Document:

exv10w1

 

Exhibit 10.1

Execution Version

     EXECUTIVE EMPLOYMENT AGREEMENT This Executive Employment Agreement (this “Agreement”),
dated as of April 24, 2006 (the “Effective Date”), is entered into by and between Akorn, Inc., a
Louisiana corporation with principal executive offices located at 2500 Millbrook Drive, Buffalo
Grove, Illinois 60089 (the “Company”), and Arthur S. Przybyl, an individual resident of the State
of Illinois (the “Executive”), with respect to the following facts:

     A. The Company is engaged in the development, manufacturing and marketing of branded and
multi-source pharmaceutical products.

     B. The Executive was previously employed by the Company as its President. He was named the
Interim Chief Executive Officer under the terms of an offer letter dated January 22, 2003 (the
“Offer Letter”). The Board of Directors of the Company (the “Board”) formally appointed the
Executive to serve as the Company’s Chief Executive Officer as of May 20, 2003, without amendment
or termination of the Offer Letter and without entry into a formal agreement. The Executive has
served as President and Chief Executive Officer since such date.

     C. The Company considers the continued availability of the Executive’s services, managerial
skills and business experience to be in the best interests of the Company and its shareholders and
accordingly desires to enter into this Agreement with the Executive.

     D. The Executive desires to continue his employment with the Company on the terms and
conditions contained in this Agreement.

     E. The Board, through its Compensation Committee (the “Compensation Committee”), has
authorized the Company to enter into this Agreement.

     NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:

     1. Termination of Offer Letter. The Offer Letter is deemed terminated and of no
further force and effect as of the Effective Date.

     2. Employment and Acceptance. The Company hereby employs the Executive to serve as
President and Chief Executive Officer of the Company upon the terms and conditions set forth in
this Agreement. The Executive hereby accepts such employment upon such terms and conditions.

     3. Obligations of Executive.

          3.1 Duties. As President and Chief Executive Officer, the Executive shall have
general and active responsibility for the management of the business of the Company, shall be the
chief executive officer of the Company, shall supervise the daily operations of the business of the
Company, and shall have responsibility to implement all orders, policies and resolutions of the
Board and all committees thereof. The Executive shall also have such other duties as the
Compensation Committee may determine and instruct from time to time consistent with the Executive’s
position and authority.

1

 

          3.2 Commercially Reasonable Best Efforts; Legal Compliance. The Executive will expend
his commercially reasonable best efforts on behalf of the Company; will abide by all lawful
policies and decisions made by the Company, the Board and any committee thereof; and will use such
efforts to comply with any and all applicable federal, state, local and foreign laws, regulations
and ordinances and any final cease and desist orders.

          3.3 Full-Time. The Executive shall devote his full business time and effort to the
business of the Company. The Executive will not engage in any work, paid or unpaid, that creates
an actual or potential conflict of interest with the Company or that interferes with the
performance of his duties under this Agreement. The Executive may (i) serve on corporate, civic or
charitable boards or committees, (ii) deliver lectures and fulfill speaking engagements, or (iii)
manage personal investments, so long as such activities do not in the view of the Board interfere,
in any substantive respect, with the Executive’s responsibilities hereunder or conflict in any
material way with the business of the Company or its Code of Ethics. If the Compensation Committee
believes that such a conflict exists, the Compensation Committee may ask the Executive to choose
whether to discontinue such other work or resign his employment with the Company. Activities taken
on with the consent of the Compensation Committee shall not constitute a violation of this Section
3.3.

          3.4 Work Location. Although the Executive may be required to travel on behalf of the
Company from time to time, his principal place of work shall be located in the Company’s corporate
offices in Buffalo Grove, Illinois or in a new corporate office located within 30 miles of such
location as may be determined by the Compensation Committee.

     4. Term of Employment.

          4.1 Initial Term. The employment relationship pursuant to this Agreement shall
commence on the Effective Date and shall continue until the third anniversary thereof (the “Initial
Term”), unless sooner terminated in accordance with Section 8 below.

          4.2 Subsequent Terms. On completion of the Initial Term, this Agreement will
automatically renew for subsequent one-year terms (each, a “Subsequent Term”) unless either the
Company or the Executive provides 120 days prior written notice of non-renewal with respect to any
Subsequent Term. In the event of non-renewal, this Agreement will expire at the end of the Initial
Term or the Subsequent Term, as applicable. The Initial Term and any one or more Subsequent Terms
are referred to in this Agreement, collectively, as the “Term”.

     5. Compensation. In consideration of the services to be rendered by the Executive
pursuant to this Agreement, the Company agrees to compensate the Executive as follows:

          5.1 Base Salary.

               5.1.1 The Company shall pay to the Executive an annual base salary (the “Base Salary”). The
Base Salary will be payable in accordance with the normal payroll practices of Company, less all
applicable withholdings and deductions pursuant to applicable laws and regulations and the policies
and procedures of the Company.

               5.1.2 The Base Salary for 2006, effective retroactive to January 1, 2006, will be $400,000.
The Base Salary for 2007 shall increase to $440,000, effective as of January 1, 2007, if the
Company achieves positive net income for fiscal 2006.

2

 

               5.1.3 The Base Salary for subsequent years may be increased by the Board in its sole
discretion, after consideration of the recommendations of the Compensation Committee, on an annual
basis. The Executive acknowledges that no increase in Base Salary is either required or guaranteed
by this Agreement.

          5.2 Annual Bonus.

               5.2.1 During the Term of this Agreement the Executive shall be eligible for bonuses, as
determined by the Board in its sole discretion after consideration of the recommendations of the
Compensation Committee, as follows:

               (a) The Board shall, acting in good faith in compliance with their fiduciary duty,
approve annual performance goals, the achievement of which will result in bonus compensation
of up to 75% of the Base Salary amount.

               (b) The Board shall, acting in good faith in compliance with their fiduciary duty,
approve additional annual performance goals, the achievement of which, provided that the 75%
bonus set forth in clause (a) above has previously been achieved in full, will result in
additional bonus compensation of up to 25% of the Base Salary amount.

               (c) The Board may, in its sole discretion, approve additional bonuses after
consideration of the recommendations of the Compensation Committee. In determining whether
to award such additional bonuses and in determining the amount thereof, the Board will focus
on overall Company performance and individual contributions by the Executive to the
achievement of established Company goals as well as on comparable marketplace compensation
comparisons.

               5.2.2 If the Board determines to award a bonus in any given year, a portion or all of such
bonus may be made in the form of an Equity Award (as defined in Section 5.3) rather than in cash.
The type of equity instrument embodied in any such Equity Award, and the proportion of equity to
cash contained in such bonus (if any), awarded by the Executive shall conform to the bonuses
awarded to other executive officers (as identified in the Company’s Definitive Proxy Statement
filed with the Securities and Exchange Commission) of the Company in the applicable year. If no
bonuses are awarded to any executive officers other than the Executive in a given year, then the
determination to include an Equity Award in the bonus granted to the Executive for such year shall
be made in the sole discretion of the Board after consideration of the recommendations of the
Compensation Committee. The Executive acknowledges that although a bonus may be awarded in any
given year, except as otherwise set forth in Section 5.2.1, bonuses are neither required nor
guaranteed by this Agreement.

               5.2.3 All bonus calculations shall be made by the Chief Financial Officer of the Company,
subject to review and approval by the Board after consideration of the recommendations of the
Compensation Committee. The calculation and payment of bonuses shall be made within 30 days after
receipt of the audited financial statements of the Company. All bonuses will be payable in cash
and/or in the form of an Equity Award as determined by the Board pursuant to Section 5.2.2.

