Unassociated Document


    

      


      


      EXECUTION
        COPY

      


      


      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
ANDREW
        D. REDDICK, residing
        at 297 North Cote Circle, Exton, Pennsylvania 19341 (the “Employee”).

      


      R E C I T
        60;A L S

      


      
        	A.  	
                The
                  Corporation and the Employee executed an employment agreement dated
                  as of
                  August 26, 2003, which agreement was amended in writing on each
                  of May 27,
                  2004 and May 24, 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).”

      


      
        
          
          

        

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

      


      “Reference
        is made to Section 409A of the Internal Revenue Code of 1986, as amended,
        and
        the regulations promulgated thereunder (“Section
        409A”).
        For
        purposes of this Agreement, the portion of the Option which vests prior to
        January 1, 2005 shall be referred to as the “Pre-409A
        Option Portion”
        and the
        portion of the Option which vests on or after January 1, 2005 shall be referred
        to as the “Post-409A
        Option Portion.”
        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 dated May 26, 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.”

      


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

      


      “(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 Eight Million, Two Hundred Fifty Thousand
        (8,250,000) 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
        6
        of the Employment Agreement (regarding vacation) is hereby amended by deleting
        “four weeks” each time it appears in such section, and inserting in lieu thereof
“five weeks.”

      


      6.    The
        last
        sentence of Section 7.1 of the Employment Agreement is hereby deleted in
        its
        entirety and the following is inserted in its place:

      


      
        
          
          

        

        
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      “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.”

      


      7.    The
        last
        sentence of the first paragraph of Section 7.2 of the Employment Agreement
        is
        hereby deleted in its entirety and the following is inserted in its
        place:

      


      “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.”

      


      8.    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 for Cause, the Employee shall be entitled
        to
        exercise (i) the Pre-409A Option Portion within forty (40) days of such
        termination, and (ii) the vested portion of the Post-409A Option Portion
        within
        the forty (40) day period commencing upon the end of any applicable holding
        period under Section 409A following such termination. 

       

      In
        the
        event 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
        during the twelve (12) months following the date of resignation, 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 resignation, or (B) the maximum
        exercise period permitted under Section 409A.

       

      At
        the
        expiration of the applicable exercise period, the unexercised stock options
        shall terminate.”

      


      
        
          
          

        

        
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      9.    Section
        7.6(c) of the Employment Agreement is hereby deleted in its entirety and
        the
        following is inserted in its place:

      


      “(c)
        Stock
        Options.”
        In the
        event of a termination of the Employee’s employment by the Corporation without
        Cause or if the Employee resigns for Good Reason, the Corporation shall
        accelerate fully the vesting of any outstanding stock options to purchase
        shares
        of stock of the Corporation granted to the Employee. In connection therewith,
        the Corporation shall cause all restrictive legends, stop transfer orders
        or
        similar restrictions to be removed from such stock options and the underlying
        shares, except as required by applicable law. Additionally, 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 twelve (12)
        month period following the date of termination or resignation, 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 or resignation, such exercise period being
        the
        lesser of (A) the twelve (12) month period following the date of termination
        or
        resignation, or (B) the maximum exercise period permitted under Section 409A.
        At
        the expiration of the applicable exercise period, the unexercised stock options
        shall terminate.”

      


      10.    The
        Employment Agreement is hereby amended to add a new Section 8.7 as
        follows:

      


      “8.7
        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 22, 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.”

      


      
        
          
          

        

        
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      11.    The
        Corporation shall reimburse the Employee (or pay directly) for the reasonable
        out-of-pocket fees and expenses incurred by the Employee (including, without
        limitation, legal and tax consulting fees and expert opinion fees) for review,
        analysis, advice and negotiation relating to this Amendment, and the matters
        referred to herein, not to exceed $15,000, on or before thirty (30) days
        following the date of execution of this Amendment. The Employee shall provide
        the Corporation with reasonable documentation evidencing such
        expenses.

      


      12.    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.

      


      13.    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/ Peter A.
                  Clemens
	 	 	
                    
                    Peter A. Clemens, 

                
	 	 	
                    
                    Senior Vice President and

                
	 	 	
                    
                    Chief Financial Officer

                
	 	 	 
	WITNESS:	 	EMPLOYEE
	 	 	 
	___________________ 	 	By: /s/ Andrew D.
                  Reddick
	 	 	
                    
                    Andrew D. Reddick

                


        

      

       

      
        
          
          

        

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