UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

 
 
IN RE ACURA PHARMACEUTICALS, INC.
SECURITIES LITIGATION
)
)
)
)
)
)
 
 
             Case No. 10-CV-5757
 
 
            Hon. Virginia M. Kendall

STIPULATION OF SETTLEMENT

 
 

--------------------------------------------------------------------------------

 

This Stipulation of Settlement (including documents executed pursuant thereto
and Exhibits) (collectively, the “Stipulation”) is entered into this 31st day of
October, 2011 between Lead Plaintiff (on behalf of themselves and each of the
Class Members) and Defendants Acura Pharmaceuticals, Inc., Jennifer Reddick (as
executrix of the estate of Andrew D. Reddick), Peter A. Clemens, Bruce F.
Wesson, William A Sumner, and Immanuel Thangaraj. This Stipulation is intended
by the Settling Parties (as defined below) to fully, finally, and forever
resolve, discharge, and settle the Released Claims (as defined below) upon and
subject to the terms and conditions herein.
 
I.
DEFINITIONS

 
As used in the Stipulation, the following terms have the meanings specified
below:
 
The Parties
 
1.1             “Acura,” “Acura Pharmaceuticals,” or “the Company” means Acura
Pharmaceuticals, Inc.
 
1.2             “Acura Shareholders Investors Group” or “ASIG” means John E.
Clark, Jr., Glenn Farmer, and John Sliwa.
 
1.3             “Defendants” means Acura, Jennifer Reddick (as executrix of the
estate of Andrew D. Reddick), Peter A. Clemens, Bruce F. Wesson, William A
Sumner, and Immanuel Thangaraj.
 
1.4             “Individual Defendants” means Jennifer Reddick (as executrix of
the estate of Andrew D. Reddick), Peter A. Clemens, Bruce F. Wesson, William A
Sumner, and Immanuel Thangaraj;
 
1.5             “KSF” means Kahn Swick & Foti, LLC and its successors.

 
1

--------------------------------------------------------------------------------

 

1.6             “Lead Counsel” means KSF.
 
1.7             “Lead Plaintiff” means ASIG, both individually and collectively
as the ASIG, which was appointed Lead Plaintiff by order of the Court dated
January 11, 2011.
 
1.8             “Local Counsel” means Susman Heffner & Hurst LLP and its
successors;
 
1.9             “Related Parties” means each Defendant’s past or present
predecessors, successors, parent entities, affiliates, employers, and
subsidiaries, and, in the case of the Defendants and their respective
predecessors, successors, parent entities, affiliates, and subsidiaries, each of
their past or present directors, officers, employees, partners, insurers,
co-insurers, reinsurers, agents, controlling shareholders, attorneys,
accountants, auditors, advisors, investment advisors, personal or legal
representatives, predecessors, successors, parent entities, subsidiaries,
divisions, joint ventures, assigns, spouses, heirs, related or affiliated
entities, and any person, firm, trust, corporation, partnership, limited
liability company, officer, director, or other individual or entity in which any
Defendant or its past or present predecessors, successors, parent entities,
affiliates and subsidiaries has or had a controlling interest or which has or
had a controlling interest in any Defendant or its past or present predecessors,
successors, parent entities, affiliates and subsidiaries, and the Individual
Defendants’ families, and any trust of which an Individual Defendant is the
settlor or which is for the benefit of an Individual Defendant’s family, and the
legal representatives, heirs, successors or assigns of each of the foregoing;
 
1.10           “Released Persons” means each and all of the Defendants and each
and all of the Related Parties;

 
2

--------------------------------------------------------------------------------

 

1.11           “Settling Parties” means, collectively, the Lead Plaintiff (on
behalf of themselves and the Class Members) and each of the Defendants who has
signed this Stipulation by and through his, her or its respective counsel;
 
Additional Defined Terms
 
1.12           “Action” means the above-captioned case.
 
1.13           “Authorized Claimant” means any Class Member whose claim for
recovery has been allowed pursuant to the terms of the Stipulation.
 
1.14           “Confidential Witnesses” means any Person identified or referred
to as a Confidential Witness or “CW” in the Complaint.
 
1.15           “Claimant” means any Class Member who files a Proof of Claim in
such form and manner, and within such time, as the Court shall prescribe.
 
1.16           “Claims Administrator” means Strategic Claims Services.
 
1.17           “Claim Form” shall have the meaning set forth in ¶3.1 of this
Stipulation.
 
1.18            “Class” means all Persons who purchased or otherwise acquired
the securities of Acura Pharmaceuticals between February 21, 2006 and April 22,
2010, inclusive. Excluded from the Class are the Defendants; any officers or
directors of Acura Pharmaceuticals during the Class Period and any current
officers or directors of Acura Pharmaceuticals; any corporation, trust or other
entity in which any Defendant has a controlling interest; and the members of the
immediate families of Andrew D. Reddick, Peter A. Clemens, Bruce F. Wesson,
William A Sumner, and Immanuel Thangaraj and their successors, heirs, assigns,
and legal representatives. Also excluded from the Class are those Persons who
timely and validly request exclusion from the Class pursuant to the Notice of
Pendency and Proposed Settlement of Class Action.

 
3

--------------------------------------------------------------------------------

 

1.19           “Class Member” means a Person who falls within the definition of
the Class.
 
1.20           “Class Notice and Administration Fund” shall have the meaning set
forth in ¶2.9 of this Stipulation.
 
1.21           “Class Period” means February 21, 2006 through April 22, 2010,
inclusive.
 
1.22           “Court” means the United States District Court for the Northern
District of Illinois.
 
1.23            “Effective Date” means the first date by which all of the events
and conditions specified in ¶7.1 of the Stipulation have been met and have
occurred
 
1.24           “Escrow Account” means an interest-bearing account maintained by
the Escrow Agent.
 
1.25           “Escrow Agent” means First NBC Bank.
 
1.26           “Exhibits” means all of the exhibits to this Stipulation,
including Exhibit A, Exhibit A-1, Exhibit A-2, Exhibit A-3 and Exhibit B.
 
1.27           “Fee and Expense Application” shall have the meaning set forth in
¶6.1 of this Stipulation.
 
1.28           “Fee and Expense Award” shall have the meaning set forth in
¶5.2(c) of this Stipulation.

 
4

--------------------------------------------------------------------------------

 

1.29           “Final” means when the last of the following with respect to the
Judgment shall occur: (i) the expiration of the time to file a motion to alter
or amend the Judgment under Federal Rule of Civil Procedure 59(e) has passed
without any such motion having been filed; (ii) the expiration of the time in
which to appeal the Judgment has passed without any appeal having been taken,
which date shall be deemed to be thirty (30) days following the entry of the
Judgment, unless the date to take such an appeal shall have been extended by
Court order or otherwise, or unless the 30th day falls on a weekend or a Court
holiday, in which case the date for purposes of this Stipulation shall be deemed
to be the next business day after such 30th day;  (iii) if such motion to alter
or amend is filed, the motion is denied; and (iv) if an appeal is taken, either
(a) the appeal has been dismissed and the time, if any, for commencing any
further appeal has expired, or (b) the Judgment has been affirmed in its
entirety and the time, if any, for commencing any further appeal has
expired.  For purposes of this paragraph, an “appeal” shall include any petition
for a writ of certiorari or other writ that may be filed in connection with
approval or disapproval of this Settlement but shall not include any appeal that
concerns only the issue of attorneys’ fees and reimbursement of costs or the
Plan of Allocation of the Settlement Fund.
 
1.30            “Judgment” means the final order and judgment approving the
Settlement and dismissing the Action with prejudice, to be entered by the Court
substantially in the form attached hereto as Exhibit B.
 
