GUARANTORS GENERAL SECURITY AGREEMENT
GUARANTORS
GENERAL SECURITY AGREEMENT
This
Guarantors General Security Agreement (the “Agreement”)
is
dated as of June 22, 2005 by and among Acura Pharmaceutical Technologies,
Inc.,
an Indiana corporation with its principal place of business at ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇
▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ (“APT”),
Axiom
Pharmaceutical Corporation, a Delaware corporation with its principal place
of
business at c/o Acura Pharmaceuticals, Inc., ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (“Axiom”
and,
together with Houba, the “Guarantors”),
and
[▇▇▇▇▇
Partners III, L.P., a Delaware limited partnership]
with its
principal place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇▇▇, acting in its capacity as agent for the Lenders, as defined
below
(the “Agent”),
for
the benefit of the Lenders.
PRELIMINARY
STATEMENTS
A. Acura
Pharmaceuticals, Inc. (the “Company”)
has
entered into a Loan Agreement of even date herewith (as the same may be amended,
modified, supplemented or restated from time to time, the “Loan
Agreement;”
terms
which are capitalized in this Agreement and not otherwise defined shall have
the
meanings ascribed to them in the Loan Agreement) with the Lenders party thereto
(the “Lenders”).
B. Each
of
the Guarantors has executed and delivered to Agent, for the benefit of the
Lenders, a Continuing Unconditional Secured Guaranty of even date herewith
(each
a “Guaranty”)
of the
Company’s obligations under the Loan Agreement (collectively, the “Obligations”).
C. The
Lenders have required, as a condition precedent to the effectiveness of the
Loan
Agreement, that each Guarantor (a) grant to the Agent, for the ratable benefit
of the Lenders, a security interest in and to the Collateral (as defined
in
Section 2.1 below) and (b) execute and deliver this Agreement in order to
secure
the payment and performance by such Guarantor of the Guaranty.
AGREEMENT
In
consideration of the premises and in order to induce the Lenders to enter
into
and perform the Loan Agreement, each Guarantor hereby agrees as
follows:
ARTICLE
1
CREATION
OF SECURITY INTEREST
1.1 SECURITY
INTEREST
Each
Guarantor hereby pledges, assigns and grants to the Agent a continuing perfected
lien and security interest having priority over any and all other security
interests in all of such Guarantor’s right, title and interest in and to the
Collateral (as defined in Section 2.1 below) in order to secure the payment
and
performance of all Obligations owing by such Guarantor.
1.2 GUARANTORS
REMAIN LIABLE
Anything
herein to the contrary notwithstanding, (a) the Guarantors shall remain liable
under the contracts and agreements included in the Collateral to the extent
set
forth therein to perform all of their duties and obligations thereunder to
the
same extent as if this Agreement had not been executed, (b) the exercise
by the
Agent of any of the rights hereunder shall not release the Guarantors from
any
of their duties or obligations under the contracts and agreements included
in
the Collateral and (c) neither the Agent nor any Lender shall have any
obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, the Loan Agreement or any other
Transaction Document, nor shall the Agent or any Lender be obligated to perform
any of the obligations or duties of the Guarantors thereunder or to take
any
action to collect or enforce any claim for payment assigned
hereunder.
ARTICLE
2
COLLATERAL
2.1 COLLATERAL
For
purposes of this Agreement, the term “Collateral”
shall
mean, with respect to each Guarantor, all of the assets of such Guarantor
including all of the kinds and types of property described in clauses (a)
through (g) of this Section 2.1, whether now owned or hereafter at any time
arising, acquired or created by such Guarantor and wherever located, and
includes all replacements, additions, accessions, substitutions, repairs,
proceeds and products relating thereto or therefrom, and all documents, ledger
sheets and files of such Guarantor relating thereto and all Proceeds (as
defined
in Section 2.2 below) of Collateral:
(a) all
of
such Guarantor’s accounts, whether now existing or existing in the future,
including without limitation (i) all accounts receivable (whether or not
specifically listed on schedules furnished to the Agent), including, without
limitation, all accounts created by or arising from all of such Guarantor’s
sales of goods or rendition of services made under any of such Guarantor’s trade
names, or through any of its divisions, (ii) all unpaid seller’s rights
(including rescission, replevin, reclamation and stoppage in transit) relating
to the foregoing or arising therefrom, (iii) all rights to any goods represented
by any of the foregoing, including returned or repossessed goods, (iv) all
reserves and credit balances held by such Guarantor with respect to any such
accounts receivable or account debtors, (v) all health-care-insurance
receivables, and (vi) all guarantees or collateral for any of the foregoing
(all
of the foregoing property and similar property being hereinafter referred
to as
“Accounts”);
(b) all
of
such Guarantor’s inventory, including without limitation (i) all raw materials,
work in process, parts, components, assemblies, supplies and materials used
or
consumed in such Guarantor’s businesses, wherever located and whether in the
possession of such Guarantor or any other Person; (ii) all goods, wares and
merchandise, finished or unfinished, held for sale or lease or leased or
furnished or to be furnished under contracts of service, wherever located
and
whether in the possession of such Guarantor or any other person or entity;
and
(iii) all goods returned to or repossessed by such Guarantor (all of the
foregoing property being hereinafter referred to as “Inventory”);
(c) all
of
the equipment owned or leased by such Guarantor, including, without limitation,
machinery, equipment, office equipment and supplies, computers and related
equipment, furniture, furnishings, tools, tooling, jigs, dies, fixtures,
manufacturing implements, fork lifts, trucks, trailers, motor vehicles, and
