Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D. C. 20549
____________
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act Of 1934
September
16, 2005
Date
of
Report (Date of earliest event reported)
___________________________________________________________
ACURA
PHARMACEUTICALS, INC.
(Exact
Name of Registrant as Specified in Charter)
___________________________________________________________
State
of New York
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1-10113
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11-0853640
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(State
of Other Jurisdiction
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(Commission
File Number)
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(I.R.S.
Employer
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of
Incorporation)
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Identification
Number)
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616
N. North Court, Suite 120
Palatine,
Illinois 60067
(Address
of principal executive offices) (Zip Code)
(847)
705-7709
(Registrant’s
telephone number, including are code)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
r› Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
r› Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17CFR
240.14a-12)
r› Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17CFR240.14d-2(b))
r› Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR
240.13e- 4(c))
Item
1.01 Entry
Into a Material Definitive Agreement
On
September 16, 2005, Acura Pharmaceuticals, Inc. (the "Company") entered into
a
Loan Agreement (the “Loan Agreement”) with Essex
Woodlands Health Venture V, L.P., Care Capital Investments II, L.P., Care
Capital Offshore Investments II, L.P., Galen Partners III, L.P., Galen Partners
International III, L.P., and Galen Employee Fund III, L.P. (collectively, the
“Bridge Lenders”) . Pursuant
to the Loan Agreement, the Lenders extended bridge financing to the Company
in
the principal amount of $500,000 (the “Bridge Loan”). The
net
proceeds from the 2005 Bridge Loan, after the satisfaction of related, expenses,
will be used by the Company to continue the development of its
AversionTM
Technology and to fund operating expenses.
The
Bridge Loan bears interest at the rate of ten percent (10%) per annum and
matures on June 1, 2006. The Bridge Loan is secured by a lien on all of the
Company’s and its subsidiaries’ assets, senior in right of payment and lien
priority to all other indebtedness of the Company. The Bridge Loan is subject
to
mandatory pre-payment by the Company upon the Company’s completion of equity or
debt financing or any sale, transfer, license or similar arrangement pursuant
to
which the Company or any of its subsidiaries sells, licenses or otherwise grants
rights in any material portion of the Company’s intellectual property to any
third party, provided that the consummation of any such transaction results
in
cash proceeds to the Company, net of all costs and expenses, of at least $4
million. The Bridge Loan Agreement requires that the Company maintain minimum
cash deposits of at least $200,000. The Bridge Loan also contains normal and
customary affirmative and negative covenants, including restrictions on the
Company’s ability to incur additional debt, or grant any lien on the assets of
the Company or its Subsidiaries, subject to certain permitted exclusions.
Item
9.01 Financial
Statements and Exhibits.
Exhibit
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Number
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Description
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10.1
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Loan
Agreement by and among Acura Pharmaceuticals, Inc. Essex Woodlands
Health
Venture V, L.P., Care Capital Investments II, L.P., Care Capital
Offshore
Investments II, L.P., Galen Partners III, L.P., Galen Partners
International III, L.P., and Galen Employee Fund III, L.P., dated
September 16, 2005.
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10.2
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Form
of Secure Promissory Note of Acura Pharmaceuticals,
Inc.
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10.3
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Subordination
Agreement by and among Essex
Woodlands Health Venture V, L.P., Care Capital Investments II, L.P.,
Care
Capital Offshore Investments II, L.P., Galen Partners III, L.P.,
Galen
Partners International III, L.P., and Galen Employee Fund III, L.P.,
dated
September 16, 2005.
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10.4
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Company
General Security Agreement by and between Acura Pharmaceuticals,
Inc. and
Galen Partners III, L.P., as Agent, dated September 16,
2005
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10.5
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Guaranty
of Axiom Pharmaceutical Corporation, dated September 16,
2005
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10.6
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Guaranty
of Acura Pharmaceutical Technologies, Inc., dated September 16,
2005
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10.7
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Guarantors
Security Agreement by and among Axiom Pharmaceutical Corporation,
Acura
Pharmaceutical Technologies, Inc. and Galen Partners III, L.P., as
Agent,
dated September 16, 2005
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10.8
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Stock
Pledge Agreement by and between Acura Pharmaceuticals, Inc. and Galen
Partners III, L.P., as Agent, dated September 16,
2005
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
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ACURA
PHARMACEUTICALS, INC. |
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By: |
/s/ Peter
A. Clemens |
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Peter
A. Clemens
Vice
President & Chief Financial
Officer
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Unassociated Document
EXHIBIT
10.1
LOAN
AGREEMENT
This
Loan
Agreement (“Agreement”)
is
made as of September 16, 2005 by and among (i) Acura Pharmaceuticals, Inc.,
a
New York corporation (“Company”),
(ii)
Essex Woodlands Health Ventures V, L.P. (“Essex”),
(iii)
Care Capital Investments II, L.P. and Care Capital Offshore Investments II,
L.P.
(collectively “Care
Capital”)
and
(iv) Galen Partners III, L.P., Galen Partners International III, L.P. and
Galen
Employee Fund III, L.P. (collectively
“Galen
and,
together with Essex and Care Capital, the “Lenders”).
In
consideration of the mutual covenants contained in this Agreement and other
good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE
I
LOAN;
SECURITY DOCUMENTS
1.1. TERM
LOAN
On
the
terms and subject to the conditions of this Agreement, each Lender severally
agrees to make to the Company on the Closing Date a term loan (each, a
“Loan”)
in a
principal amount equal to such Lender’s Commitment. No amounts paid or prepaid
with respect to any Loan may be reborrowed.
1.2. NOTES
The
Company’s unconditional and absolute obligation to repay to the Lenders the
principal of the Loans and interest thereon shall be evidenced by a promissory
note (each, as the same may be amended, supplemented or otherwise modified
from
time to time in accordance with the terms hereof, and together with any renewals
thereof or substitutions therefor, a “Note”),
in
the form of Exhibit
A
hereto
with appropriate insertions, dated the Closing Date. The date and amount
of each
repayment and prepayment of principal thereon received by a Lender shall
be
recorded by the Lender in its records or, at its option, on the schedule
attached to the Note. The aggregate unpaid principal amount so recorded shall
be
prima facie evidence of the principal amount owing and unpaid on the Note
to the
Lender absent manifest error. The failure to so record any such amount or
any
error in so recording any such amount, however, shall not limit or otherwise
affect the Company’s obligations hereunder or under the Note to repay the
principal amount of the Loan together with all interest accruing
thereon.
1.3. CLOSING
The
closing (the “Closing”)
at
which the Loans shall be disbursed to the Company will take place at the
offices
of St. John & Wayne, L.L.C., Two Penn Plaza East, Newark, New Jersey 07105
upon the satisfaction of the conditions to Closing set forth in this Agreement
on the date hereof, or such other place, time and date as shall be mutually
agreed to by the Company and the Lenders. On the date of the Closing (the
“Closing
Date”),
the
Company shall deliver to each Lender a Note, dated the Closing Date, in the
principal amount equal to such Lender’s Commitment. The Company shall deliver
the foregoing Notes against receipt by the Company from each Lender of an
amount
equal to the Commitment of such Lender, in each case by wire transfer in
immediately available funds in U.S. dollars to an account designated by the
Company.
1.4. USE
OF PROCEEDS
The
Company shall apply the proceeds of the Loans to general corporate purposes.
The
Company shall not use any proceeds of the Loans to purchase or carry any
“margin
stock” (as defined in Regulation U promulgated by the Board of Governors of the
Federal Reserve System).
1.5. COMPANY
SECURITY DOCUMENTS
All
of
the obligations of the Company under the Transaction Documents to or for
the
benefit of the Lenders (or their agents and representatives) shall be secured
by
the following items (collectively, the “Company
Collateral”),
each
of which shall be senior and superior to all other liens: (a) a lien on all
the
personal property and assets of the Company now existing or hereinafter acquired
granted pursuant to the Company General Security Agreement, including, without
limitation, a lien on and security interest in all of the issued and outstanding
shares of common stock of the Guarantors pursuant to a separate Stock Pledge
Agreement; and (b) collateral assignments of all leases, contracts, patents,
copyrights, trademarks and service marks of the Company.
1.6. GUARANTIES;
GUARANTOR SECURITY
All
of
the obligations of the Company under the Notes and this Agreement shall be
guaranteed pursuant to the Guaranties by the Guarantors. All of the obligations
of the Guarantors under the Guaranties shall be secured by the following
(collectively, the “Guarantor
Collateral”)
each
of which shall be a lien ranking senior and superior to all other liens:
(a) a
lien on all of the personal property and assets of the respective Guarantors
now
existing or hereinafter acquired, granted pursuant to the Guarantors General
Security Agreement; and (b) collateral assignments of all leases, contracts,
patents, copyrights, trademarks and service marks of the
Guarantors.
ARTICLE
II
REPAYMENT;
PREPAYMENTS; INTEREST
2.1. REPAYMENT
OF THE LOANS
The
Company shall repay the aggregate outstanding principal amount of the Loans,
together with all accrued but unpaid interest thereon, in full on the earlier
of
June 1, 2006 (the
“Maturity
Date”),
or
the date upon which the Loans become or are declared due and payable pursuant
to
Article VII of this Agreement.
2.2. PREPAYMENTS
The
Company shall have the right to prepay the principal amount of a Loan, in
whole
or in part, at any time without penalty or premium. Any prepayment of principal
shall be accompanied by a payment of all interest accrued and unpaid on the
portion of the principal amount being prepaid. In
addition the Company shall, unless the Lenders shall otherwise agree in writing,
prepay the Loans from time to time in an amount equal to the net amounts
received (after satisfaction of associated expenses) by the Company in
connection with any Funding Event immediately upon the Company’s receipt
thereof.
2.3. INTEREST
(a) The
Loans
shall bear interest on the outstanding principal amount thereof at a rate
of ten
percent (10%) per annum from the Closing Date. All accrued interest on each
Loan
shall be payable in arrears on the last day of each calendar quarter; provided
that (i) interest accrued pursuant to Section 2.3(b) shall be payable on
demand,
and (ii) in the event of any repayment or prepayment of any Loan, accrued
interest on the principal amount repaid or prepaid shall be payable on the
date
of such repayment or prepayment. All computations of interest shall be made
on
the basis of a year of 360 days, and actual days elapsed.
(b) Notwithstanding
the rate of interest specified above, after an Event of Default and during
the
continuance thereof (regardless of whether the Loans have been accelerated),
the
Company agrees to pay interest (after as well as before judgment to the extent
permitted by applicable law) on all unpaid principal, interest or other amounts
owing under the Transaction Documents, at a rate of thirteen percent (13%)
per
annum. Unpaid interest on such amounts will continue to accrue and will (to
the
extent permitted by applicable law) be compounded daily.
2.4. USURY
Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable
to
a Loan, together with all fees, charges and other amounts which are treated
as
interest on the Loan under applicable law shall exceed the maximum lawful
rate
(the “Maximum
Rate”)
which
may be contracted for, charged, taken, received or reserved by the Lenders
in
accordance with applicable law, the rate of interest payable in respect of
such
Loan hereunder, together with all charges payable in respect thereof, shall
be
limited to the Maximum Rate.
ARTICLE
III
CONDITIONS
TO CLOSING
The
obligation of each Lender to make its Loan at the Closing is subject to the
fulfillment to such Lender’s satisfaction on or prior to the Closing Date of
each of the following conditions, unless otherwise waived by such
Lender:
3.1. REPRESENTATIONS
AND WARRANTIES CORRECT; NO DEFAULT
The
representations and warranties of the Company set forth in Article IV hereof
shall be true and correct when made, and shall be true and correct on the
Closing Date with the same force and effect as if they had been made on and
as
of the Closing Date. No Event of Default, or any other event which, with
the
giving of notice, the lapse of time, or both, would constitute an Event of
Default, shall have occurred and be continuing on the date of this Agreement
or
on the Closing Date.
3.2. PERFORMANCE
All
covenants, agreements and conditions contained in this Agreement to be performed
or complied with by the Company on or prior to the Closing Date shall have
been
performed or complied with by the Company.
3.3. NO
IMPEDIMENTS
None
of
the Company, or any of the Guarantors, or any Lender shall be subject to
any
order, decree or injunction of a court or administrative or governmental
body or
agency of competent jurisdiction directing that the transactions provided
for in
the Transaction Documents or any material aspect thereof not be consummated
as
contemplated by the Transaction Documents. There shall not be any action,
suit,
proceeding, complaint, charge, hearing, inquiry or investigation before or
by
any court or administrative or governmental body or agency pending or, to
the
Company’s best knowledge, threatened, wherein an unfavorable order, decree or
injunction would prevent the performance of any of the Transaction Documents
or
the consummation of any material aspect of the transactions or events
contemplated thereby, declare unlawful any aspect of the transactions or
events
contemplated by the Transaction Documents, cause any material aspect of the
transactions contemplated by the Transaction Documents to be rescinded or
have a
Material Adverse Effect.
3.4. OTHER
AGREEMENTS AND DOCUMENTS
The
Company shall have executed and delivered to each Lender this Agreement,
issued
to such Lender its Note, and the Company and each of the Guarantors, as
applicable, shall have executed and delivered the following agreements and
documents:
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(a)
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the
Company General Security Agreement;
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(c)
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the
Guarantors Security Agreement;
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(d)
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the
Stock Pledge Agreement;
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(e)
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a
secretary’s certificate of the Company, (i) attaching a certified copy of
the Certificate of Incorporation and current bylaws of the Company
and
certifying the same as not having been amended and as being in
being in
full force and effect, (ii) attaching and certifying resolutions
by the
Board of Directors approving the execution, delivery and performance
of
the Transaction Documents and the transactions contemplated thereby,
and
(iii) certifying as to the incumbency, and attaching specimen signatures
of, the officers or representatives of the Company signing the
Transaction
Documents to which the Company is a
party;
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(f)
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a
secretary’s certificate of each of the Guarantors, (i) attaching a
certified copy of the certificate of incorporation and current
bylaws of
such Guarantor and certifying the same as not having been amended
and as
being in being in full force and effect, (ii) attaching and certifying
resolutions by the board of directors of such Guarantor approving
the
execution, delivery and performance of the Transaction Documents
and the
transactions contemplated thereby, and (iii) certifying as to the
incumbency, and attaching specimen signatures of, the officers
or
representatives of such Guarantor signing the Transaction Documents
to
which such Guarantor is a party;
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(g)
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a
Certificate of Good Standing and Tax Status from the state of
incorporation of the Company and each Guarantor and from every
state in
which any of them is qualified to do business;
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(h)
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the
IP Collateral Assignments; and
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(i)
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Financing
Statements with respect to all personal property and assets of
the Company
and each Guarantor.
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3.5. CONSENTS
The
Company shall have obtained all necessary consents or waivers, if any, from
all
parties governmental and private to any other material agreements to which
the
Company is a party or by which it is bound immediately prior to the Closing
in
order that the transactions contemplated by the Transaction Documents may
be
consummated.
3.6. PROCEEDINGS
AND OTHER DOCUMENTS
All
corporate and other proceedings taken or required to be taken by the Company
and
any Guarantor in connection with the transactions contemplated by this Agreement
and the other Transaction Documents to be consummated prior to the Closing
shall
have been taken, and the Lenders shall have received such other documents,
in
form and substance reasonably satisfactory to the Lenders and their counsel,
as
to such other matters incident to the transactions contemplated hereby as
the
Lenders may reasonably request.
3.7. OPINION
OF COUNSEL
The
Lenders shall have received the opinion of St. John & Wayne, L.L.C., counsel
to the Company, dated the Closing Date, substantially in the form of
Exhibit
B
attached
hereto.
3.8. INDEPENDENT
COMMITTEE OF BOARD OF DIRECTORS
The
Company’s independent committee of the Board of Directors (the “Independent
Committee”)
shall
deliver to each of the Lenders the Independent Committee’s resolutions approving
the execution, delivery and performance of the Transaction Documents to which
the Company is a party and the transactions contemplated thereby, each in
form
and substance reasonably acceptable to the Lenders.
3.9. SUBORDINATION
AGREEMENT
The
holders of the Senior Note and the holders of the June 2005 Notes shall have
entered into a subordination agreement, in form and substance acceptable
to the
Lenders, pursuant to which all liens (and all other interests in collateral)
securing the Company’s obligations under the Senior Note, the Watson Term Loan,
the June 2005 Notes and the June 2005 Bridge Loan shall be fully subordinated
to
the liens (and other interests in collateral) securing the Loans.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
As
a
material inducement to each Lender to enter into and perform its obligations
under this Agreement, except as set forth in the Schedule of Exceptions,
the
Company hereby represents and warrants to each Lender as follows:
4.1. ORGANIZATION
AND EXISTENCE
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of New York and is qualified to do business in such other
jurisdictions as the nature or conduct of its operations or the ownership
of its
properties require such qualification. The Company does not own or lease
any
property or engage in any activity in any jurisdiction that might require
qualification to do business as a foreign corporation in such jurisdiction
and
where the failure to so qualify could reasonably be expected to have a Material
Adverse Effect or subject the Company to a material liability. The Company
has
furnished the Lenders with true, correct and complete copies of its Certificate
of Incorporation, By-Laws and all amendments thereto, as of the date
hereof.
4.2. SUBSIDIARIES
AND AFFILIATES
Section
4.2
of the
Schedule of Exceptions sets forth the name, jurisdiction of incorporation
and
authorized and outstanding capitalization of each Subsidiary. Except as
disclosed in Section
4.2
of the
Schedule of Exceptions, all of the outstanding shares of capital stock of
each
of the Subsidiaries are duly and validly authorized, are validly issued and
are
fully paid and nonassessable and have been offered, issued, sold and delivered
in compliance with applicable federal and state securities laws. Except as
set
forth in Section
4.2
of the
Schedule of Exceptions, the Company has, and upon the Closing will have,
no
Subsidiaries and will not own of record or beneficially any capital stock
or
equity interest or investment in any corporation, association or business
entity. Except as disclosed in Section
4.2
of the
Schedule of Exceptions, each Subsidiary is a corporation duly organized,
validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to carry
on
its business as now conducted and proposed to be conducted. Except as set
forth
in Section
4.2
of the
Schedule of Exceptions, no Subsidiary owns or leases any property or engages
in
any activity in any jurisdiction which might require such Subsidiary to qualify
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 Subsidiary to a material liability.
4.3. CAPITALIZATION
As
of the
date hereof, the Company’s authorized capital stock consists of (i) 650,000,000
shares of Common Stock, of which 23,187,688 shares
are outstanding and approximately 362,848,081 shares
are reserved for issuance for the purposes set forth in Section
4.3
of the
Schedule of Exception, and (ii) 290,000,000 shares of Preferred Stock, of
which
(1) 45,000,000 shares are Series A Preferred, (2) 25,000,000 shares are Series
B
Preferred, (3) 70,000,000 shares are Series C-1 Preferred, (4) 50,000,000
shares
are Series C-2 Preferred and (5) 100,000,000 shares are Series C-3 Preferred.
Set forth in Section
4.3
of the
Schedule of Exceptions is a complete and correct list, as of the Closing
Date,
of the number of shares of Common Stock held by the Company’s public
stockholders generally, stockholders holding in excess of 5% of the Company’s
Common Stock and all holders of Preferred Stock, options, warrants, debentures
and other securities convertible or exercisable for Common Stock. Such schedule
is complete and correct in all material respects. All the issued and outstanding
shares of capital stock of the Company are (i)
duly
authorized and validly issued, (ii)
fully
paid and nonassessable and (iii)
have
been offered, issued, sold and delivered by the Company in compliance with
applicable federal and state securities laws.
4.4. AUTHORIZATION
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(a)
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Each
of the Company and the Guarantors has all requisite corporate power
and
authority (1)
to
execute and deliver, and to perform and observe their respective
obligations under, the Transaction Documents to which it is a respective
party, and (2)
to
consummate the transactions contemplated hereby and thereby, including,
without limitation, the grant of any security interest, mortgage,
payment
trust, guaranty or other security arrangement by the Company in,
on or in
respect of the Company Collateral, and by any and all of the Guarantors
in, on or in respect of the Guarantor
Collateral.
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(b)
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All
corporate action on the part of (i) the Company and the directors
and,
except as set forth in Section
4.4(b)
of
the Schedule of Exceptions, the stockholders of the Company necessary
for
the authorization, execution, delivery and performance by the Company
of
the Transaction Documents and the transactions contemplated therein,
and
for the authorization, issuance and delivery of the Notes, has
been taken
and (ii) each Guarantor and their respective directors and stockholders
necessary for the authorization, execution,
delivery and performance by each Guarantor of the Guarantors General
Security Document, the Guaranties and the transactions contemplated
therein or in any other Transaction Document with respect to the
Guarantors, has been taken.
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4.5. BINDING
OBLIGATIONS; NO MATERIAL ADVERSE CONTRACTS
The
Transaction Documents constitute valid and binding obligations of the Company
and the Guarantors enforceable in accordance with their respective terms.
Except
as set forth in Section
4.5
of the
Schedule of Exceptions, the execution, delivery and performance by the Company
and the Guarantors of the Transaction Documents and compliance therewith
will
not result in any violation of and will not conflict with, or result in a
breach
of any of the terms of, or constitute a default, or accelerate or permit
the
acceleration of any rights or obligations, under, any provision of state,
local,
federal or foreign law to which the Company or either of the Guarantors is
subject, the Certificate of Incorporation, as amended, or the By-Laws, as
amended, of the Company or either of the Guarantors, or any mortgage, indenture,
agreement, instrument, judgment, decree, order, rule or regulation or other
restriction to which the Company or either of the Guarantors is a party or
by
which it is bound, and except for Permitted Liens, result in the creation
of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties
or
assets of the Company or either of the Guarantors pursuant to any such term.
No
stockholder of the Company or either Guarantor has or will have any preemptive
rights or rights of first refusal by reason of the issuance of the Notes.
4.6. COMPLIANCE
WITH INSTRUMENTS
Neither
the Company nor any Subsidiary (a) is in violation of its organizational
documents, (b) is in default, and no event has occurred which, with the giving
of notice, or the lapse of time, or both, would constitute such a default,
in
the due performance or observance of any term, covenant or condition contained
in any material agreement, including, without limitation, any license, indenture
or other instrument to which it is a party or by which it is bound or to
which
any of its property or assets is subject or (c) is in violation of any law,
ordinance, governmental rule, regulation or court decree to which it or its
property may be subject (including without limitation any Legal Requirements
relating to the biotechnology and pharmaceutical industry) except for (x)
such
defaults and violations set forth in Section
4.6
of the
Schedule of Exceptions, and (y) such violations under clause (b) and (c)
that
would not, individually or in the aggregate, have a Material Adverse Effect.
4.7. LITIGATION
Except
as
set forth in Section
4.7
of the
Schedule of Exceptions, there are no actions, suits or proceedings (including
governmental or administrative proceedings), investigations, third-party
subpoenas or inquiries by any regulatory agency, body or other governmental
authority, to which the Company or any of the Subsidiaries is a party or
is
subject, or to which any of their authorizations, consents and approvals
or
other properties or assets, is subject, which is pending, or, to the best
knowledge of the Company, threatened or contemplated against the Company
or any
Subsidiary, or any of such property or assets, that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
The
Company is not subject to any actions, suits or proceedings (including
governmental or administrative proceedings), investigation, third-party
subpoenas or inquiries by any regulatory agency, body or other governmental
authority or any third Person regarding its accounting practices or policies.
4.8. FINANCIAL
INFORMATION; SEC DOCUMENTS
(a) The
Company has furnished to the Lenders complete and correct copies of the
consolidated financial statements of the Company and its Subsidiaries, including
consolidated balance sheets as of December 31, 2004 and 2003 and consolidated
statements of operations, changes in cash flows and stockholders’ equity,
covering the three years ended December 31, 2004, all of which statements
have
been certified by BDO Seidman LLP or Grant Thornton LLP, independent accountants
within the meaning of the Securities Act and the rules and regulations
thereunder, and all of which statements are included or incorporated by
reference in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2004 filed with the SEC under the Exchange Act. Such financial
statements have been prepared in conformity with GAAP applied on a consistent
basis throughout the periods involved, except as otherwise stated therein
and
fairly present the consolidated financial position of the Company and its
Subsidiaries as of the dates thereof and their consolidated results of
operations for such periods. Except as previously disclosed to the Lenders
in
writing, the Company’s auditors have raised no material issues nor delivered any
material correspondence with respect to any of the Company’s financial
statements or financial affairs.
(b) The
Company has also furnished to the Lenders the unaudited consolidated balance
sheet of the Company and its Subsidiaries as of June 30, 2005 and the related
unaudited consolidated statements of operations, consolidated statements
of cash
flow and consolidated statements of stockholders’ equity for the six months
ended June 30, 2005. Such financial statements were prepared in conformity
with
GAAP applied on a basis consistent with the financial statements referred
to in
Section 4.8(a) and fairly present the consolidated financial position of
the
Company and its Subsidiaries as of such date and their consolidated results
of
operations for such periods (subject to normal year-end
adjustments).
(c) None
of
the documents filed by the Company with the SEC since December 31, 2003 contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
contained therein not false or misleading in light of the circumstances in
which
they were made. There are no facts which the Company has not disclosed in
the
Company Reports or disclosed to the Lenders which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect.
(d) Except
as
set forth in Section
4.8
of the
Schedule of Exceptions or in the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005, subsequent to December 31, 2004, (i) none of
the
Company or any Guarantor has incurred any liability or obligations, direct
or
indirect, or entered into any transactions not in the ordinary course of
business, in either case which is material to the Company or any Guarantor,
as a
whole, (ii) there has not been any material change in the short-term debt
or
long-term debt of any of the Company or any Guarantor and (iii) there has
been
no material change in the Company’s accounting principles.
(e) Except
as
set forth in Section
4.8
of the
Schedule of Exceptions or in the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005, since December 31, 2004, there has been no Material
Adverse Effect with respect to the Company and its Subsidiaries.
4.9. OFFERING
EXEMPTION
(a) None
of
the Company, its Affiliates or any Person acting on its or their behalf has
engaged or will engage, in connection with the offering and sale of the Notes,
in any form in general solicitation or general advertising within the meaning
of
Rule 502(c) under the Securities Act, and none of the Company, or any of
its
Affiliates has, directly or indirectly, solicited any offer to buy, sell
or
offer to sell or otherwise negotiate in respect of, in the United States
or to
any United States citizen or resident, any security which is or would be
integrated with the sale of the Notes in a manner that would require the
Notes
to be registered under the Securities Act. The offering, sale and issuance
of
the Notes have been, are, and will be exempt from registration under the
Securities Act, and such offering, sale and issuance is also exempt from
registration under applicable state securities and “blue sky” laws.
(b) None
of
the Company or any Guarantor is, or upon consummation of the transactions
contemplated under the Transaction Documents, will be, subject to registration
as an “investment company” under the 1940 Act.
4.10. PERMITS;
GOVERNMENTAL AND OTHER APPROVALS
(a) Other
than as set forth in Section
4.10
of the
Schedule of Exceptions or in the Company Reports, each of the Company and
its
Subsidiaries possesses all necessary consents, approvals, authorizations,
orders, registrations, stamps, filings, qualifications, licenses, permits
or
other analogous acts by, of, from or with all public, regulatory or governmental
agencies, bodies and authorities and all other third parties, to own, lease
and
operate its respective properties and to carry on its business as now conducted
and proposed to be conducted except to the extent that the failure to obtain
any
such consents, approvals, authorizations, orders, registrations, stamps,
filings, qualifications, licenses or permits would not have a Material Adverse
Effect. Other than as set forth in Section
4.10
of the
Schedule of Exceptions, no approval, consent, authorization or other order
of,
and no designation, filing, registration, qualification or recording with,
any
governmental authority or any other Person is required in connection with
the
Company’s valid execution, delivery and performance of this Agreement or the
offer, issuance and sale of the Notes by the Company to the Lenders or the
consummation of any other transaction contemplated on the part of the Company
hereby.
(b) Without
limiting the generality of the representations and warranties made in Section
4.10(a), the Company represents and warrants that (i)
it and
the Guarantors are in compliance with all applicable provisions of the FDC
Act,
except where any such noncompliance could not reasonably be expected to have
a
Material Adverse Effect; (ii)
its
products and those of the Guarantors are not adulterated or misbranded and
are
in lawful distribution; (iii)
the
consent agreement entered into by the Company with the United States Attorney
for the Eastern District of New York on behalf of the FDA on June 29, 1993
has
been terminated; and (iv)
it and
the Guarantors are, and will be, in compliance with the following specific
requirements: (A) Acura Pharmaceutical Technologies, Inc. has registered
its
facility with the FDA, (B) the Company and the Guarantors have listed their
drug
products with the FDA, (C) each drug product marketed by the Company or any
Guarantor is the subject of an application approved by the FDA, (D) all drug
products marketed by the Company or either Guarantor comply with any conditions
of approval and the terms of the application submitted to the FDA, (E) all
of
the Company’s and the Guarantors’ drug products are manufactured in compliance
with the FDA’s good manufacturing practice regulations, (F) all of the Company’s
and the Guarantors’ products are labeled and promoted in accordance with the
terms of the marketing application and the provisions of the FDC Act, (G)
all
adverse events relating to the Company and the Guarantors that were required
to
be reported to the FDA have been reported to the FDA in a timely manner,
(H)
to
the Company’s best knowledge, neither the Company nor any Guarantor is employing
or utilizing the services of any individual who has been debarred under the
FDC
Act, (I) all stability studies required to be performed for products distributed
by the Company or a Guarantor have been completed or are ongoing in accordance
with the applicable FDA requirements, (J) to the best of the Company’s
knowledge, none of the Company’s or a Guarantor’s products have been exported
for sale outside the United States, and (K) each of the Company and the
Guarantors is in compliance with the provisions of the Prescription Drug
Marketing Act, to the extent applicable; except, with respect to subclauses
(iv)(E), (iv)(G), (iv)(J) and (iv)(K) above, where any such noncompliance
could
not reasonably be expected to have a Material Adverse Effect.
(c) Without
limiting the generality of the representations and warranties made in Section
4.10(a), the Company also represents and warrants that it and the Guarantors
are
in compliance with all applicable provisions of the CSA and that the Company
and
the Guarantors are in compliance with the following specific requirements,
except where such noncompliance could not reasonably be expected to have
a
Material Adverse Effect: (i) the Company and the Guarantors are registered
with
the DEA at each facility where controlled substances are exported, imported,
manufactured or distributed; (ii) all controlled substances are stored and
handled pursuant to DEA security requirements; (iii) all records and inventories
of receipt and distributions of controlled substances are maintained in the
manner and form as required by DEA regulations; (iv) all reports, including,
but
not limited to, ARCOS, manufacturing quotas, production quotas, and disposals,
have been submitted to the DEA in a timely manner; (v) all adverse events,
including thefts or significant losses of controlled substances, have been
reported to the DEA in a timely manner; (vi) to the Company’s best knowledge,
neither the Company nor any Guarantor is employing any individual, with access
to controlled substances, who has previously been convicted of a felony
involving controlled substances; and (vii) any imports or exports of controlled
substances have been conducted in compliance with the CSA and DEA
regulations.
