NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON JUNE 9, 2009
Notice is
hereby given that an Annual Meeting of Stockholders of Delcath Systems, Inc., a
Delaware corporation, will be held on Tuesday, June 9, 2009 at 11:00 a.m.
(Eastern Time) at the Offices of Hughes Hubbard & Reed LLP, One Battery Park
Plaza, 10th Floor,
New York, N.Y., for the following purposes:
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1.
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To
elect two directors to serve until the 2012 Annual Meeting of Stockholders
and until their successors are duly elected and qualified (Proposal No.
1);
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2.
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To
ratify the Board’s selection of Carlin, Charron & Rosen, LLP as the
Company’s independent registered public accounting firm for the fiscal
year ending December 31, 2009 (Proposal No.
2);
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3.
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To
approve our 2009 Stock Incentive Plan (Proposal No. 3);
and
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4.
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To
transact such other business as may properly come before the meeting or
any adjournment thereof.
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Only
stockholders of record of Delcath Common Stock, $0.01 par value per share, at
the close of business on April 24, 2009 will be entitled to notice of, and to
vote at, the Annual Meeting of Stockholders or any adjournment
thereof.
Only
record or beneficial owners of Delcath Common Stock on the Record Date may
attend the Annual Meeting in person. When you arrive at the Annual Meeting, you
must present photo identification, such as a driver’s license.
Your vote
is important, regardless of the number of shares you own. Whether or not you
expect to attend the Annual Meeting of Stockholders, please complete, sign,
date, and return the enclosed proxy card in the enclosed postage-paid envelope
in order to ensure representation of your shares. It will help in our
preparations for the meeting if you would check the box on the form of proxy if
you plan on attending the Annual Meeting.
|
By
Order of the Board of Directors
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|
 |
|
|
RICHARD
TANEY
President,
Chief Executive Officer and
Treasurer
|
New York,
New York
April 30,
2009
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TABLE
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| APPENDIX A – CHARTER OF THE AUDIT COMMITTEE OF DELCATH SYSTEMS, INC. |
A-1
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|
B-1
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DELCATH
SYSTEMS, INC.
600
FIFTH AVENUE, 23rd
FLOOR
NEW
YORK, NEW YORK 10020
_____________________
PROXY
STATEMENT
_____________________
This
proxy statement is furnished to holders of common stock, $.01 per share, of
Delcath Systems, Inc. (“Delcath” or the “Company”). The proxies are being
solicited by the Board of Directors of Delcath for use at the 2009 Annual
Meeting of Stockholders of Delcath to be held at 11:00 a.m. (Eastern Time) on
Tuesday, June 9, 2009, at the Offices of Hughes Hubbard & Reed LLP, One
Battery Park Plaza, 10th Floor,
New York, N.Y., and at any adjournment thereof. This proxy statement and the
accompanying notice of annual meeting of stockholders, form of proxy, and the
Company’s Annual Report to Stockholders for the year ended December 31, 2008 are
first being mailed on or about April 30, 2009 to all persons entitled to vote at
the Annual Meeting.
Only
stockholders of record as of the close of business on April 24, 2009 (the
“Record Date”) of our common stock, $0.01 par value per share (the “Common
Stock”) will be entitled to notice of, and to vote at, the Annual Meeting. As of
the Record Date, 25,355,254 shares of Common Stock
were issued and outstanding and the Company had no other class of equity
securities outstanding. Holders of Common Stock are entitled to one vote per
share held by them. Stockholders may vote in person or by proxy. In order to
ensure a quorum at the Annual Meeting, you are requested to vote by proxy even
if you plan to attend the Annual Meeting in person. You can vote by completing
the enclosed proxy card and returning it signed and dated in the enclosed
envelope. Granting a proxy does not in any way affect a stockholder’s right to
attend the Annual Meeting and vote in person.
The proxy
solicited by this proxy statement, if properly signed and received by the
Company in time for the Annual Meeting, and not revoked prior to its use, will
be voted in accordance with the instructions it contains. If you return a proxy
without specifying your voting instructions, the proxy will be voted FOR
election of the nominees for director described below, FOR ratification of the
selection of Carlin, Charron & Rosen, LLP as the Company’s independent
registered public accounting firm for the fiscal year ending December 31, 2009,
and FOR approval of the 2009 Stock Incentive Plan. With respect to the
transaction of such other business as may properly come before the meeting, each
proxy received will be voted in accordance with the best judgment of the persons
appointed as proxies. At this time, the Board of Directors knows of no such
other business.