other equipment (all of the foregoing property being hereinafter referred
to as
“Equipment”);
(d) all
of
such Guarantor’s general intangibles (including, without limitation, payment
intangibles), instruments, securities (including without limitation United
States of America Treasury Bills), credits, claims, demands, documents, letters
of credit and letter of credit proceeds, documents of title, certificates
of
title, certificates of deposit, warehouse receipts, bills of lading, leases
which are permitted to be assigned or pledged, deposit accounts, money, tax
refund claims, and contract rights which are permitted to be assigned or
pledged
(all of the foregoing property being hereinafter referred to as “Intangibles”);
(e) all
of
each Guarantor’s intellectual property, including, without limitation, New Drug
Applications, Investigatory New Drug Applications, Abbreviated New Drug
Applications, Alternative New Drug Applications, registrations and quotas
as
issued by the DEA or the Attorney General of the United States pursuant to
the
CSA, certifications, permits and approvals of federal and state governmental
agencies, patents, patent applications, trademarks, trademark applications,
service marks, service ▇▇▇▇ applications, trade names, domain names, technical
knowledge and processes, formal or informal licensing arrangements which
are
permitted to be assigned or pledged, blueprints, technical specifications,
computer software, programs, databases, copyrights, copyright applications
and
all confidential and proprietary information, including, without limitation,
know-how, trade secrets, manufacturing and production processes and techniques,
inventions, research and development information, databases and data, including,
without limitation, technical data, financial and marketing and business
data,
customer lists, supplier lists, pricing and cost information and business
and
marketing plans, and all embodiments thereof, and rights thereto, including,
without limitation, all of such Guarantor’s rights to use the patents,
trademarks, copyrights, service marks, or other property of the aforesaid
nature
of other Persons now or hereafter licensed to such Guarantor, together with
the
goodwill of the business symbolized by or connected with such Guarantor’s
trademarks, copyrights, service marks, licenses and the other rights included
in
this Section 2.1(e) (all of the foregoing property being hereinafter referred
to
as “Intellectual
Property”);
(f) all
deposit accounts, letter-of-credit rights, instruments (including, without
limitation, promissory notes), investment property and chattel paper;
and
(g) all
interest, dividends, distributions, cash, instruments and other property
from
time to time received, receivable or otherwise distributed in respect of
or in
exchange for any or all of the then existing Collateral.
2.2 PROCEEDS
For
purposes of this Agreement, the term “Proceeds”
shall
include (a) whatever is now or hereafter received by such Guarantor upon
the
sale, exchange, collection or other disposition of any item of Collateral,
whether such proceeds constitute Inventory, Accounts, Intangibles, royalties,
payment under insurance (whether or not the Agent is the loss payee thereof),
or
any indemnities, warranties or guaranties, payable by reason of loss or damage
to or otherwise with respect to any or the foregoing Collateral, and (b)
any
such items which are now or hereafter acquired by such Guarantor with any
proceeds of Collateral hereunder.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES
Each
Guarantor severally represents and warrants as follows:
3.1 ORGANIZATION
AND EXISTENCE
Such
Guarantor is a corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation and is qualified to do business
in
such other jurisdictions as the nature or conduct of its operations or the
ownership of its properties require such qualification. Such Guarantor does
not
own or lease any property or engage in any activity in any jurisdiction that
might require qualification to do business as a foreign corporation in such
jurisdiction and where the failure to so qualify could reasonably be expected
to
have a Material Adverse Effect or subject such Guarantor to a material
liability.
3.2 AUTHORIZATION
(a) Such
Guarantor has all requisite corporate power and authority (i) to execute
and
deliver, and to perform and observe its obligations under, the Transaction
Documents to which it is a party, and (ii) to consummate the transactions
contemplated hereby and thereby, including, without limitation, the grant
of any
security interest, mortgage, payment trust, guaranty or other security
arrangement by such Guarantor in, on or in respect of the
Collateral.
(b) All
corporate action on the part of such Guarantor and its directors and
stockholders necessary for the authorization, execution,
delivery and performance by such Guarantor of this Agreement, the Guaranty
by
such Guarantor in favor of Agent, and the transactions contemplated therein
or
in any other Transaction Document to which it is a party, has been
taken.
3.3 PLACES
OF BUSINESS
Such
Guarantor has no places of business, or warehouses in which it leases space,
other than those set forth on Section
3.3 of Schedule A,
a copy
of which is attached hereto and made a part hereof (“Schedule
A”).
3.4 LOCATION
OF COLLATERAL
Except
for the movement of Collateral from time to time from one place of business
or
warehouse listed on Section
3.3 of Schedule A
to
another place of business or warehouse listed on Section
3.3 of Schedule A,
the
Collateral is located at such Guarantor’s chief executive offices or other
places of business or warehouses listed on Section
3.3 of Schedule A,
and not
at any other location.
3.5 RESTRICTIONS
ON COLLATERAL DISPOSITION
Except
for any restrictions imposed under the Guarantors General Security Agreement
dated as of March 29, 2000 given by the Guarantors in connection with the
Senior
Note (the “▇▇▇▇▇▇ Guarantors Security Agreement”), none of the Collateral is
subject to contractual obligations that may restrict or inhibit the Agent’s
rights or ability to sell or dispose of the Collateral or any part thereof
after
the occurrence of an Event of Default.
