EMPLOYMENT AGREEMENT
EXHIBIT
10.1
THIS
EMPLOYMENT AGREEMENT (this “Agreement”) is made
and entered into this 6th day of July, 2009, by and between Delcath Systems,
Inc., a Delaware corporation (the “Company”), and Xxxxxx
Xxxxx (the “Executive”).
RECITALS
THE
PARTIES ENTER THIS AGREEMENT on the basis of the following facts, understandings
and intentions:
A. The
Company desires to hire the Executive as its Chief Executive Officer on the
terms and conditions set forth in this Agreement.
B. This
Agreement shall govern the employment relationship between the Executive and the
Company from and after the Effective Date, and, as of the Effective Date,
supersedes and negates any previous agreements or understandings with respect to
such relationship.
C. The
Executive desires to be employed by the Company on the terms and conditions set
forth in this Agreement.
AGREEMENT
NOW,
THEREFORE, in consideration of the above recitals incorporated herein and the
mutual covenants and promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby expressly
acknowledged, the parties agree as follows:
1. Retention
and Duties.
1.1
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Retention. The
Company does hereby hire, engage and employ the Executive beginning on a
date to be mutually agreed, not later than July 6, 2009 (such actual date
of employment commencement, the “Effective
Date”), and concluding on the last day of the Period of Employment
(as such term is defined in Section 2) on
the terms and conditions expressly set forth in this
Agreement. The Executive does hereby accept and agree to such
hiring, engagement and employment, on the terms and conditions expressly
set forth in this Agreement.
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1.2
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Duties. During
the Period of Employment, the Executive shall serve the Company as its
Chief Executive Officer and shall have the powers, authorities, duties and
obligations of management usually vested in the office of the Chief
Executive Officer of a company of a similar size and similar nature as the
Company, and such other powers, authorities, duties and obligations
commensurate with such position as the Company’s Board of Directors (the
“Board”)
may assign from time to time, all subject to the directives of the Board
and the corporate policies of the Company as they are in effect from time
to time throughout the Period of Employment (including, without
limitation, the Company’s business conduct and ethics policies, as in
effect from time to time). The Executive will be appointed to
the Board as of the Effective Date. During the Period of
Employment, the Executive shall report to the
Board.
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1.3
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No
Other Employment; Minimum Time Commitment. During the
Period of Employment, the Executive shall (i) devote substantially all of
the Executive’s business
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time,
energy and skill to the performance of the Executive’s duties for the Company,
(ii) perform such duties in a faithful, effective and efficient manner to the
best of his abilities, and (iii) hold no other employment. The
Company shall have the right to require the Executive to resign from any board
or similar body (including, without limitation, any association, corporate,
civic or charitable board or similar body) on which he may then serve, or to
curtail the Executive’s consulting services to AngioDynamics, Inc., in each case
if the Board reasonably determines that the Executive’s service in such capacity
interferes with the effective discharge of the Executive’s duties and
responsibilities to the Company or that any business related to such service is
then in competition with any business of the Company or any of its Affiliates
(as such term is defined in Section 5.5),
successors or assigns. The Executive’s service on the boards of
directors (or similar body) of other business entities is subject to the
approval of the Board, which approval, subject to the foregoing, is hereby
granted with respect to the Executive’s service as a consultant to
AngioDynamics, Inc. and his service as a member of the board of directors of
each of HydroMet, Inc. and MedCloud Networks, Inc.
1.4
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No
Breach of Contract. The Executive hereby represents to
the Company that: (i) the execution and delivery of this Agreement by the
Executive and the Company and the performance by the Executive of the
Executive’s duties hereunder do not and shall not constitute a breach of,
conflict with, or otherwise contravene or cause a default under, the terms
of any other agreement or policy to which the Executive is a party or
otherwise bound or any judgment, order or decree to which the Executive is
subject; (ii) the Executive has no information (including, without
limitation, confidential information and trade secrets) relating to any
other Person (as such term is defined in Section 5.5)
which would prevent, or be violated by, the Executive entering into this
Agreement or carrying out his duties hereunder; (iii) the Executive is not
bound by any employment, consulting, non-compete, confidentiality, trade
secret or similar agreement with any other Person that would prevent, or
be violated by, the Executive entering into this Agreement or carrying out
his duties hereunder; and (iv) the Executive understands the Company will
rely upon the accuracy and truth of the representations and warranties of
the Executive set forth herein and the Executive consents to such
reliance.
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1.5
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Location. The
Executive’s principal place of employment shall be the Company’s principal
executive office as it may be located from time to time. The
Executive agrees that he will be regularly present at that
office. The Executive acknowledges that he will be required to
travel from time to time in the course of performing his duties for the
Company. As of the date of this Agreement, the Company’s
principal executive office is located at 000 Xxxxx Xxxxxx in New York, New
York, and any relocation shall require the approval of the
Board.
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2.
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Period
of Employment. The “Period of
Employment” shall be a period of two years commencing on the
Effective Date and ending at the close of business on the second
anniversary of the Effective Date; provided, however, that
the Period of Employment may be extended on the same terms, by the
specific approval of the Board, for an additional period of one (1)
year. Notwithstanding the foregoing, the Period of Employment
is subject to earlier termination as provided below in this
Agreement. Failure of the Board to extend the Period of
Employment beyond the second anniversary of the Effective Date shall not
constitute a breach of this Agreement and shall not constitute an
Involuntary Termination (as such term is defined in Section 5.5)
for purposes of this Agreement.
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3.
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Compensation.
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3.1
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Base
Salary. During the Period of Employment, the Company
shall pay the Executive a base salary (the “Base Salary”),
which shall be paid in accordance with the Company’s regular payroll
practices in effect from time to time, but not less frequently than
monthly. The Executive’s minimum Base Salary shall be at an
annualized rate of four hundred twenty-five thousand dollars ($425,000),
and shall be subject to annual review by the Compensation Committee (as
defined in Section
3.2).
