UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended December 31, 1995
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _______ to _______
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
Incorporation or Organization) Identification No.)
100 Akorn Drive
Abita Springs, Louisiana 70420
(Address of Principal Executive Offices) (Zip Code)
(504) 893-9300
(Inssuer's telephone number)
Indicate by check mark whether the issuer (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
At February 9, 1996 there were 14,964,982 shares of common
stock, no par value, outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
The following financial statements are provided on the page
numbers indicated below:
Condensed Consolidated Balance Sheets -
December 31, 1995 and June 30, 1995 2
Condensed Consolidated Statements of Income -
Three months and six months ended
December 31, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows -
Six months ended December 31, 1995 and 1994 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations
The information called for by this item is provided on page 8.
<PAGE>
AKORN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, June 30,
1995 1995*
____________ _____________
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 456,053 $ 767,286
Short-term investments 1,495,971 1,568,793
Accounts receivable
(less allowance for bad debts of
$269,811 and $266,329 at December 31
and June 30, respectively) 4,462,914 4,918,753
Inventory 6,921,028 5,979,707
Prepaid expenses and other assets 1,523,002 1,068,338
____________ _____________
TOTAL CURRENT ASSETS 14,858,968 14,302,877
OTHER ASSETS 1,099,841 957,099
PROPERTY, PLANT AND EQUIPMENT 18,011,438 13,820,135
Accumulated depreciation (7,081,287) (6,750,743)
______________ _____________
10,930,151 7,069,392
Construction in progress 259,150 3,926,553
______________ _____________
11,189,301 10,995,945
______________ _____________
TOTAL ASSETS $ 27,148,110 $ 26,255,921
============== =============
<PAGE>
December 31, June 30,
1995 1995*
______________ _______________
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 262,400 $ -
Current installments of long-term
debt and capital lease obligations 826,831 641,994
Current portion of pre-funded development
costs 500,000 667,000
Trade accounts payable 1,496,880 1,718,893
Income taxes payable 1,094,657 781,824
Accrued payroll and commissions 588,743 625,839
Accrued reorganization costs 654,532 727,423
Accrued expenses and other liabilities 1,400,254 1,237,232
______________ _______________
TOTAL CURRENT LIABILITIES 6,824,297 6,400,205
LONG-TERM DEBT AND
CAPITAL LEASE OBLIGATIONS 3,516,729 3,900,389
OTHER LONG-TERM LIABILITIES 874,481 957,043
SHAREHOLDERS' EQUITY
Common stock, no par value--
authorized 20,000,000 shares; issued
15,115,673 shares at December 31 and
June 30; outstanding 14,964,982 and
14,904,653 shares at December 31 and
June 30, respectively 13,701,845 13,701,845
Treasury stock, at cost--150,781 and
211,020 shares at December 31 and
June 30, respectively (170,589) (291,067)
Retained earnings 2,401,347 1,500,109
Unrealized gain on marketable equity
securities - 87,397
_____________ _____________
TOTAL SHAREHOLDERS' EQUITY 15,932,603 14,998,284
_____________ ______________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 27,148,110 $ 26,255,921
============= ==============
*Condensed from audited consolidated financial statements.
See notes to condensed consolidated financial statements.
<PAGE>
AKORN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
1995 1994 1995 1994
_________________ __________________ _______________ _______________
<S> <C> <C> <C> <C>
Net sales $ 7,387,217 $ 8,384,252 $ 15,275,765 $ 16,925,378
Cost of sales 4,576,624 4,773,140 9,577,838 9,692,933
_________________ __________________ ________________ _______________
GROSS PROFIT 2,810,593 3,611,112 5,697,927 7,232,445
Selling, general and
administrative expenses 1,963,062 2,486,079 3,900,915 4,718,258
Research and development 228,289 181,000 463,589 350,364
_________________ __________________ ________________ _______________
2,191,351 2,667,079 4,364,504 5,068,622
_________________ __________________ ________________ _______________
OPERATING INCOME 619,242 944,033 1,333,423 2,163,823
Interest expense (98,099) - (184,664) -
Interest and other income, net 177,971 23,252 281,799 51,658
_________________ __________________ ________________ _______________
79,872 23,252 97,135 51,658
_________________ __________________ ________________ _______________
INCOME BEFORE
INCOME TAXES 699,114 967,285 1,430,558 2,215,481
Income taxes 258,882 362,531 529,516 824,364
_________________ __________________ ________________ _______________
NET INCOME $ 440,232 $ 604,754 $ 901,042 $ 1,391,117
================= ================= ================ ===============
Per Share:
NET INCOME $ .03 $ .04 $ .06 $ .09
================= ================= ================ ===============
WEIGHTED AVERAGE
SHARES OUTSTANDING 15,302,490 15,542,895 15,281,342 15,410,163
================= ================= =============== ===============
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
AKORN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six months ended December 31,
1995 1994
_____________ ______________
OPERATING ACTIVITIES
Net income $ 901,042 $ 1,391,117
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 362,641 441,337
Gain on sale of investments (79,859) -
Changes in operating assets and liabilities (1,138,120) (3,513,704)
_______________ ______________
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 45,704 (1,681,250)
INVESTING ACTIVITIES
Purchases of property, plant and equipment (523,900) (3,528,197)
Net maturities of investments 65,284 561,719
Product licensing costs (82,572) (232,385)
_______________ ______________
NET CASH USED IN INVESTING ACTIVITIES (541,188) (3,198,863)
FINANCING ACTIVITIES
Repayment of long-term debt (155,662) (862,005)
Proceeds from sale of stock 120,674 96,031
Proceeds from issuance of long-term debt - 3,500,000
Reductions in capital lease obligations (43,161) (10,318)
Short-term borrowings 262,400 804,200
_______________ ______________
NET CASH PROVIDED BY
FINANCING ACTIVITIES 184,251 3,527,908
_______________ ______________
DECREASE IN CASH
AND CASH EQUIVALENTS (311,233) (1,352,205)
Cash and cash equivalents at beginning of period 767,286 1,914,735
_______________ ______________
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 456,053 $ 562,530
=============== ==============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Interest paid, net of amount capitalized $ 184,588 $ -
=============== ==============
Income taxes paid, net of refunds $ 149,956 $ 1,092,750
=============== ==============
See notes to condensed consolidated financial statements.
<PAGE>
AKORN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements include the accounts of Akorn, Inc. (the Company) and
its wholly owned subsidiaries, Spectrum Scientific Pharmaceuticals,
Inc. , Walnut Pharmaceuticals, Inc. and Akorn Manufacturing, Inc.
Intercompany transactions and balances have been eliminated in
consolidation.
These financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q. Accordingly,
they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the
six-month period ended December 31, 1995 are not necessarily
indicative of the results that may be expected for the year ending
June 30, 1996. For further information, refer to the consolidated
financial statements and footnotes for the year ended June 30,
1995, included in the Company's Annual Report on Form 10-KSB.
NOTE B - INCOME TAXES
The Company is currently in discussions with the Internal Revenue
Service (IRS) regarding the examination of tax returns for years
1988 through 1993. The IRS has proposed adjustments to such
returns which would result in additional taxes and interest due of
approximately $1.5 million. Although the Company does agree with
approximately $600,000 of the proposed adjustments, the Company
does intend to appeal the remainder of the assessment. The Company
does not currently anticipate any adverse financial statement
effect from this proposed assessment as accruals for the financial
statement effects of these proposed adjustments have been
previously recorded.
NOTE C - EARNINGS PER SHARE
Earnings per share are based upon the weighted average number of
common shares outstanding. The computation of the weighted average
number of shares outstanding for all periods presented includes the
dilutive effect of stock options and warrants using the treasury
stock method.
NOTE D - INVENTORY
The components of inventory are as follows:
December 31, June 30,
1995 1995
________________ ________________
Finished goods $ 3,899,405 $ 3,742,411
Work in process 1,138,518 1,042,922
Raw materials and supplies 1,883,105 1,194,374
________________ _________________
$ 6,921,028 $ 5,979,707
================ =================
The inventories are reported net of reserves for unsaleable items
of $307,126 and $344,443 as of December 31, 1995 and June 30, 1995,
respectively.
NOTE E - INVESTMENTS
At June 30, 1995, the market value of the Company's marketable
equity securities exceeded the cost by $87,397; therefore, an
unrealized gain was recorded as a component of shareholders' equity
to reflect this increase in value. Subsequent to year end, the
Company sold the investment and recorded a realized gain of $79,859
during the first quarter of fiscal 1996. This amount is included
in interest and other income, net in the accompanying statement of
income for the six months ended December 31, 1995.
NOTE F - INTEREST CAPITALIZATION
Interest incurred during construction periods is capitalized as
part of the cost of the expansion project. During the six-month
periods ended December 31, 1995 and 1994, the Company capitalized
$34,682 and $43,725, respectively, in interest costs. During the
quarter ended December 31,1994, interest costs totaling $30,291
were capitalized. No interest costs were capitalized during the
second quarter of fiscal 1996.
NOTE G - LITIGATION
The Company is involved in various litigation and claims arising in
the normal course of business. The Company's management believes
that any liability the Company may have in these matters would not
have a material effect on the consolidated financial statements.
<PAGE>
AKORN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales
The following table sets forth, for the periods indicated, net
sales by segment (in thousands), excluding intersegment sales:
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
_________ __________ _________ __________
Ophthalmic distribution $ 5,503 $ 6,286 $ 11,120 $ 12,358
Contract manufacturing 1,884 2,098 4,156 4,567
__________ _________ __________ __________
Total net sales $ 7,387 $ 8,384 $ 15,276 $ 16,925
========== ========= ========== ==========
Total net sales declined 12% in the quarter ended December 31, 1995
compared to the same period in 1994, with sales of $7.4 million
versus $8.4 million. For the first six months of fiscal 1996,
sales of $15.3 million were 10% lower than the prior-year sales of
$16.9 million.
For the quarter ended December 31, 1995, ophthalmic distribution
sales declined 12% from the comparable period in 1994. For the
six-month period ended December 31, 1995, net sales for this
segment declined 10% as compared to the same period in the prior
fiscal year. These declines in sales are primarily the result of
the absence, since the second quarter of fiscal 1995, of AK-Con-A,
the Company's lead allergy product, which accounted for sales of
approximately $700,000 and $2 million in the prior-year quarter and
six-month period, respectively.
Ophthalmic distribution sales, exclusive of AK-Con-A sales, were
$5.5 million and $10.4 million, respectively, for the quarter and
six-month period ended December 31, 1994. Excluding AK-Con-A
sales, ophthalmic distribution sales for the quarter ended December
31, 1995 were flat as compared to the same period in 1994 while
sales for the six-month period were 7% higher than the previous
year. The flat sales for the quarter were primarily due to several
product backorders and the stocking in of several products in the
prior-year second quarter.
As previously announced, AK-Con-A was converted to over-the-counter
(OTC) from prescription status by the Food and Drug Administration
(FDA). The Company recently obtained FDA approval of its OTC
version of AK-Con-A which has been licensed to Pfizer Inc.(Pfizer).
The Company will begin to recognize royalty income and
manufacturing margins on this product beginning in the fourth
quarter of fiscal 1996. Such amounts are expected to bring
additional profits of approximately one to two cents per share per
quarter.
The Company has recently received several Abbreviated New Drug
Application approvals (ANDAs) for ophthalmic products at its Akorn
Manufacturing, Inc. (AMI) facilities. These approvals are expected
to add incremental revenues to the ophthalmic distribution segment
commencing in the fourth quarter of fiscal 1996, as the Company
plans to introduce "commodity generic" labels for these products.
These commodity generic sales will be in addition to the brand name
sales of the products currently being recognized.
For the quarter ended December 31, 1995, contract manufacturing
sales declined 10% over the comparable period in 1994. For the
six-month period ended December 31, 1995, this segment's sales were
9% lower than the same period in 1994. These declines in contract
manufacturing sales reflect fluctuations in ordering patterns from
contract customers which is common to this segment. In addition,
these declines are due to a recent shift by several contract
customers who, based on economic evaluation, have opted to transfer
the manufacture of their injectable products in-house, or to
discontinue the product line entirely.
As noted in previous Company disclosures, one of these customers is
Akorn's largest contract customer, which accounted for 15% and 14%
of consolidated net sales for the quarter and six-month period
ended December 31, 1995, respectively. This customer has
transferred a portion of its contract business to its own
facilities and has decided to discontinue the remaining products
currently being manufactured by AMI.
The transferred and discontinued products accounted for
approximately $1.4 million and $2.9 million in sales, respectively,
for AMI in fiscal 1995. The Company is in late stage negotiations
to acquire the discontinued products. Pending such negotiations,
this customer is continuing to order these products to keep them in
the marketplace. The acquisition of these products would help to
continue the current plant throughput and will provide Akorn an
entre into the injectable distribution business, which would be
synergistic with the ophthalmic distribution business.
In October 1995, the Company signed an agreement with Jordan
Pharmaceuticals, Inc. (Jordan) to develop and manufacture three new
generic injectable pharmaceutical products. In addition, the
agreement secured the long-term manufacture of three generic
injectables currently produced by AMI for Jordan. The three new
products are exempt from FDA approval under "grandfather" rules,
and, as such, the first of the three new products should be in
commercial production by the fourth quarter of fiscal 1996. The
combined contractual payments in the first year of the contract,
including fees for product development, are expected to approximate
$2 million. Previously, Jordan represented approximately $900,000
of the Company's contract manufacturing business. This additional
throughput will help offset declines from other contract customers
noted above.
The Jordan agreement allows Akorn to use information supporting the
development of the products to pursue recently announced strategies
in the injectable marketplace. The agreement further provides that
best efforts will be used by both parties to develop two new
products each year, under the same terms and conditions.
Gross Profit
Consolidated gross profit declined 22% to $2.8 million in the
quarter ended December 31, 1995 compared to $3.6 million for the
same period of the previous year, with gross margins declining five
percentage points. For the first six months of fiscal 1996, gross
profit of $5.7 million was 21% lower than the comparable fiscal
1995 amount of $7.2 million, with gross margins also declining six
percentage points.
The loss of AK-Con-A sales (Akorn's highest margin product at 75%),
decreased overhead absorption in manufacturing and higher product
costs imposed by suppliers were the primary reasons for the decline
in gross profit and margins for the quarter and six-month period.
Gross margins are expected to remain relatively stable for the
remainder of fiscal 1996.
Selling, General and Administrative Expenses
Selling, general and administrative (S,G&A) expenses declined 21%
during the quarter ended December 31, 1995 as compared to the same
period in 1994. For the first six months of fiscal 1996, S,G&A
expenses were 17% lower than the comparable period in fiscal 1995.
The reduction in S,G&A expenses is partly due to lower sales and
partly due to the plan, which the Company implemented in the
quarter ended March 31, 1995, to reduce certain S,G&A expenses.
The percentage of S,G&A expenses to sales declined to 27% for the
quarter ended December 31, 1995 from 30% in the comparable prior-year
quarter. For the first six months ended December 31, 1995,
the percentage of S,G&A expenses to sales declined to 26%, from 28%
in 1994.
Research and Development
Research and development expenses increased 26% and 32% for the
quarter and six months ended December 31, 1995 as compared to the
same periods in 1994. This increase reflects an acceleration in
the Company's R&D activities and a change in the mix of products
under development to a lower concentration of products for which
costs have been previously accrued.
Interest and Other Income/Expense
Interest costs incurred during the entire 1995 fiscal year and
through July 1995 were capitalized as part of the cost of
construction related to the Company's expansion project at AMI.
The expansion is now complete and the first production of product
from the new clean room (which initially will primarily be for
production under the Pfizer contract) has begun. Consequently,
interest costs for the current periods charged to results of
operations increased compared to prior year periods during which
time such costs were being capitalized
Included in interest and other income, net for the quarter ended
December 31, 1995 is $150,000 in fees associated with the licensing
to Chauvin Pharmaceuticals, Inc., a French-based sterile products
manufacturer, of certain technologies on two currently approved
ANDAs. Under the agreement, Akorn will provide product
information to be used in obtaining regulatory approvals for these
products for manufacture and distribution in Europe. In addition,
Akorn will manufacture the products for European distribution for
a period of time and will receive a royalty stream on European
sales of the product. The Company is in discussions with other
companies regarding similar arrangements in other international
markets.
Included in interest and other income for the six-month period
ended December 31, 1995 are the fees from Chauvin discussed above
and a $80,000 gain recognized on the sale of the Company's only
equity investment.
Income Taxes
The effective tax rates for all periods presented remained stable
at 37%. The Company has been in discussions with the Internal
Revenue Service (IRS) regarding the examination of tax returns for
the periods 1988 through 1993. The IRS has proposed adjustments to
such returns, some of which the Company has agreed to and some
which the Company will appeal. The financial statement effects of
these proposed agreed upon adjustments have been previously
recorded.
Net Income
As a result of the factors noted above, net income for the quarter
ended December 31, 1995 declined to $440,000 or three cents per
share compared to the prior year amount of $605,000 or four cents
per share. Net income for the first six months of fiscal 1995
declined to $901,000 or six cents per share versus $1.4 million or
nine cents per share in the comparable 1994 period. Weighted
average shares used in the calculation of per share amounts were
relatively unchanged from period to period.
Financial Condition and Liquidity
The net cash provided by operating activities for the six months
ended December 31, 1995 was $46,000 compared to net cash used of
approximately $1.7 million for the corresponding period in 1994.
During the period, significant investments in inventory, primarily
for raw materials and components associated with new ophthalmic
products, were made. As a contract manufacturer, AMI's raw
material and component inventories were relatively insignificant
since such inventories were generally supplied by contract
customers. All ophthalmic manufacturing, however, requires AMI to
purchase the raw materials and components, thus resulting in the
noted increases. Further increases in raw material and component
inventory will be based on future product approvals and product
sales.
In the prior year, in addition to inventory build up associated
with the new product additions, final estimated tax payments for
the fiscal year ended June 30, 1994 were made.
The Company has begun the development for ophthalmic use of a
non-steroidal anti-inflammatory drug (NSAID) licensed from Pfizer. It
is anticipated that the majority of the development costs, which
are expected to be funded substantially by Pfizer, will be incurred
over the next 15 to 18 months. In addition to ophthalmics, the
Company recently announced its intention to enter the generic
injectable business. This entree includes the plan to file two
Abbreviated New Drug Applications (ANDAs) for injectable products
over the next twelve months. Management believes that existing
cash, cash flows from operations, and available working capital
lines of credit are sufficient to handle the funding of these
research projects.
In addition to these short-term needs, the Company may be required
to pay additional interest and taxes in connection with the
examination by the IRS of tax returns for the periods 1988 through
1993. The proposed adjustments by the IRS would result in
additional interest and taxes currently due of approximately $1.5
million. To date, the Company and the IRS have agreed upon issues
resulting in approximately $600,000 of current net taxes and
interest due. Payment of the agreed upon items is expected to be
made over the next nine months to one year under an agreement with
the IRS pursuant to an arrangement with a commercial bank. Payment
of the remaining unsettled issues, if any, would be based on the
timing of the appeals process and the success of the Company in
arguing its position with the IRS. The Company does not currently
anticipate any adverse financial statement effect from this
proposed assessment. The income statement effects of these
proposed adjustments have been previously accrued.
