Document:

e60713112ex10_1.htm

    EXHIBIT
10.1

     

    EMPLOYMENT
AGREEMENT

     

    THIS
EMPLOYMENT AGREEMENT (this “Agreement”) is made
and entered into this 6th day of July, 2009, by and between Delcath Systems,
Inc., a Delaware corporation (the “Company”), and Eamonn
Hobbs (the “Executive”).

     

    RECITALS

     

    THE
PARTIES ENTER THIS AGREEMENT on the basis of the following facts, understandings
and intentions:

     

    A.           The
Company desires to hire the Executive as its Chief Executive Officer on the
terms and conditions set forth in this Agreement.

     

    B.           This
Agreement shall govern the employment relationship between the Executive and the
Company from and after the Effective Date, and, as of the Effective Date,
supersedes and negates any previous agreements or understandings with respect to
such relationship.

     

    C.           The
Executive desires to be employed by the Company on the terms and conditions set
forth in this Agreement.

     

    AGREEMENT

     

    NOW,
THEREFORE, in consideration of the above recitals incorporated herein and the
mutual covenants and promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby expressly
acknowledged, the parties agree as follows:

     

    1. Retention
and Duties.

     

    
      	
              1.1  

            	
              Retention.  The
      Company does hereby hire, engage and employ the Executive beginning on a
      date to be mutually agreed, not later than July 6, 2009 (such actual date
      of employment commencement, the “Effective
      Date”), and concluding on the last day of the Period of Employment
      (as such term is defined in Section 2) on
      the terms and conditions expressly set forth in this
      Agreement.  The Executive does hereby accept and agree to such
      hiring, engagement and employment, on the terms and conditions expressly
      set forth in this Agreement.

            

    

     

    
      	
              1.2  

            	
              Duties.  During
      the Period of Employment, the Executive shall serve the Company as its
      Chief Executive Officer and shall have the powers, authorities, duties and
      obligations of management usually vested in the office of the Chief
      Executive Officer of a company of a similar size and similar nature as the
      Company, and such other powers, authorities, duties and obligations
      commensurate with such position as the Company’s Board of Directors (the
      “Board”)
      may assign from time to time, all subject to the directives of the Board
      and the corporate policies of the Company as they are in effect from time
      to time throughout the Period of Employment (including, without
      limitation, the Company’s business conduct and ethics policies, as in
      effect from time to time).  The Executive will be appointed to
      the Board as of the Effective Date.  During the Period of
      Employment, the Executive shall report to the
  Board.

            

    

     

    
      	
              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, or to
curtail the Executive’s consulting services to AngioDynamics, Inc., in each case
if the Board reasonably determines that the Executive’s service in such capacity
interferes with the effective discharge of the Executive’s duties and
responsibilities to the Company or that any business related to such service is
then in competition with any business of the Company or any of its Affiliates
(as such term is defined in Section 5.5),
successors or assigns.  The Executive’s service on the boards of
directors (or similar body) of other business entities is subject to the
approval of the Board, which approval, subject to the foregoing, is hereby
granted with respect to the Executive’s service as a consultant to
AngioDynamics, Inc. and his service as a member of the board of directors of
each of HydroMet, Inc. and MedCloud Networks, Inc.

     

    
      	
              1.4  

            	
              No
      Breach of Contract.  The Executive hereby represents to
      the Company that: (i) the execution and delivery of this Agreement by the
      Executive and the Company and the performance by the Executive of the
      Executive’s duties hereunder do not and shall not constitute a breach of,
      conflict with, or otherwise contravene or cause a default under, the terms
      of any other agreement or policy to which the Executive is a party or
      otherwise bound or any judgment, order or decree to which the Executive is
      subject; (ii) the Executive has no information (including, without
      limitation, confidential information and trade secrets) relating to any
      other Person (as such term is defined in Section 5.5)
      which would prevent, or be violated by, the Executive entering into this
      Agreement or carrying out his duties hereunder; (iii) the Executive is not
      bound by any employment, consulting, non-compete, confidentiality, trade
      secret or similar agreement with any other Person that would prevent, or
      be violated by, the Executive entering into this Agreement or carrying out
      his duties hereunder; and (iv) the Executive understands the Company will
      rely upon the accuracy and truth of the representations and warranties of
      the Executive set forth herein and the Executive consents to such
      reliance.

            

    

     

    
      	
              1.5  

            	
              Location.  The
      Executive’s principal place of employment shall be the Company’s principal
      executive office as it may be located from time to time.  The
      Executive agrees that he will be regularly present at that
      office.  The Executive acknowledges that he will be required to
      travel from time to time in the course of performing his duties for the
      Company.  As of the date of this Agreement, the Company’s
      principal executive office is located at 600 Fifth Avenue in New York, New
      York, and any relocation shall require the 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 Board, for an additional period of one (1)
      year.  Notwithstanding the foregoing, the Period of Employment
      is subject to earlier termination as provided below in this
      Agreement.  Failure of the Board to extend the Period of
      Employment beyond the second anniversary of the Effective Date shall not
      constitute a breach of this Agreement and shall not constitute an
      Involuntary Termination (as such term is defined in Section 5.5)
      for purposes of this Agreement.

            

    

     

    
      
         

      

      
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              3.  

            	
              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 minimum Base Salary shall be at an
      annualized rate of four hundred twenty-five thousand dollars ($425,000),
      and shall be subject to annual review by the Compensation Committee (as
      defined in Section
      3.2).

