Document:

exh10-27.htm

Exhibit 10.27

 

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into this 16th day of April 2010, by and between Delcath Systems, Inc., a Delaware corporation (the “Company”), and Peter J. Graham (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 Executive Vice President and General Counsel 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.

	
Term and Duties.

 

1.1       Term.  The Company does hereby hire, engage and employ the Executive beginning on a date to be mutually agreed, not later than May 3, 2010 (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.

 

1.2       Duties.  During the Period of Employment, the Executive shall serve the Company as its Executive Vice President and General Counsel and shall have the powers, authorities, duties, and obligations of management usually vested in the office of the General Counsel 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 Chief Executive Officer (“CEO”) or Board of Directors (the “Board”) may assign from time to time, all subject to the lawful 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).  During the Period of Employment, the Executive shall report to the Chief Executive Officer.

 

  

  

  

1.3       No Other Employment; Minimum Time Commitment.  During the Period of Employment, the Executive shall (i) devote substantially all of the Executive’s business 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, 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 Board’s approval.

 

1.4       No Breach of Contract.  The Executive represents to the Company that: (i) the Executive is not bound by any employment, consulting, non-compete, confidentiality, trade secret, or similar agreement or any judgment, order, or decree that would prevent, or be violated by, the Executive entering into this Agreement or carrying out his duties hereunder; and (ii) 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.

 

1.5       Location.  The Executive’s principal place of employment shall be the Company’s principal corporate 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 may be required to travel from time to time in the course of performing his duties for the Company.  As of April 22, 2010, the Company’s principal corporate office will be located at 810 Seventh Avenue, New York, New York and any relocation shall require approval of the Board.

 

2.         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 CEO and consent of the Executive, for an additional period of one year.  Notwithstanding the foregoing, the Period of Employment is subject to earlier termination as provided below in this Agreement.  Failure of the CEO 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.

 

	
3.

	
Compensation.

 

3.1       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 Base Salary shall be at an annualized rate of Two Hundred Seventy Thousand and 00/100 Dollars ($270,000.00) and shall be subject to an annual review by the Compensation Committee (as defined in Section 3.2) or the Chief Executive Officer, as the case may be.

 

  

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3.2       Incentive Bonus.  The Executive shall be eligible to receive an incentive bonus (“Incentive Bonus”) for each calendar year during the Period of Employment (each, a “Bonus Year”); provided that the Executive must be employed by the Company on December 31 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 30% 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”).  For the Bonus Year ending December 31, 2010, any Incentive Bonus will be pro-rated.  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.  Should the Executive’s employment with the Company terminate as a result of an Involuntary Termination (as such term is defined in Section 5.5), after the close of a Bonus Year but before the bonus payment date for such Bonus Year, Executive shall be eligible to receive any Incentive Bonus as determined by the Compensation Committee for such Bonus Year.  Any Incentive Bonus due under this section will be paid not later than March 15th of the calendar year following the end of the Bonus Year.

 

	
  

	
3.3

	
Stock Option Grant.

 

(a)             On the Effective Date, the Company will grant the Executive a stock option to purchase 55,000 of the issued and outstanding shares of the Company’s common stock at a price per share equal to the Fair Market Value (as defined in the 2009 Incentive Stock Plan) on the date of grant (the stock options to purchase 55,000 shares of the Company’s common stock described in this paragraph, the “Option”).

 

(b)             The Option will vest with respect to one third of the shares subject to the Option on each of the annual anniversaries of the Effective Date, subject to the Executive’s continued employment by the Company through the respective anniversary.  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 Company’s 2009 Stock Incentive Plan).

 

(c)             The Option shall be granted under the Company’s 2009 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 the plan.

 

(d)             The Executive will also be eligible for an annual grant of stock options to purchase shares of the Company’s common stock, and/or grants of shares of common stock or restricted stock, in the sole discretion of the Compensation Committee, subject to such terms and

 

  

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conditions as set forth in the written documentation to be provided by the Company to the Executive to evidence the grant.

 

	
4.

	
Benefits.

 

4.1       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.

 

4.2       Vacation.  During the first year of this Agreement, the Executive shall be entitled to a pro-rated portion of the greater of a) four (4) weeks of paid vacation per calendar year; or b) the amount of paid vacation Executive would be entitled to according to Company policy.  Thereafter, during the remainder of the Period of Employment, Executive shall be entitled to the greater of a) four (4) weeks of paid vacation per calendar year; or b) the amount of paid vacation Executive would be entitled to according to Company policy.

 

4.3       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.  Manner of travel shall be according to  Company policy.  Reasonable expenses shall be deemed to include without limitation continuing legal education expenses, maintenance of state attorney licensing fees, and reasonable (as determined by the CEO) professional society dues and fees.

 

	
5.

	
Termination.

 

5.1       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).

 

5.2       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.

 

5.3       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

 

  

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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:

 

(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 12 months (the period described as 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 employment with the Company terminates.

 

(c)             Notwithstanding the foregoing provisions of this Section 5.3, if the Executive breaches his obligations under Section 6 or any material obligation 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 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 most recently ended Bonus Year, payable at the time provided in Section 3.2.

 

	
  

	
5.4

	
Release; Exclusive Remedy.

 

(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 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

 

  

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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 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 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 based on the information then known to it, that one or more of the following has occurred: (1) 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; (2) the Executive has engaged in acts of fraud, dishonesty, gross negligence, or gross misconduct, including abuse of controlled substances, that is injurious to the Company, its Affiliates or any of their customers, clients or employees; (3) the Executive willfully fails to perform or uphold his duties under this Agreement and/or fails to comply with reasonable and lawful directives of the Board; (4) the Executive is no longer admitted to practice law in New York State or is no longer in good standing with the New York State Bar; or (5) any breach by the Executive of any provision of Sections 1 or 6, any material breach by the Executive of any other contract he is a party to with the Company or any of its Affiliates, including a violation of the Code of Ethics or another material written policy.

 

  

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(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: (a) a material diminution in the Executive’s rate of Base Salary; (b) a material diminution in the Executive’s authority, duties, or responsibilities; (c) 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 (d) 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 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 such longer period shall 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).

 

5.6           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       Limitation on Benefits.

 

(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 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

 

  

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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 Sarbanes-Oxley.

 

(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 any portion of the Severance Benefit that constitutes deferred compensation under Section 409A of the Code until the earlier of (i) the date which is six (6) months after his 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 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 Sarbanes-Oxley 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.

	
Protective Covenants.

 

	
  

	
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

 

  

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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 make available to the Company and its counsel the documents and other information sought with as much in advance of the return date as possible, 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 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) that 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 mark 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

 

  

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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       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 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, executive, 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 and demonstrably 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 material businesses, including, without limitation, the research, development, identification or marketing of targeted regional cancer or infectious disease 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       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

 

  

11

  

such individual’s employment relationship with the Company or such Affiliate has been terminated.

 

6.4       Non-Disruption of Other Business Relationships.  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.

 

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, 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.

 

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.

 

  

12

  

6.7       Enforcement.  Without limiting the generality of Section 16, 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 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       Additional Documentation.  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.

 

7.         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.

 

8.         Successors and Assigns.  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.  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.

 

9.         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, the Board, or the CEO under this Agreement shall be made in their sole discretion.

 

  

13

  

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.

 

	
11.

	
Governing Law; Arbitration; Waiver of Jury Trial.

 

11.1     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.

 

11.2     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.

 

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.

 

12.       Severability.  The parties desire 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 is found 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 shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.  To this end, the provisions of this Agreement are declared to be severable.  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

 

  

14

  

provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

 

13.       Entire Agreement.  This Agreement together with the Indemnification Agreement as attached hereto as Exhibit B and the Stock Option Grant Letter as described in Section 3.3(c), 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 or offer letter 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.

 

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.

 

15.       Waiver.  No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.  Failure or delay on the part of a party to exercise fully any right, remedy, power or privilege under this Agreement shall not operate as a waiver thereof.  Any single or partial exercise of any right, remedy, power, or privilege shall not preclude any other or further exercise of the same or of any right, remedy, power or privilege.  Waiver of any right, remedy, power or privilege with respect to any occurrence shall not be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence.

 

16.       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.

 

17.       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

 

  

15

  

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.

 

if to the Company, to the address listed below or the then-current principal corporate office:

 

	  	
Delcath Systems, Inc.

	  	
Rockefeller Center

	  	
600 Fifth Avenue, 23rd Floor

	  	
New York, NY  10020

	  	
Facsimile: (212) 489-2102

	  	
Attn:  Chief Executive Officer

	  	  
	  	
with a copy to:

 

	  	
Gregory J. Champion, Esq.

	  	
Bond, Schoeneck & King, PLLC

	  	
111 Washington Ave., 5th Floor

	  	
Albany, NY 12210

	  	
Facsimile: (518) 533-3299

if to the Executive, to the address most recently on file in the payroll records of the Company.

 

18.       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.

 

19.       Legal Counsel.  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.  In any construction to be made of this Agreement, the parties agree the Agreement 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.

 

20.       Employed Lawyers’ Liability Insurance.  Promptly following the Effective Date of this Agreement, the Company shall purchase and maintain an Employed Lawyers’ Liability Insurance policy from a nationally recognized carrier with a rating of at least A- or better covering the Executive.  Such policy shall have a minimum of no less than $5,000,000 in coverage.

 

  

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IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement as of April 16th, 2010.

 

	  	
“COMPANY”

	  	  
	  	
Delcath Systems, Inc.

	  	  	  
	  	
By:

	  /s/ Eamonn P. Hobbs
	  	
Name:

	  Eamonn P. Hobbs
	  	
Title:

	  President and CEO

	  	
“EXECUTIVE”

	 	 
	  	
Peter J. Graham

	  	  
	  	  /s/ Peter J. Graham
	  	
Executive Vice President and General Counsel

 

  

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Exhibit “A” to Employment Agreement

 

FORM OF RELEASE AGREEMENT

 

This Release Agreement (this “Release Agreement”) is entered into this ___ day of _________ 20__, by and between Peter J. Graham, an individual (“Executive”), and Delcath Systems, Inc., a Delaware corporation (the “Company”).

