THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

NeoPharm, Inc. (NEOL)

5/1/2006 Proxy Information

Mr. Eidell served as interim President and Chief Executive Officer of NeoPharm, Inc. from March 2005 through October 2005.

On March 8, 2005, Mr. Eidell, a director of the Company, agreed to serve as the interim President and CEO of the Company, a position which he held until October 28, 2005, when Mr. Herrera was appointed the Company’s President and CEO.

In December 2001, following approval by the Company’s Board of Directors, the Company loaned $3,250,000 to Akorn, Inc. an independent, publicly-traded company, to assist Akorn in the completion of its lyophilized products manufacturing facility in Decatur, Illinois. Dr. John N. Kapoor, a member of the Company’s Board of Directors and the Company’s former Chairman of the Board of Directors, is the Chairman of the Akorn Board of Directors and holds a substantial stock position in both companies. The Promissory Note issued by Akorn was due in December 2006, and accrued interest at a rate equal to that received on the Company’s investments in marketable securities, which is lower than the interest rate paid by Akorn on its other outstanding debt. In exchange, the Company entered into a Processing Agreement that granted NeoPharm access to at least 15% of the annual lyophilization manufacturing capacity at Akorn at a discounted price upon completion of the facility. As of December 31, 2002, the Company determined 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 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. On October 6, 2004, NeoPharm again presented Akorn with a formal “Notice of Default” on the Amended and Restated Promissory Note resulting from Akorn’s failure to meet its obligations under the Processing Agreement.

On May 16, 2005, the Company and Akorn entered into a Note Repayment Agreement (“Repayment Agreement”) whereby the Company agreed to accept $2,500,000 as payment in full for all outstanding principal and interest due and owing under the Promissory Note, which has been paid. In addition, the parties mutually agreed to terminate the Processing Agreement. As a result of the Repayment Agreement, the Company recorded a $2,500,000 benefit which was recorded as “Recovery of Note Receivable” on the Company’s Consolidated Statement of Operations for the year ended December 31, 2005.

Until April 2006, the Company employed the brother of Dr. Imran Ahmad, our Executive Vice President and Chief Scientific Officer, as Vice President Pharmacokinetics and Safety Evaluation at a salary and earned bonus in 2005 of $208,234, which was commensurate with the compensation of other Company employees in similar positions. Dr. Ahmad’s brother is no longer with the Company.

In March 2005 Mr. Ronald Eidell, a director of the Company, agreed to serve, on an interim basis, as the Company’s President and CEO, a position he held until October 28, 2005, when the Company hired a new President and CEO. During his tenure, Mr. Eidell received $264,921 in salary and bonus, options for 80,000 shares of common stock, $11,700 in car allowance payments, as well as medical and certain other fringe benefits available to all executive officers. In addition, payments of $66,230 were made to Tatum LLC, an entity of which Mr. Eidell is a partner. See “EXECUTIVE COMPENSATION—Employment and Other Agreements.”