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Unassociated Document

    Exhibit
      10.8

    

      GUARANTORS
        GENERAL SECURITY AGREEMENT

       

      This
        Guarantors General Security Agreement (the “Agreement”)
        is
        dated November 9, 2005 by and among Acura Pharmaceutical Technologies, Inc.,
        an
        Indiana corporation with its principal place of business at 16235 State Road
        17,
        Culver, Indiana, 46511 (“APT”),
        Axiom
        Pharmaceutical Corporation, a Delaware corporation with its principal place
        of
        business at c/o Acura Pharmaceuticals, Inc., 616 N. North Court, Suite 120,
        Palatine, Illinois, 60067 (“Axiom”
        and,
        together with Houba, the “Guarantors”),
        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

       

      A. Acura
        Pharmaceuticals, Inc. (the “Company”)
        has
        entered into a Loan Agreement of even date herewith (as the same may be amended,
        modified, supplemented or restated from time to time, the “Loan
        Agreement;”
        terms
        which are capitalized in this Agreement and not otherwise defined shall have
        the
        meanings ascribed to them in the Loan Agreement) with the Lenders party thereto
        (the “Lenders”).

       

      B. Each
        of
        the Guarantors has executed and delivered to Agent, for the benefit of the
        Lenders, a Continuing Unconditional Secured Guaranty of even date herewith
        (each
        a “Guaranty”)
        of the
        Company’s obligations under the Loan Agreement (collectively, the “Obligations”).

       

      C. The
        Lenders have required, as a condition precedent to the effectiveness of the
        Loan
        Agreement, that each Guarantor (a) grant to the Agent, for the ratable benefit
        of the Lenders, a security interest in and to the Collateral (as defined
        in
        Section 2.1 below) and (b) execute and deliver this Agreement in order to
        secure
        the payment and performance by such Guarantor of the Guaranty.

       

      AGREEMENT

       

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

       

      ARTICLE
        1

       

      CREATION
        OF SECURITY INTEREST

       

      1.1  SECURITY
        INTEREST

       

      Each
        Guarantor hereby pledges, assigns and grants to the Agent a continuing perfected
        lien and security interest having priority over any and all other security
        interests in all of such Guarantor’s right, title and interest in and to the
        Collateral (as defined in Section 2.1 below) in order to secure the payment
        and
        performance of all Obligations owing by such Guarantor.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      1.2  GUARANTORS
        REMAIN LIABLE

       

      Anything
        herein to the contrary notwithstanding, (a) the Guarantors shall remain liable
        under the contracts and agreements included in the Collateral to the extent
        set
        forth therein to perform all of their duties and obligations thereunder to
        the
        same extent as if this Agreement had not been executed, (b) the exercise
        by the
        Agent of any of the rights hereunder shall not release the Guarantors from
        any
        of their duties or obligations under the contracts and agreements included
        in
        the Collateral and (c) neither the Agent nor any Lender shall have any
        obligation or liability under the contracts and agreements included in the
        Collateral by reason of this Agreement, the Loan Agreement or any other
        Transaction Document, nor shall the Agent or any Lender be obligated to perform
        any of the obligations or duties of the Guarantors thereunder or to take
        any
        action to collect or enforce any claim for payment assigned
        hereunder.

       

      ARTICLE
        2

       

      COLLATERAL

       

      2.1  COLLATERAL

       

      For
        purposes of this Agreement, the term “Collateral”
        shall
        mean, with respect to each Guarantor, all of the assets of such Guarantor
        including all of the kinds and types of property described in clauses (a)
        through (g) of this Section 2.1, whether now owned or hereafter at any time
        arising, acquired or created by such Guarantor and wherever located, and
        includes all replacements, additions, accessions, substitutions, repairs,
        proceeds and products relating thereto or therefrom, and all documents, ledger
        sheets and files of such Guarantor relating thereto and all Proceeds (as
        defined
        in Section 2.2 below) of Collateral:

       

      (a)  all
        of
        such Guarantor’s accounts, whether now existing or existing in the future,
        including without limitation (i) all accounts receivable (whether or not
        specifically listed on schedules furnished to the Agent), including, without
        limitation, all accounts created by or arising from all of such Guarantor’s
        sales of goods or rendition of services made under any of such Guarantor’s trade
        names, or through any of its divisions, (ii) all unpaid seller’s rights
        (including rescission, replevin, reclamation and stoppage in transit) relating
        to the foregoing or arising therefrom, (iii) all rights to any goods represented
        by any of the foregoing, including returned or repossessed goods, (iv) all
        reserves and credit balances held by such Guarantor with respect to any such
        accounts receivable or account debtors, (v) all health-care-insurance
        receivables, and (vi) all guarantees or collateral for any of the foregoing
        (all
        of the foregoing property and similar property being hereinafter referred
        to as
“Accounts”);

       

      (b)  all
        of
        such Guarantor’s inventory, including without limitation (i) all raw materials,
        work in process, parts, components, assemblies, supplies and materials used
        or
        consumed in such Guarantor’s businesses, wherever located and whether in the
        possession of such Guarantor or any other Person; (ii) all goods, wares and
        merchandise, finished or unfinished, held for sale or lease or leased or
        furnished or to be furnished under contracts of service, wherever located
        and
        whether in the possession of such Guarantor or any other person or entity;
        and
        (iii) all goods returned to or repossessed by such Guarantor (all of the
        foregoing property being hereinafter referred to as “Inventory”);

       

      
        
          
          

        

        
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      (c)  all
        of
        the equipment owned or leased by such Guarantor, including, without limitation,
        machinery, equipment, office equipment and supplies, computers and related
        equipment, furniture, furnishings, tools, tooling, jigs, dies, fixtures,
        manufacturing implements, fork lifts, trucks, trailers, motor vehicles, and
        other equipment (all of the foregoing property being hereinafter referred
        to as
“Equipment”);

       

      (d)  all
        of
        such Guarantor’s general intangibles (including, without limitation, payment
        intangibles), instruments, securities (including without limitation United
        States of America Treasury Bills), credits, claims, demands, documents, letters
        of credit and letter of credit proceeds, documents of title, certificates
        of
        title, certificates of deposit, warehouse receipts, bills of lading, leases
        which are permitted to be assigned or pledged, deposit accounts, money, tax
        refund claims, and contract rights which are permitted to be assigned or
        pledged
        (all of the foregoing property being hereinafter referred to as “Intangibles”);

       

      (e)  all
        of
        each Guarantor’s intellectual property, including, without limitation, New Drug
        Applications, Investigatory New Drug Applications, Abbreviated New Drug
        Applications, Alternative New Drug Applications, registrations and quotas
        as
        issued by the DEA or the Attorney General of the United States pursuant to
        the
        CSA, certifications, permits and approvals of federal and state governmental
        agencies, patents, patent applications, trademarks, trademark applications,
        service marks, service 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 such Guarantor’s rights to use the patents,
        trademarks, copyrights, service marks, or other property of the aforesaid
        nature
        of other Persons now or hereafter licensed to such Guarantor, together with
        the
        goodwill of the business symbolized by or connected with such Guarantor’s
        trademarks, copyrights, service marks, licenses and the other rights included
        in
        this Section 2.1(e) (all of the foregoing property being hereinafter referred
        to
        as “Intellectual
        Property”);
        

       

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

       

      (g)  all
        interest, dividends, distributions, cash, instruments and other property
        from
        time to time received, receivable or otherwise distributed in respect of
        or in
        exchange for any or all of the then existing Collateral.

       

      
        
          
          

        

        
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      2.2  PROCEEDS

       

      For
        purposes of this Agreement, the term “Proceeds”
        shall
        include (a) whatever is now or hereafter received by such Guarantor upon
        the
        sale, exchange, collection or other disposition of any item of Collateral,
        whether such proceeds constitute Inventory, Accounts, Intangibles, royalties,
        payment under insurance (whether or not the Agent is the loss payee thereof),
        or
        any indemnities, warranties or guaranties, payable by reason of loss or damage
        to or otherwise with respect to any or the foregoing Collateral, and (b)
        any
        such items which are now or hereafter acquired by such Guarantor with any
        proceeds of Collateral hereunder.

       

      ARTICLE
        3

       

      REPRESENTATIONS
        AND WARRANTIES

       

      Each
        Guarantor severally represents and warrants as follows:

       

      3.1  ORGANIZATION
        AND EXISTENCE

       

      Such
        Guarantor is a corporation duly organized, validly existing and in good standing
        under the laws of its state of incorporation and is qualified to do business
        in
        such other jurisdictions as the nature or conduct of its operations or the
        ownership of its properties require such qualification. Such Guarantor does
        not
        own or lease any property or engage in any activity in any jurisdiction that
        might require qualification to do business as a foreign corporation in such
        jurisdiction and where the failure to so qualify could reasonably be expected
        to
        have a Material Adverse Effect or subject such Guarantor to a material
        liability.

       

      3.2  AUTHORIZATION

       

      (a)  Such
        Guarantor has all requisite corporate power and authority (i) to execute
        and
        deliver, and to perform and observe its obligations under, the Transaction
        Documents to which it is a party, and (ii) to consummate the transactions
        contemplated hereby and thereby, including, without limitation, the grant
        of any
        security interest, mortgage, payment trust, guaranty or other security
        arrangement by such Guarantor in, on or in respect of the
        Collateral.

       

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

       

      3.3  PLACES
        OF BUSINESS

       

      Such
        Guarantor has no places of business, or warehouses in which it leases space,
        other than those set forth on Section
        3.3 of Schedule A,
        a copy
        of which is attached hereto and made a part hereof (“Schedule
        A”).

       

      
        
          
          

        

        
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      3.4  LOCATION
        OF COLLATERAL

       

      Except
        for the movement of Collateral from time to time from one place of business
        or
        warehouse listed on Section
        3.3 of Schedule A
        to
        another place of business or warehouse listed on Section
        3.3 of Schedule A,
        the
        Collateral is located at such Guarantor’s chief executive offices or other
        places of business or warehouses listed on Section
        3.3 of Schedule A,
        and not
        at any other location.

