AKORN INC
FORM OF SUBORDINATION AND INTERCREDITOR AGREEMENT
<DOCUMENT>
<TYPE>EX-10.10
<SEQUENCE>12
<FILENAME>c80364exv10w10.txt
<DESCRIPTION>FORM OF SUBORDINATION AND INTERCREDITOR AGREEMENT
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.10

                    SUBORDINATION AND INTERCREDITOR AGREEMENT
         (LaSalle Bank National Association/Argent Fund Management Ltd.)


      THIS SUBORDINATION AND INTERCREDITOR AGREEMENT dated as of October 7, 2003
(as amended, supplemented or otherwise modified from time to time, this
"Agreement") is entered into among AKORN, INC., a Louisiana corporation
("Akorn"), AKORN (NEW JERSEY), INC., an Illinois corporation ("Akorn NJ";
together with Akorn, each a "Company" and collectively, the "Companies"),
LASALLE BANK NATIONAL ASSOCIATION, as Senior Agent (as hereinafter defined) for
Senior Lenders under the Credit Agreement (as hereinafter defined), and ARGENT
FUND MANAGEMENT LTD. (the "Subordinated Lender").

                                    RECITALS

      A. The Senior Agent, certain financial institutions (together with the
successors and assigns thereof, "Senior Lenders") and the Companies have entered
into a Credit Agreement, dated as of the date hereof (as from time to time
amended, modified, extended, renewed, refinanced, or restated, the "Credit
Agreement"), together with the other Loan Documents (as defined in the Credit
Agreement), whereby the Senior Lenders have made and shall make available to
each of the Companies certain loans and other financial accommodations therein
set forth. All of the Companies' obligations under the Senior Loan Documents (as
hereinafter defined) are secured by assignments of and security interests in
substantially all of the now or hereafter acquired assets of the Companies and
their Subsidiaries, all as more fully set forth in the Loan Documents.

      B. Akorn has issued Subordinated Promissory Note of even date herewith in
the principal amount of $50,000.00 (the "Subordinated Note", together with all
guarantees and other documents or instruments executed in connection therewith
(as from time to time modified, extended, renewed, refinanced or restated to the
extent permitted by the terms of this Agreement, collectively the "Subordinated
Documents")) in favor of the Subordinated Lender.

      C. As a condition of the financing accommodations under the Loan
Documents, the parties hereto are required to enter into this Agreement to
establish the relative rights and priorities of the Senior Agent, the Senior
Lenders and the Subordinated Lender under the Senior Loan Documents and the
Subordinated Documents.

      D. The Subordinated Lender will benefit from the financing accommodations
made by the Senior Lenders under the Credit Agreement and the other Loan
Documents. The Subordinated Lender and the Companies desire to enter into this
Agreement in order to induce the Senior Lenders to enter into the Credit
Agreement. The Subordinated Lender acknowledges that the Senior Lenders would
not enter into the Senior Loan Documents but for the execution of this
Agreement.
<PAGE>
      In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:

      1. Definitions. Except as otherwise provided herein, all capitalized terms
used in this Agreement shall have the meanings ascribed to such terms in the
Credit Agreement, provided that the following terms shall have the meanings set
forth below:

      "Bankruptcy Code" means Title 11 of the United States Code (11
U.S.C.Section101 et. seq.) or any replacement or supplemental federal statute
dealing with the bankruptcy of debtors.

      "Company" and "Companies" shall have the meaning set forth in the preamble
hereof.

      "Company Property" means all assets, property and property rights, of any
kind or nature, tangible or intangible, now or hereafter existing, in which
either Company or any Obligor owns, asserts or maintains an interest.

      "Credit Agreement" shall have the meaning set forth in the recitals
hereof.

      "Finally Paid" or "Final Payment," when used in connection with the Senior
Indebtedness, means the full and indefeasible payment in cash of all of the
Senior Indebtedness and the irrevocable termination of all Commitments of all
the Senior Lenders under the Senior Loan Documents.

      "Liens" means any mortgage, deed of trust, pledge, lien, security
interest, charge, set-off right or other encumbrance, whether now existing or
hereafter created, acquired or arising.

      "Obligor" means any guarantor or obligor of any Senior Indebtedness.

      "Proceeding" means any voluntary or involuntary proceeding commenced by or
against either Company or any Obligor under any provision of the Bankruptcy
Code, or under any other bankruptcy or insolvency law, including assignments for
the benefit of creditors, formal or informal moratoria, compositions, extensions
generally with its creditors, or proceedings seeking dissolution, receivership,
reorganization, arrangement, or other similar relief.

      "Senior Agent" means LaSalle Bank National Association, as Administrative
Agent for Senior Lenders, or any other Person appointed by the holders of the
Senior Indebtedness as administrative agent for purposes of the Senior Loan
Documents and this Agreement, together with the successors and assigns of all of
the foregoing.

