Document:

Unassociated Document

    SIXTH
      AMENDMENT, WAIVER AND CONSENT

    

    TO

    

    LOAN
      AGREEMENT

    

    THIS
      SIXTH AMENDMENT, WAIVER AND CONSENT TO LOAN AGREEMENT, dated as of September
      27,
      2007 (the “Sixth
      Amendment”),
      is
      made and entered into by and between Acura Pharmaceuticals, Inc., a New York
      corporation (“Borrower”),
      and
      Galen Partners III, L.P., a Delaware limited partnership, as Agent under that
      certain Noteholders Agreement dated as of February 6, 2004 (“Lender”).
      Capitalized terms used herein and not otherwise defined shall have the meaning
      provided in the Loan Agreement (as defined below). 

     

    RECITALS

     

    WHEREAS,
      Borrower
      and Lender (as assignee of Watson Pharmaceuticals, Inc. (“Watson”)) are parties
      to that certain Loan Agreement, dated as of March 29, 2000, as amended by a
      certain Amendment to Loan Agreement dated as of March 31, 2000, as further
      amended by a certain Second Amendment to Loan Agreement dated as of December
      20,
      2002 and as further amended by a certain Third Amendment, Waiver and Consent
      to
      Loan Agreement dated as of February 6, 2004 (the “Third Amendment”) (as so
      amended, the "Loan Agreement"); and 

     

    WHEREAS,
      in
      accordance with the terms of the Loan Agreement, Borrower previously issued
      to
      Watson two Promissory Notes, the first dated December 20, 2002 in the principal
      amount of $17,500,000 (the "Replacement Note"), and the second dated December
      20, 2002 in the principal amount of $3,901,331 (the "$3.9 Million Note", and
      together with the Replacement Note, collectively, the "Old Notes"); and

     

    WHEREAS,
      in order
      to allow the Borrower to complete each of the transactions contemplated pursuant
      to that certain Term Sheet dated December 19, 2003 between the Borrower and
      the
      other signatories thereto (the "Term Sheet Transactions"), at Borrower’s request
      and in accordance with the Third Amendment, Lender consented to the Term Sheet
      Transactions and waived certain restrictions contained in the Loan Agreement;
      and

     

    WHEREAS,
      pursuant
      to a certain Umbrella Agreement dated as of February 6, 2004 (the "Umbrella
      Agreement") by and among Borrower, Watson, Care Capital Investment II, L.P.,
      Essex Woodlands Health Ventures V, LP, Galen Partners III, L.P. and the other
      signatories thereto (collectively, but excluding the Borrower and Watson, the
      "Investor Group"), in consideration of Borrower's payment to Watson of
      $4,000,000, Watson (i) cancelled and discharged in full the $3.9 Million Note,
      (ii) forgave $12,500,000 in principal amount of the Replacement Note and amended
      and restated the Replacement Note as provided in the Third Amendment, and (iii)
      amended the Loan Agreement as provided in the Third Amendment (collectively,
      the
      "2004 Note and Loan Agreement Amendments"); and 

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    WHEREAS,
      pursuant
      to the terms of the Umbrella Agreement, Watson transferred and conveyed to
      the
      Investor Group all of its right, title and interest in and to the Loan Agreement
      and Replacement Note after giving effect to the 2004 Note and Loan Agreement
      Amendments; 

     

    WHEREAS,
      simultaneous with the completion of the transactions contemplated in the
      Umbrella Agreement, the Replacement Note was amended and restated in the form
      of
      Exhibit A to the Third Amendment to Loan Agreement (the “2004 Replacement
      Note”); 

     

    WHEREAS,
      in
      accordance with the Fourth Amendment, Waiver and Consent to Loan Agreement
      dated
      June 28, 2007, between Borrower and Lender (the “Fourth Amendment to Loan
      Agreement”), the 2004 Replacement Note was amended and restated to provide for
      the extension of the Maturity Date of the 2004 Replacement Note from June 30,
      2007 to September 30, 2007 (the “June 2007 Replacement Note”);

     

    WHEREAS,
      in
      accordance with the Fifth Amendment, Waiver and Consent to Loan Agreement dated
      August 20, 2007 between Borrower and Lender (the “Fifth Amendment to Loan
      Agreement”), the June 2007 Replacement Note was amended and restated to provide
      for, among other things, the extension of the Maturity Date of the June 2007
      Replacement Note from September 30, 2007 to December 31, 2008 (the “August 2007
      Replacement Note”); 

     

    WHEREAS,
      the
      parties hereto, wish to defer the payment of interest accruing under the June
      2007 Replacement Note and make the other changes set forth below;

     

    NOW,
      THEREFORE,
      the
      parties hereto agree as follows: 

     

    
      
        
        

      

      
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    AGREEMENT

     

    

    1. Article
      One of the Loan Agreement is hereby amended in its entirety to read as
      follows:

     

    "1.
      AMOUNT AND TERMS OF LOANS.

