UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 10-K/A
[x] AMENDMENT 1 TO ANNUAL REPORT FILED SEPTEMBER 30, 1996 PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996
Commission File Number 0-13976
AKORN, INC.
(Exact name of registrant as specified in its charter)
Louisiana 72-0717400
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
100 Akorn Drive
Abita Springs, Louisiana 70420 70420
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (504) 893-9300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
___________________ _________________________________________
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of September 23, 1996 was $27,500,000.
The number of shares outstanding of the registrant's Common Stock as of
September 23, 1996 was 16,573,915.
<PAGE>
Item 10. Directors and Executive Officers of the Registrant.
The following table sets forth certain information with respect to each
director of the Board. Unless otherwise indicated, the person has been
engaged in the principal occupation shown for the past five years.
Name and Age Principal Occupation Year First Became a Director
______________________________________________________________________________
Directors
Floyd Benjamin, 53 Executive Vice President 1996
of the Company and
President of Taylor
Pharmaceuticals, Inc. (a
subsidiary of the
Company) since May 1996;
President of Pasadena
Research Laboratories,
Inc. from October 1994
to May 1996 and
Consultant to Pasadena
Research Laboratories,
Inc. from October 1993
to October 1994;
President and Chief
Executive Officer of
Neocrin, Inc.
(biomedical venture
company) from February
1992 to October 1993;
prior to October 1993,
Chief Operating Officer
of Lyphomed, Inc.
(injectable
pharmaceuticals)
Daniel E. Bruhl, M.D., 54 Ophthalmologist; 1983
director of Surgical
Care Affiliates, Inc.
J. Ed Campbell, M.D., 72 Ophthalmologist 1975
George S. Ellis, M.D., 73 Ophthalmologist<F1> 1985
Doyle S. Gaw, 65 Private investor 1975
John N. Kapoor, Ph.D., 53 Chairman of the Board of 1991
the Company since May
1995; Chief Executive
Officer of the Company
since May, 1996;
Director of the Company
since December 1991;
acting Chairman of the
Board of the Company
from April 1993 to May
1995; Chairman of the
Board of the Company
from December 1991 to
January 1993; Chairman
of the Board of Option
Care, Inc.; Chief
Executive Officer of
Option Care, Inc. from
August 1993 to April
1996; President of E. J.
Financial Enterprises,
Inc. since April 1990;
director of Unimed, Inc.
and NeoPharm, Inc.
Barry D. LeBlanc, 41 President of the Company 1987
since 1987 and Chief
Executive Officer since
December, 1991.<F2>
David H. Turner, M.D., 69 Ophthalmologist 1975
Lawrence A. Yannuzzi, M.D., 59 Ophthalmologist 1983
Executive Officers<F3>
Harold O. Koch, 47 Senior Vice President of
the Company since
January 1995; from
January 1993 to December
1994, Vice President -
Business Development;
from July 1991 to
December 1992,
coordinator of
reorganization of the
Company's manufacturing
operations
Tim J. Toney, 54<F4> Vice President -
Manufacturing of Taylor
Pharmaceuticals, Inc., a
Company subsidiary
("Taylor"), since May
1996; President of
Taylor from January 1992
to May 1996; prior to
January 1992, General
Manager of the
predecessor of Taylor
Pharmaceuticals, Inc.
Eric M. Wingerter, 34 Vice President - Finance
and Administration since
July 1993; Vice
President - Finance from
January 1993 to June
1993; Chief Financial
Officer and Principal
Accounting Officer of
the Company since
September 1988
________________________________
<F1> Dr. Ellis also serves as Secretary of the Company.
<F2> Mr. LeBlanc ceased being chief executive officer of the Company on May
3, 1996 and resigned from all positions with the Company effective July 3,
1996.
<F3> Includes executive officers of the Company who are named in the "Summary
Compensation Table" included in Item 11, other than Mr. Benjamin, Dr. Kapoor
and Mr. LeBlanc, who are included in this table under "Directors."
<F4> Mr. Toney ceased being an executive officer of the Company in May 1996.
Director Agreements
Pursuant to the agreement acquiring Pasadena Research Laboratories,
Inc., Mr. Benjamin was named a director of the Company for a term expiring at
the next annual meeting of shareholders of the Company.