      "Senior Indebtedness" means all obligations, liabilities and indebtedness
of every nature of either Company or any Obligor from time to time owed to the
Senior Agent or any Senior Lender under the Senior Loan Documents, including the
principal amount of all debts, claims and indebtedness, accrued and unpaid
interest and all premium, fees, costs and expenses, whether primary, secondary,
direct, contingent, fixed or otherwise, heretofore, now and from time to time
hereafter owing, due or payable, whether before or after the filing of a
Proceeding,


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<PAGE>
including any Hedging Obligations and Bank Product Obligations at any time due
and owing to any Senior Lender, together with (a) any indebtedness which
refinances such principal, interest or other obligations and any amendments,
modifications, renewals, restatements, refinancings or extensions thereof and
(b) any interest accruing thereon after the commencement of a Proceeding,
without regard to whether or not such interest is allowed in any Proceeding.
Senior Indebtedness shall be deemed to be outstanding until it is Finally Paid.

      "Senior Loan Documents" means the Credit Agreement, the other Loan
Documents and all other agreements, documents and instruments executed from time
to time in connection therewith, in each case as from time to time renewed,
extended, amended, restated or modified and all agreements and instruments
evidencing full or partial refundings or refinancings of the indebtedness
thereunder.

      "Subordinated Indebtedness" means all obligations, liabilities and
indebtedness of every nature of either Company or any Obligor from time to time
owed to the Subordinated Lender under the Subordinated Documents, including the
principal amount of all debts, claims and indebtedness, accrued and unpaid
interest and all premium, fees, costs and expenses, whether primary, secondary,
direct, contingent, fixed or otherwise, heretofore, now and from time to time
hereafter owing, due or payable under or in respect of the Subordinated
Documents, whether before or after the filing of a Proceeding (including any
amounts payable by either Company or any Obligor in connection with put,
redemption, repurchase or repurchase rights under any warrants or any Capital
Securities of either Company or any Obligor held by the Subordinated Lender),
together with (a) any amendments, modifications, renewals, restatements,
refinancings or extensions thereof and (b) any interest accruing thereon after
the commencement of a Proceeding, without regard to whether or not such interest
is allowed in any Proceeding.

      "Subordinated Lender Remedies" means any action (a) to take from or for
the account of either Company, any Obligor, any other guarantor of the
Subordinated Indebtedness or any other Person, by set-off or in any other
manner, the whole or any part of any moneys which may now or hereafter be owing
by either Company (other than receipt of payments of Subordinated Indebtedness
to the extent permitted by this Agreement), any Obligor, any such guarantor or
any other Person with respect to the Subordinated Indebtedness, (b) to sue for
payment of, or to initiate or participate with others in any suit, action or
proceeding (including any Proceeding) against either Company, any Obligor, any
such guarantor or any other Person to (i) enforce payment of or to collect the
whole or any part of the Subordinated Indebtedness or (ii) commence judicial
enforcement of any of the rights and remedies under the Subordinated Documents
or applicable law with respect to the Subordinated Indebtedness, (c) to
accelerate the Subordinated Indebtedness, (d) to exercise any put, repurchase or
similar option or to cause either Company, any Obligor, any such guarantor or
any other Person to honor any redemption or mandatory prepayment obligation
under any Subordinated Document or (e) to take any action under the provisions
of any state or federal law, including the UCC, or under any contract or
agreement, to enforce, foreclose upon, take possession of or sell any Company
Property or any property or assets of any such guarantor or any other Person.

      "Subordinated Lender" shall have the meaning set forth in the preamble
hereof.


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<PAGE>
      "Subordinated Note" shall have the meaning set forth in the recitals
hereof.

      "UCC" means Article 9 of the Uniform Commercial Code, as in effect in any
relevant jurisdiction.

      2. Subordination of Subordinated Indebtedness to Senior Indebtedness. Each
Company covenants and agrees, and the Subordinated Lender by its acceptance of
the Subordinated Documents (whether upon original issue or upon transfer or
assignment) likewise covenants and agrees, notwithstanding anything to the
contrary contained in any of the Subordinated Documents, that the payment of any
and all of the Subordinated Indebtedness shall be subordinate and subject in
right and time of payment, to the extent and in the manner hereinafter set
forth, to the Final Payment of all Senior Indebtedness; provided that the
foregoing shall in no way limit the ability of each company to pay the amounts
detailed in the proviso to Section 6 below. Each holder of Senior Indebtedness,
whether now outstanding or hereafter created, incurred, assumed or guaranteed,
shall be deemed to have acquired Senior Indebtedness in reliance upon the
provisions contained in this Agreement.

      3. Subordination of Liens.

      (a) The Subordinated Lender hereby covenants and agrees that any Liens and
rights of any kind the Subordinated Lender may now have and hereafter acquire
(or be deemed to now have or hereafter acquire) against either Company or any
Obligor and/or any Company Property, if any, shall be subordinate and subject to
the Liens and rights against either Company, Obligors and/or Company Property of
the Senior Lenders arising from or out of the Senior Indebtedness, regardless of
the order, time or manner in which any Liens attach to or are perfected in any
Company Property.

