Document:

EXHIBIT 4.1

                            G-III APPAREL GROUP, LTD.
                            2005 STOCK INCENTIVE PLAN
                            -------------------------

     1. Purpose. The purpose of the G-III Apparel Group, Ltd. 2005 Stock
Incentive Plan (the "Plan") is to enable G-III Apparel Group, Ltd., a Delaware
corporation (the "Company"), and its stockholders to secure the benefits of
ownership of Company common stock, $.01 par value (the "Common Stock"), by
eligible personnel of the Company and its affiliates. The Board of Directors of
the Company (the "Board") believes that the grant of awards pursuant to the Plan
will foster the Company's ability to attract, retain and motivate such persons.

     2. Types of Awards. Awards under the Plan may be in the form of any one or
more of the following: (a) options to purchase shares of Common Stock at a
specified price during specified time periods granted pursuant to Section 7(b)
("Options"), including Options intended to qualify as "incentive stock options"
("ISOs") under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and Options that do not qualify as ISOs; (b) stock appreciation rights
granted pursuant to Section 7(c) ("SARs"); (c) Common Stock granted pursuant to
Section 7(d) which is subject to certain restrictions and to a risk of
forfeiture ("Restricted Stock"); (d) rights to receive Common Stock at the end
of a specified deferral period granted pursuant to Section 7(e) ("Deferred
Stock"), whether denominated as "stock units," "restricted stock units,"
"phantom shares" or "performance shares"; (e) other stock-based awards granted
pursuant to Section 7(f) ("Other Stock-Based Awards"); and/or (f)
performance-based awards granted pursuant to Section 7(g) ("Performance
Awards").

     3. Available Shares. Subject to the provisions of Section 9, the Company
may issue a total of 500,000 shares of Common Stock pursuant to the Plan;
provided that, on each January 31st during the term of the Plan, without further
action by the Board or the Company's stockholders, the total number of shares of
Common Stock available for issuance pursuant to the Plan shall be automatically
increased (but not decreased) to the nearest whole number of shares (with .05
shares being rounded-up) equal to six percent (6%) of the total number of issued
and outstanding shares of Common Stock on each such date (excluding any shares
held in treasury). Notwithstanding the preceding sentence, subject to the
provisions of Section 9, in no event may more than 200,000 shares of Common
Stock be issued pursuant to the exercise of ISOs granted under the Plan. In
determining the number of shares available for issuance pursuant to the Plan at
any time, the following shares shall be deemed not to have been issued (and
shall remain available for issuance) pursuant to the Plan: (a)shares subject to
an award that is forfeited, canceled, terminated or settled in cash; (b) shares
repurchased by the Company from the recipient of an award for not more than the
original purchase price of such shares or forfeited to the Company by the
recipient of an award; and (c) shares withheld or tendered by the recipient of
an award as payment of the exercise or purchase price under an award or the tax
withholding obligations associated with an award. Such shares may be either
authorized and unissued or held by the Company in its treasury. No fractional
shares of Common Stock may be issued under the Plan.

     4. Per-Person Award Limitation. In each fiscal year during any part of
which the Plan is in effect, an eligible person may be granted awards intended
to qualify as "performance-

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based compensation" under Section 162(m) of the Code relating to up to his
Annual Share Limit. Subject to the provisions of Section 9, an eligible person's
"Annual Share Limit" shall equal, in any year during any part of which the
eligible person is then eligible under the Plan, 50,000 shares plus the amount
of the eligible person's unused Annual Share Limit as of the close of the
previous year.

     5. Administration.

        (a) Committee. The Plan shall be administered by the Compensation
Committee of the Board or such other committee appointed by the Board to
administer the Plan from time to time (the "Committee"). The full Board may
perform any function of the Committee hereunder, in which case the term
"Committee" shall refer to the Board. Notwithstanding the foregoing, the Board
shall have sole responsibility and authority for matters relating to the grant
and administration of awards to non-employee directors of the Company, and
reference herein to the Committee with respect to any such matters shall be
deemed to refer to the Board.