If you
give a proxy, you may revoke it at any time before it is voted by (1) filing
written notice of revocation with the Corporate Secretary of the Company
(addressed to Corporate Secretary, Delcath Systems, Inc., 600 Fifth Avenue,
23rd
Floor, New York, NY 10020; (2) submitting a duly executed proxy bearing a later
date; or (3) appearing at the Annual Meeting and giving the Corporate Secretary
notice of your intention to vote in person.
Holders
of a majority of the outstanding shares of Common Stock must be present at the
Annual Meeting, either in person or by proxy, to constitute a quorum for the
conduct of business. Assuming a quorum is present, the following votes are
necessary for approval of the matters presented at the meeting. Directors are
elected by a plurality of the votes cast. This means that nominees receiving the
highest number of “FOR” votes will be elected as directors. Shares that are not
voted, either because you marked your proxy card to withhold authority for one
or more nominees or you did not complete and return your proxy card, will have
no impact on the election of directors. The ratification of the appointment of
Carlin, Charron & Rosen, LLP as the Company’s independent registered public
accounting firm and the approval of the 2009 Stock Incentive Plan each requires
the affirmative vote of a majority of the votes entitled to vote on the proposal
and represented at the meeting.
Abstentions
and broker non-votes are considered present for purposes of determining the
presence of a quorum. Abstentions are considered entitled to vote, while broker
non-votes are treated as not entitled to vote. As a result, abstentions and
broker non-votes will not affect the plurality vote required for the election of
directors, abstentions will have the effect of a vote Against the other
proposals, and broker non-votes will have no effect on the outcome of the other
proposals. A “broker non-vote” occurs when a shareholder whose shares are held
in “street name” by a bank or broker fails to provide the bank or broker with
voting instructions and the bank or broker does not have discretionary authority
to vote the shares on the particular proposal under the New York Stock Exchange
rules. Banks and brokers have discretionary authority to vote shares held in
“street name” with respect to the election of directors and ratification of the
independent registered public accounting firm, but not with respect to approval
of the Stock Incentive Plan.
A copy of
this proxy statement and of the Company’s Annual Report to Stockholders for the
year ended December 31, 2008 are available at
https://materials.proxyvote.com/24661P.
The
following table sets forth, as of March 31, 2009, certain information regarding
the ownership of Delcath Common Stock by (i) each current director (or nominee
for director) of Delcath, (ii) each Named Executive Officer and (iii) all
current directors and executive officers as a group. To the Company’s knowledge,
except as disclosed in the table below, no person or group beneficially owns
more than 5% of the Company’s outstanding common stock. Except as otherwise
indicated, each of the stockholders named below has a business address c/o
Delcath Systems, Inc., 600 Fifth Avenue, 23rd Floor, New York, NY
10020.
|
Directors,
Executive
Officers
and 5% Stockholders(1)
|
Shares
Beneficially
Owned(2)
|
Percentage
of
Shares
Outstanding(3)
|
|
Robert
B. Ladd(4)
|
2,432,863
|
9.6
%
|
|
Richard
Taney(5)
|
521,000
|
2.1
%
|
|
Harold
S. Koplewicz, M.D.(6)
|
295,000
|
1.2
%
|
|
Laura
A. Philips, Ph.D., MBA(7)
|
194,000
|
*
|
|
Eammon
Hobbs(8)
|
150,000
|
*
|
|
Pamela
R. Contag, Ph.D.(9)
|
75,000
|
*
|
|
Roger
G. Stoll, Ph.D.(9)
|
75,000
|
*
|
|
Jason
Rifkin(10)
|
69,468
|
*
|
|
Paul
M. Feinstein(11)
|
3,375
|
*
|
|
All
current directors and executive officers as a group (9
persons)(12)
|
3,815,706
|
15.0
%
|
____________________________
* Less
than one percent.
|
(1)
|
Information
in this table is based on the information provided to us by the persons or
entities named in the table.
|
|
(2)
|
Under
the rules of the SEC, beneficial ownership includes any shares over which
an individual has sole or shared power to vote or to dispose, as well as
any shares that the individual has the right to acquire within 60 days. As
a result, the number of shares shown in this column includes shares of
Common Stock subject to options or warrants that are exercisable on or
within 60 days after March 31, 2009. Unless otherwise indicated, each
person has sole voting and dispositive power as to the shares
reported.