       

      3.5  RESTRICTIONS
        ON COLLATERAL DISPOSITION

       

      Except
        for any restrictions imposed under the Guarantors General Security Agreement
        dated as of March 29, 2000 given by the Guarantors in connection with the
        Senior
        Note (the “Watson
        Guarantors Security Agreement”),
        the
        Guarantors General Security Agreement dated as of June 22, 2005 given by
        the
        Guarantors in connection with a certain Loan Agreement, dated of even date
        therewith (“June
        Bridge Loan Guarantors Security Agreement”)
        and the
        Guarantors General Security Agreement dated as of September 16, 2005 given
        by
        the Guarantors in connection with a certain Loan Agreement, dated of even
        date
        therewith (“September
        Bridge Loan Guarantors Security Agreement”),
        none of
        the Collateral is subject to contractual obligations that may restrict or
        inhibit the Agent’s rights or ability to sell or dispose of the Collateral or
        any part thereof after the occurrence of an Event of Default.

       

      3.6  STATUS
        OF ACCOUNTS

       

      Each
        Account is based on an actual and bona fide rendition of services or sale
        of
        goods or products to customers, made by such Guarantor in the ordinary course
        of
        its business. The Accounts created are such Guarantor’s exclusive property and
        are not and shall not be subject to any lien, consignment arrangement,
        encumbrance, security interest or financing statement whatsoever, except
        (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 Guarantors 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 as of
        June
        22, 2005 and the documents executed in connection therewith, including, without
        limitation, the June Bridge Loan Guarantors 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 as of
        September 16, 2005 and the documents executed in connection therewith,
        including, without limitation, the September Bridge Loan Guarantors Security
        Agreement. To the best knowledge of such Guarantor, such Guarantor’s customers
        have accepted the goods, products and services and owe and are obligated
        to pay
        the full amounts stated in the invoices according to their terms, without
        any
        dispute, offset, defense or counterclaim.

       

      3.7  COPYRIGHTS,
        TRADEMARKS AND PATENTS

       

      (a)  Such
        Guarantor owns outright all of the Intellectual Property Rights listed on
        Section
        4.12
        of the
        Schedule of Exceptions attached to the Loan Agreement free and clear of all
        liens and encumbrances except for the Permitted Liens and pays no royalty
        to
        anyone under or with respect to any of them.

       

      
        
          
          

        

        
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      (b)  Such
        Guarantor has not licensed to anyone the use of any of such Intellectual
        Property Rights and has no knowledge of the infringing use by the Company
        or any
        Guarantor of any Intellectual Property Rights of third parties.

       

      (c)  Other
        than as disclosed to the Company’s or the Guarantors’ Board of Directors, Such
        Guarantor has no knowledge, nor has it received any notice (i) of any conflict
        with the asserted rights of others with respect to any Intellectual Property
        Rights used in, or useful to, the operation of the business conducted by
        the
        Company and the Guarantors or with respect to any license under which the
        Company or a Guarantor is licensor or licensee; or (ii) that the Intellectual
        Property Rights infringe upon the rights of any third party.

       

      (d)  Such
        Guarantor has made or performed all filings, recordings and other acts and
        has
        paid all required fees and taxes to maintain and protect its interest in
        each
        and every item of Intellectual Property in full force and effect throughout
        the
        world, and to protect and maintain its interest therein including, without
        limitation, recordations of any of its interests in patents and trademarks
        with
        the U.S. Patent and Trademark Office and in corresponding national and
        international patent offices, and recordation of any of its interests in
        any
        copyrights with the U.S. Copyright Office and in corresponding national and
        international copyright offices. Such Guarantor has used proper statutory
        notice
        in connection with its use of each patent, trademark and copyright.

       

      3.8  INVENTORY

       

      All
        Inventory of such Guarantor consists of a quality and quantity usable and
        salable in the ordinary course of business, except for obsolete items and
        items
        of below-standard quality, all of which have been or will be written off
        or
        written down to net realizable value on the consolidated balance sheet of
        the
        Guarantors and its Subsidiaries as of March 31, 2005. The quantities of each
        type of Inventory (whether raw materials, work-in-process, or finished goods)
        are not excessive, but are reasonable and warranted in the present circumstances
        of such Guarantor.

       

      3.9  OWNERSHIP

       

      Such
        Guarantor is the legal and beneficial owner of its Collateral free and clear
        of
        any lien, claim, option or right of others, except for the security interest
        created under this Agreement, the Watson Guarantors Security Agreement, the
        June
        Bridge Loan Guarantors Security Agreement and the September Bridge Loan
        Guarantors Security Agreement. No effective financing statement or other
        instrument similar in effect covering all or any part of such Collateral
        or
        listing such Guarantor or any trade name of such Guarantor is on file in
        any
        recording office, except such as may have been filed relating to the 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.

       

      
        
          
          

        

        
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      ARTICLE
        4

       

      COVENANTS

       

      Each
        Guarantor agrees (which agreements shall be several as to each Guarantor
        except
        as otherwise provided) as follows:

       

      4.1  DEFEND
        AGAINST CLAIMS

       

      Such
        Guarantor will defend the Collateral against all claims and demands of all
        Persons at any time claiming the same or any interest therein unless both
        the
        Agent and such Guarantor determine that the claim or demand is not material
        and
        that, consequently, such defense would not be consistent with good business
        judgment. Such Guarantor will not permit any lien notices with respect to
        the
        Collateral or any portion thereof to exist or be on file in any public office
        except for those in favor of the Agent and those permitted under the terms
        of
        the Loan Agreement.

       

      4.2  CHANGE
        IN COLLATERAL LOCATION

       

      Such
        Guarantor will not (a) change its corporate name, (b) change the location
        of its
        chief executive office or establish any place of business other than those
        specified in Section
        3.3 of Schedule A,
        or (c)
        move or permit movement of the Collateral from the locations specified therein
        except from one such location to another such location, unless in each case
        such
        Guarantor shall have given the Agent at least thirty (30) days prior written
        notice thereof, and shall have, in advance, executed and caused to be filed
        or
        delivered to the Agent any financing statements or other documents required
        by
        the Agent to perfect the security interest of the Agent in the Collateral
        in
        accordance with Section 4.3 of this Agreement, all in form and substance
        satisfactory to the Agent.

       

      4.3  ADDITIONAL
        FINANCING STATEMENTS

       

      Promptly
        upon the reasonable request of the Agent, such Guarantor will execute and
        deliver or use its best efforts to procure any document, give any notices,
        execute and file any financing statements, mortgages or other documents,
        all in
        form and substance satisfactory to the Agent, 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. Such Guarantor
        will pay the costs incurred in connection with any of the
        foregoing.

       

      4.4  ADDITIONAL
        LIENS; TRANSFERS

       

      Without
        the prior written consent of the Agent, such Guarantor will not, in any way,
        hypothecate or create or permit to exist any lien, security interest, charge
        or
        encumbrance on or other interest in the Collateral, other than those permitted
        under the terms of the Loan Agreement and the liens in favor of the holders
        of
        the Senior Note pursuant to (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 such Guarantor
        will not sell, transfer, assign, pledge, collaterally assign, exchange or
        otherwise dispose of the Collateral, other than the sale of Inventory in
        the
        ordinary course of business and the sale of obsolete or worn out Equipment.
        Notwithstanding the foregoing, if the proceeds of any such sale consist of
        notes, instruments, documents of title, letters of credit or chattel paper,
        such
        proceeds shall be promptly delivered to the Agent to be held as Collateral
        hereunder. If the Collateral, or any part thereof, is sold, transferred,
        assigned, exchanged, or otherwise disposed of in violation of these provisions,
        the security interest of the Agent shall continue in such Collateral or part
        thereof notwithstanding such sale, transfer, assignment, exchange or other
        disposition, and such Guarantor will hold the proceeds thereof for the benefit
        of the Agent, and promptly transfer such proceeds to the Agent in
        kind.

       

      
        
          
          

        

        
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      4.5  CONTRACTUAL
        OBLIGATIONS

       

      Such
        Guarantor will not enter into any contractual obligations which may restrict
        or
        inhibit the Agent’s rights or ability to sell or otherwise dispose of the
        Collateral or any part thereof after the occurrence or during the continuance
        of
        an Event of Default.

       

      4.6  AGENT’S
        RIGHT TO PROTECT COLLATERAL

       

      Upon
        the
        occurrence or continuance of an Event of Default, the Agent shall have the
        right
        at any time to make any payments and do any other acts the Agent may deem
        necessary to protect the security interests of the Lenders in the Collateral,
        including, without limitation, the rights to pay, purchase, contest or
        compromise any encumbrance, charge or lien which, in the reasonable judgment
        of
        the Agent, appears to be prior to or superior to the security interests granted
        hereunder, and appear in and defend any action or proceeding purporting to
        affect its security interests in, or the value of, the Collateral. The
        Guarantors hereby jointly and severally agree to reimburse the Agent for
        all
        payments made and expenses incurred under this Agreement including reasonable
        fees, expenses and disbursements of attorneys and paralegals acting for the
        Agent, including any of the foregoing payments under, or acts taken to protect
        its security interests in, the Collateral, which amounts shall be secured
        under
        this Agreement, and agree they shall be bound by any payment made or act
        taken
        by the Agent hereunder absent the Agent’s gross negligence or willful
        misconduct. The Agent shall have no obligation to make any of the foregoing
        payments or perform any of the foregoing acts.

