EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 2nd day of July, 2007 by and between Delcath Systems, Inc., a Delaware
corporation (hereinafter called the "Company"), and Xxxxxxx X. Xxxxx
(hereinafter called the "Executive").
RECITALS
WHEREAS, the Company desires to employ Executive as the Chief Executive
Officer of the Company; and
WHEREAS, Executive is willing to be employed as the Chief Executive
Officer of the Company in the manner provided for herein, and to perform the
duties of the Chief Executive Officer of the Company upon the terms and
conditions herein set forth;
AGREEMENT
NOW, THEREFORE, in consideration of the promises and mutual covenants
set forth herein, the parties agree as follows:
1. EMPLOYMENT.
1.1 EMPLOYMENT AND TERM. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to serve the Company, on the terms
and conditions set forth herein, for the period commencing on the date hereof
and expiring on July 1, 2009 (the "Initial Term") unless sooner terminated as
hereinafter set forth; provided, however, that commencing on July 1, 2009 the
Initial Term of this Agreement shall automatically be extended for one
additional year unless at least ninety (90) days prior to such date, the
Executive shall have delivered to the Company written notice that the term of
the Executive's employment hereunder will not be extended.
1.2 DUTIES OF EXECUTIVE. The Executive shall serve as the
Chief Executive Officer of the Company and shall have powers and authority
superior to any other officer or employee of the Company or of any subsidiary of
the Company, including, without limitation, the duties and responsibilities
customarily associated with a chief executive (e.g., control of day-to-day
operations, signing checks, hiring and firing, etc.). The Executive shall be
required to report solely to, and shall be subject solely to the supervision and
direction of the Board of Directors and no other person or group shall be given
authority to supervise or direct Executive in the performance of his duties. In
addition, the Executive shall regularly consult with the Chairman of the Board
with respect to the Company's business and affairs. The Executive shall devote
substantially all his working time and attention to the business and affairs of
the Company (excluding any vacation and sick leave to which the Executive is
entitled), render such services to the best of his ability, and use his
reasonable best efforts to promote the interests of the Company. It shall not be
a violation of this Agreement for the Executive to (A) serve on corporate, civic
or charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions, and (C) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company in
accordance with this Agreement. The Executive's obligations hereunder shall run
only to the Company, and not to the Company's affiliates, if any.
1.3 PLACE OF PERFORMANCE. In connection with his employment by
the Company, the Executive shall be based at the Company's principal executive
offices except for travel reasonably necessary in connection with the Company's
business.
2. COMPENSATION.
2.1 BASE SALARY. Commencing on the effective date of this
Agreement, the Executive shall receive a base salary at the monthly rate of not
less than $33,000 (the "Base Salary") during the term of this Agreement, with
such Base Salary payable in installments consistent with the Company's normal
payroll schedule, subject to applicable withholding and other taxes. The Base
Salary shall not be decreased for any reason.
2.2 INCENTIVE COMPENSATION. The Executive shall be entitled to
receive such bonus payments or incentive compensation as may be determined at
any time or from time to time by the Board (or any authorized committee thereof)
in its discretion. Such potential bonus payments and/or incentive compensation
shall be considered at least annually by the Board or committee.
2.3 STOCK OPTIONS.
(a) The Executive shall be entitled to
participate in all stock option plans (the "Plans")
in effect during the term of this Agreement.
(b) The Company hereby agrees that the
Executive shall receive stock options to purchase
50,000 shares of common stock for each six months that this Agreement is in
effect. Such options shall be priced based on the closing price of the Company's
common stock on each applicable six month anniversary. The Company's
compensation committee shall determine the vesting schedule for such options in
accordance with its policy.
(c) Upon execution of this Agreement, the
Company will issue Executive (i) an option to
purchase 50,000 shares of common stock at $3.90 per share (representing the
closing price on the day that this offer was made to the Executive); and (ii) an
option to purchase 100,000 shares of common stock at $5.85 per share
(representing the same closing price as set forth immediately above multiplied
by 1.5). Such options shall vest as determined by the Compensation Committee.
(d) The Options shall become immediately
exercisable as to 100% of the shares of Common
Stock not otherwise vested upon any termination of Executive's employment
pursuant to Section 4.4 or 4.5 hereof, it being agreed that the Company shall
vest the unvested portion of the Executive's Option shares and cooperate in good
faith to afford the Executive the right to accelerate the exercise of the Option
in full immediately prior to any "Change in Control" (as hereinafter defined).
In the event that Executive terminates or is terminated pursuant to Section 4.4
or 4.5, Executive shall have the greater of (i) five years after termination, or
(ii) the remaining term of the option, in order to exercise his options.
(e) The Company shall take all action
reasonably requested by the Executive to permit any
"cashless" exercise of the Options that is permitted under the Plan.