     

    "1.1
      Term
      Loans.
      Subject
      to the terms herein, Watson Pharmaceuticals, Inc. (“Watson”) has previously
      loaned to Borrower the aggregate principal amount of Twenty One Million Four
      Hundred One Thousand Three Hundred Thirty One Dollars ($21,401,331) (the
      "Original Loan"). Effective the date of the Third Amendment to the Loan
      Agreement, (i) Watson forever forgave, discharged, cancelled and rendered null
      and void Borrower's obligation to repay Sixteen Million Four Hundred One
      Thousand Three Hundred Thirty One Dollars ($16,401,331) in principal amount,
      plus accrued and unpaid interest on such principal amount, of the Original
      Loan,
      resulting in a remaining principal balance of the Original Loan of Five Million
      Dollars ($5,000,000) (the "Loan"), and (ii) Watson forever forgave and
      discharged Borrower's obligation to pay interest under the Original Loan, as
      evidenced by the Old Notes, to the extent accrued and unpaid through and
      including the date of the Third Amendment to the Loan Agreement. The Old Notes
      previously issued by Borrower to Watson hereunder were amended or cancelled,
      as
      appropriate, in accordance with Section 1.2 below. Notwithstanding any
      prepayment of the Loan by Borrower, sums repaid may not be re-borrowed.
      Effective the date of the Fourth Amendment to the Loan Agreement, the 2004
      Replacement Note was amended and restated by the June 2007 Replacement Note,
      which extended the maturity of the 2004 Replacement Note. Effective the date
      of
      the Fifth Amendment to Loan Agreement, the June 2007 Replacement Note was
      amended and restated by the August 2007 Replacement Note which extended the
      maturity of the June 2007 Replacement Note.

     

    1.2
      Promissory
      Notes.
      Borrower’s obligation to pay the principal of, and interest on, the Loan shall
      be evidenced by a promissory note dated as of December 20, 2002 duly executed
      and delivered by Borrower in the form attached as Exhibit A to the Sixth
      Amendment to the Loan Agreement and representing the $5,000,000 principal
      balance of the Loan (the “Note”), which Note shall be an amendment and
      restatement of the August 2007 Replacement Note. Notwithstanding anything to
      the
      contrary contained in the Note or the Loan Agreement, Borrower and each Holder
      (as defined in that certain Noteholders Agreement dated as of February 6, 2004,
      as amended, between the Borrower and the signatories thereto (the “Noteholders
      Agreement”)) hereby agree that all interest under the August 2007 Replacement
      Note will accrue quarterly and be payable in cash to the extent accrued on
      the
      earlier of (i) the maturity date of the Note, and (ii) Borrower’s (or its
      subsidiaries’) receipt of proceeds in excess of $5 million from a third party
      pharmaceutical company or companies pursuant to which the Borrower (or any
      subsidiary), in one or more transactions, grants such pharmaceutical company
      or
      companies rights to any of the Borrower’s (or its subsidiaries’) products or
      product candidates or rights to the Borrower’s Aversion® Technology - such
      proceeds shall include up front payments, progress payments, milestone payments,
      license fees, royalties and similar payments, but shall exclude fees for
      services, reimbursements or advances for costs and expenses. Within ten (10)
      days of the occurrence of an event described in subsection (ii) above, the
      Borrower shall remit to Lender such accrued and unpaid interest payments and
      all
      future interest payments shall be paid in cash on a quarterly basis as provided
      in the Note. Upon execution and delivery of the Note, the August 2007
      Replacement Note shall be null and void and of no further legal force or effect.
      Lender agrees to promptly return to Borrower the August 2007 Replacement Note
      after receipt of the Sixth Amendment to the Loan Agreement and the Note.

     

    
      
        
        

      

      
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    1.3 Mandatory
      Prepayment.
      The
      principal amount of the Note shall be mandatorily pre-paid by the Borrower,
      in
      whole or in part, with all proceeds in excess of $5 million received by the
      Borrower from a third party pharmaceutical company or companies pursuant to
      which the Borrower, in one or more transactions, grants such pharmaceutical
      company or companies rights to any of the Borrower’s products or product
      candidates or rights to the Borrower’s Aversion® Technology. Such proceeds shall
      include, without limitation, up-front fees, progress payments, milestone
      payments, license fees, royalties and any similar payments, but shall exclude
      fees for services, reimbursements or advances for costs and expenses. The
      Borrower shall remit such mandatory pre-payment not later than ten (10) days
      following receipt of any such excess proceeds from such transaction(s). All
      references to the Borrower in this paragraph shall be interpreted to include
      the
      Borrower and its subsidiaries.”