       

      4.7  FURTHER
        OBLIGATIONS WITH RESPECT TO ACCOUNTS

       

      In
        furtherance of the continuing assignment and security interest in the Accounts
        of such Guarantor granted pursuant to this Agreement, upon the creation of
        Accounts, upon the Agent’s request, such Guarantor will execute and deliver to
        the Agent in such form and manner as the Agent may require, solely for its
        convenience in maintaining records of Collateral, such confirmatory schedules
        of
        Accounts, and other appropriate reports designating, identifying and describing
        the Accounts as the Agent may reasonably require. In addition, upon the Agent’s
        request, such Guarantor shall provide the Agent with copies of agreements
        with,
        or purchase orders from, the customers of such Guarantor and copies of invoices
        to customers, proof of shipment or delivery and such other documentation
        and
        information relating to such Accounts and other Collateral as the Agent may
        reasonably require. Furthermore, upon the Agent’s request, such Guarantor shall
        deliver to the Agent any documents or certificates of title issued with respect
        to any property included in the Collateral, and any promissory notes, letters
        of
        credit or instruments related to or otherwise in connection with any property
        included in the Collateral, which in any such case came into the possession
        of
        such Guarantor, or shall cause the issuer thereof to deliver any of the same
        directly to the Agent, in each case with any necessary endorsements in favor
        of
        the Agent. Failure to provide the Agent with any of the foregoing shall in
        no
        way affect, diminish, modify or otherwise limit the security interests granted
        herein. Each Guarantor hereby authorizes the Agent to regard such Guarantor’s
        printed name or rubber stamp signature on assignment schedules or invoices
        as
        the equivalent of a manual signature by such Guarantor’s authorized officers or
        agents.

       

      
        
          
          

        

        
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      4.8  INSURANCE

       

      Such
        Guarantor agrees to maintain public liability insurance, third party property
        damage insurance and replacement value insurance on the Collateral under
        such
        policies of insurance, with such insurance companies, in such amounts and
        covering such risks as are at all times satisfactory to the Agent in its
        commercially reasonable judgment. All policies covering the Collateral are
        to
        name the Agent as an additional insured and the loss payee in case of loss,
        and
        are to contain such other provisions as the Agent may reasonably require
        to
        fully protect the Agent’s interest in the Collateral and to any payments to be
        made under such policies. Without limiting the generality of the foregoing,
        all
        such policies shall contain standard lender’s loss payable clauses in favor of
        the Agent and shall provide that the same may not be cancelled, terminated
        or
        revised without giving the Agent at least 30 days prior written notice of
        such
        cancellation, termination or revision. Proceeds of such insurance policy
        or
        policies will be applied to the Obligations unless written consent to the
        contrary is obtained from the Agent. Such Guarantor will furnish the Agent
        with
        certificates of insurance or such other evidence satisfactory to the Agent
        so as
        to evidence compliance with the provisions of this Section.

       

      4.9  TAXES

       

      Such
        Guarantor agrees to pay, when due, all taxes lawfully levied or assessed
        against
        such Guarantor or any of the Collateral before any penalty or interest accrues
        thereon; provided,
        however,
        that,
        unless such taxes have become a federal tax or ERISA lien on any of the assets
        of such Guarantor, no such tax need be paid if the same is being contested,
        in
        good faith, by appropriate proceedings promptly instituted and diligently
        conducted and if an adequate reserve or other appropriate provision shall
        have
        been made therefor as required in order to be in conformity with
        GAAP.

       

      4.10  COMPLIANCE
        WITH LAWS

       

      Such
        Guarantor agrees to comply in all material respects with all Legal Requirements
        applicable to the Collateral or any part thereof, or to the operation of
        its
        business or its assets generally, unless such Guarantor contests in good
        faith,
        by appropriate legal, administrative or other proceedings promptly instituted
        and diligently conducted, any such Legal Requirements in a reasonable manner
        and
        in good faith. Such Guarantor agrees to maintain in full force and effect,
        its
        respective licenses and permits granted by any governmental authority as
        may be
        necessary or advisable for such Guarantor to conduct its business in all
        material respects. 

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      4.11  MAINTENANCE
        OF PROPERTY

       

      Such
        Guarantor agrees to keep all property useful and necessary to its business
        in
        good working order and condition (ordinary wear and tear excepted) and not
        to
        commit or suffer any waste with respect to any of its properties.

       

      4.12  ENVIRONMENTAL
        AND OTHER MATTERS

       

      Such
        Guarantor will conduct its business so as to comply in all respects with
        all
        environmental, land use, occupational, safety or health Legal Requirements
        in
        all jurisdictions in which it is or may at any time be doing business, except
        to
        the extent that such Guarantor is contesting, in good faith by appropriate
        legal, administrative or other proceedings, promptly instituted and diligently
        conducted, any such Legal Requirement; provided,
        further,
        that
        such Guarantor shall comply with the order of any court or other governmental
        authority relating to such Legal Requirements unless such Guarantor shall
        currently be prosecuting an appeal, proceedings for review or administrative
        proceedings and shall have secured a stay of enforcement or execution or
        other
        arrangement postponing enforcement or execution pending such appeal, proceedings
        for review or administrative proceedings.

       

      4.13  INTELLECTUAL
        PROPERTY

       

      With
        respect to each item of its Intellectual Property, each of the Guarantors
        agrees
        to take, at its expense, all necessary steps, including, without limitation,
        in
        the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other
        governmental authority, to (a) maintain the validity and enforceability of
        such
        Intellectual Property and maintain such Intellectual Property in full force
        and
        effect, and (b) pursue the registration and maintenance of each patent,
        trademark, or copyright registration or application, now or hereafter included
        in such Intellectual Property of the Guarantors, including, without limitation,
        the payment of required fees and taxes, the filing of responses to office
        actions issued by the U.S. Patent and Trademark Office, the U.S. Copyright
        Office or other governmental authorities, the filing of applications for
        renewal
        or extension, the filing of affidavits under Sections 8 and 15 of the U.S.
        Trademark Act, the filing of divisional, continuation, continuation-in-part,
        reissue and renewal applications or extensions, the payment of maintenance
        fees
        and the participation in interference, reexamination, opposition, cancellation,
        infringement and misappropriation proceedings. Neither Guarantor shall, without
        the prior written consent of the Agent, discontinue use of or otherwise abandon
        any Intellectual Property, or abandon any right to file an application for
        any
        patent, trademark or copyright, unless such Guarantor shall have previously
        determined that such use or the pursuit or maintenance of such Intellectual
        Property is no longer desirable in the conduct of such Guarantor’s business and
        that the loss thereof would not be reasonably likely to have a Material Adverse
        Effect, in which case, such Guarantor will give prompt notice of any such
        abandonment to the Agent.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      4.14  FURTHER
        ASSURANCES

       

      Such
        Guarantor shall take all such further actions and execute all such further
        documents and instruments (including, but not limited to, collateral assignments
        of Intellectual Property and Intangibles or any portion thereof) as the Agent
        may at any time reasonably determine in its sole discretion to be necessary
        or
        desirable to further carry out and consummate the transactions contemplated
        by
        the Loan Agreement and the documentation relating thereto, including this
        Agreement, and to perfect or protect the liens (and the priority status thereof)
        of the Agent in the Collateral.

       

      ARTICLE
        5

       

      REMEDIES

       

      5.1  OBTAINING
        COLLATERAL UPON DEFAULT

       

      If
        any
        Event of Default shall have occurred and be continuing, then and in every
        such
        case, subject to the terms of the Loan Agreement and any mandatory requirements
        of applicable law then in effect, the Agent, in addition to any rights now
        or
        hereafter existing under applicable law, shall have all rights as a secured
        creditor under the Uniform Commercial Code in all relevant jurisdictions
        and
        may:

       

      (a)  personally,
        or by agents or attorneys, immediately retake possession of the Collateral
        or
        any part thereof, from any Guarantor or any other Person who then has possession
        of any part thereof, with or without notice or process of law, and for that
        purpose may enter upon such Guarantor’s premises where any of the Collateral is
        located and remove the same and use in connection with such removal any and
        all
        services, supplies, aids and other facilities of such Guarantor;

       

      (b)  instruct
        the obligor or obligors on any agreement, instrument or other obligation
        (including, without limitation, the Accounts) constituting the Collateral
        to
        make any payment required by the terms of such instrument or agreement directly
        to the Agent;

       

      (c)  withdraw
        all monies, securities and instruments held pursuant to any pledge arrangement
        for application to the Obligations;

       

      (d)  sell,
        assign or otherwise liquidate, or direct any Guarantor to sell, assign or
        otherwise liquidate, any or all of the Collateral or any part thereof, and
        take
        possession of the proceeds of any such sale or liquidation;

       

      (e)  take
        possession of the Collateral or any part thereof, by directing any Guarantor
        in
        writing to deliver the same to the Agent at any place or places designated
        by
        the Agent, in which event such Guarantor shall at its own expense:

       

      (1)  forthwith
        cause the same to be moved to the place or places so designated by the Agent
        and
        there delivered to the Agent,

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      (2)  store
        and
        keep any Collateral so delivered to the Agent at such place or places pending
        further action by the Agent as provided in Section 5.2, and

       

      (3)  while
        the
        Collateral shall be so stored and kept, provide such guards and maintenance
        services as shall be necessary to protect the same and to preserve and maintain
        the Collateral in good condition;

       

      it
        being
        understood that any Guarantor’s obligation to so deliver the Collateral is of
        the essence of this Agreement and that, accordingly, upon application to
        a court
        of equity having jurisdiction, the Agent shall be entitled to a decree requiring
        specific performance by such Guarantor of said obligation.