3

 

          5.3 Equity-Based Incentive Awards. As partial consideration for this Agreement, the
Executive has or will receive the following equity award grants on the dates specified and on the
additional terms and conditions set forth on Schedule 1 (collectively, the “Initial Equity
Grant”): (i) 250,000 shares of restricted stock on April 20, 2006, (ii) 500,000 common stock
options on April 20, 2006 and (iii) 400,000 common stock options on January 1, 2007. In addition to
the Initial Equity Grant, during the Term the Executive may, in the sole discretion of the Board
after consideration of the recommendations of the Compensation Committee, receive one or more
additional equity award grants (“Equity Awards”) from time to time. Any such Equity Awards will be
determined by the Board in its sole discretion, after consideration of the recommendations of the
Compensation Committee, and will take into account the following factors, among others: (a) the
Company’s needs in retaining the services of the Executive, (b) the amount and nature of Equity
Awards granted to other executives and employees, and (c) the specific role and contribution of the
Executive. In determining whether to make an Equity Award and in determining the amount of any
Equity Award, the Board (and the Compensation Committee in making its recommendations to the Board)
will focus on overall Company performance and individual contributions to the achievement of
established Company goals as well as on comparable marketplace compensation comparisons. The
Executive acknowledges that although additional Equity Awards may be granted, such Equity Awards
are neither required nor guaranteed by this Agreement. The Initial Equity Grant will be granted in
accordance with, and governed by the terms and conditions of, the Company’s Amended and Restated
2003 Stock Option Plan (the “Stock Option Plan”). Any additional Equity Awards will be granted in
accordance with, and governed by the terms and conditions of, the Stock Option Plan and any
replacement or superseding plan, as applicable.

     6. Benefits. In further consideration of the services to be rendered by the Executive
pursuant to this Agreement, the Company agrees to compensate and provide benefits to the Executive
as follows; provided, however, that the Compensation Committee may, in its sole
discretion, modify any such benefits on a prospective basis, at any time, effective upon 60 days
prior written notice to the Executive, so long as such modification is applicable to all executives
of the Company who are entitled to receive the benefits being modified.

          6.1 Health, Insurance and Retirement. The Executive will receive all health,
insurance and retirement benefits generally available to executives of the Company including,
without limitation, medical, dental, prescription drug, 401(k) retirement savings program, life
insurance and paid time off. As of the date of this Agreement, the benefits provided to the
Executive are as set forth on Schedule 2. All such benefits are subject to the terms and
conditions of applicable benefit plan documents. The Executive agrees to submit to any application
process, including medical testing, requested by the Company or any benefit provider in connection
with any benefit provided to the Executive hereunder. Subject to Section 8.2.1(d), the Company
may, in its sole discretion at any time, change the nature and terms of the benefits described in
this Section 6.1, including without limitation those set forth on Schedule 2, provided that
such changes are applicable to all executives of the Company.

          6.2 Vacation and Paid Time Off. The Executive will receive four weeks of paid
vacation and an additional five days of Paid Time Off (PTO) per year, to be taken at the
Executive’s discretion. Vacation must be taken in the calendar year in which it accrues. Any
unused vacation time will expire on December 31 of the calendar year in which it accrued. Unused
PTO may roll over for one year. Any unused PTO will expire on December 31 of the subsequent
calendar year. No payment shall be made to the Executive in consideration of any unused or expired
vacation or PTO.

          6.3 Stock Purchase Program. The Executive will be eligible to purchase shares of the
Company’s common stock through participation in the Company’s Employee Stock Purchase Plan.

4

 

          6.4 Stock and Option Grants. The Executive will be designated as a participant in the
Stock Option Plan and, as such, will be eligible to receive grants, under and pursuant to the Stock
Option Plan, of stock options, restricted or unrestricted stock awards, restricted stock units,
stock appreciation rights, performance unit awards, performance share awards and other stock-based
awards, including without limitation Equity Awards pursuant to Section 5.4 hereof. In accordance
with and subject to the provisions of the Stock Option Plan, the Administrator (as designated
thereunder) will have the authority, in its discretion, to determine whether to grant any such
awards to the Executive and, if granted, to determine the terms of such awards including, without
limitation, the exercise price, the number of shares subject to each award, the exercise period for
the award, and the form of consideration payable upon exercise.

          6.5 Vehicle Allowance. The Executive will receive a vehicle allowance of $10,000 per
year to be used at the Executive’s discretion.

     7. Business Expenses. The Company will pay or reimburse the Executive for all
reasonable and necessary business expenses, including, without limitation, expenses related to
travel and entertainment, incurred in the performance of the Executive’s duties under this
Agreement. To obtain reimbursement, expenses must be submitted promptly with appropriate
supporting documentation in accordance with Company’s policies and procedures.

     8. Termination of Employment.

          8.1 Termination for Good Cause.

               8.1.1 Termination for “Good Cause” means termination for any one or more of the following
reasons:

               (a) Acts or omissions by the Executive constituting gross misconduct, dishonesty or
moral turpitude with respect to the Executive’s obligations under this Agreement or
otherwise relating to or affecting the business of the Company;

               (b) The Executive’s conviction, guilty plea or entry of a no contest plea for fraud,
misappropriation or embezzlement, or any felony or crime of moral turpitude;

               (c) The Executive’s inability to perform all of the essential functions and duties of
his position, provided, however, that the Company has complied with
applicable law in connection with such inability;

               (d) The Executive’s death; or

               (e) The Executive’s intentional violation of any material rule, regulation or policy of
the Company or any applicable federal, state, local or foreign law, regulation or ordinance
material to the business of the Company, or any final cease and desist order.

               8.1.2 The Company may terminate the Executive’s employment for Good Cause effective upon
written notice to the Executive setting forth which clause or clauses of Section 8.1.1 comprise the
basis for termination.

5

 

               8.1.3 In the event of termination for Good Cause, the Executive will receive (a) his Base
Salary pro rated through the date of termination, (b) any benefits and expense reimbursements to
which he is entitled pursuant to Sections 6 and 7, respectively, through such date, less all
applicable withholdings and deductions pursuant to applicable laws and regulations and the policies
and procedures of the Company (collectively, the “Standard Entitlements”), and (c) accelerated
vesting of any unvested portion of the Initial Equity Award. All other Company payment obligations
to the Executive pursuant to this Agreement will automatically terminate and be completely
extinguished as of the date of termination except as set forth in Section 18.

          8.2 Termination for Good Reason.

               8.2.1 Termination for “Good Reason” means termination upon the occurrence of any one or more
of the following events absent the Executive’s prior written consent to such event,
provided that (x) the Executive gives the Company written notice describing such event and
stating the Executive’s intent to terminate, and (y) the Company fails to cure such event within 15
days after receipt of such notice:

               (a) A material reduction in the Executive’s responsibilities, authority, or title
including without limitation the involuntary removal of the Executive from the Board or the
Board’s failure to nominate the Executive for re-election thereto; provided,
however, that an involuntary removal from the Board or a failure to nominate the
Executive for re-election to the Board in conjunction with the existence of Good Cause for
termination shall not constitute termination for Good Reason;

               (b) A change in the Executive’s work location to a new location that is more than 30
miles from the current corporate office;

               (c) A reduction in the Executive’s Base Salary; or

               (d) A material reduction in the quality or quantity Executive’s benefits set forth in
Section 6.1.

               8.2.2 The Executive may terminate his employment for Good Reason at any time upon 60 days
prior written notice setting forth which clause or clauses of Section 8.2.1 comprise the basis for
termination.

