Unassociated Document


    Exhibit
      10.5

    

      COMPANY
        GENERAL SECURITY AGREEMENT

       

      This
        Company General Security Agreement (the “Agreement”)
        is
        dated as of November 9, 2005 by and among Acura Pharmaceuticals, Inc., a
        New
        York corporation with its principal place of business at 616 N. North Court,
        Palatine, Illinois, 60067 (“Debtor”),
        and
        Galen Partners III, L.P., a Delaware limited partnership with its principal
        place of business at 610 Fifth Avenue, Fifth Floor, New York, New York, 10020,
        acting in its capacity as agent for the Lenders, as defined below (the
“Agent”),
        for
        the benefit of the Lenders.

       

      PRELIMINARY
        STATEMENTS

       

      Debtor
        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”).
        The
        Lenders have required, as a condition precedent to the effectiveness of the
        Loan
        Agreement, that the Debtor (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 the Debtor of the obligations owing by the Debtor
        to
        the Lenders under the Loan Agreement, the Notes, the other Transaction Documents
        and each of the agreements, documents and instruments delivered by the Debtor
        pursuant thereto or in connection therewith (collectively, the “Obligations”).

       

      AGREEMENT

       

      In
        consideration of the premises and in order to induce the Lenders to enter
        into
        and perform the Loan Agreement, the Debtor hereby agrees as
        follows:

       

      ARTICLE
        1

       

      CREATION
        OF SECURITY INTEREST

       

      1.1  SECURITY
        INTEREST

       

      The
        Debtor 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 the Debtor’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 the Debtor.

       

      1.2  DEBTOR
        REMAINS LIABLE

       

      Anything
        herein to the contrary notwithstanding, (a) the Debtor shall remain liable
        under
        the contracts and agreements included in the Collateral to the extent set
        forth
        therein to perform all of its 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 Debtor from any of its
        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 Debtor 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 all of the assets of the Debtor including all of the kinds and types
        of
        property described in clauses (a) through (h) of this Section 2.1, whether
        now
        owned or hereafter at any time arising, acquired or created by the Debtor
        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 the Debtor relating thereto and
        all
        Proceeds (as defined in Section 2.2 below) of Collateral:

       

      (a)  all
        of
        the Debtor’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 the Debtor’s sales of goods or
        rendition of services made under any of the Debtor’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 the Debtor 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
        the Debtor’s inventory, including without limitation (i) all raw materials, work
        in process, parts, components, assemblies, supplies and materials used or
        consumed in the Debtor’s businesses, wherever located and whether in the
        possession of the Debtor 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 the Debtor or any other person or entity; and
        (iii)
        all goods returned to or repossessed by the Debtor (all of the foregoing
        property being hereinafter referred to as “Inventory”);

       

      (c)  all
        of
        the equipment owned or leased by the Debtor, 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
        the Debtor’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”);

       

      
        
          
          

        

        
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      (e)  all
        of
        the Debtor’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 mark 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 the Debtor’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 the Debtor, together with the goodwill
        of
        the business symbolized by or connected with the Debtor’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
        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; 

       

      (g)  all
        deposit accounts, letter-of-credit rights, instruments (including, without
        limitation, promissory notes), investment property and chattel paper;
        and

       

      (h)  all
        of
        the shares of stock or other securities of Acura Pharmaceutical Technologies,
        Inc. and Axiom Pharmaceutical Corporation, and the certificates, if any,
        representing such shares or other securities, and all dividends, distributions,
        return of capital, 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 such shares or securities and all subscription warrants, rights
        or
        options issued thereon or with respect thereto, and all investment property,
        all, to the extent applicable, as further set forth in the Stock Pledge
        Agreement.

       

      2.2  PROCEEDS

       

      For
        purposes of this Agreement, the term “Proceeds”
        shall
        include (a) whatever is now or hereafter received by the Debtor 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 the Debtor with any proceeds
        of
        Collateral hereunder.

       

      
        
          
          

        

        
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      ARTICLE
        3

       

      REPRESENTATIONS
        AND WARRANTIES

       

      The
        Debtor represents and warrants as follows:

       

      3.1  ORGANIZATION
        AND EXISTENCE

       

      The
        Debtor is a corporation duly organized, validly existing and in good standing
        under the laws of the State of New York 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. The Debtor 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 the Debtor to a material liability.

       

      3.2  AUTHORIZATION

       

      (a)  The
        Debtor 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 the Debtor in, on or in respect of the Collateral.

       

      (b)  All
        corporate action on the part of the Debtor and its directors and stockholders
        necessary for the authorization, execution,
        delivery and performance by the Debtor of this Agreement and the transactions
        contemplated herein or in any other Transaction Document to which it is a
        party,
        has been taken.

       

      3.3  PLACES
        OF BUSINESS

       

      The
        Debtor 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 the Debtor’s chief executive office 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 Watson Security Agreement, the June
        Bridge Loan Security Agreement and the September Bridge Loan Security Agreement
        (each as hereinafter defined), 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.

