Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT is made and entered into as of the 25th day of April 2005, by and
between NEOPHARM, INC., a Delaware corporation (the “Company”) and RONALD G.
EIDELL (“Executive”).

 

WITNESSETH:

 

WHEREAS, the Company desires to employ the Executive, on an interim basis, and
the Executive desires to accept such employment on an interim basis, upon the
terms and conditions hereinafter set forth;

 

NOW, THEREFORE, in consideration of the covenants and mutual agreements set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:

 

1.                                       Employment.  Throughout the Term (as
defined in Section 2 below), the Company shall employ Executive as provided
herein, and Executive hereby accepts such employment.  In accepting such
employment, Executive states that, to the best of his knowledge, (i) he is not
now, and by accepting such employment, will not be, under any restrictions in
the performance of the duties contemplated under this Agreement as a result of
the provisions of any prior employment agreement or non-compete or similar
agreement to which Executive is or was a party; and (ii) he will not make use of
or reveal to anyone employed by or affiliated with the Company any information
that is of a confidential or proprietary nature which he has obtained or which
has been disclosed to him as a result of his position with any entity with which
he has been previously employed or affiliated.

 

2.                                       Term of Employment.  The term of
Executive’s employment by the Company hereunder shall commence on March 8, 2005
(the “Effective Date”) and shall continue thereafter until the Company has
identified a permanent CEO and such individual has accepted such position,
unless sooner terminated as a result of Executive’s death or in accordance with
the provisions of Section 7 below (the “Term”).

 

3.                                       Duties.  Throughout the Term, and
except as otherwise expressly provided herein, Executive shall be employed by
the Company to serve, on an interim basis, as the President and Chief Executive
Officer (“CEO”) of the Company.  In such capacity, Executive shall devote his
full time to the performance of his duties as President and CEO of the Company
in accordance with the Company’s By-laws, this Agreement and the directions of
the Company’s Board of Directors.  Executive shall continue to serve as a member
of the Board of Directors.  Without limiting the generality of the foregoing,
throughout the Term, Executive shall faithfully perform his duties as President
and CEO at all times so as to promote the best interests of the Company.

 

4.                                       Compensation.

 

(a)                                  Base Salary.  For any and all services
performed by Executive under this Agreement during the Term, in whatever
capacity, the Company shall pay to Executive a base salary, prorated for the
period in which he serves, of Two Hundred Sixty Thousand Dollars ($260,000) per
year (the “Base Salary”), less

 

--------------------------------------------------------------------------------

 

any and all applicable federal, state and local payroll and withholding taxes. 
The Base Salary shall be paid in the same increments as the Company’s normal
payroll, but no less frequent than monthly and prorated, however, for any period
of less than a full month.

 

(b)                                 Bonus.  In addition to the Base Salary,
Executive shall be eligible to receive from the Company an incentive
compensation bonus (the “Bonus”) based on a percentage of his Base Salary, and
prorated for the period of his employment.  The Bonus, if any, shall be
determined by the Compensation Committee based on the achievement by the Company
of certain specific strategic plans and goals (the “Performance Goals”) during
the Executive’s period of employment (the “Measurement Period”) as such
Performance Goals shall be determined by the Board in consultation with the
Executive.  The initial Performance Goals will be established by the Board, in
consultation with the Execution within ninety (90) days of Executive’s
employment hereunder.  Following the end of the Measurement Period, the
Compensation Committee of the Board shall review the Performance Goals for the
Measurement Period in light of the Company’s actual performance during the
Measurement Period as reflected on the Company’s financial statements. 
Achievement of the Performance Goals, as determined by the Compensation
Committee, shall result in the following payments as a percentage of Salary:

 

Level of Achievement

 

Bonus as Percent of Salary

 

 

 

 

 

Below Target

 

0-35

%

 

Target Goal

 

35

%

 

Overachievement Goal

 

35-50

%

 

 

Payment of the Bonus, if any, shall be made within thirty (30) days after the
Company’s performance for the Measurement Period is established on the basis of
the Company’s financial statements and payment has been authorized by the
Compensation Committee.  In addition, and at its sole discretion, the Board may
award additional compensation to Executive based on Executive’s contributions to
the Company.

 

5.                                       Benefits and Other Rights.  In
consideration for Executive’s performance under this Agreement, the Company
shall provide to Executive the following benefits:

 

(a)                                  The Company will provide Executive with
cash advances for or reimbursement of all reasonable out-of-pocket business
expenses incurred by Executive in connection with his employment hereunder;
provided, however, Executive adheres to any and all reasonable policies
established by the Company from time to time with respect to such reimbursements
or advances, including, but not limited to, a requirement that Executive submit
supporting evidence of any such expenses to the Company.

