<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
</TABLE>
<TABLE>
<S> <C> <C>
NEOPHARM, INC.
- --------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
<PAGE>
NEOPHARM, INC.
100 CORPORATE NORTH
SUITE 215
BANNOCKBURN, ILLINOIS 60015
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 8, 2000
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
NeoPharm, Inc., a Delaware corporation, will be held at the Conference Center,
located at 100 Corporate North, Bannockburn, Illinois on June 8, 2000, at
10:00 a.m., local time, for the following purposes:
1. To elect six directors to serve until the 2001 Annual Meeting of
Stockholders.
2. To transact such other business as may properly come before the meeting.
Only stockholders of record on April 21, 2000 will be entitled to notice of
and to vote at this Meeting.
TO ASSURE THAT YOUR INTERESTS WILL BE REPRESENTED, WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING, YOU ARE URGED TO SIGN AND DATE THE ENCLOSED PROXY CARD
AND PROMPTLY RETURN IT IN THE PRE-ADDRESSED ENVELOPE PROVIDED, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. THE ENCLOSED PROXY IS REVOCABLE AND WILL
NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
By Order of the Board of Directors,
[LOGO]
KEVIN M. HARRIS
SECRETARY
Bannockburn, Illinois
April 28, 2000
<PAGE>
NEOPHARM, INC.
100 CORPORATE NORTH
SUITE 215
BANNOCKBURN, ILLINOIS 60015
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 8, 2000
------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of NeoPharm, Inc., a Delaware corporation (the
"Company"), to be used at the Annual Meeting of Stockholders of the Company (the
"Annual Meeting") to be held at the Conference Center, located at 100 Corporate
North, Bannockburn, Illinois on June 8, 2000 at 10:00 a.m. for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders and in this
Proxy Statement. This Proxy Statement and the enclosed form of proxy were first
sent or given to stockholders on or about May 5, 2000.
Only stockholders of record at the close of business on April 21, 2000 (the
"Record Date") will be entitled to vote at the meeting or any adjournment
thereof. As of the close of business on the Record Date, there were 11,138,406
shares of the Company's common stock, par value $.0002145 per share ("Common
Stock"), outstanding.
The presence, either in person or by properly executed proxy, of the holders
of a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum at the Annual Meeting. In the election of directors, each
share is entitled to cast one vote for each director to be elected; cumulative
voting is not permitted. For all matters except the election of directors, each
share is entitled to one vote. Directors are elected by a plurality of the votes
cast by the holders of shares of Common Stock at a meeting at which a quorum is
present. In all other matters other than the election of directors, the
affirmative vote of a majority of the outstanding shares of Common Stock present
in person or represented by proxy at the Annual Meeting is required for the
adoption of such matters. Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. Abstentions and broker non-votes are not counted for purposes of
determining whether a proposal presented to stockholders has been approved.
A proxy may be revoked at any time before it is exercised by giving a
written notice to the Secretary of the Company bearing a later date than the
proxy, by submitting a later-dated proxy or by voting the shares represented by
the proxy in person at the Annual Meeting. Unless revoked, the shares
represented by each duly executed, timely delivered proxy will be voted in
accordance with the specifications made. If no specifications are made, such
shares will be voted FOR the election of directors as proposed in this Proxy
Statement. The Board of Directors does not intend to present any other matters
at the Annual Meeting. However, should any other matters properly come before
the Annual Meeting, it is the intention of the proxy holders to vote the proxy
in accordance with their best judgment.
The expenses of soliciting proxies will be paid by the Company. In addition
to solicitation by mail, officers, directors and employees of the Company, who
will receive no extra compensation therefor, may solicit proxies personally or
by telephone, telecopy or telegram. The Company will reimburse brokerage houses,
custodians, nominees and fiduciaries for their expenses in mailing proxy
materials to principals.
<PAGE>
ELECTION OF DIRECTORS
Six directors, constituting the entire Board of Directors, are to be elected
at the Annual Meeting. Each director will hold office until the 2001 Annual
Meeting of stockholders and until his successor has been elected and qualified.
The nominees named below have been selected by the Board of Directors of the
Company. The Board believes that all of its present nominees will be available
for election at the Annual Meeting and will serve if elected. If, due to
circumstances not now foreseen, any of the nominees named below will not be
available for election, the proxies will be voted for such other person or
persons as the Board of Directors may select. Two of the nominees,
Dr. Matthew P. Rogan and Dr. Kaveh T. Safavi, are not currently directors of the
Company.