        (b) Responsibility and Authority of Committee. Subject to the provisions
of the Plan, the Committee, acting in its discretion, shall have responsibility
and full power and authority to (i) select the persons to whom awards shall be
made; (ii) prescribe the terms and conditions of each award and make amendments
thereto, (iii) to the extent permitted by applicable law, to reprice outstanding
options or SARs and to grant new awards in substitution for outstanding awards;
(iv) construe, interpret and apply the provisions of the Plan and of any
agreement or other document evidencing an award made under the Plan; and (v)
make any and all determinations and take any and all other actions as it deems
necessary or desirable in order to carry out the terms of the Plan. In
exercising its responsibilities under the Plan, the Committee may obtain at the
Company's expense such advice, guidance and other assistance from outside
compensation consultants and other professional advisers as it deems
appropriate.

        (c) Delegation of Authority. To the fullest extent authorized under
Section 157(c) of the Delaware General Corporation Law, the Committee may
delegate to officers of the Company or any affiliate, or committees thereof, the
authority, subject to such terms as the Committee shall determine, to perform
such functions, including administrative functions, as the Committee may
determine.

        (d) Committee Actions. A majority of the members of the Committee shall
constitute a quorum. The Committee may act by the vote of a majority of its
members present at a meeting at which there is a quorum or by unanimous written
consent. The decision of the Committee as to any disputed question, including
questions of construction, interpretation and administration, shall be final and
conclusive on all persons. The Committee shall keep a record of its proceedings
and acts and shall keep or cause to be kept such books and records as may be
necessary in connection with the proper administration of the Plan.

        (e) Indemnification. The Company shall indemnify and hold harmless each
member of the Board, the Committee or any officer or subcommittee member to whom
authority is delegated by the Committee and any employee of the Company who
provides assistance with the administration of the Plan from and against any
loss, cost, liability (including any sum paid in settlement of a claim with the
approval of the Board), damage and expense (including reasonable legal fees and
other expenses incident thereto and, to the extent permitted by applicable law,

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advancement of such fees and expenses) arising out of or incurred in connection
with the Plan, unless and except to the extent attributable to such person's
fraud or willful misconduct.

     6. Eligibility. Awards may be granted under the Plan to any member of the
Board (whether or not an employee of the Company or its affiliates), to any
officer or other employee of the Company or its affiliates (including
prospective officers and employees) and to any consultant or other independent
contractor who performs or will perform services for the Company or its
affiliates.

     7. Specific Terms of Awards.

        (a) General. Awards may be granted on the terms and conditions set forth
in this Section 7. In addition, the Committee may impose on any award or the
exercise thereof, at the date of grant or thereafter, such additional terms and
conditions, not inconsistent with the provisions of the Plan, as the Committee
shall determine, including terms requiring forfeiture of awards in the event of
termination of employment or service by the recipient. The Committee shall
require the payment of lawful consideration for an award to the extent necessary
to satisfy the requirements of the Delaware General Corporation Law, and may
otherwise require payment of consideration for an award except as limited by the
Plan.

        (b) Stock Options. The Committee is authorized to grant Options to
eligible persons on the following terms and conditions:

            (i) Exercise Price. The exercise price per share of Common Stock
purchasable under an Option shall be determined by the Committee, provided that
such exercise price shall not be less than the Fair Market Value (as defined
below) of a share of Common Stock on the date of grant of such Option.

            (ii) Option Term; Time and Method of Exercise. The Committee shall
determine the term of each Option, which in no event shall exceed a period of
ten years from the date of grant. The Committee shall determine the time or
times at which or the circumstances under which an Option may be exercised in
whole or in part (including based on achievement of performance goals and/or
future service requirements), the methods by which such exercise price may be
paid or deemed to be paid and the form of such payment (including, without
limitation, cash, Common Stock (including through withholding of Common Stock
deliverable upon exercise), other awards or awards granted under other plans of
the Company or any affiliate, or other property (including through "cashless
exercise" arrangements, to the extent permitted by applicable law) and the
methods by or forms in which Common Stock shall be delivered or deemed to be
delivered in satisfaction of Options.

            (iii) ISO Grants to 10% Stockholders. Notwithstanding anything to
the contrary in this Section 7(b), if an ISO is granted to an employee who owns
stock representing more than 10% of the voting power of all classes of stock of
the Company or a subsidiary corporation thereof (as such term is defined in
Section 424 of the Code), the term of the Option shall not exceed five years
from the date of grant and the exercise price shall be at least 110% of the Fair
Market Value (on the date of grant) of the Common Stock subject to the Option.