4.11. SALES
REPRESENTATIVES; CUSTOMERS AND KEY EMPLOYEES
(a) Except
as
set forth in Section
4.11
of the
Schedule of Exceptions, to the best knowledge of the Company, no independent
sales representatives, customers, officers or key employees or group of key
employees of the Company or any Guarantor has any intention to terminate
his,
her or its relationship with the Company or such Guarantor on or after the
Closing or, in the case of employees, leave the employ of the Company or
any of
the Guarantors on and after the Closing, nor has the Company or any of the
Guarantors discussed or taken any steps to terminate the employment of any
officer or key employee or group of key employees. Other than as set forth
in
Section
4.11
of the
Schedule of Exceptions or in the Company Reports, all personnel of the Company
and any of the Guarantors are employed on an “at will” basis and may be
terminated upon notice of not more than 30 days.
(b) To
the
Company’s best knowledge, no employee of the Company or any of the Guarantors,
or any consultant (including any scientific advisor) with whom the Company
or
any of the Guarantors has contracted, is in violation of any term of any
employment contract, proprietary information agreement, licenses, or any
other
agreement relating to the right of any such
individual to be employed by, or to contract with, the Company or any of
the
Guarantors because of the nature of the business conducted by the Company
and
the Guarantors; and the continued employment by the Company or any of the
Guarantors of their present employees, and the performance of the Company’s and
the Guarantor’s contracts with its independent contractors, will not result in
any such violation, except where any such violation could not reasonably
be
expected to have a Material Adverse Effect. None of the Company or any of
the
Guarantors has received any written, or to the best knowledge of the Company,
oral notice alleging that any such violation has occurred.
(c) All
of
the Company’s and any of the Guarantor’s consultants (including scientific
advisors), officers and key employees are subject to customary non-disclosure
and non-competition agreements.
4.12. COPYRIGHTS,
TRADEMARKS AND PATENTS; LICENSES
(a) Section
4.12
of the
Schedule of Exceptions sets forth a list of all of the Company’s and any
Guarantor’s Intellectual Property Rights. The Intellectual Property Rights are,
to the best of the Company’s knowledge, fully valid and are in full force and
effect; provided, that the Company makes no representation as to whether
any
pending patent applications will be allowed.
(b) The
Company or a Guarantor owns outright all of the Intellectual Property Rights
listed on Section
4.12
of the
Schedule of Exceptions attached hereto free and clear of all liens and
encumbrances except for the Permitted Liens, and does not pay, and is not
required to pay, any royalty to anyone under or with respect to any of
them.
(c) Neither
the Company nor any Guarantor has licensed anyone to use any of such
Intellectual Property Rights and has no knowledge of, nor has it received
any
notice relating to, the infringing use by the Company or any Guarantor of
any
Intellectual Property Rights.
(d) Except
as
otherwise disclosed to the Company’s Board of Directors, the Company 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.
(e) Except
as
set forth in Section
4.12
of the
Schedule of Exceptions, neither the Company nor any Guarantor is a party
to any
license agreement pursuant to which the Company is the licensor or licensee
of
any Intellectual Property Rights.
4.13. INVENTORY
The
Company and its Subsidiaries do not maintain any material
inventory.
4.14. NO
DISCRIMINATION; LABOR MATTERS
Neither
the Company nor any Guarantor in any manner or form discriminates, fosters
discrimination or permits discrimination against any Person based on gender
or
age, or belonging to any minority race or believing in any minority creed
or
religion. No charge of discrimination in employment, whether by reason of
age,
gender, race, religion or other legally protected category that has been
asserted or is now pending or, to the best knowledge of the Company and the
Guarantors, threatened before the United States Equal Employment Opportunity
Commission or other federal or governmental authorities. The Company and
each
Guarantor is in compliance with all applicable Legal Requirements respecting
employment practices, terms and conditions of employment and wages and hours
and
is not and has not engaged in any unfair labor practice. The Company and
each
Guarantor has withheld and paid to the appropriate governmental authorities
or
is holding for payment not yet due to governmental authorities, all amounts
required to be withheld from such employees of the Company or the Guarantors
and
is not liable for any arrears of wages, taxes, penalties or other sums for
failure to comply with any of the foregoing. Except as set forth in Section
4.14
of the
Schedule of Exceptions, in connection with the operation of the Company’s and
each Guarantor’s business, (a) there is no unfair labor practice charge or
complaint against the Company or any Guarantor pending before the National
Labor
Relations Board or any other governmental agency arising out of the Company’s or
any Guarantor’s activities and the Company has no knowledge, nor has it received
notice of any facts or information that would give rise thereto; (b) there
is no
significant labor trouble, labor strike, material controversy, material
unsettled grievance, dispute, request for representation, slowdown or stoppage
actually pending against or affecting the Company or any of the Guarantors
and,
to the best knowledge of the Company, none is or has been threatened; and
(c)
none of the Company or any of the Guarantors has any collective bargaining
agreements with respect to any personnel nor is the Company aware of any
current
attempts to organize or establish any labor union or employee association
with
respect to any personnel, nor is there any certification, interim certifications
or voluntary recognition of any such union with regard to a bargaining unit.
4.15. ENVIRONMENTAL
MATTERS
(a) Without
limiting the generality of the representations and warranties given in
Section
4.10(a),
each of
the Company and the Subsidiaries has obtained all environmental, health and
safety permits, licenses and other authorizations necessary or required for
the
operation of its business, except where the failure to possess such franchises,
licenses, permits or other authority could not reasonably be expected to
have a
Material Adverse Effect, and all such permits, licenses and other authorizations
are in full force and effect and each of the Company and, except as set forth
in
Section
4.15
of the
Schedule of Exceptions, the Subsidiaries is in compliance with all terms
and
conditions of such permits, except where such noncompliance could not reasonably
be expected to have a Material Adverse Effect.
(b) There
is
no proceeding pending or, to the best knowledge of the Company, threatened,
which may result in the denial, rescission, termination, modification or
suspension of any environmental or health or safety permits, licenses or
other
authorizations necessary for the operation of the business of the Company
and
the Subsidiaries.
(c) During
the occupancy by the Company or any Subsidiary of any real property owned
or
leased by the Company or such Subsidiary, neither the Company nor any
Subsidiary, and to the best knowledge of the Company, no other Person, has
caused or permitted materials to be generated, released, stored, treated,
recycled, disposed of on, under or at such parcels, which materials, if known
to
be present, would require cleanup, removal or other remedial or responsive
action under any environmental Legal Requirements. To the best knowledge
of the
Company, there are no underground storage tanks and no PCB, PCB contaminated
oil
or asbestos on any property leased by the Company or any
Subsidiary.
(d) Except
as
set forth in Section
4.15
of the
Schedule of Exceptions, neither the Company nor any Subsidiary is subject
to any
judgment, decree, order or citation related to or arising out of environmental
Legal Requirements, or has received notice that it has been named or listed
as a
potentially responsible party by any Person in any matter arising under
environmental Legal Requirements.
(e) To
the
Company’s best knowledge, each of the Company and the Subsidiaries has disposed
of all waste in full compliance with all environmental Legal
Requirements.
4.16. TAXES
The
Company and each of the Guarantors have (a) filed all necessary income,
franchise and other material tax returns, domestic and foreign, (b) paid
all
taxes shown as due thereunder and (c) withheld and paid to the appropriate
tax
authorities all amounts required to be withheld from wages, salaries and
other
remuneration to employees. The Company has no knowledge, nor has it received
notice, of any tax deficiency which might be assessed against the Company
or any
Guarantor which, if so assessed, could reasonably be expected to have a Material
Adverse Effect.
4.17. EMPLOYEE
BENEFIT PLANS AND SIMILAR ARRANGEMENTS
(a) Section
4.17
of the
Schedule of Exceptions and the Company Reports list all employee benefit
plans
and collective bargaining, labor and employment agreements or other similar
arrangements in effect to which the Company, the Guarantors, and any of their
respective ERISA Affiliates are a party or by which the Company, the Guarantors,
and any of respective ERISA Affiliates are bound, legally or otherwise,
including, without limitation, (i) any profit-sharing, deferred compensation,
bonus, stock option, stock purchase, pension, retainer, consulting, retirement,
severance, welfare or incentive plan, agreement or arrangement; (ii) any
plan,
agreement or arrangement providing for fringe benefits or perquisites to
employees, officers, directors or agents, including but not limited to benefits
relating to employer-supplied automobiles, clubs, medical, dental,
hospitalization, life insurance and other types of insurance, retiree medical,
retiree life insurance and any other type of benefits for retired and terminated
employees; (iii) any employment agreement; or (iv) any other “employee benefit
plan” (within the meaning of Section 3(3) of ERISA) (herein referred to
individually as “Plan”
and
collectively as “Plans”).
(b) True
and
complete copies of the following documents with respect to any Plan of the
Company, its Subsidiaries, and each ERISA Affiliate, as applicable, have
been
made available to each of the Lenders: (i) the most recent Plan document
and
trust agreement (including any amendments thereto and prior plan documents,
if
amended within the last two years), (ii) the last two Form 5500 filings and
schedules thereto, (iii) the most recent IRS determination letter, (iv) all
summary plan descriptions, (v) a written description of each material
non-written Plan, (vi) each written communication to employees intended to
describe a Plan or any benefit provided by such Plan, (vii) the most recent
actuarial report, and (viii) all correspondence with the IRS, the Department
of
Labor and the PBGC concerning any controversy. Each report described in clause
(vii) accurately reflects the funding status of the Plan to which it relates
and
subsequent to the date of such report there has been no adverse change in
the
funding status or financial condition of such Plan.
(c) Each
Plan
is and has been maintained in compliance with applicable Legal Requirements,
including but not limited to ERISA and the Code, and with any applicable
collective bargaining agreements or other contractual obligations.
(d) With
respect to any 412 Plan, there has been no failure to make any contribution
or
pay any amount due as required by Section 412 of the Code, Section 302 of
ERISA
or the terms of any such Plan, and no funding waiver has been requested or
received from the IRS. The assets of the Company, its Subsidiaries, or any
ERISA
Affiliates are not now, nor will they after the passage of time be, subject
to
any lien imposed under Section 412(n) of the Code by reason of a failure
of the
Company, any Subsidiary, or any ERISA Affiliate to make timely installments
or
other payments required under Section 412 of the Code.
(e) No
Plan
subject to Title IV of ERISA has any Unfunded Pension Liability.
(f) Except
as
shown on Section
4.17
of the
Schedule of Exceptions, there are no pending, or to the best knowledge of
the
Company, its Subsidiaries, and ERISA Affiliates, threatened
claims, investigations, actions or lawsuits, other than routine claims for
benefits in the ordinary course, asserted or instituted against (i) any Plan
or
its assets, (ii) any ERISA Affiliate with respect to any 412 Plan, or (iii)
any
fiduciary with respect to any Plan for which the Company, its Subsidiaries,
or
any ERISA Affiliate may be directly or indirectly liable, through
indemnification obligations or otherwise.
(g) Except
as
set forth in Section
4.17
of the
Schedule of Exceptions, none of the Company, any Subsidiary, or any ERISA
Affiliate has incurred and or reasonably expects to incur (i) any Withdrawal
Liability and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in Withdrawal Liabilities, or any liability
under Section 4063, 4064, or 4243, or (ii) any outstanding liability under
Title
IV of ERISA with respect to any 412 Plan.
(h) Except
as
shown on Section
4.17
of the
Schedule of Exceptions, within the last five years, none of the Company,
any
Subsidiary or any ERISA Affiliate has transferred any assets or liabilities
of a
412 Plan subject to Title IV of ERISA which had, at the date of such transfer,
an Unfunded Pension Liability or has engaged in a transaction which may
reasonably be subject to Section 4212(c) or Section 4069 of ERISA.
(i) None
of
the Company, any Subsidiary, or any ERISA Affiliate has engaged, directly
or
indirectly, in a non-exempt prohibited transaction (as defined in Section
4975
of the Code or Section 406 of ERISA) in connection with any Plan.
(j) No
“reportable event” (within the meaning of Section 4043 of ERISA) has occurred
with respect to any Plan.
(k) Neither
the Company nor any of its Subsidiaries provides, or has provided, retiree
welfare benefits for the benefit of any present or former employee or
director.
(l) Neither
the Company nor any of its Subsidiaries has made any commitment or any formal
plan to create any additional Plan or to modify or terminate (except to the
extent required by applicable law) any existing Plan.
(m) Neither
the Company nor any of its Subsidiaries is a party to any plan, agreement
or
arrangement pursuant to the terms of which the consummation or announcement
of
any transaction contemplated by this Agreement will result (either alone
or in
connection with the occurrence of any additional or further acts or events)
in
any benefit under any Plan being established or becoming accelerated or
immediately vested and payable.
(n) The
provisions of Section 280G of the Code will not apply with respect to any
payment made or to be made pursuant to or in connection with any
Plan.
4.18. PERSONAL
PROPERTY
The
Company and the Guarantors have good and marketable title to each item of
equipment, machinery, furniture, fixtures, vehicles, structures and other
personal property, tangible and intangible, included as an asset in the
Financial Statements filed as part of the Company Reports, free and clear
of any
security interests, options, liens, claims, charges or encumbrances whatsoever,
except as set forth in Section
4.18
of the
Schedule of Exceptions and as disclosed in the Company General Security
Agreement and the Guarantors General Security Agreement.
4.19. REAL
PROPERTY
(a) The
Company and the Guarantors do not own any fee simple interest in real property
other than as set forth in Section
4.19
of the
Schedule of Exceptions (the “Owned
Property”).
The
Company and the Guarantors do not lease or sublease any real property other
than
as set forth on Schedule
4.19
(the
“Leased
Property”).
The
Company has made available for inspection by the Lenders true and complete
copies of all Leases. The Company and each Guarantor enjoys a peaceful and
undisturbed possession of the Owned Property and Leased Property. No Person
other than the Company or any Guarantor has any right to use or occupy any
part
of the Owned Property and the Leased Property. Except as set forth in
Section
4.19
of the
Schedule of Exceptions, the Leases are valid, binding and in full force and
effect, all rent and other sums and charges payable thereunder are current,
no
notice of default or termination under any of the Leases is outstanding,
no
termination event or condition or uncured default on the part of the Company
or,
to the best of the Company’s knowledge, on the part of the landlord,
sublandlord, as the case may be, thereunder, exists under the Leases, and
no
event has occurred and no condition exists which, with the giving of notice,
or
the lapse of time, or both, would constitute such a default or termination
event
or condition. There are no subleases, licenses or other agreements granting
to
any Person other than the Company or the Guarantors any right to possession,
use, occupancy or enjoyment of the Premises demised by the Leases. Each Owned
Property and Leased Property is used in the conduct of the Company’s or the
Guarantors’ business.
(b) Without
limiting the generality of the representations and warranties given in
Section
4.10(a),
all
required permits, licenses, franchises, approvals and authorizations of all
governmental authorities having jurisdiction over each Leased Property and
from
all insurance companies and fire rating and other similar boards and
organizations have been issued to the Company and the Guarantors to enable
each
Leased Property or Owned Property to be lawfully occupied and used for all
the
purposes for which they are currently occupied and used and have been lawfully
issued and are in full force and effect, except where the failure to possess
such permits, licenses, franchises, approvals and authorizations, individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse
Effect.
(c) Neither
the Company nor the Guarantors have received any notice nor have they any
knowledge of any pending, threatened or contemplated condemnation proceeding
affecting any Leased Property or the Owned Property or any part
thereof.
4.20. DISCLOSURE
The
information heretofore provided and to be provided in connection with this
Agreement, including, without limitation, the Schedule of Exceptions and
the
Exhibits hereto, the Transaction Documents and each of the agreements,
documents, certificates and writings previously furnished to the Lenders
or
their representatives, do not and will not contain any untrue statement of
a
material fact and do not and will not omit to state a material fact necessary
in
order to make the statements and writings contained herein and therein not
false
or misleading in the light of the circumstances under which they were made.
There are no facts that (individually or in the aggregate) could reasonably
be
expected to have a Material Adverse Effect, which has not been set forth
herein
or in the Schedule of Exceptions or the Company Reports.
4.21. INSURANCE
(a) Each
of
the Company and the Guarantors maintains, with financially sound and reputable
insurers, insurance against loss or damage by theft, fire, explosion and
other
risks customarily insured against by companies in the line of business of
the
Company or the Guarantors, in amounts sufficient to prevent the Company or
the
Guarantors from becoming a co-insurer of the property insured as well as
insurance against other hazards and risks and liability to Persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated or as may be required by law, including, without limitation,
general liability, fire and business interruption insurance, and product
liability insurance as may be required pursuant to any license agreement
to
which the Company or the Guarantors is a party or by which it is
bound.
(b) The
Company maintains D&O Insurance as detailed in Section
4.21(b)
of the
Schedule of Exceptions, which D&O Insurance is in full force and effect and
as to which the Company has not received any notice of default, termination,
change in terms, change in coverage or similar notice.
4.22. NON-COMPETES
Except
as
set forth in Section
4.22
of the
Schedule of Exceptions, and as contemplated by Section
4.11(c),
the
Company and its Subsidiaries are not subject to any non-compete or similar
arrangements with any Persons that restrict or may restrict the Company and
its
Subsidiaries from carrying on its business as now conducted and as it is
proposed to be conducted.
4.23. PRODUCT
WARRANTY
Except
as
set forth in Section
4.23
of the
Schedule of Exceptions, or as reflected or reserved against in the Financial
Statements, (a) to the knowledge of the Company, each product manufactured
by
the Company or any Subsidiary has been in material conformity with all
applicable contractual commitments of the Company or any Subsidiary, and
(b) no
product currently manufactured by the Company or any Subsidiary is subject
to
any guaranty, warranty or indemnity of a contractual nature other than the
applicable standard terms and conditions, if any, applicable to the sale
or
delivery of such product.
4.24. MINUTE
BOOKS
The
Company and the Subsidiaries have made accurate and complete copies of their
minute books available for inspection by the Lenders.
ARTICLE
V
AFFIRMATIVE
COVENANTS
The
Company hereby covenants and agrees, so long as any Note remains outstanding,
as
follows:
5.1. MAINTENANCE
OF CORPORATE EXISTENCE; PROPERTIES AND LEASES; TAXES;
INSURANCE
(a) The
Company shall, and shall cause each of the Guarantors to, maintain in full
force
and effect its corporate existence, rights and franchises and all terms of
licenses and other rights to use licenses, trademarks, trade names, service
marks, copyrights, patents, processes or any other Intellectual Property
Rights
owned or possessed by it and necessary to the conduct of its business, except
where failure to maintain such rights, franchises and terms of licenses and
other rights to use such Intellectual Property Rights could not reasonably
be
expected to have a Material Adverse Effect.
(b) The
Company shall, and shall cause the Guarantors to, keep each of its properties
necessary to the conduct of its business in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make
all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company shall, and shall cause the Guarantors to, at all
times
comply with each provision of all leases to which it is a party or under
which
it occupies property, except where any such noncompliance could not reasonably
be expected to have a Material Adverse Effect.
(c) The
Company shall, and shall cause each of the Guarantors to, (i) promptly pay
and
discharge, or cause to be paid and discharged when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, assets, property or business of the Company and the Guarantors,
(ii)
withhold and promptly pay to the appropriate tax authorities all amounts
required to be withheld from wages, salaries and other remuneration to
employees, and (iii) promptly pay all claims or indebtedness (including,
without
limitation, claims or demands of workmen, materialmen, vendors, suppliers,
mechanics, carriers, warehousemen and landlords) which, if unpaid might become
a
lien upon the assets or property of the Company or the Guarantors; provided,
however,
that
any such tax, lien, assessment, charge or levy need not be paid if (1) the
validity thereof shall be contested timely and in good faith by appropriate
proceedings, (2) the Company or the Guarantors shall have set aside on its
books
adequate reserves with respect thereto, and (3) the failure to pay shall
not be
prejudicial in any material respect to the holders of the Notes, and
provided further that
the
Company or the Guarantors will pay or cause to be paid any such tax, lien,
assessment, charge or levy forthwith upon the commencement of proceedings
to
foreclose any lien which may have attached as security therefore. Except
to the
extent prohibited by Article VI of this Agreement, the Company shall, and
shall
cause the Guarantors to, pay or cause to be paid all other indebtedness incident
to the operations of the Company or the Guarantors.
(d) The
Company shall, and shall cause each of the Guarantors to, keep its assets
which
are of an insurable character insured by financially sound and reputable
insurers against loss or damage by theft, fire, explosion and other risks
customarily insured against by companies in the line of business of the Company
or the Guarantors, in amounts sufficient to prevent the Company or the
Guarantors from becoming a co-insurer of the property insured; and the Company
shall, and shall cause the Guarantors to, maintain, with financially sound
and
reputable insurers, insurance against other hazards and risks and liability
to
Persons and property to the extent and in the manner customary for companies
in
similar businesses similarly situated or as may be required by law, including,
without limitation, general liability, fire and business interruption insurance,
and product liability insurance as may be required pursuant to any license
agreement to which the Company or the Guarantors is a party or by which it
is
bound.
5.2. BASIC
FINANCIAL INFORMATION
The
Company shall furnish the following reports to each Lender, so long as it
is a
holder of a Note:
(a) as
soon
as practicable, but in any event within 90 days after the end of each fiscal
year of the Company, (i) audited balance sheets of the Company as at the
end of
such year, together with audited statements of income and retained earnings
and
statements of cash flows of the Company for such year, together with notes
related thereto, each prepared in accordance with GAAP, consistently applied,
and setting out in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and certified by certified independent
public accountants of established national reputation, and (ii) a report
of the
principal financial officer of the Company containing a management discussion
and analysis of the Company’s consolidated financial condition at the end of
such year and the results of operations for such year, including, but not
limited to, a description of significant events with respect to the Company
and
its Subsidiaries, if any, during the preceding year and any planned or
anticipated significant activities or events during the upcoming
months;
(b) as
soon
as practicable, but in any event within 45 days after the end of each of
the
first three fiscal quarters of the Company in each year, (i) an unaudited
balance sheet at the end of such quarter, and unaudited statements of income,
of
profit and loss and of changes in financial condition of the Company (including
cash flow statements) for such period and for the current fiscal year to
date,
in each case prepared in accordance with GAAP, consistently applied (other
than
for accompanying notes and subject to changes resulting from year-end audit
adjustments), and (ii) a report of the principal financial officer of the
Company containing a management discussion and analysis of the Company’s
consolidated financial condition at the end of such quarter and the results
of
operations for such quarter and the year to date, including, but not limited
to,
a description of significant events with respect to the Company and its
Subsidiaries, if any, during such periods and any planned or anticipated
significant activities or events during the upcoming months; and
(c) with
reasonable promptness such other information and financial data concerning
the
Company as any Person entitled to receive materials under this Section 5.2
may
reasonably request.
5.3. NOTICE
OF ADVERSE CHANGE
The
Company shall promptly give notice to all Lenders (but in any event within
two
days) after becoming aware of the existence of any condition or event which
constitutes, or the occurrence of, any of the following:
(a) any
Event
of Default or any default that with the passage of time or the giving of
notice
would constitute an Event of Default;
(b) the
institution or threatening of institution of any action, suit or proceeding
against the Company or any Subsidiary before any court, administrative agency
or
arbitrator, including, without limitation, any action of a foreign government
or
instrumentality, which, if adversely decided, could reasonably be expected
to
have a Material Adverse Effect;
(c) any
information relating to the Company or any Subsidiary which could reasonably
be
expected to have a Material Adverse Effect; or
(d) any
failure by the Company or any of its Subsidiaries to comply with the provisions
of Section 5.4 below.
Any
notice given under this Section 5.3 shall specify the nature and period of
existence of the condition, event, information, development or circumstance,
the
anticipated effect thereof and what actions the Company or any Guarantor,
as the
case may be, has taken and proposes to take with respect thereto.
5.4. COMPLIANCE
WITH AGREEMENTS; COMPLIANCE WITH LAWS
The
Company shall, and shall cause its Subsidiaries to, comply with the terms
and
conditions of all material agreements, commitments or instruments to which
the
Company or any of its Subsidiaries is a party or by which it or they may
be
bound. The Company shall, and shall cause each of its Subsidiaries to, duly
comply with any Legal Requirements relating to the conduct of their respective
businesses, properties or assets, including, but not limited to, the
requirements of the FDA Act, the Prescription Drug Marketing Act, the CSA,
ERISA, the Environmental Protection Act, the Occupational Safety and Health
Act,
the Foreign Corrupt Practices Act, the Sarbanes-Oxley Act of 2002 and the
rules
and regulations of each of the agencies administering such acts, in each
case
except for any such noncompliance that could not reasonably be expected to
have
a Material Adverse Effect.
5.5. PROTECTION
OF LICENSES
The
Company shall, and shall cause its Subsidiaries to, maintain, defend and
protect
to the best of their ability licenses and sublicenses (and to the extent
the
Company or a Subsidiary is a licensee or sublicensee under any license or
sublicense, as permitted by the license or sublicense agreement), trademarks,
trade names, service marks, patents and applications therefore and other
proprietary information or Intellectual Property Rights owned or used by
it or
them and shall keep duplicate copies of any licenses, trademarks, service
marks
or patents owned or used by it, if any, at a secure place selected by the
Company.
5.6. ACCOUNTS
AND RECORDS; INSPECTIONS
(a) The
Company shall keep true records and books of account in which full, true
and
correct entries will be made of all dealings or transactions in relation
to the
business and affairs of the Company and its Subsidiaries in accordance with
GAAP
applied on a consistent basis.
(b) The
Company shall permit each Lender or any of such Lender’s officers, employees or
representatives during regular business hours of the Company, upon reasonable
notice and as often as such Lender may reasonably request, to visit and inspect
the offices and properties of the Company and its Subsidiaries and to make
extracts or copies of the books, accounts and records of the Company or its
Subsidiaries, and to discuss the affairs, finances and accounts of the Company
and its Subsidiaries, with the Company’s (or Subsidiary’s) directors and
officers, its independent public accountants, consultants and
attorneys.
(c) Nothing
contained in this Section 5.6 shall be construed to limit any rights that
a
Lender may have with respect to the books and records of the Company and
its
Subsidiaries, to inspect its properties or to discuss its affairs, finances
and
accounts.
(d) The
Company will retain an Approved Accounting Firm to audit the Company’s financial
statements at the end of each fiscal year. In the event the services of an
Approved Accounting Firm or any firm of
independent public accountants hereafter employed by the Company are terminated,
the Company will promptly thereafter request the firm of independent public
accountants whose services are terminated to deliver to the Lenders a letter
of
such firm setting forth its understanding as to the reasons for the termination
of their services and whether there were, during the two most recent fiscal
years or such shorter period during which said firm had been retained by
the
Company any disagreements between them and the Company on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure. In its notice, the Company shall state whether the change
of
accountants was recommended or approved by the Board of Directors or any
committee thereof. In the event of such termination, the Company will promptly
thereafter engage another Approved Accounting Firm.
5.7. MAINTENANCE
OF OFFICE
The
Company will maintain its principal office at the address of the Company
set
forth in Section 10.4 of this Agreement where notices, presentments and demands
in respect of this Agreement and any of the Notes may be made upon the Company,
until such time as the Company shall notify the Lenders in writing, at least
30
days prior thereto, of any change of location of such office.
5.8. FURTHER
ASSURANCES
From
time
to time the Company shall execute and deliver to the Lenders such other
instruments, certificates, agreements and documents and take such other action
and do all other things as may be reasonably requested by the Lenders in
order
to implement or effectuate the terms and provisions of this Agreement and
the
transactions contemplated hereby.
5.9. SEC
REPORTS
The
Company will file, on a timely basis, any SEC Reports and keep all such SEC
Reports and public information current. The Company agrees that none of the
SEC
Reports filed by the Company will, at the time of filing, contain any untrue
statement of a material fact or omit to state any material fact required
to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not
misleading.
5.10. COLLATERAL
With
respect to all Company Collateral and Guarantor Collateral, the Company shall
(and shall cause the Guarantors to) take all actions necessary to preserve
and
protect the Lenders’ first priority security interest therein pursuant to the
applicable Transaction Documents or otherwise.
5.11. MINIMUM
CASH
The
Company shall maintain at all times cash or cash deposits in an amount of
at
least Two Hundred Thousand Dollars ($200,000).
ARTICLE
VI
NEGATIVE
COVENANTS
The
Company hereby covenants and agrees, so long as any Note remains outstanding,
it
will not (and not allow any of the Guarantors to), directly or indirectly,
without the prior written consent of the Lenders:
6.1. STAY,
EXTENSION AND USURY LAWS
At
any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay, extension or usury law wherever enacted, now or
at
any time hereinafter in force, which may affect the covenants or the performance
of the Notes or this Agreement, the Company hereby expressly waiving all
benefit
or advantage of any such law, or by resort to any such law, hinder, delay
or
impede the execution of any power herein granted to the Lenders but will
suffer
and permit the execution of every such power as though no such law had been
enacted.
6.2. LIENS
Except
as
otherwise provided in this Agreement or any other Transaction Document, create,
incur, assume or permit to exist any mortgage, pledge, lien, security interest
or encumbrance on any part of its properties or assets, or on any interest
it
may have therein, now owned or hereafter acquired, nor acquire or agree to
acquire property or assets under any conditional sale agreement or title
retention contract, except that the foregoing restrictions shall not apply
to:
(a) liens
for
taxes, assessments and other governmental charges, if payment thereof shall
not
at the time be required to be made, and provided such reserve as shall be
required by GAAP consistently applied shall have been made
therefore;
(b) liens
of
workmen, materialmen, vendors, suppliers, mechanics, carriers, warehouseman
and
landlords or other like liens, incurred in the ordinary course of business
for
sums not then due or that are being contested in good faith and provided
that an
adverse decision in such contest would not materially affect the business
of the
Company;
(c) liens
securing the Company’s obligations under (i) the Senior Note and the Watson Term
Loan, and (ii) the June 2005 Notes and the June 2005 Bridge Loan;
(d) statutory
liens of landlords, statutory liens of banks and rights of set-off, and other
liens imposed by law, in each case incurred in the ordinary course of business
(i) for amounts not yet overdue or (ii) for amounts that are overdue and
that
are being contested in good faith by appropriate proceedings, so long as
reserves or other appropriate provisions, if any, as shall be required by
GAAP,
shall have been made for any such contested amounts;
(e) liens
incurred or deposits made in the ordinary course of business in connection
with
workers’ compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations,
surety
and appeal bonds, bids, leases, government contracts, trade contracts,
performance and return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money);
(f) any
attachment or judgment lien not otherwise constituting an Event of Default,
or
an event which, with the giving of notice, the lapse of time, or both, would
not
otherwise constitute an Event of Default;
(g) easements,
rights-of-way, restrictions, encroachments, and other minor defects or
irregularities in title, in each case which do not and will not interfere
with
the ordinary conduct of the business of the Company or any of its Subsidiaries,
except where such interference could not reasonably be expected to have a
Material Adverse Effect;
(h) any
(i)
interest or title of a lessor or sublessor under any lease, (ii) restriction
or
encumbrance that the interest or title of such lessor or sublessor may be
subject to, or (iii) subordination of the interest of the lessee or sublessee
under such lease to any restriction or encumbrance referred to in the preceding
clause (ii), so long as the holder of such restriction or encumbrance agrees
to
recognize the rights of such lessee or sublessee under such lease;
(i) liens
in
favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of
goods;
(j) any
zoning or similar law or right reserved to or vested in any governmental
office
or agency to control or regulate the use of any real property;
(k) liens
securing obligations (other than obligations representing Indebtedness for
borrowed money) under operating, reciprocal easement or similar agreements
entered into in the ordinary course of business of the Company and its
Subsidiaries;
and
(l) the
replacement, extension or renewal of any lien permitted by this Section 6.2
upon or in the same property theretofore subject or the replacement, extension
or renewal (without increase in the amount or change in any direct or contingent
obligor) of the Indebtedness secured thereby.
