SETTLEMENT AGREEMENT
EXECUTION
COPY
SETTLEMENT
AGREEMENT, dated as of October 8, 2006 (this “Agreement”),
by
and between Delcath Systems, Inc., a Delaware corporation (“Delcath”),
on
the one hand, and Laddcap Value Partners LP, a Delaware limited partnership,
Laddcap Value Advisors LLC, a Delaware limited liability company, Laddcap Value
Associates LLC, a Delaware limited liability company, any affiliates (as defined
under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”))
of
any of the foregoing, and Xx. Xxxxxx X. Xxxx (“Xxxx”),
in
his individual capacity (collectively, “Laddcap,”
and
together with Delcath, the “Parties”),
on
the other hand.
WHEREAS,
on June 27, 2006, Delcath announced, in response to concerns raised by Delcath
stockholders at Delcath’s annual stockholders meeting, held on June 13, 2006,
plans to, among other things, expand its Board of Directors (the “Board”)
to add
two new independent directors;
WHEREAS,
following this announcement, the Board promptly commenced an extensive search
and reviewed a number of qualified Board candidates;
WHEREAS,
on July 27, 2006, Laddcap initiated a consent solicitation (the “Consent
Solicitation”)
to,
among other things, remove the Board, including any director elected after
commencement of the Consent Solicitation, and replace them with a new slate
of
nominees selected by Laddcap;
WHEREAS,
on August 4, 2006, Delcath initiated litigation against Laddcap in the United
States District Court for the District of Columbia, which litigation was
subsequently transferred to the United States District Court for the Southern
District of New York (No. 06-CV-6420 (LAP)), alleging, among other things,
that
Laddcap had violated various United States securities laws, and which litigation
was subsequently appealed to the United States Circuit Court of Appeals for
the
Second Circuit (the “NY
Litigation”);
WHEREAS,
on August 4, 2006, Delcath initiated litigation against Xxxxxxxx X. Xxxxx
(“Xxxxx”)
in the
Connecticut Superior Court (Docket No. CV-06-4009802-S), alleging, among other
things, that Xxxxx misappropriated and misused Delcath’s intellectual property
(the “CT
Litigation”);
WHEREAS,
on September 21, 2006, the Board elected Xxxxxx X. Xxxxxxxxx to be a new Class
I
member of the Board; and
WHEREAS,
Delcath and Laddcap have each determined that it is in their respective best
interests and in the best interests of their stockholders and/or investors,
as
applicable, that the Parties enter into a global settlement involving (i) the
Consent Solicitation, (ii) the NY Litigation and (iii) certain other associated
matters, as more fully set forth in this Agreement.
NOW,
THEREFORE, in consideration of the mutual execution of this Agreement, and
the
mutual covenants, agreements, promises, releases and representations set forth
herein, the Parties agree as follows:
1. Settlement
of Consent Solicitation, Litigation and Related Matters
(a) Immediately
after
execution and delivery of this Agreement by the Parties (the “Effective
Time”),
and
without further action by the Parties, (i) any and all written consents
delivered to Delcath and/or its registered agent by Laddcap in connection with
the Consent Solicitation, including, but not limited to, the written consents
delivered on July 27, 2006 and September 25, 2006 (the “Written
Consents”),
shall
be deemed withdrawn, and (ii) the Consent Solicitation shall be terminated
and
be deemed null and void, with the same effect as if the Consent Solicitation
had
never been initiated. In addition, the Parties will take all necessary action
to
seek and obtain an order from the Honorable Judge Xxxxxxx X. Xxxxxx of the
United States District Court for the Southern District of New York declaring
the
Written Consents withdrawn and considered null and void.
(b) As
soon as
practicable after the Effective Time, the Parties shall cause their respective
counsel to dismiss with prejudice the NY Litigation.
(c) Delcath
shall no
later than 9:30 a.m., New York City time, on Monday, October 9, 2006,
communicate an offer of settlement in the CT Litigation to Xxxxx and to Xxxxx'x
counsel. The offer shall have the terms set forth on Exhibit
A
hereto.
The offer shall remain open to at least 5:30 p.m., New York City time, Monday,
October 9, 2006.
(d) On
or prior to
October 23, 2006, the Parties shall return or destroy all materials (which
includes any and all copies thereof) obtained pursuant to any discovery order
in
the NY Litigation or pursuant to any request for inspection of Delcath’s books
and records (collectively, the “Produced
Materials”)
and
shall certify that the materials returned are all of the ever existent copies
of
the Produced Materials ever in their possession, custody or control (or in
the
possession, custody or control of the Parties’ agents), or shall similarly
certify the destruction of the same.
(e) Any
information
obtained by any of the Parties relating to the other party as a result, directly
or indirectly, of such party’s possession of the Produced Materials
(collectively, the “Confidential
Information”)
shall
be kept confidential by the party receiving such Confidential Information (the
“Receiving
Party”)
and
shall not, directly or indirectly, be misappropriated, disclosed, copied, used,
reproduced, sold or made available to any third party at any time without the
express written consent of the party disclosing such Confidential Information
(the “Disclosing
Party”).