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3.2
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Incentive
Bonus. The Executive shall be eligible to receive an
incentive bonus (“Incentive
Bonus”) for each consecutive 12-month period that ends on an
anniversary of the Effective Date (each, a “Bonus Year”)
during the Period of Employment; provided that
the Executive must be employed by the Company on the anniversary date in
order to be eligible for an Incentive Bonus with respect to the Bonus Year
ending on such date (and, except as provided in Section 5.3, if
the Executive is not so employed at such time, he shall not be considered
to have “earned” any Incentive Bonus with respect to the Bonus Year in
question). The target Incentive Bonus for each Bonus Year shall
equal 50% of the total Base Salary paid in that Bonus Year, based on
performance objectives (which may include corporate, business unit or
division, financial, strategic, individual or other objectives) reasonably
established with respect to that particular Bonus Year by the compensation
and stock option committee of the Board or its successor (the “Compensation
Committee”). No Incentive Bonus shall be paid unless the
applicable performance objectives have been attained, and the Compensation
Committee shall determine whether an Incentive Bonus is merited in any
given Bonus Year. Under no circumstances shall the Company pay
the Executive an Incentive Bonus for a Bonus Year if his employment is
terminated for Cause on or prior to the bonus payment date for such Bonus
Year.
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3.3 Stock
Option Grant.
(a) On the
Effective Date, the Company will grant the Executive a stock option to purchase
800,000 of the issued and outstanding shares of the Company’s common stock at a
price per share equal to the closing price on the date of grant. On
January 4, 2010, provided the Executive remains employed on such date, the
Company will grant the Executive a stock option to purchase an additional 50,000
issued and outstanding shares of the Company’s common stock at a price per share
equal to the closing price on that date (the stock options to purchase 850,000
shares of the Company’s common stock described in this paragraph, the “Option.”)
(b) 50,000 of
the shares covered by the Option shall be vested upon the Effective
Date. The remainder of the Option will vest with respect to 266,667
of the shares subject to the Option on each of the first two (2) anniversaries
of the Effective Date and 266,666 on the third (3rd) anniversary of the
Effective Date, subject to the Executive’s continued employment by the Company
through the respective anniversary. Notwithstanding the foregoing, if
earlier than provided in the immediately preceding sentence (and, without
duplication, reduced by any shares that previously vested pursuant to the
immediately preceding sentence), (i) 200,000 of the shares subject to the Option
shall vest upon receipt by the Company of financing from third party investors
of $15 million or more (gross proceeds), (ii) 200,000 of the shares subject to
the Option shall vest on submission to the U.S. Food and Drug Administration
(the “FDA”),
with the consent of the Board, of a Premarket Approval or New Drug Approval (as
such terms are used by the FDA) for
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the
Company’s percutaneous hepatic perfusion treatment system, and (iii) 400,000 of
the shares subject to the Option shall vest upon the FDA’s formal written notice
of such approval including FDA-approved labeling language for the percutaneous
hepatic perfusion treatment. Notwithstanding the foregoing, all
shares subject to the Option shall immediately vest upon (i) the Executive’s
Involuntary Termination (as defined in Section 5.5) after
the first anniversary of the Effective Date or (ii) a Change of Control (as such
term is defined in subsections (a)-(d) of the definition of “Change of Control”
contained in the Company’s 2009 Stock Incentive Plan). Upon the
Executive’s Involuntary Termination between the Effective Date and its first
anniversary, an additional number of shares such that a total of 50% of all
shares subject to the Option shall be vested as of the Severance Date (as
defined in Section
5.3).
(c) The
Option shall be granted in part under the Company’s 2009 Stock Incentive Plan
and in part under the Company’s 2004 Stock Incentive Plan and shall be subject
to such further terms and conditions as set forth in a written stock option
grant letter to be provided by the Company to the Executive to evidence the
Option under each plan.
3.4
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Special
One-Time Bonus.
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The
Executive shall receive a special one-time bonus of $175,000 (the “Special Bonus”)
within seven (7) business days of the Effective Date. The Special
Bonus is intended to reduce the impact of the costs to the Executive in
connection with his relocation, moving and temporary housing while he secures
permanent housing in New York and includes a “gross up” for income taxes that
the Executive would bear on a net payment of
$100,000. Notwithstanding the foregoing, if the Executive is
terminated for Cause or resigns without Good Reason prior to the first
anniversary of the Effective Date, a pro rata portion of the Special Bonus
(determined by multiplying the Special Bonus by a fraction, the numerator of
which is the number of days from the Severance Date (as such term is defined in
Section 5.3) to
the first anniversary of the Effective Date and the denominator of which is 365)
shall be due and payable to the Company immediately upon such employment
termination, subject to offset, at the Company’s election, against any Severance
Benefit (as such term is defined in Section 5.3) or other
amount otherwise due under this Agreement.
4.
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Benefits.
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4.1
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Retirement,
Welfare and Fringe Benefits. During the Period of
Employment, the Executive shall be entitled to participate in all
retirement and welfare benefit plans and programs, and fringe benefit
plans and programs, made available by the Company to the Company’s
executive officers generally, in accordance with the eligibility and
participation provisions of such plans and as such plans or programs may
be in effect from time to time.
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4.2
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Reimbursement
of Business Expenses. The Executive is authorized to
incur reasonable expenses in carrying out the Executive’s duties for the
Company under this Agreement and shall be entitled to reimbursement for
all reasonable business expenses that the Executive incurs during the
Period of Employment in connection with carrying out the Executive’s
duties for the Company, subject to the Company’s expense reimbursement
policies and any pre-approval policies in effect from time to
time.
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5.
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Termination.