6.3. INDEBTEDNESS
Create,
incur, assume, suffer, permit to exist, or guarantee, directly or indirectly,
any Indebtedness, excluding:
(a) the
endorsement of instruments for the purpose of deposit or collection in the
ordinary course of business;
(b) Indebtedness
which may, from time to time be incurred or guaranteed by the Company which
in
the aggregate principal amount does not exceed $500,000 and is subordinate
to
the Indebtedness under this Agreement on terms reasonably satisfactory to
the
Lenders;
(c) Indebtedness
existing on the date hereof and described in Section 6.3
of the
Schedule of Exceptions;
(d) Indebtedness
relating to contingent obligations of the Company and its Subsidiaries under
guaranties in the ordinary course of business of the obligations of suppliers,
customers, and licensees of the Company and its Subsidiaries;
(e) Indebtedness
relating to loans from the Company to its Subsidiaries or Indebtedness owed
to
any of the Guarantors;
(f) Indebtedness
relating to capital leases in an amount not to exceed $500,000;
(g) Indebtedness
relating to a working capital line of credit in an amount not to exceed
$5,000,000 and which is subordinate to the Indebtedness under this Agreement
on
terms reasonably satisfactory to the Lenders;
(h) accounts
or notes payable arising out of the purchase of merchandise or services in
the
ordinary course of business; or
(i) the
Notes.
6.4. ARM’S
LENGTH TRANSACTIONS
Enter
into any transaction, contract or commitment or take any action other than
at
Arm’s Length.
6.5. LOANS
AND ADVANCES
Except
for loans and advances outstanding as of the Closing Date and set forth in
Section
6.5
of the
Schedule of Exceptions, directly or indirectly, make any advance or loan
to, or
guarantee any obligation of, any Person, except for intercompany loans or
advances in the ordinary course of business and those provided for in this
Agreement.
6.6. INTERCOMPANY
TRANSFERS; TRANSACTIONS WITH AFFILIATES; DIVERSION OF CORPORATE
OPPORTUNITIES
(a) Make
any
intercompany transfers of monies or other assets in any single transaction
or
series of transactions, except as otherwise permitted in this
Agreement.
(b) Engage
in
any transaction with any of the officers, directors, employees or Affiliates
of
the Company or of its Subsidiaries, except on terms no less favorable to
the
Company or the Subsidiary as could be obtained at Arm’s Length.
(c) Divert
(or permit anyone to divert) any business or opportunity of the Company or
any
Subsidiary to any other corporate or business entity.
6.7. INVESTMENTS
Make
any
investments in, or purchase any stock, option, warrant, or other security
or
evidence of Indebtedness of, any Person (exclusive of any Subsidiary), other
than obligations of the United States Government or certificates of deposit
or
other instruments maturing within one year from the date of purchase from
financial institutions with capital in excess of $100 million, in each case
which are pledged to the Lenders (or their agent) in a manner that is acceptable
to the Lenders and that results in a perfected first priority security interest
in favor of the Lenders (or their agent).
6.8. OTHER
BUSINESS
Enter
into or engage, directly or indirectly, in any business other than the business
currently conducted or proposed to be conducted as disclosed to the Lenders
prior to the date hereof by the Company or any Subsidiary.
6.9. EMPLOYEE
BENEFIT PLANS AND COMPENSATION
Except
as
otherwise approved by the Board, or by a committee thereof to whom the Board
has
delegate such authority, (a) enter into or materially amend any agreement
to
provide for or otherwise establish any written or unwritten employee benefit
plan, program or other arrangement of any kind, covering current or former
employees of the Company or its Subsidiaries except for any such plan, program
or arrangement expressly permitted under an existing agreement listed in
Section
4.17
the
Schedule of Exceptions or in the Company Reports; or (b) provide for or agree
to
any material increase in any benefit provided to current or former employees
of
the Company or its Subsidiaries over that which is provided to such individuals
pursuant to a plan or arrangement disclosed in Section
4.17
of the
Schedule of Exceptions or in the Company Reports.
6.10. CAPITAL
EXPENDITURES
Other
than for capital expenditures approved by the Company’s Board of Directors, make
or commit to make, or permit any of its Subsidiaries to make or commit to
make,
any capital expenditures in excess of $25,000 in the aggregate during any
fiscal
year of the Company.
6.11. FORMATION
OF SUBSIDIARIES
Organize
or invest, or permit any Subsidiary to organize or invest, in any new
corporation, partnership, joint venture, limited liability company, trust
or
estate of which (or in which) (a) more than 50% of the issued and outstanding
capital stock having ordinary voting power to elect a majority of the board
of
directors of such corporation (irrespective of whether at the time capital
stock
of any other class of such corporation shall or might have voting power upon
the
occurrence of any contingency), the interest in the capital or profits of
such
partnership, joint venture or limited liability company or the beneficial
interest in such trust or estate, is at the time directly or indirectly owned
or
controlled by the Company, any of its Subsidiaries or any of their respective
officers or directors, or (b) a material minority investment in any such
entity
is directly or indirectly owned or controlled by the Company, any of its
Subsidiaries or any of their respective officers or directors.
6.12. CERTAIN
PAYMENTS
Make
any
cash payments of principal or interest with respect to any Indebtedness (other
than the Loans or as expressly provided for in the Budget), without the prior
written consent of the Lenders, which consent shall be within their sole
and
absolute discretion.
ARTICLE
VII
EVENTS
OF DEFAULT
7.1. EVENTS
OF DEFAULT
If
any of
the following events shall occur and be continuing, an “Event
of Default”
shall
be deemed to have occurred:
(a) if
the
Company shall default in the payment of any part of the principal or interest
of
any Note, when the same shall become due and payable, whether at maturity
or at
a date fixed for payment or prepayment or by acceleration or
otherwise;
(b) if
the
Company shall default in the performance of any of the covenants contained
in
Articles V or VI
and, in
a case of a default under Section 5.1 through and including Section 5.7
(exclusive of Section 5.1(c)), such default shall have continued without
cure
for fifteen (15) days after written notice (“Default
Notice”)
is
given to the Company with respect to such covenant by any holder of the Notes
(and the Company shall give to all of the holders of the Notes at the time
outstanding prompt written notice of the receipt of such Default Notice,
specifying the default referred to therein); provided,
however,
that
such 15 day grace period shall not apply in the event the Company fails to
give
notice as provided in Section 5.3;
(c) except
as
provided in Section 7.1(b), if the Company or any of the Guarantors shall
default in the performance of any other agreement contained in any Transaction
Document or in any other agreement executed in connection with this Agreement
and such default shall not have been remedied to the satisfaction of the
Lenders
within 15 days after notice thereof shall have been given to the Company;
provided,
however,
that
such 15 day grace period shall not apply in the event the Company fails to
give
notice as provided in Section 5.3;
(d) if
any
representation or warranty made by the Company, any Guarantor or any of their
officers in any Transaction Document or in or any certificate delivered pursuant
thereto shall prove to have been incorrect in any material respect when
made;
(e) if
(i)
any default shall occur under any indenture, mortgage, agreement, instrument
or
commitment evidencing, or under which there is at the time outstanding, any
Indebtedness of the Company or a Subsidiary, in excess of $250,000, or which
results in such Indebtedness, in an aggregate amount (with other defaulted
Indebtedness) in excess of $250,000 becoming (or being declared by its holders
or, on its behalf, by an agent or trustee therefore to be) due and payable
prior
to its due date; (ii) irrespective of the monetary thresholds specified in
subclause (i) above, if any default, event of default or any other condition
shall occur or exist under the Watson Term Loan or the June 2005 Bridge Loan
which shall be continuing after the respective grace period, if any, specified
in the Watson Term Loan or the June 2005 Bridge Loan, and the effect of which
is
to permit the acceleration of the maturity of the Indebtedness outstanding
thereunder; (iii) a
Change
of Control shall have occurred; or (iv) a Funding Event shall have occurred
without the simultaneous prepayment in full of the Loans pursuant to Section
2.2
above;
(f) if
any of
the Company or its Subsidiaries shall default in the observance or performance
of any term or provision of an agreement to which it is a party or by which
it
is bound which default could reasonably be expected to have a Material Adverse
Effect and such default is not waived or cured within the applicable grace
period;
(g) if
a
final judgment which, either alone or together with other outstanding final
judgments against the Company and its Subsidiaries, exceeds an aggregate
of
$250,000 shall be rendered against the Company or any Subsidiary and such
judgment shall have continued undischarged or unstayed for 45 days after
entry
thereof;
(h) if
the
Company or any Subsidiary shall generally not pay its debts as such debts
become
due or shall make an assignment for the benefit of creditors generally, or
shall
admit in writing its inability to pay its debts generally; or if any proceeding
shall be instituted by or against the Company or any Subsidiary seeking to
adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition
of it
or its debts under any law relating to bankruptcy, insolvency or the
reorganization or relief of debtors, or seeking entry of an order for relief
or
the appointment of a receiver, trustee, custodian or other similar official
for
it or for any substantial part of its property and, in the case of such
proceeding instituted against it (but not instituted by it) that is being
diligently contested by it in good faith, either such proceeding shall remain
undismissed or unstayed for a period of 45 days or any of the actions sought
in
such proceeding (including, without limitation, the entry of an order for
relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or any substantial part of its property) shall occur; or
if any
writ of attachment or execution or any similar process shall be issued or
levied
against it or any substantial part of its property which is either not released,
stayed, bonded or vacated within 45 days after its issue or levy or any of
the
actions sought or relief sought in any proceeding pursuant to which such
writ or
similar process shall be issued or initiated shall occur or be granted; or
if
the Company or any Subsidiary takes corporate action in furtherance of any
of
the aforesaid purposes or conditions;
(i) if
any
provision of any Transaction Document shall for any reason cease to be valid
and
binding
on, or
enforceable
against,
the Company or any Guarantor, or the Company or any Guarantor shall so assert
in
writing; or
(j) any
Transaction Document (or any financing statement) which purports:
(i) to
create, perfect or evidence a lien on or security interest in any Company
Collateral or Guarantor Collateral in favor of the Lenders (or their agents
and
representatives), or to provide for the priority of any such lien or security
interest over the interest of any other party in the same Collateral, shall
cease to create, or to preserve the enforceability, perfection or priority
of,
such lien and security interest; or
(ii) to
provide for the priority in right of payment of the Company’s obligations under
the Transaction Documents to or in favor of the Lenders (or their agents
or
representatives) shall cease to preserve such priority.
7.2. REMEDIES
Upon
the
occurrence and during the continuance of an Event of Default, any Lender
or
Lenders of 60% of the then outstanding principal amount of the Loans may
at any
time (unless all defaults shall theretofore have been remedied) at its or
their
option, by written notice or notices to the Company (a) declare all the Notes
to
be due and payable, whereupon the same shall forthwith mature and become
due and
payable, together with interest accrued thereon, without presentment, demand,
protest or notice, all of which are hereby waived by the Company; and (b)
declare any other amounts payable to the Lenders under this Agreement or
as
contemplated hereby due and payable; provided,
however,
that
upon the occurrence of an Event of Default under Section 7.1(h), the Notes,
together with interest accrued thereon, shall automatically become and be
due
and payable, without presentment, demand, protest or notice of any kind,
or any
other action of any Lender of any kind, all of which are hereby waived by
the
Company.
Notwithstanding
anything to the contrary contained in this Section 7.2, in the event that
at any
time after the principal of the Notes shall so become due and payable and
prior
to the date of maturity stated in the Notes all arrears of principal of an
interest on the Notes (with interest at the rate specified in the Notes on
any
overdue principal and, to the extent legally enforceable, on any interest
overdue) shall be paid by or for the account of the Company, then the holder
or
holders of sixty percent (60%) of the then outstanding principal amount of
the
Loans, by written notice or notices to the Company, may (but shall not be
obligated to) waive such Event of Default and its consequences and rescind
or
annul such declaration, but no such waiver shall extend to or affect any
subsequent Event of Default or impair a right resulting therefrom. If any
holder
of the Note shall give any notices or take any other action with respect
to a
claimed default, the Company, forthwith upon receipt of such notice or obtaining
knowledge of any such other action, will give notice thereof to all other
holders of the Notes, describing such notice or other action and the nature
of
the claimed default.
7.3. ENFORCEMENT
In
case
any one or more Events of Default shall occur and be continuing, the Lenders
or
their agent may proceed to protect and enforce the rights of the Lenders
(granted to them or to their agent) by an action at law, suit in equity or
other
appropriate proceeding, whether for the specific performance of any agreement
in
favor of the Lenders or their agent which is contained in any of the Transaction
Documents or in such Note or for an injunction against a violation of any
of the
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law (including, without limitation, the right to enforce
the
Company Collateral, the Guaranties and the Guarantor Collateral, each in
accordance with its respective terms). Each Lender agrees that it will give
written notice to the other Lenders prior to instituting any such action.
In
case of a default in the payment of any principal of or interest on any Note,
the Company will pay to the holder thereof such further amount as shall be
sufficient to cover the cost and the expenses of collection, including, without
limitation, reasonable attorney’s fees, expenses and disbursements. No course of
dealing and no delay on the part of any Lender or their agent in exercising
any
rights shall operate as a waiver thereof or otherwise prejudice such Lender’s or
their agent’s rights. No right conferred hereby or by any Note upon any holder
thereof shall be exclusive of any other right referred to herein or therein
or
now available at law or in equity, by statute or otherwise.
ARTICLE
VIII
INDEMNIFICATION
To
the
greatest extent permitted by applicable law, the Company agrees to indemnify
each Lender, its Affiliates and respective legal counsel, and each of the
officers, directors, partners and stockholders of each, against and hold
it
harmless from all Losses arising out of or resulting from: (i) the breach
of any
representation or warranty of the Company in any Transaction Document or
in any
agreement, certificate or instrument delivered pursuant thereto; and (ii)
the
breach of any agreement by the Company contained in any Transaction Document
or
any agreement, certificate of instrument delivered pursuant
thereto.
ARTICLE
IX
AMENDMENT
AND WAIVER
No
amendment of any provision of this Agreement, including any amendment of
this
Article IX, shall be valid unless the same shall be in writing and signed
by the
Company (and the Independent Committee) and the Lenders. No waiver by any
party
of any default, misrepresentation, or breach of warranty or covenant hereunder
or under any other Transaction Document, whether intentional or not, shall
be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or thereunder or affect in any way
any
rights arising by virtue of any prior or
subsequent such occurrence.
ARTICLE
X
MISCELLANEOUS
10.1. GOVERNING
LAW
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.
10.2. SUCCESSORS
AND ASSIGNS
Except
as
otherwise expressly provided herein, the provisions hereof shall inure to
the
benefit of, and be binding upon and enforceable by and against, the parties
hereto and their respective successors, assigns, heirs, executors and
administrators. No party may assign any of its rights hereunder without the
prior written consent of the other parties; provided,
however,
that
any Lender may assign any of its rights under any of the Transaction Documents
to (a) any Affiliate of such Lender or (b) any Person to whom such Lender
shall
transfer its Note, provided,
that in
each case the transferee will be subject to the applicable terms of the
Transaction Documents to the same extent as if such transferee were an original
Lender hereunder.
10.3. ENTIRE
AGREEMENT
This
Agreement (including the Exhibits and Schedules hereto), the other Transaction
Documents and any other documents delivered pursuant hereto and simultaneously
herewith constitute the full and entire understanding and agreement between
the
parties with regard to the subject matter hereof and thereof.
10.4. NOTICES
All
notices, demands or other communications given hereunder shall be in writing
and
shall be sufficiently given if transmitted by facsimile or delivered either
personally or by a nationally recognized courier service marked for next
business day delivery or sent in a sealed envelope by first class mail, postage
prepaid and either registered or certified, return receipt requested, addressed
as follows:
(a) if
to the
Company:
Acura
Pharmaceuticals, Inc.
616
N.
North Court, Suite 120
Palatine,
Illinois 60067
Attention:
Mr. Andrew D. Reddick
President
and Chief Executive Officer
Facsimile:
(847) 705-5399
(b) if
to a
Lender, to the address set forth on the signature page hereto,
or to
such other address with respect to any party hereto as such party may from
time
to time notify (as provided above) the other parties hereto. Any such notice,
demand or communication shall be deemed to have been given (i) on the date
of
delivery, if delivered personally, (ii) on the date of facsimile transmission,
receipt confirmed, (iii) one business day after delivery to a nationally
recognized overnight courier service, if marked for next day delivery, or
(iv)
five business days after the date of mailing, if mailed.
(c) Copies
of
any notice, demand or communication given to the Company shall also be delivered
to St. John & Wayne, L.L.C., Two Penn Plaza East, Newark, New Jersey,
07105-2249 Attn.: John P. Reilly, Esq., or such other address as may be
directed.
10.5. DELAYS,
OMISSIONS OR WAIVERS
No
delay
or omission to exercise any right, power or remedy accruing to any Lender
upon
any breach or default of the Company under this Agreement shall impair any
such
right, power or remedy of such Lender nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence, therein, or of or in any
similar breach or default thereafter occurring. Any permit, consent or approval
of any kind or character on the part of any Lender of any breach or default
under this Agreement must be made in writing and shall be effective only
to the
extent specifically set forth in such writing. All remedies, either under
this
Agreement or by law or otherwise afforded to any Lender, shall be cumulative
and
not alternative. Notwithstanding anything set forth herein or in any Transaction
Document, if the consent of or the waiver by any Lender is needed or otherwise
desirable under any Transaction Document and the Company, or any Affiliate
thereof, pays or other gives consideration to any Lender, or an Affiliate
thereof, for such consent or waiver the Company shall offer the same to all
other Lenders.
10.6. INDEPENDENCE
OF COVENANTS AND REPRESENTATIONS AND WARRANTIES
All
covenants hereunder shall be given independent effect so that if a certain
action or condition constitutes a default under a certain covenant, the fact
that such action or condition is permitted by another covenant shall not
affect
the occurrence of such default. In addition, all representations and warranties
hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact
that
another representation or warranty concerning the same or similar subject
matter
is correct or is not breached will not affect the incorrectness of or a breach
of a representation and warranty hereunder.
10.7. RIGHTS
AND OBLIGATIONS; SEVERABILITY
Unless
otherwise expressly provided herein, each Lender’s rights and obligations
hereunder are several rights and obligations, not rights and obligations
jointly
held with any other Person. In case any provision of this Agreement shall
be
invalid, illegal or unenforceable, the validity, legality and enforceability
of
the remaining provisions shall not in any way be affected or impaired
thereby.
10.8. AGENT’S
FEES
The
Company hereby (a) represents and warrants that the Company has not retained
a
finder or broker in connection with the transactions contemplated by this
Agreement and (b) agrees to indemnify and to hold the Lenders harmless of
and
from any liability for commission or compensation in the nature of an agent’s
fee to any broker or other Person, and the costs and expenses of defending
against such liability or asserted liability, including, without limitation,
reasonable attorney’s fees, arising from any act by the Company or any of the
Company’s employees or representatives.
10.9. EXPENSES
(a) The
Company shall bear its own expenses and legal fees incurred on its behalf
with
respect to the negotiation, execution and consummation of the transactions
contemplated by this Agreement, and, subject to Section 10.9(b) the Company
will
reimburse each Lender for all of the legal fees and expenses incurred by
such
Lender’s counsel with respect to the negotiation, execution and consummation of
the transactions contemplated by this Agreement and the transactions
contemplated hereby; provided, however, that the Company’s reimbursement
obligation under this Section 10.9(a) shall not exceed Ten Thousand Dollars
($10,000) in
the
aggregate.
(b) If
the
Loans are not disbursed, then each party shall bear its own expenses and
legal
fees incurred on its behalf with respect to the negotiation, execution and
consummation of the transactions contemplated by this Agreement.
(c) The
Company also agrees to reimburse each Lender for all reasonable legal fees
and
expenses subsequently incurred by such Lender or its agent and their respective
Affiliates in connection with the negotiation, execution and consummation
of any
amendment, waiver or consent with respect to any agreement to which the Company
and the Lender or its agent are parties; provided, that such waiver, amendment
or consent (i) is requested by the Company or (ii) is required by the terms
of
the agreement or is required as a result of any action or inaction of the
Company in violation of any such agreement.
(d) The
Company further agrees to pay or reimburse each Lender and their agent for
all
out-of-pocket costs and expenses, including, without limitation, reasonable
attorneys’ fees and disbursements, and costs of settlement incurred by the
Lenders or their agent after the occurrence of an Event of Default (i) in
enforcing any obligation or in foreclosing against the Company Collateral
or
Guarantors Collateral or exercising or enforcing any other right or remedy
available by reason of such Event of Default; (ii) in connection with any
negotiation, refinancing or restructuring of, or attempted refinancing or
restructuring of, the credit arrangements provided under this Agreement and
the
other Transaction Documents in the nature of a “work-out” or in any insolvency
or bankruptcy proceeding; (iii) in commencing, defending or intervening in
any
litigation or in filing a petition, complaint, answer, motion or other pleadings
in any legal proceeding relating to either Company or any of its Affiliates
and
related to or arising out of the transactions contemplated hereby or by any
of
the other Transaction Documents; (iv) in taking any other action in or with
respect to any suit or proceeding (whether in bankruptcy or otherwise) arising
out of or in connection with this Agreement or any of the other Transaction
Documents; (v) in protecting, preserving, collecting, leasing, selling, taking
possession of, or liquidating any of the Company Collateral or Guarantors
Collateral; or (vi) attempting to enforce or enforcing any security interest
in
any of the Company Collateral, the Guarantors Collateral or any other rights
under any Transaction Document.
10.10. 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 out of or relating
to this
Agreement or any of the other Transaction Documents to which it is a party
or to
whose benefit it is entitled, 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.
10.11. WAIVER
OF JURY TRIAL
EACH
OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT OR THE
ACTIONS
OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.
10.12. CONFIDENTIALITY
(a) Each
of
the Lenders hereby agrees to keep (and to cause its Affiliates, employees,
agents, attorneys, accountants and other professional advisors to keep)
confidential the confidential information provided to it by or on behalf
of the
Company or its Subsidiaries pursuant to or in connection with the Agreement
or
any other Transaction Document, provided
that,
such information may be disclosed (i) solely in connection with the performance
of the transactions contemplated by this Agreement and any other Transaction
Document to (A) its Affiliates, directors, officers and employees who have
a
need to know such information and its agents, attorneys, accountants and
other
professional advisors or (B) the other Lenders, (ii) in response to any order
of
any court or other governmental or administrative body or agency or as may
be
required by any law binding upon any of the Lenders, (iii) in connection
with
the exercise of any remedies under any Transaction Document or the enforcement
of rights hereunder and thereunder, (iv) with the consent of the Company
or (v)
to the extent such information (A) is on the date hereof, or at or before
the
time such disclosure becomes, publicly available other than as a result of
a
breach by such disclosing Person of the obligation set forth in this Agreement
or (B) at or before the time of such disclosure becomes available to any
Lender
on a nonconfidential basis from a source other than the Company or its
Subsidiaries, which source is not known to the recipient of such information
to
have breached a confidentiality agreement with the Company or its Subsidiaries
in respect of such information.
(b) Each
Lender hereby agrees that in the event such Lender is requested or required
other than by applicable law (by interrogatory, request for information or
documents, subpoena, deposition, civil investigative demand or other process)
to
disclose any information pursuant to Section 10.12(a)(ii), such Lender will,
except to the extent such notice would cause such Lender to be in violation
of
law, provide the Company with prompt notice of any such request or requirement
so that the Company may seek an appropriate protective order or other similar
assurance to prevent disclosure of such information or waive compliance with
the
provisions of this Section 10.12. Such Lender may not oppose action by the
Company to obtain an appropriate protective order or other reliable assurance
that confidential treatment will be accorded such information, provided
that
such Lender may oppose the Company’s action to obtain an appropriate protective
order or other reliable assurance in the event that, in connection with any
action, suit or other legal or equitable proceeding (including any bankruptcy
proceeding), such Lender reasonably believes that the failure to publicly
disclose such information would adversely affect such Lender’s ability to
protect or exercise its rights and remedies hereunder or under any other
Transaction Document.
(c) A
Lender
may also disclose, subject to their compliance with the requirements of Section
10.12(b), such information to the extent the Lender reasonably believe
it is appropriate to in connection with any action, suit or other legal or
equitable proceeding (including any bankruptcy proceeding) to protect or
otherwise exercise their rights and remedies hereunder or under any other
Transaction Document in any legal or equitable proceeding.
(d) In
furtherance to the foregoing, each of the Lenders agrees that its right to
request any information pursuant to Section 5.2(b) or to avail itself of
the
provisions of Section 5.6(b) shall be conditioned on its continuing compliance
with the requirements of this Section 10.12.
10.13. TITLES
AND SUBTITLES
The
titles of the articles, sections and subsections of this Agreement are for
convenience of reference only and are not to be considered in construing
this
Agreement.
10.14. COUNTERPARTS
This
Agreement may be executed in any number of counterparts, including by facsimile
copy, each of which shall be deemed an original, but all of which together
shall
constitute one instrument.
10.15. MARSHALLING;
RECOURSE TO SECURITY; PAYMENTS SET ASIDE
The
Lenders shall not be under any obligation to marshal any assets in favor
of the
Company or any of its Affiliates or any other party or against or in payment
of
any or all of the Loan or other obligations hereunder. Recourse to security
shall not be required at any time. To the extent that the Company makes a
payment or payments to a Lender or a Lender enforces its security interests
or
exercises its rights of setoff, and such payment or payments or the proceeds
of
such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law,
state
or federal law, common law or equitable cause, then to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all liens, rights and remedies therefor, shall be revived and continued
in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
ARTICLE
XI
CERTAIN
DEFINED TERMS
For
purposes of this Agreement, the following terms have the meanings indicated
(unless otherwise expressly provided herein):
“412
Plan”
means a
Plan that is subject to Section 412 of the Code.
“1940
Act”
means
the Investment Company Act of 1940, as amended, and any applicable rules
and
regulations thereunder, and any successor to such statute, rules or regulations.
Any reference herein to a specific section, rule or regulation of the 1940
Act
shall be deemed to include any corresponding provisions of future
law.
“Affiliate”
has the
meaning specified in Rule 501(b) under the Securities Act.
“Approved
Accounting Firm”
means
any firm
of
independent certified public accountants reasonably acceptable to the
Lenders.
“ARCOS”
means
the Automation of Reports and Consolidated Orders System which monitors the
flow
of DEA controlled substances from their point of manufacture to point of
sale or
distribution.
“Board
of Directors”
means
the board of directors of the Company.
“Change
of Control”
means
the occurrence of any of the following: (a) the Company consolidates with,
or
merges with or into, another Person (other than a direct or indirect wholly
owned Subsidiary) or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of the Company’s assets or the assets of
the Company and its Subsidiaries taken as a whole to any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the Company,
as the case may be, is converted into or exchanged for cash, securities or
other
property, other than any such transaction where the outstanding Voting Stock
of
the Company, as the case may be, is converted into or exchanged for Voting
Stock
of the surviving or transferee corporation and the beneficial owners of the
Voting Stock of the Company immediately prior to such transaction own, directly
or indirectly, not less than a majority of the Voting Stock of the surviving
or
transferee corporation immediately after such transaction, or (b) the Company,
either individually or in conjunction with one or more Subsidiaries sells,
assigns, conveys, transfers, leases or otherwise disposes of, or the
Subsidiaries sell, assign, convey, transfer, lease or otherwise dispose of,
all
or substantially all of the properties and assets of the Company and its
Subsidiaries, taken as a whole (either in one transaction or a series of
related
transactions), including capital stock of the Subsidiaries, to any Person
(other
than the Company or a wholly owned Subsidiary of the Company). For purposes
of
this definition, the term “Voting
Stock”
of the
Company means securities of any class of capital stock of the Company entitling
the holders thereof to vote in the election of members of the Board of
Directors.
“Code”
means
the Internal Revenue Code of 1986, as amended, and any applicable rules and
regulations thereunder, and any successor to such statute, rules or regulations.
Any reference herein to a specific section, rule or regulation of the Code
shall
be deemed to include any corresponding provisions of future law.
“Commitment”
means,
with respect to each Lender, the commitment of such Lender to make such Loan
hereunder. The initial amount of each Lender’s Commitment is set forth opposite
its signature hereto. The aggregate amount of the Commitments is $500,000.
“Common
Stock”
means
the common stock, $0.01 par value, of the Company (now or hereafter issued).
“Company
General Security Agreement”
means
that certain Company General Security Agreement of even date herewith by
and
between the Company and Galen Partners III, L.P, as agent for the Lenders,
as
such agreement may be supplemented, amended or otherwise modified from time
to
time in accordance with its terms.
“Company
Reports”
means,
collectively, (a) the Company’s Annual Reports on Form 10-K for the fiscal years
ended December 31, 2004, and (b) the Company’s Quarterly Reports on Form 10-Q
for the three months ended March 31, 2005 and six months ended June 30,
2005.
“CSA”
means
Controlled Substances Act, as amended, and any applicable rules and regulations
thereunder, and any successor to such statute, rules or regulations. Any
reference herein to a specific section, rule or regulation of the CSA shall
be
deemed to include any corresponding provisions of future law.
“D&O
Insurance”
means
“directors and officers” insurance.
“DEA”
means
the United States Drug Enforcement Administration.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended and any
applicable rules and regulations thereunder, and any successor to such statute,
rules or regulations. Any reference herein to a specific section, rule or
regulation of ERISA shall be deemed to include any corresponding provisions
of
future law.