               8.2.3 In the event of termination for Good Reason, the Executive will receive the Standard
Entitlements through the date of termination. In addition, the Executive will receive a severance
payment comprised of the following (collectively, the “Severance Payment”): (x) a cash amount equal
to 18 months of Base Salary, payable in the sole discretion of the Board after consideration of the
recommendations of the Compensation Committee, either (a) in a lump sum, or (b) over time in
accordance with Company’s regular payroll cycle, (y) a cash bonus equal to (i) 1.5 times the last
annual bonus received by the Executive (if termination occurs in 2006), or (ii) 1.5 times the
average of the last two annual bonuses received by the Executive (if termination occurs in 2007 or
thereafter), and (z) accelerated vesting of all unvested Equity Awards granted on or after the
Effective Date that would otherwise vest during the 18-month period following termination;
provided, however, that as consideration for the Severance Payment and as a
precondition to receipt thereof the Executive must do all of the following: (1) comply with all
surviving provisions of this Agreement; (2) execute a full general release, releasing all claims,
known or unknown, that the Executive may have against the Company arising out of or any way related
to the Executive’s employment or termination of employment with the

6

 

Company; and (3) agree to act as a consultant on a reasonable basis for the Company during
regular business hours and with full reimbursement for all reasonable and necessary expenses for up
to a maximum of 30 days, at his then-current Base Salary, if requested to do so by the Board in its
sole discretion after consideration of the recommendations of the Compensation Committee prior to
or upon the termination date (clauses (1)-(3), collectively, the “Severance Consideration”). All
other Company payment obligations to the Executive pursuant to this Agreement will automatically
terminate and be completely extinguished as of the date of termination, except as set forth in
Section 18.

          8.3 Termination Without Cause.

               8.3.1 Termination “Without Cause” means termination for any reason (other than for Good Cause
or Good Reason) or for no reason.

               8.3.2 The Company may terminate the Executive’s employment Without Cause at any time upon 60
days prior written notice.

               8.3.3 In the event of termination Without Cause, the Executive will receive the Standard
Entitlements through the date of termination. In addition, conditioned upon the Company’s receipt
of the Severance Consideration, the Executive will receive the Severance Payment. All other
Company payment obligations to the Executive pursuant to this Agreement will automatically
terminate and be completely extinguished as of the date of termination, except as set forth in
Section 18.

          8.4 Voluntary Resignation. The Executive may voluntarily resign his position with the
Company, at any time and for any reason or no reason, upon 60 days prior written notice to the
Company. In the event of voluntary resignation, the Executive will be entitled to receive the
Standard Entitlements through the date of the resignation and will not be entitled to receive the
Severance Payment or any other payments. The Compensation Committee reserves the right,
exercisable in its sole discretion, to pay the Executive his Base Salary for such 60 day period, on
a pro rated basis and less all applicable withholdings and deductions pursuant to applicable laws
and regulations and the policies and procedures of the Company, in lieu of the Executive remaining
employed during such period. All other Company payment obligations to the Executive pursuant to
this Agreement will automatically terminate and be completely extinguished as of the date of
termination, except as set forth in Section 18.

          8.5 Termination upon Nonrenewal of Agreement. In the event either the Company or the
Executive decides not to renew this Agreement at the end of the Initial Term or any Subsequent Term
in accordance with Section 4, this Agreement will expire, the Executive’s employment with the
Company will terminate, and the Executive will receive the Standard Entitlements through the date
of termination. In addition, conditioned upon the Company’s receipt of the Severance
Consideration, the Executive will receive the Severance Payment. All other Company payment
obligations to the Executive pursuant to this Agreement will automatically terminate and be
completely extinguished as of the date of termination, except as set forth in Section 18.

          8.6 Termination upon Change in Control.

     8.6.1 Definitions.

               (a) A “Change in Control” of the Company means, for purposes of this Agreement, the
occurrence of any of the following events: (i) a merger or consolidation of the Company with
any other entity such that, after the transaction, more than 50% of the outstanding “Voting
Securities” (defined as any securities that entitle the holder thereof to vote

7

 

for the election of directors) of the surviving entity are beneficially owned by
“Persons” (as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) who did not beneficially own Voting Securities of the Company prior to the
transaction, (ii) an acquisition, directly or indirectly, of more than 50% of the
outstanding shares of any class of Voting Securities of the Company by any Person, (iii) a
sale of all or substantially all of the assets of the Company or the liquidation of the
Company, or (iv) the replacement of a majority of the Board during any 12-month period by
directors whose appointment or election is not endorsed by a majority of the Board prior to
the date of the appointment or election.

               (b) A “Change in Control Termination” means a termination of the Executive’s employment
for Good Reason or Without Cause that occurs upon or within 24 months after a Change in
Control.

               8.6.2 Change in Control Severance. In the event of a Change in Control Termination,
the Executive shall receive the following payments and benefits (collectively, the “Change in
Control Severance”):

               (a) Continuation, until the 30-month anniversary of the Change in Control Termination,
of all medical, dental and prescription drug benefits to which the Executive is entitled
pursuant to Section 6.1 as of the Change in Control Termination. Should the Company
introduce any changes to its medical, dental and/or prescription drug benefit plans during
such period, the Executive’s coverage under such plans shall be affected in the same manner
as all other plan participants. All other benefits to which the Executive is entitled
pursuant to Section 6.1 shall cease, effective upon the Change in Control Termination.

               (b) A cash amount equal to 2.5 times Base Salary, payable in the sole discretion of the
Compensation Committee either (i) in a lump sum, or (ii) over time in accordance with
Company’s regular payroll cycle;

               (c) A cash bonus equal to (i) 2.5 times the most recent annual bonus received by the
Executive (if termination occurs in 2006), or (ii) 2.5 times the average of the two most
recent annual bonuses received by the Executive (if termination occurs in 2007 or
thereafter);

               (d) Accelerated vesting of all unvested Equity Awards granted on or after the Effective
Date that would otherwise vest on any date following termination; and

               (e) Reimbursement for up to $20,000 for outplacement and job placement assistance
chosen by the Executive.

               8.6.3 Gross-Up for Taxes. In the event of a Change in Control Termination, and in
addition to the Change in Control Severance, the Company shall pay the Executive an amount of cash
equal to amount of combined federal and state income tax payable by the Executive with respect to
the Change in Control Severance (the “Gross-Up Payment”). The Gross-Up Payment shall be capped at
$2.5 million in the event of a Change in Control Termination on or before December 31, 2007, and
shall not be capped in the event of a Change in Control Termination thereafter.

8

 

          8.7 Severance Payment Deferral. In the event that (a) Section 409A of the Code
applies to a Severance Payment made pursuant to Sections 8.1.3, 8.2.3 or 8.3.3, and (b) the
Executive is a “specified employee” (as defined in Section 409A), and (c) Section 409A requires a
delay in payment of the Severance Payment, and (d) the Executive has signed an Election Notice
substantially in the form of Exhibit A prior to signing this Agreement, then the Company
shall pay the Severance Payment on the first business day following the six-month anniversary of
the termination date. If the Compensation Committee has elected to pay the Severance Payment in
installments, then payment of the first installment shall be so delayed; provided, however, that
the first payment shall equal six months of installments (together with accrued interest) that
would otherwise have become payable if the Executive was not a specified employee. Interest, at a
rate equal to the then-current One-Year Treasury Bill Rate (calculated as of the date any Severance
Payment becomes due and payable), shall accrue and be paid on the principal amount of the Severance
Payment during the initial six-month deferral period and any additional deferral period caused by
use of the installment payment method. Accrued interest shall be paid current with payment of the
Severance Payment or each installment thereof, as applicable.

     9. Confidential Information.

          9.1 Access to Confidential Information. During the course of the Executive’s
employment, the Executive has had and will continue to have access to certain Confidential
Information of the Company.