       

      5.2  DISPOSITION
        OF COLLATERAL

       

      Any
        Collateral repossessed by the Agent under or pursuant to Section 5.1 and
        any
        other Collateral whether or not so repossessed by the Agent may be sold,
        assigned, leased or otherwise disposed of under one or more contracts or
        as an
        entirety, and without the necessity of gathering at the place of sale the
        property to be sold, and in general in such manner, at such time or times,
        at
        such place or places and on such terms as the Agent may, in compliance with
        any
        mandatory requirements of applicable law, determine to be commercially
        reasonable. Any of the Collateral may be sold, leased or otherwise disposed
        of,
        in the condition in which the same existed when taken by the Agent or after
        any
        overhaul or repair which the Agent shall determine to be commercially
        reasonable. Any such disposition which shall be a private sale or other private
        proceedings permitted by such requirements shall be made upon not less than
        ten
        (10) days’ written notice to such Guarantor specifying the time at which such
        disposition is to be made and the intended sale price or other consideration
        therefor, and shall be subject, for the ten (10) days after the giving of
        such
        notice, to the right of such Guarantor or any nominee of such Guarantor to
        acquire the Collateral involved at a price or for such other consideration
        at
        least equal to the intended sale price or other consideration so specified.
        Any
        such disposition which shall be a public sale permitted by such requirements
        shall be made upon not less than ten (10) days’ written notice to such Guarantor
        specifying the time and place of such sale and, in the absence of applicable
        requirements of law, shall be by public auction (which may, at the option
        of the
        Agent, be subject to reserve), after publication at least once in The
        New York Times
        not less
        than ten (10) days prior to the date of sale. If The
        New York Times
        is not
        then being published, publication may be made in lieu thereof in any newspaper
        then being circulated in the City of New York, New York, as the Agent may
        elect.
        All requirements of reasonable notice under this Section 5.2 shall be met
        if
        such notice is mailed, postage prepaid at least ten (10) days before the
        time of
        such sale or disposition, to the Guarantor at its address set forth herein
        or
        such other address as the Guarantor may have, in writing, provided to the
        Agent.
        The Agent may, if it deems it reasonable, postpone or adjourn any sale of
        any
        Collateral from time to time by an announcement at the time and place of
        the
        sale to be so postponed or adjourned without being required to give a new
        notice
        of sale. The proceeds realized from the sale of any Collateral shall be applied
        as follows: first, to the reasonable costs, expenses and attorneys’ fees and
        expenses incurred by Agent for collection and for acquisition, completion,
        protection, removal, storage, sale and delivery of the Collateral; second,
        to
        interest due on any of the Obligations and any fees payable under this
        Agreement; and third, to the principal of the Obligations. If any deficiency
        shall arise, Guarantors shall remain liable to Agent and Lenders
        therefor.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      5.3  POWER
        OF ATTORNEY

       

      Each
        Guarantor hereby irrevocably authorizes and appoints the Agent, or any Person
        or
        agent the Agent may designate, as such Guarantor’s attorney-in-fact, at such
        Guarantor’s cost and expense, subject to the terms of the Loan Agreement, to
        exercise all of the following powers upon and at any time after the occurrence
        and during the continuance of an Event of Default, which powers, being coupled
        with an interest, shall be irrevocable until all of the Obligations owing
        by
        such Guarantor shall have been paid and satisfied in full:

       

      (a)  accelerate
        or extend the time of payment, compromise, issue credits, bring suit or
        administer and otherwise collect Accounts or proceeds of any
        Collateral;

       

      (b)  receive,
        open and dispose of all mail addressed to such Guarantor and notify postal
        authorities to change the address for delivery thereof to such address as
        the
        Agent may designate;

       

      (c)  give
        customers indebted on Accounts notice of the Agent’s interest therein, or to
        instruct such customers to make payment directly to the Agent for such
        Guarantor’s account;

       

      (d)  convey
        any item of Collateral to any purchaser thereof;

       

      (e)  give
        any
        notices or record any liens under Section 4.3 hereof; and 

       

      (f)  make
        any
        payments or take any acts under Section 4.6 hereof.

       

      The
        Agent’s authority under this 5.3 shall include, without limitation, the
        authority to execute and give receipt for any certificate of ownership or
        any
        document, transfer title to any item of Collateral, sign such Guarantor’s name
        on all financing statements or any other documents deemed necessary or
        appropriate to preserve, protect or perfect the security interest in the
        Collateral and to file the same, prepare, file and sign such Guarantor’s name on
        any notice of lien, assignment or satisfaction of lien or similar document
        in
        connection with any Account and prepare, file and sign such Guarantor’s name on
        a proof of claim in bankruptcy or similar document against any customer of
        such
        Guarantor, and to take any other actions arising from or incident to the
        rights,
        powers and remedies granted to the Agent in this Agreement. This power of
        attorney is coupled with an interest and is irrevocable by such
        Guarantor.

       

      5.4  WAIVER
        OF CLAIMS

       

      Except
        as
        otherwise provided in this Agreement, EACH GUARANTOR HEREBY WAIVES, TO THE
        EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION
        WITH THE AGENT’S OR ANY LENDER’S TAKING POSSESSION OF OR DISPOSING OF ANY OF THE
        COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
        FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH ANY GUARANTOR
        WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED
        STATES
        OR OF ANY STATE, and each Guarantor hereby further waives, to the extent
        permitted by law:

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      (a)  all
        damages occasioned by such taking of possession except any damages which
        are the
        direct result of the Agent’s or Lender’s gross negligence or willful
        misconduct;

       

      (b)  all
        other
        requirements as to the time, place and terms of sale or other requirements
        with
        respect to the enforcement of the Agent’s or Lender’s rights hereunder, except
        as expressly provided herein; and

       

      (c)  all
        rights of redemption, appraisement, valuation, stay, extension or moratorium
        now
        or hereafter in force under any applicable law in order to prevent or delay
        the
        enforcement of this Agreement or the absolute sale of the Collateral or any
        portion thereof, and such Guarantor, for itself and all who may claim under
        it,
        insofar as it or they now or hereafter lawfully may, hereby waives the benefit
        of all such laws.

       

      Any
        sale
        of, or the grant of options to purchase, or any other realization upon any
        Collateral shall operate to divest all right, title, interest, claim and
        demand,
        either at law or in equity, of such Guarantor therein and thereto, and shall
        be
        a perpetual bar both at law and in equity against such Guarantor and against
        any
        and all persons claiming or attempting to claim the Collateral so sold, optioned
        or realized upon, or any part thereof, from, through and under such
        Guarantor.

       

      5.5  REMEDIES
        CUMULATIVE

       

      Each
        and
        every right, power and remedy hereby specifically given to the Agent shall
        be in
        addition to every other right, power and remedy specifically given under
        this
        Agreement, under the Loan Agreement or under other documentation relating
        thereto or now or hereafter existing at law or in equity, or by statute,
        and
        each and every right, power and remedy whether specifically herein given
        or
        otherwise existing may be exercised from time to time or simultaneously and
        as
        often and in such order as may be deemed expedient by the Agent. All such
        rights, powers and remedies shall be cumulative and the exercise or the
        beginning of exercise of one shall not be deemed a waiver of the right to
        exercise of any other or others. No delay or omission of the Agent in the
        exercise of any such right, power or remedy and no renewal or extension of
        any
        of the Obligations shall impair any such right, power or remedy or shall
        be
        construed to be a waiver of any default or Event of Default or any acquiescence
        therein.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      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 Guarantors, then to c/o Acura Pharmaceuticals, Inc.,
        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.

       

      6.3  SEVERABILITY

       

      The
        provisions of this Agreement are severable, and if any clause or provision
        shall
        be held invalid or unenforceable in whole or in part in any jurisdiction,
        then
        such invalidity or unenforceability shall affect, in that jurisdiction only,
        such clause or provision, or part thereof, and shall not in any manner affect
        such clause or provision in any other jurisdiction or any other clause or
        provision of this Agreement in any jurisdiction.

       

      6.4  AMENDMENTS,
        WAIVERS AND CONSENTS

       

      Any
        amendment or waiver of any provision of this Agreement and any consent to
        any
        departure by any Guarantor from any provision of this Agreement shall be
        effective only if made or given in writing signed by the Agent.

       

      6.5  INTERPRETATION
        OF AGREEMENT

       

      All
        terms
        not defined herein or in the Loan Agreement shall have the meaning set forth
        in
        the applicable Uniform Commercial Code. Acceptance of or acquiescence in
        a
        course of performance rendered under this Agreement shall not be relevant
        in
        determining the meaning of this Agreement even though the accepting or
        acquiescing party had knowledge of the nature of the performance and opportunity
        for objection.

       

      6.6  CONTINUING
        SECURITY INTEREST

       

      This
        Agreement shall create a continuing security interest in the Collateral and
        shall (a) remain in full force and effect, (b) be binding upon each Guarantor,
        and its successors and assigns and (b) inure to the benefit of the Agent
        and its
        successors and assigns.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      6.7  REINSTATEMENT

       

      To
        the
        extent permitted by law, this Agreement shall continue to be effective or
        be
        reinstated if at any time any amount received by the Agent in respect of
        the
        Obligations owing by the Guarantors is rescinded or must otherwise be restored
        or returned by the Agent upon the occurrence or during the pendency of any
        Event
        of Default, all as though such payments had not been made.

       

      

       

      6.8  SURVIVAL
        OF PROVISIONS

       

      All
        representations, warranties and covenants of the Guarantors contained herein
        shall survive the execution and delivery of this Agreement, and shall terminate
        only upon the full and final indefeasible payment and performance by the
        Guarantors of the Obligations secured hereby.

       

      6.9  SETOFF

       

      The
        Agent
        shall have all rights of setoff available at law or in equity.

       

      6.10  POWER
        OF ATTORNEY

       

      In
        addition to the powers granted to the Agent under Section 5.3, each Guarantor
        hereby irrevocably authorizes and appoints the Agent, or any Person or agent
        the
        Agent may designate, as such Guarantor’s attorney-in-fact, at such Guarantor’s
        cost and expense, to exercise all of the following powers, which being coupled
        with an interest, shall be irrevocable until all of the Obligations shall
        have
        been indefeasibly paid and satisfied in full:

       

      (a)  after
        the
        occurrence of an Event of Default, to receive, take, endorse, sign, assign
        and
        deliver, all in the name of the Agent or such Guarantor, any and all checks,
        notes, drafts, and other documents or instruments relating to the Collateral;
        and

       

      (b)  to
        request, at any time from customers indebted on Accounts, verification of
        information concerning the Accounts and the amounts owing thereon.