Notwithstanding the foregoing, Confidential Information does not include
information (i) that is or becomes generally available to the public other
than
as a result of an act or omission by the Receiving Party or as a result of
the
breach of this Agreement by the Receiving Party, (ii) that the Receiving Party
receives on a non-confidential basis from a source other than the Disclosing
Party or any of its current or former officers, directors, employees,
consultants, stockholders or affiliates, provided that such source is not
subject to a contractual, legal, fiduciary or other obligation of
confidentiality with respect to such information or (iii) that the Receiving
Party is required by applicable law to disclose; provided,
that,
the Receiving Party promptly shall notify the Disclosing Party in the event
the
Receiving Party is required by applicable law to disclose any Confidential
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Information.
The Parties further agree and covenant that (i) none of the Parties shall
disclose to any third party, directly or indirectly, any information relating
to
the final or any intermediate tally of Written Consents, regardless of the
source of such information, (ii) each of the Parties shall cause their
respective agents and representatives to comply with such prohibition and (iii)
within three business days after the Effective Time, Laddcap shall cause all
Written Consents in its possession or under its control to be destroyed and
will
provide a written certification to Delcath that such action has been taken.
2. Board
Representation and Related Matters
(a) (i)
Delcath shall
obtain the resignation of Xxxxxx Xxxxxx, which resignation shall be effective
within 10 business days after the Effective Time, (ii) immediately following
the
Effective Time, the Board shall increase the number of directors to seven (7)
through the creation of a new Class I directorship and appoint Xxxx to such
Class I directorship (the “Class
I Director”)
and
(iii) within five business days after the Effective Time, (A) Laddcap shall
provide the Board with a list of five individuals (the “Candidate
List”)
whom
Laddcap considers acceptable for appointment to the Board, and each of whom
is
unaffiliated with, and not a “family member” (as such term is defined in Rule
4200(a)(14) of the NASDAQ Manual) of, Laddcap and meets the standard for
“independence” set forth in Rule 4200(a)(15) of the NASDAQ Manual, (B) within 10
business days after receipt of the Candidate List, Delcath shall notify Laddcap
if one or more individuals listed on the Candidate List are reasonably
acceptable to Delcath and (C) if so, Delcath shall select such an individual
from the Candidate List and immediately thereafter, the Board shall elect such
individual as a Class II director of the Board (the “Class
II Director”);
provided,
however,
that if
none of the individuals on the Candidate List are reasonably acceptable to
Delcath, the process described in clauses (A) and (B) of this sentence shall
be
repeated as necessary until an individual who is reasonably acceptable to
Delcath is appointed as the Class II Director.
(b) Until
the fifth
anniversary of the Effective Time (the “Standstill
Period”),
Delcath agrees to nominate the Class I Director and the Class II Director for
re-election to the Board provided that the 5% Ownership Threshold (as defined
below) is met with respect to the Class I Director and the 10% Ownership
Threshold (as defined below) is met with respect to the Class II Director at
the
time that Delcath files a proxy statement in connection with the annual meeting
at which such director is up for re-election. In addition, if either or both
of
the Class I Director and the Class II Director shall no longer be able to serve
as a Delcath director for any reason, Laddcap shall have the right (and Delcath
shall do all things reasonably necessary) to nominate individuals to serve
as
the Class I Director and the Class II Director, and the Board shall nominate
such individuals to fill any vacancy caused by the inability of either the
Class
I Director or the Class II Director to serve; provided,
however,
that
Laddcap’s right to fill a vacancy of the Class II Director is subject in all
respects to Laddcap’s ownership of Delcath common stock, par value $0.01 per
share (the “Common
Stock”),
remaining above the 10% Ownership Threshold and Laddcap’s right to fill a
vacancy of the Class I Director is subject in all respects to Laddcap’s
ownership of Common Stock remaining above the 5% Ownership Threshold, as more
fully set forth in Section
2(c)
below.
Any such individual selected by Laddcap to fill such a vacancy must be
reasonably acceptable to Delcath; provided,
that
Laddcap shall not select, and the Board shall not be required to nominate,
Xxxxx, Xx. Xxxx X. Xxxxxxx (“Xxxxxxx”),
Xx.
Xxxxxxx Xxxxx, M.D. (“Xxxxx”),
or
Xx. Xxxx Xxxxxxx Xxxxxxxxx Xxxxxxxx (“Xxxxxxxx”)
to the
Board. As a condition to the appointment of the Class I Director and the Class
II Director to serve on
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the
Board, Laddcap shall procure from each of the Class I Director and the Class
II
Director such director’s irrevocable resignation from the Board, effective
immediately upon Laddcap’s ownership of Common Stock dropping below the 5%
Ownership Threshold and the 10% Threshold, respectively, which resignations
the
Board can accept or reject in its sole discretion, and Laddcap further covenants
and agrees that it shall take all additional actions necessary to cause the
Class I Director and the Class II Director to resign from the Board upon
Laddcap’s ownership of Common Stock dropping below the 5% Ownership Threshold
and the 10% Ownership Threshold, respectively.