            

    

     

    
      	
              3.2  

            	
              Incentive
      Bonus.  The Executive shall be eligible to receive an
      incentive bonus (“Incentive
      Bonus”) for each consecutive 12-month period that ends on an
      anniversary of the Effective Date (each, a “Bonus Year”)
      during the Period of Employment; provided that
      the Executive must be employed by the Company on the anniversary date in
      order to be eligible for an Incentive Bonus with respect to the Bonus Year
      ending on such date (and, except as provided in Section 5.3, if
      the Executive is not so employed at such time, he shall not be considered
      to have “earned” any Incentive Bonus with respect to the Bonus Year in
      question).  The target Incentive Bonus for each Bonus Year shall
      equal 50% of the total Base Salary paid in that Bonus Year, based on
      performance objectives (which may include corporate, business unit or
      division, financial, strategic, individual or other objectives) reasonably
      established with respect to that particular Bonus Year by the compensation
      and stock option committee of the Board or its successor (the “Compensation
      Committee”).  No Incentive Bonus shall be paid unless the
      applicable performance objectives have been attained, and the Compensation
      Committee shall determine whether an Incentive Bonus is merited in any
      given Bonus Year.  Under no circumstances shall the Company pay
      the Executive an Incentive Bonus for a Bonus Year if his employment is
      terminated for Cause on or prior to the bonus payment date for such Bonus
      Year.     

            

    

     

    3.3 Stock
Option Grant.

     

    (a) On the
Effective Date, the Company will grant the Executive a stock option to purchase
800,000 of the issued and outstanding shares of the Company’s common stock at a
price per share equal to the closing price on the date of grant.  On
January 4, 2010, provided the Executive remains employed on such date, the
Company will grant the Executive a stock option to purchase an additional 50,000
issued and outstanding shares of the Company’s common stock at a price per share
equal to the closing price on that date (the stock options to purchase 850,000
shares of the Company’s common stock described in this paragraph, the “Option.”)

     

    (b) 50,000 of
the shares covered by the Option shall be vested upon the Effective
Date.  The remainder of the Option will vest with respect to 266,667
of the shares subject to the Option on each of the first two (2) anniversaries
of the Effective Date and 266,666 on the third (3rd) anniversary of the
Effective Date, subject to the Executive’s continued employment by the Company
through the respective anniversary.  Notwithstanding the foregoing, if
earlier than provided in the immediately preceding sentence (and, without
duplication, reduced by any shares that previously vested pursuant to the
immediately preceding sentence), (i) 200,000 of the shares subject to the Option
shall vest upon receipt by the Company of financing from third party investors
of $15 million or more (gross proceeds), (ii) 200,000 of the shares subject to
the Option shall vest on submission to the U.S. Food and Drug Administration
(the “FDA”),
with the consent of the Board, of a Premarket Approval or New Drug Approval (as
such terms are used by the FDA) for

     

    
      
         

      

      
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    the
Company’s percutaneous hepatic perfusion treatment system, and (iii) 400,000 of
the shares subject to the Option shall vest upon the FDA’s formal written notice
of such approval including FDA-approved labeling language for the percutaneous
hepatic perfusion treatment.  Notwithstanding the foregoing, all
shares subject to the Option shall immediately vest upon (i) the Executive’s
Involuntary Termination (as defined in Section 5.5) after
the first anniversary of the Effective Date or (ii) a Change of Control (as such
term is defined in subsections (a)-(d) of the definition of “Change of Control”
contained in the Company’s 2009 Stock Incentive Plan).  Upon the
Executive’s Involuntary Termination between the Effective Date and its first
anniversary, an additional number of shares such that a total of 50% of all
shares subject to the Option shall be vested as of the Severance Date (as
defined in Section
5.3).

     

    (c) The
Option shall be granted in part under the Company’s 2009 Stock Incentive Plan
and in part under the Company’s 2004 Stock Incentive Plan and shall be subject
to such further terms and conditions as set forth in a written stock option
grant letter to be provided by the Company to the Executive to evidence the
Option under each plan.

     

    
      	
              3.4  

            	
              Special
      One-Time Bonus.

            

    

     

    The
Executive shall receive a special one-time bonus of $175,000 (the “Special Bonus”)
within seven (7) business days of the Effective Date.  The Special
Bonus is intended to reduce the impact of the costs to the Executive in
connection with his relocation, moving and temporary housing while he secures
permanent housing in New York and includes a “gross up” for income taxes that
the Executive would bear on a net payment of
$100,000.  Notwithstanding the foregoing, if the Executive is
terminated for Cause or resigns without Good Reason prior to the first
anniversary of the Effective Date, a pro rata portion of the Special Bonus
(determined by multiplying the Special Bonus by a fraction, the numerator of
which is the number of days from the Severance Date (as such term is defined in
Section 5.3) to
the first anniversary of the Effective Date and the denominator of which is 365)
shall be due and payable to the Company immediately upon such employment
termination, subject to offset, at the Company’s election, against any Severance
Benefit (as such term is defined in Section 5.3) or other
amount otherwise due under this Agreement.

     

    
      	
              4.  

            	
              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  

            	
              Reimbursement
      of Business Expenses.  The Executive is authorized to
      incur reasonable expenses in carrying out the Executive’s duties for the
      Company under this Agreement and shall be entitled to reimbursement for
      all reasonable business expenses that the Executive incurs during the
      Period of Employment in connection with carrying out the Executive’s
      duties for the Company, subject to the Company’s expense reimbursement
      policies and any pre-approval policies in effect from time to
      time.

            

    

     

    
      
         

      

      
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              5.  

            	
              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 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 the
greater of (i) 12 months or (ii) if the Severance Date occurs before the second
anniversary of the Effective Date, the period of time between the Severance Date
and the second anniversary of the Effective Date (the period described in (i) or
(ii), as applicable, the “Severance
Period”).  Such amount is referred to hereinafter as the “Severance
Benefit.”  Subject to Section 5.8(a), the
Company shall pay the Severance Benefit to the Executive in substantially equal
installments in accordance with the Company’s standard payroll practices over a
period of 12 months, with the first installment payable in the month following
the month in which the Executive’s Separation from Service (as such term is
defined in Section
5.5) occurs.  In addition, if the Executive’s employment
terminates as a result of an Involuntary Termination, the Executive shall,
solely to the extent the applicable performance objectives have been met for the
Bonus Year that includes the Severance Date, be paid an Incentive Bonus for such
Bonus Year at such time as such Incentive Bonus would have been paid in
accordance with Section 3.2 had the
Executive’s employment continued until such payment date; provided, however, that such
Incentive Bonus will be reduced to reflect the percentage of the Bonus Year
during which the Executive was employed under this Agreement (any such Incentive
Bonus, the “Stub
Bonus”). 

