Unassociated Document


    


    THIRD
      AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT

    


    THIS
      THIRD AMENDMENT
      TO EXECUTIVE EMPLOYMENT AGREEMENT (this
      “Amendment”)
      made
      this 22nd
      day of
      December, 2005 by and between ACURA
      PHARMACEUTICALS, INC.,
      (formerly Halsey Drug Co., Inc.), a New York corporation (the “Corporation”),
      with
      offices at 616 N. North Court, Suite 120, Palatine, Illinois 60067 and
PETER
      A. CLEMENS, residing
      at 20860 Valley Road, Kideer, Illinois 60047 (the “Employee”).

    


    R E C I T 
      ;A L S

    


    
      	A.  	
              The
                Corporation and the Employee executed an employment agreement dated
                as of
                March 10, 1998, which agreement was amended in writing on each of
                June 28,
                2000 and January, 2005 (as so amended, the “Employment
                Agreement”).

            


    

    


    
      	B.  	
              The
                Corporation and the Employee now desire to further amend the Employment
                Agreement as provided herein. 

            


    

    


    NOW,
      THEREFORE,
      in
      consideration of the mutual covenants and undertakings herein contained, the
      parties agree as follows:

    


    1.    Section
      2
      of the Employment Agreement is hereby deleted in its entirety and the following
      is inserted in its place:

    


    “The
      term
      of the Employee’s employment under this Agreement shall commence on the date of
      this Agreement and shall expire on December 31, 2006 (the “Initial
      Term”),
      unless sooner terminated pursuant to Section 7 of this Agreement; provided,
      however,
      that
      the term
      of the Employee’s employment hereunder shall automatically be extended for
      successive one (1) year periods (each, a “Renewal
      Period”
      and
      together with the Initial Term, the “Term”)
      unless
      either the Corporation or the Employee provides written notice of non-renewal
      of
      the Employee’s employment with the Corporation ninety (90) days prior to the
      expiration of the Initial Term or any Renewal Period.”

    


    2.    Section
      3(b) of the Employment Agreement is hereby deleted in its entirety and the
      following is inserted in its place:

    


    “(b) Annual
      Bonus.
      During
      the Term, the Employee will be eligible to receive from the Corporation an
      annual bonus (the “Bonus”)
      in the
      amount of up to one hundred percent (100%) of the Employee’s then current annual
      Base Salary during the fiscal year (or portion thereof) for which the Bonus
      may
      be awarded. The Bonus will be based upon the achievement of such targets,
      conditions or parameters (the “Bonus
      Criteria”)
      as
      will be agreed upon by the Employee and the Board of Directors or the
      Compensation Committee of the Board of Directors of the Corporation within
      sixty
      (60) days of (before or after) the beginning of each fiscal year during the
      Term. The Bonus shall be paid at the same time as the bonuses are paid to other
      executive officers, but in any event within seventy five (75) days following
      the
      end of the Corporation’s fiscal year.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    Notwithstanding
      the foregoing, with respect to the Corporation’s fiscal year ending December 31,
      2006 (“Fiscal
      2006”),
      in
      the event the Corporation completes one or more Funding Transactions during
      Fiscal 2006 which results in the Corporation’s receipt of aggregate gross
      Funding Proceeds of at least Fifteen Million Dollars ($15,000,000)(the
“Minimum
      Funding Threshold”),
      the
      Corporation shall pay the Employee a bonus in an amount equal to one hundred
      percent (100%) of the Employee’s then current annual Base Salary not later than
      thirty (30) calendar days following the Corporation’s receipt of Funding
      Proceeds satisfying the Minimum Funding Threshold. For purposes of this Section
      3(b) “Funding
      Transaction”
      shall
      mean (a) any equity financing, and/or (b) any licensing or similar arrangement
      (including, by means of a joint venture, option or similar arrangement) whereby
      the Corporation licenses or otherwise grants any interest in or to any of the
      Corporation’s intellectual property rights, technology, know-how or similar
      property rights (whether existing now or hereafter) to a non-affiliated third
      party, or any similar transaction. “Funding
      Proceeds”
      shall
      mean and include (a) in the case of a Funding Transaction comprising an equity
      financing, the gross proceeds received by the Corporation from the issuance
      or
      sale of its equity securities, and (b) in the case of a Funding Transaction
      comprising a licensing or similar arrangement, the gross proceeds (consisting
      of
      signing fees, upfront fees, license fees, sublicense fees, milestone payments
      or
      any similar fees or payments, but expressly excluding any royalty payments,
      profit sharing payments or similar payments calculated based on the sale of
      products incorporating the Company’s technology) received by the Corporation
      with respect to such arrangement, and (c) in each case, the gross proceeds
      are
      received by the Corporation on or before March 31, 2007 with respect to a
      Funding Transaction pursuant to a definitive agreement executed on or before
      December 31, 2006 by the Corporation and the other party to such transaction.
      