(c) Notwithstanding
anything to the contrary contained in this Section
2,
at any
time during the Standstill Period, (i) if Laddcap’s ownership of Common Stock
falls below 1,988,904 shares (which number shall be subject to adjustment to
the
extent of any stock split or stock dividend) (the “10%
Ownership Threshold),
then
Laddcap’s right to nominate any Class II Director shall immediately terminate
and without further action, the irrevocable resignation of the Class II Director
shall be deemed accepted, effective immediately, and, if requested by the Board,
Laddcap shall take all additional actions necessary to cause the immediate
resignation of the Class II Director and (ii) if Laddcap’s ownership of Common
Stock falls below 994,452 shares (which number shall be subject to adjustment
to
the extent of any stock split or stock dividend) (the “5%
Ownership Threshold),
then
Laddcap’s right to nominate any Class I Director shall immediately terminate and
without further action, the irrevocable resignation of the Class I Director
shall be deemed accepted, effective immediately, and, if requested by the Board,
Laddcap shall take all additional actions necessary to cause the immediate
resignation of the Class I Director.
(d) It
shall be a
condition of this Agreement that the Class I Director and the Class II Director
(i) shall comply with all duly authorized lawful policies and practices of
the
Board now in effect or hereinafter adopted and provided to such directors,
and
(ii) shall provide Delcath with completed Directors’ & Officers’
Questionnaires, in a form which Delcath shall provide and which form of
questionnaire Delcath ordinarily uses, within five business days after being
provided such questionnaire by Delcath after the execution of this Agreement
and
annually thereafter during their terms of office, in accordance with Board
policy and practice as applicable to all directors.
(e) During
the
Standstill Period, Delcath covenants and agrees that it shall not convene an
annual, regular or special meeting of the Board or of any committee of the
Board
on which either the Class I Director or the Class II Director serves without
providing advance notice, in accordance with Sections 3 and 4 of Article III
of
the Amended and Restated Bylaws of Delcath (the “Bylaws”),
of
such meeting to, or obtaining a waiver thereof from, the applicable director,
and which notice, in any event and at a minimum, shall be the same notice as
provided to all directors and shall provide reasonable detail of the purpose
of
the meeting.
(f) During
the
Standstill Period, one of the Class I Director or the Class II Director shall
be
appointed to serve as a member of each of the nominating committee, the
compensation and stock option committee and the audit committee of the Board
so
long as such director is willing to serve and meets any and all qualifications
for service on such committee and Laddcap’s ownership of Common Stock does not
drop below the 5% Ownership Threshold.
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(g) Except
to the
extent specifically provided in this Settlement Agreement, the Class I Director
and the Class II Director shall have the same powers, protections, obligations
and compensation as other directors, and shall have the rights provided to
directors under Delaware law.
3. Standstill
Subject
to the last paragraph of this Section
3
and
except to the extent specifically provided in Section
4
of this
Agreement, Laddcap covenants and agrees that until the expiration of the
Standstill Period, unless specifically requested in writing in advance by a
majority of the Board, excluding Xxxx for as long as he is a director, neither
Laddcap nor any of its representatives will (and Laddcap and they will not
assist, encourage or participate with others to), directly or indirectly:
(a) acquire,
announce
an intention to acquire, offer, seek or propose to acquire, or agree to acquire,
directly or indirectly, by purchase, gift, tender or exchange offer, or
otherwise, beneficial or record ownership of any common shares or any other
voting securities of Delcath, including any rights, warrants, options or other
securities convertible into or exchangeable for common shares or any other
voting securities of Delcath from Delcath or third parties;
(b) form,
join or in
any way participate in a “group” within the meaning of Section 13(d)(3) of the
Exchange Act with respect to the common shares or any other voting securities
of
Delcath or otherwise act in concert with any Person in respect of any such
securities;
(c) arrange,
or in any
way participate in, any financing for the purchase by any individual,
corporation, partnership, limited liability company, limited liability
partnership, syndicate, person, trust, association, organization or other
entity, including any successor, by merger or otherwise, of any of the foregoing
(collectively, “Persons”
and
each, a “Person”)
of
common shares or any other voting securities or assets or businesses of Delcath
or any of its affiliates;
(d) join
in or in any
way participate in any pooling agreement, voting trust or other arrangement
or
agreement with respect to the voting of any of Delcath’s voting securities;
(e) make,
seek to
propose or participate in making a proposal to Delcath or any third party (by
public announcement, submission to Delcath or a third party or otherwise) in
respect of any extraordinary corporate transaction involving Delcath, its voting
securities or any of its affiliates, including a merger, reorganization,
recapitalization, extraordinary dividend, dissolution, restructuring,
liquidation, sale or transfer of assets other than in the ordinary course of
Delcath’s business, or the acquisition or purchase by Laddcap or any other
Person of all or any portion of the assets or capital stock of Delcath, whether
by merger, consolidation, tender or exchange offer or otherwise;
(f) (i)
solicit
proxies or consents for the voting of any voting or other securities of Delcath
or otherwise become a “participant,” directly or indirectly, in any
“solicitation” of “proxies” or consents to vote, or become a “participant” in
any “election contest” involving Delcath or Delcath’s securities (all terms used
herein and defined in Regulation 14A under the Exchange Act having the meanings