      (b) If (x) either Company or any Obligor, as the case may be, desires to
make any distribution or payment or to sell any Company Property as to which the
Senior Lenders have provided their written consent or which is otherwise
permitted under the Senior Loan Documents or (y) the Senior Lenders release
their Lien in connection with any sale or disposition of any Company Property,
the Subordinated Lender shall be deemed to have consented to such disposition
and shall execute such releases with respect to such Company Property to be sold
as the Senior Agent or the Senior Lenders request to evidence the release of any
Lien against such property the Subordinated Lender may have or be deemed to
have. The Subordinated Lender hereby irrevocably appoints the holders of the
Senior Indebtedness, or the Senior Agent on their behalf, as the true and lawful
attorneys of the Subordinated Lender for the purpose of executing and filing any
such releases. The Subordinated Lender hereby waives any rights the Subordinated
Lender has or may have in the future to object to the appointment of a receiver
for all or any portion of the equity or the assets of either Company or any
Obligor or to require any Senior Lender to marshal the collateral and agrees
that each Senior Lender may proceed against the collateral in any order that it
deems appropriate in the exercise of its absolute discretion.

      4. Warranties and Representations of Companies and Subordinated Lender.


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      (a) Each Company and the Subordinated Lender hereby severally represent
and warrant to the Senior Lenders that each Senior Lender has been furnished
with a true and correct copy of all instruments and securities in existence as
of the date hereof evidencing or pertaining to the Subordinated Indebtedness.

      (b) Each Company hereby represents and warrants to the Senior Lenders that
this Agreement has been duly executed and delivered by each Company and
constitutes a legal, valid and binding obligation of each Company enforceable in
accordance with its terms except to the extent that the enforceability thereof
may be limited by any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect affecting generally the
enforcement of creditors' rights and remedies and general principles of equity.

      (c) The Subordinated Lender represents and warrants to the Senior Lenders:
(i) that this Agreement has been duly executed and delivered by the Subordinated
Lender and constitutes a legal, valid and binding obligation of the Subordinated
Lender enforceable against the Subordinated Lender in accordance with its terms,
except to the extent that the enforceability thereof may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect affecting generally the enforcement of creditors'
rights and remedies and general principles of equity, (ii) that the Subordinated
Lender has not relied and shall not rely on any representation or information of
any nature made by or received from any Senior Lender relative to either Company
or any Obligor in deciding to execute this Agreement or to permit it to continue
in effect (iii) that the Subordinated Lender is the current holder of the
Subordinated Indebtedness.

      (d) Notwithstanding anything contained in this Agreement to the contrary,
the Subordinated Lender hereby represents and warrants to the Senior Agent and
each Company that the Subordinated Lender has no security interest in or Lien on
any assets of either Company or any Obligor or any Company Property.

      5. Negative Covenants. Until all of the Senior Indebtedness has been
Finally Paid: (A) the Subordinated Lender shall not demand, accept or acquire
from either Company or any Obligor any security interest in or Lien on any
assets of either Company or any Obligor or any Company Property, nor any
collateral from either Company or any Obligor; (B) neither Company shall
discharge the Subordinated Indebtedness other than in accordance with the terms
of the Subordinated Documents; (C) the Subordinated Lender shall not demand or
accept from either Company, any Obligor or other Person any consideration which
would result in a discharge of the Subordinated Indebtedness; (D) the
Subordinated Lender shall not hereafter give any subordination in respect of the
Subordinated Indebtedness; and (E) neither Company shall hereafter issue any
instrument, security or other writing evidencing any part of the Subordinated
Indebtedness, and the Subordinated Lender shall not receive any such writing,
except upon the condition that such security shall bear the legend referred to
in Section 25 below and a true copy thereof shall be thereupon promptly
furnished to the Senior Agent.

      6. Permitted Payments. Notwithstanding the terms of the Subordinated
Documents, each Company hereby agrees that it shall not make (and will not
permit any other Obligor to make), and the Subordinated Lender hereby agrees
that it will not accept, any payment or



                                       5
<PAGE>
distribution with respect to the Subordinated Indebtedness including any payment
or distribution received through the exercise of any right of setoff,
counterclaim or crossclaim, until the Senior Indebtedness is Finally Paid;
provided that the Companies may make to the Subordinated Lender and the
Subordinated Lender may accept payments in kind (but not in cash) in respect of
interest on the Subordinated Indebtedness, all on a non-accelerated basis and in
accordance with the terms of the Subordinated Documents.

      7. Forbearance of Legal Remedies.

      (a) Until the Senior Indebtedness is Finally Paid, the Subordinated Lender
shall not, without the prior written consent of the Senior Agent, exercise any
Subordinated Lender Remedies.

      (b) Notwithstanding anything contained herein to the contrary or any
rights or remedies available to the Subordinated Lender under any of the
Subordinated Documents, applicable law or otherwise, prior to the time that the
Senior Indebtedness has been Finally Paid, any payments, distributions or other
proceeds obtained by the Subordinated Lender from the exercise of any
Subordinated Lender Remedies shall in any event be held in trust by it for the
benefit of the Senior Agent and the Senior Lenders and promptly paid or
delivered to the Senior Agent for the benefit of the Senior Lenders in the form
received.