1.31           “Net Settlement Fund” means the balance of the Settlement Fund
after payment of items (a) through (d) of ¶5.2 of this Stipulation.
 
1.32           “Notice” shall have the meaning set forth in ¶3.1 of this
Stipulation.
 
1.33           “Person” means an individual, corporation, partnership, limited
partnership, association, joint stock company, estate, legal representative,
trust, unincorporated association, government, or any political subdivision or
agency thereof, and any entity, including any business or legal entity, and, as
to each of the foregoing, their spouses, heirs, predecessors, successors,
representatives, or assignees.

 
5

--------------------------------------------------------------------------------

 

1.34           “Plan of Allocation” means a plan or formula of allocation of the
Settlement Fund, to be proposed by Lead Counsel and approved by the Court,
whereby the Settlement Fund shall be distributed to Authorized Claimants after
payment of the items set forth in ¶5.2(a)-(d) herein.
 
1.35           “Preliminary Approval Order” means the preliminary order issued
by the Court for mailing and publication as defined in ¶3.1 herein and
substantially in the form of Exhibit A hereto.
 
1.36           “Released Claims” shall mean any and all claims (including
Unknown Claims), debts, demands, damages, losses, rights, obligations,
liabilities, suits, actions, causes of action, allegations, and arguments of
every nature and description whatsoever (including, but not limited to, any
claims for damages, interest, attorneys’ fees, expert or consulting fees, and
any other costs, expenses or liability whatsoever), whether based on federal,
state, local, statutory or common law, or any other law, rule, or regulation,
whether fixed or contingent, accrued or un-accrued, liquidated or unliquidated,
at law or in equity, matured or unmatured, known or unknown, whether class or
individual in nature, and whether or not concealed or hidden, that have been
asserted or could have been asserted in the Action or any forum by Lead
Plaintiffs or any Class Member, arising from, relating in any way to, or in
connection with:  (i) the facts alleged in the Action; (ii)  investments
(including, but not limited to, purchases, sales, exercises, and decisions to
hold) in securities issued by Acura Pharmaceuticals, including, but not limited
to, the purchase or sale of Acura Pharmaceuticals stock between February 21,
2006 and April 22, 2010, inclusive; (iii) any disclosures, registration
statements, or other statements by Acura Pharmaceuticals, including, and any
other any disclosures, registration statements, or other statements disclosed,
made, released, distributed, or disseminated during the time period covered by
the Complaint, including but not limited to the time period between February 21,
2006 and April 22, 2010, inclusive; (iv) the Securities Act of 1933 and/or the
Securities Exchange Act of 1934, arising from, relating in any way to, or in
connection with the purchase or acquisition of the securities of Acura
Pharmaceuticals between February 21, 2006 and April 22, 2010, inclusive; or (v)
any alleged negligence, gross negligence, recklessness, intentional conduct,
breach of duty of care and/or breach of duty of loyalty, unjust enrichment,
fraud, or breach of fiduciary duty, arising from, or relating in any way to, or
in connection with the facts alleged in the Action;

 
6

--------------------------------------------------------------------------------

 

1.37           “Settlement” means the settlement embodied in this Stipulation.
 
1.38           “Settlement Amount” means the sum of One Million, Five Hundred
Thousand Dollars ($1,500,000.00), in cash.
 
1.39           “Settlement Fairness Hearing” shall have the meaning set forth in
¶3.2 of this Stipulation.
 
1.40           “Settlement Fund” means the principal amount of One Million, Five
Hundred Thousand Dollars ($1,500,000.00), in cash, deposited, or to be deposited
into the Escrow Account, pursuant to ¶2.2 of this Stipulation, and in accordance
with the other terms of this Stipulation, plus all interest earned thereon
pursuant to ¶¶2.2, 2.3, and 2.6 of this Stipulation.
 
1.41            “Stipulation” shall have the meaning set forth in the
introductory paragraph of this document.
 
1.42           “Summary Notice” shall have the meaning set forth in ¶3.1 of this
Stipulation.

 
7

--------------------------------------------------------------------------------

 

1.43           “Unknown Claims” means any and all claims, debts, demands,
damages, losses, rights, obligations, liabilities, suits, actions, causes of
action, allegations, and arguments of every nature and description whatsoever
(including, but not limited to, any claims for damages, interest, attorneys’
fees, expert or consulting fees, and any other costs, expenses or liability
whatsoever), whether based on federal, state, local, statutory or common law, or
any other law, rule, or regulation, whether fixed or contingent, accrued or
un-accrued, liquidated or unliquidated, at law or in equity, matured or
unmatured, whether class or individual in nature, and whether or not concealed
or hidden, that any Lead Plaintiff or any Class Member does not know or suspect
to exist at the time of the release of the Released Persons that, if known,
might have affected this Stipulation or any of the terms hereof, or the decision
by any Class Member not to object to this Settlement or not to opt out from the
Class.
 
II.
THE ACTION

 
This litigation is a putative federal securities class action lawsuit brought on
behalf of all those who purchased or otherwise acquired Acura securities during
the Class Period alleging that Defendants made materially false and misleading
statements and omissions regarding, inter alia, the safety and efficacy of
Acura’s lead drug candidate, Acurox; the results of the Company’s clinical
studies and the design of such studies; Acurox’s product labeling and
commercialization; communications between Acura and the FDA; Acura’s compliance
with its code of ethics; and the likelihood of FDA approval for Acurox.   The
Complaint alleges that on April 22, 2010, the previously omitted or misstated
facts were fully revealed to the public.

 
8

--------------------------------------------------------------------------------

 

In their Complaint, Lead Plaintiff alleged that Defendants engage in the
research, development, and manufacture of pharmaceutical product candidates that
utilize Acura’s Aversion Technology, Impede Technology, and other technologies
that purportedly provide orally administered pharmaceutical drug products
containing commonly-abused ingredients with deterrent features designed to
reduce the likelihood of such abuse.  Acura’s lead product candidate during the
Class Period, “Acurox,” was an orally administered immediate release tablet
containing the pain reliever oxycodone and the purported adversive agent,
niacin.  Acurox was designed to relieve pain while discouraging common methods
of abuse, including intentional overdosing, intravenous injection of dissolved
tablets or capsules, and nasal snorting of crushed tablets or capsules.  The
Complaint alleges that Defendants, throughout the Class Period, knew that the
niacin additive rendered Acurox non-approvable by the FDA because only
non-abusers would experience the adverse niacin effects, while abusers could
easily avoid them.
 
The Complaint alleges that Acura’s clinical studies, from the inception of the
Class Period, had already demonstrated that Acurox did little to deter oral
abuse and caused a negative side effect in normal users. The Complaint also
alleges that Defendants knew and/or recklessly disregarded that Acurox would not
deter abusers from swallowing excessive numbers of tablets, and, as a result,
Acura was unlikely to receive FDA approval for Acurox, was unlikely to be
permitted to label Acurox as an abuse deterrent, and was unlikely to be able to
viably promote or commercialize Acurox.

 
9

--------------------------------------------------------------------------------

 

The Complaint further alleges that Acura’s stock value dropped by approximately
45% after the FDA and Acura filed their respective briefing materials on Acurox
and the FDA Advisory Committee determined by a vote of 19-1 that it did not have
sufficient evidence to support the approval of the Acurox NDA.1
 
All Defendants deny that any of them made any material misstatement or omission,
or violated the federal securities laws, or committed any other legal wrong.
 