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5.1
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Termination
by the Company. The Executive’s employment by the
Company, and the Period of Employment, may be terminated at any time by
the Company: (i) with Cause (as such term is defined in Section 5.5),
or (ii) without Cause, or (iii) in the event of the Executive’s death, or
(iv) in the event that the Board determines in good faith that the
Executive has a Disability (as such term is defined in Section
5.5).
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5.2
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Termination
by the Executive. The Executive’s employment by the
Company, and the Period of Employment, may be terminated by the Executive
with no less than ninety (90) days’ advance written notice to the Company
(such notice to be delivered in accordance with Section 17);
provided,
however,
that in the case of a termination with Good Reason, the Executive may
provide immediate written notice of termination once the applicable cure
period (as contemplated by the definition of Good Reason) has lapsed if
the Company has not reasonably cured the circumstances that gave rise to
the basis for the termination with Good
Reason.
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5.3
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Benefits
Upon Termination. If the Executive’s employment by the
Company is terminated during the Period of Employment for any reason by
the Company or by the Executive, or upon or following the expiration of
the Period of Employment (in any case, the date that the Executive’s
employment by the Company terminates is referred to as the “Severance
Date”), the Company shall have no further obligation to make or
provide to the Executive, and the Executive shall have no further right to
receive or obtain from the Company, any payments or benefits except as
follows:
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(a) The
Company shall pay the Executive (or, in the event of his death, the Executive’s
estate) any Accrued Obligations (as such term is defined in Section
5.5);
(b) If,
during the Period of Employment, the Executive’s employment with the Company
terminates as a result of an Involuntary Termination (as such term is defined in
Section 5.5),
the Company shall pay the Executive (in addition to the Accrued Obligations),
subject to tax withholding and other authorized deductions, Base Salary for the
greater of (i) 12 months or (ii) if the Severance Date occurs before the second
anniversary of the Effective Date, the period of time between the Severance Date
and the second anniversary of the Effective Date (the period described in (i) or
(ii), as applicable, the “Severance
Period”). Such amount is referred to hereinafter as the “Severance
Benefit.” Subject to Section 5.8(a), the
Company shall pay the Severance Benefit to the Executive in substantially equal
installments in accordance with the Company’s standard payroll practices over a
period of 12 months, with the first installment payable in the month following
the month in which the Executive’s Separation from Service (as such term is
defined in Section
5.5) occurs. In addition, if the Executive’s employment
terminates as a result of an Involuntary Termination, the Executive shall,
solely to the extent the applicable performance objectives have been met for the
Bonus Year that includes the Severance Date, be paid an Incentive Bonus for such
Bonus Year at such time as such Incentive Bonus would have been paid in
accordance with Section 3.2 had the
Executive’s employment continued until such payment date; provided, however, that such
Incentive Bonus will be reduced to reflect the percentage of the Bonus Year
during which the Executive was employed under this Agreement (any such Incentive
Bonus, the “Stub
Bonus”).
(c) Notwithstanding
the foregoing provisions of this Section 5.3, if the
Executive breaches his obligations under Section 6 or under
any other agreement signed by the Executive and the Company or any of its
Affiliates that imposes restrictions with respect to the Executive’s activities
at any time, from and after the date of such breach and not in
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any way
in limitation of any right or remedy otherwise available to the Company, the
Executive will no longer be entitled to, and the Company will no longer be
obligated to pay, any remaining unpaid portion of the Severance Benefit; provided that, if the
Executive provides the release contemplated by Section 5.4, in no
event shall the Executive be entitled to a Severance Benefit payment of less
than $5,000, which amount the parties agree is good and adequate consideration,
standing alone, for the Executive’s release contemplated by Section
5.4.
(d) The
foregoing provisions of this Section 5.3 shall not
affect: (i) the Executive’s receipt of any benefits otherwise due terminated
employees under group insurance coverage consistent with the terms of an
applicable Company welfare benefit plan; (ii) the Executive’s rights to
continued health coverage under COBRA; (iii) the Executive’s receipt of benefits
otherwise due in accordance with the terms of the Company’s 401(k) plan (if
any); and (iv) the Executive’s receipt of any accrued but unpaid Incentive Bonus
for the Bonus Year ended on the most recent anniversary of the Effective Date,
payable at the time provided in Section
3.2.
5.4
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Release;
Exclusive Remedy.
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(a) This
Section 5.4
shall apply notwithstanding anything else contained in this Agreement or any
stock option or other equity-based award agreement to the
contrary. As a condition precedent to payment of the Severance
Benefit or Stub Bonus or any obligation to accelerate vesting of any
equity-based award on an Involuntary Termination or a Change of Control, the
Executive shall, upon or promptly following his last day of employment with the
Company, provide the Company with a valid, executed general release agreement in
a form acceptable to the Company substantially in the form attached as Exhibit
A, and such release agreement shall have not been revoked by the Executive
pursuant to any revocation rights afforded by applicable law.
(b) The
Executive agrees that the payments and benefits contemplated by Section 5.3 (and any
applicable acceleration of any equity-based award or bonus on an Involuntary
Termination or Change of Control) shall constitute the exclusive and sole remedy
for any termination of his employment and the Executive covenants not to assert
or pursue any other remedies, at law or in equity, with respect to any
termination of employment. The Executive agrees to resign, on the
Severance Date, as an officer and director of the Company and any Affiliate of
the Company, and as a fiduciary of any benefit plan of the Company or any
Affiliate of the Company, and to promptly execute and provide to the Company any
further documentation, as requested by the Company, to confirm such
resignation.
5.5 Certain
Defined Terms.
(a) As used
herein, “Accrued
Obligations” means:
(i) any Base
Salary that had accrued but had not been paid on or before the Severance Date;
and
(ii) any
reimbursement due to the Executive pursuant to Section 4.2 for
expenses reasonably incurred by the Executive on or before the Severance
Date
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and
documented and pre-approved, to the extent applicable, in accordance with the
Company’s expense reimbursement policies in effect at the applicable
time.
