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0000950137-06-000026.txt : 20060103 0000950137-06-000026.hdr.sgml : 20060102 20060103172401 ACCESSION NUMBER: 0000950137-06-000026 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20051227 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060103 DATE AS OF CHANGE: 20060103 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: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-32360 FILM NUMBER: 06503526 BUSINESS ADDRESS: STREET 1: 2500 MILLBROOK DRIVE CITY: BUFFALO GROVE STATE: IL ZIP: 60089 BUSINESS PHONE: 8472796100 MAIL ADDRESS: STREET 1: 2500 MILLBROOK DRIVE CITY: BUFFALO GROVE STATE: IL ZIP: 60089 8-K 1 c01178e8vk.htm CURRENT REPORT e8vk

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act

Date of Report: December 27, 2005
(Date of Earliest Event Reported)

Akorn, Inc.

(Exact Name of Registrant as Specified in its Charter)


Louisiana (State or other Jurisdiction of Incorporation)		0-13976 (Commission File Number)		72-0717400 (I.R.S. Employer Identification No.)

2500 MILLBROOK DRIVE
BUFFALO GROVE, ILLINOIS
(Address of principal executive offices)

(847) 279-6100
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2. below):

o		Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o		Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o		Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement

In response to passage of The American Jobs Creation Act of 2004 (the “Act”), the board of directors of Akorn, Inc. (“we” or “our”) has taken steps to ensure that our deferred compensation plans, programs, and arrangements comply with new requirements under the Internal Revenue Code of 1986. Specifically, the Act added a new section to the Internal Revenue Code, Section 409A, which imposes new requirements on deferred compensation arrangements. Accordingly, on December 27, 2005, we entered into executive bonus agreements with each of Mr. Arthur S. Przybyl, our president and chief executive officer, and Mr. Jeffrey A. Whitnell, our chief financial officer (collectively, the “bonus agreements”). To comply with Section 409A of the Internal Revenue Code, we entered into the bonus agreements to memorialize the bonus arrangements adopted by resolution of our board of directors in March 2005. The bonus agreements do not change the terms of the bonus arrangements adopted by resolution of our board of directors in March 2005. The following summary of the material terms of the bonus agreements is qualified in its entirety by reference to the copies of the agreements attached as Exhibits 99.1 and 99.2, which are incorporated by reference.

Under Mr. Przybyl’s bonus agreement, he is eligible to receive a one-time cash bonus equal to the sum of (i) up to $240,188, which equals 75% of his annual base compensation rate, if he achieves all of the performance measurements set forth in his bonus agreement in 2005, and (ii) up to $80,063, which equals 25% of his annual base compensation rate, if our adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”) for 2005 is at least $11,400,000. Mr. Przybyl’s performance measurements include (i) achieving adjusted EBITDA for 2005 of at least $9,500,000, (ii) conducting a successful capital raise or achieving cash flows from operations such that a capital raise is unnecessary, (iii) removing the restrictions imposed on our Decatur, Illinois facility set forth in the warning letter issued by the Food and Drug Administration (the “FDA”) and (iv) filing eight new abbreviated new drug application with the FDA and introducing six new abbreviated new drug application products to the market.

Under Mr. Whitnell’s bonus agreement, he shall receive a one-time cash bonus equal to the sum of (i) up to $89,775, which equals 45% of his annual compensation, if he achieves all of the performance measurements set forth in his bonus agreement in 2005 and (ii) up to $29,925, which equals 15% of his annual compensation, if our adjusted EBITDA for 2005 is at least $11,400,000. Mr. Whitnell’s performance measurements include (i) achieving adjusted EBITDA for 2005 of at least $9,500,000, (ii) conducting a successful capital raise or achieving cash flows from operations such that a capital raise is unnecessary, (iii) successfully renegotiating our debt and (iv) developing an omnibus equity compensation plan that is approved by our shareholders.

The calculation and payment of bonuses must be made within 30 days from the date we receive our audited financial statements.

Item 9.01 Financial Statements and Exhibits.


No.		Description
99.1		Arthur S. Przybyl Executive Bonus Agreement by and between Akorn, Inc. and Arthur S. Przybyl dated December 27, 2005.

99.2		Jeffrey A. Whitnell Executive Bonus Agreement by and between Akorn, Inc. and Jeffrey A. Whitnell dated December 27, 2005.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	AKORN, INC.
	By:	/s/ Jeffrey A. Whitnell
		Jeffrey A. Whitnell
		Chief Financial Officer, Treasurer and Secretary

Date: December 29, 2005

EX-99.1 2 c01178exv99w1.htm EXECUTIVE BONUS AGREEMENT exv99w1

EXHIBIT 99.1

ARTHUR S. PRZYBYL
EXECUTIVE BONUS AGREEMENT

THIS Arthur S. Przybyl Executive Bonus Agreement (the “Agreement”) is entered into between Akorn, Inc., a Louisiana corporation (the “Corporation”) and Arthur S. Przybyl (the “Participant”), effective December 27, 2005. The purpose of the Agreement is to reward the service, performance, productivity and loyalty of the Participant by providing the Participant with a prospective bonus to be paid in accordance with the terms of this Agreement.

