-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I7yvqq+ibzQHMhXdhfo84jgSHKfJ1exWdZF8CmZlJ2ytU8wrimjnbU64IM9guKOy xADAZc9C+SHuEYpO0ls80g== 0000950172-04-002721.txt : 20041117 0000950172-04-002721.hdr.sgml : 20041117 20041117160016 ACCESSION NUMBER: 0000950172-04-002721 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20041111 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Material Modifications to Rights of Security Holders ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041117 DATE AS OF CHANGE: 20041117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEOPHARM INC CENTRAL INDEX KEY: 0000942788 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 510327886 STATE OF INCORPORATION: DE FISCAL YEAR END: 0907 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12493 FILM NUMBER: 041152277 BUSINESS ADDRESS: STREET 1: 150 FIELD DRIVE STREET 2: SUITE 195 CITY: LAKE FORREST STATE: IL ZIP: 60045 BUSINESS PHONE: 8472958678 MAIL ADDRESS: STREET 1: C/O WILSON SONSIN GOODRICH & ROSETI STREET 2: 650 PAGE MILL ROAD CITY: PALO ALTO STATE: CA ZIP: 94304 8-K 1 ch428798.txt 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 November 11, 2004 ------------------------------------------------ Date of Report (Date of earliest event reported) NeoPharm, Inc. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 001-12493 51-0327886 - ------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 150 Field Drive, Suite 195, Lake Forest, Illinois 60045 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 847-295-8678 ------------------------ - ------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01 Entry into a Material Definitive Agreement. Settlement Agreement On November 11, 2004, NeoPharm, Inc. (the "Company"), John N. Kapoor, Ph.D. ("Kapoor"), Erick E. Hanson ("Hanson"), Gregory P. Young ("Young"), and Dr. Kaveh T. Safavi ("Safavi") entered into a settlement agreement (the "Settlement Agreement") relating to the consent solicitation commenced by Kapoor on September 2, 2004 (the "Consent Solicitation") to, among other things, remove the Company's four independent directors and elect three individuals nominated by Kapoor. Hanson, Young, Safavi and Kapoor are each members of the Board of Directors of the Company. Kapoor was previously Chairman of the Board of Directors, and he is also the Company's largest shareholder, holding 21.7% of the Company's outstanding common stock. Pursuant to the Settlement Agreement, Kapoor has terminated the Consent Solicitation, and he and his affiliates and associates have revoked any written consents previously delivered by them. In addition, the Board of Directors of the Company has authorized the increase of the size of the Board of Directors from six directors to eight directors. Pursuant to the Separation Agreements described below, two of the Company's prior directors, Matthew P. Rogan and Sander A. Flaum, have resigned from the Board of Directors and the vacancies created by their resignations and the expansion of the Board of Directors have been filled by Bernard A. Fox, Ph.D., Ronald Eidell, Paul E. Frieman and Frank C. Becker (collectively, the "New Directors"). The Company has also agreed to cause the New Directors, as well as Kapoor, Hanson, Young and Safavi (collectively, the "Nominees"), to be nominated for election as directors to the Board of Directors at the 2005 Annual Meeting of Stockholders (the "Annual Meeting"), to publicly support and recommend the Nominees, to include the recommendation in the Company's proxy materials for the Annual Meeting, to solicit authority to vote for the Nominees at the Annual Meeting, and to use its best efforts to solicit proxies in favor of the election of the Nominees at the Annual Meeting. Hanson, Young and Safavi (collectively, the "Continuing Directors") and Kapoor have agreed to, and to cause their affiliates and associates to, support the Nominees at the Annual Meeting. In conjunction with any meeting of stockholders or action by written consent in lieu of a meeting relating to the election of directors, Kapoor and the Continuing Directors have agreed to vote any and all shares of common stock over which they have voting power in favor of the Nominees and to cause their affiliates and associates to so vote or consent. In connection with the Settlement Agreement, Kapoor may nominate directors and propose other business for the Company's 2006 Annual Meeting of Stockholders so long as he submits the information required by applicable law and Section 2.4 of the Company's By-laws as currently in effect no later than December 30, 2005, and the Company and the Continuing Directors agree not to take any action to preclude Kapoor from nominating directors or proposing other business at such meeting. The term of the Settlement Agreement is from November 11, 2004 through December 1, 2005. Throughout the term, the Company, Kapoor and the Continuing Directors may not take any action (including the solicitation of proxies or consents) seeking the removal of any Nominee from the Board of Directors or vote or consent in favor of the removal of any Nominee from the Board of Directors, and they each agreed to cause their affiliates and associates not to take any such action or so vote or consent. The Company, Kapoor and the Continuing Directors have also agreed that they will not commence or initiate any solicitation of proxies relating to the election of directors of the Company, except in favor of the Nominees or in favor of a matter that is approved by the Board of Directors, and will cause their affiliates and associates not to commence or initiate any such action. The Continuing Directors and Kapoor also agreed not to initiate or propose or otherwise solicit stockholders of the Company for the approval of any stockholder proposals or make any publicly disclosed proposal regarding any of the foregoing matters. If the Company breaches its obligations relating to the nomination, support for, and solicitation of authority to vote for the Nominees at the Annual Meeting, the restrictions placed on Kapoor and his affiliates and associates to vote their shares of stock or solicit proxies cease to apply, and Kapoor will have the right to nominate candidates for director or propose other business for the 2005 Annual Meeting. Under the Settlement Agreement, the Company has also agreed to reimburse Kapoor for up to $350,000 of his out-of-pocket fees and expenses incurred in connection with the Consent Solicitation, and Kapoor has agreed not to publicly disparage the Company or its current and former officers, directors and employees, or publicly disparage or make any public statements or proposals that are critical of, or alternatives to, the Company's business strategy or practices. Similarly, the Company and the Continuing Directors have agreed not to publicly disparage Kapoor or his affiliates or associates or make any public statements or proposals that are critical of Kapoor's views on the Company's business strategies and practices. Kapoor also agreed not to seek to be elected or agree to serve as Chairman of the Board of Directors until the 2005 Annual Meeting. The foregoing description of the Settlement Agreement is a general description only and is qualified in its entirety by reference to the Settlement Agreement. A copy of the Settlement Agreement is attached hereto as Exhibit 10.01, and is incorporated herein by reference. As a consequence of the above described changes made to the Company's Board of Directors, the Incumbent Directors (as that term is defined in the Company's 1998 Equity Incentive Plan, the "Plan") no longer constitute a majority of the Board of Directors, resulting, for purposes of the Plan, in a change of control and the immediate vesting of all outstanding options. The Company does not expect any net financial impact as a result of this accelerated vesting. Certain Relationships - --------------------- In 1994, the Company entered into a Consulting Agreement with EJ Financial Enterprises, Inc. ("EJ Financial"). Kapoor is the president and a director of EJ Financial. In June 2004, the agreement was terminated by mutual agreement. In December 2001, following approval by the Company's Board of Directors, the Company loaned $3,250,000 to Akorn, Inc. ("Akorn"), an independent publicly traded company, to assist Akorn in the completion of its lyophilized products manufacturing facility in Decatur, Illinois. The Promissory Note issued to Akorn is due in December 2006. In exchange, the Company entered into a manufacturing and processing agreement that grants the Company access to at least 15% of the annual lyophilization manufacturing capacity at Akorn at a discounted price, upon completion of the facility. As of December 31, 2002, the Company determined the Promissory Note was impaired and recorded a charge to fully reserve for the Promissory Note and accrued interest. No amounts have yet been paid on the loan. On October 6, 2004, the Company announced an event of default had occurred under the loan. Kapoor is a director and Chairman of Akorn. On June 17, 2004, NeoPharm entered into an Employment Agreement with Young to serve as the Company's President, Chief Executive Officer and a Director. Hanson is currently the Chairman of the Board of Directors of the Company and Safavi is a member of the Board of Directors of the Company. Amendment to Preferred Stock Rights Agreement - --------------------------------------------- See the information included under Item 3.03 hereof. Separation Agreements - --------------------- On November 11, 2004, Sander A. Flaum and Matthew P. Rogan each resigned from the Board of Directors. In connection with their resignations, each of them executed a Separation Agreement with the