Unassociated Document


     

    CONTINUING
      UNCONDITIONAL SECURED GUARANTY

     

    This
      Continuing Unconditional Secured Guaranty (“Guaranty”)
      is
      made on January 31, 2006 by Acura Pharmaceutical Technologies, Inc., an Indiana
      corporation (“Guarantor”)
      in
      favor of Galen Partners III, L.P., a Delaware limited partnership, acting in
      its
      capacity as agent for the Lenders, as defined below (“Agent”),
      for
      the benefit of the Lenders.

     

     

    PRELIMINARY
      STATEMENTS

     

    Acura
      Pharmaceuticals, Inc., a New York corporation (the “Borrower”),
      entered into a Loan Agreement of even date herewith (the “Loan
      Agreement;”
terms
      used in this Guaranty and not otherwise defined shall have the meanings given
      to
      them in the Loan Agreement) with the Lenders party (each a “Lender”
and
      collectively, the “Lenders”).
      Pursuant to the Loan Agreement, the Lenders have made financial accommodations
      to the Borrower in accordance with the terms of the Loan Agreement. The
      Guarantor will continue to receive certain benefits from such accommodations
      and
      is therefore willing to guaranty the prompt payment and performance of the
      obligations of the Borrower, on the terms set forth in this Guaranty. The
      extension of credit by the Lenders to the Borrower is necessary and desirable
      to
      the conduct and operation of the business of the Borrower and will inure to
      the
      financial benefit of the Guarantor.

     

    AGREEMENT

     

    For
      value
      received and in consideration of any loan, advance, or financial accommodation
      of any kind whatsoever heretofore, now or hereafter made, given or granted
      to
      the Borrower by the Lenders (including, without limitation, the loans evidenced
      by the Notes as made by the Lenders to the Borrower pursuant to, the Loan
      Agreement) and other good and valuable consideration (the sufficiency and
      receipt of which are hereby acknowledged), the Grantor hereby agrees as follows:
      

     

    ARTICLE
      1

     

    GUARANTY

     

    1.1  GUARANTY

     

    The
      Guarantor unconditionally guarantees to the Agent for the benefit of the Lenders
      (a) the full and prompt payment and performance when due, whether at maturity
      or
      earlier, by reason of acceleration or otherwise, and at all times thereafter,
      of
      all liabilities of the Borrower to the Lenders and (b) the prompt, full and
      faithful discharge by the Borrower of each and every term, condition, agreement,
      representation, warranty or covenant now or hereafter made by the Borrower
      to
      the Lenders or the Agent, in each case, under these clauses (a) and (b),
      pursuant to the Loan Agreement, the Notes, the other Transaction Documents
      or
      any document or instrument delivered by the Borrower to the Lenders in
      connection therewith or pursuant thereto (which, together with the liabilities
      described in clause (a) of this Section 1.1, are collectively referred to in
      this Guaranty as the “Borrower’s
      Liabilities”).
      The
      Guarantor further agrees to pay all reasonable out-of-pocket costs and expenses,
      including, without limitation, all court costs and reasonable attorneys’ and
      paralegals’ fees paid or incurred by the Lenders and the Agent (on behalf of the
      Lenders), in endeavoring to collect all or any part of the Borrower’s
      Liabilities from, or in prosecuting any action against the Guarantor or any
      other guarantor of all or any part of the Borrower’s Liabilities.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.2  NO
      FRAUDULENT CONVEYANCE

     

    Notwithstanding
      any provision of this Guaranty to the contrary, it is intended that this
      Guaranty, and any liens and security interests granted by the Guarantor to
      secure this Guaranty, will not constitute a Fraudulent Conveyance (as defined
      below). Consequently, the Guarantor agrees that if this Guaranty, or any liens
      or security interests securing this Guaranty, would, but for the application
      of
      this sentence, constitute a Fraudulent Conveyance, this Guaranty and each such
      lien and security interest shall be valid and enforceable only to the maximum
      extent that would not cause this Guaranty or such lien or security interest
      to
      constitute a Fraudulent Conveyance, and this Guaranty shall automatically be
      deemed to have been amended accordingly at all relevant times. For purposes
      hereof, “Fraudulent
      Conveyance”
means
      a
      transfer of property or the incurrence of liability which would be avoidable
      under Section 548 or 544(b) of the Bankruptcy Code (as defined herein) or a
      fraudulent conveyance or fraudulent transfer under the provisions of any
      applicable fraudulent conveyance or fraudulent transfer law or similar law
      of
      any state, nation or other governmental unit, as in effect from time to
      time.