     

    (c) Notwithstanding
the foregoing provisions of this Section 5.3, if the
Executive breaches his obligations under Section 6 or under
any other agreement signed by the Executive and the Company or any of its
Affiliates that imposes restrictions with respect to the Executive’s activities
at any time, from and after the date of such breach and not in

     

    
      
         

      

      
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    any way
in limitation of any right or remedy otherwise available to the Company, the
Executive will no longer be entitled to, and the Company will no longer be
obligated to pay, any remaining unpaid portion of the Severance Benefit; provided that, if the
Executive provides the release contemplated by Section 5.4, in no
event shall the Executive be entitled to a Severance Benefit payment of less
than $5,000, which amount the parties agree is good and adequate consideration,
standing alone, for the Executive’s release contemplated by Section
5.4.

     

    (d) The
foregoing provisions of this Section 5.3 shall not
affect: (i) the Executive’s receipt of any benefits otherwise due terminated
employees under group insurance coverage consistent with the terms of an
applicable Company welfare benefit plan; (ii) the Executive’s rights to
continued health coverage under COBRA; (iii) the Executive’s receipt of benefits
otherwise due in accordance with the terms of the Company’s 401(k) plan (if
any); and (iv) the Executive’s receipt of any accrued but unpaid Incentive Bonus
for the Bonus Year ended on the most recent anniversary of the Effective Date,
payable at the time provided in Section
3.2.

     

    
      	
              5.4  

            	
              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 Stub Bonus or any obligation to accelerate vesting of any
equity-based award on an Involuntary Termination or a Change of Control, the
Executive shall, upon or promptly following his last day of employment with the
Company, provide the Company with a valid, executed general release agreement in
a form acceptable to the Company substantially in the form attached as Exhibit
A, and such release agreement shall have not been revoked by the Executive
pursuant to any revocation rights afforded by applicable law.

     

    (b) The
Executive agrees that the payments and benefits contemplated by Section 5.3 (and any
applicable acceleration of any equity-based award or bonus on an Involuntary
Termination or Change of Control) shall constitute the exclusive and sole remedy
for any termination of his employment and the Executive covenants not to assert
or pursue any other remedies, at law or in equity, with respect to any
termination of employment.  The Executive agrees to resign, on the
Severance Date, as an officer and director of the Company and any Affiliate of
the Company, and as a fiduciary of any benefit plan of the Company or any
Affiliate of the Company, and to promptly execute and provide to the Company any
further documentation, as requested by the Company, to confirm such
resignation.

     

    5.5 Certain
Defined Terms.

     

    (a) As used
herein, “Accrued
Obligations” means:

     

    (i) any Base
Salary that had accrued but had not been paid on or before the Severance Date;
and

     

    (ii) any
reimbursement due to the Executive pursuant to Section 4.2 for
expenses reasonably incurred by the Executive on or before the Severance
Date

     

    
      
         

      

      
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    and
documented and pre-approved, to the extent applicable, in accordance with the
Company’s expense reimbursement policies in effect at the applicable
time.

     

    (b) As used
herein, “Affiliate” of the
Company means a Person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Company.  As used in this definition, the term “control,”
including the correlative terms “controlling,” “controlled by” and “under common
control with,” means the possession, directly or indirectly, of the power to
direct or cause the direction of management or policies (whether through
ownership of securities or any partnership or other ownership interest, by
contract or otherwise) of a Person.

     

    (c) As used
herein, “Cause”
shall mean, as reasonably determined by the Board (excluding the Executive, if
he is then a member of the Board) based on the information then known to it,
that one or more of the following has occurred:

     

    (i) the
Executive has committed a felony (under the laws of the United States or any
relevant state, or a similar crime or offense under the applicable laws of any
relevant foreign jurisdiction);

     

    (ii) the
Executive has engaged in acts of fraud, dishonesty, gross negligence or other
misconduct including abuse of controlled substances, that is injurious to the
Company, its Affiliates or any of their customers, clients or
employees;

     

    (iii) the
Executive willfully fails to perform or uphold his duties under this Agreement
and/or willfully fails to comply with reasonable directives of the Board;
or

     

    (iv) any
breach by the Executive of any provision of Section 6, or any
material breach by the Executive of any other contract he is a party to with the
Company or any of its Affiliates including the Code of Ethics or another
material written policy.

     

    (d) As used
herein, “Good
Reason” shall mean a termination of the Executive’s employment by means
of resignation by the Executive after the occurrence (without the Executive’s
consent) of any one or more of the following conditions:

     

    (i) a
material diminution in the Executive’s rate of Base Salary;

     

    (ii) a
material diminution in the Executive’s authority, duties, or
responsibilities;

     

    (iii) a
material change in the geographic location of the Executive’s principal office
with the Company (for this purpose, in no event shall a relocation of such
office to a new location that is not more than fifty (50) miles from the current
location of the Company’s executive offices constitute a “material change”);
or

     

    (iv) a
material breach by the Company of this Agreement;

     

    provided, however, that any
such condition or conditions, as applicable, shall not constitute grounds for a
termination with Good Reason unless (x) the Executive provides written notice to
the Company of the condition claimed to constitute grounds for a

     

    
      
         

      

      
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    termination
with Good Reason within ninety (90) days after the initial existence of such
condition(s) (such notice to be delivered in accordance with Section 17), and (y)
the Company fails to remedy such condition(s) within thirty (30) days of
receiving such written notice thereof; and (z) the termination of the
Executive’s employment with the Company shall not constitute a termination with
Good Reason unless such termination occurs not more than one hundred and twenty
(120) days following the initial existence of the condition claimed to
constitute grounds for a termination with Good Reason.

     

    (e) As used
herein, “Disability” shall
mean a physical or mental impairment which, as reasonably determined by the
Board, renders the Executive unable to perform the essential functions of his
employment with the Company, even with reasonable accommodation that does not
impose an undue hardship on the Company, for more than 90 days in any 180-day
period, unless a longer period is required by federal or state law, in which
case that longer period would apply.