(b) As used
herein, “Affiliate” of the
Company means a Person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Company. As used in this definition, the term “control,”
including the correlative terms “controlling,” “controlled by” and “under common
control with,” means the possession, directly or indirectly, of the power to
direct or cause the direction of management or policies (whether through
ownership of securities or any partnership or other ownership interest, by
contract or otherwise) of a Person.
(c) As used
herein, “Cause”
shall mean, as reasonably determined by the Board (excluding the Executive, if
he is then a member of the Board) based on the information then known to it,
that one or more of the following has occurred:
(i) the
Executive has committed a felony (under the laws of the United States or any
relevant state, or a similar crime or offense under the applicable laws of any
relevant foreign jurisdiction);
(ii) the
Executive has engaged in acts of fraud, dishonesty, gross negligence or other
misconduct including abuse of controlled substances, that is injurious to the
Company, its Affiliates or any of their customers, clients or
employees;
(iii) the
Executive willfully fails to perform or uphold his duties under this Agreement
and/or willfully fails to comply with reasonable directives of the Board;
or
(iv) any
breach by the Executive of any provision of Section 6, or any
material breach by the Executive of any other contract he is a party to with the
Company or any of its Affiliates including the Code of Ethics or another
material written policy.
(d) As used
herein, “Good
Reason” shall mean a termination of the Executive’s employment by means
of resignation by the Executive after the occurrence (without the Executive’s
consent) of any one or more of the following conditions:
(i) a
material diminution in the Executive’s rate of Base Salary;
(ii) a
material diminution in the Executive’s authority, duties, or
responsibilities;
(iii) a
material change in the geographic location of the Executive’s principal office
with the Company (for this purpose, in no event shall a relocation of such
office to a new location that is not more than fifty (50) miles from the current
location of the Company’s executive offices constitute a “material change”);
or
(iv) a
material breach by the Company of this Agreement;
provided, however, that any
such condition or conditions, as applicable, shall not constitute grounds for a
termination with Good Reason unless (x) the Executive provides written notice to
the Company of the condition claimed to constitute grounds for a
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termination
with Good Reason within ninety (90) days after the initial existence of such
condition(s) (such notice to be delivered in accordance with Section 17), and (y)
the Company fails to remedy such condition(s) within thirty (30) days of
receiving such written notice thereof; and (z) the termination of the
Executive’s employment with the Company shall not constitute a termination with
Good Reason unless such termination occurs not more than one hundred and twenty
(120) days following the initial existence of the condition claimed to
constitute grounds for a termination with Good Reason.
(e) As used
herein, “Disability” shall
mean a physical or mental impairment which, as reasonably determined by the
Board, renders the Executive unable to perform the essential functions of his
employment with the Company, even with reasonable accommodation that does not
impose an undue hardship on the Company, for more than 90 days in any 180-day
period, unless a longer period is required by federal or state law, in which
case that longer period would apply.
(f) As used
herein, “Involuntary
Termination” shall mean (i) a termination of the Executive’s employment
by the Company without Cause (and other than due to Executive’s death or in
connection with a good faith determination by the Board that the Executive has a
Disability), or (ii) a termination with Good Reason.
(g) As used
herein, the term “Person” shall be
construed broadly and shall include, without limitation, an individual, a
partnership, a limited liability company, a corporation, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision
thereof.
(h) As used
herein, a “Separation
from Service” occurs when the Executive dies, retires, or otherwise has a
termination of employment with the Company that constitutes a “separation from
service” within the meaning of Treasury Regulation Section 1.409A-1(h)(1),
without regard to the optional alternative definitions available
thereunder.
5.6
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Notice
of Termination. Any termination of the Executive’s
employment under this Agreement shall be communicated by written notice of
termination from the terminating party to the other party. This
notice of termination must be delivered in accordance with Section 17 and
must indicate the specific provision(s) of this Agreement relied upon in
effecting the termination.
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5.7
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Limitation
on Benefits.
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(a) To the
extent that, prior to a Change of Control that occurs at a time that no stock of
the Company is readily tradable on an established securities market, any
payment, benefit or distribution of any type to or for the benefit of the
Executive by the Company or any of its affiliates, whether paid or payable,
provided or to be provided, or distributed or distributable pursuant to the
terms of this Agreement or otherwise (including, without limitation, any
accelerated vesting of stock options or other equity-based awards or incentives)
(collectively, the “Total Payments”)
would be subject to the excise tax imposed under Section 4999 of the Internal
Revenue Code of 1986, as amended (the “Code”), then the
Company shall submit for the vote of the stockholders of the Company (the “Stockholders”) the
payments to the Executive in a manner that complies with the requirements of
Section 280G(b)(5)(B) of the Code and the Treasury Regulations promulgated
thereunder. It shall be a prerequisite to the Company’s obligations
under
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this
Section 5.7(a)
that the Executive shall have executed a valid waiver in a form reasonably
satisfactory to the Company and sufficient to enable the Stockholders’ approval
to have the effect that no payments to the Executive would be subject to the
excise tax under Section 4999 of the Code. If the exemption described
in Section 280G(b)(5)(B) of the Code and the Treasury Regulations promulgated
thereunder does not apply, then the procedures set forth in Section 5.7(b) and
Section 5.7(c)
hereof shall apply.