        (c) Stock Appreciation Rights. The Committee is authorized to grant SARs
to eligible persons on the following terms and conditions:

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            (i) Right to Payment. A SAR shall confer on the recipient a right to
receive a payment, in shares of Common Stock, with a value equal to the excess
of the Fair Market Value of a specified number of shares of Common Stock at the
time the SAR is exercised over the exercise price of such SAR, which shall be no
less than the Fair Market Value of the same number of shares at the time the SAR
was granted.

            (ii) Other Terms. The Committee shall determine the time or times at
which and the circumstances under which a SAR may be exercised in whole or in
part (including based on achievement of performance goals and/or future service
requirements), the method of exercise, the method by or forms in which Common
Stock shall be delivered or deemed to be delivered to recipients upon exercise
of a SAR, whether or not a SAR shall be free-standing or in tandem or
combination with any other award, and the maximum term of an SAR, which in no
event shall exceed a period of ten years from the date of grant.

        (d) Restricted Stock. The Committee is authorized to grant Restricted
Stock to eligible persons on the following terms and conditions:

            (i) Grant and Restrictions. Restricted Stock shall be subject to
such restrictions on transferability, risk of forfeiture and other restrictions,
if any, as the Committee may impose, which restrictions may lapse separately or
in combination at such times, under such circumstances (including based on
achievement of performance goals and/or future service requirements), in such
installments or otherwise and under such other circumstances as the Committee
may determine at the date of grant or thereafter. Except to the extent
restricted under the terms of the Plan and any award document relating to the
Restricted Stock, a recipient of Restricted Stock shall have all of the rights
of a stockholder, including the right to vote the Restricted Stock and the right
to receive dividends thereon (subject to any mandatory reinvestment or other
requirements imposed by the Committee).

            (ii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment or service during the applicable restriction
period, Restricted Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided that the Committee may
provide, by rule or regulation or in any award document, or may determine in any
individual case, that restrictions or forfeiture conditions relating to
Restricted Stock shall lapse in whole or in part, including in the event of
terminations resulting from specified causes.

            (iii) Certificates for Stock. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of the
recipient, the Committee may require that such certificates bear an appropriate
legend referring to the terms, conditions and restrictions applicable to such
Restricted Stock, that the Company retain physical possession of the
certificates and that the recipient deliver a stock power to the Company,
endorsed in blank, relating to the Restricted Stock.

            (iv) Dividends and Splits. As a condition to the grant of an award
of Restricted Stock, the Committee may require that any dividends paid on a
share of Restricted Stock shall be either (A) paid with respect to such
Restricted Stock at the dividend payment date in cash, in kind, or in a number
of shares of unrestricted Common Stock having a Fair Market Value equal to the
amount of such dividends, or (B) automatically reinvested in additional

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Restricted Stock or held in kind, which shall be subject to the same terms as
applied to the original Restricted Stock to which it relates. Unless otherwise
determined by the Committee, Common Stock distributed in connection with a stock
split or stock dividend, and other property distributed as a dividend, shall be
subject to restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Common Stock or other property has
been distributed.

        (e) Deferred Stock. The Committee is authorized to grant Deferred Stock
to eligible persons, which are rights to receive Common Stock, other awards, or
a combination thereof at the end of a specified deferral period, subject to the
following terms and conditions:

            (i) Award and Restrictions. The issuance of Common Stock shall occur
upon expiration of the deferral period specified for an award of Deferred Stock
by the Committee. In addition, Deferred Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other restrictions, if
any, as the Committee may impose, which restrictions may lapse at the expiration
of the deferral period or at earlier specified times (including based on
achievement of performance goals and/or future service requirements), separately
or in combination, in installments or otherwise, and under such other
circumstances as the Committee may determine at the date of grant or thereafter.
Deferred Stock may be satisfied by delivery of Common Stock, other awards, or a
combination thereof, as determined by the Committee at the date of grant or
thereafter.

            (ii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment or service during the applicable deferral period
or portion thereof to which forfeiture conditions apply (as provided in the
award document evidencing the Deferred Stock), all Deferred Stock that is at
that time subject to such forfeiture conditions shall be forfeited; provided
that the Committee may provide, by rule or regulation or in any award document,
or may determine in any individual case, that restrictions or forfeiture
conditions relating to Deferred Stock shall lapse in whole or in part, including
in the event of terminations resulting from specified causes.