    


    In
      the
      event the Corporation does not satisfy the Minimum Funding Threshold, but
      receives Funding Proceeds of at least Eleven Million Dollars ($11,000,000)
      on or
      before March 31, 2007, the Corporation shall pay the Employee a Bonus in an
      amount equal to a percentage of the Employee’s then current annual Base Salary
      in an amount equal to the product of (x) 100%, multiplied by (y) the quotient
      of
      (A) the Funding Proceeds received by the Corporation on or before March 31,
      2007, divided by (B) Fifteen Million Dollars ($15,000,000).”

    


    3.    Section
      5(b) of the Employment Agreement is hereby amended to add the following at
      the
      end of such Section:

    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    The
      Corporation will promptly amend the Corporation’s 1998 Stock Option Plan to
      comply with Section 409A and prepare and issue to the Employee an amended and
      restated non-qualified stock option agreement conforming to the requirements
      of
      Section 409A with respect to the Post-409A Option Portion, in form and substance
      satisfactory to the parties in replacement of the Non-Qualified Stock Option
      Agreement granted to the Employee on August 13, 2004 (the ‘Existing Option”).
      The Corporation acknowledges and agrees that shareholder approval of the
      Existing Option has been obtained and that the shares underlying the Existing
      Option have been duly registered. All references in this Employment Agreement
      to
      the “Option” and “Option Shares” shall be deemed to include all stock options
      granted by the Corporation to the Employee during the term of this
      Agreement.”

    


    4.    Section
      5(c) of the Employment Agreement is hereby deleted in its entirety and replaced
      with the following: 

    


    “(c) Restricted
      Stock Units.
      Simultaneously with the execution of the Third Amendment to Executive Employment
      Agreement dated December 22, 2005, the Corporation granted to the Employee
      a
      Restricted Stock Units Award Agreement which, subject to its terms and the
      terms
      of the Corporation’s 2005 Restricted Stock Unit Award Plan, provides for the
      Corporation’s issuance of up to Four Million Four Hundred Thousand (4,400,000)
      shares of the Corporation’s common stock, $.01 par value per share (the
“Restricted Stock Units”). Notwithstanding anything to the contrary contained in
      this Employment Agreement, the grant, vesting and distribution relating to
      the
      Restricted Stock Units will be governed solely by Corporation’s Restricted Stock
      Units Award Plan dated December 22, 2005 and the Restricted Stock Unit Award
      Agreement dated December 22, 2005 between the Corporation and the Employee.
      The
      shares underlying the Restricted Stock Units shall be duly registered under
      a
      registration statement on Form S-8 filed by the Corporation with the Securities
      and Exchange Commission promptly following the grant of such Restricted Stock
      Units.”

    


    5.    Section
      8.1 of the Employment Agreement is hereby amended to add the following at the
      end of such Section:

    


    “Additionally,
      notwithstanding any language to the contrary contained in any option agreements
      with the Employee (or any other applicable agreement or plan), the Employee’s
      Designees shall be entitled to exercise (i) the Pre-409A Option Portion during
      the twelve (12) month period following the date of termination under this
      Section 7.1, and (ii) the vested portion of the Post-409A Option Portion during
      the lesser of (A) the twelve (12) month period following the date of termination
      under this Section 7.1, or (B) the maximum exercise period permitted under
      Section 409A. At the expiration of the applicable exercise period, the
      unexercised stock options shall terminate.”