“ERISA
Affiliates”
means
(a) any corporation which at any time on or before the Closing Date is or
was a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Company, its Subsidiaries, or any ERISA
Affiliate; (b) any partnership, trade or business (whether or not incorporated)
which at any time on or before the Closing Date is or was under common control
(within the meaning of Section 414(c) of the Code) with the Company, its
Subsidiaries, or any ERISA Affiliate; and (c) any entity which at any time
on or
before the Closing Date is or was a member of the same affiliated service
group
(within the meaning of Section 414(m) of the Code) as the Company, its
Subsidiaries or any ERISA Affiliate, or any corporation described in clause
(a)
or any partnership, trade or business described in clause (b) of this
paragraph.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and any applicable rules
and
regulations thereunder, and any successor to such statute, rules or regulations.
Any reference herein to a specific section, rule or regulation of the Exchange
Act shall be deemed to include any corresponding provisions of future law.
“FDA”
means
the United States Food and Drug Administration.
“FDC
Act”
means
the federal Food, Drug, and Cosmetic Act, as amended, and any applicable
rules
and regulations thereunder, and any successor to such statute, rules or
regulations. Any reference herein to a specific section, rule or regulation
of
the FDC Act shall be deemed to include any corresponding provisions of future
law.
“Funding
Event”
means
the consummation by the Company or any of its Subsidiaries after the date
hereof
of (a) any equity or debt financing, or (b) any sale, transfer, license or
similar arrangement (including by means of a joint venture) whereby the Company
or any of its Subsidiaries sells, transfers, licenses or otherwise grants
an
interest in any material portion of its assets (including Intellectual Property
Rights) to another Person, provided that the consummation of a transaction
under
Section (a) and/or (b) results in cash proceeds to the Company, net of all
costs
and expenses, of at least Four
Million
Dollars ($4,000,000).
“GAAP”
means
generally accepted accounting principles in the United States.
“Guaranties”
means
the Continuing Unconditional Secured Guaranties of even date herewith by
each of
the Guarantors.
“Guarantors”
means
Acura
Pharmaceutical Technologies, Inc. and Axiom
Pharmaceutical Corporation.
“Guarantors
Security Agreement”
means
that certain Guarantors General Security Agreement of even date herewith
by and
among the Guarantors and Galen Partners III, L.P, as agent for the Lenders,
as
such agreement may be supplemented, amended or otherwise modified from time
to
time in accordance with its terms.
“Intellectual
Property Rights”
means
any and all patents, patent applications, trademarks, copyrights, trademark
registrations and applications therefore, patent, trademark or trade name
licenses, service marks, domain names, contracts with employees or others
relating in whole or in part to disclosure, assignment or patenting of any
inventions, discoveries, improvements, processes, formulae or other know-how,
and all patent, trademark or trade names or copyright licenses which are
in
force.
“IP
Collateral Assignments”
means
(a) that certain Patent Security Agreement and that certain Trademark Security
Agreement, each of even date herewith by and between the Company and Galen
Partners III, L.P, as agent for the Lenders, and (b) that certain Trademark
Security Agreement of even date herewith by and between Axiom Pharmaceutical
Corporation and Galen Partners III, L.P, as agent for the Lenders, as such
agreements may be supplemented, amended or otherwise modified from time to
time
in accordance with their terms.
“IRS”
means
the Internal Revenue Service.
“June
2005 Bridge Loan”
means
the curtain Loan Agreement dated June 22, 2005 by and among the Company and
the
holders of the June 2005 Notes, as such agreement may be supplemented, amended
or otherwise modified from time to time in accordance with its
terms.
“June
2005 Notes”
means
those certain Promissory Notes dated June 22, 2005 in the aggregate principal
amount of $1,000,000 issued by the Company pursuant to the June 2005 Bridge
Loan.
“Leases”
any
lease and sublease agreements, as amended to date, relating to the Owned
Property and the Leased Property.
“Legal
Requirements”
means
any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, order,
edict, judgment, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by
or
under the authority of any governmental entity.
“Losses”
means
any claims, losses, damages, liabilities (or actions in respect thereof),
obligations, penalties, awards, judgments, expenses (including, without
limitation, reasonable fees and expenses of counsel) or
disbursements.
“Material
Adverse Effect”
means
(a) a material adverse effect on, or change in, the business, prospects,
properties, operations, condition (financial or other) or results of operations
of the Company and its Subsidiaries, taken as a whole, or (b) a material
adverse
effect on (i) the ability of the Company or any of the Guarantors to perform
its
respective obligations or (ii) the rights or remedies of any Lender under
any
Transaction Document.
“PBGC”
means
the Pension Benefit Guaranty Corporation.
“PCB”
means
polychlorinated biphenyls.
“Permitted
Liens”
means
the liens permitted by Section 6.2.
“Person”
means
any individual, corporation, limited liability company, partnership,
association, trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
“Preferred
Stock”
means
the Series A Preferred, the Series B Preferred, the Series C-1 Preferred,
the
Series C-2 Preferred and the Series C-3 Preferred.
“Schedule
of Exceptions”
means
the Schedule of Exceptions attached to this Agreement.
“SEC”
means
the Securities and Exchange Commission.
“SEC
Reports”
means
any reports, statements, releases or other documents required to be filed
by the
Company with the SEC under the Exchange Act.
“Securities
Act”
means
the Securities Act of 1933, as amended, and any applicable rules and regulations
thereunder, and any successor to such statute, rules or regulations. Any
reference herein to a specific section, rule or regulation of the Securities
Act
shall be deemed to include any corresponding provisions of future law.
“Senior
Note”
means
that certain Amended and Restated Note in the principal amount of $5,000,000
issued by the Company pursuant to the Watson Term Loan, and any other promissory
notes issued by the Company pursuant to the Watson Term Loan from time to
time.
“Series
A Preferred”
means
the Series A Convertible Preferred Stock, $.01 par value, of the Company
(now or
hereafter issued).
“Series
B Preferred”
means
the Series B Convertible Preferred Stock, $.01 par value, of the Company
(now or
hereafter issued).
“Series
C-1 Preferred”
means
the Series C-1 Convertible Preferred Stock, $.01 par value, of the Company
(now
or hereafter issued).
“Series
C-2 Preferred”
means
the Series C-2 Convertible Preferred Stock, $.01 par value, of the Company
(now
or hereafter issued).
“Series
C-3 Preferred”
means
the Series C-3 Convertible Preferred Stock, $.01 par value, of the Company
(now
or hereafter issued).
“Stock
Pledge Agreement”
means
the Stock Pledge Agreement of even date herewith by and among the Company
and
Galen Partners III, L.P, as agent for the Lenders, as such agreement may
be
supplemented, amended or otherwise modified from time to time in accordance
with
its terms.
“Subsidiary”
means
any entity in which the Company owns securities having a majority of the
voting
power in the election of directors or persons serving equivalent
functions.
“Transaction
Documents”
means,
collectively, (a) this Agreement, (b) the Notes, (c) the Company General
Security Agreement, (d) the Guaranties, (e) the Guarantors Security Agreement,
(f) the IP Collateral Assignments and (g) the Stock Pledge
Agreement.
“Unfunded
Pension Liability”
means,
as of any determination date, the amount, if any, by which the present value
of
all benefit liabilities (as that term is defined in Section 4001(a)(16) of
ERISA) of a plan subject to Title IV of ERISA exceeds the fair market value
of
all assets of such plan, all determined using the actuarial assumptions that
would be used by the PBGC in the event of a termination of the plan on such
determination date.
“Watson
Term Loan”
means
that certain Term Loan Agreement dated March 29, 2000 by and between the
Company
and Watson, as such agreement may be supplemented, amended or otherwise modified
from time to time in accordance with its terms, including, without limitation,
by the Third Amendment to the Watson Term Loan as of February 6, 2004.
“Withdrawal
Liability”
has the
meaning specified in Section 4201 of ERISA.
[SIGNATURE
PAGES TO FOLLOW]
IN
WITNESS WHEREOF, the parties hereto have executed this Loan Agreement as
of the
date first written above.
|
ACURA
PHARMACEUTICALS,
INC.
By:
/s/ Andrew D.
Reddick
Name:
Andrew D. Reddick
Title:
Chief Executive Officer
|
|
|
|
|
Commitment:
$10,700.00
|
CARE
CAPITAL OFFSHORE INVESTMENTS II, LP
By:
Care Capital II, LLC, as general partner
47
Hulfish Street, Suite 310
Princeton,
NJ 08542
Name:
David R. Ramsay
Its:
Authorized Signatory
|
|
|
|
|
Commitment:
$155,966.67
|
CARE
CAPITAL INVESTMENTS II, LP
By:
Care Capital II, LLC, as general partner
47
Hulfish Street, Suite 310
Princeton,
NJ 08542
By:
/s/David
R.
Ramsay
Name:
David R. Ramsay
Its:
Authorized Signatory
|
|
|
|
|
Commitment:
$152,260.95
|
GALEN
PARTNERS III, L.P.
By:
Claudius, L.L.C., General Partner
610
Fifth Avenue, 5th
Fl.
New
York, New York 10020
By: /s/
Srini
Conjeevaram
Name:
Srini Conjeevaram
Its:
General Partner
|
|
|
|
|
Commitment:
$13,782.24
|
GALEN
PARTNERS INTERNATIONAL, III, L.P.
By:
Claudius, L.L.C., General Partner
610
Fifth Avenue, 5th
Fl.
New
York, New York 10020
By:
/s/
Srini
Conjeevaram
Name:
Srini Conjeevaram
Its:
General Partner
|
|
|
|
|
Commitment:
$623.48
|
GALEN
EMPLOYEE FUND III, L.P.
By:
Wesson Enterprises, Inc.
610
Fifth Avenue, 5th
Fl.
New
York, New York 10020
By:
/s/
Bruce F.
Wesson
Name:
Bruce F. Wesson
Its:
General Partner
|
|
|
|
|
Commitment:
$166,666.67
|
ESSEX
WOODLANDS HEALTH
VENTURES
V, L.P.
190
South LaSalle Street, Suite 2800
Chicago,
IL 60603
By:
/s/
Immanuel
Thangaraj
Name:
Immanuel Thangaraj
Its:
Managing Director
|
Unassociated Document
EXHIBIT
10.2
SECURED
PROMISSORY NOTE
ACURA
PHARMACEUTICALS, INC.
$
|
No.
N-__
|
September
16, 2005
|
|
ACURA
PHARMACEUTICALS, INC., a corporation organized under the laws of the State
of
New York (the “Company”),
for
value received, hereby promises to pay to _______________, or
registered assigns (the “Payee”
or
“Holder”),
upon
due presentation and surrender of this Secured Promissory Note (this
“Note”),
on
the Maturity Date, the principal amount of [ ]
($ )
and all
accrued but unpaid interest thereon as hereinafter provided. As used herein,
the
“Maturity
Date”
means
June 1, 2006.
This
Note
was issued by the Company pursuant to a certain Loan Agreement dated as of
September 16, 2005 among the Company and certain lenders identified therein,
including the Payee (together with the Schedules and Exhibits thereto, the
“Loan
Agreement”).
The
holders from time to time of the Notes issued under the Loan Agreement
(including the Holder) are referred to hereinafter as the “Holders”.
The
Holder is entitled to the benefits of the Loan Agreement, including, without
limitation, the rights upon the occurrence and during the continuance of
an
Event of Default and the benefits of security interests and guaranties referred
to below. Reference is made to the Loan Agreement and the documents entered
into
pursuant thereto with respect to certain additional rights of the Holder
and
obligations of the Company and its Subsidiaries not expressly set forth herein.
Capitalized terms used herein but not otherwise defined herein shall have
the
meaning ascribed thereto in the Loan Agreement. All such rights and obligations
set forth in the Loan Agreement are incorporated herein by
reference.
ARTICLE
I
PAYMENT
OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT
1.1. Payment,
if any, of the principal and accrued interest on this Note shall be made
in
cash, in immediately available funds, in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts. Interest (computed on the basis of a
360-day year of twelve 30-day months) shall accrue on the unpaid portion
of said
principal amount from time to time outstanding at the Stated Interest Rate
(as
defined below), and shall be paid by the Company to the Payee in arrears
on the
last day of each calendar quarter unless required to be paid earlier by the
terms of the Loan Agreement. Both principal hereof and interest hereon are
payable at such address as the Holder shall designate from time to time by
written notice to the Company. The Company will pay or cause to be paid all
sums
becoming due hereon for principal and interest by check or wire transfer,
at the
Holder’s election, and, without any requirement for the presentation of this
Note or making any notation thereon, except that the Holder hereof agrees
that
payment of the final amount due shall be made only upon surrender of this
Note
to the Company for cancellation. Prior to any sale or other disposition of
this
instrument, the Holder hereof agrees to endorse hereon the amount of principal
paid hereon and the last date to which interest has been paid hereon and
to
notify the Company of the name and address of the transferee. As used herein,
the “Stated Interest Rate” means the rate of (i) ten percent (10%) per annum
prior to the occurrence of an Event of Default, and (ii) thirteen percent
(13%)
per annum after the occurrence of an Event of Default and during the continuance
thereof (regardless of whether the Loans have been accelerated), in each
case
subject to the limitations of applicable law.
1.2. If
this
Note or any portion hereof becomes due and payable on a Saturday, Sunday
or
public holiday under the laws of the State of New York, the due date hereof
shall be extended to the next succeeding full business day and interest shall
be
payable at the Stated Interest Rate per annum during such extension. All
payments received by the Holder shall be applied first to the payment of
all
accrued interest payable hereunder.
1.3 The
Company shall have the right to prepay the principal amount of this Note,
in
whole or in part, at any time without penalty or premium. Any prepayment
of
principal shall be accompanied by a payment of all interest accrued and unpaid
on the portion of the principal amount being prepaid. In addition, this Note
is
subject to mandatory prepayment as provided in the Loan Agreement.
ARTICLE
II
SECURITY
2.1. The
obligations of the Company under this Note are secured pursuant to security
interests on and collateral assignments of, assets, tangible and intangible,
of
the Company granted by the Company to the Holder and the other Holders (or
their
agent) pursuant to a General Security Agreement of even date herewith, and
the
collateral assignments referred to in the Loan Agreement. In addition, each
of
Acura Pharmaceutical Technologies, Inc. (“APT”) and Axiom Pharmaceutical
Corporation, each a wholly owned subsidiary of the Company (individually
a
“Guarantor” and collectively, the “Guarantors”), has executed and delivered in
favor of the Holder and the other Holders (or their agent) a Continuing
Unconditional Guaranty, dated an even date herewith (each a “Guarantee”),
guaranteeing the full and unconditional payment when due of the amounts payable
by the Company to the Holder and the other Holders pursuant to the terms
of
their respective Notes. The obligations of each Guarantor under its Guaranty
are
secured pursuant to security interests on and collateral assignments of,
assets,
tangible and intangible, of such Guarantor granted by the Guarantor to the
Holder and the other Holders (or their agent) pursuant to a security agreement
of even date herewith, and the collateral assignments referred to in the
Loan
Agreement.
MISCELLANEOUS
3.1. Default.
Subject to the terms of the Loan Agreement, upon the occurrence of any one
or
more of the Events of Default specified in the Loan Agreement all amounts
then
remaining unpaid on this Note may be declared to be, or automatically become,
immediately due and payable as provided in the Loan Agreement.
3.2. Collection
Costs. In the event that this Note shall be placed in the hands of an attorney
for collection by reason of any event of default hereunder, the undersigned
agrees to pay reasonable attorney’s fees and disbursements and other reasonable
expenses incurred by the Holder or its agent in connection with the collection
of this Note. In addition, the undersigned shall be responsible for all other
expenses of the Holder and its agent to the extent provided by the Loan
Agreement.
3.3. Rights
Cumulative; Specific Performances. The rights, powers and remedies given
to the
Payee under this Note shall be in addition to all rights, powers and remedies
given to it by virtue of the Loan Agreement, any document or instrument executed
in connection therewith, or any statute or rule of law.
3.4. No
Waivers. Any forbearance, failure or delay by the Payee in exercising any
right,
power or remedy under this Note, the Loan Agreement, any documents or
instruments executed in connection therewith or otherwise available to the
Payee
shall not be deemed to be a waiver of such right, power or remedy, nor shall
any
single or partial exercise of any right, power or remedy preclude the further
exercise thereof.
3.5. Amendments
in Writing. Subject to the terms of the Loan Agreement, no amendment,
modification or waiver of any provision of this Note shall be effective unless
it shall be in writing and signed by the Holder, and any such amendment,
modification or waiver shall apply only in the specific instance for which
given.
3.6. Governing
Law; Jurisdiction. i) This
Note and the rights of the holders hereof shall be governed by, and construed
in
accordance with, the laws of the State of New York wherein the terms of this
Note 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) The
undersigned 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 out of or relating to this Note
or
for recognition or enforcement of any judgment, and each of the parties hereto
irrevocably and unconditionally agrees that all claims in respect of any
such
action or proceeding may be heard and determined in any such New York State
court or, to the fullest extent permitted by law, in such United States Federal
court. The undersigned 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 judgment or any other manner provided by law. Nothing in this
Note
or any other Transaction Document shall affect any right that any party may
otherwise have to bring any action or proceeding relating to this Note or
any of
the other Transaction Documents in the courts of any jurisdiction.
(c)
The
Company 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 Note or any other transaction document to which it is a
party
in any such New York State or United States Federal Court. The Company 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.
3.7. No
Counterclaims. The Company waives the right to interpose counterclaims or
set-offs of any kind and description in any litigation arising hereunder
(whether or not arising out of or relating to this Note).
3.8. Successors.
The term “Payee” and “Holder” as used herein shall be deemed to include the
Holder and its successors, endorsees and assigns.
3.9. Certain
Waivers. The Company hereby waives presentment, demand for payment, protest,
notice of protest and notice of non-payment hereof.
3.10. Mutilated,
Lost, Stolen or Destroyed Notes. In case this Note shall be mutilated, lost,
stolen or destroyed, the Company shall issue and deliver in exchange and
substitution for and upon cancellation of the mutilated Note, or in lieu
of and
substitution for the Note, mutilated, lost, stolen or destroyed, a new Note
of
like tenor and representing an equivalent right or interest, but only upon
receipt of evidence reasonably satisfactory to the Company of such loss,
theft
or destruction and an indemnity, if requested, also reasonably satisfactory
to
it (but without requirement of posting any bond).
3.11. Maintenance
of Office. The Company covenants and agrees that so long as this Note shall
be
outstanding, it will maintain an office or agency in New York (or such other
place as the Company may designate in writing to the holder of this Note)
where
notices, presentations and demands to or upon the Company in respect of this
Note may be given or made.
3.12. WAIVER
OF
JURY TRIAL. THE COMPANY 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 THIS DEBENTURE OR ANY OTHER TRANSACTION
DOCUMENT TO WHICH IT IS A PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE
OR ENFORCEMENT THEREOF.
IN
WITNESS WHEREOF, Acura Pharmaceuticals, Inc. has caused this Note to be signed
by its President and to be dated the day and year first above
written.
ATTEST [SEAL] |
|
ACURA PHARMACEUTICALS,
INC. |
|
|
|
|
|
|
By: |
/s/
Andrew D. Reddick |
|
|
|
Name: Andrew D. Reddick |
|
|
|
Title: President Chief Executive
Officer |
ATTACHMENT
I
Assignment
For
value
received, the undersigned hereby assigns subject to the provisions of the
Loan
Agreement, to ________ $_________________ principal amount of the Secured
Promissory Note evidenced hereby and hereby irrevocably appoints _______________
attorney to transfer the Note on the books of the within named corporation
with
full power of substitution in the premises.
Dated:
In
the
presence of:
Unassociated Document
EXHIBIT
10.3
SUBORDINATION
AGREEMENT,
dated
as of September 16, 2005, by and among Acura Pharmaceuticals, Inc., a New
York
corporation (the "Company"),
the
legal and beneficial holders of the Watson Note (the "Watson
Holders"),
the
holders of the June 2005 Notes (the "June
2005 Lenders"),
the
holders of the September 2005 Notes (the “September
2005 Lenders”),
Galen
Partners III, L.P., a Delaware limited partnership, as agent for the Watson
Holders, the June 2005 Lenders and the September 2005 Lenders (in such capacity,
the "Agent")
and
the Grantors listed on the signature pages hereof.
RECITALS
(A) Certain
capitalized terms used in this Agreement without definition have the meaning
ascribed to them in Section 1
below.
(B) WHEREAS,
Watson Pharmaceuticals, Inc., a Nevada corporation ("Watson")
and
the Company have entered into a Loan Agreement dated March 29, 2000 (such
agreement, as supplemented, amended or otherwise modified from time to time,
including, without limitation, as amended through the Third Amendment to
Loan
Agreement dated February 6, 2004, the "Watson
Loan Agreement")
pursuant to which Watson agreed to extend certain funds to the Company. The
Company’s obligation to pay the principal amount of, and interest on, the Watson
Term Loan is now evidenced by a secured promissory note dated as of December
20,
2002 (the "Watson
Note")
which
is secured by (i) a lien on and security interest in the Company Personal
Property granted pursuant to the Watson Security Agreement dated March 29,
2000
between the Company and Watson (such agreement, as amended, supplemented,
or
otherwise modified from time to time, the "Watson
Security Agreement"),
(ii)
collateral assignments of the Company Assignable Property pursuant to the
Watson
Security Agreement or otherwise (such collateral assignments, as amended,
supplemented, or otherwise modified from time to time, collectively the
“Watson
Assignments”),
and
(iii) a lien on and security interest in the Company Investment Property
pursuant to a Stock Pledge Agreement between the Company and Watson (such
agreement, as amended, supplemented, or otherwise modified from time to time,
the "Watson
Stock Pledge Agreement").
(C) WHEREAS,
in connection with, and in order to support the obligations of the Company
under, the Watson Loan Agreement, each of the Guarantors has guaranteed the
Company’s obligations under the Watson Term Loan and has undertaken certain
additional obligations pursuant to the Continuing Unconditional Secured Guaranty
by each Guarantor dated March 29, 2000 (each such guaranty and all other
obligations of each of the Guarantors under the Watson Loan Agreement, in
each
case, as they may be amended, supplemented or otherwise modified from time
to
time, a "Watson
Guaranty").
The
Watson Guaranties are secured by (i) a lien on and security interest in the
Guarantor Personal Property of each Guarantor granted pursuant to a Guarantors
General Security Agreement dated March 29, 2000 between the Guarantors and
Watson (such agreement, as amended, supplemented, or otherwise modified from
time to time, the "Watson
Guarantors General Security Agreement"),
(ii)
collateral assignments of the Guarantor Assignable Property of each Guarantor
pursuant to the Watson Guarantors General Security Agreement or otherwise
(such
collateral assignments, as amended, supplemented, or otherwise modified from
time to time, collectively the “Watson
Guarantor Assignments”),
and
(iii) a mortgage granted by Acura Pharmaceutical Technologies, Inc. to Watson
of
its Guarantor Mortgage Property (such mortgage, as amended, supplemented,
or
otherwise modified from time to time, the "Watson Mortgage").
(D) WHEREAS,
the June 2005 Lenders and the Company have entered into a Loan Agreement
dated
as of June 22, 2005 (such agreement, as amended, supplemented, or otherwise
modified from time to time, the "June
2005 Loan Agreement")
pursuant to which the Company has issued the June 2005 Notes. The June 2005
Notes are secured by (i) liens and security interests granted pursuant to
the
Company General Security Agreement dated as of June 22, 2005 between the
Company
and the Agent (such agreement, as amended, supplemented, or otherwise modified
from time to time, the "June
2005 Company General Security Agreement"),
(ii)
collateral assignments of the Company Assignable Property pursuant to the
June
2005 Company General Security Agreement or otherwise (such collateral
assignments, as amended, supplemented, or otherwise modified from time to
time,
collectively the “June
2005 Assignments”),
and
(iii) a lien on and security interest in the Company Investment Property
pursuant to a Stock Pledge Agreement between the Company and the Agent (such
agreement, as amended, supplemented, or otherwise modified from time to time,
the "June
2005 Stock Pledge Agreement").
(E) WHEREAS,
as a condition to the June 2005 Lenders’ obligation to lend sums under the June
2005 Loan Agreement and in order to support the Obligations of the Company
under
the June 2005 Loan Agreement, each of the Guarantors has guaranteed the
Company’s Obligations under the June 2005 Notes and the June 2005 Loan Agreement
and has undertaken certain additional obligations pursuant to the Continuing
Unconditional Secured Guaranty by each Guarantor dated as of June 22, 2005
(each
such guaranty and all other obligations of each of the Guarantors under the
June
2005 Loan Agreement, in each case, as they may be amended, supplemented or
otherwise modified from time to time, a "June
2005 Guaranty").
The
June 2005 Guaranties are secured by (i) a lien on and security interest in
the
Guarantor Personal Property of each Guarantor granted pursuant to a Guarantors
General Security Agreement dated as of June 22, 2005 between the Guarantors
and
the Agent (such agreement, as amended, supplemented, or otherwise modified
from
time to time, the "June
2005 Guarantors General Security Agreement")
and
(ii) collateral assignments of the Guarantor Assignable Property of each
Guarantor pursuant to the June 2005 Guarantors General Security Agreement
or
otherwise (such collateral assignments, as amended, supplemented, or otherwise
modified from time to time, collectively the “June
2005 Guarantor Assignments”).
(F) WHEREAS,
in connection with the execution of the June 2005 Loan Agreement, the Company,
Agent, the Watson Holders and the June 2005 Lenders entered into a Subordination
Agreement dated as of June 22, 2005 (the “June
2005 Subordination Agreement”).
(G) WHEREAS,
the September 2005 Lenders and the Company have entered into a Loan Agreement
dated as of the date hereof (such agreement, as amended, supplemented, or
otherwise modified from time to time, the "September
2005 Loan Agreement")
pursuant to which the Company has agreed to issue the September 2005 Notes.
The
September 2005 Notes are, or will be, secured by (i) liens and security
interests granted pursuant to the Company General Security Agreement dated
as of
the date hereof between the Company and the Agent (such agreement, as amended,
supplemented, or otherwise modified from time to time, the "September
2005 Company General Security Agreement"),
(ii)
collateral assignments of the Company Assignable Property pursuant to the
September 2005 Company General Security Agreement or otherwise (such collateral
assignments, as amended, supplemented, or otherwise modified from time to
time,
collectively the “September
2005 Assignments”),
and
(iii) a lien on and security interest in the Company Investment Property
pursuant to a Stock Pledge Agreement between the Company and the Agent (such
agreement, as amended, supplemented, or otherwise modified from time to time,
the "September
2005 Stock Pledge Agreement").
(H) WHEREAS,
as a condition to the September 2005 Lenders’ obligation to lend sums under the
September 2005 Loan Agreement and in order to support the Obligations of
the
Company under the September 2005 Loan Agreement, each of the Guarantors has
guaranteed the Company’s Obligations under the September 2005 Notes and the
September 2005 Loan Agreement and has undertaken certain additional obligations
pursuant to the Continuing Unconditional Secured Guaranty by each Guarantor
dated as of as of the date hereof (each such guaranty and all other obligations
of each of the Guarantors under the September 2005 Loan Agreement, in each
case,
as they may be amended, supplemented or otherwise modified from time to time,
a
"September
2005 Guaranty").
The
September 2005 Guaranties are, or will be, secured by (i) a lien on and security
interest in the Guarantor Personal Property of each Guarantor granted pursuant
to a Guarantors General Security Agreement dated as of the date hereof between
the Guarantors and the Agent (such agreement, as amended, supplemented, or
otherwise modified from time to time, the "September
2005 Guarantors General Security Agreement")
and
(ii) collateral assignments of the Guarantor Assignable Property of each
Guarantor pursuant to the September 2005 Guarantors General Security Agreement
or otherwise (such collateral assignments, as amended, supplemented, or
otherwise modified from time to time, collectively the “September
2005 Guarantor Assignments”).
(I) WHEREAS,
it is a condition to closing under the September 2005 Loan Agreement that
the
parties hereto shall have entered into this Agreement to confirm, among other
things, their relative rights with respect to the Company Collateral and
the
Guarantor Collateral.
NOW
THEREFORE, in consideration of the foregoing and the mutual promises and
agreements hereinafter contained, the parties hereto agree as follows:
SECTION
1. Definitions. (a)
As
used herein, the following terms have the following meanings:
"Agent"
has the
meaning specified in the introductory paragraph of this Agreement.
this
"Agreement"
means
this Subordination Agreement, as it may be supplemented, amended or otherwise
modified from time to time.
"Bankruptcy
Proceeding"
means,
in the case of any Grantor, each of the following: (a) any distribution of
all
or any of the assets of such Grantor upon the dissolution, winding up, total
or
partial liquidation, arrangement, reorganization, adjustment, protection,
relief
or composition of such Grantor or its debts, whether in any bankruptcy,
insolvency, arrangement, reorganization, receivership or relief proceeding
or
similar case or proceeding under any Federal or state bankruptcy or similar
law
and (b) any assignment for the benefit of creditors of any other marshalling
of
the assets and liabilities of such Grantor or otherwise.
"Cash
Obligations"
means,
as at any time, the Obligations of the Company or any Guarantor, as applicable,
to the extent then payable in cash.
"Collateral"
means,
collectively, the Company Collateral and the Guarantor Collateral of all
Guarantors.
"Company"
has the
meaning specified in the introductory paragraph of this Agreement.
"Company
Assignable Property"
means,
collectively, all of the Company’s leases, contracts, patents, copyrights,
trademarks and service marks, now owned or existing or hereafter acquired
or
arising.
"Company
Collateral"
means,
collectively, the Company Personal Property, the Company Assignable Property
and
Company Investment Property.
"Company
Investment Property"
means
all of the issued and outstanding shares of Acura Pharmaceutical Technologies,
Inc. and Axiom Pharmaceutical Corporation.
"Company
Personal Property"
means
all of the Company’s properties and assets of whatever nature, tangible or
intangible, now owned or existing or hereafter acquired or arising.
"Company
Security Documents"
means,
collectively, the Watson Company Security Documents, the June 2005 Company
Security Documents and the September 2005 Company Security Documents.
"Grantors"
means
the Company, Axiom Pharmaceutical Corporation, a Delaware corporation, and
Acura
Pharmaceutical Technologies, Inc., an Indiana corporation, and each other
subsidiary or affiliate of the Company that is or becomes a party to any
Security Document or any Guaranty Security Document.
"Guarantors"
means
Axiom Pharmaceutical Corporation, a Delaware corporation, and Acura
Pharmaceutical Technologies, Inc., an Indiana corporation, and each other
subsidiary or affiliate of the Company that is or becomes a party to any
Security Document.
