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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 12)*
Akorn, Inc.
--------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, no par value
--------------------------------------------------------------------------------
(Title of Class of Securities)
009728 10 6
--------------------------------------------------------------------------------
(Cusip Number)
John N. Kapoor Copy Thomas J. Murphy
EJ Financial Enterprises, Inc. To: McDermott, Will & Emery
225 E. Deerpath, Suite 250 227 West Monroe Street
Lake Forest, IL 60045 Chicago, IL 60606
--------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 7, 2003
--------------------------------------------------------------------------------
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box / /.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the act (however, see the
Notes).
SCHEDULE 13D
CUSIP No. 009728 10 6
-----------
--------------------------------------------------------------------------------
1 Names of Reporting Persons: I.R.S. Identification Nos. of
John N. Kapoor Trust, dtd 9/20/89 Above Persons (entities only):
--------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions):
(a) / /
(b) / /
--------------------------------------------------------------------------------
3 SEC Use Only:
--------------------------------------------------------------------------------
4 Source of Funds (See Instruction):
OO (See Item 3)
--------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e): / /
--------------------------------------------------------------------------------
6 Citizenship or Place of Organization:
Illinois
--------------------------------------------------------------------------------
7 Sole Voting Power:
24,126,699
Number of Shares
Beneficially -----------------------------------------------------
Owned by 8 Shared Voting Power:
Each -0-
Reporting
Person -----------------------------------------------------
With 9 Sole Dispositive Power:
24,126,699
-----------------------------------------------------
10 Shared Dispositive Power:
-0-
--------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person:
24,126,699
--------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions): / /
--------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11):
56.0%
--------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions):
OO
CUSIP No. 009728 10 6
-----------
--------------------------------------------------------------------------------
1 Names of Reporting Persons: I.R.S. Identification Nos. of
John N. Kapoor Above Persons (entities only):
--------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions):
(a) / /
(b) / /
--------------------------------------------------------------------------------
3 SEC Use Only:
--------------------------------------------------------------------------------
4 Source of Funds (See Instruction):
--------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e): / /
--------------------------------------------------------------------------------
6 Citizenship or Place of Organization:
USA
--------------------------------------------------------------------------------
7 Sole Voting Power:
24,622,637
Number of Shares
Beneficially -----------------------------------------------------
Owned by 8 Shared Voting Power:
Each 3,395,000
Reporting
Person -----------------------------------------------------
With 9 Sole Dispositive Power:
24,622,637
-----------------------------------------------------
10 Shared Dispositive Power:
3,395,000
--------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person:
28,017,637
--------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) /X/
--------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11):
64.4% (See Item 5(a)(i))
--------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions):
IN
CUSIP No. 009728 10 6
-----------
--------------------------------------------------------------------------------
1 Names of Reporting Persons: I.R.S. Identification Nos. of
EJ Financial/Akorn Management, L.P. Above Persons (entities only):
--------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions):
(a) / /
(b) / /
--------------------------------------------------------------------------------
3 SEC Use Only:
--------------------------------------------------------------------------------
4 Source of Funds (See Instruction):
OO
--------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e): / /
--------------------------------------------------------------------------------
6 Citizenship or Place of Organization:
Illinois
--------------------------------------------------------------------------------
7 Sole Voting Power:
3,395,000
Number of Shares
Beneficially -----------------------------------------------------
Owned by 8 Shared Voting Power:
Each -0-
Reporting
Person -----------------------------------------------------
With 9 Sole Dispositive Power:
3,395,000
-----------------------------------------------------
10 Shared Dispositive Power:
-0-
--------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person:
3,395,000
--------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions): / /
--------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11):
17.2%
--------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
PN
CUSIP No. 009728 10 6
-----------
--------------------------------------------------------------------------------
1 Names of Reporting Persons: I.R.S. Identification Nos. of
Pharma Nevada, Inc. Above Persons (entities only):
--------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions):
(a) / /
(b) / /
--------------------------------------------------------------------------------
3 SEC Use Only:
--------------------------------------------------------------------------------
4 Source of Funds (See Instruction):
OO
--------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e): / /
--------------------------------------------------------------------------------
6 Citizenship or Place of Organization:
Illinois
--------------------------------------------------------------------------------
7 Sole Voting Power:
3,395,000
Number of Shares
Beneficially -----------------------------------------------------
Owned by 8 Shared Voting Power:
Each -0-
Reporting
Person -----------------------------------------------------
With 9 Sole Dispositive Power:
3,395,000
-----------------------------------------------------
10 Shared Dispositive Power:
-0-
--------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person:
3,395,000
--------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions): / /
--------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11):
17.2%
--------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
CO
CUSIP No. 009728 10 6
-----------
--------------------------------------------------------------------------------
1 Names of Reporting Persons: I.R.S. Identification Nos. of
Editha A. Kapoor Above Persons (entities only):
--------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions):
(a) / /
(b) / /
--------------------------------------------------------------------------------
3 SEC Use Only:
--------------------------------------------------------------------------------
4 Source of Funds (See Instruction):
--------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e): / /
--------------------------------------------------------------------------------
6 Citizenship or Place of Organization:
USA
--------------------------------------------------------------------------------
7 Sole Voting Power:
63,600
Number of Shares
Beneficially -----------------------------------------------------
Owned by 8 Shared Voting Power:
Each 3,395,000
Reporting
Person -----------------------------------------------------
With 9 Sole Dispositive Power:
63,600
-----------------------------------------------------
10 Shared Dispositive Power:
3,395,000
--------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person:
3,458,600
--------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions): / /
--------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11):
17.5%
--------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
IN
This Amendment No. 12 (the "Amendment") to Schedule 13D is being
filed to disclose that on October 7, 2003 the John N. Kapoor Trust
dated 9/20/89 (the "Trust"), along with other investors,
consummated a recapitalization transaction (the "Transaction")
involving Akorn, Inc. ("Akorn") by purchasing all of Akorn's
outstanding senior debt from The Northern Trust Company. In return
for its contribution, the Trust received from Akorn: 107,350 shares
of Series A 6% Participating Convertible Preferred Stock, a
subordinated note of Akorn in the principal amount of
$2,117,139.03, warrants to purchase 3,578,333 shares of Akorn
common stock ("Shares") at $1.00 per share and warrants to purchase
1,091,714 Shares at $1.10 per share.
This Amendment is filed jointly by (i) the Trust, of which John N.
Kapoor is trustee and sole beneficiary, (ii) John N. Kapoor, (iii)
EJ Financial/Akorn Management, L.P., a Delaware limited partnership
("EJ/Akorn") of which Pharma Nevada, Inc. is the managing general
partner, (iv) Pharma Nevada, Inc., a Nevada corporation wholly
owned by John N. Kapoor and Editha A. Kapoor and of which John N.
Kapoor serves as the president and chairman of the board of
directors, and (v) Editha A. Kapoor, wife of John N. Kapoor
(collectively, the "Reporting Persons").
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The Trust funded its obligation to purchase the Participating
Convertible Preferred Stock and warrants from its own assets and/or
from borrowings.
The information set forth in Item 6 hereof is hereby incorporated
by reference into this Item 3.
ITEM 4. PURPOSE OF TRANSACTION
The purpose of the Transaction was to reduce Akorn's outstanding
senior bank debt and provide Akorn with additional working capital.
The information set forth in Item 6 hereof is hereby incorporated
by reference into this Item 4.