     

    1.3  GUARANTY
      UNCONDITIONAL

     

    The
      Guarantor hereby agrees that, except as hereinafter provided, and to the extent
      permitted by applicable law, its obligations under this Guaranty shall be
      unconditional, irrespective of (a) the validity or enforceability of the
      Borrower’s Liabilities or any part thereof, or of any Note or other document
      evidencing all or any part of the Borrower’s Liabilities, (b) the absence of any
      attempt to collect the Borrower’s Liabilities from the Borrower or any other
      guarantor or other action to enforce the same, (c) the waiver or consent by
      the
      Agent, any Lender or Lenders with respect to any provision of any instrument
      evidencing the Borrower’s Liabilities, or any part thereof, or any other
      agreement heretofore, now or hereafter executed by the Borrower and delivered
      to
      the Agent, the Lender or Lenders, (d) the failure by the Agent or any Lender
      to
      take any steps to perfect and maintain its security interest in, or to preserve
      its rights to, any security or collateral for the Borrower’s Liabilities, (e)
      the institution of any proceeding under Chapter 11 of Title 11 of the United
      States Code (11 U.S.C. §101 et seq.), as amended (the “Bankruptcy
      Code”),
      or
      any similar proceeding, by or against the Borrower, or the Agent’s or any
      Lender’s election in any such proceeding of the application of Section
      1111(b)(2) of the Bankruptcy Code, (f) any borrowing or grant of a security
      interest by the Borrower as debtor-in-possession, under Section 364 of the
      Bankruptcy Code, (g) the disallowance, under Section 502 of the Bankruptcy
      Code,
      of all or any portion of the Lenders’ claim(s) for repayment of the Borrower’s
      Liabilities, or (h) any other circumstance which might otherwise constitute
      a
      legal or equitable discharge or defense of a guarantor.

     

    1.4  WAIVERS

     

    (a)  The
      Guarantor hereby waives diligence, presentment, demand of payment, filing of
      claims with a court in the event of receivership or bankruptcy of the Borrower,
      protest or notice with respect to the Borrower’s Liabilities and all demands
      whatsoever, and covenants that this Guaranty will not be discharged, except
      by
      complete performance of the obligations and liabilities contained herein. Upon
      the occurrence and during the continuance of an Event of Default under the
      Loan
      Agreement, Lenders may, at their sole election, proceed directly and at once,
      without notice, against the Guarantor to collect and recover the full amount
      or
      any portion of the Borrower’s Liabilities, without first proceeding against any
      other Person, or against any security or collateral for the Borrower’s
      Liabilities.

     

    
      
         

      

      
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    (b)  The
      Guarantor hereby waives any and all claims (including, without limitation,
      any
      claim for reimbursement, contribution or subrogation) of the Guarantor against
      the Borrower, any endorser or any other guarantor of all or any part of the
      Borrower’s Liabilities, or against any of the Borrower’s properties, arising by
      reason of any payment by the Guarantor to the Lenders pursuant to the provisions
      hereof.

     

    1.5  NO
      SUBROGATION

     

    The
      Guarantor hereby unconditionally and irrevocably agrees not to exercise any
      rights that it may now have or hereafter acquire against the Borrower or any
      other insider guarantor that arise from the existence, payment, performance
      or
      enforcement of the Borrower’s Liabilities under or in respect of this Guaranty,
      the Loan Agreement, the Notes, the other Transaction Documents or any document
      or instrument delivered by the Borrower to the Lenders in connection therewith
      or pursuant thereto, including, without limitation, any right of subrogation,
      reimbursement, exoneration, contribution or indemnification and any right to
      participate in any claim or remedy of the Agent or the Lenders against the
      Borrower or any other insider guarantor or any Collateral, whether or not such
      claim, remedy or right arises in equity or under contract, statute or common
      law, including, without limitation, the right to take or receive from the
      Borrower or any other insider guarantor, directly or indirectly, in cash or
      other property or by set-off or in any other manner, payment or security on
      account of such claim, remedy or right. If any amount shall be paid to any
      Guarantor in violation of the immediately preceding sentence at any time prior
      to the indefeasible payment in full in cash of the Borrower’s Liabilities and
      all other amounts payable under this Guaranty, such amount shall be received
      and
      held in trust for the benefit of the Lenders, shall be segregated from other
      property and funds of the Guarantor and shall forthwith be paid or delivered
      to
      the Agent in the same form as so received (with any necessary endorsement or
      assignment) to be credited and applied to the Borrower’s Liabilities and all
      other amounts payable under this Guaranty, whether matured or unmatured, in
      accordance with the terms of the Notes and the Loan Agreement, or to be held
      as
      collateral for any Borrower’s Liabilities or other amounts payable under this
      Guaranty thereafter arising. After the Loan Agreement has been terminated and
      the Notes canceled and the indefeasible payment in full in cash of the
      Borrower’s Liabilities and all other amounts payable under this Guaranty has
      occurred, except in the case of a Reinstatement Event (as defined below), the
      Agent and the Lenders will, at the Guarantor’s request and expense, execute and
      deliver to the Guarantor appropriate documents, without recourse and without
      representation or warranty, necessary to evidence the transfer by subrogation
      to
      the Guarantor of an interest in the Borrower’s Liabilities resulting from such
      payment made by the Guarantor pursuant to this Guaranty.