       

      6.11  INDEMNIFICATION;
        AUTHORITY OF AGENT

       

      Neither
        the Agent or any Lender nor any director, officer, employee, attorney or
        agent
        of the Agent or any Lender shall be liable to any Guarantor for any action
        taken
        or omitted to be taken by it or them hereunder, except for its or their own
        gross negligence or willful misconduct, nor shall the Agent or any Lender
        be
        responsible for the validity, effectiveness or sufficiency of this Agreement
        or
        of any document or security furnished pursuant hereto. The Agent, the Lenders
        and their respective directors, officers, employees, attorneys and agents
        shall
        be entitled to rely on any communication, instrument or document reasonably
        believed by it or them to be genuine and correct and to have been signed
        or sent
        by the proper person or persons. Each Guarantor agrees to indemnify and hold
        harmless the Agent, the Lenders and any other person from and against any
        and
        all costs, expenses (including reasonable fees, expenses and disbursements
        of
        attorneys and paralegals (including, without duplication, reasonable charges
        of
        inside counsel)), claims or liability incurred by the Agent, any Lender or
        such
        person hereunder, unless such claim or liability shall be due to willful
        misconduct or gross negligence on the part of the Agent, the Lender or such
        person.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      6.12  RELEASE;
        TERMINATION OF AGREEMENT

       

      Subject
        to the provisions of Section 6.7 of this Agreement, this Agreement shall
        terminate upon the termination of the Guaranties and the full and final
        indefeasible payment and performance of all the Obligations owing by each
        Guarantor. At such time, the Agent shall, at the request of any Guarantor,
        reassign and redeliver to such Guarantor all of the Collateral hereunder
        which
        has not been sold, disposed of, retained or applied by the Agent in accordance
        with the terms hereof. Such reassignment and redelivery shall be without
        warranty by or recourse to the Agent, except as to the absence of any prior
        assignments by the Agent of its interest in the Collateral, and shall be
        at the
        expense of such Guarantor.

       

      6.13  COUNTERPARTS

       

      This
        Agreement may be executed in one or more counterparts, including by facsimile
        copy, each of which shall be deemed an original but all of which shall together
        constitute one and the same agreement.

       

      6.14  GOVERNING
        LAW

       

      This
        Agreement and the rights of the parties hereunder shall be governed by, and
        construed in accordance with, the laws of the State of New York wherein the
        terms of this Agreement were negotiated, excluding to the greatest extent
        permitted by law any rule of law that would cause the application of the
        laws of
        any jurisdiction other than the State of New York.

       

      6.15  SUBMISSION
        TO JURISDICTION

       

      (a)  Each
        of
        the parties hereto hereby irrevocably and unconditionally submits, for itself
        and its property, to the nonexclusive jurisdiction of any New York State
        court
        or United States Federal court sitting in New York City, and any appellate
        court
        from any thereof, in any action or proceeding arising our of or relating
        to this
        Agreement or any of the other Transaction Documents to which it is a party,
        or
        for recognition or enforcement of any judgment, and each of the parties hereto
        irrevocably and unconditionally agrees that all claims in respect of any
        such
        action or proceeding may be heard and determined in any such New York State
        court or, to the fullest extent permitted by law, in such United States Federal
        court. Each of the parties hereto agrees that a final judgment in any such
        action or proceeding shall be conclusive and may be enforced in other
        jurisdictions by suit on the right that any party may otherwise have to bring
        any action or proceeding relating to this Agreement or any of the other
        Transaction Documents in the courts of any other jurisdiction. 

       

      (b)  Each
        of
        the parties hereto irrevocably and unconditionally waives, to the fullest
        extent
        it may legally and effectively do so, any objection that it may now or hereafter
        have to the laying of venue of any suit, action or proceeding arising out
        of or
        in relation to this Agreement or any other Transaction Document to which
        it is a
        party in any such New York State or United States Federal court sitting in
        New
        York City. Each of the parties hereto hereby irrevocably waives, to the fullest
        extent permitted by law, the defense of an inconvenient forum to the maintenance
        of such action or proceeding in any such court.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      6.16  SERVICE
        OF PROCESS

       

      EACH
        GUARANTOR HEREBY IRREVOCABLY AGREES THAT SERVICE OF PROCESS IN ANY LEGAL
        ACTION
        OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE EFFECTED BY MAILING A
        COPY
        THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH GUARANTOR
        AT
        ITS ADDRESS SET FORTH IN SECTION 6.1 HEREOF. 

       

      6.17  LIMITATION
        OF LIABILITY

       

      THE
        AGENT
        AND THE LENDERS SHALL NOT HAVE ANY LIABILITY TO ANY GUARANTOR (WHETHER SOUNDING
        IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY ANY GUARANTOR IN
        CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS
        OR
        RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT
        OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND
        NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON THE AGENT OR LENDER, AS
        APPLICABLE, THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING
        GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

       

      6.18  DELAYS;
        PARTIAL EXERCISE OF REMEDIES

       

      No
        delay
        or omission of the Agent to exercise any right or remedy hereunder, whether
        before or after the happening of any Event of Default, shall impair any such
        right or shall operate as a waiver thereof or as a waiver of any such Event
        of
        Default. No single or partial exercise by the Agent of any right or remedy
        shall
        preclude any other or further exercise thereof, or preclude any other right
        or
        remedy.

       

      6.19  JURY
        TRIAL

       

      EACH
        OF
        THE GUARANTORS AND THE AGENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
        BY
        JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
        TORT
        OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT OR THE
        ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
        ENFORCEMENT THEREOF.

       

      
        [SIGNATURE
          PAGE TO FOLLOW]

      

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

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

       

       

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

      

       

       

      
        	 	 	 
	 	AXIOM
                PHARMACEUTICAL CORPORATION
	 
 	 
 	 
 
	 	By:  	/s/ Andrew
                D. Reddick
	 	
                
Name:
                Andrew D. Reddick
	 	Title:
                President and Chief Executive Officer

      

      

      

      By
        its
        acceptance hereof, as of the day and year first above written, the Agent
        agrees
        to be bound by the provisions hereof applicable to it.

      

       

      
        	 	 	 
	 	
                GALEN
                  PARTNERS III, L.P.

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

                610
                  Fifth Avenue, 5th
                  Fl.

                New
                  York, New York 10019

              
	 
 	 
 	 
 
	 	By:  	/s/ Srini
                Conjeevaram
	 	
                
Name:
                Srini Conjeevaram, its General Partner
	 	Title:
                President and Chief Executive Officer

      

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      SCHEDULE
        A

      

      Section
        3.3

      

      ·    APT

      

      16235
        State Road 17, Culver, Indiana 46511.

      

      

      ·    Axiom

      

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

       

      
        
          
          

        

        
          20Unassociated Document

    Exhibit
      10.9

    

    STOCK
      PLEDGE AGREEMENT

     

    This
      Stock Pledge Agreement (this “Agreement”)
      is
      dated as of November 9, 2005 by and between Acura Pharmaceuticals, Inc., a
      New
      York corporation (the “Pledgor”),
      and
      Galen Partners III, L.P., a Delaware limited partnership, acting in its capacity
      as agent for the Lenders, as hereinafter defined (the “Agent”),
      for
      the benefit of the Lenders.

     

    PRELIMINARY
      STATEMENTS

     

    The
      Pledgor 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”).
      It is
      a condition precedent to the effectiveness of the Loan Agreement that the
      Pledgor shall have executed this Agreement and made the pledges referred to
      herein in favor of the Agent, for the ratable benefit of the Lenders, as
      contemplated hereby.

     

    AGREEMENT

     

    In
      consideration of the premises and to induce the Lenders to enter into the Loan
      Agreement, and for other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, the Pledgor hereby agrees with
      the
      Agent as follows:

     

    ARTICLE
      1

     

    PLEDGE
      OF PLEDGED STOCK

     

    1.1  DEFINITIONS;
      INTERPRETATION OF AGREEMENT

     

    Unless
      the context otherwise requires, all terms not defined herein or in the Loan
      Agreement shall have the meaning set forth in the New York Uniform Commercial
      Code (the “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.

     

    1.2  PLEDGE
      OF THE PLEDGED STOCK; POWER OF ATTORNEY

     

    (a)  As
      security for the prompt payment and performance when due of the obligations
      now
      or hereafter owing by the Pledgor to the Lenders under the Loan Agreement,
      the
      Notes, the other Transaction Documents and under the agreements, documents
      and
      instruments delivered by the Pledgor pursuant thereto or in connection therewith
      (collectively, the “Obligations”),
      the
      Pledgor hereby pledges to the Agent, for the ratable benefit of the Lenders,
      and
      grants to the Agent, for the ratable benefit of the Lenders, a lien on and
      security interest having priority over any and all other security interests,
      in
      the following (collectively the “Pledged
      Collateral”):
      (i)
      all of the issued and outstanding shares of common stock of Acura Pharmaceutical
      Technologies, Inc. (“APT”),
      and
      Axiom Pharmaceutical Corporation (“Axiom”
      and,
      together with APT, the “Subsidiaries”),
      which
      shares are more particularly described on Schedule
      A
      attached
      hereto (the “Pledged
      Stock”),
      (ii)
      all additional shares of common stock at any time issued to the Pledgor by
      APT
      or Axiom, (iii) the certificates evidencing all Pledged Collateral, (iv) subject
      to Section 1.6 hereof, all dividends, cash, securities, investment property,
      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 Pledged
      Stock and such shares and securities, and (v) all proceeds of any and all
      Pledged Collateral (including, without limitation, proceeds constituting any
      property of the types described above). The Pledgor shall deliver to the Agent
      original stock certificates for all of the Pledged Stock, each accompanied
      by an
      undated stock power executed in blank by the Pledgor.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)  The
      Agent
      shall have no obligation with respect to the Pledged Collateral or any other
      property held or received by it hereunder except to use reasonable care in
      the
      custody thereof. The Agent may hold the Pledged Collateral in the form in which
      it is received by it.