       

      
        
          
          

        

        
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      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 the Debtor in the ordinary course
        of its
        business. The Accounts created are the Debtor’s exclusive property and are not
        and shall not be subject to any lien, consignment arrangement, encumbrance,
        security interest or financing statement whatsoever, except (i) the lien
        in
        favor of the holders of the Senior Note under the Watson Term Loan and the
        documents executed in connection therewith, including, without limitation,
        the
        Watson Security Agreement dated as of March 29, 2000 (the “Watson
        Security Agreement”);
        (ii)
        the lien in favor of the holders of the Secured Promissory Notes issued in
        connection with a bridge loan (the “June
        Bridge Loan”)
        extended
        pursuant to the terms of that certain Loan Agreement, dated June 22, 2005
        and
        the documents executed in connection therewith, including, without limitation,
        the Guarantors Security Agreement dated June 22, 2005 (the “June
        Bridge Loan Security Agreement”);
        and
        (iii) the lien in favor of the holders of the Secured Promissory Notes issued
        in
        connection with a bridge loan (the “September
        Bridge Loan”)
        extended
        pursuant to the terms of that certain Loan Agreement, dated September 16,
        2005
        and the documents executed in connection therewith, including, without
        limitation, the Guarantors Security Agreement dated September 16, 2005 (the
        “September
        Bridge Loan Security Agreement”)
        . To
        the best knowledge of the Debtor, the Debtor’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)  The
        Debtor 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)  The
        Debtor has not licensed to anyone the use of any of such Intellectual Property
        Rights and has no knowledge of the infringing use by the Debtor or any Guarantor
        of any Intellectual Property Rights of third parties.

       

      (c)  Other
        than as disclosed to the Debtor’s Board of Directors, the Debtor 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 Debtor and the
        Guarantors or with respect to any license under which the Debtor or a Guarantor
        is licensor or licensee; or (ii) that the Intellectual Property Rights infringe
        upon the rights of any third party.

       

      (d)  The
        Debtor 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. The Debtor has used proper statutory notice
        in
        connection with its use of each patent, trademark and copyright.

       

      
        
          
          

        

        
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      3.8  INVENTORY

       

      All
        Inventory of the Debtor 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 Debtor
        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 the
        Debtor.

       

      3.9  OWNERSHIP

       

      The
        Debtor 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, the Watson Security Agreement, the June Bridge Loan
        Security Agreement and the September Bridge Loan Security Agreement. No
        effective financing statement or other instrument similar in effect covering
        all
        or any part of such Collateral or listing the Debtor or any trade name of
        the
        Debtor is on file in any recording office, except such as may have been filed
        relating to the Watson Term Loan, the June Bridge Loan and the September
        Bridge
        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

       

      The
        Debtor agrees as follows:

       

      4.1  DEFEND
        AGAINST CLAIMS

       

      The
        Debtor 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
        the Debtor determine that the claim or demand is not material and that,
        consequently, such defense would not be consistent with good business judgment.
        The Debtor 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

       

      The
        Debtor 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
        the
        Debtor 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, the Debtor 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, mark 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. The Debtor will pay
        the
        costs incurred in connection with any of the foregoing.

       

      
        
          
          

        

        
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      4.4  ADDITIONAL
        LIENS; TRANSFERS

       

      Without
        the prior written consent of the Agent, the Debtor 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 (i) the Watson Term Loan and documents relative
        thereto; (ii) the June Bridge Loan and the documents relative thereto; and
        (iii)
        the September Bridge Loan and the documents relative thereto, and the Debtor
        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 the Debtor 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

       

      The
        Debtor 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 Debtor
        hereby agrees 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 agrees
        it
        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.

       

      
        
          
          

        

        
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      4.7  FURTHER
        OBLIGATIONS WITH RESPECT TO ACCOUNTS

       

      In
        furtherance of the continuing assignment and security interest in the Accounts
        of the Debtor granted pursuant to this Agreement, upon the creation of Accounts,
        upon the Agent’s request, the Debtor 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, the
        Debtor shall provide the Agent with copies of agreements with, or purchase
        orders from, the customers of the Debtor 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, the Debtor 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 the Debtor,
        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.
        The
        Debtor hereby authorizes the Agent to regard the Debtor’s printed name or rubber
        stamp signature on assignment schedules or invoices as the equivalent of
        a
        manual signature by the Debtor’s authorized officers or agents.

       

      4.8  INSURANCE

       

      The
        Debtor 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. The Debtor 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

       

      The
        Debtor agrees to pay, when due, all taxes lawfully levied or assessed against
        the Debtor 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 the Debtor, 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.

       

      
        
          
          

        

        
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      4.10  COMPLIANCE
        WITH LAWS

       

      The
        Debtor 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 the Debtor 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. The Debtor 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 the Debtor to conduct its business in all material
        respects. 