      8. Dissolution, Liquidation, Reorganization or Bankruptcy. (a) In the
event of any Proceeding involving either Company or any Obligor:

            (i) all Senior Indebtedness shall be Finally Paid before the
Subordinated Lender shall be entitled to receive any payment on account of any
Subordinated Indebtedness; and

            (ii) any payment or distribution of assets of such Person of any
kind or character, whether in cash, property or securities, to which the
Subordinated Lender would be entitled except for these provisions, shall be paid
by the liquidating trustee or agent or other Person making such payment or
distribution directly to the Senior Agent, to the extent necessary to make Final
Payment of all Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution or provision therefor to the holders of such
Senior Indebtedness. The Subordinated Lender irrevocably authorizes, empowers
and directs any debtor, debtor-in-possession, receiver, trustee or agent or
other person having authority, to pay or otherwise deliver all such payments or
distributions to Senior Agent.

      (b) Until the Senior Indebtedness has been Finally Paid, if a Proceeding
shall occur and be continuing, the Subordinated Lender shall file all claims it
may have against either Company or any Obligor, and shall direct the debtor in
possession or trustee in bankruptcy, as appropriate, to pay over to the Senior
Agent all amounts due to the Subordinated Lender on account of the Subordinated
Indebtedness until the Senior Indebtedness has been Finally Paid. If the
Subordinated Lender fails to file such claims or to vote such claims prior to 30
days before the expiration of time to do so, the Senior Agent may (but shall
have no obligation to) file and/or vote such claims in the Subordinated Lender's
name on behalf of the Senior Lenders. If the


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<PAGE>
Senior Agent votes any such claim in accordance with the authority granted
hereof, the Subordinated Lender shall not be entitled to withdraw or change such
vote.

      (c) The Subordinated Lender agrees, in connection with any such
Proceeding, that while it shall retain the right to vote and otherwise act in
any such proceeding (including the right to vote to accept or reject any plan of
partial or complete liquidation, reorganization, arrangement, composition or
extension), it will not take any action or vote in any way so as to (i) contest
the validity of the Liens securing the Senior Indebtedness, (ii) contest the
enforceability of any of the Senior Loan Documents, (iii) contest the Senior
Lenders' priority position over the Subordinated Lender created by this
Agreement or (iv) take any position or action which would have directly or
indirectly any of the following effects: (A) extension of the final maturity of
and/or forgiveness, reduction or cram-down of the Senior Indebtedness or
deferral of any required payment in respect of Senior Indebtedness, (B) opposing
or objecting to initiatives or claims by the Senior Lenders for adequate
protection or relief from the automatic stay, use of cash collateral or
super-priority expense of administration for failure of adequate protection, (C)
challenging in any respect treatment of the Senior Indebtedness as a first
priority perfected fully secured claim, (D) blocking current payment of any
obligation in respect of Senior Indebtedness, (E) assenting to or supporting any
requested extension of the exclusivity period for the submission by Company of
any plan of reorganization or liquidation under the Bankruptcy Code unless such
extension is assented to or supported by the Senior Lenders; and (F) opposing or
objecting to any sale or lease of any Company Property that has been consented
to by the holders of Senior Indebtedness. In the event of any violation of any
provisions of this section by the Subordinated Lender, the Senior Lenders may in
the name of the Subordinated Lender, or in their own name thereafter amend,
modify or rescind any such prior act taken or vote issued, in violation of this
Agreement.

      (d) Until the Senior Indebtedness has been Finally Paid, if a Proceeding
shall occur and be continuing, the Subordinated Lender hereby (i) expressly
consents to any Senior Lender's providing post-petition financing to either
Company or any Obligor or the granting by either Company or any Obligor to any
Senior Lender of senior liens and priorities in connection therewith and/or the
use of cash collateral and (ii) agrees that adequate notice of such financing or
cash collateral usage to the Subordinated Lender shall have been provided if the
Subordinated Lender received notice in accordance with Section 16 hereof 2
Business Days prior to the entry of any order approving such financing or cash
collateral usage.

      (e) If the Subordinated Lender has or at any time acquires any security
interest or Lien for the Subordinated Indebtedness, the Subordinated Lender
agrees not (i) to initiate any proceeding involving the marshalling of any
Company Property (whether in a Proceeding or otherwise) or (ii) to assert any
right it may have to "adequate protection" of its interest, if any, in such
security in any Proceeding and agrees that it will not seek to have the
automatic stay lifted with respect to such security, in each case without the
prior written consent of the Senior Agent (not to be unreasonably withheld or
delayed). The Subordinated Lender waives any claim or defense the Subordinated
Lender may now or hereafter have arising out of the election by any Senior
Lender in any Proceeding instituted under Chapter 11 of the Bankruptcy Code of
any use of cash collateral, any borrowing or any grant of a security interest
under Sections 363 and/or 364 of the Bankruptcy Code by either Company or any
Obligor, as debtor-in-possession. The



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<PAGE>
Subordinated Lender agrees that it will not object to or oppose a sale or other
disposition of any property securing all or any part of the Senior Indebtedness
free and clear of any security interests or other Liens or other claims of the
Subordinated Lender under Section 363 of the Bankruptcy Code if the Senior Agent
has consented to such sale or disposition. The Subordinated Lender further
agrees that it will not seek to participate on any creditors committee without
the Senior Agent's prior written consent. To the extent that any Senior Lender
receives payments on, or proceeds of collateral for, the Senior Indebtedness
which are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law, or equitable cause,
then as between such Senior Lender and the Subordinated Lender hereunder, to the
extent of such payment or proceeds received, the Senior Indebtedness, or part
thereof, intended to be satisfied shall be revived and continue in full force
and effect as if such payments or proceeds had not been received by such Senior
Lender.