          9.2 Definition of Confidential Information. The term “Confidential Information” means
all information and material that is proprietary to the Company and that has been or is disclosed
to or obtained by the Executive, whether by or from the Company or otherwise, and whether prior to,
on or after the Effective Date, which relates to the Company’s past, present or future active
business development activities and is not known or freely available to the general public.
Confidential Information includes, without limitation, all of the following pertaining to the
Company, whether written or oral, and whether in hard copy, electronic or other format: (a)
designs, drawings, specifications, techniques, models, data, source code, object code,
documentation, diagrams, flow charts, research, development, processes, procedures, prototypes,
samples, product formulations, “know-how,” patents, trademarks, intellectual property, and new
product or new technology information; (b) development or marketing techniques and materials; (c)
business, development and marketing timetables, strategies and plans; (d) the names of, and other
information related to, customers, contacts, suppliers, competitors and personnel; (e) pricing
policies, financial statements and other financial information; (f) information of a similar nature
to that described in clauses (a)-(e) above, whether or not reduced to writing or other tangible
form; and (g) any other trade secrets or nonpublic business or information. The Executive agrees
and acknowledges that such Confidential Information has been acquired by the Company over a
considerable period of time, through great effort and expense. The Executive agrees and
acknowledges that such Confidential Information and its continued confidentiality are critical to
the Company’s business operations, and that the disclosure or loss of such Confidential Information
would cause the Company significant and irreparable harm. Confidential Information includes not
only information belonging to the Company which existed before the date of this Agreement, but also
information developed during the term of the Executive’s employment with the Company. However,
Confidential Information does not include any information which: (i) is or becomes generally
available to the public by acts other than those of the Executive outside of the scope of his
employment after receiving it; (ii) is released pursuant to a court order or as otherwise required
by law, provided that the Executive immediately notifies the Company of such court order or legal
requirement, and gives the Company a reasonable opportunity and cooperates with the Company to
contest, limit or condition the scope of such required disclosure; or (iii) is shown by acceptable
evidence to have been developed by the Executive independently and outside the scope of his
employment with the Company.

9

 

          9.3 Non-Disclosure of Confidential Information. The Executive will not, either during
the term of the Executive’s employment with the Company or at any time thereafter, publish or
disclose, or cause or allow with his consent or knowledge to be published or disclosed, any
Confidential Information to any person or entity other than an employee of the Company with reason
to know such Confidential Information, unless such disclosure (i) is necessary for the performance
of the Executive’s obligations under this Agreement, (ii) is consented to by the Board in advance
of such disclosure in writing, which consent may be withheld in the Board’s sole discretion; or
(iii) is required by applicable law or order, provided, however, that prior to any
disclosure pursuant to clause (iii) the Executive will provide prompt written notice to the Company
of the intended disclosure and will assist the Company (upon the request and at the sole expense of
the Company) in obtaining a protective order or other reliable assurance from the proposed
recipient that the Confidential Information intended to be disclosed to such recipient will be
afforded confidential treatment and be used only for the limited purposes required by such
applicable law or order.

     10. Non-Competition.

          10.1 During the term of the Executive’s employment with the Company, the Executive will not
Compete with the Company nor will the Executive refer any client or potential client of the Company
to any competitor of the Company without the Board’s prior written consent, which may be withheld
in the Board’s sole discretion. Upon the termination of the Executive’s employment with the
Company for any reason, including without limitation upon non-renewal of this Agreement pursuant to
Section 4.2, and indefinitely thereafter, the Executive will not, Compete with the Company using
any Confidential Information. In addition, for a period of 18 months after termination of the
Executive’s employment with the Company for any reason, the Executive will not Compete with the
Company in any other manner within 100 miles of any geographic location in which the Company is
Conducting Business as of the date of such termination.

          10.2 The term “Compete” means to compete directly or indirectly in any way, including, without
limitation, by serving as an employee, officer, director, consultant, shareholder, volunteer,
lender or agent of any business enterprise of the same nature as, or which is in direct or indirect
competition with, any business endeavor in which (a) the Company is engaged as of the Effective
Date, or (b) the Company, as of the Effective Date or at any time thereafter during the term of
this Agreement, is engaged in, developing or actively planning to become involved in. The term
“Conducting Business” in a given location means that the Company has an office, vendor, wholesaler,
distributor, customer, licensee or licensor in such location or that the Company is party to an
exclusive license agreement that includes such location within its territory.

          10.3 The Executive agrees and acknowledges that compliance with the provisions set forth in
this Section 10 will not, and is not expected to, substantially interfere with his livelihood or
ability to earn a living in his chosen profession.

     11. Nonsolicitation.

          11.1 Nonsolicitation of Employees and Independent Contractors. During the term of the
Executive’s employment with the Company and for a period of 24 months thereafter, the Executive
will not directly or indirectly, separately or in association with others, solicit or encourage or
cause others to solicit or encourage any of the Company’s employees or independent contractors to
discontinue their employment or services with the Company. This restriction shall not apply to any
general public solicitation or advertisement for employment carried out by any employer or business
affiliate of the Executive during the 24-month period following termination of employment.

10

 

     11.2 Nonsolicitation of Customers. The Executive acknowledges that proprietary
information about the Company’s customers is confidential and constitutes Confidential Information
of the Company. During the term of the Executive’s employment with the Company and for a period of
24 months thereafter, the Executive will not, either directly or indirectly, separately or in
association with others, whether for the benefit of the Executive or for any other person or
entity, solicit, or attempt to solicit, for purposes of competing with the Company, any of the
customers of the Company whom the Executive solicited, on whom the Executive called, or with whom
the Executive transacted business or had any contact with, direct or indirect, or became aware of
or acquainted with, during the Executive’s association with the Company.

     12. Injunctive Relief. The Executive acknowledges that his breach of the covenants
contained in Sections 9, 10 and 11 (collectively, the “Covenants”) would cause irreparable injury
to the Company and agrees that in the event of any such breach, the Company shall be entitled to
seek (in addition to any other relief the Company may elect to seek) temporary, preliminary and
permanent injunctive relief in accordance with Section 16.3 without the necessity of proving actual
damages or posting any bond or other security.

     13. Accounting and Indemnification. In the event the Executive breaches any of the
Covenants, the Company shall have the right and remedy to require the Executive to account for and
pay over to the Company all profits, monies or other benefits derived or received by the Executive
as a result of any such breach of the Covenants. Both parties agree that the provisions of this
Section 13 may not adequately compensate the Company for injury in the event of the Executive’s
breach of any of the Covenants. Accordingly, the parties agree the provisions of this Section 13
may not in any way limit or interfere with the Company’s right to seek injunctive relief pursuant
to Section 12.

     14. Return of Company Property. Upon termination of the Executive’s employment with
the Company for any reason, or upon the written request of the Board at any time, the Executive
agrees to promptly deliver to the Company all records, files, computer disks, memoranda, documents,
lists and other information regarding or containing any Confidential Information of the Company,
including, without limitation, all copies, reproductions, summaries or excerpts thereof, then in
the Executive’s possession or control, whether prepared by the Executive or others and whether in
written, electronic or other form. The Executive also agrees to promptly return, upon termination
of employment or upon the written request of the Board at any time, any and all Company property
issued to the Executive, including, without limitation, computers, fax machines, printers, cellular
phones, PDAs, keys and credit cards. The Executive further agrees that, should he discover any
Company property or Confidential Information or other property of the Company in his possession
after the termination of his employment, he shall return such property promptly to the Company
without retaining copies or excerpts of any kind.

     15. No Violation of Rights of Third Parties. The Executive warrants that his
performance of this Agreement will not breach any agreement to keep in confidence any proprietary
information, knowledge or data acquired by the Executive prior to his employment with the Company.
The Executive agrees not to disclose to the Company, or induce the Company to use, any confidential
or proprietary information or material belonging to any previous employers or any other party. The
Executive warrants that he is not a party to any other agreement that will interfere with his full
compliance with this Agreement and agrees not to enter into any agreement, whether written or oral,
in conflict with any of the provisions of this Agreement or any of his duties hereunder.

