEDNESS UNDER THAT AGREEMENT AS CONTEMPLATED BY THE
SUBORDINATION AGREEMENT; AND EACH HOLDER OF THIS INSTRUMENT, BY ITS
ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE BOUND BY THE PROVISIONS
OF THE SUBORDINATION AGREEMENT.
THIS
SUBORDINATED PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT
”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE OFFERED, SOLD, ENCUMBERED OR OTHERWISE
TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND SUCH STATE SECURITIES LAWS, OR AN EXEMPTION FROM
REGISTRATION THEREUNDER.
FOR VALUE
RECEIVED, AKORN, INC., a Louisiana corporation (“
Akorn ”) and AKORN (NEW JERSEY), INC., an Illinois
corporation (“ Akorn New Jersey ”) and
collectively with Akorn, the “ Makers ” and each
a “ Maker ”), hereby promise jointly and
severally to pay to the order of THE JOHN N. KAPOOR TRUST DATED
SEPTEMBER 20, 1989, or its permitted successors or assigns (“
Payee ”), the aggregate principal sum of FIVE
MILLION DOLLARS ($5,000,000) on the terms and conditions set
forth below, and to pay to Payee interest on the unpaid principal
balance hereof at the rate and on the terms and conditions set
forth herein.
1.
Payment of Principal . The principal amount of this
Subordinated Promissory Note (the “ Note ”),
together with all unpaid interest accrued hereon, shall be due and
payable on the one year anniversary of the date hereof (the “
Maturity Date ”).
2.
Payment of Interest . The unpaid principal balance due
hereunder shall bear interest at a fixed annual rate (based on a
360-day year) of fifteen percent (15%) (the “ Interest
Rate ”) and such interest shall accrue quarterly in
arrears (each, whether at the Interest Rate or Default Interest
Rate (as defined below), an “Interest Payment” )
on the 28 th
day of each January,
CHI : 2118073.6
April, July and
October (each, an “Interest Payment Date” )
commencing on October 28, 2008; provided that upon the
occurrence of a Default, the outstanding principal balance
hereunder shall accrue at a fixed annual rate (based on a 360-day
year) of twenty percent (20%) (the “ Default Interest
Rate ”). All accrued interest (including default
interest) under this Note shall be paid in kind, and the amount of
each Interest Payment shall be added to the outstanding principal
balance of this Note on such Interest Payment Date and, thereafter,
for all purposes under this Note, references to the
“principal amount” of this Note shall include the
amount of any Interest Payment that has been added to the
outstanding principal balance of this Note.
3.
Subordination . Pursuant to the terms of the Subordination
and Intercreditor Agreement dated as of the date hereof (as
amended, restated, modified or replaced from time to time, the
“ Subordination Agreement ”) among Makers, Payee
and the senior lenders to Makers, this Note and the indebtedness
evidenced hereby shall at all times be and remain subordinated to
any indebtedness owed to such senior lenders (any such
indebtedness
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