            (iii) Dividend Equivalents. Unless otherwise determined by the
Committee, dividend equivalents on the specified number of shares of Common
Stock covered by an award of Deferred Stock shall be either (A) paid with
respect to such Deferred Stock at the dividend payment date in cash or in shares
of unrestricted Common Stock having a Fair Market Value equal to the amount of
such dividends, or (B) deferred with respect to such Deferred Stock, with the
amount or value thereof automatically deemed reinvested in additional Deferred
Stock.

        (f) Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to eligible persons such other awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Common Stock or factors that may
influence the value of Common Stock, including, without limitation, stock
bonuses, dividend equivalents, convertible or exchangeable debt securities,
other rights convertible or exchangeable into Common Stock, purchase rights for
Common Stock, awards with value and payment contingent upon performance of the
Company or business units thereof or any other factors designated by the
Committee, awards valued by reference to the book value of Common Stock or the
value of securities of or the performance of specified subsidiaries or
affiliates or other business units and awards designed to comply with or

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take advantage of the applicable local laws or jurisdictions other than the
United States. The Committee shall determine the terms and conditions of such
awards.

        (g) Performance Awards. The Committee is authorized to grant Performance
Awards to eligible persons on the following terms and conditions:

            (i) Generally. The Committee may specify that any award granted
under the Plan shall constitute a Performance Award by conditioning the grant,
exercise, vesting or settlement, and the timing thereof, upon achievement or
satisfaction of such performance conditions as may be specified by the
Committee. The Committee may use such business criteria and other measures of
performance as it may deem appropriate in establishing any performance
conditions, and may exercise its discretion to reduce or increase the amounts
payable under any award subject to performance conditions, except as limited
under this Section 7(g) in the case of a Performance Award intended to qualify
as "performance-based compensation" under Section 162(m) of the Code.

            (ii) Awards exempt under Section 162(m) of the Code. If the
Committee determines that an Award should qualify as "performance-based
compensation" for purposes of Section 162(m) of the Code (other than Options or
SARs which otherwise qualify as "performance-based compensation" for purposes of
Section 162(m) of the Code), the grant, exercise, vesting and/or settlement of
such Performance Award shall be contingent upon achievement of one or more
pre-established, objective performance goals. The performance goal or goals for
such Performance Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each of such criteria,
as specified by the Committee consistent with this subsection (ii). One or more
of the following business criteria for the Company, on a consolidated basis,
and/or for specified subsidiaries or affiliates or other business units of the
Company, shall be used by the Committee in establishing performance goals for
such Performance Awards, either on an absolute basis or relative to an index:
(1)revenues on a corporate or product by product basis; (2) earnings from
operations, earnings before or after taxes, earnings before or after interest,
depreciation, amortization, incentives, service fees or extraordinary or special
items; (3) net income or net income per common share (basic or diluted); (4)
return on assets, return on investment, return on capital, or return on equity;
(5) cash flow, free cash flow, cash flow return on investment, or net cash
provided by operations; (6) economic value created or added; (7) operating
margin or profit margin; and/or (8) stock price, dividends or total stockholder
return. The targeted level or levels of performance with respect to such
business criteria may be established at such levels and in such terms as the
Committee may determine, in its discretion, including in absolute terms, as a
goal relative to performance in prior periods, or as a goal compared to the
performance of one or more comparable companies or an index covering multiple
companies. All determination by the Committee as to the establishment of
performance goals, the amount potentially payable in respect of Performance
Awards, the level of actual achievement of the specified performance goals
relating to Performance Awards and the amount of any final Performance Award
shall be recorded in writing. Specifically, the Committee shall certify in
writing, in a manner conforming to applicable regulations under Section 162(m)
of the Code, prior to settlement of each such award, that the performance
objective relating to the Performance Award and other material terms of the
award upon which settlement of the award was conditioned have been satisfied.

     8. Limits on Transferability. No award or other right or interest of an
award recipient under the Plan shall be pledged, hypothecated or otherwise
encumbered or subject to