Company which entitles each of them to an honorarium payment of $50,000 and the payment of certain expenses. The Separation Agreements also provide for immediate vesting of all shares under the Award of Restricted Stock granted to each director under the Company's 1998 Equity Incentive Plan (the "Plan") on March 10, 2004, and an extension of the exercisability of each Award of Options (as defined in the Plan) under the Plan until the earlier of June 30, 2008 or ten years from the date of the original grant of such award. Each director also agreed to confidentiality and non-disparagement provisions, and the Company agreed not to disparage either former director or his good name or business reputation. The foregoing description of the Separation Agreements is a general description only and is qualified in its entirety by reference to the Separation Agreements. The Separation Agreements for each of Sander A. Flaum and Matthew P. Rogan are attached hereto as Exhibits 10.02 and 10.03, respectively, and are incorporated herein by reference. In March 2000, the Company entered into a Consulting Agreement with Unicorn Pharma Consulting, Inc. ("Unicorn"). Matthew P. Rogan is the President and a principal stockholder of Unicorn. The Consulting Agreement with Unicorn was terminated by mutual agreement of the parties on October 1, 2000, and the parties entered into a new consulting agreement in November 2001. No consulting or other services have been provided by Unicorn subsequent to March 31, 2002. Item 3.03 Material Modification to Rights of Security Holders. Reference is hereby made to the Registration Statement on Form 8-A dated July 7, 2003 and filed with the Securities and Exchange Commission (File No. 000-26898) on July 7, 2003 (the "Original Form 8-A") and the Amended Registration Statement on Form 8-A/A dated September 24, 2004 and filed with the Securities and Exchange Commission (File No. 001-12493) on September 24, 2004 (the "Amended Form 8-A") by the Company, relating to the rights distributed to the stockholders of the Company (the "Rights") in connection with the Preferred Stock Rights Agreement, dated as of June 30, 2003 (the "Original Rights Agreement"), as amended as of September 20, 2004 (together with the Original Rights Agreement, the "Amended Rights Agreement"), between the Company and Computershare Investor Services, L.L.C., a Delaware limited liability company, as Rights Agent. On November 11, 2004, the Board of Directors of the Company approved and adopted the Second Amendment to Rights Agreement, dated as of November 11, 2004 (the "Second Amendment"), by and between the Company and Computershare. The Second Amendment amends the Amended Rights Agreement between the Company and Computershare, as Rights Agent (such Amended Rights Agreement, as amended by the Second Amendment, being referred to hereinafter as the "Rights Agreement"). The Amendment has the effect of increasing from 22% to 30% the percentage of outstanding shares of common stock of the Company which Kapoor, together with his Affiliates (as defined in the Rights Agreement), must be or become the beneficial owner of before being deemed to be an Acquiring Person (as defined in the Rights Agreement). The foregoing description of the Second Amendment is a general description only and is qualified in its entirety by reference to the Second Amendment. A copy of the Second Amendment is attached hereto as Exhibit 4.01, and is incorporated herein by reference. Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers. On November 11, 2004, the vacancies on the Board of Directors of the Company created by the resignations of Matthew P. Rogan and Sander A. Flaum and the expansion of the Board of Directors to eight members were filled by the election of Bernard A. Fox, Ph.D., Ronald Eidell, Paul E. Frieman and Frank C. Becker (the "New Directors"), pursuant to action by the Board of Directors in accordance with the terms of the Settlement Agreement. See Item 1.01 - Settlement Agreement. None of the New Directors have engaged in any transactions which are required to be disclosed under Item 404(a) of Regulation S-K. As of the date hereof, the New Directors have not been named to any committees of the Board of Directors. Item 9.01 Financial Statements and Exhibits. (c) Exhibits. Exhibit Description - ------- ----------- 4.01 Second Amendment to Rights Agreement, dated as of November 11, 2004, by and between NeoPharm, Inc. and Computershare Investor Services, L.L.C. 10.01 Settlement Agreement, dated as of November 11, 2004, among NeoPharm, Inc., John N. Kapoor, Ph.D., Erick E. Hanson, Gregory P. Young, and Dr. Kaveh T. Safavi. 10.02 Separation Agreement, dated as of November 11, 2004, by and between NeoPharm, Inc. and Sander A. Flaum. 10.03 Separation Agreement, dated as of November 11, 2004, by and between NeoPharm, Inc. and Matthew P. Rogan. 99.1 Press Release dated November 12, 2004 announcing the Settlement Agreement and related matters. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NeoPharm, Inc. /s/ Lawrence Kenyon ----------------------------------- Date: November 17, 2004 By: Lawrence Kenyon Its: Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer) EXHIBIT INDEX Exhibit Description - ------- ----------- 4.01 Second Amendment to Rights Agreement, dated as of November 11, 2004, by and between NeoPharm, Inc. and Computershare Investor Services, L.L.C. 10.01 Settlement Agreement, dated as of November 11, 2004, among NeoPharm, Inc., John N. Kapoor, Ph.D., Erick E. Hanson, Gregory P. Young, and Dr. Kaveh T. Safavi. 10.02 Separation Agreement, dated as of November 11, 2004, by and between NeoPharm, Inc. and Sander A. Flaum. 10.03 Separation Agreement, dated as of November 11, 2004, by and between NeoPharm, Inc. and Matthew P. Rogan. 99.1 Press Release dated November 12, 2004 announcing the Settlement Agreement and related matters. EX-4 2 chi429340.txt EXHIBIT 4.1 EXHIBIT 4.01 SECOND AMENDMENT TO RIGHTS AGREEMENT This SECOND AMENDMENT TO RIGHTS AGREEMENT (this "Amendment"), adopted by the board of directors of NeoPharm, Inc., a Delaware corporation (the "Company"), on November 11, 2004 and dated as of November 11, 2004, is by and between the Company and Computershare Investor Services, L.L.C., a Delaware limited liability company ("Computershare"). Capitalized terms not otherwise defined in this Amendment shall have the meanings set forth in the Rights Agreement (as defined below). Recitals WHEREAS, the Company and Computershare are parties to a Preferred Stock Rights Agreement, dated as of June 30, 2003 (the "Rights Agreement"), which Rights Agreement was amended on September 20, 2004; WHEREAS, the Rights Agreement currently provides that John N. Kapoor, Ph.D. ("Kapoor"), one of the founders of the Company, and his Affiliates could be or become the beneficial owner of up to 22% of the Company's Common Shares then outstanding without being deemed to be an Acquiring Person; WHEREAS, as of the date hereof, Kapoor and his Affiliates beneficially owned and as of the date hereof beneficially own 21.7% of the Common Shares outstanding; WHEREAS, the Board of Directors of the Company has approved certain changes to the definition of the term "Acquiring Person" in the Rights Agreement as more specifically set forth herein to increase from 22% to 30% the percentage of outstanding Common Shares which Kapoor, together with his Affiliates, must be or become the beneficial owner of before being deemed to be an Acquiring Person; and WHEREAS, pursuant to Section 27 of the Rights Agreement, the Board of Directors of the Company has determined that an amendment to the Rights Agreement as set forth herein is necessary and desirable, and the Company and the other parties hereto desire to evidence such amendment in writing. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: 1. Amendment of Section 1(a). Section 1(a) of the Rights Agreement is hereby amended by replacing "22%" with "30%" in each place where "22%" appears in such Section. 2. Effectiveness. This Amendment shall be deemed effective as of the date first written above, as if executed on such date. Except as amended hereby, the Rights Agreement shall remain in full force and effect and shall be otherwise unaffected hereby. 3. Governing Law. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed entirely within such State. 4. Miscellaneous. (a) This Amendment may be executed in any number of counterparts, each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. (b) If any provision, covenant or restriction of this Amendment is held by a court of competent jurisdiction or other authority to be invalid, illegal or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment shall remain in full force and effect and shall in no way be affected, impaired or invalidated. [Signature page follows.] EXECUTED as of the date first set forth above. Attest: NEOPHARM, INC. By: /s/ Lawrence A. Kenyon /s/ Gregory P. Young - ----------------------------- --------------------------- Name: Lawrence A. Kenyon Name: Gregory P. Young Title: Chief Financial Officer Title: President and Chief and Secretary Executive Officer Attest: COMPUTERSHARE INVESTOR SERVICES, L.L.C. By: /s/ Carol Wolniakowski /s/ Keith Bradley - ------------------------------- ---------------------------- Name: Carol Wolniakowski Name: Keith Bradley Title: Assistant Secretary Title: Vice President EX-10 3 neo10_1.txt EXHIBIT 10.01 EXHIBIT 10.01 AGREEMENT, dated as of November 11, 2004 (this "Agreement"), among NEOPHARM, INC., a Delaware corporation (the "Company"), John N. Kapoor, Ph.D. ("Kapoor"), Erick E. Hanson ("Hanson"), Gregory P. Young ("Young"), and Dr. Kaveh T. Safavi ("Safavi"). W I T N E S S E T H: WHEREAS, Kapoor has commenced a consent solicitation to, among other things, remove from the Board the Resigning Directors and the Continuing Directors (other than Gregory P. Young); WHEREAS, the Company, Kapoor and each of the Continuing Directors have determined that it is in their respective best interests to enter into this Agreement; and WHEREAS, immediately prior to the execution of this Agreement, each of the Resigning Directors has entered into an agreement with the Company, whereby, among other things, each of the Resigning Directors has resigned as a director from the Board of Directors. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1. Definitions. Capitalized terms shall have the following meanings for purposes of this Agreement (and shall apply equally to both the singular as well as the plural forms): (a) "Affiliate" shall have the meaning assigned to such term in Rule 12b-2 promulgated under the Exchange Act. (b) "Annual Meeting" shall mean the Annual Meeting of the Company's stockholders to be held during the 2005 calendar year. (c) "Associate" shall have the meaning assigned to such term in Rule 12b-2 promulgated under the Exchange Act. (d) "Board of Directors" shall mean the board of directors of the Company. (e) "By-laws" shall mean the Amended and Restated By-laws of the Company, as in effect on the date hereof. (f) "Commission" shall mean the United States Securities and Exchange Commission. (g) "Common Stock" shall mean the common stock, par value $.0002145 per share, of the Company. (h) "Consent Solicitation" shall mean the solicitation of written consents from the Company's stockholders commenced by Kapoor pursuant to his definitive consent statement filed with the Securities and Exchange Commission on September 27, 2004. (i) "Continuing Directors" shall mean Hanson, Young and Safavi. (j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (k) "New Directors" shall mean Dr. Bernard A. Fox, Ronald Eidell, Paul E. Freiman and Frank C. Becker. (l) "person" shall mean an individual, corporation, partnership, limited partnership, limited liability company, association, trust, estate, or other entity or organization. (m) "Resigning Directors" shall mean Dr. Matthew P. Rogan and Sander A. Flaum. 2. Representations and Warranties. (a) Each of Kapoor, Hanson, Young and Safavi hereby severally represents and warrants to the Company and each other party as follows: (i) Such person has all requisite power and authority to execute, deliver and perform its respective obligations under this Agreement. The execution, delivery and performance of this Agreement by such person and the consummation of the transactions contemplated hereby have been duly authorized by all requisite action on the part of such person. Such person is of sound mind and has all requisite legal capacity to execute and deliver this Agreement. (ii) This Agreement has been duly executed and delivered by such person and (assuming due and valid execution and delivery by the Company and each other party hereto) constitutes a legal, valid and binding obligation of such person, enforceable against such person in accordance with its terms. (iii) The execution, delivery and performance of this Agreement by such person does not and will not violate or conflict with (i) any law, rule, regulation, order, judgment or decree applicable to such person, or (ii) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both could become a default) under or pursuant to, any agreement, contract, commitment, understanding or arrangement (any of the foregoing, a "Contract") to which such person is a party. (iv) No consent, approval, authorization, license or clearance of, or filing or registration with, or notification to, any court, legislative, executive or regulatory authority or agency (a "Governmental Authority") is required in order to permit such person to perform its respective obligations under this Agreement, except for such as have been obtained. (b) The Company hereby represents and warrants to each of the other parties as follows: (i) The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of the Company. (ii) This Agreement has been duly executed and delivered by the Company and (assuming due and valid execution and delivery hereof by each of the other parties hereto) constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. (iii) The execution, delivery and performance of this Agreement by the Company does not and will not (i) violate or conflict with (A) the certificate of incorporation of the Company or By-laws or (B) any law, rule, regulation, order, judgment or decree applicable to the Company, or (ii) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both could become a default) under or pursuant to, any Contract to which the Company is a party. (iv) No consent, approval, authorization, license or clearance of, or filing or registration with, or notification to, any Governmental Authority, is required in order to permit the Company to perform its obligations under this Agreement, except for such as have been obtained. 3. Resigning Directors. Fully executed copies of the Separation Agreements entered into between each of the Resigning Directors and the Company have heretofore been delivered to Kapoor, each such agreement being effective on the Effective Date immediately prior to the execution of this Agreement. 4. Board of Directors Consent; Consent Solicitation. Concurrent with the execution of this Agreement, (a) the Continuing Directors and Kapoor have executed the unanimous written consent of directors attached hereto as Exhibit A, and (b) Kapoor shall terminate, effective immediately, the Consent Solicitation and revoke in writing any consents that he or his Affiliates or Associates have delivered in connection therewith. Without limiting the generality of the foregoing, not later than one business day after the date hereof, Kapoor shall notify the staff of the Commission in writing that he has terminated the Consent Solicitation. Promptly thereafter, the Company and Kapoor shall issue the joint press release attached hereto as Exhibit B, which the Company shall file with the Commission as additional definitive proxy materials under the Exchange Act. 5. Annual Meeting. (a) The Company shall (1) cause to be nominated for election as directors to the Board of Directors at the Annual Meeting, each of: (i) the Continuing Directors; (ii) Kapoor; and (iii) the New Directors (the persons listed in clauses (i), (ii) and (iii), collectively, the "Nominees"), (2) publicly support and recommend that the Company's stockholders vote to elect the Nominees as directors of the Company at the Annual Meeting, (3) include the foregoing recommendation in its proxy materials for the Annual Meeting, and (4) solicit authority (and the Company's form of proxy shall so solicit) to vote for the Nominees at the Annual Meeting. The Company shall use its best efforts to solicit proxies in favor of the election of the Nominees at the Annual Meeting. In connection with the Annual Meeting, each of Kapoor and the Continuing Directors shall, and shall each cause its respective Affiliates and Associates to, support the Nominees as directors of the Company at the Annual Meeting. Each of the Company, Kapoor and the Continuing Directors acknowledge that to the best of their knowledge, (A) there are no circumstances that would preclude any of the New Directors from serving as members of the Board of Directors and (B) each of the New Directors are suitable nominees for election to the Board of Directors. (b) In connection with the election of directors at any meeting of stockholders or in connection with any action by written consent in lieu of a meeting related to the election of directors, each of the Continuing Directors and Kapoor shall vote, in person or by proxy or written consent, as the case may be, any and all shares of Common Stock over which such person has voting power in favor of the election of the Nominees to the Board of Directors and shall cause his Affiliates and Associates to so vote or consent with respect to shares of Common Stock over which they have voting power. (c) Each of the Company and the Continuing Directors agrees that (i) so long as Kapoor submits to the Company the requisite information required by applicable law and Section 2.4 of the By-laws as such Section 2.4 is in effect immediately prior to the execution of this Agreement (the "Advance Notice Provisions") no later than 5:00pm, New York City time, December 30, 2005, and notwithstanding any amendment of the Advance Notice Provisions or adoption of other restrictions with respect to the 2006 Annual Meeting, Kapoor shall be entitled to nominate directors and propose other business at the annual meeting of the Company's stockholders for the 2006 calendar year (the "2006 Annual Meeting") and (ii) the Company and the Continuing Directors will not take any action, including action with respect to the mailing of the Company's proxy materials for the 2006 Annual Meeting or scheduling of the date of the 2006 Annual Meeting, intended to preclude or that would have the effect of precluding Kapoor from nominating directors or proposing other business at the 2006 Annual Meeting. 