     

    (c)  The
      Pledgor, to the fullest extent permitted by law, hereby constitutes and
      irrevocably appoints the Agent (and any officer or agent of the Agent, with
      full
      power of substitution and revocation) as the Pledgor’s true and lawful
      attorney-in-fact, in the Pledgor’s stead and in the name of the Pledgor or in
      the name of the Agent, to transfer, upon the occurrence and during the
      continuance of an Event of Default or at any time the Agent, based on all the
      facts and circumstances then existing, and in the exercise of its commercially
      reasonable credit judgment, believes, and has so notified the Pledgor in
      writing, that, in connection with the Loan Agreement and the agreements,
      documents and instruments delivered by the Pledgor pursuant thereto or in
      connection therewith, fraud has occurred with respect to the Pledgor or any
      other Person controlling, controlled by, or under common control with the
      Pledgor which has a material adverse effect on the operations or condition
      (financial or otherwise) of the Pledgor and its subsidiaries, taken as a whole
      (a “Fraud”),
      the
      Pledged Collateral on the books of APT and Axiom, as applicable, in whole or
      in
      part, to the name of the Agent or such other Person or Persons as the Agent
      may
      designate and, upon the occurrence and during the continuance of an Event of
      Default or at any time the Agent, based on all the facts and circumstances
      then
      existing, and in the exercise of its commercially reasonable credit judgment,
      believes, and has so notified the Pledgor in writing, that Fraud has occurred,
      to take all such other and further actions as the Pledgor could have taken
      with
      respect to the Pledged Collateral which the Agent in its reasonable judgment
      determines to be necessary or appropriate to accomplish the purposes of this
      Agreement.

     

    (d)  The
      powers of attorney granted pursuant to this Agreement and all authority hereby
      conferred are granted and conferred solely to protect the Agent’s interests in
      the Pledged Collateral and shall not impose any duty upon the attorney-in-fact
      to exercise such powers. Such powers of attorney shall be irrevocable prior
      to
      the payment in full of the Obligations and shall not be terminated prior thereto
      or affected by any act of the Pledgor or other Persons or by operation of law.
      The foregoing power of attorney, being coupled with an interest, is irrevocable
      so long as any Obligation remains outstanding.

     

    (e)  Except
      to
      the extent that the Agent releases its pledge of any of the Pledged Collateral,
      each Person who shall be a transferee of the beneficial ownership of any of
      the
      Pledged Collateral shall be deemed to have irrevocably appointed the Agent,
      with
      full power of substitution and revocation, as such Person’s true and lawful
      attorney-in-fact in such Person’s name and otherwise to do any and all acts
      herein permitted and to exercise any and all powers herein conferred;
provided,
      however,
      that no
      Person shall exercise any such power of attorney unless an Event of Default
      shall have occurred and be continuing, and subject to the terms of the Loan
      Agreement regarding the exercise of remedies upon an Event of Default, or from
      and after such time as such Person has notified the Pledgor in writing that
      based on all the facts and circumstances then existing, and in the exercise
      of
      its commercially reasonable judgment, such Person believes that Fraud has
      occurred.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    1.3  RIGHTS
      OF PLEDGOR; VOTING

     

    (a)  During
      the term of this Agreement, and so long as the Pledgor has not received a Voting
      Notice (as defined below) from the Agent following (i) the occurrence and during
      the continuance of an Event of Default, and subject to the terms of the Loan
      Agreement regarding the exercise of remedies upon an Event of Default, or (ii)
      from and after such time as the Agent determines that based on all the facts
      and
      circumstances then existing, and in the exercise of its commercially reasonable
      judgment, the Agent believes that Fraud has occurred, the Pledgor shall have
      the
      right to vote any of the Pledged Collateral in all corporate matters except
      those which would contravene this Agreement, the Loan Agreement or any of the
      agreements, documents and instruments delivered by the Pledgor and each
      Subsidiary pursuant thereto unless the Agent consents in writing thereto.

     

    (b)  Upon
      the
      occurrence and during the continuance of an Event of Default, and subject to
      the
      terms of the Loan Agreement regarding the exercise of remedies upon an Event
      of
      Default, or from or from and after such time as the Agent has notified the
      Pledgor in writing that based on all the facts and circumstances then existing,
      and in the exercise of its commercially reasonable judgment, Agent believes
      that
      Fraud has occurred, the Pledgor shall give the Agent at least fifteen (15)
      days’
      prior notice of (i) any meeting of stockholders of any of the Subsidiaries
      or
      any meeting of directors of any of the Subsidiaries convened for any purpose
      and
      (ii) any written consent which the Pledgor proposes to execute as the
      stockholder of any of the Subsidiaries or which any of the representatives
      of
      the Pledgor proposes to execute as a director of any of the Subsidiaries. During
      the continuance of an Event of Default, and subject to the terms of the Loan
      Agreement regarding the exercise of remedies upon an Event of Default, or from
      and after such time as the Agent determines that based on all the facts and
      circumstances then existing, and in the exercise of its commercially reasonable
      judgment, the Agent believes that Fraud has occurred, the Pledgor hereby
      authorizes the Agent to send its agents and representatives to any such meeting
      of stockholders or directors of any of the Subsidiaries that the Agent wishes
      to
      attend, and agrees to take such steps as may be necessary to confirm and
      effectuate such authority, including, without limitation, causing such
      Subsidiary to give reasonable prior written notice to the Agent of the time
      and
      place of any such meeting and the principal actions to be taken
      thereat.

     

    (c)  Notwithstanding
      the occurrence of an Event of Default, and subject to the terms of the Loan
      Agreement regarding the exercise of remedies upon an Event of Default, or the
      determination by the Agent that based on all the facts and circumstances then
      existing, and in the exercise of its commercially reasonable judgment, the
      Agent
      believes that Fraud has occurred, the Pledgor may continue to exercise the
      voting rights of the Pledgor as herein described (and subject to the limitations
      herein) except to the extent that the Agent elects to exercise voting power
      (as
      determined by it in its sole discretion) by providing written notice to the
      Pledgor at any time during the continuance of an Event of Default or from and
      after such time as the Agent has determined that based on all the facts and
      circumstances then existing, and in the exercise of its commercially reasonable
      judgment, the Agent believes that Fraud has occurred (a “Voting
      Notice”),
      whereupon the Agent shall have the exclusive right during the continuance of
      an
      Event of Default or from and after the Agent’s determination of Fraud to
      exercise such rights to the extent specified in such Voting Notice, and the
      Pledgor shall take all such steps as may be necessary to effectuate such rights
      until the Agent notifies the Pledgor in writing of the release of such rights.
      Once any such Event of Default has been cured or waived and such cure or waiver
      is confirmed by the Agent to the Pledgor in writing, any relevant Voting Notice
      shall be deemed to be rescinded.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    1.4  NO
      RESTRICTIONS ON TRANSFER

     

    The
      Pledgor warrants and represents that except as otherwise provided in (i) the
      Watson Stock Pledge Agreement dated March 29, 2000 executed by the Pledgor
      to
      secure the Senior Note (as amended, the “Watson
      Stock Pledge Agreement”);
      (ii)
      the Stock Pledge Agreement dated as of June 22, 2005 executed by the Pledgor
      to
      secure a certain bridge loan (the “June Bridge
      Loan”)
      extended
      pursuant to the terms of that certain Loan Agreement, dated as of June 22,
      2005
      (the “June
      Bridge Loan Stock Pledge Agreement”);
      and
      (iii) the Stock Pledge Agreement dated as of September 16, 2005 executed by
      the
      Pledgor to secure a certain bridge loan (the “September
      Bridge Loan”)
      extended
      pursuant to the terms of that certain Loan Agreement, dated as of September
      16,
      2005 (the “September
      Bridge Loan Stock Pledge Agreement”)
      ,
      there are no restrictions on the transfer of the Pledged Stock (except for
      such
      restrictions imposed by operation of law), that there are no options, warrants
      or rights pertaining thereto, and that the Pledgor has the right to transfer
      the
      Pledged Stock free of any encumbrances and without the consent of the creditors
      of the Pledgor or the consent of any of the Subsidiaries or any other Person
      or
      any governmental agency whatsoever.

     

    1.5  NO
      TRANSFER OF LIENS; ADDITIONAL SECURITIES

     

    The
      Pledgor agrees that it will not sell, transfer or convey any interest in, or
      suffer or permit any lien or encumbrance to be created upon or with respect
      to,
      any of the Pledged Collateral during the term of this Agreement, except to
      or in
      favor of the Agent, or as agreed to in writing in advance by the Agent in
      accordance with the terms of the Loan Agreement. The Pledgor shall not cause,
      suffer or permit any Subsidiary to issue any common or preferred stock, or
      any
      other equity security or any other instruments convertible into equity
      securities, to any Person, unless the Agent otherwise consents in writing (which
      consent may be withheld in the Agent’s reasonable credit judgment).