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any lien, obligation or liability of such recipient to any party (other than the
Company or an affiliate thereof), or assigned or transferred by such recipient
otherwise than by will or the laws of descent and distribution or to a
beneficiary upon the death of a recipient, and such awards or rights that may be
exercisable shall be exercised during the lifetime of the recipient only by the
recipient or his or her guardian or legal representative, except that awards and
other rights may be transferred to one or more transferees during the lifetime
of the recipient, and may be exercised by such transferees in accordance with
the terms of such award, but only if and to the extent such transfers are
permitted by the Committee, subject to any terms and conditions which the
Committee may impose thereon. A beneficiary, transferee, or other person
claiming any rights under the Plan from or through any award recipient shall be
subject to all terms and conditions of the Plan and any award document
applicable to such Participant, except as otherwise determined by the Committee,
and to any additional terms and conditions deemed necessary or appropriate by
the Committee. For purposes hereof, "beneficiary" shall mean the legal
representatives of the recipient's estate entitled by will or the laws of
descent and distribution to receive the benefits under a recipient's award upon
a recipient's death, provided that, if and to the extent authorized by the
Committee, a recipient may be permitted to designate a beneficiary, in which
case the "beneficiary" instead shall be the person, persons, trust or trusts (if
any are then surviving) which have been designated by the recipient in his or
her most recent written beneficiary designation filed with the Committee to
receive the benefits specified under the recipient's award upon such recipient's
death.

     9. Capital Changes, Reorganization, Sale.

        (a) Adjustments upon Changes in Capitalization. The aggregate number and
class of shares issuable pursuant to the Plan and pursuant to the exercise of
ISOs, the Annual Share Limit, the number and class of shares and the exercise
price per share covered by each outstanding Option, the number and class of
shares and the base price per share covered by each outstanding SAR, the number
and class of shares covered by each outstanding award of Deferred Stock or Other
Stock-Based Award or Performance Award, any per-share base or purchase price or
target market price included in the terms of any such award, and related terms
shall all be adjusted proportionately or as otherwise appropriate to reflect any
increase or decrease in the number of issued shares of Common Stock resulting
from a split-up or consolidation of shares or any like capital adjustment, or
the payment of any stock dividend, and/or to reflect a change in the character
or class of shares covered by the Plan arising from a readjustment or
recapitalization of the Company's capital stock.

        (b) Cash, Stock or Other Property for Stock. In the case of a merger,
sale of assets or similar transaction which results in a replacement of the
Common Stock with stock of another corporation (an "Exchange Transaction"), the
Company shall make a reasonable effort, but shall not be required, to replace
any outstanding Options or SARs with comparable options to purchase the stock or
SARs on the stock of such other corporation, or shall provide for immediate
exercisability of all outstanding Options and SARs, with all options or SARs not
being exercised within the time period specified by the Board being terminated.
The Committee, acting in its discretion, may accelerate vesting of Restricted
Stock, Deferred Stock, Other Stock-Based Awards and Performance Awards, provide
for cash settlement and/or make such other adjustments to the terms of such
awards as it deems appropriate in the context of an Exchange Transaction, taking
into account the manner in which outstanding Options and SARs are being treated.

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        (c) Fractional Shares. In the event of any adjustment in the number of
shares covered by any award pursuant to the provisions hereof, any fractional
shares resulting from such adjustment shall be disregarded and each such award
shall cover only the number of full shares resulting from the adjustment.

        (d) Determination of Board to be Final. All adjustments under this
Section 9 shall be made by the Committee, and its determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive.

     10. Tax Withholding. As a condition to the exercise of any award, the
delivery of any shares of Common Stock pursuant to any award, the lapse of
restrictions on any award or the settlement of any award, or in connection with
any other event that gives rise to a federal or other governmental tax
withholding obligation on the part of the Company or an affiliate relating to an
award (including, without limitation, an income tax deferral arrangement
pursuant to which employment tax is payable currently), the Company and/or the
affiliate may (a) deduct or withhold (or cause to be deducted or withheld) from
any payment or distribution to an award recipient whether or not pursuant to the
Plan or (b) require the recipient to remit cash (through payroll deduction or
otherwise), in each case in an amount sufficient in the opinion of the Company
to satisfy such withholding obligation. If the event giving rise to the
withholding obligation involves a transfer of shares of Common Stock, then, at
the sole discretion of the Committee, the recipient may satisfy the withholding
obligation described under this Section 10 by electing to have the Company
withhold shares of Common Stock or by tendering previously-owned shares of
Common Stock, in each case having a Fair Market Value equal to the amount of tax
to be withheld (or by any other mechanism as may be required or appropriate to
conform with local tax and other rules).

     11. Fair Market Value. For purposes of the Plan, "Fair Market Value" shall
mean the fair market value of the Common Stock as determined in good faith by
the Committee or under procedures established by the Committee. Unless otherwise
determined by the Committee, the Fair Market Value of the Common Stock as of any
given date shall be the closing sale price per share of Common Stock reported on
a consolidated basis for securities listed on the principal stock exchange or
market on which the Common Stock is traded on the date as of which such value is
being determined or, if there is no sale on that day, then on the last previous
day on which a sale was reported.

