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Exchange Act of 1934
Filed by a Party other than the Registranto
o CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to Section 240.14a-12
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Buffalo Grove, Illinois 60089
To Be Held May 25, 2006
1. | To elect five directors to the Board of Directors. | ||
2. | To ratify the selection by the Audit Committee of the Board of Directors of BDO Seidman, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2006. | ||
3. | To transact such other business as may properly come before the meeting or any adjournments thereof. |
By Order of the Board of Directors | ||||
/s/ Arthur S. Przybyl | ||||
Arthur S. Przybyl President and Chief Executive Officer | ||||
Buffalo Grove, Illinois April 21, 2006 |
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2500 Millbrook Drive
Buffalo Grove, Illinois 60089
PROXY STATEMENT
To Be Held May 25, 2006
• | Election of five directors; and | ||
• | Ratification of the selection by the Audit Committee of the Board of Directors of BDO Seidman, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2006. |
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• | To vote in person, come to the annual meeting and we will give you a ballot when you arrive. | ||
• | To vote using the proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the annual meeting, we will vote your shares as you direct. |
• | FOR the proposal to elect the nominated directors as set forth on page 4; and | ||
• | FOR the ratification of the selection by the Audit Committee of BDO Seidman, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2006, as set forth on page 6. |
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• | You may submit a written notice of revocation to Akorn’s Secretary at 2500 Millbrook Drive, Buffalo Grove, Illinois 60089. | ||
• | You may submit a proxy bearing a later date. | ||
• | You may attend the annual meeting and vote in person. Attendance at the meeting will not, by itself, revoke a proxy. |
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Director | ||||||
Name | Age | Since | Present Position with Akorn | |||
John N. Kapoor, Ph.D. | 62 | 1991 | Chairman of the Board | |||
Arthur S. Przybyl | 49 | 2003 | President, Chief Executive Officer, Director | |||
Jerry N. Ellis*#§ | 68 | 2001 | Director | |||
Ronald M. Johnson*#§ | 60 | 2003 | Director | |||
Jerry I. Treppel*#§ | 51 | 2003 | Director |
* | Member of the Audit Committee. Mr. Ellis is Chair of the committee. | |
# | Member of the Compensation Committee. Mr. Johnson is Chair of the committee. | |
§ | Member of the Nominating and Corporate Governance Committee. Mr. Treppel is Chair of the committee. |
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• | The Audit Committee consists of Mr. Ellis (Chairman), Mr. Johnson and Mr. Treppel. | ||
• | The Compensation Committee consists of Mr. Johnson (Chairman), Mr. Ellis and Mr. Treppel. | ||
• | The Nominating and Corporate Governance Committee consists of Mr. Treppel (Chairman), Mr. Ellis and Mr. Johnson. |
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Jerry I. Treppel Ronald M. Johnson Jerry N. Ellis, Chairman
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BENEFICIAL OWNERS AND MANAGEMENT
Shares | Percent of | |||||||
Beneficial Owner | Beneficially Owned (1) | Class | ||||||
Directors | ||||||||
John N. Kapoor, Ph.D. | 30,851,519 | (2) | 38.27 | % | ||||
Jerry I. Treppel | 925,157 | (3) | 1.24 | % | ||||
Jerry N. Ellis | 67,000 | (4) | 0.09 | % | ||||
Ronald M. Johnson | 40,000 | (5) | 0.05 | % | ||||
Named Executive Officers | ||||||||
Arthur S. Przybyl | 1,360,335 | (6) | 1.80 | % | ||||
Jeffrey A. Whitnell | 72,908 | (7) | 0.10 | % | ||||
Abu S. Alam, Ph.D. | 180,047 | (8) | 0.24 | % | ||||
John R. Sabat | 313,489 | (9) | 0.42 | % | ||||
John W. Stern | 92,932 | (10) | 0.12 | % | ||||
Directors and officers as a group (9 persons) | 33,903,387 | 40.27 | % | |||||
Other Beneficial Owners | ||||||||
Arjun C. Waney Flat No. 16 46 Lowndes Square London SW1X 9JV England | 6,046,028 | (11) | 8.14 | % | ||||
Pequot Capital Management Inc. 500 Nyala Farm Rd. Westport, CT 06880 | 18,428,453 | (12) | 23.78 | % |
(1) | Includes all shares beneficially owned, whether directly and indirectly, individually or together with associates, jointly or as community property with a spouse, as well as any shares as to which beneficial ownership may be acquired within 60 days of March 31, 2006 by the exercise of options, warrants or other convertible securities. Unless otherwise specified in the footnotes that follow, the indicated person has sole voting power and sole investment power with respect to the shares. | |
