**Exhibit10.1**

 

**SEPARATIONAGREEMENT AND FULL RELEASE OF ALL CLAIMS**

 

THIS SEPARATION AGREEMENT AND FULL RELEASE OF ALL CLAIMS (hereinafterthe “Agreement”) is entered into as of this 17th day of June, 2004 by andbetween NEOPHARM, INC. (the “Company”) and JAMES M. HUSSEY (“Executive”).

 

**WITNESSETH**

 

A.                                   TheCompany and Executive are parties to that certain Employment Agreement (the“Employment Agreement”) dated as of March 16, 1998.

 

B.                                     Executivehas resigned as an officer and director of the Company and from all relatedoffices and positions with affiliates of the Company, as set forth in theletter of resignation attached hereto as Exhibit A for reference.

 

C.                                     Executiveand the Company are terminating their employment relationship effective on thedate of this Agreement, and desire to settle fully and finally all issuesbetween them that may arise out of or relate to Executive’s employment with theCompany and all other claims the Company or Executive have or may have againsteach other through the date of this Agreement.

 

NOW, THEREFORE, in consideration of the recitals, the mutual agreementscontained herein and other good and valuable consideration, the receipt,adequacy and sufficiency of which is hereby acknowledged, the parties to thisAgreement hereby agree, promise and covenant as to each of the following:

 

# ***1.***                                       Capacity to Execute.

# *** ***

Each of the parties represents and warrants that he or it is legallyviable and competent to enter into this Agreement, is relying on independentjudgment and has not been influenced, pressured or coerced to any extentwhatsoever in making this Agreement by any representations or statements madeby the Company and/or any person or persons representing the Company, and thatthe individuals executing this Agreement on his or its behalf are authorized todo so. Each of the parties further represents and warrants that he or it hasnot sold, assigned, transferred, conveyed or otherwise disposed of all or anypart of the claims released hereunder, whether known or unknown.

 

# ***2.***                                       SpecificConsideration Provided to Executive.

# *** ***

In exchange for the covenants of Executive hereunder, the futureconsulting services to be provided by Executive, and other good and valuableconsideration the receipt of which is hereby acknowledged, and notwithstandingany provisions to the contrary contained in the Employment Agreement, whichprovisions shall be considered to be null and void, Executive shall receive thefollowing consideration from the Company:

 

## (a)                                  The Company shall: (i) provide Executive with salarycontinuance, subject to Sections 2(c) and 4 below, for twelve (12) months basedupon his current base salary (the “Salary Continuance”), plus (ii) an amountequal to 50% of Executive’s target milestone bonus as established by theCompensation Committee of the Board of Directors (the “Bonus Payment”) for2004, payable at such time as the Company makes payment to its other employeesof bonus payments from 2004, but only if at such time the Company’s paymentobligations under this Agreement have not been terminated, plus (iii) subjectto Sections 2(b), 2(c) and 4 below, for twelve (12) months from the date ofthis Agreement, either continue to provide Executive with coverage under theCompany’s medical insurance plan (“Medical Insurance”) or, in the event Executiveshall not be eligible for such coverage, pay the cost of COBRA coverage forExecutive which shall be substantially equivalent to the Medical Insurance,plus (iv) pay Executive for any unused vacation time remaining available to himin 2004, on the basis of his correct base salary, plus (v) subject toSection 3(b), all of Executive’s previously issued, but currently unvestedoptions granted pursuant to the Company’s stock option plans, shall continue tovest in accordance with their current vesting schedules.

##  

## (b)                                 The benefits set forth in Section 2(a)(iii) above,which provide for twelve (12) months of Medical Insurance or, alternatively,COBRA coverage for Executive shall, in addition, include such benefits forthose of Executive’s dependents who are currently included in Executive’sMedical Insurance coverage and which would be subject to COBRA to the extentsuch benefits otherwise are in effect for Executive under the

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## Employment Agreement,understanding, however, that Executive is responsible for complying with allterms and conditions of any such insurance plan.