 

(b)                                 The Company will provide Executive with a
monthly transportation allowance in the amount of $1,500.00, subject to standard
payroll withholding for taxes, to be used by Executive for commuting to and from
the Company’s offices.

 

2

--------------------------------------------------------------------------------

 

(c)                                  The Company will provide Executive and his
family with the opportunity to receive group medical coverage under the terms of
the Company’s health insurance plan, but subject to completion of normal waiting
periods.  During any such waiting period, the Company will pay, or reimburse
Executive for, the cost of COBRA coverage for Executive and his family under his
prior health plan.

 

(d)                                 During the Term Executive shall be eligible
to participate in the Company’s 401(k) program and life insurance programs, if
any, subject to satisfying any eligibility requirements for said benefits.

 

(e)                                  The Company shall also enter into an
indemnification agreement with Tatum Partners, LLP, an entity of which Executive
is a member.

 

6.                                       Options. The Company shall grant to
Executive options pursuant to the Company’s 1998 Equity Incentive Plan (the
“Option Plan”), as amended, to purchase eighty thousand (80,000) shares of the
Company’s common stock (the “Options”) at an option exercise price equal to the
Fair Market Value (as determined under the Option Plan) of the Company’s common
stock as of the date of grant of the Options as determined under the Option Plan
(the “Date of Grant”).  The Options shall vest upon the termination of the Term
as a result of Executive stepping down to allow a new permanent CEO to take
office or, if the Term has not yet ended, one year from the Date of Grant,
whichever occurs earlier.  The Options shall not be exercisable subsequent to
the date that is ten (10) years after the Date of Grant. In all other respects
the Options shall be governed by the terms and conditions of the Option Plan.

 

7.                                       Termination of the Term.

 

(a)                                  The Term shall end without any further
action by the Company upon the Board electing an individual to succeed the
Executive as CEO and President and, upon such election, Executive shall be
deemed to have immediately resigned all executive and other positions with the
Company and any subsidiary of the Company.

 

(b)                                 The Company shall have the right to
terminate the Term under the following circumstances:

 

(i)                                     Executive shall die; or

 

(ii)                                  With or without Cause, as herein defined,
effective upon written notice to Executive by the Company.

 

(c)                                  Executive shall have the right to terminate
the Term at any time upon sixty (60) days prior written notice to the Company.

 

(d)                                 For purposes of this Agreement, “Cause”
shall mean:

 

(i)                                     Executive shall be convicted of the
commission of a felony or a crime involving dishonesty, fraud or moral
turpitude;

 

(ii)                                  Executive has engaged in acts of fraud,
embezzlement, theft or other dishonest acts against the Company;

 

(iii)                               Executive commits an act which negatively
impacts the Company or its employees including, but not limited to, engaging in
competition with the

 

3

--------------------------------------------------------------------------------

 

Company, disclosing confidential information or engaging in sexual harassment,
discrimination or other human rights-type violations;

 

(iv)                              Executive’s gross neglect or willful
misconduct in the discharge of his duties and responsibilities; or

 

(v)                                 Executive’s repeated refusal to follow the
lawful direction of the Board of Directors or supervising officers.

 

8.                                       Effect of Expiration or Termination of
the Term.  Promptly following the termination of the Term, and except otherwise
expressly agreed to by the Company, Executive shall:

 

(a)                                  Immediately resign from any and all
executive and other positions which Executive holds with the Company or any
subsidiary of the Company, including, but not limited to, as CEO and President
of the Company or any subsidiary of the Company; provided, however, that except
for a termination under Section 7(b)(i) or a termination for Cause under Section
7(b)(ii), the Company shall permit Executive to continue as a member of the
Company’s board of directors on the same terms of service, including, but not
limited to, continuing eligibility for re-nomination, at the discretion of the
Corporate Governance Committee and the Board of Directors, and with compensation
and benefits at a level appropriate for non-employee board members.

 

(b)                                 Provide the Company with all reasonable
assistance necessary to permit the Company to continue its business operations
without interruption and in a manner consistent with reasonable business
practices; provided, however, that such transition period shall not exceed
thirty (30) days after termination nor require more than twenty (20) hours of
Executive’s time per week and Executive shall be promptly reimbursed for all
out-of-pocket expenses.