Under agreements between the Company and the John N. Kapoor Trust dated
September 20, 1989, the Trust is entitled to designate two individuals to be
nominated and recommended by the Company's Board of Directors for election as
a director.
Section 16(a) Beneficial Ownership Reporting Compliance
During 1996, Dr. Campbell, a director of the Company, failed to file
timely two Forms 4 to report three transactions, as required by Section 16(a)
of the Securities Exchange Act of 1934, and Mr. Gaw, also a director, failed
to file timely two Forms 4 to report four such transactions. All such
transactions have been reported on amended annual statements on Form 5.
Item 11. Executive Compensation
Summary of Executive Compensation
The following table summarizes the compensation paid by the Company for
services rendered during the fiscal years ended June 30, 1994, 1995 and 1996
to each person who, during fiscal 1996, served as the chief executive officer
of the Company and to each other executive officer of the Company whose total
annual salary and bonus for fiscal 1996 exceeded $100,000:
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Year Ended Number of All Other<F1>
Name and Principal Position June 30 Salary Bonus Options Awarded Compensation
____________________________ _________ ________ _______ _________________ _______________
<S> <C> <C> <C> <C> <C>
John N. Kapoor, Ph.D.<F2> 1996 $10,000<F3> --- --- $40,000<F3>
Chief Executive Officer
Barry D. LeBlanc<F4> 1996 $210,000 --- --- $ 2,100
President and Chief Executive 1995 207,731 --- 34,000 2,310
Officer 1994 184,362 $24,667 50,000 2,310
Harold O. Koch<F5> 1996 $125,000 --- --- $ 938
Senior Vice President 1995 122,247 --- 58,000 1,530
1994 105,602 $16,444 25,000 791
Tim J. Toney<F6> 1996 $120,000 --- --- $ 1,800
Vice President- 1995 117,292 --- 10,000 2,018
Manufacturing, 1994 115,000 $17,250 --- 359
Taylor Pharmaceuticals, Inc.
</TABLE>
____________________
<F1> Represents contributions to the Company's Savings and Retirement Plan.
(See also <F2> below).
<F2> Dr. Kapoor became Chief Executive Officer effective May 3, 1996.
<F3> Dr. Kapoor received $50,000 for his services during all of fiscal 1996
as Chairman of the Board of theCompany, $40,000 of which was waived in
exchange for other consideration, as described in Item 13.
<F4> Mr. LeBlanc ceased being Chief Executive Officer of the Company
effective May 3, 1996.
<F5> Mr. Koch became an executive officer of the Company in February 1993 and
became Senior Vice President in January 1995.
<F6> Mr. Toney ceased being an executive officer of the Company in May 1996.
______________________________
Stock Option Grants
The following table provides information concerning the grant of options
to purchase Company common stock to the executive officers named in the
Summary Compensation Table during the fiscal year ended June 30, 1996. If
there is a reorganization, merger or consolidation involving the Company in
which the Company is not the surviving corporation or a transfer of
substantially all of the property or more than two-thirds of the stock of the
Company, all options will become immediately exercisable in full.
Fiscal 1996 Option Grants
No. of Options % of Total Options Granted Exercise Expiration
Name Granted to Employees in 1994 Price Date
______ ______________ _________________________ ___________ _____________
NONE NONE NONE NONE NONE
______________________________
Aggregate Option Exercises in Fiscal 1996 and
Option Values as of June 30, 1996
<TABLE>
<CAPTION>
No. of Unexercised Value of Unexercised
No. of Shares Options at In-the-Money Options
Acquired Value June 30, 1996 at June 30, 1996
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
_______ ____________ __________ ___________ _____________ ____________ _____________
<S> <C> <C> <C> <C> <C> <C>
John N. Kapoor 0 $ 0 0 0 $ 0 $ 0
Barry D. LeBlanc 143,500 121,075 328,469 0 399,462 0
Harold O. Koch 0 0 118,700 29,300 86,654 15,091
Tim J. Toney 0 0 45,000 5,000 27,500 0
______________________________
</TABLE>
Director Compensation
For services as Chairman of the Board and as a consultant to the
Company, Dr. Kapoor receives a fee of $50,000 per year. Each other director
who is not a salaried officer or consultant of the Company receives a fee for
his services as a director of $1,000 per regular meeting of the Board of
Directors, $250 per telephone meeting and $500 per committee meeting, plus
reimbursement of his expenses related to those services. In addition, the
chairman of each committee (other than Dr. Kapoor) receives an annual fee of
$2,500.