Both Dr. Kapoor and the Trust, as well as the other persons filing
this Amendment No. 12, have acquired the Shares as an investment
and intend to continue to review Akorn's business affairs and
general economic and industry conditions. Based upon such review,
persons named herein, will, on an on-going basis, evaluate various
alternative courses of action including additional capital
investments in Akorn. Alternatively, the persons filing this
statement may sell all or a portion of their holdings in Akorn in
the open market, subject to the requirements of Rule 144 or as
otherwise permitted. Dr. Kapoor has held discussions with
shareholders of Akorn regarding potential changes to the
composition of Akorn's board of directors. These discussions are
ongoing and may result in changes to Akorn's board of directors in
the foreseeable future.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) As of the date hereof:
(i) John N. Kapoor beneficially owns (a) presently
exercisable options to purchase 470,938 Shares representing 2.3% of
the Shares outstanding, (b) 25,000 Shares representing 0.1% of the
Shares outstanding, (c) 24,126,699 Shares representing 56.0% of the
Shares outstanding through the Trust, of which he is the sole
trustee, (c) 3,395,000 Shares representing 17.2% of Shares
outstanding through EJ/Akorn;
In accordance with the requirements for determining beneficial
ownership of a class of securities pursuant to Schedule 13D, the
above Akorn share ownership percentages are calculated assuming the
conversion of all convertible securities and exercise of all
warrants and options held by the Reporting Persons, but not of all
outstanding convertible securities, warrants and options of Akorn
eligible for conversion or exercise. If the above percentages were
calculated on a fully diluted basis, after the conversion of all
convertible securities and exercise of all warrants and options of
Akorn, John N. Kapoor's ownership percentage of Akorn common stock
would be reduced to approximately 38.4%.
(ii) the Trust beneficially owns (a) 851,800 Shares
representing 4.3% of the Shares outstanding, (b) warrants allowing
it to purchase up to 6,337,047 Shares representing 24.3% of the
Shares outstanding, (c) convertible subordinated debt which is
convertible into 2,426,900 Shares representing 10.9% of the Shares
outstanding, (d) the right to convert interest accrued to date on
$2,000,000 of subordinated debt into 197,619 Shares representing
1.0% of the Shares outstanding, (e) 107,350 shares of Series A 6%
Participating Convertible Preferred Stock convertible into
14,313,333 Shares representing 42.0% of Shares outstanding;
(iii) EJ/Akorn owns 3,395,000 Shares representing
17.2% of the Shares outstanding;
(iv) Pharma Nevada, Inc. owns 3,395,000 Shares
representing 17.2% of the Shares outstanding through EJ/Akorn; and
(iv) Editha A. Kapoor beneficially owns (a) 63,600
Shares representing 0.3% of the Shares outstanding in her capacity
as trustee of four trusts established for the benefit of the
children of John Kapoor and Editha Kapoor (the "Childrens' Trust")
and (c) 3,395,000 Shares representing 17.2% of Shares outstanding
through EJ/Akorn.
(b) John N. Kapoor has sole voting and dispositive power over
24,622,637 Shares (comprised of the Shares, subordinated debt
convertible to Shares, participating convertible preferred stock,
options and warrants held by himself and the Trust) and shared
dispositive and voting power over 3,395,000 Shares (comprised of
Shares held by EJ/Akorn). The Trust, acting through its trustee,
has sole voting and dispositive power over 24,126,699 Shares and
does not share voting power or dispositive power over any other
Shares. EJ/Akorn, acting through its managing general partner, has
sole voting and dispositive power over 3,395,000 Shares and does
not share voting power or dispositive power over any other Shares.
Pharma Nevada, Inc. has sole voting and dispositive power over
3,395,000 Shares held through EJ/Akorn and does not share voting
power or dispositive power over any other Shares. Editha A. Kapoor,
as trustee of the Childrens' Trust, has sole voting and dispositive
power over 63,600 Shares representing the shares held in the
Childrens' Trust and shared dispositive and voting power over
3,395,000 Shares (comprised of Shares held by EJ/Akorn).
(c) Except for the transactions described in Item 6 below,
which were effected in a privately negotiated transaction, there
have been no transactions effected with respect to Shares since
August 21, 2003 (the date of the last filing on Schedule 13D) by
any of the Reporting Persons.
(d) Inapplicable.
(e) Inapplicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
The Reporting Persons acquired Shares in the Transaction as
follows. On September 25, 2003, The Northern Trust Company, an
Illinois banking corporation ("Northern Trust"), the certain
purchasers identified therein, including the Trust (collectively,
the "Purchasers"), Akorn and Akorn (New Jersey), Inc., an Illinois
corporation ("Akorn New Jersey"), entered into an Assignment and
Assumption Agreement (the "Assignment and Assumption Agreement")
whereby the Purchasers agreed to purchase and assume all of
Northern Trust's interest (the "Assigned Interests") in and to all
of Northern Trust's rights and obligations under the Credit
Agreement dated as of September 15, 1999, as amended, (the "Credit
Agreement") between Akorn and Akorn New Jersey, as borrowers, and
Northern Trust, as lender.
