-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V0wgGcDFEfxmdngdAmr78eqH/pFN5oxqssZVeEojF3OS3RMmEAlGBriFOYmXkzQ8 WsTCUgh+eZlVekft5GO5uw== 0000906280-96-000116.txt : 19961029 0000906280-96-000116.hdr.sgml : 19961029 ACCESSION NUMBER: 0000906280-96-000116 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19961028 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AKORN INC CENTRAL INDEX KEY: 0000003116 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 720717400 STATE OF INCORPORATION: LA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-13976 FILM NUMBER: 96648795 BUSINESS ADDRESS: STREET 1: 100 AKORN DR CITY: ABITA SPRINGS STATE: LA ZIP: 70420 BUSINESS PHONE: 5048939300 MAIL ADDRESS: STREET 1: 100 AKORN DRIVE CITY: ABITA SPRINGS STATE: LA ZIP: 70420 10-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________ FORM 10-K/A [x] AMENDMENT 1 TO ANNUAL REPORT FILED SEPTEMBER 30, 1996 PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1996 Commission File Number 0-13976 AKORN, INC. (Exact name of registrant as specified in its charter) Louisiana 72-0717400 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 100 Akorn Drive Abita Springs, Louisiana 70420 70420 (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: (504) 893-9300 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ___________________ _________________________________________ None None Securities registered pursuant to Section 12(g) of the Act: Common Stock, No Par Value (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the registrant as of September 23, 1996 was $27,500,000. The number of shares outstanding of the registrant's Common Stock as of September 23, 1996 was 16,573,915. Item 10. Directors and Executive Officers of the Registrant. The following table sets forth certain information with respect to each director of the Board. Unless otherwise indicated, the person has been engaged in the principal occupation shown for the past five years. Name and Age Principal Occupation Year First Became a Director ______________________________________________________________________________ Directors Floyd Benjamin, 53 Executive Vice President 1996 of the Company and President of Taylor Pharmaceuticals, Inc. (a subsidiary of the Company) since May 1996; President of Pasadena Research Laboratories, Inc. from October 1994 to May 1996 and Consultant to Pasadena Research Laboratories, Inc. from October 1993 to October 1994; President and Chief Executive Officer of Neocrin, Inc. (biomedical venture company) from February 1992 to October 1993; prior to October 1993, Chief Operating Officer of Lyphomed, Inc. (injectable pharmaceuticals) Daniel E. Bruhl, M.D., 54 Ophthalmologist; 1983 director of Surgical Care Affiliates, Inc. J. Ed Campbell, M.D., 72 Ophthalmologist 1975 George S. Ellis, M.D., 73 Ophthalmologist 1985 Doyle S. Gaw, 65 Private investor 1975 John N. Kapoor, Ph.D., 53 Chairman of the Board of 1991 the Company since May 1995; Chief Executive Officer of the Company since May, 1996; Director of the Company since December 1991; acting Chairman of the Board of the Company from April 1993 to May 1995; Chairman of the Board of the Company from December 1991 to January 1993; Chairman of the Board of Option Care, Inc.; Chief Executive Officer of Option Care, Inc. from August 1993 to April 1996; President of E. J. Financial Enterprises, Inc. since April 1990; director of Unimed, Inc. and NeoPharm, Inc. Barry D. LeBlanc, 41 President of the Company 1987 since 1987 and Chief Executive Officer since December, 1991. David H. Turner, M.D., 69 Ophthalmologist 1975 Lawrence A. Yannuzzi, M.D., 59 Ophthalmologist 1983 Executive Officers Harold O. Koch, 47 Senior Vice President of the Company since January 1995; from January 1993 to December 1994, Vice President - Business Development; from July 1991 to December 1992, coordinator of reorganization of the Company's manufacturing operations Tim J. Toney, 54 Vice President - Manufacturing of Taylor Pharmaceuticals, Inc., a Company subsidiary ("Taylor"), since May 1996; President of Taylor from January 1992 to May 1996; prior to January 1992, General Manager of the predecessor of Taylor Pharmaceuticals, Inc. Eric M. Wingerter, 34 Vice President - Finance and Administration since July 1993; Vice President - Finance from January 1993 to June 1993; Chief Financial Officer and Principal Accounting Officer of the Company since September 1988 ________________________________ Dr. Ellis also serves as Secretary of the Company. Mr. LeBlanc ceased being chief executive officer of the Company on May 3, 1996 and resigned from all positions with the Company effective July 3, 