11

 

     16. Agreement to Arbitrate. The Executive and the Company agree to arbitrate any
controversy, claim or dispute between them arising out of or in any way related to this Agreement,
the employment of the Executive by the Company, or the termination of the Executive’s employment,
in accordance with the following provisions:

          16.1 Claims Covered by the Agreement. The Executive and the Company mutually consent
to the resolution by final and binding arbitration of all claims or controversies (collectively,
“Claims”) that the Company may have against the Executive or that the Executive may have against
the Company or any Company Party relating to, resulting from, or in any way arising out of this
Agreement, the Executive’s employment relationship with the Company and/or the termination of the
Executive’s employment, to the extent permitted by law. Claims covered by this Agreement include,
without limitation, claims for wages or other compensation due; claims for breach of any contract
or covenant (express or implied); tort claims; claims for unfair competition; claims for
misappropriation of trade secrets or other Confidential Information; breach of fiduciary duty,
usurpation of corporate opportunity or similar claims; claims for discrimination and harassment
(including, without limitation, based on race, sex, religion, national origin, age, marital status
or medical condition, disability, sexual orientation, or any other characteristic protected by
applicable federal, state or local law); claims for benefits (except where an employee benefit or
pension plan specifies that its claims procedure shall culminate in an arbitration procedure
different from this one, in which case such other procedure shall control); and claims for
violation of any applicable public policy, federal, state or other governmental law, statute,
regulation or ordinance.

          16.2 Arbitration Procedures. The party demanding arbitration shall file a demand for
arbitration with the American Arbitration Association (“AAA”) in Cook County, Illinois. Except as
provided herein, all rules governing the arbitration shall be the then-applicable rules set forth
by the AAA. If the dispute is employment related, the dispute shall be governed by the AAA’s
then-current version of the national rules for the resolution of employment disputes. The
arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the State of
Illinois or federal law, or both, as applicable to the Claims asserted. The arbitrator shall have
exclusive authority to resolve any dispute relating to the interpretation, applicability,
enforceability or formation of this Agreement, including, without limitation, any assertion that
all or any part of this Agreement is void or voidable.

          16.3 Application For Emergency Injunctive or Other Equitable Relief. Claims by the
Company for emergency injunctive and/or other equitable relief relating to unfair competition or
the use or unauthorized disclosure of trade secrets or other confidential or proprietary
information of the Company shall be subject to the then-current version of the AAA’s Optional Rules
for Emergency Measures of Protection set forth within the AAA’s Commercial Dispute Resolution
Procedures. The AAA shall appoint a single emergency arbitrator to handle any such Claims. The
emergency arbitrator selected by the AAA shall be either a retired judge or an individual
experienced in handling matters involving claims for emergency injunctive and/or other equitable
relief relating to unfair competition and the use or unauthorized disclosure of trade secrets and
other confidential and proprietary information.

          16.4 Arbitration Decision. The arbitrator’s decision will be final and binding. The
arbitrator shall issue a written arbitration decision revealing the essential findings and
conclusions upon which the decision and/or award is based. A party’s right to appeal the decision
is limited to grounds provided under applicable federal or state law.

12

 

          16.5 Place of Arbitration. The arbitration will be held at a mutually convenient
location within 50 miles of the Company’s principal place of business at the time of the
arbitration. If the parties cannot agree upon a location, then the arbitration will be held at the
AAA office nearest to such principal place of business at the time of the arbitration.

          16.6 Representation, Fees and Costs. Each party may be represented by one or more
attorneys and/or other representatives selected by such party. Except as otherwise provided for by
statute, each party shall be responsible for its own attorneys’ or representatives’ fees, and the
fees and costs of the arbitrator shall be paid by the non-prevailing party. Notwithstanding the
foregoing, the arbitrator may award reasonable attorneys’ fees to the prevailing party, unless
otherwise provided by law.

          16.7 Waiver of Jury Trial. By agreeing to arbitration pursuant to this Section 16,
each of the Executive and the Company knowingly and voluntarily waive any constitutional, statutory
or other right to have any dispute between them decided in a court of law or by a jury.

     17. Indemnification. The Executive and the Company are parties to an Indemnification
Agreement, dated as of May 15, 2003, a copy of which is attached hereto as Exhibit B (the
“Indemnification Agreement”). The parties agree that the Indemnification Agreement shall survive
and remain in full force and effect from and after the Effective Date in accordance with its terms.

     18. Survival. Section 9 (Confidential Information), Section 10 (Non-Competition),
Section 11 (Nonsolicitation), Section 12 (Injunctive Relief), Section 13 (Accounting and
Indemnification), Section 14 (Return of Company Property), Section 16 (Agreement to Arbitrate),
Section 17 (Indemnification), Section 18 (Survival) and Section 19 (General Provisions) shall
survive the termination of the Executive’s employment with the Company and of this Agreement.

     19. General Provisions.

          19.1 Successors and Assigns. This Agreement is personal to the Executive, and
accordingly the Executive may not assign any of his rights or obligations hereunder. The rights
and obligations of the Company under this Agreement shall inure to the benefit of and be binding
upon the successors and assigns of the Company.

          19.2 Waiver. Either party’s failure to enforce any provision of this Agreement shall
not in any way be construed as a waiver of any such provision, nor shall such failure prevent that
party thereafter from enforcing each and every other provision of this Agreement.

          19.3 Severability; Modification. In the event any provision of this Agreement is
found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall
be deemed modified to the extent necessary to allow enforceability of the provision as so limited,
it being intended that the parties shall receive the benefit contemplated herein to the fullest
extent permitted by law. If a deemed modification is not satisfactory in the judgment of such
arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and
enforceability of the remaining provisions shall not be affected thereby.

13

 

          19.4 Interpretation; Construction. The headings set forth in this Agreement are for
convenience only and shall not be used in interpreting this Agreement. Both parties have
participated in the negotiation of the terms of this Agreement. The Executive acknowledges that he
has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if
desired, and, therefore, the normal rule of construction to the effect that any ambiguities are to
be resolved against the drafting party shall not be employed in the interpretation of this
Agreement.

          19.5 Governing Law. This Agreement will be governed by and construed in accordance
with the laws of the State of Illinois. Each party consents to the jurisdiction and venue of the
state or federal courts located in the State of Illinois in any action, suit, or proceeding arising
out of or relating to this Agreement, subject to Section 16 hereof.

          19.6 Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be delivered as follows with notice deemed given as indicated: (a) by personal delivery
when delivered personally; (b) by overnight courier upon written verification of receipt; (c) by
telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or
(d) by certified or registered mail, return receipt requested, upon verification of receipt.
Notice shall be sent to the Executive at the last address recorded in his personnel file with the
Company, and to the Company at its principal place of business, or to such other address as either
party has specified in writing in a notice given to the other party in accordance with this Section
19.6.

          19.7 Release. The Executive fully, finally and forever releases and discharges the
Company and its officers, directors, employees, agents, pension or benefit plans, administrators,
fiduciaries, subsidiaries and affiliates, and each of them, of and from all manner of actions,
suits, liens, debts, dues, damages, claims, judgments, bonds, executions, demands or liabilities of
whatever nature, kind or description whatsoever, known or unknown, whether suspected or
unsuspected, and accruing or arising prior to the Effective Date.

          19.8 Entire Agreement. This Agreement and the Indemnification Agreement together
constitute the entire agreement between the parties relating to the subject matter hereof and
thereof and supersede all prior or simultaneous representations, discussions, negotiations, and
agreements between the parties, whether written or oral.

          19.9 Amendment, Modification. This Agreement may be amended or modified only in a
writing signed by the Executive and the Company upon the prior written consent of the Compensation
Committee.

          19.10 Company Policies. The personnel policies and procedures established by the
Company for its employees from time to time shall apply to the Executive; provided,
however, that to the extent any provision of any such personnel policy or procedure differs
from the terms of this Agreement, the terms of this Agreement shall govern.