 

WHEREAS, Executive has been employed by the Company; and

 

WHEREAS, Executive’s employment by the Company has terminated and, in connection with the Executive’s Employment Agreement with the Company, dated as of [______________] (the “Employment Agreement”), the Company and Executive desire to enter into this Release Agreement upon the terms set forth herein;

 

NOW, THEREFORE, in consideration of the covenants undertaken and the releases contained in this Release Agreement, and in consideration of the obligations of the Company to pay severance and other benefits (conditioned upon this Release Agreement) under and pursuant to the Employment Agreement, Executive and the Company agree as follows:

 

1.           Termination of Employment.  Executive’s employment with the Company terminated on [______________, _____].  Executive waives any right or claim to reinstatement as an employee of the Company and each of its affiliates.  Executive hereby confirms that Executive does not hold any position as an officer or employee with the Company and each of its affiliates.  Executive acknowledges and agrees that Executive has received all amounts owed for his regular and usual salary (including, but not limited to, any overtime, bonus, accrued vacation, commissions, or other wages), reimbursement of expenses, and usual benefits.  Executive understands and agrees that he will not receive the payments specified in Section 5.3 of the Employment Agreement unless he executes this Release Agreement and does not revoke this Release Agreement within the time period permitted hereafter and that such amounts shall be forfeited if he breaches this Release Agreement or Section 6 of the Employment Agreement.

 

2.           Release.  Executive, on behalf of himself, his descendants, dependents, heirs, executors, administrators, assigns, and successors, and each of them, hereby covenants not to sue and fully releases and discharges the Company and each of its parents, subsidiaries and affiliates, past and present, as well as its and their trustees, directors, officers, members, managers, partners, agents, attorneys, insurers, employees, stockholders, representatives, assigns, and successors, past and present, and each of them, hereinafter together and collectively referred to as the “Releasees,” with respect to and from any and all claims, wages, demands, rights, liens, agreements or contracts (written or oral), covenants, actions, suits, causes of action, obligations, debts, costs, expenses, attorneys’ fees, damages, judgments, orders and liabilities of whatever kind or nature in law, equity or otherwise arising out of or in connection with Executive’s service as an officer, director, employee, member or manager of any Releasee or Executive’s separation from his position as an officer, director, employee, manager and/or member, as applicable, of any Releasee, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden (each, a “Claim”), which he now owns or holds or he has at any time heretofore owned or held or may in the future own or hold as against any of said Releasees (including, any Claim arising out of or in any way connected, in whole or in part, with Executive’s service as an officer, director, employee, member or manager of any Releasee, Executive’s separation from his position as an officer, director, employee, manager and/or member, as applicable, of any Releasee, or any other transactions, occurrences, acts or omissions or any loss, damage or injury in connection with Executive’s service as an officer, director, employee, member or manager of any Releasee or Executive’s separation

 

  

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from his position as an officer, director, employee, manager and/or member, as applicable, of any Releasee), whether known or unknown, suspected or unsuspected, resulting from any act or omission by or on the part of said Releasees, or any of them, committed or omitted prior to the date of this Release Agreement including, without limiting the generality of the foregoing, any Claim under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, or any other federal, state or local law, regulation, or ordinance, or any Claim for severance pay, equity compensation, bonus, sick leave, holiday pay, vacation pay, life insurance, health or medical insurance or any other fringe benefit, workers’ compensation or disability (the “Release”); provided, however, that the foregoing Release does not apply to any obligation of the Company to Executive pursuant to any rights to the severance and other benefits payable under Section 5.3 of the Employment Agreement in accordance with the terms of the Employment Agreement.  In addition, this Release does not cover any Claim that cannot be so released as a matter of applicable law.  Executive acknowledges and agrees that he has received any and all leave and other benefits that he has been and is entitled to pursuant to the Family and Medical Leave Act of 1993.

 

3.           ADEA Waiver.  Executive expressly acknowledges and agrees that by entering into this Release Agreement, Executive is waiving any and all rights or Claims that he may have arising under the Age Discrimination in Employment Act of 1967, as amended (the “ADEA”), which have arisen on or before the date of execution of this Release Agreement.  Executive further expressly acknowledges and agrees that:

 

A.           In return for this Release Agreement, the Executive will receive consideration beyond that which the Executive was already entitled to receive before entering into this Release Agreement;

 

B.           Executive is hereby advised in writing by this Release Agreement to consult with an attorney before signing this Release Agreement;

 

C.           Executive has voluntarily chosen to enter into this Release Agreement and has not been forced or pressured in any way to sign it;

 

D.           Executive was given a copy of this Release Agreement on [_________________, 20__] and informed that he had [twenty one (21)/forty five (45)] days within which to consider this Release Agreement and that if he wished to execute this Release Agreement prior to expiration of such [21-day/45-day] period, he should execute the Endorsement attached hereto;

 

E.           Executive was informed that he had seven (7) days following the date of execution of this Release Agreement in which to revoke this Release Agreement, and this Release Agreement will become null and void if Executive elects revocation during that time.  Any revocation must be in writing and must be received by the Company during the seven-day revocation period.  In the event that Executive exercises his right of revocation, neither the Company nor Executive will have any obligations under this Release Agreement.

 

4.           Proceedings.  Executive acknowledges that he has not filed any complaint, charge, claim or proceeding, if any, against any of the Releasees before any local, state or federal agency, court or other body (each individually a “Proceeding”).  Executive (i) acknowledges that he will not initiate or cause to be initiated on his behalf any Proceeding and will not participate in any Proceeding, in each case, except as required by law and (ii) waives any right he may have to benefit in any manner from any relief (whether monetary or otherwise) arising out of any Proceeding, including any Proceeding conducted by the Equal Employment Opportunity Commission (the “EEOC”).  Further, Executive understands that, by executing this Release, he will be limiting the availability of certain remedies that he

 

  

19

  

may have against the Company and limiting also his ability to pursue certain claims against the Releasees.  Notwithstanding the above, nothing in Section 2 of this Release shall prevent Executive from (i) initiating or causing to be initiated on his behalf any complaint, charge, claim or proceeding against the Company before any local, state or federal agency, court or other body challenging the validity of the waiver of his claims under the ADEA contained in this Release or (ii) initiating or participating in an investigation or proceeding conducted by the EEOC, but Executive acknowledges, and Executive intends, that this Release Agreement  precludes him from receiving any consideration, payment, or relief as a result of any such Proceeding or Claim.

 

5.           No Transferred Claims.  Executive warrants and represents that the Executive has not heretofore assigned or transferred to any person not a party to this Release Agreement any released matter or any part or portion thereof and he shall defend, indemnify and hold the Company and each of its affiliates harmless from and against any claim (including the payment of attorneys’ fees and costs actually incurred whether or not litigation is commenced) based on or in connection with or arising out of any such assignment or transfer made, purported or claimed.

 

5.           Severability.  It is the desire and intent of the parties hereto that the provisions of this Release 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 Release Agreement shall be adjudicated by an arbitrator or court of competent jurisdiction to be invalid, prohibited or unenforceable under any present or future law, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Release Agreement or affecting the validity or enforceability of such provision in any other jurisdiction; furthermore, in lieu of such invalid or unenforceable provision there will be added automatically as a part of this Release 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 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 Release Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

 

6.           Counterparts.  This Release Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

 

7.           Successors.  This Release Agreement is personal to Executive and shall not, without the prior written consent of the Company, be assignable by Executive.  This Release Agreement shall inure to the benefit of and be binding upon the Company and its respective successors and assigns and any such successor or assignee shall be deemed substituted for the Company under the terms of this Release Agreement for all purposes.  As used herein, “successor” and “assignee” shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger, acquisition of assets, or otherwise, directly or indirectly acquires the ownership of the Company, acquires all or substantially all of the Company’s assets, or to which the Company assigns this Release Agreement by operation of law or otherwise.

 

8.           Governing Law; Forum; Waiver of Jury Trial.  This Release Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (without regard to any conflicts of laws principles thereof that would give effect to the laws of another jurisdiction), and the parties submit to arbitration provisions set forth in Section 11 of the Employment Agreement as if such Section were incorporated by reference and reprinted herein (with appropriate references to this Release Agreement as the context requires).  TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, THE EXECUTIVE HEREBY WAIVES, AND COVENANTS THAT

 

  

20

  

HE WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY ACTION ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS RELEASE AGREEMENT OR ANY MATTERS CONTEMPLATED HEREBY.

 

9.           Amendment and Waiver.  The provisions of this Release Agreement may be amended and waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Release Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Release Agreement or any provision hereof.

 

10.           Descriptive Headings.  The descriptive headings of this Release Agreement are inserted for convenience only and do not constitute a part of this Release Agreement.

 

11.           Construction.  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.  The language used in this Release Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party.

 

12.           Nouns and Pronouns.  Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice-versa.

 

13.           Legal Counsel.  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.  Executive acknowledges and agrees that he has read and understands this Release Agreement completely, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Release Agreement and he has had ample opportunity to do so.

 

[The Remainder of this Page is Intentionally Left Blank]

 

 

  

21

  

The undersigned have read and understand the consequences of this Release Agreement and voluntarily sign it.  The undersigned declare under penalty of perjury under the laws of the State of [                 ] that the foregoing is true and correct.

 

EXECUTED this ________ day of ________ 20__, at_________________

 

	  	
“Executive”

 

	  	  
	  	  
	  	  
	  	
Print Name: Peter J. Graham

 

	  	
DELCATH SYSTEMS, INC., a Delaware corporation

	  	
By:

	  
	  	
Name:

	
 

	  	
Title:

	  

 

  

  

  

ENDORSEMENT

 

I, Peter Graham, hereby acknowledge that I was given [21/45] days to consider the foregoing Release Agreement and voluntarily chose to sign the Release Agreement prior to the expiration of the [21-day/45-day] period.

 

I declare under penalty of perjury under the laws of the United States and the State of [            ] that the foregoing is true and correct.

 

EXECUTED this  [____] day of [_____________ 20____].

 

	  	  
	  	
Print Name: Peter J. Grahamexh10-32.htm

Exhibit 10.32

 

 

CONFIDENTIAL TREATMENT

 

[***] Indicates that text has been omitted which is the subject of a confidential treatment request. This text has been separately filed with the Securities and Exchange Commission.

 

 

 

LICENSE, SUPPLY AND CONTRACT MANUFACTURING AGREEMENT

 

 

by and among

 

 

SYNERX PHARMA, LLC

 

 

and

 

 

BIONICHE TEORANTA

 

 

and

 

 

DELCATH SYSTEMS, INC.

 

 

* * *

 

 

50MG MELPHALAN HYDROCHLORIDE

 

FOR INJECTION VIALS FOR INTRA-ARTERIAL USE

 

 

* * *

 

 

OCTOBER 13, 2010

 

  

  

  

 

CONFIDENTIAL TREATMENT

 

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LICENSE, SUPPLY AND CONTRACT MANUFACTURING AGREEMENT

 

THIS LICENSE, SUPPLY AND CONTRACT MANUFACTURING AGREEMENT (this “Agreement”), dated as of October 13, 2010, by and between Synerx Pharma, LLC, a Pennsylvania limited liability company (“Synerx”) and Bioniche Teoranta, a limited liability company organized and existing under the laws of The Republic of Ireland (“Bioniche Pharma” and together with Synerx, “Synerx/Bioniche”) on the one hand, and Delcath Systems, Inc., a Delaware corporation (“Delcath”), on the other hand.  Each of Synerx, Bioniche Pharma and Delcath may be referred to herein as a “Party” and together as the “Parties”.