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## (c)                                  The Salary Continuance provided in Section 2(a)(i) andMedical Insurance or COBRA payments provided in Section 2(a)(iii) shallcontinue only until such time as Executive shall have accepted anotherfull-time position or until the first date that Executive provides consultingor other services to any pharmaceutical or biotechnology entity.  In addition, in the event that Executiveshall perform consulting or other services for any third party, other than apharmaceutical or biotechnology entity, for which he shall receive compensationduring the period he is receiving the Salary Continuance, all such compensationshall be reported to the Company and shall be offset against any remainingSalary Continuance payments.  Failure ofExecutive to promptly report the receipt of any compensation from a third partyor the acceptance of a new position, or the rendering of consulting or otherservices to any pharmaceutical/biotechnology entity, shall entitle the Companyto terminate all remaining Salary Continuance, the Bonus Payment, MedicalInsurance or COBRA benefit payments and to seek restitution for any suchpayments made to Executive subsequent to such job acceptance or performance ofsuch pharmaceutical/biotechnology services, or other compensation receipt.

##  

## (d)                                 Any Salary Continuance payments shall be made in accordancewith the usual payroll practices which were applicable prior totermination.  Except as otherwisespecifically set forth herein, any and all payments made pursuant to thisAgreement shall be net of any and all applicable federal, state and localpayroll and withholding taxes.

##  

## (e)                                  The severance obligations of the Company set forth inparagraphs 2(a), 2(b) and 2(c) herein shall constitute the total payment andseverance obligations under this Agreement, which represent payments andobligations that Executive would not otherwise be entitled to receive from theCompany. Accordingly, Executive understands and warrants that no amount otherthan as set forth in this Section 2 (which supercedes and goes beyondpost-termination benefits otherwise available under the Employment Agreement)is or shall be due or claimed to be due from the Company and/or from any otherperson or entity released in paragraph 5 below with respect to any claim orclaims released in Section 5 below, including, but not limited to, any andall claims for attorneys’ fees and the costs of litigation that he may haveunder any federal, state or local law, common law or in equity; provided,however, that notwithstanding the foregoing, the Company shall continue toindemnify Executive in accordance with the Company’s Certificate ofIncorporation and By-laws and Delaware law, including, but not limited to, thepayment or reimbursement of attorneys fees.

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# ***3.***                                       Consulting Services.

# *** ***

## (a)                                  Effective with Executive’stermination of employment, and continuing until the earlier of termination ofthis Agreement or twenty-four (24) months from the date hereof (the “ConsultingTerm”), Executive’s status shall change to that of a consultant to, and not anemployee of, the Company.  During theConsulting Term, Executive will be reasonably available to NeoPharm personnelduring normal business hours for consultation on matters relating to theCompany’s business operations and strategies, including, but not limited to,the Company’s development of drugs and nondrugs which are currently beingresearched and developed by the Company; provided, however, that suchconsultation shall not exceed twenty (20) hours per week.

##  

## (b)                                 While serving as aconsultant to the Company, Executive’s previously granted options will continueto vest in accordance with the current vesting schedule applicable to suchoptions and shall remain exercisable until the date that is ninety (90) daysafter the termination of the Consulting Term.

##  

# ***4.***                                       Restrictive Covenants for Executive.

# *** ***

## (a)                                  Executive hereby covenantsand agrees with the Company that, in consideration for the payments and othervaluable consideration to be provided to Executive under this Agreement, for aperiod (the “Restricted Period”) of twenty-four (24) months from the date ofthis Agreement, Executive shall not, without the prior written consent of theCompany, which consent shall be within the sole and exclusive discretion of theCompany, either directly or indirectly, on his own account or as an executive,consultant, agent, partner,

 

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##  joint venturer, owner, officer, director orshareholder of any other person, firm, corporation, partnership, limitedliability company or other entity:

##  

## (i)                                     Perform services for any Competing Business, as hereinafter defined, includingspecifically, but not limited to, participating in the research, development,sale or marketing of drug or non-drug products or the management of individualsinvolved in the research, development, sale or marketing of drug or non-drugproducts.  For purposes of thiscovenant, the term “Competing Business” shall mean any entity engaged in theresearch, development, marketing or sale of drug and nondrug products which areor would be competitive in the fields of cancer or liposome technologywith:  (1) those products being marketedby the Company at the time of Executive’s termination; or (2) those productsthat Executive was aware were under research and development by the Company andexpected to be marketed within four years of Executive’s termination.  This covenant shall apply only within the“Territory” which is defined as the fifty states of the United States.  Executive recognizes and agrees that in hiscapacity as President and CEO of the Company, his duties extended throughoutthe entire service area of the Company which includes, at a minimum, the fiftystates of the United States and that, because of the executive nature ofExecutive’s position with the Company, in order to afford the Companyprotection from unfair competition by the Executive following his terminationof employment, this covenant must extend throughout the stated Territory.  Executive further acknowledges that thiscovenant does not prohibit him from engaging in his entire trade or businessbut only a very limited segment of the pharmaceuticals industry; or

###  

## (ii)                                  Solicit any currentemployee, supplier, customer, or client of the Company with whom Executivedealt, or with whom anyone in Executive’s direct chain of command dealt, onbehalf of the Company within the year preceding Executive’s termination ofemployment, for the purpose of researching, developing or purchasing, sellingor marketing drug or non-drug products, which are or would be competitive inthe fields of cancer or liposome technology with:  (1) those products being marketed by the Company at the time ofExecutive’s termination; or (2) those products that Executive was aware wereunder development by the Company and expected to be marketed within four yearsof Executive’s termination;

###  

Executive acknowledges and agrees that breach by Executive of theprovisions of this Section 4(a) shall entitle the Company, at its option,to terminate this Agreement, including, but not limited to, termination of theremaining payments, if any, to be made to Executive under Section 2hereof.

 

## (b)                                 Executive acknowledges thatall ideas, inventions, trademarks, and other developments or improvementsconceived or developed by the Executive, alone or with others, during the termof his employment with the Company or during the Restricted Period, whether ornot during working hours, that are within the scope of the Company’s businessoperations, or that relate to any Company work or projects, are conclusivelypresumed to have been created for or on behalf of the Company as part of theExecutive’s services to the Company (“Developments”).  Such Developments are the exclusive property of the Companywithout the payment of consideration therefore, and the Executive herebytransfers, assigns and conveys all of the Executive’s right, title and interestin any such Developments to the Company and agrees to execute and deliver anydocuments that the Company deems necessary to effect such transfer on thedemand of the Company.  The Executiveagrees to assist the Company, at its expense, to obtain patents on any suchpatentable Developments, and agrees to execute all documents necessary toobtain such patents in the name of the Company.  This Agreement does not apply to any invention for which noequipment, supplies, facility or trade secret information of the Company wasused and which was developed entirely on the Executive’s own time unless:  (1) the invention relates (a) to thebusiness of the Company or (b) to the Company’s actual demonstrativelyanticipated research and development, or (2) the invention results from anywork performed by the Executive for the Company.

##  

## (c)                                  Executive recognizes andunderstands that Executive’s duties at the Company while in its employ orduring the Restricted Period, may have included, or may include, thepreparation of materials, including written or graphic materials and otherDevelopments, and that any such materials conceived or

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## written by Executive are deemed to be “work made for hire” as definedand used in the Federal Copyright Act, 17 U.S.C. § 101.  In the event of publication of suchmaterials, Executive understands that since such work is “work made for hire,”the Company shall solely retain and own all rights in such materials, includingany right of copyright.

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# ***5.***                                       Mutual Release of Claims.