(b) Notwithstanding
anything contained in this Agreement to the contrary, to the extent that the
Total Payments would be subject to Section 4999 of the Code, then the Total
Payments shall be reduced (but not below zero) so that the maximum amount of the
Total Payments (after reduction) shall be one dollar ($1.00) less than the
amount which would cause the Total Payments to be subject to the excise tax
imposed by Section 4999 of the Code. Unless the Executive shall have
given prior written notice to the Company to effectuate a reduction in the Total
Payments that complies with the requirements of Section 409A of the Code to
avoid the imputation of any tax, penalty or interest thereunder, the Company
shall reduce or eliminate the Total Payments by first reducing or eliminating
any cash severance benefits (with the payments to be made furthest in the future
being reduced first), then by reducing or eliminating any accelerated vesting of
stock options or similar awards, then by reducing or eliminating any other
remaining Total Payments. The preceding provisions of this Section 5.7(b) shall
take precedence over the provisions of any other plan, arrangement or agreement
governing the Executive’s rights and entitlements to any benefits or
compensation.
(c) Any
determination that Total Payments to the Executive must be reduced or eliminated
in accordance with Section 5.7(b) and
the assumptions to be utilized in arriving at such determination, shall be made
by the Board in the exercise of its reasonable, good faith discretion based upon
the advice of such professional advisors it may deem appropriate in the
circumstances. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the Board
hereunder, it is possible that Total Payments to the Executive which will not
have been made by the Company should have been made (“Underpayment”). If
an Underpayment has occurred, the amount of any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
Executive. In the event that any Total Payment made to the Executive
shall be determined to otherwise result in the imposition of any tax under
Section 4999 of the Code, then the Executive shall promptly repay to the Company
the amount of any such Underpayment together with interest on such amount (at
the same rate as is applied to determine the present value of payments under
Section 280G of the Code or any successor thereto), from the date the
reimbursable payment was received by the Executive to the date the same is
repaid to the Company.
5.8 Section
409A and Xxxxxxxx-Xxxxx.
(a) If the
Executive is a “specified employee” within the meaning of Treasury Regulation
Section 1.409A-1(i) as of the date of the Executive’s Separation from Service,
the Executive shall not be entitled to the Severance Benefit or Stub Bonus until
the earlier of (i) the date which is six (6) months after his or her Separation
from Service for any reason other than death, or (ii) the date of the
Executive’s death. The provisions of this paragraph shall apply only
if, and to the extent, required to avoid the imputation of any tax, penalty or
interest pursuant to Section 409A of the Code. Any amounts otherwise
payable to the Executive upon or in the six (6) month period following the
Executive’s
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Separation
from Service that are not so paid by reason of this Section 5.8(a) shall
be paid (without interest) as soon as practicable (and in all events within
thirty (30) days) after the date that is six (6) months after the Executive’s
Separation from Service (or, if earlier, as soon as practicable, and in all
events within thirty (30) days, after the date of the Executive’s
death).
(b) It is
intended that any amounts payable under this Agreement and the Company’s and the
Executive’s exercise of authority or discretion hereunder shall comply with and
avoid the imputation of any tax, penalty or interest under Section 409A of the
Code. This Agreement shall be construed and interpreted consistent
with that intent. Nothing contained herein is intended to provide a
guarantee of tax treatment to the Executive.
(c) To the
extent required under Section 304 of the Xxxxxxxx-Xxxxx Act of 2002, as amended,
or other applicable law or rule, if the Company is required to prepare an
accounting restatement due to the material noncompliance of the Company, as a
result of misconduct, with any financial reporting requirement under the
securities laws, the Executive shall reimburse the issuer to the extent required
by such authority, including for (i) any bonus or other incentive-based or
equity-based compensation received by the Executive from the Company during the
12-month period following the first public issuance or filing with the
Securities and Exchange Commission (whichever first occurs) of the financial
document embodying such financial reporting requirement; and (ii) any profits
realized from the sale of securities of the issuer during that 12-month
period.
6.
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Protective
Covenants.
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6.1 Confidential
Information; Inventions.
(a) The
Executive shall not disclose or use at any time, either during the Period of
Employment or thereafter, any Confidential Information (as defined below) of
which the Executive is or becomes aware, whether or not such information is
developed by him, except to the extent that such disclosure or use is directly
related to and required by the Executive’s performance in good faith of duties
for the Company. The Executive will take all reasonably appropriate
steps to safeguard Confidential Information in his possession and to protect it
against disclosure, misuse, espionage, loss and theft. The Executive
shall deliver to the Company at the termination of the Period of Employment, or
at any time the Company may request, all memoranda, notes, plans, records,
reports, computer tapes and software and other documents and data (and copies
thereof) relating to the Confidential Information or the Work Product (as
hereinafter defined) of the business of the Company or any of its Affiliates
which the Executive may then possess or have under his
control. Notwithstanding the foregoing, the Executive may truthfully
respond to a lawful and valid subpoena or other legal process, but shall give
the Company the earliest possible notice thereof, shall, as much in advance of
the return date as possible, make available to the Company and its counsel the
documents and other information sought, and shall assist the Company and such
counsel in responding to such process.
(b) As used
in this Agreement, the term “Confidential
Information” means information that is not generally known to the public
and that is used, developed or obtained by the Company in connection with its
business, including, but not limited to, information, observations and data
obtained by the Executive while employed by the Company or any predecessors
thereof (including those obtained prior to the Effective
10
Date)
concerning (i) the business or affairs of the Company (or such predecessors),
(ii) products or services, (iii) fees, costs, compensation and pricing
structures, (iv) designs, (v) analyses, (vi) drawings, photographs and reports,
(vii) computer software, including operating systems, applications and program
listings, (viii) flow charts, manuals and documentation, (ix) data bases, (x)
accounting and business methods, (xi) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xii) customers and clients and customer or client lists,
(xiii) other copyrightable works, (xiv) all production methods, processes,
technology and trade secrets, and (xv) all similar and related information in
whatever form. Confidential Information will not include any
information that has been published (other than a disclosure by the Executive in
breach of this Agreement) in a form generally available to the public prior to
the date the Executive proposes to disclose or use such
information. Confidential Information will not be deemed to have been
published merely because individual portions of the information have been
separately published, but only if all material features comprising such
information have been published in combination.