"Guarantor
Assignable Property"
means,
collectively, in respect of any Guarantor, all of such Guarantor’s leases,
contracts, patents, copyrights, trademarks and service marks, now owned or
existing or hereafter acquired or arising.
"Guarantor
Collateral"
means,
collectively, in respect of any Guarantor, (a) its Guarantor Personal Property,
(b) its Guarantor Assignable Property and (c) if such Guarantor is Acura
Pharmaceutical Technologies, Inc., its Guarantor Mortgage Property.
"Guarantor
Mortgage Property"
means
Acura Pharmaceutical Technologies, Inc.’s real property located at 16235 State
Road 17, Culver, Indiana.
"Guarantor
Personal Property"
means,
in respect of either Guarantor, all of such Guarantor’s properties and assets of
whatever nature, tangible or intangible, now owned or existing or hereafter
acquired or arising.
"Guarantor
Security Documents"
means,
collectively, the Watson Guarantor Security Documents, the June 2005 Guarantor
Security Documents and the September 2005 Guarantor Security Documents.
"Guaranty
Documents"
means,
collectively, the Watson Guaranties, the June 2005 Guaranties and the September
2005 Guaranties.
"June
2005 Company General Security Agreement"
has the
meaning specified in the recitals.
"June
2005 Company Security Documents"
means,
collectively, the June 2005 Company General Security Agreement, the June
2005
Assignments and the June 2005 Stock Pledge Agreement.
"June
2005 Guarantor Security Documents"
means,
collectively, the June 2005 Guarantors General Security Agreement and the
June
2005 Guarantor Assignments.
"June
2005 Guarantors General Security Agreement"
has the
meaning specified in the recitals.
"June
2005 Guaranty"
has the
meaning specified in the recitals.
"June
2005 Lenders"
has the
meaning specified in the introductory paragraph of this Agreement.
"June
2005 Loan Agreement"
has the
meaning specified in the recitals.
"June
2005 Loan Maximum Amount"
means,
at any time, an amount equal to the sum of (a) the aggregate principal amount
of
all June 2005 Notes then outstanding, (b) without duplication, the aggregate
amount of unpaid interest theretofore accrued on the June 2005 Notes, and
(c)
without duplication, the aggregate amount of all costs, expenses, fees,
indemnities and other amounts payable in respect of the June 2005 Notes,
the
June 2005 Loan Agreement, the June 2005 Guaranties, the June 2005 Company
Security Documents and the June 2005 Guarantor Security Documents.
"June
2005 Notes"
means
the Company’s Secured Promissory Notes (as amended, supplemented or otherwise
modified from time to time) issued from time to time under the June 2005
Loan
Agreement.
"June
2005 Stock Pledge Agreement"
has the
meaning specified in the recitals.
"June
2005 Subordination Agreement"
has the
meaning specified in the recitals.
"Junior
Secured Party",
as to
any item of Collateral, and as to Secured Creditors purporting to have liens
on
and securities interests in such item under the Security Documents, means
one
such Secured Creditor whose lien on and security interest in such item (and
to
the extent such lien on and security interest in such item) is stated in
Section
2 hereof to be junior in right to the liens and security interests of one
or
more such other Secured Creditors on and in such item.
"Obligations"
of the
Company or any Guarantor means, at any time, any loans, advances, debts,
liabilities and obligations of the Company or such Guarantor, (a) in the
case of
the Company, under the September 2005 Notes, the September 2005 Loan Agreement,
the June 2005 Notes, the June 2005 Loan Agreement and the Watson Loan Agreement;
and (b) in the case of any Guarantor, under its Watson Guaranty, its September
2005 Guaranty and its June 2005 Guaranty, in each case, whether matured or
unmatured, contingent or liquidated and whether for principal, accrued and
unpaid interest (including, without limitation, interest accruing after the
filing of a petition, or other act, initiating a Bankruptcy Proceeding),
accrued
and unpaid expenses, indemnities, fees (including attorneys fees and
disbursements) or otherwise, whether or not such obligations are due and
payable
at such time.
"Person"
means
any individual, corporation, limited liability company, partnership,
association, trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Secured
Creditors"
means
the Watson Holders, the June 2005 Lenders and the September 2005 Lenders
and
their respective agents, permitted successors, transferees and assigns, in
their
respective capacities as the beneficiaries under the Security Documents and
the
Guaranty Documents, respectively (whether named in such agreement or as an
assignee thereof).
"Security
Documents"
means,
collectively, the Company Security Documents and the Guarantor Security
Documents.
"Senior
Secured Party",
as to
any item of Collateral, and as to Secured Creditors purporting to have liens
on
and security interests in such item under the Security Documents, means one
such
Secured Creditor whose lien on and security interest in such item (and to
the
extent such lien on and security interest in such item) is stated in Section
2
hereof to be senior and prior in right to the liens and security interests
of
one or more such other Secured Creditors on and in such item.
"September
2005 Company General Security Agreement"
has the
meaning specified in the recitals.
"September
2005 Company Security Documents"
means,
collectively, the September 2005 Company General Security Agreement, the
September 2005 Assignments and the September 2005 Stock Pledge Agreement.
"September
2005 Guarantor Security Documents"
means,
collectively, the September 2005 Guarantors General Security Agreement and
the
September 2005 Guarantor Assignments.
"September
2005 Guarantors General Security Agreement"
has the
meaning specified in the recitals.
"September
2005 Guaranty"
has the
meaning specified in the recitals.
"September
2005 Lenders"
has the
meaning specified in the introductory paragraph of this Agreement.
"September
2005 Loan Agreement"
has the
meaning specified in the recitals.
"September
2005 Loan Maximum Amount"
means,
at any time, an amount equal to the sum of (a) the aggregate principal amount
of
all September 2005 Notes then outstanding, (b) without duplication, the
aggregate amount of unpaid interest theretofore accrued on the September
2005
Notes, and (c) without duplication, the aggregate amount of all costs, expenses,
fees, indemnities and other amounts payable in respect of the September 2005
Notes, the September 2005 Loan Agreement, the September 2005 Guaranties,
the
September 2005 Company Security Documents and the September 2005 Guarantor
Security Documents.
"September
2005 Notes"
means
the Company’s Secured Promissory Notes (as amended, supplemented or otherwise
modified from time to time) issued from time to time under the September
2005
Loan Agreement.
"September
2005 Stock Pledge Agreement"
has the
meaning specified in the recitals.
"Transaction
Documents"
means,
collectively, (a) this Agreement, (b) the September 2005 Loan Agreement,
(c) the
September 2005 Notes, (d) the June 2005 Loan Agreement, (e) the June 2005
Notes,
(f) the Watson Loan Agreement, (g) the Watson Note, (h) the Security Documents,
and (i) the Guaranty Documents.
"Watson"
has the
meaning specified in the recitals.
"Watson
Holders"
has the
meaning specified in the introductory paragraph of this Agreement.
"Watson
Company Security Documents"
means,
collectively, the Watson Security Agreement, the Watson Assignments and the
Watson Stock Pledge Agreement.
"Watson
Guarantor Security Documents"
means,
collectively, the Watson Guarantors General Security Agreement, the Watson
Guarantor Assignments and the Watson Mortgage.
"Watson
Guaranty"
has the
meaning specified in the recitals.
"Watson
Guarantors General Security Agreement"
has the
meaning specified in the recitals.
"Watson
Loan Agreement"
has the
meaning specified in the recitals.
"Watson
Maximum Amount"
means,
at any time, an amount equal to the sum of (a) $5,000,000, (b) without
duplication, the aggregate amount of unpaid interest theretofore accrued
on the
Watson Term Loan and (c) without duplication, the aggregate amount of all
costs,
expenses, fees, indemnities and other amounts payable in respect of the Watson
Loan Agreement, the Watson Note, the Watson Guaranties, the Watson Company
Security Documents and the Watson Guarantor Security Documents.
"Watson Mortgage"
has the
meaning specified in the recitals.
"Watson Note"
has the
meaning specified in the recitals.
"Watson
Security Agreement"
has the
meaning specified in the recitals.
"Watson
Stock Pledge Agreement"
has the
meaning specified in the recitals.
"Watson
Term Loan"
means
the term loan in the principal amount of $5,000,000 (as amended, supplemented,
or otherwise modified from time to time) evidenced by the Watson
Note.
(b) UCC
Terms.
Terms
defined in Article 9 of the Uniform Commercial Code in effect in the State
of
New York (or in any other State, including, without limitation, the State
of
Indiana, to the extent that the Uniform Commercial Code in effect in such
State
is to be applied pursuant to the terms hereof) and not otherwise defined
herein
are used as therein defined.
SECTION
2. Priorities. (a)
(i) The parties hereto hereby agree to the following priorities of interest
in
the Company Collateral:
The
liens
and securities interests of the September 2005 Lenders (under the September
2005
Company Security Documents) on and in the Company Collateral, securing the
Company’s Obligations to the September 2005 Lenders (up to an aggregate amount
equal to the September 2005 Loan Maximum Amount in effect from time to time)
shall at all times be senior and prior in right to the liens thereon and
security interests therein of the June 2005 Lenders under the June 2005 Company
Security Documents and the Watson Holders under the Watson Company Security
Documents.
The
liens
and security interests of the June 2005 Lenders (under the June 2005 Company
Security Documents) on and in the Company Collateral, securing the Company’s
Obligations to the June 2005 Lenders (up to an aggregate amount equal to
the
June 2005 Loan Maximum Amount in effect from time to time) shall at all times
be
senior and prior in right to the liens thereon and security interests therein
of
the Watson Holders under the Watson Company Security Documents.
The
liens
and security interests of the Watson Holders (under the Watson Company Security
Documents) on and in the Company Collateral securing the Company’s Obligations
to the Watson Holders (up to an aggregate amount equal to the Watson Maximum
Amount in effect from time to time) shall at all times be junior and subordinate
in right to the liens thereon and security interests therein of the September
2005 Lenders under the September 2005 Company Security Documents and the
June
2005 Lenders under the June 2005 Company Security Documents.
(ii)
The
parties hereto hereby agree to the following priorities of interest in the
Guarantor Collateral of each Guarantor:
The
liens
and security interests of the September 2005 Lenders (under the September
2005
Guarantor Security Documents) on and in the Guarantor Collateral of such
Guarantor, securing such Guarantor’s Obligations under its September 2005
Guaranty (in respect of the Company’s Obligations to the September 2005 Lenders
up to an aggregate amount equal to the September 2005 Loan Maximum Amount
in
effect from time to time) shall at all times be senior and prior in right
to the
liens thereon and security interests therein of the June 2005 Lenders under
the
June 2005 Guarantor Security Documents and the Watson Holders under the Watson
Guarantor Security Documents.
The
liens
and security interests of the June 2005 Lenders (under the June 2005 Guarantor
Security Documents) on and in the Guarantor Collateral of such Guarantor,
securing such Guarantor’s Obligations under its June 2005 Guaranty (in respect
of the Company’s Obligations to the June 2005 Lenders up to an aggregate amount
equal to the June 2005 Loan Maximum Amount in effect from time to time) shall
at
all times be senior and prior in right to the liens thereon and security
interests therein of the Watson Holders under the Watson Guarantor Security
Documents.
The
liens
and security interests of the Watson Holders (under the Watson Guarantor
Security Documents) on and in the Guarantor Collateral of such Guarantor
securing such Guarantor’s Obligations under its Watson Guaranty (in respect of
the Company’s Obligations to the Watson Holders up to an aggregate amount equal
to the Watson Maximum Amount in effect from time to time) shall at all times
be
junior and subordinate in right to the liens thereon and security interests
therein of the September 2005 Lenders under the September 2005 Guarantor
Security Documents and the June 2005 Lenders under the June 2005 Guarantor
Security Documents.
(b)
(i)
The
parties hereto hereby agree to the following priorities in right of payment
of
the Company’s Cash Obligations:
The
Company’s Cash Obligations under the September 2005 Notes and the September 2005
Loan Agreement (up to an aggregate amount equal to the September 2005 Loan
Maximum Amount in effect from time to time) shall at all times be senior
and
prior in right of payment to the Company’s Cash Obligations under the June 2005
Loan Agreement, the June 2005 Notes, the Watson Loan Agreement and the Watson
Note.
The
Company’s Cash Obligations under the June 2005 Notes and the June 2005 Loan
Agreement (up to an aggregate amount equal to the June 2005 Loan Maximum
Amount
in effect from time to time) shall at all times be senior and prior in right
of
payment to the Company’s Cash Obligations under the Watson Loan Agreement and
the Watson Note.
The
Company’s Cash Obligations under the Watson Loan Agreement (up to an aggregate
amount equal to the Watson Maximum Amount in effect from time to time) shall
at
all time be junior and subordinate in right of payment to the Company’s Cash
Obligations under the September 2005 Notes, the September 2005 Loan Agreement,
the June 2005 Notes and the 2005 Loan Agreement.
(ii) The
parties hereto hereby agree to the following priorities in right of payment
of
each Guarantor’s Cash Obligations:
Such
Guarantor’s Cash Obligations under its September 2005 Guaranty in respect of the
Company’s Obligations to the September 2005 Lenders (up to an aggregate amount
equal to the September 2005 Loan Maximum Amount in effect from time to time)
shall at all times be senior and prior in right of payment to such Guarantor’s
Cash Obligations under its June 2005 Guaranty and its Watson
Guaranty.
Such
Guarantor’s Cash Obligations under its June 2005 Guaranty in respect of the
Company’s Obligations to the June 2005 Lenders (up to an aggregate amount equal
to the June 2005 Loan Maximum Amount in effect from time to time) shall at
all
times be senior and prior in right of payment to such Guarantor’s Cash
Obligations under its Watson Guaranty.
Such
Guarantor’s Cash Obligations under its Watson Guaranty in respect of the
Company’s Obligations to the Watson Holders (up to an aggregate amount equal to
the Watson Maximum Amount in effect from time to time) shall at all times
be
junior and subordinate in right of payment to such Guarantor’s Cash Obligations
under its September 2005 Guaranty and its June 2005 Guaranty.
For
the
avoidance of doubt, nothing in this Section 2(b) shall apply at any time
to any
Obligations of the Company or any Guarantor to the extent that they are not
then
Cash Obligations.
(c) Except
as
otherwise provided in Sections 2(a) and 2(b) hereof, no Secured Creditor
shall
have any lien or security interest which is prior to the lien and security
interest of any other Secured Creditor in any item of Collateral covered
by the
Company Security Documents or the Guarantor Security Documents.
(d) So
long
as any Person is a Secured Creditor, the priorities set forth in this Agreement
are applicable irrespective of the order of creation, attachment or perfection
of any lien or security interest arising under the Security Documents (whether
or not such security interests have been perfected) or any priority that
might
otherwise be available to such Secured Creditor under applicable law and
notwithstanding any representation or warranty of the Company or any of the
Guarantors to the contrary in any Transaction Document.
(e) Each
Secured Creditor agrees not to contest, or to bring (or voluntarily join
in) any
action or proceeding for the purpose of contesting, the creation, attachment,
validity, enforceability, perfection or priority (as herein provided) of,
or
seeking to avoid, the lien and security interest which any Security Document
(as
amended or otherwise modified hereby) purports to create in favor of any
other
Secured Creditor on or in any item of Collateral. Nothing herein shall be
deemed
or construed to prevent any Secured Creditor from commencing an action or
proceeding against any other Secured Creditor to assert any right or claim
it
may have arising under or in connection with this Agreement.
(f) Notwithstanding
anything to the contrary in this Agreement, in the event of a Bankruptcy
Proceeding of the Company, the June 2005 Lenders hereby agree as follows,
in
each case unless otherwise consented to in writing by the September 2005
Lenders:
(i) the
June
2005 Lenders waive any and all rights to dispute actions taken by the September
2005 Lenders to seek adequate protection with respect to the collateral securing
the September 2005 Notes;
(ii) the
June
2005 Lenders agree not to seek any form of adequate protection other than:
(A)
replacement liens which shall be junior to any replacement liens granted
to the
September 2005 Lenders and to any liens securing debtor-in-possession
(“DIP”)
financing that has been approved by the September 2005 Lenders, and (B) periodic
reports from the Company;
(iii) the
June
2005 Lenders agree not to oppose the use of cash collateral as agreed to
by the
September 2005 Lenders and will not oppose the use of any June 2005 Lenders’
cash collateral; provided, however, that the June 2005 Lenders receive
replacement liens. The June 2005 Lenders agree to a carve out from their
collateral equal to any carve out agreed to by the September 2005 Lenders,
for
example, for fees of the U.S. Trustee and estate professionals;
(iv) the
June
2005 Lenders agree not to oppose their liens being primed by any DIP loan
that
has been approved by the September 2005 Lenders; provided however, that the
June
2005 Lenders receive replacement liens junior to the liens securing the DIP
loan
and the replacement liens received by the September 2005 Lenders.
Notwithstanding the foregoing, the June 2005 Lenders reserve all rights to
oppose other aspects of any DIP loan that could be asserted if they held
unsecured debt;
(v) in
the
event of a sale or sales of an asset or assets by the Company that has been
approved by the September 2005 Lenders in a bankruptcy case, the June 2005
Lenders agree to waive any right to assert that it is impossible to sell
assets
free and clear of their liens without their consent. Notwithstanding the
foregoing, the June 2005 Lenders retain their rights to object a sale of
assets
on grounds other than the assets being sold free and clear of the June 2005
Lenders’ liens;
(vi) the
June
2005 Lenders waive any and all rights to credit bid at a bankruptcy sale
of the
Company’s assets, unless the September 2005 Lenders’ consent; and
(vii) the
June
2005 Lenders agree not to vote in favor of any plan of reorganization proposed
in a bankruptcy case unless the plan either pays the September 2005 Lenders
in
full in cash or is supported by the September 2005 Lenders.
(g)
Notwithstanding anything to the contrary in this Agreement, in the event
of a
Bankruptcy Proceeding of the Company, the Watson Holders hereby agree as
follows, in each case unless otherwise consented to in writing by the Senior
Secured Parties:
(i) the
Watson Holders waive any and all rights to dispute actions taken by the Senior
Secured Parties to seek adequate protection with respect to the collateral
securing the June 2005 Notes and the September 2005 Notes;
(ii) the
Watson Holders agree not to seek any form of adequate protection other than:
(A)
replacement liens which shall be junior to any replacement liens granted
to the
Senior Secured Parties and to any liens securing debtor-in-possession
(“DIP”)
financing that has been approved by the Senior Secured Parties, and (B) periodic
reports from the Company;
(iii) the
Watson Holders agree not to oppose the use of cash collateral as agreed to
by
the Senior Secured Parties and will not oppose the use of any Watson Holders’
cash collateral; provided, however, that the Watson Holders receive replacement
liens. The Watson Holders agree to a carve out from their collateral equal
to
any carve out agreed to by the Senior Secured Parties, for example, for fees
of
the U.S. Trustee and estate professionals;
(iv) the
Watson Holders agree not to oppose their liens being primed by any DIP loan
that
has been approved by the Senior Secured Parties; provided however, that the
Watson Holders receive replacement liens junior to the liens securing the
DIP
loan and the replacement liens received by the Senior Secured Parties.
Notwithstanding the foregoing, the Watson Holders reserve all rights to oppose
other aspects of any DIP loan that could be asserted if they held unsecured
debt;
(v) in
the
event of a sale or sales of an asset or assets by the Company that has been
approved by the Senior Secured Parties in a bankruptcy case, the Watson Holders
agree to waive any right to assert that it is impossible to sell assets free
and
clear of their liens without their consent. Notwithstanding the foregoing,
the
Watson Holders retain their rights to object a sale of assets on grounds
other
than the assets being sold free and clear of the Watson Holders’ liens;
(vi) the
Watson Holders waive any and all rights to credit bid at a bankruptcy sale
of
the Company’s assets, unless the Senior Secured Parties consent; and
(vii) the
Watson Holders agree not to vote in favor of any plan of reorganization proposed
in a bankruptcy case unless the plan either pays the Senior Secured Parties
in
full in cash or is supported by the Senior Secured Parties.
SECTION 3. Enforcement
of Security. (a)
Each Secured Creditor may, from time to time, to the extent provided in the
Transaction Documents to which it is a party, (i) give notice that an "event
of
default" has occurred and is continuing under such Transaction Documents,
(ii)
accelerate the Company’s Obligations under such Transaction Documents and (iii)
whether or not it has given such notice or has effected such acceleration
(but
except as otherwise provided in this Agreement), take or authorize the taking
of
such action with regard to the protection, exercise, enforcement and collection
of its rights in and to that portion of the Collateral, in which it may have
an
interest, as it may determine to be necessary or appropriate; provided,
however,
that
each Secured Creditor which is, as to any item of Collateral, a Junior Secured
Party in relation to one or more Senior Secured Parties, agrees that it (A)
will
not take any action to enforce, collect on or exercise any or its rights
or
remedies in respect of its liens on and security interests in such item or
take
or receive from the Company or any Guarantor, respectively, directly or
indirectly, in cash or other property or by setoff or in any other manner,
whether pursuant to any judicial or nonjudicial enforcement, collection,
execution, levy or foreclosure proceedings or otherwise, including by deed
in
lieu of foreclosure, the Collateral, or any part thereof or interest therein,
in
each case unless and until each such Senior Secured Party has given written
notice to such Junior Secured Party that those Obligations to such Senior
Secured Party which are secured by such item and which are stated in Section
2
hereof to be senior to the Obligations to such Junior Secured Party have
been
indefeasibly paid in full (and each such Senior Secured Party hereby agrees
promptly to give such notification following such payment to such Senior
Secured
Party), (B) will not interfere with any exercise by or on behalf of each
such
Senior Secured Party in respect of any liens and security interests of such
Senior Secured Party on or in such item or any other rights or remedies of
such
Senior Secured Party in furtherance of the rights and remedies of such Senior
Secured Party to the extent set forth in Section 2 hereof, and (C) will hold
and
promptly pay or deliver to each such Senior Secured Party, in order of and
in
accordance with the priorities set forth in Section 2 above (subject, however,
to Section 3(b) hereof), any such item received by such Junior Secured Party
(including, without limitation, any proceeds from the sale or other disposition
of such item), in each case unless and until each such Senior Secured Party
has
given written notice to such Junior Secured Party that its Obligations (to
the
extent set forth in clause (A) above) have been indefeasibly paid in full.
(b) (i) Except
as otherwise provided in clause (ii) below, each Secured Creditor agrees
to hold
any item of Collateral, received by it, in or against which a security interest
or lien may be perfected by possession, as possessory agent on behalf of
all
Secured Creditors that have a lien on or security interest in such item
(including, if appropriate, on its own behalf), and, unless such Secured
Creditor is a Senior Secured Party as to such item in relation to all other
Secured Creditors, to give notice (indicating the nature and amount of such
items) of such item and to turn over to the appropriate Secured Creditor
thereto
forthwith upon receipt thereof, provided
that
this clause (i) is intended solely to assure continuous perfection of the
liens
and security interests granted under the Security Documents and nothing in
this
clause (i) shall be deemed or construed as altering the priorities or
obligations set forth elsewhere in this Agreement; and (ii) in the event
any
Secured Creditor receives any proceeds from the sale or any other disposition
of
any Collateral in contravention of this Agreement) or in excess of the portion
of such proceeds to which such Secured Creditor is entitled hereunder, such
Secured Creditor shall give notice (indicating the nature and amount of such
proceeds and such excess, as applicable) and turn such proceeds or such excess,
as applicable, over to the appropriate Secured Creditor entitled thereto.
(c) Except
as
otherwise expressly provided in this Agreement, each right, power and remedy
of
any of the Secured Creditors provided for in this Agreement or any of the
Transaction Documents, or any other document relating thereto, whether such
right, power or remedy is now existing or hereafter available at law or in
equity or by statute or otherwise, shall be cumulative and concurrent (except
to
the extent otherwise provided in any such document) and shall be in addition
to
every other such right, power or remedy. Except as otherwise provided in
Section
3(a), the Transaction Documents, or any other document relating thereto,
the
exercise or the beginning of the exercise by any Secured Creditor of any
one or
more of such rights, powers or remedies shall not preclude the simultaneous
or
later exercise of all such rights, powers or remedies, and no course of dealing
or failure or delay on the part of any party hereto in exercising any such
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
its rights, powers or remedies.
(d) Each
Secured Creditor which is, as to any item of Collateral, a Junior Secured
Party
in relation to one or more Senior Secured Parties agrees that this Agreement
shall be enforceable against it in all circumstances, including, without
limitation, in any Bankruptcy Proceeding.
SECTION 4. Notices
of Default; Collateral Disposition, etc. (a)
Each of the Secured Creditors agrees individually to give the others (as
applicable): copies of any written notice of an event of default (under any
Transaction Document) received from or sent to any Grantor, (i) within 10
business days of receipt of any such notice by such Secured Creditor from
such
Grantor (or, if earlier, prior to such Secured Creditor’s exercising any right
or remedy or taking any other action, in respect of such event of default,
against the Company, any Guarantor, any Company Collateral or any Guarantor
Collateral), or, as applicable, (ii) simultaneously with any such notice
sent by
such Secured Creditor to any Grantor; and
(b) This
Agreement is intended, in part, to constitute a request for notice and a
written
notice of a claim by each Secured Creditor to the other of any interest in
the
Collateral, in accordance with the provisions of Section 9-611 and 9-621
of the
Uniform Commercial Code.
(c) Anything
herein to the contrary notwithstanding, nothing in this Section 4 shall permit
any Secured Creditor to exercise any right or remedy, or to take any other
action, against or in respect of the Company, any Guarantor, any Company
Collateral or any Guarantor Collateral in contravention of Sections 2 or
3
hereof or of any other provision of this Agreement.
SECTION 5. Rights
of Subrogation. Any
Junior Secured Party in respect of one or more Senior Secured Parties agrees
that, whether or not any such Senior Secured Party shall have received any
payment or distribution to any one or more Senior Secured Parties from the
Company or any Guarantor or on account of their Obligations, such Junior
Secured
Party shall not be entitled to exercise any rights of subrogation or
reimbursement (or similar right or remedy of a surety) until the date on
which
all Obligations to all such Senior Secured Parties (to the extent such
Obligations are stated in Section 2 hereof to be senior to the Obligations
to
such Junior Secured Party) shall have been indefeasibly paid in full.
SECTION 6. Further
Assurances. Any
Junior Secured Party in respect of one or more Senior Secured Parties will,
at
the expense of the Company, at any time and from time to time promptly execute
and deliver all further instruments and documents and take all further action,
that any Senior Secured Party may reasonably request, in order to protect
any
right or interest granted or purported to be granted hereby or to enable
any
Senior Secured Party to exercise and enforce its rights and remedies hereunder.
SECTION 7. Waiver
of Marshalling and Similar Rights. Each
of the parties hereto, to the fullest extent permitted by applicable law,
waives
any requirement regarding, and agrees not to demand, request, plead or otherwise
claim the benefit of, any marshalling, appraisement, valuation or other similar
right that a creditor or any other Person may otherwise may have under
applicable law.
SECTION 8. Obligations
Hereunder Not Affected. Except
as otherwise provided in this Agreement, all rights, interests, agreements
and
obligations of the Secured Creditors hereunder, in respect of each other
or in
respect of the other parties to this Agreement, and all agreements and
obligations of the Junior Secured Parties in respect of the respective Senior
Secured Parties under this Agreement shall remain in full force and effect
irrespective of:
(a) Any
lack
of validity or enforceability of any Transaction Document or any other agreement
or instrument relating thereto;
(b) Any
change in the time, manner or place of payment of, the security for, or in
any
other term of, all or any of the Obligations secured or guaranteed by the
Security Documents, or any other extension, renewal, supplement, amendment
or
other modification, waiver, refinancing or restructuring of or any consent
to
departure from, or any act, omission or default under, this Agreement or
any
other Transaction Document (including, without limitation, any increase in
such
Obligations resulting from the extension of additional credit to, or the
issuance of additional debt or equity instruments by, the Company or any
of its
Subsidiaries or otherwise, but excluding, in any event, any such increase
in the
Company’s Obligations to any one or more Secured Creditors to the extent that,
after giving effect thereto and to any reductions associated or occurring
substantially concurrently with such increase, the aggregate amount of the
Company’s Obligations to such Secured Creditors would exceed the aggregate
amount of such Obligations to such Secured Creditors stated to be subject
to the
priorities of Section 2 hereof);
(c) Any
taking, exchange, surrender, release or non-perfection of any lien or security
interest in the Collateral, or any other collateral, or any taking, release,
supplement, amendment or other modification or waiver of or consent to departure
from any Guaranty, or any other guaranty, for all or any of the Obligations,
or
any settlement or compromise of any of such Obligations;
(d) Any
manner of application of the Collateral, or any other collateral, or proceeds
thereof, to all or any of the Obligations of the Company secured or guaranteed
by the Security Documents, or any manner of sale or other disposition of
any
Collateral or such other collateral or any other assets of the Company;
(e) Any
exercise or failure to exercise any rights by or against any Secured Creditor;
(f) Any
change, restructuring or termination of the corporate structure of the Company
or any of its Subsidiaries (including, without limitation, Acura Pharmaceutical
Technologies, Inc. and Axiom Pharmaceutical Corporation); or
(g) Any
other
circumstance (including, without limitation, any statute of limitations)
that
might otherwise constitute a defense available to, or a discharge of, any
Grantor, any Guarantor, any borrower, any Secured Creditor or any other secured
creditor (irrespective of such creditor being subordinated whether in priority
of its liens on or security interest in collateral, in right of payment or
otherwise).
This
Agreement shall continue to be effective or be reinstated, as the case may
be,
if at any time any payment of any Obligation is rescinded or must otherwise
be
returned by any Secured Creditor upon the initiation of any Bankruptcy
Proceedings against any Grantor, or otherwise, all as though such payment
had
not been made.
SECTION 9. Appointment
of Collateral Agents.
In case
of the pendency of any Bankruptcy Proceeding or other judicial proceeding
relative to any Grantor or Guarantor, the Agent shall be entitled and empowered,
by intervention in such proceeding or otherwise, (a) to file and prove a
claim
for the whole amount of the Obligations and other amounts due under the
Transaction Documents or this Agreement and to file such other papers or
documents as may be necessary or advisable in order to have such claims and
amounts due allowed in such Bankruptcy Proceeding or judicial proceeding,
and
(b) to collect and receive any moneys or other property payable or deliverable
on any such claims or other amounts due and to distribute the same in accordance
with the provisions hereof. Nothing in this paragraph shall be deemed to
authorize the Agent to authorize or consent to or accept or adopt on behalf
of
any 2005 Lender any plan or reorganization, arrangement, adjustment or
composition affecting the Obligations or other amounts due under the Transaction
Documents or this Agreement, or to authorize the Agent to vote in respect
of the
Obligations or other amounts due in any such Bankruptcy Proceeding or judicial
proceeding.