     

    1.6  ADJUSTMENTS
      OF CAPITAL STOCK; PAYMENT AND APPLICATION OF DIVIDENDS

     

    Subject
      to the Loan Agreement, in the event that during the term of this Agreement
      any
      stock dividend, reclassification, readjustment or other change is declared
      or
      made in the capital structure of any Subsidiary or if any other or additional
      shares of stock of any Subsidiary are issued to the Pledgor, all new,
      substituted and additional shares or other securities issued by reason of any
      such change or acquisition shall immediately be delivered by the Pledgor to
      the
      Agent and shall be deemed to be part of the Pledged Collateral under the terms
      of this Agreement in the same manner as the shares of capital stock originally
      pledged hereunder. Subject to the Loan Agreement, upon the occurrence and during
      the continuance of an Event of Default and subject to the terms of the Loan
      Agreement regarding the exercise of remedies upon an Event of Default, or from
      and after such time as the Agent determines that based on all the facts and
      circumstances then existing, and in the exercise of its commercially reasonable
      judgment, the Agent believes that Fraud has occurred, all cash dividends
      received by or payable to the Pledgor in respect of the Pledged Collateral,
      including any additional shares of stock or investment property received by
      the
      Pledgor as a result of the Pledgor’s record ownership of the Pledged Stock,
      shall immediately be delivered by the Pledgor to the Agent, to be held by the
      Agent as Pledged Collateral hereunder or to be applied by the Agent against
      the
      Obligations. Upon the occurrence and during the continuance of an Event of
      Default and subject to the terms of the Loan Agreement regarding the exercise
      of
      remedies upon an Event of Default, or from and after such time as the Agent
      determines that based on all the facts and circumstances then existing, and
      in
      the exercise of its commercially reasonable judgment, the Agent believes that
      Fraud has occurred, the Pledgor will not demand and will not be entitled to
      receive, any cash dividends or other income, interest or property in or with
      respect to the Pledged Collateral, and if the Pledgor receives any of the same,
      the Pledgor shall immediately deliver it to the Agent to be held by it and
      applied as provided in the preceding sentence.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    1.7  WARRANTS
      AND OPTIONS

     

    In
      the
      event that during the term of this Agreement subscription warrants or other
      rights or options shall be issued to the Pledgor in connection with the Pledged
      Collateral, all such stock warrants, rights and options shall forthwith be
      assigned to the Agent by the Pledgor, and such stock warrants, rights and
      options shall be, and, if exercised by the Pledgor, all new stock issued
      pursuant thereto shall be, pledged by the Pledgor to the Agent to be held as,
      and shall be deemed to be part of, the Pledged Collateral under the terms of
      this Agreement in the same manner as the shares of capital stock originally
      pledged hereunder.

     

    1.8  RETURN
      OF PLEDGED COLLATERAL UPON TERMINATION

     

    Upon
      the
      termination of the Loan Agreement and the indefeasible payment in full in cash
      of the Obligations and all other amounts payable under this Agreement, the
      Agent
      shall cause to be transferred or returned to the Pledgor all of the stock
      pledged by the Pledgor herein and any money, property and rights received by
      the
      Agent pursuant hereto, to the extent the Agent has not taken, sold or otherwise
      realized upon the same as permitted hereunder, together with all other documents
      reasonably required by the Pledgor to evidence termination of the pledge
      contemplated hereby.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      2

     

    EVENTS
      OF DEFAULT; REMEDIES

     

    2.1  RIGHTS
      OF AGENT UPON DEFAULT

     

    Upon
      the
      occurrence and during the continuance of any Event of Default and subject to
      the
      terms of the Loan Agreement regarding the exercise of remedies upon an Event
      of
      Default, or from and after such time as the Agent determines that based on
      all
      the facts and circumstances then existing, and in the exercise of its
      commercially reasonable judgment, the Agent believes that Fraud has occurred,
      the Agent shall have and at any time may exercise with respect to the Pledged
      Collateral, the proceeds thereof, and any other property or money held by the
      Agent hereunder, all rights and remedies available to it under law, including,
      without limitation, those given, allowed or permitted to a secured party by
      or
      under the Code, and all rights and remedies provided for herein and in the
      Loan
      Agreement.

     

    2.2  DISPOSITION
      OF PLEDGED STOCK

     

    (a)  Without
      limiting the foregoing, in the event that the Agent elects to sell the Pledged
      Stock (such term including, for purposes of this Section 2.2, the Pledged Stock
      and all other shares of stock or securities at any time forming part of the
      Pledged Collateral), the Agent shall have the power and right in connection
      with
      any such sale, exercisable at its option and in its absolute discretion, to
      sell, assign, and deliver the whole or any part of the Pledged Stock or any
      additions thereto at a private or public sale for cash, on credit or for future
      delivery and at such price as the Agent deems to be satisfactory. Any such
      disposition which shall be made by private sale or other private proceeding
      shall be made upon not less than ten (10) days’ prior written notice to Pledgor
      specifying the date and time at which such disposition is to be made. Notice
      of
      any public sale shall be sufficient if it describes the Pledged Collateral
      to be
      sold in general terms, and is published 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.
      If any notice of a proposed sale or other disposition of Pledged Collateral
      shall be required by law, such notice shall be deemed reasonable and proper
      if
      mailed, postage prepaid, to the Pledgor at its address set forth in Section
      5.5
      hereof or such other address as the Pledgor 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. 

     

    (b)  Because
      federal and state securities laws may restrict the methods of disposition of
      the
      Pledged Stock which are readily available to the Agent, and specifically because
      a public sale thereof may be impossible or impracticable by reason of certain
      restrictions under the Securities Act or under applicable “blue sky” or other
      state securities laws as now or hereafter in effect, the Pledgor agrees that
      the
      Agent may from time to time attempt to sell the Pledged Stock by means of a
      private placement restricting the offering or sale to a limited number of
      prospective purchasers who meet suitability standards the Agent deems
      appropriate and who agree that they are purchasing for their own accounts for
      investment and not with a view to distribution, and the Agent’s acceptance of
      the highest offer obtained therefrom shall be deemed to be a commercially
      reasonable disposition of the Pledged Stock. To the extent permitted by law,
      the
      Agent or its assigns may purchase all or any part of the Pledged Stock and
      any
      purchaser thereof shall thereafter hold the same absolutely free from any right
      or claim of any kind. To the fullest extent permitted by law, the Agent shall
      not be obligated to make any such sale pursuant to notice and may, without
      notice or publication, adjourn any public or private sale by announcement at
      the
      time and place fixed for the sale, and such sale may be held at any time or
      place to which the same may be adjourned. If any of the Pledged Stock is sold
      by
      the Agent upon credit or for future delivery, the Agent shall not be liable
      for
      the failure of the purchaser to pay for same and, in such event, the Agent
      may
      resell such Pledged Stock and the Pledgor shall continue to be liable to the
      Agent for the full amount of the Obligations to the extent the Agent does not
      receive full and final payment in cash therefor.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (c)  Except
      as
      otherwise provided in the Loan Agreement or by applicable law, the Agent shall
      have the sole right to determine the order in which Obligations shall be deemed
      discharged by the application of the proceeds of Pledged Stock or any other
      property or money held hereunder or any amount realized thereon.

     

    ARTICLE
      3

     

    REPRESENTATIONS
      AND WARRANTIES

     

    The
      Pledgor represents and warrants to the Agent that:

     

    3.1  CAPITALIZATION;
      GOOD TITLE

     

    (a)  All
      shares of Pledged Stock are fully paid, duly and properly issued, nonassessable
      and owned by the Pledgor free and clear of any lien or encumbrance of any kind
      whatsoever, excepting those herein granted to the Agent hereunder and in
      connection with the June Bridge Loan Agreement, and the September Bridge Loan
      Agreement and those granted to the holders of the Senior Note. The Pledged
      Stock
      constitutes all of the outstanding securities of any class or kind of all of
      the
      Subsidiaries.

     

    (b)  Except
      in
      the case of the liens granted to the holders of the Senior Note and the June
      Bridge Loan lenders and the September Bridge Loan Lenders , no effective
      financing statement or other instrument similar in effect covering all or any
      part of the Pledged Collateral is on file in any recording office.

     

    3.2  VALID
      SECURITY INTEREST

     

    The
      pledge of the Pledged Collateral pursuant to this Agreement creates a valid
      and
      perfected first-priority security interest, securing the payment of the
      Obligations, and all filings and other actions necessary or desirable to perfect
      and protect such security interest having been duly made or taken.

     

    3.3  CONSENTS

     

    Except
      for the consent of the holders of the Senior Note, the holders of the Series
      A
      Preferred and the June Bridge Loan lenders and the September Bridge Loan
      Lenders, no authorization, approval or other action by, and no notice to or
      filing with, any governmental authority or regulatory body is required for
      (a)
      the pledge by the Pledgor of the Pledged Collateral pursuant to this Agreement,
      the grant by the Pledgor of the assignment or security interest granted hereby
      or the execution, delivery or performance of this Agreement by the Pledgor,
      (b)
      the perfection of or exercise by the Agent of its rights and remedies provided
      for in this Agreement, or (c) the exercise by the Agent of the voting or other
      rights provided for in this Agreement or the remedies in respect of the Pledged
      Collateral pursuant to this Agreement (except as may be required in connection
      with a judicial foreclosure, if applicable, or the disposition of the Pledged
      Stock by laws affecting the offering and sale of securities
      generally).

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    3.4  AUTHORIZATION;
      ENFORCEABILITY

     

    The
      Pledgor has full right, power and authority to enter into this Agreement and
      to
      grant the security interest in the Pledged Collateral made hereby, and this
      Agreement constitutes the legal, valid and binding obligation of the Pledgor
      enforceable against the Pledgor in accordance with its terms, except as the
      enforceability thereof may be (a) limited by bankruptcy, insolvency,
      reorganization, moratorium or similar laws affecting the enforceability of
      creditors’ rights generally, and (b) subject to general principles of equity
      (regardless of whether such enforceability is considered in a proceeding in
      equity or at law).

     

    3.5  NO
      CONFLICT

     

    The
      execution, delivery and performance by the Pledgor of this Agreement will not
      result in any violation, 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 Pledgor.

     

    ARTICLE
      4

     

    Indemnity
      and Expenses

     

    4.1  INDEMNITY

     

    The
      Pledgor agrees to and hereby indemnifies the Agent and each of the Lenders
      from
      and against any and all Losses arising out of, or in connection with, or
      resulting from this Agreement (including, without limitation, enforcement of
      this Agreement) unless resulting from or arising out of the gross negligence
      or
      willful misconduct of the Agent or such Lender.