(2) | Includes (i) 20,774,378 shares of common stock owned by the Kapoor Trust of which Dr. Kapoor is the sole trustee and beneficiary, (ii) 3,273,976 shares of common stock owned by EJ Financial/Akorn Management, L.P. of which Dr. Kapoor is managing general partner, (iii) 63,600 shares of common stock owned by a trust, the trustee of which is Dr. Kapoor’s wife and the beneficiaries of which are their children, (iv) 6,337,047 shares of common stock issuable upon exercise of warrants issued to the Kapoor Trust. | |
(3) | Includes (i) 20,000 shares of common stock issuable pursuant to stock options, (ii) 83,333 shares of common stock issuable upon exercise of warrants, (iii) 356,974 shares of common stock and 83,334 shares of common stock issuable upon exercise of warrants, each of which are held indirectly through Wheaton Capital Management LLC, an entity of which Mr. Treppel is the managing member. | |
(4) | Includes 65,000 shares of common stock issuable upon exercise of stock options. | |
(5) | Such shares are issuable upon exercise of stock options. | |
(6) | Includes (i) 1,125,000 shares of common stock issuable upon exercise of stock options and (ii) 41,222 shares of restricted common stock which become fully vested on April 1, 2006. | |
(7) | Includes 57,500 shares of common stock issuable upon exercise of stock options and 15,408 shares of restricted common stock, which become fully vested on April 1, 2006. | |
(8) | Includes (i) 90,000 shares of common stock issuable upon exercise of stock options, (ii) 8,333 shares of common stock issuable upon exercise of warrants and (iii) 14,597 shares of restricted common stock, which become fully vested on April 1, 2006. |
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(9) | Includes (i) 110,000 shares of common stock issuable upon exercise of stock options, (ii) 33,333 shares of common stock issuable upon exercise of warrants and (iii) 14,411 shares of restricted common stock, which become fully vested on April 1, 2006. | |
(10) | Includes (i) 86,250 shares of common stock issuable upon exercise of stock options and (ii) 4,811 shares of restricted common stock, which become fully vested on April 1, 2006. | |
(11) | Includes (i) 960,331 shares of common stock held by Argent Fund Management, Ltd. (“Argent”), for which Mr. Waney serves as Chairman and Managing Director and 52% of which is owned by Mr. Waney, (ii) 628,400 shares of common stock held by First Winchester Investments Ltd. (“First Winchester”), which operates as an equity fund for investors unrelated to Mr. Waney and whose investments are directed by Argent, (iii) 506,000 shares of common stock held by Mr. Waney through individual retirement accounts maintained in the United States, (iv) 3,951,297 shares held jointly by Mr. Waney and Mrs. Judith D. Waney, including 10,000 shares of common stock issuable pursuant to stock options. Under the Rules of the SEC, Mr. Waney may be deemed to be the beneficial owner of the shares held by First Winchester. | |
(12) | Includes (i) 1,851,852 shares of common stock issuable upon conversion of 50,000 shares of Preferred Stock and 185,868 shares of common stock issuable upon conversion of accrued dividends related thereto, (ii) 630,667 shares of common stock issuable upon exercise of warrants, and (iii) 555,556 shares of common stock issuable upon exercise of warrants. |
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Number of | ||||||||||||
securities to | Number of securities | |||||||||||
be issued upon | remaining available for future | |||||||||||
exercise | Weighted-average | issuance under equity | ||||||||||
of outstanding | exercise price of | compensation plans | ||||||||||
options, | outstanding options, | (excluding securities reflected | ||||||||||
Plan Category | warrants and rights | warrants and rights | in the first column) | |||||||||
Equity Compensation plans approved by security holders: | 3,706,475 | $ | 2.45 | 2,687,113 | ||||||||
Equity Compensation plans not approved by security holders: | — | — | — | |||||||||
Total | 3,706,475 | — | 2,687,113 | (1) | ||||||||
(1) | Includes 2,382,875 shares of common stock available under the Amended 2003 Plan and 304,238 shares of common stock available under our Employee Stock Purchase Plan. |
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Year | ||||||||||
Became | ||||||||||
Name | Position | Age | Officer | |||||||
Arthur S. Przybyl | President, Chief Executive Officer and Director | 49 | 2002 | |||||||
Jeffrey A. Whitnell | Sr. Vice President, Chief Financial Officer, Secretary and Treasurer | 50 | 2004 | |||||||
Abu S. Alam, Ph.D. | Senior Vice President, New Business and Product Development | 60 | 2004 | |||||||
John R. Sabat | Senior Vice President, National Accounts | 56 | 2004 | |||||||