SECTION 10. Representations
and Warranties. Each
of the Watson Holders, the June 2005 Lenders and the September 2005 Lenders
represents and warrants to the other Watson Holders, June 2005 Lenders and
September 2005 Lenders party hereto as follows:
(a) (i) This
Agreement has been duly executed and delivered by its duly authorized officer
and constitutes its legal, valid and binding obligation, enforceable against
it
in accordance with the terms hereof; and (ii) the execution, delivery and
performance by it of this Agreement have been duly authorized by all necessary
corporate or partnership action, as the case may be, and do not and will
not (A)
violate any provision of any law, rule or regulation having applicability
to it
or of its (x) charter or articles of association or by-laws or (y) limited
partnership agreement, as the case may be, (B) result in a breach of or
constitute a default or an event of default (or any event which, with the
giving
of notice, the lapse of time, or both, would constitute an event of default)
under any indenture or loan or credit agreement or any other material agreement,
lease or instrument to which it is a party, or (C) require the consent or
approval of any governmental authority or arbitrator;
(b) Each
of
the Watson Holders represents and warrants that it has not heretofore
transferred or assigned its lien on and security interest in any Collateral
under the Watson Company Security Documents or the Watson Guarantor Security
Documents; and
(c) Each
of
the June 2005 Lenders represents and warrants that it has not heretofore
transferred or assigned its lien on and security interest in any Collateral
under the June 2005 Company Security Documents or the June 2005 Guarantor
Security Documents.
SECTION 11. Assignments. (a) No
party hereto shall assign its rights hereunder or any interest herein or
any of
its rights or interests pursuant to the respective Security Documents made
by it
or in its favor, or any of its obligations hereunder or thereunder, to any
other
Person (i) without the prior written consent of the Senior Secured Parties
holding a majority of the amount of the Obligations to such Senior Secured
Parties and (ii) in compliance with Section 11(b) below.
(b) In
the
event of any assignment of any Security Document by any party hereto or by
any
successor or assignee of any party hereto or by any other party which may
now or
hereafter have any rights, title or interest in such Security Document,
respectively, the terms of such assignment shall provide that, and the assigned
Security Document shall bear a legend to the effect that (i) all provisions
of
such agreement, including provisions relating to the assignment thereof,
shall
be subject to the terms of this Agreement and that in the event of any conflict
between such agreement and this Agreement, this Agreement shall prevail and
(ii)
the assignee of such Security Document shall be bound by all duties and
obligations of the assignor of such Security Document under this
Agreement.
(c) Notwithstanding
anything to the contrary in this Agreement, each party hereto acknowledges
the
assignment before the date hereof by Watson to the Watson Holders (and/or
the
Agent) of all of Watson’s rights and interests under the Watson Company Security
Documents, the Watson Guarantor Security Documents, the Watson Guaranty,
the
Watson Loan Agreement, the Watson Term Loan and the Watson Note.
SECTION 12. Continuing
Agreement; Assignments of Obligations. (a) This
Agreement shall remain in full force and effect until the date on which all
Obligations shall have been indefeasibly paid in full and no Obligations
are
outstanding.
(b) This
Agreement shall be binding upon, and inure to the benefit of and be enforceable
by, each party hereto and its successors, permitted transferees and assigns.
(c) Without
limiting the generality of Section 12(b) above, except as otherwise provided
in
Section 11, nothing in this Agreement shall preclude any Secured Creditor
from
assigning or otherwise transferring all or any porting of its rights and
obligations under any Transaction Document to any other Person, and such
other
Person shall thereupon become vested with all the rights in respect thereof
granted to such Secured Creditor herein or otherwise, in each case as provided
in the respective Transaction Documents.
SECTION 13. Amendment;
Modification; Waiver of Documents. (a) Except
as otherwise expressly provided herein, no provision of this Agreement may
be
supplemented, amended, or otherwise modified or waived other than by a writing
signed by the parties hereto holding (i) at least 60% of the outstanding
principal amount under the September 2005 Notes, (ii) at least 60% of the
outstanding principal amount under the June 2005 Notes, and (iii) at least
60%
of the outstanding principal amount under the Watson Note. Without limiting
the
generality of the foregoing, the parties expressly acknowledge that no
amendment, waiver or modification of Sections 2 or 3 of this Agreement shall
require any consent of any Grantor. Furthermore, except as otherwise expressly
provided herein, no rights of any Secured Creditor in any item of Collateral
may
be amended, supplemented, or otherwise modified (whether by virtue of supplement
or amendment to or other modification of this Agreement, any Transaction
Document or otherwise) without the prior written consent of such parties
as
would be sufficient to amend this Agreement pursuant to the first sentence
of
this Section 13. Anything herein to the contrary notwithstanding (but except
as
otherwise specified in the following sentence), each Secured Creditor may
make
supplements or amendments to, or modifications or waivers of the provisions
of
its Transaction Documents in accordance with the terms thereof without the
prior
written consent of or notice to any other Person, except for any changes
in the
definition of "Company Collateral" or "Guarantor Collateral" (or similar
terms)
set forth therein resulting in increase of the rights of such Secured Creditor
in such item, which changes in such definitions shall require the prior written
consent of such parties as would be sufficient to amend this Agreement pursuant
to the first sentence of this Section 13.
(b) To
the
extent any provision of Section 13(a) or (b) hereof requires the consent
of any
Secured Creditor under one or more Security Documents to which such Secured
Creditor is a party, the effectiveness of such consent shall be determined
in
accordance with such Security Documents.
(c) This
Agreement supersedes in all respects the June 2005 Subordination Agreement.
SECTION 14. Intercreditor
Agreement for Benefit of Parties Hereto. Nothing
in this Agreement, express or implied, is intended or shall be construed
to
confer upon any person or entity other than the Secured Creditors any right,
remedy or claim by reason of this Agreement or any covenant, condition or
stipulation hereof; and the covenants, stipulations and agreements contained
in
this Agreement are and shall be for the sole and exclusive benefit of the
parties hereto, and their respective successors and assigns.
SECTION 15. Notices. All
notices, demands or other communications given hereunder shall be in writing
and
shall be sufficiently given if transmitted by facsimile or delivered either
personally or by a nationally recognized courier service marked for next
business day delivery or sent in a sealed envelope by first class mail, postage
prepaid and either registered or certified, return receipt requested, addressed
as follows:
if
to any
Watson Holder, June 2005 Lender or September 2005 Lender, to it as set forth
opposite its signature on the signature pages hereto;
if
to the
Company, to 616 N. North Court, Palatine, Illinois 60067, fax no. (847)
705-5399, to the attention of Mr. Andrew D. Reddick, Chief Executive Officer;
if
to the
Grantors and Guarantors, as applicable to: (i) Acura Pharmaceutical
Technologies, Inc., c/o the Company at the notice address or fax number above;
or (ii) Axiom Pharmaceutical Corporation, c/o the Company at the notice address
or fax number above;
if
to any
future Grantor or Guarantor, at such address given by such Grantor or Guarantor
for notices to it; and
or
to
such other address with respect to any party hereto as such party may from
time
to time notify (as provided above) the other parties hereto.
Any
such
notice, demand or communication shall be deemed to have been given (i) on
the
date of delivery, if delivered personally, (ii) on the date of facsimile
transmission, receipt confirmed, (iii) one business day after delivery to
a
nationally recognized overnight courier service, if marked for next day delivery
or (iv) five business days after the date of mailing, if mailed.
SECTION 16. Individual
Action. No
Secured Creditor may require any other Secured Creditor to take or refrain
from
taking any action hereunder or with respect to any of the Collateral, except
as
and to the extent expressly set forth in this Agreement. Except as otherwise
specified herein, no Secured Creditor shall be responsible to the other Secured
Creditors for any recitals, statements, representations or warranties contained
in this Agreement, any of the Transaction Documents, or any other agreements
or
instruments executed and delivered by any Grantor pursuant to any of the
Transaction Documents or in any certificate of other document referred to
or
provided for in, or received by either of them under, any of the Transaction
Documents or for the authenticity, accuracy, completeness, value, validity,
effectiveness, genuineness, enforceability or sufficiency of any of the
Transaction Documents or any other document referred to or provided for therein
or any lien under any Transaction Document, or the perfection of any such
lien
or for any failure by any Grantor to perform any of its Obligations under
any of
the Transaction Documents. Each Secured Creditor may employ agents and
attorneys-in-fact and shall not be responsible, except as to money or securities
received by it or its authorized agents, for the negligence or misconduct
of any
such agents or attorneys-in-fact selected by it with reasonable care. No
Secured
Creditor, and none of its directors, officers, employees or agents shall
be
liable or responsible for any action taken or omitted to be taken by it or
them
hereunder or in connection herewith, except for its or their own gross
negligence or willful misconduct.
SECTION 17. Reliance. In
acting with respect to this Agreement, each of the Secured Creditors shall
be
entitled (a) to rely on any communication believed by it to be genuine and
to
have been made, sent or signed by the Person by whom it purports to have
been
made, sent or signed and (b) to rely on the advice or services or opinions
and
statements of any professional advisor whose advice or services to it seem
necessary, expedient or desirable and are given or made in connection with
this
Agreement.
SECTION 18. No
Waiver; Remedies. Except
as otherwise specified herein, no failure on the part of any Secured Creditor
to
exercise and no delay in exercising, any right or remedy hereunder shall
operate
as a waiver thereof, nor shall any single or partial exercise of any right
or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right. The rights and remedies herein provided are cumulative
and
not exclusive of any remedies provided by law.
SECTION 19. Severability. If
any provision of this Agreement shall be invalid, illegal or unenforceable,
the
validity, legality and enforceability of the remaining provisions shall not
in
any way be affected or impaired thereby.
SECTION 20. Governing
Law. 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.
SECTION 21. 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 judgment or any other manner provided by law.
Nothing in this Agreement or any other Transaction Document shall affect
any
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 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. 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.
SECTION 22. Waiver
of Jury Trial. EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION
DOCUMENT OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT THEREOF.
SECTION 23. Titles
and Subtitles. The
titles of the articles, sections and subsections of this Agreement are for
convenience of reference only and are not to be considered in construing
this
Agreement.
SECTION 24. Counterparts. This
Agreement may be executed in any number of counterparts, including by facsimile
copy, each of which shall be deemed an original, but all of which together
shall
constitute one instrument.
SECTION 25. Entire
Agreement. This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior representations,
negotiations, writings, memoranda and agreements.
[Signature
pages follow]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of
the
date first written above.
|
"GRANTORS"
ACURA
PHARMACEUTICALS, INC.,
a
New York corporation
/s/
Andrew D.
Reddick
By:
Andrew D. Reddick
Its:
Chief Executive Officer
|
|
|
|
|
|
AXIOM
PHARMACEUTICAL
CORPORATION,
a
Delaware corporation
/s/
Andrew D.
Reddick
By:
Andrew D. Reddick
Its:
Chief Executive Officer
|
|
|
|
ACURA
PHARMACEUTICAL
TECHNOLOGIES,
INC.,
an
Indiana corporation
/s/
Andrew D.
Reddick
By:
Andrew D. Reddick
Its:
Chief Executive Officer
|
GALEN
PARTNERS III, L.P.
By:
Claudius, L.L.C., General Partner
610
Fifth Avenue, 5th
Fl.
New
York, New York 10019
/s/Srini
Conjeevaram
By:
Srini Conjeevaram
Its:
General Partner
|
ESSEX
WOODLANDS HEALTH
VENTURES
V, L.P.
190
South LaSalle Street, Suite 2800
Chicago,
IL 60603
/s/
Immanuel
Thangaraj
By:
Immanuel Thangaraj
Its:
Managing Director
|
|
|
|
|
GALEN
PARTNERS INTERNATIONAL, III, L.P.
By:
Claudius, L.L.C., General Partner
610
Fifth Avenue, 5th
Floor
New
York, New York 10020
/s/
Srini Conjeevaram
By:
Srini Conjeevaram
Its:
General Partner
|
CARE
CAPITAL INVESTMENTS II, LP
By:
Care Capital II, LLC, as general partner
47
Hulfish St., Suite 310
Princeton,
NJ 08542
By:
/s/
David R.
Ramsay
Name:
David R. Ramsay
Title:
Authorized Signatory
|
|
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|
GALEN
EMPLOYEE FUND III, L.P.
By:
Wesson Enterprises, Inc.
610
Fifth Avenue, 5th
Floor
New
York, New York 10020
/s/
Bruce F. Wesson
By:
Bruce F. Wesson
Its:
General Partner
|
CARE
CAPITAL OFFSHORE
INVESTMENTS
II, LP
By:
Care Capital, L.L.C., as general partner
47
Hulfish St., Suite 310
Princeton,
NJ 08542
By:
/s/
David R.
Ramsay
Name:
David R. Ramsay
Title:
Authorized Signatory
|
MICHAEL
WEISBROT
1136
Rock Creek Road
Gladwyne,
Pennsylvania 19035
/s/Michael
Weisbrot
|
SUSAN
WEISBROT
1136
Rock Creek Road
Gladwyne,
Pennsylvania 19035
/s/Susan
Weisbrot
|
|
|
JOHN
E. HEPPE, JR.
237
W. Montgomery Avenue
Haverford,
Pennsylvania 19041
/s/John
E. Heppe, Jr.
|
DENNIS
ADAMS
120
Kynlyn Road
Radnor,
Pennsylvania 19312
/s/Dennis
Adams
|
|
|
PETER
STIEGLITZ
RJ
Palmer LLC
156
West 56th
Street, 5th
Floor
New
York, New York 10019
/s/Peter
Stieglitz
|
GEORGE
E. BOUDREAU
222
Elbow Lane
Haverford,
PA 19041
/s/George
E.
Boudreau
|
Unassociated Document
EXHIBIT
10.4
COMPANY
GENERAL SECURITY AGREEMENT
This
Company General Security Agreement (the “Agreement”)
is
dated as of September 16, 2005 by and among Acura Pharmaceuticals, Inc.,
a New
York corporation with its principal place of business at 616 N. North Court,
Palatine, Illinois, 60067 (“Debtor”),
and
Galen Partners III, L.P., a Delaware limited partnership with its principal
place of business at 610 Fifth Avenue, Fifth Floor, New York, New York, 10020,
acting in its capacity as agent for the Lenders, as defined below (the
“Agent”),
for
the benefit of the Lenders.
PRELIMINARY
STATEMENTS
Debtor
has entered into a Loan Agreement of even date herewith (as the same may
be
amended, modified, supplemented or restated from time to time, the “Loan
Agreement;”
terms
which are capitalized in this Agreement and not otherwise defined shall have
the
meanings ascribed to them in the Loan Agreement) with the Lenders party thereto
(the “Lenders”).
The
Lenders have required, as a condition precedent to the effectiveness of the
Loan
Agreement, that the Debtor (a) grant to the Agent, for the ratable benefit
of
the Lenders, a security interest in and to the Collateral (as defined in
Section
2.1 below) and (b) execute and deliver this Agreement in order to secure
the
payment and performance by the Debtor of the obligations owing by the Debtor
to
the Lenders under the Loan Agreement, the Notes, the other Transaction Documents
and each of the agreements, documents and instruments delivered by the Debtor
pursuant thereto or in connection therewith (collectively, the “Obligations”).
AGREEMENT
In
consideration of the premises and in order to induce the Lenders to enter
into
and perform the Loan Agreement, the Debtor hereby agrees as
follows:
ARTICLE
1
CREATION
OF SECURITY INTEREST
1.1 SECURITY
INTEREST
The
Debtor hereby pledges, assigns and grants to the Agent a continuing perfected
lien and security interest having priority over any and all other security
interests in all of the Debtor’s right, title and interest in and to the
Collateral (as defined in Section 2.1 below) in order to secure the payment
and
performance of all Obligations owing by the Debtor.
1.2 DEBTOR
REMAINS LIABLE
Anything
herein to the contrary notwithstanding, (a) the Debtor shall remain liable
under
the contracts and agreements included in the Collateral to the extent set
forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Agent
of any of the rights hereunder shall not release the Debtor from any of its
duties or obligations under the contracts and agreements included in the
Collateral and (c) neither the Agent nor any Lender shall have any obligation
or
liability under the contracts and agreements included in the Collateral by
reason of this Agreement, the Loan Agreement or any other Transaction Document,
nor shall the Agent or any Lender be obligated to perform any of the obligations
or duties of the Debtor thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder.
ARTICLE
2
COLLATERAL
2.1 COLLATERAL
For
purposes of this Agreement, the term “Collateral”
shall
mean all of the assets of the Debtor including all of the kinds and types
of
property described in clauses (a) through (h) of this Section 2.1, whether
now
owned or hereafter at any time arising, acquired or created by the Debtor
and
wherever located, and includes all replacements, additions, accessions,
substitutions, repairs, proceeds and products relating thereto or therefrom,
and
all documents, ledger sheets and files of the Debtor relating thereto and
all
Proceeds (as defined in Section 2.2 below) of Collateral:
(a) all
of
the Debtor’s accounts, whether now existing or existing in the future, including
without limitation (i) all accounts receivable (whether or not specifically
listed on schedules furnished to the Agent), including, without limitation,
all
accounts created by or arising from all of the Debtor’s sales of goods or
rendition of services made under any of the Debtor’s trade names, or through any
of its divisions, (ii) all unpaid seller’s rights (including rescission,
replevin, reclamation and stoppage in transit) relating to the foregoing
or
arising therefrom, (iii) all rights to any goods represented by any of the
foregoing, including returned or repossessed goods, (iv) all reserves and
credit
balances held by the Debtor with respect to any such accounts receivable
or
account debtors, (v) all health-care-insurance receivables, and (vi) all
guarantees or collateral for any of the foregoing (all of the foregoing property
and similar property being hereinafter referred to as “Accounts”);
(b) all
of
the Debtor’s inventory, including without limitation (i) all raw materials, work
in process, parts, components, assemblies, supplies and materials used or
consumed in the Debtor’s businesses, wherever located and whether in the
possession of the Debtor or any other Person; (ii) all goods, wares and
merchandise, finished or unfinished, held for sale or lease or leased or
furnished or to be furnished under contracts of service, wherever located
and
whether in the possession of the Debtor or any other person or entity; and
(iii)
all goods returned to or repossessed by the Debtor (all of the foregoing
property being hereinafter referred to as “Inventory”);
(c) all
of
the equipment owned or leased by the Debtor, including, without limitation,
machinery, equipment, office equipment and supplies, computers and related
equipment, furniture, furnishings, tools, tooling, jigs, dies, fixtures,
manufacturing implements, fork lifts, trucks, trailers, motor vehicles, and
other equipment (all of the foregoing property being hereinafter referred
to as
“Equipment”);
(d) all
of
the Debtor’s general intangibles (including, without limitation, payment
intangibles), instruments, securities (including, without limitation, United
States of America Treasury Bills), credits, claims, demands, documents, letters
of credit and letter of credit proceeds, documents of title, certificates
of
title, certificates of deposit, warehouse receipts, bills of lading, leases
which are permitted to be assigned or pledged, deposit accounts, money, tax
refund claims, and contract rights which are permitted to be assigned or
pledged
(all of the foregoing property being hereinafter referred to as “Intangibles”);
(e) all
of
the Debtor’s intellectual property, including, without limitation, New Drug
Applications, Investigatory New Drug Applications, Abbreviated New Drug
Applications, Alternative New Drug Applications, registrations and quotas
as
issued by the DEA or the Attorney General of the United States pursuant to
the
CSA, certifications, permits and approvals of federal and state governmental
agencies, patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade names, domain names, technical
knowledge and processes, formal or informal licensing arrangements which
are
permitted to be assigned or pledged, blueprints, technical specifications,
computer software, programs, databases, copyrights, copyright applications
and
all confidential and proprietary information, including, without limitation,
know-how, trade secrets, manufacturing and production processes and techniques,
inventions, research and development information, databases and data, including,
without limitation, technical data, financial and marketing and business
data,
customer lists, supplier lists, pricing and cost information and business
and
marketing plans, and all embodiments thereof, and rights thereto, including,
without limitation, all of the Debtor’s rights to use the patents, trademarks,
copyrights, service marks, or other property of the aforesaid nature of other
Persons now or hereafter licensed to the Debtor, together with the goodwill
of
the business symbolized by or connected with the Debtor’s trademarks,
copyrights, service marks, licenses and the other rights included in this
Section 2.1(e) (all of the foregoing property being hereinafter referred
to as
“Intellectual
Property”);
(f) all
interest, dividends, distributions, cash, instruments and other property
from
time to time received, receivable or otherwise distributed in respect of
or in
exchange for any or all of the then existing Collateral;
(g) all
deposit accounts, letter-of-credit rights, instruments (including, without
limitation, promissory notes), investment property and chattel paper;
and
(h) all
of
the shares of stock or other securities of Acura Pharmaceutical Technologies,
Inc. and Axiom Pharmaceutical Corporation, and the certificates, if any,
representing such shares or other securities, and all dividends, distributions,
return of capital, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange
for
any or all of such shares or securities and all subscription warrants, rights
or
options issued thereon or with respect thereto, and all investment property,
all, to the extent applicable, as further set forth in the Stock Pledge
Agreement.
2.2 PROCEEDS
For
purposes of this Agreement, the term “Proceeds”
shall
include (a) whatever is now or hereafter received by the Debtor upon the
sale,
exchange, collection or other disposition of any item of Collateral, whether
such proceeds constitute Inventory, Accounts, Intangibles, royalties, payment
under insurance (whether or not the Agent is the loss payee thereof), or
any
indemnities, warranties or guaranties, payable by reason of loss or damage
to or
otherwise with respect to any or the foregoing Collateral, and (b) any such
items which are now or hereafter acquired by the Debtor with any proceeds
of
Collateral hereunder.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES
The
Debtor represents and warrants as follows:
3.1 ORGANIZATION
AND EXISTENCE
The
Debtor is a corporation duly organized, validly existing and in good standing
under the laws of the State of New York and is qualified to do business in
such
other jurisdictions as the nature or conduct of its operations or the ownership
of its properties require such qualification. The Debtor does not own or
lease
any property or engage in any activity in any jurisdiction that might require
qualification to do business as a foreign corporation in such jurisdiction
and
where the failure to so qualify could reasonably be expected to have a Material
Adverse Effect or subject the Debtor to a material liability.
3.2 AUTHORIZATION
(a) The
Debtor has all requisite corporate power and authority (i) to execute and
deliver, and to perform and observe its obligations under, the Transaction
Documents to which it is a party, and (ii) to consummate the transactions
contemplated hereby and thereby, including, without limitation, the grant
of any
security interest, mortgage, payment trust, guaranty or other security
arrangement by the Debtor in, on or in respect of the Collateral.
(b) All
corporate action on the part of the Debtor and its directors and stockholders
necessary for the authorization, execution,
delivery and performance by the Debtor of this Agreement and the transactions
contemplated herein or in any other Transaction Document to which it is a
party,
has been taken.
3.3 PLACES
OF BUSINESS
The
Debtor has no places of business, or warehouses in which it leases space,
other
than those set forth on Section
3.3 of Schedule A,
a copy
of which is attached hereto and made a part hereof (“Schedule
A”).
3.4 LOCATION
OF COLLATERAL
Except
for the movement of Collateral from time to time from one place of business
or
warehouse listed on Section
3.3 of Schedule A
to
another place of business or warehouse listed on Section
3.3 of Schedule A,
the
Collateral is located at the Debtor’s chief executive office or other places of
business or warehouses listed on Section
3.3 of Schedule A,
and not
at any other location.
3.5 RESTRICTIONS
ON COLLATERAL DISPOSITION
Except
for any restrictions imposed under the Watson Security Agreement and the
Bridge
Loan Security Agreement (each as hereinafter defined), none of the Collateral
is
subject to contractual obligations that may restrict or inhibit the Agent’s
rights or ability to sell or dispose of the Collateral or any part thereof
after
the occurrence of an Event of Default.
3.6 STATUS
OF ACCOUNTS
Each
Account is based on an actual and bona fide rendition of services or sale
of
goods or products to customers, made by the Debtor in the ordinary course
of its
business. The Accounts created are the Debtor’s exclusive property and are not
and shall not be subject to any lien, consignment arrangement, encumbrance,
security interest or financing statement whatsoever, except (i) the lien
in
favor of the holders of the Senior Note under the Watson Term Loan and the
documents executed in connection therewith, including, without limitation,
the
Watson Security Agreement dated as of March 29, 2000 (the “Watson
Security Agreement”)
and
(ii) the lien in favor of the holders of the Secured Promissory Notes issued
in
connection with a bridge loan (the “Bridge
Loan”)
extended
pursuant to the terms of that certain Loan Agreement, dated June 22, 2005
and
the documents executed in connection therewith, including, without limitation,
the Guarantors Security Agreement dated June 22, 2005 (the “Bridge
Loan Security Agreement”).
To
the best knowledge of the Debtor, the Debtor’s customers have accepted the
goods, products and services and owe and are obligated to pay the full amounts
stated in the invoices according to their terms, without any dispute, offset,
defense or counterclaim.
3.7 COPYRIGHTS,
TRADEMARKS AND PATENTS
(a) The
Debtor owns outright all of the Intellectual Property Rights listed on
Section
4.12
of the
Schedule of Exceptions attached to the Loan Agreement free and clear of all
liens and encumbrances except for the Permitted Liens and pays no royalty
to
anyone under or with respect to any of them.
(b) The
Debtor has not licensed to anyone the use of any of such Intellectual Property
Rights and has no knowledge of the infringing use by the Debtor or any Guarantor
of any Intellectual Property Rights of third parties.
(c) Other
than as disclosed to the Debtor’s Board of Directors, the Debtor has no
knowledge, nor has it received any notice (i) of any conflict with the asserted
rights of others with respect to any Intellectual Property Rights used in,
or
useful to, the operation of the business conducted by the Debtor and the
Guarantors or with respect to any license under which the Debtor or a Guarantor
is licensor or licensee; or (ii) that the Intellectual Property Rights infringe
upon the rights of any third party.
(d) The
Debtor has made or performed all filings, recordings and other acts and has
paid
all required fees and taxes to maintain and protect its interest in each
and
every item of Intellectual Property in full force and effect throughout the
world, and to protect and maintain its interest therein including, without
limitation, recordations of any of its interests in patents and trademarks
with
the U.S. Patent and Trademark Office and in corresponding national and
international patent offices, and recordation of any of its interests in
any
copyrights with the U.S. Copyright Office and in corresponding national and
international copyright offices. The Debtor has used proper statutory notice
in
connection with its use of each patent, trademark and copyright.
3.8 INVENTORY
All
Inventory of the Debtor consists of a quality and quantity usable and salable
in
the ordinary course of business, except for obsolete items and items of
below-standard quality, all of which have been or will be written off or
written
down to net realizable value on the consolidated balance sheet of the Debtor
and
its Subsidiaries as of March 31, 2005. The quantities of each type of Inventory
(whether raw materials, work-in-process, or finished goods) are not excessive,
but are reasonable and warranted in the present circumstances of the
Debtor.
3.9 OWNERSHIP
The
Debtor is the legal and beneficial owner of its Collateral free and clear
of any
lien, claim, option or right of others, except for the security interest
created
under this Agreement, the Watson Security Agreement and the Bridge Loan Security
Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of such Collateral or listing the Debtor
or any
trade name of the Debtor is on file in any recording office, except such
as may
have been filed relating to the Watson Term Loan and the Bridge Loan. The
Agent
has, for the benefit of the Lenders, a valid and perfected security interest
in
the Collateral which security interest has priority over any and all other
security interests in such Collateral.
ARTICLE
4
COVENANTS
The
Debtor agrees as follows:
4.1 DEFEND
AGAINST CLAIMS
The
Debtor will defend the Collateral against all claims and demands of all Persons
at any time claiming the same or any interest therein unless both the Agent
and
the Debtor determine that the claim or demand is not material and that,
consequently, such defense would not be consistent with good business judgment.
The Debtor will not permit any lien notices with respect to the Collateral
or
any portion thereof to exist or be on file in any public office except for
those
in favor of the Agent and those permitted under the terms of the Loan
Agreement.
4.2 CHANGE
IN COLLATERAL LOCATION
The
Debtor will not (a) change its corporate name, (b) change the location of
its
chief executive office or establish any place of business other than those
specified in Section
3.3 of Schedule A,
or (c)
move or permit movement of the Collateral from the locations specified therein
except from one such location to another such location, unless in each case
the
Debtor shall have given the Agent at least thirty (30) days prior written
notice
thereof, and shall have, in advance, executed and caused to be filed or
delivered to the Agent any financing statements or other documents required
by
the Agent to perfect the security interest of the Agent in the Collateral
in
accordance with Section 4.3 of this Agreement, all in form and substance
satisfactory to the Agent.
4.3 ADDITIONAL
FINANCING STATEMENTS
Promptly
upon the reasonable request of the Agent, the Debtor will execute and deliver
or
use its best efforts to procure any document, give any notices, execute and
file
any financing statements, mortgages or other documents, all in form and
substance satisfactory to the Agent, mark any chattel paper, deliver any
chattel
paper or instruments to the Agent and take any other actions that are necessary
or, in the opinion of the Agent, desirable to perfect or continue the perfection
and the first priority of the Agent’s security interest in the Collateral, to
protect the Collateral against the rights, claims, or interests of third
persons, or to effect the purposes of this Agreement. The Debtor will pay
the
costs incurred in connection with any of the foregoing.
4.4 ADDITIONAL
LIENS; TRANSFERS
Without
the prior written consent of the Agent, the Debtor will not, in any way,
hypothecate or create or permit to exist any lien, security interest, charge
or
encumbrance on or other interest in the Collateral, other than those permitted
under the terms of the Loan Agreement and the liens in favor of the holders
of
the Senior Note pursuant to (i) the Watson Term Loan and documents relative
thereto and (ii) the Bridge Loan and the documents relative thereto, and
the
Debtor will not sell, transfer, assign, pledge, collaterally assign, exchange
or
otherwise dispose of the Collateral, other than the sale of Inventory in
the
ordinary course of business and the sale of obsolete or worn out Equipment.
Notwithstanding the foregoing, if the proceeds of any such sale consist of
notes, instruments, documents of title, letters of credit or chattel paper,
such
proceeds shall be promptly delivered to the Agent to be held as Collateral
hereunder. If the Collateral, or any part thereof, is sold, transferred,
assigned, exchanged, or otherwise disposed of in violation of these provisions,
the security interest of the Agent shall continue in such Collateral or part
thereof notwithstanding such sale, transfer, assignment, exchange or other
disposition, and the Debtor will hold the proceeds thereof for the benefit
of
the Agent, and promptly transfer such proceeds to the Agent in
kind.
4.5 CONTRACTUAL
OBLIGATIONS
The
Debtor will not enter into any contractual obligations which may restrict
or
inhibit the Agent’s rights or ability to sell or otherwise dispose of the
Collateral or any part thereof after the occurrence or during the continuance
of
an Event of Default.