Simultaneously with the execution of the Assignment and Assumption
Agreement, Akorn entered into a Preferred Stock and Note Purchase
Agreement (the "Purchase Agreement") with the Purchasers to redeem
from the Purchasers the Assigned Interests in exchange for (a) an
aggregate of 257,172 shares of Akorn's Series A 6% Participating
Convertible Preferred Stock, par value $1.00 per share (the "Series
A Preferred Stock"), currently convertible into 34,289,600 Shares
at $0.75 per Share, (b) warrants currently exercisable to purchase
an aggregate of 8,572,400 Shares at an exercise price of $1.00 per
Share and (c) an aggregate of approximately $2,767,139.03 in
subordinated promissory notes (the "Purchased Notes") issued to
certain Purchasers, including the Trust. Pursuant to the Purchase
Agreement and certain warrant agreements dated October 7, 2003
between Akorn and the Trust, the Trust acquired 107,350 shares of
Series A Preferred Stock currently convertible into 14,313,333
Shares at $0.75 per share and warrants currently exercisable to
purchase an aggregate of 3,578,333 Shares at an exercise price of
$1.00 per share. Warrants issued in the Transaction have cashless
exercise and certain antidilution protection.
In connection with the Transaction, Akorn filed that certain
Articles of Amendment to Articles of Incorporation ("Articles of
Amendment," attached hereto as Exhibit I), with the Louisiana
Secretary of State on October 6, 2003. The Articles of Amendment
designate and set forth the rights, preferences and privileges of
the Series A Preferred Stock, including the following. The Series A
Preferred accrues dividends at a rate of 6.0% per annum, which rate
is fully cumulative, accrues daily and compounds quarterly,
provided that in the event stockholder approval authorizing
sufficient shares to be authorized and reserved for conversion of
all of the Series A Preferred Stock and warrants issued in
connection with the Transaction ("Stockholder Approval") has not
been received by October 7, 2004, such rate is to increase to 10.0%
until Stockholder Approval has been received and sufficient shares
are authorized and reserved. Subject to certain limitations, on
October 31, 2011, Akorn is to redeem all shares of Series A
Preferred Stock for an amount per share equal to $100, as may be
adjusted from time to time as set forth in the Articles of
Amendment (the "Stated Value"), plus all accrued but unpaid
dividends on such share ("Redemption Price"). If Akorn does not
have sufficient funds to redeem all such shares, any shares of
Series A Preferred not redeemed will accrue dividends at a rate of
10.0% per annum until redeemed. Shares of Series A Preferred Stock
shall have liquidation rights in preference over junior securities,
including shares of common stock and have certain antidilution
protections. Without the approval of 50.1% of the Series A
Preferred Stock, Akorn shall not take certain actions, including
(i) issuing Series A Preferred Stock, securities senior or on par
with the Series A Preferred Stock, (ii) amending Akorn's Articles
of Incorporation or Bylaws to alter the rights of the Series A
Preferred Stock, (iii) effect a change of control or (iv) effect a
reverse split of the Series A Preferred Stock. The Series A
Preferred Stock is convertible at any time into a number of shares
of common stock equal to the quotient obtained by dividing (x) the
Stated Value plus any accrued but unpaid dividends by (y) $0.75, as
such numbers may be adjusted form time to time pursuant to the
terms of the Articles of Amendment. Provided that Stockholder
Approval has been received and sufficient shares of common stock
are authorized and reserved, all shares of Series A Preferred Stock
shall convert to shares of common stock on October 8, 2006.
Pursuant to the Purchase Agreement dated October 7, 2003 between
Akorn and the Trust, the Trust acquired 107,350 shares of Series A
Preferred Stock currently convertible into 14,313,333 Shares at
$0.75 per share and, pursuant to the terms of a certain warrant
agreement dated October 7, 2003 between Akorn and the Trust
(attached hereto as Exhibit IV), the Trust acquired warrants
currently exercisable to purchase an aggregate of 3,578,333 Shares
at an exercise price of $1.00 per Share.
