Exhibit 10.01


 


EMPLOYMENT AGREEMENT


 


THIS AGREEMENT is made and entered into as of the 28th
day of October, 2005, by and between NEOPHARM, INC., a Delaware corporation
(the “Company”) and GUILLERMO A. HERRERA (“Executive”).


 


WITNESSETH:


 


WHEREAS, the Company desires to employ Executive and
Executive desires to accept such employment, 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
October 28, 2005, or such earlier or later date as Executive and the Company
may mutually agree (the “Effective Date”) and shall continue thereafter 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 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.  In addition, the Company shall promptly
appoint Executive to the Board and thereafter nominate Executive as a nominee
for election to the Board and solicit proxies for his election for so long as
this Agreement is in effect.  Without
limiting the generality of the foregoing, throughout the Term, Executive shall
use his best efforts to faithfully perform his duties as President and CEO at
all times so as to promote the best interests of the Company.  Notwithstanding the foregoing, Executive may
engage in charitable, civic or community activities and, with the prior
approval of the Board, may serve as a director of other business corporations,
provided that such activities or service do not interfere with Executive’s
duties hereunder or violate the terms of any other covenants contained in
Sections 9 and 10 hereof.


 





















 


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 an annual salary of Four Hundred
Twenty-Five Thousand Dollars ($425,000) 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.  The Salary will be reviewed annually by the
Compensation Committee of the Board of Directors and a determination shall be
made at that time as to the appropriateness of an increase, if any, thereto.


 


(b)           Stock Grant.  Upon execution of this
Agreement by Executive and the Company, the Company will grant to Executive.
pursuant to the Company’s 1998 Equity Incentive Plan, that number of shares of
the Company’s common stock as shall equal, based on the closing price of the
common stock as reported by Nasdaq on the date of this Agreement, Two Hundred
Thousand Dollars ($200,000.00) adjusted, as necessary, to reflect the nearest
whole share (the “Stock Grant”).


 


(c)           Bonus.  In addition to the Base
Salary, Executive shall be eligible to receive from the Company an annual
incentive compensation bonus (the “Bonus”) based on a percentage of his Base
Salary.  The Bonus, if any, shall be
determined based on the achievement by the Company of certain specific
strategic plans and goals (the “Performance Goals”) during the preceding
calendar year (the “Measurement Period”) as shall be determined by the Board in
consultation with Executive.  The
Performance Goals for each Measurement Period, beginning with the 2006
Measurement Period, shall be established as promptly as possible in each such
Measurement Period, with the expectation that the Performance Goals be in place
each year prior to distribution of the Company’s annual proxy materials.  Following each Measurement Period, the
Compensation Committee of the Board shall review the Performance Goals for the
prior Measurement Period in light of the Company’s actual performance during
such Measurement Period as reflected on the Company’s audited financial
statements.  Achievement of various
levels of the Performance Goals shall result in the following payments as a
percentage of Salary:


 


	
  Level of Achievement

  	
   

  	
  Bonus as Percent of Salary

  	
   

  
	
  Below Target

  	
   

  	
  0%

  	
   

  
	
  Target Goal

  	
   

  	
  50%

  	
   

  
	
  Overachievement Goal

  	
   

  	
  50-100%

  	
   

  



 


Payment of each year’s 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 audited financial statements.  In addition, and at its sole discretion, the
Board may award additional compensation to Executive based on Executive’s
contributions to the Company.  For the
2005 Measurement Period, a Bonus, if any, shall be at the discretion of the
Board of Directors and shall be


 





















 


based upon such criteria as the Compensation Committee of the Board
shall deem reasonable.


 


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 car allowance in the
amount of One Thousand Dollars ($1,000.00) subject to standard payroll
withholding for taxes.


 


(c)           The Company will provide Executive with disability coverage on the same
basis as is provided to its other senior executives.


 


(d)           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.


 


(e)           During the Term Executive shall be entitled to four (4) weeks paid
vacation, it being understood and agreed that unused vacation shall not be
carried over from one year to the next.


 


(f)            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.


 


6.             Options.


 


(a)           The Company shall grant to Executive options pursuant to the Company’s
1998 Equity Incentive Plan (the “Option Plan”), as amended, to purchase 500,000
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 Effective Date, which date shall be the
date of grant of the Options for purposes of the Option Plan (the “Date of
Grant”).  The Options shall vest in equal
installments of 125,000 Options per year on each of the first four
anniversaries of the Date of Grant.  The
Options shall not be exercisable subsequent to the date ten (10) years
after the Date of Grant. In all other respects the Initial Options shall be
governed by the terms and conditions of the Option Plan.