3.6 STATUS
OF ACCOUNTS
Each
Account is based on an actual and bona fide rendition of services or sale
of
goods or products to customers, made by such Guarantor in the ordinary course
of
its business. The Accounts created are such Guarantor’s exclusive property and
are not and shall not be subject to any lien, consignment arrangement,
encumbrance, security interest or financing statement whatsoever, except
the
lien in favor of the holders of the Senior Note under the ▇▇▇▇▇▇ Term Loan
and
the documents executed in connection therewith, including, without limitation,
the ▇▇▇▇▇▇ Guarantors Security Agreement. To the best knowledge of such
Guarantor, such Guarantor’s customers have accepted the goods, products and
services and owe and are obligated to pay the full amounts stated in the
invoices according to their terms, without any dispute, offset, defense or
counterclaim.
3.7 COPYRIGHTS,
TRADEMARKS AND PATENTS
(a) Such
Guarantor owns outright all of the Intellectual Property Rights listed on
Section
4.12
of the
Schedule of Exceptions attached to the Loan Agreement free and clear of all
liens and encumbrances except for the Permitted Liens and pays no royalty
to
anyone under or with respect to any of them.
(b) Such
Guarantor has not licensed to anyone the use of any of such Intellectual
Property Rights and has no knowledge of the infringing use by the Company
or any
Guarantor of any Intellectual Property Rights of third parties.
(c) Other
than as disclosed to the Company’s or the Guarantors’ Board of Directors, Such
Guarantor has no knowledge, nor has it received any notice (i) of any conflict
with the asserted rights of others with respect to any Intellectual Property
Rights used in, or useful to, the operation of the business conducted by
the
Company and the Guarantors or with respect to any license under which the
Company or a Guarantor is licensor or licensee; or (ii) that the Intellectual
Property Rights infringe upon the rights of any third party.
(d) Such
Guarantor has made or performed all filings, recordings and other acts and
has
paid all required fees and taxes to maintain and protect its interest in
each
and every item of Intellectual Property in full force and effect throughout
the
world, and to protect and maintain its interest therein including, without
limitation, recordations of any of its interests in patents and trademarks
with
the U.S. Patent and Trademark Office and in corresponding national and
international patent offices, and recordation of any of its interests in
any
copyrights with the U.S. Copyright Office and in corresponding national and
international copyright offices. Such Guarantor has used proper statutory
notice
in connection with its use of each patent, trademark and copyright.
3.8 INVENTORY
All
Inventory of such Guarantor consists of a quality and quantity usable and
salable in the ordinary course of business, except for obsolete items and
items
of below-standard quality, all of which have been or will be written off
or
written down to net realizable value on the consolidated balance sheet of
the
Guarantors and its Subsidiaries as of March 31, 2005. The quantities of each
type of Inventory (whether raw materials, work-in-process, or finished goods)
are not excessive, but are reasonable and warranted in the present circumstances
of such Guarantor.
3.9 OWNERSHIP
Such
Guarantor is the legal and beneficial owner of its Collateral free and clear
of
any lien, claim, option or right of others, except for the security interest
created under this Agreement and the ▇▇▇▇▇▇ Security Agreement. No effective
financing statement or other instrument similar in effect covering all or
any
part of such Collateral or listing such Guarantor or any trade name of such
Guarantor is on file in any recording office, except such as may have been
filed
relating to the ▇▇▇▇▇▇ Term Loan. The Agent has, for the benefit of the Lenders,
a valid and perfected security interest in the Collateral which security
interest has priority over any and all other security interests in such
Collateral.
ARTICLE
4
COVENANTS
Each
Guarantor agrees (which agreements shall be several as to each Guarantor
except
as otherwise provided) as follows:
4.1 DEFEND
AGAINST CLAIMS
Such
Guarantor will defend the Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein unless both
the
Agent and such Guarantor determine that the claim or demand is not material
and
that, consequently, such defense would not be consistent with good business
judgment. Such Guarantor will not permit any lien notices with respect to
the
Collateral or any portion thereof to exist or be on file in any public office
except for those in favor of the Agent and those permitted under the terms
of
the Loan Agreement.
4.2 CHANGE
IN COLLATERAL LOCATION
Such
Guarantor will not (a) change its corporate name, (b) change the location
of its
chief executive office or establish any place of business other than those
specified in Section
3.3 of Schedule A,
or (c)
move or permit movement of the Collateral from the locations specified therein
except from one such location to another such location, unless in each case
such
Guarantor shall have given the Agent at least thirty (30) days prior written
notice thereof, and shall have, in advance, executed and caused to be filed
or
delivered to the Agent any financing statements or other documents required
by
the Agent to perfect the security interest of the Agent in the Collateral
in
accordance with Section 4.3 of this Agreement, all in form and substance
satisfactory to the Agent.
4.3 ADDITIONAL
FINANCING STATEMENTS
Promptly
upon the reasonable request of the Agent, such Guarantor will execute and
deliver or use its best efforts to procure any document, give any notices,
execute and file any financing statements, mortgages or other documents,
all in
form and substance satisfactory to the Agent, ▇▇▇▇ any chattel paper, deliver
any chattel paper or instruments to the Agent and take any other actions
that
are necessary or, in the opinion of the Agent, desirable to perfect or continue
the perfection and the first priority of the Agent’s security interest in the
Collateral, to protect the Collateral against the rights, claims, or interests
of third persons, or to effect the purposes of this Agreement. Such Guarantor
will pay the costs incurred in connection with any of the
foregoing.