     

    
      
        
        

      

      
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    2. Section
      12.1 of the Loan Agreement is hereby amended by adding the following definitions
      in alphabetical order: 

     

    “August
      2007 Replacement Note” shall mean the Replacement Note in the principal amount
      of $5 million issued to Galen Partner’s III, LP, as agent, amending and
      restating the June 2007 Replacement Note pursuant to the Fifth Amendment to
      Loan
      Agreement.”

     

    3. Limitation
      of Amendment.
      Except
      as amended above, the terms of the Loan Agreement shall remain in full force
      and
      effect.

     

    4.Governing
      Law.
      This
      Sixth Amendment 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 Fourth
      Amendment were negotiated.

     

    5.Counterparts.
      This
      Sixth Amendment may be executed in any number of counterparts, including by
      facsimile, each of which shall be an original, but all of which together shall
      constitute one instrument.

     

    

     

    IN
      WITNESS WHEREOF, Borrower and Lender have caused this Sixth Amendment to be
      duly
      executed by their duly authorized officers all as of the day and year first
      above written.

     

    
      
        	
                "BORROWER"

              	 	
                "LENDER"

              
	 	 	 	 	 
	
                ACURA
                  PHARMACEUTICALS, INC.

              	 	
                GALEN
                  PARTNERS III, L.P., as Agent 

              
	 	 	 	 	 
	 	 	 	 	 
	
                By:
                  

              	
                /s/
                  Peter Clemens 

              	 	
                By:
                  

              	
                /s/
                  Bruce F. Wesson

              
	
                Name:
                  Peter A. Clemens

              	 	
                Name:
                  Bruce F. Wesson

              
	
                Title:
                  Senior Vice President and
                  Chief Financial Officer

              	 	
                Title:
                  Managing Director

              
	
                 

              	 	 	 

      

       

    

    
      
        
        

      

      
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    EXHIBIT
      A

    

    NoteSECURED
      PROMISSORY NOTE

     

    
      
        	
                $5,000,000

              	
                As
                  of December 20, 2002

              
	
                 

              	
                Corona,
                  California

              

      

    

    

    1. Promise
      to Pay.
      For
      good and valuable consideration, the receipt of which is hereby acknowledged,
      ACURA PHARMACEUTICALS, INC., a New York corporation (“Maker”),
      promises to pay to GALEN PARTNERS III, L.P., a Delaware limited partnership,
      as
      Agent under that certain Noteholders Agreement dated as of February 6, 2004,
      as
      amended (“Galen”), or order (either, the “Holder”),
      on
      the Maturity Date (as defined below), unless sooner paid as provided in
Section 5
      hereof,
      the principal sum of Five Million Dollars ($5,000,000), plus accrued unpaid
      interest thereon. The outstanding principal balance of this Note shall bear
      interest at a variable rate equal to the prime rate announced from time to
      time
      by Bank of America (the “Prime
      Rate”)
      plus
      four and one half percent (4.5%) per annum from February 6, 2004 to the date
      of
      the Fifth Amendment (as defined in Section 15 below), and at a fixed rate of
      ten
      percent (10%) per annum thereafter until the date the principal sum is paid
      in
      full. Interest payments shall be made as provided in Section
      2
      below.
      All payments under this Note shall be made to the order of the Holder at the
      address Holder may designate in writing to Maker. All payments of principal
      under this Note shall be made in U.S. Dollars.

    

    2. Payment
      of Interest.
      Except
      as otherwise provided in the Loan Agreement, all accrued interest shall be
      paid
      on each March 31, June 30, September 30 and December 31 during the term of
      this
      Note, commencing March 31, 2004. From and after the date of the Fifth Amendment,
      the payment of accrued interest on this Note shall be made in U.S.
      Dollars.

    

    3. Maturity
      Date.
      The
      date that this Note shall mature, and the principal amount outstanding
      hereunder, plus accrued unpaid interest thereon and any charges pertaining
      thereto, shall become due and payable (the “Maturity
      Date”)
      shall
      be December 31, 2008.