      9. Obligation of Company Unconditional. Nothing contained herein or in the
Senior Loan Documents is intended to or shall impair, as between either Company
and the Subordinated Lender only, the obligation of the Companies, which is
absolute and unconditional, to pay to the Subordinated Lender the Subordinated
Indebtedness as and when the same shall become due and payable in accordance
with their terms, or to affect the relative rights of the Subordinated Lender
and creditors of the Companies other than the Senior Lenders.

      10. Subordination Rights Not Impaired by Acts or Omissions of either
Company or Holders of Senior Indebtedness.

      (a) No right of any present or future holders of any Senior Indebtedness
to enforce the subordination provisions as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
either Company; by any act or failure to act by any such holder; by any act or
failure to act by any other holder of the Senior Indebtedness; or by any
noncompliance by either Company with the terms hereof, regardless of any
knowledge thereof which any such holder may have or be otherwise charged with.
The Subordinated Lender shall not be released, nor shall the Subordinated
Lender's obligation hereunder be in anyway diminished, by any of the following:
(i) the exercise or the failure to exercise by any Senior Lender of any rights
or remedies conferred on it or them under the Senior Loan Documents, hereunder
or existing at law or otherwise, or against any Company Property; (ii) the
commencement of an action at law or the recovery of a judgment at law against
either Company or any Obligor for the performance of the Senior Indebtedness and
the enforcement thereof through levy or execution or otherwise; (iii) the taking
or institution or any other action or proceeding against either Company or any
Obligor; (iv) any delay in taking, pursuing, or exercising any of the foregoing
actions, rights, powers, or remedies (even though requested by the Subordinated
Lender) by any Senior Lender or anyone acting for any Senior Lender; (v) any
lack of validity or enforceability of any Senior Loan Document; (vi) the release
or non-perfection of any collateral securing the Senior Indebtedness; or (vii)
any other circumstance which might otherwise constitute a defense available to,
or a discharge of, either Company or any Obligor in respect of the Senior
Indebtedness or Subordinated Lender in respect of this Agreement (other than the
Final Payment of the Senior Indebtedness).


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<PAGE>
      (b) Without limiting the generality of the foregoing, and anything else
contained herein to the contrary notwithstanding, any Senior Lender, from time
to time, without prior notice to or the consent of the Subordinated Lender, may
take all or any of the following actions without in any manner affecting or
impairing the obligation or liability of the Subordinated Lender hereunder: (i)
obtain a Lien in any property to secure any of the Senior Indebtedness; (ii)
obtain the primary and secondary liability of any party or parties with respect
to any of the Senior Indebtedness; (iii) renew, extend, or otherwise change the
time for payment of the Senior Indebtedness or any installment thereof for any
period, or change the interest rates and fees with respect to the Senior
Indebtedness; (iv) renew, reaffirm, extend, release or otherwise change any
liability of any nature of any person or entity, including any Obligor, with
respect to the Senior Indebtedness; (v) exchange, enforce, waive, release, and
apply any Company Property and direct the order or manner of sale thereof as
such Senior Lender may in its discretion determine; (vi) enforce its rights
hereunder, whether or not such Senior Lender shall proceed against any other
Person; (vii) exercise its rights to consent to any action or non-action of
either Company or any Obligor which may violate the covenants and agreements
contained in the Senior Loan Documents, with or without consideration, on such
terms and conditions as may be acceptable to it; or (viii) exercise any of its
rights conferred by the Senior Loan Documents or by law.

      11. Waivers. Each Company and the Subordinated Lender hereby waive, to the
fullest extent permitted by law, any defense based on the adequacy of a remedy
at law which might be asserted as a bar to the remedy of specific performance of
this Agreement in any action brought therefor by the Senior Lenders. To the
fullest extent permitted by law and except as to any notices specified in this
Agreement, notices regarding the intended sale or disposition of any portion of
the collateral held by the Senior Lenders, or any notice which may not be waived
in accordance with the UCC, each Company and the Subordinated Lender hereby
further waive: (a) presentment, demand, protest, notice of protest, notice of
default or dishonor, notice of payment or nonpayment and any and all other
notices and demands of any kind in connection with all negotiable instruments
evidencing all or any portion of the Senior Indebtedness or the Subordinated
Indebtedness to which the Companies or the Subordinated Lender may be a party;
(b) prior notice of and consent to any loans made, extensions granted or other
action taken in reliance thereon; and (c) all other demands and notices of every
kind in connection with this Agreement, the Senior Indebtedness or the
Subordinated Indebtedness. The Subordinated Lender consents to any release,
renewal, extension, compromise or postponement of the time of payment of the
Senior Indebtedness, to any substitution, exchange or release of collateral
therefor, and to the addition or release of any person primarily or secondarily
liable thereon.