          19.11 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which shall constitute one agreement. Signatures by
facsimile and other electronic means shall be valid and enforceable.

14

 

     IN WITNESS WHEREOF, the Company and the Executive have executed this Executive Employment
Agreement, to be effective as of the Effective Date set forth above.

	 	 	 	 	 	 	 
	 	 	Akorn, Inc.	 	 
	 

	 	By:
	 	/s/ John N. Kapoor
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	John N. Kapoor, Ph.D.	 	 
	 

	 	 	 	Chairman of the Board	 	 
	 
	 	 	 	 	 	 
	 	 	The Executive	 	 
	 
	 	 	 	 	 	 
	 	 	     /s/ Arthur S. Przybyl	 	 
	 	 	 	 	 
	 	 	Arthur S. Przybyl	 	 

 

Exhibit A

See attached form of Election Pursuant to Internal Revenue Code Section 409A

 

Election Pursuant to Internal Revenue Code Section 409A

     This Election Pursuant to Internal Revenue Code Section 409A (this “Election”) is made in
connection with that certain Executive Employment Agreement (the “Agreement”), dated as of
___, 2006 (the “Effective Date”), between Akorn, Inc. (the “Company”), and Arthur S.
Przybyl (the “Executive”), which is to be executed on or about the Effective Date.

     The Executive hereby makes the following irrevocable elections in accordance with and pursuant
to Section 409A of the Internal Revenue Code and its underlying Treasury regulations (“Section
409A”):

     1. Initial Election: The Executive hereby defers all “separation pay” owed to him
by the Company under the terms of the Agreement. For purposes of this Election, the term
“separation pay” shall be defined in accordance with Section 409A.

     2. Specified Distribution Date: The Executive hereby designates the distribution
date of the separation pay to be in accordance with the time and manner as specified in the
Agreement.

     3. Subsequent Election: The Executive hereby agrees to make any subsequent
election, if any, in accordance with Section 409A.

     IN WITNESS WHEREOF, this Election Pursuant to Internal Revenue Code Section 409A is made and
entered into as of ___, 2006. *

EXECUTIVE:

                                        

Arthur S. Przybyl

* This Election must be signed prior to the signing of the Agreement.

 

Exhibit B

See attached copy of Indemnification Agreement, dated as of May 15, 2003

 

INDEMNIFICATION AGREEMENT

     THIS AGREEMENT is made this 15th day of May, 2003 between Akorn, Inc., a Louisiana corporation
(the “Company”), and Arthur S. Przybyl (“Indemnitee”).

Recitals.

     A. Indemnitee is an executive officer of the Company and in such capacity is performing
valuable services for the Company.

     B. The Bylaws of the Company provide for the indemnification of its officers and directors as
permitted by the General Corporation Law of the State of Louisiana (the “State Law”). Such Bylaws
and the State Law specifically provide that they are not exclusive, and thereby contemplate that
contracts may be entered into between the Company and members of its Board of Directors and its
executive officers with respect to indemnification of such directors and officers.

     To induce Indemnitee to continue to serve as an executive officer of the Company, the parties
hererto hereby agree as follows:

     1. Intentionally Omitted.

     2. Additional Indemnity. Subject to Section 3 below, the Company further agrees to hold
harmless and indemnify the Indemnitee against any and all expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee in
connection with any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including an action brought in the right of the Company)
to which Indemnitee is, was or at any time becomes a party, or is threatened to be made a party, by
reason of the fact that Indemnitee executes, submits to or files with the U.S. Securities and
Exchange Commission any certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 or
Rule 13(a)-14 promulgated under the Securities Exchange Act of 1934.

     3. Limitations on Additional Indemnity. No indemnity pursuant to Section 2 of this Agreement
shall be paid by the Company (a) to the extent Indemnitee is indemnified pursuant to any policy of
directors and officers liability insurance purchased and maintained by the Company or (b) on
account of Indemnitee’s conduct which is finally adjudged by a Court having jurisdiction in the
matter to have been knowingly fraudulent, deliberately dishonest, willful or intentional
misconduct; or (c) if a final decision by a Court having jurisdiction in the matter shall determine
that such indemnification is unlawful. In no event shall the additional indemnity provided herein
apply to any certifications executed, submitted to or filed with the U.S. Securities and Exchange
Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 or Rule 13(a)-14 promulgated
under the Securities Exchange Act of 1934 covering periodic reports for any period throughout which
the Chief Financial Officer of the Company reports on financial and accounting matters directly to
Indemnitee (each, an “Excluded Period”).

     4. Contribution. If for any reason the indemnification provided for in this Agreement is
unavailable to the Indemnitee or is insufficient to hold

 

 

Indemnitee harmless as contemplated by this Agreement, then the Company shall contribute to the
amount paid or payable by the Company to any Indemnitee as a result of such loss, claims, damage or
liability in such proportion as is appropriate to reflect not only the relative benefits received
by the Company and the Indemnitee, but also the relative fault of the past or present employees,
officers, directors and agents and contractors of the Company and the Indemnitee, as well as any
other relevant equitable considerations. Absent a final decision by a Court having jurisdiction in
the matter to the contrary, the applicable
contributions shall be 99% by the Company and 1% by the Indemnitee.

     5. Continuation of Indemnity. All agreements and obligations of the
Company contained herein shall continue during the period Indemnitee is a director, officer,
employee or agent of the Company and shall continue thereafter so long as Indemnitee shall be
subject to any possible claim or threatened, pending or completed action, suit, proceeding, whether
civil, criminal, administrative, or investigative, by reason of the fact that Indemnitee executed,
submitted to, or filed a certification with the U.S. Securities and Exchange Commission pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 or Rule 13(a)-14 promulgated under the Securities
Exchange Act of 1934 other than for an Excluded Period.

     6. Notification and Defense of Claim. Promptly after receipt by
Indemnitee of notice of the commencement of any action, suit or proceeding, Indemnitee shall, if a
claim in respect thereof is to be made against the Company under this Agreement, notify the Company
of the commencement thereof; but the omission so to notify the Company will not relieve it from any
liability which it may have to Indemnitee otherwise than under this Agreement. With respect to any
such action, suit or proceeding as to which Indemnitee notifies the Company of the commencement
thereof:

     (a) The Company shall be entitled to participate therein at its own expense;

     (b) Except as otherwise provided below, to the extent that it may wish, the Company jointly
with any other indemnifying party similarly notified will be entitled to assume the defense
thereof, with counsel reasonably acceptable to Indemnitee. After notice from the Company to
Indemnitee of its election so to assume the defense thereof, the Company will not be liable to
Indemnitee under this Agreement for any legal or other expense subsequently incurred by Indemnitee
in connection with the defense thereof other than reasonable costs of investigation or as otherwise
provided below. Indemnitee shall have the right to employ counsel of his own choice in such action,
suit or proceeding, provided that the fees and expenses of any such counsel incurred after notice
from the Company of its assumption of the defense thereof shall be the sole obligation of
Indemnitee unless (i) the employment of such counsel by Indemnitee has been authorized by the
Company, (ii) Indemnitee shall have reasonably concluded that there may be a conflict of interest
between the Company and Indemnitee in the conduct of the defense of such action, or (iii) the
Company shall not have employed counsel to assume the defense of such action, in each of which
cases the fees and expenses of such counsel shall be at the expense of the Company. The Company
shall not be entitled to assume the defense of any action, suit or proceeding brought
by or on behalf of the Company or as to which Indemnitee shall have made the conclusion provided
for in (ii) above; and

     (c) The Company shall not be liable to indemnify Indemnitee under this Agreement for any
amounts paid in settlement of any action or claim effected without its written consent. The
Company shall not settle any action or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee’s written consent. Neither the Company nor

 

 

Indemnitee will unreasonably withhold, delay or condition their consent to any proposed
settlement.