 

(c)                                  Deliver to the Company possession of any
and all property owned or leased by the Company which may then be in Executive’s
possession or under his control, including, without limitation, any and all such
keys, credit cards, automobiles, equipment, supplies, books, records, files,
computer equipment, computer software and other such tangible and intangible
property of any description whatsoever.  If, following the expiration or
termination of the Term, Executive shall receive any mail addressed to the
Company, then Executive shall immediately deliver such mail, unopened and in its
original envelope or package, to the Company;

 

(d)                                 Other than as specifically provided in this
Section 8, upon a termination of employment all other benefits and/or
entitlements to participate in programs or benefits, if any, will cease as of
the effective date of such termination

 

(e)                                  Upon termination of Executive pursuant to
Section 7(a) or a termination without Cause pursuant to Section 7(b)(ii), the
Company shall (i) pay Executive or Executive’s estate all Base Salary accrued,
but unpaid, as of the date of such termination; (ii) make a Bonus payment in
accordance with the provisions of Section 4(b); and, (iii) all of Executive’s
then unvested Options, if any, previously issued pursuant to the Option Plan
shall immediately vest and be exercisable as provided in the Option Plan.

 

4

--------------------------------------------------------------------------------

 

(f)                                    Upon termination of Executive pursuant to
Section 7(b)(i), a termination for Cause pursuant to Section 7(b)(ii) or a
termination pursuant to Section 7(c), the Company shall pay Executive or
Executive’s estate all Base Salary accrued, but unpaid, as of the date of
termination.

 

9.                                       Restrictive Covenants for Executive. 
Executive hereby covenants and agrees with the Company that for so long as
Executive is employed by the Company and for a period (the “Restricted Period”)
of twelve (12) months after the termination of such employment for any reason,
Executive shall not, without the prior written consent of the Company, which
consent shall be within the sole and exclusive discretion of the Company, either
directly or indirectly, on his own account or as an executive, consultant,
agent, partner, joint venturer, owner, officer, director or shareholder of any
other person, firm, corporation, partnership, limited liability company or other
entity:

 

(a)                                  Solicit any current supplier, customer,
employee, or client of the Company with whom Executive dealt, or with whom
anyone in Executive’s direct chain of command dealt, on behalf of the Company
within the year preceding Executive’s termination of employment, for the purpose
of researching, developing or purchasing, selling or marketing drug or non-drug
products, which are competitive with:  (1) those products being marketed by the
Company at the time of Executive’s termination; or (2) those products that
Executive was aware were under development by the Company and expected to be
marketed within four years of Executive’s termination;

 

(b)                                 All ideas, inventions, trademarks, and other
developments or improvements conceived or developed by the Executive, alone or
with others, during the term of this Agreement, whether or not during working
hours that are within the scope of the Company’s business operations, or that
relate to any Company work or projects, shall be conclusively presumed to have
been created for or on behalf of the Company as part of the Executive’s services
to the Company (“Development”).  Executive shall disclose promptly to Company
any and all such Developments.  Such Developments are the exclusive property of
the Company without the payment of consideration therefore, and the Executive
hereby transfers, assigns and conveys all of the Executive’s right, title and
interest in any such Developments to the Company and agrees to execute and
deliver any documents that the Company deems necessary to effect such transfer
on the demand of the Company.  The Executive agrees to assist the Company, at
its expense, to obtain patents on any such patentable Developments, and agrees
to execute all documents necessary to obtain such patents in the name of the
Company.  This Agreement does not apply to any invention for which no equipment,
supplies, facility or trade secret information of the Company was used and which
was developed entirely on the Executive’s own time unless:  (1) the invention
relates (a) to the business of the Company or (b) to the Company’s actual
demonstratively anticipated research and development, or (2) the invention
results from any work performed by the Executive for the Company.

 

(c)                                  Executive recognizes and understands that
Executive’s duties at the Company may include the preparation of materials,
including written or graphic materials and other Developments, and that any such
materials conceived or written by

 

5

--------------------------------------------------------------------------------

 

Executive shall be deemed a “work made for hire” as defined and used in the
Federal Copyright Act, 17 U.S.C.
§ 101.  In the event of publication of such materials, Executive understands
that since such work is “work made for hire,” the Company shall solely retain
and own all rights in such materials, including any right of copyright.