assigned to them therein), (ii) call or seek to call, directly or indirectly,
any special meeting of stockholders of Delcath for any reason whatsoever, (iii)
seek, request, or take any action to obtain or retain, directly or indirectly,
any list of holders of any
5
voting
or
other securities of Delcath or to obtain or retain, directly or indirectly,
the
books and records of Delcath or its affiliates, (iv) seek to advise or influence
any Person with respect to the voting of any securities of Delcath, (v)
initiate, propose or otherwise “solicit” Delcath stockholders for the approval
of shareholder proposals, whether made pursuant to Rule 14a-8 or Rule 14a-4
under the Exchange Act, or otherwise, (vi) otherwise communicate with Delcath’s
stockholders or others pursuant to Rule 14a-1(l)(2)(iv) under the Exchange
Act,
(vii) participate in, or take any action pursuant to, any “shareholder access”
proposal which may be adopted by the Securities and Exchange Commission whether
in accordance with previously proposed Rule 14a-11 or otherwise, (vii) otherwise
engage in any course of conduct with the purpose of causing stockholders of
Delcath to vote contrary to the recommendation of the Board on any matter
presented to Delcath’s stockholders for their vote or challenging the policies
of Delcath or (viii) otherwise act, alone or in concert with others, to seek
to
control or influence the management, the Board, policies or affairs of Delcath;
(g) except
as
specifically and expressly set forth in this Agreement, seek any change in
the
composition or classification of the Board or management of Delcath, including
any plans or proposals to change the number or term of directors, vote against
any candidate for the Board nominated for election or re-election by the
Nominating Committee (or any successor committee) of the then-existing Board,
or
fill any vacancies on the Board;
(h) seek
to change the
determination or direction of the basic business decisions of Delcath, the
present capitalization or dividend policy of Delcath, Delcath’s Amended and
Restated Certificate of Incorporation (the “Charter”)
or
Bylaws or Delcath’s business or corporate structure or otherwise take any action
inconsistent with the ownership of common shares “solely for the purpose of
investment”;
(i) (i)
make or
disclose any statement regarding any intent, purpose, plan or proposal with
respect to the Board, Delcath, its management, policies or affairs or any of
its
securities or assets or this Agreement that is inconsistent with the provisions
of this Agreement, including, but not limited to, a request (by submission
to
Delcath, public announcement or otherwise) in any form that the prohibitions
set
forth in this Agreement be waived or that Delcath take any action which would
permit Laddcap to take any of the actions prohibited by this Agreement, (ii)
otherwise seek in any fashion a waiver, amendment or modification of this
Agreement or make any statement (to Delcath or a third party or by public
announcement) relating to Laddcap’s willingness to pursue any such prohibited
action conditioned upon waiver of this Agreement or (iii)
take any action that could require Delcath to make any public disclosure
relating to any such intent, purpose, plan, proposal or condition; and
(j) (i)
initiate,
solicit, advise, assist, facilitate, finance, or encourage or otherwise
participate in the taking of any of the foregoing actions by any other Person,
(ii) make any investments in any third party that engages, or offers or proposes
to engage, in any of the foregoing, or (iii) otherwise enter into any
discussions, negotiations, arrangements or understandings with, any third party
with respect to any of the foregoing actions.
Limitations
on Standstill.
Except
as set forth herein, no provision in this Section
3
shall
prevent Laddcap from selling shares of Common Stock. Notwithstanding any other
provision of this
6
Agreement
to the contrary, nothing in this Section
3
shall
limit either the Class I Director or the Class II Director, during the term
of
their service as directors of Delcath, from discussing, proposing, or voting
for
any of the above actions on a confidential basis with or to the Board, from
having such actions recorded in the minutes of the Board of Directors and from
otherwise acting as directors and complying in good faith with their fiduciary
duties as directors of Delcath.
4. Acquisition
of Additional Common Stock and Related Matters
(a) Notwithstanding
anything in Section
3
of this
Agreement to the contrary, during the Standstill Period, Laddcap may acquire
additional shares of Common Stock in an aggregate amount that, when added to
all
shares then owned by Laddcap (including shares received by Laddcap pursuant
to
Section
11
of this
Agreement), do not exceed 14.9% of the then-outstanding shares of Common Stock
(and Delcath agrees to sell such shares to Laddcap) subject to compliance with
the provisions of this Section
4,
if such
shares are purchased directly from Delcath pursuant to a customary stock
purchase agreement containing customary representations, warranties and
indemnification provisions in a form to be negotiated in good faith by the
Parties; provided,
however,
that at
any annual meeting, special meeting or consent solicitation in lieu of such
meeting, Laddcap shall vote any and all shares of Common Stock then owned by
it
in favor of all director candidates nominated by the Nominating Committee of
the
Board, or any successor committee.
(b) Purchases
of
Delcath stock by Laddcap from Delcath pursuant to Section
4(a)
may be
made up to a maximum of three times during the Standstill Period and shall
be
made as follows:
(i) Laddcap
shall
deliver a written request (a “Purchase
Request”)
to
Delcath at least 10 business days prior to the date on which it intends to
wire
to Delcath the amount of funds necessary to pay for the Purchased Stock (the
“Payment
Date”),
which
notice shall specify the Payment Date and the number of shares of Delcath stock
that Laddcap intends to purchase from Delcath (the “Purchased
Stock”);
and
(ii) The
price per share
of Delcath stock to be purchased by Laddcap from Delcath pursuant to any
Purchase Request shall be equal to the average of the closing price per share
of
such stock over the 10 trading days prior to the date that Delcath receives
such
Purchase Request from Laddcap.