       

      4.11  MAINTENANCE
        OF PROPERTY

       

      The
        Debtor 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

       

      The
        Debtor 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 the Debtor is contesting, in good faith by appropriate legal,
        administrative or other proceedings, promptly instituted and diligently
        conducted, any such Legal Requirement; provided,
        further,
        that
        the Debtor shall comply with the order of any court or other governmental
        authority relating to such Legal Requirements unless the Debtor 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, the Debtor 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 Debtor, 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. The Debtor shall not, 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 the Debtor shall have previously
        determined that such use or the pursuit or maintenance of such Intellectual
        Property is no longer desirable in the conduct of the Debtor’s business and that
        the loss thereof would not be reasonably likely to have a Material Adverse
        Effect, in which case, the Debtor will give prompt notice of any such
        abandonment to the Agent.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      4.14  FURTHER
        ASSURANCES

       

      The
        Debtor 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 regarding the exercise of
        remedies 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 the Debtor 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 the Debtor’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 the Debtor;

       

      (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 the Debtor 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 the Debtor
        in
        writing to deliver the same to the Agent at any place or places designated
        by
        the Agent, in which event the Debtor 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

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (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 the Debtor’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 the Debtor 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 the Debtor 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 the Debtor or any nominee of the Debtor 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 the Debtor 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 Debtor at its address set forth herein or
        such
        other address as the Debtor 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, the Debtor shall remain liable to Agent and Lenders
        therefor.

       

      5.3  POWER
        OF ATTORNEY

       

      The
        Debtor hereby irrevocably authorizes and appoints the Agent, or any Person
        or
        agent the Agent may designate, as the Debtor’s attorney-in-fact, at the Debtor’s
        cost and expense, subject to the terms of the Loan Agreement regarding the
        exercise of remedies, 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 the Debtor shall have been paid and satisfied in
        full:

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      (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 the Debtor 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 the Debtor’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 the Debtor’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 the Debtor’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 the Debtor’s name on a proof of claim in
        bankruptcy or similar document against any customer of the Debtor, 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 the Debtor.

       

      5.4  WAIVER
        OF CLAIMS

       

      Except
        as
        otherwise provided in this Agreement, THE DEBTOR 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 THE DEBTOR
        WOULD
        OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
        OR OF
        ANY STATE, and the Debtor 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

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      (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 the Debtor, 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 the Debtor therein and thereto, and shall
        be a
        perpetual bar both at law and in equity against the Debtor 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 the
        Debtor.

       

      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 Bruce F. Wesson, c/o Galen Partners III,
        L.P.,
        610 Fifth Avenue, Fifth Floor, New York, New York, 10020, fax no. (212)
        218-4990, with a copy to George N. Abrahams, Esq., c/o Blank Rome, LLP, Chrysler
        Building, 405 Lexington Avenue, New York, New York 10174, fax no. (917)
        332-3763, and if to the Debtor, then to the attention of Mr. Andrew D. Reddick,
        616 N. North Court, Suite 120, Palatine, Illinois 60067, with a copy to John
        P.
        Reilly, Esq., St. John & Wayne, L.L.C., 2 Penn Plaza East, Newark, New
        Jersey, 07105, fax no. (973) 491-3555.

       

      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.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      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 the Debtor 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 the Debtor,
        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 Debtor 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 Debtor 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 Debtor
        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, the Debtor
        hereby
        irrevocably authorizes and appoints the Agent, or any Person or agent the
        Agent
        may designate, as the Debtor’s attorney-in-fact, at the Debtor’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:

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      (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 the Debtor, 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 the Debtor 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. The Debtor 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 full and final indefeasible payment and performance of all
        the
        Obligations owing by the Debtor. At such time, the Agent shall, at the request
        of the Debtor, reassign and redeliver to the Debtor 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 the Debtor.

       

      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.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      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

       

      THE
        DEBTOR 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 THE DEBTOR 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 THE DEBTOR (WHETHER SOUNDING
        IN
        TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY THE DEBTOR 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.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      6.19  JURY
        TRIAL

       

      THE
        DEBTOR 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]

    

     

    
      


      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      


      IN
        WITNESS WHEREOF,
        the
        Debtor has caused this Company General Security Agreement to be duly executed
        and delivered as of the date first written above.

       

       

      
        	 	 	 
	 	ACURA
                PHARMACEUTICALS, INC.
	 
 	 
 	 
 
	Date: 	By:  	/s/ Andrew
                D. Reddick
	 	
                
                  
Name:
                  Andrew D. Reddick 

              
	 	Title:
                President and Chief Executive Office


      

      


      


      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.

       

      
        	 	 	 
	 	
                GALEN
                  PARTNERS III, L.P.

                By:
                  Claudius, L.L.C, General Partner

                610
                  Fifth Avenue, 5th
                  Fl.

                New
                  York, New York 10019

              
	 
 	 
 	 
 
	Date: 	By:  	/s/ Srini
                Conjeevaram
	 	
                
                  
Name:
                  Srini Conjeevaram, its General Partner 

              
	 	Title:
                President and Chief Executive Officer


      

      
 

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      


      SCHEDULE
        A

      


      Section
        3.3  Places
        of Business

      


      616
        N.
        North Court, Suite 120, Palatine, Illinois 60067

       

       

      
        
          
          

        

        
          19