    


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

    

    6.    Section
      8.2 of the Employment Agreement is hereby amended to add the following at the
      end of the first paragraph of such Section:

    


    “Additionally,
      notwithstanding any language to the contrary contained in any option agreements
      with the Employee (or any other applicable agreement or plan), the Employee’s
      Designees shall be entitled to exercise (i) the Pre-409A Option Portion during
      the twelve (12) month period following the date of termination under this
      Section 7.2, and (ii) the vested portion of the Post-409A Option Portion during
      the lesser of (A) the twelve (12) month period following the date of termination
      under this Section 7.2, or (B) the maximum exercise period permitted under
      Section 409A. At the expiration of the applicable exercise period, the
      unexercised stock options shall terminate.”

    


    7.    Section
      7.3 of the Employment agreement is hereby amended to add the following at the
      end of such Section:

     

    “In
      the
      event the Employee is terminated by the Company for Cause or if the Employee
      resigns other than for Good Reason (as defined in Section 7.5), the Employee
      shall be entitled to exercise (i) the Pre-409A Option Portion within forty
      (40)
      days of such termination or resignation, and (ii) the vested portion of the
      Post-409A Option Portion within the forty (40) days period commencing upon
      the
      end of any applicable holding period under Section 409A following such
      termination or resignation. At the expiration of the applicable exercise period,
      the stock options shall terminate.”

    


    8.    Section
      8.6 of the Employment Agreement is hereby amended to add the following at the
      end of such Section:

    


    “(c)
      Stock
      Options.”
      In the
      event of a termination of the Employee’s employment with the Corporation without
      Cause or a termination by the Employee of his Employment with the Corporation
      for Good Reason, during the Term, notwithstanding any language to the contrary
      contained in any stock option agreements with the Employee (or any other
      applicable agreement or plan), the Employee shall be entitled to exercise (i)
      the Pre-409A Option Portion during the twenty-four (24) month period following
      the date of termination without Cause or for Good Reason, and (ii) the vested
      portion of the Post-409A Option Portion during an exercise period commencing
      upon the end of any applicable holding period under Section 409A following
      the
      date of termination, such exercise period being the lesser of (A) the twelve
      (12) month period following the date of termination, or (B) the maximum exercise
      period permitted under Section 409A. At the expiration of the applicable
      exercise period, the unexercised stock options shall terminate.”

    


    


    9.    Section
      8.7 of the Employment Agreement is hereby deleted in its entirety and the
      following inserted in its place:

    


    
      
        
        

      

      
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    "8.7  Change
      of Control.
      In the
      event that (i) a Change of Control (as hereinafter defined) occurs during
      the Term
      and
      (ii) the Employee's employment with the Corporation is terminated by
      the
      Corporation other than for Cause or the Employee resigns or terminates his
      employment hereunder for any reason by giving sixty (60) days prior written
      notice to the Corporation subsequent to the date of closing of the Change of
      Control transaction, the Employee shall be entitled to the accrued salary,
      unused vacation, bonus, termination payment, benefits, and stock option
      treatment as are provided in Sections 8.6(a), (b), and (c) above, except,
      that
      upon termination or resignation under this Section 8.7, the Corporation shall
      accelerate fully the vesting of any outstanding stock options to purchase shares
      of stock of the Corporation granted to the Employee, such that all stock options
      shall vest in their entirety. 

    


    For
      purposes of this Section 8.7, the term “Change
      of Control”
      means
      the occurrence of any of the following, in one or a series of related
      transactions: (v) the sale or transfer of fifty percent (50)% or more
      of
      the Outstanding Shares of the Corporation to any person or entity other than
      (i)
      a transfer to a wholly-owned subsidiary of the Corporation or (ii) a transfer
      by
      a holder or holders of the Corporation's common stock or convertible securities
      as of the date hereof to Affiliates (as defined below), or (w) the sale,
      lease, license or other transfer of all or substantially all of the assets
      or
      earning power of the Corporation to any person or entity other
      than (i) a wholly-owned subsidiary of the Corporation or (ii) an Affiliate
      whereby the purpose or effect of such transfer is to provide for the transfer
      by
      a holder or holders of the Corporation’s common stock or convertible securities
      as of the date hereof of such holders’ direct or indirect interests in the
      assets of the Corporation to Affiliates and so long as such transfer does not
      result in a transaction described by one of the other clauses of this paragraph
      of Section 8.7; or (x) merger, consolidation, reorganization,
      recapitalization, share exchange, business combination or a similar transaction
      which results in any person or entity (other than the persons who are
      shareholders or security holders of the Corporation immediately prior to such
      transaction (or their Affiliates as of the date of such transaction)) owning
      fifty percent (50%) or more of the Outstanding Shares or combined voting power
      of the Corporation, (y) merger, consolidation, reorganization, business
      combination or a similar transaction in which the Corporation is not the
      surviving entity; or (z) a transaction commonly known as “going private” whereby
      the Corporation engages one or a series of transactions which results in the
      Corporation not being required to file periodic reports with the Securities
      and
      Exchange Commission, unless the Employee is a participant in such transaction.
      “Outstanding
      Shares”
      shall
      mean the total number of common shares and common share equivalents of the
      Corporation outstanding at the time the Change of Control. “Affiliate”
      shall
      mean (i) any person or entity controlling, controlled by or under the common
      control of the existing holders of common stock or convertible securities of
      the
      Corporation and (ii) any partner, shareholder or member of the existing holders
      of common stock or convertible securities of the Corporation. For the purposes
      hereof, “control”
      shall
      mean the direct or indirect ownership of at least fifty (50%) percent of the
      outstanding shares or other voting rights of the subject entity or if it
      possesses, directly or indirectly, the power to direct or cause the direction
      of
      management and policies of such other entity.