(f) Upon proper exercise of an Option, the
Executive shall be deemed for all purposes the
owner of the shares of Common Stock that are purchasable upon such exercise.
(g) The provisions of the Plan shall not be
adversely modified as to the Executive without
the Executive's prior written consent.
(h) All Option shares shall be fully
adjusted for events such as splits.
2
2.4 STOCK ISSUANCES. Upon execution of this Agreement, the
Company will issue Executive 25,000 shares of common stock as a signing bonus.
Thereafter, on each successive twelve month anniversary of this Agreement, the
Company shall issue Executive an additional 25,000 shares of its common stock.
2.5 MILESTONE BONUSES.
(a) On the date that the first non-NCI
patient is treated in the Company's ongoing Phase
III Melphalan trial, the Company will issue Executive 10,000 shares of its
common stock.
(b) On the date that the 46th patient is
enrolled in the Company's ongoing Phase III
Melphalan trial, the Company will issue Executive 20,000 shares of its common
stock.
(c) On the date that the Company consummates
any equity-based capital offering which
results in gross proceeds of in excess of $15 million (over any consecutive 12
month period) which offering is completed on a post-money valuation basis of in
excess of $175 million, the Company will issue the Executive 25,000 shares of
its common stock.
(d) On the date that the Company submits a
PMA to the FDA for the Delcath System the
Company will issue the Executive 50,000 shares of its common stock.
(e) On the date that the FDA approves the
Delcath System, the Company will issue the
Executive 75,000 shares of its common stock.
(f) On the date that the Company enters into
a binding agreement for the sale of more than
50% of its common stock or a sale of substantially all of its assets at a price
of in excess of $10.00 per share (the "Sale"), the Company shall issue Executive
100,000 shares of its common stock plus an additional 20,000 shares of its
common stock for each $1.00 per share over $10.00 per share that the Sale
results in.
3. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
3.1 EXPENSE REIMBURSEMENT. During the term of Executive's
employment hereunder, the Company, upon the submission of reasonable supporting
documentation by the Executive, shall reimburse the Executive for all reasonable
expenses actually paid or incurred by the Executive in the course of and
pursuant to the business of the Company, including expenses for travel, lodging
and entertainment.
3.2 INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Initial Term, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable to
other key executives of the Company and its subsidiaries, in each case
comparable to those currently in effect or as subsequently amended. Such plans,
practices, policies and programs, in the aggregate, shall provide the Executive
with compensation, benefits and reward opportunities at least as favorable as
the most favorable of such compensation, benefits and reward opportunities
provided at any time hereafter with respect to other key executives.
3.3 WELFARE BENEFIT PLANS. During the Initial Term, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its subsidiaries
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs), at least as favorable as the most
favorable of such plans, practices, policies and programs in effect at any time
hereafter with respect to other key executives.
3
3.4 VACATION. During the Initial Term, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its subsidiaries as in effect at any
time hereafter with respect to other key executives of the Company and its
subsidiaries; PROVIDED, HOWEVER, that in no event shall Executive be entitled to
fewer than four weeks paid vacation per year, as well as pay for holidays
observed by the Company.
4. TERMINATION.
4.1 TERMINATION FOR CAUSE. Notwithstanding anything contained
to the contrary in this Agreement, this Agreement may be terminated by the
Company for Cause. As used in this Agreement, "Cause" shall only mean (i) an act
or acts of personal dishonesty taken by the Executive and intended to result in
substantial personal enrichment of the Executive at the expense of the Company,
(ii) subject to the following sentences, repeated violation by the Executive of
the Executive's material obligations under this Agreement which are demonstrably
willful and deliberate on the Executive's part and which are not remedied in a
reasonable period of time after receipt of written notice from the Company's
Board of Directors, or (iii) the conviction of the Executive for any criminal
act which is a felony. Upon any reasonable and good faith determination by the
Company's Board of Directors that Cause exists under clause (i) of the preceding
sentence and clause (ii) of the preceding sentence (to the extent the violation
under said clause (ii) has not been cured by the Executive), the Company shall
cause a special meeting of the Board to be called and held at a time mutually
convenient to the Board and Executive, but in no event later than ten (10)
business days after Executive's receipt of the notice contemplated by clauses
(i) and (ii). Executive shall have the right to appear before such special
meeting of the Board with legal counsel of his choosing to refute any
determination of Cause specified in such notice, and any termination of
Executive's employment by reason of such Cause determination shall not be
effective until Executive is afforded such opportunity to appear. Any
termination for Cause pursuant to clause (i) or (iii) of the first sentence of
this Section 4.1 shall be made in writing to Executive, which notice shall set
forth in detail all acts or omissions upon which the Company is relying for such
termination. Upon any termination pursuant to this Section 4.1, the Executive
shall be entitled to be paid his Base Salary to the date of termination and the
Company shall have no further liability hereunder (other than for reimbursement
for reasonable business expenses incurred prior to the date of termination).