     7. Advancement and Repayment of Expenses. Expenses incurred by Indemnitee in defending any
action, suit or proceeding referred to in Section 2 of this Agreement shall be paid by the Company
in advance of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the Indemnitee to repay such amount if it shall ultimately be
determined in a final decision by a Court having jurisdiction in the matter that the Indemnitee is
not entitled to indemnification by the Company for such expenses. Indemnitee agrees to reimburse
the Company in accordance with any such undertaking.

     8. Enforcement.

     (a) The Company expressly confirms and agrees that it has entered into this Agreement
and
assumed the obligations imposed on the Company hereby in order to induce Indemnitee to
continue as an officer of the Company, and acknowledges that Indemnitee is relying upon this
Agreement in continuing in such capacity.

     (b) In the event Indemnitee is required to bring any action to enforce rights or to
collect monies due under this Agreement and is successful in such action, the Company shall
reimburse Indemnitee for all of Indemnitee’s reasonable fees and expenses in bringing and
pursuing such action (including attorneys’ fees at any stage including on appeal).

     9. Severability. Each of the provisions of this Agreement is a separate and distinct agreement
and independent of the others. If any provisions hereof shall be held to be invalid or
unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.

     10. Governing Law; Binding Effect; Amendment.

     (a) This Agreement shall be interpreted and enforced in accordance with the laws of the
State of Louisiana.

     (b) This Agreement shall be binding upon Indemnitee and upon the Company and its
successors and assigns including any purchaser of all or substantially all of the assets of
the Company, and shall inure to the benefit of Indemnitee, his heirs, personal
representatives and assigns and to the benefit of the Company and its successors and assigns
including any purchaser of all or substantially all of the assets of the Company.

     (c) No amendment, modification, termination or cancellation of this Agreement shall be
effective unless in writing signed by both parties hereto.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and
year first above written.

	 	 	 	 	 	 	 	 	 
	AKORN, INC.	 	 	 	INDEMNITEE:	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Bernard J. Pothast
	 	 	 	/s/ Arthur S. Przybyl
	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	Bernard J. Pothast
	 	 	 	     Arthur S. Przybyl	 	 
	 

	 	Chief Financial Officer	 	 	 	 	 	 

 

 

Schedule 1

Terms and Conditions of Initial Equity Grant

(i) 250,000 shares of Restricted Stock on April 20, 2006 

Grant of Restricted Stock as defined in the Stock Option Plan

Vesting:

50% (125,000 shares) to vest on the one-year anniversary of the date of grant.

25% (62,500 shares) to vest on the two-year anniversary of the date of grant.

25% (62,500 shares) to vest on the three-year anniversary of the date of grant.

In all other respects, grant to conform with the terms and conditions of the Stock Option Plan

(ii) 500,000 common stock options on April 20, 2006

Grant of Non-Qualified Stock Options as defined in the Stock Option Plan

Vesting:

25% (125,000 options) to vest immediately upon grant.

25% (125,000 options) to vest on the one-year anniversary of the date of grant.

25% (125,000 options) to vest on the two-year anniversary of the date of grant.

25% (125,000 options) to vest on the three-year anniversary of the date of grant.

Exercise price:

Fair Market Value, as defined in the Stock Option Plan (being the closing sales price as quoted on
the date of grant, or $5.05 per share).

Term:

Five years from the date of grant

(iii) 400,000 common stock options on January 1, 2007

Grant of Non-Qualified Stock Options as defined in the Stock Option Plan

Vesting:

25% (100,000 options) to vest immediately upon grant.

25% (100,000 options) to vest on the one-year anniversary of the date of grant.

25% (100,000 options) to vest on the two-year anniversary of the date of grant.

25% (100,000 options) to vest on the three-year anniversary of the date of grant.

Exercise price:

Fair Market Value, as defined in the Stock Option Plan (being the closing sales price as quoted on
the date of grant).

Term:

Five years from the date of grant

 

 

Schedule 2

Benefits Provided to Executive

Medical

Akorn has contracted with Private Health Care Systems (PHCS), a Preferred Provider Organization
(PPO) that offers an extensive network of medical providers. The Executive may access both family
doctors as well as specialists directly. Coverage for treatment within the network is extensive.
Deductibles are $250/500 individual/family and out-of-pocket maximums are $750/1,500. Physician
visit co-payment is $15. (Preventive Care and Routine Well Child Care are 100% after co-payment)
Emergency Room co-payment is $50. Out of network hospital deductible is $200 and out of network
Emergency Room deductible is $100.

Treatment by out-of-network providers is also covered, with a $1,000/2,000 deductible and
$2,500/5,000 out-of-pocket maximum and 65% coverage after deductible. Non-network emergency
facility charges for emergencies while traveling more than 100 miles from home are covered at
network rates until the patient can safely be moved to a network facility.

Scheduled, non-emergency hospital admission requires PPO pre-admission approval. Emergency
admission (including childbirth) requires approval within 48 hours after admission. Otherwise there
is a $300 penalty.

Akorn assumes the portion of premiums that would otherwise be paid by the Executive.

Annual Executive Physical Program

Akorn assumes the cost of comprehensive annual executive physical examinations at Lake Forest
Hospital. This will include age and gender specific additional tests based on risk factors.

Dental

Dental coverage begins after a $50/150 deductible. Preventive care (oral exams, cleaning and x-rays
once every 6 months) is covered at 100%, with no deductible. Basic procedures (fillings,
extractions and oral surgery) are covered at 80% after deductible and major procedures
(periodontal, crowns, bridges and dentures) at 50%. Annual limit per person for all non-orthodontia
procedures is $1,750. Orthodontia is covered at 50% after deductible up to $1,750 lifetime. There
is no network, so coverage is the same for all providers. Akorn assumes the portion of premiums
that would otherwise be paid by the Executive.

Vision

$50 for an eye exam every 12 months, $100 for lenses and $100 for frames every 12 months.

Prescription Drugs

Prescription drugs are purchased with an authorizing card or through mail order supply. Cost is as
follows. Tier One Medications (Generics): $5 retail copay, $10 mail order copay. Tier Two
Medications (Preferred Brands): $30 retail copay, $60 mail order copay. Tier Three Medications
(Non-Preferred Brands) $45 retail copay, $90 mail order copay. OTC Claritin and OTC Prilosec: $0.

 

 

Life Insurance and AD&D

Subject to availability from a provider reasonably acceptable to the Board and subject to
qualification, Akorn shall provide basic life insurance at no cost to the Executive in the amount
of $1,000,000.

Additional life and AD&D coverage may be purchased by the Executive under Akorn’s voluntary life
insurance plan.

Business Travel Insurance and Travel Assistance

Under a policy with AIG Life Inc. (or other provider reasonably acceptable to the Board), subject
to availability from the provider and subject to qualification, Akorn shall provide Business Travel
Insurance at no cost to the Executive that insures life of Executive at 2X then-current Base Salary
while traveling anywhere on Akorn business and additional insurance for family members if they are
traveling with the Executive.

AIG International Services offers various travel services for domestic and international travel
such as pre-departure passport/visa and immunization requirements, lost baggage/passport/ticket
assistance, medical evacuation and emergency support, legal assistance and emergency cash.

Employee Assistance Program (EAP)

Akorn has contracted with Workplace Solutions L.I.C. to offer an Employee Assistance Program. Their
staff assists employees on a strictly confidential basis in developing problem-solving strategies
on issues such as chemical dependency, legal, financial, emotional, marital and relationship
difficulties. They also provide a variety of other miscellaneous services to help employees with
personal needs.

Health and Fitness Centers

Buffalo Grove employees may use Akorn’s corporate membership at Highland Park Health and Wellness
Center, a health evaluation and fitness center associated with Highland Park Hospital. Akorn pays
for the full health evaluation by professional trainers and technicians that is conducted upon
joining. Additionally, Akorn pays the monthly membership fee.