 


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7.             Termination of the Term.


 


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


 


(i)            Executive shall die or suffer a Disability,
as herein defined;


 


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


 


(iii)          Upon or within one (1) year following a
Change of Control, as herein defined, effective upon written notice to
Executive from the Company.


 


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


 


(i)            At any time upon thirty (30) days prior
written notice to the Company; or


 


(ii)           For Good Reason, as herein defined, upon or within one (1) year
following a Change of Control.


 


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


 


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


 


(ii)           Executive has engaged in acts of fraud, misappropriation, embezzlement,
theft or other dishonest acts with respect to the Company or any affiliate of
the Company;


 


(iii)          Executive violates the Company’s Code of Business Conduct and Ethics or
any statutory or common law duty of loyalty to the Company or its subsidiaries,
which violation is willful and deliberate on Executive’s part;


 


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


 


(v)           Executive’s failure to follow the lawful direction of the Board of
Directors or supervising officers which failure continues for five (5) business
days after written notice of the failure has been given to Executive by the Company;
or


 


(vi)          Executive’s material breach of any restrictive covenant set forth in Section 9
or Section 10 of this Agreement.


 


(d)           For purposes of this Agreement, “Change of Control” shall mean the
occurrence of any of the following:


 


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(i)            The acquisition (other than by a direct
purchase of shares from the Company) by any “person,” including a “syndication”
or “group”, as those terms are used in Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (other than by any such person
currently owning in excess of 20% of the type of securities hereafter
described), of securities representing 50% or more of the combined voting power
of the Company’s then outstanding voting securities, which is any security that
ordinarily possesses the power to vote in the election of the Board of
Directors of a corporation without the happening of any precondition or
contingency;


 


(ii)           The Company is merged or consolidated with another corporation and immediately
after giving effect to the merger or consolidation less than 50% of the
outstanding voting securities of the surviving or resulting entity are then
beneficially owned in the aggregate by (x) the stockholders of the Company
immediately prior to such merger or consolidation, or (y) if a record date has
been set to determinate the stockholders of the Company entitled to vote on
such merger or consolidation, the stockholders of the Company as of such record
date;


 


(iii)          If at any time during a calendar year a majority of the directors of
the Company are not persons who were directors at the beginning of the calendar
year or are not persons who were nominated or approved for election by a
majority of directors who were directors at the beginning of the year (or are
deemed to have been in office as of such date through the prior operation of
this provision); or


 


(iv)          The Company transfers substantially all of its assets to another
corporation which is a less than 80% owned subsidiary of the Company.


 


(e)           For purposes of this Agreement, “Good Reason” shall mean the occurrence
of any one or more of the following events which continues uncured for a period
of not less than thirty (30) days following written notice given by Executive
to the Company within fifteen (15) days following the occurrence of such event,
unless Executive specifically agrees in writing that such event shall not be
Good Reason:


 


(i)            Any material breach of this Agreement by the
Company;


 


(ii)           Any failure to continue Executive as an executive officer of the
Company;


 


(iii)          The requirement by the Company that Executive perform his services
hereunder primarily at a location outside of the metropolitan Chicago, Illinois
area; or


 


(iv)          The reduction of the Employee’s Base Salary below the amount set forth
in Section 4(a) above without the written consent of Executive.


 


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(f)            For purposes of this Agreement, “Disability”
shall mean (i) Executive becomes eligible for full benefits under a
long-term disability policy provided by the Company or (ii) Executive has
been unable, due to physical or mental illness or incapacity, as verified by a
licensed physician selected by the Company, to substantially perform the
essential duties of his employment for a continuous period of ninety (90) days
or an aggregate of one-hundred eighty (180) days during any consecutive twelve
(12)-month period.


 


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


 


(a)           Immediately resign, effective as of the date of termination, from any
and all other positions or committees which Executive holds or is a member of
with the Company or any subsidiary of the Company, including, but not limited
to, as an officer and director of the Company or any subsidiary of the
Company.  Executive hereby agrees to
execute any and all reasonable documentation evidencing such resignation upon
request and at the sole expense of the Company, but he shall be treated for all
purposes as having so resigned upon termination of his employment regardless of
when or whether he executes any such documentation.


 


(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 § 7(a)(ii),
without Cause, following the six (6) month anniversary of the Effective
Date, the Company shall provide Executive with Base Salary continuance, subject
to § 8(h), for twelve (12) months (a “Salary Continuance”) at the rate in
effect immediately prior to termination.