1996. Includes executive officers of the Company who are named in the "Summary Compensation Table" included in Item 11, other than Mr. Benjamin, Dr. Kapoor and Mr. LeBlanc, who are included in this table under "Directors." Mr. Toney ceased being an executive officer of the Company in May 1996. Director Agreements Pursuant to the agreement acquiring Pasadena Research Laboratories, Inc., Mr. Benjamin was named a director of the Company for a term expiring at the next annual meeting of shareholders of the Company. Under agreements between the Company and the John N. Kapoor Trust dated September 20, 1989, the Trust is entitled to designate two individuals to be nominated and recommended by the Company's Board of Directors for election as a director. Section 16(a) Beneficial Ownership Reporting Compliance During 1996, Dr. Campbell, a director of the Company, failed to file timely two Forms 4 to report three transactions, as required by Section 16(a) of the Securities Exchange Act of 1934, and Mr. Gaw, also a director, failed to file timely two Forms 4 to report four such transactions. All such transactions have been reported on amended annual statements on Form 5. Item 11. Executive Compensation Summary of Executive Compensation The following table summarizes the compensation paid by the Company for services rendered during the fiscal years ended June 30, 1994, 1995 and 1996 to each person who, during fiscal 1996, served as the chief executive officer of the Company and to each other executive officer of the Company whose total annual salary and bonus for fiscal 1996 exceeded $100,000:
Long-Term Annual Compensation Compensation Year Ended Number of All Other Name and Principal Position June 30 Salary Bonus Options Awarded Compensation ____________________________ _________ ________ _______ _________________ _______________ John N. Kapoor, Ph.D. 1996 $10,000 --- --- $40,000 Chief Executive Officer Barry D. LeBlanc 1996 $210,000 --- --- $ 2,100 President and Chief Executive 1995 207,731 --- 34,000 2,310 Officer 1994 184,362 $24,667 50,000 2,310 Harold O. Koch 1996 $125,000 --- --- $ 938 Senior Vice President 1995 122,247 --- 58,000 1,530 1994 105,602 $16,444 25,000 791 Tim J. Toney 1996 $120,000 --- --- $ 1,800 Vice President- 1995 117,292 --- 10,000 2,018 Manufacturing, 1994 115,000 $17,250 --- 359 Taylor Pharmaceuticals, Inc.
____________________ Represents contributions to the Company's Savings and Retirement Plan. (See also below). Dr. Kapoor became Chief Executive Officer effective May 3, 1996. Dr. Kapoor received $50,000 for his services during all of fiscal 1996 as Chairman of the Board of theCompany, $40,000 of which was waived in exchange for other consideration, as described in Item 13. Mr. LeBlanc ceased being Chief Executive Officer of the Company effective May 3, 1996. Mr. Koch became an executive officer of the Company in February 1993 and became Senior Vice President in January 1995. Mr. Toney ceased being an executive officer of the Company in May 1996. ______________________________ Stock Option Grants The following table provides information concerning the grant of options to purchase Company common stock to the executive officers named in the Summary Compensation Table during the fiscal year ended June 30, 1996. If there is a reorganization, merger or consolidation involving the Company in which the Company is not the surviving corporation or a transfer of substantially all of the property or more than two-thirds of the stock of the Company, all options will become immediately exercisable in full. Fiscal 1996 Option Grants No. of Options % of Total Options Granted Exercise Expiration Name Granted to Employees in 1994 Price Date ______ ______________ _________________________ ___________ _____________ NONE NONE NONE NONE NONE ______________________________ Aggregate Option Exercises in Fiscal 1996 and Option Values as of June 30, 1996
No. of Unexercised Value of Unexercised No. of Shares Options at In-the-Money Options Acquired Value June 30, 1996 at June 30, 1996 Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable _______ ____________ __________ ___________ _____________ ____________ _____________ John N. Kapoor 0 $ 0 0 0 $ 0 $ 0 Barry D. LeBlanc 143,500 121,075 328,469 0 399,462 0 Harold O. Koch 0 0 118,700 29,300 86,654 15,091 Tim J. Toney 0 0 45,000 5,000 27,500 0 ______________________________