 

WHEREAS, Delcath is a specialty pharmaceutical and medical device company;

 

WHEREAS, Synerx is primarily engaged in the development of specialty generic pharmaceutical finished dosage forms;

 

WHEREAS, Bioniche Pharma currently manufactures pharmaceutical products containing melphalan hydrochloride pursuant to Synerx’s ANDA, and distributes those products throughout the Territory, under the terms of a license agreement between Synerx and Bioniche Pharma;

 

WHEREAS, Synerx and Bioniche Pharma wish to supply Product (as defined below) to Delcath and Delcath wishes to purchase Product from Bioniche; and

 

WHEREAS, the Parties desire that Delcath market and sell the Product on the terms and subject to the conditions hereinafter set forth.

 

NOW, THEREFORE, the Parties agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1     Certain Terms.  For purposes hereof, the following terms shall have the meanings set forth below:

 

“Adverse Event” means an “adverse drug experience” as such term is defined at 21 C.F.R. 310.305(b) (as such definition may be amended, supplemented or replaced from time to time) and includes any adverse event associated with the use of a drug in humans, whether or not considered drug related, including any failure of expected pharmacological action and any adverse event occurring (i) in the course of the use of a drug product in professional practice; (ii) from drug overdose, whether accidental or intentional; (iii) from drug abuse or (iv) from drug withdrawal.

 

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, is controlled by, controls, or is under common control with such

 

  

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Person.  For purposes of this definition, the term “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) as used with respect to a Person means direct or indirect beneficial or legal ownership of more than fifty (50%) percent of the voting interest in, or more than fifty (50%) percent of the equity of, or the right to appoint more than fifty (50%) percent of the directors or managers of the corporation or other business entity, or the power to direct or cause the direction of the management and policies or such corporation or entity, whether pursuant to the ownership of voting securities, by contract or otherwise.

 

“ANDA” means the abbreviated new drug application (including any amendments or supplements thereto) (ANDA 90-270) filed with the FDA by Synerx in the name of Synerx to manufacture, distribute and sell in the United States melphalan lyophilized product containing 50mg melphalan hydrochloride equivalent to 50mg melphalan and 20mg povidone (“Melphalan Hydrochloride”).

 

“API” means the active pharmaceutical ingredient for the Product.

 

“cGMP” means the current Good Manufacturing Practices regulations of the FDA (as in effect from time to time) contained in 21 C.F.R. §§ 210 and 211.

 

“CMC” means Chemistry, Manufacturing and Control.

 

“Commercially Reasonable Efforts” means, with respect to the efforts to be expended by a Party with respect to any objective, reasonable, diligent, good faith efforts to accomplish such objective.

 

“Competent Authority” shall mean the governmental, trade or manufacturing entities or agencies in the Territory responsible for the regulation of medical devices and pharmaceuticals intended for human use.

 

“Confidential Information” means the specific terms set forth in this Agreement and all trade secrets, processes, formulae, data, know-how, improvements, inventions, chemical or biological materials, techniques, marketing plans, strategies, customer lists or other information that has been created, discovered or developed by a Party or its Affiliate or that has otherwise become known to, or to which rights have been acquired by, a Party or its Affiliate (including all information and materials of a Party’s (or its Affiliates’) customers and consultants), in each case that are disclosed by such Party and/or its Affiliate to the other Party and/or its Affiliate, including those made prior to the execution of this Agreement, regardless of whether any of the foregoing is marked “confidential” or “proprietary” or communicated to the other by the disclosing Party in oral, written or graphic, or electronic form; provided, however, that Confidential Information shall not include any information:

 

(i)     that, at the time of its disclosure, is generally available in the public domain;

 

  

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(ii)     that, after its disclosure in connection herewith, becomes generally available in the public domain through no fault, act or failure to act, error, effort or breach of this Agreement by the receiving Party or its Affiliates;

 

(iii)     that becomes available to the recipient of such information from a third party who has acquired a legal right to possess and disclose such Confidential Information;

 

(iv)     that the recipient can demonstrate through written evidence was developed independently without the aid, application or use of the disclosing Party’s Confidential Information; or

 

(v)     that is known to the recipient at the time of disclosure as evidenced by prior written records.

 

“Contract Manufacturer” means NerPharMa S.r.l., or such other manufacturer as the FDA may approve at Synerx’s request.

 

“Contract Year” means a twelve month period beginning on the first day of the third month following the month in which Delcath receives notification from the FDA of approval of its NDA.

 

“Deliver” or “Deliveries” or “Delivery” means the day upon which Synerx issues a quality release notification including a certificate of analysis (whether in electronic or written form) to Delcath and Bioniche Pharma notifying Delcath and Bioniche Pharma that the Product has been tested against and confirmed to meet Specifications.

 

“Effective Date” means the date of this Agreement as written above.

 

“Excess Requirements” has the meaning set forth in Section 3.11(b).

 

“FDA” means the United States Food and Drug Administration or any successor government agency.

 

“[***]” has the meaning set forth in Section 3.5.

 

“Force Majeure Event” has the meaning set forth in Section 9.1.

 

“GAAP” means U.S. generally accepted accounting principles as in effect from time to time.

 

“Incremental Purchase Order” has the meaning set forth in Section 3.4(b).

 

“Indemnitee” has the meaning set forth in Section 6.7.

 

  

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“Indemnitor” has the meaning set forth in Section 6.7.

 

“Ineligible Person” has the meaning set forth in Section 6.3(a).

 

“[***]” has the meaning set forth in Section 3.5.

 

“Initial Term” has the meaning set forth in Section 7.1.

 

“Intellectual Property” means all (i) patent applications, continuation applications, continuation in part applications, divisional applications, any corresponding foreign patent applications to any of the foregoing, and any patents that may grant or may have been granted on any of the foregoing, including reissues, re-examinations and extensions; (ii) right in know-how, trade secrets, inventions (whether patentable or otherwise), data, processes, technologies, techniques, procedures, compositions, designs, devices, methods, formulas, protocols and information, whether patentable or not; (iii) copyrightable works, copyrights and applications, registrations and renewals; (iv) trademarks, trademark applications and renewals thereof, trade names, trade dress and service marks; (v) other intellectual proprietary rights; in each case, whether or not registered, applied for or granted; and (vi) copies and tangible memorializations of any one or more of the foregoing.

 

“License” has the meaning set forth in Section 2.1.

 

“Licensed Form” has the meaning set forth in Section 2.1.

 

“Losses” means any and all damages, claims, liabilities, fines, penalties, costs, fees and expenses (including the reasonable cost of investigations, settlement and arbitration negotiation costs and reasonable attorneys’ fees, accounting fees and expert fees), as limited by the provisions of Section 6.9 hereof.

 

“NDA” means the new drug application (including any amendments or supplements thereto) filed with the FDA (No. 201848) by Delcath in the name of Delcath to distribute and sell in the United States Product as incorporated into PHP Systems.

 

“Manufacturing Requirements” shall have the meaning as set forth in Section 3.2.

 

“Person” means a natural person, corporation, partnership, company or other entity.

 

“PHP System” means the Delcath chemosaturation system for Percutaneous Hepatic Perfusion as such name may be modified from time to time by Delcath in its sole and absolute discretion.

 

“Product” means one carton containing one single-use vial of melphalan lyophilized product for injection (containing 50mg melphalan hydrochloride equivalent

 

  

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to 50 mg melphalan, and 20 mg povidone) together with one sterile diluent vial (containing 0.2 g sodium citrate, 6.0 ml propylene glycol, 0.52 ml ethanol 96%, and water for injection to a total of 10 ml) solely for intra-arterial use in Percutaneous Hepatic Perfusion as defined by FDA requirements, and labeled in accordance with FDA requirements and the terms hereof.

 

“Product Approval” means the non-tentative approval of the NDA by the FDA as evidenced by a written communication from the FDA, in accordance with 21 C.F.R. §314.105.

 

“Product Warranty” has the meaning set forth in Section 6.4.

 

“Purchase Order” has the meaning set forth in Section 3.4.

 

“Purchase Price” has the meaning set forth in Section 4.2.

 

“Quality Assurance Agreement” has the meaning set forth in Section 10.14.

 

“Renewal Term” has the meaning set forth in Section 7.1.

 

“Rolling Forecast” has the meaning in Section 3.4.

 

“Shortfall Payment” has the meaning set forth in Section 3.11.

 

“Specifications” means the terms, requirements and conditions applicable to the Product and described in the ANDA, as the same may be supplemented and/or amended from time to time, and as required by United States Pharmacopeia.

 

“Term” has the meaning set forth in Section 7.1.

 

“Territory” means the United States, including its territories and possessions.

 

1.2     Interpretation.  The Section headings contained in this Agreement are for the convenience of reference only and shall not affect the meaning or interpretation of this Agreement.  As used in this Agreement, any reference to the masculine, feminine or neuter gender shall include all genders, the plural shall include the singular, and the singular shall include the plural.  The words “includes” and “including” when used herein shall be deemed to be followed by the phrase “without limitation” unless such phrase otherwise appears.  Unless the context otherwise requires, references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement.  Unless the context otherwise requires, the words “hereof,” “hereby,” “hereunder” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any

 

  

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particular Section or provision hereof. All monetary amounts in this Agreement are expressed and shall be paid in U.S. dollars.

 

ARTICLE II

LICENSE GRANT AND COMMERCIALIZATION

 

2.1     Limited License by Synerx. Subject to the terms and conditions of this Agreement, Synerx hereby grants to Delcath, as of the Effective Date, a limited right of reference and limited license (the “License”) in, to and under the ANDA owned or controlled by Synerx, and solely to the extent necessary to register, market, promote, distribute, offer for sale, sell and otherwise commercialize the Product in the Territory during the Term for prescription pharmaceutical sales as incorporated into PHP Systems and in no other form (the “Licensed Form”). For the avoidance of doubt, Delcath shall have no rights to the Product outside the Territory, or inside the Territory for any use other than the Licensed Form during the Term. Within fifteen (15) days of the Effective Date, Synerx will provide Delcath with a written letter of authorization granting the FDA access to the Synerx ANDA in support of Delcath’s NDA. Synerx agrees that during the Term of this Agreement, it will not, directly or indirectly, grant any license or right in, to and under the ANDA including a right of reference to the CMC section thereof to any third party which competes with Delcath for use in the Territory in the field of chemosaturation for Percutaneous Hepatic Perfusion. Notwithstanding the foregoing and any other provision hereof, Synerx shall at all times maintain its full right, title, interest and ownership of the ANDA and any associated Intellectual Property, and Delcath shall have no right, title or interest therein, or ability to make use thereof, other than as specifically granted in the License.