|
|
(3)
|
On
March 31, 2009, the number of shares of Common Stock issued and
outstanding was 25,355,254 shares. Shares of Common Stock subject to
options or warrants that are exercisable on or within 60 days after March
31, 2009 are deemed outstanding for purposes of calculating the percentage
owned by the person or entity holding such options or warrants, but are
not deemed outstanding for computing the percentage owned by other
holders.
|
|
(4)
|
Includes
stock options to purchase 40,000 shares of Common
Stock.
|
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(5)
|
Includes
stock options to purchase 340,000 shares of Common
Stock.
|
|
(6)
|
Includes
stock options to purchase 240,000 shares of Common
Stock.
|
|
(7)
|
Includes
12,000 shares owned of record by Dr. Philips’ spouse with respect to which
shares Dr. Philips disclaims beneficial ownership; 20,000 shares owned
jointly by Dr. Philips and her spouse; and stock options to purchase
150,000 shares of Common Stock.
|
|
(8)
|
Consists
of stock options to purchase 150,000 shares of Common
Stock.
|
|
(9)
|
Consists
of stock options to purchase 75,000 shares of Common
Stock.
|
|
(10)
|
Includes
stock options to purchase 68,333 shares of Common
Stock.
|
|
(11)
|
Mr.
Feinstein served as Chief Financial Officer and Treasurer of Delcath
during 2008 and as such is a named executive officer.
|
|
(12)
|
The
number of shares beneficially owned by all current directors and executive
officers as a group includes 1,138,333 shares of Common Stock issuable
upon exercise of stock
options.
|
The Board
of Directors oversees our business affairs and monitors the performance of
management. In accordance with our corporate governance principles, the Board
does not involve itself in day-to-day operations. The directors keep themselves
informed through discussions with the Chief Executive Officer, other key
executives and by reading the reports and other materials that we send them and
by participating in Board and committee meetings. Our directors hold office
until their successors have been elected and qualified unless the director
resigns or by reason of death or other cause is unable to serve in the capacity
of director.
The
Company applies the standards of The NASDAQ Capital Market (“NASDAQ”), the stock
exchange upon which the Company’s Common Stock is listed, for determining the
independence of the members of its Board of Directors and Board committees.
Under these standards, a director is not independent if he or she has certain
specified relationships with the Company or any other relationship that, in the
opinion of the Board, would interfere with the exercise of independent judgment
as a director. The Board has determined that each of the following directors is
independent within the meaning of such rules: Dr. Harold Koplewicz, Dr. Pamela
Contag, Mr. Eamonn Hobbs, Dr. Laura Philips, Dr. Roger Stoll, and Mr. Robert
Ladd.
The Board
of Directors met seven times during year ended December 31,
2008. During 2008, each of the then-directors attended at least 75%
of the aggregate of (i) the total number of meetings of the Board of Directors
and (ii) the total number of meetings held by all committees of the Board of
Directors on which he or she served.
It is the
Company’s policy that, absent unusual or unforeseen circumstances, all of the
directors are expected to attend annual meetings of stockholders. All of the
Company’s then-directors attended the Company’s 2008 Annual Meeting of
Stockholders.
Our Board of Directors has three
standing committees: a Compensation and Stock Option Committee, an Audit
Committee and a Nominating and Corporate Governance Committee.
Compensation and
Stock Option Committee. The Compensation and Stock
Option Committee assists the Board of Directors in the discharge of its
responsibilities with respect to the compensation of the Company’s directors,
executive officers, and other key employees and consultants. It
reviews compensation arrangements for the Company’s executive officers and
administers certain of the Company’s employee benefit plans, including its
equity incentive plans. The Compensation and Stock Option Committee is
authorized to approve the compensation payable to the Company’s executive
officers and other key employees, including all perquisites, equity incentive
awards, cash bonuses, and severance packages. The Charter of the Compensation
and Stock Option Committee is available on the Company’s website at
http://www.delcath.com. The current members of
the Compensation and Stock Option Committee are Dr. Stoll (Chair), Dr.
Koplewicz, and Mr. Ladd, each of whom is independent as defined in the rules of
NASDAQ. During 2008, the Compensation and Stock Option Committee met 4 times in
person or by teleconference.