There follows information as to each nominee for election as a director at
the Annual Meeting, including his age, present principal occupation, other
business experience during the last five years, directorships of other
publicly-held companies and period of service as a director of the Company.
THE PERSONS NAMED IN THE ACCOMPANYING FORM OF PROXY WILL VOTE FOR THE
ELECTION OF THE NOMINEES UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
NOMINEES FOR DIRECTOR. The following information has been provided by the
respective nominees for election to the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
- ---- -------- ------------------------------------------------
<S> <C> <C>
James M. Hussey, R.Ph., MBA.................. 41 Mr. Hussey joined the Company as President,
Chief Executive Officer and Director on March
16, 1998. Prior to joining the Company,
Mr. Hussey served as Chief Executive Officer
of Physicians Quality Care, Inc., a managed
care organization from 1994 to 1998. Previous
to that, Mr. Hussey held several positions
with Bristol-Myers Squibb, a diversified
pharmaceutical manufacturer, from 1986 to
1994, most recently as the General Manager
Midwest Integrated Regional Business Unit.
John N. Kapoor, Ph.D......................... 56 Dr. Kapoor has been a Director and Chairman of
the Board of the Company since its formation in
July 1990. Prior to forming the Company,
Dr. Kapoor formed EJ Financial
Enterprises, Inc., a health care consulting
and investment company, in March 1990, of
which Dr. Kapoor is the principal shareholder
and President. Dr. Kapoor is presently
Chairman of Option Care, Inc., a provider of
home health care services; Chairman of
Akorn, Inc., a manufacturer, distributor and
marketer of generic ophthalmic products; a
director of First Horizon Pharmaceutical
Corporation, a distributor of pharmaceuticals;
a director of Introgen Therapeutics, Inc., a
gene therapy company; and, a director of
Integrated Surgical Systems, Inc., a
manufacturer and distributor of robotic
surgical systems.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
- ---- -------- ------------------------------------------------
<S> <C> <C>
Sander A. Flaum.............................. 63 Mr. Flaum joined the Company as a Director in
July 1998. Since 1991, Mr. Flaum has served as
President and CEO of Robert A Becker
EURO/RSCG, a marketing and advertising
company. Mr. Flaum was Executive Vice
President of Kleinter Advertising from 1984 to
1991 and prior to that served as Market
Director of Lederle Laboratories, a division
of American Cyanamid.
Erick E. Hanson.............................. 53 Mr. Hanson joined the Company as a Member of the
Board of Directors in April 1997. Mr. Hanson
is currently President of Hanson and
Associates, a consulting firm working with
venture capital companies. Previously,
Mr. Hanson served as President and CEO of
Option Care, Inc., a provider of home health
care. Prior to joining Option Care,
Mr. Hanson held a variety of executive
positions with Caremark, Inc., including Vice
President Sales and Marketing. Mr. Hanson
served as President and Chief Operating
Officer of Clinical Partners Inc. in Boston,
MA from 1989 to 1991 and prior to 1989 was
associated with Blue Cross and Blue Shield of
Indiana for over twenty years. Mr. Hanson
presently serves on the board of directors of
Condell Medical Centers.
Matthew P. Rogan, M.D........................ 54 Dr. Rogan is President and CEO of Unicorn Pharma
Consulting, Inc., a provider of customized
pharmaceutical and biotechnology medical
services. From 1997 to 1999, Dr. Rogan was
Vice President, Medical Affairs for Sanofi
Pharmaceuticals in the United States. Prior to
joining Sanofi, Dr. Rogan served as Senior
Medical Director, Medical Affairs for Zeneca
Pharmaceuticals from 1996-1997 and was
Director of Clinical Support at Burroughs
Wellcome from 1993-1995. Prior to 1993,
Dr. Rogan held senior positions with
Bristol-Myers Squibb. Dr. Rogan is a Diplomate
of the American Board of Pediatrics, a Fellow
of the American Academy of Pediatrics and a
member of the American Academy of
Pharmaceutical Physicians.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
- ---- -------- ------------------------------------------------
<S> <C> <C>
Kaveh T. Safavi, M.D., J.D................... 39 Dr. Safavi is Vice President of Business and
Strategic Development for Alexian Brothers of
Illinois, Inc., a multi-hospital health system
in metropolitan Chicago, Illinois. Prior to
assuming his current position in January 2000,
Dr. Safavi served as Vice President, Medical
Affairs for UnitedHealthcare of Illinois,
Inc., a large managed care organization from
1996 to 1999 and served as President of Health
Springs Medical Group of Illinois, a primary
care group practice and physician practice
management company from 1993 to 1995.