The Purchased Note issued to the Trust (attached hereto as Exhibit
II) is in the principal amount of $2,117,139.03, accrues interest
at a rate of prime plus 1.75% and is due and payable on April 7,
2006. As an additional incentive to purchase the Purchased Notes,
Akorn granted the Purchasers acquiring the Purchased Notes,
including the Trust, an aggregate of 276,714 warrants currently
exercisable to purchase Shares at an exercise price of $1.10 per
Share. Pursuant to the terms of that certain warrant agreement
dated October 7, 2003 between Akorn and the Trust (attached hereto
as Exhibit V), the Trust received warrants currently exercisable to
purchase 211,714 Shares at an exercise price of $1.10 per Share.
Akorn and Akorn New Jersey also entered into a Credit Facility
dated October 7, 2003 ("Credit Facility") with LaSalle Bank
National Association ("LaSalle Bank") to provide for new senior
secured debt to Akorn. As a condition of entering into the Credit
Facility, John N. Kapoor and the Trust executed a guaranty (the
"Guaranty") in favor of LaSalle Bank on behalf of Akorn (attached
hereto as Exhibit III). In exchange for entering into the Guaranty,
pursuant to the terms of that certain warrant agreement dated
October 7, 2003 between Akorn and the Trust (attached hereto as
Exhibit VI), the Trust received warrants currently exercisable to
purchase 880,000 Shares at an exercise price of $1.10 per Share.
As part of the Transaction, Akorn and the Purchasers also entered
into a Registration Rights Agreement dated October 7, 2003 (the
"Registration Rights Agreement") pursuant to which Purchasers were
granted certain registration rights in connection with the Series A
Preferred Stock and warrants issued in connection with the
Transaction, including three (3) demand registrations for holders
of more than 5,000,000 Shares, incidental or piggy-back
registrations upon a registration by Akorn on Form S-1, S-2 or S-3
and shelf registration rights. Akorn further agreed not to enter
into any new agreement with more preferential registration rights.
The Transaction closed on October 7, 2003.
The foregoing description of the transactions and agreements set
forth in this schedule 13D are qualified in their entirety by
reference to the complete agreements governing such matters, each
of which are incorporated by reference or attached to this Schedule
13D as exhibits below pursuant to Item 7.
Except as set forth herein, the Reporting Persons do not have any
contracts, arrangements, understandings or relationships with
respect to any securities of Akorn.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The following Exhibits are filed with this Amendment:
I. Articles of Amendment to Articles of Incorporation of Akorn
filed with the Secretary of State of Lousiana on October 6, 2003.
II. Subordinated Promissory Note of Akorn in the principal amount
of $2,117,139.03 due April 7, 2003.
III. Guaranty, dated as of October 7, 2003, of John N. Kapoor and
the Trust in favor LaSalle Bank National Association, as
Administrative Agent, and the Lender Parties, as defined therein.
IV. Warrant Agreement, dated as of October 7, 2003, between Akorn
and the Trust (Preferred Stock Warrants).
V. Warrant Agreement, dated as of October 7, 2003, between Akorn
and the Trust (Purchased Note Warrants).
VI. Warrant Agreement, dated as of October 7, 2003, between Akorn
and the Trust (Guaranty Warrants).
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
October 21, 2003 /s/ John N. Kapoor
-----------------------------------
John N. Kapoor
October 21, 2003 /s/ Editha A. Kapoor
-----------------------------------
Editha A. Kapoor
EJ FINANCIAL/AKORN MANAGEMENT, L.P.
October 21, 2003 By: Pharma Nevada, Inc.
Managing General Partner
/s/ John N. Kapoor
-------------------------------
John N. Kapoor, President
October 21, 2003 Pharma Nevada, Inc.
By: /s/ John N. Kapoor
-------------------------------
John N. Kapoor, President
John N. Kapoor Trust
dtd 9/20/89
October 21, 2003 By: /s/ John N. Kapoor
------------------------------
John N. Kapoor as Trustee