Audit
Committee. The Audit Committee
provides assistance to the Board in fulfilling its oversight responsibilities
with respect to the Company’s financial statements, the Company’s system of
internal accounting and financial controls and the independent audit of the
Company’s financial statements. Functions of the Audit Committee
include:
|
·
|
the
selection, evaluation and, where appropriate, replacement of the Company’s
outside auditors;
|
|
·
|
an
annual review and evaluation of the qualifications, performance and
independence of the Company’s outside
auditors;
|
|
·
|
the
approval of all auditing services and permitted non-audit services
provided by the Company’s outside
auditors;
|
|
·
|
the
review of the adequacy and effectiveness of the Company’s accounting and
internal controls over financial reporting;
and
|
|
·
|
the
review and discussion with management and the outside auditors of the
Company’s financial statements to be filed with the Securities and
Exchange Commission.
|
The Audit
Committee is also responsible for approving proposed related party transactions
between the Company and directors, executive officers, 5% stockholders, and
certain individuals and entities related to any of them.
The
current members of the Audit Committee are Dr. Philips (Chair), Mr. Hobbs and
Mr. Ladd, all of whom satisfy the independence requirements of NASDAQ and the
SEC. During 2008, the Audit Committee met 4 times in person or by
teleconference. The Charter of the Audit Committee is not available on the
Company’s website, but is attached as Appendix A to this proxy
statement.
Audit Committee
Financial Experts. The Board has determined
that Dr. Philips and Mr. Ladd are “audit committee financial experts” as defined
under SEC rules, and that both are independent as defined under applicable
NASDAQ rules.
Nominating and
Corporate Governance Committee. The Nominating and Corporate Governance
Committee is responsible for identifying individuals qualified to become Board
members and recommends to the Board the director nominees to be proposed by the
Board for election by the stockholders (as well as any director nominees to be
appointed by the Board to fill interim vacancies). The committee also recommends
the directors to be selected for membership on each Board committee. The
committee is also responsible for developing and recommending to the Board
appropriate corporate governance guidelines and policies, and for leading the
Board in its annual review of the Board’s performance. The charter of the
Nominating and Corporate Governance Committee is available on the Company’s
website at http://www.delcath.com.
The
current members of the Nominating and Corporate Governance Committee are Dr.
Contag (Chair), Dr. Philips and Mr. Hobbs, each of whom is independent, as
defined in the rules of NASDAQ. During 2008, the Nominating and Corporate
Governance Committee met 1 time in person or by teleconference.
The
Nominating Committee will consider any recommendation by a stockholder of a
candidate for nomination as a director. If a stockholder wants to recommend to
the Nominating and Corporate Governance Committee a candidate for election as a
director, the stockholder may submit the name of the proposed nominee, together
with the reasons why the stockholder believes the election of the candidate
would be beneficial to the Company and its stockholders and the information
about the nominee that would be required in a proxy
statement
requesting proxies to vote in favor of the candidate. The stockholder’s
submission must be accompanied by the written consent of the proposed nominee to
being nominated by the Board and the candidate’s agreement to serve if nominated
and elected.
Any such
submission should be directed to the Nominating and Corporate Governance
Committee at the Company’s principal office, 600 Fifth Avenue, 23rd Floor,
New York, New York 10020. For any annual meeting, the submission of a
recommendation must be received no later than the deadline for receiving a
stockholder proposal for inclusion in the Company’s proxy statement for such
meeting (as described below under the heading “Stockholder Proposals For 2010
Annual Meeting.”) Copies of any recommendation received in accordance with these
procedures will be distributed to each member of the Nominating and Corporate
Governance Committee. One or more members of the Nominating and Corporate
Governance Committee may contact the proposed candidate to request additional
information.
At the
request of any director, the candidacy of the proposed nominee will be
considered by the full Nominating and Corporate Governance Committee. The
Nominating and Corporate Governance Committee will not, however, be obligated to
notify a stockholder who has recommended a candidate for election as a director
of the reasons for any action the Committee may or may not take with respect to
such recommendation. No stockholder
recommendations were received in 2008. During 2008, the Company paid fees to a
third party search firm in connection with identifying, recruiting,
prescreening, evaluating and processing Mr. Hobbs, Dr. Contag and Dr. Stoll as
new directors.
The Board
of the Company welcomes questions, comments and observations from stockholders
concerning the policies and operation of the Board and about the general
business and operation of the Company.
Any
stockholder wishing to communicate with the Board or with any specified director
should address his or her communication to the Board of Directors or to the
particular director(s) and send it to the Company’s principal office at 600
Fifth Avenue, 23rd Floor,
New York, New York 10020. Unless otherwise requested by a stockholder in a
separate written request accompanying the communication, stockholder
communications to the Board or to specified director(s) will be initially
reviewed by the Company’s Chief Executive Officer. Communications
that the reviewing officer determines relate to the Company’s ordinary course of
business will be responded to by the officer or his designee. Communications
that the Chief Executive Officer determines do not relate to the Company’s
ordinary course of business or that he otherwise believes are appropriate for
review by the directors will be forwarded to each of the directors. Actions, if
any, to be taken in response to any stockholder communication will be in the
discretion of the Board. At the request of the Board, the Chief Executive
Officer will summarize any stockholder communications that are not forwarded on
the basis that such communications relate to the ordinary course of the
Company’s business.
