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Hi-Tech Pharmacal sale could yield CEO $84.9M

A worker prepares a production line at Hi-Tech

A worker prepares a production line at Hi-Tech Pharmacal plant in Amityville. (June 18, 2013) Credit: Johnny Milano

The chief executive at Hi-Tech Pharmacal Co., David Seltzer, could receive nearly $85 million if the sale of the Amityville-based generic drugmaker to Akorn Inc. goes through.

Most of that sum -- around $81 million -- would stem from stock and vested options Seltzer already owns, according to a regulatory filing with the Securities & Exchange Commission.

The rest of the package includes $1.1 million from accelerating unvested stock options and $2.7 million in cash severance and other benefits, the filing disclosed.

Seltzer would only receive his severance and benefits package if he quits or is terminated within 24 months of the sale's completion. Hi-Tech announced in late August that it had agreed to be acquired by Lake Forest, Ill.-based Akorn for $630 million. The sale, which still requires shareholder approval, is scheduled to close in early 2014.

Two other members of management -- chief financial officer William Peters and executive vice chairman Reuben Seltzer -- will receive their entire payout upon completion of the acquisition, regardless of their employment status. Peters will receive around $4.4 million in total. Reuben Seltzer, the brother of the chief executive, is set to receive around $45.4 million -- a majority of which, like his brother's payout, will also come from stock ownership. The Seltzer brothers' stock holdings include shares owned by their families.

Peters said in an interview the executive team's future roles at Akorn had not been discussed yet.

James Reda, a managing director at human resources consultancy James F. Reda & Associates in Manhattan, said severance and unvested stock option payments to the top five executives of an acquired company usually totals 3 percent to 5 percent of the purchase price. Hi-Tech's top five could receive more than $13 million, roughly 2 percent of the purchase price.

"It's a good deal for the shareholders," Reda said.

The proxy statement filed with the SEC also said Hi-Tech had begun exploring a sale as early as 2010, fielding interest from about 25 firms and negotiating with 11.

Offers for Hi-Tech ranged from $23.50 per share to $46 per share. Akorn, which first approached Hi-Tech in June, offered $46 initially, but the deal was later renegotiated to the final offer of $43.50.

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