UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
CONSENT STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
AND EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-12
NEOPHARM, INC.
(Name of Registrant as Specified in its Charter)
JOHN N. KAPOOR, PH.D.
(Name of Person(s) Filing Consent 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)(l)
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:
PRELIMINARY COPY -- SUBJECT TO COMPLETION
JOHN N. KAPOOR, PH.D.
225 DEERPATH ROAD, SUITE 250
LAKE FOREST, ILLINOIS 60045
Dear Fellow Stockholder of NeoPharm, Inc.:
I am one of the founders and a director of NeoPharm, Inc. ("NeoPharm" or
the "Company") and, together with my wife, the largest beneficial owner of
NeoPharm's common stock. As an investor experienced with emerging healthcare
companies, I am deeply concerned by the Company's slow pace of progress in
commercializing its products, the Company's cash "burn rate," and the Company's
inability to prioritize effectively its pre-clinical and clinical activities. I
am convinced that these factors are all contributing to the steady decline of
NeoPharm's stock price.
I BELIEVE NEOPHARM'S CURRENT BOARD OF DIRECTORS IS POORLY SUITED TO MEET THE
CHALLENGES FACING YOUR COMPANY.
I believe that four of the six members of the board of directors, Messrs.
Sander A. Flaum and Erick E. Hanson and Drs. Matthew P. Rogan and Kaveh T.
Safavi (the "Other Incumbent Directors"), have proven themselves unable to
adequately challenge, oversee and direct the Company's management, or to hold
management accountable for its actions and inactions. They also do not, in my
opinion, fully understand the urgency of the issues facing the Company or the
need for significant changes in the manner in which the Company conducts
business.
I believe it is in the best interest of NeoPharm and all of its
stockholders that the Other Incumbent Directors be removed and replaced with
new, independent directors (referred to in the accompanying consent statement as
the "Nominees") who have each indicated their desire to work with management and
me, consistent with their fiduciary duties to NeoPharm stockholders, to improve
NeoPharm's long-term viability and stock price by working toward the following
objectives:
o focusing the Company's efforts on commercializing IL 13-PE38QQR, the
Company's most advanced drug product candidate in the FDA approval
process and, in my opinion, the most promising of the Company's drug
product candidates,
o restructuring substantially the Company's operations in order to
reduce its cash burn rate from approximately $55 to 58 million
(according to the Company press release dated August 6, 2004) to
approximately $30 million annually, in order that the Company's cash
resources will be preserved for the commercialization of IL 13-PE38QQR
and the development of its liposomal products,
o streamlining the Company's clinical trials to improve their efficiency
so as to allow continued development of the Company's liposomal
products and IL 13-PE38QQR within a cash burn rate of approximately
$30 million annually, and
o eliminating the need to rely on the public equity markets and/or
private placements in the near future to fund current clinical trials,
thereby preventing stockholder dilution.
Accordingly, I am commencing a solicitation of written consents from
certain NeoPharm stockholders to repeal each provision of NeoPharm's Bylaws or
any amendment thereto adopted since June 10, 2004 and prior to the effectiveness
of the proposed action by written consent, to remove the Other Incumbent
Directors from the board of directors of NeoPharm, to amend NeoPharm's Bylaws to
fix the number of directors of the Company at five, and to elect three new,
independent directors to NeoPharm's board of directors. The accompanying consent
statement describes the specific terms of these proposals, as well as the
consent procedure itself.
I URGE YOU TO VOTE IN FAVOR OF THESE PROPOSALS BY SIGNING, DATING AND
RETURNING THE ENCLOSED WHITE CONSENT CARD.
Thank you for your support,
John N. Kapoor, Ph.D.
This consent statement is dated September ___, 2004 and is first being mailed to
NeoPharm stockholders on or about September ___, 2004.
IMPORTANT
1. If you hold your shares of common stock in your own name, then please
sign, date and mail the enclosed WHITE consent card to Innisfree M&A
Incorporated ("Innisfree"), the firm assisting me with this solicitation, in the
postage-paid envelope provided.
2. If your shares of common stock are held in the name of a bank, broker,
custodian, nominee, fiduciary or other institution, then only it can execute a
consent representing your shares and only on receipt of your specific
instructions. Accordingly, it is critical that you promptly contact the person
responsible for your account and give instructions for a WHITE consent card
representing your shares to be signed, dated and returned as soon as possible. I
urge you to confirm in writing your instructions to the person responsible for
your account and provide a copy of those instructions to me in care of Innisfree
in order that I will be aware of all instructions given and can attempt to
ensure that those instructions are followed.
If you have any questions or require any assistance in executing your
consent, please call:
INNISFREE M&A INCORPORATED
501 MADISON AVENUE
20TH FLOOR
NEW YORK, NEW YORK 10022
BANKS AND BROKERAGE FIRMS, PLEASE CALL COLLECT: 212-750-5833
ALL OTHERS PLEASE CALL TOLL-FREE: 888-750-5834
PRELIMINARY COPY -- SUBJECT TO COMPLETION
SEPTEMBER , 2004
CONSENT STATEMENT
OF
JOHN N. KAPOOR, PH.D.
This consent statement, the accompanying letter and the enclosed form of
written consent are being furnished on or about September _, 2004 in connection
with the solicitation from holders of common stock, par value $.0002145 per
share, of NeoPharm, Inc. ("NeoPharm" or the "Company") of written consents to
take the following actions without a stockholders meeting, as permitted by the
General Corporation Law of the State of Delaware ("DGCL"):
(1) To repeal each provision of NeoPharm's Bylaws or any amendment thereto
adopted since June 10, 2004 and prior to the effectiveness of the Proposals (as
defined below);
(2) To remove without cause all current members of the Company's board of
directors, other than Gregory P. Young and me, such other members being, at the
present time, Mr. Sander A. Flaum, Mr. Erick E. Hanson, Dr. Matthew P. Rogan and
Dr. Kaveh T. Safavi (collectively, the "Other Incumbent Directors"), and any
other person or persons (other than the persons elected pursuant to this
proposed action by written consent) elected or appointed to the board of
directors of the Company prior to the effective date of the Proposals (as
defined below) in addition to or in lieu of any of the Other Incumbent Directors
to fill any newly-created directorship or vacancy on the board of directors of
the Company;
(3) To amend NeoPharm's Bylaws to fix the number of directors of the
Company at five; and
(4) To elect Mr. Brian Tambi, Mr. Ronald Eidell, and Dr. Bernard A. Fox
(collectively, the "Nominees") as replacement directors of NeoPharm to fill the
newly-created vacancies on the Company's board of directors and to serve until
their respective successors are duly elected and qualified (together with (1),
(2), and (3), the "Proposals").
Innisfree M&A Incorporated ("Innisfree") has been retained to assist in the
solicitation of written consents to the Proposals.
IF YOUR SHARES ARE REGISTERED IN YOUR OWN NAME, then please sign, date and
mail the enclosed WHITE consent card to Innisfree in the postage-paid envelope
provided.
IF YOUR SHARES ARE HELD IN THE NAME OF A BANK, BROKER, CUSTODIAN, NOMINEE,
FIDUCIARY OR OTHER INSTITUTION, then only it can execute a consent representing
your shares and only on receipt of your specific instructions. Accordingly, it
is critical that you promptly contact the person responsible for your account
and give instructions for a WHITE consent card representing your shares to be
signed, dated and returned as soon as possible. I urge you to confirm in writing
your instructions to the person responsible for your account and provide a copy
of those instructions to me in care of Innisfree in order that I will be aware
of all instructions given and can attempt to ensure that those instructions are
followed.
I RECOMMEND THAT YOU CONSENT TO EACH OF THE PROPOSALS. YOUR CONSENT IS
IMPORTANT. PLEASE SIGN AND DATE THE ENCLOSED WHITE CONSENT CARD AND RETURN IT IN
THE ENCLOSED POSTAGE PAID ENVELOPE PROMPTLY. FAILURE TO RETURN YOUR CONSENT WILL
HAVE THE SAME EFFECT AS VOTING AGAINST THE PROPOSALS.
TABLE OF CONTENTS
PAGE
QUESTIONS AND ANSWERS ABOUT THIS CONSENT SOLICITATION..........................1
What are the Proposals Under Consideration?...........................1
Why am I Soliciting Your Consent?.....................................1
Who is Entitled to Execute a Consent?.................................1
Who is Paying for the Consent Solicitation?...........................1
What is a Consent Solicitation?.......................................1
Whom Should You Contact for Additional Information?...................2
BACKGROUND OF THE CONSENT SOLICITATION.........................................3
REASONS FOR THE CONSENT SOLICITATION...........................................6
THE PROPOSALS..................................................................8
Repeal of Certain Bylaw Provisions and Amendments.....................8
Removal of Directors..................................................9
Amendment of Bylaws to Reduce Board Size to Five......................9
Election of Nominees..................................................9
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF...............................12
INFORMATION CONCERNING JOHN N. KAPOOR, PH.D. AND EDITHA A. KAPOOR.............14
Interest of Certain Persons in Matters to be Acted Upon..............14
SOLICITATION OF CONSENTS......................................................15
CONSENT PROCEDURE.............................................................16
Special Instructions.................................................16
Consequences of Partial Approval of the Proposals....................17
Consequences of Consent Solicitation.................................18
ANNEX I SHARES HELD BY THE COMPANY'S DIRECTORS, EXECUTIVE OFFICERS
AND THE NOMINEES
ANNEX II INFORMATION CONCERNING PARTICIPANTS
ANNEX III SHARES HELD BY PARTICIPANTS AND CERTAIN TRANSACTIONS
BETWEEN ANY OF THEM AND THE COMPANY
QUESTIONS AND ANSWERS ABOUT THIS CONSENT SOLICITATION
The information in this question and answer section is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this consent statement.