     

    (f) As used
herein, “Involuntary
Termination” shall mean (i) a termination of the Executive’s employment
by the Company without Cause (and other than due to Executive’s death or in
connection with a good faith determination by the Board that the Executive has a
Disability), or (ii) a termination with Good Reason.

     

    (g) As used
herein, the term “Person” shall be
construed broadly and shall include, without limitation, an individual, a
partnership, a limited liability company, a corporation, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision
thereof.

     

    (h) As used
herein, a “Separation
from Service” occurs when the Executive dies, retires, or otherwise has a
termination of employment with the Company that constitutes a “separation from
service” within the meaning of Treasury Regulation Section 1.409A-1(h)(1),
without regard to the optional alternative definitions available
thereunder.

     

    
      	
              5.6  

            	
              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.

            

    

     

    
      	
              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

     

    
      
         

      

      
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    this
Section 5.7(a)
that the Executive shall have executed a valid waiver in a form reasonably
satisfactory to the Company and sufficient to enable the Stockholders’ approval
to have the effect that no payments to the Executive would be subject to the
excise tax under Section 4999 of the Code.  If the exemption described
in Section 280G(b)(5)(B) of the Code and the Treasury Regulations promulgated
thereunder does not apply, then the procedures set forth in Section 5.7(b) and
Section 5.7(c)
hereof shall apply.

     

    (b) Notwithstanding
anything contained in this Agreement to the contrary, to the extent that the
Total Payments would be subject to Section 4999 of the Code, then the Total
Payments shall be reduced (but not below zero) so that the maximum amount of the
Total Payments (after reduction) shall be one dollar ($1.00) less than the
amount which would cause the Total Payments to be subject to the excise tax
imposed by Section 4999 of the Code.  Unless the Executive shall have
given prior written notice to the Company to effectuate a reduction in the Total
Payments that complies with the requirements of Section 409A of the Code to
avoid the imputation of any tax, penalty or interest thereunder, the Company
shall reduce or eliminate the Total Payments by first reducing or eliminating
any cash severance benefits (with the payments to be made furthest in the future
being reduced first), then by reducing or eliminating any accelerated vesting of
stock options or similar awards, then by reducing or eliminating any other
remaining Total Payments.  The preceding provisions of this Section 5.7(b) shall
take precedence over the provisions of any other plan, arrangement or agreement
governing the Executive’s rights and entitlements to any benefits or
compensation.

     

    (c) Any
determination that Total Payments to the Executive must be reduced or eliminated
in accordance with Section 5.7(b) and
the assumptions to be utilized in arriving at such determination, shall be made
by the Board in the exercise of its reasonable, good faith discretion based upon
the advice of such professional advisors it may deem appropriate in the
circumstances.  As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the Board
hereunder, it is possible that Total Payments to the Executive which will not
have been made by the Company should have been made (“Underpayment”).  If
an Underpayment has occurred, the amount of any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
Executive.  In the event that any Total Payment made to the Executive
shall be determined to otherwise result in the imposition of any tax under
Section 4999 of the Code, then the Executive shall promptly repay to the Company
the amount of any such Underpayment together with interest on such amount (at
the same rate as is applied to determine the present value of payments under
Section 280G of the Code or any successor thereto), from the date the
reimbursable payment was received by the Executive to the date the same is
repaid to the Company.

     

    5.8 Section
409A and 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 the Severance Benefit or Stub Bonus until
the earlier of (i) the date which is six (6) months after his or her Separation
from Service for any reason other than death, or (ii) the date of the
Executive’s death.  The provisions of this paragraph shall apply only
if, and to the extent, required to avoid the imputation of any tax, penalty or
interest pursuant to Section 409A of the Code.  Any amounts otherwise
payable to the Executive upon or in the six (6) month period following the
Executive’s

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    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 disclosure, misuse, espionage, loss and theft.  The Executive
shall deliver to the Company at the termination of the Period of Employment, or
at any time the Company may request, all memoranda, notes, plans, records,
reports, computer tapes and software and other documents and data (and copies
thereof) relating to the Confidential Information or the Work Product (as
hereinafter defined) of the business of the Company or any of its Affiliates
which the Executive may then possess or have under his
control.  Notwithstanding the foregoing, the Executive may truthfully
respond to a lawful and valid subpoena or other legal process, but shall give
the Company the earliest possible notice thereof, shall, as much in advance of
the return date as possible, make available to the Company and its counsel the
documents and other information sought, and shall assist the Company and such
counsel in responding to such process.

     

    (b) As used
in this Agreement, the term “Confidential
Information” means information that is not generally known to the public
and that is used, developed or obtained by the Company in connection with its
business, including, but not limited to, information, observations and data
obtained by the Executive while employed by the Company or any predecessors
thereof (including those obtained prior to the Effective

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    Date)
concerning (i) the business or affairs of the Company (or such predecessors),
(ii) products or services, (iii) fees, costs, compensation and pricing
structures, (iv) designs, (v) analyses, (vi) drawings, photographs and reports,
(vii) computer software, including operating systems, applications and program
listings, (viii) flow charts, manuals and documentation, (ix) data bases, (x)
accounting and business methods, (xi) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xii) customers and clients and customer or client lists,
(xiii) other copyrightable works, (xiv) all production methods, processes,
technology and trade secrets, and (xv) all similar and related information in
whatever form.  Confidential Information will not include any
information that has been published (other than a disclosure by the Executive in
breach of this Agreement) in a form generally available to the public prior to
the date the Executive proposes to disclose or use such
information.  Confidential Information will not be deemed to have been
published merely because individual portions of the information have been
separately published, but only if all material features comprising such
information have been published in combination.