The Company invested $524,000 in new property, plant and equipment
during the six-month period ended December 31, 1995 compared to
$3.5 million in the prior year comparable period. The current year
additions were primarily related to expansion of the Company's R&D
facilities, while the prior year additions were associated with the
expansion of the Company's manufacturing facilities, including the
addition of a high-speed ophthalmic line.
On September 30, 1994, the Company entered into a $6.3 million
credit facility with a commercial bank. The credit facility
includes the following:
- a $1.3 million Term loan for the payout of existing debt
and reimbursement for the early payout of a capital lease
on the AMI manufacturing facility.
- a $3.5 million Revolver/Term construction loan to
finance the expansion of the AMI facilities.
- a $1.5 million Line of Credit for working capital
purposes.
The entire Term loan was drawn in October 1994 and, as of December
31, 1995, $2.6 million had been drawn on the Revolver/Term
construction loan. In addition, approximately $262,000 had been
drawn on the Line of Credit at December 31, 1995.
The construction project at the Decatur facilities allows for new
high-speed ophthalmic production, as well as the capabilities to
add suspensions, ointments and unit-dose products with some
additional investments. The total cost of the expansion project,
including additional equipment, was approximately $5.4 million.
The Company has plans for capital improvements of approximately
$1.5 million to $2 million during calendar 1996. It is currently
anticipated that such expenditures will be financed through
internal cash flows, $900,000 remaining availability under the
Revolver/Term loan and an additional $500,000 loan obtained from
the same commercial bank. The timing of such expenditures will be
staged to ensure compliance with debt covenant requirements.
Financing activities provided $184,000 and $3.5 million in the
six-month periods ended December 31, 1995 and 1994, respectively. The
prior year amount is primarily related to draws on the various bank
financing arrangements in support of the Company's expansion
project.
In connection with the negotiations with its lead contract customer
regarding the acquisition of a line of discontinued injectable
products, the Company has a commitment from its commercial bank to
lend up to $1.5 million.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Certain legal proceedings in which the registrant, Akorn,
Inc. (the "Company"), is involved are described in Item 3 to
the Company's Form 10-KSB for the fiscal year ended June 30,
1995 and in Note R to the consolidated financial statements
included in that report.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Development and Supply Agreement with Jordan
Pharmaceuticals, Inc. dated October 18, 1995
(10.2) Employment Agreement dated January 1, 1996 --
Barry D. LeBlanc
(10.3) Employment Agreement dated January 1, 1996 --
Harold O. Koch
(10.4) Employment Agreement dated January 1, 1996 --
Tim J. Toney
(99.1) Press release issued by Akorn, Inc. on
February 7, 1996 announcing its second
quarter 1996 financial results.
(b) Reports on Form 8-K
None.
<PAGE>
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 thereunto duly authorized.
AKORN, INC.
/s/ Barry D. LeBlanc
_______________________
Barry D. LeBlanc
President and Chief Executive Officer
(Duly Authorized Officer)
/s/ Eric M. Wingerter
________________________
Eric M. Wingerter
Vice President - Finance and Administration
(Principal Financial Officer)
Date: February 9, 1996
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Pages
(10.1) Development and Supply Agreement with Jordan
Pharmaceuticals, Inc. dated October 18, 1995
(10.2) Employment Agreement dated January 1, 1996 --
Barry D. LeBlanc
(10.3) Employment Agreement dated January 1, 1996 --
Harold O. Koch
(10.4) Employment Agreement dated January 1, 1996 --
Tim J. Toney
(99.1) Press release issued by Akorn, Inc. on February 7, 1996
announcing its second quarter 1996 financial results.
October 18, 1995
Mr. Tim J. Toney
President
Akorn Manufacturing, Inc.
150 South Wyckles Road
P.O. Box 1220
Decatur, IL 62525
Re: Development Of: Sodium Chloride Injection, U.S.P. 0.9%,
Tetracaine Hydrochloride Injection, U.S.P. 1% & Epinephrine
Injection, U.S.P.
Supply Of: Sodium Chloride Injection, U.S.P. 0.9%, Tetracaine
Hydrochloride Injection, U.S.P. 1%, Epinephrine Injection,
U.S.P., Dextrose Injection, U.S.P. 10%, Ephedrine Sulfate
Injection, U.S.P. and Sterile Water for Injection, U.S.P.
Dear Tim:
In connection with our recent discussions and correspondence,
this letter is intended as a binding agreement relative to (i)
the development by Akorn Manufacturing, Inc. ("Akorn") of Sodium
Chloride Injection, U.S.P. 0.9% ("Sodium Chloride"), Tetracaine
Hydrochloride Injection, U.S.P. 1% ("Tetracaine Hydrochloride")
and Epinephrine Injection, U.S.P. ("Epinephrine"), to include a
complete Product Development Report on each of those three
products, and (ii) the provision by Akorn to Jordan
Pharmaceuticals, Inc. ("Jordan") of Sodium Chloride, Tetracaine
Hydrochloride, Epinephrine, Dextrose Injection, U.S.P. 10%
("Dextrose"), Ephedrine Sulfate Injection, U.S.P. ("Ephedrine
Sulfate") and Sterile Water for Injection, U.S.P. ("Sterile
Water") in specified sizes and formats. The proposed terms and
conditions of the agreement (the "Agreement") are as follows:
Product Development.
Subject to the terms and conditions of this Agreement, Akorn
agrees to perform the necessary development work in order to
manufacture and supply Sodium Chloride, Tetracaine Hydrochloride
and Epinephrine (the "Development Products") to Jordan in
accordance with the respective specifications for such products
set forth in Exhibit 1 attached hereto. As part of such
development work, Akorn shall prepare and properly document a
complete Product Development Report for each Development Product,
and shall produce three (3) lots of each of the Products for
stability studies, consisting of the number of units per lot for
each Development Product set forth in Exhibit 2 attached hereto.
The Product Development Report shall contain the data relating to
the development work for each Development Product, and shall
contain, at a minimum, the information summarized in the section
headings of the report as listed in Exhibit 9 attached hereto,
and any other development work reasonably necessary for
marketable product.
Jordan agrees to pay Akorn the amounts set forth in Exhibit 3
attached hereto (the "Development Cost") for the development of
each of the Development Products. Development Costs shall not
include the costs of the three lots of each of the Products for
stability studies produced during the development work, which
Products shall be paid for by Jordan pursuant to Paragraph 2(b),
below. Akorn shall invoice Jordan for thirty percent (30%) of
the specified Development Cost for a Development Product upon
Akorn's commencement of development work, an additional thirty
percent (30%) of the specified Development Cost at such time as
Akorn commences stability studies of such Product, and the
balance of the Development Cost at such time as Akorn has
submitted a Product Development Report for such Development
Product to Jordan indicating successful completion of all product
development activities, and Jordan has accepted such report.
Akorn will use its commercial best efforts to complete its
development work with respect to all three Development Products
by March 31, 1996. In performing its development work, Akorn
shall give first priority to the development of the Tetracaine
Hydrochloride, second priority to the development of Sodium
Chloride, and third priority to the development of Epinephrine.
Akorn will also use its best efforts to ensure that its
development work and stability studies satisfy Food and Drug
Administration ("FDA") requirements.
Akorn agrees that Jordan shall be entitled to all information
pertaining to the development work and stability studies,
including master batch records and analytical methods and
results. Akorn shall, at Akorn's expense, promptly provide all
of such information to Jordan upon its request. All stability
batch test data and all actual Product(s) produced as a result of
said tests shall be the exclusive property of Jordan, and Akorn
shall not have the right to use said test data or Product(s) for
or on behalf of itself (except for meeting its obligations to
Jordan) or any other party without Jordan's prior written
consent. All other information obtained in the development of
the Products shall be the non-exclusive property of Jordan and
Akorn shall be entitled to use any such information to produce
the Products for any other party, including Akorn. However, in
the event Akorn does generate its own stability data, stability
batch records and stability batches for the purpose of marketing
and selling the Product (s) to any party other than Jordan, Akorn
shall refund to Jordan fifty (50%) per cent of the Development
cost (as set out in Exhibit 3), attributable to such Product(s).
Agreements to Purchase and Supply Products.
Subject to the terms and conditions of this Agreement, Jordan
hereby agrees to purchase from Akorn, for the term of this
Agreement, one hundred percent (100%) of Jordan's purchase
requirements for Sodium Chloride, Tetracaine Hydrochloride,
Epinephrine, Dextrose, Ephedrine Sulfate and Sterile Water (the
"Products") in accordance with the respective specifications for
such products set forth in Exhibit 1 attached hereto, and Akorn
hereby agrees to supply to Jordan, during the term of this
Agreement, all of Jordan's purchase requirements for such
Products. Notwithstanding the foregoing, Jordan may terminate its
obligations under this Paragraph, as to any Development Product,
should Akorn fail to provide Jordan with a complete Product
Development Report as to that Product.
Jordan hereby agrees to provide Akorn, within thirty (30) days of
execution of this Agreement, and thereafter ninety (90) days
prior to each year for which this Agreement is in effect, with an
annual forecast of its estimated purchase requirements for the
Products for such year. Thereafter, Jordan agrees to place
irrevocable rolling 90-day purchase orders for its actual
purchase requirements. Such forecasts shall enable Akorn to
manufacture the Products in whole batch increments as specified
in Exhibit 4 attached hereto. Marketable Products produced by
Akorn in the stability runs shall be deemed part of an initial
purchase order and shall be purchased by Jordan as any other
Product.
Jordan agrees that its purchases of each Product within any year
shall not be less than the minimum annual purchase commitment for
such Product specified in Exhibit 5; provided, however, Jordan
shall have no obligation to purchase the minimum annual purchase
commitment of Sterile Water specified in Exhibit 5 after December
31, 1997 unless and to the extent it has purchase orders for such
minimum quantities from its customers after such date.
Satisfaction of the minimum purchase commitments shall be
determined on a basis corresponding with the anniversary dates of
this Agreement. The minimum purchase order for Sterile Water for
the period in which December 1997 falls within shall be
appropriately prorated. Notwithstanding anything in this
Subparagraph (c) to the contrary, Jordan may purchase quantities
of one or more Products within a year without being in violation
of its minimum purchase commitments so long as the aggregate
dollar volume of purchases for all of the Products exceed the
aggregate minimum purchase commitments specified in Exhibit 5.
Additionally, Jordan agrees to use its best efforts to purchase
additional sizes of Sterile Water from Akorn, and to purchase new
development sizes of Sterile Water and Calcium Chloride for
Injection, USP from Akorn, provided Akorn is able to meet
Jordan's specifications.
Akorn agrees to use its commercial best efforts to accommodate
Jordan's request to change the amount of Products specified in
its purchase orders and/or the delivery dates for such Products,
and anticipates that all reasonable requests will be
accommodated. Nevertheless, Jordan understands that Akorn's
ability to source Product purchases within any pending 90-day
period are subject to limitations based upon lead times it is
required to give its suppliers, and that Akorn therefore cannot
guarantee that any requested changes in quantities ordered and/or
delivery dates within such 90-day period following the requested
change can be effectuated. Jordan agrees to pay any additional
costs incurred by Akorn to accommodate Jordan's request.
Notwithstanding anything in this Agreement to the contrary, to
the extent that Akorn cannot supply Jordan's purchase
requirements, Jordan shall have the right to purchase any
shortfall in its purchase requirements from another vendor
without restriction. Should Akorn fail to fill any two
consecutive purchase orders for any Product within one hundred
twenty (120) days of the order, it shall be deemed to be unable
to supply Jordan's purchase requirements for the purposes of the
preceding sentence.
Notwithstanding anything in this Agreement to the contrary,
Jordan shall have the right to manufacture any of the Products
should it acquire the facilities to do so provided Jordan gives
Akorn at least twelve (12) months prior written notice. If such
notice is provided by Jordan, it shall be released from its
purchase obligations for such Products hereunder.
Additional Products.
Commencing April 1, 1996, Akorn agrees that it shall use its
commercial best efforts to perform the necessary development work
in order to manufacture and supply to Jordan two new products per
year which shall be jointly agreed to by Akorn and Jordan (the
"Additional Products"). The parties agree to negotiate in good
faith as to the development cost, minimum annual purchase
commitments, and pricing for each of the Additional Products, and
such agreement shall be a condition precedent to Akorn's
obligation to develop the Additional Products. Upon such
agreement, this Agreement and Exhibits 1 though 8 hereof shall be
amended to make appropriate reference to the Additional Products.
The development of the Additional Products (including payment of
the development costs) shall be governed by the terms of
Paragraph 1, and the Additional Products shall be deemed to be
Development Products for the purposes of Paragraph 1 as well as
any other applicable provisions of this Agreement. The
Additional Products shall also be deemed to be Products under
Paragraph 2 and, as such, shall be governed by the provisions of
Paragraph 2 as well as any other applicable provisions of this
Agreement.
(b) Jordan may specify that one of the two Additional Products per
year specified in Paragraph 3(a) above be an ANDA Product. Any
such ANDA Additional Product, shall be considered for all
purposes as a Development Product, and subject to the provisions
of Paragraph 1 above, with the following modifications. Jordan
shall own, exclusively, the stability data, stability batch
records, stability batches as well as Jordan's ANDA filing with
the FDA for the ANDA Additional Product. Jordan's ownership of
the remaining data and information comprising the ANDA shall be
non-exclusive and subject to the provisions of Paragraph 1(d),
except that should Akorn use the non-exclusive ANDA data along
with its own stability data, stability batch records, and
stability batches to file its own ANDA to market and sell any
Additional Products to any party other than Jordan, Akorn shall
refund to Jordan forty (40%) per cent of the development cost
attributable to such Additional Product.
4. Quality Standards. The Products shall meet all applicable
United States Pharmacopeia ("U.S.P.") and Food and Drug
Administration ("F.D.A.") regulations, including Good
Manufacturing Practices, as such regulations may be in place at
the time of delivery.
5. Manufacturing, Packaging and Labeling Standards. Akorn
warrants that the Products shall be manufactured, packed and
labeled in accordance with the standards and requirements set
forth in Exhibit 6 attached hereto. Akorn shall assume the
responsibility for the sourcing and purchasing of raw materials
and components for the manufacture and packaging of the Products
excepting labels and inserts, which will be provided by Jordan at
its cost. Labels and inserts may be either in Jordan's name or
that of its customers. Akorn and Jordan shall jointly develop
label copy, with Akorn being responsible for ensuring that the
label copy, including both content and layout, satisfies
applicable U.S.P. and FDA regulations. Notwithstanding the
foregoing, Akorn shall retain the responsibility and sole
authority to select label stock and insert stock compatible with
its machinery.
6. Price. Jordan agrees to pay Akorn with respect to its supply
of the Products the applicable price specified in Exhibit 7
attached hereto, subject to adjustment as hereinafter provided.
Beginning on the second annual anniversary date of this
Agreement, and on each annual anniversary date thereafter, the
specific price for the Products shall be increased by an amount
equal to the percentage increase, if any, in the rate of
inflation for the expiring year relative to the prior year
thereto, but not to exceed five percent (5%). The rate of
inflation shall be determined using the Producer Price Index
(#063) published by the United States Bureau of Labor Statistics
(the "Index"). In order to avoid any delays in calculating the
increase, the percentage increase in the Index for any expiring
year shall be determined by comparing the published Index for the
month which occurs three months prior to the expiration of the
year to the Index for the corresponding month for the immediately
preceding year. For purposes of making calculations, all
percentages shall be rounded to the nearest tenth of a
percentage, and all monetary amounts shall be rounded to the
cent.
7.Delivery and Payment Terms.
(a) The Products shall be delivered F.O.B. place of origin to the
Jordan warehouse located in California or any designee of Jordan
located within the continental United States, provided said
shipments are in whole batch increments as specified in Exhibit 4
attached hereto. Freight method and carrier shall be selected
and directly paid by Jordan. All customs, duties, costs, taxes,
insurance premiums and other expenses relating to transportation
and delivery shall be arranged and directly paid by Jordan.
(b) Akorn shall invoice Jordan no earlier than the shipment date
for such order. Payment terms for an order shall be net forty-
five (45) days of the date of the invoice. All invoiced amounts
not paid within said forty-five (45) days shall bear interest at
the rate of one and one-half percent (1.5%) per month from the
date due until paid. Except as such terms may be inconsistent
with the terms of this Agreement, all of such orders shall be
delivered in accordance with conditions set forth on purchase
orders submitted by Jordan to Akorn. If a conflict between the
purchase order and the terms of this Agreement exists or
develops, the terms of this Agreement shall prevail.
8. Rejected Products. If any of the delivered Products fail to
meet quality standards as determined by U.S.P. or any applicable
FDA standards, as well as any other specifications stipulated by
the terms of this Agreement, then Akorn shall take possession of
the rejected products at its cost and, at Jordan's option,
reimburse Jordan the price of any rejected products, extend
credit to Jordan for future purchases, or replace the rejected
Products at Akorn's cost. Notwithstanding the foregoing, Akorn
shall not be liable for any lost profits or consequential damages
as a result of defective Products (with the exception of those
matters set forth in Paragraph 11 of this Agreement). In the
event of the operation of this Paragraph 8, Jordan agrees to give
Akorn thirty (30) days from the shipment date to resolve any
problem before returning the rejected Products.
9. Warranties and Remedies. Akorn warrants that the Products,
when shipped to Jordan, (i) will conform in all respects to the
specifications by the parties with respect to such Products as
then in effect, (ii) will meet U.S.P. quality standards and all
applicable F.D.A. regulations, and (iii) will not be adulterated
or misbranded within the meaning of F.D.A regulations. EXCEPT
FOR THE FOREGOING WARRANTIES, AKORN DOES NOT WARRANT THE
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE
PRODUCTS OR THE PERFORMANCE THEREOF, DOES NOT MAKE ANY WARRANTY,
EXPRESS OR IMPLIED, WITH RESPECT TO PRODUCTS, SPECIFICATIONS,
SUPPORT, SERVICE OR ANYTHING ELSE, AND DOES NOT MAKE ANY WARRANTY
TO OR FOR THE BENEFIT OF JORDAN OR ITS CUSTOMERS OR AGENTS.
AKORN HAS NOT AUTHORIZED ANYONE TO MAKE ANY REPRESENTATIONS OR
WARRANTY OTHER THAN AS PROVIDED ABOVE. NEITHER PARTY SHALL IN
ANY EVENT BE LIABLE WITH RESPECT TO THE SUBJECT MATTER OF THIS
LETTER AGREEMENT OR ANY PORTION THEREOF UNDER ANY CONTRACT,
NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY
(A) FOR ANY SPECIAL INCIDENTAL OR CONSEQUENTIAL DAMAGES, OR (B)
SO LONG AS IT USED ITS DILIGENT COMMERCIAL EFFORTS, FOR FAILURE
OR DELAY IN DELIVERY OF PRODUCTS.