 

2.2     Consideration.  In consideration of the rights and licenses granted by Synerx to Delcath pursuant to this Article II, Delcath will make the payments contemplated in Article IV to Synerx and Bioniche Pharma.

 

2.3     Commercialization.  The Parties hereby acknowledge that, during the Term, all day-to-day activities in respect of the sales and marketing of the Product pursuant to the License in the Territory will be the sole responsibility of Delcath.

 

2.4     Delcath Responsibilities. In addition to other responsibilities set forth in this Agreement, Delcath shall have the following responsibilities with respect to the Product:

 

(a)     Delcath will be responsible for preparing and submitting the NDA to the FDA and such application will cover the PHP System incorporating the Product.  Delcath shall be responsible for obtaining, maintaining, supplementing and amending the NDA approval.

 

  

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(b)     Delcath shall undertake all activities to incorporate Product into PHP Systems and shall warehouse, distribute, and manage logistics for PHP Systems through final distribution to the market.

 

(c)     Delcath shall submit to the FDA all required annual reports, supplements, and other required submissions and maintain the NDA as current with FDA commitments, and in accordance with the Synerx ANDA, as it shall exist from time to time.

 

(d)     In accordance with the Quality Assurance Agreement to be entered into by the Parties according to Section 10.14 Delcath will, at its sole expense, provide such assistance and documentation as Synerx may reasonably request to fulfill Synerx’s obligation under Section 2.6(a), including, without limitation, providing Synerx with (i) annual distribution data (number of vials distributed) on a June to June basis consistent with FDA annual report filing requirements, and (ii) any analytical, stability or other data and associated reports that may be generated by Delcath on Product.

 

Except as otherwise provided herein, Delcath shall bear the costs of administering its responsibilities provided in this Section.

 

2.5     Bioniche Pharma Responsibilities.  In addition to other responsibilities set forth in this Agreement, Bioniche Pharma shall have the following commercialization responsibilities with respect to the Product:

 

(a)     Bioniche Pharma shall use Commercially Reasonable Efforts to source required quantities of the API and shall manufacture and supply the Product through Contract Manufacturer.

 

(b)     Bioniche Pharma shall, through Contract Manufacturer, use Commercially Reasonable Efforts to source all required Product components (including excipients, primary and secondary packaging components).

 

(c)     Bioniche Pharma shall, promptly upon receipt of a Release Notice(as defined in Section 3.13 hereof) from Synerx with respect to any Product, make arrangements for the prompt shipping to Delcath of such Product in accordance with the terms of  Section 3.8 hereof.

 

(d)     Bioniche Pharma shall use its best efforts to cause the Contract Manufacturer to allow Delcath or its designee to conduct a quality audit of the facilities of the Contract Manufacturer, in accordance with Section 5.2.

 

Except as otherwise provided for herein, Bioniche Pharma shall bear its own costs of administering the responsibilities listed in this Section.

 

  

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2.6     Synerx Responsibilities. In addition to other responsibilities set forth in this Agreement, Synerx shall have the following responsibilities with respect to the Product:

 

(a)     Synerx shall compile and submit to the FDA all required annual reports, supplements, and other required submissions to maintain the ANDA as current with FDA commitments, requirements, USP specifications, and cGMP’s.

 

(b)     Synerx shall be responsible for providing Delcath with a right of reference to its CMC section of its ANDA and any supplements or amendments thereto in order to permit Delcath to include the right of reference to the CMC information in its NDA submission.

 

Except as otherwise provided for herein, Synerx shall each bear their own costs of administering the responsibilities listed in this Section.

 

ARTICLE III

MANUFACTURE AND SUPPLY

 

3.1     Manufacture and Supply Product. During the Term of this Agreement, Bioniche Pharma will cause the Contract Manufacturer to manufacture and supply the Product in accordance with the terms and conditions of this Agreement. Bioniche Pharma shall be responsible for all acts or omissions of the Contract Manufacturer. Synerx shall provide Delcath one hundred and twenty (120) days prior written notice in the event of a change in the Contract Manufacturer and shall arrange for Delcath to conduct a facility inspection/audit of the new Contract Manufacturer prior to any such change occurring.

 

3.2     Manufacturing Requirements. All Product manufactured and supplied by Bioniche Pharma pursuant to this Agreement shall be manufactured in an FDA registered facility in compliance with (i) the Specifications, (ii) the requirements of the ANDA, (iii) cGMP, (iv) the terms and conditions of this Agreement, and (v) any applicable laws, rules and regulations (collectively, the “Manufacturing Requirements”).

 

3.3     Product Change. Synerx shall not file any supplemental ANDA application that requires prior approval with the FDA to change the Specification for Product without providing Delcath ninety (90) days prior written notice and shall immediately notify Delcath upon receipt of approval from the FDA regarding the supplemental ANDA application. To the extent the foregoing notice period is not practicable, Synerx, acting reasonably and in good faith, shall provide Delcath with such prior written notice as shall be practicable.

 

3.4     Forecasts; Purchase Orders; Firm Period. (a) Delcath shall provide to Bioniche Pharma, no later than the fifth business day of each calendar month, a rolling fifteen (15) month forecast for its requirements of the Product (the “Rolling Forecast”).  Delcath shall use Commercially Reasonable Efforts to provide the initial Rolling Forecast

 

  

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no less than three (3) months prior to the FDA approving the NDA. To the extent the foregoing three (3) month time period is not practicable, Delcath, acting reasonably and in good faith, shall provide Bioniche Pharma with such prior written notice as shall be practicable. Notwithstanding the foregoing, Delcath shall provide to Bioniche Pharma, its initial Rolling Forecast no less than [***] ([***]) months prior to the first scheduled Delivery date. The [***] ([***]) months of the Rolling Forecast shall be binding on Delcath with respect to Product (and API equivalent) and the [***] month of such Rolling Forecast shall be binding on Delcath with respect to the API. Together with each Rolling Forecast, Delcath shall issue purchase orders for Product for such [***] month binding period (“Purchase Order”). Delcath shall only place Purchase Orders for full batches of Product (averaging between [***] vials per batch), or multiples thereof.  Such Purchase Orders shall provide a lead time of no less than [***] ([***]) days before the Delivery date. The Rolling Forecast shall be used by Bioniche Pharma, acting reasonably and in good faith, to order required materials and components to support Delcath requirements beyond the [***] month binding period.

 

           (b)     In addition to the foregoing Section 3.4(a), Delcath may, from time to time, order additional Product not contained in any Rolling Forecast, by submitting a written purchase order to Bioniche Pharma (an “Incremental Purchase Order”), which shall be subject to the terms and conditions of this Agreement. Any Incremental Purchase Order may not order more than [***] ([***]) batches of Product without the written consent of Bioniche Pharma, which Bioniche Pharma may withhold in their sole and absolute discretion. In addition, Delcath may not submit an Incremental Purchase Order more than [***] in any given [***] ([***]) day time period. Upon receipt of an Incremental Purchase Order, Bioniche Pharma shall use Commercially Reasonable Efforts to supply Product to Delcath at Delcath’s facility in Queensbury, NY, or such other facility within the United States as Delcath may indicate in such Incremental Purchase Order, on the Delivery date specified therein but in no event later than [***] days from the date that the Incremental Purchase Order is received by Bioniche Pharma. Bioniche Pharma shall provide Delcath written confirmation of each Incremental Purchase Order including the Delivery date within ten (10) business days of receipt.

 

3.5     Payment.  Delcath shall pay to Bioniche Pharma the Purchase Price for all the Product ordered by Delcath throughout the Term, which payments shall be made as follows: [***]. All payments to Bioniche Pharma hereunder shall be made in United States dollars via bank wire transfer to Bioniche Pharma, to such account as Bioniche Pharma shall specify, or in accordance with such other payment method as the Parties may mutually agree in writing from time to time.

 

3.6     Product Label.  Bioniche Pharma shall cause the Contract Manufacturer to custom label and package the Product with Delcath’s trade name, trade dress and applicable labeling content  as required pursuant to FDA approval of Delcath’s NDA (and as a may be amended from time to time), such labeling and packaging to include vial label, vial carton, and package insert. Delcath shall be responsible to provide Synerx and Bioniche FDA approved master labeling/artwork (the “Label Template”) no less than

 

  

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ninety (90) days prior to when Delcath requires such label, or amended label, to be included on the Product and Bioniche Pharma shall print and affix such label and package according to such Label Template.

 

3.7     Product Package.  Bioniche Pharma shall cause the Contract Manufacturer to package the Product in cartons containing five (5) single-use vials of melphalan lyophilized product for injection (each vial containing 50mg melphalan hydrochloride equivalent to 50 mg melphalan, and 20 mg povidone) together with five (5) sterile diluent vials (each vial containing 0.2 g sodium citrate, 6.0 ml propylene glycol, 0.52 ml ethanol 96%, and water for injection to a total of 10 ml) and one Product insert (“Packaging Requirements”).   Each carton shall conform to the Label Template.

 

3.8     Delivery Terms. All Product shall be shipped FOB Destination (Incoterms 2000) to Delcath’s facility in Queensbury, NY or such other facility within the United States as Delcath may select from time to time. The cost of freight, insurance and customs/duties will be prepaid by Bioniche Pharma and added to each invoice. Bioniche Pharma and Delcath shall discuss the mode of transportation and related costs from time to time. The Product delivered to Delcath shall be appropriately labeled and packaged by Bioniche Pharma at its expense in accordance with the Label Template and Packaging Requirements. Bioniche Pharma shall use Commercially Reasonable Efforts to deliver the Product by the requested Delivery date.

 

3.9     Product Shelf Life. All Products supplied by Bioniche Pharma under this Agreement shall have, at the time of Delivery, a remaining shelf life of no less than the greater of (i) the maximum number of months on its stated shelf life less [***] ([***]) months, and (ii)  [***] ([***]) months.

 

3.10   Inability to Supply.  If at any time during the Term of this Agreement, Bioniche Pharma is unable to supply Product (other than as a result of a Force Majeure Event as described in Article IX), within [***] ([***]) days of a Delivery date as set forth in a Purchase Order, Bioniche Pharma shall notify Delcath immediately and any portion of the delayed or late Product will be subject to a [***]percent ([***]%) discount. If Bioniche Pharma is unable to supply Product within [***] ([***]) days of the original Delivery date as set forth in such Purchase Order, Delcath shall be entitled to cancel such Purchase Order, and the number of vials as set forth on the Minimum Binding Purchase Commitments for the then current Contract Year shall be reduced accordingly. If Bioniche Pharma is unable to supply Product within [***] ([***]) days of the Delivery date set forth in a Purchase Order [***] times ([***]) in any [***] ([***]) month time period, in addition to such other rights of Delcath hereunder, Delcath shall be entitled to, in its sole and absolute discretion, terminate the Agreement upon [***] ([***]) days written notice, which notice shall be delivered not more than [***] ([***]) days following the [***] such Delivery failure.