     

    
      
         

      

      
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    1.6  LENDERS’
      RIGHTS WITH RESPECT TO BORROWER’S LIABILITIES

     

    The
      Lenders are hereby authorized, without notice or demand and without affecting
      the liability of the Guarantor hereunder, at any time and from time to time
      to
      (a) increase the amount of, renew, extend, accelerate or otherwise change the
      time for payment of, or other terms relating to the Borrower’s Liabilities or
      otherwise modify, amend or change the terms of any debenture, note or other
      agreement, document or instrument now or hereafter executed by the Borrower
      and
      delivered to the Lenders; (b) accept partial payments on the Borrower’s
      Liabilities; (c) take and hold security or collateral for the payment of the
      Borrower’s Liabilities guaranteed hereby, or for the payment of this Guaranty,
      or for the payment of any other guaranties of the Borrower’s Liabilities or
      other liabilities of the Borrower, and exchange, enforce, waive and release
      any
      such security or collateral; (iv) apply such security or collateral and direct
      the order or manner of sale thereof as in their sole discretion they may
      determine; and (v) settle, release, compromise, collect or otherwise liquidate
      the Borrower’s Liabilities and any security or collateral therefor in any
      manner, without affecting or impairing the obligations of the Guarantor
      hereunder. The Lenders shall have the exclusive right to determine the time
      and
      manner of application of any payments or credits, whether received from the
      Borrower or any other source, and such determination shall be binding on the
      Guarantor. All such payments and credits may be applied, reversed and reapplied,
      in whole or in part, to any of the Borrower’s Liabilities as the Lenders shall
      determine in their sole discretion without affecting the validity or
      enforceability of this Guaranty (unless otherwise required pursuant to the
      Loan
      Agreement).

     

    1.7  INFORMATION

     

    The
      Guarantor hereby assumes responsibility for keeping itself informed of the
      financial condition of the Borrower, and any and all endorsers and/or other
      guarantors of any instrument or document evidencing all or any part of the
      Borrower’s Liabilities and of all other circumstances bearing upon the risk of
      nonpayment of the Borrower’s Liabilities or any part thereof that diligent
      inquiry would reveal, and the Guarantor hereby agrees that neither the Agent
      nor
      the Lenders shall have any duty to advise the Guarantor of information known
      to
      any of them regarding such condition or any such circumstances or to undertake
      any investigation not a part of their respective regular business routines.
      If
      the Agent or any Lender, in their respective sole discretions, undertake at
      any
      time or from time to time to provide any such information to the Guarantor,
      the
      Agent or such Lender, as the case may be, shall not be under any obligation
      to
      update any such information or to provide any such information to the Guarantor
      on any subsequent occasion.

     

    1.8  REINSTATEMENT

     

    The
      Guarantor consents and agrees that neither the Agent nor the Lenders shall
      be
      under any obligation to marshal any assets in favor of the Guarantor or against
      or in payment of any or all of the Borrower’s Liabilities. The Guarantor further
      agrees that, to the extent that the Borrower makes a payment or payments to
      the
      Lenders or the Lenders receive any proceeds of collateral, which payment or
      payments or any part thereof are subsequently invalidated, declared to be
      fraudulent or preferential, set aside and/or required to be repaid to the
      Borrower, its estate, trustee, receiver or any other party, including, without
      limitation, the Guarantor, under any bankruptcy law or state or federal
      statutory or common law, then to the extent of such payment or repayment, the
      Borrower’s Liabilities or the part thereof which has been paid, reduced or
      satisfied by such amount, and the Guarantor’s obligations hereunder with respect
      to such portion of the Borrower’s Liabilities, shall be reinstated and continued
      in full force and effect as of the date such initial payment, reduction or
      satisfaction occurred. Notwithstanding anything else to the contrary contained
      herein, the Guarantor consents and agrees that this Guaranty shall continue
      to
      be effective or be reinstated, as the case may be, if at any time any payment
      of
      any of the Borrower’s Liabilities is rescinded or must otherwise be returned by
      any Lender or any other Person upon the insolvency, bankruptcy or reorganization
      of the Borrower or the Guarantor or otherwise, all as though such payment had
      not been made (each such continuation or reinstatement, a “Reinstatement
      Event”).