This lawsuit was commenced on September 10, 2010.  On November 9, 2010,
competing motions for appointment as lead plaintiff and lead counsel were
filed.  On December 20, 2010, the court heard oral arguments from counsel for
both lead plaintiff movants and on January 11, 2011, the Court appointed ASIG as
Lead Plaintiff, and approved its selection of KSF as Lead Counsel, and Susman
Heffner & Hurst LLP as Local Counsel.  On March 14, 2011, Lead Plaintiff,
through lead counsel and local counsel, filed the Amended Complaint.
 
On May 13, 2011, Defendants moved to dismiss the Amended Complaint in its
entirety.  In accordance with the Private Securities Litigation Reform Act of
1995 (“PSLRA”), discovery was stayed during the pendency of the motions to
dismiss.  ASIG filed its opposition to the Defendants’ Motion to Dismiss on July
12, 2011 and Defendants filed their Reply Brief on August 11, 2011. The Motion
to Dismiss is currently pending before the Court.
 
On July 21, 2011, the Parties conducted a full-day mediation before retired
Judge Nicholas H. Politan, in New York City.  The mediation did not result in a
settlement of the action.

--------------------------------------------------------------------------------

1 Acurox was never approved by the FDA.  On June 17, 2011, the FDA approved
Oxecta, a drug that contains just a single active ingredient, Oxycodone
Hydrochloride, and no niacin.

 
10

--------------------------------------------------------------------------------

 
 
On May 13, 2011, Defendants filed a Notice of the Death of Andrew D. Reddick,
and after several conversations between Lead Counsel and Counsel for Defendants,
Plaintiff filed a Motion to Substitute Ms. Jennifer Reddick as the proper
defendant on August 4, 2011. On August 15, 2011, the Court held a hearing and
granted Plaintiff’s Motion to Substitute Ms. Reddick as the proper defendant.
 
Following the unsuccessful mediation, counsel for the parties engaged in
informal settlement negotiations.  This Settlement was the product of those
negotiations.  In connection with the Settlement, Lead Plaintiff (on their own
behalf and behalf of the putative Class) has agreed to dismiss with prejudice
all claims and causes of action asserted against all Defendants.
 
On September 29, 2011, the Court held a status conference, wherein the Court was
advised by Lead Counsel that the parties have reached an agreement in
principle.  After being fully advised in the matter, the Court set another
status hearing for November 3, 2011, at which time the parties anticipate the
Court will consider preliminary approval of the settlement and related issues.
 
III.
DEFENDANTS’ DENIALS OF WRONGDOING AND LIABLITY

 
Defendants have denied and continue to deny all charges of wrongdoing or
liability against them arising out of any of the conduct, statements, acts, or
omissions alleged, or that could have been alleged, in the Action and believe
they have meritorious defenses to the claims. Defendants also have denied and
continue to deny, inter alia, the allegations that Lead Plaintiff and the Class
have suffered damages, that the prices of Acura Pharmaceuticals securities were
artificially inflated by reasons of alleged misrepresentations, non-disclosures,
or otherwise, and that Lead Plaintiff and the Class were harmed by the conduct
alleged in the Amended Complaint. Moreover, Defendants believe that the evidence
developed to date supports their position, and assert that the Action has no
merit.

 
11

--------------------------------------------------------------------------------

 
 
Nonetheless, the undersigned Defendants have concluded that further conduct of
the Action would be protracted and expensive, and have taken into account the
uncertainty and risks inherent in any litigation, especially in a complex case
like this Action.  As set forth below in ¶8.3 of this Stipulation, neither this
Stipulation nor any act performed or document executed pursuant to or in
furtherance of the Stipulation or the Settlement shall constitute an admission
or finding of wrongful conduct, acts, or omissions on the part of any Defendant.
 
IV.
CLAIMS OF LEAD PLAINTIFF AND BENEFITS OF SETTLEMENT

 
Lead Plaintiff believes that the claims asserted in this Action have merit and
that the evidence developed to date supports the claims. However, Lead Plaintiff
recognizes and acknowledges the expense and length of continued proceedings
necessary to prosecute the Action against Defendants through trial and possible
appeals. Lead Plaintiff also has taken into account the uncertain outcome and
the risk of any litigation, especially complex litigation such as this Action.
 
Further, Lead Plaintiff has considered the Action’s inherent difficulties and
delays as well as the possibility that the Defendants may be unable to satisfy
any eventual judgment awarded in favor of the Lead Plaintiff and the Class. Lead
Plaintiff also is mindful of the inherent problems of proof and the possible
defenses to the securities law violations asserted in the Action. Based on their
evaluation, Lead Plaintiff and Lead Counsel believe that the Settlement set
forth in the Stipulation confers substantial benefits upon and is in the best
interests of the Class.

 
12

--------------------------------------------------------------------------------

 
 
V.
TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT

 
 
1.
The Agreement

 
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the Lead
Plaintiff (for themselves and the Class Members) and the undersigned Defendants,
by and through their counsel, that, subject to Court approval, the Action and
the Released Claims shall be finally and fully compromised, settled, and
released, and the Action shall be dismissed with prejudice as to all Settling
Parties, upon and subject to the terms and conditions of the Stipulation, as
follows.
 
 
2.
The Settlement

 
 
a.
The Settlement Class

 
2.1         The Settling Parties stipulate, for purposes of this Stipulation and
Settlement only, to the certification of the Class pursuant to Rules 23(a) and
(b)(3) of the Federal Rules of Civil Procedure.  If for any reason (including
the exercise of a right to terminate under the Stipulation) Final Approval of
the Settlement is not granted, then the certification of the Class shall become
null and void without further order of any court.
 
 
b.
The Settlement Fund

 
2.2          Acura Pharmaceuticals shall pay or cause to be paid the Settlement
Amount within the time set forth in ¶2.3 of this Stipulation, below, into the
Escrow Account in settlement of the Action and the Released Claims which, with
any accrued interest, shall constitute the Settlement Fund.  Other than the sole
and exclusive obligation of Acura Pharmaceuticals to pay or cause to be paid the
Settlement Amount to the Escrow Agent, no Defendant shall have any obligation to
make any payment pursuant to this Stipulation or the Settlement.  Under no
circumstances will Acura Pharmaceuticals be required to pay more than the
Settlement Amount pursuant to this Stipulation or the Settlement, subject to any
interest payments allowed and required under ¶2.3 below.

 
13

--------------------------------------------------------------------------------

 
 
2.3           Subject to the terms of this Stipulation, Acura Pharmaceuticals
shall pay or cause to be paid the Settlement Amount into the Escrow Account
within thirty (30) business days after entry of the Preliminary Approval Order.
To enable the timely payment of the Settlement Amount, Lead Counsel shall, no
later than two (2) days after the entry of the Preliminary Approval Order,
provide counsel for the undersigned Defendants with mailing instructions and a
taxpayer identification number for the Escrow Account. If the Settlement Amount
is not paid within thirty (30) business days after entry of the Preliminary
Approval Order (and provided that Lead Counsel has timely provided the mailing
instructions and taxpayer identification detailed above), Lead Plaintiff may
require interest to be paid by Acura Pharmaceuticals at the published
three-month LIBOR rate per annum on such dates, from thirty (30) business days
after entry of the Preliminary Approval Order until the Settlement Amount is
paid.
 
2.4           This is not a claims-made settlement, and Defendants will have no
ability to recapture any of the Settlement Amount, unless the Settlement does
not become effective as set forth in Section 7 of this Stipulation.
 
2.5           The Released Persons shall have no responsibility for or incur any
liability with respect to the management, investment, or distribution of the
Settlement Fund or Net Settlement Fund or for any losses suffered by, or
fluctuations in the value of, the Settlement Fund or Net Settlement Fund.