 

  

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3.11     Minimum Purchases of Product by Delcath.

 

(a)     Delcath will purchase not less than the applicable Minimum Binding Purchase Commitment (as set forth on Schedule A hereto) in each Contract Year during the Term. In the event that Delcath fails to purchase the Minimum Binding Purchase Commitment amount in any Contract Year(s), Delcath shall, [***] (“Shortfall Payment”). Any Shortfall Payment by Delcath to Bioniche Pharma, made in accordance with the terms hereof, shall constitute a complete and proper remedy for any failure by Delcath to satisfy the Minimum Binding Purchase Commitment in the Contract Year to which such Shortfall Payment relates and this Agreement shall continue in full force and effect. The Shortfall Payment, made in accordance with the terms hereof, shall be Synerx/Bioniche’s sole and exclusive remedy for Delcath’s failure to purchase the Minimum Binding Purchase Commitment in a Contract Year.

 

(b)     In addition to the Minimum Binding Purchase Commitment, to the extent Delcath’s requirements of Product in any Contract Year exceed the Minimum Binding Purchase Commitment, Delcath will purchase from Synerx/Bioniche not less than [***] ([***]) of such excess requirements of Product (“Excess Requirements”).

 

(c)     In the event that Delcath (or an Affiliate of Delcath) acquires another party (manufacturer, developer, or marketer) that has a pending ANDA or FDA approval for an equivalent to the Product, or acquires from another party an ANDA or other FDA approval for an equivalent to the Product, Delcath shall nonetheless be bound to the commitments set forth in paragraphs (a) and (b) of this Section unless waiver of such obligations is agreed in writing by the Parties with specific reference to this Section.

 

(d)     For purposes of this Section, a “purchase” shall be considered made, and shall apply toward the Minimum Binding Purchase Commitment only if the [***] with respect to a Purchase Order or Incremental Purchase Order  has been received from Delcath by Bioniche Pharma prior to the end of the applicable Contract Year and the applicable Purchase Order or Incremental Purchase Order is not, thereafter, revoked by Delcath or amended or otherwise modified by Delcath to lower the amount of Product to be Delivered in connection therewith. For purposes of clarity, purchases shall apply toward Minimum Binding Purchase Commitments only in the Contract Year in which the applicable [***] is received by Bioniche Pharma from Delcath, and shall not also apply to a subsequent Contract Year by virtue of the Delivery of Product and payment of the [***] in such subsequent Contract Year.

 

3.12     Manufacturing Defects. Bioniche Pharma is responsible for providing Delcath with Product meeting the Manufacturing Requirements and shall assume all costs (including the cost of freight, insurance, customs, duties and tariffs) for any batches failing to do so, and the Purchase Price shall not be owed by Delcath in respect thereof, and any amounts previously paid in respect thereof by Delcath including the costs of

 

  

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freight, insurance, customs, duties and tariffs paid by Delcath to third parties shall be reimbursed to Delcath by Bioniche Pharma.

 

3.13     Release of Product. Synerx shall release Product to Delcath in accordance with the Quality Assurance Agreement and shall notify Delcath and Bioniche Pharma in writing upon the release of Product (the “Release Notice”). Notwithstanding any other provision hereof, in no event shall Delcath release any Product to the market prior to receiving a Release Notice from Synerx.

 

3.14     Rejection of Product. Following delivery to Delcath of Product and a Release Notice with respect to such Product, Delcath shall have the right to reject, and shall not have the obligation to pay for, any Product which (i) does not conform to the terms of this Agreement, including the Quality Agreement (excepting any failure to conform caused by acts or omissions of Delcath or its agents), or (ii) is not accompanied by a complete and accurate certificate of analysis with respect to such Product (such Product, “Defective Product”), provided, however, that Synerx shall have an opportunity to correct minor inaccuracies or missing information in the certificate of analysis for the Product without penalty under this Agreement. Notwithstanding the foregoing, Delcath shall be deemed to have accepted delivery of the Product unless it notifies Bioniche Pharma in writing of the failure of the Product to conform to the terms of this Agreement within thirty (30) days of delivery of such Product unless such Defective Product contains a latent or hidden defect or non-conformity which could not have reasonably been discovered during such thirty (30) day inspection period.

 

3.15     Resolution of Defective Product. If Bioniche Pharma agrees that a Product is Defective Product, Bioniche Pharma shall, at Bioniche Pharma’s sole and absolute option, either (i) replace such Product or (ii) remit the full amount of any Delcath payments to Bioniche Pharma related thereto plus any and all direct costs incurred by Delcath for the freight, insurance, customs and duties associated with the Defective Product. If Bioniche Pharma does not agree with Delcath’s determination that such Product is Defective Product then, after reasonable efforts to resolve the disagreement, either Delcath or Bioniche Pharma may request, in writing, that an independent laboratory resolve the disagreement. Thereafter, the Parties shall in good faith mutually agree upon and select a reputable independent laboratory (the “Laboratory”) to resolve the disagreement. The Laboratory shall in good faith review and analyze the Product to determine whether the Product is Defective Product. The Laboratory shall render its decision within thirty (30) days of the laboratory’s selection, in writing, which shall be non-appealable and binding on the Parties. If the Laboratory determines that such Product is Defective Product, Bioniche Pharma shall, at Bioniche Pharma’s sole and absolute option, (i) replace such Product or (ii) remit the full amount of any Delcath payments to Bioniche Pharma related thereto. If the Laboratory determines that the Product is not Defective Product, Delcath shall be obligated to purchase such Product on the terms set forth herein. Unless otherwise agreed to by the Parties in writing, the cost of the Laboratory’s testing and review of such Product shall be borne by the non-prevailing Party.

 

  

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ARTICLE IV

FINANCIAL TERMS.

 

4.1     Milestones.  Delcath shall pay to each of Synerx and Bioniche Pharma the following amounts:

 

(a)     Concurrently with execution of this Agreement, Two Hundred Fifty Thousand Dollars ($250,000) to each of Synerx and Bioniche by wire transfer of immediately legally available funds to accounts designated by Synerx and Bioniche, respectively, and

 

(b)     Not later than ten (10) calendar days following FDA approval of Delcath’s NDA, Two Hundred Fifty Thousand Dollars ($250,000) to each of Synerx and Bioniche Pharma by wire transfer of immediately legally available funds to accounts designated by Synerx and Bioniche Pharma, respectively.

 

4.2     Pricing.  The Purchase Price for all Product purchased by Delcath hereunder shall be as set forth on Schedule A attached hereto and made a part hereof.  The Purchase Price shall remain firm except as provided in Schedule A.

 

4.3     Reimbursable Expenses.  If either Party is entitled to reimbursement by the other Party of expenses pursuant to the terms of this Agreement, such Party shall invoice the other Party (without any markup), and such other Party shall pay such invoice within thirty (30) days of receipt thereof.

 

ARTICLE V

REGULATORY COMPLIANCE.

 

5.1     Compliance with the Laws.  Each Party shall comply with all applicable laws, rules and regulations in the performance of its obligations hereunder.

 

5.2     Quality Audit.  Bioniche Pharma shall use its best efforts to cause the Contract Manufacturer to allow Delcath or its designee, upon fifteen (15) business days prior notice to Bioniche Pharma, to conduct a quality audit of the facilities of Contract Manufacturer, which are used in the manufacture and supply of the Product during the period commencing January 10, 2011 through March 31, 2011 (the “Initial Audit”). Thereafter, Bioniche Pharma shall use Commercially Reasonable Efforts to cause the Contract Manufacturer to allow Delcath or its designee, not more often than once every two (2) calendar years, upon fifteen (15) business days prior written notice to Bioniche Pharma, to conduct a quality audit of the facilities of Contract Manufacturer, which are used in the manufacture and supply of the Product, provided, however, that at any time during the Term of this Agreement, in the event of a Product recall, Delcath or its designee shall be entitled to conduct a quality audit upon ten (10) business days prior written notice to Bioniche Pharma.  The duration of all Delcath quality audits hereunder shall be no more than two (2) business days.

 

  

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5.3     Document Control. Synerx/Bioniche shall maintain complete and accurate books, records, manufacturing data, test and laboratory data and reports and all other information relating to the manufacturing and supply of Product including without limitation all information required to be maintained by the FDA and any applicable law, rule or regulation. All such, books, records and information shall be maintained for such period as FDA requires following the relevant date of manufacturing of each batch of the Product.

 

5.4     Government Inspections.  Synerx/Bioniche shall promptly inform Delcath of the results of all visits and inspections relating to Product by the FDA or any Competent Authorities, including without limitation, providing Delcath with copies of all warning letters, 483s and correspondence related thereto with or from the FDA or any Competent Authority.

 

5.5     Complaints and Adverse Drug Experiences. In accordance with the Quality Assurance Agreement to be entered into by the Parties according to Section 10.14, and under the requirements of their respective regulatory approvals, both Synerx and Delcath are responsible for reporting Adverse Events relating to the PHP System incorporating the Product and Product defects to the FDA and each shall notify the other promptly in all such cases. Delcath shall field, triage, and document incoming Adverse Events and Product defect complaints and supply Synerx with the information required for filing with FDA to fulfill its reporting obligations to the FDA, which reporting obligations include fifteen (15) day reports, quarterly periodic reports and annual periodic reports. If third party services are required to be contracted by Delcath or Synerx with respect to Delcath obligations hereunder, then such costs shall be borne by Delcath.

 

5.6     Recall Responsibilities.

 

(a)     In accordance with the Quality Assurance Agreement to be entered into by the Parties according to Section 10.14, Delcath shall be the primary point of contact with FDA with respect to any recall of the PHP Systems incorporating the Product. The Parties agree, however, that any recall would be conducted and coordinated in full consultation with the other Party, with Delcath handling the logistics of such recall. The Parties agree that the cost of any recall (including without limitation the costs of notifying the customers, Product recovery, Product destruction, replacement Product and applicable freight,  insurance, taxes, customs and duties for all of the above) shall be borne by Delcath unless and to the extent such recall relates to (i) Synerx/Bioniche’s breach of their representations, warranties, or obligations under this Agreement or applicable laws, (ii) Synerx/Bioniche’s negligence or willful misconduct, or (iii) the manufacturing and supply of the Product, in which case, to the extent the recall is related to or results from the events set forth in clauses (i), (ii) or (iii) above,  the costs of such recall (including without limitation the costs of notifying the customers, Product recovery, Product destruction, replacement Product and applicable freight,  insurance, taxes, customs and duties for all of the above) shall be borne by Synerx/Bioniche. For purposes of this Section, “recall” means any action by Delcath or any Affiliate of Delcath

 

  

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to recover title to or possession of any PHP System incorporating the Product sold or shipped including, but not limited to, market withdrawal.