 

10.                                 Confidentiality.  The Executive acknowledges
that during the period of his employment by the Company, and in his performance
of services hereunder, he will be placed in a relationship of trust and
confidence regarding the Company and its affairs.  In the course of and due to
that relationship he will have contact with the Company’s customers, suppliers,
affiliates, and distributors and their personnel.  In the course of the
aforesaid relationship, he will have access to and will acquire confidential
information relating to the business and operations of the Company, including,
without limitation, information relating to processes, plans and methods of
operation of the Company.  The Executive acknowledges that any such information
that is not a trade secret, nonetheless constitutes confidential information as
between himself and the Company, that the disclosure thereof (or of any
information which he knows relates to confidential, trade, or other secret
aspects of the Company’s business) would cause substantial loss to the goodwill
of the Company, and will continue to be made known to Executive only because of
the position of trust and confidence which he will continue to occupy
hereunder.  In view of the foregoing, and in consideration of the covenants and
premises of this Agreement, the Executive agrees that he will not, at any time
during the term of his employment, and for a period of twelve months thereafter,
disclose to any person, firm or company any trade secrets or confidential
information or such ideas which he may have acquired or developed or may acquire
or develop relating to the business of the Company while serving the Company as
an executive.

 

11.                                 Remedies.

 

(a)                                  The covenants of Executive set forth in
Sections 9 and 10 are separate and independent covenants for which valuable
consideration has been paid, the receipt, adequacy and sufficiency of which are
acknowledged by Executive, and have also been made by Executive to induce the
Company to enter into this Agreement.  Each of the aforesaid covenants may be
availed of, or relied upon, by the Company in any court of competent
jurisdiction, and shall form the basis of injunctive relief and damages
including expenses of litigation (including, but not limited to, reasonable
attorney’s fees upon trial and appeal) suffered by the Company arising out of
any breach of the aforesaid covenants by Executive.  The covenants of Executive
set forth in this Agreement are cumulative to each other and to all other
covenants of Executive in favor of the Company contained in this Agreement and
shall survive the termination of this Agreement for the purposes intended.

 

(b)                                 Each of the covenants contained in Sections
9 and 10 above shall be construed as agreements which are independent of any
other provision of this Agreement, and the existence of any claim or cause of
action by any party hereto against any other party hereto, of whatever nature,
shall not constitute a defense to the enforcement of such covenants.  If any of
such covenants shall be deemed unenforceable by virtue of its scope in terms of
geographical area, length of time or otherwise, but

 

6

--------------------------------------------------------------------------------

 

may be made enforceable by the imposition of limitations thereon, Executive
agrees that the same shall be enforceable to the fullest extent permissible
under the laws and public policies of the jurisdiction in which enforcement is
sought.  The parties hereto hereby authorize any court of competent jurisdiction
to modify or reduce the scope of such covenants to the extent necessary to make
such covenants enforceable.

 

(c)                                  In the event that Executive believes that
the Company is in violation of a material obligation owed to Executive under
this Agreement, and the Executive has given notice of such violation to the
Company requesting that the Company cure such violation, and within twenty (20)
business days the Company has not undertaken steps to cure such violation or to
provide information to Executive demonstrating that the Company is not in
violation of the Agreement, and as a result of such failure to cure or dispute
such violation, the Executive terminates the Agreement in accordance with
Section 7(b), Executive shall be entitled to receive from the Company the
payments and benefits set forth in Section 8(e) of this Agreement provided,
however, that the restrictions contained in this Agreement, including, but not
limited to, the covenants in Section 9(b) and in Section 10, shall remain in
full force and effect.

 

12.                                 Enforcement Costs.  If any legal action or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorney’s fees, court costs and all
expenses even if not taxable as court costs (including, without limitation, all
such fees, costs and expenses incident to appeal and other post-judgment
proceedings), incurred in that action or proceeding, in addition to any other
relief to which such party or parties may be entitled.  Attorney’s fees shall
include, without limitation, paralegal fees, investigative fees, administrative
costs, sales and use taxes and all other charges billed by the attorney to the
prevailing party.

 

The Company shall maintain directors’ and officers’ insurance to cover the
Executive in an amount reasonably agreeable to the Executive at no additional
cost to the Executive, and the Company will maintain such insurance at all times
while this Agreement remains in effect.  Furthermore, the Company will maintain
such insurance coverage with respect to occurrences arising during the term of
this Agreement for at least three years following the termination of this
Agreement or will purchase a directors’ and officers’ extended reporting period,
or “tail,” policy to cover the Executive.  The Company agrees to provide
documentary evidence of such insurance coverage to Executive.