      12. No Estoppel. Neither the failure nor any delay on the part of any
Senior Lender to exercise any right, remedy, power or privilege hereunder shall
operate as a waiver thereof or give rise to an estoppel, nor be construed as an
agreement to modify the terms of this Agreement, nor shall any single or partial
exercise of any right, remedy, power or privilege with respect to any occurrence
be construed as a waiver of such right, remedy, power or privilege with respect
to any other occurrence. No waiver by a party hereunder shall be effective
unless it is in writing and signed by the party making such waiver, and then
only to the extent specifically stated in such writing.


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      13. Incorrect Payments; Specific Performance. If either Company or any
Obligor shall make or the Subordinated Lender shall collect any payment on
account of the principal of, premium or interest on or any other amounts due
under the Subordinated Indebtedness in contravention of this Agreement, such
payments shall be held in trust by the Subordinated Lender and not commingled
with any assets of the Subordinated Lender and shall be paid over and delivered
to the Senior Agent, for the benefit of the Senior Lenders, promptly upon
receipt thereof. At any time the Subordinated Lender fails to comply with any
provision of this Agreement, the Senior Lenders may demand specific performance
of this Agreement, whether or not either Company has complied with this
Agreement, and may exercise any other remedy available at law or equity.

      14. Amendment of the Subordinated Documents and Senior Loan Documents. The
Subordinated Lender agrees that it will not, without the prior written consent
of the Senior Agent, agree to any amendment, modification, waiver or supplement
to the Subordinated Documents. The Senior Indebtedness may at any time be
amended, extended, modified, restated, refinanced or waived without limitation,
without notice to, or the consent of, the Subordinated Lender.

      15. Inconsistent or Conflicting Provisions; Construction. If a provision
of the Senior Loan Documents or the Subordinated Documents is inconsistent or
conflicts with the provisions of this Agreement, the provisions of this
Agreement shall govern and prevail. The term "including" is not limiting and
means "including without limitation." In the computation of periods of time from
a specified date to a later specified date, the word "from" means "from and
including"; the words "to" and "until" each mean "to but excluding", and the
word "through" means "to and including."

      16. Notices. Any notice, consent or other communication provided for in
this Agreement shall be in writing and shall be delivered personally (effective
upon delivery), via facsimile (effective upon confirmation of transmission), via
overnight courier (effective the next Business Day after dispatch if instructed
to deliver on next business day) or via U.S. Mail (effective 3 days after
mailing, postage prepaid, first class) to each party at its address(es) and/or
facsimile number(s) set forth on Annex I hereto, or to such other address as
either party shall specify to the other in writing from time to time. The
Subordinated Lender shall provide the Senior Agent with written notice promptly
upon the occurrence of an event of default under the Subordinated Documents.

      17. Entire Agreement. This Agreement constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, whether express or implied, oral or
written. Neither this Agreement nor any portion or provision hereof may be
changed, waived or amended orally or in any manner other than by an agreement in
writing signed by the Senior Agent and the Subordinated Lender; provided that
any such change, waiver or amendment shall be binding upon each Company by their
written consent thereto. This Agreement shall constitute a Loan Document and the
recitals hereto shall constitute part of this Agreement.


                                       10
<PAGE>
      18. Additional Documentation. Each Company and the Subordinated Lender
shall execute and deliver to the Senior Agent such further instruments and shall
take such further action (in each case, at the cost of the Companies) as the
Senior Agent may at any time or times reasonably request in order to carry out
the provisions and intent of this Agreement.

      19. Expenses. The Companies, joint and severally, agree to pay the Senior
Agent and the Senior Lenders on demand all expenses of every kind, including
Attorney Costs, that the Senior Agent or the Senior Lenders incur in enforcing
any of their rights against either Company and/or the Subordinated Lender under
this Agreement.

      20. Successors and Assigns.

      (a) This Agreement shall inure to the benefit of each Senior Lender, the
Subordinated Lender, and their respective successors and assigns, and shall be
binding upon each Company and its successors and assigns, and each Senior
Lender, the Subordinated Lender and their respective transferees, successors and
assigns, including any subsequent holders of the Subordinated Note. Any Senior
Lender, without prior notice or consent of any kind, may sell, assign or
transfer any Senior Indebtedness, and in such event each and every immediate and
successive assignee or transferee thereof may be given the right by such Person
to enforce this Agreement in full against each Company and the Subordinated
Lender, by suit or otherwise, for its own benefit.

      (b) The Subordinated Lender shall not sell, assign, pledge, dispose of or
otherwise transfer all or any portion of the Subordinated Indebtedness or any
Subordinated Document without the prior written consent of the Senior Agent
which consent shall not be unreasonably withheld or delayed.