All directors of the Company participate in the Company's Stock Option
Plan for Directors, pursuant to which each director of the Company is granted
an option to acquire 5,000 shares of Company common stock on the day after
each annual meeting of shareholders at which he is elected to serve as a
director. Any director appointed between annual meetings is entitled to
receive a pro rata portion of an option to acquire 5,000 shares. The plan is
administered by the Incentive Compensation Committee. The Committee may, in
its sole discretion, grant an option to purchase up to 100,000 shares to a
person who is not already a director and who becomes a director at any time;
no member of the Committee is eligible to be granted such an option and any
director who has been granted such an option is not permitted to serve on the
Committee for one year after such grant. Options granted under the plan
expire five years from the date of grant. The option exercise price is the
fair market value of the shares covered by the option at the time of the
grant. Options covering a total of 337,917 shares are currently outstanding
and options covering 142,083 shares remain available for issuance under the
plan.
Employment Agreements
In January 1996 the Company entered into employment
agreements with Messrs. LeBlanc, Koch and Toney calling for
annual salaries of, respectively, $210,000, $125,000 and
$120,000, increased annually by the percentage increase in the
consumer price index (and, in the case of Mr. LeBlanc, by
specified increments conditioned on certain increases in the
trading price of the Company's common stock) plus bonuses
determined by the Board of Directors in its discretion. Messrs.
LeBlanc and Koch were provided with the use of an automobile.
The agreements terminate one year after notice of termination is
given by the Company or the employee. If the employee's
employment is terminated by the Company without "cause" (as
defined in the agreement) or by the employee for "good reason"
(as defined in the agreement), the employee is entitled to a lump
sum payment equal to his annual salary plus any performance-based
bonus and options to which the employee would have been entitled
had the performance goals been met. In the event of a change of
control of the Company, the employee is entitled upon termination
of his employment by the Company for "cause" (as defined in the
agreement) or by the employee for "good reason" (as defined in
the agreement), to a lump sum payment equal to his annual salary
until the later of the second anniversary of the change of
control or one year after the notice of termination, plus any
performance-based bonus and options to which the employee would
have been entitled had the performance goals been met. If any
such payments are considered "excess parachute payments" under
Section 4999 of the Internal Revenue Code of 1996, the employee
is entitled to such additional amounts as would be necessary to
place him in the same position after payment of federal, state
and local taxes as he would have been in if such provisions had
not been applicable to him. The Company and Mr. LeBlanc entered
into a separation agreement which was effective as of July 3,
1996 under which Mr. LeBlanc's employment by the Company and all
of his rights under his employment agreement were terminated in
consideration of payment to him of $213,045 in four equal
installments of principal, plus interest, in July and October of
1996 and January and April of 1997, plus accrued but unpaid
vacation and sick leave of $23,423.
Compensation Committee Interlocks and Insider Participation
Drs. Campbell, Bruhl and Yannuzzi, who comprise the Compensation
Committee, are all independent, non-employee directors of the Company.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors reviews, analyzes
and makes recommendations related to compensation packages for the Company's
executive officers, evaluates the performance of the Chief Executive Officer
and administers the grant of stock options under the Company's Incentive
Compensation Plan. The committee awards all stock options. As to other
matters the committee makes recommendations that are presented to the full
Board for final approval.
The Company's executive compensation policies are designed to (a)
provide competitive levels of compensation to attract and retain qualified
executives, (b) reward achievements in corporate performance, (c) integrate
pay with annual and long-term performance goals, and (d) align the interests
of executives with the goals of shareholders.
The Company's executive compensation is comprised of salaries, annual cash
incentive bonuses and long-term incentive opportunities in the form of stock
options.
Salary
Dr. John N. Kapoor, the Chairman of the Company's Board of Directors, has
served as chief executive officer of the Company since May 3, 1996. During
Fiscal 1996 Dr. Kapoor received no additional compensation for serving as the
Company's chief executive officer. The salaries of Barry D. LeBlanc, who
served as president and chief executive officer of the Company until May 3,
1996, and the other executive officers named in the table under Summary of
Executive Compensation, were fixed in their Employment Agreements, which are
described above under "Employment Agreements." Such amounts were determined
after considering the executive compensation policies noted above, the impact
the executive has on the Company, the skills and experience the executive
brings to the job, competition in the marketplace for those skills and the
potential of the executive in the job.