6. Restriction on Certain Activities. (a) The Company, Kapoor and each of the Continuing Directors hereby agree that, during the term of this Agreement, they shall not, alone or as part of a group, and will not encourage or assist another party to, take any action, including the "solicitation" of "proxies" or consents (as such terms are defined in Rule 14a-1 under the Exchange Act), seeking the removal of any Nominee from the Board of Directors and that they will not vote or consent with respect to any shares of Common Stock over which such person has voting power in favor of the removal of any of the Nominees from the Board of Directors and shall each cause his Affiliates and Associates not to take any such action or so vote or consent with respect to any shares over which they have voting power. The Company, Kapoor and each of the Continuing Directors agree that, during the term of this agreement they shall not, alone or as part of a group, and will not encourage or assist another party to, commence or initiate any "solicitation" of "proxies" relating to the election of directors of the Company, except (i) in favor of the Nominees at the Annual Meeting or (ii) in favor of a matter that is approved by the Board of Directors, and that they will cause their Affiliates and Associates not to commence or initiate any such action. Each of the Continuing Directors and Kapoor agrees not to, alone or as part of a group, and will not encourage or assist another party to, initiate, propose or otherwise solicit stockholders of the Company for the approval of any stockholder proposals, whether made pursuant to Rule 14a-8 under the Exchange Act or otherwise (other than any proposal supported by the Company with the approval of the Board of Directors). Each of the Company, the Continuing Directors and Kapoor agrees not to, alone or as part of a group, and will not encourage or assist another party to, make any publicly disclosed proposal regarding any of the matters described in the preceding sentences of this Section 6(a) and they will cause each of their Affiliates and Associates not to take any such action. It is understood and agreed that the foregoing shall not be deemed to prohibit any of the Continuing Directors or Kapoor from engaging in any lawful acts in his capacity as a director of the Company that, if such action was not taken, would result in a breach of such person's fiduciary duties to the Company's stockholders under the Delaware General Corporation Law. (b) The Company represents and warrants to Kapoor that the By-laws have not been amended or modified since September 7, 2004. (c) In the event that the Company breaches any provision of, or fails to perform any of its obligations under, the first sentence of Section 5(a) of this Agreement, then: (i) any restrictions on the right or ability of Kapoor, his Affiliates or his Associates to vote their shares of Common Stock or solicit "proxies" (as such term is defined in Rule 14a-1 under the Exchange Act), including the restrictions set forth in Section 6(a) of this Agreement, shall cease to apply and shall be of no further force or effect with respect to Kapoor, his Affiliates or his Associates; (ii) Kapoor shall have the right to nominate candidates for director or propose any other business in connection with the Annual Meeting; and (iii) any time periods, advance notice requirements, informational requirements, conditions, or other restrictions established by the By-laws (including Section 2.4 of the By-laws), by resolution of the Board of Directors or otherwise, that apply to the right or ability of Kapoor, his Affiliates or his Associates to nominate candidates for director or propose any other business shall not apply to such persons at the Annual Meeting, and the nomination of any candidates for director by Kapoor or the proposal of any other business by Kapoor shall be deemed conclusively to have been properly brought before the Annual Meeting or any postponement or adjournment thereof. It is understood and agreed that any Nominee's inability or unwillingness to serve as a director, which then precludes the Company from being able to fully comply with the first sentence of Section 5(a), shall not constitute a breach of such sentence by the Company. (d) Kapoor agrees that he shall not in any way publicly disparage the Company or its current and former officers, directors and employees or publicly disparage or make any public statements or proposals that are critical of, or alternatives to, the Company's business strategy or practices, verbally or in writing, or make any public statements that may reasonably be derogatory or detrimental to the good name or business reputation of any of the foregoing. Likewise, the Company and the Continuing Directors agree that they shall not in any way publicly disparage Kapoor or his Affiliates or Associates or make any public statements or proposals that are critical of Kapoor's views on the Company's business strategy or practices, verbally or in writing, or make any public statements that may reasonably be derogatory or detrimental to Kapoor's good name or business reputation. Nothing in this section shall preclude any party from responding truthfully to inquiries made in connection with any legal or governmental proceeding or from making such other statements as may be required by applicable law. (e) Kapoor agrees that he shall not seek to be elected or agree to serve as the Chairman of the Board of Directors until the date of the Annual Meeting. (f) None of the Company, the Continuing Directors or Kapoor shall make any public request to amend, waive or terminate any provision of this Agreement. 7. Additional Agreements. Not later than the second business day after the date hereof, the Company shall reimburse Kapoor, in cash in immediately available funds, an amount up to $350,000 in documented, out-of-pocket fees and expenses incurred by Kapoor and payable to third parties not related to Kapoor in connection with the Consent Solicitation. 8. Enforcement. The parties acknowledge and agree that irreparable harm would result if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, the parties will be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically its provisions in any court having jurisdiction, this being in addition to any other remedy to which they may be entitled at law or in equity. 9. Entire Agreement; Waivers. This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the parties with respect to such subject matter. The parties expressly disclaim reliance on any information, statements, representations, or warranties regarding the subject matter of this Agreement other than the terms of this Agreement. No waiver of any provision of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), shall constitute a continuing waiver unless otherwise expressly provided, or shall be effective unless in writing and executed by the party against which enforcement of such waiver is sought. 10. Amendment or Modification; Severability. The parties hereto may not amend or modify this Agreement except in such manner as may be agreed upon by a written instrument executed by all of the parties hereto. If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable, the remaining provisions shall remain in full force and effect. It is declared to be the intention of the parties that they would have executed the remaining provisions without including any that may be declared unenforceable. 11. Successors and Assigns. All the terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors, and each successor shall be deemed to be a party hereto for all purposes hereof. 12. Headings; Interpretation; Counterparts. Descriptive headings are for convenience only and will not control or affect the meaning or construction of any provision of this Agreement. The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation." Words denoting gender shall include all genders. For the convenience of the parties, any number of counterparts of this Agreement may be executed by the parties, and each such executed counterpart will be an original instrument. 13. Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if in writing (including telecopy or similar teletransmission), addressed as follows: If to the Company or the Continuing Directors, to: NeoPharm, Inc. 150 Field Drive, Suite 195 Lake Forest, Illinois 60045 Attention: Gregory P. Young Telephone No.: (847) 295-8678 Facsimile No.: (847) 295-8854 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 333 West Wacker Drive Chicago, Illinois 60606 Attention: Brian W. Duwe Telephone No.: (312) 407-0816 Facsimile No.: (312) 407-8505 and Burke, Warren, McKay & Seritella, P.C. 330 North Wabash Avenue Chicago, Illinois 60611 Attention: Christopher R. Manning Telephone No. (312) 840-7010 Facsimile No. (312) 840-7900 If to Kapoor, to: John N. Kapoor, Ph.D. 225 Deerpath Road, Suite 250 Lake Forest, Illinois 60045 Telephone No.: (847) 295-8665, x110 Facsimile No.: (847) 295-8680 with a copy to: McDermott Will & Emery LLP 227 West Monroe Chicago, Illinois 60606 Attention: Thomas J. Murphy Telephone No.: (312) 984-2069 Facsimile No.: (312) 984-7700 Unless otherwise specified herein, such notices or other communications shall be deemed received (a) in the case of any notice or communication sent other than by mail, on the date actually delivered to such address (evidenced, in the case of delivery by overnight courier, by confirmation of delivery from the overnight courier service making such delivery, and in the case of a telecopy, by receipt of a transmission confirmation form or the addressee's confirmation of receipt), or (b) in the case of any notice or communication sent by mail, three business days after being sent, if sent by registered or certified mail, with first-class postage prepaid. Each of the parties hereto shall be entitled to specify a different address by giving notice as aforesaid to each of the other parties hereto. 14. Termination. This Agreement shall remain in full force and effect from the date hereof until December 1, 2005. Notwithstanding anything in this Agreement to the contrary, the provisions of Section 5(c), Section 6(c) and Sections 9 through 16, inclusive, shall survive any termination of this Agreement. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic substantive law of the State of Delaware, without giving effect to any choice or conflict of law provision or rule that would cause the application of the law of any other jurisdiction. 16. Exclusive Submission to Jurisdiction. Any disputes arising out of or in connection with this Agreement shall be adjudicated in the Court of Chancery of the State of Delaware. Each party hereto irrevocably submits to the personal jurisdiction of such court for the purposes of any such suit, action, counterclaim or proceeding arising out of this Agreement (collectively, a "Suit"). Each of the parties hereto hereby waives and agrees not to assert by way of motion, as a defense or otherwise in any such Suit, any claim that it is not subject to jurisdiction of the above court, that such Suit is brought in an inconvenient forum, or the venue of such Suit is improper. Each of the parties hereby agrees that service of all writs, process and summonses in any Suit may be made upon such party by mail to the address as provided in this Agreement. Nothing herein shall in anyway be deemed to limit the ability of any party to serve any such writs, process or summonses in any other matter permitted by applicable law. [Remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written by their respective duly authorized representatives. NEOPHARM, INC. By: /s/ Gregory P. Young ----------------------------- Name: Gregory P. Young Title: Chief Executive Officer and President /s/ John N. Kapoor --------------------------------- John N. Kapoor, Ph.D. /s/ Gregory P. Young --------------------------------- Gregory P. Young /s/ Erick E. Hanson --------------------------------- Erick E. Hanson /s/ Kaveh T. Safavi --------------------------------- Dr. Kaveh T. Safavi EXHIBIT A UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS OF NEOPHARM, INC. November 11, 2004 The undersigned, being all of the directors of the board of directors (the "Board of Directors") of NeoPharm, Inc., a Delaware corporation (the "Company"), hereby consent in writing, pursuant to Section 141(f) of the Delaware General Corporation Law, to the adoption of the following resolutions by written consent in lieu of a meeting: RESOLVED that the resignations of Dr. Matthew P. Rogan and Sander A. Flaum as directors of the Company are hereby accepted. RESOLVED that the Board of Directors approves and declares it advisable that the Company enter into (i) the Agreement, dated as of the date hereof, among the Company, Gregory P. Young, Erick E. Hanson, Kaveh T. Safavi and John N. Kapoor, Ph.D. (the "Agreement") and (ii) the Separation Agreements dated as of the date hereof, with each of Dr. Matthew P. Rogan and Sander A. Flaum (the "Separation Agreements"). RESOLVED that the form, terms and conditions of the Agreement and the Separation Agreements, copies of which have been provided to the members of the Board of Directors, be, and the same hereby are, approved, authorized and adopted by the Company, and the acts and transactions contemplated by the Agreement and the Separation Agreements and all other actions or matters necessary or appropriate to give effect to the foregoing be, and the same hereby are, in all respects, approved, authorized and adopted by the Board of Directors. RESOLVED that, pursuant to Section 3.2 of the Amended and Restated By-laws of the Company, as in effect on the date hereof, the number of directors of the Corporation shall be set at eight (8). RESOLVED that the vacancies created by (i) the resignation of Dr. Matthew P. Rogan and Sander A. Flaum as directors from the Board of Directors and (ii) the expansion of the size of the Board of Directors pursuant to the immediately preceding resolution, shall be filled by the following individuals: Dr. Bernard A. Fox, Ronald Eidell, Paul E. Freiman and Frank C. Becker. RESOLVED that Section 1(a) of the Rights Agreement dated as of June 30, 2003, and amended as of September 20, 2004, between the Company and Computershare Investor Services, L.L.C. (the "Rights Agreement") is hereby amended by replacing "22%" with "30%" in each place "22%" appears in such section, as evidenced by the Second Amendment to the Rights Agreement dated as of the date hereof and attached hereto as Annex I. RESOLVED, that the officers of the Company, or any one of them, is hereby authorized, empowered and directed for, in the name of and on behalf of the Company, to take any and all actions,, to enter into all agreements, perform all such further acts and things, to execute, file, deliver, or record in the name of and on behalf of the Company all such certificates, instruments or other documents, and to make all such payments as they, in their judgment, or in the judgment of any one or more of them, may deem necessary or advisable in order to carry out fully the intent and purpose of the foregoing resolutions. [Signature page follows.] IN WITNESS WHEREOF, the undersigned, being all of the directors of the board of directors of the Company, have executed this Unanimous Written Consent as of the date first written above. ___________________________________ Gregory P. Young ___________________________________ Erick E. Hanson ___________________________________ Dr. Kaveh T. Safavi ___________________________________ John N. Kapoor, Ph.D. ANNEX I TO UNANIMOUS WRITTEN CONSENT SECOND AMENDMENT TO RIGHTS AGREEMENT This SECOND AMENDMENT TO RIGHTS AGREEMENT (this "Amendment"), adopted by the board of directors of NeoPharm, Inc., a Delaware corporation (the "Company"), on November 11, 2004 and dated as of November 11, 2004, is by and among the Company and Computershare Investor Services, L.L.C., a Delaware limited liability company ("Computershare"). Capitalized terms not otherwise defined in this Amendment shall have the meanings set forth in the Rights Agreement (as defined below). Recitals WHEREAS, the Company and Computershare are parties to a Preferred Stock Rights Agreement, dated as of June 30, 2003 (the "Rights Agreement"), which Rights Agreement was amended on September 20, 2004; WHEREAS, the Rights Agreement currently provides that John N. Kapoor, Ph.D. ("Kapoor"), one of the founders of the Company, and his Affiliates could be or become the beneficial owner of up to 22% of the Company's Common Shares then outstanding without being deemed to be an Acquiring Person; WHEREAS, as of the date hereof, Kapoor and his Affiliates beneficially owned and as of the date hereof beneficially own 21.7% of the Common Shares outstanding; WHEREAS, the Board of Directors of the Company has approved certain changes to the definition of the term "Acquiring Person" in the Rights Agreement as more specifically set forth herein to increase from 22% to 30% the percentage of outstanding Common Shares which Kapoor, together with his Affiliates, must be or become the beneficial owner of before being deemed to be an Acquiring Person; and WHEREAS, pursuant to Section 27 of the Rights Agreement, the Board of Directors of the Company has determined that an amendment to the Rights Agreement as set forth herein is necessary and desirable, and the Company and the other parties hereto desire to evidence such amendment in writing. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: 1. Amendment of Section 1(a). Section 1(a) of the Rights Agreement is hereby amended by replacing "22%" with "30%" in each place where "22%" appears in such Section. 2. Effectiveness. This Amendment shall be deemed effective as of the date first written above, as if executed on such date. Except as amended hereby, the Rights Agreement shall remain in full force and effect and shall be otherwise unaffected hereby. 3. Governing Law. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed entirely within such State. 4. Miscellaneous. (a) This Amendment may be executed in any number of counterparts, each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. (b) If any provision, covenant or restriction of this Amendment is held by a court of competent jurisdiction or other authority to be invalid, illegal or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment shall remain in full force and effect and shall in no way be affected, impaired or invalidated. [Signature page follows.] EXECUTED as of the date first set forth above. Attest: NEOPHARM, INC. By: - ------------------------------ -------------------------------- Name: Lawrence A. Kenyon Name: Gregory P. Young Title: Chief Financial Officer Title: President and and Secretary Chief Executive Officer Attest: COMPUTERSHARE INVESTOR SERVICES, L.L.C. By: - ------------------------------ -------------------------------- Name: Carol Wolniakowski Name: Blanche Hurt Title: Assistant Secretary Title: General Counsel EXHIBIT B [Form of Joint Press Release] EX-10 4 sep10_2.txt EXHIBIT 10.02 EXHIBIT 10.02 SEPARATION AGREEMENT SEPARATION AGREEMENT (the "Agreement"), made and entered into as of November 11, 2004, by and between NeoPharm, Inc., a Delaware corporation (the "Company"), and Sander A. Flaum (together with his marital community, heirs, executors, administrators and assigns, the "Director"). W I T N E S S E T H: WHEREAS, the Director has served as a member of the Board of Directors (the "Board") of the Company; WHEREAS, in connection with such service, pursuant to the Company's 1998 Equity Incentive Plan (the "Plan"), the Director has received Awards of Restricted Stock and Options (each such terms as is defined in the Plan); WHEREAS, John N. Kapoor, Ph.D. has initiated a consent solicitation seeking, among other things, the removal of the Director from the Board; WHEREAS, the Company and Mr. Kapoor have mutually agreed to terms on which Mr. Kapoor will withdraw his consent solicitation, pursuant to a Settlement Agreement by and among the Company, Mr. Kapoor, Erick E. Hanson, Gregory P. Young and Dr. Kaveh T. Safavi (the "Settlement Agreement"); WHEREAS, in connection with the actions contemplated by the Settlement Agreement, the parties hereto desire to enter into this Agreement in order to settle fully and finally all matters between them, including but not limited to any matters arising out of Director's service on the Board and his separation therefrom. NOW THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and the Director agree as follows: 1. Resignation. By his execution hereof, effective as of immediately prior to the execution of the Settlement Agreement on the Effective Date (as such term is defined in the Settlement Agreement), the Director hereby resigns his position as a member of the Board. Except as provided herein, the Director shall no longer be entitled to any compensation or benefits in respect of his service as a member of the Board. 