Dr. Safavi is board certified in Internal
Medicine and Pediatrics and is licensed to
practice law in the State of Illinois.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE ELECTION OF ALL NOMINEES FOR DIRECTOR.
4
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held 6 meetings in 1999. During 1999, each of the
directors participated in at least 75% of the total number of such meetings of
the Board and meetings of committees of the Board on which he served.
The Board of Directors has established a Compensation Committee and an Audit
Committee. The Company's bylaws provide that each such committee shall have one
or more members, who serve at the pleasure of the Board of Directors. The
Company does not have a standing nominating committee, however, the Board of
Directors will consider director nominations which are submitted by stockholders
in writing addressed to: Corporate Secretary, NeoPharm, Inc., 100 Corporate
North, Suite 215, Bannockburn, Illinois 60015.
COMPENSATION COMMITTEE. The Compensation Committee is responsible for
overseeing the Company's incentive compensation and benefit plans and for
reviewing and making recommendations to the Board of Directors with respect to
the administration of the salaries, incentives and other compensation of
directors, officers, and other employees of the Company, including the terms and
conditions of their employment and other compensation matters. The Compensation
Committee currently consists of Messrs. Kapoor, Flaum and Hanson. During fiscal
1999, the Compensation Committee held one meeting.
AUDIT COMMITTEE. The Audit Committee is responsible for making an annual
recommendation, based on a review of qualifications, to the Board of Directors
for the appointment of independent public accountants to audit the financial
statements of the Company and to perform such other duties as the Board of
Directors may from time to time prescribe. The Audit Committee is also
responsible for reviewing and making recommendations to the Board of Directors
with respect to (i) the scope of audits conducted by the Company's independent
public accountants and internal auditors and (ii) the accounting methods and the
system of internal controls used by the Company. In addition, the Audit
Committee reviews reports from the Company's independent public accountants and
internal auditors concerning compliance by management with governmental laws and
regulations and with the Company's policies relating to ethics, conflicts of
interest and disbursements of funds. The Audit Committee currently consists of
Messrs. Flaum and Hanson. During fiscal 1999, the Audit Committee held two
meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. As noted
above, the Compensation Committee of the Board consists of Messrs. Kapoor, Flaum
and Hanson and the Audit Committee consist of Messrs. Flaum and Hanson. Each of
the aforementioned individuals is a non-employee director of the Company. In
1999, the Company paid EJ Financial Enterprises, Inc. ("EJ") $131,251 pursuant
to a Consulting Agreement for certain business and financial services, plus
reimbursement of expenses. Dr. Kapoor, the Company's Chairman, is the president
and a director of EJ. Dr. Mahendra Shah, a Vice President of the Company, is
also a Vice President of EJ and Mr. Kevin M. Harris, Chief Financial Officer and
Secretary of the Company, is Director of Taxes and Planning at EJ. The Company's
principal offices are located in space subleased from Option Care, Inc. of which
Dr. Kapoor is Chairman. See "Certain Relationships and Related Transactions" for
additional information.
COMPENSATION OF DIRECTORS
Non-employee directors ("Outside Directors"), other than Kapoor, are paid
$1,000 for attendance at each directors' meeting and $500 for attendance at each
committee meeting. Directors are reimbursed for reasonable out-of-pocket
expenses incurred in connection with attendance at such meetings.