     

    4.2  EXPENSES

     

    The
      Pledgor agrees promptly upon the Agent’s or such Lender’s demand to pay or
      reimburse the Agent or such Lender for all reasonable expenses (including,
      without limitation, reasonable fees and disbursements of counsel) incurred
      by
      the Agent or such Lender in connection with (a) any modification or amendment
      to
      or waiver of any provision of this Agreement requested by the Pledgor, (b)
      the
      custody or preservation of the Pledged Collateral, (c) any actual or attempted
      sale or exchange of, or any enforcement, collection, compromise or settlement
      respecting, the Pledged Collateral or any other property or money held hereunder
      or any other action taken by the Agent or such Lender hereunder reasonably
      necessary to enforce its rights, whether directly or as attorney-in-fact
      pursuant to the power of attorney herein conferred, or (d) the failure by the
      Pledgor to perform or observe any of the provisions hereof. All such expenses
      shall be deemed a part of the Obligations for all purposes of this Agreement
      and
      the Agent may apply the Pledged Collateral or any other property or money held
      hereunder to payment of or reimbursement for such expenses after notice and
      demand to the Pledgor.

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      5

     

    MISCELLANEOUS

     

    5.1  AGENT
      MAY PERFORM

     

    If
      the
      Pledgor fails to perform any representation, warranty, covenant or agreement
      required to be performed by it contained herein, the Agent may, but shall not
      be
      obligated to, perform, or cause performance of, such representation, warranty,
      covenant or agreement, and the out-of-pocket expenses of the Agent incurred
      in
      connection therewith shall be payable by the Pledgor.

     

    5.2  WAIVERS
      AND AMENDMENT

     

    The
      rights and remedies given hereby are in addition to all others however arising,
      but it is not intended that any right or remedy be exercised in any jurisdiction
      in which such exercise would be prohibited by law. No action, failure to act
      or
      knowledge of the Agent shall be deemed to constitute a waiver of any power,
      right or remedy hereunder, nor shall any single or partial exercise thereof
      preclude any further exercise thereof or the exercise of any other power, right
      or remedy. Any right or power of the Agent hereunder in respect of the Pledged
      Collateral and any other property or money held hereunder may at the option
      of
      the Agent be exercised as to all or any part of the same and the term the
“Pledged Collateral” wherever used herein, unless the context clearly requires
      otherwise, shall be deemed to mean (and shall be read as) “the Pledged
      Collateral and any other property or money held hereunder or any part thereof.”
      This Agreement shall not be amended nor shall any right hereunder be deemed
      waived except by a written agreement expressly setting forth the amendment
      or
      waiver and signed by the Agent.

     

    5.3  CONTINUING
      SECURITY INTEREST; ASSIGNMENTS OF SECURED DEBT

     

    This
      Agreement shall create a continuing security interest having priority over
      any
      and all security interests in the Pledged Collateral and shall (a) remain in
      full force and effect, (b) be binding upon the Pledgor, and the Pledgor’s
      successors and assigns, and upon each of the Subsidiaries, and their successors
      and assigns, and (c) inure, together with the rights and remedies of the Agent
      and the Lenders hereunder, to the benefit of the Agent, its successors and
      permitted assigns. Without limiting the generality of the foregoing clause
      (c),
      the Agent may assign or otherwise transfer all or any portion of its rights
      and
      obligations under this Agreement to any other Person, to the extent and in
      the
      manner provided in the Loan Agreement and such other Person shall thereupon
      become vested with all the benefits in respect hereof granted to the Agent
      herein; the Agent shall, however, retain all of its rights and powers with
      respect to any part of the Pledged Collateral not transferred. Any agent or
      nominee of the Agent shall have the benefit of this Agreement as if named herein
      and may exercise all the rights and powers given to the Agent
      hereunder.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    5.4  GOVERNING
      LAW; CONSENT TO JURISDICTION

     

    (a)  This
      Agreement and the rights of the parties hereunder shall be governed in all
      respects by 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.

     

    (b)  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. 

     

    (c)  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.

     

    5.5  NOTICES

     

    All
      notices hereunder shall be in writing (except only as otherwise provided in
      Section 5.2) and shall be conclusively deemed to have been received and shall
      be
      effective (a) on the day on which delivered if delivered personally (including
      delivery by courier or overnight mail providing evidence of delivery), or
      transmitted by telex or telegram or telecopier with transmission confirmed,
      or
      (b) five (5) days after the date on which the same is deposited in the United
      States mail (certified or registered if required under Section 5.4), with
      postage prepaid and properly addressed, and any notice mailed shall be
      addressed:

     

    (a)  in
      the
      case of the Pledgor, to:

     

    Acura
      Pharmaceuticals, Inc.

    616
      N.
      North Court, Suite 120

    Palatine,
      Illinois 60067

    Telecopier
      No.: (847) 705-5399

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    with
      copies to:

    

    St.
      John
& Wayne

    2
      Penn
      Plaza East

    Newark,
      New Jersey 07105

    Attention:
      John P. Reilly, Esq.

    Telephone
      No.: (973) 491-3600

    Telecopier
      No.: (973) 491-3555

    

    (b)  in
      the
      case of the Agent, to:

     

    Galen
      Partners III, L.P.

    610
      Fifth
      Avenue, Fifth Floor

    New
      York,
      NY 10020

    Telecopier
      No.: (212) 218-4999

    Attention:
      Bruce F. Wesson

    with
      a
      copies to:

    

    Blank
      Rome, LLP

    Chrysler
      Building

    405
      Lexington Avenue

    New
      York,
      New York 10174

    Attention:
      George N. Abrahams, Esq.

    Telephone
      No.: (212) 885-5207

    Telecopier
      No.: (917) 332-3763

    

    or
      at
      such other address as the party giving such notice shall have been advised
      of in
      writing for such purpose by the party to whom or to which the same is
      directed.

     

    5.6  SEVERABILITY;
      ENTIRE AGREEMENT

     

    (a)  If
      any
      provision of this Agreement shall be invalid, illegal, or unenforceable in
      any
      jurisdiction, the validity, legality or enforceability of any such provision
      in
      any other jurisdiction shall not be affected or impaired, and to the extent
      any
      provision is held invalid, illegal or unenforceable, then such provision shall
      be deemed severable from, and shall in no way affect the validity or
      enforceability of the remaining provisions of this Agreement.

     

    (b)  This
      Agreement, together with the other Transaction Documents, constitutes the entire
      agreement of the Pledgor and replaces any other or prior agreements or
      undertakings, with respect to the subject matter hereof, and there are no other
      agreements or undertakings, oral or written, respecting such subject matter
      which are intended to have any force or effect after the execution
      hereof.

     

    5.7  SUCCESSORS
      AND ASSIGNS; HEADINGS

     

    This
      Agreement shall be binding upon and shall inure to the benefit of the Pledgor
      and the Agent and their respective successors and permitted assigns. Section
      headings used herein are for convenience only and shall not affect the meaning
      or construction of any of the provisions hereof.

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    5.8  COUNTERPARTS

     

    This
      Agreement may be executed in any number of counterparts, including by facsimile
      copy, each executed counterpart constituting an original but all counterparts
      together constituting only one instrument.

     

    5.9  FURTHER
      ASSURANCES

     

    Pledgor
      shall execute, in a proper and timely manner, at or after the date hereof,
      such
      additional documents and instruments as may be reasonably requested by the
      Agent
      in connection with the consummation or confirmation of the transactions
      contemplated by this Agreement.

     

    5.10  NO
      ASSIGNMENT

     

    This
      Agreement may not be assigned by the Pledgor without the prior express written
      consent of the Agent.

     

    5.11  WAIVERS
      OF JURY TRIAL

     

    THE
      PLEDGOR AND, BY ITS ACCEPTANCE HEREOF, THE AGENT HEREBY IRREVOCABLY WAIVE 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.

     

    5.12  WAIVERS
      OF CONSEQUENTIAL DAMAGES

     

    NEITHER
      THE PLEDGOR, THE AGENT OR ANY LENDER, NOR ANY EMPLOYEE, AGENT OR ATTORNEY OF
      ANY
      OF THEM, SHALL BE LIABLE TO THE OTHER FOR CONSEQUENTIAL DAMAGES ARISING FROM
      ANY
      BREACH OF CONTRACT, TORT OR OTHER WRONG RELATING TO THIS AGREEMENT OR THE
      ESTABLISHMENT, ADMINISTRATION OR COLLECTION OF THE OBLIGATIONS, EXCEPT FOR
      BAD
      FAITH.

     

    5.13  LIMITATION
      OF LIABILITY

     

    THE
      AGENT
      AND THE LENDERS SHALL NOT HAVE ANY LIABILITY TO THE PLEDGOR (WHETHER SOUNDING
      IN
      TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY THE PLEDGOR 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.

     

    

    

    [SIGNATURE
      PAGE TO FOLLOW]

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, the Pledgor has caused this Stock Pledge Agreement to be
      executed by its duly authorized officer as of the date first written
      above.

     

     

    
      	 	 	 
	 	ACURA
              PHARMACEUTICALS, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Andrew
              D. Reddick
	 	
              
Name:
              Andrew D. Reddick
	 	Title:
              President and Chief Executive Officer

    

     

     

    
      	 	Accepted
              and Agreed to:
	 	 	 
	 	
              GALEN
                PARTNERS III, L.P.

              on
                behalf of itself and as Agent

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

              610
                Fifth Avenue, 5th
                Fl.

              New
                York, New York 10019

            
	 
 	 
 	 
 
	 	By:  	/s/ Srini
              Conjeevaram
	 	
              

               Name:
              Srini Conjeevaram, its General Partner
	 	 

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      A

    

    

    Designation
      and Number of

    shares
      of
      capital stock owned by Pledgor

    

    

    

    
      	
               

               

              Issuer

            	
               

               

               Certificate
                No.

            	
               

               

              Designation

            	
               

              Number
                of Shares

            
	
               

              Acura
                Pharmaceutical Technologies, Inc.

            	
               

              1

            	
               

              Common
                Stock, $.01 par value

            	
               

              100

            
	
               

              Axiom
                Pharmaceutical Corporation

               

            	
               

              1

               

            	
               

              Common
                Stock, $.01 par value

               

            	
               

              100

               

            

    

    

    
      
        
        

      

      
        14

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