4.4 ADDITIONAL
LIENS; TRANSFERS
Without
the prior written consent of the Agent, such Guarantor will not, in any way,
hypothecate or create or permit to exist any lien, security interest, charge
or
encumbrance on or other interest in the Collateral, other than those permitted
under the terms of the Loan Agreement and the liens in favor of the holders
of
the Senior Note pursuant to the ▇▇▇▇▇▇ Term Loan and documents relative thereto,
and such Guarantor will not sell, transfer, assign, pledge, collaterally
assign,
exchange or otherwise dispose of the Collateral, other than the sale of
Inventory in the ordinary course of business and the sale of obsolete or
worn
out Equipment. Notwithstanding the foregoing, if the proceeds of any such
sale
consist of notes, instruments, documents of title, letters of credit or chattel
paper, such proceeds shall be promptly delivered to the Agent to be held
as
Collateral hereunder. If the Collateral, or any part thereof, is sold,
transferred, assigned, exchanged, or otherwise disposed of in violation of
these
provisions, the security interest of the Agent shall continue in such Collateral
or part thereof notwithstanding such sale, transfer, assignment, exchange
or
other disposition, and such Guarantor will hold the proceeds thereof for
the
benefit of the Agent, and promptly transfer such proceeds to the Agent in
kind.
4.5 CONTRACTUAL
OBLIGATIONS
Such
Guarantor will not enter into any contractual obligations which may restrict
or
inhibit the Agent’s rights or ability to sell or otherwise dispose of the
Collateral or any part thereof after the occurrence or during the continuance
of
an Event of Default.
4.6 AGENT’S
RIGHT TO PROTECT COLLATERAL
Upon
the
occurrence or continuance of an Event of Default, the Agent shall have the
right
at any time to make any payments and do any other acts the Agent may deem
necessary to protect the security interests of the Lenders in the Collateral,
including, without limitation, the rights to pay, purchase, contest or
compromise any encumbrance, charge or lien which, in the reasonable judgment
of
the Agent, appears to be prior to or superior to the security interests granted
hereunder, and appear in and defend any action or proceeding purporting to
affect its security interests in, or the value of, the Collateral. The
Guarantors hereby jointly and severally agree to reimburse the Agent for
all
payments made and expenses incurred under this Agreement including reasonable
fees, expenses and disbursements of attorneys and paralegals acting for the
Agent, including any of the foregoing payments under, or acts taken to protect
its security interests in, the Collateral, which amounts shall be secured
under
this Agreement, and agree they shall be bound by any payment made or act
taken
by the Agent hereunder absent the Agent’s gross negligence or willful
misconduct. The Agent shall have no obligation to make any of the foregoing
payments or perform any of the foregoing acts.
4.7 FURTHER
OBLIGATIONS WITH RESPECT TO ACCOUNTS
In
furtherance of the continuing assignment and security interest in the Accounts
of such Guarantor granted pursuant to this Agreement, upon the creation of
Accounts, upon the Agent’s request, such Guarantor will execute and deliver to
the Agent in such form and manner as the Agent may require, solely for its
convenience in maintaining records of Collateral, such confirmatory schedules
of
Accounts, and other appropriate reports designating, identifying and describing
the Accounts as the Agent may reasonably require. In addition, upon the Agent’s
request, such Guarantor shall provide the Agent with copies of agreements
with,
or purchase orders from, the customers of such Guarantor and copies of invoices
to customers, proof of shipment or delivery and such other documentation
and
information relating to such Accounts and other Collateral as the Agent may
reasonably require. Furthermore, upon the Agent’s request, such Guarantor shall
deliver to the Agent any documents or certificates of title issued with respect
to any property included in the Collateral, and any promissory notes, letters
of
credit or instruments related to or otherwise in connection with any property
included in the Collateral, which in any such case came into the possession
of
such Guarantor, or shall cause the issuer thereof to deliver any of the same
directly to the Agent, in each case with any necessary endorsements in favor
of
the Agent. Failure to provide the Agent with any of the foregoing shall in
no
way affect, diminish, modify or otherwise limit the security interests granted
herein. Each Guarantor hereby authorizes the Agent to regard such Guarantor’s
printed name or rubber stamp signature on assignment schedules or invoices
as
the equivalent of a manual signature by such Guarantor’s authorized officers or
agents.
4.8 INSURANCE
Such
Guarantor agrees to maintain public liability insurance, third party property
damage insurance and replacement value insurance on the Collateral under
such
policies of insurance, with such insurance companies, in such amounts and
covering such risks as are at all times satisfactory to the Agent in its
commercially reasonable judgment. All policies covering the Collateral are
to
name the Agent as an additional insured and the loss payee in case of loss,
and
are to contain such other provisions as the Agent may reasonably require
to
fully protect the Agent’s interest in the Collateral and to any payments to be
made under such policies. Without limiting the generality of the foregoing,
all
such policies shall contain standard lender’s loss payable clauses in favor of
the Agent and shall provide that the same may not be cancelled, terminated
or
revised without giving the Agent at least 30 days prior written notice of
such
cancellation, termination or revision. Proceeds of such insurance policy
or
policies will be applied to the Obligations unless written consent to the
contrary is obtained from the Agent. Such Guarantor will furnish the Agent
with
certificates of insurance or such other evidence satisfactory to the Agent
so as
to evidence compliance with the provisions of this Section.
4.9 TAXES
Such
Guarantor agrees to pay, when due, all taxes lawfully levied or assessed
against
such Guarantor or any of the Collateral before any penalty or interest accrues
thereon; provided,
however,
that,
unless such taxes have become a federal tax or ERISA lien on any of the assets
of such Guarantor, no such tax need be paid if the same is being contested,
in
good faith, by appropriate proceedings promptly instituted and diligently
conducted and if an adequate reserve or other appropriate provision shall
have
been made therefor as required in order to be in conformity with
GAAP.