10. Product Liability Insurance. Effective January 1, 1996, each
party agrees to carry products liability insurance coverage in an
amount not less than $3 million, naming the other party as
additional insured under said policies, and to promptly provide
proof of insurance upon demand by the other party.
11. Product Liability Claims.
(a) Akorn agrees to indemnify, defend and hold Jordan harmless
from and against any and all liabilities, damages losses, costs
and expenses (including reasonable attorneys' fees and costs of
litigation regardless of outcome) with respect to all claims for
personal injury, wrongful death or property damage by third
parties which arise from Akorn's negligence or a manufacturing
defect in Products purchased from Akorn or resold by Jordan
hereunder or a failure of such Products to meet all
specifications required by this Agreement or any deficiency in
the Products's packaging, labelling or inserts.
(b) Jordan agrees to indemnify, defend and hold Akorn harmless
from and against any and all liabilities, damages losses, costs
and expenses (including reasonable attorneys' fees and costs of
litigation regardless of outcome) with respect to all claims
(other than those specified in Subparagraph (a)) for personal
injury, wrongful death or property damage by third parties which
arise from Products purchased or resold by Jordan hereunder
including, without limitation, those alleged to arise from
misstatements or misrepresentations made by Jordan in the course
of selling such Products that are outside of or different from
the approved labeling or package inserts.
Each party will promptly notify the other of any claim or action
by reason of the manufacture, use or sale of any Products of
which it becomes aware, and shall instruct its attorneys
defending the case to share all information bearing on the claim
and its defense with the other party.
(d) If either party intends to claim indemnification from the
other party pursuant to this Paragraph 11, it shall not be
entitled to settle any of the claims for which it claims or
intends to claim indemnification without the consent of such
other party, which consent shall not be unreasonably withheld.
(e) The indemnities of this Paragraph 11 shall not apply (i) if
the indemnified party fails to give the indemnifying party prompt
written notice of any claim it receives and such failure
materially prejudices the indemnifying party, or (ii) unless the
indemnifying party is given the opportunity to approve any
settlement, which approval shall not be unreasonably withheld.
Furthermore, the indemnifying party shall not be liable for
attorneys' fees or expenses of litigation of the indemnified
party unless the indemnified party gives the indemnifying party
the opportunity to assume control of the defense or settlement.
In addition, if the indemnifying party assumes such control, it
shall only be responsible for the legal fees and litigation
expenses of the attorneys it designates to assume control of the
litigation. In no event shall the indemnifying party assume
control of the defense of the indemnified party without the
consent of the indemnified party (which consent shall be given or
not at its sole discretion).
12. Force Majeure. The failure or omission by a party in the
performance of an obligation contained in this Agreement shall
not be deemed a breach and the performance of said obligation
shall be suspended if the same shall arise from any of the
following ("Events of Force Majeure"): provided, however, such
cause was beyond the reasonable control and without the fault or
negligence of such party: acts or orders of foreign, federal,
state, or local governments or any officer, department, agency or
instrumentality thereof; acts of God such as, by way of example,
fire, earthquake, storm, flood, perils of the sea or waters;
explosion or accident; acts of the public enemy, war, rebellion,
insurrection, riot or other civil disturbances, sabotage,
epidemic, or quarantine; labor disputes such as strikes; or
transportation embargoes or failures or delays in transportation.
Each party shall use its best efforts to minimize the duration
and consequences of any failure or delay caused by an Event of
Force Majeure. The affected part shall notify the other party
promptly of the existence of the Force Majeure and its estimated
duration. Should performance of any party be suspended due to
Force Majeure for more than six (6) months, then the other party
shall have the right to terminate this Agreement. However,
should the Event of Force Majeure affect less than all of the
Products, the foregoing right to terminate shall apply only to
those Products affected, and this Agreement shall otherwise
remain in effect as to the other Products not so affected.
13.Term.
(a) The initial term of this Agreement shall be five (5) years
from the date of execution by Akorn. Thereafter, Jordan may
renew this Agreement for three consecutive one (1) year periods,
providing it gives written notice to Akorn no later than ninety
(90) days prior to the end of the expiring year. Thereafter,
unless a party shall notify the other party in writing of its
termination of this Agreement within ninety (90) days of the
expiration of the expiring year, this Agreement shall
automatically renew for additional one (1) year periods.
(b) This Agreement may be terminated at any time by either party
in the event the other party commits a breach of the terms and
conditions of this Agreement and fails to substantially remedy
such breach within sixty (60) days after written notice thereof.
Termination for breach hereunder shall not relieve the breaching
party from its liability for damages.
(c) Either party may terminate this Agreement with respect to any
Product at any time upon written notice to the other without any
liability at law or equity if any of the following events occur:
(i) Governmental health authorities prohibit such Product from
being sold and distributed.
(ii) Serious unexpected adverse reactions occur which cause
removal of such Product from sale and distribution.
In the event of termination under this Subparagraph (c), this
Agreement shall remain in force and effect as to all Products to
which the termination does not apply.
(d) Akorn may terminate this Agreement at any time in the event
Jordan does not meet its total minimum dollar annual purchase
commitment in any one contract year.
In the event of termination under Subparagraphs 13(a), 13(b),
13(c)(i) or 13(d), Akorn shall fill all outstanding purchase
orders received before the effective date of termination which
orders are for delivery dates ninety (90) days or less from the
date of the purchase order.
(f) The provisions of Paragraphs 8 through 12, 13(e), and 14
through 26 hereof, shall survive the termination of this
Agreement.
(g) All notices of termination must be in writing and delivered in
accordance with the notice provisions of Paragraph 25.
Termination under Paragraphs 2(a), 12 and 13(d) hereof shall be
effective as of the date specified in the notice, but in no event
shall the effective date be less than ninety (90) days from the
date of the notice. If the notice does not state an effective
date, termination shall be deemed effective ninety (90) days
after the deemed delivery date of the notice. Terminations under
any other provisions hereof shall be effective as of the date of
the notice.
(h) In the event of early termination of this Agreement by Jordan,
Jordan agrees to reimburse Akorn for all unused in-house
components and materials related to the manufacture and packaging
of the products at Akorn's cost, unless such termination relates
to Akorn's wrongful failure to provide Products to Jordan in
accordance with the terms of this Agreement.
14. Covenant Not to Compete. To protect and preserve Jordan's
business opportunities with Jordan's customers, Akorn agrees that
it will not, during the term of this Agreement or any renewal
thereof, either directly or indirectly, or knowingly by
distribution means under Akorn's control, solicit and/or contract
with any of Jordan's "Customers" (as such persons are listed on
Exhibit 8 attached hereto) to meet their needs for the Products.
The parties agree to update this list from time to time. This
prohibition shall include the sale or provision of the Products
to any of Jordan's Customers through intermediaries. This
prohibition may be waived by the written consent of Jordan, but
such waiver may be arbitrarily and unreasonably withheld.
15. Confidentiality.
(a) Each party (a "receiving party") shall maintain in confidence
all information disclosed by the other (the "disclosing party")
which such party knows or has reason to know comprises trade
secrets and other proprietary information of the other including,
by way of example and not limitation, information relating to the
names of the disclosing party's customers (whether or not a
customer for the Products or any other product), the names of the
disclosing party's suppliers, the names of the disclosing party's
distributors or sales representatives, and any marketing,
competitive, or financial or other information to come into the
receiving party's possession as a consequence of this Agreement,
and shall not use such trade secrets or proprietary information
except as permitted by this Agreement or disclose the same to
anyone other than those of its employees, consultants and agents
as are necessary in connection with such party's permissible
activities as contemplated in this Agreement. To the extent
permitted by applicable law, each party shall have obtained
written agreement prior to disclosure to such employees,
consultants, and agents to hold in confidence and not make use of
such trade secrets or proprietary information for any purpose
other than those permitted by this Agreement. Each party shall
use its best efforts to ensure that its employees, consultants
and agents do not disclose or make any unauthorized use of such
trade secrets or proprietary information. Each party shall
notify the other promptly upon discovery of any unauthorized use
or disclosure of the other's trade secrets or proprietary
information. Each party shall return all confidential
information upon termination of this Agreement.
(b) The obligation of confidentiality contained in this Agreement
shall not apply to the extent that (i) the receiving party is
required to disclose information by applicable law, regulation or
order of a governmental agency or a court of competent
jurisdiction; (ii) the receiving party can demonstrate that the
disclosed information was at the time of disclosure already in
the public domain or has since come into the public domain other
than as a result of actions or failure to act by the receiving
party in violation hereof; (iii) the disclosed information was
rightfully known by the receiving party (as shown by its written
records) prior to the date of disclosure to the receiving party
in connection with this Agreement; (iv) the disclosed information
was developed by the receiving party (as shown by its written
records) without access to the disclosed information; or (v) the
disclosed information was received by the receiving party on an
unrestricted basis from a source other than the receiving party
and which is not under a duty of confidentiality to the
disclosing party.
16. Relationship of Parties. Anything else in this Agreement to
the contrary notwithstanding, this Agreement does not establish a
partnership, joint venture, association, agency or other
relationship between the parties except as that of vendor and
vendee. Neither party, nor such party's officers, employees,
directors, shareholders and/or representatives, shall be deemed
an employee or agent of the other party, or have any right or
authority to act for and/or bind the other party in any way, or
represent that the other party is in any way responsible for acts
of the other. Each party shall have exclusive liability for the
payment of all taxes imposed on such party or its employees or
agents which arise in connection with the performance of this
Agreement including, without limitation, the payment and/or
withholding, as the case may be, of income taxes, property taxes,
sales or use taxes, social security and other payroll taxes,
workmen's compensation insurance, disability benefits and the
like which are measured by the wages, salaries or other
remunerations to the extent applicable to the personnel involved,
and neither party shall be liable for any such payments which may
be assessed against the other party. No right, express or
implied, is granted by this Agreement to either party to use in
any manner the name of the other or any other trade name or
trademark of the other in connection with the performance of this
Agreement.
17. Assignability. Neither party to this Agreement shall
transfer, sell, assign, pledge or otherwise encumber any of its
rights or obligations under this Agreement, without the prior
written consent of the other parties hereto, which consent shall
not be unreasonably withheld; provided, however, that each party
may, without the prior written consent of the other party, (a)
assign any or all of its right or obligations under this
Agreement to any Affiliate (as such term is hereinbelow defined),
which assignment shall not release the assigning party from any
of its obligations under this Agreement, or (b) assign all of
such party's rights or obligations under this Agreement to any
other person or entity in connection with the transfer or sale of
all or substantially all of its business to any person or entity
or the merger or consolidation of the assigning party with or
into any other entity, so long as such transferee, purchaser or
surviving entity shall assume such obligations of the assigning
party. The term "Affiliate" is defined as any person controlling
a party, controlled by a party, or under common control with a
party. Any transfer, sale, assignment, pledge or encumbrance in
violation of this Paragraph 17 shall be null and void. Subject
to the foregoing, this Agreement shall bind and inure to the
benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors and
assigns.
18. Interpretation. This Agreement is an agreement between
financially sophisticated and knowledgeable parties and is
entered into by the parties in reliance upon the economic and
legal bargains contained herein and shall be interpreted and
construed in a fair and impartial manner without regard to such
factors as the party who prepared (or caused the preparation of)
this instrument or the relative bargaining power of the parties.
19. Entire Agreement. Each party expressly acknowledges and
agrees that this Agreement, including all exhibits attached
hereto, (1) is the final, complete and exclusive statement of the
agreement of the parties with respect to the subject matter
hereof; (2) supersedes any prior or contemporaneous agreements or
understandings of any kind, oral or written, and that any such
prior agreements are of no force or effect except as expressly
set forth herein; and (3) may not be varied, supplemented or
contradicted by evidence of prior agreements, or by evidence of
subsequent oral agreements.
Amendment; Waiver; Forbearance. This Agreement nor any provision
contained herein may be amended or modified or terminated (other
than by performance), except by a written instrument signed by
all of the parties to this Agreement. No waiver of any breach of
any provision herein contained, or of the performance of any acts
or obligations under this Agreement, shall be effective and
binding unless such waiver shall be in a written instrument
signed by each party. No such waiver shall be deemed a waiver of
any other provision under this Agreement, or any preceding or
subsequent breach thereof. No forbearance by a party to seek a
remedy for any noncompliance or breach by another party hereto
shall be deemed to be a waiver by such forbearing party with
respect to such noncompliance or breach unless such waiver shall
be in a written instrument signed by the forbearing party.
21. Governing Law/Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois.
Subject to Paragraph 21, any legal action or other proceeding
brought by any of the parties to enforce or interpret this
Agreement shall be filed only in the County of Macon, State of
Illinois.
22. Arbitration. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof will be settled
by arbitration in accordance with the rules of the American
Arbitration Association, and with the arbitration taking place in
Macon County, Illinois. All awards shall be final and binding
and may be filed with the clerk of any court having jurisdiction
over the parties. The arbitrator shall have the power to issue
any award or decree that a court of law or equity could issue,
including specific performance and/or injunctive relief, and
shall also have the same power to compel discovery and impose
sanctions, including attorneys' fees and court cost, as a court
of law or equity.
23. Attorneys' Fees. In the event of any litigation between the
parties due to breach of this Agreement, the unsuccessful party
agrees to pay the successful party all costs and expenses of
litigation incurred by the successful party including, but not
limited to, reasonable attorneys' fees for all legal counsel,
depositions, witness fees and other expenses incurred in
connection with such litigation, and if the successful party
shall recover judgment in any action proceeding, the costs,
expenses and attorneys' fees shall be included as part of the
judgment.
24. Severability. If all or any portion of any of the provisions
of this Agreement shall be invalid, illegal or unenforceable by
laws applicable thereto, then the performance of said offending
provision or provisions shall be excused by the parties hereto
and such invalidity, illegibility, or unenforceability shall not
affect any other provision of this Agreement.
25. Notices. Unless otherwise specifically provided in this
Agreement, all notices, demands, requests, consents, approvals or
other communications (collectively and severally called
"notices") required or permitted to be given hereunder, or which
are given with respect to this Agreement, shall be in writing,
and shall be given: (A) by personal delivery (which form of
notice shall be deemed to have been given upon delivery), (B) by
telegraph or by private airborne/overnight delivery service
(which forms of notice shall be deemed to have been given upon
confirmed delivery by the delivery agency), (C) by electronic or
facsimile or telephonic transmission, provided the receiving
party has a compatible device or confirms receipt thereof (which
forms of notice shall be deemed delivered upon confirmed
transmission or confirmation of receipt), or (D) by mailing in
the United States mail by registered or certified mail, return
receipt requested, postage prepaid (which forms of notice shall
be deemed to have been given upon the fifth {5th} business day
following the date mailed). Each party, and their respective
counsel, hereby agree that if notice is to be given hereunder by
such party's counsel, such counsel may communicate directly with
all principals, as required to comply with the foregoing notice
provisions. Notices shall be addressed at the addresses
hereinabove set forth on the cover page of this Agreement or to
such other address as the receiving party shall have specified
most recently by like notice, with a copy to the other parties
hereto. Notices to each party shall be directed to the attention
of such party's President, by name if known or reasonably
ascertainable.
26. Counterparts. This Agreement may be executed in several
counterparts, including facsimile copies, each of which shall be
deemed an original, and all of such counterparts together shall
constitute one agreement, binding on all parties hereto.
If the terms and conditions of this Agreement are satisfactory,
then indicate your approval by executing and dating this letter
below and delivering it to the undersigned. In the event the
terms and conditions described above are not satisfactory, or you
have any question or comments, then please refrain from signing
this Agreement and call me at your earliest convenience.
Finally, please note that this Agreement is legally binding upon
your execution thereof.
Very truly yours,
JORDAN PHARMACEUTICALS, INC.
By:
Earl Jordan, its President
By signature below in the space provided, Akorn Manufacturing,
Inc. evidences its agreement with the terms of this Agreement and
its intention to be legally bound hereby.
AKORN MANUFACTURING, INC.
By:
Tim J. Toney, its President
Date: , 1995
<PAGE>
Exhibit 1
Product Description
____________________
Sodium Chloride: Sodium Chloride Injection, U.S.P. 0.9%,
10 mL Ampul
Tetracaine Hydrochloride: Tetracaine Hydrochloride Injection,
U.S.P. 1%, 2mL Ampul
Epinephrine: Epinephrine Injection, U.S.P., 1 mL Ampul
(Preservative Free)
Dextrose: Dextrose Injection, U.S.P. 10%, 3 mL Ampul
Ephedrine Sulfate: Ephedrine Sulfate Injection, U.S.P.,
1 mL Ampul
Sterile Water: Sterile Water for Injection, U.S.P.,
192 mL Vial
<PAGE>
Exhibit 2
Stability Batch Size (Units)
____________________________
Sodium Chloride* 65,000
Tetracaine Hydrochloride* 50,000
Epinephrine* 100,000
*Approximately 1,000 units will be removed per batch for
stability studies.
<PAGE>
Exhibit 3
Product Development Cost
_________________________
Sodium Chloride $ 49,275
Tetracaine Hydrochloride $ 94,169
Epinephrine $100,285
<PAGE>
Exhibit 4
Commercial Batch Sizes (Units)
______________________________
Sodium Chloride 65,000 Ampuls
Tetracaine Hydrochloride 50,000 Ampuls
Epinephrine 100,000 Ampuls
Dextrose 48,500 Ampuls
Ephedrine Sulfate 47,500 Ampuls
Sterile Water 6,750 Vials
<PAGE>
Exhibit 5
Minimum Annual Purchase
________________________
Units Price Total
Sodium Chloride 400,000 Ampuls .437 $174,800
Tetracaine Hydrochloride 600,000 Ampuls .388 $232,800
Epinephrine 1,000,000 Ampuls .309 $309,000
Dextrose 600,000 Ampuls .359 $215,400
Ephedrine Sulfate 500,000 Ampuls .312 $156,000
Sterile Water 1996 - 250,000 Vials 2.65 $662,500
1997 - 125,000 Vials 2.65 $331,250
<PAGE>
Exhibit 6
Packing Specifications
________________________
Sodium Chloride - Labeled Ampuls in Gross Pack Boxes
(Master Case to be Defined)
Tetracaine Hydrochloride - Labeled Ampuls in 100 Pack Boxes
(Master Case to be Defined)
Epinephrine - Labeled Ampuls in 100 Pack Boxes
(Master Case to be Defined)
Dextrose - Labeled Ampuls in Gross Pack Boxes
(Master Case to be Defined)
Ephedrine Sulfate - Labeled Ampuls in 100 Pack Boxes
(Master Case to be Defined)
Sterile Water - Labeled Vials in 20 Pack Boxes
<PAGE>
Exhibit 7
Pricing
________
Sodium Chloride $437.00 per thousand Ampuls
Tetracaine Hydrochloride $388.00 per thousand Ampuls
Epinephrine $309.00 per thousand Ampuls
Dextrose $359.00 per thousand Ampuls
Ephedrine Sulfate $312.00 per thousand Ampuls
Sterile Water $ 2.65 per Vial
(Akorn Mfg. Supplies Vial,
Stopper,& Cap)
<PAGE>
Exhibit 8
Jordan Customer List
____________________
1. Baxter Healthcare Corporation
Surgical Group Division
2. Baxter Healthcare Corporation
I.V. System Division
3. Baxter Healthcare Corporation
Biotech Group
Hyland Division
4. Kendall Healthcare Products Company
5. B. Braun Medical, Inc.
6. Arrow International
7. Sherwood Medical
8. Alpha Therapeutic Corporation
9. Becton Dickinson and Company
Becton Dickinson Division
10. UDL Laboratories, Inc.
<PAGE>
Exhibit 9
Product Development Report
____________________________
SECTION I CERTIFICATIONS
SECTION II LABELING
SECTION III FORMULATION JUSTIFICATION
SECTION IV RAW MATERIAL CONTROLS
SECTION V MANUFACTURING & PROCESSING
SECTION VI MICROBIOLOGICAL CONTROLS
SECTION VII IN-PROCESS CONTROLS
SECTION VIII CONTAINER/CLOSURES
SECTION IX FINISHED PRODUCT CONTROLS
SECTION X ANALYTICAL METHODS
SECTION XI STABILITY
EMPLOYMENT AGREEMENT--BARRY D. LEBLANC
This Employment Agreement ("Agreement") between Akorn, Inc.,
a Louisiana corporation (the "Company"), and Barry D. LeBlanc
(the "Employee") is dated as of January 1, 1996 (the "Agreement
Date").