5. Mutual
Release and Waiver
(a) Laddcap
(for
itself, its agents, heirs, successors, assigns, executors and/or administrators)
does hereby and forever release and discharge Delcath and its directors,
officers, employees, agents, attorneys, partners, representatives and
affiliates, past or present, (each, a “Delcath
Person”),
from
any and all causes of action, actions, judgments, liens, debts, contracts,
indebtedness, damages, losses, claims, liabilities, rights, interests and
demands of whatsoever kind or character, known or unknown, suspected to exist
or
not suspected to exist, anticipated or not anticipated, whether or not
heretofore brought before any state or federal court, which Laddcap has or
may
have against any Delcath Person by reason of any and all acts, omissions, events
or facts occurring or existing prior to the Effective Time, including, without
limitation, all claims arising under contract, tort, common law, or any federal,
state or other governmental statute, regulation or
7
ordinance
or common law, excepting only those obligations expressly recited to be
performed hereunder.
(b) Delcath
(for
itself, its agents, heirs, successors, assigns, executors and/or administrators)
does hereby and forever release and discharge Laddcap and its directors,
officers, employees, agents, attorneys, partners, representatives and
affiliates, past or present (each, a “Laddcap
Person”),
from
any and all causes of action, actions, judgments, liens, debts, contracts,
indebtedness, damages, losses, claims, liabilities, rights, interests and
demands of whatsoever kind or character, known or unknown, suspected to exist
or
not suspected to exist, anticipated or not anticipated, whether or not
heretofore brought before any state or federal court, which Delcath has or
may
have against any Laddcap Person by reason of any and all acts, omissions, events
or facts occurring or existing prior to the Effective Time, including, without
limitation, all claims arising under contract, tort, common law, or any federal,
state or other governmental statute, regulation or ordinance or common law,
excepting only those obligations expressly recited to be performed hereunder;
provided,
however,
that
Delcath only releases and discharges Xxxxx to the extent expressly provided
for
in a separate, stand-alone agreement between Delcath and Xxxxx, and Xxxxx shall
not be deemed to be a Laddcap Person for purposes of this release.
(c) Except
for those
obligations created by or arising out of this Agreement and except as limited
in
this Agreement, it is the intention of Laddcap and Delcath in executing this
Agreement that the same shall be effective as a bar to each and every claim,
demand and cause of action hereinabove specified. In furtherance of this
intention, Laddcap and Delcath hereby expressly and mutually consent that this
Agreement shall be given full force and effect according to each and all of
its
express terms and provisions, including those related to unknown and unsuspected
claims, demands and causes of action, if any, as well as those relating to
any
other claims, demands and causes of action hereinabove specified.
(d) Laddcap
and Delcath
acknowledge that each party may hereafter discover claims or facts in addition
to or different from those which each party now knows or believes to exist
with
respect to the subject matter of this Agreement and which, if known or suspected
at the time of executing this Agreement, may have materially affected this
settlement. Laddcap and Delcath hereby waive any right, claim or cause of action
that might arise as a result of such different or additional claims or facts.
6. Mutual
Non-Disparagement
Each of
the Parties covenants and agrees that none of it or its respective subsidiaries,
affiliates, successors, assigns, officers, employees or directors shall in
any
way disparage, attempt to discredit, or otherwise call into disrepute, the
other
Parties or such other Parties’ subsidiaries, affiliates, successors, assigns,
officers, directors, employees, stockholders, agents, attorneys or
representatives, or any of their products or services, in any manner that would
damage the business or reputation of such other Parties, their products or
services or their subsidiaries, affiliates, successors, assigns, officers,
directors, employees, agents, attorneys or representatives. Each of the Parties
further covenants and agrees that it shall not otherwise engage in conduct
which
could reasonably be expected to disrupt, damage, impair or interfere with the
business reputation of the other Parties or their subsidiaries, affiliates,
successors, assigns, officers, directors, employees, agents, attorneys or
representatives. Without limiting the foregoing, none of the Parties shall
make
any comments or statements to the press, employees or former employees of
8
any
of
the Parties, any client or prospective or former client of any of the Parties,
any individual or entity with whom any of the Parties has a business
relationship or any other Person, if such comment or statement reasonably could
adversely affect the conduct of the business of the other Parties, or any of
their plans or prospects or the business reputation of such other Parties or
any
of such other Parties’ products or services or that of any of its subsidiaries,
affiliates, successors, assigns, officers, directors, employees, agents,
attorneys or representatives, except as may be required by applicable law or
subpoena. Notwithstanding anything to the contrary contained in this
Section
6,
Delcath’s ability to pursue the litigation currently pending in Connecticut
state court captioned Delcath
Systems, Inc. v. Xxxxxxxx Xxxxx
or any
related future litigation shall only be limited to the extent expressly provided
for in a separate, stand-alone agreement between Delcath and Xxxxx.