(c) As used
in this Agreement, the term “Work Product” means
all inventions, innovations, improvements, technical information, systems,
software developments, methods, designs, analyses, drawings, reports, service
marks, trademarks, trade names, logos and all similar or related information
(whether patentable or unpatentable, copyrightable, registerable as a trademark,
reduced to writing, or otherwise) which relates to the Company’s or any of its
Affiliates’ actual or anticipated business, research and development or existing
or future products or services and which are conceived, developed or made by the
Executive (whether or not during usual business hours, whether or not by the use
of the facilities of the Company or any of its Affiliates, and whether or not
alone or in conjunction with any other person) while employed by the Company
(including those conceived, developed or made prior to the Effective Date)
together with all patent applications, letters patent, trademark, trade name and
service xxxx applications or registrations, copyrights and reissues thereof that
may be granted for or upon any of the foregoing. All Work Product
that the Executive may have discovered, invented or originated during his
employment by the Company or any of its Affiliates prior to the Effective Date,
that he may discover, invent or originate during the Period of Employment or at
any time in the period of twelve (12) months after the Severance Date, shall be
the exclusive property of the Company and its Affiliates, as applicable, and
Executive hereby assigns all of Executive’s right, title and interest in and to
such Work Product to the Company or its applicable Affiliate, including all
intellectual property rights therein. Executive shall promptly
disclose all Work Product to the Company, shall execute at the request of the
Company any assignments or other documents the Company may deem necessary to
protect or perfect its (or any of its Affiliates’, as applicable) rights
therein, and shall assist the Company, at the Company’s expense, in obtaining,
defending and enforcing the Company’s (or any of its Affiliates’, as applicable)
rights therein. The Executive hereby appoints the Company as his
attorney-in-fact to execute on his behalf any assignments or other documents
deemed necessary by the Company to protect or perfect the Company, the Company’s
(and any of its Affiliates’, as applicable) rights to any Work
Product.
6.2
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Restriction
on Competition. The Executive agrees that if the
Executive were to become employed by, or substantially involved in, the
business of a competitor of the Company or any of its Affiliates during
the Severance Period, it would be very difficult for the Executive not to
rely on or use the Company’s and its Affiliates’ trade secrets and
confidential information. Thus, to avoid the inevitable
disclosure of the Company’s and
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11
its
Affiliates’ trade secrets and confidential information, and to protect such
trade secrets and confidential information and the Company’s and its Affiliates’
relationships and goodwill with customers, during the Period of Employment and
for a period of time after the Severance Date equal to the Severance Period, the
Executive will not directly or indirectly through any other Person engage in,
enter the employ of, render any services to, have any ownership interest in, nor
participate in the financing, operation, management or control of, any Competing
Business. For purposes of this Agreement, the phrase “directly or
indirectly through any other Person engage in” shall include, without
limitation, any direct or indirect ownership or profit participation interest in
such enterprise, whether as an owner, stockholder, member, partner, joint
venturer or otherwise, and shall include any direct or indirect participation in
such enterprise as an employee, consultant, director, officer, licensor of
technology or otherwise. For purposes of this Agreement, “Competing Business”
means a Person anywhere in the continental United States or elsewhere in the
world where the Company or any of its Affiliates engage in business, or
reasonably anticipate engaging in business, on the Severance Date (the “Restricted Area”)
that at any time during the Period of Employment has competed, or at any time
during the Severance Period competes, with the Company or any of its Affiliates
in any of its or their businesses, including, without limitation, the research,
development, identification or marketing of cancer treatments or targeted drug
delivery systems. Nothing herein shall prohibit the Executive from
being a passive owner of not more than 2% of the outstanding stock of any class
of a corporation that is publicly traded, so long as the Executive has no active
participation in the business of such corporation.
6.3
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Non-Solicitation
of Employees and Consultants. During the Period of
Employment and for a period of twenty-four (24) months after the Severance
Date, the Executive will not directly or indirectly through any other
Person (i) induce or attempt to induce any employee or independent
contractor of the Company or any Affiliate of the Company to leave the
employ or service, as applicable, of the Company or such Affiliate, or in
any way interfere with the relationship between the Company or any such
Affiliate, on the one hand, and any employee or independent contractor
thereof, on the other hand, or (ii) hire any person who was an employee of
the Company or any Affiliate of the Company until twelve (12) months after
such individual’s employment relationship with the Company or such
Affiliate has been terminated.
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6.4
|
Non-Solicitation
of Customers. During the Period of Employment and for a
period of twenty-four (24) months after the Severance Date, the Executive
will not directly or indirectly through any other Person influence or
attempt to influence customers, vendors, suppliers, licensors, lessors,
joint venturers, associates, consultants, agents, or partners of the
Company or any Affiliate of the Company to divert their business away from
the Company or such Affiliate, and the Executive will not otherwise
interfere with, disrupt or attempt to disrupt the business or professional
relationships, contractual or otherwise, between the Company or any
Affiliate of the Company, on the one hand, and any of its or their
customers, suppliers, vendors, lessors, licensors, joint venturers,
government regulators, associates, officers, employees, consultants,
managers, partners, members or investors, on the other
hand.
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6.5
|
Non-Disparagement. At
all times following the date hereof, the Executive shall not, whether in
writing or orally, disparage or denigrate the Company or any Affiliate, or
any of their respective current or former affiliates, directors, officers,
employees, members, partners, agents or representatives. At all
times following the date hereof, the
directors,
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12
officers,
and communications and human resources personnel of the Company shall not,
whether in writing or orally, disparage or denigrate the Executive.