Outside Directors, other than Dr. Kapoor, are eligible to receive grants of
nonstatutory stock options. Each Outside Director is granted an option to
purchase 5,000 shares of Common Stock of the Company upon his or her initial and
each subsequent election as a director. Options granted to Outside Directors
vest one year from the date of grant. Currently two directors are eligible to
participate in this program.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION OF EXECUTIVE OFFICERS. The
following table sets forth certain summary compensation information for the
fiscal year ended December 31, 1999, for services rendered by each person who
served as chief executive officer of the Company at any time during 1999 and for
each executive officer of the Company who received more than $100,000 in salary
and bonus in 1999 (the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
-------------------------------------------------- COMPENSATION AWARDS
ANNUAL OTHER -----------------------------
NAME AND FISCAL COMPENSATION ANNUAL RESTRICTED STOCK
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION AWARDS($) OPTIONS(#)
- ------------------ -------- --------- ------------ ------------ ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
James M. Hussey.................... 1999 $254,700 $100,000 $82,900 $ 0 140,000(3)
Chief Executive Officer 1998 197,000 90,000 7,100 187,500 400,000(4)
and President(1)
Aquilur Rahman,.................... 1999 $194,800 $100,000 $ 9,700 $ 0 40,000(3)
Chief Scientific Officer 1998 178,000 54,000 9,600 0 0
1997 167,000 51,000 0 0 0
Lewis Strauss, M.D.,............... 1999 $160,500 $ 42,500 $20,000 $ 31,500 80,000(3)
Chief Medical Officer(2) 1998 110,000 16,800 20,000 35,000 20,000(5)
</TABLE>
- ------------------------
(1) Mr. Hussey joined the Company as President and CEO in March 1998.
(2) Dr. Strauss joined the Company as Chief Medical Officer in April 1998.
(3) The stock options became exercisable for 25% of the covered shares on
January 4, 2000 and will become exercisable with respect to an additional
25% on each anniversary of such date.
(4) The stock option became exercisable for 25% of the covered shares on
January 16, 1999 and will become exercisable with respect to an additional
25% on each anniversary of such date.
(5) The stock options became exercisable for 25% of the covered shares on
April 6, 1999 and will become exercisable with respect to an additional 25%
on each anniversary of such date.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to grants of options
to purchase Common Stock granted to the Named Executive Officers during the
fiscal year ended December 31, 1999:
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AS ASSUMED ANNUAL RATES
% OF TOTAL OF STOCK PRICE APPRECIATION
OPTIONS GRANTED FOR OPTION TERM
GRANTED TO EMPLOYEES EXERCISE PRICE EXPIRATION ---------------------------
NAME OPTIONS(#) IN FISCAL YEAR PER SHARE DATE 5% 10%
- ---- ---------- --------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
James M. Hussey......... 140,000 40.0% $11.875 1/04/09 $1,045,537 $2,649,597
Aquilur Rahman.......... 40,000 11.5% $11.875 1/04/09 $ 298,725 $ 757,028
Lewis Strauss........... 80,000 23.0% $11.875 1/04/09 $ 597,450 $1,514,055
</TABLE>
6
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR, AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to stock options
exercised during the fiscal year ended December 31, 1999, and the value at
December 31, 1999, of unexercised stock options held by the Named Executive
Officers:
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT OPTIONS IN-THE-MONEY
SHARES ACQUIRED VALUE FISCAL YEAR-END AT FISCAL YEAR-END*
ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME # $ # $*
- ---- --------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
James M. Hussey............. 0 0 100,000/440,000 $1,681,250/$6,400,000
Aquilur Rahman.............. 0 0 50,000/40,000 $728,125/$387,500
Lewis Strauss............... 0 0 5,000/95,000 $89,063/$1,042,188
</TABLE>
- ------------------------
* Represents the fair market value at December 31, 1999 of the Common Stock
underlying the options minus the exercise price.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors, consisting of
directors John N. Kapoor, Sander A. Flaum and Erick E. Hanson, none of whom is
an employee of the Company, annually reviews and makes recommendations to the
Board of Directors regarding executive compensation. It is the philosophy of the
Committee that the total executive compensation package should align the
financial interests of the Company's executives with the short-term and
long-term goals of the Company and consequently enhance stockholder value. The
key elements of the Company's current compensation program include a base
salary, an annual bonus and equity participation through a long term incentive
plan.
BASE SALARY. As an emerging cancer research company, with six full time
employees, it is difficult to compare salaries to any particular peer group.
Rather, the Committee takes into consideration the responsibilities, experience
level, individual performance levels and amount of time devoted to the Company's
needs. Salaries are reviewed annually by the Committee based on the foregoing
criteria and are adjusted, if warranted, by the Committee.
ANNUAL BONUS. The Committee recommends to the Board the amount of bonus
awards, including who should receive them, based upon its evaluations. The
awards are intended to reward excellent individual and team performance in the
achievement of the Company's financial and operational goals. The Board of
Directors reviews the Committee's bonus recommendations and makes its bonus
determinations based on the Committee's report. Bonuses (exclusive of
restrictive stock awards) paid to employees for the fiscal year 1999 amounted to
34% of base salary.