WHAT ARE THE PROPOSALS UNDER CONSIDERATION?
Written consents from NeoPharm's stockholders are being solicited:
o to repeal each provision of NeoPharm's Bylaws or any amendment thereto
adopted since June 10, 2004 and prior to the effectiveness of the
proposed action by written consent;
o to remove without cause all of the Other Incumbent Directors and any
other person or persons (other than the persons elected pursuant to
this proposed action by written consent) elected or appointed to the
board of directors of the Company prior to the effective date of the
Proposals in addition to or in lieu of any of the Other Incumbent
Directors to fill any newly-created directorship or vacancy on the
board of directors of the Company;
o to amend NeoPharm's Bylaws to fix the number of directors of the
Company at five; and
o to elect the Nominees as replacement directors of NeoPharm to fill the
newly-created vacancies on the Company's board of directors and to
serve until their respective successors are duly elected and
qualified.
WHY AM I SOLICITING YOUR CONSENT?
I believe that approval of each of these Proposals will provide the Company
with a board of directors that is committed to work more effectively with
management and me, consistent with their fiduciary duties to NeoPharm
stockholders, to implement the following business strategy, which I believe is
critical to confront successfully the issues facing the Company and to improve
the Company's long term viability and stock price: (1) focus the Company's
efforts on commercializing IL 13-PE38QQR, the Company's most advanced drug
product candidate in the FDA approval process and, in my opinion, the most
promising of the Company's drug product candidates, (2) substantially
restructure the Company's operations in order to reduce its cash burn rate from
approximately $55 to 58 million (according to the Company press release dated
August 6, 2004) to approximately $30 million annually, in order that the
Company's cash resources will be preserved for the commercialization of IL
13-PE38QQR and the development of its liposomal products, (3) streamline the
Company's clinical trials to improve their efficiency so as to continue
development of the Company's liposomal products and IL 13-PE38QQR within a burn
rate of approximately $30 million annually and (4) eliminate the need to rely on
the public equity markets and/or private placements in the near future to fund
current clinical trials, thereby preventing stockholder dilution.
WHO IS ENTITLED TO EXECUTE A CONSENT?
The common stock of NeoPharm constitutes its only class of outstanding
voting securities. Accordingly, only holders of common stock as of September [
], 2004, the record date, are entitled to execute consents. For information
regarding the persons who I believe own more than five percent of the common
stock, see "Voting Securities and Principal Holders Therof."
WHO IS PAYING FOR THE CONSENT SOLICITATION?
I will pay all costs of the solicitation of written consents. However, if
the Proposals are approved, I intend to seek reimbursement of my expenses from
the Company without a stockholder vote.
WHAT IS A CONSENT SOLICITATION?
In lieu of voting in person or by proxy at an annual or special meeting of
stockholders, the Company's stockholders may act by submitting written consents
to any proposed stockholder actions. Whereas stockholders approve many proposed
actions at a special or annual meeting of stockholders at which a quorum is
present by voting a majority of the shares represented at the meeting in favor
of a proposal, even if only a fraction of the stock outstanding is represented,
an action by written consent requires the majority vote of all stock outstanding
of the Company. To be effective, the requisite consents must be delivered to
NeoPharm within 60 days of the date of the earliest dated consent delivered to
NeoPharm.
WHOM SHOULD YOU CONTACT FOR ADDITIONAL INFORMATION?
If you have any questions about executing your consent or require
assistance, please contact:
INNISFREE M&A INCORPORATED
501 MADISON AVENUE
20TH FLOOR
NEW YORK, NEW YORK 10022
BANKS AND BROKERAGE FIRMS, PLEASE CALL COLLECT: 212-750-5833
ALL OTHERS PLEASE CALL TOLL-FREE: 888-750-5834
2
BACKGROUND OF THE CONSENT SOLICITATION
I am a director and one of the founders of NeoPharm, and my wife and I are,
together, the largest beneficial owner of its common stock. I served as Chairman
of the Board from the Company's inception in July 1990 until June 17, 2004. I am
also the Chairman of the Board of Directors of the following four
publicly-traded pharmaceutical and pharmacy services companies: Akorn, Inc.,
First Horizon Pharmaceutical Corporation, Introgen Therapeutics, Inc., and
Option Care, Inc. My wife and I, together, are also, to my knowledge, the
largest beneficial owner of the common stock of each of those companies, except
Introgen Therapeutics, Inc., of which, to my knowledge, we are the second
largest beneficial owner. In addition, I am President of EJ Financial
Enterprises, Inc. ("EJ Financial"), a private investment firm that I own.
Through EJ Financial and related entities, I have made a large number of
substantial investments in other publicly and privately-held companies.
In March 1998, Mr. James M. Hussey became the President, Chief Executive
Officer and a director of NeoPharm. At that time, the board of directors of
NeoPharm consisted of five members, including Messrs. Hussey and Hanson and me.
Also, at that time, Mr. Hanson was Chief Executive Officer of Option Care, Inc.,
one of the other companies of which I am the Chairman of the Board and together
with my wife, to my knowledge, the largest beneficial shareholder. Subsequently,
Mr. Flaum and Drs. Rogan and Safavi became members of the Company's board of
directors at the suggestion of Mr. Hussey. Option Care, Inc. terminated Mr.
Hanson's employment in October 1998 at my suggestion because of poor
performance. During Mr. Hanson's tenure as Chief Executive Officer of Option
Care, Inc., Option Care defaulted on its line of credit, making it necessary
that I guarantee personally a portion of the line of credit in order for Option
Care to continue to have access to financing. Despite this fact and the fact
that I did not have a prior history with Mr. Flaum or Drs. Rogan and Safavi, I
believed that I enjoyed a good working relationship with the other members of
the board of directors and management of the Company.
Beginning in December 2002, I began to grow concerned about the slow pace
of progress in the Company's clinical trials and the fact that the Company was
not prioritizing effectively its pre-clinical and clinical activities. Because
the Company has not had meaningful revenues from the sale of products, its
future is dependent upon its ability to obtain FDA approval of its drug
products, particularly IL13-PE38QQR. In addition, I began to be concerned that
the Company was spending more of its resources and developing more
infrastructure than was warranted given the status of its proposed products and
the fact that the Company was dependent upon borrowings and equity offerings for
cash. Because of the Company's limited options for financing, I was additionally
concerned about the Company's cash burn rate and believed that it was necessary
to focus on the preservation of its cash.
As a result of these concerns, beginning in June 2003, I made numerous and
repeated suggestions to management and the other board members in several areas
including:
- Improved budgeting, particularly a focus on analyzing and justifying
each expenditure in order to conserve the Company's cash and reduce
its burn rate;
- More sophisticated management of clinical projects to monitor more
effectively the costs and timelines on a project-by-project basis;
- Use of consultants to evaluate clinical trials; and
- Improved focus in commercializing the Company's most promising
products, especially IL 13-PE38QQR, with a view towards minimizing
costs and time-to-market.
While I believed that many of my suggestions were well received by
management and the rest of the board of directors and while management indicated
an intention to implement many of them, I was concerned that progress in
addressing these matters was too slow. I recommended as early as the third
quarter of 2003 to Mr. Hussey and to the Other Incumbent Directors that the
Company hire a Chief Operating Officer to speed the implementation of the
necessary changes. Although Mr. Hussey resisted this suggestion and the board of
directors acted more slowly than I would have liked, at the direction of the
board of directors, the Company ultimately retained Egon Zehnder International,
an executive search firm, to identify a Chief Operating Officer for the Company.
At that time, although progress on my suggestions was proceeding slowly, I
3
nonetheless believed that I still enjoyed a positive working relationship with
Mr. Hussey, the Company's management team and the Other Incumbent Directors.
On February 13, 2004, at a regularly scheduled meeting of the board of
directors of the Company, Mr. Hussey complained that I was unduly interfering
with the management of the Company and was being too critical of management. He
also criticized the entire board of directors and characterized it as "divided"
and "dysfunctional." He also indicated he did not intend to hire a Chief
Operating Officer. The board of directors then asked Mr. Hussey to leave the
meeting. In Mr. Hussey's absence, I expressed my opinion that Mr. Hussey's
statements were unfounded and that he should be removed as Chief Executive
Officer of the Company. However, the Other Incumbent Directors were not
supportive of my position and no formal action was taken at the meeting toward
replacing Mr. Hussey.
Since April 2002, the Company had been involved in an arbitration with
Pharmacia Corporation (now Pfizer), Pharmacia and Upjohn, Inc. and Pharmacia and
Upjohn Company (collectively, "Pharmacia") concerning delays in the development
programs for the Company's LEP (Liposome Encapsulated Paclitaxel) and LED
(Liposome Encapsulated Doxornbicin) drug products under a license agreement
dated February 19, 1999 between NeoPharm and Pharmacia providing for Pharmacia's
development of these products. On May 3, 2004, the Company issued a press
release announcing that the arbitration panel in the Pharmacia dispute had
dismissed the claims of each party against the other. Although Mr. Hussey had
been predicting to the board of directors that the Company would win the
arbitration and receive a substantial award, after the decision of the panel he
downplayed the matter and its impact on the Company's prospects and cash
position. The price of Company common stock immediately declined from $20.43
(the close on Friday, April 30) to $18.56 (the close on Monday, May 3) and
continued to decline over the next 20 trading days to $11 per share. I was
extremely disappointed with the arbitration decision and Mr. Hussey's handling
of the matter. This situation only strengthened my belief that it was in the
best interest of the Company to remove Mr. Hussey as Chief Executive Officer.