 
14

--------------------------------------------------------------------------------

 

 
c.
The Escrow Agent

 
2.6         The Escrow Agent shall not disburse the Settlement Fund except as
provided in the Stipulation, by Court order, or by written agreement of counsel
for all Settling Parties. Upon Final Approval of the Settlement and completion
of the claims processing, the Escrow Agent shall distribute the Net Settlement
Fund (as defined below) in accordance with the Court-approved Plan of Allocation
without further order of the Court.
 
2.7         Subject to further order and/or direction as may be made by the
Court, the Escrow Agent is authorized to execute transactions on behalf of the
Class Members that are consistent with the terms of the Stipulation.
 
2.8         All funds held by the Escrow Agent shall be deemed and considered to
be in custodia legis of the Court, and shall remain subject to the jurisdiction
of the Court until such time as such funds shall be distributed pursuant to the
Stipulation and/or further order(s) of the Court.
 
2.9         After payment of the Settlement Fund to the Escrow Agent, the Escrow
Agent may establish a “Class Notice and Administration Fund” of up to $116,250
from the Settlement Fund. The Class Notice and Administration Fund may be used
by Lead Counsel, without prior approval of the Court, only to pay costs and
expenses reasonably and actually incurred in connection with providing notice to
the Class (including any reimbursement of banks, brokerage houses or other
nominees solely for their reasonable out-of-pocket expenses incurred in
providing notice to beneficiaries who are Class Members, which expenses would
not have been incurred except for the sending of such notice, subject to further
order of the Court with respect to any dispute concerning such compensation),
locating Class Members, assisting with the filing of claims, administering and
distributing the Settlement Fund to Authorized Claimants, processing Proof of
Claim and Release forms, and paying escrow fees and costs.

 
15

--------------------------------------------------------------------------------

 
 
2.10        The Released Persons shall not have any responsibility for or incur
any liability with respect to: any act, omission, or determination of or by the
Escrow Agent, Lead Counsel, or any designees or agents thereof; the Class Notice
and Administration Fund; the administration of, distribution of, or disbursement
from the Class Notice and Administration Fund; the Settlement Fund; the
administration of, distribution of, or disbursement from the Settlement Fund;
the Net Settlement Fund; or the administration of, distribution of, or
disbursement from the Net Settlement Fund.
 
 
d.
Taxes

 
2.11       The Settling Parties and the Escrow Agent agree to treat the
Settlement Fund as being at all times a “qualified settlement fund” within the
meaning of Treas. Reg. §1.468B-1. In addition, the Escrow Agent shall timely
make such elections as necessary or advisable, including the “relation-back
election” (as defined in Treas. Reg. §1.468B-1) back to the earliest permitted
date. Such elections shall be made in compliance with the procedures and
requirements contained in such regulations. It shall be the responsibility of
the Escrow Agent to timely and properly prepare and deliver the necessary
documentation for signature by all necessary parties, and thereafter to cause
the appropriate filing to occur.

 
16

--------------------------------------------------------------------------------

 

2.12           For the purpose of Section 468B of the Internal Revenue Code of
1986, as amended, and the regulations promulgated thereunder, the
“administrator” shall be the Escrow Agent. The Escrow Agent shall timely and
properly file all informational and other tax returns necessary or advisable
with respect to the Settlement Fund (including, without limitation, the returns
described in Treas. Reg. §1.468B-2(k)). Such returns shall reflect that all
Taxes (including any estimated Taxes, interest or penalties) on the income
earned by the Settlement Fund shall be paid out of the Settlement Fund as
provided in ¶2.13 of this Stipulation.
 
2.13         All Taxes (including any estimated Taxes, interest, or penalties)
arising with respect to the income earned by the Settlement Fund, including: (i)
any Taxes or tax detriments that may be imposed upon the Released Persons with
respect to any income earned by the Settlement Fund for any period during which
the Settlement Fund does not qualify as a “qualified settlement fund” for
federal or state income tax purposes (“Taxes”); and (ii) expenses and costs
incurred (including, without limitation, expenses of tax attorneys and/or
accountants and mailing and distribution costs and expenses relating to filing
(or failing to file) tax returns) (“Tax Expenses”), shall be paid out of the
Settlement Fund; in no event shall the Released Persons have any responsibility
for or liability with respect to the Taxes or the Tax Expenses. The Escrow Agent
shall indemnify and hold each of the Released Persons harmless for Taxes and Tax
Expenses (including, without limitation, Taxes payable by reason of any such
indemnification). Further, Taxes and Tax Expenses shall be treated as, and
considered to be, a cost of administration of the Settlement Fund and shall be
timely paid by the Escrow Agent out of the Settlement Fund without prior order
from the Court and the Escrow Agent shall be obligated (notwithstanding anything
herein to the contrary) to withhold from distribution to Authorized Claimants
any funds necessary to pay such amounts including the establishment of adequate
reserves for any Taxes and Tax Expenses (as well as any amounts that may be
required to be withheld under Treas. Reg. §1.468B-2(1)(2)). The Settling Parties
hereto agree to cooperate with the Escrow Agent, each other, and their tax
attorneys and accountants to the extent reasonably necessary to carry out the
provisions of ¶¶2.11 to 2.13 of this Stipulation.

 
17

--------------------------------------------------------------------------------

 
 
2.14       For the purpose of ¶¶2.11 to 2.13 of this Stipulation, references to
the Settlement Fund shall include the Settlement Fund, the Class Notice and
Administration Fund and the Net Settlement Fund, and shall also include any
earnings on each of the foregoing.
 
 
e.
CAFA Notice

 
The undersigned Defendants shall, no later than ten (10) calendar days following
the filing of this Stipulation in Court, serve a notice of the proposed
Settlement in compliance with the requirements of the Class Action Fairness Act,
28 U.S.C. § 1711 et seq.
 
 
f.
Termination of Settlement

 
In the event that the Effective Date does not occur or the Stipulation shall
terminate, or be canceled, or shall not become effective for any reason,
including, without limitation, in the event that the Settlement is not approved
by the Court or the Judgment is reversed or vacated following any appeal taken
therefrom, the Settlement Fund and the Class Notice and Administration Fund and
the Net Settlement Fund (in each case, including accrued interest), less certain
expenses actually incurred and properly due and owing in connection with the
Settlement provided for herein, shall be refunded pro rata to Acura
Pharmaceuticals and/or any other entities contributing to the Settlement Fund,
as provided in ¶7.3 of this Stipulation, below.

 
18

--------------------------------------------------------------------------------

 

 
3.
Preliminary Approval Order and Settlement Fairness Hearing

 
3.1           Promptly after execution of the Stipulation, the Settling Parties
shall submit the Stipulation together with its Exhibits to the Court and shall
apply for entry of the Preliminary Approval Order, substantially in the form of
Exhibit A hereto, requesting, inter alia, the preliminary approval of the
Settlement set forth in the Stipulation, and approval for mailing the Notice of
Pendency and Proposed Settlement of Class Action (the “Notice”) substantially in
the form of Exhibit A-1 hereto, mailing the Proof of Claim and Release (the
“Claim Form”) substantially in the form of Exhibit A-2 hereto, and publication
of a Summary Notice substantially in the form of Exhibit A-3 hereto.  The Notice
shall include the general terms of the Settlement set forth in the Stipulation,
the proposed Plan of Allocation, the general terms of the Fee and Expense
Application (as defined below), and the date of the Settlement Fairness Hearing
(as defined below).
 