Decatur employees have access to a health and fitness center, the Decatur Athletic Club. There is
no enrollment fee. Akorn pays the membership fee while the employee is actively employed.

Paid-Time-Off (PTO)

PTO may be used for any reason, including vacation, sick or personal days. PTO time may be taken in
the same calendar year in which it is earned. Unused, rolled-over PTO must be taken the next
calendar year and there is no compounding from year to year. The Executive shall be eligible for
PTO as set forth in the Agreement.

Company Holidays

Akorn schedules 10 company-wide holidays each year.

 

 

Short- and Long-Term Disability Coverage

Akorn shall provide Executive with short-term disability coverage at 66-2/3% of base pay, subject
to availability from a provider reasonably acceptable to the Board and subject to qualification.
Short-term disability coverage begins after five continuous working days of absence and continues
for the duration of the ailment, to a maximum of 26 weeks.

Akorn shall provide Executive with long-term disability coverage at 60% of base pay, subject to
availability from a provider reasonably acceptable to the Board and subject to qualification.
Long-term disability begins at the end of the 26-week short-term disability coverage period.

Worker’s Compensation

Akorn shall provide Worker’s Compensation Insurance in accordance with applicable law.

Smart Choice! Akorn’s 401(K) Retirement Savings Program

The Executive may defer up to 100% of gross compensation, subject to maximum amount limits ($15,000
for 2006) and other applicable laws. (Participants who are over 50 have higher limits). Akorn
matches $0.50 per dollar for the first 6% saved. Rollovers from 401(K) plans with former employers
are accepted at any time.

ING manages this program. Smart Choice! offers a variety of diversified investment options,
including a self-directed brokerage option, and web based access, information and change options.

Flexible Spending Accounts

The Executive may establish a pre-tax spending account for eligible health care and dependent care
expenses that aren’t covered elsewhere. For the health care account, the Executive may save up to
$3,000 a year and for the dependent care account as much as $5,000 a year. Unused savings cannot be
returned nor carried over into the next year nor can money be transferred from one account to the
other.

Tuition Reimbursement

Akorn will reimburse up to $5,250 per calendar year for the costs (tuition, books and registration
fees) of attending school to pursue any bachelor’s degree or a graduate degree that is related to
the Executive’s professional career at Akorn. Eligibility begins after 6 months of employment.
Pre-approval is required. Upon voluntary termination, any tuition reimbursement monies paid within
the previous 12 months must be returned to Akorn.

Direct Deposit

Akorn offers Direct Deposit of paycheck into one or several accounts at financial institutions of
the Executive’s choosing. This allows electronic payroll funds transfer directly to checking
accounts, savings account and/or investment accounts.

Professional Financial Planning

Akorn offers Professional Financial Planning services on an individualized basis.exv10w2

 

Exhibit 10.2

* Confidential Treatment Requested Under

17 C.F.R. §§ 200.80(b)(4), 200.83 and 240.24b-2

EXECUTIVE BONUS AGREEMENT

FOR

ARTHUR S. PRZYBYL

     This Executive Bonus Agreement (the “Agreement”) is entered into between Akorn, Inc., a
Louisiana corporation (the “Corporation”), and Arthur S. Przybyl (the “Participant”), effective
April 27, 2006. The purpose of the Agreement is to reward the service, performance, productivity
and loyalty of the Participant by providing the Participant with a prospective bonus to be paid in
accordance with the terms of this Agreement.

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

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

     1.1 Bonus. A bonus up to $300,000 (75% of the Participant’s annual base compensation
rate (“Base Comp”)) for achieving all of the following performance measurements in 2006, or, if one
or more but not all of these performance measurements are achieved, Participant is eligible to
receive a portion of that amount in accordance with the sum of the following:

          1.1.1 Financial Results.

               (a) Earnings Per Share. $50,000 (12.5% of Base Comp) will be awarded for achieving earnings
per share of at least $0.01.

               (b) EBIDTA. $50,000 (12.5% of Base Comp) will be awarded for achieving an “EBITDA” of at
least [...***...]. “EBITDA” means earning before interest, taxes, depreciation and amortization.

               (c) Net Revenue. $50,000 (12.5% of Base Comp) will be awarded for achieving net revenue of at
least [...***...].

          1.1.2 Capital Raise. $50,000 (12.5% of Base Comp) will be awarded for conducting a
successful capital raise that is approved by the Board of Directors of the Corporation (the
“Board”).

          1.1.3 ANDAs. $50,000 (12.5% of Base Comp) will be awarded if the Corporation files at
least twenty (20) new abbreviated new drug applications (“ANDAs”) with the United States Food and
Drug Administration (“FDA”) and launches (introduces to the market) ten (10) new ANDA products.

          1.1.4 Lyophilization Facility. $50,000 (12.5% of Base Comp) will be awarded for both
(i) achieving fully operational status for commercial production at the Corporation’s

* CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed separately with the Securities & Exchange Commission.

1

 

* Confidential Treatment Requested Under

17 C.F.R. §§ 200.80(b)(4), 200.83 and 240.24b-2

lyophilization facility and (ii) ensuring the Corporation’s lyophilization facility is (x) ready
for inspection by the FDA and, should the FDA inspect the facility, (y) approved by the FDA;
provided that each (i) and (ii) occur no later than December 31, 2006.

     1.2 Over Achievement Bonus. If, and only if, all of the performance measurements (and
the entire bonus) set forth in Section 1.1 above have been achieved in full, a bonus of up to
$100,000 (25% of Base Comp) for over achievement of the EBITDA performance measures in accordance
with the sum of the following:

          1.2.1 If the Corporation’s EBITDA is at least [...***...], Participant shall receive an additional
$50,000 (12.5% of Base Comp); and

          1.2.2 If the Corporation’s EBITDA is at least [...***...], Participant will receive an additional
$50,000 (for a total of $100,000, or 25% of Base Comp).

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

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

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

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

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

* CONFIDENTIAL TREATMENT REQUESTED — This language has been omitted and filed separately with the Securities & Exchange Commission.

2

 

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

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

          6.1.2 to interpret the Agreement;

          6.1.3 to decide all questions concerning the Agreement and the eligibility of any person to
participate in the Agreement;

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

          6.1.5 to authorize payments under the Agreement;

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

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

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

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

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

7. Amendment. The Committee reserves the power at any time or times to amend the
provisions of the Agreement to any extent and in any manner that it may deem advisable.

3

 

However, the Committee shall not have the power to amend the Agreement retroactively in such a
manner as would reduce the accrued vested benefit of the Participant, except as otherwise permitted
or required by law.

8. Savings Clause. The parties intend for this Agreement to comply in form and in operation
with Section 409A of the Code. Notwithstanding any other provision of this Agreement, the
Committee shall be permitted to amend or eliminate any provision or term of this Agreement to the
extent that such provision or term violates or conflicts with the requirements of Section 409A or
the compliance by the Corporation or Participant with such provision or term will result in a
violation of Section 409A.

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

10. Entire Agreement. The Agreement and the Executive Employment Agreement dated April 24,
2006 between the Corporation and the Participant constitute the full and entire understanding and
agreement between the parties with regard to the subject matter hereof and thereof, and supersede
all prior agreements, understandings, inducements or conditions, express or implied, oral or
written, relating to the subject matter hereof and thereof. The express terms of the Agreement
control and supersede any course of performance and/or usage of trade inconsistent with any of the
terms hereof.

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

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

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

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

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

4

 

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

	 	 	 	 	 	 	 
	AKORN, INC.:	 	 	 	PARTICIPANT:
	Corporation

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	By:

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

	 	 
	 	 	 	 
	 

	 	 	 	 	 	Arthur S. Przybyl
	Its:

	 	Chief Financial Officer	 	 	 	 

5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}]]