Unassociated Document


    Exhibit
      10.7

     

    
      
        CONTINUING
          UNCONDITIONAL SECURED GUARANTY

        This
          Continuing Unconditional Secured Guaranty (“Guaranty”) is made on
          November 9, 2005 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.

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

         

        (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.

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

         

        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”).

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

         

        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.

        
          
            
            

          

          
            5

            
              

            

          

          
            
            

          

        

         

        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.

        
          
            
            

          

          
            6

            
              

            

          

          
            
            

          

        

         

        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]

      


       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       


      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

              


      

       

       

      
        
          
          

        

        
          8