Director Compensation For services as Chairman of the Board and as a consultant to the Company, Dr. Kapoor receives a fee of $50,000 per year. Each other director who is not a salaried officer or consultant of the Company receives a fee for his services as a director of $1,000 per regular meeting of the Board of Directors, $250 per telephone meeting and $500 per committee meeting, plus reimbursement of his expenses related to those services. In addition, the chairman of each committee (other than Dr. Kapoor) receives an annual fee of $2,500. All directors of the Company participate in the Company's Stock Option Plan for Directors, pursuant to which each director of the Company is granted an option to acquire 5,000 shares of Company common stock on the day after each annual meeting of shareholders at which he is elected to serve as a director. Any director appointed between annual meetings is entitled to receive a pro rata portion of an option to acquire 5,000 shares. The plan is administered by the Incentive Compensation Committee. The Committee may, in its sole discretion, grant an option to purchase up to 100,000 shares to a person who is not already a director and who becomes a director at any time; no member of the Committee is eligible to be granted such an option and any director who has been granted such an option is not permitted to serve on the Committee for one year after such grant. Options granted under the plan expire five years from the date of grant. The option exercise price is the fair market value of the shares covered by the option at the time of the grant. Options covering a total of 337,917 shares are currently outstanding and options covering 142,083 shares remain available for issuance under the plan. Employment Agreements In January 1996 the Company entered into employment agreements with Messrs. LeBlanc, Koch and Toney calling for annual salaries of, respectively, $210,000, $125,000 and $120,000, increased annually by the percentage increase in the consumer price index (and, in the case of Mr. LeBlanc, by specified increments conditioned on certain increases in the trading price of the Company's common stock) plus bonuses determined by the Board of Directors in its discretion. Messrs. LeBlanc and Koch were provided with the use of an automobile. The agreements terminate one year after notice of termination is given by the Company or the employee. If the employee's employment is terminated by the Company without "cause" (as defined in the agreement) or by the employee for "good reason" (as defined in the agreement), the employee is entitled to a lump sum payment equal to his annual salary plus any performance-based bonus and options to which the employee would have been entitled had the performance goals been met. In the event of a change of control of the Company, the employee is entitled upon termination of his employment by the Company for "cause" (as defined in the agreement) or by the employee for "good reason" (as defined in the agreement), to a lump sum payment equal to his annual salary until the later of the second anniversary of the change of control or one year after the notice of termination, plus any performance-based bonus and options to which the employee would have been entitled had the performance goals been met. If any such payments are considered "excess parachute payments" under Section 4999 of the Internal Revenue Code of 1996, the employee is entitled to such additional amounts as would be necessary to place him in the same position after payment of federal, state and local taxes as he would have been in if such provisions had not been applicable to him. The Company and Mr. LeBlanc entered into a separation agreement which was effective as of July 3, 1996 under which Mr. LeBlanc's employment by the Company and all of his rights under his employment agreement were terminated in consideration of payment to him of $213,045 in four equal installments of principal, plus interest, in July and October of 1996 and January and April of 1997, plus accrued but unpaid vacation and sick leave of $23,423. Compensation Committee Interlocks and Insider Participation Drs. Campbell, Bruhl and Yannuzzi, who comprise the Compensation Committee, are all independent, non-employee directors of the Company. Compensation Committee Report on Executive Compensation The Compensation Committee of the Board of Directors reviews, analyzes and makes recommendations related to compensation packages for the Company's executive officers, evaluates the performance of the Chief Executive Officer and administers the grant of stock options under the Company's Incentive Compensation Plan. The committee awards all stock options. As to other matters the committee makes recommendations that are presented to the full Board for final approval. The Company's executive compensation policies are designed to (a) provide competitive levels of compensation