     12. Amendment and Termination of the Plan. Except as may otherwise be
required by law or the requirements of any stock exchange or market upon which
the Common Stock may then be listed, the Board, acting in its sole discretion
and without further action on the part of the stockholders of the Company, may
amend the Plan at any time and from time to time and may terminate the Plan at
any time. No amendment or termination may affect adversely any outstanding award
without the written consent of the award recipient.

     13. General Provisions.

        (a) Compliance with Law. The Company shall not be obligated to issue or
deliver shares of Common Stock pursuant to the Plan unless the issuance and
delivery of such shares complies with applicable law, including, without
limitation, the Securities Act, the Securities Exchange Act of 1934, as amended,
and the requirements of any stock exchange or

                                       8

market upon which the Common Stock may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

        (b) Transfer Orders; Placement of Legends. All certificates for shares
of Common Stock delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Company may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange or market upon which the Common Stock may then be listed, and
any applicable federal or state securities law. The Company may cause a legend
or legends to be placed on any such certificates to make appropriate reference
to such restrictions.

        (c) No Rights Conferred. Nothing contained herein shall be deemed to
give any individual a right to receive an award under the Plan or to be retained
in the employ or service of the Company or any affiliate.

        (d) Decisions and Determinations to be Final. Any decision or
determination made by the Board pursuant to the provisions hereof and, except to
the extent rights or powers under the Plan are reserved specifically to the
discretion of the Board, all decisions and determinations of the Committee are
final and binding.

        (e) Nonexclusivity of the Plan. No provision of the Plan, and neither
its adoption Plan by the Board or submission to the stockholders for approval,
shall be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements, apart from the
Plan, as it may deem desirable.

     14. Governing Law. The Plan and each award agreement or other document
evidencing an award shall be governed by the laws of the State of Delaware,
without regard to its principles of conflict of laws.

     15. Term of the Plan. The Plan shall become effective on the date on which
it is approved by the Company's stockholders (the "Effective Date"). Unless
sooner terminated by the Board, the Plan shall terminate on the tenth
anniversary of the Effective Date. The rights of any person with respect to an
award made under the Plan that is outstanding at the time of the termination of
the Plan shall not be affected solely by reason of the termination of the Plan
and shall continue in accordance with the terms of the award and of the Plan, as
each is then in effect or is thereafter amended.

                                       9exv10w63

 

Exhibit 10.63

NOTE REPAYMENT AGREEMENT

      THIS NOTE REPAYMENT AGREEMENT (“Agreement”) is made and entered into as of this 16th day of
May, 2005 by and between NeoPharm, Inc. (“Neopharm”), a Delaware corporation, of 150 Field Drive,
Suite 195, Lake Forest, Illinois 60045 and Akorn, Inc. (“Akorn”), a Louisiana corporation, of 2500
Milbrook Drive, Buffalo Drive, Illinois 60089. Neopharm and Akorn are sometimes referred to
individually as “Party” and collectively as “Parties.”

RECITALS

      A. On or about December 20, 2001, Neopharm and Akorn entered into a certain Processing
Agreement (as amended by amendment dated October 7, 2003, the “Processing Agreement”) relating to
the processing of certain pharmaceutical products by Akorn for Neopharm.

      B. On or about October 7, 2003, Akorn executed and delivered to Neopharm a certain Amended and
Restated Promissory Note (the “Note”), payable to the order of Neopharm, in the principal amount of
$3,250,000.00, having a maturity date of December 20, 2006.

      C. On or about October 7, 2003, Neopharm, Akorn, Akorn (New Jersey), Inc., an Illinois
corporation, and LaSalle Bank National Association (the “Bank”) entered into a certain
Subordination and Intercreditor Agreement (the “Subordination Agreement”), pursuant to which, among
other things, Neopharm subordinated certain of its rights and remedies under the Note to the rights
and remedies of the Bank, as Senior Agent for Senior Lenders under the Credit Agreement (as such
terms are defined in the Subordinated Agreement).

      D. On or about October 6, 2004, Neopharm sent notice to Akorn, advising it that an Event of
Default existed under the Note.