     

    (c) As used
in this Agreement, the term “Work Product” means
all inventions, innovations, improvements, technical information, systems,
software developments, methods, designs, analyses, drawings, reports, service
marks, trademarks, trade names, logos and all similar or related information
(whether patentable or unpatentable, copyrightable, registerable as a trademark,
reduced to writing, or otherwise) which relates to the Company’s or any of its
Affiliates’ actual or anticipated business, research and development or existing
or future products or services and which are conceived, developed or made by the
Executive (whether or not during usual business hours, whether or not by the use
of the facilities of the Company or any of its Affiliates, and whether or not
alone or in conjunction with any other person) while employed by the Company
(including those conceived, developed or made prior to the Effective Date)
together with all patent applications, letters patent, trademark, trade name and
service 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 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

            

    

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    its
Affiliates’ trade secrets and confidential information, and to protect such
trade secrets and confidential information and the Company’s and its Affiliates’
relationships and goodwill with customers, during the Period of Employment and
for a period of time after the Severance Date equal to the Severance Period, the
Executive will not directly or indirectly through any other Person engage in,
enter the employ of, render any services to, have any ownership interest in, nor
participate in the financing, operation, management or control of, any Competing
Business.  For purposes of this Agreement, the phrase “directly or
indirectly through any other Person engage in” shall include, without
limitation, any direct or indirect ownership or profit participation interest in
such enterprise, whether as an owner, stockholder, member, partner, joint
venturer or otherwise, and shall include any direct or indirect participation in
such enterprise as an employee, consultant, director, officer, licensor of
technology or otherwise.  For purposes of this Agreement, “Competing Business”
means a Person anywhere in the continental United States or elsewhere in the
world where the Company or any of its Affiliates engage in business, or
reasonably anticipate engaging in business, on the Severance Date (the “Restricted Area”)
that at any time during the Period of Employment has competed, or at any time
during the Severance Period competes, with the Company or any of its Affiliates
in any of its or their businesses, including, without limitation, the research,
development, identification or marketing of cancer treatments or targeted drug
delivery systems.  Nothing herein shall prohibit the Executive from
being a passive owner of not more than 2% of the outstanding stock of any class
of a corporation that is publicly traded, so long as the Executive has no active
participation in the business of such corporation.

     

    
      	
              6.3  

            	
              Non-Solicitation
      of Employees and Consultants.  During the Period of
      Employment and for a period of twenty-four (24) months after the Severance
      Date, the Executive will not directly or indirectly through any other
      Person (i) induce or attempt to induce any employee or independent
      contractor of the Company or any Affiliate of the Company to leave the
      employ or service, as applicable, of the Company or such Affiliate, or in
      any way interfere with the relationship between the Company or any such
      Affiliate, on the one hand, and any employee or independent contractor
      thereof, on the other hand, or (ii) hire any person who was an employee of
      the Company or any Affiliate of the Company until twelve (12) months after
      such individual’s employment relationship with the Company or such
      Affiliate has been terminated.

            

    

     

    
      	
              6.4  

            	
              Non-Solicitation
      of Customers.  During the Period of Employment and for a
      period of twenty-four (24) months after the Severance Date, the Executive
      will not directly or indirectly through any other Person influence or
      attempt to influence customers, vendors, suppliers, licensors, lessors,
      joint venturers, associates, consultants, agents, or partners of the
      Company or any Affiliate of the Company to divert their business away from
      the Company or such Affiliate, and the Executive will not otherwise
      interfere with, disrupt or attempt to disrupt the business or professional
      relationships, contractual or otherwise, between the Company or any
      Affiliate of the Company, on the one hand, and any of its or their
      customers, suppliers, vendors, lessors, licensors, joint venturers,
      government regulators, associates, officers, employees, consultants,
      managers, partners, members or investors, on the other
    hand.

            

    

     

    
      	
              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,

            

    

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    officers,
and communications and human resources personnel of the Company shall not,
whether in writing or orally, disparage or denigrate the Executive.

     

    
      	
              6.6  

            	
              Understanding
      of Covenants.  The Executive acknowledges that, in the
      course of his employment with the Company and/or its Affiliates and their
      predecessors, he has become familiar, or will become familiar, with the
      Company’s and its Affiliates’ and their predecessors’ trade secrets and
      with other confidential and proprietary information concerning the
      Company, its Affiliates and their respective predecessors and that his
      services have been and will be of special, unique and extraordinary value
      to the Company and its Affiliates.  The Executive agrees that
      the foregoing covenants set forth in this Section 6
      (together, the “Restrictive
      Covenants”) are reasonable and necessary to protect the Company’s
      and its Affiliates’ trade secrets and other confidential and proprietary
      information, good will, stable workforce, and customer
      relations.

            

    

     

    
      	
               
      

            	
              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.

            

    

     

    
      	
              6.7  

            	
              Enforcement.  The
      Executive agrees that the Executive’s services are unique and that he has
      access to Confidential Information and Work
      Product.  Accordingly, without limiting the generality of Section 17, the
      Executive agrees that a breach by the Executive of any of the covenants in
      this Section
      6 would cause immediate and irreparable harm to the Company that
      would be difficult or impossible to measure, and that damages to the
      Company for any such injury would therefore be an inadequate remedy for
      any such breach.  Therefore, the Executive agrees that in the
      event of any breach or threatened breach of any provision of this Section 6 or
      any similar provision, the Company shall be entitled, in addition to and
      without limitation upon all other remedies the Company may have under this
      Agreement, at law or otherwise, to obtain specific performance, injunctive
      relief and/or other appropriate relief (without posting any bond or
      deposit) in order to enforce or prevent any violations of the provisions
      of this Section
      6 or any similar provision, as the case may be, or require the
      Executive to account for and pay over to the Company all compensation,
      profits, moneys, accruals, increments or other benefits derived from or
      received as a result of any transactions constituting a breach of this
      Section 6
      or any similar provision, as the case may be, if and when final judgment
      of a court of competent jurisdiction or arbitrator is so entered against
      the Executive.  The Executive further agrees that the applicable
      period of time any Restrictive Covenant is in effect following the
      Severance Date, as determined pursuant to the foregoing
      provisions

            

    

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    of this
Section 6, such
period of time shall be extended by the same amount of time that Executive is in
breach of any Restrictive Covenant.

     

    
      	
              6.8  

            	
              The
      Executive agrees to execute any additional documentation as may reasonably
      be requested by the Company in furtherance of the enforcement of any
      Restrictive Covenant.