# *** ***

## (a)                                  In consideration of the payments provided for in paragraph 2above, and other good and valuable consideration, the receipt, adequacy, andsufficiency of which is hereby acknowledged, Executive and his heirs,executors, administrators, agents, assigns, receivers, attorneys, servants,legal representatives, predecessors and successors in interest, regardless ofform, trustees in bankruptcy or otherwise, wards, and any other representativeor entity acting on his or their behalf, pursuant to, or by virtue of therights of any of them, do hereby now and forever unconditionally release,discharge, acquit and hold harmless the Company and any parent, subsidiary orrelated companies, and any and all of their officers, directors, employees,agents, administrators, assigns, receivers, attorneys, servants, legal representatives,affiliates, insurers, predecessors and successors in interest, regardless ofform, trustees in bankruptcy or otherwise, insurance benefit plans, and anyother representative or entity acting on its or their behalf (collectively, the“Released Parties”), from any and all claims, rights, demands, actions, suits,damages, losses, expenses, liabilities, indebtedness, and causes of action, ofwhatever kind or nature related to the Company that existed from the beginningof time through the date of execution of this Agreement, regardless of whetherknown or unknown, and regardless of whether asserted by Executive to date,including, but not limited to, all claims for or relating to assault, battery,negligence, negligent hiring, negligent retention, negligent supervision,negligent training, negligent or intentional infliction of emotional distress,false imprisonment, defamation (whether libel or slander), personal injury,bodily injury, bad faith, pain and suffering, medical expenses, wage and hour,lost income and earnings (including, but not limited to, back pay, front payand any other form of present or future income, benefits and/or earnings),equitable reinstatement, breach of any express or implied contract, breach ofthe covenant of good faith and fair dealing, workers’ compensation, wrongfultermination, wrongful demotion, wrongful failure to promote, wrongfuldeprivation of a career opportunity, discrimination (including disparatetreatment and disparate impact), hostile work environment, quid pro quo sexualharassment, retaliation, any request to submit to a drug or polygraph test,and/or whistleblowing, whether said claim(s) are brought pursuant to Title VIIof the Civil Rights Act of 1964, the Civil Rights Act of 1991,42 U.S.C.§ 1981, the Executive Retirement Income Security Act, the Equal Pay Act,the Pregnancy Discrimination Act, the Fair Labor Standards Act, the AgeDiscrimination in Employment Act, the Americans with Disabilities Act, theFamily and Medical Leave Act or any other constitutional, federal, regulatory,state or local law, or under the common law or in equity.

##  

## Executive further understands and warrants that this Agreement shalloperate as a fully binding and complete resolution of all claims as to theparties to this Agreement and all parties represented by or claiming throughsuch parties, and that he shall not be able to seek any monies for any claimrelated to the Company, whether known or unknown, against any of the persons orentities released hereunder other than as provided in paragraphs 2 and 8 ofthis Agreement.

 

## (b)                                 The Company does hereby now and forever unconditionallyrelease, discharge, acquit and hold harmless Executive from any and all claims,rights, demands, actions, suits, damages, losses, expenses, liabilities,indebtedness, and causes of actions, of whatever kind or nature that existedfrom the beginning of time through the date of execution of this Agreement,regardless of whether known or unknown, and regardless of whether asserted bythe Company to date, except for any criminal acts or fraudulent acts oromissions of Executive.

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# ***6.***                                       Mutual Covenant Not-to-Sue.

# *** ***

## (a)                                  Executive covenants andagrees not to file or initiate a lawsuit against any of the Released Parties inregard to any claims, demands, causes of action, suits, damages, losses andexpenses, arising from acts or omissions of the Company occurring on or beforethe date of execution of this Agreement, and Executive will ask no other personor entity to initiate such a lawsuit on his behalf. If Executive breaches thiscovenant and agreement, Executive must immediately repay and refund to theCompany all payments he

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## received pursuant to paragraph 2 above, and Executive shall alsoindemnify and hold harmless the Company, any of the Released Parties, and anyof their officers, owners, directors, executives and agents from any and allcosts incurred by any and all of them, including their reasonable attorneys’fees, in defending against any such lawsuit.