The
process for stockholder communication with the Board of Directors or with
specified director(s) has been approved by the Company’s Board, including by a
majority of the Company’s independent directors.
We have
adopted a Code of Business Conduct and Ethics that applies to our directors,
officers and employees, including our CEO, principal accounting officer,
controller, and persons performing similar functions. A copy of the
Code of Business Conduct and Ethics is available on the Company’s website at
http://www.delcath.com. Any substantive
amendments
to the code and any grant of a waiver from a provision of the code requiring
disclosure under applicable SEC or NASDAQ rules will be disclosed on the
Company’s website.
None of
the members of the Compensation and Stock Option Committee is a current or
former officer of the Company, nor did they engage in any “related party”
relationship or transaction that would be required to be disclosed under Item
404 of Regulation S-K. During 2008, there were no interlocking relationships
between our Board of Directors or the Compensation and Stock Option Committee,
and the board of directors or compensation committee of any other company that
would be required to be disclosed under Item 407 of Regulation S-K.
Policy for Review
of Related Party Transactions. The Company has adopted
a written policy for the review and approval or ratification of transactions
between the Company and Related Parties. Under the policy, the
Company’s Nominating and Corporate Governance Committee will review the material
facts of proposed transactions involving the Company in which a Related Party
will have a direct or indirect material interest. The Committee will
either approve or disapprove the Company’s entry into the transaction or, if
advance approval is not feasible, will consider whether to ratify the
transaction. The Committee may establish guidelines for ongoing transactions
with a Related Party, and will review such transactions at least annually. If
the aggregate amount of the transaction is expected to be less than $200,000,
such approval or ratification may be made by the Chair of the Committee. In
determining whether to approve or ratify a transaction with a Related Party, the
Committee (or Chair) will consider, among other factors, whether the transaction
is on terms no less favorable than terms generally available to an unaffiliated
third-party and the extent of the Related Party’s interest in the
transaction.
Certain
transactions are deemed pre-approved under the Policy, including compensation of
executive officers and directors (except that employment of an immediate family
member of an executive officer requires specific approval), and transactions
with a company at which the Related Party’s only relationship is as a
non-officer employee, director, or less than 10% owner if the aggregate amount
involved does not exceed 2% of the company’s total annual revenues (or, in the
case of charitable contributions by the Company, 2% of the charity’s total
annual receipts). Pre-approval is not required if the amount involved in the
transaction is not expected to exceed $120,000 in any calendar
year.
For
purposes of the policy, a Related Party is generally anyone who since the
beginning of the last full fiscal year is or was an executive officer, director
or director nominee, owner of more than 5% of the Common Stock, or immediate
family member of any of such persons.
Promoters and
Certain Control Persons. Not applicable.
(PROPOSAL
NO. 1)
The Board
of Directors of the Company currently consists of seven directors divided into
three approximately equal classes. The directors hold office for staggered terms
of three years (and until their successors are elected and qualified). One of
the three classes is elected each year to succeed the directors whose terms are
expiring.
The
nominees for director at the 2009 annual meeting, are Laura A. Philips and Roger
G. Stoll. Each of these nominees is currently a director and has been nominated
by the Board of Directors, upon the recommendation of its Nominating and
Corporate Governance Committee, to stand for election for a term expiring at the
annual meeting of stockholders to be held in 2012. Each of these nominees has
consented to being named in this proxy statement as a Board nominee and to serve
if elected.
Unless
otherwise instructed, it is the intention of the proxy holders to vote the
proxies received by them in response to this solicitation FOR the election of
the nominees named above as directors. If any such nominee should refuse or be
unable to serve, the proxies will be voted for such person as shall be
designated by the Board of Directors to replace such nominee. The Board of
Directors has no reason to believe that any of the Board nominees will refuse or
be unable to serve as a director if elected.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR”
ELECTION OF THE ABOVE NOMINEES AS DIRECTORS.