            

    

     

    
      	
              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.

            

    

     

    
      	
              8.1  

            	
              This
      Agreement is personal to the Executive and without the prior written
      consent of the Company shall not be assignable by the Executive otherwise
      than by will or the laws of descent and distribution.  This
      Agreement shall inure to the benefit of and be enforceable by the
      Executive’s legal representatives.

            

    

     

    
      	
              8.2  

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

            

    

     

    
      	
              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.

            

    

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    
      	
              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.  It
      is the desire and intent of the parties hereto that the provisions of this
      Agreement be enforced to the fullest extent permissible under the laws and
      public policies applied in each jurisdiction in which enforcement is
      sought.  Accordingly, if any particular provision of this
      Agreement shall be adjudicated by an arbitrator or court of competent
      jurisdiction to be invalid, prohibited or unenforceable under any present
      or future law, and if the rights and obligations of any party under this
      Agreement will not be materially and adversely affected thereby, such
      provision, as to such jurisdiction, shall be ineffective, without
      invalidating the remaining provisions of this Agreement or affecting the
      validity or enforceability of such provision in any other jurisdiction,
      and to this end the provisions of this Agreement are declared to be
      severable; furthermore, in lieu of such invalid or unenforceable provision
      there will be added automatically as a part of this Agreement, a legal,
      valid and enforceable provision as similar in terms to such invalid or
      unenforceable provision as may be possible.  Notwithstanding the
      foregoing, if such provision could be more narrowly drawn (as to
      geographic scope, period of duration or otherwise) so as not to be
      invalid, prohibited or unenforceable in such jurisdiction, it shall, as to
      such jurisdiction, be so narrowly drawn, without invalidating the
      remaining provisions of this Agreement or affecting the validity or
      enforceability of such provision in any other
  jurisdiction.

            

    

     

    
      	
              13.  

            	
              Entire
      Agreement.  This Agreement embodies the entire agreement
      of the parties hereto respecting the matters within its
      scope.  This Agreement supersedes all prior and contemporaneous
      agreements of the parties hereto that directly or indirectly bears upon
      the subject matter hereof, including, without limitation, any term sheet
      prepared in connection herewith.  Any prior negotiations,
      correspondence, agreements, proposals or understandings relating to the
      subject matter hereof shall be deemed to have been merged into this
      Agreement, and to the extent inconsistent herewith, such negotiations,
      correspondence, agreements, proposals, or understandings shall be deemed
      to be of no force or effect.  There are no representations,
      warranties, or agreements, whether express or implied, or oral or written,
      with respect to the subject matter hereof, except as expressly set forth
      herein.  Notwithstanding the foregoing integration provisions,
      the Executive acknowledges having received and read the Company’s Code of
      Business Conduct and Ethics and agrees to conduct himself in accordance
      therewith as in effect from time to
time.

            

    

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    
      	
              14.  

            	
              Modifications.  This
      Agreement may not be amended, modified or changed (in whole or in part),
      except by a formal, definitive written agreement expressly referring to
      this Agreement, which agreement is executed by both of the parties
      hereto.

            

    

     

    
      	
              15.  

            	
              Waiver.  Neither
      the failure nor any delay on the part of a party to exercise any right,
      remedy, power or privilege under this Agreement shall operate as a waiver
      thereof, nor shall any single or partial exercise of any right, remedy,
      power or privilege preclude any other or further exercise of the same or
      of any right, remedy, power or privilege, nor shall any waiver of any
      right, remedy, power or privilege with respect to any occurrence be
      construed as a waiver of such right, remedy, power or privilege with
      respect to any other occurrence.  No waiver shall be effective
      unless it is in writing and is signed by the party asserted to have
      granted such waiver.

            

    

     

    
      	
              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 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:

     

    Delcath
Systems, Inc.

    Rockefeller
Center

    600 Fifth
Avenue, 23rd Floor

    New York,
NY  10020

    Facsimile:
(212) 489-2102

    Attn: Board of
Directors

    

    with a
copy to:

     

    Hughes
Hubbard & Reed

    One
Battery Park Plaza

    New York,
NY  10004

    Facsimile:
(212) 422-4726

    Attn: Gary J. Simon,
Esq.

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    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; Mutual Drafting.  Each party recognizes that
      this is a legally binding contract and acknowledges and agrees that they
      have had the opportunity to consult with legal counsel of their
      choice.  Each party has cooperated in the drafting, negotiation
      and preparation of this Agreement.  Hence, in any construction
      to be made of this Agreement, the same shall not be construed against
      either party on the basis of that party being the drafter of such
      language.  The Executive agrees and acknowledges that he has
      read and understands this Agreement, is entering into it freely and
      voluntarily, and has been advised to seek counsel prior to entering into
      this Agreement and has had ample opportunity to do
  so.

            

    

     

    [The
remainder of this page has intentionally been left blank.]

    

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
Company and the Executive have executed this Agreement as of July __,
2009.

     

    
      	 
      	
              “COMPANY”

            	 
      
	 
      	 
      	 
      
	 
      	
              Delcath
      Systems, Inc.

            	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
               /s/
      Harold S. Koplewicz

            	 
      
	 
      	
              Name:

            	
              Harold
      S. Koplewicz, M.D.

            	 
      
	 
      	
              Title:

            	
              Chairman

            	 
      

    

    

    
      	 
      	
              “EXECUTIVE”

            	 
      
	 
      	 
      	 
      
	 
      	
              /s/
      Eamonn P. Hobbs

            	 
      
	 
      	 
      	
              Eamonn
      Hobbse60713112ex10_2.htm

    EXHIBIT
10.2

    

    SEPARATION AND GENERAL
RELEASE AGREEMENT

     

    This
Separation and General Release Agreement (this “Separation Agreement”), is
entered into this 5th day of
July, 2009, by and between Richard L. Taney, an individual (the “Executive”), and Delcath
Systems, Inc., a Delaware corporation (the “Company”).