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## (b)                                 The Company covenants andagrees not to file or initiate a lawsuit against Executive in regard to anyclaims, demands, causes of action, suits, damages, losses and expenses, arisingfrom acts or omissions (except for any criminal act or fraudulent acts oromissions) of Executive occurring on or before the date of execution of thisAgreement, and the Company will ask no other person or entity to initiate sucha lawsuit on its behalf.

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# ***7.***                                       No Proceedings Initiated.

# *** ***

Executive represents and warrants that neither he nor anyone acting onhis behalf has filed or initiated any charge or claim against the Company inany administrative or judicial proceeding.

 

# ***8.***                                       Covenants of the Parties.

# *** ***

## (a)                                  Executive ratifies and confirms the confidentiality provisionsof Section 9 of the Employment Agreement and acknowledges that suchcovenants and agreement survive the termination of employment of Executive withthe Company and remain in full force and effect in accordance with their terms.

##  

## (b)                                 Executive agrees that he shall not disparage the Company or its officers,directors, employees, agents, representatives or its products or products indevelopment, or otherwise seek to reduce the goodwill of the Company or thereputation of the Company or its officers, directors, employees, agents, orrepresentatives. The Company, on behalf of its directors and executiveofficers, agrees not to disparage Executive or to act in any way to diminishExecutive’s reputation.

##  

## (c)                                  Upon execution of this Agreement, Executive shall deliver to the Companypossession of any and all property owned or leased by the Company which maythen be in Executive’s possession or under his control, including, withoutlimitation, any and all such keys, credit cards, automobiles, equipment,supplies, books, records, files, computer equipment, computer software andother such tangible and intangible property of any description whatsoever.  If, following the date of this Agreement,Executive shall receive any mail, including, but not limited to, electronic mail,addressed to the Company or to the Executive as an officer of the Company,Executive shall immediately deliver, or forward, such mail, unopened, and inits original envelope or package, to the Company;

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# ***9.***                                       No Voluntary Assistance.

# *** ***

Executive hereby covenants and agrees that, except under compulsion oflaw, he will not voluntarily assist, support, or cooperate with, directly orindirectly, any entity or person alleging or pursuing any claim, administrativecharge, or cause of action against the Company, including without limitation,by providing testimony or other information, audio or video recordings, ordocuments.  If compelled to testify,nothing contained herein shall in any way inhibit or interfere with Executiveproviding completely truthful testimony or producing documents.  In addition, and notwithstanding anythingelsewhere appearing in this Agreement, nothing herein shall prevent or hinderExecutive’s full cooperation with any investigation or other proceeding by anyfederal, state or local governmental agency, including, but not limited to, theongoing investigation by the U.S. Securities and Exchange Commission.

 

# ***10.***                                 No Admission of Liability.

# *** ***

The parties agree and acknowledge that this Agreement is a full andcomplete compromise of the matters released herein between the parties hereto;that neither the releases nor the negotiations for this Agreement and thesettlement embodied herein, including all statements or communications made todate, shall be considered admissions by them.

 

# ***11.***                                 Confidentiality.

# *** ***

## (a)                                  Executive acknowledges that the information, observationsand data that has been or will be obtained by him during his involvement withthe Company as an employee or consultant concerning the

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## business or affairs of theCompany which has not been released publicly by authorized representatives ofthe Company (“Confidential Information”) is the property of the Company.  Accordingly, Executive agrees, on behalf ofhimself and any affiliate, that he will not disclose to any person notauthorized by the Company to receive such Confidential Information, or use forhis own account, any of the Confidential Information previously obtained duringhis employment or which is hereafter obtained during the Consulting Termwithout the prior written consent of the Company, unless, and to the extentthat, the aforementioned matters (i) are or become generally known to andavailable for use by the public otherwise than as a direct or indirect resultof Executive’s acts or omissions to act in the protection of such ConfidentialInformation or (ii) are disclosed to Executive by a third party who, to thebest knowledge of Executive, is not thereby in breach of any duty to theCompany or any of its affiliates.  Forpurposes of this Agreement, the term “affiliate” means any person, partnership,corporation or business entity controlling, controlled by or under commoncontrol with the Company or Executive, as the case may be.