4.10 COMPLIANCE
WITH LAWS
Such
Guarantor agrees to comply in all material respects with all Legal Requirements
applicable to the Collateral or any part thereof, or to the operation of
its
business or its assets generally, unless such Guarantor contests in good
faith,
by appropriate legal, administrative or other proceedings promptly instituted
and diligently conducted, any such Legal Requirements in a reasonable manner
and
in good faith. Such Guarantor agrees to maintain in full force and effect,
its
respective licenses and permits granted by any governmental authority as
may be
necessary or advisable for such Guarantor to conduct its business in all
material respects.
4.11 MAINTENANCE
OF PROPERTY
Such
Guarantor agrees to keep all property useful and necessary to its business
in
good working order and condition (ordinary wear and tear excepted) and not
to
commit or suffer any waste with respect to any of its properties.
4.12 ENVIRONMENTAL
AND OTHER MATTERS
Such
Guarantor will conduct its business so as to comply in all respects with
all
environmental, land use, occupational, safety or health Legal Requirements
in
all jurisdictions in which it is or may at any time be doing business, except
to
the extent that such Guarantor is contesting, in good faith by appropriate
legal, administrative or other proceedings, promptly instituted and diligently
conducted, any such Legal Requirement; provided,
further,
that
such Guarantor shall comply with the order of any court or other governmental
authority relating to such Legal Requirements unless such Guarantor shall
currently be prosecuting an appeal, proceedings for review or administrative
proceedings and shall have secured a stay of enforcement or execution or
other
arrangement postponing enforcement or execution pending such appeal, proceedings
for review or administrative proceedings.
4.13 INTELLECTUAL
PROPERTY
With
respect to each item of its Intellectual Property, each of the Guarantors
agrees
to take, at its expense, all necessary steps, including, without limitation,
in
the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other
governmental authority, to (a) maintain the validity and enforceability of
such
Intellectual Property and maintain such Intellectual Property in full force
and
effect, and (b) pursue the registration and maintenance of each patent,
trademark, or copyright registration or application, now or hereafter included
in such Intellectual Property of the Guarantors, including, without limitation,
the payment of required fees and taxes, the filing of responses to office
actions issued by the U.S. Patent and Trademark Office, the U.S. Copyright
Office or other governmental authorities, the filing of applications for
renewal
or extension, the filing of affidavits under Sections 8 and 15 of the U.S.
Trademark Act, the filing of divisional, continuation, continuation-in-part,
reissue and renewal applications or extensions, the payment of maintenance
fees
and the participation in interference, reexamination, opposition, cancellation,
infringement and misappropriation proceedings. Neither Guarantor shall, without
the prior written consent of the Agent, discontinue use of or otherwise abandon
any Intellectual Property, or abandon any right to file an application for
any
patent, trademark or copyright, unless such Guarantor shall have previously
determined that such use or the pursuit or maintenance of such Intellectual
Property is no longer desirable in the conduct of such Guarantor’s business and
that the loss thereof would not be reasonably likely to have a Material Adverse
Effect, in which case, such Guarantor will give prompt notice of any such
abandonment to the Agent.
4.14 FURTHER
ASSURANCES
Such
Guarantor shall take all such further actions and execute all such further
documents and instruments (including, but not limited to, collateral assignments
of Intellectual Property and Intangibles or any portion thereof) as the Agent
may at any time reasonably determine in its sole discretion to be necessary
or
desirable to further carry out and consummate the transactions contemplated
by
the Loan Agreement and the documentation relating thereto, including this
Agreement, and to perfect or protect the liens (and the priority status thereof)
of the Agent in the Collateral.
ARTICLE
5
REMEDIES
5.1 OBTAINING
COLLATERAL UPON DEFAULT
If
any
Event of Default shall have occurred and be continuing, then and in every
such
case, subject to the terms of the Loan Agreement and any mandatory requirements
of applicable law then in effect, the Agent, in addition to any rights now
or
hereafter existing under applicable law, shall have all rights as a secured
creditor under the Uniform Commercial Code in all relevant jurisdictions
and
may:
(a) personally,
or by agents or attorneys, immediately retake possession of the Collateral
or
any part thereof, from any Guarantor or any other Person who then has possession
of any part thereof, with or without notice or process of law, and for that
purpose may enter upon such Guarantor’s premises where any of the Collateral is
located and remove the same and use in connection with such removal any and
all
services, supplies, aids and other facilities of such Guarantor;
(b) instruct
the obligor or obligors on any agreement, instrument or other obligation
(including, without limitation, the Accounts) constituting the Collateral
to
make any payment required by the terms of such instrument or agreement directly
to the Agent;
(c) withdraw
all monies, securities and instruments held pursuant to any pledge arrangement
for application to the Obligations;
(d) sell,
assign or otherwise liquidate, or direct any Guarantor to sell, assign or
otherwise liquidate, any or all of the Collateral or any part thereof, and
take
possession of the proceeds of any such sale or liquidation;
(e) take
possession of the Collateral or any part thereof, by directing any Guarantor
in
writing to deliver the same to the Agent at any place or places designated
by
the Agent, in which event such Guarantor shall at its own expense:
(1) forthwith
cause the same to be moved to the place or places so designated by the Agent
and
there delivered to the Agent,
(2) store
and
keep any Collateral so delivered to the Agent at such place or places pending
further action by the Agent as provided in Section 5.2, and
(3) while
the
Collateral shall be so stored and kept, provide such guards and maintenance
services as shall be necessary to protect the same and to preserve and maintain
the Collateral in good condition;
it
being
understood that any Guarantor’s obligation to so deliver the Collateral is of
the essence of this Agreement and that, accordingly, upon application to
a court
of equity having jurisdiction, the Agent shall be entitled to a decree requiring
specific performance by such Guarantor of said obligation.