3.2           Lead Counsel shall request that after notice is given, the Court
hold a hearing (the “Settlement Fairness Hearing”) and approve the Settlement of
the Action as set forth herein. At or after the Settlement Fairness Hearing, as
set forth in ¶3.1 of this Stipulation, above, and ¶¶6.1 to 6.4 of this
Stipulation, below, Lead Counsel also will request that the Court approve the
proposed Plan of Allocation and the Fee and Expense Application; Lead Counsel
also may request Court approval of an application by each of the Lead Plaintiffs
for reimbursement for reasonable costs and expenses, including their time spent
on the Action. The Preliminary Approval Order submitted to the Court shall
specifically include provisions that, among other things, will:
 
(a)           Preliminarily approve this Stipulation and the Settlement as being
fair, just, reasonable and adequate to all Settling Parties;
 

 
19

--------------------------------------------------------------------------------

 

(b)          Preliminarily certify the Class, solely for purposes of the
Settlement, and find, solely for purposes of the Settlement, that each element
for certification of the Class pursuant to Rule 23 of the Federal Rules of Civil
Procedure is met;
 
(c)          Approve the form of the Notice for mailing to Members of the Class;
 
(d)          Approve the form of the Claim Form for mailing to Members of the
Class;
 
(e)           Approve the Summary Notice for publication;
 
(f)           Direct Lead Counsel to mail or cause to be mailed by first class
mail the Notice and the Claim Form to those Persons in the Class who can be
identified through reasonable effort, on or before the date specified in the
Preliminary Approval Order;
 
(g)          Direct nominees who purchased or otherwise acquired Acura
Pharmaceuticals common stock or call options or who sold Acura Pharmaceuticals
put options for the benefit of Class Members between February 21, 2006 and April
22, 2010, inclusive, to send the Notice and Claim Form to all such Class Members
within ten (10) days after receipt of the Notice or send a list of the names and
addresses of such beneficiaries to the Claims Administrator within ten (10) days
of receipt of the Notice;
 
(h)          Direct Lead Counsel to cause the Summary Notice to be published
once in the Investor’s Business Daily, on or before the date specified in the
Preliminary Approval Order, and once online over the PR Newswire, on or before
the date specified in the Preliminary Approval Order, and to place a copy of the
Complaint and the Stipulation (including Exhibits) on the website of Lead
Counsel or a website maintained by Lead Counsel, on or before the date specified
in the Preliminary Approval Order;

 
20

--------------------------------------------------------------------------------

 
 
(i)           Provide that Class Members who wish to participate in the
Settlement shall complete and file Claim Forms pursuant to the instructions
contained therein;
 
(j)           Find that the notice given pursuant to subparagraphs (b)-(g) above
constitutes the best notice practicable under the circumstances, including
individual notice to all Class Members who can be identified upon reasonable
effort, and constitutes valid, due and sufficient notice to all Class Members,
complying fully with the requirements of Rule 23 of the Federal Rules of Civil
Procedure, the Constitution of the United States, and any other applicable law;
 
(k)          Schedule the Settlement Fairness Hearing to be held by the Court to
consider and determine whether the Settlement should be approved as fair,
reasonable and adequate, and whether the Judgment approving the Settlement
should be entered;
 
(l)           Provide that any Class Member who so desires may exercise the
right to exclude themselves from the Class but only if they comply with the
requirements for so doing as set forth in the Notice;
 
(m)         Provide that at or after the Settlement Fairness Hearing, the Court
shall determine whether the proposed Plan of Allocation should be approved;
 
(n)          Provide that at or after the Settlement Fairness Hearing, the Court
shall determine and enter an Order regarding whether and in what amount
attorneys’ fees and reimbursement of expenses should be awarded to Lead Counsel
out of the Settlement Fund;

 
21

--------------------------------------------------------------------------------

 

(o)           Provide that pending final determination of whether the Settlement
should be approved, neither Lead Plaintiffs nor any Class Member, either
directly, representatively, or in any other capacity, shall commence or
prosecute any action or proceeding in any court or tribunal asserting any of the
Released Claims against any of the Released Persons;
 
(p)           Provide that any objections to: (i) the Settlement; (ii) entry of
the Judgment approving the Settlement; (iii) the proposed Plan of Allocation;
(iv) Lead Counsel’s fee and expense application(s); or (v) Lead Plaintiff’s
application(s) for expenses, and any papers submitted in support of said
objections, shall be considered by the Court at the Settlement Fairness Hearing
only if, on or before the date specified in the Preliminary Approval Order,
Persons making objections shall have filed and served written objections (which
shall set forth each objection and the basis therefore) and copies of any papers
in support of their position as set forth in the Preliminary Approval Order; and
 
(q)           Provide that the Settlement Fairness Hearing may be continued or
adjourned by Order of the Court without further notice to the Class.
 
 
4.
Releases

 
4.1           Upon the Effective Date, as defined in ¶1.23 of this Stipulation,
Lead Plaintiff and each of the Class Members, on behalf of themselves, their
respective present and former parent entities, subsidiaries, divisions, and
affiliates, the present and former employees, officers, directors, advisors,
partners, and agents of each of them, and the predecessors, heirs, executors,
administrators, trusts, family members, successors and assigns of each of them,
and anyone claiming through or on behalf of any of them, shall be deemed to
have, and by operation of the Judgment shall have, fully, finally, and forever
released, relinquished, and discharged all Released Claims as against the
Released Persons, whether or not such Class Member executes and delivers a Claim
Form or participates in the Settlement Fund, unless such person validly and
timely seeks to exclude themselves from the Class pursuant to the terms set
forth in the Notice.

 
22

--------------------------------------------------------------------------------

 
 
4.2         Upon the Effective Date, all Class Members and anyone claiming
through or on behalf of any of them, will be forever barred and enjoined from
commencing, instituting, intervening in or participating in, prosecuting, or
continuing to prosecute any action or other proceeding in any court of law or
equity, arbitration tribunal, administrative forum, or other forum of any kind
or character (whether brought directly, in a representative capacity,
derivatively, or in any other capacity), asserting any of the Released Claims
against any of the Released Persons, unless such person validly and timely seeks
to exclude themselves from the Class pursuant to the terms set forth in the
Notice.
 
4.3         With respect to any and all Released Claims, the Settling Parties
stipulate and agree that upon the Effective Date, the Class shall expressly
waive, and each Class Member shall be deemed to have waived, and by operation of
the Judgment shall have expressly waived, any and all provisions, rights and
benefits conferred by California Civil Code § 1542 (to the extent it applies to
the Action) or any other law of any state or territory of the United States, or
principle of common law, which is similar, comparable, or equivalent to
California Civil Code § 1542, which provides:
 
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.

 
23

--------------------------------------------------------------------------------

 
 
Lead Plaintiff and Class Members expressly acknowledge that they may hereafter
discover facts in addition to or different from those that any of them or their
counsel now knows or believes to be true with respect to the subject matter of
the Released Claims or otherwise, but upon the Effective Date Lead Plaintiff
shall expressly have, each Class Member shall be deemed to have, and by
operation of the Judgment shall have, fully, finally, and forever settled and
released any and all Released Claims, known or unknown, suspected or
unsuspected, contingent or non-contingent, whether or not concealed or hidden,
that now exist or heretofore have existed, upon any theory of law or equity now
existing or coming into existence in the future, including, but not limited to,
conduct that is negligent, reckless, intentional, with or without malice, or a
breach of any duty, law, or rule, without regard to the subsequent discovery or
existence of such different or additional facts.  Lead Plaintiff acknowledges,
and the Class Members shall be deemed to have acknowledged, and by operation of
the Judgment shall have acknowledged, that the foregoing waiver was separately
bargained for and a key element of the Settlement of which this release is a
part.
 