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## (b)                                 Executive acknowledges that the Confidential Information isproprietary and of value to the Company and, accordingly, Executive will followreasonable security practices with regard to the protection and non-disclosureof the Confidential Information.  IfExecutive is required to disclose any Confidential Information in accordancewith applicable law, Executive will, whenever possible, first provide to theCompany a copy of the proposed disclosure so that the Company may have asufficient opportunity to review and comment thereon and Executive agrees toseek such maximum confidential treatment of such disclosure as NeoPharmrequests or as may be permitted by applicable law.  Executive’s obligations under this Article will survive anytermination of this Agreement.

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## (c)                                  Upon completion or earlier termination of this Agreement,Executive will promptly return to NeoPharm all written or electronicConfidential Information, as well as all written or electronic material whichincorporates any Confidential Information.

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# ***12.***                                 OWBPA Rights.

# *** ***

## (a)                                  Executive is advised to seek legal counsel regarding theterms of this Agreement. Executive acknowledges that he has either sought legalcounsel or has, notwithstanding the foregoing, consciously decided not to seeklegal counsel regarding the terms and effect of this Agreement.

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## (b)                                 Executive acknowledges that this Agreement releases onlythose claims which exist as of the date of Executive’s execution of thisAgreement.

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## (c)                                  Executive acknowledges that he may take a period oftwenty-one (21) days from the date of receipt of this Agreement (June 14,2004) within which to consider and sign this Agreement.

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## (d)                                 Executive acknowledges that he will have seven (7) days fromthe date of signing this Agreement to revoke the Agreement in writing in itsentirety (“Revocation Period”). Executive acknowledges that the Agreement willnot become effective or enforceable until the Revocation Period has expired andthat pending acceptance of this Agreement by Executive, and other than as maybe provided for by the terms of the Employment Agreement, upon termination ofemployment the Company shall not be obligated to make any of the payments or toprovide any of the benefits to be provided to Executive under thisAgreement.  Inthe event the Executive chooses to revoke this Agreement, within the RevocationPeriod, he will:

##  

## (i)         Revoke the entire Agreement in a signedwriting, delivered to the following person on or before the seventh (7th) dayafter he executed the Agreement:

###  

## NeoPharm, Inc.

## c/o Mr. Rick Hanson

## 14404 Champion Woods Place

## Louisville, KY 40245

 

## (ii)                                  Forfeit all severance andother consideration from the Company that is contemplated by this Agreement;and

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## (iii)                               Return the full amount ofany consideration received under this Agreement, if any, to the Company alongwith the signed writing.

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## (e)                                  The Effective Date of this Agreement shall be the eighth (8th) day after the date Executivesigns this Agreement, assumingthe Executive has not revoked the Agreement in writing within the RevocationPeriod.

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## (f)                                    Executive expressly acknowledges that the payments and theother consideration that he is receiving under this Agreement constitutematerial consideration for his execution of this Agreement, and representvaluable consideration to which he would not otherwise be entitled.

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# ***13.***                                 Jurisdiction/Choice of Forum.

# *** ***

The laws of the State of Illinois shall govern this Agreement, unlesspre-empted by any applicable federal law controlling the review of thisAgreement. The parties further stipulate and agree that any litigationregarding this Agreement shall be brought in the state or federal courts forthe Northern District of Illinois and neither party will object to personaljurisdiction or venue in any of these courts.