      E. Neopharm and Akorn desire to have the Note paid off in full and to terminate the Processing
Agreement, on the terms and conditions hereinafter set forth.

      THEREFORE, incorporating the Recitals above, and in consideration of the mutual covenants
hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by each Party hereto, Neopharm and Akorn agree as follows:

      1. Agreed Payment. On or before May 16, 2005, Akorn shall pay to Neopharm the sum of
Two Million Five Hundred Thousand Dollars ($2,500,000.00) (the “Agreed Payment”) as payment in full
of all sums now or hereafter owing under the Note. The Agreed Payment shall be in the form of a
cashier’s or certified check or wired funds. Upon timely delivery of the Agreed Payment by Akorn
to Neopharm, Neopharm will return to Akorn the Note marked as “Paid in Full.” Except for the
Agreed Payment, this Agreement involves no other economic exchanges between the Parties. Each
Party will bear its own costs, expenses and attorneys’ fees relating to all real or potential
claims released by this Agreement.

 

 

      2. Termination of Processing Agreement. Upon timely delivery of the Agreed Payment by
Akorn to Neopharm, the Processing Agreement shall be deemed terminated and have no further force or
effect.

      3. Mutual and General Release. Provided that the Agreed Payment is timely delivered
by Akorn to Neopharm, and except as otherwise set forth in this Agreement, Neopharm on the one hand
and Akorn on the other hereby fully and forever release and discharge each other and their present
and former officers, directors, shareholders, partners, affiliates, employees, agents,
representatives, insurers, and attorneys, and predecessors, assignees, heirs, executors and
successors of each of them, from all claims, actions, causes of action, demands, cross-claims,
counterclaims, obligations, contracts, indemnity, contribution, suits, debts, sums, accounts,
controversies, rights, damages, costs, attorney’s fees, losses, expenses, and liabilities
whatsoever (contingent, accrued, mature, direct, derivative, subrogated, personal, assigned,
discovered, undiscovered, inchoate, or otherwise) (hereafter “Claims”) which they may now have or
have had as of the date of this Agreement or which may hereafter accrue, individually,
collectively, or otherwise in connection with, relating to or arising out of the facts recited
above, the Note, the Processing Agreement, or of any other event or occurrence having taken place
on or before the date of this Agreement, whether currently known or unknown.

      4. Waiver of Unknown Claims. The Parties acknowledge that they have been fully
advised of and are aware of the contents of California Civil Code Section 1542, and having been
advised as to its benefits, expressly agree that they hereby waive any rights or benefits they have
under such statute. Section 1542 provides:

A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if known
by him must have materially affected his settlement with the debtor.

      The Parties represent that they understand the above-quoted provision of the California Civil
Code Section 1542 and knowingly enter into this waiver with advice of counsel. The Parties
acknowledge that the foregoing waiver was separately bargained for and that it is the Parties’
intention in executing this Agreement to discharge any and all present Claims, whether foreseen or
unforeseen. The Parties also agree to waive any similar right which they may have under the laws
of any of the States of the United States of America, or of any foreign state, which are equal to
or substantially similar to the rights and benefits granted by California Civil Code Section 1542.

      5. Consent of Bank. Pursuant to the Subordination Agreement, Akorn shall not make and
Neopharm shall not receive the Agreed Payment without the prior written consent of the Bank. As a
condition precedent to the effectiveness of this Agreement, therefore, Akorn shall furnish to
Neopharm, prior to making the Agreed Payment, the written consent of the Bank to same (the “Written
Consent”). Akorn shall use reasonable efforts to timely obtain the Written Consent.

      6. Time of Essence: Termination. If the Written Consent is not delivered and the
Agreed Payment not made by Akorn to Neopharm on or before Monday, May 16, 2005, then Neopharm shall
have the right to terminate this Agreement upon delivery of written notice of

2

 

termination to Akorn. Upon termination of this Agreement pursuant to such notice, this
Agreement and each of its provisions shall be deemed null and void.

      7. Press Release. In the event that either Party intends to issue a press release or
other public statement or filing regarding any of the facts recited above or related transactions,
or the negotiation or terms of this Agreement, such Party shall not issue such release or statement
unless the other Party has first approved it in writing.

      8. Non-Disparagement. Each Party agrees that it shall not make, or encourage, aid or
abet any third party to make, any statement, whether written or oral, that disparages, reflects
unfavorably upon or reasonably casts the other Party (and its officers, directors, agents,
employees and attorneys) in a negative light relating to matters arising on or before the date of
this Agreement.