During the following week, the other members of the board of directors
finally agreed with my continuing suggestion that Mr. Hussey should be replaced
as Chief Executive Officer, and the board of directors notified Egon Zehnder
International, the executive search firm, that the search for a Chief Operating
Officer should be converted to a search for a Chief Executive Officer. Egon
Zehnder had previously identified Gregory P. Young as a candidate for the
position of Chief Operating Officer and, at this point, he became a candidate
for the position of Chief Executive Officer. During the week of June 14, the
board of directors, after conducting candidate interviews, reached a decision,
which I supported, that it was in the best interest of the Company for Mr. Young
to be offered the position of Chief Executive Officer; an offer was formally
extended to Mr. Young which he accepted; and the board of directors asked Mr.
Hussey for his resignation.
The Company's board of directors decided in informal conversations among
themselves that, because the Company's annual meeting of stockholders was
scheduled for June 17, 2004, the change in Chief Executive Officer should be
announced at that time. The following morning, at the meeting of the board of
directors held in conjunction with the annual meeting of stockholders, the
Company's board of directors approved the hiring of Mr. Young and also approved
a separation agreement for Mr. Hussey. After these actions were taken, the other
members of the board of directors (excluding Mr. Young, who was not in
attendance at the meeting) informed me, without any prior notice, that they were
voting to replace me as Chairman of the Board with Mr. Hanson. The Other
Incumbent Directors then approved a resolution to pay Mr. Hanson $10,000 each
month for his service as Chairman of the Board. I voted against this resolution
and I was quite concerned that the Other Incumbent Directors would approve such
a substantial compensation package to the Chairman of the Board. The price of
Company common stock closed at $9.15 on June 16th, the day before the board's
action. Over the next 30 trading days, it declined to $6.20.
Because of my belief that the Other Incumbent Directors should be replaced
and because the Company's Bylaws prohibited me, as a stockholder of the Company,
from proposing an alternative slate of directors without providing advance
notice to the Company prior to December 30, 2003, my wife and I withheld our
votes for the Other Incumbent Directors at the Company's annual meeting of
stockholders held on June 17, 2004.
At a meeting of the board of directors of the Company held on August 12,
2004, I continued to express to the other board members my strong belief that
the Company needed to conserve cash and focus its efforts on the IL13-PE38QQR
4
clinical trials. It was at this meeting that I proposed that the Company
implement a program that would cut the cash burn rate of the Company to
approximately $30 million without sacrificing any products in development. The
Other Incumbent Directors instead concluded that the situation only warranted
further study, not immediate action. Specifically, they determined that the
Company should hire consultants to review the value of the Company's product
portfolio with an objective of having more information available to the board of
directors by November 2004.
I now believe that it is in the best interest of the Company and its
stockholders for the Other Incumbent Directors to be replaced as members of the
board of directors. My reasons for this belief include the following:
- I believe that the Other Incumbent Directors have not demonstrated a
sufficient willingness to challenge, oversee and direct the Company's
management or to hold management accountable for its actions and
inactions;
- I believe the Other Incumbent Directors do not fully understand the
urgency of the issues facing the Company and the need for significant
change in the manner in which the Company conducts its business; and
- In the last six months, the market value of the Company has dropped
approximately 70%, representing a total loss to stockholders of
approximately $335 million (based on a closing price on March 2, 2004
of $20.72 per share, a closing price of $6.30 per share on September
2, 2004 (the day I initially filed this consent statement with the
SEC) and 23,278,985 shares outstanding as of July 31, 2004 according
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2004).
On September 1, 2004, I contacted Mr. Hanson and informed him of my
intention to proceed immediately to solicit written consents to remove the Other
Incumbent Directors as directors. I informed him that I believed it was in the
best interest of the Company and all of its stockholders for the Other Incumbent
Directors to resign and thereby avoid the expense and distraction of a consent
solicitation and any challenge to such a solicitation, and I requested the
resignations of the Other Incumbent Directors as directors. The Other Incumbent
Directors refused my request.
5
REASONS FOR THE CONSENT SOLICITATION
I believe that the Company's stockholders should adopt the Proposals as
promptly as practicable in order to replace the Other Incumbent Directors with a
slate of nominees who are committed to confront more effectively the critical
issues facing the Company that I believe are contributing to the steady decline
of NeoPharm's stock price, including the Company's slow pace of progress in
commercializing its products, the Company's cash burn rate, and the Company's
inability to prioritize effectively its pre-clinical and clinical activities.
I believe that it is in the best interest of NeoPharm and all of its
stockholders that the Other Incumbent Directors be removed and replaced with
new, independent directors who have indicated their desire to work with
management and me, consistent with their fiduciary duties to NeoPharm
stockholders, to improve NeoPharm's long term viability and stock price by
working toward the following objectives:
o focusing the Company's efforts on commercializing IL 13-PE38QQR, the
Company's most advanced drug product candidate in the FDA approval
process and, in my opinion, the most promising of the Company's drug
product candidates;
o restructuring substantially the Company's operations in order to
reduce its cash burn rate from approximately $55 to 58 million
(according to the Company press release dated August 6, 2004) to
approximately $30 million annually, in order that the Company's cash
resources will be preserved for the commercialization of IL 13-PE38QQR
and the development of its liposomal products;
o streamlining the Company's clinical trials to improve their efficiency
so as to allow continued development of the Company's liposomal
products and IL 13-PE38QQR within a cash burn rate of approximately
$30 million annually; and
o eliminating the need to rely on the public equity markets and/or
private placements in the near future to fund current clinical trials,
thereby preventing shareholder dilution.
I believe that the Other Incumbent Directors have allowed the Company and
its management to develop an infrastructure and related expense levels that are
unjustified and excessive based on the Company's stage of development and the
fact that it has essentially no revenues. I also believe that they have allowed
the Company and its management to become less focused with respect to its
clinical trials and other development efforts and to pursue projects that I do
not believe will speed approval of the Company's drug product candidates. Given
the decrease in the Company's stock price over the past six months, I believe
immediate and decisive action is essential.
I intend to ask the newly constituted board of directors to direct
management to immediately (i) identify and implement cost saving measures with a
clearly defined primary objective of reducing the Company's cash burn rate to
approximately $30 million annually, (ii) identify those clinical trials and
other programs that are critical to the Company receiving FDA approval of its
drug product candidates and (iii) focus the Company's efforts on those
activities, to the exclusion of all other initiatives. This should have the
effect of shortening the timeline for FDA approvals and accelerating the
commercialization of the Company's products and the Company's receipt of
meaningful revenues from product sales.
More specific examples of actions I have identified to be taken immediately
include the following:
o Focus the Company's efforts on the PRECISE trials of IL13-PE38QQR and
cease ongoing efforts on all other IL 13-PE38QQR trials and
development efforts, including pediatric trials and the trials on
initially diagnosed glioblastoma patients. I believe that these other
trials and development efforts are expensive and serve as a
distraction to the Company's efforts to commercialize IL13-PE38QQR. I
believe that overall clinical costs can be reduced substantially by
eliminating these other trials and development efforts and by
significantly reducing employee headcount in the clinical department;
o Streamline clinical protocols of all Phase I/II liposomol products, so
as to shorten the time necessary for completion. I believe the Company
uses unduly complicated clinical protocols which are expensive and
6
time consuming. I believe that overall clinical costs can be reduced
substantially by using the advice of oncology experts to streamline
this process and by significantly reducing employee headcount in the
clinical department;
o Reduce the Company's research and development efforts and expenses
substantially. The development of the Company's key products, IL
13-PE38QQR, the liposomal products and NeoPhectin(TM), are essentially
complete. As a result, I believe that the current employee headcount
in the research and development department and the current level of
continuing expense on research and development are unjustified; and
o Seek to aggressively reduce the Company's general and administrative
expenses by implementing the substantial reductions in employee
headcount outlined above and by identifying other opportunities for
substantial cost savings, including additional reductions to employee
headcount.
I believe that the Other Incumbent Directors do not share the sense of
urgency with which I view the need for action. I do not believe that the
Company's management team, most of which have participated in the building of
the Company's excessive infrastructure, will initiate the necessary decisive
action to substantially reduce the Company's cash burn rate without firm and
clear direction from the board of directors, direction which the Other Incumbent
Directors are, I believe, unwilling or unable to provide.
I believe, based on my extensive knowledge of the Company, its operations
and its prospects, acquired over the 14 years since I founded the Company, and
on my experience with numerous other pharmaceutical and pharmacy services
companies, many of which have undergone significant operational restructurings,
that the Company can reduce its annual cash burn rate to approximately $30
million while still continuing to commercialize its liposomal products and IL
13-PE38QQR.
My goal is to restore NeoPharm's ability to respond effectively to the
challenges it faces by forming a board of directors, endorsed by the Company's
stockholders, that combines true independence with real commitment to NeoPharm
and its stockholders and experienced judgment from a variety of fields. Despite
the steady decline of NeoPharm's stock price, I believe that the Other Incumbent
Directors do not fully understand the urgency of the issues facing the Company
and the need for significant change in the manner in which the Company conducts
its business.