 

# ***14.***                                 Advice of Attorneys.

# *** ***

The parties acknowledge that they have fully read, understood andunconditionally accepted this Agreement after consulting with their attorneysor having the opportunity to consult with an attorney, and acknowledge thatthis Agreement is mutual and binding upon all parties hereto regardless of theextent of damages allegedly suffered by any of the parties hereto.

 

# ***15.***                                 Counterparts.

# *** ***

This Agreement may be signed in counterpart originals with the sameforce and effect as if signed in a single original document.

 

# ***16.***                                 Cooperation of the Parties.

# *** ***

The parties to this Agreement agree to cooperate fully and to executeany and all supplementary documents and to take all additional actions that maybe necessary or appropriate to give full force and effect to the basic termsand intent of this Agreement and the settlement embodied herein. Executivefurther agrees to fully cooperate with the Company in any and allinvestigations, inquiries or litigation whether in any judicial,administrative, or public, quasi-public or private forum, in which the Companyis involved, including, but not limited to, the current investigation of theCompany by the U.S. Securities and Exchange Commission and the class actionlitigation involving the Company which is currently pending in the federalcourt for the Northern District of Illinois, whether or not Executive is adefendant in such investigations, inquiries, proceedings or litigation.Executive shall provide truthful and accurate testimony, backgroundinformation, and other support and cooperation as the Company may reasonablyrequest. The Company will compensate Executive for all travel expenses,attorney’s fees, and preparation expenses and lost wages associated withpursuit of actions necessary to comply with this Section 16.

 

# ***17.***                                 Modification in Writing Only.

# *** ***

Neither this Agreement nor any provision of this Agreement may bemodified or waived in any way except by an agreement in writing signed by eachof the parties hereto consenting to such modification or waiver.

 

# ***18.***                                 Construction of this Agreement.

# *** ***

The parties agree that they each have participated in the drafting ofthis Agreement, and that, as a result, this Agreement shall not be construed infavor of or against any party hereto.

 

# ***19.***                                 No False Statements or Misrepresentation.

# *** ***

The Company and Executive each hereby warrants and represents that theyhave not made any false statements or misrepresentations in connection withthis Agreement.

 

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# ***20.***                                 Headings and Captions.

# *** ***

The headings and captions used in the Agreement are for convenience ofreference only, and shall in no way define, limit, expand, or otherwise affectthe meaning or construction of any provision of this Agreement.

 

# ***21.***                                 Remedies.

# *** ***

Executive agrees that money damages cannot adequately compensate theCompany in case of a breach or threatened breach of the covenants contained inSections 4(a) or 11 and that, accordingly, the Company would be entitled toinjunctive relief upon such breach. Executive understands that it is the Company’s intent to have thecovenants contained in Section 4(a) and 11 enforced to their fullestextent.  Accordingly, Executive and theCompany agree that, if any portion of the restrictions contained inSection 4(a) or 11 are deemed unenforceable, the court shall construe andenforce these covenants to the fullest extent permitted by law.

 

# ***22.***                                 Enforcement Costs.

# *** ***

If any legal action or other proceeding is brought for the enforcementof this Agreement, or because of an alleged dispute, breach, default ormisrepresentation in connection with any provisions of this Agreement, thesuccessful or prevailing party or parties shall be entitled to recoverreasonable attorney’s fees, court costs and all expenses even if not taxable ascourt costs (including, without limitation, all such fees, costs and expensesincident to appeal and other post-judgment proceedings), incurred in thataction or proceeding, in addition to any other relief to which such party orparties may be entitled.  Attorney’s feesshall include, without limitation, paralegal fees, investigative fees,administrative costs, sales and use taxes and all other charges billed by theattorney to the prevailing party.