     

    WHEREAS, the Executive is
resigning from employment with the Company effective July 6, 2009;

     

    WHEREAS, the Executive and the
Company have agreed upon the terms set forth herein;

     

    NOW, THEREFORE, in
consideration of the covenants undertaken and the releases contained in this
Separation Agreement, the Executive and the Company agree as
follows:

     

    I. Resignation.  The Executive
hereby resigns as an officer, employee, member, manager and in any other
capacity with the Company and each of its affiliates, effective July 6,
2009 (the “Separation
Date”); provided,
however, that the Executive does not resign from his position as a member
of the Board of Directors of the Company (the “Board”).  Concurrently
with the execution of this Separation Agreement, the Executive shall execute the
letter attached as Annex A hereto and
promptly deliver such letter to the Company.  The Company and its
affiliates hereby accept such resignation, effective as of the Separation
Date.  The Executive shall be paid any accrued but unpaid base salary
for services performed through the Separation Date and payment for any
unreimbursed business expenses reasonably incurred prior to the Separation Date
and timely submitted in accordance with the Company’s reimbursement
policies.

     

    II. Severance.

     

    A. The
Company shall pay the Executive cash severance in the amount of $396,000 in a
lump sum within 30 days after the Separation Date.

     

    B. Based on
his performance in fiscal year 2009 through the Separation Date, the
Compensation and Stock Option Committee of the Board has determined that the
Executive is entitled to a bonus in the amount of $80,000, which amount shall be
paid in a lump sum within 30 days after the Separation Date.

     

    Payment
of the benefits set forth in this Section II is
contingent upon the Executive’s execution and non-revocation of this Separation
Agreement pursuant to Section
VI.B.5.

     

    III. Health
Coverage.  The Company shall
pay the entire premiums due for the Executive’s  continued
participation in the Company’s medical and dental plans under COBRA for 12
months after the Separation Date.

     

    IV. Stock
Options.  As of the
Separation Date, the Executive is a party to option agreements (each, an “Option Agreement”) providing
for options (each, an “Option”) to acquire shares of
common stock of the Company as shown on the attached Schedule
I.  Each Option is fully vested and exercisable for the periods
stated on such Schedule
I.

     

    V. No Other
Benefits.  The benefits
provided pursuant to Sections I, II, III and
IV are in lieu of any other payments or benefits beyond the Separation
Date, and no such payments or benefits shall accrue or be payable, except for
fees earned by the Executive for services provided after the Separation Date as
a non-employee member of the Board.  The Executive specifically
acknowledges and agrees that

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    he is
entitled to receive no other severance pay or other benefits pursuant to any
plan or policy of the Company or any of its affiliates, including, without
limitation, the Employment Agreement.

     

    VI. Release.

     

    A. The
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, with respect to any claim under Title VII of
the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age
Discrimination in Employment Act of 1967 (“ADEA”), the Family and Medical
Leave Act of 1993, the New York Human Rights Law, the New York Retaliatory
Action By Employers Law, the New York Civil Rights Law, the New
York  Nondiscrimination for Legal Actions Law, the New York Wage-Hour
Law, the New York Workers' Compensation Law, the New York Wage Payment Law, the
New York City Human Rights Law, and for  harassment, discrimination
and retaliation of any kind, or any other cause of action, or any claim, for
severance pay, bonus, sick leave, holiday pay, vacation pay, life insurance,
health or medical insurance or any other fringe benefit, workers’ compensation
or disability coverage, in each case arising out his service as an officer
or  employee or his separation from his position as an officer or
employee, as applicable, committed or omitted prior to the date of this
Separation Agreement.  Notwithstanding the foregoing, the Executive is
specifically not releasing any rights he has to indemnification by the Company
in his capacity as an officer or director of the Company, any claims he has or
may have in the future in his capacity as a director of the Company, or any
claims he has for reimbursement of medical or dental claims incurred under
Company policies.  Nothing in this Section VI.A. shall
expressly or by implication diminish, decrease, discharge, release or lessen the
obligations of the Company under this Separation Agreement.

     

    B. ADEA
Waiver.  The Executive further expressly acknowledges and
agrees that:

     

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

     

    2. The
Executive is hereby advised in writing by this Separation Agreement to consult
with an attorney before signing this Separation Agreement;

     

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

     

    4. The
Executive was given a copy of this Separation Agreement on July 5, 2009 and
informed that he had twenty one (21) days within which to consider this
Separation Agreement and that if he wished to execute this Separation Agreement
prior to expiration of such 21-day period, he should execute the Endorsement
attached hereto as Annex B;

     

    5. The
Executive was informed that he had seven (7) days following the date of
execution of this Separation Agreement in which to revoke this Separation
Agreement, and this Separation 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 Separation Agreement.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    VII. No
Transferred Claims.  The Executive
warrants and represents that he has not heretofore assigned or transferred to
any person not a party to this Separation 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.

     

    VIII. Miscellaneous

     

    A. Successors.

     

    1. This
Separation Agreement is personal to the Executive and shall not, without the
prior written consent of the Executive, be assignable by the
Executive.

     

    2. This
Separation 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
Separation 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 or otherwise, directly or
indirectly acquires the ownership of the Company or to which the Company assigns
this Separation Agreement by operation of law or otherwise.

     

    B. Waiver.  No waiver of any
breach of any term or provision of this Separation Agreement shall be construed
to be, nor shall be, a waiver of any other breach of this Separation
Agreement.  No waiver shall be binding unless in writing and signed by
the party waiving the breach.

     

    C. Modification.  This Separation
Agreement may not be amended or modified other than by a written agreement
executed by the Executive and the Company.

     

    D. Complete
Agreement.  This Separation
Agreement constitutes and contains the entire agreement and final understanding
concerning the Executive’s relationship with the Company and its affiliates and
the other subject matters addressed herein between the parties, and supersedes
and replaces all prior negotiations and all agreements proposed or otherwise,
whether written or oral, concerning the subject matters hereof, it being
acknowledged that Section 6 of the Employment Agreement is incorporated herein
and remains binding on the Executive in accordance with its
terms.  Except as specifically modified by this Separation Agreement,
the Option Agreements are outside of the scope of the preceding sentence and
shall continue in effect in accordance with their terms.  Any
representation, promise or agreement not specifically included in this
Separation Agreement or an Option Agreement shall not be binding upon or
enforceable against either party.