      (c) Notwithstanding the failure of any transferee to execute or deliver an
agreement substantially identical to this Agreement, the subordination effected
hereby shall survive any sale, assignment, pledge, disposition or other transfer
of all or any portion of the Subordinated Indebtedness, and the terms of this
Agreement shall be binding upon the successors and assigns of each Subordinated
Indebtedness, as provided in this Section 20.

      (d) The Subordinated Lender hereby agrees that any party that refinances
the Senior Indebtedness of the Senior Lenders may rely on and enforce this
Agreement as if it were such Senior Lender. The Subordinated Lender further
hereby agrees that it will, at the request of such Senior Lender, enter into an
agreement, in the form of this Agreement, mutatis mutandis, to subordinate the
Subordinated Indebtedness, to the same extent as provided herein, to the party
refinancing all or a portion of such Senior Indebtedness; provided that the
failure of the Subordinated Lender to execute such an agreement shall not affect
such party's right to rely on and enforce the terms of this Agreement.

      21. Covenant Not to Challenge. This Agreement has been negotiated by the
parties with the expectation and in reliance upon the assumption that the
instruments and documents evidencing the Senior Indebtedness are valid and
enforceable. In determining whether to enter into this Agreement, the
Subordinated Lender has assumed such validity and enforceability, and


                                       11
<PAGE>
has agreed to the provisions contained herein, without relying upon any
reservation of a right to challenge or call into question such validity or
enforceability. As between any Senior Lender and the Subordinated Lender, the
Subordinated Lender hereby covenants and agrees, to the fullest extent permitted
by law, that it shall not initiate in any proceeding a challenge to the validity
or enforceability of the documents and instruments evidencing the Senior
Indebtedness or the validity, perfection or priority of any Lien of the Senior
Agent or the Senior Lenders securing the Senior Indebtedness, nor shall the
Subordinated Lender instigate other parties to raise any such challenges, nor
shall the Subordinated Lender participate in or otherwise assert any such
challenges which are raised by other parties.

      22. Subrogation. Subject to the Final Payment of all Senior Indebtedness
and the provisions of Section 24 hereof, the Subordinated Lender shall be
subrogated to the rights of the Senior Lenders to receive payments and
distributions of cash, property and securities applicable to the Senior
Indebtedness to the extent that distributions otherwise payable to the
Subordinated Lender have been applied to the Senior Indebtedness, until all
amounts payable under the Subordinated Indebtedness shall have been paid in
full. For purposes of such subrogation, no payments or distributions to the
Senior Lenders of any cash, property or securities to which the Subordinated
Lender would be entitled except for the provisions of this Agreement, and no
payment pursuant to the provisions of this Agreement to the Senior Lenders by
the Subordinated Lender shall, as among the Companies and their creditors other
than the Senior Lenders, be deemed to be a payment or distribution by either
Company to or on account of the Senior Indebtedness. If either Company fails to
make any payment on account of the Subordinated Indebtedness by reason of any
provision contained herein, such failure shall, notwithstanding such provision
contained herein, constitute a default with respect to the Subordinated
Indebtedness if and to the extent such failure would otherwise constitute such a
default in accordance with the terms of the Subordinated Indebtedness.

      23. Termination of Agreement. This Agreement shall continue and shall be
irrevocable until the date all of the Senior Indebtedness has been Finally Paid
or otherwise discharged and released in an express writing to such effect by the
Senior Lenders.

      24. Reinstatement. The obligations of the Subordinated Lender under the
Agreement shall continue to be effective, or be reinstated, as the case may be,
if at any time any payment in respect of any Senior Indebtedness is rescinded or
must otherwise be restored or returned by any Senior Lender by reason of any
bankruptcy, reorganization, arrangement, composition or similar proceeding or as
a result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, either Company, any Obligor or any substantial
part of its property, or otherwise, all as though such payment had not been
made.

      25. Legends. Until the termination of this Agreement, the Subordinated
Lender will cause to be clearly, conspicuously and prominently inserted (or
otherwise attached thereto) on the face of the Subordinated Note and any other
Subordinated Document, as well as any renewals or replacements thereof, the
following legend:

      "THIS INSTRUMENT AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE
      SUBORDINATE IN THE MANNER AND TO


                                       12
<PAGE>
      THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AND INTERCREDITOR
      AGREEMENT (THE "SUBORDINATION AGREEMENT") DATED AS OF OCTOBER 7, 2003
      AMONG ARGENT FUND MANAGEMENT LTD., AKORN, INC., A LOUISIANA CORPORATION
      ("AKORN"), AND AKORN (NEW JERSEY), INC., AN ILLINOIS CORPORATION ("AKORN
      NJ"; TOGETHER WITH AKORN, EACH A "COMPANY" AND COLLECTIVELY THE
      "COMPANIES") AND LASALLE BANK NATIONAL ASSOCIATION (TOGETHER WITH ITS
      SUCCESSORS AND ASSIGNS, THE "SENIOR 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, THE SENIOR
      AGENT AND THE LENDERS FROM TIME TO TIME PARTY THERETO, AND THE OTHER LOAN
      DOCUMENTS (AS DEFINED IN THE CREDIT AGREEMENT) AS SUCH CREDIT AGREEMENT
      AND OTHER LOAN DOCUMENTS MAY BE AMENDED, RESTATED, SUPPLEMENTED OR
      OTHERWISE MODIFIED FROM TIME TO TIME AND TO INDEBTEDNESS REFINANCING THE
      INDEBTEDNESS THEREUNDER 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."