WHEREAS, Employee currently is employed by the Company;
WHEREAS, the Company desires to retain the services of
Employee pursuant to the terms of this Agreement and Employee
desires to continue in the service of the Company on such terms;
NOW, THEREFORE, for and in consideration of the continued
employment of Employee by the Company and the payment of wages,
salary and other compensation to Employee by the Company, the
parties hereto agree as follows:
Section 1.Employment Capacity and Term
1.1 Capacity and Duties of Employee. The Employee is
employed by the Company to render services on behalf of the
Company as President and Chief Executive Officer. As the
President and Chief Executive Officer, the Employee shall perform
such duties as are assigned to the individual holding such title
by the Company's Bylaws and such other duties, consistent with
the Employee's job title, as may be prescribed from time to time
by the Board of Directors of the Company (the "Board").
1.2 Employment Term. The term of this Agreement (the
"Employment Term") shall commence on the Agreement Date and shall
continue until and terminate one year after either the Company or
the Employee has notified the other of such termination of the
Employment Term; and provided, further, that the Employment Term
is subject to extension as provided in Section 5.2 and Employee's
status as an employee is subject to earlier termination to the
extent provided in this Agreement.
1.3 Devotion to Responsibilities. During the Employment
Term, the Employee shall devote all of his business time to the
business of the Company and its subsidiaries and affiliated
companies, shall use his reasonable best efforts to perform
faithfully and efficiently his duties under this Agreement, and
shall not engage in or be employed by any other business;
provided, however, that nothing contained herein shall prohibit
the Employee from (a) serving as a member of the board of
directors, board of trustees or the like of any for-profit or
non-profit entity that does not compete with the Company, or
performing services of any type for any civic or community
entity, whether or not the Employee receives compensation
therefor, (b) investing his assets in such form or manner as
shall require no more than nominal services on the part of the
Employee in the operation of the business of or property in which
such investment is made, or (c) serving in various capacities
with, and attending meetings of, industry or trade groups and
associations, as long as the Employee's engaging in any
activities permitted by virtue of clauses (a), (b) and (c) above
does not materially interfere with the ability of the Employee to
perform the services and discharge the responsibilities required
of him under this Agreement. Notwithstanding clause (b) above,
during the Employment Term, the Employee shall not perform any
services for and shall not beneficially own more than 2% of the
equity interests of a business organization that competes with
the Company or its affiliates. For purposes of this paragraph,
"beneficially own" shall have the meaning given to that term in
Rule 13d-3 under the Securities Exchange Act of 1934 (the
"Exchange Act").
Section 2.Compensation and Benefits
During the Employment Term, the Company shall provide the
Employee with the compensation and benefits described below:
2.1 Salary. A salary ("Base Salary") at the rate of
$210,000 per year; provided, however, that Employee's Base Salary
shall increase to $225,000 per year if the closing price at which
the Company's common stock is traded on the Nasdaq National
Market or other exchange on which such stock may be designated
for trading, equals or exceeds $4.00 per share for ten or more
consecutive trading days and shall increase to $250,000 if such
price equals or exceeds $5.50 per share for ten consecutive
trading days; and provided, further, that Employee's Base Salary
shall increase as of each anniversary of the Agreement Date by a
factor equal to the increase in the Consumer Price Index
maintained by the United States Department of Labor. Employee's
Base Salary shall be payable to the Employee at such intervals as
the salaries of other salaried employees of the Company are paid.
Any increase in Employee's Base Salary shall take effect for the
payroll period next following the date on which the condition to
such increase is met.
2.2 Bonus. Employee shall be eligible to receive such
bonuses and supplementary compensation as the Board may
determine.
2.3 Benefits. The Company shall provide the Employee and,
if applicable, his family members, with the following benefits
and perquisites:
(a) The Company will continue to provide for
Employee's use a new Oldsmobile Ninety-Eight or other equivalent
new automobile of his choice, such automobile to be replaced
every other year, and to provide or reimburse Employee for all
gasoline, maintenance, repairs and insurance for such automobile.
(b) All such (i) incentive, savings and retirement
plans, practices, policies and programs, (ii) welfare benefit
plans, practices, policies and programs (including, without
limitation, medical, prescription, dental, disability, employee
life, group life, accident health and travel accident insurance
plans and programs) and (iii) paid vacation and other fringe
benefits, plans, practices, policies and programs as are
applicable generally to other peer employees of the Company and
its affiliated companies.
2.4 Office and Support Staff. Employee shall be entitled
to an office or offices of the size and with furnishings and
other appointments, and to personal secretarial and other
assistance, at least equal to the those provided to him on the
Agreement Date.
2.5 Expenses. The Employee shall be reimbursed for
reasonable out-of-pocket expenses incurred from time to time on
behalf of the Company or any subsidiary in the performance of his
duties under this Agreement, upon the presentation of such
supporting invoices, documents and forms as the Company
reasonably requests.
Section 3.Termination of Employment
3.1 Death. The Employee's status as an employee shall
terminate immediately and automatically upon the Employee's death
during the Employment Term.
3.2 Disability. The Employee's status as an employee may
be terminated for "Disability" as follows:
(a) The Employee's status as an employee shall
terminate if the Employee has a disability that would entitle him
to receive benefits under the Company's long-term disability
insurance policy in effect at the time either because he is
Totally Disabled or Partially Disabled, as such terms are defined
in the Company's policy in effect as of the Agreement Date or as
similar terms are defined in any successor policy. Any such
termination shall become effective on the first day on which the
Employee is eligible to receive payments under such policy (or on
the first day that he would be so eligible, if he had applied
timely for such payments).
(b) If the Company has no long-term disability plan in
effect, the Employee's status as an employee shall terminate if
(i) the Employee is rendered incapable because of physical or
mental illness of satisfactorily discharging his duties and
responsibilities under this Agreement for a period of 90
consecutive days and (ii) a duly qualified physician chosen by
the Company and acceptable to the Employee or his legal
representative so certifies in writing, the Board shall have the
power to determine that the Employee has become disabled. If the
Board makes such a determination, the Company shall have the
continuing right and option, during the period that such
disability continues, and by notice given in the manner provided
in this Agreement, to terminate the status of Employee as an
employee. Any such termination shall become effective 30 days
after such notice of termination is given, unless within such 30-
day period, the Employee becomes capable of rendering services of
the character contemplated hereby (and a physician chosen by the
Company and acceptable to the Employee or his legal
representative so certifies in writing) and the Employee in fact
resumes such services.
(c) The "Disability Effective Date" shall mean the
date on which termination of employment becomes effective due to
Disability.
3.3 Cause. The Company may terminate the Employee's status
as an employee for Cause. As used herein, termination by the
Company of the Employee's status as an employee for "Cause" shall
mean termination as a result of (a) the Employee's breach of this
Agreement, or (b) the willful engaging by the Employee in gross
misconduct injurious to the Company, which in either case is not
remedied within 10 days after the Company provides written notice
to the Employee of such breach or willful misconduct.
3.4 Good Reason. The Employee may terminate his status as
an employee for Good Reason. As used herein, the term "Good
Reason" shall mean:
(a) The occurrence of any of the following during the
Employment Term:
(i) the assignment by the Board or by any
authorized person to the Employee of any duties or
responsibilities that are inconsistent with the Employee's
status, title and position as President and Chief Executive
Officer;
(ii) any removal of the Employee from, or any
failure to reappoint or reelect the Employee to, the position of
President and Chief Executive Officer of the Company, except in
connection with a termination of Employee's status as an employee
as permitted by this Agreement;
(iii)the Company's requiring the Employee to be
based anywhere other than at or within 50 miles of the Company's
headquarters in Abita Springs, Louisiana, except for required
travel in the ordinary course of the Company's business;
(b) any breach of this Agreement by the Company that
continues for a period of 10 days after written notice thereof is
given by the Employee to the Company;
(c) the failure by the Company to obtain the
assumption of its obligations under this Agreement by any
successor or assignee as contemplated by Section 6.1(c); or
(d) any purported termination by the Company of the
Employee's status as an employee for Cause that is not effected
pursuant to a Notice of Termination satisfying the requirements
of this Agreement.
3.5 Voluntary Termination by the Company. Subject to the
terms and conditions provided herein, the Company may terminate
the Employee's status as an employee during the Employment Term
for reasons other than death, Disability or Cause.
3.6 Voluntary Termination by the Employee. Subject to the
terms and conditions provided herein, the Employee may terminate
the Employee's status as an employee during the Employment Term
for reasons other than Good Reason.
3.7 Notice of Termination. Any termination by the Company
for Disability or Cause, or by the Employee for Good Reason,
shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 6.2. For purposes of
this Agreement, a "Notice of Termination" means a written notice
that (a) indicates the specific termination provision in this
Agreement relied upon, (b) to the extent applicable, sets forth
in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Employee's employment
under the provisions so indicated and (c) if the Date of
Termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date (which date shall
be not more than 30 days after the giving of such notice). The
failure by the Employee or the Company to set forth in the Notice
of Termination any fact or circumstance that contributes to a
showing of Good Reason, Disability or Cause shall not negate the
effect of the notice nor waive any right of the Employee or the
Company, respectively, hereunder or preclude the Employee or the
Company, respectively, from asserting such fact or circumstance
in enforcing the Employee's or the Company's rights hereunder.
3.8 Date of Termination. "Date of Termination" means (a)
if Employee's employment is terminated by reason of his death or
Disability, the Date of Termination shall be the date of death of
Employee or the Disability Effective Date, as the case may be,
(b) if Employee's employment is terminated by the Company for
Cause, or by Employee for Good Reason, the date of delivery of
the Notice of Termination or any later date specified therein,
(which date shall not be more than 30 days after the giving of
such notice) as the case may be, (c) if the Employee's employment
is terminated by the Company prior to the end of the Employment
Term for reasons other than death, Disability or Cause, the Date
of Termination shall be the date on which the Company notifies
the Employee of such termination, (d) if the Employee's
employment is terminated by the Employee prior to the end of the
Employment Term for reasons other than Good Reason, the Date of
Termination shall be the date on which the Employee notifies the
Company of such termination, and (e) if the Employment Term
terminates upon notice by the Company or the Employee as provided
for in Section 1.2 or Section 5.2, the Date of Termination shall
be the date on which the Employment Term ends.
Section 4.Obligations Upon Termination
4.1 Death. If Employee's status as an employee is
terminated by reason of Employee's death, this Agreement shall
terminate without further obligations to Employee's legal
representatives under this Agreement, other than the obligation
to make any payments due pursuant to employee benefit plans
maintained by the Company or its subsidiaries.
4.2 Disability. If Employee's status as an employee is
terminated by reason of Employee's Disability, this Agreement
shall terminate without further obligation to Employee, other
than the obligation to make any payments due pursuant to employee
benefit plans maintained by the Company or its subsidiaries.
4.3 Termination by Company for Reasons other than Death,
Disability or Cause; Termination by Employee for Good Reason. If
the Company terminates the Employee's status as an employee prior
to the end of the Employment Term for reasons other than death,
Disability or Cause, or the Employee terminates his employment
prior to the end of the Employment Term for Good Reason, then
(a) within 30 days of the Date of Termination the
Company shall pay to the Employee in a lump sum an amount equal
to the Employee's Base Salary through the end of the Employment
Term had the notice contemplated by Section 1.2 been given as of
the Date of Termination; and
(b) the amount of any performance-based bonus or
options granted to the Employee shall be deemed to be the amount
to which the Employee would have been entitled if the budgeted
goals or other performance goals applicable thereto had been met
but not exceeded and, whether or not the performance goals have
been met as of the Date of Termination, such bonus shall be
payable within 30 days of the Date of Termination and such
options (if not already exercisable) shall become exercisable as
of the Date of Termination and shall expire on the date of
expiration of the options as provided in the applicable option
agreement.
4.4 Termination for Cause, Without Good Reason or at End of
Employment Term. This Agreement shall terminate without further
obligation to the Employee other than obligations imposed by law
and obligations imposed pursuant to any employee benefit plan
maintained by the Company or its subsidiaries (a) if the
Employee's status as an Employee is terminated by the Company for
Cause or by the Employee for reasons other than Good Reason or
(b), except as otherwise provided in Section 5.2, at the end of
the Employment Term. If the Company or the Employee gives notice
of termination of the Employment Term as provided for in Section
1.2, the Company may, at its option, terminate Employee's status
as an employee, in which case such termination shall be deemed a
termination by the Company without Cause for purposes of all
provisions of this Agreement.
4.5 Resignation as Director. If Employee is a director of
the Company and his employment is terminated for any reason other
than death, the Employee shall, if requested by the Company,
immediately resign as a director of the Company. If such
resignation is not received when so requested, the Employee shall
forfeit any right to receive any payments pursuant to this
Agreement.
4.6 Accrued Obligations and Other Benefits. Upon
termination of employment for any reason the Employee shall be
entitled to receive promptly, and in addition to any other
benefits specifically provided, (a) the Employee's Base Salary
through the Date of Termination to the extent not theretofore
paid, (b) any accrued vacation pay, to the extent not theretofore
paid, and (c) any other amounts or benefits required to be paid
or provided or which the Employee is entitled to receive under
any plan, program, policy practice or agreement of the Company.
4.7 Stock Options. The foregoing benefits are intended to
be in addition to the value of any options to acquire Common
Stock of the Company the exercisability of which may be
accelerated pursuant to the terms of any stock option, incentive
or other similar plan heretofore or hereafter adopted by the
Company.
Section 5.Change of Control
5.1 Definitions. For purposes of this Section 5, the
following terms shall have the meanings indicated below.
(a) Company. In the event of any assignment or
succession as described in Section 6.1(c), the term "Company" as
used in this Agreement shall refer also to such successor or
assignee.
(b) Change of Control. A Change of Control shall mean
the occurrence of any of the following events:
(i) the acquisition by any individual, entity or
"person" (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act) of beneficial ownership of more than 30% of the
outstanding shares of the Company's common stock, no par value
per share (the "Common Stock"); provided, however, that for
purposes of this subsection (i), the following acquisitions shall
not constitute a Change of Control:
(A) any acquisition of Common Stock directly
from the Company,
(B) any acquisition of Common Stock by the
Company,
(C) any acquisition of Common Stock by any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company, or
(D) any acquisition of Common Stock by any
corporation pursuant to a transaction that complies with clauses
(A), (B) and (C) of subsection (b)(iii) of this Section 5.1; or
(ii) individuals who, as of the Agreement Date,
constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the Agreement Date whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered a member of the Incumbent Board, unless such
individual's initial assumption of office occurs as a result of
an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person
other than the Incumbent Board; or
(iii)the consummation of a reorganization, merger
or consolidation, or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in any such case, unless, following such Business
Combination,
(A) all or substantially all of the
individuals and entities who were the direct or indirect
beneficial owners of the Company's outstanding common stock and
the Company's voting securities entitled to vote generally in the
election of directors immediately prior to such Business
Combination have direct or indirect beneficial ownership,
respectively, of more than 50% of the then outstanding shares of
common stock, and more than 50% of the combined voting power of
the then outstanding voting securities entitled to vote generally
in the election of directors, of the corporation resulting from
such Business Combination (which, for purposes of this paragraph
(A) and paragraphs (B) and (C), shall include a corporation which
as a result of such transaction controls the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries), and
(B) except to the extent that such ownership
existed prior to the Business Combination, no person (excluding
any corporation resulting from such Business Combination or any
employee benefit plan or related trust of the Company or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of the
then outstanding shares of common stock of the corporation
resulting from such Business Combination or 20% or more of the
combined voting power of the then outstanding voting securities
of such corporation, and
(C) at least a majority of the members of
the board of directors of the corporation resulting from such
Business Combination were members of the board of directors of
the Company at the time of the initial action of the Board
providing for such Business Combination; or
(iv) approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company.
(c) Affiliate. The term "affiliate" or "affiliated
companies" shall mean any company or other entity controlled by,
controlling, or under common control with, the Company.
(d) Cause. After a Change of Control, "Cause," as
used in this Agreement, shall have the following meaning and not
the meaning given in Section 3.3:
(i) the willful and continued failure of the
Employee to perform substantially the Employee's duties hereunder
(other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for
substantial performance is delivered to the Employee by the Board
of the Company which specifically identifies the manner in which
the Board believes that the Employee has not substantially
performed the Employee's duties, or
(ii) the willful engaging by the Employee in
illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company or its affiliates.
For purposes of this provision, no act or failure to act, on the
part of the Employee, shall be considered "willful" unless it is
done, or omitted to be done, by the Employee in bad faith or
without reasonable belief that the Employee's action or omission
was in the best interests of the Company or its affiliates. Any
act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of
a senior officer of the Company or based upon the advice of
counsel for the Company or its affiliates shall be conclusively
presumed to be done, or omitted to be done, by the Employee in
good faith and in the best interests of the Company or its
affiliates. The cessation of employment of the Employee shall
not be deemed to be for Cause unless and until there shall have
been delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is
provided to the Employee and the Employee is given an
opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the
Employee has engaged in the conduct described in subparagraph (i)
or (ii) above, and specifying the particulars thereof in detail.