7.
Non-Solicitation
During
the Standstill Period, Laddcap shall not, directly or indirectly, either on
Laddcap’s own behalf or on behalf of any other Person, encourage, facilitate or
attempt to persuade or solicit any Person who is an employee of, or consultant,
independent contractor or other vendor for, either Delcath or any governmental
agency or medical, research or non-profit institution to the extent of such
agency’s or institution’s dealings with any Delcath product or device or
proposed product or device, (i) to terminate or materially and adversely alter
such employment, consulting, independent contractor or vendor relationship,
(ii)
to take any action against, or that would materially and adversely affect,
Delcath, the Board or Delcath’s current management, or (iii) to use any
Confidential Information for the benefit of any Person other than Delcath.
8.
Restrictions
on Certain Actions
(a) Until
the
period ending on the earlier of the end of the Standstill Period or the date
that Laddcap’s ownership of Common Stock drops below the 10% Ownership
Threshold, the Board shall not, (i) without the affirmative vote of a majority
of the Board, which vote shall include at least one of the Class I Director
or
the Class I Director, increase the number of directors beyond seven (7) and
(ii)
without the affirmative vote of a majority of the non-management members of
the
Board who are disinterested, (A) amend Delcath’s Rights Agreement, dated as of
October 30, 2001 (the “Rights
Agreement”),
or
adopt a similar agreement; provided,
however,
that
after October 30, 2010, the Board may amend the Rights Agreement to extend
its
term or adopt a new rights agreement on substantially the same terms as the
Rights Agreement but having a term extending beyond October 30, 2011, or (B)
adopt, amend or repeal the Bylaws. Delcath represents and warrants that the
Amended and Restated Bylaws of Delcath filed with the Securities and Exchange
Commission on August 23, 2000 as Exhibit 3.2
to
Amendment No. 1 to Delcath’s Registration Statement on Form SB-2 is a true and
correct copy of the Bylaws.
(b) Effective
as of the
Effective Time and for so long as Laddcap beneficially owns any shares of
Delcath capital stock, Laddcap agrees that, without the prior written consent
of
Delcath in its sole and absolute discretion, Laddcap will not retain, engage,
hire or employ, directly or indirectly, in any capacity whatsoever, Xxxxx in
connection with the provision of any services to Laddcap relating to Laddcap’s
investment in, or other involvement with, Delcath or any past, present or future
officer, employee or director of Delcath; provided,
however,
that
Laddcap may retain Xxxxx to provide services unrelated to Delcath without the
prior written consent of Delcath.
9
9. Public
Announcements
Immediately after the Effective Time, the Parties shall issue a joint press
release in the form attached hereto as Exhibit
B
(the
“Press
Release”).
Thereafter, none of the Parties shall issue or make any statements, public
or
otherwise, regarding this Agreement, its terms, the obligations of the Parties
hereunder, or any other matters discussed in the Press Release, which statements
are inconsistent with such Press Release.
10. Change
of Control Provisions
Delcath
covenants and agrees that as of the Effective Time, no event has occurred that
shall be deemed to be a change of control that would trigger any payments to
officers, directors or employees of Delcath, including, but not limited to,
change of control payments under the 2003 Change of Control payment plan,
pursuant to provisions in any Delcath stock option plan, employment agreement,
or otherwise; provided,
that
nothing in this Section
10
shall
affect any rights that Mr. X. X. Xxxx has under the terms of his Employment
Agreement, dated October 1, 2003, with Delcath.
11. Expenses
(a) Except
as otherwise
provided in this Section
11,
the
Parties shall bear their own expenses related to the Consent Solicitation,
the
NY Litigation and the preparation, negotiation and delivery of this
Agreement.
(b) As
reimbursement
for a portion of the expenses incurred by Laddcap related to the Consent
Solicitation and related matters, Delcath agrees as follows. On or prior to
October 23, 2006 and provided that Delcath has received from Laddcap written
documentation of reasonable and actual out-of-pocket expenses incurred by
Laddcap in connection with the Consent Solicitation in an amount at least equal
to $306,000, Delcath shall issue to Laddcap 100,000 unregistered shares of
Common Stock. Each of the Parties agrees that it will execute and deliver such
documents as are reasonably necessary to effect the transfer by Delcath to
Laddcap of such Common Stock.
12. Representations
and Warranties
Each of
the Parties hereby represents and warrants to the other party that:
(a) it
is duly
organized, validly existing and in good standing under the laws of the state
of
its jurisdiction of organization;
(b) it
has full power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder, all of which have been duly authorized by all requisite
corporate, partnership or limited liability company action, as the case may
be;
and
(c) this
Agreement has
been duly and validly executed and delivered by such party and constitutes
the
legal, valid and binding obligation of such party, enforceable against it in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ rights generally and by general principles of equity (regardless of
whether considered in a proceeding in equity or at law).
13. Miscellaneous
Provisions
10
(a) This
Agreement and
all disputes or controversies arising out of or relating to this Agreement
or
the obligations of the Parties hereunder shall be governed by, and construed
in
accordance with, the internal laws of the State of New York, without regard
to
the laws of any other jurisdiction that might be applied because of the conflict
of laws principles of the State of New York other than Section 5-1401 of the
New
York General Obligations Law.