John W. Stern | Vice President, Sales and Marketing | 40 | 2004 |
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Long-Term | ||||||||||||||||||||||||||||
Annual Compensation | Compensation | �� | ||||||||||||||||||||||||||
Securities | ||||||||||||||||||||||||||||
Name and Principal | Other Annual | Restricted Stock | Underlying | All Other | ||||||||||||||||||||||||
Position | Year | Salary | Bonus(1) | Compensation(2) | Awards(3) | Options/SARS | Compensation | |||||||||||||||||||||
Arthur S. Przybyl (4) | 2005 | 317,317 | 240,208 | 10,000 | 152,500 | — | 110,374 | |||||||||||||||||||||
President and | 2004 | 305,000 | — | 10,000 | — | 750,000 | 103,306 | |||||||||||||||||||||
Chief Executive Officer | 2003 | 259,089 | — | 10,000 | — | 75,000 | 44,649 | |||||||||||||||||||||
Jeffrey A. Whitnell (5) | 2005 | 197,673 | 108,433 | 6,000 | 57,000 | — | 5,515 | |||||||||||||||||||||
Senior Vice President, | 2004 | 99,654 | — | 3,231 | — | 115,000 | — | |||||||||||||||||||||
Chief Financial Officer, | 2003 | — | — | — | — | — | — | |||||||||||||||||||||
Secretary and Treasurer | ||||||||||||||||||||||||||||
Abu S. Alam, Ph.D. (6) | 2005 | 184,038 | 55,500 | 6,000 | 54,001 | — | 7,275 | |||||||||||||||||||||
Sr. Vice President, | 2004 | 172,847 | — | 6,000 | — | 50,000 | 2,693 | |||||||||||||||||||||
New Business and | 2003 | 157,673 | — | 4,846 | — | 25,000 | 2,365 | |||||||||||||||||||||
Product Development | ||||||||||||||||||||||||||||
John R. Sabat (7) | 2005 | 183,409 | 91,625 | 6,000 | 54,001 | — | 10,410 | |||||||||||||||||||||
Sr. Vice President, | 2004 | 171,500 | — | 6,000 | — | 50,000 | 2,837 | |||||||||||||||||||||
National Accounts | 2003 | 78,692 | — | 2,769 | — | 100,000 | — | |||||||||||||||||||||
John W. Stern (8) | 2005 | 141,372 | 17,911 | 6,000 | 20,551 | — | 5,867 | |||||||||||||||||||||
Vice President, | 2004 | 136,462 | — | 6,000 | — | 40,000 | 20,276 | |||||||||||||||||||||
Sales & Marketing | 2003 | 15,577 | — | 692 | — | 75,000 | — |
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(1) | There were no executive officer bonuses awarded for 2004 or 2003. | |
(2) | Represents automobile allowance. | |
(3) | Mr. Przybyl held 58,429 shares of restricted stock at the end of the last fiscal year valued at $266,436. All 58,429 shares of restricted stock granted to Mr. Przybyl vested on April 1, 2006. Mr. Whitnell held 21,839 shares of restricted stock at the end of the last fiscal year valued at $99,586. All 21,839 shares of restricted stock granted to Mr. Whitnell vested on April 1, 2006. Mr. Alam held 20,690 shares of restricted stock at the end of the last fiscal year valued at $94,346. All 20,690 shares of restricted stock granted to Mr. Alam vested on April 1, 2006. Mr. Sabat held 20,690 shares of restricted stock at the end of the last fiscal year valued at $94,346. All 20,690 shares of restricted stock granted to Mr. Sabat vested on April 1, 2006. Mr. Stern held 7,874 shares of restricted stock at the end of the last fiscal year valued at $35,905. All 7,874 shares of restricted stock granted to Mr. Stern vested on April 1, 2006. No dividends were paid on any restricted stock. | |
(4) | Mr. Przybyl became Chief Executive Officer on February 17, 2003. Before then, Mr. Przybyl was our President and Chief Operating Officer. For 2005, his “All Other Compensation” represents reimbursement for temporary housing expenses of $101,123, Group Term Life Insurance premiums of $540, supplemental long term disability insurance premiums of $1,806, and 401(k) contributions of $6,905. | |
(5) | Mr. Whitnell has been our Chief Financial Officer since June 2004, Secretary and Treasurer since August 2004 and Senior Vice President since November 2004. For 2005, his “All Other Compensation” represents Group Term Life Insurance premiums of $540, supplemental long term disability insurance premiums of $2,010, and 401(k) contributions of $2,965. | |
(6) | Dr. Alam has served as Senior Vice President of New Business/New Products Development since November 2004. For 2005, his “All Other Compensation” represents Group Term Life Insurance premiums of $2,376, supplemental long term disability insurance premiums of $2,138, and 401(k) contributions of $2,761. | |
(7) | Mr. Sabat has been our Senior Vice President of National Accounts since October 2004. For 2005, his “All Other Compensation” represents Group Term Life Insurance premiums of $1,548, supplemental long term disability insurance premiums of $ 2,203, 401(k) contributions of $5,302, and a $1,357 benefit associated with our employee stock purchase plan. | |
(8) | Mr. Stern has been our Vice President of Sales & Marketing since November 2003. For 2005, his “All Other Compensation” represents Group Term Life Insurance premiums of $270, supplemental long term disability insurance premiums of $868, 401(k) contributions of $4,255, and a $474 benefit associated with our employee stock purchase plan. |