4.2 DISABILITY. Notwithstanding anything contained in this
Agreement to the contrary, the Company, by written notice to the Executive,
shall at all times have the right to terminate this Agreement, and the
Executive's employment hereunder, if the Executive shall, as the result of
mental or physical incapacity, illness or disability, fail to perform his duties
and responsibilities provided for herein for a period of more than one hundred
twenty (120) consecutive days in any 12-month period. Upon any termination
pursuant to this Section 4.2, the Executive shall be entitled to be paid his
Base Salary for the remaining term of the Agreement. In the event that the
Agreement has less than six months remaining at such time, Executive shall be
entitled to a payment equal to six months of his Base Salary. In addition,
Executive shall be entitled to reimbursement for all business expenses incurred
prior to his disability.
4.3 DEATH. In the event of the death of the Executive during
the term of his employment hereunder, the Company shall pay to the estate of the
deceased Executive an amount equal to the Base Salary for the remaining term of
this Agreement. In the event that the Agreement has less than six months
remaining at such time, Executive shall be entitled to a payment equal to six
months of his Base Salary. In addition, Executive shall be entitled to
reimbursement for all business expenses incurred prior to his death.
4.4 OPTIONAL TERMINATION Notwithstanding anything contained in
this Agreement to the contrary, the Executive, by giving thirty days notice to
the Company, shall one year after the date of this Agreement, have the right to
terminate this Agreement at his sole discretion. Upon any termination pursuant
to this Section 4.4, the Executive shall be entitled to be paid his Base Salary
to the date of termination and the Company shall have no further liability
hereunder (other than for reimbursement for
4
reasonable business expenses incurred prior to the date of termination and as to
option vesting as per Section 2.3(d)), unless the Executive and the Company
agree to a different arrangement.
4.5 TERMINATION WITHOUT CAUSE. At any time the Company shall
have the right to terminate Executive's employment hereunder by written notice
to Executive; provided, however, that the Company shall (i) pay to Executive any
unpaid Base Salary accrued through the effective date of termination specified
in such notice, and any pro-rata bonus that would be payable had Executive
completed a full year of employment, and (ii) pay to the Executive in a lump
sum, in cash within 30 days after the date of employment termination, an amount
equal to the greater of (i) 100% of his annual Base Salary then in effect, or
(ii) the balance of the Executive's Base Salary from the effective date of
termination through the expiration of the Initial Term or any renewal term then
in effect. In addition, the Company shall continue to pay the Executive's health
and disability insurance for the longer of a period of twelve months or the
remaining term of this agreement. The Company shall be deemed to have terminated
the Executive's employment pursuant to this Section 4.4 if such employment is
terminated (i) by the Company without Cause, (ii) by the Executive voluntarily
for "Good Reason", or (iii) as a result of a Charge in Control. For purposes of
this Agreement, "Good Reason" means:
(a) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 1.2 of this Agreement, or any other
action by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(b) any failure by the Company to comply with any of
the provisions of Section 2, Section 3, or Section 16 of this Agreement, other
than an isolated, insubstantial and inadvertent failure not occurring in bad
faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(c) the Company's requiring the Executive to be based
at any office or location more than 50 miles from its current executive offices,
except for travel reasonably required in the performance of the Executive's
responsibilities;
(d) any change in the designation of the particular
executive that the Executive is obligated to report to under Section 1.2 hereof;
(e) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this Agreement;
(f) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement; or
(g) any termination by the Executive for any reason
during the three-month period following the effective date of any "Change in
Control".
5. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall mean:
(d) The acquisition (other than by or from the Company), at
any time after the date hereof, by any person, entity or "group", within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act"), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more of either the then
outstanding shares of common stock or the combined voting power of the Company's
then outstanding voting securities entitled to vote generally in the election of
directors; or
5
(e) All or any of the six (6) individuals who, as of the date
hereof, constitute the Board (as of the date hereof the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board, provided that any
person becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board (other
than an election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election contest relating
to the election of the directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for
purposes of this Agreement, considered as though such person were a member of
the Incumbent Board; or
(f) Approval by the shareholders of the Company of (A) a
reorganization, merger or consolidation with respect to which persons who were
the shareholders of the Company immediately prior to such reorganization, merger
or consolidation do not, immediately thereafter, own more than 75% of the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated company's then outstanding voting
securities, (B) a liquidation or dissolution of the Company, or (C) the sale of
all or substantially all of the assets of the Company, unless the approved
reorganization, merger, consolidation, liquidation, dissolution or sale is
subsequently abandoned.