Incentive Bonus
Annual incentive compensation for executive officers during fiscal 1996 was
based on corporate net earnings as compared to pre-established objectives set
at the beginning of the fiscal year. Based on the Company performance in
relation to such objectives, no incentive bonus was granted to any of the
executive officers or any other officer of the Company for fiscal 1996.
Mr. Floyd Benjamin, was hired as Executive Vice President of the Company
and President of the Company's injectable subsidiary effective May 31, 1996.
Pursuant to the three year contract with Mr. Benjamin, he is eligible for
bonuses each fiscal year beginning June 30, 1997 based on certain performance
criteria.
Stock Options
The Committee's practice with respect to stock options has been to grant
options based upon the attainment of Company performance goals and that vest
based on the passage of time. Based on the Company performance in relation to
pre-established objectives, no stock option awards were made to executive
officers in fiscal 1996.
The Compensation Committee is currently evaluating its policies with
respect to executive compensation in light of the recent realignment of the
Company into two distinct operating divisions.
Submitted by the Compensation Committee of the Board of Directors
J. Ed Campbell, M.D. Daniel E. Bruhl, M.D. Lawrence A. Yannuzzi, M.D.
Performance Graph
The graph below compares the cumulative shareholder return on the Company's
Common Stock for the last five fiscal years with the S&P Small Cap 600 Index
and an index composed of a group of peer issuers. The members of the peer
group were selected by the Company based upon size and type of business. The
peer group consists of the following companies: Chesapeake Biological, Inc.;
Faulding, Inc.; Hi Tech Pharmacal Co. Inc.; Insite Vision, Inc.; Nutramax
Products, Inc.; Pharmos Corp.; and Unimed Pharmaceuticals, Inc. The graph
assumes $100 was invested in June 1991 in the Company Common Stock and the two
indices presented. The cumulative total return on the Company's Common Stock
for the period presented was 50%. The cumulative returns for the S&P Small
Cap 600 and the Company's peer group were 132% and 26%, respectively.
[Insert - Performance Graph]
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Stock Ownership of Certain Beneficial Owners
As of October 11, 1996, the following person was known by the Company to
own beneficially more than 5% of its common stock (the only outstanding voting
security of the Company). The information set forth below has been determined
in accordance with Rule 13d-3 under the Securities Exchange Act of 1934 based
upon information furnished by the persons listed.
Name and Address of
Beneficial Owner Shares Beneficially Owned Percent of Class
_____________________ __________________________ _______________
John N. Kapoor, Ph.D. 4,259,000<F1> 24.20%
225 East Deerpath
Suite 250
Lake Forest, Illinois 60045
____________________
<F1> Of such 4,259,000 shares, (i) 3,204,000 are owned directly by the John N.
Kapoor Trust dated September 20, 1989 (the "Trust") of which Dr. Kapoor is
the sole trustee and beneficiary, (ii) 1,000,000 are issuable pursuant to a
warrant issued to the Trust in 1992, (iii) 30,000 are owned by a trust, the
trustee of which is Dr. Kapoor's wife and the beneficiaries of which are
their children, and (iv) 25,000 are issuable pursuant to options granted by
the Company directly to Dr. Kapoor.
______________________________
Stock Ownership of Directors and Executive Officers
The following table sets forth as of June 30, 1996 the beneficial ownership
of shares of Company common stock of each director and named executive officer
of the Company. Unless otherwise indicated, the shares shown as being
beneficially owned are held with sole voting and investment power.
