THIRD AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
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
XXXXX
X. XXXXXXX, residing
at 00000 Xxxxxx Xxxx, Xxxxxx, Xxxxxxxx 00000 (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:
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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.”
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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:
4
"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.
5
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/ Xxxxxx X. Xxxxxxx | |
|
Xxxxxx
X. Xxxxxxx
|
||
|
President
and
|
||
|
Chief
Executive Officer
|
||
| WITNESS: | EMPLOYEE | |
| ___________________ | By: /s/ Xxxxx X. Xxxxxxx | |
|
Xxxxx
X.
Xxxxxxx
|
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