The
following table sets forth certain information regarding the Board nominees and
members of the Board of Directors of the Company whose terms will continue after
the Annual Meeting. Jonathan J. Lewis resigned as a member of the Board on
December 2, 2008.
|
Name
|
Age(1)
|
Position(s) with the
Company
|
Director
Since
|
Director
Class
|
Term
Expires
|
|
Pamela
R. Contag
|
51
|
Director
|
2008
|
II
|
2011
|
|
Eamonn
Hobbs
|
50
|
Director
|
2008
|
II
|
2011
|
|
Harold
S. Koplewicz
|
55
|
Chairman
of the Board
|
2006
|
I
|
2010
|
|
Robert
B. Ladd
|
50
|
Director
|
2006
|
I
|
2010
|
|
Laura
A. Philips
|
51
|
Director
|
2007
|
III
|
2009(2)
|
|
Roger
G. Stoll
|
66
|
Director
|
2008
|
III
|
2009(2)
|
|
Richard
Taney
|
52
|
President,
Chief Executive Officer, Treasurer and Director
|
2006
|
II
|
2011
|
___________________
|
(1)
|
As
of December 31, 2008.
|
|
(2)
|
Nominee
for re-election at the 2009 Annual Meeting for a term expiring in
2012.
|
Set forth
below is certain information with respect to the nominees and other directors of
the Company. Unless otherwise indicated, the principal occupation listed below
for each person has been his or her principal occupation for the past five
years.
Laura A. Philips, Ph.D., MBA
was appointed as a director in May 2007. Dr. Philips currently serves as Chair
of the Board of Directors of Planned Parenthood of New York City, and on the
Board of Directors of Boyce Thompson Institute. From 2003 to 2006, she was Chief
Operating Officer and Acting Chief Financial Officer of NexGenix
Pharmaceuticals. Prior to that, she was Vice President, Program Management for
the AMDeC Foundation. Dr. Philips worked at Corning Incorporated from 1997 to
2002, where she held several positions including Program Director of the Fuel
Cells Division. From 1994 to 1996 Dr. Philips held various government positions
in Washington, D.C., most recently in a Presidential appointment as Senior
Policy Advisor to Secretary of Commerce Ronald Brown. Dr. Philips was on the
faculty of Cornell University in the Department of Chemistry from 1987 to 1994
and was an NIH Post-Doctoral Fellow at the University of Chicago. She received a
B.A. in Chemistry from Williams College, a Ph.D. in Physical Chemistry from the
University of California Berkeley and an MBA with Distinction from Cornell
University’s Johnson School of Management.
Roger G. Stoll, Ph.D. was
appointed as a director in December 2008. From 2002 to 2008 he served
as Chief Executive Officer and President of Cortex Pharmaceuticals, Inc., where
he was appointed Executive Chairman in August 2008. From 2001 to 2002, he was a
consultant to several east coast venture capital firms and startup
ventures. From 1998 to 2001, he was Executive Vice President of
Fresenius Medical Care-North America, in charge of the dialysis products
division and the diagnostic systems business units, which included hemodialysis
machines and dialysis filters equipment. From 1991 to 1998 he was
Chief Executive of Ohmeda, a global leader in anesthesia pharmaceuticals and
related operating room equipment and devices. He also served on the
boards of directors of St. Jude Medical and the BOC Group, plc. From
1986 to 1991, Dr. Stoll held several executive management positions at Bayer,
AG, including Executive Vice-President and General Manager for the worldwide
Diagnostic Business Group. Prior to that, Dr. Stoll worked for
American Hospital Supply Corp, where he rose from Director of Clinical
Pharmacology to President of its American Critical Care Division. He
began his pharmaceutical career at the Upjohn Company in 1972. Dr.
Stoll obtained his BS in Pharmacy from Ferris State University, obtained a Ph.D.
in Biopharmaceutics and Drug Metabolism at the University of Connecticut, and
was a post-doctoral fellow for two years at the University of
Michigan. Dr. Stoll also serves on the board of directors of Chelsea
Therapeutics and School of Pharmacy Advisory Board of the University of
Connecticut.
Harold S. Koplewicz, M.D. was
first appointed a director in September 2006. He was appointed Chairman of the
Board in February 2007. In May 2006, Dr. Koplewicz was appointed by then-New
York Governor George Pataki to the position of Executive Director of the Nathan
S. Kline Institute for Psychiatric Research, where he is the third person to
hold this position since 1952. Dr. Koplewicz is also the Arnold and Debbie Simon
Professor and Chairman of the Department of Child and Adolescent Psychiatry and
Professor of Pediatrics and founder of the NYU Child Study Center at the New
York University School of Medicine. He has served as a member of the National
Board of Medical Examiners and as a commissioner of the New York State
Commission on Youth, Crime and Violence and Reform of the Juvenile Justice
System.