     

    E. Litigation
and Investigation Assistance.  The Executive
agrees to cooperate, at the Company’s sole cost and expense, in the defense of
the Company or any of its affiliates against any threatened or pending
litigation or in any investigation or proceeding by any governmental agency or
body that relates to any events or actions which occurred during or prior to the
term of the Executive’s employment with the Company.  Furthermore, the
Executive agrees to cooperate, at the Company’s sole cost and expense, in the
prosecution of any claims and lawsuits brought by the Company or any of its
affiliates that are currently outstanding or that may in the future be brought
relating to matters which occurred during or prior to the term of the
Executive’s employment with the Company.  From and after the
Separation Date, except as requested by the Company or as required by law, the
Executive shall not comment upon any (i) threatened or pending claim or
litigation

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    (including
investigations or arbitrations) involving the Company or any of its affiliates
or (ii) threatened or pending government investigation involving the Company or
any of its affiliates.

     

    F. Severability.  If any provision
of this Separation Agreement or the application thereof is held invalid, the
invalidity shall not affect other provisions or applications of the Separation
Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Separation Agreement are
declared to be severable.

     

    G. Cooperation
in Drafting.  Each party has
cooperated in the drafting and preparation of this Separation
Agreement.  Hence, in any construction to be made of this Separation
Agreement, the same shall not be construed against any party on the basis that
the party was the drafter.

     

    H. Counterparts.  This Separation
Agreement may be executed in counterparts, including via facsimile, and each
counterpart, when executed, shall have the efficacy of a signed
original.  Photographic copies of such signed counterparts may be used
in lieu of the originals for any purpose.

     

    I. Choice of
Law; Forum; Waiver of Jury Trial.

     

    1. THIS
SEPARATION 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.

     

    2. Except
for the limited purpose of enforcing a restrictive covenant as provided in
Section 6.4 of the Employment Agreement, any legal dispute related to this
Separation Agreement and/or any claim related to this Separation 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 shall be
construed as providing the Executive a cause of action, remedy or procedure that
the Executive would not otherwise have under this Separation Agreement or the
law.

     

    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.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    J. Advice of
Counsel.  In entering this Separation Agreement, the parties
represent that they have had the opportunity to consult with attorneys and that
the terms of this Separation Agreement are fully understood and voluntarily
accepted by them.

     

    K. Supplementary
Documents.  All parties agree
to cooperate fully and to execute any and all supplementary documents and to
take all additional actions, in each case that may be reasonably necessary or
appropriate to give full force to the basic terms and intent of this Separation
Agreement and which are not inconsistent with its terms.

     

    L. Headings.  The
section headings contained in this Separation Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Separation Agreement.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    I have
read the foregoing Separation Agreement and I accept and agree to the provisions
it contains and hereby execute it voluntarily with full understanding of its
consequences.

     

    

    
      	 
      	
              the
      “Executive”

            	 
      
	 
      	 
      	 
      
	 
      	
              /s/
      Richard L. Taney

            	 
      
	 
      	
              Richard
      L. Taney

            	 
      

    

    

    
      	 
      	
              the
      “Company”

            	 
      
	 
      	 
      	 
      
	 
      	
              Delcath
      Systems, Inc.,

              a
      Delaware corporation

            	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              /s/
      Jason Rifkin

            	 
      
	 
      	
              By:

            	
              Jason
      Rifkin

            	 
      
	 
      	
              Its:

            	
              Secretary

            	 
      

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SCHEDULE
I

     

    Options

     

    

      
        
          	
                  Name
      of Company Plan

                	 
      	
                  Date
      of Grant

                	 
      	
                  Number
      of Shares Covered by Option (subject to adjustment in accordance with
      applicable Plan)

                	 
      	
                  Exercise
      Price per Share

                	 
      	
                  Last
      Date on which Options May be Exercised (unless sooner terminated under
      applicable Plan1)

                
	
                  2004
      Stock Incentive Plan

                	 
      	
                  November
      14, 2006

                	 
      	
                  40,000

                	 
      	
                  $3.28

                	 
      	
                  November
      14, 2011

                
	
                  2004
      Stock Incentive Plan

                	 
      	
                  July
      2, 2007

                	 
      	
                  50,000

                	 
      	
                  $3.90

                	 
      	
                  5th
      anniversary of the Separation Date

                
	
                  2004
      Stock Incentive Plan

                	 
      	
                  July
      2, 2007

                	 
      	
                  100,000

                	 
      	
                  $5.85

                	 
      	
                  5th
      anniversary of the Separation Date

                
	
                  2004
      Stock Incentive Plan

                	 
      	
                  January
      2, 2008

                	 
      	
                  50,000

                	 
      	
                  $1.74

                	 
      	
                  5th
      anniversary of the Separation Date

                
	
                  2004
      Stock Incentive Plan

                	 
      	
                  July
      2, 2008

                	 
      	
                  50,000

                	 
      	
                  $2.44

                	 
      	
                  5th
      anniversary of the Separation Date

                
	
                  2004
      Stock Incentive Plan

                	 
      	
                  January
      2, 2009

                	 
      	
                  50,000

                	 
      	
                  $1.24

                	 
      	
                  5th
      anniversary of the Separation Date

                
	
                  2009
      Stock Incentive Plan

                	 
      	
                  July
      2, 2009

                	 
      	
                  50,000

                	 
      	
                  $3.51

                	 
      	
                  5th
      anniversary of the Separation
Date

                

        

      

      

        

      

       

        1.    The Executive
and Company acknowledge that (a) the Options may terminate earlier than the
dates shown on the table in accordance with the terms of the applicable Company
Stock Incentive Plan under which they were granted (for example, if all options
under the Plan are terminated in connection with a sale of the Company) but (b)
the Options otherwise shall remain exercisable through the dates shown and (c)
the Executive is under no obligation to provide services to the Company as a
director, consultant or otherwise for any period of time as a condition to
retaining his rights to exercise the Options until the dates
shown.

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