    


    
      
        
        

      

      
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    In
      the
      event that the Employee resigns or terminates his employment following a Change
      of Control as described above, the Employee acknowledges and agrees that upon
      the request of the Corporation, he will execute and deliver a release in
      customary form releasing all claims of the Employee arising out of his
      employment with the Corporation except for the obligations of the Corporation
      under this Agreement.”

    


    10.    The
      Employment Agreement is hereby amended to add a new Section 9.7 as
      follows:

    


    “9.7
      Assignment
      of Invention.
      All
      discoveries, inventions, improvements and innovations, whether patentable or
      not
      (including all data and records pertaining thereto), which Employee may have
      invented, discovered, originated or conceived of during the Term of his
      employment with the Corporation prior to the date of the Third Amendment to
      Executive Employment Agreement dated December __, 2005, or may invent, discover,
      originate or conceive during the Term of this Agreement and which directly
      relate to the business of the Corporation or any of its subsidiaries as
      described in the Corporation’s filings with the Securities and Exchange
      Commission, shall be the sole and exclusive property of the Corporation.
      Employee shall promptly and fully disclose each and all such discoveries,
      inventions, improvements or innovations to the Corporation. Employee shall
      assign to the Corporation his entire right, title and interest in and to all
      of
      his discoveries, inventions, improvements and innovation described in this
      Section 8.7 and any related U.S. or foreign patent and patent applications,
      shall execute any instruments reasonably necessary to convey or perfect the
      Corporation’s ownership thereof, and shall assist the Corporation in obtaining,
      defending and enforcing its rights therein. The Corporation shall bear all
      expenses it authorizes to be incurred in connection with such activity and
      shall
      pay the Employee reasonable compensation for time spent by the Employee in
      performing such duties at the request of the Corporation after the termination
      of his employment, for a period not to exceed three (3) years.”

    


    11.    Except
      as
      expressly amended by this Amendment, the Employment Agreement remains in full
      force and effect. Capitalized terms used herein shall have the same meaning
      as
      in the Employment Agreement unless otherwise defined herein. This Amendment
      shall be governed and construed and enforced in accordance with the local laws
      of the State of New York applicable to agreements made and to be performed
      entirely in New York.

    


    12.    This
      Amendment may be executed in one or more facsimile or original counterparts,
      each of which shall be deemed an original, but all of which taken together
      will
      constitute one and the same instrument.


    
      
        
        

      

      
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    IN
      WITNESS WHEREOF,
      the
      parties have executed this Amendment as of the date first above
      written.

     

    
      
        	ATTEST:	 	ACURA PHARMACEUTICALS, INC.
	 	 	 
	___________________	 	By: /s/ Andrew D.
                Reddick
	 	 	
                Andrew
                  D. Reddick

              
	 	 	
                President
                  and

              
	 	 	
                Chief
                  Executive Officer

              
	 	 	 
	WITNESS:	 	EMPLOYEE
	 	 	 
	___________________ 	 	By: /s/ Peter A.
                Clemens
	 	 	
                
                  Peter
                    A.
                    Clemens

                

              


      



    
      
        
        

      

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