(b) Each
of the Parties
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or for recognition and enforcement of any judgment
in
respect hereof brought by the other party or its successors or assigns shall
be
brought and determined in a New York State or federal court sitting in the
Borough of Manhattan in the City of New York, and each of the Parties hereby
irrevocably submits to the co-exclusive jurisdiction of the aforesaid courts
for
itself and with respect to its property, generally and unconditionally, with
regard to any such action or proceeding arising out of or relating to this
Agreement and the obligations of the Parties hereunder (and agrees not to
commence any action, suit or proceeding relating thereto except in such courts,
except to enforce judgments rendered by such state or federal courts located
in
the City of New York; such actions to enforce a New York judgment may be brought
in any court of competent jurisdiction). Each of the Parties further agrees
to
accept service of process in any manner permitted by such courts. Each of the
Parties hereby irrevocably and unconditionally waives, and agrees not to assert,
by way of motion or as a defense, counterclaim or otherwise, in any action
or
proceeding arising out of or relating to this Agreement or the obligations
of
the Parties hereunder, (a) any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure
lawfully to serve process, (b) that it or its property is exempt or immune
from
jurisdiction of any court anywhere or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
(c) that the suit, action or proceeding in any such court is brought in an
inconvenient forum, (d) that the venue of such suit, action or proceeding is
improper or (e) that this Agreement, or the subject matter hereof, may not
be
enforced in or by such courts.
(c) Neither
this
Agreement nor any of the rights, interests or obligations under this Agreement
may be assigned or delegated, in whole or in part, by operation of law or
otherwise, by any of the Parties without the prior written consent of the other
Parties, and any such assignment without such prior written consent shall be
null and void. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the Parties and their
respective successors and assigns.
(d) This
Agreement may
not be amended, modified or supplemented in any manner, whether by course of
conduct or otherwise, except by an instrument in writing signed on behalf of
each party and otherwise as expressly set forth herein.
(e) No
failure or delay
of any of the Parties in exercising any right or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right
or power, or any abandonment or discontinuance of steps to enforce such right
or
power, or any course of conduct, preclude any other or further exercise thereof
or the exercise of any other right or power. The rights and remedies of the
Parties hereunder are cumulative and are not exclusive of any rights or remedies
which they would otherwise have hereunder. Any agreement on the part of any
of
the Parties to any
11
such
waiver shall be valid only if set forth in a written instrument executed and
delivered by a duly authorized officer on behalf of such party.
(f) Nothing
in
this Agreement, express or implied, is intended to or shall confer upon any
Person other than the Parties and their respective successors and permitted
assigns any legal or equitable right, benefit or remedy of any nature under
or
by reason of this Agreement.
(g) This
Agreement
constitutes the entire agreement, and supersedes all prior written agreements,
arrangements, communications and understandings and all prior and
contemporaneous oral agreements, arrangements, communications and understandings
among the Parties with respect to the subject matter of this Agreement. This
Agreement shall not be deemed to contain or imply any restriction, covenant,
representation, warranty, agreement or undertaking of any party with respect
to
the matters contemplated hereby other than those expressly set forth herein,
and
none shall be deemed to exist or be inferred with respect to the subject matter
hereof. Notwithstanding any oral agreement of the Parties or their
representatives to the contrary, no party to this Agreement shall be under
any
legal obligation to enter into or complete the matters contemplated hereby
unless and until this Agreement shall have been executed and delivered by each
of the Parties.
(h) The
Parties agree
that irreparable damage would occur in the event that any of the provisions
of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached (a “Breach”).
Accordingly, each of the Parties shall be entitled to specific performance
of
the terms hereof, including an injunction or injunctions to prevent breaches
of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any New York State or federal court sitting in the Borough of
Manhattan in the City of New York, this being in addition to any other remedy
to
which they are entitled at law or in equity. Each of the Parties further hereby
waives (a) any defense in any action for specific performance that a remedy
at
law would be adequate and (b) any requirement under any law to post security
as
a prerequisite to obtaining equitable relief. In addition, each of the Parties
agrees that in the event of a Breach by such party, the non-breaching party
shall be entitled to payment by the breaching party of any expenses, including
without limitation, the reasonable fees and expenses of legal counsel, that
such
non-breaching party may incur in connection with its enforcement of the
provisions of this Agreement.
(i) Whenever
possible, each provision or portion of any provision of this Agreement shall
be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision or portion of any provision of this Agreement is held
to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or portion of any provision in such jurisdiction,
and this Agreement shall be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision or portion
of any provision had never been contained herein.
(j) THE
PARTIES
TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN
ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE OBLIGATIONS OF EACH OF THE PARTIES HEREUNDER.