5.2 DISPOSITION
OF COLLATERAL
Any
Collateral repossessed by the Agent under or pursuant to Section 5.1 and
any
other Collateral whether or not so repossessed by the Agent may be sold,
assigned, leased or otherwise disposed of under one or more contracts or
as an
entirety, and without the necessity of gathering at the place of sale the
property to be sold, and in general in such manner, at such time or times,
at
such place or places and on such terms as the Agent may, in compliance with
any
mandatory requirements of applicable law, determine to be commercially
reasonable. Any of the Collateral may be sold, leased or otherwise disposed
of,
in the condition in which the same existed when taken by the Agent or after
any
overhaul or repair which the Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceedings permitted by such requirements shall be made upon not less than
ten
(10) days’ written notice to such Guarantor specifying the time at which such
disposition is to be made and the intended sale price or other consideration
therefor, and shall be subject, for the ten (10) days after the giving of
such
notice, to the right of such Guarantor or any nominee of such Guarantor to
acquire the Collateral involved at a price or for such other consideration
at
least equal to the intended sale price or other consideration so specified.
Any
such disposition which shall be a public sale permitted by such requirements
shall be made upon not less than ten (10) days’ written notice to such Guarantor
specifying the time and place of such sale and, in the absence of applicable
requirements of law, shall be by public auction (which may, at the option
of the
Agent, be subject to reserve), after publication at least once in The
New York Times
not less
than ten (10) days prior to the date of sale. If The
New York Times
is not
then being published, publication may be made in lieu thereof in any newspaper
then being circulated in the City of New York, New York, as the Agent may
elect.
All requirements of reasonable notice under this Section 5.2 shall be met
if
such notice is mailed, postage prepaid at least ten (10) days before the
time of
such sale or disposition, to the Guarantor at its address set forth herein
or
such other address as the Guarantor may have, in writing, provided to the
Agent.
The Agent may, if it deems it reasonable, postpone or adjourn any sale of
any
Collateral from time to time by an announcement at the time and place of
the
sale to be so postponed or adjourned without being required to give a new
notice
of sale. The proceeds realized from the sale of any Collateral shall be applied
as follows: first, to the reasonable costs, expenses and attorneys’ fees and
expenses incurred by Agent for collection and for acquisition, completion,
protection, removal, storage, sale and delivery of the Collateral; second,
to
interest due on any of the Obligations and any fees payable under this
Agreement; and third, to the principal of the Obligations. If any deficiency
shall arise, Guarantors shall remain liable to Agent and Lenders
therefor.
5.3 POWER
OF ATTORNEY
Each
Guarantor hereby irrevocably authorizes and appoints the Agent, or any Person
or
agent the Agent may designate, as such Guarantor’s attorney-in-fact, at such
Guarantor’s cost and expense, subject to the terms of the Loan Agreement, to
exercise all of the following powers upon and at any time after the occurrence
and during the continuance of an Event of Default, which powers, being coupled
with an interest, shall be irrevocable until all of the Obligations owing
by
such Guarantor shall have been paid and satisfied in full:
(a) accelerate
or extend the time of payment, compromise, issue credits, bring suit or
administer and otherwise collect Accounts or proceeds of any
Collateral;
(b) receive,
open and dispose of all mail addressed to such Guarantor and notify postal
authorities to change the address for delivery thereof to such address as
the
Agent may designate;
(c) give
customers indebted on Accounts notice of the Agent’s interest therein, or to
instruct such customers to make payment directly to the Agent for such
Guarantor’s account;
(d) convey
any item of Collateral to any purchaser thereof;
(e) give
any
notices or record any liens under Section 4.3 hereof; and
(f) make
any
payments or take any acts under Section 4.6 hereof.
The
Agent’s authority under this 5.3 shall include, without limitation, the
authority to execute and give receipt for any certificate of ownership or
any
document, transfer title to any item of Collateral, sign such Guarantor’s name
on all financing statements or any other documents deemed necessary or
appropriate to preserve, protect or perfect the security interest in the
Collateral and to file the same, prepare, file and sign such Guarantor’s name on
any notice of lien, assignment or satisfaction of lien or similar document
in
connection with any Account and prepare, file and sign such Guarantor’s name on
a proof of claim in bankruptcy or similar document against any customer of
such
Guarantor, and to take any other actions arising from or incident to the
rights,
powers and remedies granted to the Agent in this Agreement. This power of
attorney is coupled with an interest and is irrevocable by such
Guarantor.
5.4 WAIVER
OF CLAIMS
Except
as
otherwise provided in this Agreement, EACH GUARANTOR HEREBY WAIVES, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION
WITH THE AGENT’S OR ANY LENDER’S TAKING POSSESSION OF OR DISPOSING OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH ANY GUARANTOR
WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED
STATES
OR OF ANY STATE, and each Guarantor hereby further waives, to the extent
permitted by law:
(a) all
damages occasioned by such taking of possession except any damages which
are the
direct result of the Agent’s or Lender’s gross negligence or willful
misconduct;
(b) all
other
requirements as to the time, place and terms of sale or other requirements
with
respect to the enforcement of the Agent’s or Lender’s rights hereunder, except
as expressly provided herein; and
(c) all
rights of redemption, appraisement, valuation, stay, extension or moratorium
now
or hereafter in force under any applicable law in order to prevent or delay
the
enforcement of this Agreement or the absolute sale of the Collateral or any
portion thereof, and such Guarantor, for itself and all who may claim under
it,
insofar as it or they now or hereafter lawfully may, hereby waives the benefit
of all such laws.