4.4         Upon the Effective Date, each of the Released Persons shall be
deemed to have, and by operation of the Judgment shall have, fully, finally, and
forever released, relinquished, and discharged Lead Plaintiff, each and all of
the Class Members, any confidential witness, any individual contacted by Lead
Counsel in the course of their investigation, and Lead Counsel from all claims
whatsoever arising out of, relating to, incidental to or in connection with the
investigation, institution, prosecution, assertion, settlement, or resolution of
the Action or the Released Claims, except for those claims brought to enforce
the Settlement.

 
24

--------------------------------------------------------------------------------

 
 
 
5.
Administration and Calculation of Claims, Final Awards, and Supervision and
Distribution of Settlement Fund

 
5.1         The Claims Administrator shall administer and calculate the claims
submitted by Class Members under the supervision of Lead Counsel and pursuant to
the Preliminary Approval Order entered by the Court.
 
5.2         Subject to the terms of this Stipulation and any orders of the
Court, the Settlement Fund shall be applied as follows:
 
(a)           to pay all the costs and expenses reasonably and actually incurred
in connection with providing notice, locating Class Members, assisting with the
filing of claims, administering and distributing the Settlement Fund to
Authorized Claimants, processing Claim Forms, and paying escrow fees and costs,
if any;
 
(b)           to pay Taxes and Tax Expenses;
 
(c)           after the Effective Date, to pay Lead Counsel’s attorneys’ fees
and expenses, to the extent allowed by the Court (the “Fee and Expense Award”);
 
(d)           after the Effective Date, to distribute the Net Settlement Fund to
Authorized Claimants as allowed by the Stipulation (including ¶¶5.3-5.7 below)
and the Plan of Allocation and any other applicable order of the Court.
 
5.3         Upon the Effective Date and thereafter, and in accordance with the
terms of the Stipulation and the Plan of Allocation, the Net Settlement Fund
shall be distributed to Authorized Claimants, subject to and in accordance with
¶¶5.4 through 5.7 below.

 
25

--------------------------------------------------------------------------------

 
 
5.4         Any Person falling within the definition of the Class may be
excluded from the Class by submitting to the Claims Administrator a request for
exclusion which complies with the requirements set forth in the Notice and is
postmarked no later than fourteen (14) days prior to the date of the Settlement
Hearing.  Any Person who submits a valid and timely request for exclusion (and
does not subsequently revoke this request for exclusion) shall have no rights
under the Stipulation, shall not share in the distribution of the Net Settlement
Fund, and shall not be bound by the Stipulation (including the releases herein)
or the Judgment. However, a Class Member may submit a written revocation of a
request for exclusion within ninety (90) days after the mailing of the Notice,
or such other period as may be ordered by the Court, and may receive payments
pursuant to this Stipulation and Settlement provided the Class Member also
submits a valid Claim Form, as set forth in ¶5.6 below, within ninety (90) days
after the mailing of the Notice, or such other period as may be ordered by the
Court.
 
5.5         Within ninety (90) days after the mailing of the Notice or such
other time as may be set by the Court, each Person claiming to be an Authorized
Claimant shall be required to submit to the Claims Administrator a completed
Claim Form, signed under penalty of perjury and supported by such documents as
are specified in the Claim Form and as are reasonably available to the
Authorized Claimant.
 
5.6         All Class Members who fail to timely submit a Claim Form within
ninety (90) days after the mailing of the Notice, or such other period as may be
ordered by the Court, shall be forever barred from receiving any payments
pursuant to the Stipulation and the Settlement, but will in all other respects
be subject to and bound by the provisions of the Stipulation, the releases
contained herein, and the Judgment.

 
26

--------------------------------------------------------------------------------

 
 
5.7         The Net Settlement Fund shall be distributed to the Authorized
Claimants substantially in accordance with a Plan of Allocation to be described
in the Notice and approved by the Court. If there is any balance remaining in
the Net Settlement Fund after six (6) months from the date of distribution of
the Net Settlement Fund (whether by reason of tax refunds, uncashed checks or
otherwise), Lead Counsel shall, if feasible, reallocate such balance among
Authorized Claimants in an equitable and economic fashion. Thereafter, any
balance which still remains in the Net Settlement Fund shall be donated to an
appropriate, non-profit organization agreed upon by Lead Counsel and approved by
the Court.
 
5.8         No Person shall have any claim against Lead Counsel, Defense
Counsel, the Claims Administrator, or any entity designated by Lead Counsel
based on distributions made substantially in accordance with the Stipulation and
the Settlement contained herein, the Plan of Allocation, or further order(s) of
the Court.
 
5.9         It is understood and agreed by the Settling Parties that any
proposed Plan of Allocation of the Net Settlement Fund including, but not
limited to, any adjustments to an Authorized Claimant’s claim set forth therein,
is not a part of the Stipulation and is to be considered by the Court separately
from the Court’s consideration of the fairness, reasonableness, and adequacy of
the Settlement, and any order or proceeding relating to the Plan of Allocation
shall not operate to terminate or cancel the Stipulation or affect or delay the
finality of the Judgment or Settlement of the Action (including the releases
contained in the Stipulation), or any other orders entered pursuant to the
Stipulation.
 
5.10       The undersigned Defendants will take no position with respect to the
Proposed Plan of Allocation or such plan as may be approved by the Court, except
that the Plan of Allocation shall be in accordance with the statutory limitation
on damages set forth at 15 U.S.C. § 77k(e). The Plan of Allocation is a matter
separate and apart from the Settlement and any decision by the Court concerning
the Plan of Allocation shall not affect the validity or finality of the
Settlement.

 
27

--------------------------------------------------------------------------------

 
 
5.11       The Released Persons shall not have any responsibility for or incur
any liability with respect to: any act, omission, or determination of or by the
Claims Administrator, Lead Counsel, or any designees or agents thereof; any act,
omission, or determination of or by any other entity designated by Lead Counsel
as referenced in ¶5.8 of this Stipulation; the Plan of Allocation; or the
administration of the Plan of Allocation.  This provision shall have no impact
on any responsibility for or liability regarding the holding and management of
the Settlement Fund by the Escrow Agent, which is governed by separate escrow
agreement among the parties and the Escrow Agent.
 
 
6.
Lead Counsel’s Attorneys’ Fees and Reimbursement of Expenses

 
6.1         Lead Counsel intends to submit an application or applications for
distributions to them from the Settlement Fund for: (a) an award of attorneys’
fees; and (b) reimbursement of actual expenses, including the fees of any
experts or consultants incurred in connection with prosecuting the Action, plus
any interest on such attorneys’ fees and expenses accrued at the same rate and
for the same periods as earned by the Settlement Fund (until paid), as may be
awarded by the Court (the “Fee and Expense Application”).  Defendants will not
take any position on any Fee and Expense Application that Lead Counsel may file,
provided that such Fee and Expense Application seeks an award of attorneys’ fees
in an amount not greater than one third (331/3%) of the Settlement Fund and
reimbursement of expenses incurred in connection with the prosecution of this
Action not to exceed fifty-two thousand dollars ($52,000.00), and further
provided that any such Fee and Expense Application is subject to the approval of
the Court.
 
 
28

--------------------------------------------------------------------------------

 
 
6.2         The attorneys’ fees and expenses, as awarded by the Court, shall be
paid to Lead Counsel from the Settlement Fund, as ordered, immediately after the
Effective Date of the Settlement, subject to the joint and several obligation of
Lead Counsel to make appropriate refunds or repayments to the Settlement Fund
plus interest (accrued as from the date the funds of the Settlement Fund are
deposited with the Escrow Agent until the date the appropriate refunds or
repayments are made), if and when, as a result of any appeal and/or further
proceedings on remand, or successful collateral attack, the fee or expense award
is reduced or reversed.
 