 

(b)     Each Party shall keep the other fully informed in writing of any notification or other information, whether received directly or indirectly, that might (i) affect the marketability, safety or effectiveness of any PHP System, (ii) result in liability issues or otherwise necessitate action on the part of either Party or (iii) result in recall or seizure of any PHP System. Delcath shall be responsible for assuring that such recall is closed-out with the FDA, unless the FDA shall otherwise require. For purposes of this Section, “seizure” means any action by any governmental authority to detain or destroy any PHP System.

 

5.7     Insurance.  Each of Delcath, Synerx and Bioniche Pharma shall (and shall cause their respective Affiliates, as required, to), during the Term and for a period of not less than thirty-six (36) months following the termination or expiration of this Agreement, carry or be subject to coverage (as a named insured) under product liability insurance in an amount of not less than $[***] with respect to each incident/occurrence and $[***] in the aggregate, which insurance shall be written on a “claims-made” policy basis.  Each Party shall add the other Party as a named insured on their respective policies and provide the other Parties with evidence of coverage contemplated hereby, in the form of certificates of insurance, as reasonably requested in writing by the other Party. Each Party shall provide written notice to the other Parties thirty (30) days prior to any material change in or cancellation or non-renewal of the policy.

 

ARTICLE VI

WARRANTIES; INDEMNIFICATION; AND LIMITATIONS ON LIABILITY.

 

6.1     Certain Representations and Warranties of Synerx and Bioniche Pharma.  (a) Synerx and Bioniche Pharma each, individually as to itself, and not jointly and severally, represents and warrants to Delcath that as of the Effective Date: (i) it is organized and validly existing under the laws of the jurisdiction of its organization; (ii) it has the full right, power and authority to enter into this Agreement and to perform the activities required to be performed by it in accordance with this Agreement; (iii) this Agreement is legally binding upon it and enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally or by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or law), and the execution, delivery and performance of this Agreement by it does not conflict with any agreement or instrument, oral or written, to which it is a party or by which it is bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it or its activities; (iv) there is no action, suit, proceeding or investigation pending or, to its knowledge, threatened against it, that questions the validity of this Agreement or its right to enter into this Agreement or perform its obligations contemplated hereby or alleging that the proposed marketing and sale of the Product in the Territory in the Licensed Form would infringe or violate any

 

  

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patent or other proprietary right of any other Person; and (v) to the best of its knowledge, it is not in violation of any law or regulation that could reasonably be expected to adversely affect its performance of its obligations hereunder, and, except as otherwise contemplated hereby, it holds each of the licenses, permits, approvals and authorizations required to conduct its current business and operations (and perform its obligations contemplated hereby) in material compliance with all laws and regulations.

 

(b)     Synerx hereby represents and warrants to Delcath that as of the Effective Date, to Synerx’s knowledge, (i) Synerx has sufficient rights in the ANDA and the Intellectual Property licensed by Synerx hereunder to grant the License to Delcath described in Article 2 of this Agreement;  (ii) all Intellectual Property licensed by Synerx hereunder is free and clear of any and all liens, charges and encumbrances other than liens created by borrowings; (iii) Synerx has not, as of the Effective Date, entered into any enforceable agreement or granted any Intellectual Property rights whatsoever relating to the ANDA to any Person that, subject to the conditions, restrictions and exceptions set forth herein, would prohibit Delcath from fully exercising and enjoying the License granted by Synerx herein; (iv) there are no claims, judgments or settlements against or by Synerx and no pending or, to Synerx’s knowledge, threatened claims or litigation claiming that the Product infringes or violates the Intellectual Property rights of any Person or asserting the invalidity, improper use or unenforceability of the ANDA.

 

THE WARRANTIES MADE IN THIS SECTION 6.1 ARE MADE BY SYNERX AND BIONICHE PHARMA, INDIVIDUALLY AS TO ITSELF AND NOT JOINTLY AND SEVERALLY, EXPRESSLY IN LIEU OF ANY OTHER EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT BY WAY OF LIMITATION, THE WARRANTIES OF NON-INFRINGEMENT, OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE.

 

6.2     Certain Representations and Warranties of Delcath.  Delcath hereby represents and warrants to Synerx and Bioniche Pharma that as of the Effective Date: (a) Delcath is organized and validly existing under the laws of the jurisdiction of its incorporation or organization; (b) Delcath has the full right, power and authority to enter into this Agreement and to perform the activities required to be performed by it in accordance with this Agreement; (c) this Agreement is legally binding upon Delcath and enforceable against Delcath in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally or by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or law), and the execution, delivery and performance of this Agreement by Delcath does not conflict with any agreement or instruments, oral or written, to which it is a Party or by which it may be bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it or its activities; (d) there is no action, suit, proceeding or investigation pending or, to its knowledge, threatened against Delcath that questions the validity of this Agreement or the right of Delcath to enter into this Agreement or perform its obligations contemplated hereby, nor does Delcath have knowledge that there

 

  

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is any basis for the foregoing; and (e) Delcath, to the best of its knowledge, is not in violation of any law or regulation that could reasonably be expected to adversely affect its performance of its obligations hereunder, and, except as otherwise contemplated hereby, Delcath holds each of the licenses, permits, approvals or authorizations required to conduct its current business and operations (and perform obligations contemplated hereby) in material compliance with all laws and regulations.

 

THE WARRANTIES MADE IN THIS SECTION 6.2 ARE MADE BY DELCATH EXPRESSLY IN LIEU OF ANY OTHER EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT BY WAY OF LIMITATION, THE WARRANTIES OF NON-INFRINGEMENT, OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE.

 

6.3     Representations and Warranties and Covenants with Regard to Status.

 

(a)     Delcath hereby represents and warrants to Synerx/Bioniche that neither it nor any of its officers, directors or Affiliates is prohibited by any law, rule or regulation or by any order, directive or policy or contract or relationship from selling the Product  or other pharmaceutical products within the Territory and that neither Delcath nor any of its officers, directors or Affiliates is a Person that is listed by a United States federal agency as debarred, suspended or otherwise ineligible for federal programs in the United States, its territories and protectorates (an “Ineligible Person”) or proposed for such debarment or suspension. Delcath covenants with Synerx/Bioniche that Delcath storage and distribution facilities shall at all times conform to FDA requirements and that Product shall, at all times while under its control, be stored and distributed so as to comply with FDA requirements.

 

(b)     Synerx and Bioniche Pharma each hereby, individually for itself  and not jointly and severally, represent and warrant to Delcath that neither it nor any of its officers, directors or Affiliates that has been or is developing the Product, or that is or will be a manufacturer thereof, is prohibited by any law, rule or regulation, or by any order, directive or policy, from manufacturing or selling the Product and that neither it nor any of its officers, directors or Affiliates is or is proposed to be an Ineligible Person.

 

6.4     Product Warranty.  Synerx/Bioniche warrants that the Product(s) will be free of defects in material and workmanship and comply with the Manufacturing Requirements at the time of Delivery and until the stated expiration date on each such Product (“Product Warranty”).  The foregoing is Synerx/Bioniche’s sole warranty.

 

THE FOREGOING WARRANTIES ARE EXCLUSIVE AND IN LIEU OF ANY OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE GOODS SOLD HEREUNDER. EXCEPT AS EXPRESSLY PROVIDED HEREIN, SYNERX/BIONICHE MAKES NO WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, ORAL, WRITTEN OR OTHERWISE, WITH RESPECT TO THE PRODUCT(S) SOLD HEREUNDER, INCLUDING, BUT NOT LIMITED TO, ANY

 

  

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IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR USE OR PURPOSE.

 

6.5     Synerx and Bioniche Pharma’s Indemnification Obligations.

 

(a)     Subject to Section 6.9, Synerx shall indemnify, defend and hold Delcath and its Affiliates, and their respective officers, directors, stockholders, employees and agents harmless from and against, and pay or reimburse, any Losses related to (i) Synerx or its Affiliates’ negligent acts or omissions, or willful wrongful acts; (ii) its breach of any of its representations, warranties, covenants or other obligations hereunder; and (iii) any third party claims that the Product infringes upon or otherwise violates such third party’s  intellectual property rights; provided, however, that Synerx shall not be required to indemnify Delcath with respect to any such Losses to the extent they arise from or are related to Delcath’s, Bioniche Pharma’s or their Affiliates’ negligent acts or omissions, willful wrongful acts or Delcath’s breach of its representations, warranties, covenants or other obligations hereunder.

 

(b)     Subject to Section 6.9, Bioniche Pharma shall indemnify, defend and hold Delcath and its Affiliates, and their respective officers, directors, stockholders, employees and agents harmless from and against, and pay or reimburse, any Losses related to (i) Bioniche Pharma or its Affiliates’ negligent acts or omissions, or willful wrongful acts, or the negligent acts or omissions, or willful wrongful acts of the Contract Manufacturer relating to the Product; (ii) its breach of any of its representations, warranties, covenants or other obligations hereunder; and (iii) any third party claims that the Product infringes upon or otherwise violates such third party’s  intellectual property rights; provided, however, that Bioniche Pharma shall not be required to indemnify Delcath with respect to any such Losses to the extent they arise from or are related to Delcath’s, Synerx’s or their Affiliates’ negligent acts or omissions, willful wrongful acts or Delcath’s breach of its representations, warranties, covenants or other obligations hereunder.

 

6.6     Delcath’s Indemnification Obligations.  Subject to Section 6.9, Delcath shall indemnify, defend and hold Synerx, Bioniche Pharma and their Affiliates and their respective officers, directors, stockholders, employees and agents harmless from and against, and pay or reimburse, any Losses related to (a) Delcath’s or its Affiliates’ or its third party logistic service provider’s negligent acts or omissions or willful wrongful acts, (b) breach of any of its representations, warranties, covenants or other obligations hereunder, and (c) any third party claims that the PHP System infringes upon or otherwise violate such party’s intellectual property rights, provided, however, that Delcath shall not be required to indemnify Synerx with respect to any such Losses to the extent they arise from or are related to Synerx or its Affiliates’ negligent acts or omissions, willful wrongful acts or Synerx’s breach of their representations, warranties, covenants or other obligations hereunder, and provided, further, that Delcath shall not be required to indemnify Bioniche Pharma with respect to any such Losses to the extent they arise from or are related to Bioniche Pharma or its Affiliates’ negligent acts or omissions,

 

  

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willful wrongful acts or Bioniche Pharma breach of their representations, warranties, covenants or other obligations hereunder.