Any
sale
of, or the grant of options to purchase, or any other realization upon any
Collateral shall operate to divest all right, title, interest, claim and
demand,
either at law or in equity, of such Guarantor therein and thereto, and shall
be
a perpetual bar both at law and in equity against such Guarantor and against
any
and all persons claiming or attempting to claim the Collateral so sold, optioned
or realized upon, or any part thereof, from, through and under such
Guarantor.
5.5 REMEDIES
CUMULATIVE
Each
and
every right, power and remedy hereby specifically given to the Agent shall
be in
addition to every other right, power and remedy specifically given under
this
Agreement, under the Loan Agreement or under other documentation relating
thereto or now or hereafter existing at law or in equity, or by statute,
and
each and every right, power and remedy whether specifically herein given
or
otherwise existing may be exercised from time to time or simultaneously and
as
often and in such order as may be deemed expedient by the Agent. All such
rights, powers and remedies shall be cumulative and the exercise or the
beginning of exercise of one shall not be deemed a waiver of the right to
exercise of any other or others. No delay or omission of the Agent in the
exercise of any such right, power or remedy and no renewal or extension of
any
of the Obligations shall impair any such right, power or remedy or shall
be
construed to be a waiver of any default or Event of Default or any acquiescence
therein.
ARTICLE
6
MISCELLANEOUS
PROVISIONS
6.1 NOTICES
All
notices, approvals, consents or other communications required or desired
to be
given hereunder shall be delivered in person, by facsimile transmission followed
promptly by first class mail, by a nationally recognized courier service
marked
for next business day delivery or by overnight mail, and delivered if to
the
Agent, then to the attention of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, c/o ▇▇▇▇▇ Partners III,
L.P.,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, fax no. (▇▇▇)
▇▇▇-▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., c/o Blank Rome, LLP, Chrysler
Building, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, fax no. (▇▇▇)
▇▇▇-▇▇▇▇, and if to the Guarantors, then to c/o Acura Pharmaceuticals, Inc.,
attention of ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇, with a copy to ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., St. ▇▇▇▇ & ▇▇▇▇▇, L.L.C., ▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, fax no. (▇▇▇) ▇▇▇-▇▇▇▇.
6.2 HEADINGS
The
headings in this Agreement are for purposes of reference only and shall not
affect the meaning or construction of any provision of this
Agreement.
6.3 SEVERABILITY
The
provisions of this Agreement are severable, and if any clause or provision
shall
be held invalid or unenforceable in whole or in part in any jurisdiction,
then
such invalidity or unenforceability shall affect, in that jurisdiction only,
such clause or provision, or part thereof, and shall not in any manner affect
such clause or provision in any other jurisdiction or any other clause or
provision of this Agreement in any jurisdiction.
6.4 AMENDMENTS,
WAIVERS AND CONSENTS
Any
amendment or waiver of any provision of this Agreement and any consent to
any
departure by any Guarantor from any provision of this Agreement shall be
effective only if made or given in writing signed by the Agent.
6.5 INTERPRETATION
OF AGREEMENT
All
terms
not defined herein or in the Loan Agreement shall have the meaning set forth
in
the applicable Uniform Commercial Code. Acceptance of or acquiescence in
a
course of performance rendered under this Agreement shall not be relevant
in
determining the meaning of this Agreement even though the accepting or
acquiescing party had knowledge of the nature of the performance and opportunity
for objection.
6.6 CONTINUING
SECURITY INTEREST
This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect, (b) be binding upon each Guarantor,
and its successors and assigns and (b) inure to the benefit of the Agent
and its
successors and assigns.
6.7 REINSTATEMENT
To
the
extent permitted by law, this Agreement shall continue to be effective or
be
reinstated if at any time any amount received by the Agent in respect of
the
Obligations owing by the Guarantors is rescinded or must otherwise be restored
or returned by the Agent upon the occurrence or during the pendency of any
Event
of Default, all as though such payments had not been made.
6.8 SURVIVAL
OF PROVISIONS
All
representations, warranties and covenants of the Guarantors contained herein
shall survive the execution and delivery of this Agreement, and shall terminate
only upon the full and final indefeasible payment and performance by the
Guarantors of the Obligations secured hereby.
6.9 SETOFF
The
Agent
shall have all rights of setoff available at law or in equity.
6.10 POWER
OF ATTORNEY
In
addition to the powers granted to the Agent under Section 5.3, each Guarantor
hereby irrevocably authorizes and appoints the Agent, or any Person or agent
the
Agent may designate, as such Guarantor’s attorney-in-fact, at such Guarantor’s
cost and expense, to exercise all of the following powers, which being coupled
with an interest, shall be irrevocable until all of the Obligations shall
have
been indefeasibly paid and satisfied in full:
(a) after
the
occurrence of an Event of Default, to receive, take, endorse, sign, assign
and
deliver, all in the name of the Agent or such Guarantor, any and all checks,
notes, drafts, and other documents or instruments relating to the Collateral;
and
(b) to
request, at any time from customers indebted on Accounts, verification of
information concerning the Accounts and the amounts owing thereon.