I believe that a factor contributing to the Other Incumbent Directors'
failure to grasp the urgency of NeoPharm's need for reform is that the Company
does not represent a significant personal investment for them. According to
their Forms 4 filed with the Securities and Exchange Commission ("SEC"), the
Other Incumbent Directors collectively hold only 41,395 shares of Company common
stock (despite their collective 21 years of board service), all of which were
obtained as part of their director compensation.
I also believe that, in the case of Mr. Flaum, his failure to attend at
least 75% of the Company's board meetings in 2003, as reported in NeoPharm's
Annual Report on Form 10-K for that year, is further evidence of an insufficient
level of personal commitment.
7
THE PROPOSALS
I am seeking the written consent of the Company's stockholders to take the
following actions without a stockholders' meeting, as permitted by the DGCL:
(1) To repeal each provision of NeoPharm's Bylaws or any amendment thereto
adopted since June 10, 2004 and prior to the effectiveness of the Proposals by
adopting the following resolution:
RESOLVED, that each provision of the Company's Bylaws and any amendment
thereto adopted since June 10, 2004 and prior to the effectiveness of the
Proposals (as defined in the consent statement of John N. Kapoor, Ph.D.
dated September __, 2004) are repealed.
(2) To remove without cause the Other Incumbent Directors by adopting the
following resolution:
RESOLVED, that each member of the board of directors of the Company, other
than John N. Kapoor, Ph.D. and Gregory P. Young, such other members
currently consisting of Sander A. Flaum, Erick E. Hanson, Matthew P. Rogan
and Kaveh T. Safavi, and any other person or persons (other than the
persons elected pursuant to this consent) elected or appointed to the board
of directors of the Company prior to the effective date of this resolution
in addition to or in lieu of any of the aforenamed individuals to fill any
newly-created directorship or vacancy on the board of directors of the
Company, or otherwise, is hereby removed and the office of each member of
the board of directors (other than the offices of John N. Kapoor and
Gregory P. Young) is hereby declared vacant.
(3) To amend NeoPharm's Bylaws to fix the number of directors of the
Company at five by adopting the following resolution:
RESOLVED, that Section 3.2 of the Bylaws of the Company is hereby amended
and restated in its entirety to read as follows: "The number of directors
of the Corporation shall be set at five (5)."
(4) To elect the three Nominees, Mr. Brian Tambi, Mr. Ronald Eidell and Dr.
Bernard A. Fox, as replacement directors of NeoPharm to fill the newly-created
vacancies by adopting the following resolution:
RESOLVED, that the following persons are hereby elected as directors of the
Company to fill the vacancies on the Company's board of directors, and to
serve until their respective successors are duly elected and qualified:
Messrs. Brian Tambi and Ronald Eidell and Dr. Bernard Fox.
The effectiveness of each Proposal will require the duly completed and
delivered, unrevoked written consent to that Proposal by the holders of record,
as of the close of business on the record date for this consent solicitation, of
a majority of the shares of Company common stock then outstanding. According to
the Company's latest Quarterly Report on Form 10-Q filed August 11, 2004, as of
July 31, 2004 the Company had 23,278,985 shares outstanding. It is anticipated
that each Proposal will become effective upon delivery of complete and unrevoked
written consents representing at least 11,639,493 shares of Company stock.
I RECOMMEND THAT YOU CONSENT TO EACH PROPOSAL.
REPEAL OF CERTAIN BYLAW PROVISIONS AND AMENDMENTS. This Proposal would
repeal any measures taken by the current board of directors to amend certain
provisions of the Company's Bylaws. This proposal is intended to prevent any
changes to the Company's Bylaws that might impede the effectiveness of any of
the Proposals or negatively impact my ability to obtain stockholder consents or
give effect to the will of the stockholders expressed in such consents.
After I filed my preliminary consent statement on September 2, 2004 with
the SEC, the board of directors adopted a Bylaw amendment on September 7, 2004
that I believe is intended to frustrate my efforts to have the Proposals
adopted. The amendment requires stockholders desiring to take action by written
consent to submit a request in writing to the Company Secretary that the board
8
of directors of the Company establish a record date. The Bylaw amendment also
provides that upon receipt of such a request, the board of directors must,
within ten days, establish a record date that is no later than ten days after
the board of directors action. On September 8, 2004, I delivered to the Company
Secretary a request to establish a record date for this consent solicitation. If
the board of directors had not adopted this Bylaw amendment, then I could have
set the record date for the action at a time of my choosing by delivering a
signed and dated consent.
This Bylaw amendment would be repealed pursuant to my proposal. I believe
that the provisions of the DGCL regarding the establishment of record dates for
stockholder actions to be taken by written consent provide a sufficient
mechanism for this process.
REMOVAL OF DIRECTORS. This Proposal provides for the removal without cause
of each member of the board of directors of the Company, other than Gregory P.
Young and me. The directors who would currently be removed are Sander A. Flaum,
Erick E. Hanson, Matthew P. Rogan and Kaveh T. Safavi. This Proposal also
contemplates the removal of any other person or persons (other than the persons
elected pursuant to this consent statement) elected or appointed to the board of
directors of the Company prior to the effective date of this Proposal in
addition to or in lieu of any of the aforenamed individuals to fill any newly
created directorship or vacancy on the board of directors of the Company. This
is intended to address the possibility that the Other Incumbent Directors might
try to add directors to the board of directors who are aligned with them.
Section 141(k) of the DGCL provides that any director or the entire board
of directors of a Delaware corporation may be removed, with or without cause, by
the holders of a majority of the shares then entitled to vote at an election of
the corporation's directors, subject to exceptions if the corporation has a
classified board or cumulative voting in the election of its directors or the
corporation's certificate of incorporation says otherwise.
The Company does not have a classified board or cumulative voting in the
election of its directors and the Company's certificate of incorporation does
not limit removal of directors or the entire board of directors. Consequently,
section 141(k) of the DGCL permits the stockholders of the Company to remove any
director or its entire board without cause.
AMENDMENT OF BYLAWS TO REDUCE BOARD SIZE TO FIVE. This Proposal provides
for the amendment and restatement of Section 3.2 of the Company's Bylaws to fix
the number of directors at five. Section 109(a) of the DGCL and Article XI of
the Company's Bylaws permit the Company's stockholders to amend the Bylaws.
ELECTION OF NOMINEES. This Proposal provides for the election of the three
Nominees, Brian Tambi, Ronald Eidell, and Bernard A. Fox, Ph.D., as replacement
directors of the Company. Each of the Nominees has consented to serve as a
director, if elected, until the next annual meeting of stockholders and until
his successor has been elected and qualified. My principal purpose in seeking to
elect these Nominees to the Company's board is to install a board of directors
that is willing, consistent with their fiduciary duties to NeoPharm
stockholders, to take a more active role in directing and questioning
management, that has the necessary experience and expertise to manage NeoPharm
and will work with management and me to focus the Company's efforts on
commercializing IL 13-PE38QQR, to restructure substantially the Company's
operations in order to reduce its cash burn rate from approximately $55 to 58
million (according to the Company press release dated August 6, 2004) to
approximately $30 million annually, and to streamline the Company's clinical
trials to improve their efficiency so as to allow continued development of the
Company's liposomal products and IL 13-PE38QQR within a cash burn rate of
approximately $30 million annually and eliminate the need to rely on the public
equity markets and/or private placements in the near future to fund current
clinical trials, thereby preventing stockholder dilution. Each director has an
obligation under the DGCL to discharge his duties as a director on an informed
basis, in good faith, with care an ordinarily careful and prudent person in a
like position would exercise under similar circumstances and in a manner the
director honestly believes to be in the best interests of the Company. In this
connection, circumstances may arise in which my interests, on the one hand, and
the interests of the other stockholders of the Company, on the other hand, may
differ. In any such case, the Nominees intend to discharge fully their
obligations owing to the Company and its stockholders under the DGCL.
9
If I am successful, I intend to seek nomination and election as Chairman of
the board of directors from those directors elected pursuant to this consent
solicitation. However, I do not intend to accept the $120,000 annual fee for
service as Chairman that the Company currently provides to Mr. Hanson.
If this consent solicitation is unsuccessful, I intend to nominate the
Nominees pursuant to the nomination procedures outlined in the Company's Bylaws
and seek their election at the Company's annual meeting, which is anticipated to
be in June 2005. At the annual meeting, if a quorum is represented, the election
of the Nominees would only require a plurality vote of the stockholders voting,
rather than a majority of the total shares of common stock outstanding as is the
case for this proposed action by written consent.
I have no reason to believe that any Nominee will be unable or unwilling to
serve as a director of the Company, but, if any Nominee is not available for
election, then I intend to ask the members of the board of directors, including
any Nominee or Nominees who are elected pursuant to this proposed action by
written consent to fill the resulting vacancy or vacancies.
- --------------------------------------------------------------------------------
BRIAN TAMBI, Chief Executive Officer and Chairman of the Board of
Directors, Morton Grove Pharmaceuticals, Inc., Morton Grove, Illinois
Brian Tambi has been involved in the pharmaceutical industry since 1974. Since
1995, Mr. Tambi has been President, CEO, and Chairman of the Board of Directors
of Morton Grove Pharmaceuticals, Inc., a leading supplier of specialty and
generic liquid pharmaceutical products ("MGP"). Prior to MGP, Mr. Tambi held
executive positions at Ivax Corporation from 1992 to 1993, where he was an
Executive Vice President and President of the North American Pharmaceutical
Group, Fujisawa Pharmaceutical Company, USA from 1990 to 1992, where he was
President and Chief Operating Officer, and Lyphomed, Inc. from 1986 to 1990,
where he was Vice President, Corporate Development. Mr. Tambi received his MBA
in International Finance and Economics in 1974 and his BS (cum laude) in Finance
and Economics in 1972, both from Syracuse University.