Robert B. Ladd was first
appointed a director in October 2006. Since January 2003, Mr. Ladd has served as
the founder and managing member of Laddcap Value Associates LLC, the general
partner of Laddcap Value Partners LP, an investment management company. From
1988 to November 2002, Mr. Ladd served as a Managing Director of Neuberger
Berman, an investment management company, where his responsibilities included
serving as a portfolio manager for various high net worth clients and as a
securities analyst. Mr. Ladd graduated from the University of
Pennsylvania’s Wharton School with a B.S. in Economics in 1980. He
received his MBA from Northwestern University’s Kellogg School of Management in
1983. Mr. Ladd has also earned a CFA designation.
Eamonn Hobbs was appointed a
director in October 2008. Mr. Hobbs is a Co-Founder and Vice Chairman of the
Board of Directors of AngioDynamics, Inc., where he served as President, CEO and
Director from 2004 to 2009. AngioDynamics, Inc. focuses on medical devices and
pharmaceuticals used in image guided procedures to treat cancer and peripheral
vascular disease. AngioDynamics, Inc. was twice recognized (2005 and
2006) by Business Week as a “Top 100 Hot Growth Company” and by Forbes in 2006
as #11 in the “Top 200 Small Companies.” From 1988 to 2004, Mr. Hobbs
was a Senior Vice-President at E-Z-EM, Inc., a medical device company. Before
that he was the Director of Marketing and Product Development of North American
Instrument Corporation. From 1983 to 1985, Mr. Hobbs was President, CEO and
Chairman of the Board of Hobbs Medical Inc. Mr. Hobbs started his career at Cook
Incorporated. Mr. Hobbs has over 25 years experience in the interventional
radiology, interventional cardiology and gastroenterology medical device
industries. He received a Bachelor of Science in Plastics Engineering with a
Biomaterials emphasis at the University of Massachusetts in Lowell in 1980. Mr.
Hobbs was inducted in 2005 as an Honorary Fellow in the Society of
Interventional Radiology, representing one of ten Honorary Fellowships granted
in the 34 year history of the Society, and one of only three ever granted to a
non-physician. Mr. Hobbs currently serves on the Board of Directors
of Sentinelle Medical, Inc., the Society of Interventional Radiology Foundation,
and is the incoming Chairman of the Medical Device Manufacturers
Association.
Pamela R. Contag, Ph.D. was
appointed a director in December 2008. Dr. Contag founded in 2006 and currently
is Chief Technology Officer of Cobalt Technologies, Inc., which engages in the
development of biofuel production technologies. Prior to starting Cobalt, she
founded Xenogen Corporation, which specializes in technology and services for
preclinical drug development and testing, where she served as President and
Director from 1995 to 2006. Xenogen, which went public in 2004, was acquired in
2006 by Caliper Life Sciences. Xenogen was listed as one of the “Top 25 Young
Businesses” by Fortune Small Business and twice received the “R&D 100
Award.” Dr. Contag was also recognized as one of the “Top 25 Women in Small
Business” by Fortune magazine. Dr. Contag received her Ph.D. in Microbiology
from the University of Minnesota Medical School and completed her postdoctoral
training at Stanford University School of Medicine. Dr. Contag is a consulting
Professor at the Stanford School of Medicine and is widely published in the
field of non-invasive molecular and cellular imaging.
Richard Taney, J.D. was
appointed a director in November 2006. He has served as our Chief Executive
Officer since December 2006, and was appointed to the additional positions of
President in April 2007 and Treasurer in December 2008. Mr. Taney was the
founding member of T2 Capital Management, LLC, a diversified investment
management company, which he founded in 1999. Prior thereto, Mr. Taney spent
twenty years working on Wall Street in various management and sales positions at
firms including Goldman Sachs, Salomon Brothers and Banc of America Securities,
where most recently he served as a Managing Director. Mr. Taney is
also a founding partner of Sandpiper Capital Partners, an investment partnership
focused on private equity investments and advisory assignments for privately
held companies involved in a variety of emerging technologies. He earned his
B.A. from Tufts University and his J.D. from Temple University School of
Law.