IN CONSIDERATION of the mutual promises made and other good and valuable consideration, receipt of which is hereby acknowledged, the Corporation and the Participant agree as follows:

1. Amount of Payment. The Participant is eligible to receive a one-time cash bonus equal to the sum of parts 1.1 and 1.2, below:

1.1 A bonus up to $240,188 (75% of the Participant’s annual base compensation rate (“Base Comp”)) for achieving all of the following performance measurements in 2005, or, if one or more but not all of these performance measurements are achieved, Participant is eligible to receive a portion of that amount in accordance with the sum of the following:

(a) $120,094 (37.5% of Base Comp) will be awarded for achieving an “Adjusted EBITDA” of at least $9,500,000. “Adjusted EBITDA” means EBITDA, excluding from EBITDA expense to the extent otherwise includable in that calculation, the charges for the Strides-Arcolab joint venture and the charges (expected to be $436,562) related to the grant of restricted stock on April 1, 2005.

(b) $24,019 (7.5% of Base Comp) will be awarded for either: (i) conducting a successful capital raise that is approved by the Board of Directors of the Corporation, or (ii) achieving cash flows from operations such that a capital raise is unnecessary.

(c) $75,056 (22.5% of Base Comp) will be awarded for achieving the removal of the warning letter restrictions on the Decatur facility.

(d) $24,019 (7.5% of Base Comp) will be awarded if the Corporation files eight new ANDA’s with the FDA and launches (introduces to the market) six new ANDA products.

1.2 A bonus up to $80,063 (25% of Base Comp) for over achievement of the Adjusted EBITDA performance measures in accordance with the sum of the following:

(a) If the Corporation’s Adjusted EBITDA is at least $10,450,000, Participant shall receive an additional $40,031 (12.5% of Base Comp).

(b) If the Corporation’s Adjusted EBITDA is at least $11,400,000, Participant will receive an additional $40,032 (for a total of $80,063, or 25% of Base Comp).

2. Calculating the Bonus. All bonus calculations shall be made by the Chief Financial Officer of the Corporation, subject to the review and approval of the Compensation Committee (the “Committee”). The calculation and payment of bonuses under this Agreement shall be made within 30 days from the Corporation’s receipt of its audited financial statements. All bonuses under this Agreement shall be payable in cash or in other consideration as determined in the sole discretion of the Committee.

3. No Agreement to Employ. Nothing in this Agreement shall affect any right with respect to continuance of the Participant’s employment by the Corporation or any of its affiliates. The right of the Corporation or any of its affiliates to terminate at will the Participant’s employment at any time (whether by dismissal, discharge or otherwise), with or without cause, is specifically reserved.

4. Unfunded and Unsecured Obligation. The amount payable to the Participant hereunder is merely an unfunded and unsecured promise to pay money pursuant to this Agreement. The Corporation is not required to segregate funds for this purpose and all amounts payable hereunder are subject to the rights of all secured and unsecured creditors of the Corporation. The Participant shall not have any security interest in any asset of the Corporation as a result of this Agreement, and the Participant shall be merely an unsecured creditor of the Corporation with respect to amounts payable hereunder.

5. Tax Consequences. The Participant acknowledges that he has considered the advisability of consulting with his or her own tax advisors as to the specific tax consequences of participating in the Agreement, including the applicable federal, state, local and foreign tax consequences, and that the Corporation has no responsibility for the tax consequences related to the Participant’s participation in the Agreement other than the Corporation’s duty to satisfy its withholding obligations.

6. Administrator. The Committee, or such other committee or persons as the Committee may designate from time to time, is designated as the “Administrator” with authority to control and manage the operation and administration of the Agreement.

6.1 Powers of the Administrator. The Administrator shall have full discretionary power to administer the Agreement in all of its details. For this purpose the Administrator’s discretionary power shall include, but shall not be limited to, the following authority:

(a) to make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Agreement or required to comply with applicable law;

(b) to interpret the Agreement;

(d) to compute the amounts to be distributed under the Agreement, and to determine the person or persons to whom such amounts will be distributed;

(e) to authorize payments under the Agreement;

(f) to keep such records and submit such filings, elections, applications, returns or other documents or forms as may be required under the Internal Revenue Code of 1986, as amended, and applicable regulations, or under other federal, state or local law and regulations; and

(g) to allocate and delegate its ministerial duties and responsibilities and to appoint such agents, counsel, accountants and consultant as may be required or desired to assist in administering the Agreement.

6.2 Effect of Interpretation or Determination. Any interpretation of the Agreement or other determination with respect to the Agreement by the Administrator shall be final and conclusive on all persons in the absence of clear and convincing evidence that the Administrator acted arbitrarily and capriciously.

6.3 Reliance on Information or Advice. In administering the Agreement, the Administrator shall be entitled, to the extent permitted by law, to rely conclusively on all tables, valuations, certificates, opinions and reports which are furnished by any accountant, counsel or other expert who is employed or engaged by the Corporation or by the Administrator on the Corporation’s behalf.