Number of | Value of | |||
Securities Underlying | Unexercised in-the- | |||
Unexercised Options | Money Options at | |||
at FY-End(#) | FY-End($)(1) | |||
Name | Exercisable/Unexercisable | Exercisable/ Unexercisable | ||
Arthur S. Przybyl | 1,106,250/18,750 | 3,172,625/69,875 | ||
Jeffrey A. Whitne ll | 57,500/57,500 | 59,775/59,775 | ||
Abu S. Alam, Ph.D. | 98,750/31,250 | 134,225/48,875 | ||
John R. Sabat | 100,000/50,000 | 315,250/124,750 | ||
John W. Stern | 76,250/38,750 | 165,075/69,825 |
(1) | Value of unexercised in-the-money options calculated using the December 31, 2005 closing price of $4.56. |
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![(PERFORMANCE GRAPH)](https://capedge.com/proxy/DEF 14A/0000950137-06-004822/c04466dc0446601.gif)
Total Return Chart | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | ||||||||||||||||||
AMEX US Index | 93 | 86 | 71 | 96 | 110 | 119 | ||||||||||||||||||
AMEX Health Products and Services Index | 119 | 113 | 78 | 137 | 140 | 121 | ||||||||||||||||||
Akorn, Inc. (AKN) | 134 | 82 | 26 | 43 | 78 | 93 |
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• | Assure executive compensation is based upon performance in the achievement of pre-determined financial and business objectives; | ||
• | Provide equity-based compensation incentives to meld the financial interests of executive officers with those of shareholders; and | ||
• | Provide incentives that promote executive retention. |
• | Base salary; | ||
• | Performance-based annual bonus, which may be paid in cash, stock units, shares of stock or a combination of these; and | ||
• | Periodic grants of long-term stock-based compensation, such as stock options, restricted stock units, performance shares and/or restricted stock, which may be subject to performance-based and/or time-based vesting requirements. |
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Ronald M. Johnson, Chairman Jerry I. Treppel Jerry N. Ellis
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Secretary
April 21, 2006
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AUDIT COMMITTEE CHARTER
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![(BAR CODE)](https://capedge.com/proxy/DEF 14A/0000950137-06-004822/c04466dc0446602.gif)
![(AKORN INC. LOGO)](https://capedge.com/proxy/DEF 14A/0000950137-06-004822/c04466dc0446600.gif)
000004 | 000000000.000 ext 000000000.000 ext 000000000.000 ext | |||||
![]() | MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 ![]() | Least Address Line | 000000000.000 ext 000000000.000 ext 000000000.000 ext 000000000.000 ext C 1234567890 J N T ![]() | |||
o | Mark this box with an X if you have made changes to your name or address details above. |
A | Election of Directors |
For | Withhold | |||
01 - John N. Kapoor, Ph.D. | o | o | ||
02 - Arthur S. Przybyl | o | o | ||
03 - Jerry N. Ellis | o | o | ||
04 - Ronald M. Johnson | o | o | ||
05 - Jerry I. Treppel | o | o | ||
B | Issues |
For | Against | Abstain | ||||
2. Proposal to ratify the selection of BDO Seidman, LLP to serve as Akorn’s independent registered public accounting firm for the fiscal year ending December 31, 2006. | o | o | o | |||
3. In the discretion to vote upon such other business as may properly come before the Annual Meeting and any adjournments thereof. (Please See Reverse Side) | ||||||
C | Authorized Signatures - Sign Here - This section must be completed for your instructions to be executed. |
Signature 1 - Please keep signature within the box | Signature 2 - Please keep signature within the box | Date (mm/dd/yyyy) | ||
/ / |
n | 0 0 8 5 7 1 | 1 U P X | C O Y | + |
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This Proxy is Solicited on Behalf of the Board of Directors of AKORN, INC.
The undersigned hereby constitutes and appoints Arthur S. Przybyl and Jeffrey A. Whitnell or either of them proxy for the undersigned, with full power of substitution, to represent the undersigned and to vote, as designated on the reverse side, all of the shares of common stock of Akorn, Inc. (the “Company”) that the undersigned is entitled to vote held of record by the undersigned on April 7, 2006, at the annual meeting of shareholders of Akorn to be held on May 25, 2006 (the “Meeting”), and at all adjournments thereof.
This proxy when properly executed will be voted in the manner directed herein by the undersigned shareholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES AND FOR THE PROPOSALS LISTED ON THE REVERSE SIDE. THE REVERSE SIDE. THE INDIVIDUALS DESIGNATED ABOVE WILL VOTE IN THEIR DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.