 

# ***23.***                                 Notices.

# *** ***

Any and all notices necessary or desirable to be served hereunder shallbe in writing and shall be

 

## (a)                                  personally delivered, or

##  

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

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## (c)                                  For notices sent to theCompany:

##  

## NeoPharm, Inc.

## 150 Field Drive, Suite 195

## Lake Forest, IL 60045

##  

## Telephone No.:     (847) 295-8678

## Facsimile No.:       (847) 295-8854

##  

## (d)                                 For notices sent to Executive:

##  

## Mr. James M. Hussey

## 15 Mulberry Drive

## Hawthorn Woods, IL 60047

 

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

 

# ***24.***                                 Binding Agreement.

# *** ***

This Agreement shall be binding upon and inure to the benefit of theparties hereto, jointly and severally, and the past, present and future heirs,executors, administrators, agents, executors, servants, attorneys, affiliatedpersons and entities, predecessors and successors in interest and assigns,regardless of form, trustees in bankruptcy or otherwise, and any otherrepresentative or entity acting on behalf of, pursuant to, or by virtue of therights of each.

 

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# ***25.***                                 Non-Assignability: Assignment in the Eventof Acquisition or Merger

# *** ***

This Agreement, and the benefits hereunder are not assignable ortransferable by Executive and the rights and obligations of the Company underthis Agreement will automatically be deemed to be assigned by the Company toany corporation or entity acquiring all or substantially all of the assets orstock of the Company or of any corporation or entity with or into which theCompany may be merged or consolidated; provided, however, that in the event ofExecutive’s death, the Company shall make such payments as may then be due andowing to the Executive, if any, to the Executive’s estate.

 

# ***26.***                                 Entire Agreement.

# *** ***

This Agreement contains the entire agreement of the parties concerningthe subject matter hereof, and is intended and shall be construed as anintegrated agreement. Each party understands, acknowledges and herebyrepresents and warrants that this Agreement supersedes any and all prior orcontemporaneous understandings, agreements, representations and/or promises,whether oral or written, which are not expressly set forth herein or expresslyreferred to in this Agreement, and no understanding, agreement, representation,warranty, promise or inducement has been made concerning the subject matter ofthis Agreement other than as set forth in this Agreement, and that each partyenters into this Agreement without any reliance whatsoever upon anyunderstanding, agreement, representation, warranty or promise not set forthherein.

 

**[SIGNATUREPAGE TO FOLLOW]**

 

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IN WITNESS WHEREOF, the undersigned haveexecuted this Separation Agreement and Full Release of All Claims.

 
|   | EXECUTIVE:         |                                           |
|--------|--------------------|------------------------------------------------|
|   |               |                                           |
|   |               |                                           |
|   | S/ James M. Hussey |                                           |
|   | James M. Hussey    |                                           |
|   |               |                                           |
|   | Date: 6/16/04      |                                           |
|   |               |                                           |
|   |               |                                           |
|   | NEOPHARM, INC:     |                                           |
|   |               |                                           |
|   |               |                                           |
|   | By:                | s/ Erick  E. Hanson                       |   |
|   |               |                                           |   |
|   | Title:             | Chairman of the Corporate Governance Committee |   |
|   |               |                                           |   |
|   | Date:              | 6/17/04                                        |   |

 

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Exhibit A

 

June 17, 2004

 

Board of Directors

NeoPharm, Inc.

150 Field Drive, Suite 195

Lake Forest, IL 60521

 

Re: Resignation

 

Gentlemen:

 

I am resigning effective June 17, 2004, from any and all officeswhich I hold with NeoPharm, Inc. (including, but not limited to, as a director)and any subsidiary of NeoPharm, Inc., including, but not limited to, NeoPharmEU Limited, and as trustee, administrator or otherwise for any employee plan ofNeoPharm, Inc.  In addition, I alsohereby withdraw my name from consideration as a nominee for election as adirector of the Company at the 2004 NeoPharm Annual Meeting of Stockholders tobe held June 17, 2004.

 
|   | Sincerely,          |
|--------|---------------------|
|   |                |
|   |                |
|   | /s/ James M. Hussey |
|   | James M. Hussey     |

 

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