      Each Company's relevant books shall be marked to evidence the
subordination of all of the Subordinated Indebtedness to the holders of Senior
Indebtedness, in accordance with the terms of this Agreement. Each Senior Lender
is authorized to examine such books from time to time in accordance with the
terms of the Credit Agreement and to make any notations required by this
Agreement.

      26. Governing Law. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICT
OF LAWS PRINCIPLES. EACH COMPANY AND THE SUBORDINATED LENDER HEREBY AGREE THAT
ALL ACTIONS OR PROCEEDINGS INITIATED BY EACH COMPANY OR THE SUBORDINATED LENDER
AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT SHALL BE LITIGATED IN A
COOK COUNTY, ILLINOIS COURT OR THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS OR, IF ANY SENIOR LENDER INITIATES SUCH ACTION, IN ADDITION
TO THE FOREGOING COURTS, ANY COURT IN WHICH SUCH SENIOR LENDER SHALL INITIATE
SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION. EACH COMPANY AND THE
SUBORDINATED LENDER HEREBY EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY ANY SENIOR LENDER AND
HEREBY WAIVE ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM OR AN IMPROPER
FORUM BASED



                                       13
<PAGE>
UPON LACK OF VENUE. THE EXCLUSIVE CHOICE OF FORUM AS SET FORTH IN THIS SECTION
SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY ANY SENIOR LENDER, OF ANY
JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING, BY ANY SENIOR LENDER, OF ANY
ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION, AND EACH
COMPANY AND THE SUBORDINATED LENDER HEREBY WAIVE THE RIGHT TO COLLATERALLY
ATTACK SUCH JUDGMENT OR ACTION.

      27. Jury Trial. THE SENIOR AGENT, THE SUBORDINATED LENDER AND EACH COMPANY
WAIVE TRIAL BY JURY IN ANY DISPUTE ARISING FROM, UNDER OR IN CONNECTION WITH
THIS AGREEMENT.

      28. Severability. The provisions of this Agreement are independent of and
separable from each other. If any provision hereof shall for any reason be held
invalid or unenforceable, it is the intent of the parties that such invalidity
or unenforceability shall not affect the validity or enforceability of any other
provision hereof, and that this Agreement shall be construed as if such invalid
or unenforceable provision had never been contained herein.

      29. Counterparts. This Agreement may be executed in any number of separate
counterparts, all of which, when taken together, shall constitute one and the
same instrument, notwithstanding the fact that all parties did not sign the same
counterpart. Receipt of an executed signature page to this Agreement by
facsimile or other electronic transmission shall constitute effective delivery
thereof.

      30. Sections. The section headings used in this Agreement are for
convenience only and shall not affect the interpretation of any of the
provisions hereof.

      31. Defines Rights of Creditors. The provisions of this Agreement are
solely for the purpose of defining the relative rights of the Senior Lenders and
the Subordinated Lender and shall not be deemed to create any rights or
priorities in favor of any other Person, including each Company.


                            [signature pages follow]


                                       14
<PAGE>
      The parties hereto have executed this Agreement as of the date first above
written.

COMPANIES:                           AKORN, INC.


                                     By:
                                           -------------------------------------
                                     Name:
                                           -------------------------------------
                                     Title:
                                           -------------------------------------

                                     AKORN (NEW JERSEY), INC.


                                     By:
                                           -------------------------------------
                                     Name:
                                           -------------------------------------
                                     Title:
                                           -------------------------------------

SENIOR AGENT:                        LASALLE BANK NATIONAL ASSOCIATION



                                     By:
                                           -------------------------------------
                                     Name:
                                           -------------------------------------
                                     Title:
                                           -------------------------------------

SUBORDINATED LENDER:                 ARGENT FUND MANAGEMENT LTD.


                                     By:
                                           -------------------------------------
                                     Name:
                                           -------------------------------------
                                     Title:
                                           -------------------------------------
<PAGE>
                                     ANNEX I

                                NOTICE ADDRESSES

COMPANIES:

c/o Akorn, Inc.
2500 Milbrook Drive
Buffalo Grove, Illinois 60089
Attention: Chief Financial Officer
Facsimile: (847) 279-6123


SENIOR AGENT:

LaSalle Bank National Association
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Patrick O'Toole
Facsimile: (312) 904-0522


SUBORDINATED LENDER:

Argent Fund Management Ltd.

----------------------

----------------------

----------------------
Attention:
           -----------
Facsimile:
           -----------



</TEXT>
</DOCUMENT>