to attract and retain qualified executives, (b) reward achievements in corporate performance, (c) integrate pay with annual and long-term performance goals, and (d) align the interests of executives with the goals of shareholders. The Company's executive compensation is comprised of salaries, annual cash incentive bonuses and long-term incentive opportunities in the form of stock options. Salary Dr. John N. Kapoor, the Chairman of the Company's Board of Directors, has served as chief executive officer of the Company since May 3, 1996. During Fiscal 1996 Dr. Kapoor received no additional compensation for serving as the Company's chief executive officer. The salaries of Barry D. LeBlanc, who served as president and chief executive officer of the Company until May 3, 1996, and the other executive officers named in the table under Summary of Executive Compensation, were fixed in their Employment Agreements, which are described above under "Employment Agreements." Such amounts were determined after considering the executive compensation policies noted above, the impact the executive has on the Company, the skills and experience the executive brings to the job, competition in the marketplace for those skills and the potential of the executive in the job. Incentive Bonus Annual incentive compensation for executive officers during fiscal 1996 was based on corporate net earnings as compared to pre-established objectives set at the beginning of the fiscal year. Based on the Company performance in relation to such objectives, no incentive bonus was granted to any of the executive officers or any other officer of the Company for fiscal 1996. Mr. Floyd Benjamin, was hired as Executive Vice President of the Company and President of the Company's injectable subsidiary effective May 31, 1996. Pursuant to the three year contract with Mr. Benjamin, he is eligible for bonuses each fiscal year beginning June 30, 1997 based on certain performance criteria. Stock Options The Committee's practice with respect to stock options has been to grant options based upon the attainment of Company performance goals and that vest based on the passage of time. Based on the Company performance in relation to pre-established objectives, no stock option awards were made to executive officers in fiscal 1996. The Compensation Committee is currently evaluating its policies with respect to executive compensation in light of the recent realignment of the Company into two distinct operating divisions. Submitted by the Compensation Committee of the Board of Directors J. Ed Campbell, M.D. Daniel E. Bruhl, M.D. Lawrence A. Yannuzzi, M.D. Performance Graph The graph below compares the cumulative shareholder return on the Company's Common Stock for the last five fiscal years with the S&P Small Cap 600 Index and an index composed of a group of peer issuers. The members of the peer group were selected by the Company based upon size and type of business. The peer group consists of the following companies: Chesapeake Biological, Inc.; Faulding, Inc.; Hi Tech Pharmacal Co. Inc.; Insite Vision, Inc.; Nutramax Products, Inc.; Pharmos Corp.; and Unimed Pharmaceuticals, Inc. The graph assumes $100 was invested in June 1991 in the Company Common Stock and the two indices presented. The cumulative total return on the Company's Common Stock for the period presented was 50%. The cumulative returns for the S&P Small Cap 600 and the Company's peer group were 132% and 26%, respectively. [Insert - Performance Graph] Item 12. Security Ownership of Certain Beneficial Owners and Management. Stock Ownership of Certain Beneficial Owners As of October 11, 1996, the following person was known by the Company to own beneficially more than 5% of its common stock (the only outstanding voting security of the Company). The information set forth below has been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934 based upon information furnished by the persons listed. Name and Address of Beneficial Owner Shares Beneficially Owned Percent of Class _____________________ __________________________ _______________ John N. Kapoor, Ph.D. 4,259,000 24.20% 225 East Deerpath Suite 250 Lake Forest, Illinois 60045 ____________________ Of such 4,259,000 shares, (i) 3,204,000 are owned directly by the John N. Kapoor Trust dated September 20, 1989 (the "Trust") of which Dr. Kapoor is the sole trustee and beneficiary, (ii) 1,000,000 are issuable pursuant to a warrant issued to the Trust in 1992, (iii) 30,000 are owned by a trust, the trustee of which is Dr. Kapoor's wife and the beneficiaries of which are their children, and (iv) 25,000 are issuable pursuant to options