- --------------------------------------------------------------------------------
RONALD EIDELL, Independent Consultant
Ronald Eidell has been a financial and operating executive in the healthcare
industry since 1998. From December 2001 to December 2003, he was Executive Vice
President, Chief Financial Officer and Secretary of Esoterix, Inc., a
privately-held clinical laboratory services company with net revenue for the
year ended December 31, 2003 of more than $100 million. Esoterix, Inc. provides
medical testing services (including clinical trails testing services) to
healthcare professionals, hospitals and pharmaceutical companies. Prior to
Esoterix, Inc., he was Executive Vice President, Chief Financial Officer and
Secretary of NovaMed, Inc. ("NovaMed"), a Nasdaq listed healthcare services and
facilities company. Mr. Eidell received his MBA from the University of Chicago
in 1982 and his BS in Business Administration from Drexel University in 1967. He
currently serves on the Dean's Advisory Council to Drexel University's LeBow
College of Business. His service as the chief financial officer of NovaMed
qualifies him as a potential audit committee financial expert under the rules
and regulations of the SEC, a position he has agreed to accept if requested by
NeoPharm's board of directors.
- --------------------------------------------------------------------------------
10
BERNARD A. FOX, PH.D., Chief, Laboratory of Molecular and Tumor Immunology,
Earle A. Chiles Research Institute, Providence Portland Medical Center
and Associate Professor, Departments of Molecular Microbiology &
Immunology and Environmental & Biomolecular Systems, Oregon Health and
Science University
Bernard A. Fox, Ph.D. has been Chief of the Laboratory of Molecular and Tumor
Immunology ("LMTI") at the Earle Chiles Research Institute at the Providence
Portland Medical Center in Portland, Oregon and also Associate Professor in the
Departments of Molecular Microbiology & Immunology and Environmental &
Biomolecular Systems at Oregon Health and Science University School of Medicine
in Portland, Oregon since 1994. Dr. Fox has been the principal investigator,
co-investigator or a collaborator in at least nine clinical trials and has
published at least fifty-six articles in scientific journals over the course of
his career. Dr. Fox's laboratory has helped monitor the Company's trial of IL
13-PE38QQR, and he has previously served as a consultant to the Company. Dr. Fox
received his B.S. and M.S. degrees from the University of Detroit in 1975 and
1978, respectively, and his Ph.D. in 1985 from Wayne State University. He
received his post-doctoral training as a Staff Fellow in the Surgery Branch,
Division of Cancer Treatment, Clinical Oncology Program at the National Cancer
Institute at the National Institutes of Health in Bethesda, Maryland from 1985
to 1987 and was a Senior Staff Fellow there from 1987 to 1990. Mr. Fox is also a
director of International Society for the Biological Therapy of Cancer and is a
member of the scientific advisory boards of Cell Genesys Inc. and the Biological
Development Association (Europe).
- --------------------------------------------------------------------------------
None of the Nominees beneficially own any shares of Company common stock.
Annex III sets forth certain information relating to transactions between the
Nominees and the Company.
I anticipate that each Nominee, on his election, will receive director's
fees, consistent with the Company's past practice, for services as a director of
the Company. Directors currently receive grants of restricted shares of Company
common stock with an approximate value of $50,000 annually. The shares are not
available for sale until the one year anniversary of the stock grant. Directors
are also currently paid a quarterly fee to serve on the various committees of
the Company's board of directors as indicated in the table below. Directors are
reimbursed for reasonable out-of-pocket expenses incurred in connection with any
board or committee meeting.
COMMITTEE MEMBER COMPENSATION
--------- -------------------
Governance $5,000
Compensation $2,000
Audit $2,000
Legal $2,000
11
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The common stock of the Company constitutes its only class of outstanding
voting securities and only holders of that stock are entitled to execute
consents. According to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2004, 23,278,985 shares of common stock were outstanding
as of July 31, 2004. Each share entitles its record holder to one vote.
Stockholders of the Company do not have cumulative voting rights in the election
of directors.
The following table sets forth information regarding my beneficial
ownership of shares of Company common stock and also the name of and other
information respecting each person who I believe, on the basis of the publicly
available information indicated below, owned beneficially more than five percent
of the shares of Company common stock outstanding at the dates indicated.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
------------------------------------ --------- -----
John N. Kapoor, Ph.D. 5,060,793 Shares (1) 21.71%
225 East Deerpath Road, Suite 250
Lake Forest, Illinois 60045
Kern Capital Management LLC 2,745,110 Shares (2) 11.79%
114 West 47th Street, Suite 1926
New York, New York 10036
GAM Holding AG 1,569,830 Shares (3) 6.74%
Klaustrasse 10
8008 Zurich, Switzerland
(1) Includes 5,342 shares, 31,625 shares that may be acquired pursuant to
exercisable options, 1,348,340 shares held by the John N. Kapoor Trust
dated 9/20/89 (the "JNK Trust"), of which I am the sole trustee and sole
beneficiary, and 1,144,586 shares held by EJ Financial/NEO Management, L.P.
(the "Limited Partnership") of which I am Managing General Partner. The
amount shown also includes 379,500 shares which are held by the John N.
Kapoor Charitable Foundation (the "Charitable Foundation"), of which my
wife and I are co-trustees; 1,958,180 shares which are owned by the John N.
Kapoor 1994-A Annuity Trust (the "Annuity Trust") of which the sole trustee
is my wife; and 393,220 shares which are owned by four trusts which have
been established for my children (the "Children's Trusts") of which the
sole trustee is my wife. I do 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 I disclaim beneficial ownership of these shares
as well as the shares held by the Charitable Foundation.
(2) Ownership is as reported by Kern Capital Management LLC ("KCM") on Schedule
13G dated February 13, 2004. In its filing, KCM indicates that Robert E.
Kern, Jr. (R. Kern) and David G. Kern (D. Kern), as controlling members of
KCM, may be deemed to be beneficial owners of the securities of the Company
owned by KCM, because those individuals share the power to direct the
voting or disposition of the securities. KCM further states in its filing
that: "Neither the filing of this Schedule nor any of its contents shall be
deemed to constitute an admission that either R. Kern or D. Kern is, for
any purpose, the beneficial owner of any such securities to which this
Schedule relates, and such beneficial ownership is expressly denied."
(3) Ownership is as reported by GAM Holding AG ("GAM") on Schedule 13G dated
February 17, 2004. GAM states in its Schedule 13G filing that, as of
December 31, 2003, the Company's shares are held by its subsidiaries, GAM
International Management Limited and GAM Limited, London, and that: "No
subsidiary of GAM holds more than 5% of the outstanding voting securities."
12
GAM has advised the Company that the Company's shares held by its
subsidiaries are owned by widely held mutual funds over which the subject
subsidiaries retain discretionary investment authority.
For information relating to the ownership of common stock by directors and
executive officers of the Company and the Nominees, see Annex I hereto.
13
INFORMATION CONCERNING JOHN N. KAPOOR, PH.D. AND EDITHA A. KAPOOR
My wife, Editha A. Kapoor, and I are the beneficial owners of an aggregate
of 5,060,793 shares of Company common stock, representing approximately 21.71%
of the shares currently outstanding. Further information about me is set forth
in Annexes I, II and III.
Editha A. Kapoor is my wife, a homemaker and co-trustee of the John N.
Kapoor Charitable Foundation (the "Charitable Foundation") and the sole trustee
of the John N. Kapoor 1994-A Annuity Trust (the "Annuity Trust") and four trusts
established for our children (the "Children's Trusts"). Her principal business
address is 225 Deerpath Road, Suite 250, Lake Forest, Illinois 60045. She is the
indirect owner of 1,958,180 shares of Company stock held for the account of the
Annuity Trust, 379,500 shares of Company stock held for the account of the
Charitable Foundation and 393,220 shares of Company stock held for the account
of the Children's Trusts.
During the past year, Edith A. Kapoor has not been a party to any contract,
arrangement or understanding with any person with respect to any securities of
the Company.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Additional information about me and the Nominees to serve as directors of
the Company is set forth in Annex II and under the heading "Information
Concerning the Participants."
14
SOLICITATION OF CONSENTS
I am furnishing this consent statement to certain Company stockholders in
connection with the solicitation of written consents to the Proposals outlined
herein. Consents will be solicited by mail, advertisement, telephone or
telecopier and in person by myself or employees of my consulting firm, EJ
Financial. EJ Financial and I are not receiving any compensation for
solicitation efforts.
In addition, I have retained Innisfree to assist in the solicitation, for
which I will pay Innisfree a fee not to exceed $85,000 and will reimburse
Innisfree for its reasonable out-of-pocket expenses. I have also agreed to
indemnify Innisfree against various liabilities and expenses, including various
liabilities and expenses under the federal securities laws. Innisfree
anticipates that it will use approximately fifty persons to solicit
stockholders.
Banks, brokers, custodians, nominees, fiduciaries and other institutions
will be requested to forward solicitation material to certain beneficial owners
of shares. I will reimburse banks, brokers, custodians, nominees and fiduciaries
for their reasonable expenses for sending solicitation material to the
beneficial owners.