(e) Good Reason. After a Change of Control, "Good
Reason," as used in this Agreement, shall have the following
meaning and not the meaning given in Section 3.4:
(i) Any failure of the Company or its affiliates
to provide the Employee with the position, authority, duties and
responsibilities at least equivalent in all material respects
with the most significant of those held, exercised and assigned
at any time during the 120-day period immediately preceding the
Change of Control;
(ii) The assignment to the Employee of any duties
inconsistent in any respect with Employee's position (including
status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Section 1.1, or any
other action that results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in
bad faith that is remedied within 10 days after receipt of
written notice thereof from the Employee to the Company;
(iii)Any failure by the Company or its affiliates
to comply with any of the provisions of this Agreement, other
than an isolated, insubstantial and inadvertent failure not
occurring in bad faith that is remedied within 10 days after
receipt of written notice thereof from the Employee to the
Company;
(iv) The Company or its affiliates requiring the
Employee to be based at any office or location other than as
provided in Section 3.4(a)(iii) hereof or requiring the Employee
to travel on business to a substantially greater extent than
required immediately prior to the Change of Control;
(v) Any purported termination of the Employee's
employment otherwise than as expressly permitted by this
Agreement; or
(vi) Any failure by the Company to comply with and
satisfy Sections 6.1(c) and (d) of this Agreement.
For purposes of this Section 5, any good faith determination of
"Good Reason" made by the Employee shall be conclusive. Anything
in this Agreement to the contrary notwithstanding, a termination
by the Employee for any reason during the 30-day period
immediately following the first anniversary of the Change of
Control shall be deemed to be a termination for Good Reason.
(f) Beneficial Ownership. The terms "beneficial
ownership," "beneficial owner," "beneficially owns," and similar
terms shall have the meanings set forth in Rule 13d-3 under the
Exchange Act.
5.2 Employment Capacity and Term after Change of Control.
(a) If a Change of Control occurs during the Employment Term, the
Employee's Employment Term (the "Modified Employment Term") shall
be extended until and terminate at the close of business on the
later to occur of the second anniversary of the Change of
Control; or the date one year after the date on which either the
Company or the Employee has notified the other of such
termination; and provided, further, that Employee's status as an
employee is subject to earlier termination to the extent provided
in this Agreement.
(b) After a Change of Control and during the Modified
Employment Term, (i) the Employee's position (including status,
offices, titles and reporting requirements), authority, duties
and responsibilities in and with respect to the Company shall be
at least equivalent in all material respects to the most
significant of those held, exercised and assigned at any time
during the 120-day period immediately preceding the Change of
Control and (ii) the Employee's service shall be performed at the
location where the Employee was employed immediately preceding
the Change of Control or any office or location less than 50
miles from such location.
5.3 Compensation and Benefits. During the Modified
Employment Term, in addition to the compensation and benefits
described in Section 2, the Employee shall be entitled to the
following compensation and benefits:
(a) Salary. During the Modified Employment Term,
Employee's Base Salary shall be as provided for in Section 2.1.
(b) Benefit Plans. During the Modified Employment
Term, the Employee and his family, if any, shall be entitled to
participate in and receive applicable benefits under all such (i)
incentive, savings and retirement plans, practices, policies and
programs, (ii) welfare benefit plans, practices, policies and
programs (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental health
and travel accident insurance plans and programs) and (iii) paid
vacation and other fringe benefits, plans, practices, policies
and programs as are applicable generally to other peer employees
of the Company and its affiliated companies in effect generally
after the Change of Control or, if more favorable to the
Employee, as in effect for the Employee at any time during the
120-day period immediately preceding the Change of Control.
(c) Expenses. During the Modified Employment Term,
the Employee shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by the Employee in
accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect
generally after the Change of Control with respect to other peer
employees of the Company and its affiliated companies or, if more
favorable to the Employee, as in effect for the Employee at any
time during the 120-day period immediately preceding the Change
of Control.
(d) Office and Support Staff. During the Modified
Employment Term, the Employee shall be entitled to an office or
offices of a size and with furnishings and other appointments,
and to personal secretarial and other assistance, at least equal
to the most favorable of the foregoing provided generally after
the Change of Control with respect to other peer employees of the
Company and its affiliated companies or, if more favorable to the
Employee, as in effect for the Employee at any time during the
120-day period immediately preceding the Change of Control.
5.4 Termination of Employment after a Change of Control.
After a Change of Control and during the Modified Employment
Term, the Employee's status as an employee shall terminate or may
be terminated as provided in Section 3 of this Agreement;
provided, however, that after a Change of Control and during the
Modified Employment Term the terms "Cause" and "Good Reason," as
used in Section 3 and elsewhere in this Agreement, shall have the
meanings given to them in this Section 5 and not the meanings
given to them in Section 3.
5.5 Obligations of the Company upon Termination after a
Change of Control. (a) If, after a Change of Control and prior
to the end of the Modified Employment Term, the Company
terminates the Employee's employment other than for Cause, death
or Disability, or the Employee terminates employment for Good
Reason, then
(i) within 30 days of the Date of Termination the
Company shall pay to the Employee in a lump sum an amount equal
to the Employee's Base Salary through the end of the Modified
Employment Term had such termination not occurred; and
(ii) Employee shall be entitled to the benefits
provided in Section 4.3(b) and the amounts, if any, contemplated
by Sections 4.6 and 4.7.
(b) If, after a Change of Control and prior to the end
of the Modified Employment Term, the Employee's employment is
terminated (i) for death, (ii) for Disability or (iii) for Cause
(as defined in this Section 5), by the Employee for reasons other
than Good Reason (as defined in this Section 5) or at the end of
the Modified Employment Term, then the Employee shall be entitled
to the benefits described in Section 4.1, Section 4.2 or Section
4.4, as the case may be, and shall be entitled to the benefits
described in Sections 4.6 and 4.7. If the Company or the
Employee gives notice of termination of the Modified Employment
Term as provided for in Section 5.2, the Company may, at its
option, terminate Employee's status as an Employee, in which case
such termination shall be deemed a termination without Cause for
purposes of all provisions of this Agreement.
(c) The rights and obligations of the Company and
Employee contained in Section 4.5 ("Resignation as Director")
shall continue to apply after a Change of Control.
5.6 Certain Additional Payments. If after a Change of
Control Employee is subjected to an excise tax as a result of the
"excess parachute payment" provisions of section 4999 of the
Internal Revenue Code of 1986, as amended, whether by virtue of
the benefits of this Agreement or by virtue of any other benefits
provided to Employee in connection with a Change of Control
pursuant to Company plans, policies or agreements (including the
value of any options to acquire Common Stock of the Company the
exercisability of which is accelerated pursuant to the terms of
any stock option, incentive or similar plan heretofore or
hereafter adopted by the Company), the Company shall pay to
Employee (whether or not his employment has terminated) such
amounts as are necessary to place Employee in the same position
after payment of federal income and excise taxes and state and
local income taxes as he would have been if such provisions had
not been applicable to him.
Section 6.Miscellaneous
6.1 Binding Effect.
(a) This Agreement shall be binding upon and inure to
the benefit of the Company and any of its successors or assigns.
(b) This Agreement is personal to the Employee and
shall not be assignable by the Employee without the consent of
the Company (there being no obligation to give such consent)
other than such rights or benefits as are transferred by will or
the laws of descent and distribution.
(c) The Company shall require any successor to or
assignee of (whether direct or indirect, by purchase, merger,
consolidation or otherwise) all or substantially all of the
assets or businesses of the Company (i) to assume unconditionally
and expressly this Agreement and (ii) to agree to perform all of
the obligations under this Agreement in the same manner and to
the same extent as would have been required of the Company had no
assignment or succession occurred, such assumption to be set
forth in a writing reasonably satisfactory to the Employee. In
the event of any such assignment or succession, the term
"Company" as used in this Agreement shall refer also to such
successor or assign.
(d) The Company shall require all entities that
control, or that after the Change of Control will control,
directly or indirectly, any such successor or assignee to agree
to cause to be performed all of the obligations under this
Agreement in the same manner and to the same extent as would have
been required of the Company had no assignment or succession
occurred, such agreement to be set forth in writing reasonably
satisfactory to the Employee.
6.2 Notices. All notices hereunder must be in writing and
shall be deemed to have given upon receipt of delivery by: (a)
personal delivery to the designated individual, (b) certified or
registered mail, postage prepaid, return receipt requested, (c) a
nationally recognized overnight courier service (against a
receipt therefor) or (d) facsimile transmission with confirmation
of receipt. All such notices must be addressed as follows or
such other address as to which any party hereto may have notified
the other in writing:
If to the Company, to:
Akorn, Inc.
100 Akorn Drive
Abita Springs, Louisiana 70420
Attn: Chairman of the Board
Facsimile transmission No. (504) 893-1257
If to the Employee, to:
Barry D. LeBlanc
15 Neron Place
New Orleans, Louisiana 70118
Facsimile transmission No. (504) 861-9649
6.3 Governing Law. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of
the State of Louisiana.
6.4 Withholding. The Employee agrees that the Company has
the right to withhold, from the amounts payable pursuant to this
Agreement, all amounts required to be withheld under applicable
income and/or employment tax laws, or as otherwise stated in
documents granting rights that are affected by this Agreement.
6.5 Severability. If any term or provision of this Agree-
ment or the application thereof to any person or circumstance,
shall at any time or to any extent be invalid, illegal or
unenforceable in any respect as written, Employee and the Company
intend for any court construing this Agreement to modify or limit
such provision temporally, spatially or otherwise so as to render
it valid and enforceable to the fullest extent allowed by law.
Any such provision that is not susceptible of such reformation
shall be ignored so as to not affect any other term or provision
hereof, and the remainder of this Agreement, or the application
of such term or provision to persons or circumstances other than
those as to which it is held invalid, illegal or unenforceable,
shall not be affected thereby and each term and provision of this
Agreement shall be valid and enforced to the fullest extent
permitted by law.
6.6 Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach thereof.
6.7 Remedies Not Exclusive. No remedy specified herein
shall be deemed to be such party's exclusive remedy, and
accordingly, in addition to all of the rights and remedies
provided for in this Agreement, the parties shall have all other
rights and remedies provided to them by applicable law, rule or
regulation.
6.8 Company's Reservation of Rights. Employee acknowledges
and understands that the Employee serves at the pleasure of the
Board and that the Company has the right at any time to terminate
Employee's status as an employee of the Company, or to change or
diminish his status during the Employment Term, subject to the
rights of the Employee to claim the benefits conferred by this
Agreement.
6.9 Survival. Following the Date of Termination, each
party shall have the right to enforce all rights, and shall be
bound by all obligations, of such party that are continuing
rights and obligations under this Agreement.
6.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the Company and the Employee have caused
this Agreement to be executed as of the Agreement Date.
AKORN, INC.
By: ____________________________
George S. Ellis, M.D.
Compensation Committee Chairman
EMPLOYEE:
____________________________
Barry D. LeBlanc
EMPLOYMENT AGREEMENT--HAROLD O. KOCH
This Employment Agreement ("Agreement") between Akorn, Inc.,
a Louisiana corporation (the "Company"), and Harold O. Koch (the
"Employee") is dated as of January 1, 1996 (the "Agreement
Date").
WHEREAS, Employee currently is employed by the Company;
WHEREAS, the Company desires to retain the services of
Employee pursuant to the terms of this Agreement and Employee
desires to continue in the service of the Company on such terms;
NOW, THEREFORE, for and in consideration of the continued
employment of Employee by the Company and the payment of wages,
salary and other compensation to Employee by the Company, the
parties hereto agree as follows:
Section 1.Employment Capacity and Term
1.1 Capacity and Duties of Employee. The Employee is
employed by the Company to render services on behalf of the
Company as Senior Vice President. In that capacity the Employee
shall perform such duties as are assigned to the individual
holding any such title by the Company's Bylaws and such other
duties, consistent with the Employee's job title, as may be
prescribed from time to time by the Board of Directors of the
Company (the "Board").
1.2 Employment Term. The term of this Agreement (the
"Employment Term") shall commence on the Agreement Date and shall
continue until and terminate one year after either the Company or
the Employee has notified the other of such termination of the
Employment Term; and provided, further, that the Employment Term
is subject to extension as provided in Section 5.2 and Employee's
status as an employee is subject to earlier termination to the
extent provided in this Agreement.
1.3 Devotion to Responsibilities. During the Employment
Term, the Employee shall devote all of his business time to the
business of the Company and its subsidiaries and affiliated
companies, shall use his reasonable best efforts to perform
faithfully and efficiently his duties under this Agreement, and
shall not engage in or be employed by any other business;
provided, however, that nothing contained herein shall prohibit
the Employee from (a) serving as a member of the board of
directors, board of trustees or the like of any for-profit or
non-profit entity that does not compete with the Company, or
performing services of any type for any civic or community
entity, whether or not the Employee receives compensation
therefor, (b) investing his assets in such form or manner as
shall require no more than nominal services on the part of the
Employee in the operation of the business of or property in which
such investment is made, or (c) serving in various capacities
with, and attending meetings of, industry or trade groups and
associations, as long as the Employee's engaging in any
activities permitted by virtue of clauses (a), (b) and (c) above
does not materially interfere with the ability of the Employee to
perform the services and discharge the responsibilities required
of him under this Agreement. Notwithstanding clause (b) above,
during the Employment Term, the Employee shall not perform any
services for and shall not beneficially own more than 2% of the
equity interests of a business organization that competes with
the Company or its affiliates. For purposes of this paragraph,
"beneficially own" shall have the meaning given to that term in
Rule 13d-3 under the Securities Exchange Act of 1934 (the
"Exchange Act").
Section 2.Compensation and Benefits
During the Employment Term, the Company shall provide the
Employee with the compensation and benefits described below:
2.1 Salary. A salary ("Base Salary") at the rate of
$125,000 per year; provided, however, that Employee's Base Salary
shall increase as of each anniversary of the Agreement Date by a
factor equal to the increase in the Consumer Price Index
maintained by the United States Department of Labor. Employee's
Base Salary shall be payable to the Employee at such intervals as
the salaries of other salaried employees of the Company are paid.
Any increase in Employee's Base Salary shall take effect for the
payroll period next following the date on which the condition to
such increase is met.
2.2 Bonus. Employee shall be eligible to receive such
bonuses and supplementary compensation as the Board may
determine.
2.3 Benefits. The Company shall provide the Employee and,
if applicable, his family members, with the following benefits
and perquisites:
(a) The Company will continue to provide for
Employee's use a new Oldsmobile Ninety-Eight or other equivalent
new automobile of his choice, such automobile to be replaced
every third year, and to provide or reimburse Employee for all
gasoline, maintenance, repairs and insurance for such automobile.
(b) All such (i) incentive, savings and retirement
plans, practices, policies and programs, (ii) welfare benefit
plans, practices, policies and programs (including, without
limitation, medical, prescription, dental, disability, employee
life, group life, accident health and travel accident insurance
plans and programs) and (iii) paid vacation and other fringe
benefits, plans, practices, policies and programs as are
applicable generally to other peer employees of the Company and
its affiliated companies.
2.4 Office and Support Staff. Employee shall be entitled
to an office or offices of the size and with furnishings and
other appointments, and to personal secretarial and other
assistance, at least equal to the those provided to him on the
Agreement Date.
2.5 Expenses. The Employee shall be reimbursed for
reasonable out-of-pocket expenses incurred from time to time on
behalf of the Company or any subsidiary in the performance of his
duties under this Agreement, upon the presentation of such
supporting invoices, documents and forms as the Company
reasonably requests.
Section 3.Termination of Employment
3.1 Death. The Employee's status as an employee shall
terminate immediately and automatically upon the Employee's death
during the Employment Term.
3.2 Disability. The Employee's status as an employee may
be terminated for "Disability" as follows:
(a) The Employee's status as an employee shall
terminate if the Employee has a disability that would entitle him
to receive benefits under the Company's long-term disability
insurance policy in effect at the time either because he is
Totally Disabled or Partially Disabled, as such terms are defined
in the Company's policy in effect as of the Agreement Date or as
similar terms are defined in any successor policy. Any such
termination shall become effective on the first day on which the
Employee is eligible to receive payments under such policy (or on
the first day that he would be so eligible, if he had applied
timely for such payments).
(b) If the Company has no long-term disability plan in
effect, the Employee's status as an employee shall terminate if
(i) the Employee is rendered incapable because of physical or
mental illness of satisfactorily discharging his duties and
responsibilities under this Agreement for a period of 90
consecutive days and (ii) a duly qualified physician chosen by
the Company and acceptable to the Employee or his legal
representative so certifies in writing, the Board shall have the
power to determine that the Employee has become disabled. If the
Board makes such a determination, the Company shall have the
continuing right and option, during the period that such
disability continues, and by notice given in the manner provided
in this Agreement, to terminate the status of Employee as an
employee. Any such termination shall become effective 30 days
after such notice of termination is given, unless within such 30-
day period, the Employee becomes capable of rendering services of
the character contemplated hereby (and a physician chosen by the
Company and acceptable to the Employee or his legal
representative so certifies in writing) and the Employee in fact
resumes such services.
(c) The "Disability Effective Date" shall mean the
date on which termination of employment becomes effective due to
Disability.
3.3 Cause. The Company may terminate the Employee's status
as an employee for Cause. As used herein, termination by the
Company of the Employee's status as an employee for "Cause" shall
mean termination as a result of (a) the Employee's breach of this
Agreement, or (b) the willful engaging by the Employee in gross
misconduct injurious to the Company, which in either case is not
remedied within 10 days after the Company provides written notice
to the Employee of such breach or willful misconduct.
3.4 Good Reason. The Employee may terminate his status as
an employee for Good Reason. As used herein, the term "Good
Reason" shall mean:
(a) The occurrence of any of the following during the
Employment Term:
(i) the assignment by the Board or by any
authorized person to the Employee of any duties or
responsibilities that are inconsistent with the Employee's
status, title and position as Senior Vice President;
(ii) any removal of the Employee from, or any
failure to reappoint or reelect the Employee to, the position of
Senior Vice President of the Company, except in connection with a
termination of Employee's status as an employee as permitted by
this Agreement;
(iii) the Company's requiring the Employee to be
based anywhere other than at or within 50 miles of the Company's
headquarters in Abita Springs, Louisiana, except for required
travel in the ordinary course of the Company's business;
(b) any breach of this Agreement by the Company that
continues for a period of 10 days after written notice thereof is
given by the Employee to the Company;
(c) the failure by the Company to obtain the
assumption of its obligations under this Agreement by any
successor or assignee as contemplated by Section 6.1(c); or
(d) any purported termination by the Company of the
Employee's status as an employee for Cause that is not effected
pursuant to a Notice of Termination satisfying the requirements
of this Agreement.
3.5 Voluntary Termination by the Company. Subject to the
terms and conditions provided herein, the Company may terminate
the Employee's status as an employee during the Employment Term
for reasons other than death, Disability or Cause.
3.6 Voluntary Termination by the Employee. Subject to the
terms and conditions provided herein, the Employee may terminate
the Employee's status as an employee during the Employment Term
for reasons other than Good Reason.