 

6.7     Indemnification Procedures.  A Party that intends to claim indemnification under this Article 6 (the “Indemnitee”) with respect to any third-party action, claim or liability shall notify the other Party (the “Indemnitor”) promptly in writing of any action, claim or liability in respect of which the Indemnitee believes it is entitled to claim indemnification; provided, that the failure to give timely notice to the Indemnitor shall not release the Indemnitor from any liability to the Indemnitee except to the extent the Indemnitor is materially prejudiced thereby.  The Indemnitor shall have the right, by written notice to the Indemnitee, to assume the defense of any such action or claim, within the fifteen (15)-day period after the Indemnitor’s receipt of written notice of any action or claim, with counsel of the Indemnitor’s choice and at the sole cost of the Indemnitor.  If the Indemnitor so assumes such defense, the Indemnitee may participate therein through counsel of its choice, but at the sole cost of the Indemnitee.  If the Indemnitor fails to assume such defense and/or to diligently prosecute the same, the Indemnitee may assume such defense at the Indemnitor’s sole expense.  The Party not assuming the defense of any such claim shall render all reasonable assistance to the Party assuming such defense, and all reasonable out-of-pocket costs of such assistance shall be for the account of the Indemnitor.  No such claim shall be settled other than by the Party defending the same, and then only with the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed; provided, however, that the Indemnitee shall have (a) no obligation to consent to any settlement of any such action or claim that (i) imposes on the Indemnitee any monetary or other liability or obligation that is not assumed and agreed to be performed in full by the Indemnitor or (ii) adversely affects the Indemnitee’s rights hereunder or damages its reputation or business, and (b) no right to withhold its consent to any settlement of any such action or claim if the settlement involves only the payment of money by the Indemnitor or its insurer without admission of liability by the Indemnitee and the Indemnitor or its insurer irrevocably agrees in writing to make such payment.  If the Parties are unable to agree as to the application of Sections 6.5 and 6.6 to any claim, then, pending resolution of the dispute in accordance with Section 10.1 hereof, the Parties may conduct separate defenses of such claims, with each Party retaining the right to claim indemnification from the other Party in accordance with Sections 6.5 and 6.6 upon resolution of the underlying action.

 

6.8     Product Liability.

 

(a)     Delcath shall bear fully all responsibility, and shall indemnify, defend and hold Synerx, Bioniche Pharma and their Affiliates and their respective officers, directors, stockholders, employees and agents harmless from and against, and pay or reimburse, any Losses related to all product liability claims which arise in connection with the use or administration of the PHP System, or the Product as used in the PHP System (except with respect to Product not meeting the Product Warranty as set forth in Section 6.4), including, without limiting the foregoing, those premised on a “failure to warn” or “design defect” theory of liability.

 

  

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(b)     Synerx and Bioniche Pharma shall jointly and severally bear all responsibility, and shall indemnify, defend and hold Delcath and its Affiliates and their respective officers, directors, stockholders, employees and agents harmless from and against, and pay or reimburse, any Losses related to all product liability claims which arise in connection with Product not meeting the Product Warranty as set forth in Section 6.4, including, without limitation the foregoing, those premised on a “manufacturing defect” or “design defect” theory of liability.

 

6.9     Limitations on Liability.  EXCEPT IN RESPECT OF THIRD PARTY CLAIMS, IN NO EVENT WILL THE PARTIES HERETO BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR INDIRECT DAMAGES, INCLUDING ANY LOSS OF INCOME, LOSS OF PROFITS, COSTS OF SUBSTITUTION, COSTS OF COVER OR INCREASED CAPITAL COSTS, REGARDLESS OF THE FORM OR NATURE OF ACTION, WHETHER IN CONTRACT, BREACH OF WARRANTY, STRICT LIABILITY, EQUITY, INDEMNITY, NEGLIGENCE, INTENTIONAL CONDUCT, TORT OR OTHERWISE, EVEN IF SUCH DAMAGES WERE FORESEEABLE OR IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

ARTICLE VII

TERM AND TERMINATION.

 

7.1     Term.  This Agreement shall commence on the Effective Date and continue, unless otherwise earlier terminated in accordance herewith, for a period that shall extend seven (7) Contract Years from the first day of the third month following the date on which on which the FDA notifies Delcath of its approval of the Delcath NDA (the “Initial Term”).  Thereafter, this Agreement may be renewed for successive one (1)-year periods (each, a “Renewal Term” and collectively with the Initial Term, the “Term”) upon the written mutual agreement of the Parties.

 

7.2     Termination for Breach.  (a) If either Party commits a material breach or default in the performance or observance of any of its obligations under this Agreement, and such material breach or default continues for a period of sixty (60) days after delivery by the other Party of written notice reasonably detailing such material breach or default, then the non-breaching or non-defaulting Party shall have the right to terminate this Agreement, with immediate effect, by giving written notice to the breaching or defaulting Party.  The Parties shall retain all rights and remedies (at law or in equity) in respect of any breach hereof.

 

(b)     Either Party may terminate this Agreement upon thirty (30) days’ prior written notice if the other Party is legally prohibited from performing its obligations hereunder or becomes (or its Affiliate becomes) an Ineligible Person in respect of the Product.

 

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bankruptcy (voluntary or involuntary), reorganization, dissolution, liquidation or arrangement for the appointment of a receiver or trustee to take possession of the assets of the Insolvent Party or similar proceeding under the law for release of creditors by or against the Insolvent Party or if the Insolvent Party shall make a general assignment for the benefit of its creditors.  If any of the applicable circumstances described above, besides a voluntary bankruptcy petition, shall have continued for one hundred twenty (120) days undismissed, unstayed, unbonded and undischarged, the Solvent Party may terminate this Agreement upon written notice to the Insolvent Party upon notice of the circumstances referenced above; provided, however, if the Insolvent Party provides for the cure of all of its defaults under this Agreement (if any) and provides adequate assurance of its future performance of its obligations to the Solvent Party’s reasonable satisfaction, then the Solvent Party shall not have the right to terminate this Agreement pursuant to this Section.  If the Insolvent Party shall initiate any voluntary bankruptcy proceeding, then the Solvent Party may terminate this Agreement upon written notice to the Insolvent Party.  All licenses and rights to licenses granted under or pursuant to this Agreement are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code (the “Code”), licenses of rights to “intellectual property” as defined under Section 101(35A) of the Code.  Delcath, as the licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Code.  The foregoing provisions of this Section are without prejudice to any rights Delcath may have arising under the Code or other applicable law.

 

7.4     Certain Termination Rights of Synerx/Bioniche. Notwithstanding other termination rights of Synerx/Bioniche included in this Agreement, Synerx/Bioniche shall have the right to terminate this Agreement:

 

(a)     upon delivery of [***] ([***]) days’ prior written notice to Delcath, in the event that Delcath shall fail to purchase the Minimum Purchase Commitment amount in any Contract Year during the Term and shall not have made the Shortfall Payment for such Contract Year, as described in Section 3.11, provided that such notice of termination must be delivered to Delcath not later than [***] ([***]) days following the end of the Contract Year in which such Minimum Purchase Commitment amount was not purchased; or

 

(b)     upon delivery of [***] ([***]) days’ prior written notice to Delcath, in the event that Delcath shall fail to purchase at least [***] percent ([***]%) of its Excess Requirements of Product from Synerx/Bioniche in any Contract Year during the Term, provided that such notice of termination must be delivered to Delcath not later than [***] ([***]) days following the end of the Contract Year in which such [***] percent ([***]%) of Excess Requirements of Products was not purchased.

 

7.5     Certain Termination Rights of Delcath. Notwithstanding other termination rights of Delcath included in this Agreement, in accordance with Section 3.10, Delcath shall have the right to terminate this Agreement in the event Bioniche Pharma fails to

 

  

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supply Product within [***] ([***]) days of the Delivery date set forth in a Purchase Order [***]  times in any [***] ([***]) month time period.

 

7.6     Post-Termination.  The termination or expiration of this Agreement shall not affect any payment or other obligations or liabilities that have accrued prior to or on the date of such termination or expiration, and the Parties shall retain all rights and remedies (at law or in equity) in respect of any breach hereof.

 

ARTICLE VIII

CONFIDENTIALITY AND INTELLECTUAL PROPERTY.

 

8.1     Treatment of Confidential Information.  Except as required by applicable laws and regulations (including rules or regulations of any exchange upon which a Party’s capital stock or the capital stock of a Party’s parent company may be traded and filing requirements of governmental agencies, including the FDA) or as otherwise provided in this Article VIII, during the Term, and for ten (10) years thereafter, each Party shall hold in confidence, and shall not disclose, in whole or in part, to a third party (except as specifically set forth herein or with the express prior written consent of the other Party) any and all Confidential Information of the other Party and its Affiliates.  During the Term and thereafter in perpetuity, the Parties may not use any Confidential Information of the other Party and its Affiliates for purposes other than those permitted by this Agreement. Notwithstanding anything contained herein to the contrary, the Parties understand and agree that Delcath is required to disclose the existence of and file the actual Agreement with the United States Securities and Exchange Commission EDGAR system, in connection with which Delcath covenants and agrees to use its Commercially Reasonable Efforts to seek confidential treatment of the pricing terms contained herein.

 

8.2     Limits on Disclosure.  (a) Without limiting the generality of Section 8.1, each Party may, with the exercise of reasonable discretion, (i) disclose Confidential Information to those employees or agents who need to receive the Confidential Information in order to further the activities contemplated by this Agreement; and (ii) make disclosures of such portions of Confidential Information to third-party consultants, attorneys, contractors, advisors, Affiliates and governmental authorities where, in such Party’s judgment, such disclosure is beneficial to the development, approval or marketing of the NDA or PHP System pursuant to this Agreement; provided, that such Party shall make best efforts to safeguard the Confidential Information, including by obtaining appropriate commitments and enforceable confidentiality agreements having provisions no less stringent than those contained herein.

 

(b)     Each Party understands and agrees that the wrongful disclosure of Confidential Information may result in serious and irreparable damage to the other Party, that the remedy at law for any breach of this covenant may be inadequate, and that the Party seeking redress hereunder shall be entitled to injunctive relief, without prejudice to any other rights and remedies to which such Party may be entitled.

 

  

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(c)     Except as otherwise set forth in this Agreement, upon the termination or expiration of this Agreement, the receiving Party shall, at the written request of the disclosing Party, either return all Confidential Information of the disclosing Party (including all copies, excerpts and summaries thereof contained on any media) or destroy such Confidential Information; provided, however, that the receiving Party may retain one copy of all Confidential Information of the disclosing Party for its legal records.

 

8.3     Ownership of Intellectual Property.  Except as specifically set forth herein, each Party shall continue to own all right, title and interest in and to its Intellectual Property and nothing herein shall be deemed to transfer or assign any rights with respect thereto to any of the other Parties hereto.

 

ARTICLE IX

FORCE MAJEURE.