LONG-TERM INCENTIVES. The Company adopted the 1998 Equity Incentive Plan in
July 1998. The purpose of this plan is to create an opportunity for employees,
including executive officers, directors and consultants to the Company, to share
in the enhancement of stockholder value. As with annual bonus payments, the
Compensation Committee annually recommends to the Board the grant of incentive
awards based upon its evaluation of individual contributions towards the
Company's past and future success. After reviewing the recommendation of the
Committee, including the executive's individual performance and level of
responsibility together with the Company's achievement with respect to
profitability and growth, the Board grants incentive awards. In 1999 the
Committee made recommendations for the issuance of 347,000 stock options.
Compensation Committee
Dr. John N. Kapoor
Sander A. Flaum
Erick E. Hanson
7
<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information regarding beneficial
ownership of shares of the Common Stock as of March 3, 2000 by (i) all those
known by the Company to be beneficial owners of more than 5% of its outstanding
Common Stock, (ii) each director of the Company and each nominee for director,
(iii) each of the Named Executive Officers and (iv) all executives, directors
and nominees for director as a group. Unless otherwise noted, each person's
address is in care of NeoPharm, Inc., 100 Corporate North, Suite 2515,
Bannockburn, Illinois 60015.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP CLASS(1)
- ---- -------------------- ----------
<S> <C> <C>
John N. Kapoor, Ph.D........................................ 3,996,410(2) 36.15%
John N. Kapoor 1994-A Annuity Trust......................... 1,549,328(3) 14.02
Aquilur Rahman, Ph.D........................................ 925,540(4) 8.33
EJ Financial/NEO Management, L.P............................ 904,812(5) 8.19
John P. Curran.............................................. 774,465(6) 7.01
First Union Corporation..................................... 622,500(7) 5.63
James M. Hussey............................................. 299,073(8) 2.65
Lewis Strauss, M.D.......................................... 43,651(9) *
Erick E. Hanson............................................. 8,400(10) *
Sander A. Flaum............................................. 7,000 *
Matthew P. Rogan, M.D....................................... 0 *
Kaveh T. Safavi, M.D........................................ 0 *
All officers and directors as a group (10 persons).......... 5,505,390 47.94%
</TABLE>
- ------------------------
* Indicates ownership of less than 1%.
(1) Based on 11,047,487 shares of Common Stock outstanding as of March 3, 2000,
plus 436,250 shares subject to options that are considered to be
beneficially owned by the persons listed. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission (the "Commission") and generally includes voting or investment
power with respect to securities. Shares of Common Stock subject to options
or warrants exercisable or convertible within 60 days are deemed
outstanding for computing the percentage of the person or group holding
such options or warrants.
(2) Includes 25,000 shares that may be acquired pursuant to vested options,
906,422 shares held by the John N. Kapoor Trust, dated 9/20/89 (the "JNK
Trust"), of which Dr. Kapoor is the sole trustee and sole beneficiary and
904,812 shares held by EJ Financial/NEO Management, L.P. (the "Limited
Partnership") of which John N. Kapoor is Managing General Partner. The
amount shown also includes: 300,000 shares which are held by the John N.
Kapoor Charitable Trust (the "Charitable Trust"), of which Dr. Kapoor and
his spouse are co-trustees; 1,549,328 shares of common stock which are
owned by the John N. Kapoor 1994-A Annuity Trust (the "Annuity Trust") of
which the sole trustee is Editha Kapoor, Dr. Kapoor's spouse; and 310,848
shares which are owned by four trusts which have been established for
Dr. Kapoor's children (the "Children's Trusts") of which the sole trustee
is Editha Kapoor. Dr. Kapoor does not have or share voting, investment or
dispositive power with respect to the shares owned by the Annuity Trust or
the Children's Trusts and Dr. Kapoor disclaims beneficial ownership of
these shares as well as the shares held by the Charitable Trust.
8
<PAGE>
(3) The sole trustee of the John N. Kapoor 1994-A Annuity Trust (the "Annuity
Trust") is Editha Kapoor, Dr. Kapoor's spouse, who also serves as trustee
for four trusts which have been established for their children (the
"Childrens' Trusts") and which collectively own 310,848 shares and as
co-trustee with Dr. Kapoor of the John N. Kapoor Charitable Trust. The
shares held by the Childrens' Trusts and the Charitable Trust are not
included in the reported shares.
(4) Includes 60,000 shares that may be acquired pursuant to vested options.