granted by the Company directly to Dr. Kapoor. ______________________________ Stock Ownership of Directors and Executive Officers The following table sets forth as of June 30, 1996 the beneficial ownership of shares of Company common stock of each director and named executive officer of the Company. Unless otherwise indicated, the shares shown as being beneficially owned are held with sole voting and investment power. Shares Percent Beneficially of Beneficial Owners Owned Class ___________________ _______________ __________ Directors Floyd Benjamin 466,667 2.82% Daniel E. Bruhl, M.D. 290,517 1.75% J. Ed Campbell, M.D. 193,691 1.17% George S. Ellis, M.D. 284,260 1.71% Doyle S. Gaw 175,824 1.06% John N. Kapoor, Ph.D. 4,259,000 24.20% Barry D. LeBlanc 614,481 3.64% David H. Turner, M.D. 249,650 1.50% Lawrence A. Yannuzzi, M.D. 200,883 1.21% Executive Officers Harold O. Koch 127,107 0.76% Tim J. Toney 179,967 1.08% Directors and officers as a 7,099,772(6) 38.69% group (12 Persons) ______________________________ Beneficial ownership is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934. Mr. Benjamin's shares are held by a trust of which Mr. Benjamin and h is wife are trustees and their child is beneficiary. These numbers contain options to purchase shares. The following directors and officers have options to purchase shares in the following amounts: Dr. Bruhl - 35,000; Dr. Campbell - 35,000; Dr. Ellis - 35,000; Mr. Gaw - 35,000; Mr. LeBlanc - 328,469; Dr. Turner - 35,000; Dr. Yannuzzi - 35,000. Furthermore, several directors' shares are owned partially by family members or pensions. The following shows the family members or pension of each such director and their amounts: Dr. Bruhl's pension - 64,266; Dr. Ellis' wife - 101,500; Mr. LeBlanc's minor children - 34,000. The nature of the beneficial ownership of such shares is described in note (1) to the table under "Stock Ownership of Beneficial Owners," above. Includes Executive Officers of the Company who are named in the Summary Compensation Table included inItem 11, other than Mr. Benjamin, Dr. Kapoor and Mr. LeBlanc, who are included in this table under "Directors." Of such 7,099,772 shares, 1,563,469 are not presently outstanding, but are issuable pursuant to option and warrant rights described in the preceding footnotes and 213,950 are issuable pursuant to options held by officers of the Company who are not also directors. ______________________________ Item 13. Certain Relationships and Related Transactions For services performed by Dr. Kapoor in connection with the Company's acquisition of Taylor Pharmaceuticals, Inc., the John N. Kapoor Trust dated September 20, 1989 received, among other things, 125,000 shares of Company common stock which were subject to forfeiture if the market price of the Company common stock were not to reach $5.00 by January 15, 1996. At the time of this issuance, the market price of Company common stock was $3.50 per share. In August 1995, the Company, the Trust and Dr. Kapoor entered into an agreement under which (i) the forfeiture period was extended to January 15, 1998, (ii) forfeiture would not occur in the event that persons unaffiliated with Dr. Kapoor acquire beneficial ownership of more than 50% of the outstanding common stock of the Company, and (iii) Dr. Kapoor waived his right to receive $40,000 otherwise payable to him by the Company for serving as Chairman of the Board in fiscal 1996. SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AKORN, INC. By: /s/ John N. Kapoor, Ph.D. _______________________________ John N. Kapoor, Ph.D. Chief Executive Officer Date: October 28, 1996 In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, and in the capacities and on the dates indicated. Signature Title Date /s/ John N. Kapoor, Ph.D. Chief Executive October 28, 1996 John N. Kapoor, Ph.D. Officer and Director (Principal Executive Officer) /s/ Eric M. Wingerter Vice President - October 28, 1996 Eric M. Wingerter Finance and Administration (Principal Financial Officer and Principal Accounting Officer) * /s/ Floyd Benjamin Director October 28, 1996 Floyd Benjamin * /s/ Daniel E. Bruhl, M.D. Director October 28, 1996 Daniel E. Bruhl, M.D. * /s/ J. Ed Campbell, M.D. Director October 28, 1996 J. Ed Campbell, M.D. * /s/ George S. Ellis, M.D. Director October 28, 1996 George S. Ellis, M.D. * /s/ Doyle S. Gaw Director October 28, 1996 Doyle S. Gaw * /s/ David H. Turner, M.D. Director October 28, 1996 David H. Turner, M.D. * /s/ Lawrence A. Yannuzzi, M.D. Director October 28, 1996 Lawrence A. Yannuzzi, M.D. *By: /s/ Eric M. Wingerter Eric M. Wingerter Attorney-in-fact -----END PRIVACY-ENHANCED MESSAGE-----