THIRD AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
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 Xxxxxx Drug Co., Inc.), a New York corporation (the “Corporation”),
with
offices at 000 X. Xxxxx Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx 00000 and
XXXXXX
X. XXXXXXX, residing
at 000 Xxxxx Xxxx Xxxxxx, Xxxxx, Xxxxxxxxxxxx 00000 (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”).
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| B. |
The
Corporation and the Employee now desire to further amend the Employment
Agreement as provided herein.
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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/ Xxxxx X. Xxxxxxx | |
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Xxxxx X. Xxxxxxx,
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Senior Vice President and
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Chief Financial Officer
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| WITNESS: | EMPLOYEE | |
| ___________________ | By: /s/ Xxxxxx X. Xxxxxxx | |
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Xxxxxx X. Xxxxxxx
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