     

    
      
         

      

      
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    1.9  ASSIGNMENTS
      BY LENDERS

     

    Each
      Lender may, to the extent and in the manner set forth in the Loan Agreement,
      sell or assign the Borrower’s Liabilities or any part thereof, or grant
      participations therein, and in any such event each and every permitted assignee
      or holder of, or participant in, all or any of the Borrower’s Liabilities shall
      have the right to enforce this Guaranty, by suit or otherwise for the benefit
      of
      such assignee, holder, or participant, as fully as if herein by name
      specifically given such right.

     

    ARTICLE
      2

     

    REPRESENTATIONS
      AND WARRANTIES

     

    The
      Guarantor hereby represents and warrants that: (a) it is a corporation duly
      organized, validly existing and in good standing under the laws of the State
      of
      Indiana; (b) it is duly authorized and empowered to execute and deliver this
      Guaranty; (c) all corporate action on the part of the Guarantor requisite for
      the due execution and delivery of this Guaranty and the due granting and
      creation of the security interests referred to herein has been duly and
      effectively taken; (d) the Guarantor’s chief executive office is located at c/o
      Acura Pharmaceuticals, Inc., 616 N. North Court, Suite 120, Palatine, Illinois
      60067; and (e) the execution, delivery and performance of this Guaranty will
      not
      result in any violation of, conflict with, or result in a breach of, any of
      the
      terms of, or constitute a default under, any agreements, contracts, court orders
      or consent decrees, the Certificate of Incorporation or the By-laws, as amended,
      of the Guarantor.

     

    ARTICLE
      3

     

    MISCELLANEOUS

     

    3.1  SUCCESSORS
      AND ASSIGNS; ASSIGNMENT BY GUARANTOR

     

    This
      Guaranty shall be binding upon the Guarantor and upon the successors (including
      without limitation, any receiver, trustee or debtor in possession of or for
      the
      Guarantor) of the Guarantor and shall inure to the benefit of the Lenders and
      their respective successors and permitted assigns. Notwithstanding anything
      contained herein to the contrary, this Guaranty may not be assigned by the
      Guarantor without the prior written consent of the Lenders.

     

    
      
         

      

      
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    3.2  TERM
      OF GUARANTY

     

    This
      Guaranty shall continue in full force and effect, and the Lenders shall be
      entitled to make loans and advances and extend financial accommodations to
      the
      Borrower on the faith hereof, until the Loan Agreement has been terminated
      and
      the Notes canceled and the indefeasible payment in full in cash of the
      Borrower’s Liabilities and all other amounts payable under this Guaranty has
      occurred. The Guarantor hereby unconditionally and irrevocably waives any right
      to revoke this Guaranty and acknowledges that this Guaranty is continuing in
      nature and applies to all Borrower’s Liabilities, whether existing now or in the
      future.

     

    


    3.3  SEVERABILITY

     

    Wherever
      possible each provision of this Guaranty shall be interpreted in such manner
      as
      to be effective and valid under applicable law, but if any provision of this
      Guaranty shall be prohibited by or invalid under such law, such provision shall
      be ineffective to the extent of such prohibition or invalidity without
      invalidating the remainder of such provision or the remaining provisions of
      this
      Guaranty.

     

    3.4  GOVERNING
      LAW

     

    THIS
      GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
      THE
      STATE OF NEW YORK WHEREIN THE TERMS OF THIS GUARANTY WERE NEGOTIATED, EXCLUDING
      TO THE GREATEST EXTENT PERMITTED BY LAW ANY RULE OF LAW THAT WOULD CAUSE THE
      APPLICATION OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.

     

    3.5  CONSENT
      TO JURISDICTION

     

    (a)  The
      Guarantor 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 Guaranty
      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. The Guarantor 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 Guaranty or any of the other Transaction Documents
      in the courts of any other jurisdiction.

     

    (b)  The
      Guarantor 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 Guaranty 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. The Guarantor 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.

     

    
      
         

      

      
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    3.6  WAIVER
      OF JURY TRIAL

     

    EACH
      OF
      THE PARTIES HERETO 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]

     

    
      
         

      

      
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    IN
      WITNESS WHEREOF,
      this
      Guaranty has been duly executed by the undersigned as of the date first written
      above.

     

    
      	 	 	 
	 	ACURA
              PHARMACEUTICAL TECHNOLOGIES,
              INC.
	 
 	 
 	 
 
	 	By:  	/s/ Andrew
              D.
              Reddick
	 	
              
Name:
              Andrew D. Reddick
	 	Title:
              President and CEO




    
      
         

      

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