6.4 Limitation on Rights and Authority of Participants. The Participant expressly acknowledges that nothing contained herein shall be construed to: (i) grant the Participant any ownership interest or other rights as a shareholder of the Corporation or any other entity; (ii) create a partnership; or (iii) give the Participant any right or authority with respect to the property except as expressly provided herein.

7. Amendment. The Committee reserves the power at any time or times to amend the provisions of the Agreement to any extent and in any manner that it may deem advisable. However, the Committee shall not have the power to amend the Agreement retroactively in such a manner as would reduce the accrued vested benefit of the Participant, except as otherwise permitted or required by law.

8. Limitation of Rights. The establishment of the Agreement, any amendments thereof, the creation of any fund or account or the payment of any benefits shall not be construed as giving to the Participant or other person any legal or equitable right against the Corporation or the Administrator, except as provided herein, and in no event shall the terms of employment or service of any Participant be modified or in any way be affected hereby.

9. Entire Agreement. The Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof, and supersedes all prior agreements, understanding, inducements or conditions, express or implied, oral or written, relating to the subject matter hereof, except as herein contained. The express terms of the Agreement control and supersede any course of performance and/or usage of trade inconsistent with any of the terms hereof.

10. Assignment by the Corporation. The rights and obligations of the Corporation hereunder are fully assignable at the sole discretion of the Corporation.

11. Severability. The provisions of the Agreement are severable. Except as otherwise provided herein, in the event that one or more of the provisions contained in the Agreement or in any other agreement referred to herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not effect the remaining provisions of the Agreement. Further a court of competent jurisdiction shall have the authority to rewrite, interpret or construe the terms of the Agreement so as to render them enforceable to the maximum extent allowed by law, consistent with the intent of the parties as evidenced hereby.

12. Attorney Fees. If any legal action is necessary to enforce the terms of the Agreement, the prevailing party shall be entitled to recover, in addition to other amounts to which the prevailing party may be entitled, actual attorneys’ fees and costs.

13. Counterparts. The Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument.

14. Governing Law. The Agreement shall be construed, administered and enforced according to the laws of the State of Illinois, without regard to its conflicts of laws rules.

IN WITNESS HEREOF, the parties have executed this Agreement as of the date set forth above.


AKORN, INC.: Corporation		PARTICIPANT:

By:	/s/ Jeffrey A. Whitnell	/s/ Arthur S. Przybyl

		Arthur S. Przybyl
Its:	Chief Financial Officer

EX-99.2 3 c01178exv99w2.htm EXECUTIVE BONUS AGREEMENT exv99w2

EXHIBIT 99.2

JEFFREY A. WHITNELL
EXECUTIVE BONUS AGREEMENT

THIS Jeffrey A. Whitnell Executive Bonus Agreement (the “Agreement”) is entered into between Akorn, Inc., a Louisiana corporation (the “Corporation”) and Jeffrey Whitnell (the “Participant”), effective December 27, 2005. The purpose of the Agreement is to reward the service, performance, productivity and loyalty of the Participant by providing the Participant with a prospective bonus to be paid in accordance with the terms of this Agreement.

IN CONSIDERATION of the mutual promises made and other good and valuable consideration, receipt of which is hereby acknowledged, the Corporation and the Participant agree as follows:

1. Amount of Payment. The Participant shall receive a one-time cash bonus equal to the sum of parts 1.1 and 1.2, below:

1.1 a bonus up to $89,775 (45% of his annual compensation (“Base Comp”) for achieving all of the following performance measurements in 2005, or, if one or more but not all of these performance measurements are achieved, Participant is eligible to receive a portion of that amount in accordance with the sum of the following:

(a) $44,888 (22.5% of Base Comp) will be awarded for achieving an “Adjusted EBITDA” of at least $9,500,000. “Adjusted EBITDA” means EBITDA, excluding from EBITDA expense to the extent otherwise includable in that calculation, the charges for the Strides-Arcolab joint venture and the charges (expected to be $436,562) related to the grant of restricted stock on April 1, 2005.

(b) $13,466 (6.75% of Base Comp) will be awarded for either: (i) conducting a successful capital raise that is approved by the Board of Directors of the Corporation, or (ii) achieving cash flows from operations such that a capital raise is unnecessary.

(c) $17,955 (9.0% of Base Comp) will be awarded for successfully renegotiating the LaSalle credit agreement on more favorable terms to the Corporation (e.g., increasing the line of $5 million and reducing the interest rate from Prime based to LIBOR based).

(d) $13,466 (6.75% of Base Comp) will be awarded for developing an omnibus equity compensation plan that is approved by the shareholders of the Corporation.

1.2 A bonus up to $29,925 (15% of Base Comp) for over achievement of the Adjusted EBITDA performance measures, in accordance with the sum of the following:

(a) If the Corporation’s Adjusted EBITDA is at least $10,450,000, Participant will receive an additional $14,963 (7.5% of Base Comp).

(b) If the Corporation’s Adjusted EBITDA is at least $11,400,000, Participant will receive an additional $14,962 (for a total of $29,925, or 15% of Base Comp).