Shares Percent
Beneficially of
Beneficial Owners Owned<F1> Class
___________________ _______________ __________
Directors
Floyd Benjamin 466,667<F2> 2.82%
Daniel E. Bruhl, M.D. 290,517<F3> 1.75%
J. Ed Campbell, M.D. 193,691<F3> 1.17%
George S. Ellis, M.D. 284,260<F3> 1.71%
Doyle S. Gaw 175,824<F3> 1.06%
John N. Kapoor, Ph.D. 4,259,000<F4> 24.20%
Barry D. LeBlanc 614,481<F3> 3.64%
David H. Turner, M.D. 249,650<F3> 1.50%
Lawrence A. Yannuzzi, M.D. 200,883<F3> 1.21%
Executive Officers<F5>
Harold O. Koch 127,107 0.76%
Tim J. Toney 179,967 1.08%
Directors and officers as a 7,099,772(6) 38.69%
group (12 Persons)
______________________________
<F1> Beneficial ownership is determined in accordance with Rule 13d-3
under the Securities Exchange Act of 1934.
<F2> Mr. Benjamin's shares are held by a trust of which Mr. Benjamin and
h is wife are trustees and their child is beneficiary.
<F3> These numbers contain options to purchase shares. The following
directors and officers have options to purchase shares in the
following amounts: Dr. Bruhl - 35,000; Dr. Campbell - 35,000; Dr.
Ellis - 35,000; Mr. Gaw - 35,000; Mr. LeBlanc - 328,469; Dr. Turner
- 35,000; Dr. Yannuzzi - 35,000. Furthermore, several directors'
shares are owned partially by family members or pensions. The
following shows the family members or pension of each such director
and their amounts: Dr. Bruhl's pension - 64,266; Dr. Ellis' wife -
101,500; Mr. LeBlanc's minor children - 34,000.
<F4> The nature of the beneficial ownership of such shares is described
in note (1) to the table under "Stock Ownership of Beneficial
Owners," above.
<F5> Includes Executive Officers of the Company who are named in the
Summary Compensation Table included inItem 11, other than Mr.
Benjamin, Dr. Kapoor and Mr. LeBlanc, who are included in this table
under "Directors."
<F6> Of such 7,099,772 shares, 1,563,469 are not presently outstanding,
but are issuable pursuant to option and warrant rights described
in the preceding footnotes and 213,950 are issuable pursuant to
options held by officers of the Company who are not also directors.
______________________________
Item 13. Certain Relationships and Related Transactions
For services performed by Dr. Kapoor in connection with the Company's
acquisition of Taylor Pharmaceuticals, Inc., the John N. Kapoor Trust dated
September 20, 1989 received, among other things, 125,000 shares of Company
common stock which were subject to forfeiture if the market price of the
Company common stock were not to reach $5.00 by January 15, 1996. At the time
of this issuance, the market price of Company common stock was $3.50 per
share. In August 1995, the Company, the Trust and Dr. Kapoor entered into an
agreement under which (i) the forfeiture period was extended to January 15,
1998, (ii) forfeiture would not occur in the event that persons unaffiliated
with Dr. Kapoor acquire beneficial ownership of more than 50% of the
outstanding common stock of the Company, and (iii) Dr. Kapoor waived his right
to receive $40,000 otherwise payable to him by the Company for serving as
Chairman of the Board in fiscal 1996.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
AKORN, INC.
By: /s/ John N. Kapoor, Ph.D.
_______________________________
John N. Kapoor, Ph.D.
Chief Executive Officer
Date: October 28, 1996
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant, and in
the capacities and on the dates indicated.
Signature Title Date
/s/ John N. Kapoor, Ph.D. Chief Executive October 28, 1996
John N. Kapoor, Ph.D. Officer and
Director (Principal
Executive Officer)
/s/ Eric M. Wingerter Vice President - October 28, 1996
Eric M. Wingerter Finance and Administration
(Principal Financial
Officer and Principal
Accounting Officer)
* /s/ Floyd Benjamin Director October 28, 1996
Floyd Benjamin
* /s/ Daniel E. Bruhl, M.D. Director October 28, 1996
Daniel E. Bruhl, M.D.
* /s/ J. Ed Campbell, M.D. Director October 28, 1996
J. Ed Campbell, M.D.
* /s/ George S. Ellis, M.D. Director October 28, 1996
George S. Ellis, M.D.
* /s/ Doyle S. Gaw Director October 28, 1996
Doyle S. Gaw
* /s/ David H. Turner, M.D. Director October 28, 1996
David H. Turner, M.D.
* /s/ Lawrence A. Yannuzzi, M.D. Director October 28, 1996
Lawrence A. Yannuzzi, M.D.
*By: /s/ Eric M. Wingerter
Eric M. Wingerter
Attorney-in-fact