6.11 INDEMNIFICATION;
AUTHORITY OF AGENT
Neither
the Agent or any Lender nor any director, officer, employee, attorney or
agent
of the Agent or any Lender shall be liable to any Guarantor for any action
taken
or omitted to be taken by it or them hereunder, except for its or their own
gross negligence or willful misconduct, nor shall the Agent or any Lender
be
responsible for the validity, effectiveness or sufficiency of this Agreement
or
of any document or security furnished pursuant hereto. The Agent, the Lenders
and their respective directors, officers, employees, attorneys and agents
shall
be entitled to rely on any communication, instrument or document reasonably
believed by it or them to be genuine and correct and to have been signed
or sent
by the proper person or persons. Each Guarantor agrees to indemnify and hold
harmless the Agent, the Lenders and any other person from and against any
and
all costs, expenses (including reasonable fees, expenses and disbursements
of
attorneys and paralegals (including, without duplication, reasonable charges
of
inside counsel)), claims or liability incurred by the Agent, any Lender or
such
person hereunder, unless such claim or liability shall be due to willful
misconduct or gross negligence on the part of the Agent, the Lender or such
person.
6.12 RELEASE;
TERMINATION OF AGREEMENT
Subject
to the provisions of Section 6.7 of this Agreement, this Agreement shall
terminate upon the termination of the Guaranties and the full and final
indefeasible payment and performance of all the Obligations owing by each
Guarantor. At such time, the Agent shall, at the request of any Guarantor,
reassign and redeliver to such Guarantor all of the Collateral hereunder
which
has not been sold, disposed of, retained or applied by the Agent in accordance
with the terms hereof. Such reassignment and redelivery shall be without
warranty by or recourse to the Agent, except as to the absence of any prior
assignments by the Agent of its interest in the Collateral, and shall be
at the
expense of such Guarantor.
6.13 COUNTERPARTS
This
Agreement may be executed in one or more counterparts, including by facsimile
copy, each of which shall be deemed an original but all of which shall together
constitute one and the same agreement.
6.14 GOVERNING
LAW
This
Agreement and the rights of the parties hereunder shall be governed by, and
construed in accordance with, the laws of the State of New York wherein the
terms of this Agreement were negotiated, excluding to the greatest extent
permitted by law any rule of law that would cause the application of the
laws of
any jurisdiction other than the State of New York.
6.15 SUBMISSION
TO JURISDICTION
(a) Each
of
the parties hereto hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York State
court
or United States Federal court sitting in New York City, and any appellate
court
from any thereof, in any action or proceeding arising our of or relating
to this
Agreement or any of the other Transaction Documents to which it is a party,
or
for recognition or enforcement of any judgment, and each of the parties hereto
irrevocably and unconditionally agrees that all claims in respect of any
such
action or proceeding may be heard and determined in any such New York State
court or, to the fullest extent permitted by law, in such United States Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the right that any party may otherwise have to bring
any action or proceeding relating to this Agreement or any of the other
Transaction Documents in the courts of any other jurisdiction.
(b) Each
of
the parties hereto irrevocably and unconditionally waives, to the fullest
extent
it may legally and effectively do so, any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out
of or
in relation to this Agreement or any other Transaction Document to which
it is a
party in any such New York State or United States Federal court sitting in
New
York City. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
6.16 SERVICE
OF PROCESS
EACH
GUARANTOR HEREBY IRREVOCABLY AGREES THAT SERVICE OF PROCESS IN ANY LEGAL
ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE EFFECTED BY MAILING A
COPY
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH GUARANTOR
AT
ITS ADDRESS SET FORTH IN SECTION 6.1 HEREOF.
6.17 LIMITATION
OF LIABILITY
THE
AGENT
AND THE LENDERS SHALL NOT HAVE ANY LIABILITY TO ANY GUARANTOR (WHETHER SOUNDING
IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY ANY GUARANTOR IN
CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS
OR
RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT
OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND
NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON THE AGENT OR LENDER, AS
APPLICABLE, THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
6.18 DELAYS;
PARTIAL EXERCISE OF REMEDIES
No
delay
or omission of the Agent to exercise any right or remedy hereunder, whether
before or after the happening of any Event of Default, shall impair any such
right or shall operate as a waiver thereof or as a waiver of any such Event
of
Default. No single or partial exercise by the Agent of any right or remedy
shall
preclude any other or further exercise thereof, or preclude any other right
or
remedy.
6.19 JURY
TRIAL
EACH
OF
THE GUARANTORS AND THE AGENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT OR THE
ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT THEREOF.
[SIGNATURE
PAGE TO FOLLOW]
IN
WITNESS WHEREOF,
each
Guarantor has caused this Guarantors General Security Agreement to be duly
executed and delivered as of the date first written above.
ACURA
PHARMACEUTICAL
TECHNOLOGIES,
INC.
By:
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:
President and Chief Executive Officer
AXIOM
PHARMACEUTICAL
CORPORATION
By:
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:
President and Chief Executive Officer
By
its
acceptance hereof, as of the day and year first above written, the Agent
agrees
to be bound by the provisions hereof applicable to it.
▇▇▇▇▇
PARTNERS III, L.P.
By:
Claudius, L.L.C, General Partner
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇
▇▇.
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
By:
/s/
▇▇▇▇▇ Coonjeevaram
Name:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, its General Partner
Title:
President and Chief Executive Officer
SCHEDULE
A
Section
3.3
·APT
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
·Axiom
▇▇▇
▇.
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.