(g) The approval by the Board of the sale, distribution and/or
other transfer or action (and/or series of sales, distributions and/or other
transfers or actions from time to time or over a period of time), that results
in the Company's ownership of less than 50% of the Company's current assets.
6. RESTRICTIVE COVENANTS.
6.1 NONDISCLOSURE. During his employment and for twelve (12)
months thereafter, Executive shall not divulge, communicate, use to the
detriment of the Company or for the benefit of any other person or persons, or
misuse in any way, any Confidential Information (as hereinafter defined)
pertaining to the business of the Company, unless required to do so by a
governmental agency or court of law. Any Confidential Information or data now or
hereafter acquired by the Executive with respect to the business of the Company
shall be deemed a valuable, special and unique asset of the Company that is
received by the Executive in confidence and as a fiduciary, and Executive shall
remain a fiduciary to the Company with respect to all of such information. For
purposes of this Agreement, "Confidential Information" means all material
information about the Company's business disclosed to the Executive or known by
the Executive as a consequence of or through his employment by the Company
(including information conceived, originated, discovered or developed by the
Executive) after the date hereof, and not generally known.
6.2 NONSOLICITATION OF EMPLOYEES. While employed by the
Company and for a period of twelve (12) months thereafter, Executive shall not
directly or indirectly, for himself or for any other person, firm, corporation,
partnership, association or other entity, attempt to employ or enter into any
contractual arrangement with any employee or former employee of the Company,
unless such employee or former employee has not been employed by the Company for
a period in excess of six months. Notwithstanding the foregoing, the Executive
shall not be restricted in hiring any person who responds to any general
solicitation for employees or public advertising of employment opportunities
(including through the use of employment agencies) not specifically directed at
any such person.
6.3 COVENANT NOT TO COMPETE. Executive will not, at any time,
during the term of this Agreement, and for one (1) year thereafter, either
directly or indirectly, engage in, with or for any enterprise, institution,
whether or not for profit, business, or company, competitive with the business
(as identified herein) of the Company as such business may be conducted on the
date thereof, as a creditor, guarantor, or financial backer, stockholder,
director, officer, consultant, advisor, employee, member, or otherwise of or
through any corporation, partnership, association, sole proprietorship or other
entity; provided, that an investment by Employee, his spouse or his children is
permitted if such investment is not more than four percent (4%) of the total
debt or equity capital of any such competitive enterprise or
6
business. As used in this Agreement, the business of Employer shall be deemed to
include any business which directly competes with the Company in the medical
device industry. The covenant not to compete for one year after termination
shall only be effective if the Executive has received all compensation due to
him pursuant to this Agreement. The Company shall have the right in its sole
discretion to waive the non-compete.
6.4 INJUNCTION. It is recognized and hereby acknowledged by
the parties hereto that a breach by the Executive of any of the covenants
contained in Section 6.1, 6.2 or 6.3 of this Agreement will cause irreparable
harm and damage to the Company, the monetary amount of which may be virtually
impossible to ascertain. As a result, the Executive recognizes and hereby
acknowledges that the Company shall be entitled to an injunction from any court
of competent jurisdiction enjoining and restraining any violation of any or all
of the covenants contained in this Section 6 by the Executive or any of his
affiliates, associates, partners or agents, either directly or indirectly, and
that such right to injunction shall be cumulative and in addition to whatever
other remedies the Company may possess.
7. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
8. NOTICES: Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or when deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid, or via overnight
courier addressed as follows:
If to the Company: Delcath Systems, Inc.
0000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx, XX 00000
WITH A COPY TO: Xxxxxxx Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
If to the Executive: Xxxxxxx X. Xxxxx
0 Xxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxx 00000
or to such other addresses as either party hereto may from time to time give
notice of to the other in the aforesaid manner.
9. SUCCESSORS.
(h) 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.
(i) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(j) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent
7
that the Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law or otherwise.
10. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
11. WAIVERS. The waiver by either party hereto of a breach or violation
of any term or provision of this Agreement shall not operate nor be construed as
a waiver of any subsequent breach or violation.
12. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement.
13. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
(other than the parties hereto and, in the case of Executive, his heirs,
personal representative(s) and/or legal representative) any rights or remedies
under or by reason of this Agreement.
14. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement. The Company
agrees to pay, to the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to Section 15 of this
Agreement), plus in each case interest at the applicable Federal rate provided
for in Section 7872(f)(2) of the Code.
8
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
DELCATH SYSTEMS, INC
BY: /S/ XXXXXX XXXXXXXXX
----------------------------------------
XXXXXX XXXXXXXXX - CHAIRMAN OF THE BOARD
/S/ XXXXXXX X. XXXXX
----------------------------------------
XXXXXXX X. XXXXX