      9. No Violation: Consent: Authority. Other than the Written Consent, each Party
warrants that no third party consent to this Agreement is required and this Agreement shall not
violate any agreement, order, law or regulation to which it is or may be subject or bound. Each
Party further warrants that it is duly authorized to enter into and fully perform this Agreement.

      10. Conflict. To the extent that there is a conflict between the terms of this
Agreement and the terms of the Note or the Processing Agreement, the terms of this Agreement shall
prevail.

      11. Entire Agreement. This Agreement constitutes the entire written agreement of
compromise and settlement among the Parties, and there are no other agreements modifying or
affecting its terms. This Agreement supersedes all other agreements, written, oral, or implied,
relating to the same subject. This Agreement can only be modified by a writing signed by the
Parties and expressly stating that such modification is intended.

      12. Illinois Law to Govern. This Agreement is being made and delivered and is
intended to be performed in the State of Illinois and the execution, validity, construction, and
performance of this Agreement will be construed and enforced in accordance with the laws of
Illinois. This Agreement will be deemed made and entered into in Cook County, which will be the
exclusive venue for any action relating to this Agreement.

      13. Agreement As Defense. This Agreement may be pleaded as a full and complete
defense and may be used as the basis for an injunction against any action, suit or proceeding that
may be prosecuted, instituted or attempted by any Party in breach thereof.

      14. Severability. If any provision of this Agreement, or part thereof, is held
invalid, void or voidable as against public policy or otherwise, the invalidity will not affect
other provisions, or parts thereof, which may be given effect without the invalid provision or
part. To this extent, the provisions, and parts thereof, of this Agreement are declared to be
severable.

      15. No Admission of Liability. This Agreement is being entered into for the sole
purpose of bringing to an end any relationship between the Parties. This Agreement embodies a
compromise of claims and will not be used or construed as an admission of liability or fault for
any purpose.

3

 

      16. Counterparts. This Agreement may be signed in counterparts. A facsimile
signature will have the same force and effect as an original signature.

      17. Attorneys’ Fees. In the event of dispute arising out of the interpretation or a
breach of this Agreement, the prevailing Party shall be entitled to recover attorneys’ fees
incurred in connection with the dispute concerning the interpretation or a breach of this
Agreement.

      18. Cooperation. The Parties hereto agree that, for their respective selves, heirs,
executors and assigns, they will abide by this Agreement, the terms of which are meant to be
contractual, and further agree that they will do such acts and prepare, execute and deliver such
documents as may reasonably be required in order to carry out the objectives of this Agreement.

      19. Successors and Assigns. This Agreement shall be binding upon and shall inure to
the benefit of the Parties hereto and to their respective representatives, successors and assigns.

      20. Interpretation. Each Party declares and represents that this Agreement is being
made without reliance upon any statement or representation not contained herein of any other Party,
or of any agent or attorney of any other Party. Each Party represents to each other Party that it
has reviewed each term of this Agreement with its counsel and that it shall never dispute the
validity of this Agreement on the ground that it did not have advice of its counsel. This
Agreement shall be construed and enforced according to its fair meaning as if prepared by all
Parties after extensive negotiation; no part of this Agreement shall be construed against any Party
on the ground that the attorney for that Party drafted it.

      21. Knowing, Free and Voluntary Making. The Parties have carefully read this
Agreement, and the Parties acknowledge that they know and fully understand its contents. The
Parties acknowledge that they have fully discussed this Agreement with their respective attorneys
and fully understand the consequences of this Agreement. No Party is being influenced by any
statement made by or on behalf of any of the other Party to this Agreement. The Parties have
relied and are relying solely upon their own judgment, belief and knowledge of the nature, extent,
effect and consequences relating to this Agreement and/or upon the advice of their own legal
counsel concerning the legal and income tax consequences of this Agreement. The Agreement is
freely and voluntarily signed by the Parties.

      IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth
above.

	 	 	 	 	 	 	 
	NEOPHARM, INC.
	 	AKORN, INC.
	 
	 	 	 	 	 	 
	By:

	 	/s/ Ronald G. Eidell
	 	By:
	 	/s/ Arthur S. Przybyl
	

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Title:

	 	President and CEO
	 	Title:
	 	President and CEO
	

	 	 
	 	 	 	 

4

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