6.3         The procedure for and the allowance or disallowance by the Court of
any applications by Lead Counsel for attorneys’ fees and expenses, including the
fees of experts and consultants, and for any reimbursement to Lead Plaintiffs
for reasonable time, costs, and expenses incurred directly related to
representation of the Class, all to be paid out of the Settlement Fund, are not
part of the Settlement, and are to be considered by the Court separately from
the Court’s consideration of the fairness, reasonableness and adequacy of the
Settlement. The Settling Parties agree that the Fee and Expense Award are not
settlement terms and will not be grounds for terminating the Settlement or
proposed Settlement. Any order or proceedings relating to the Fee and Expense
Application, or any appeal from any order relating to either of the foregoing or
reversal or modification of either of the foregoing, shall not operate to
terminate or cancel the Stipulation, or affect or delay the finality of the
Judgment or the Settlement (including the releases contained therein).

 
29

--------------------------------------------------------------------------------

 
 
6.4         The Released Persons shall have no responsibility for, and no
liability whatsoever with respect to: any Fee and Expense Application that Lead
Counsel may file; any payments to Lead Counsel pursuant to ¶¶6.1 and 6.2, above;
any Fee and Expense Award that the Court may make in the Action. The Released
Persons also shall have no responsibility for, and no liability whatsoever, with
respect to any other Person who may seek fees and expenses in connection with
prosecuting or helping to prosecute this Action against Defendants, or to any
other Person who may assert some claim to:  any payments to Lead Counsel
pursuant to ¶¶6.1 and 6.2, above; or any Fee and Expense Award that the Court
may make in the Action;.
 

 
7.
Conditions of Settlement, Effect of Disapproval, Cancellation, or Termination

 
7.1         The Effective Date of the Stipulation and the Settlement shall be
conditioned on the occurrence of all of the following events:
 
(a)        the Settlement Fund has been funded as required by ¶2.2 of this
Stipulation;
 
(b)        The undersigned Defendants have not exercised their option to
terminate the Stipulation pursuant to the terms of the Supplemental Agreement
referenced in ¶7.8 of this Stipulation;
 
(c)         the Court has entered the Preliminary Approval Order referenced in
¶3.1 of this Stipulation;
 
(d)         the Court has entered the Judgment, or a judgment substantially in
the form of Exhibit B hereto, which, inter alia, dismisses the Action with
prejudice as to all Defendants and includes the releases set forth in this
Stipulation; and
 
(e)          the Judgment has become Final, as defined in ¶1.30 of this
Stipulation.

 
30

--------------------------------------------------------------------------------

 
 
7.2         Upon the occurrence of all of the events referenced in ¶7.1 of this
Stipulation, any and all remaining interest or right of Defendants in or to the
Settlement Fund, if any, shall be absolutely and forever extinguished. If all of
the conditions specified in ¶7.1 of this Stipulation are not met, then the
Stipulation shall be canceled and terminated subject to ¶7.4 of this Stipulation
unless Lead Counsel and counsel for the undersigned Defendants mutually agree in
writing to proceed with the Stipulation.
 
7.3         Unless otherwise ordered by the Court, in the event that the
Effective Date does not occur or the Stipulation shall terminate, or be
canceled, or shall not become effective for any reason, including, without
limitation, in the event that the Settlement is not approved by the Court or the
Judgment is reversed or vacated following any appeal taken therefrom, then
within ten (10) business days after written notification of such event is sent
by counsel for the undersigned Defendants (or any of them) to the Escrow Agent,
the Settlement Fund (including accrued interest), including the Settlement
Amount, plus the Class Notice and Administration Fund (including accrued
interest), and the Net Settlement Fund, and all payments disbursed, including
all expenses, costs, and any Fee and Expense Award– excluding only expenses and
costs which have either been disbursed or are determined to be chargeable to the
Class Notice and Administration Fund, in connection with providing notice and
other reasonable administrative costs of implementing the Settlement, pursuant
to ¶2.09 of this Stipulation, and Taxes and Tax Expenses that have been paid or
that have accrued and will be payable at some later date – shall be refunded by
the Escrow Agent to the respective entities that contributed to the Settlement
Fund, pursuant to written instructions from Acura Pharmaceuticals or its
successor-in-interest.  Such amount due to Acura Pharmaceuticals or the
respective entities and/or persons that contributed to the Settlement Fund shall
not be reduced by any investment losses on funds in escrow and any such losses
shall be an obligation of the Escrow Agent.  If said amount or any portion
thereof is not returned within such ten (10) day period, then interest shall
accrue thereon at the rate earned on the Settlement Fund until the date that
amount is returned.  At the request of counsel for Defendants, the Escrow Agent
or its designee shall apply for any tax refund owed on the Settlement Fund and
Class Notice and Administration Fund and pay the proceeds, after deduction of
any fees or expenses reasonably incurred in connection with such application(s)
for refund, pursuant to written direction from Acura Pharmaceuticals or its
successor-in-interest.

 
31

--------------------------------------------------------------------------------

 
 
7.4         In the event that the Stipulation is not approved by the Court or
the Settlement is not approved by the Court or is terminated or fails to become
effective in accordance with its terms, the Settling Parties shall be restored
to their respective positions in the Action as of the moment immediately before
this Stipulation was fully executed. In such event, the terms and provisions of
the Stipulation and any document executed pursuant to or in furtherance of the
Stipulation or the Settlement, with the exception of ¶¶2.11, 7.3-7.5, and 8.4,
shall have no further force and effect with respect to the Settling Parties and
shall not be used in this Action or in any other proceeding for any purpose, and
any judgment or order entered by the Court in accordance with the terms of the
Stipulation shall be treated as vacated, nunc pro tunc. No order of the Court or
modification or reversal on appeal of any Court order concerning the Plan of
Allocation or the amount of any attorneys’ fees, costs, expenses and interest
awarded by the Court to Lead Counsel shall constitute grounds for cancellation
or termination of the Stipulation.

 
32

--------------------------------------------------------------------------------

 
 
7.5         If the Effective Date does not occur, or if the Stipulation is
terminated, pursuant to its terms without prejudice, neither Lead Plaintiff nor
Lead Counsel shall have any obligation to repay any amounts actually and
properly disbursed from the Class Notice and Administration Fund. In addition,
any expenses already incurred and properly chargeable to the Class Notice and
Administration Fund pursuant to ¶2.10 of this Stipulation at the time of such
termination or cancellation, but which have not been paid, shall be paid by the
Escrow Agent in accordance with the terms of the Stipulation prior to the
balance being refunded in accordance with ¶¶2.9 and 7.3 of this Stipulation.
 
7.6         If a case is commenced in respect to any Defendant under Title 11 of
the United States Code (Bankruptcy), or a trustee, receiver, or conservator is
appointed under any similar law, and in the event of the entry of a final order
of a court of competent jurisdiction determining the transfer of the Settlement
Fund, or any portion thereof, by or on behalf of such Defendant to be a
preference, voidable transfer, fraudulent transfer, or similar transaction,
then, at Lead Plaintiff’s option, as to such Defendant, the releases given and
Judgment entered in favor of such Defendant pursuant to this Stipulation shall
be null and void.
 
7.7         Notwithstanding the foregoing ¶7.6, Lead Plaintiff’s right to
nullify the releases and Judgment as to any Defendant pursuant to ¶7.6 shall
expire upon the Effective Date.
 
7.8         Pursuant to Federal Rule of Civil Procedure 23(e)(3), under which
the parties seeking approval must file a statement identifying any agreement
made in connection with the proposal, there is a Supplemental Agreement to this
Stipulation of Settlement with additional provisions agreed upon between the
Settling Parties.
 