 


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


 


(g)           Upon termination of Executive pursuant to
§7(a)(iii) or § 7(b)(ii), the Company shall:  (i) provide Executive with Salary
Continuance for twelve (12) months at the rate in effect immediately prior to
termination, plus (ii) a lump sum payment equal to one hundred percent
(100%) of the Bonus, if any, paid to Executive for the calendar year
immediately preceding such termination, plus (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.


 


(h)           In the event that Executive shall be entitled
to receive a Salary Continuance pursuant to § 8(e), such Salary
Continuance shall continue only while Executive is in compliance with the
covenants set forth in Sections 9 and 10 of this Agreement and only until such
time as Executive shall have accepted another full-time position.  In addition, in the event that Executive
shall perform consulting or other services during the period he is receiving
any Salary Continuance for which he shall receive compensation, all
compensation shall be reported to the Company and shall be offset against any
remaining Salary Continuance payments. 
Failure of Executive to observe the provisions of Sections 9 and 10 of
this Agreement or to promptly report the receipt of any compensation from a
third party or the acceptance of a new position shall entitle the Company to
terminate all remaining Salary Continuance and to seek restitution for any
payments made to Executive subsequent to such breach, job acceptance or
compensation receipt.


 


(i)            Any Salary Continuance payments shall be made
in accordance with the usual payroll practices which were applicable prior to
termination. Except as otherwise specifically set forth herein, any and all
payments made pursuant to this Agreement shall be net of any and all applicable
federal, state and local payroll and withholding taxes.


 


(j)            If the Company or the Company’s accountants determine
that the payments called for under Section 8(g) of this Agreement
either alone or in conjunction with any other payments or benefits made
available to Executive by the Company will result in Executive being subject to
an excise tax (“Excise Tax”) under Section 4999 of the Internal Revenue
Code of 1986, as amended (the “Code”), or if an Excise Tax is assessed against
Executive as a result of such payments or other benefits, the Company shall
make a Gross-Up Payment (as defined below) to or on behalf of Executive as and
when such determination(s) and assessments(s), as appropriate, are made,
subject to the conditions of this subsection (j).  A “Gross-Up Payment” shall mean a payment to
or on behalf of Executive that shall be sufficient to pay (i) any Excise
Tax in full, (ii) any federal, state and local income tax and Social
Security or other employment tax on the payment made to pay such Excise Tax as
well as any additional Excise Tax on the Gross-Up Payment, and (iii) any
interest or penalties assessed by the Internal Revenue Service on Executive if
such interest or penalties are attributable to the Company’s failure to comply
with its obligations under this subsection (j) or applicable law.  Any determination under this subsection (j)
by the Company or the Company’s


 


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accountants shall be made in accordance with Section 280G
of the Code, any applicable related regulations (whether proposed, temporary or
final), any related Internal Revenue Service rulings and any related case law,
and shall assume that Executive shall pay Federal income taxes at the highest
marginal rate in effect for the year in which the Gross-Up Payment is made and
state and local income taxes at the highest marginal rate in effect in the
state of Executive’s residence for such year. 
Executive shall take such action (other than waiving Executive’s right
to any payments or benefits) as the Company reasonably requests under the
circumstances to mitigate or challenge such tax.  If the Company reasonably requests that
Executive take action to mitigate or challenge, or to mitigate and challenge,
any such tax or assessment and Executive complies with such request, the
Company shall provide Executive with such information and such expert advice
and assistance from the Company’s accountants, lawyers and other advisors as
Executive may reasonably request and shall pay for all expenses incurred in
effecting such compliance and any related fines, penalties, interest and other
assessments.  Subject to the provisions
of this subsection (j), all determinations required to be made under this
subsection (j), including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made, after receiving the prior
approval of the Audit Committee of the Board of Directors, by the public
accounting firm that is retained by the Company as of the date immediately
prior to the Change of Control (the “Accounting Firm”) which shall provide
detailed supporting calculations both to the Company and Executive within
thirty (30) business days of receipt of notice from the Company or Executive
that there has been a payment that could trigger a Gross-Up Payment, or such
earlier time as is requested by the Company (collectively the “Determination”).  In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change of Control, or in the event that the Audit Committee of the Board of
Directors shall not approve of the accountants’ performing such services,
Executive may appoint another nationally recognized public accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). 
All fees and expenses of the Accounting Firm shall be borne solely by
the Company and the Company shall enter into any agreement requested by the
Accounting Firm in connection with the performance of the services
hereunder.  The Gross-Up Payment under
this subsection (j) with respect to any payments shall be made no later
than sixty (60) days following such payments. 
If the Accounting Firm determines that no Excise Tax is payable by
Executive, it shall furnish Executive with a written opinion to such effect,
and to the effect that failure to report the Excise Tax, if any, on Executive’s
applicable federal income tax return will not result in the imposition of a
negligence or similar penalty.  The
Determination by the Accounting Firm shall be binding upon the Company and
Executive.  As a result of the
uncertainty in the application of Section 4999 of the Code at the time of
the Determination, it is possible that the Gross-Up Payments which will not
have been made by the Company should have been made (“Underpayment”) or
Gross-Up Payments are made by the Company which should not have been made (“Overpayment”),
consistent with the calculations required to be made hereunder.  In the event that Executive thereafter is
required