 

13.                                 Indemnification.  The Company covenants and
agrees that, to the extent permitted by applicable law, it will indemnify and
hold Executive harmless from any and all liability, loss, damage, cost and
expense (including reasonable attorneys’ fees) which Executive may incur, suffer
or be required to pay and which result from or arise in connection with any act
by the Company, or on the Company’s behalf by any of the Company’s officers,
directors, employees, consultants, representatives or agents, which act occurred
prior to the Effective Date and in which Executive did not, directly or
indirectly, participate.

 

7

--------------------------------------------------------------------------------

 

14.                                 Notices.  Any and all notices necessary or
desirable to be served hereunder shall be in writing and shall be

 

(a)                                  personally delivered, or

 

(b)                                 sent by certified mail, postage prepaid,
return receipt requested, or guaranteed overnight delivery by a nationally
recognized express delivery company, in each case addressed to the intended
recipient at the address set forth below.

 

(c)                                  For notices sent to the Company:

 

NeoPharm, Inc.

150 Field Drive, Suite 195

Lake Forest, Illinois 60045

 

Telephone No.: (847) 295-8678

Facsimile No.: (847) 295-8654

 

(d)                                 For notices sent to Executive:

 

Mr. Ronald G. Eidell

1110 N. Lake Shore Drive

Chicago, IL 60611

Telephone No.: (312) 642-0570

Fax No.: (312) 649-9196

 

Either party hereto may amend the addresses for notices to such party hereunder
by delivery of a written notice thereof served upon the other party hereto as
provided herein.  Any notice sent by certified mail as provided above shall be
deemed delivered on the third (3rd) business day next following the postmark
date which it bears.

 

15.                                 Tatum Resources.  The Company acknowledges
and agrees that Executive is and will remain a partner of, and has and will
retain an interest in, Tatum CFO Partners, LLP (“Tatum”), which will benefit the
Company in that Executive will have access to certain Tatum resources.  The
Company and Executive acknowledge and agree that a Resource Fee, and other
compensation, will be paid by the Company to Tatum in consideration for Tatum’s
provision of resources to Executive as provided in the Interim Engagement
Resources Agreement between the Company and Tatum, dated on or about the date of
this Agreement (the “Resources Agreement”).  The Company and Executive agree
that any payments made by the Company to Tatum pursuant to the terms of the
Resources Agreement will not be treated as income to Executive from services
performed by Executive to the Company and will not be reflected as compensation
in the Executive’s W-2 report.

 

16.                                 Entire Agreement.  Except for the Resources
Agreement, this Agreement sets forth the entire agreement of the parties hereto
with respect to the subject matter hereof, and all prior negotiations,
agreements and understandings are merged herein.  This Agreement may not be
modified or revised except pursuant to a written instrument signed by the party
against whom enforcement is sought.

 

17.                                 Severability.  The invalidity or
unenforceability of any provision hereof shall not  affect  the  enforceability
of any other provision hereof, and except as otherwise provided in 

 

8

--------------------------------------------------------------------------------

 

Section 11 above, any such invalid or unenforceable provision shall be severed
from this Agreement.

 

18.                                 Waiver. Failure to insist upon strict
compliance with any of the terms or conditions hereof shall not be deemed a
waiver or such term or condition, and the waiver or relinquishment of any right
or remedy hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or remedy at any other time or times.

 

19.                                 Governing Law.  This Agreement and the
rights and obligations of the parties hereto shall be governed by and construed
in accordance with the laws of the State of Illinois, without regard to its
conflicts of laws provisions.  Each party hereto hereby (a) agrees that any
litigation which may be initiated with respect to this Agreement or to enforce
rights granted hereunder shall be initiated in a court located in Cook County,
Illinois and (b) consents to personal jurisdiction of such courts for such
purpose.

 

20.                                 Benefit and Assignability. This Agreement
shall inure to the benefit of and be binding upon the Company and its successors
and assigns.  The rights and obligations of Executive hereunder are personal to
him, and are not subject to voluntary or involuntary alienation, transfer,
delegation or assignment.

 

[SIGNATURE PAGE FOLLOWS]

 

9

--------------------------------------------------------------------------------

 

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

 

 

 

NEOPHARM, INC.

 

 

 

 

 

By:

/s/ Erick E. Hanson

 

 

Its: Chairman of the Board

 

 

 

EXECUTIVE:

 

 

 

 

 

/s/ Ronald G. Eidell

 

 

RONALD G. EIDELL

 

10

--------------------------------------------------------------------------------