6.6
|
Understanding
of Covenants. The Executive acknowledges that, in the
course of his employment with the Company and/or its Affiliates and their
predecessors, he has become familiar, or will become familiar, with the
Company’s and its Affiliates’ and their predecessors’ trade secrets and
with other confidential and proprietary information concerning the
Company, its Affiliates and their respective predecessors and that his
services have been and will be of special, unique and extraordinary value
to the Company and its Affiliates. The Executive agrees that
the foregoing covenants set forth in this Section 6
(together, the “Restrictive
Covenants”) are reasonable and necessary to protect the Company’s
and its Affiliates’ trade secrets and other confidential and proprietary
information, good will, stable workforce, and customer
relations.
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Without
limiting the generality of the Executive’s agreement in the preceding
paragraph, the Executive (i) represents that he is familiar with and has
carefully considered the Restrictive Covenants, (ii) represents that he is
fully aware of his obligations hereunder, (iii) agrees to the
reasonableness of the length of time, scope and geographic coverage, as
applicable, of the Restrictive Covenants, (iv) agrees that the Company and
its Affiliates currently conducts business throughout the Restricted Area,
and (v) agrees that the Restrictive Covenants will continue in effect for
the applicable periods set forth above in this Section 6
regardless of whether the Executive is then entitled to receive severance
pay or benefits from the Company. The Executive understands
that the Restrictive Covenants may limit his ability to earn a livelihood
in a business similar to the business of the Company and any of its
Affiliates, but he nevertheless believes that he has received and will
receive sufficient consideration and other benefits as an employee of the
Company and as otherwise provided hereunder or as described in the
recitals hereto to clearly justify such restrictions which, in any event
(given his education, skills and ability), the Executive does not believe
would prevent him from otherwise earning a living. The
Executive agrees that the Restrictive Covenants do not confer a benefit
upon the Company disproportionate to the detriment of the
Executive.
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6.7
|
Enforcement. The
Executive agrees that the Executive’s services are unique and that he has
access to Confidential Information and Work
Product. Accordingly, without limiting the generality of Section 17, the
Executive agrees that a breach by the Executive of any of the covenants in
this Section
6 would cause immediate and irreparable harm to the Company that
would be difficult or impossible to measure, and that damages to the
Company for any such injury would therefore be an inadequate remedy for
any such breach. Therefore, the Executive agrees that in the
event of any breach or threatened breach of any provision of this Section 6 or
any similar provision, the Company shall be entitled, in addition to and
without limitation upon all other remedies the Company may have under this
Agreement, at law or otherwise, to obtain specific performance, injunctive
relief and/or other appropriate relief (without posting any bond or
deposit) in order to enforce or prevent any violations of the provisions
of this Section
6 or any similar provision, as the case may be, or require the
Executive to account for and pay over to the Company all compensation,
profits, moneys, accruals, increments or other benefits derived from or
received as a result of any transactions constituting a breach of this
Section 6
or any similar provision, as the case may be, if and when final judgment
of a court of competent jurisdiction or arbitrator is so entered against
the Executive. The Executive further agrees that the applicable
period of time any Restrictive Covenant is in effect following the
Severance Date, as determined pursuant to the foregoing
provisions
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13
of this
Section 6, such
period of time shall be extended by the same amount of time that Executive is in
breach of any Restrictive Covenant.
6.8
|
The
Executive agrees to execute any additional documentation as may reasonably
be requested by the Company in furtherance of the enforcement of any
Restrictive Covenant.
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7.
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Withholding
Taxes. Notwithstanding anything else herein to the
contrary, the Company may withhold (or cause there to be withheld, as the
case may be) from any amounts otherwise due or payable under or pursuant
to this Agreement such federal, state and local income, employment, or
other taxes as may be required to be withheld pursuant to any applicable
law or regulation.
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8.
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Successors
and Assigns.
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8.1
|
This
Agreement is personal to the Executive and without the prior written
consent of the Company shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Executive’s legal representatives.
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8.2
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This
Agreement shall inure to the benefit of and be binding upon the Company
and its successors and assigns. As used in this Agreement,
“Company” shall mean the Company as hereinbefore defined and any assignee
or successor to all or substantially all of the Company’s assets, as
applicable, which assumes this Agreement by operation of law or
otherwise.
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9.
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Rules
of Construction. Where the context requires, the
singular shall include the plural, the plural shall include the singular,
and any gender shall include all other genders. Where specific
language is used to clarify by example a general statement contained
herein, such specific language shall not be deemed to modify, limit or
restrict in any manner the construction of the general statement to which
it relates. Unless otherwise expressly provided herein, all
determinations to be made by the Compensation Committee or the Board under
this Agreement shall be made in their sole
discretion.
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10.
|
Section
Headings. The section headings of, and titles of
paragraphs and subparagraphs contained in, this Agreement are for the
purpose of convenience only, and they neither form a part of this
Agreement nor are they to be used in the construction or interpretation
thereof.
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11.
|
Governing
Law; Arbitration; Waiver of Jury
Trial.
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11.1
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THIS
AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER
THAN THE STATE OF DELAWARE TO BE APPLIED. IN FURTHERANCE OF THE
FOREGOING, THE INTERNAL LAW OF THE STATE OF DELAWARE WILL CONTROL THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH
JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE
LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY
APPLY.
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14
11.2
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Except
for the limited purpose provided in Section 16, any
legal dispute related to this Agreement and/or any claim related to this
Agreement, or breach thereof, shall, in lieu of being submitted to a court
of law, be submitted to arbitration, in accordance with the applicable
dispute resolution procedures of the American Arbitration Association. The
award of the arbitrator shall be final and binding upon the
parties. The parties hereto agree that (i) one arbitrator shall
be selected pursuant to the rules and procedures of the American
Arbitration Association, (ii) the arbitrator shall have the power to award
injunctive relief or to direct specific performance, (iii) each of the
parties, unless otherwise required by applicable law, shall bear its own
attorneys’ fees, costs and expenses and an equal share of the arbitrator’s
and administrative fees of arbitration, and (iv) the arbitrator shall
award to the prevailing party a sum equal to that party’s share of the
arbitrator’s and administrative fees of arbitration. Nothing in
this Section
11 shall be construed as providing the Executive a cause of action,
remedy or procedure that the Executive would not otherwise have under this
Agreement or the law.