2. Agreements and Payments in Connection with Resignation. In connection with the Director's resignation, the Company hereby agrees and acknowledges that the Director shall be entitled to receive from the Company, effective immediately upon the Effective Date, the following payments and benefits: (a) an honorarium payment in the amount of Fifty Thousand Dollars ($50,000.00), payable in cash in immediately available funds; (b) reimbursement of expenses incurred in connection with the Director's position as a member of the Board, in accordance with Company policy; (c) immediate vesting of all shares under the Award of Restricted Stock granted under the Plan to the Director on March 10, 2004; (d) extension of the exercisability of each Award of Options granted under the Plan to the Director until the earlier of (i) June 30, 2008 or (ii) the date that is ten (10) years from the date of the original grant of any such Award; and (e) payment in advance, on a yearly basis, upon notice from the Director, of all dues and fees necessary to continue the Director's membership in the National Association of Corporate Directors through 2008; and (f) reimbursement of reasonable attorney's fees in connection with the negotiation hereof. 3. Confidentiality. The Director acknowledges that his service as a member of the Board brought him into close contact with many confidential financial and proprietary matters concerning the Company, including, without limitation, information about costs, profits, assets, liabilities, patents, licenses, trade secrets, management bonuses, business plans, customer lists, other proprietary matters and other information not available to the public, and plans for future development. In recognition of the foregoing, the Director agrees that he will keep secret any and all confidential financial and proprietary matters of the Company, which are not otherwise in the public domain, and will not disclose them to anyone outside of the Company without the Company's written consent, except as may be required by a lawful order of a court or agency of competent jurisdiction. 4. Non-Disparagement. The Director agrees that he shall not in any way disparage the Company or its current and former officers, directors and employees, verbally or in writing, or make any statements to the press or to third parties that may reasonably be derogatory or detrimental to the Company's or any such person's good name or business reputation. Likewise, the Company, and each of its directors, officers and employees, shall not in any way disparage the Director, verbally or in writing, or make any statements to the press or to third parties that may reasonably be derogatory or detrimental to the Director's good name or business reputation. Nothing in this section shall preclude any party from responding truthfully to inquiries made in connection with any legal or governmental proceeding or from making such other statements as may be required by applicable law. 5. General. (a) Cooperation. Following the Effective Date, upon request of the Chief Executive Officer of the Company, the Director shall make himself available to the Company at mutually convenient times and places to assist the Company with respect to Company-related matters, including but not limited to pending and future litigations, arbitrations, governmental investigations or other disputes relating to matters that arose during the Director's service as a member of the Board. The Company shall reimburse the Director for all reasonable expenses and costs he may incur as a result of providing assistance under this Section 5(a), upon receipt of proper documentation. In connection with any such cooperation provided hereunder, the Director will be reimbursed based upon a daily $4,000 per diem for any assistance provided, including any travel time related to providing such assistance, provided that on June 1, 2005, and each subsequent anniversary thereof, the foregoing reimbursement rate will increase by 10%. In the event the Director provides assistance to the Company for less than half of a day, the Director will be paid half of the per diem, or $2,000; provided that the Director will be paid the full per diem, or $4,000, for providing service for more than half of a day. (b) Remedies. The Director recognizes that irreparable injury will result to the Company and its business in the event of any breach by the Director of any of the provisions of this Agreement as determined by a court of competent jurisdiction. In the event of any breach of any of the commitments of the Director pursuant hereto, the Company shall be entitled, in addition to any other remedies and damages available, to injunctive relief to restrain the violation of such commitments by the Director or by any person or persons acting for or with the Director in any capacity whatsoever. (c) Amendments. This Agreement may not be modified, amended, or waived in any manner except by an instrument in writing signed by both parties to this Agreement. (d) Waiver. The waiver by either party of compliance by the other party with any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement (whether or not similar), or a continuing waiver, or a waiver of any subsequent breach by a party of any provision of this Agreement. (e) Governing Law; Jurisdiction. The laws of the State of Delaware shall govern the validity, performance, enforcement, interpretation, and other aspects of this Agreement, notwithstanding any state's choice of law provisions to the contrary. Any proceeding to enforce, interpret, challenge the validity of', or recover for the breach of any provision of, this Agreement may be filed in the courts of the State of Delaware or the United States District Court sitting in the State of Delaware, and the parties hereto expressly waive any and all objections to personal jurisdiction, service of process or venue in connection therewith. (f) Complete Agreement. This Agreement constitutes a complete and total integration of the understanding of the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous negotiations, commitments, agreements, writings, and discussions with respect to the subject matter of this Agreement; provided, however, that the Director and Executive Officer Indemnification Agreement, dated as of September 24, 2004, between the Director and the Company, shall remain in full force and effect pursuant to the terms thereof. (g) Severability. If a court having proper jurisdiction holds a particular provision of this Agreement unenforceable or invalid for any reason, that provision shall be modified only to the extent necessary in the opinion of such court to make it enforceable and valid and the remainder of this Agreement shall be deemed valid and enforceable and shall be enforced to the greatest extent possible under the then existing law. In the event the court determines such modification is not possible, the provision shall be deemed severable and deleted, and all other provisions of this Agreement shall remain unchanged and in full force and effect. (h) Counterparts. This Agreement may be executed in two (2) counterparts, each of which shall be deemed an original but both of which together shall constitute one and the same Agreement. Facsimile transmission of the executed version of this Agreement or any counterpart hereof shall have the same force and effect as the original. (i) Headings. The headings of the Sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction of this Agreement. (j) Notices. Any notice required or permitted hereunder shall be personally delivered or mailed by certified mail, return receipt requested, to the addresses of the parties set out on the signature pages hereto, or as changed from time to time by notice as provided herein. (k) Successors and Assigns. All provisions of this Agreement are binding upon, shall inure to the benefit of, and are enforceable by or against, the parties and their respective heirs, executors, administrators or other legal representatives and permitted successors and assigns. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties have made this Agreement effective as of the Effective Date. "COMPANY" NEOPHARM, INC. By: /s/ Gregory P. Young -------------------------------- Printed: Gregory P. Young Title: President and CEO NeoPharm, Inc. 150 Field Drive, Suite 195 Lake Forest, Illinois 60045 "DIRECTOR" /s/ Sander A. Flaum ----------------------------------- Sander A. Flaum 630 Park Avenue Apt. 9B New York, New York 10021 EX-10 5 phar10_3.txt EXHIBIT 10.03 EXHIBIT 10.03 SEPARATION AGREEMENT SEPARATION AGREEMENT (the "Agreement"), made and entered into as of November 11, 2004, by and between NeoPharm, Inc., a Delaware corporation (the "Company"), and Matthew P. Rogan, M.D. (together with his marital community, heirs, executors, administrators and assigns, the "Director"). W I T N E S S E T H: WHEREAS, the Director has served as a member of the Board of Directors (the "Board") of the Company; WHEREAS, in connection with such service, pursuant to the Company's 1998 Equity Incentive Plan (the "Plan"), the Director has received Awards of Restricted Stock and Options (each such terms as is defined in the Plan); WHEREAS, John N. Kapoor, Ph.D. has initiated a consent solicitation seeking, among other things, the removal of the Director from the Board; WHEREAS, the Company and Mr. Kapoor have mutually agreed to terms on which Mr. Kapoor will withdraw his consent solicitation, pursuant to a Settlement Agreement by and among the Company, Mr. Kapoor, Erick E. Hanson, Gregory P. Young and Dr. Kaveh T. Safavi (the "Settlement Agreement"); WHEREAS, in connection with the actions contemplated by the Settlement Agreement, the parties hereto desire to enter into this Agreement in order to settle fully and finally all matters between them, including but not limited to any matters arising out of Director's service on the Board and his separation therefrom. NOW THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and the Director agree as follows: 1. Resignation. By his execution hereof, effective as of immediately prior to the execution of the Settlement Agreement on the Effective Date (as such term is defined in the Settlement Agreement), the Director hereby resigns his position as a member of the Board. Except as provided herein, the Director shall no longer be entitled to any compensation or benefits in respect of his service as a member of the Board. 2. Agreements and Payments in Connection with Resignation. In connection with the Director's resignation, the Company hereby agrees and acknowledges that the Director shall be entitled to receive from the Company, effective immediately upon the Effective Date, the following payments and benefits: (a) an honorarium payment in the amount of Fifty Thousand Dollars ($50,000.00), payable in cash in immediately available funds; (b) reimbursement of expenses incurred in connection with the Director's position as a member of the Board, in accordance with Company policy; (c) immediate vesting of all shares under the Award of Restricted Stock granted under the Plan to the Director on March 10, 2004; (d) extension of the exercisability of each Award of Options granted under the Plan to the Director until the earlier of (i) June 30, 2008 or (ii) the date that is ten (10) years from the date of the original grant of any such Award; and (e) payment in advance, on a yearly basis, upon notice from the Director, of all dues and fees necessary to continue the Director's membership in the National Association of Corporate Directors through 2008. 3. Confidentiality. The Director acknowledges that his service as a member of the Board brought him into close contact with many confidential financial and proprietary matters concerning the Company, including, without limitation, information about costs, profits, assets, liabilities, patents, licenses, trade secrets, management bonuses, business plans, customer lists, other proprietary matters and other information not available to the public, and plans for future development. In recognition of the foregoing, the Director agrees that he will keep secret any and all confidential financial and proprietary matters of the Company, which are not otherwise in the public domain, and will not disclose them to anyone outside of the Company without the Company's written consent, except as may be required by a lawful order of a court or agency of competent jurisdiction. 4. Non-Disparagement. The Director agrees that he shall not in any way disparage the Company or its current and former officers, directors and employees, verbally or in writing, or make any statements to the press or to third parties that may reasonably be derogatory or detrimental to the Company's or any such person's good name or business reputation. Likewise, the Company, and each of its directors, officers and employees, shall not in any way disparage the Director, verbally or in writing, or make any statements to the press or to third parties that may reasonably be derogatory or detrimental to the Director's good name or business reputation. Nothing in this section shall preclude any party from responding truthfully to inquiries made in connection with any legal or governmental proceeding or from making such other statements as may be required by applicable law. 5. General. (a) Cooperation. Following the Effective Date, upon request of the Chief Executive Officer of the Company, the Director shall make himself available to the Company at mutually convenient times and places to assist the Company with respect to Company-related matters, including but not limited to pending and future litigations, arbitrations, governmental investigations or other disputes relating to matters that arose during the Director's service as a member of the Board. The Company shall reimburse the Director for all reasonable expenses and costs he may incur as a result of providing assistance under this Section 5(a), upon receipt of proper documentation. In connection with any such cooperation provided hereunder, the Director will be reimbursed at a rate of (i) $300.00 per hour for any assistance provided and (ii) $150.00 per hour for all travel time related to providing such assistance, provided that on June 1, 2005, and each subsequent anniversary thereof, the foregoing reimbursement rates will increase by $50.00 per hour and $25.00 per hour respectively. (b) Remedies. The Director recognizes that irreparable injury will result to the Company and its business in the event of any breach by the Director of any of the provisions of this Agreement as determined by a court of competent jurisdiction. In the event of any breach of any of the commitments of the Director pursuant hereto, the Company shall be entitled, in addition to any other remedies and damages available, to injunctive relief to restrain the violation of such commitments by the Director or by any person or persons acting for or with the Director in any capacity whatsoever. (c) Amendments. This Agreement may not be modified, amended, or waived in any manner except by an instrument in writing signed by both parties to this Agreement. (d) Waiver. The waiver by either party of compliance by the other party with any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement (whether or not similar), or a continuing waiver, or a waiver of any subsequent breach by a party of any provision of this Agreement. (e) Governing Law; Jurisdiction. The laws of the State of Delaware shall govern the validity, performance, enforcement, interpretation, and other aspects of this Agreement, notwithstanding any state's choice of law provisions to the contrary. Any proceeding to enforce, interpret, challenge the validity of', or recover for the breach of any provision of, this Agreement may be filed in the courts of the State of Delaware or the United States District Court sitting in the State of Delaware, and the parties hereto expressly waive any and all objections to personal jurisdiction, service of process or venue in connection therewith. (f) Complete Agreement. This Agreement constitutes a complete and total integration of the understanding of the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous negotiations, commitments, agreements, writings, and discussions with respect to the subject matter of this Agreement; provided, however, that the Director and Executive Officer Indemnification Agreement, dated as of September 24, 2004, between the Director and the Company, shall remain in full force and effect pursuant to the terms thereof. (g) Severability. If a court having proper jurisdiction holds a particular provision of this Agreement unenforceable or invalid for any reason, that provision shall be modified only to the extent necessary in the opinion of such court to make it enforceable and valid and the remainder of this Agreement shall be deemed valid and enforceable and shall be enforced to the greatest extent possible under the then existing law. In the event the court determines such modification is not possible, the provision shall be deemed severable and deleted, and all other provisions of this Agreement shall remain unchanged and in full force and effect. (h) Counterparts. This Agreement may be executed in two (2) counterparts, each of which shall be deemed an original but both of which together shall constitute one and the same Agreement. Facsimile transmission of the executed version of this Agreement or any counterpart hereof shall have the same force and effect as the original. (i) Headings. The headings of the Sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction of this Agreement. (j) Notices. Any notice required or permitted hereunder shall be personally delivered or mailed by certified mail, return receipt requested, to the addresses of the parties set out on the signature pages hereto, or as changed from time to time by notice as provided herein. (k) Successors and Assigns. All provisions of this Agreement are binding upon, shall inure to the benefit of, and are enforceable by or against, the parties and their respective heirs, executors, administrators or other legal representatives and permitted successors and assigns. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties have made this Agreement effective as of the Effective Date. "COMPANY" NEOPHARM, INC. By: /s/ Gregory P. Young ---------------------------- Printed: Gregory P. Young Title: President and CEO NeoPharm, Inc. 150 Field Drive, Suite 195 Lake Forest, Illinois 60045 "DIRECTOR" /s/ Matthew P. Rogan --------------------------------- Matthew P. Rogan, M.D. 103 High Country Drive Cary, North Carolina 27513 EX-99 6 neo99.txt EXHIBIT 99.1 EXHIBIT 99.1 [NEOPHARM GRAPHIC OMITTED] ***FOR IMMEDIATE RELEASE*** - --------------------------- CONTACT: Larry Kenyon, Chief Financial Officer Paul Arndt, Corporate Communications lkenyon@neophrm.com Manager 847-295-8678 x 210 parndt@neophrm.com 847-295-8678 x 215 NEOPHARM AND JOHN N. KAPOOR ANNOUNCE COMPROMISE AGREEMENT TO END CONSENT SOLICITATION Board of Directors expanded to 8 members - includes 4 new independent directors LAKE FOREST, Illinois - November 12, 2004 - NeoPharm, Inc. (Nasdaq: NEOL) and John N. Kapoor, Ph.D., NeoPharm's largest stockholder, jointly announced today that they have entered into an agreement whereby, effective immediately, Dr. Kapoor will end his consent solicitation seeking to, among other things, remove the Company's four independent Directors and replace them with three of Dr. Kapoor's nominees. Pursuant to the agreement: > the size of the NeoPharm Board has been increased from six to eight directors, > two current NeoPharm directors (Mr. Sander Flaum and Dr. Matthew Rogan) have resigned from the Board, > four new independent directors (Mr. Frank Becker, Mr. Ronald Eidell, Dr. Bernard Fox and Mr. Paul Freiman) have been appointed to fill the vacancies created by the increase in the size of the Board and resignations (biographical information on each of the new directors is set forth below), > none of the parties to the agreement, which include individuals who are continuing as directors of NeoPharm, will, nor will their affiliates and associates, among other things, take any action (including the solicitation of proxies or consents) to remove any of the directors or nominate or elect any additional directors not approved by the Board prior to December 1, 2005, and the individuals, and their affiliates and associates, will vote their shares in favor of the election of the Company's eight directors at the 2005 Annual Meeting of Stockholders, and > Dr. Kapoor will be reimbursed for out-of-pocket costs incurred in connection with the solicitation up to $350,000. In addition, the Company has amended its Stockholder Rights Plan (the "Plan") to provide that Dr. Kapoor will not be deemed an "acquiring person" under the Plan unless and until he becomes the beneficial owner of 30% or more of NeoPharm's outstanding common stock, the level of ownership permitted by him under the Plan prior to the commencement of Dr. Kapoor's consent solicitation. "We are pleased to announce that we have been able to reach this agreement with John that will allow our management team to move forward and focus on the development of our drug product candidates," commented Erick Hanson, NeoPharm's Chairman of the Board of Directors. "The -more- priority for everyone on the Board has been, and continues to be, the completion of the Phase III PRECISE trial for IL13-PE38QQR and reducing expenses. Additionally, I would like to thank Mr. Flaum and Dr. Rogan for their significant contributions to this Company in their service as members of the Board of Directors." "I believe that these changes at NeoPharm will improve our chances for future success," added Dr. Kapoor. "This is a strong Board and the new independent directors provide a diverse background and additional skills that should enhance the Board's ability to provide effective oversight, governance and accountability to our investors." Biographical Information for New Directors - ------------------------------------------ Frank Becker - Mr. Becker is currently the President and a partner at Greenfield Chemical, a pharmaceutical consulting and sourcing company. From 1999 to 2002, Mr. Becker served as President and Chief Operating Officer of Sicor Pharmaceuticals, an injectable pharmaceutical company. Prior to that, Mr. Becker spent over 35 years at Abbott Laboratories, most recently as Vice President of Process Research and Chemical Manufacturing. Mr. Becker received his MBA in Finance from the University of Chicago in 1971. Ronald Eidell - Mr. Eidell has been a financial and operating executive in the healthcare industry since 1998. From December 2001 to December 2003, he was Executive Vice President, Chief Financial Officer and Secretary of Esoterix, Inc., a privately-held clinical laboratory services company providing medical testing services (including clinical trials testing services) to healthcare professionals, hospitals and pharmaceutical companies. Prior to Esoterix, Inc., he was Executive Vice President, Chief Financial Officer and Secretary of NovaMed, Inc., a Nasdaq listed healthcare services and facilities company. Mr. Eidell received his MBA from the University of Chicago in 1982 and his BS in Business Administration from Drexel University in 1967. He currently serves on the Dean's Advisory Council to Drexel University's LeBow College of Business. Bernard A Fox, Ph.D. - Dr. Fox has been Chief of the Laboratory of Molecular and Tumor Immunology at the Earle Chiles Research Institute at the Providence Portland Medical Center in Portland, Oregon and also Associate Professor in the Departments of Molecular Microbiology & Immunology and Environmental & Biomolecular Systems at Oregon Health and Science University School of Medicine in Portland, Oregon since 1994. Dr. Fox has been the principal investigator, co-investigator or a collaborator in at least nine clinical trials and has published at least fifty-six articles in scientific journals over the course of his career. Dr. Fox received his post-doctoral training as a Staff Fellow in the Surgery Branch, Division of Cancer Treatment, Clinical Oncology Program at the National Cancer Institute at the National Institutes of Health in Bethesda, Maryland from 1985 to 1987 and was a Senior Staff Fellow there from 1987 to 1990. Mr. Fox is also a director of The International Society for the Biological Therapy of Cancer and is a member of the scientific advisory boards of Cell Genesys Inc. and the Biological Development Association (Europe). -more- Paul E. Freiman - Mr. Freiman is currently the President, Chief Executive Officer and a director of Neurobiological Technologies, Inc., a post he has held since May 1997. He is the former Chairman and Chief Executive Officer of Syntex Corporation. Mr. Freiman currently serves as Chairman of the Board of SciGen Pte. Ltd., and serves on the boards of Penwest Pharmaceutical Co., Calypte Biomedical, Phytos, Inc. and Otsuka America Pharmaceuticals, Inc. He has been chairman of the Pharmaceutical Manufacturers Association of America (PhRMA) and has also chaired a number of key PhRMA committees. Mr. Freiman holds a B.S. degree from Fordham University and an honorary doctorate from the Arnold & Marie Schwartz College of Pharmacy. About NeoPharm NeoPharm, Inc., based in Lake Forest, IL, is a publicly traded biopharmaceutical company dedicated to the research, development and commercialization of new and innovative cancer drugs for therapeutic applications. The Company has a portfolio of compounds in various stages of development. Additional information about NeoPharm, recent news releases, and scientific abstracts related to NeoPharm's clinical and pre-clinical research can be obtained by visiting NeoPharm's Website at www.neophrm.com, or calling Paul Arndt at 847-295-8678x215. =============================================================================== Forward Looking Statements - This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company has tried to identify such forward-looking statements by use of such words as "expects," "intends," "hopes," "anticipates," "believes," "could," "may," "evidences" and "estimates," and other similar expressions, but these words are not the exclusive means of identifying such statements. Such statements include, but are not limited to, any statements relating to the Company's drug development program, including, but not limited to the initiation, progress and outcomes of clinical trials of the Company's drug product candidates, and any other statements that are not historical facts. Such statements involve risks and uncertainties, including, but not limited to, those risks and uncertainties relating to difficulties or delays in financing, development, testing, regulatory approval, production and marketing of the Company's drug and non-drug compounds, uncertainty regarding the availability of third party production capacity, uncertainty regarding the outcome of damage claims made by or against the Company, the Company's ability to cut back on its funding of certain of its development projects in order to conserve its cash resources, the ability of the Company to procure additional future sources of financing, unexpected adverse side effects or inadequate therapeutic efficacy of the Company's drug and non-drug compounds that could slow or prevent products coming to market, uncertainty regarding the Company's ability to market its drug and non-drug products directly or through independent distributors, the uncertainty of patent protection for the Company's intellectual property or trade secrets, and other risks detailed from time to time in filings the Company makes with the Securities and Exchange Commission including its annual reports on Form 10-K and quarterly reports on Forms 10-Q. Such statements are based on management's current expectations, but actual results may differ materially due to various factors, including those risks and uncertainties mentioned or referred to in this press release. Accordingly, you should not rely on these forward-looking statements as a prediction of actual future results. -----END PRIVACY-ENHANCED MESSAGE-----