4.6 AGENT’S
RIGHT TO PROTECT COLLATERAL
Upon
the
occurrence or continuance of an Event of Default, the Agent shall have the
right
at any time to make any payments and do any other acts the Agent may deem
necessary to protect the security interests of the Lenders in the Collateral,
including, without limitation, the rights to pay, purchase, contest or
compromise any encumbrance, charge or lien which, in the reasonable judgment
of
the Agent, appears to be prior to or superior to the security interests granted
hereunder, and appear in and defend any action or proceeding purporting to
affect its security interests in, or the value of, the Collateral. The Debtor
hereby agrees to reimburse the Agent for all payments made and expenses incurred
under this Agreement including reasonable fees, expenses and disbursements
of
attorneys and paralegals acting for the Agent, including any of the foregoing
payments under, or acts taken to protect its security interests in, the
Collateral, which amounts shall be secured under this Agreement, and agrees
it
shall be bound by any payment made or act taken by the Agent hereunder absent
the Agent’s gross negligence or willful misconduct. The Agent shall have no
obligation to make any of the foregoing payments or perform any of the foregoing
acts.
4.7 FURTHER
OBLIGATIONS WITH RESPECT TO ACCOUNTS
In
furtherance of the continuing assignment and security interest in the Accounts
of the Debtor granted pursuant to this Agreement, upon the creation of Accounts,
upon the Agent’s request, the Debtor will execute and deliver to the Agent in
such form and manner as the Agent may require, solely for its convenience
in
maintaining records of Collateral, such confirmatory schedules of Accounts,
and
other appropriate reports designating, identifying and describing the Accounts
as the Agent may reasonably require. In addition, upon the Agent’s request, the
Debtor shall provide the Agent with copies of agreements with, or purchase
orders from, the customers of the Debtor and copies of invoices to customers,
proof of shipment or delivery and such other documentation and information
relating to such Accounts and other Collateral as the Agent may reasonably
require. Furthermore, upon the Agent’s request, the Debtor shall deliver to the
Agent any documents or certificates of title issued with respect to any property
included in the Collateral, and any promissory notes, letters of credit or
instruments related to or otherwise in connection with any property included
in
the Collateral, which in any such case came into the possession of the Debtor,
or shall cause the issuer thereof to deliver any of the same directly to
the
Agent, in each case with any necessary endorsements in favor of the Agent.
Failure to provide the Agent with any of the foregoing shall in no way affect,
diminish, modify or otherwise limit the security interests granted herein.
The
Debtor hereby authorizes the Agent to regard the Debtor’s printed name or rubber
stamp signature on assignment schedules or invoices as the equivalent of
a
manual signature by the Debtor’s authorized officers or agents.
4.8 INSURANCE
The
Debtor agrees to maintain public liability insurance, third party property
damage insurance and replacement value insurance on the Collateral under
such
policies of insurance, with such insurance companies, in such amounts and
covering such risks as are at all times satisfactory to the Agent in its
commercially reasonable judgment. All policies covering the Collateral are
to
name the Agent as an additional insured and the loss payee in case of loss,
and
are to contain such other provisions as the Agent may reasonably require
to
fully protect the Agent’s interest in the Collateral and to any payments to be
made under such policies. Without limiting the generality of the foregoing,
all
such policies shall contain standard lender’s loss payable clauses in favor of
the Agent and shall provide that the same may not be cancelled, terminated
or
revised without giving the Agent at least 30 days prior written notice of
such
cancellation, termination or revision. Proceeds of such insurance policy
or
policies will be applied to the Obligations unless written consent to the
contrary is obtained from the Agent. The Debtor will furnish the Agent with
certificates of insurance or such other evidence satisfactory to the Agent
so as
to evidence compliance with the provisions of this Section.
4.9 TAXES
The
Debtor agrees to pay, when due, all taxes lawfully levied or assessed against
the Debtor or any of the Collateral before any penalty or interest accrues
thereon; provided,
however,
that,
unless such taxes have become a federal tax or ERISA lien on any of the assets
of the Debtor, no such tax need be paid if the same is being contested, in
good
faith, by appropriate proceedings promptly instituted and diligently conducted
and if an adequate reserve or other appropriate provision shall have been
made
therefor as required in order to be in conformity with GAAP.
4.10 COMPLIANCE
WITH LAWS
The
Debtor agrees to comply in all material respects with all Legal Requirements
applicable to the Collateral or any part thereof, or to the operation of
its
business or its assets generally, unless the Debtor contests in good faith,
by
appropriate legal, administrative or other proceedings promptly instituted
and
diligently conducted, any such Legal Requirements in a reasonable manner
and in
good faith. The Debtor agrees to maintain in full force and effect, its
respective licenses and permits granted by any governmental authority as
may be
necessary or advisable for the Debtor to conduct its business in all material
respects.
4.11 MAINTENANCE
OF PROPERTY
The
Debtor agrees to keep all property useful and necessary to its business in
good
working order and condition (ordinary wear and tear excepted) and not to
commit
or suffer any waste with respect to any of its properties.
4.12 ENVIRONMENTAL
AND OTHER MATTERS
The
Debtor will conduct its business so as to comply in all respects with all
environmental, land use, occupational, safety or health Legal Requirements
in
all jurisdictions in which it is or may at any time be doing business, except
to
the extent that the Debtor is contesting, in good faith by appropriate legal,
administrative or other proceedings, promptly instituted and diligently
conducted, any such Legal Requirement; provided,
further,
that
the Debtor shall comply with the order of any court or other governmental
authority relating to such Legal Requirements unless the Debtor shall currently
be prosecuting an appeal, proceedings for review or administrative proceedings
and shall have secured a stay of enforcement or execution or other arrangement
postponing enforcement or execution pending such appeal, proceedings for
review
or administrative proceedings.
4.13 INTELLECTUAL
PROPERTY
With
respect to each item of its Intellectual Property, the Debtor agrees to take,
at
its expense, all necessary steps, including, without limitation, in the U.S.
Patent and Trademark Office, the U.S. Copyright Office and any other
governmental authority, to (a) maintain the validity and enforceability of
such
Intellectual Property and maintain such Intellectual Property in full force
and
effect, and (b) pursue the registration and maintenance of each patent,
trademark, or copyright registration or application, now or hereafter included
in such Intellectual Property of the Debtor, including, without limitation,
the
payment of required fees and taxes, the filing of responses to office actions
issued by the U.S. Patent and Trademark Office, the U.S. Copyright Office
or
other governmental authorities, the filing of applications for renewal or
extension, the filing of affidavits under Sections 8 and 15 of the U.S.
Trademark Act, the filing of divisional, continuation, continuation-in-part,
reissue and renewal applications or extensions, the payment of maintenance
fees
and the participation in interference, reexamination, opposition, cancellation,
infringement and misappropriation proceedings. The Debtor shall not, without
the
prior written consent of the Agent, discontinue use of or otherwise abandon
any
Intellectual Property, or abandon any right to file an application for any
patent, trademark or copyright, unless the Debtor shall have previously
determined that such use or the pursuit or maintenance of such Intellectual
Property is no longer desirable in the conduct of the Debtor’s business and that
the loss thereof would not be reasonably likely to have a Material Adverse
Effect, in which case, the Debtor will give prompt notice of any such
abandonment to the Agent.
4.14 FURTHER
ASSURANCES
The
Debtor shall take all such further actions and execute all such further
documents and instruments (including, but not limited to, collateral assignments
of Intellectual Property and Intangibles or any portion thereof) as the Agent
may at any time reasonably determine in its sole discretion to be necessary
or
desirable to further carry out and consummate the transactions contemplated
by
the Loan Agreement and the documentation relating thereto, including this
Agreement, and to perfect or protect the liens (and the priority status thereof)
of the Agent in the Collateral.
ARTICLE
5
REMEDIES
5.1 OBTAINING
COLLATERAL UPON DEFAULT
If
any
Event of Default shall have occurred and be continuing, then and in every
such
case, subject to the terms of the Loan Agreement regarding the exercise of
remedies and any mandatory requirements of applicable law then in effect,
the
Agent, in addition to any rights now or hereafter existing under applicable
law,
shall have all rights as a secured creditor under the Uniform Commercial
Code in
all relevant jurisdictions and may:
(a) personally,
or by agents or attorneys, immediately retake possession of the Collateral
or
any part thereof, from the Debtor or any other Person who then has possession
of
any part thereof, with or without notice or process of law, and for that
purpose
may enter upon the Debtor’s premises where any of the Collateral is located and
remove the same and use in connection with such removal any and all services,
supplies, aids and other facilities of the Debtor;
(b) instruct
the obligor or obligors on any agreement, instrument or other obligation
(including, without limitation, the Accounts) constituting the Collateral
to
make any payment required by the terms of such instrument or agreement directly
to the Agent;
(c) withdraw
all monies, securities and instruments held pursuant to any pledge arrangement
for application to the Obligations;
(d) sell,
assign or otherwise liquidate, or direct the Debtor to sell, assign or otherwise
liquidate, any or all of the Collateral or any part thereof, and take possession
of the proceeds of any such sale or liquidation;
(e) take
possession of the Collateral or any part thereof, by directing the Debtor
in
writing to deliver the same to the Agent at any place or places designated
by
the Agent, in which event the Debtor shall at its own expense:
(1) forthwith
cause the same to be moved to the place or places so designated by the Agent
and
there delivered to the Agent,
(2) store
and
keep any Collateral so delivered to the Agent at such place or places pending
further action by the Agent as provided in Section 5.2, and
(3) while
the
Collateral shall be so stored and kept, provide such guards and maintenance
services as shall be necessary to protect the same and to preserve and maintain
the Collateral in good condition;
it
being
understood that the Debtor’s obligation to so deliver the Collateral is of the
essence of this Agreement and that, accordingly, upon application to a court
of
equity having jurisdiction, the Agent shall be entitled to a decree requiring
specific performance by the Debtor of said obligation.
5.2 DISPOSITION
OF COLLATERAL
Any
Collateral repossessed by the Agent under or pursuant to Section 5.1 and
any
other Collateral whether or not so repossessed by the Agent may be sold,
assigned, leased or otherwise disposed of under one or more contracts or
as an
entirety, and without the necessity of gathering at the place of sale the
property to be sold, and in general in such manner, at such time or times,
at
such place or places and on such terms as the Agent may, in compliance with
any
mandatory requirements of applicable law, determine to be commercially
reasonable. Any of the Collateral may be sold, leased or otherwise disposed
of,
in the condition in which the same existed when taken by the Agent or after
any
overhaul or repair which the Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceedings permitted by such requirements shall be made upon not less than
ten
(10) days’ written notice to the Debtor specifying the time at which such
disposition is to be made and the intended sale price or other consideration
therefor, and shall be subject, for the ten (10) days after the giving of
such
notice, to the right of the Debtor or any nominee of the Debtor to acquire
the
Collateral involved at a price or for such other consideration at least equal
to
the intended sale price or other consideration so specified. Any such
disposition which shall be a public sale permitted by such requirements shall
be
made upon not less than ten (10) days’ written notice to the Debtor specifying
the time and place of such sale and, in the absence of applicable requirements
of law, shall be by public auction (which may, at the option of the Agent,
be
subject to reserve), after publication at least once in The
New York Times
not less
than ten (10) days prior to the date of sale. If The
New York Times
is not
then being published, publication may be made in lieu thereof in any newspaper
then being circulated in the City of New York, New York, as the Agent may
elect.
All requirements of reasonable notice under this Section 5.2 shall be met
if
such notice is mailed, postage prepaid at least ten (10) days before the
time of
such sale or disposition, to the Debtor at its address set forth herein or
such
other address as the Debtor may have, in writing, provided to the Agent.
The
Agent may, if it deems it reasonable, postpone or adjourn any sale of any
Collateral from time to time by an announcement at the time and place of
the
sale to be so postponed or adjourned without being required to give a new
notice
of sale. The proceeds realized from the sale of any Collateral shall be applied
as follows: first, to the reasonable costs, expenses and attorneys’ fees and
expenses incurred by Agent for collection and for acquisition, completion,
protection, removal, storage, sale and delivery of the Collateral; second,
to
interest due on any of the Obligations and any fees payable under this
Agreement; and third, to the principal of the Obligations. If any deficiency
shall arise, the Debtor shall remain liable to Agent and Lenders
therefor.
5.3 POWER
OF ATTORNEY
The
Debtor hereby irrevocably authorizes and appoints the Agent, or any Person
or
agent the Agent may designate, as the Debtor’s attorney-in-fact, at the Debtor’s
cost and expense, subject to the terms of the Loan Agreement regarding the
exercise of remedies, to exercise all of the following powers upon and at
any
time after the occurrence and during the continuance of an Event of Default,
which powers, being coupled with an interest, shall be irrevocable until
all of
the Obligations owing by the Debtor shall have been paid and satisfied in
full:
(a) accelerate
or extend the time of payment, compromise, issue credits, bring suit or
administer and otherwise collect Accounts or proceeds of any
Collateral;
(b) receive,
open and dispose of all mail addressed to the Debtor and notify postal
authorities to change the address for delivery thereof to such address as
the
Agent may designate;
(c) give
customers indebted on Accounts notice of the Agent’s interest therein, or to
instruct such customers to make payment directly to the Agent for the Debtor’s
account;
(d) convey
any item of Collateral to any purchaser thereof;
(e) give
any
notices or record any liens under Section 4.3 hereof; and
(f) make
any
payments or take any acts under Section 4.6 hereof.
The
Agent’s authority under this 5.3 shall include, without limitation, the
authority to execute and give receipt for any certificate of ownership or
any
document, transfer title to any item of Collateral, sign the Debtor’s name on
all financing statements or any other documents deemed necessary or appropriate
to preserve, protect or perfect the security interest in the Collateral and
to
file the same, prepare, file and sign the Debtor’s name on any notice of lien,
assignment or satisfaction of lien or similar document in connection with
any
Account and prepare, file and sign the Debtor’s name on a proof of claim in
bankruptcy or similar document against any customer of the Debtor, and to
take
any other actions arising from or incident to the rights, powers and remedies
granted to the Agent in this Agreement. This power of attorney is coupled
with
an interest and is irrevocable by the Debtor.
5.4 WAIVER
OF CLAIMS
Except
as
otherwise provided in this Agreement, THE DEBTOR HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH
THE
AGENT’S OR ANY LENDER’S TAKING POSSESSION OF OR DISPOSING OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH THE DEBTOR
WOULD
OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF
ANY STATE, and the Debtor hereby further waives, to the extent permitted
by
law:
(a) all
damages occasioned by such taking of possession except any damages which
are the
direct result of the Agent’s or Lender’s gross negligence or willful
misconduct;
(b) all
other
requirements as to the time, place and terms of sale or other requirements
with
respect to the enforcement of the Agent’s or Lender’s rights hereunder, except
as expressly provided herein; and
(c) all
rights of redemption, appraisement, valuation, stay, extension or moratorium
now
or hereafter in force under any applicable law in order to prevent or delay
the
enforcement of this Agreement or the absolute sale of the Collateral or any
portion thereof, and the Debtor, for itself and all who may claim under it,
insofar as it or they now or hereafter lawfully may, hereby waives the benefit
of all such laws.
Any
sale
of, or the grant of options to purchase, or any other realization upon any
Collateral shall operate to divest all right, title, interest, claim and
demand,
either at law or in equity, of the Debtor therein and thereto, and shall
be a
perpetual bar both at law and in equity against the Debtor and against any
and
all persons claiming or attempting to claim the Collateral so sold, optioned
or
realized upon, or any part thereof, from, through and under the
Debtor.
5.5 REMEDIES
CUMULATIVE
Each
and
every right, power and remedy hereby specifically given to the Agent shall
be in
addition to every other right, power and remedy specifically given under
this
Agreement, under the Loan Agreement or under other documentation relating
thereto or now or hereafter existing at law or in equity, or by statute,
and
each and every right, power and remedy whether specifically herein given
or
otherwise existing may be exercised from time to time or simultaneously and
as
often and in such order as may be deemed expedient by the Agent. All such
rights, powers and remedies shall be cumulative and the exercise or the
beginning of exercise of one shall not be deemed a waiver of the right to
exercise of any other or others. No delay or omission of the Agent in the
exercise of any such right, power or remedy and no renewal or extension of
any
of the Obligations shall impair any such right, power or remedy or shall
be
construed to be a waiver of any default or Event of Default or any acquiescence
therein.
ARTICLE
6
MISCELLANEOUS
PROVISIONS
6.1 NOTICES
All
notices, approvals, consents or other communications required or desired
to be
given hereunder shall be delivered in person, by facsimile transmission followed
promptly by first class mail, by a nationally recognized courier service
marked
for next business day delivery or by overnight mail, and delivered if to
the
Agent, then to the attention of Bruce F. Wesson, c/o Galen Partners III,
L.P.,
610 Fifth Avenue, Fifth Floor, New York, New York, 10020, fax no. (212)
218-4990, with a copy to George N. Abrahams, Esq., c/o Blank Rome, LLP, Chrysler
Building, 405 Lexington Avenue, New York, New York 10174, fax no. (917)
332-3763, and if to the Debtor, then to the attention of Mr. Andrew D. Reddick,
616 N. North Court, Suite 120, Palatine, Illinois 60067, with a copy to John
P.
Reilly, Esq., St. John & Wayne, L.L.C., 2 Penn Plaza East, Newark, New
Jersey, 07105, fax no. (973) 491-3555.
6.2 HEADINGS
The
headings in this Agreement are for purposes of reference only and shall not
affect the meaning or construction of any provision of this
Agreement.
6.3 SEVERABILITY
The
provisions of this Agreement are severable, and if any clause or provision
shall
be held invalid or unenforceable in whole or in part in any jurisdiction,
then
such invalidity or unenforceability shall affect, in that jurisdiction only,
such clause or provision, or part thereof, and shall not in any manner affect
such clause or provision in any other jurisdiction or any other clause or
provision of this Agreement in any jurisdiction.
6.4 AMENDMENTS,
WAIVERS AND CONSENTS
Any
amendment or waiver of any provision of this Agreement and any consent to
any
departure by the Debtor from any provision of this Agreement shall be effective
only if made or given in writing signed by the Agent.
6.5 INTERPRETATION
OF AGREEMENT
All
terms
not defined herein or in the Loan Agreement shall have the meaning set forth
in
the applicable Uniform Commercial Code. Acceptance of or acquiescence in
a
course of performance rendered under this Agreement shall not be relevant
in
determining the meaning of this Agreement even though the accepting or
acquiescing party had knowledge of the nature of the performance and opportunity
for objection.
6.6 CONTINUING
SECURITY INTEREST
This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect, (b) be binding upon the Debtor,
and
its successors and assigns and (b) inure to the benefit of the Agent and
its
successors and assigns.
6.7 REINSTATEMENT
To
the
extent permitted by law, this Agreement shall continue to be effective or
be
reinstated if at any time any amount received by the Agent in respect of
the
Obligations owing by the Debtor is rescinded or must otherwise be restored
or
returned by the Agent upon the occurrence or during the pendency of any Event
of
Default, all as though such payments had not been made.
6.8 SURVIVAL
OF PROVISIONS
All
representations, warranties and covenants of the Debtor contained herein
shall
survive the execution and delivery of this Agreement, and shall terminate
only
upon the full and final indefeasible payment and performance by the Debtor
of
the Obligations secured hereby.
6.9 SETOFF
The
Agent
shall have all rights of setoff available at law or in equity.
6.10 POWER
OF ATTORNEY
In
addition to the powers granted to the Agent under Section 5.3, the Debtor
hereby
irrevocably authorizes and appoints the Agent, or any Person or agent the
Agent
may designate, as the Debtor’s attorney-in-fact, at the Debtor’s cost and
expense, to exercise all of the following powers, which being coupled with
an
interest, shall be irrevocable until all of the Obligations shall have been
indefeasibly paid and satisfied in full:
(a) after
the
occurrence of an Event of Default, to receive, take, endorse, sign, assign
and
deliver, all in the name of the Agent or the Debtor, any and all checks,
notes,
drafts, and other documents or instruments relating to the Collateral;
and
(b) to
request, at any time from customers indebted on Accounts, verification of
information concerning the Accounts and the amounts owing thereon.
6.11 INDEMNIFICATION;
AUTHORITY OF AGENT
Neither
the Agent or any Lender nor any director, officer, employee, attorney or
agent
of the Agent or any Lender shall be liable to the Debtor for any action taken
or
omitted to be taken by it or them hereunder, except for its or their own
gross
negligence or willful misconduct, nor shall the Agent or any Lender be
responsible for the validity, effectiveness or sufficiency of this Agreement
or
of any document or security furnished pursuant hereto. The Agent, the Lenders
and their respective directors, officers, employees, attorneys and agents
shall
be entitled to rely on any communication, instrument or document reasonably
believed by it or them to be genuine and correct and to have been signed
or sent
by the proper person or persons. The Debtor agrees to indemnify and hold
harmless the Agent, the Lenders and any other person from and against any
and
all costs, expenses (including reasonable fees, expenses and disbursements
of
attorneys and paralegals (including, without duplication, reasonable charges
of
inside counsel)), claims or liability incurred by the Agent , any Lender
or such
person hereunder, unless such claim or liability shall be due to willful
misconduct or gross negligence on the part of the Agent, the Lender or such
person.
6.12 RELEASE;
TERMINATION OF AGREEMENT
Subject
to the provisions of Section 6.7 of this Agreement, this Agreement shall
terminate upon full and final indefeasible payment and performance of all
the
Obligations owing by the Debtor. At such time, the Agent shall, at the request
of the Debtor, reassign and redeliver to the Debtor all of the Collateral
hereunder which has not been sold, disposed of, retained or applied by the
Agent
in accordance with the terms hereof. Such reassignment and redelivery shall
be
without warranty by or recourse to the Agent, except as to the absence of
any
prior assignments by the Agent of its interest in the Collateral, and shall
be
at the expense of the Debtor.
6.13 COUNTERPARTS
This
Agreement may be executed in one or more counterparts, including by facsimile
copy, each of which shall be deemed an original but all of which shall together
constitute one and the same agreement.
6.14 GOVERNING
LAW
This
Agreement and the rights of the parties hereunder shall be governed by, and
construed in accordance with, the laws of the State of New York wherein the
terms of this Agreement were negotiated, excluding to the greatest extent
permitted by law any rule of law that would cause the application of the
laws of
any jurisdiction other than the State of New York.
6.15 SUBMISSION
TO JURISDICTION
(a) Each
of
the parties hereto hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York State
court
or United States Federal court sitting in New York City, and any appellate
court
from any thereof, in any action or proceeding arising our of or relating
to this
Agreement or any of the other Transaction Documents to which it is a party,
or
for recognition or enforcement of any judgment, and each of the parties hereto
irrevocably and unconditionally agrees that all claims in respect of any
such
action or proceeding may be heard and determined in any such New York State
court or, to the fullest extent permitted by law, in such United States Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the right that any party may otherwise have to bring
any action or proceeding relating to this Agreement or any of the other
Transaction Documents in the courts of any other jurisdiction.
(b) Each
of
the parties hereto irrevocably and unconditionally waives, to the fullest
extent
it may legally and effectively do so, any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out
of or
in relation to this Agreement or any other Transaction Document to which
it is a
party in any such New York State or United States Federal court sitting in
New
York City. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
6.16 SERVICE
OF PROCESS
THE
DEBTOR HEREBY IRREVOCABLY AGREES THAT SERVICE OF PROCESS IN ANY LEGAL ACTION
OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE EFFECTED BY MAILING A COPY
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE DEBTOR AT
ITS
ADDRESS SET FORTH IN SECTION 6.1 HEREOF.
6.17 LIMITATION
OF LIABILITY
THE
AGENT
AND THE LENDERS SHALL NOT HAVE ANY LIABILITY TO THE DEBTOR (WHETHER SOUNDING
IN
TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY THE DEBTOR IN CONNECTION
WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS
CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE
JUDGMENT OR COURT ORDER BINDING ON THE AGENT OR LENDER, AS APPLICABLE, THAT
THE
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE
OR
WILLFUL MISCONDUCT.
6.18 DELAYS;
PARTIAL EXERCISE OF REMEDIES
No
delay
or omission of the Agent to exercise any right or remedy hereunder, whether
before or after the happening of any Event of Default, shall impair any such
right or shall operate as a waiver thereof or as a waiver of any such Event
of
Default. No single or partial exercise by the Agent of any right or remedy
shall
preclude any other or further exercise thereof, or preclude any other right
or
remedy.
6.19 JURY
TRIAL
THE
DEBTOR AND THE AGENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT OR THE
ACTIONS
OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.
[SIGNATURE
PAGE TO FOLLOW]
IN
WITNESS WHEREOF,
the
Debtor has caused this Company General Security Agreement to be duly executed
and delivered as of the date first written above.
|
ACURA
PHARMACEUTICALS, INC.
|
|
|
|
By:
/s/ Andrew D.
Reddick
Name:
Andrew D. Reddick
Title:
President and Chief Executive
Office
|
By
its
acceptance hereof, as of the day and year first above written, the Agent
agrees
to be bound by the provisions hereof applicable to it.
|
GALEN
PARTNERS III, L.P.
By:
Claudius, L.L.C, General Partner
610
Fifth Avenue, 5th
Fl.
New
York, New York 10019
|
|
|
|
By:
/s/ Srini
Conjeevaram
Name:
Srini Conjeevaram, its General Partner
Title:
President and Chief Executive
Officer
|
SCHEDULE
A
Section
3.3 Places
of Business
616
N.
North Court, Suite 120, Palatine, Illinois 60067
Unassociated Document
EXHIBIT
10.5
CONTINUING
UNCONDITIONAL SECURED GUARANTY
This
Continuing Unconditional Secured Guaranty (“Guaranty”)
is
made on September 16, 2005 by Axiom Pharmaceutical Corporation, a Delaware
corporation (“Guarantor”)
in
favor of Galen Partners III, L.P., a Delaware limited partnership, acting
in its
capacity as agent for the Lenders, as defined below (“Agent”),
for
the benefit of the Lenders.
PRELIMINARY
STATEMENTS
Acura
Pharmaceuticals, Inc., a New York corporation (the “Borrower”),
entered into a Loan Agreement of even date herewith (the “Loan
Agreement;”
terms
used in this Guaranty and not otherwise defined shall have the meanings given
to
them in the Loan Agreement) with the Lenders party (each a “Lender”
and
collectively, the “Lenders”).
Pursuant to the Loan Agreement, the Lenders have made financial accommodations
to the Borrower in accordance with the terms of the Loan Agreement. The
Guarantor will continue to receive certain benefits from such accommodations
and
is therefore willing to guaranty the prompt payment and performance of the
obligations of the Borrower, on the terms set forth in this Guaranty. The
extension of credit by the Lenders to the Borrower is necessary and desirable
to
the conduct and operation of the business of the Borrower and will inure
to the
financial benefit of the Guarantor.
AGREEMENT
For
value
received and in consideration of any loan, advance, or financial accommodation
of any kind whatsoever heretofore, now or hereafter made, given or granted
to
the Borrower by the Lenders (including, without limitation, the loans evidenced
by the Notes as made by the Lenders to the Borrower pursuant to, the Loan
Agreement) and other good and valuable consideration (the sufficiency and
receipt of which are hereby acknowledged), the Grantor hereby agrees as follows:
ARTICLE
1
GUARANTY
1.1 GUARANTY
The
Guarantor unconditionally guarantees to the Agent for the benefit of the
Lenders
(a) the full and prompt payment and performance when due, whether at maturity
or
earlier, by reason of acceleration or otherwise, and at all times thereafter,
of
all liabilities of the Borrower to the Lenders and (b) the prompt, full and
faithful discharge by the Borrower of each and every term, condition, agreement,
representation, warranty or covenant now or hereafter made by the Borrower
to
the Lenders or the Agent, in each case, under these clauses (a) and (b),
pursuant to the Loan Agreement, the Notes, the other Transaction Documents
or
any document or instrument delivered by the Borrower to the Lenders in
connection therewith or pursuant thereto (which, together with the liabilities
described in clause (a) of this Section 1.1, are collectively referred to
in
this Guaranty as the “Borrower’s
Liabilities”).
The
Guarantor further agrees to pay all reasonable out-of-pocket costs and expenses,
including, without limitation, all court costs and reasonable attorneys’ and
paralegals’ fees paid or incurred by the Lenders and the Agent (on behalf of the
Lenders), in endeavoring to collect all or any part of the Borrower’s
Liabilities from, or in prosecuting any action against the Guarantor or any
other guarantor of all or any part of the Borrower’s Liabilities.
1.2 NO
FRAUDULENT CONVEYANCE
Notwithstanding
any provision of this Guaranty to the contrary, it is intended that this
Guaranty, and any liens and security interests granted by the Guarantor to
secure this Guaranty, will not constitute a Fraudulent Conveyance (as defined
below). Consequently, the Guarantor agrees that if this Guaranty, or any
liens
or security interests securing this Guaranty, would, but for the application
of
this sentence, constitute a Fraudulent Conveyance, this Guaranty and each
such
lien and security interest shall be valid and enforceable only to the maximum
extent that would not cause this Guaranty or such lien or security interest
to
constitute a Fraudulent Conveyance, and this Guaranty shall automatically
be
deemed to have been amended accordingly at all relevant times. For purposes
hereof, “Fraudulent
Conveyance”
means a
transfer of property or the incurrence of liability which would be avoidable
under Section 548 or 544(b) of the Bankruptcy Code (as defined herein) or
a
fraudulent conveyance or fraudulent transfer under the provisions of any
applicable fraudulent conveyance or fraudulent transfer law or similar law
of
any state, nation or other governmental unit, as in effect from time to
time.
1.3 GUARANTY
UNCONDITIONAL
The
Guarantor hereby agrees that, except as hereinafter provided, and to the
extent
permitted by applicable law, its obligations under this Guaranty shall be
unconditional, irrespective of (a) the validity or enforceability of the
Borrower’s Liabilities or any part thereof, or of any Note or other document
evidencing all or any part of the Borrower’s Liabilities, (b) the absence of any
attempt to collect the Borrower’s Liabilities from the Borrower or any other
guarantor or other action to enforce the same, (c) the waiver or consent
by the
Agent, any Lender or Lenders with respect to any provision of any instrument
evidencing the Borrower’s Liabilities, or any part thereof, or any other
agreement heretofore, now or hereafter executed by the Borrower and delivered
to
the Agent, the Lender or Lenders, (d) the failure by the Agent or any Lender
to
take any steps to perfect and maintain its security interest in, or to preserve
its rights to, any security or collateral for the Borrower’s Liabilities, (e)
the institution of any proceeding under Chapter 11 of Title 11 of the United
States Code (11 U.S.C. §101 et seq.), as amended (the “Bankruptcy
Code”),
or
any similar proceeding, by or against the Borrower, or the Agent’s or any
Lender’s election in any such proceeding of the application of Section
1111(b)(2) of the Bankruptcy Code, (f) any borrowing or grant of a security
interest by the Borrower as debtor-in-possession, under Section 364 of the
Bankruptcy Code, (g) the disallowance, under Section 502 of the Bankruptcy
Code,
of all or any portion of the Lenders’ claim(s) for repayment of the Borrower’s
Liabilities, or (h) any other circumstance which might otherwise constitute
a
legal or equitable discharge or defense of a guarantor.