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11.3
|
EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
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12.
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Severability. It
is the desire and intent of the parties hereto that the provisions of this
Agreement be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular provision of this
Agreement shall be adjudicated by an arbitrator or court of competent
jurisdiction to be invalid, prohibited or unenforceable under any present
or future law, and if the rights and obligations of any party under this
Agreement will not be materially and adversely affected thereby, such
provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction,
and to this end the provisions of this Agreement are declared to be
severable; furthermore, in lieu of such invalid or unenforceable provision
there will be added automatically as a part of this Agreement, a legal,
valid and enforceable provision as similar in terms to such invalid or
unenforceable provision as may be possible. Notwithstanding the
foregoing, if such provision could be more narrowly drawn (as to
geographic scope, period of duration or otherwise) so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to
such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other
jurisdiction.
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13.
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Entire
Agreement. This Agreement embodies the entire agreement
of the parties hereto respecting the matters within its
scope. This Agreement supersedes all prior and contemporaneous
agreements of the parties hereto that directly or indirectly bears upon
the subject matter hereof, including, without limitation, any term sheet
prepared in connection herewith. Any prior negotiations,
correspondence, agreements, proposals or understandings relating to the
subject matter hereof shall be deemed to have been merged into this
Agreement, and to the extent inconsistent herewith, such negotiations,
correspondence, agreements, proposals, or understandings shall be deemed
to be of no force or effect. There are no representations,
warranties, or agreements, whether express or implied, or oral or written,
with respect to the subject matter hereof, except as expressly set forth
herein. Notwithstanding the foregoing integration provisions,
the Executive acknowledges having received and read the Company’s Code of
Business Conduct and Ethics and agrees to conduct himself in accordance
therewith as in effect from time to
time.
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15
14.
|
Modifications. This
Agreement may not be amended, modified or changed (in whole or in part),
except by a formal, definitive written agreement expressly referring to
this Agreement, which agreement is executed by both of the parties
hereto.
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15.
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Waiver. Neither
the failure nor any delay on the part of a party to exercise any right,
remedy, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy,
power or privilege preclude any other or further exercise of the same or
of any right, remedy, power or privilege, nor shall any waiver of any
right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with
respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have
granted such waiver.
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16.
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Remedies. Each
of the parties to this Agreement and any such person or entity granted
rights hereunder whether or not such person or entity is a signatory
hereto shall be entitled to enforce its rights under this Agreement
specifically to recover damages and costs for any breach of any provision
of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that each party may in its sole discretion apply to any
court of law or equity of competent jurisdiction for specific performance,
injunctive relief and/or other appropriate equitable relief (without
posting any bond or deposit) in order to enforce or prevent any violations
of the provisions of this Agreement. Each party shall be
responsible for paying its own attorneys’ fees, costs and other expenses
pertaining to any such legal proceeding and enforcement regardless of
whether an award or finding or any judgment or verdict thereon is entered
against either party.
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17.
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Notices. Any
notice provided for in this Agreement must be in writing and must be
either personally delivered, transmitted via telecopier, mailed by first
class mail (postage prepaid and return receipt requested) or sent by
reputable overnight courier service (charges prepaid) to the recipient at
the address below indicated or at such other address or to the attention
of such other person as the recipient party has specified by prior written
notice to the sending party. Notices will be deemed to have
been given hereunder and received when delivered personally, when received
if transmitted via telecopier, five days after deposit in the U.S. mail
and one day after deposit on a weekday with a reputable overnight courier
service.
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if to the
Company:
Delcath
Systems, Inc.
Rockefeller
Center
000 Xxxxx
Xxxxxx, 00xx Xxxxx
Xxx Xxxx,
XX 00000
Facsimile:
(000) 000-0000
Attn: Board of
Directors
with a
copy to:
Xxxxxx
Xxxxxxx & Xxxx
Xxx
Xxxxxxx Xxxx Xxxxx
Xxx Xxxx,
XX 00000
Facsimile:
(000) 000-0000
Attn: Xxxx X. Xxxxx,
Esq.
16
if to the
Executive, to the address most recently on file in the payroll records of the
Company.
18.
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Counterparts. This
Agreement may be executed in any number of counterparts, each of which
shall be deemed an original as against any party whose signature appears
thereon, and all of which together shall constitute one and the same
instrument. This Agreement shall become binding when one or
more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the
signatories. Photographic copies of such signed counterparts
may be used in lieu of the originals for any
purpose.
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19.
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Legal
Counsel; Mutual Drafting. Each party recognizes that
this is a legally binding contract and acknowledges and agrees that they
have had the opportunity to consult with legal counsel of their
choice. Each party has cooperated in the drafting, negotiation
and preparation of this Agreement. Hence, in any construction
to be made of this Agreement, the same shall not be construed against
either party on the basis of that party being the drafter of such
language. The Executive agrees and acknowledges that he has
read and understands this Agreement, is entering into it freely and
voluntarily, and has been advised to seek counsel prior to entering into
this Agreement and has had ample opportunity to do
so.
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[The
remainder of this page has intentionally been left blank.]
17
IN WITNESS WHEREOF, the
Company and the Executive have executed this Agreement as of July __,
2009.
“COMPANY”
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||||
Delcath
Systems, Inc.
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||||
By:
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/s/
Xxxxxx X. Xxxxxxxxx
|
|||
Name:
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Xxxxxx
X. Xxxxxxxxx, M.D.
|
|||
Title:
|
Chairman
|
“EXECUTIVE”
|
|||
/s/
Xxxxxx X. Xxxxx
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|||
Xxxxxx
Xxxxx
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