 
33

--------------------------------------------------------------------------------

 
 

 
8.
Miscellaneous Provisions

 
8.1         The Settling Parties (a) acknowledge that it is their intent to
consummate this agreement; and (b) agree to cooperate to the extent reasonably
necessary to effectuate and implement all terms and conditions of the
Stipulation and to exercise their reasonable best efforts to accomplish the
terms and conditions of the Stipulation.
 
8.2         Subject to the terms of this Stipulation, the Settling Parties
intend this Settlement, along with the Stipulation and [Proposed] Judgment, to
be a final and complete resolution of all disputes that Lead Plaintiffs and the
Class have with the Released Persons, and that Defendants have with Lead
Plaintiff and the Class, with respect to the Released Claims. The Settlement
compromises claims which are contested and shall not be deemed an admission by
any Lead Plaintiff or Defendant as to the merits of any claim or defense. The
Judgment will contain a statement that during the course of the Action, Lead
Plaintiff, Defendants, and their respective counsel at all times complied with
the requirements of Federal Rule of Civil Procedure 11.  In addition, Lead
Plaintiff and the Class will not make applications against Released Persons, and
Defendants will not make applications against Lead Plaintiffs and the Class for
fees, costs or sanctions, pursuant to Rule 11, Rule 37, Rule 45 or any other
court rule or statute, with respect to any claims or defenses in this Action or
to any aspect of the institution, prosecution, or defense of the Action. While
retaining their right to deny liability, the undersigned Defendants agree that
the amount paid to the Settlement Fund and the other terms of the Settlement
were negotiated in good faith by the Settling Parties, and reflect a settlement
that was reached voluntarily after consultation with competent legal
counsel.  Each Lead Plaintiff and each Defendant reserves his, her or its right
to rebut, in a manner that such party determines to be appropriate, any
contention made in any public forum that the Action was brought, defended or
settled in bad faith or without a reasonable basis.

 
34

--------------------------------------------------------------------------------

 
   
8.3         Neither the Stipulation nor the Settlement, nor any act performed or
document executed pursuant to or in furtherance of the Stipulation or the
Settlement: (a) is or may be deemed to be or may be used as an admission of, or
evidence of, the validity of any Released Claim, or of any wrongdoing or
liability of the Released Persons, or; (b) is or may be deemed to be or may be
used as an admission of, or evidence of, any fault or omission of any of the
Released Persons in any civil, criminal, administrative, or other proceeding
before any court, administrative agency, arbitration tribunal, or other body.
Any Released Person may file the Stipulation and/or the Judgment in any action
or other proceeding that may be brought against them in order to support a
defense, argument, or counterclaim based on principles of res judicata,
collateral estoppel, release, good faith settlement, judgment bar or reduction,
or any other theory of claim preclusion or issue preclusion or similar defense,
argument, or counterclaim.
 
8.4         All agreements made and orders entered during the course of the
Action relating to the confidentiality of information shall survive this
Stipulation, pursuant to their terms.
 
8.5         All of the Exhibits to the Stipulation are material and integral
parts hereof and are fully incorporated herein by reference.  In the event there
exists a conflict or inconsistency between the terms of the Stipulation, on the
one hand, and any Exhibit or the Supplemental Agreement, on the other, the terms
of this Stipulation shall govern.
 
8.7         The Stipulation may be amended or modified only by a written
instrument signed by or on behalf of all Settling Parties or their respective
successors-in-interest.

 
35

--------------------------------------------------------------------------------

 
 
8.8         The Stipulation, Supplemental Agreement, and the executed or so
ordered versions of those ancillary documents which are attached hereto as
Exhibits constitute the entire agreement among the Settling Parties and no
representations, warranties or inducements have been made to any party
concerning the Stipulation or its Exhibits other than the representations,
warranties, and covenants contained and memorialized in such documents. Except
as otherwise provided herein, Lead Plaintiff shall not be responsible for any
costs borne by Defendants or their counsel, and Defendants shall not be
responsible for any costs borne by Lead Plaintiff or their counsel.
 
8.9         Lead Counsel, on behalf of the Class, are expressly authorized by
Lead Plaintiff to take all appropriate action required or permitted to be taken
by the Class pursuant to the Stipulation to effectuate its terms and also are
expressly authorized to enter into any modifications or amendments to the
Stipulation on behalf of the Class which Lead Counsel deem appropriate.
 
8.10       Each counsel or other Person executing the Stipulation or any of its
Exhibits on behalf of any party hereto hereby warrants that such Person has the
full authority to do so.
 
8.11       The Stipulation may be executed in one or more counterparts. All
executed counterparts and each of them shall be deemed to be one and the same
instrument. A complete set of original executed counterparts shall be filed with
the Court.
 
8.12       The Stipulation shall be binding upon, and inure to the benefit of,
the successors and assigns of the Settling Parties.

 
36

--------------------------------------------------------------------------------

 
 
8.13       The Court shall retain jurisdiction with respect to implementation
and enforcement of the terms of the Stipulation, and all Settling Parties submit
to the jurisdiction of the Court for purposes of implementing and enforcing the
Settlement.  The Settling Parties agree that any action based on this
Stipulation or to enforce any of its terms shall be brought in this Court.
 
8.14       Lead Plaintiff and Lead Counsel represent and warrant that none of
Lead Plaintiff’s claims or causes of action in the Action have been assigned,
encumbered, or in any manner transferred in whole or in part.
 
8.15       All terms of this Stipulation and the executed or so ordered versions
of those ancillary documents which are attached hereto as Exhibits shall be
governed by and interpreted according to the substantive laws of the State of
Illinois, without giving regard or effect to its choice-of-law rules, except to
the extent that federal law requires the application of federal law.
 
8.16       The headings herein are used for the purpose of convenience only and
are not meant to have legal effect.
 
8.17       The waiver by one Settling Party of any breach of this Stipulation by
any other Settling Party shall not be deemed a waiver of any other prior or
subsequent breach of this Stipulation.  Unless otherwise stated herein, any
breach of any provision of this Stipulation by any Settling Party hereto shall
not constitute grounds for rescission of this Stipulation, but shall constitute
grounds only for a claim for specific performance for breach of this
Stipulation.
 
8.18       The Settling Parties agree that no further discovery is necessary to
confirm the fairness, reasonableness, and adequacy of the Settlement.

 
37

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be
executed, by their duly authorized attorneys dated this 31st day of October,
2011.
 
Dated: October 31, 2011
SUSMAN HEFFNER & HURST LLP
     
/s/ Matthew T. Heffner by GH
 
Matthew T. Heffner
 
Two First National Plaza
 
Suite 600
 
Chicago, IL
 
Tel: (312) 346-3466
 
Fax: (312) 346-2829
 
Email: mheffner@shhllp.com
     
Local Counsel for Lead Plaintiffs and the Class
     
KAHN SWICK & FOTI, LLC
 
Kim E. Miller, pro hac vice
 
500 5th Avenue, Suite 1810
 
New York, NY 10110
 
Tel:  973-696-3730
 
kim.miller@ksfcounsel.com
     
Lead Counsel for Lead Plaintiff and the Class
     
LATHAM & WATKINS LLP
     
/s/ Sean Berkowitz
 
Sean M. Berkowitz
 
233 South Wacker Drive, Suite 5800
 
Chicago IL 60606
 
Tel: 312-777-7016
 
sean.berkowitz@lw.com
     
-and-
     
LATHAM & WATKINS LLP
 
J. Christian Word
 
555 Eleventh Street, NW, Suite 1000
 
Washington DC 20004-1304
 
Tel: 202-637-2223
 
christian.word@lw.com
      Counsel for Defendants

 
 
38

--------------------------------------------------------------------------------