I will bear the costs of this consent solicitation. However, if the
Proposals are approved, I will seek reimbursement of those costs from the
Company without a stockholder vote. Costs related to the solicitation of
consents include expenditures for attorneys, accountants, financial advisors,
consent solicitors, public relations advisors, printing, advertising, postage,
and related expenses and filing fees and are expected to aggregate approximately
$200,000. The portion of those costs allocable solely to the solicitation of
consents is not readily determinable.
I AM NOT REQUESTING OR AUTHORIZING ANY STOCKHOLDER OF THE COMPANY OR ANY
RECIPIENT OF THIS CONSENT STATEMENT TO ASSIST WITH THE SOLICITATION OF
STOCKHOLDER CONSENTS OR TO CONTACT STOCKHOLDERS OF THE COMPANY ON MY BEHALF.
If I acted in concert with other stockholders of the Company in conducting
this consent solicitation, then it might be necessary for certain additional
disclosures or filings to be made with the SEC, which could complicate my
efforts. Accordingly, I am asking that you not solicit other stockholders or
otherwise attempt to persuade them to return an executed consent.
15
CONSENT PROCEDURE
Section 228 of the DGCL states that, unless the certificate of
incorporation of a Delaware corporation otherwise provides, any action required
to be taken at any annual or special meeting of stockholders of that
corporation, or any action that may be taken at any annual or special meeting of
those stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action so
taken, is signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take that action
at a meeting at which all shares entitled to vote thereon were present and
voted, and those consents are delivered to the corporation by delivery to its
registered office in Delaware, its principal place of business or an officer or
agent of the corporation having custody of the books in which proceedings of
meetings of stockholders are recorded. Delivery made to the Company's registered
office must be by hand or by certified or registered mail, return receipt
requested. The Company's certificate of incorporation does not prohibit
stockholder action by written consent.
According to the Company's latest 10-Q filed August 11, 2004, the Company
had 23,278,985 shares outstanding as of July 31, 2004. It is anticipated that
each Proposal will become effective upon delivery of complete and unrevoked
written consents representing at least 11,639,493 shares of Company stock.
Section 213(b) of the DGCL provides that the record date for determining
the stockholders of a Delaware corporation entitled to consent to corporate
action in writing without a meeting, when no prior action by the corporation's
board of directors is required and the board has not fixed the record date, will
be the first date on which a signed written consent setting forth the action
taken or proposed to be taken is delivered to the corporation by delivery to its
registered office in Delaware, its principal place of business or an officer or
agent of the corporation having custody of the books in which proceedings of
meetings of the stockholders are recorded. Delivery made to the Company's
registered office must be by hand or by certified or registered mail, return
receipt requested. No prior action is required by the Company's board of
directors with respect to the Proposals. The Company's Bylaws, as amended on
September 7, 2004, require stockholders desiring to take action by written
consent to submit a request in writing to the Company's Secretary that the board
of directors of the Company establish a record date. The Bylaws also provide
that upon receipt of such a request, the board of directors must, within ten
days, establish a record date that is no later than ten days after the board of
directors action. On September 8, 2004, I delivered to the Company Secretary a
request to establish a record date for this consent solicitation.
If any or all of the Proposals become effective as a result of this consent
solicitation, then prompt notice will be given under section 228(e) of the DGCL
to the Company's stockholders who have not executed consents.
An executed consent card may be revoked at any time by marking, dating,
signing and delivering a written revocation before the time that the action
authorized by the executed consent becomes effective. A revocation may be in any
written form validly signed by the record holder as long as it clearly states
that the consent previously given is no longer effective. The delivery of a
subsequently dated consent card that is properly completed will constitute a
revocation of any earlier consent. The revocation may be delivered either to me
in care of Innisfree M&A Incorporated, 501 Madison Avenue, 20th Floor, New York,
New York, 10022, Attn: Alan Miller, or to NeoPharm, Inc. at 150 Field Drive,
Lake Forest, Illinois 60045, or any other address the Company has provided.
Although a revocation is effective if delivered to the Company, I request that
either the original or photostatic copies of all revocations of consents be
mailed or delivered to me in care of Innisfree M&A Incorporated, 501 Madison
Avenue, 20th Floor, New York, New York, 10022, Attn: Alan Miller, in order that
I am aware of all revocations and can more accurately determine if and when
consents to the Proposals have been received from the holders of record on the
record date for this consent solicitation of a majority of the outstanding
shares.
Special Instructions
If you were a record holder of shares of common stock as of the close of
business on the record date for this consent solicitation, then you may elect to
consent or withhold consent with respect to each Proposal by marking the
"CONSENTS" or "WITHHOLD CONSENT" box, as applicable, underneath each Proposal on
the accompanying WHITE consent card and signing, dating and returning it
promptly in the enclosed postage-paid envelope.
16
In addition, you may withhold consent to the removal of any one or more of
the Other Incumbent Directors or to the election of any individual Nominee by
writing that person's name on the consent card. However, the effectiveness of
each Proposal is subject to, and conditioned on, the receipt of consents from
the holders of record on the record date for this consent solicitation of a
majority of the shares of common stock then outstanding for such Proposal.
IF A STOCKHOLDER EXECUTES AND DELIVERS A WHITE CONSENT CARD, BUT FAILS TO
CHECK A BOX MARKED "CONSENTS" OR "WITHHOLD CONSENT" FOR A PROPOSAL, THEN THAT
STOCKHOLDER WILL BE DEEMED TO HAVE CONSENTED TO THAT PROPOSAL, EXCEPT THAT THE
STOCKHOLDER WILL NOT BE DEEMED TO CONSENT TO THE REMOVAL OF ANY INCUMBENT
DIRECTOR WHOSE NAME IS WRITTEN IN THE SPACE THE INSTRUCTION TO THE REMOVAL
PROPOSAL PROVIDES ON THE CARD OR TO THE ELECTION OF ANY CANDIDATE WHOSE NAME IS
WRITTEN IN THE SPACE THE INSTRUCTION TO THE ELECTION PROPOSAL PROVIDES ON THE
CARD.
I RECOMMEND THAT YOU CONSENT TO EACH OF THE PROPOSALS.
YOUR CONSENT IS IMPORTANT. PLEASE SIGN AND DATE THE ENCLOSED WHITE CONSENT
CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. FAILURE TO
RETURN YOUR CONSENT WILL HAVE THE SAME EFFECT AS VOTING AGAINST THE PROPOSALS.
If your shares of common stock are held in the name of a bank, broker,
custodian, nominee, fiduciary or other institution, then only it can execute a
consent representing your shares and only on receipt of your specific
instructions. Accordingly, it is critical that you promptly contact the person
responsible for your account and give instructions for a WHITE consent card
representing your shares to be signed, dated and returned as soon as possible. I
urge you to confirm in writing your instructions to the person responsible for
your account and provide a copy of those instructions to me in care of Innisfree
in order that I will be aware of all instructions given and can attempt to
ensure that those instructions are followed.
CONSEQUENCES OF PARTIAL APPROVAL OF THE PROPOSALS
Proposal 1. The repeal of each provision of NeoPharm's Bylaws or any
amendment thereto adopted after June 10, 2004 is not conditioned on any of the
other Proposals being approved.
Proposal 2. The removal without cause of each of Mr. Sander A. Flaum, Mr.
Erick E. Hanson, Dr. Matthew P. Rogan or Dr. Kaveh Safavi, or any other person
elected or appointed to the board of directors of the Company prior to the
effective date of this Proposal in addition to or in lieu of any Other Incumbent
Director, to fill any newly-created directorship or vacancy on the board of
directors of the Company is not conditioned on any of the other Proposals being
approved.
Proposal 3. The amendment of NeoPharm's Bylaws to fix the number of
directors of the Company at five is conditioned upon at least two of the Other
Incumbent Directors being removed from the board of directors of the Company and
one less Nominee being elected than the number of Other Incumbent Directors
removed.
Proposal 4. The election of Nominees is conditioned upon the removal of one
or more of the Other Incumbent Directors. To the extent that fewer than three of
the Other Incumbent Directors are removed, vacancies will be filled by the
Nominee receiving the most consents. If two or more Nominees receive an equal
number of consents, vacancies will be filled in the following order: first Brian
Tambi, second Ronald Eidell and third Bernard A. Fox, Ph.D. The Company's Bylaws
provide that a majority of the directors may fill vacancies. Accordingly, if
sufficient consents are received in order to create vacancies on the board of
directors but sufficient consents are not received to elect Nominees to fill
such vacancies, I intend to ask Gregory P. Young and the other directors, if
any, on the board to fill the vacancies with the Nominees in the order specified
above. If Proposal 3 is not approved, reducing the size of the board of
directors, the resulting vacancy may also be filled by a majority of the
remaining directors. In that case, I intend to seek the support of Gregory P.
Young and any directors appointed pursuant to this consent solicitation to
17
reduce the size of the board to five or to appoint the remaining Nominees
described in this consent solicitation, or an as yet unidentified director.
CONSEQUENCES OF CONSENT SOLICITATION
A change in a majority of the members of the board of directors could be
defined as a "change of control" under certain NeoPharm agreements with other
parties and could provide those parties with certain additional rights. Based on
a review of the contracts that NeoPharm has filed as exhibits to its periodic
reports filed with the SEC, it appears that the 1998 Equity Incentive Plan is
the only agreement where the removal and replacement of the Other Incumbent
Directors, as described in this consent statement, might be defined as a "change
of control" and convey additional rights to the other parties. Upon a "change of
control" as defined under this plan, all unvested options that are issued and
outstanding will immediately vest.