 


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to make payment of any additional Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the
Company to or for the benefit of Executive. 
In the event the amount of the Gross-Up Payment exceeds the amount
necessary to reimburse Executive for his Excise Tax as herein set forth, the
Accounting Firm shall determine the amount of the Overpayment that has been
made and any such Overpayment (together with interest at the rate provided in Section 1274(b)(2) of
the Code) shall be promptly paid by Executive to or for the benefit of the
Company.  Executive shall cooperate, to
the extent Executive’s expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.


 


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,
but which consent shall not be unreasonably withheld, 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)           Perform services for the Competing Business, as hereinafter defined,
that are substantially similar in whole or in part to those that he performed
for the Company in his role as President and CEO, including specifically, but
not limited to, the research, development, sale or marketing of drug or
non-drug products or the management of individuals involved in the research,
development, sale or marketing of drug or non-drug products.  For purposes of this covenant, the term “Competing
Business” shall mean any entity engaged in the research, development, marketing
or sale of drug and nondrug 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 research and development by the Company and
expected 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
capacity of President and CEO, his duties extend throughout the entire service
area of the Company which includes, at a minimum, the Territory and that,
because of the executive nature of Executive’s position with the Company, in
order to afford the Company protection from unfair competition by Executive
following his termination of employment, this covenant must extend throughout
the stated Territory.  Executive further
acknowledges that this covenant does not prohibit him from engaging in his
entire trade or business but only a very limited segment of the pharmaceuticals
industry;


 


(b)           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


 


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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;


 


(c)           All ideas, inventions, trademarks, and other developments or
improvements conceived or developed by 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 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 Executive hereby transfers, assigns and conveys
all of 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.  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
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 Executive for the Company.


 


(d)           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 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.


 


(e)           Executive, during the Term and at all times thereafter, shall not (i) make
any public derogatory comment concerning the Company or its affiliates or
anyone whom Executive knows to be a current or former director, officer, or
employee of the Company or (ii) publish or produce any information or
write any book, article, screenplay, teleplay or similar type of publication
relating to the Company or its affiliates or anyone whom Executive knows to be
a current or former director, officer, or employee.


 


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(f)            If any restrictions on competition or other
activities contained in this Section 9 shall for any reason be held by a
court of competent jurisdiction to be excessively broad as to duration,
geographical scope, activity or subject, such restrictions shall be construed
so as thereafter to be limited or reduced to be enforceable to the extent compatible
with the applicable law; it being understood that by the execution of this
Agreement, (i) the parties hereto regard the current restrictions as
reasonable and compatible with their respective rights and (ii) Executive
acknowledges and agrees that the restrictions will not prevent him from
obtaining gainful employment subsequent to the termination of his employment.


 


10.           Confidentiality. 
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.  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, Executive agrees that he will not, at any time during the term of
his employment, and for a period of twelve (12) 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.


 


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(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 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 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, Executive terminates
the Agreement in accordance with Section 7(b), Executive shall not be
barred from seeking employment with a competitor notwithstanding the
restriction of Section 9(a); provided, however, that all other
restrictions contained in this Agreement, including, but not limited to, the
other covenants in Section 9 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.


 


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.


 


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


 


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(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


Attention: 
Office of the Secretary


Telephone No.: (847) 295-8678


Facsimile No.: (847) 295-8654


 


(d)           For notices sent to Executive:


At the most recent address on file with the Company


 


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.           Entire 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.


 


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


 


17.           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.


 


18.           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.


 


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19.           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]


 


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


 


	
   

  	
  NEOPHARM, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Frank C. Becker

  	
   

  
	
   

  	
  Its:

  	
  Chairman

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Guillermo A. Herrera

  	
   

  
	
   

  	
  GUILLERMO A. HERRERA

  
					



 


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