    

    4. Loan
      and Security Agreements.
      Maker
      and Galen, as assignee of Watson Pharmaceuticals, Inc., are parties to that
      certain Loan Agreement, dated as of March 29, 2000, as amended by that certain
      Amendment to Loan Agreement dated as of March 31, 2000, as further amended
      by
      that certain Second Amendment to Loan Agreement dated as of December 20, 2002,
      as further amended by that certain Third Amendment, Waiver and Consent to Loan
      Agreement dated as of February 6, 2004, as further amended by that certain
      Fourth Amendment, Waiver and Consent to Loan Agreement dated as of June 28,
      2007, as further amended by that Fifth Amendment to Loan Agreement dated as
      of
      August 20, 2007, and as further amended by that Sixth Amendment to Loan
      Agreement dated as of September __, 2007 (as so amended, the “Loan
      Agreement”).
      The
      full and punctual payment and performance of this Note by Maker are secured
      and
      guaranteed by the Company General Security Agreement, the Company Collateral
      Assignments, the Stock Pledge Agreement, the Guaranties, the Guarantors Security
      Agreement, the Guarantor Collateral Assignments and the Mortgage, as those
      terms
      are defined in the Loan Agreement (the “Security
      Agreements”).
      The
      security interest granted to Holder under the Security Agreements extends to
      the
      proceeds of any sale or other transfer or disposition of such assets, whether
      by
      Maker, its affiliates, the Holder or any other person, that occurs prior to
      the
      payment in full of this Note. Copies of the Loan Agreement and the Security
      Agreements may be obtained from Maker without charge.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5. Prepayments.
      Maker
      may voluntarily prepay this Note either in whole or in part without penalty
      or
      premium. This Note is subject to mandatory pre-payment, in whole or in part,
      as
      provided in Section 1.3 of the Loan Agreement.

    

    6. Waivers.
      Maker
      hereby waives diligence, presentment for payment, demand, protest, notice of
      non-payment, notice of dishonor, notice of protest, and any and all other
      notices and demands whatsoever. Maker shall remain bound under this Note until
      all principal and interest and any other amounts that are payable hereunder
      or
      under the Loan Agreement or the Security Agreements have been paid in full,
      notwithstanding any extensions or renewals granted with respect to this Note
      or
      the release of any party liable hereunder or any security for the payment of
      this Note. Maker, and any and all endorsers hereof, also waive the right to
      plead any and all statutes of limitations as a defense to any demand on this
      Note or any and all obligations or liabilities arising out of or in connection
      with this Note, the Loan Agreement or the Security Agreements, to the fullest
      extent permitted by law.

    

    7. Events
      of Default.
      Any of
      the following events shall constitute an event of default by Maker under this
      Note (an “Event
      of Default”):

    

    (a) the
      failure of Maker to pay to Holder, on the Maturity Date, any and all principal
      amounts due and owing under this Note; 

    

    (b) the
      failure of Maker to pay to Holder interest payments when due; or

    

    (c) there
      occurs any other event or circumstance that constitutes an “Event of Default” as
      defined in Section 9.1
      of the
      Loan Agreement.

    

    Subject
      to the forbearance provisions contained in Section 9.4 of the Loan Agreement,
      upon the occurrence of any Event of Default, as defined herein above, at
      Holder’s option, Holder may declare immediately due and payable, and on any such
      declaration there shall become immediately due and payable, the entire unpaid
      principal balance of this Note, together with all accrued and unpaid interest
      under this Note and any other sums owing at the time of such declaration
      pursuant to this Note, the Loan Agreement or the Security Agreements, and Holder
      shall be entitled to exercise all rights and remedies available to Holder under
      this Note, under the Loan Agreement and the Security Agreements and under
      applicable law, all of which rights and remedies shall be cumulative. Without
      limiting the generality of the foregoing, upon the occurrence of an Event of
      Default, the interest rate at which interest shall accrue on the principal
      sum
      and any other amounts that are due under this Note shall increase to the lower
      of (i) twelve percent (12%) per annum or (ii) the maximum interest rate
      permitted under applicable law (the “Default
      Rate”),
      until
      all such amounts have been paid in full.

    
      
        
        

      

      
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    8. No
      Waiver by Holder.
      Subject
      to the forbearance provisions contained in Section 9.4 of the Loan Agreement,
      any delay or omission on the part of Holder to exercise any of Holder’s rights
      or remedies hereunder, under the Loan Agreement or the Security Agreements
      or
      under applicable law, including, without limitation, the right to accelerate
      amounts owing under this Note, shall not be deemed a waiver of that right or
      remedy or of any other right or remedy of Holder in respect thereof. The
      acceptance by Holder of any payment pursuant to the terms of this Note which
      is
      less than payment in full of all amounts due and payable at the time of such
      payment shall not constitute a waiver of the right to exercise any of the
      Holder’s rights or remedies under this Note, the Loan Agreement, the Security
      Agreements or under applicable law at that time or at any subsequent time or
      nullify any prior exercise of any such rights or remedies without the express
      written consent of Holder, except as and to the extent provided to the contrary
      by applicable law.