At present, due to the Company's low stock price, most unvested options
have an exercise price above the Company's current market price. According to
the Company's 2003 Annual Report on Form 10-K, as of December 31, 2003, under
the 1995 Stock Option Plan, the 1995 Director Option Plan and the 1998 Equity
Incentive Plan, there were 748,247 options outstanding with an exercise price
under $8.00 per share, all of which have already become exercisable. A change of
control as defined in the 1998 Equity Incentive Plan would, however, cause
certain options under the 1998 Equity Incentive Plan that are currently
unexercisable and which have an exercise price above $8.00 per share to become
exercisable. The table below is reproduced from the Company's 2003 Annual Report
on Form 10-K and summarizes outstanding options as of December 31, 2003.
OPTIONS NOT
RANGE OF OPTIONS OPTIONS CURRENTLY CURRENTLY
EXERCISE PRICE OUTSTANDING EXERCISABLE EXERCISABLE
- -------------- ----------- ----------- -----------
$1.75 to $3.50 197,973 197,973 0
$3.51 to $8.00 550,274 550,274 0
$8.01 to $14.00 1,377,094 553,332 832,762
$14.01 to $18.00 455,597 273,491 182,106
$18.01 to $29.00 665,787 416,087 249,700
18
If you have any questions about giving your consent or require assistance,
please contact:
INNISFREE M&A INCORPORATED
501 MADISON AVENUE
20TH FLOOR
NEW YORK, NEW YORK 10022
BANKS AND BROKERAGE FIRMS, PLEASE CALL COLLECT: 212-750-5833
ALL OTHERS PLEASE CALL TOLL-FREE: 888-750-5834
Dated: September ___, 2004
19
ANNEX I
SHARES HELD BY THE COMPANY'S DIRECTORS
AND EXECUTIVE OFFICERS AND THE NOMINEES
The following table is derived from the Company's Proxy Statement filed
with the SEC on April 29, 2004, certain Forms 4 filed after April 29, 2004 and
information provided to me by the Nominees and, to my knowledge, summarizes
information as of April 29, 2004. Except as otherwise noted, the following table
sets forth certain information regarding beneficial ownership of shares of
NeoPharm common stock by (i) each director of the Company and each Nominee for
director, (ii) each of the named executive officers and (iii) all officers and
directors as a group:
NAME OF AMOUNT/NATURE OF PERCENT OF CLASS
BENEFICIAL OWNER BENEFICIAL OWNERSHIP BENEFICIALLY OWNED (1)
---------------- -------------------- ----------------------
John N. Kapoor, Ph.D. 5,060,793 (2) 21.71%
Jeffrey W. Sherman, M.D. 214,186 (3) *
Imran Ahmad, Ph.D. 105,080 (4) *
Lawrence A. Kenyon 67,992 (5) *
Sander A. Flaum 50,652 (6) *
Erick E. Hanson 41,797 (6) *
Matthew P. Rogan, M.D. 35,472 (7) *
Kaveh T. Safavi, M.D. 35,472 (7) *
Gregory P. Young 0 *
Brian Tambi 0 *
Ronald Eidell 0 *
Bernard A. Fox, Ph.D. 0 *
All officers and directors as a group 6,362,968 27.33%
(10 persons)
*Less than 1% of the common stock outstanding.
(1) Based on 23,218,579 shares of Company common stock outstanding as of April
30, 2004. Beneficial ownership is determined in accordance with the rules
of the SEC and generally includes voting or investment power with respect
to securities. Shares of Company common stock subject to options
exercisable within 60 days are deemed outstanding for purposes of computing
the percentage of the person or group holding such options.
(2) Includes 5,342 shares, 31,625 shares that may be acquired pursuant to
vested options, 1,148,340 shares held by the John N. Kapoor Trust, dated
9/20/89 (the "JNK Trust"), of which I am the sole trustee and sole
beneficiary, and 1,144,586 shares held by EJ Financial/NEO Management, L.P.
(the "Limited Partnership") of which I am the Managing General Partner. The
amount shown also includes: 379,500 shares which are held by the John N.
Kapoor Charitable Foundation (the "Charitable Foundation"), of which my
wife and I are co-trustees; 1,958,180 shares which are owned by the John N.
Kapoor 1994-A Annuity Trust (the "Annuity Trust") of which the sole trustee
is my wife; and 393,220 shares which are owned by four trusts which have
been established for my children (the "Children's Trusts") of which the
sole trustee is my wife. I do 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 I disclaim beneficial ownership of these shares
as well as the shares held by the Charitable Foundation.
(3) Includes 214,186 shares that may be acquired pursuant to options
exercisable as of April 15, 2004 or that will become exercisable within 60
days of April 15, 2004.
(4) Includes 105,080 shares that may be acquired pursuant to options
exercisable as of April 15, 2004 or that will become exercisable within 60
days of April 15, 2004.
I-1
(5) Includes 67,992 shares that may be acquired pursuant to options exercisable
as of April 15, 2004 or that will become exercisable within 60 days of
April 15, 2004.
(6) Includes 33,637 shares that may be acquired pursuant to options exercisable
as of April 15, 2004 or that will become exercisable within 60 days of
April 15, 2004.
(7) Includes 27,312 shares that may be acquired pursuant to options exercisable
as of April 15, 2004 or that will become exercisable within 60 days of
April 15, 2004.
I-2
ANNEX II
INFORMATION CONCERNING PARTICIPANTS
The following tables set forth the name and the present principal
occupation or employment, and the name, principal business and address of any
corporation or other organization in which such employment is carried on, of (1)
John N. Kapoor, Ph. D. and (2) the Nominees.
JOHN N. KAPOOR, PH.D.
I have been a director of the Company since its formation in 1990. From
1990 to June of 2004 I was also Chairman of the Board of Directors of the
Company. I am the sole stockholder and President of EJ Financial
Enterprises, Inc., a health care consulting and investment company located
at 225 East Deerpath Road, Suite 250, Lake Forest, Illinois 60045. In
addition, I serve as director and Chairman of each of Option Care, Inc., a
provider of home health care services, First Horizon Pharmaceutical
Corporation, a distributor of pharmaceuticals, Akorn, Inc., a manufacturer,
distributor and marketer of generic ophthalmic products, and Introgen
Therapeutics, Inc., a gene therapy company.
NOMINEES
BRIAN TAMBI AGE 59
Morton Grove Pharmaceuticals, Inc.
6451 Main St.
Morton Grove, IL 60053
Chief Executive Officer and Chairman of the Board of Directors, Morton
Grove Pharmaceuticals, Inc., Morton Grove, Illinois
RONALD EIDELL AGE 60
1110 N. Lake Shore Drive
Apartment 33N
Chicago, IL 60611
Independent Consultant
BERNARD A. FOX, PH.D. AGE 51
Earle A. Chiles Research Institute
4805 N.E. Glisan
Portland, OR 97213
Chief, Laboratory of Molecular and Tumor Immunology, Earle A. Chiles
Research Institute, Providence Portland Medical Center and Associate
Professor, Departments of Molecular Microbiology & Immunology and
Environmental & Biomolecular Systems, Oregon Health and Science University
II-1
ANNEX III
SHARES HELD BY PARTICIPANTS
AND CERTAIN TRANSACTIONS BETWEEN ANY OF THEM AND THE COMPANY
JOHN N. KAPOOR, PH.D.
In 1994, in lieu of directly receiving the standard director compensation,
I opted for EJ Financial Enterprises, Inc. ("EJ Financial") to enter into a
Consulting Agreement with the Company. I am the president, a director and the
sole stockholder of EJ Financial. The Consulting Agreement provided that the
Company pay EJ Financial $125,000 per year (paid quarterly) for certain
management consulting services consisting primarily of consulting on strategic
corporate objectives and operations, including growth and product development
opportunities for the Company. These charges reflect the management consulting
services provided by EJ Financial to NeoPharm. Unless terminated by the parties,
the management services agreement with EJ Financial automatically renewed in
June of each year for a one-year term. At my suggestion, prior to the Company's
2004 annual meeting, the EJ Financial Consulting Agreement with the Company was
terminated, and I began receiving the standard compensation for the Company's
non-employee directors of restricted common stock valued at $50,000 annually.
In December 2001, following approval by the Company's board of directors,
the Company loaned $3,250,000 to Akorn, Inc. ("Akorn"), an independent publicly
traded company, to assist Akorn in the completion of its lyophilized products
manufacturing facility in Decatur, Illinois. I am Chairman of the Board of Akorn
and hold a substantial stock position in both Akorn and NeoPharm. The Promissory
Note issued to Akorn is due in December 2006, and originally accrued interest at
a rate equal to that received on the Company's investments in marketable
securities, which was lower than the interest rate paid by Akorn on its other
outstanding debt. In exchange, the Company entered into a manufacturing and
processing agreement that grants the Company access to at least 15% of the
annual lyophilization manufacturing capacity at Akorn's Decatur facility at a
discounted price, upon completion of the facility. As of December 31, 2002, the
Company determined that the Promissory Note was impaired and recorded a charge
to fully reserve for the Promissory Note and accrued interest. In August 2003,
the Company notified Akorn that it was in default under the loan agreement. In
September 2003, Akorn advised the Company that it wished to refinance its senior
debt with a new senior lender, which lender would require the Company to
subordinate its debt. In order to preserve the possibility of collecting Akorn's
debt to the Company and in consideration of a higher rate of interest (which
would now equal that to be charged by the new senior lender) and the possibility
of accelerated mandatory repayments once Akorn's senior debt was repaid in full,
NeoPharm agreed to waive Akorn's default, to allow Akorn until October 2004 to
provide the required manufacturing rights and to subordinate Akorn's
indebtedness to the Company to Akorn's indebtedness to its new senior lender.