3.7 Notice of Termination. Any termination by the Company
for Disability or Cause, or by the Employee for Good Reason,
shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 6.2. For purposes of
this Agreement, a "Notice of Termination" means a written notice
that (a) indicates the specific termination provision in this
Agreement relied upon, (b) to the extent applicable, sets forth
in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Employee's employment
under the provisions so indicated and (c) if the Date of
Termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date (which date shall
be not more than 30 days after the giving of such notice). The
failure by the Employee or the Company to set forth in the Notice
of Termination any fact or circumstance that contributes to a
showing of Good Reason, Disability or Cause shall not negate the
effect of the notice nor waive any right of the Employee or the
Company, respectively, hereunder or preclude the Employee or the
Company, respectively, from asserting such fact or circumstance
in enforcing the Employee's or the Company's rights hereunder.
3.8 Date of Termination. "Date of Termination" means (a)
if Employee's employment is terminated by reason of his death or
Disability, the Date of Termination shall be the date of death of
Employee or the Disability Effective Date, as the case may be,
(b) if Employee's employment is terminated by the Company for
Cause, or by Employee for Good Reason, the date of delivery of
the Notice of Termination or any later date specified therein,
(which date shall not be more than 30 days after the giving of
such notice) as the case may be, (c) if the Employee's employment
is terminated by the Company prior to the end of the Employment
Term for reasons other than death, Disability or Cause, the Date
of Termination shall be the date on which the Company notifies
the Employee of such termination, (d) if the Employee's
employment is terminated by the Employee prior to the end of the
Employment Term for reasons other than Good Reason, the Date of
Termination shall be the date on which the Employee notifies the
Company of such termination, and (e) if the Employment Term
terminates upon notice by the Company or the Employee as provided
for in Section 1.2 or Section 5.2, the Date of Termination shall
be the date on which the Employment Term ends.
Section 4.Obligations Upon Termination
4.1 Death. If Employee's status as an employee is
terminated by reason of Employee's death, this Agreement shall
terminate without further obligations to Employee's legal
representatives under this Agreement, other than the obligation
to make any payments due pursuant to employee benefit plans
maintained by the Company or its subsidiaries.
4.2 Disability. If Employee's status as an employee is
terminated by reason of Employee's Disability, this Agreement
shall terminate without further obligation to Employee, other
than the obligation to make any payments due pursuant to employee
benefit plans maintained by the Company or its subsidiaries.
4.3 Termination by Company for Reasons other than Death,
Disability or Cause; Termination by Employee for Good Reason. If
the Company terminates the Employee's status as an employee prior
to the end of the Employment Term for reasons other than death,
Disability or Cause, or the Employee terminates his employment
prior to the end of the Employment Term for Good Reason, then
(a) within 30 days of the Date of Termination the
Company shall pay to the Employee in a lump sum an amount equal
to the Employee's Base Salary through the end of the Employment
Term had the notice contemplated by Section 1.2 been given as of
the Date of Termination; and
(b) the amount of any performance-based bonus or
options granted to the Employee shall be deemed to be the amount
to which the Employee would have been entitled if the budgeted
goals or other performance goals applicable thereto had been met
but not exceeded and, whether or not the performance goals have
been met as of the Date of Termination, such bonus shall be
payable within 30 days of the Date of Termination and such
options (if not already exercisable) shall become exercisable as
of the Date of Termination and shall expire on the date of
expiration of the options as provided in the applicable option
agreement.
4.4 Termination for Cause, Without Good Reason or at End of
Employment Term. This Agreement shall terminate without further
obligation to the Employee other than obligations imposed by law
and obligations imposed pursuant to any employee benefit plan
maintained by the Company or its subsidiaries (a) if the
Employee's status as an Employee is terminated by the Company for
Cause or by the Employee for reasons other than Good Reason or
(b), except as otherwise provided in Section 5.2, at the end of
the Employment Term. If the Company or the Employee gives notice
of termination of the Employment Term as provided for in Section
1.2, the Company may, at its option, terminate Employee's status
as an employee, in which case such termination shall be deemed a
termination by the Company without Cause for purposes of all
provisions of this Agreement.
4.5 Resignation as Director. If Employee is a director of
the Company and his employment is terminated for any reason other
than death, the Employee shall, if requested by the Company,
immediately resign as a director of the Company. If such
resignation is not received when so requested, the Employee shall
forfeit any right to receive any payments pursuant to this
Agreement.
4.6 Accrued Obligations and Other Benefits. Upon
termination of employment for any reason the Employee shall be
entitled to receive promptly, and in addition to any other
benefits specifically provided, (a) the Employee's Base Salary
through the Date of Termination to the extent not theretofore
paid, (b) any accrued vacation pay, to the extent not theretofore
paid, and (c) any other amounts or benefits required to be paid
or provided or which the Employee is entitled to receive under
any plan, program, policy practice or agreement of the Company.
4.7 Stock Options. The foregoing benefits are intended to
be in addition to the value of any options to acquire Common
Stock of the Company the exercisability of which may be
accelerated pursuant to the terms of any stock option, incentive
or other similar plan heretofore or hereafter adopted by the
Company.
Section 5.Change of Control
5.1 Definitions. For purposes of this Section 5, the
following terms shall have the meanings indicated below.
(a) Company. In the event of any assignment or
succession as described in Section 6.1(c), the term "Company" as
used in this Agreement shall refer also to such successor or
assignee.
(b) Change of Control. A Change of Control shall mean
the occurrence of any of the following events:
(i) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of beneficial ownership of more than 30% of the
outstanding shares of the Company's common stock, no par value
per share (the "Common Stock"); provided, however, that for
purposes of this subsection (i), the following acquisitions shall
not constitute a Change of Control:
(A) any acquisition of Common Stock directly
from the Company,
(B) any acquisition of Common Stock by the
Company,
(C) any acquisition of Common Stock by any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company, or
(D) any acquisition of Common Stock by any
corporation pursuant to a transaction that complies with clauses
(A), (B) and (C) of subsection (b)(iii) of this Section 5.1; or
(ii) individuals who, as of the Agreement Date,
constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the Agreement Date whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered a member of the Incumbent Board, unless such
individual's initial assumption of office occurs as a result of
an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person
other than the Incumbent Board; or
(iii)the consummation of a reorganization, merger
or consolidation, or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in any such case, unless, following such Business
Combination,
(A) all or substantially all of the
individuals and entities who were the direct or indirect
beneficial owners of the Company's outstanding common stock and
voting securities entitled to vote generally in the election of
directors immediately prior to such Business Combination have
direct or indirect beneficial ownership, respectively, of more
than 50% of the then outstanding shares of common stock, and more
than 50% of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, of the corporation resulting from such Business
Combination (which, for purposes of this paragraph (A) and
paragraphs (B) and (C), shall include a corporation which as a
result of such transaction controls the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries), and
(B) except to the extent that such ownership
existed prior to the Business Combination, no person (excluding
any corporation resulting from such Business Combination or any
employee benefit plan or related trust of the Company or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of the
then outstanding shares of common stock of the corporation
resulting from such Business Combination or 20% or more of the
combined voting power of the then outstanding voting securities
of such corporation, and
(C) at least a majority of the members of
the board of directors of the corporation resulting from such
Business Combination were members of the board of directors of
the Company at the time of the initial action of the Board
providing for such Business Combination; or
(iv) approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company.
(c) Affiliate. The term "affiliate" or "affiliated
companies" shall mean any company or other entity controlled by,
controlling, or under common control with, the Company.
(d) Cause. After a Change of Control, "Cause," as
used in this Agreement, shall have the following meaning and not
the meaning given in Section 3.3:
(i) the willful and continued failure of the
Employee to perform substantially the Employee's duties hereunder
(other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for
substantial performance is delivered to the Employee by the Board
of the Company which specifically identifies the manner in which
the Board believes that the Employee has not substantially
performed the Employee's duties, or
(ii) the willful engaging by the Employee in
illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company or its affiliates.
For purposes of this provision, no act or failure to act, on the
part of the Employee, shall be considered "willful" unless it is
done, or omitted to be done, by the Employee in bad faith or
without reasonable belief that the Employee's action or omission
was in the best interests of the Company or its affiliates. Any
act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of
a senior officer of the Company or based upon the advice of
counsel for the Company or its affiliates shall be conclusively
presumed to be done, or omitted to be done, by the Employee in
good faith and in the best interests of the Company or its
affiliates. The cessation of employment of the Employee shall
not be deemed to be for Cause unless and until there shall have
been delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is
provided to the Employee and the Employee is given an
opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the
Employee has engaged in the conduct described in subparagraph (i)
or (ii) above, and specifying the particulars thereof in detail.
(e) Good Reason. After a Change of Control, "Good
Reason," as used in this Agreement, shall have the following
meaning and not the meaning given in Section 3.4:
(i) Any failure of the Company or its affiliates
to provide the Employee with the position, authority, duties and
responsibilities at least equivalent in all material respects
with the most significant of those held, exercised and assigned
at any time during the 120-day period immediately preceding the
Change of Control;
(ii) The assignment to the Employee of any duties
inconsistent in any respect with Employee's position (including
status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Section 1.1, or any
other action that results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in
bad faith that is remedied within 10 days after receipt of
written notice thereof from the Employee to the Company;
(iii)Any failure by the Company or its affiliates
to comply with any of the provisions of this Agreement, other
than an isolated, insubstantial and inadvertent failure not
occurring in bad faith that is remedied within 10 days after
receipt of written notice thereof from the Employee to the
Company;
(iv) The Company or its affiliates requiring the
Employee to be based at any office or location other than as
provided in Section 3.4(a)(iii) hereof or requiring the Employee
to travel on business to a substantially greater extent than
required immediately prior to the Change of Control;
(v) Any purported termination of the Employee's
employment otherwise than as expressly permitted by this
Agreement; or
(vi) Any failure by the Company to comply with and
satisfy Sections 6.1(c) and (d) of this Agreement.
For purposes of this Section 5, any good faith determination of
"Good Reason" made by the Employee shall be conclusive. Anything
in this Agreement to the contrary notwithstanding, a termination
by the Employee for any reason during the 30-day period
immediately following the first anniversary of the Change of
Control shall be deemed to be a termination for Good Reason.
(f) Beneficial Ownership. The terms "beneficial
ownership," "beneficial owner," "beneficially owns," and similar
terms shall have the meanings set forth in Rule 13d-3 under the
Exchange Act.
5.2 Employment Capacity and Term after Change of Control.
(a) If a Change of Control occurs during the Employment Term, the
Employee's Employment Term (the "Modified Employment Term") shall
be extended until and terminate at the close of business on the
later to occur of the second anniversary of the Change of
Control; or the date one year after the date on which either the
Company or the Employee has notified the other of such
termination; and provided, further, that Employee's status as an
employee is subject to earlier termination to the extent provided
in this Agreement.
(b) After a Change of Control and during the Modified
Employment Term, (i) the Employee's position (including status,
offices, titles and reporting requirements), authority, duties
and responsibilities in and with respect to the Company shall be
at least equivalent in all material respects to the most
significant of those held, exercised and assigned at any time
during the 120-day period immediately preceding the Change of
Control and (ii) the Employee's service shall be performed at the
location where the Employee was employed immediately preceding
the Change of Control or any office or location less than 50
miles from such location.
5.3 Compensation and Benefits. During the Modified
Employment Term, in addition to the compensation and benefits
described in Section 2, the Employee shall be entitled to the
following compensation and benefits:
(a) Salary. During the Modified Employment Term,
Employee's Base Salary shall be as provided for in Section 2.1.
(b) Benefit Plans. During the Modified Employment
Term, the Employee and his family, if any, shall be entitled to
participate in and receive applicable benefits under all such (i)
incentive, savings and retirement plans, practices, policies and
programs, (ii) welfare benefit plans, practices, policies and
programs (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental health
and travel accident insurance plans and programs) and (iii) paid
vacation and other fringe benefits, plans, practices, policies
and programs as are applicable generally to other peer employees
of the Company and its affiliated companies in effect generally
after the Change of Control or, if more favorable to the
Employee, as in effect for the Employee at any time during the
120-day period immediately preceding the Change of Control.
(c) Expenses. During the Modified Employment Term,
the Employee shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by the Employee in
accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect
generally after the Change of Control with respect to other peer
employees of the Company and its affiliated companies or, if more
favorable to the Employee, as in effect for the Employee at any
time during the 120-day period immediately preceding the Change
of Control.
(d) Office and Support Staff. During the Modified
Employment Term, the Employee shall be entitled to an office or
offices of a size and with furnishings and other appointments,
and to personal secretarial and other assistance, at least equal
to the most favorable of the foregoing provided generally after
the Change of Control with respect to other peer employees of the
Company and its affiliated companies or, if more favorable to the
Employee, as in effect for the Employee at any time during the
120-day period immediately preceding the Change of Control.
5.4 Termination of Employment after a Change of Control.
After a Change of Control and during the Modified Employment
Term, the Employee's status as an employee shall terminate or may
be terminated as provided in Section 3 of this Agreement;
provided, however, that after a Change of Control and during the
Modified Employment Term the terms "Cause" and "Good Reason," as
used in Section 3 and elsewhere in this Agreement, shall have the
meanings given to them in this Section 5 and not the meanings
given to them in Section 3.
5.5 Obligations of the Company upon Termination after a
Change of Control. (a) If, after a Change of Control and prior
to the end of the Modified Employment Term, the Company
terminates the Employee's employment other than for Cause, death
or Disability, or the Employee terminates employment for Good
Reason, then
(i) within 30 days of the Date of Termination the
Company shall pay to the Employee in a lump sum an amount equal
to the Employee's Base Salary through the end of the Modified
Employment Term had such termination not occurred; and
(ii) Employee shall be entitled to the benefits
provided in Section 4.3(b) and the amounts, if any, contemplated
by Sections 4.6 and 4.7.
(b) If, after a Change of Control and prior to the end
of the Modified Employment Term, the Employee's employment is
terminated (i) for death, (ii) for Disability or (iii) for Cause
(as defined in this Section 5), by the Employee for reasons other
than Good Reason (as defined in this Section 5) or at the end of
the Modified Employment Term, then the Employee shall be entitled
to the benefits described in Section 4.1, Section 4.2 or Section
4.4, as the case may be, and shall be entitled to the benefits
described in Sections 4.6 and 4.7. If the Company or the
Employee gives notice of termination of the Modified Employment
Term as provided for in Section 5.2, the Company may, at its
option, terminate Employee's status as an Employee, in which case
such termination shall be deemed a termination without Cause for
purposes of all provisions of this Agreement.
(c) The rights and obligations of the Company and
Employee contained in Section 4.5 ("Resignation as Director")
shall continue to apply after a Change of Control.
5.6 Certain Additional Payments. If after a Change of
Control Employee is subjected to an excise tax as a result of the
"excess parachute payment" provisions of section 4999 of the
Internal Revenue Code of 1986, as amended, whether by virtue of
the benefits of this Agreement or by virtue of any other benefits
provided to Employee in connection with a Change of Control
pursuant to Company plans, policies or agreements (including the
value of any options to acquire Common Stock of the Company the
exercisability of which is accelerated pursuant to the terms of
any stock option, incentive or similar plan heretofore or
hereafter adopted by the Company), the Company shall pay to
Employee (whether or not his employment has terminated) such
amounts as are necessary to place Employee in the same position
after payment of federal income and excise taxes and state and
local income taxes as he would have been if such provisions had
not been applicable to him.
Section 6.Miscellaneous
6.1 Binding Effect.
(a) This Agreement shall be binding upon and inure to
the benefit of the Company and any of its successors or assigns.
(b) This Agreement is personal to the Employee and
shall not be assignable by the Employee without the consent of
the Company (there being no obligation to give such consent)
other than such rights or benefits as are transferred by will or
the laws of descent and distribution.
(c) The Company shall require any successor to or
assignee of (whether direct or indirect, by purchase, merger,
consolidation or otherwise) all or substantially all of the
assets or businesses of the Company (i) to assume unconditionally
and expressly this Agreement and (ii) to agree to perform all of
the obligations under this Agreement in the same manner and to
the same extent as would have been required of the Company had no
assignment or succession occurred, such assumption to be set
forth in a writing reasonably satisfactory to the Employee. In
the event of any such assignment or succession, the term
"Company" as used in this Agreement shall refer also to such
successor or assign.
(d) The Company shall require all entities that
control, or that after the Change of Control will control,
directly or indirectly, any such successor or assignee to agree
to cause to be performed all of the obligations under this
Agreement in the same manner and to the same extent as would have
been required of the Company had no assignment or succession
occurred, such agreement to be set forth in writing reasonably
satisfactory to the Employee.
6.2 Notices. All notices hereunder must be in writing and
shall be deemed to have given upon receipt of delivery by: (a)
personal delivery to the designated individual, (b) certified or
registered mail, postage prepaid, return receipt requested, (c) a
nationally recognized overnight courier service (against a
receipt therefor) or (d) facsimile transmission with confirmation
of receipt. All such notices must be addressed as follows or
such other address as to which any party hereto may have notified
the other in writing:
If to the Company, to:
Akorn, Inc.
100 Akorn Drive
Abita Springs, Louisiana 70420
Attn: President
Facsimile: (504) 893-1257
If to the Employee, to:
Harold O. Koch
106 Riverdale
Covington, Louisiana 70433
Facsimile: (504) __________
6.3 Governing Law. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of
the State of Louisiana.
6.4 Withholding. The Employee agrees that the Company has
the right to withhold, from the amounts payable pursuant to this
Agreement, all amounts required to be withheld under applicable
income and/or employment tax laws, or as otherwise stated in
documents granting rights that are affected by this Agreement.
6.5 Severability. If any term or provision of this Agree-
ment or the application thereof to any person or circumstance,
shall at any time or to any extent be invalid, illegal or
unenforceable in any respect as written, Employee and the Company
intend for any court construing this Agreement to modify or limit
such provision temporally, spatially or otherwise so as to render
it valid and enforceable to the fullest extent allowed by law.
Any such provision that is not susceptible of such reformation
shall be ignored so as to not affect any other term or provision
hereof, and the remainder of this Agreement, or the application
of such term or provision to persons or circumstances other than
those as to which it is held invalid, illegal or unenforceable,
shall not be affected thereby and each term and provision of this
Agreement shall be valid and enforced to the fullest extent
permitted by law.
6.6 Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach thereof.
6.7 Remedies Not Exclusive. No remedy specified herein
shall be deemed to be such party's exclusive remedy, and
accordingly, in addition to all of the rights and remedies
provided for in this Agreement, the parties shall have all other
rights and remedies provided to them by applicable law, rule or
regulation.
6.8 Company's Reservation of Rights. Employee acknowledges
and understands that the Employee serves at the pleasure of the
Board and that the Company has the right at any time to terminate
Employee's status as an employee of the Company, or to change or
diminish his status during the Employment Term, subject to the
rights of the Employee to claim the benefits conferred by this
Agreement.
6.9 Survival. Following the Date of Termination, each
party shall have the right to enforce all rights, and shall be
bound by all obligations, of such party that are continuing
rights and obligations under this Agreement.