1.4 WAIVERS
(a)The
Guarantor hereby waives diligence, presentment, demand of payment, filing
of
claims with a court in the event of receivership or bankruptcy of the Borrower,
protest or notice with respect to the Borrower’s Liabilities and all demands
whatsoever, and covenants that this Guaranty will not be discharged, except
by
complete performance of the obligations and liabilities contained herein.
Upon
the occurrence and during the continuance of an Event of Default under the
Loan
Agreement, Lenders may, at their sole election, proceed directly and at once,
without notice, against the Guarantor to collect and recover the full amount
or
any portion of the Borrower’s Liabilities, without first proceeding against any
other Person, or against any security or collateral for the Borrower’s
Liabilities.
(b)The
Guarantor hereby waives any and all claims (including, without limitation,
any
claim for reimbursement, contribution or subrogation) of the Guarantor against
the Borrower, any endorser or any other guarantor of all or any part of the
Borrower’s Liabilities, or against any of the Borrower’s properties, arising by
reason of any payment by the Guarantor to the Lenders pursuant to the provisions
hereof.
1.5 NO
SUBROGATION
The
Guarantor hereby unconditionally and irrevocably agrees not to exercise any
rights that it may now have or hereafter acquire against the Borrower or
any
other insider guarantor that arise from the existence, payment, performance
or
enforcement of the Borrower’s Liabilities under or in respect of this Guaranty,
the Loan Agreement, the Notes, the other Transaction Documents or any document
or instrument delivered by the Borrower to the Lenders in connection therewith
or pursuant thereto, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right
to
participate in any claim or remedy of the Agent or the Lenders against the
Borrower or any other insider guarantor or any Collateral, whether or not
such
claim, remedy or right arises in equity or under contract, statute or common
law, including, without limitation, the right to take or receive from the
Borrower or any other insider guarantor, directly or indirectly, in cash
or
other property or by set-off or in any other manner, payment or security
on
account of such claim, remedy or right. If any amount shall be paid to any
Guarantor in violation of the immediately preceding sentence at any time
prior
to the indefeasible payment in full in cash of the Borrower’s Liabilities and
all other amounts payable under this Guaranty, such amount shall be received
and
held in trust for the benefit of the Lenders, shall be segregated from other
property and funds of the Guarantor and shall forthwith be paid or delivered
to
the Agent in the same form as so received (with any necessary endorsement
or
assignment) to be credited and applied to the Borrower’s Liabilities and all
other amounts payable under this Guaranty, whether matured or unmatured,
in
accordance with the terms of the Notes and the Loan Agreement, or to be held
as
collateral for any Borrower’s Liabilities or other amounts payable under this
Guaranty thereafter arising. After the Loan Agreement has been terminated
and
the Notes canceled and the indefeasible payment in full in cash of the
Borrower’s Liabilities and all other amounts payable under this Guaranty has
occurred, except in the case of a Reinstatement Event (as defined below),
the
Agent and the Lenders will, at the Guarantor’s request and expense, execute and
deliver to the Guarantor appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer by subrogation
to
the Guarantor of an interest in the Borrower’s Liabilities resulting from such
payment made by the Guarantor pursuant to this Guaranty.
1.6 LENDERS’
RIGHTS WITH RESPECT TO BORROWER’S LIABILITIES
The
Lenders are hereby authorized, without notice or demand and without affecting
the liability of the Guarantor hereunder, at any time and from time to time
to
(a) increase the amount of, renew, extend, accelerate or otherwise change
the
time for payment of, or other terms relating to the Borrower’s Liabilities or
otherwise modify, amend or change the terms of any debenture, note or other
agreement, document or instrument now or hereafter executed by the Borrower
and
delivered to the Lenders; (b) accept partial payments on the Borrower’s
Liabilities; (c) take and hold security or collateral for the payment of
the
Borrower’s Liabilities guaranteed hereby, or for the payment of this Guaranty,
or for the payment of any other guaranties of the Borrower’s Liabilities or
other liabilities of the Borrower, and exchange, enforce, waive and release
any
such security or collateral; (iv) apply such security or collateral and direct
the order or manner of sale thereof as in their sole discretion they may
determine; and (v) settle, release, compromise, collect or otherwise liquidate
the Borrower’s Liabilities and any security or collateral therefor in any
manner, without affecting or impairing the obligations of the Guarantor
hereunder. The Lenders shall have the exclusive right to determine the time
and
manner of application of any payments or credits, whether received from the
Borrower or any other source, and such determination shall be binding on
the
Guarantor. All such payments and credits may be applied, reversed and reapplied,
in whole or in part, to any of the Borrower’s Liabilities as the Lenders shall
determine in their sole discretion without affecting the validity or
enforceability of this Guaranty (unless otherwise required pursuant to the
Loan
Agreement).
1.7 INFORMATION
The
Guarantor hereby assumes responsibility for keeping itself informed of the
financial condition of the Borrower, and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of the
Borrower’s Liabilities and of all other circumstances bearing upon the risk of
nonpayment of the Borrower’s Liabilities or any part thereof that diligent
inquiry would reveal, and the Guarantor hereby agrees that neither the Agent
nor
the Lenders shall have any duty to advise the Guarantor of information known
to
any of them regarding such condition or any such circumstances or to undertake
any investigation not a part of their respective regular business routines.
If
the Agent or any Lender, in their respective sole discretions, undertake
at any
time or from time to time to provide any such information to the Guarantor,
the
Agent or such Lender, as the case may be, shall not be under any obligation
to
update any such information or to provide any such information to the Guarantor
on any subsequent occasion.
1.8 REINSTATEMENT
The
Guarantor consents and agrees that neither the Agent nor the Lenders shall
be
under any obligation to marshal any assets in favor of the Guarantor or against
or in payment of any or all of the Borrower’s Liabilities. The Guarantor further
agrees that, to the extent that the Borrower makes a payment or payments
to the
Lenders or the Lenders receive any proceeds of collateral, which payment
or
payments or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to the
Borrower, its estate, trustee, receiver or any other party, including, without
limitation, the Guarantor, under any bankruptcy law or state or federal
statutory or common law, then to the extent of such payment or repayment,
the
Borrower’s Liabilities or the part thereof which has been paid, reduced or
satisfied by such amount, and the Guarantor’s obligations hereunder with respect
to such portion of the Borrower’s Liabilities, shall be reinstated and continued
in full force and effect as of the date such initial payment, reduction or
satisfaction occurred. Notwithstanding anything else to the contrary contained
herein, the Guarantor consents and agrees that this Guaranty shall continue
to
be effective or be reinstated, as the case may be, if at any time any payment
of
any of the Borrower’s Liabilities is rescinded or must otherwise be returned by
any Lender or any other Person upon the insolvency, bankruptcy or reorganization
of the Borrower or the Guarantor or otherwise, all as though such payment
had
not been made (each such continuation or reinstatement, a “Reinstatement
Event”).
1.9 ASSIGNMENTS
BY LENDERS
Each
Lender may, to the extent and in the manner set forth in the Loan Agreement,
sell or assign the Borrower’s Liabilities or any part thereof, or grant
participations therein, and in any such event each and every permitted assignee
or holder of, or participant in, all or any of the Borrower’s Liabilities shall
have the right to enforce this Guaranty, by suit or otherwise for the benefit
of
such assignee, holder, or participant, as fully as if herein by name
specifically given such right.
ARTICLE
2
REPRESENTATIONS
AND WARRANTIES
The
Guarantor hereby represents and warrants that: (a) it is a corporation duly
organized, validly existing and in good standing under the laws of the State
of
Delaware; (b) it is duly authorized and empowered to execute and deliver
this
Guaranty; (c) all corporate action on the part of the Guarantor requisite
for
the due execution and delivery of this Guaranty and the due granting and
creation of the security interests referred to herein has been duly and
effectively taken; (d) the Guarantor’s chief executive office is located at c/o
Acura Pharmaceuticals, Inc., 616 N. North Court, Palatine, Illinois 60067;
and
(e) the execution, delivery and performance of this Guaranty will not result
in
any violation of, conflict with, or result in a breach of, any of the terms
of,
or constitute a default under, any agreements, contracts, court orders or
consent decrees, the Certificate of Incorporation or the By-laws, as amended,
of
the Guarantor.
ARTICLE
3
3.1 SUCCESSORS
AND ASSIGNS; ASSIGNMENT BY GUARANTOR
This
Guaranty shall be binding upon the Guarantor and upon the successors (including
without limitation, any receiver, trustee or debtor in possession of or for
the
Guarantor) of the Guarantor and shall inure to the benefit of the Lenders
and
their respective successors and permitted assigns. Notwithstanding anything
contained herein to the contrary, this Guaranty may not be assigned by the
Guarantor without the prior written consent of the Lenders.
3.2 TERM
OF GUARANTY
This
Guaranty shall continue in full force and effect, and the Lenders shall be
entitled to make loans and advances and extend financial accommodations to
the
Borrower on the faith hereof, until the Loan Agreement has been terminated
and
the Notes canceled and the indefeasible payment in full in cash of the
Borrower’s Liabilities and all other amounts payable under this Guaranty has
occurred. The Guarantor hereby unconditionally and irrevocably waives any
right
to revoke this Guaranty and acknowledges that this Guaranty is continuing
in
nature and applies to all Borrower’s Liabilities, whether existing now or in the
future.
3.3 SEVERABILITY
Wherever
possible each provision of this Guaranty shall be interpreted in such manner
as
to be effective and valid under applicable law, but if any provision of this
Guaranty shall be prohibited by or invalid under such law, such provision
shall
be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions
of this
Guaranty.
3.4 GOVERNING
LAW
THIS
GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE
STATE OF NEW YORK WHEREIN THE TERMS OF THIS GUARANTY WERE NEGOTIATED, EXCLUDING
TO THE GREATEST EXTENT PERMITTED BY LAW ANY RULE OF LAW THAT WOULD CAUSE
THE
APPLICATION OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
3.5 CONSENT
TO JURISDICTION
(a)The
Guarantor hereby irrevocably and unconditionally submits, for itself and
its
property, to the nonexclusive jurisdiction of any New York State court or
United
States Federal court sitting in New York City, and any appellate court from
any
thereof, in any action or proceeding arising our of or relating to this Guaranty
or any of the other Transaction Documents to which it is a party, or for
recognition or enforcement of any judgment, and each of the parties hereto
irrevocably and unconditionally agrees that all claims in respect of any
such
action or proceeding may be heard and determined in any such New York State
court or, to the fullest extent permitted by law, in such United States Federal
court. The Guarantor agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions
by
suit on the right that any party may otherwise have to bring any action or
proceeding relating to this Guaranty or any of the other Transaction Documents
in the courts of any other jurisdiction.
(b)The
Guarantor irrevocably and unconditionally waives, to the fullest extent it
may
legally and effectively do so, any objection that it may now or hereafter
have
to the laying of venue of any suit, action or proceeding arising out of or
in
relation to this Guaranty or any other Transaction Document to which it is
a
party in any such New York State or United States Federal court sitting in
New
York City. The Guarantor hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance
of
such action or proceeding in any such court.
3.6 WAIVER
OF JURY TRIAL
EACH
OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT OR THE
ACTIONS
OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.
[SIGNATURE
PAGE TO FOLLOW]
IN
WITNESS WHEREOF,
this
Guaranty has been duly executed by the undersigned as of the date first written
above.
|
AXIOM
PHARMACEUTICALCORPORATION |
|
|
|
|
By: |
/s/
Andrew D.
Reddick
Name:
Andrew D. Reddick
Title:
President and CEO
|
Unassociated Document
EXHIBIT
10.6
CONTINUING
UNCONDITIONAL SECURED GUARANTY
This
Continuing Unconditional Secured Guaranty (“Guaranty”)
is
made on September 16, 2005 by Acura Pharmaceutical Technologies, Inc., an
Indiana corporation (“Guarantor”)
in
favor of Galen Partners III, L.P., a Delaware limited partnership, acting
in its
capacity as agent for the Lenders, as defined below (“Agent”),
for
the benefit of the Lenders.
PRELIMINARY
STATEMENTS
Acura
Pharmaceuticals, Inc., a New York corporation (the “Borrower”),
entered into a Loan Agreement of even date herewith (the “Loan
Agreement;”
terms
used in this Guaranty and not otherwise defined shall have the meanings given
to
them in the Loan Agreement) with the Lenders party (each a “Lender”
and
collectively, the “Lenders”).
Pursuant to the Loan Agreement, the Lenders have made financial accommodations
to the Borrower in accordance with the terms of the Loan Agreement. The
Guarantor will continue to receive certain benefits from such accommodations
and
is therefore willing to guaranty the prompt payment and performance of the
obligations of the Borrower, on the terms set forth in this Guaranty. The
extension of credit by the Lenders to the Borrower is necessary and desirable
to
the conduct and operation of the business of the Borrower and will inure
to the
financial benefit of the Guarantor.
AGREEMENT
For
value
received and in consideration of any loan, advance, or financial accommodation
of any kind whatsoever heretofore, now or hereafter made, given or granted
to
the Borrower by the Lenders (including, without limitation, the loans evidenced
by the Notes as made by the Lenders to the Borrower pursuant to, the Loan
Agreement) and other good and valuable consideration (the sufficiency and
receipt of which are hereby acknowledged), the Grantor hereby agrees as follows:
ARTICLE
1
1.1 GUARANTY
The
Guarantor unconditionally guarantees to the Agent for the benefit of the
Lenders
(a) the full and prompt payment and performance when due, whether at maturity
or
earlier, by reason of acceleration or otherwise, and at all times thereafter,
of
all liabilities of the Borrower to the Lenders and (b) the prompt, full and
faithful discharge by the Borrower of each and every term, condition, agreement,
representation, warranty or covenant now or hereafter made by the Borrower
to
the Lenders or the Agent, in each case, under these clauses (a) and (b),
pursuant to the Loan Agreement, the Notes, the other Transaction Documents
or
any document or instrument delivered by the Borrower to the Lenders in
connection therewith or pursuant thereto (which, together with the liabilities
described in clause (a) of this Section 1.1, are collectively referred to
in
this Guaranty as the “Borrower’s
Liabilities”).
The
Guarantor further agrees to pay all reasonable out-of-pocket costs and expenses,
including, without limitation, all court costs and reasonable attorneys’ and
paralegals’ fees paid or incurred by the Lenders and the Agent (on behalf of the
Lenders), in endeavoring to collect all or any part of the Borrower’s
Liabilities from, or in prosecuting any action against the Guarantor or any
other guarantor of all or any part of the Borrower’s Liabilities.
1.2 NO
FRAUDULENT CONVEYANCE
Notwithstanding
any provision of this Guaranty to the contrary, it is intended that this
Guaranty, and any liens and security interests granted by the Guarantor to
secure this Guaranty, will not constitute a Fraudulent Conveyance (as defined
below). Consequently, the Guarantor agrees that if this Guaranty, or any
liens
or security interests securing this Guaranty, would, but for the application
of
this sentence, constitute a Fraudulent Conveyance, this Guaranty and each
such
lien and security interest shall be valid and enforceable only to the maximum
extent that would not cause this Guaranty or such lien or security interest
to
constitute a Fraudulent Conveyance, and this Guaranty shall automatically
be
deemed to have been amended accordingly at all relevant times. For purposes
hereof, “Fraudulent
Conveyance”
means a
transfer of property or the incurrence of liability which would be avoidable
under Section 548 or 544(b) of the Bankruptcy Code (as defined herein) or
a
fraudulent conveyance or fraudulent transfer under the provisions of any
applicable fraudulent conveyance or fraudulent transfer law or similar law
of
any state, nation or other governmental unit, as in effect from time to
time.
1.3 GUARANTY
UNCONDITIONAL
The
Guarantor hereby agrees that, except as hereinafter provided, and to the
extent
permitted by applicable law, its obligations under this Guaranty shall be
unconditional, irrespective of (a) the validity or enforceability of the
Borrower’s Liabilities or any part thereof, or of any Note or other document
evidencing all or any part of the Borrower’s Liabilities, (b) the absence of any
attempt to collect the Borrower’s Liabilities from the Borrower or any other
guarantor or other action to enforce the same, (c) the waiver or consent
by the
Agent, any Lender or Lenders with respect to any provision of any instrument
evidencing the Borrower’s Liabilities, or any part thereof, or any other
agreement heretofore, now or hereafter executed by the Borrower and delivered
to
the Agent, the Lender or Lenders, (d) the failure by the Agent or any Lender
to
take any steps to perfect and maintain its security interest in, or to preserve
its rights to, any security or collateral for the Borrower’s Liabilities, (e)
the institution of any proceeding under Chapter 11 of Title 11 of the United
States Code (11 U.S.C. §101 et seq.), as amended (the “Bankruptcy
Code”),
or
any similar proceeding, by or against the Borrower, or the Agent’s or any
Lender’s election in any such proceeding of the application of Section
1111(b)(2) of the Bankruptcy Code, (f) any borrowing or grant of a security
interest by the Borrower as debtor-in-possession, under Section 364 of the
Bankruptcy Code, (g) the disallowance, under Section 502 of the Bankruptcy
Code,
of all or any portion of the Lenders’ claim(s) for repayment of the Borrower’s
Liabilities, or (h) any other circumstance which might otherwise constitute
a
legal or equitable discharge or defense of a guarantor.
1.4 WAIVERS
(a)The
Guarantor hereby waives diligence, presentment, demand of payment, filing
of
claims with a court in the event of receivership or bankruptcy of the Borrower,
protest or notice with respect to the Borrower’s Liabilities and all demands
whatsoever, and covenants that this Guaranty will not be discharged, except
by
complete performance of the obligations and liabilities contained herein.
Upon
the occurrence and during the continuance of an Event of Default under the
Loan
Agreement, Lenders may, at their sole election, proceed directly and at once,
without notice, against the Guarantor to collect and recover the full amount
or
any portion of the Borrower’s Liabilities, without first proceeding against any
other Person, or against any security or collateral for the Borrower’s
Liabilities.
(b)The
Guarantor hereby waives any and all claims (including, without limitation,
any
claim for reimbursement, contribution or subrogation) of the Guarantor against
the Borrower, any endorser or any other guarantor of all or any part of the
Borrower’s Liabilities, or against any of the Borrower’s properties, arising by
reason of any payment by the Guarantor to the Lenders pursuant to the provisions
hereof.
1.5 NO
SUBROGATION
The
Guarantor hereby unconditionally and irrevocably agrees not to exercise any
rights that it may now have or hereafter acquire against the Borrower or
any
other insider guarantor that arise from the existence, payment, performance
or
enforcement of the Borrower’s Liabilities under or in respect of this Guaranty,
the Loan Agreement, the Notes, the other Transaction Documents or any document
or instrument delivered by the Borrower to the Lenders in connection therewith
or pursuant thereto, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right
to
participate in any claim or remedy of the Agent or the Lenders against the
Borrower or any other insider guarantor or any Collateral, whether or not
such
claim, remedy or right arises in equity or under contract, statute or common
law, including, without limitation, the right to take or receive from the
Borrower or any other insider guarantor, directly or indirectly, in cash
or
other property or by set-off or in any other manner, payment or security
on
account of such claim, remedy or right. If any amount shall be paid to any
Guarantor in violation of the immediately preceding sentence at any time
prior
to the indefeasible payment in full in cash of the Borrower’s Liabilities and
all other amounts payable under this Guaranty, such amount shall be received
and
held in trust for the benefit of the Lenders, shall be segregated from other
property and funds of the Guarantor and shall forthwith be paid or delivered
to
the Agent in the same form as so received (with any necessary endorsement
or
assignment) to be credited and applied to the Borrower’s Liabilities and all
other amounts payable under this Guaranty, whether matured or unmatured,
in
accordance with the terms of the Notes and the Loan Agreement, or to be held
as
collateral for any Borrower’s Liabilities or other amounts payable under this
Guaranty thereafter arising. After the Loan Agreement has been terminated
and
the Notes canceled and the indefeasible payment in full in cash of the
Borrower’s Liabilities and all other amounts payable under this Guaranty has
occurred, except in the case of a Reinstatement Event (as defined below),
the
Agent and the Lenders will, at the Guarantor’s request and expense, execute and
deliver to the Guarantor appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer by subrogation
to
the Guarantor of an interest in the Borrower’s Liabilities resulting from such
payment made by the Guarantor pursuant to this Guaranty.
1.6 LENDERS’
RIGHTS WITH RESPECT TO BORROWER’S LIABILITIES
The
Lenders are hereby authorized, without notice or demand and without affecting
the liability of the Guarantor hereunder, at any time and from time to time
to
(a) increase the amount of, renew, extend, accelerate or otherwise change
the
time for payment of, or other terms relating to the Borrower’s Liabilities or
otherwise modify, amend or change the terms of any debenture, note or other
agreement, document or instrument now or hereafter executed by the Borrower
and
delivered to the Lenders; (b) accept partial payments on the Borrower’s
Liabilities; (c) take and hold security or collateral for the payment of
the
Borrower’s Liabilities guaranteed hereby, or for the payment of this Guaranty,
or for the payment of any other guaranties of the Borrower’s Liabilities or
other liabilities of the Borrower, and exchange, enforce, waive and release
any
such security or collateral; (iv) apply such security or collateral and direct
the order or manner of sale thereof as in their sole discretion they may
determine; and (v) settle, release, compromise, collect or otherwise liquidate
the Borrower’s Liabilities and any security or collateral therefor in any
manner, without affecting or impairing the obligations of the Guarantor
hereunder. The Lenders shall have the exclusive right to determine the time
and
manner of application of any payments or credits, whether received from the
Borrower or any other source, and such determination shall be binding on
the
Guarantor. All such payments and credits may be applied, reversed and reapplied,
in whole or in part, to any of the Borrower’s Liabilities as the Lenders shall
determine in their sole discretion without affecting the validity or
enforceability of this Guaranty (unless otherwise required pursuant to the
Loan
Agreement).
1.7 INFORMATION
The
Guarantor hereby assumes responsibility for keeping itself informed of the
financial condition of the Borrower, and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of the
Borrower’s Liabilities and of all other circumstances bearing upon the risk of
nonpayment of the Borrower’s Liabilities or any part thereof that diligent
inquiry would reveal, and the Guarantor hereby agrees that neither the Agent
nor
the Lenders shall have any duty to advise the Guarantor of information known
to
any of them regarding such condition or any such circumstances or to undertake
any investigation not a part of their respective regular business routines.
If
the Agent or any Lender, in their respective sole discretions, undertake
at any
time or from time to time to provide any such information to the Guarantor,
the
Agent or such Lender, as the case may be, shall not be under any obligation
to
update any such information or to provide any such information to the Guarantor
on any subsequent occasion.
1.8 REINSTATEMENT
The
Guarantor consents and agrees that neither the Agent nor the Lenders shall
be
under any obligation to marshal any assets in favor of the Guarantor or against
or in payment of any or all of the Borrower’s Liabilities. The Guarantor further
agrees that, to the extent that the Borrower makes a payment or payments
to the
Lenders or the Lenders receive any proceeds of collateral, which payment
or
payments or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to the
Borrower, its estate, trustee, receiver or any other party, including, without
limitation, the Guarantor, under any bankruptcy law or state or federal
statutory or common law, then to the extent of such payment or repayment,
the
Borrower’s Liabilities or the part thereof which has been paid, reduced or
satisfied by such amount, and the Guarantor’s obligations hereunder with respect
to such portion of the Borrower’s Liabilities, shall be reinstated and continued
in full force and effect as of the date such initial payment, reduction or
satisfaction occurred. Notwithstanding anything else to the contrary contained
herein, the Guarantor consents and agrees that this Guaranty shall continue
to
be effective or be reinstated, as the case may be, if at any time any payment
of
any of the Borrower’s Liabilities is rescinded or must otherwise be returned by
any Lender or any other Person upon the insolvency, bankruptcy or reorganization
of the Borrower or the Guarantor or otherwise, all as though such payment
had
not been made (each such continuation or reinstatement, a “Reinstatement
Event”).
1.9 ASSIGNMENTS
BY LENDERS
Each
Lender may, to the extent and in the manner set forth in the Loan Agreement,
sell or assign the Borrower’s Liabilities or any part thereof, or grant
participations therein, and in any such event each and every permitted assignee
or holder of, or participant in, all or any of the Borrower’s Liabilities shall
have the right to enforce this Guaranty, by suit or otherwise for the benefit
of
such assignee, holder, or participant, as fully as if herein by name
specifically given such right.
ARTICLE
2
REPRESENTATIONS
AND WARRANTIES
The
Guarantor hereby represents and warrants that: (a) it is a corporation duly
organized, validly existing and in good standing under the laws of the State
of
Indiana; (b) it is duly authorized and empowered to execute and deliver this
Guaranty; (c) all corporate action on the part of the Guarantor requisite
for
the due execution and delivery of this Guaranty and the due granting and
creation of the security interests referred to herein has been duly and
effectively taken; (d) the Guarantor’s chief executive office is located at c/o
Acura Pharmaceuticals, Inc., 616 N. North Court, Suite 120, Palatine, Illinois
60067; and (e) the execution, delivery and performance of this Guaranty will
not
result in any violation of, conflict with, or result in a breach of, any
of the
terms of, or constitute a default under, any agreements, contracts, court
orders
or consent decrees, the Certificate of Incorporation or the By-laws, as amended,
of the Guarantor.
ARTICLE
3
3.1 SUCCESSORS
AND ASSIGNS; ASSIGNMENT BY GUARANTOR
This
Guaranty shall be binding upon the Guarantor and upon the successors (including
without limitation, any receiver, trustee or debtor in possession of or for
the
Guarantor) of the Guarantor and shall inure to the benefit of the Lenders
and
their respective successors and permitted assigns. Notwithstanding anything
contained herein to the contrary, this Guaranty may not be assigned by the
Guarantor without the prior written consent of the Lenders.
3.2 TERM
OF GUARANTY
This
Guaranty shall continue in full force and effect, and the Lenders shall be
entitled to make loans and advances and extend financial accommodations to
the
Borrower on the faith hereof, until the Loan Agreement has been terminated
and
the Notes canceled and the indefeasible payment in full in cash of the
Borrower’s Liabilities and all other amounts payable under this Guaranty has
occurred. The Guarantor hereby unconditionally and irrevocably waives any
right
to revoke this Guaranty and acknowledges that this Guaranty is continuing
in
nature and applies to all Borrower’s Liabilities, whether existing now or in the
future.
3.3 SEVERABILITY
Wherever
possible each provision of this Guaranty shall be interpreted in such manner
as
to be effective and valid under applicable law, but if any provision of this
Guaranty shall be prohibited by or invalid under such law, such provision
shall
be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions
of this
Guaranty.
3.4 GOVERNING
LAW
THIS
GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE
STATE OF NEW YORK WHEREIN THE TERMS OF THIS GUARANTY WERE NEGOTIATED, EXCLUDING
TO THE GREATEST EXTENT PERMITTED BY LAW ANY RULE OF LAW THAT WOULD CAUSE
THE
APPLICATION OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
3.5 CONSENT
TO JURISDICTION
(a)
The
Guarantor hereby irrevocably and unconditionally submits, for itself and
its
property, to the nonexclusive jurisdiction of any New York State court or
United
States Federal court sitting in New York City, and any appellate court from
any
thereof, in any action or proceeding arising our of or relating to this Guaranty
or any of the other Transaction Documents to which it is a party, or for
recognition or enforcement of any judgment, and each of the parties hereto
irrevocably and unconditionally agrees that all claims in respect of any
such
action or proceeding may be heard and determined in any such New York State
court or, to the fullest extent permitted by law, in such United States Federal
court. The Guarantor agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions
by
suit on the right that any party may otherwise have to bring any action or
proceeding relating to this Guaranty or any of the other Transaction Documents
in the courts of any other jurisdiction.
(b)
The
Guarantor irrevocably and unconditionally waives, to the fullest extent it
may
legally and effectively do so, any objection that it may now or hereafter
have
to the laying of venue of any suit, action or proceeding arising out of or
in
relation to this Guaranty or any other Transaction Document to which it is
a
party in any such New York State or United States Federal court sitting in
New
York City. The Guarantor hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance
of
such action or proceeding in any such court.
3.6 WAIVER
OF JURY TRIAL
EACH
OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT OR THE
ACTIONS
OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.
[SIGNATURE
PAGE TO FOLLOW]
IN
WITNESS WHEREOF,
this
Guaranty has been duly executed by the undersigned as of the date first written
above.
ACURA
PHARMACEUTICAL TECHNOLOGIES,
INC.
By: /s/
Andrew D.
Reddick
Name:
Andrew D. Reddick
Title:
President and CEO
Unassociated Document
GUARANTORS
GENERAL SECURITY AGREEMENT
This
Guarantors General Security Agreement (the “Agreement”)
is
dated September 16, 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”);
(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.
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”).
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”)
and
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 (“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 and (ii) the lien in favor of the
holders of the Secured Promissory Notes issued in connection with a bridge
loan
(the “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 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.
(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 and
the
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 and the Bridge Loan. The Agent has, for the benefit of the Lenders, a
valid
and perfected security interest in the Collateral which security interest has
priority over any and all other security interests in such
Collateral.
ARTICLE
4
COVENANTS
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 and (ii) the 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.
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.
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.
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.
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,
(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.
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:
(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.
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.
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.
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.
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]
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
|
SCHEDULE
A
Section
3.3
·APT
16235
State Road 17, Culver, Indiana 46511.
·Axiom
616
N.
North Court, Suite 120, Palatine, Illinois 60067.
Unassociated Document
EXHIBIT
10.8
STOCK
PLEDGE AGREEMENT
This
Stock Pledge Agreement (this “Agreement”)
is
dated as of September 16, 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.
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.
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”)
and
(ii) the Stock Pledge Agreement dated as of June 22, 2005 executed by the
Pledgor to secure a certain bridge loan (the “Bridge
Loan”)
extended
pursuant to the terms of that certain Loan Agreement, dated as of June 22,
2005
(the “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.
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.
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.
(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 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 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 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).
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
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.
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.
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
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.
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]
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.
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ACURA
PHARMACEUTICALS, INC. |
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By: |
/s/
Andrew D.
Reddick
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Name:
Andrew D. Reddick
Title:
President and Chief Executive Officer
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Accepted
and Agreed to: |
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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
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By: |
/s/ Srini
Conjeevaram
|
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Name:
Srini Conjeevaram, its General Partner
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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
|