Akorn's refinancing was completed on October 7, 2003. I have recused myself with
respect to any Company matters regarding Akorn.
My wife, Editha A. Kapoor, and I are the beneficial owners of an aggregate
of 5,060,793 shares of Company common stock, representing approximately 21.71%
of the Company's shares currently outstanding. I am the sole owner of 5,342
shares as well as options to purchase 31,625 shares of Company common stock.
Additionally, I am the sole trustee and beneficiary of the John N. Kapoor Trust
dated 9/20/90, which is the holder of 1,148,340 shares of Company common stock,
and the Managing General Partner of EJ Financial/NEO Management, L.P., which is
the holder of 1,144,586 shares of Company common stock. Editha A. Kapoor is my
wife and co-trustee with me of the John N. Kapoor Charitable Foundation, which
is the holder of 379,500 share of Company common stock. Editha A. Kapoor is also
the sole trustee of the John N. Kapoor 1994-A Annuity Trust (the "Annuity
Trust"), which is the holder of 1,958,180 shares of Company common stock, and
four trusts established for our children (the "Children's Trusts"), which
collectively hold 393,220 shares of Company common stock I do 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 I disclaim beneficial ownership of
these shares as well as the shares held by the Charitable Foundation.
BERNARD A. FOX, PH.D.
From 1999 until 2003, Dr. Fox provided consulting services to the Company
relating to the evaluation of the Company's clinical testing for which he was
paid approximately $12,000 annually. Dr. Fox was asked by NeoPharm to conduct
certain monitoring and follow-up studies relating to (1) the distribution of IL
13-PEQ338 in human subjects and the interaction of antibodies with IL 13-PE38QQR
III-1
from September 1999 to May 2001, for which the Laboratory of Molecular and Tumor
Immunology at the Earle A. Chiles Research Institute at Providence Portland
Medical Center in Portland, Oregon ("LMTI") was reimbursed $108,925 for costs
arising from the study as its only consideration, (2) the IL 13-PE38QQR receptor
distribution on renal cancer and normal kidney cells from October 2001 to
September 2002, for which LMTI was reimbursed $57,749.31 for costs arising from
the study as its only consideration and (3) the IL 13-PE38QQR receptor on brain
tumor cells from October 2002 to December 2002, for which LMTI was reimbursed
$5,572.71 for costs arising from the study as its only consideration. Dr. Fox is
Chief of LMTI and did not receive any personal compensation in connection with
the monitoring or research studies performed by LMTI for the Company except the
consulting fee described above.
JOHN N. KAPOOR, PH.D. AND THE NOMINEES
Except as this consent statement discloses, none of the participants or the
Nominees named in Annex II owns any securities of the Company, beneficially or
of record, has purchased or sold any of those securities within the past two
years or is or was within the past year a party to any contract, arrangement or
understanding with any person with respect to those securities. Except as
disclosed in this consent statement, to my best knowledge and the best knowledge
of the Nominees named in Annex II, none of their associates beneficially owns,
directly or indirectly, any securities of the Company.
Except as this consent statement discloses, neither I nor the Nominees or
any of my or their employees or other representatives named in Annex II or, to
their best knowledge, their associates has any arrangement or understanding with
any person (1) with respect to any future employment by the Company or its
affiliates or (2) with respect to future transactions to which the Company or
any of its affiliates will or may be a party, nor any material interest, direct
or indirect, in any transaction that has occurred since January 1, 2003 or any
currently proposed transaction, or series of similar transactions, which the
Company or any of its affiliates was or is to be a party. Except as this consent
statement discloses, neither I nor the Nominees or any of my or their employees
or other representatives named in Annex II, or to their best knowledge, their
associates, has within the past year been a party to any contracts, arrangements
or understandings with any person with respect to any securities of the Company,
including, but not limited to, joint ventures, loan or option arrangements, puts
or calls, guarantees against loss or guarantees of profit, division of losses or
profits or the giving or withholding of proxies. Certain Nominees and/or their
respective associates may also be directors or officers of other companies and
organizations that have engaged in transactions with the Company or its
subsidiaries in the ordinary course of business since January 1, 2004, but I
believe that the interest of those persons in those transactions is not of
material significance.
III-2
CONSENT SOLICITED BY JOHN N. KAPOOR, PH.D.
Unless otherwise specified below, the undersigned, a holder of common stock, par
value $0.0002145 per share (the "Common Stock"), of NeoPharm, Inc., a Delaware
corporation ("NeoPharm" or the "Company"), on September __, 2004 (the "Record
Date"), hereby consents pursuant to Section 228 of the Delaware General
Corporation Law, with respect to all of the shares of Common Stock which the
undersigned is entitled to vote, to the taking of the following actions
(collectively, the "Proposals") without a meeting of the stockholders of
NeoPharm as more fully described in the consent statement of John N. Kapoor,
Ph.D. dated September ___, 2004 ("Consent Statement") (receipt of which is
hereby acknowledged).
IF YOU SIGN, DATE AND RETURN THIS CARD (THE "CONSENT CARD") WITHOUT INDICATING
YOUR VOTE ON ONE OR MORE OF THE FOLLOWING PROPOSALS, YOU WILL BE DEEMED TO HAVE
CONSENTED WITH RESPECT TO SUCH PROPOSALS, EXCEPT YOU WILL NOT BE DEEMED TO
CONSENT TO THE REMOVAL OF ANY INCUMBENT DIRECTOR WHOSE NAME IS WRITTEN IN THE
SPACE THE INSTRUCTION TO THE REMOVAL PROPOSAL PROVIDES ON THIS CARD OR TO THE
ELECTION OF ANY CANDIDATE WHOSE NAME IS WRITTEN IN THE SPACE THE INSTRUCTION TO
THE ELECTION PROPOSAL PROVIDES ON THIS CARD. IF YOU CONSENT WITH RESPECT TO ONE
OR MORE OF THE FOLLOWING PROPOSALS, THIS CONSENT CARD WILL REVOKE ANY PREVIOUSLY
EXECUTED REVOCATION OF CONSENT WITH RESPECT TO SUCH PROPOSALS.
- --------------------------------------------------------------------------------
I, JOHN N.KAPOOR, PH.D. STRONGLY RECOMMEND THAT YOU CONSENT TO ALL OF THE
FOLLOWING PROPOSALS.
/X/ Please mark
Votes as in
this example
- --------------------------------------------------------------------------------
1. Repeal each provision of NeoPharm's Bylaws or any
amendment thereto adopted since June 10, 2004 and CONSENT WITHHOLD
prior to the effectiveness of the Proposals set CONSENT
forth in this Consent Card by adopting the following
resolution: "RESOLVED, that each provision of the / / / /
Company's Bylaws and any amendment thereto adopted
since June 10, 2004 and prior to the effectiveness
of the Proposals (as defined in the consent statement
of John N. Kapoor, Ph.D. dated September__, 2004)
are repealed."
(Continued and to be DATED and SIGNED on the reverse
side.)
- --------------------------------------------------------------------------------
2. Remove without cause the members of the Board of
Directors of the Company, other than John N. Kapoor, CONSENT WITHHOLD
Ph.D. and Gregory P. Young and the directors elected CONSENT
by this Consent Card pursuant to the resolutions set
forth in the Consent Statement. / / / /
For Removal: Sander A. Flaum, Erick E. Hanson,
Matthew P. Rogan, Kaveh T. Safavi and any other
person or persons (other than the persons elected
pursuant to the Consent Statement) elected or
appointed to the board of directors of the Company
prior to the effective date of this proposal (the
"Other Incumbent Directors")
To withhold consent to the removal of any Other
Incumbent Director, specify the Other Incumbent
Director or Directors in the following space:
--------------------------------------------------
- --------------------------------------------------------------------------------
3. Amend NeoPharm's Bylaws to fix the number of directors
of the Company at five by adopting the following CONSENT WITHHOLD
resolution: "RESOLVED, that Section 3.2 of the Bylaws CONSENT
of the Company is hereby amended and restated in
its entirety to read as follows: `The number of / / / /
directors of the Corporation shall be set at
five (5).'"
- --------------------------------------------------------------------------------
4. Elect Mr. Brian Tambi, Mr. Ronald Eidell and Dr.
Bernard A. Fox (each a "Nominee"), as replacement CONSENT WITHHOLD
directors of NeoPharm to fill the newly-created CONSENT
vacancies pursuant to the resolutions set forth
in the Consent Statement: / / / /
To withhold consent to a Nominee, specify the
Nominee in the following space:
-------------------
- --------------------------------------------------------------------------------
DATE:
---------------------------------------
Signature
-----------------------------------
Signature (if held jointly)
-----------------
Title(s):
------------------------------------
When shares are held by joint tenants, both
must sign. When signing as attorney-in-fact,
executor, administrator, trustee, guardian,
corporate officer or partner, please give
full title as such. If a corporation, please
sign in a corporate name by President or
other authorized officer. If a partnership,
please sign in partnership name by authorized
person.
IMPORTANT: YOUR CONSENT MUST BE DATED TO BE VALID.
If you have any questions about how to execute your consent,
please call Innisfree M&A Incorporated, toll-free at 888-750-5834.