 

9.1     Effects of Force Majeure.  A Party hereto shall be excused and shall not be held liable or responsible for failure or delay in fulfilling or performing any of its obligations under this Agreement, other than the payment of money, if such failure or delay is caused by acts of God, acts of the public enemy, fire, explosion, flood, drought, war, terrorists, riot, sabotage, embargo, strikes or other labor disputes, intervention of governmental authority, shortages in raw materials, actions by any applicable governmental health authority, or by any other event or circumstance of like or different character to the foregoing beyond the reasonable control and without the fault or negligence of the affected Party (a “Force Majeure Event”). Such excuse shall continue as long as the Force Majeure Event continues, provided, however, that in the event the Force Majeure Event cannot be remedied within one hundred twenty (120) days, either party shall have the right to terminate this Agreement upon ten (10) days prior written notice and neither Party shall any liability as a result of such termination. Upon cessation of such Force Majeure Event, such Party shall promptly resume performance hereunder.

 

9.2     Notice of Force Majeure.  Each Party agrees to give the other Party prompt written notice of the occurrence of any Force Majeure Event, the nature thereof and the extent to which the affected Party will be unable to perform its obligations hereunder.  Each Party further agrees to use reasonable efforts to correct or otherwise address the Force Majeure Event as soon as practicable and to give the other Party prompt written notice when it is again fully able to perform such obligations.

 

ARTICLE X

MISCELLANEOUS.

 

10.1   Dispute Resolution.  The Parties recognize that a bona fide dispute as to certain matters may, from time to time, arise during the Term that relates to a Party’s rights and/or obligations hereunder.  In the event of the occurrence of such a dispute, either Party shall, by written notice to the other Party, have such dispute referred to the

 

  

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respective officers designated below, or their successors, for attempted resolution by good faith negotiation within thirty (30) days after such notice is received. Such designated officers are as follows:

 

For Synerx/Bioniche:  Douglas S. Hamilton, President (Synerx)

 

                                  and Damien Kelly, CFO (Bioniche Pharma)

 

For Delcath:    Eamonn P. Hobbs, President & CEO

 

In the event that the designated officers or their successors are not able to resolve the dispute within such thirty (30)-day period, or such other period of time as the Parties may mutually agree to in writing, each Party shall have the right to pursue any and all remedies available at law or in equity.  Notwithstanding anything contained in this Section 10.1 to the contrary, this Section 10.1 shall not apply in the event a Party is seeking an immediate injunction to stop, limit or prevent a material breach of this Agreement.

 

10.2   Independent Contractors.  The relationship between (a) Synerx and Delcath and (b) Bioniche Pharma and Delcath and (c) Synerx and Bioniche Pharma is that of independent contractors and nothing herein shall be deemed to constitute or create the relationship of partners, joint venturers or principal-agent between any two of them.  No Party shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of the other Parties or to bind the other Parties to any contract, agreement or undertaking with any third party.

 

10.3   Assignment.  Except as set forth below, neither this Agreement nor any other rights or obligations hereunder shall be assigned or delegated by any Party without the prior written consent of the other Parties.  Notwithstanding anything contained herein to the contrary, this Agreement shall automatically be assigned by Delcath, Bioniche Pharma or Synerx in connection with any merger, consolidation, or sale of all or substantially all of the equity, business or assets to which this Agreement relates of Delcath, Bioniche Pharma, or Synerx, as the case may be, to the applicable successor entity, and written notice of such assignment shall be provided to the other Parties.  In such an instance of automatic assignment, the prior written consent of the other Parties is not required.  This Agreement will be binding upon and inure to the benefit of the Parties and their respective successors and assigns.

 

10.4   Governing Law; Waiver of Jury Trial.  This contract shall be governed by, and construed in accordance with, the laws of the State of New York without reference to any rules of conflicts of laws.  The Parties hereby consent to the exclusive jurisdiction of the Federal and New York State courts located in Manhattan, New York and hereby waive any objection to venue or forum laid therein.  The Parties hereby agree that service of process by certified mail, return receipt requested, shall constitute personal service for all purposes hereof.  The Parties expressly reject the application of the United Nations

 

  

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Convention on Contracts for the International Sale of Goods and all implementing legislation thereunder.  EACH PARTY HEREBY WAIVES ITS RIGHT TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY PARTY AGAINST THE OTHER, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

 

10.5   No Implied Waiver.  No failure or delay on the part of either Party hereto to exercise any right, power or privilege hereunder or under any instrument executed pursuant hereto shall, in itself, operate as a waiver; nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

10.6   Notice.  All notices required to be given hereunder shall be in writing and shall be given by personal delivery, via confirmed facsimile transmission followed by U.S. mail, by a nationally recognized overnight carrier or by registered or certified mail, postage prepaid with return receipt requested. Notices shall be addressed to the Parties as follows:

 

	
If, to Delcath, to:

	
Delcath Systems, Inc.

810 Seventh Avenue, Suite 3505

New York, NY 10019

Attn: Eamonn P. Hobbs, President & CEO

Fax: 212-489-2102

 

	
and to:

 

 

 

 

 

 

	
Delcath Systems, Inc.

810 Seventh Avenue, Suite 3505

New York, NY  10019

Attn:  Executive Vice President, General Counsel

Fax:  (646) 225-5203

 

  

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If, to Synerx/Bioniche, to:

	
Synerx Pharma, LLC

100 North State Street

Newtown, PA 18940

Attn: Douglas S. Hamilton, President

Fax: (215) 895-9629

 

Synerx Pharma, LLC

100 North State Street

Newtown, PA 18940

Attn: Walter G. Jump, Vice President

Fax: (215) 895-9629

 

	
and to:

	
Bioniche Pharma

Inverin, County Galway

Ireland

Attn: Damien Kelly, CFO

Fax:  +353 91 593228

 

With a copy to:

 

Mylan Inc.

1500 Corporate Drive

Canonsburg, PA 15317

Attn:  Global General Counsel

Fax: (724) 514-1972

 

	
If to Synerx, to:

	
Synerx Pharma, LLC

100 North State Street

Newtown, PA 18940

Attn: Douglas S. Hamilton, President

Fax: (215) 895-9629

 

  

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If to Bioniche Pharma, to:

	
Bioniche Pharma

Inverin, County Galway

Ireland

Attn: Damien Kelly, CFO

Fax:  +353 91 593228

 

With a copy to:

 

Mylan Inc.

1500 Corporate Drive

Canonsburg, PA 15317

Attn:  Global General Counsel

Fax: (724) 514-1972

 

 

Notices delivered personally shall be deemed communicated as of actual receipt; notices sent via facsimile transmission shall be deemed communicated as of receipt by the sender of written confirmation of transmission thereof; notices sent via overnight courier shall be deemed received as of confirmation of delivery of same; and notices mailed shall be deemed communicated as of ten (10) business days after proper mailing.  A Party may change its address by written notice sent in accordance with this Section 10.6.

 

10.7   Amendments.  Any amendment or modification of this Agreement shall be valid only if made in writing and signed by the Parties hereto.

 

10.8    Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which shall constitute a single document.  A facsimile or other electronically transmitted signature of an authorized signatory of either Party shall be valid and binding and constitute due execution and delivery of this Agreement by such Party.

 

10.9    Entire Agreement.  This Agreement constitutes the entire understanding between the Parties with respect to the subject matter hereof and supersedes all prior contracts, agreements and understandings related to the same subject matter between the Parties.  The Parties intend this Agreement to be a complete statement of the terms of their understanding.

 

10.10   Benefit; Binding Effect.  This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

 

10.11   Survival.  The provisions of Sections 3.15, 5.3-5.7, 6.4-6.9, 7.6, 10.1, 10.4, 10.6, 10.12 and this Section 10.11, and Articles I, IV, VI, VIII and IX shall survive, in accordance with their respective terms, any termination or expiration of this Agreement.

 

  

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10.12   Further Assurances.  The Parties agree that they shall take all appropriate actions, including the execution or filing of any documents or instruments, that may be reasonably necessary or advisable to carry out the intent and accomplish the purposes of any of the provisions hereof.

 

10.13   Severability.  In the event that any provision of this Agreement shall be held invalid or unenforceable for any reason by a court of competent jurisdiction, such provision or part thereof shall be considered separate from the remaining provisions of this Agreement, which shall remain in full force and effect.  Such invalid or unenforceable provision shall be deemed revised to effect, to the fullest extent permitted by applicable law, the intent of the Parties as set forth herein.

 

10.14   Quality Assurance Agreement.  Within ninety (90) days following the date hereof, the Parties shall enter into an agreement that details the quality assurance obligations of each Party on mutually agreeable and customary terms (the “Quality Assurance Agreement”).

 

10.15   Rights and Remedies Cumulative.  Except as expressly provided herein, the rights and remedies provided in this Agreement, shall be cumulative and not exclusive of any other rights and remedies provided by law or otherwise.

 

*****************************

[SIGNATURE PAGE FOLLOWS]

 

  

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first above written by their duly authorized representatives.

 

	  	
SYNERX PHARMA, LLC

	  	  	  
	  	
By:

	
/s/ Douglas S. Hamilton                            

	  	  	
Name:  Douglas S. Hamilton

Title:  President

	  	  	  
	  	
BIONICHE TEORANTA

	  	  	  
	  	
By:

	
/s/ Damien Kelly                                        

	  	  	
Name:  Damien Kelly

Title:  CFO

	  	  	  
	  	
DELCATH SYSTEMS, INC.

	  	  	  
	  	
By:

	
/s/ David McDonald                                  

	  	  	
Name:  David McDonald

Title:  CFO

 

  

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SCHEDULE A

 

Minimum Binding Purchase Commitments

 

	
Contract Year

 

	
1

 

	
2

 

	
3

 

	
4

 

	
5

 

	
6

 

	
7

 

	
Minimum Binding Purchase Commitment    (No. of vials)

 

	
[***]

 

	
[***]

 

	
[***]

 

	
[***]

 

	
[***]

 

	
[***]

 

	
[***]

 

	
Price Per Vial*

 

	
[***]

 

	
[***]

 

	
[***]

 

	
[***]

 

	
[***]

 

	
[***]

 

	
[***]

 

 

*  To the extent that, in any Contract Year, Delcath’s purchases of Product hereunder are more than [***] percent ([***] %) above the Minimum Binding Purchase Commitment for such Contract Year (“Excess Purchases”), the applicable price per vial with respect to vials constituting Excess Purchases shall be [***] percent ([***]%) of the Price Per Vial set forth above for such Contract Year.

** Lowest Cost (or “LC”) shall be the lower of (a) [***] ($[***]) per vial or (b) Average Market Selling Price x [***]. For purposes of such calculation, “Average Market Selling Price” shall mean (Y) the Total Dollar Sales of Melphalan Injection reported by IMS Health in USA for the most recent reported time period available, divided by (Z) Total Number of Vials of Melphalan Injection reported by IMS Health in USA for the most recent reported time period available.

  

-i-

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