(5) The Managing Partner of EJ Financial/Neo Management, L.P. is John N. Kapoor
and its address is 225 East Deerpath, Suite 250, Lake Forest, Illinois
60015.
(6) Includes 659,000 shares of Common Stock which are held by Curran
Partners, L.P., of which John Curran is general partner. The address for
Curran Partners and John P. Curran is 237 Park Avenue, New York, NY 10017
(7) The address for First Union Corporation is One First Union Center,
Charlotte, NC 28288.
(8) Includes 235,000 shares that may be acquired pursuant to vested options.
(9) Includes 30,000 shares that may be acquired pursuant to vested options.
(10) Includes 7,000 shares that may be acquired pursuant to vested options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1997, the Company relocated its principal corporate office to
space subleased from Option Care Inc. Mr. Hanson, a director of the Company, was
formerly President, CEO and a director of Option Care Inc. In addition,
Dr. Kapoor, Chairman of the Company's Board of Directors, is a director and
principal shareholder of Option Care Inc. Dr. Kapoor holds approximately 51.9%
of the outstanding shares of Option Care Inc.. The sublease was negotiated at
arms length and during 1999 the Company expensed approximately $33,025 for rent
under the Option Care sublease.
On July 1, 1994, the Company entered into a Consulting Agreement with EJ
Financial Enterprises, Inc. ("EJ Financial"). The Consulting Agreement provides
that the Company will pay EJ Financial $125,000 per year (paid quarterly) for
certain business and financial services, including having certain officers of EJ
Financial serve as officers of the Company. Dr. John Kapoor, the Company's
Chairman of the Board is the president and a director of EJ Financial.
Dr. Mahendra Shah, Vice President of the Company, is also a Vice President of EJ
Financial. Mr. Kevin Harris, Chief Financial Officer of the Company, is Director
of Taxes and Planning of EJ. Dr. Kapoor, Dr. Shah and Mr. Harris are paid by EJ
and do not receive salaries from the Company. These charges reflect the
increased need for EJ Financial's services in connection with operation of
NeoPharm as a publicly-held company. Unless terminated by the parties, the
management services agreement with EJ Financial automatically renews in June of
each year for a one year term.
Dr. Aquilur Rahman, Chief Scientific Officer and currently a director of the
Company, was formerly an associate professor of pathology and pharmacology at
Georgetown University. As a result of his position with Georgetown University
Dr. Rahman entered into an agreement with Georgetown relating to the ownership
of inventions and other intellectual property developed while in Georgetown's
employ. As part of his agreements with Georgetown University, Dr. Rahman has
advised the Company that Georgetown University may share with him payments which
Georgetown receives from the Company under the License Agreements between the
Company and Georgetown. While there were no royalty payments to Georgetown
University by the Company in 1999, as a result of the Company entering into a
License Agreement with Pharmacia & Upjohn in February 1999, a payment of
$800,000 was made to Georgetown University and, assuming regulatory approval is
obtained in the future for the Company's LED and LEP compounds, future royalty
payments, which could be substantial, would be made by the Company to Georgetown
which the Company understands Georgetown may then share with Dr. Rahman. While
9
<PAGE>
Dr. Rahman will continue to serve as the Company's Chief Scientific Officer, he
chose not to stand for re-election to the Board at the Annual Meeting.
In connection with the Company's initial public offering, the Company
adopted a policy whereby any further transactions between the Company and its
officers, directors, principal stockholders and any affiliates of the foregoing
persons will be on terms no less favorable to the Company than could reasonably
be obtained in arm's length transactions with independent third parties, and
that any such transactions also be approved by a majority of the Company's
disinterested outside directors.
STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in cumulative total
stockholder return on the Company's Common Stock with the cumulative return on
the AMEX Market Value Index, the NASDAQ Stock Market Index and the NASDAQ
Pharmaceutical Stock Index during the period beginning January 25, 1996 (the
date on which the Company's Common Stock began trading publicly on the Nasdaq
Small Cap System) through December 31, 1999. The price of the Common Stock as
reflected in the graph has been adjusted to reflect the two-for-one stock split
in the Common Stock in August 1996. The comparison assumes that $100 was
invested on January 1, 1996 in the Company's Common Stock and in the foregoing
indices and assumes the reinvestment of dividends. On April 14, 2000, the
Company's common stock began trading on the Nasdaq National Market under the
symbol NEOL. As of April 20, 2000, the Company's common stock closed at $15.5625
per share.