6.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the Company and the Employee have caused
this Agreement to be executed as of the Agreement Date.
AKORN, INC.
By: ____________________________
George S. Ellis, M.D.
Compensation Committee Chairman
EMPLOYEE:
____________________________
Harold O. Koch
EXHIBIT 10.4
EMPLOYMENT AGREEMENT--TIM J. TONEY
This Employment Agreement ("Agreement") between Akorn
Manufacturing, Inc., an Illinois corporation (the "Company"), and
Tim J. Toney (the "Employee") is dated as of January 1, 1996 (the
"Agreement Date").
WHEREAS, Employee currently is employed by the Company;
WHEREAS, the Company desires to retain the services of
Employee pursuant to the terms of this Agreement and Employee
desires to continue in the service of the Company on such terms;
NOW, THEREFORE, for and in consideration of the continued
employment of Employee by the Company and the payment of wages,
salary and other compensation to Employee by the Company, the
parties hereto agree as follows:
Section 1.Employment Capacity and Term
1.1 Capacity and Duties of Employee. The Employee is
employed by the Company to render services on behalf of the
Company as Vice President Manufacturing Operations. In that
capacity the Employee shall perform such duties as are assigned
to the individual holding any such title by the Company's Bylaws
and such other duties, consistent with the Employee's job title,
as may be prescribed from time to time by the Board of Directors
of the Company (the "Board").
1.2 Employment Term. The term of this Agreement (the
"Employment Term") shall commence on the Agreement Date and shall
continue until and terminate one year after either the Company or
the Employee has notified the other of such termination of the
Employment Term; and provided, further, that the Employment Term
is subject to extension as provided in Section 5.2 and Employee's
status as an employee is subject to earlier termination to the
extent provided in this Agreement.
1.3 Devotion to Responsibilities. During the Employment
Term, the Employee shall devote all of his business time to the
business of the Company and its subsidiaries and affiliated
companies, shall use his reasonable best efforts to perform
faithfully and efficiently his duties under this Agreement, and
shall not engage in or be employed by any other business;
provided, however, that nothing contained herein shall prohibit
the Employee from (a) serving as a member of the board of
directors, board of trustees or the like of any for-profit or
non-profit entity that does not compete with the Company, or
performing services of any type for any civic or community
entity, whether or not the Employee receives compensation
therefor, (b) investing his assets in such form or manner as
shall require no more than nominal services on the part of the
Employee in the operation of the business of or property in which
such investment is made, or (c) serving in various capacities
with, and attending meetings of, industry or trade groups and
associations, as long as the Employee's engaging in any
activities permitted by virtue of clauses (a), (b) and (c) above
does not materially interfere with the ability of the Employee to
perform the services and discharge the responsibilities required
of him under this Agreement. Notwithstanding clause (b) above,
during the Employment Term, the Employee shall not perform any
services for and shall not beneficially own more than 2% of the
equity interests of a business organization that competes with
the Company or its affiliates. For purposes of this paragraph,
"beneficially own" shall have the meaning given to that term in
Rule 13d-3 under the Securities Exchange Act of 1934 (the
"Exchange Act").
Section 2. Compensation and Benefits
During the Employment Term, the Company shall provide the
Employee with the compensation and benefits described below:
2.1 Salary. A salary ("Base Salary") at the rate of
$120,000 per year; provided, however, that Employee's Base Salary
shall increase as of each anniversary of the Agreement Date by a
factor equal to the increase in the Consumer Price Index
maintained by the United States Department of Labor. Employee's
Base Salary shall be payable to the Employee at such intervals as
the salaries of other salaried employees of the Company are paid.
Any increase in Employee's Base Salary shall take effect for the
payroll period next following the date on which the condition to
such increase is met.
2.2 Bonus. Employee shall be eligible to receive such
bonuses and supplementary compensation as the Board may
determine.
2.3 Benefits. The Company shall provide the Employee and,
if applicable, his family members, with all such (i) incentive,
savings and retirement plans, practices, policies and programs,
(ii) welfare benefit plans, practices, policies and programs
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accident health and travel
accident insurance plans and programs) and (iii) paid vacation
and other fringe benefits, plans, practices, policies and
programs as are applicable generally to other peer employees of
the Company.
2.4 Office and Support Staff. Employee shall be entitled
to an office or offices of the size and with furnishings and
other appointments, and to personal secretarial and other
assistance, at least equal to the those provided to him on the
Agreement Date.
2.5 Expenses. The Employee shall be reimbursed for
reasonable out-of-pocket expenses incurred from time to time on
behalf of the Company or any affiliate in the performance of his
duties under this Agreement, upon the presentation of such
supporting invoices, documents and forms as the Company
reasonably requests.
Section 3. Termination of Employment
3.1 Death. The Employee's status as an employee shall
terminate immediately and automatically upon the Employee's death
during the Employment Term.
3.2 Disability. The Employee's status as an employee may
be terminated for "Disability" as follows:
(a) The Employee's status as an employee shall
terminate if the Employee has a disability that would entitle him
to receive benefits under the Company's long-term disability
insurance policy in effect at the time either because he is
Totally Disabled or Partially Disabled, as such terms are defined
in the Company's policy in effect as of the Agreement Date or as
similar terms are defined in any successor policy. Any such
termination shall become effective on the first day on which the
Employee is eligible to receive payments under such policy (or on
the first day that he would be so eligible, if he had applied
timely for such payments).
(b) If the Company has no long-term disability plan in
effect, the Employee's status as an employee shall terminate if
(i) the Employee is rendered incapable because of physical or
mental illness of satisfactorily discharging his duties and
responsibilities under this Agreement for a period of 90
consecutive days and (ii) a duly qualified physician chosen by
the Company and acceptable to the Employee or his legal
representative so certifies in writing, the Board shall have the
power to determine that the Employee has become disabled. If the
Board makes such a determination, the Company shall have the
continuing right and option, during the period that such
disability continues, and by notice given in the manner provided
in this Agreement, to terminate the status of Employee as an
employee. Any such termination shall become effective 30 days
after such notice of termination is given, unless within such 30-
day period, the Employee becomes capable of rendering services of
the character contemplated hereby (and a physician chosen by the
Company and acceptable to the Employee or his legal
representative so certifies in writing) and the Employee in fact
resumes such services.
(c) The "Disability Effective Date" shall mean the
date on which termination of employment becomes effective due to
Disability.
3.3 Cause. The Company may terminate the Employee's status
as an employee for Cause. As used herein, termination by the
Company of the Employee's status as an employee for "Cause" shall
mean termination as a result of (a) the Employee's breach of this
Agreement, or (b) the willful engaging by the Employee in gross
misconduct injurious to the Company, which in either case is not
remedied within 10 days after the Company provides written notice
to the Employee of such breach or willful misconduct.
3.4 Good Reason. The Employee may terminate his status as
an employee for Good Reason. As used herein, the term "Good
Reason" shall mean:
(a) The occurrence of any of the following during the
Employment Term:
(i) the assignment by the Board or by any
authorized person to the Employee of any duties or
responsibilities that are inconsistent with the Employee's
status, title and position as Vice President Manufacturing
Operations;
(ii) any removal of the Employee from, or any
failure to reappoint or reelect the Employee to, the position of
Vice President Manufacturing Operations of the Company, except in
connection with a termination of Employee's status as an employee
as permitted by this Agreement;
(iii) the Company's requiring the Employee to be
based anywhere other than at or within 50 miles of the Company's
principal offices in Decatur, Illinois except for required travel
in the ordinary course of the Company's business;
(b) any breach of this Agreement by the Company that
continues for a period of 10 days after written notice thereof is
given by the Employee to the Company;
(c) the failure by the Company to obtain the
assumption of its obligations under this Agreement by any
successor or assignee as contemplated by Section 6.1(c); or
(d) any purported termination by the Company of the
Employee's status as an employee for Cause that is not effected
pursuant to a Notice of Termination satisfying the requirements
of this Agreement.
3.5 Voluntary Termination by the Company. Subject to the
terms and conditions provided herein, the Company may terminate
the Employee's status as an employee during the Employment Term
for reasons other than death, Disability or Cause.
3.6 Voluntary Termination by the Employee. Subject to the
terms and conditions provided herein, the Employee may terminate
the Employee's status as an employee during the Employment Term
for reasons other than Good Reason.
3.7 Notice of Termination. Any termination by the Company
for Disability or Cause, or by the Employee for Good Reason,
shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 6.2. For purposes of
this Agreement, a "Notice of Termination" means a written notice
that (a) indicates the specific termination provision in this
Agreement relied upon, (b) to the extent applicable, sets forth
in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Employee's employment
under the provisions so indicated and (c) if the Date of
Termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date (which date shall
be not more than 30 days after the giving of such notice). The
failure by the Employee or the Company to set forth in the Notice
of Termination any fact or circumstance that contributes to a
showing of Good Reason, Disability or Cause shall not negate the
effect of the notice nor waive any right of the Employee or the
Company, respectively, hereunder or preclude the Employee or the
Company, respectively, from asserting such fact or circumstance
in enforcing the Employee's or the Company's rights hereunder.
3.8 Date of Termination. "Date of Termination" means (a)
if Employee's employment is terminated by reason of his death or
Disability, the Date of Termination shall be the date of death of
Employee or the Disability Effective Date, as the case may be,
(b) if Employee's employment is terminated by the Company for
Cause, or by Employee for Good Reason, the date of delivery of
the Notice of Termination or any later date specified therein,
(which date shall not be more than 30 days after the giving of
such notice) as the case may be, (c) if the Employee's employment
is terminated by the Company prior to the end of the Employment
Term for reasons other than death, Disability or Cause, the Date
of Termination shall be the date on which the Company notifies
the Employee of such termination, (d) if the Employee's
employment is terminated by the Employee prior to the end of the
Employment Term for reasons other than Good Reason, the Date of
Termination shall be the date on which the Employee notifies the
Company of such termination, and (e) if the Employment Term
terminates upon notice by the Company or the Employee as provided
for in Section 1.2 or Section 5.2, the Date of Termination shall
be the date on which the Employment Term ends.
Section 4. Obligations Upon Termination
4.1 Death. If Employee's status as an employee is
terminated by reason of Employee's death, this Agreement shall
terminate without further obligations to Employee's legal
representatives under this Agreement, other than the obligation
to make any payments due pursuant to employee benefit plans
maintained by the Company or its affiliates.
4.2 Disability. If Employee's status as an employee is
terminated by reason of Employee's Disability, this Agreement
shall terminate without further obligation to Employee, other
than the obligation to make any payments due pursuant to employee
benefit plans maintained by the Company or its affiliates.
4.3 Termination by Company for Reasons other than Death,
Disability or Cause; Termination by Employee for Good Reason. If
the Company terminates the Employee's status as an employee prior
to the end of the Employment Term for reasons other than death,
Disability or Cause, or the Employee terminates his employment
prior to the end of the Employment Term for Good Reason, then
(a) within 30 days of the Date of Termination the
Company shall pay to the Employee in a lump sum an amount equal
to the Employee's Base Salary through the end of the Employment
Term had the notice contemplated by Section 1.2 been given as of
the Date of Termination; and
(b) the amount of any performance-based bonus or
options granted to the Employee shall be deemed to be the amount
to which the Employee would have been entitled if the budgeted
goals or other performance goals applicable thereto had been met
but not exceeded and, whether or not the performance goals have
been met as of the Date of Termination, such bonus shall be
payable within 30 days of the Date of Termination and such
options (if not already exercisable) shall become exercisable as
of the Date of Termination and shall expire on the date of
expiration of the options as provided in the applicable option
agreement.
4.4 Termination for Cause, Without Good Reason or at End of
Employment Term. This Agreement shall terminate without further
obligation to the Employee other than obligations imposed by law
and obligations imposed pursuant to any employee benefit plan
maintained by the Company or its affiliates (a) if the Employee's
status as an Employee is terminated by the Company for Cause or
by the Employee for reasons other than Good Reason or (b), except
as otherwise provided in Section 5.2, at the end of the
Employment Term. If the Company or the Employee gives notice of
termination of the Employment Term as provided for in Section
1.2, the Company may, at its option, terminate Employee's status
as an employee, in which case such termination shall be deemed a
termination by the Company without Cause for purposes of all
provisions of this Agreement.
4.5 Resignation as Director. If Employee is a director of
the Company and his employment is terminated for any reason other
than death, the Employee shall, if requested by the Company,
immediately resign as a director of the Company. If such
resignation is not received when so requested, the Employee shall
forfeit any right to receive any payments pursuant to this
Agreement.
4.6 Accrued Obligations and Other Benefits. Upon
termination of employment for any reason the Employee shall be
entitled to receive promptly, and in addition to any other
benefits specifically provided, (a) the Employee's Base Salary
through the Date of Termination to the extent not theretofore
paid, (b) any accrued vacation pay, to the extent not theretofore
paid, and (c) any other amounts or benefits required to be paid
or provided or which the Employee is entitled to receive under
any plan, program, policy practice or agreement of the Company.
4.7 Stock Options. The foregoing benefits are intended to
be in addition to the value of any options to acquire common
stock of Akorn the exercisability of which may be accelerated
pursuant to the terms of any stock option, incentive or other
similar plan heretofore or hereafter adopted by Akorn.
Section 5. Change of Control
5.1 Definitions. For purposes of this Section 5, the
following terms shall have the meanings indicated below.
(a) Company. In the event of any assignment or
succession as described in Section 6.1(c), the term "Company" as
used in this Agreement shall refer also to such successor or
assignee. As used in Section 5.1(b) the term "Company" shall
refer to Akorn and shall not refer to Akorn Manufacturing, Inc.,
except as otherwise indicated.
(b) Change of Control. A "Change of Control" shall
mean the occurrence of any of the following events:
(i) the acquisition by any individual, entity or
"person" (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act) of beneficial ownership of more than 30% of the
outstanding shares of the Company's common stock, no par value
per share (the "Common Stock"); provided, however, that for
purposes of this subsection (i), the following acquisitions shall
not constitute a Change of Control:
(A) any acquisition of Common Stock directly
from the Company,
(B) any acquisition of Common Stock by the
Company,
(C) any acquisition of Common Stock by any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company, or
(D) any acquisition of Common Stock by any
corporation pursuant to a transaction that complies with clauses
(A), (B) and (C) of subsection (b)(iii) of this Section 5.1; or
(ii) individuals who, as of the Agreement Date,
constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the Agreement Date whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered a member of the Incumbent Board, unless such
individual's initial assumption of office occurs as a result of
an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person
other than the Incumbent Board; or
(iii) the consummation of a reorganization,
merger or consolidation, or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in any such case, unless, following such Business
Combination,
(A) all or substantially all of the
individuals and entities who were the direct or indirect
beneficial owners of the Company's outstanding common stock and
voting securities entitled to vote generally in the election of
directors immediately prior to such Business Combination have
direct or indirect beneficial ownership, respectively, of more
than 50% of the then outstanding shares of common stock, and more
than 50% of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, of the corporation resulting from such Business
Combination (which, for purposes of this paragraph (A) and
paragraphs (B) and (C), shall include a corporation which as a
result of such transaction controls the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries), and
(B) except to the extent that such ownership
existed prior to the Business Combination, no person (excluding
any corporation resulting from such Business Combination or any
employee benefit plan or related trust of the Company or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of the
then outstanding shares of common stock of the corporation
resulting from such Business Combination or 20% or more of the
combined voting power of the then outstanding voting securities
of such corporation, and
(C) at least a majority of the members of
the board of directors of the corporation resulting from such
Business Combination were members of the board of directors of
the Company at the time of the initial action of the Board
providing for such Business Combination;
(iv) approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company or;
(v) the consummation of a reorganization, merger
or consolidation, sale or other disposition of all or
substantially all of the assets, or sale, transfer or other
distribution of more than 50% of the shares of common stock of
Akorn Manufacturing, Inc. or of the voting securities entitled to
vote in the election of directors thereof, in any such case,
unless, following such transaction, at least a majority of the
members of the Board of Directors of Akorn Manufacturing, Inc. or
other corporation resulting from such transaction were members of
the Board of Directors of Akorn Manufacturing, Inc. or of the
Company at the time of the initial action of the Board of
Directors of Akorn Manufacturing, Inc. or of the Company
providing for such transaction.
(c) Affiliate. The term "affiliate" or "affiliated
companies" shall mean any company or other entity controlled by,
controlling, or under common control with, the Company.
(d) Cause. After a Change of Control, "Cause," as
used in this Agreement, shall have the following meaning and not
the meaning given in Section 3.3:
(i) the willful and continued failure of the
Employee to perform substantially the Employee's duties hereunder
(other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for
substantial performance is delivered to the Employee by the Board
of the Company which specifically identifies the manner in which
the Board believes that the Employee has not substantially
performed the Employee's duties, or
(ii) the willful engaging by the Employee in
illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company or its affiliates.
For purposes of this provision, no act or failure to act, on the
part of the Employee, shall be considered "willful" unless it is
done, or omitted to be done, by the Employee in bad faith or
without reasonable belief that the Employee's action or omission
was in the best interests of the Company or its affiliates. Any
act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of
a senior officer of the Company or based upon the advice of
counsel for the Company or its affiliates shall be conclusively
presumed to be done, or omitted to be done, by the Employee in
good faith and in the best interests of the Company or its
affiliates. The cessation of employment of the Employee shall
not be deemed to be for Cause unless and until there shall have
been delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is
provided to the Employee and the Employee is given an
opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the
Employee has engaged in the conduct described in subparagraph (i)
or (ii) above, and specifying the particulars thereof in detail.
(e) Good Reason. After a Change of Control, "Good
Reason," as used in this Agreement, shall have the following
meaning and not the meaning given in Section 3.4:
(i) Any failure of the Company or its affiliates
to provide the Employee with the position, authority, duties and
responsibilities at least equivalent in all material respects
with the most significant of those held, exercised and assigned
at any time during the 120-day period immediately preceding the
Change of Control;
(ii) The assignment to the Employee of any duties
inconsistent in any respect with Employee's position (including
status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Section 1.1, or any
other action that results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in
bad faith that is remedied within 10 days after receipt of
written notice thereof from the Employee to the Company;
(iii) Any failure by the Company or its
affiliates to comply with any of the provisions of this
Agreement, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith that is remedied within 10
days after receipt of written notice thereof from the Employee to
the Company;
(iv) The Company or its affiliates requiring the
Employee to be based at any office or location other than as
provided in Section 3.4(a)(iii) hereof or requiring the Employee
to travel on business to a substantially greater extent than
required immediately prior to the Change of Control;
(v) Any purported termination of the Employee's
employment otherwise than as expressly permitted by this
Agreement; or
(vi) Any failure by the Company to comply with and
satisfy Sections 6.1(c) and (d) of this Agreement.
For purposes of this Section 5, any good faith determination of
"Good Reason" made by the Employee shall be conclusive. Anything
in this Agreement to the contrary notwithstanding, a termination
by the Employee for any reason during the 30-day period
immediately following the first anniversary of the Change of
Control shall be deemed to be a termination for Good Reason.