12
(k) All
notices and
other communications hereunder shall be in writing and shall be deemed duly
given (a) on the date of delivery if delivered personally, or if by facsimile,
upon written confirmation of receipt by facsimile or otherwise, (b) on the
first
business day following the date of dispatch if delivered utilizing a next-day
service by a recognized next-day courier or (c) on the earlier of confirmed
receipt or the fifth business day following the date of mailing if delivered
by
registered or certified mail, return receipt requested, postage prepaid. All
notices hereunder shall be delivered to the addresses set forth below, or
pursuant to such other instructions as may be designated in writing by the
party
to receive such notice:
if
to Delcath to:
Delcath
Systems, Inc.
0000
Xxxxxx Xxxxxx
Xxxxxxxx,
Xxxxxxxxxxx 00000
Attention:
Mr. X. X. Xxxx
Facsimile:
(000) 000-0000
with
a copy (which shall not constitute notice) to:
Xxxxxx,
Xxxx & Xxxxxxxx LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxx X. Xxxxxx, Esq.
Xxxx
X.
Xxxxxxxxxx, Esq.
Facsimile:
(000)
000-0000
if
to Laddcap to:
Laddcap
Value Partners LP
000
Xxxxx
Xxxxxx, Xxxxx 000
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xx. Xxxxxx X. Xxxx
Facsimile:
(000) 000-0000
with
a copy (which shall not constitute notice) to:
Xxxxx
Xxxxxxxxxx Xxxxxxxx & Xxxxxxxx, P.C.
Xxx
Xxxxx
Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxx
Xxxxxx, Xxx Xxxx 00000
Attention:
Xxxxxxx X. Xxxxx, Esq.
Facsimile:
(000) 000-0000
(l) When
a
reference is made in this Agreement to a Section of this Agreement, such
reference shall be to a Section of this Agreement unless otherwise indicated.
The headings contained in this Agreement are for convenience of reference
purposes only and shall not affect in any way the
13
meaning
or interpretation of this Agreement. All words used in this Agreement will
be
construed to be of such gender or number as the circumstances require. The
word
“including” and words of similar import when used in this Agreement will mean
“including, without limitation,” unless otherwise specified.
(m) Each
of the
Parties acknowledges that each party to this Agreement has been represented
by
counsel in connection with this Agreement and the obligations of each of the
Parties hereunder. Accordingly, any rule of law or any legal decision that
would
require interpretation of any claimed ambiguities in this Agreement against
the
drafting party has no application and is expressly waived.
(n) This
Agreement may
be executed in two or more counterparts, all of which shall be considered as
one
and the same instrument and shall become effective when one or more counterparts
have been signed by each of the Parties and delivered to the other
party.
(o) This
Agreement may
be executed by facsimile signature and a facsimile signature shall constitute
an
original for all purposes.
[Remainder
of page intentionally left blank.]
14
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first written above.
LADDCAP
VALUE PARTNERS LP
By
LADDCAP VALUE ASSOCIATES LLC,
its
General Partner
By:
/s/ Xxxxxx X.
Xxxx
Name:
Xxxxxx X. Xxxx
Title:
Managing Member
LADDCAP
VALUE ASSOCIATES LLC
By:
/s/ Xxxxxx X.
Xxxx
Name:
Xxxxxx X. Xxxx
Title:
Managing Member
LADDCAP
VALUE ADVISORS LLC
By: /s/
Xxxxxx X.
Xxxx
Name: Xxxxxx X. Xxxx
Title: Managing Member
XXXXXX
X.
XXXX
/s/
Xxxxxx X.
Xxxx
DELCATH
SYSTEMS, INC.
By: /s/
X. X.
Xxxx
Name: X. X. Xxxx
Title: President
[Signature
Page to Settlement Agreement]
Exhibit
A
Terms
of
Xxxxx Settlement
| 1. |
Xxxxx
admits to deleting certain Delcath emails and computer files and
to taking
possession of Delcath confidential and proprietary information.
|
| 2. |
Xxxxx
provides a letter to Delcath's Board and employees acknowledging
that he
deleted Delcath emails and computer files and that he took possession
of
Delcath confidential and proprietary information.
|
| 3. |
Xxxxx
agrees to abide by the current terms of the temporary restraining
order
issued in connection with the CT Litigation (the “TRO”)
and will refrain from any use or disclosure of any Delcath information
in
any way. Terms of TRO to be incorporated into settlement agreement.
TRO to
be dissolved per #6 below.
|
| 4. |
Xxxxx
provides hard drive to Kroll; Kroll removes personal information
and
returns personal information to Xxxxx; hard drive provided to Delcath.
|
| 5. |
Xxxxx
returns to Delcath all Delcath material in his possession, custody
and
control.
|
| 6. |
CT
Litigation is dismissed with prejudice (TRO dissolved). Exchange
of mutual
releases (carve out for breach of settlement agreement).
|
| 7. |
Xxxxx
to agree to have no further contact with a list to be provided of
Delcath
employees, consultants and other individuals with whom Delcath has
a
business relationship.
|
| 8. |
Xxxxx
to agree to a 12-month non-compete clause and thereafter agrees to
have
nothing to do with Delcath in any capacity and will not participate
or
assist in any manner with any individual or group attempting to change
the
board composition, management or activities of Delcath.
|
| 9. |
Each
party bears its own costs and legal fees (i.e., no indemnification
from
Delcath sought for legal fees).
|
Exhibit
B
Form
of
Joint Press Release