NEOPHARM, INC.
STOCK PERFORMANCE GRAPH
<TABLE>
INDEX-BASE INFORMATION: 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C>
NeoPharm, Inc. $ 3.500 $ 8.000 $ 5.250 $ 12.125 $ 21.563
AMEX Market Value Index--U.S. Cos. 240.914 244.750 306.096 328.547 419.718
NASDAQ Market Index--U.S. Cos. 345.609 425.222 521.032 734.202 1326.416
NASDAQ Pharmaceutical Index 396.535 397.770 410.733 522.507 976.397
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NEOPHARM, INC. AMEX MARKET INDEX-U.S. COS. NASDAQ MARKET INDEX-U.S. COS. NASDAQ PHARMACEUTICAL INDEX
<S> <C> <C> <C> <C>
12/31/1995 100 100 100 100
12/31/1996 229 102 123 100
12/31/1997 150 127 151 104
12/31/1998 346 136 212 132
12/31/1999 616 174 384 246
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity security, to file with the Securities
and Exchange Commission and the applicable stock exchanges reports of ownership
and changes in ownership of common stock and other equity securities of the
Company. Officers, directors and greater than 10% shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
10
<PAGE>
Based solely on a review of the copies of such reports furnished to the
Company or written representations that no other reports were required, the
Company believes that, during the 1999 fiscal year, all filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with, except that Mr. Erick E. Hanson, a director of the Company,
did not timely report his acquisition of shares of the Company's common stock in
May 1998, and failed to file his 1999 Form 5 report within 45 days of the
calendar year-end. Mr. Hanson has now made the required filings.
RELATIONSHIP WITH INDEPENDENT AUDITORS
The firm of Arthur Andersen LLP was the Company's independent public
accountant for the 1999 fiscal year. A representative from the Company's
independent public accountants customarily attends the Annual Meeting and has
the opportunity to make a statement if he so desires. This representative also
is available to respond to appropriate questions. The Company has not yet
selected its independent public accountants for the 2000 fiscal year.
OTHER MATTERS
The only matters which management intends to present to the meeting are set
forth in the Notice of Annual Meeting. Management knows of no other matters
which will be brought before the meeting by any other person. However, if any
other matters are properly brought before the meeting, the persons named on the
enclosed form of proxy intend to vote on such matters in accordance with their
best judgement on such matters.
2001 ANNUAL MEETING
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders to be held in 2001 must be received by the Company on or
before January 2, 2001 for inclusion in the Company's Proxy Statement and form
of proxy relating to that Annual Meeting.
1999 ANNUAL REPORT ON FORM 10-K
A copy of the Company's 1999 Annual Report on Form 10-K (the "Form 10-K")
accompanies this Proxy Statement as part of the Company's Annual Report.
Additional copies of the Form 10-K are available to stockholders without charge
on request made in writing to the following address: NeoPharm, Inc.,
100 Corporate North, Suite 215, Bannockburn, Illinois 60015.
By Order of the Board of Directors,
[LOGO]
James M. Hussey
PRESIDENT AND CHIEF EXECUTIVE OFFICER
April 28, 2000
11
<PAGE>
NEOPHARM, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS -- JUNE 8, 2000
The undersigned appoints James M. Hussey, Kevin M. Harris and Christopher R.
Manning, and each of them, as proxies, with full power of substitution and
revocation, to vote, as designated on the reverse side hereof, all the Common
Stock of NeoPharm, Inc. which the undersigned has power to vote, with all
powers which the undersigned would possess if personally present, at the
Annual Meeting of Stockholders thereof to be held on June 8, 2000, or at any
adjournment thereof.
Unless otherwise marked, this proxy will be voted FOR the election of the
nominees named.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
- -------------------------------------------------------------------------------
1. Election of Directors --
Nominees: John N. Kapoor, James M. Hussey,
Sander A. Flaum, Erick E. Hanson,
Matthew P. Rogan, Kaveh T. Safavi / / For All / / Withhold All
/ / For All Except _________
The undersigned acknowledges receipt of the Notice of Annual
Meeting of Shareholders and of the Proxy Statement.
Dated: ___________________, 2000
Signature(s):________________________________________
______________________________________________________
Please sign exactly as your name appears. Joint owners
should each sign personally. Where applicable, indicate
your___________ position or representation ___________.
- --------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