    

    9. Governing
      Law.
      This
      Note shall be governed by and construed according to and enforced under the
      internal laws of the State of New York without giving effect to its choice
      of
      laws rules.

    

    10. Enforcement
      of the Note.
      Maker
      agrees that the Superior Court in and for the County of New York, New York
      shall
      have exclusive jurisdiction over any disputes, between the Maker and Holder
      and
      any action, suit or other proceeding brought by Maker or Holder relating to
      the
      interpretation or enforcement of this Note, and Maker agrees as follows: (a)
      Maker shall accept and not contest the personal or subject matter jurisdiction
      of such Court; (b) Maker shall accept and not object to or challenge the venue
      of such Court or assert the doctrine of forum non conveniens with respect to
      such Court; (c) Maker shall accept and not contest the validity or effectiveness
      of service of process in any such action, suit or other proceeding by registered
      or certified first class mail; and (d) TO THE MAXIMUM EXTENT PERMITTED BY LAW,
      MAKER WAIVES AND SHALL WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
      OTHER
      PROCEEDING BROUGHT WITH RESPECT TO THIS NOTE OR ITS ENFORCEMENT OR
      INTERPRETATION. If Maker fails to pay any amounts due hereunder when due, then
      Maker shall pay all costs of enforcement and collection, including, without
      limitation, reasonable attorneys’ fees and costs incurred by Holder, whether or
      not enforcement and collection includes the filing of a lawsuit, and whether
      or
      not that lawsuit is prosecuted to judgment. The costs of enforcement and
      collection shall be added to the principal amount of the Note and shall accrue
      interest at the Default Rate from the Date incurred until the date paid by
      Maker.

    

    11. Binding
      Nature.
      The
      provisions of this Note shall be binding on Maker and shall inure to the benefit
      of Holder.

    

    12. Usury
      Savings Provisions.
      In the
      event Holder receives any sums under this Note which constitute interest in
      an
      amount in excess of that permitted by any applicable law, then, all such sums
      constituting interest in excess of that permitted to be paid under applicable
      law shall, at Holder’s option, either be credited to the payment of principal
      owing hereunder or returned to Maker. The provisions of this Section 12
      control
      the other provisions of this Note and any other agreement between Maker and
      Holder.

    
      
        
        

      

      
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    13. Severability.
      If, but
      only to the extent that, any provision of this Note shall be invalid or
      unenforceable, then, such offending provision shall be deleted from this Note,
      but only to the extent necessary to preserve the validity and effectiveness
      of
      this Note to the fullest extent permitted by applicable law.

    

    14. Interpretation.
      No
      provision of this Note shall be interpreted for or against Maker or Holder
      because that person or that person’s legal representative drafted such
      provision. Unless otherwise indicated elsewhere in this Note, (a) the term
“or”
shall not be exclusive, (b) the term “including” shall mean “including, but not
      limited to,” and (c) the terms “below,” “above,” “herein,” “hereof,” “hereto,”
“hereunder” and other terms similar to such terms shall refer to this Note as a
      whole and not merely to the specific section, subsection, paragraph or clause
      where such terms may appear. The section and sub-section headings in this Note
      are included for convenience of reference only and shall be ignored in the
      construction or interpretation of this Note.

    

    15. Amended
      and Restated Note.
      This
      Note is issued in accordance with that certain Sixth Amendment to Loan Agreement
      dated as of September __, 2007, between Maker and Galen (the "Sixth
      Amendment"),
      and
      is issued by Maker as an amendment and restatement of that certain Secured
      Promissory Note issued by Maker to Galen in the principal amount of $5,000,000
      dated December 20, 2002 (the "Original
      Note").
      Upon
      execution and delivery of this Note to Galen, the Original Note shall be null
      and void and of no further legal force or effect.

     

     

    [SIGNATURE
      PAGE TO FOLLOW]

    
      
        
        

      

      
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              “MAKER”

            
	 	 
	 	
              ACURA
                PHARMACEUTICALS, INC.

            
	 	 
	 	 
	 	
              /s/
                Peter Clemens

            
	 	
              By:
                Peter A. Clemens

            
	 	
              Its:
                Senior Vice President and Chief Financial
                Officer

            

    

    

    
      
        
        

      

      
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