(f) Beneficial Ownership. The terms "beneficial
ownership," "beneficial owner," "beneficially owns," and similar
terms shall have the meanings set forth in Rule 13d-3 under the
Exchange Act.
5.2 Employment Capacity and Term after Change of Control.
(a) If a Change of Control occurs during the Employment Term, the
Employee's Employment Term (the "Modified Employment Term") shall
be extended until and terminate at the close of business on the
later to occur of the second anniversary of the Change of Control
or the date one year after the date on which either the Company
or the Employee has notified the other of such termination; and
provided, further, that Employee's status as an employee is
subject to earlier termination to the extent provided in this
Agreement.
(b) After a Change of Control and during the Modified
Employment Term, (i) the Employee's position (including status,
offices, titles and reporting requirements), authority, duties
and responsibilities in and with respect to the Company shall be
at least equivalent in all material respects to the most
significant of those held, exercised and assigned at any time
during the 120-day period immediately preceding the Change of
Control and (ii) the Employee's service shall be performed at the
location where the Employee was employed immediately preceding
the Change of Control or any office or location less than 50
miles from such location.
5.3 Compensation and Benefits. During the Modified
Employment Term, in addition to the compensation and benefits
described in Section 2, the Employee shall be entitled to the
following compensation and benefits:
(a) Salary. During the Modified Employment Term,
Employee's Base Salary shall be as provided for in Section 2.1.
(b) Benefit Plans. During the Modified Employment
Term, the Employee and his family, if any, shall be entitled to
participate in and receive applicable benefits under all such (i)
incentive, savings and retirement plans, practices, policies and
programs, (ii) welfare benefit plans, practices, policies and
programs (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental health
and travel accident insurance plans and programs) and (iii) paid
vacation and other fringe benefits, plans, practices, policies
and programs as are applicable generally to other peer employees
of the Company and its affiliated companies in effect generally
after the Change of Control or, if more favorable to the
Employee, as in effect for the Employee at any time during the
120-day period immediately preceding the Change of Control.
(c) Expenses. During the Modified Employment Term,
the Employee shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by the Employee in
accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect
generally after the Change of Control with respect to other peer
employees of the Company and its affiliated companies or, if more
favorable to the Employee, as in effect for the Employee at any
time during the 120-day period immediately preceding the Change
of Control.
(d) Office and Support Staff. During the Modified
Employment Term, the Employee shall be entitled to an office or
offices of a size and with furnishings and other appointments,
and to personal secretarial and other assistance, at least equal
to the most favorable of the foregoing provided generally after
the Change of Control with respect to other peer employees of the
Company and its affiliated companies or, if more favorable to the
Employee, as in effect for the Employee at any time during the
120-day period immediately preceding the Change of Control.
5.4 Termination of Employment after a Change of Control.
After a Change of Control and during the Modified Employment
Term, the Employee's status as an employee shall terminate or may
be terminated as provided in Section 3 of this Agreement;
provided, however, that after a Change of Control and during the
Modified Employment Term the terms "Cause" and "Good Reason," as
used in Section 3 and elsewhere in this Agreement, shall have the
meanings given to them in this Section 5 and not the meanings
given to them in Section 3.
5.5 Obligations of the Company upon Termination after a
Change of Control. (a) If, after a Change of Control and prior
to the end of the Modified Employment Term, the Company
terminates the Employee's employment other than for Cause, death
or Disability, or the Employee terminates employment for Good
Reason, then
(i) within 30 days of the Date of Termination the
Company shall pay to the Employee in a lump sum an amount equal
to the Employee's Base Salary through the end of the Modified
Employment Term had such termination not occurred; and
(ii) Employee shall be entitled to the benefits
provided in Section 4.3(b) and the amounts, if any, contemplated
by Sections 4.6 and 4.7.
(b) If, after a Change of Control and prior to the end
of the Modified Employment Term, the Employee's employment is
terminated (i) for death, (ii) for Disability or (iii) for Cause
(as defined in this Section 5), by the Employee for reasons other
than Good Reason (as defined in this Section 5) or at the end of
the Modified Employment Term, then the Employee shall be entitled
to the benefits described in Section 4.1, Section 4.2 or Section
4.4, as the case may be, and shall be entitled to the benefits
described in Sections 4.6 and 4.7. If the Company or the
Employee gives notice of termination of the Modified Employment
Term as provided for in Section 5.2, the Company may, at its
option, terminate Employee's status as an Employee, in which case
such termination shall be deemed a termination without Cause for
purposes of all provisions of this Agreement.
(c) The rights and obligations of the Company and
Employee contained in Section 4.5 ("Resignation as Director")
shall continue to apply after a Change of Control.
5.6 Certain Additional Payments. If after a Change of
Control Employee is subjected to an excise tax as a result of the
"excess parachute payment" provisions of section 4999 of the
Internal Revenue Code of 1986, as amended, whether by virtue of
the benefits of this Agreement or by virtue of any other benefits
provided to Employee in connection with a Change of Control
pursuant to Company plans, policies or agreements (including the
value of any options to acquire Common Stock of the Company the
exercisability of which is accelerated pursuant to the terms of
any stock option, incentive or similar plan heretofore or
hereafter adopted by the Company), the Company shall pay to
Employee (whether or not his employment has terminated) such
amounts as are necessary to place Employee in the same position
after payment of federal income and excise taxes and state and
local income taxes as he would have been if such provisions had
not been applicable to him.
Section 6. Miscellaneous
6.1 Binding Effect.
(a) This Agreement shall be binding upon and inure to
the benefit of the Company and any of its successors or assigns.
(b) This Agreement is personal to the Employee and
shall not be assignable by the Employee without the consent of
the Company (there being no obligation to give such consent)
other than such rights or benefits as are transferred by will or
the laws of descent and distribution.
(c) The Company shall require any successor to or
assignee of (whether direct or indirect, by purchase, merger,
consolidation or otherwise) all or substantially all of the
assets or businesses of the Company (i) to assume unconditionally
and expressly this Agreement and (ii) to agree to perform all of
the obligations under this Agreement in the same manner and to
the same extent as would have been required of the Company had no
assignment or succession occurred, such assumption to be set
forth in a writing reasonably satisfactory to the Employee. In
the event of any such assignment or succession, the term
"Company" as used in this Agreement shall refer also to such
successor or assign.
(d) The Company shall require all entities that
control, or that after the Change of Control will control,
directly or indirectly, any such successor or assignee to agree
to cause to be performed all of the obligations under this
Agreement in the same manner and to the same extent as would have
been required of the Company had no assignment or succession
occurred, such agreement to be set forth in writing reasonably
satisfactory to the Employee.
6.2 Notices. All notices hereunder must be in writing and
shall be deemed to have given upon receipt of delivery by: (a)
personal delivery to the designated individual, (b) certified or
registered mail, postage prepaid, return receipt requested, (c) a
nationally recognized overnight courier service (against a
receipt therefor) or (d) facsimile transmission with confirmation
of receipt. All such notices must be addressed as follows or
such other address as to which any party hereto may have notified
the other in writing:
If to the Company, to:
Akorn Manufacturing, Inc.
100 Akorn Drive
Abita Springs, Louisiana 70420
Attn: President
Facsimile transmission No. (504) 893-1257
If to the Employee, to:
Tim J. Toney
2850 Virt Road
Decatur, Illinois 62521
Facsimile transmission No. __________
6.3 Governing Law. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of
the State of Louisiana.
6.4 Withholding. The Employee agrees that the Company has
the right to withhold, from the amounts payable pursuant to this
Agreement, all amounts required to be withheld under applicable
income and/or employment tax laws, or as otherwise stated in
documents granting rights that are affected by this Agreement.
6.5 Severability. If any term or provision of this Agree-
ment or the application thereof to any person or circumstance,
shall at any time or to any extent be invalid, illegal or
unenforceable in any respect as written, Employee and the Company
intend for any court construing this Agreement to modify or limit
such provision temporally, spatially or otherwise so as to render
it valid and enforceable to the fullest extent allowed by law.
Any such provision that is not susceptible of such reformation
shall be ignored so as to not affect any other term or provision
hereof, and the remainder of this Agreement, or the application
of such term or provision to persons or circumstances other than
those as to which it is held invalid, illegal or unenforceable,
shall not be affected thereby and each term and provision of this
Agreement shall be valid and enforced to the fullest extent
permitted by law.
6.6 Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach thereof.
6.7 Remedies Not Exclusive. No remedy specified herein
shall be deemed to be such party's exclusive remedy, and
accordingly, in addition to all of the rights and remedies
provided for in this Agreement, the parties shall have all other
rights and remedies provided to them by applicable law, rule or
regulation.
6.8 Company's Reservation of Rights. Employee acknowledges
and understands that the Employee serves at the pleasure of the
Board and that the Company has the right at any time to terminate
Employee's status as an employee of the Company, or to change or
diminish his status during the Employment Term, subject to the
rights of the Employee to claim the benefits conferred by this
Agreement.
6.9 Survival. Following the Date of Termination, each
party shall have the right to enforce all rights, and shall be
bound by all obligations, of such party that are continuing
rights and obligations under this Agreement.
6.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the Company and the Employee have caused
this Agreement to be executed as of the Agreement Date.
AKORN MANUFACTURING, INC.
By: ________________________
Eric M. Wingerter
Secretary
EMPLOYEE:
_______________________
Tim J. Toney
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM CONSOLIDATED
FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-30-1995
<PERIOD-END> DEC-31-1995
<CASH> 456,053
<SECURITIES> 1,495,971
<RECEIVABLES> 4,732,725
<ALLOWANCES> (269,811)
<INVENTORY> 6,921,028
<CURRENT-ASSETS> 14,858,968
<PP&E> 18,270,588
<DEPRECIATION> (7,081,287)
<TOTAL-ASSETS> 27,148,110
<CURRENT-LIABILITIES> 6,824,297
<BONDS> 3,516,729
<COMMON> 13,701,845
0
0
<OTHER-SE> 2,230,758
<TOTAL-LIABILITY-AND-EQUITY> 27,148,110
<SALES> 15,275,765
<TOTAL-REVENUES> 15,275,765
<CGS> 9,577,838
<TOTAL-COSTS> 9,577,838
<OTHER-EXPENSES> 4,358,504
<LOSS-PROVISION> 6,000
<INTEREST-EXPENSE> 184,664
<INCOME-PRETAX> 1,430,558
<INCOME-TAX> 529,516
<INCOME-CONTINUING> 901,042
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 901,042
<EPS-PRIMARY> .06
<EPS-DILUTED> 0
</TABLE>
AT AKORN :AT FRB:
Barry LeBlanc Jenifer Estabrook Kathy Brunson
President & CEO General Information Analyst Contact
Eric Wingerter
Vice President-Finance
(504) 893-9300 (312) 640-6787 (312) 640-6696
FOR IMMEDIATE RELEASE
WEDNESDAY, FEBRUARY 7, 1996
AKORN'S 2ND-QTR RESULTS IN LINE WITH EXPECTATIONS;
POSITIVE OUTLOOK DUE TO RECENT APPROVALS
ABITA SPRINGS, LA, February 7, 1996 - Akorn, Inc. (Nasdaq: AKRN)
today announced that net income for the second quarter of fiscal
1996 was $440,000, or 3 cents per share, on sales of $7.4 million
compared with net income of $605,000, or 4 cents per share, on
sales of $8.4 million in the year-ago period. Akorn recognized
net income of $901,000, or 6 cents per share, on revenues of
$15.3 million for the first six months of fiscal 1996. In the
comparable period for fiscal 1995, Akorn recognized net income of
$1.4 million, or 9 cents per share, on revenues of $16.9 million.
"These results were in line with our expectations," said Barry D.
LeBlanc, president and chief executive officer. "Although
second-quarter comparisons continued to be affected by the
temporary loss of our lead allergy product, AK-Con-A, we are
happy to have recently received the regulatory approval necessary
to have an over-the-counter (OTC) version of the product back on
the market through a licensing agreement with Pfizer Inc. We
expect to begin recognizing royalties and manufacturing profits
from this agreement starting in the fourth quarter of fiscal-year
1996."
The U.S. Food and Drug Administration (FDA) had switched AK-Con-A
to OTC status in the second quarter of fiscal 1995. In response,
Akorn filed a New Drug Application (NDA) for an OTC version of
the product, which the company licensed to Pfizer Inc in exchange
for agreed upon royalties and manufacturing revenue. As
announced earlier this week, Akorn has successfully obtained the
necessary NDA.
REVIEW OF RESULTS
Net sales for the quarter ended December 31, 1995, were $7.4
million, down 12 percent from last year's $8.4 million. In
addition to the effects of temporarily losing AK-Con-A, a
reduction in contract manufacturing revenues also contributed to
the unfavorable comparisons. Gross profit declined 22 percent
from $3.6 million to $2.8 million. Gross margins declined five
basis points, primarily resulting from the temporary loss of AK-
Con-A, Akorn's highest-margin product at nearly 75 percent, and
the reduction in plant throughput associated with the decline in
both contract business and production of AK-Con-A.
Operating expenses declined 21 percent during the quarter, while
research and development expenditures increased 26 percent,
reflecting an accelerated program to obtain Abbreviated New Drug
Applications (ANDAs) and a change in the mix of products in the
R&D pipeline to a larger percentage of new products versus
products for which expenses have been previously accrued.
Operating expenses as a percentage of sales declined to 26.6
percent for the quarter ended December 31, 1995, from 29.7
percent for the prior-year period. This reduction in operating
expense is a result of certain cost reductions Akorn made in the
third quarter of fiscal 1995. The company's effective tax rate
remained stable at 37 percent.
Net sales for the six months ended December 31, 1995, were $15.3
million, or 10 percent lower than the year-ago amount of $16.9
million. Gross profit declined 21 percent to $5.7 million from
$7.2 million in the prior-year period. Gross margins declined
five basis points due to the factors previously noted.
Operating expenses declined 17 percent during the six-month
period ended December 31, 1995, as compared with the same period
in the previous year, while research and development expenditures
increased 33 percent. Operating expenses as a percentage of
sales declined to 25.5 percent for the six months ended December
31, 1995, from 27.9 percent for the prior year.
OUTLOOK
Commenting on these results, LeBlanc said, "The absence of AK-
Con-A continued to have a significant effect on comparative
results; however, with the recent NDA approval, this effect
should reverse by the end of the fiscal year." The company
expects incremental profits from manufacturing margins and
royalties to approximate 1 to 2 cents per share per quarter.
LeBlanc continued, "In addition, the recent approval of
Tobramycin Ophthalmic Solution U.S.P. 0.3%, announced today,
should add incremental revenues and profits to the company,
commencing in the fourth fiscal quarter, when we plan to
introduce a `commodity generic' label of this product. This
would add to Akorn's growing line of generic ophthalmic
pharmaceuticals sold to generic source programs, formularies of
national accounts, and managed-care providers." The annual U.S.
market for ophthalmic tobramycin is approximately $30 million,
making it one of the larger ophthalmic pharmaceuticals.
"The current weakness in the contract segment is due to a recent
shift by several contract customers who, based on economic
evaluation, have opted to transfer the manufacture of their
injectable products in-house, or to discontinue the product line
entirely," LeBlanc noted. "While this shift has caused a
temporary decline in contract revenue, it has created
opportunities for Akorn as we seek to acquire injectable products
and product lines for manufacture at our Decatur facility.
Currently, we are in discussions with several customers to
acquire such products to support our recent decision to enter the
generic injectable business in the anesthesia/analgesia market.
And, we have several ANDAs for injectable products in this market
currently in process."
Akorn offers a full line of contract services in the injectable
area, including product development, stability testing, sterile
manufacturing, and regulatory assistance. Akorn's full-service
capability is best evidenced by the previously announced
agreement with Jordan Pharmaceuticals, Inc. to develop and
manufacture three new generic injectable pharmaceutical products.
In addition, the agreement secured the long-term manufacture of
three other generic injectables historically produced by Akorn
for Jordan.
LeBlanc concluded, "All of these efforts should contribute to
establishing a profitable injectable presence for Akorn's
contract manufacturing business as well as for Akorn-owned
products. We expect that this injectable presence will better
leverage Akorn's established positions in the development,
manufacture, and distribution of sterile pharmaceuticals."
Akorn, Inc. manufactures sterile ophthalmic and injectable
pharmaceuticals, and markets and distributes an extensive line of
ophthalmic products.
Financial Tables Follow...
For additional information about Akorn, Inc. free of charge via
fax,
dial 1-800-PRO-INFO and enter "AKRN."
CONSOLIDATED STATEMENT OF EARNINGS
In thousands, except per share amounts
<TABLE>
<CAPTION>
Three months ended December 31 Six months ended December 31
1995 1994 %Chg 1995 1994 %Chg
__________ ________ _________ __________ __________ ________
<S> <C> <C> <C> <C> <C> <C>
Net sales $7,387 $8,384 -11.9% $15,276 $16,925 -9.7%
Cost of sales 4,577 4,773 -4.1% 9,578 9,693 -1.2%
__________ _________ _________ _________
Gross profit 2,810 3,611 -22.2% 5,698 7,232 -21.2%
Selling, general
and adminstrative 1,963 2,486 -21.0% 3,901 4,718 -17.3%
Research and development 228 181 26.0% 464 350 32.6%
__________ __________ __________ __________
Operating income 619 944 -34.4% 1,333 2,164 -38.4%
Interest & other income
(expense), net 80 23 247.8% 97 51 90.2%
__________ __________ ___________ ___________
Pretax income 699 967 -27.7% 1,430 2,215 -35.4%
Income taxes 259 362 -28.5% 529 824 -35.8%
__________ __________ ___________ ___________
Net income $440 $605 -27.3% $901 $1,391 -35.2%
========== ========== =========== ===========
Per share:
Net income $0.03 $0.04 -25.0% $0.06 $0.09 -33.3%
========== =========== =========== ===========
Weighted average shares 15,302 15,543 -1.6% 15,281 15,410 -0.8%
========== =========== =========== ===========
</TABLE>
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1994 1995
____________ ____________
Cash and investments $1,952 $2,336
Accounts receivable, net 4,463 4,919
Other current assets 8,444 7,048
____________ _____________
Total current assets 14,859 14,303
Property, plant and equipment, net 11,189 10,996
Other assets 1,100 957
____________ _____________
Total assets $27,148 $26,256
============ =============
Liabilities and shareholders' equity
Short-term borrowings $ 262 $ -
Current portion of long-term debt an 826 642
Trade accounts payable 1,497 1,719
Income taxes payable 1,095 782
Accrued reorganization costs 655 727
Other accrued expenses 2,656 2,531
______________ _____________
Total current liabilities 6,991 6,401
Long-term debt and capital leases 3,517 3,900
Other long-term liabilities 707 957
Shareholders' equity 15,933 14,998
______________ ______________
Total liabilites and shareholers' equity $ 27,148 $26,256
============== ==============