Directors
who are not also executive officers of Delcath receive a cash retainer of $5,000
for each quarter year of service on the Board, which is paid at the start of the
quarter after the service is rendered. Directors who serve on
committees of the Board also receive $1,000 for each meeting of the committee
attended, whether in person or by teleconference. Directors are also reimbursed
for reasonable travel expenses and are covered by the Company’s directors and
officers insurance policy. The chair of the Board and each committee
receives $2,500 for each quarter year of service in that capacity. In addition, in 2008 Mr.
Ladd received $10,000 for extraordinary performance on the Board.
Each of
our directors and executive officers is a party to an indemnification agreement
with us. Each indemnification agreement requires the Company to hold harmless
and to indemnify each indemnitee to the fullest extent authorized or permitted
by the Delaware General Corporation Law and the Company’s Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws, subject to
specified limitations. Each indemnification agreement provides for advancement
of reasonable expenses to an indemnitee within 20 days after the Company
receives an indemnitee’s invoices for such expenses. An indemnitee will be
required to reimburse the Company for reasonable expenses paid by the Company,
however, if it shall be ultimately determined that the indemnitee is not
entitled to indemnification.
The
following table shows the amount of compensation paid to each of the Company’s
non-employee directors for the fiscal year ended December 31, 2008. As Chief
Executive Officer, Mr. Taney does not receive any additional compensation for
his service on the Board of Directors, and thus is not included in the table
below. The compensation received by Mr. Taney as an employee and officer of the
Company is shown in the Summary Compensation Table on page 16.
Director
Compensation for 2008
|
Name
|
Fees
Earned
or Paid in
Cash
($)
|
Stock
Awards(1)
($)
|
Options
Awards(1)(2) ($)
|
Total
($)
|
||||||||||||
|
Current
Directors:
|
||||||||||||||||
|
Harold
S. Koplewicz, M.D.
|
40,000 | 24,700 | – | 64,700 | ||||||||||||
|
Robert
B. Ladd
|
42,000 | 24,700 | – | 66,700 | ||||||||||||
|
Laura
A. Philips, Ph.D., MBA
|
37,000 | 24,700 | – | 61,700 | ||||||||||||
|
Pamela
R. Contag, Ph.D.(3)
|
1,870 | – | 47,036 | (4) | 48,906 | |||||||||||
|
Eamonn
P. Hobbs(3)
|
6,457 | – | 67,713 | (5) | 74,170 | |||||||||||
|
Roger
G. Stoll, Ph.D.(3)
|
2,087 | – | 41,939 | (6) | 44,026 | |||||||||||
|
Former
Director:
|
||||||||||||||||
|
Jonathan
J. Lewis, M.D., Ph.D.(7)
|
35,000 | 24,700 | – | 59,700 | ||||||||||||
|
(1)
|
The
amount shown in the table reflects the dollar amount recognized for
financial statement reporting purposes for the fiscal year ended December
31, 2008 in accordance with FAS 123R. Assumptions used in the calculation
of such amounts are included in Note 3 to the Company’s audited financial
statements for the fiscal year ended December 31, 2008 included in the
Company’s Annual Report on Form 10-K for such year. Stock
grants are valued at the closing price on the date of grant. All stock
grants to the Board of Directors vested
immediately.
|
|
(2)
|
As
of December 31, 2008, each Director had the following number of stock
options outstanding: Dr. Lewis, 0 options; Dr. Koplewicz,
240,000 options; Mr. Ladd, 40,000 options; Dr. Philips, 150,000 options;
Dr. Contag, 75,000 options; Mr. Hobbs, 150,000 options; and Dr. Stoll,
75,000 options.
|
|
(3)
|
Dr.
Contag was appointed as director on December 11, 2008. Mr. Hobbs was
appointed as a director on October 14, 2008. Dr. Stoll was appointed as
director on December 5, 2008.
|
|
(4)
|
Reflects
options to purchase 75,000 shares of Common Stock, granted on December 11,
2008, which are immediately exercisable at $1.40 per share and
expire on December 11, 2013, with a grant date fair value computed in
accordance with FAS 123R of $0.63 per
share.
|
|
(5)
|
Reflects
options to purchase an aggregate of 150,000 shares of Common Stock. This
includes: (i) options to purchase 50,000 shares of Common Stock, granted
on October 14, 2008, which are immediately exercisable at $1.23 per share
and expire on October 14, 2013, with a grant date fair value computed in
accordance with FAS 123R of $0.55 per share; and (ii) options to purchase
100,000 shares of Common Stock, granted on October 14, 2008, which are
immediately exercisable at $1.845 per share and expire on October 14,
2013, with a grant date fair value computed in accordance with FAS 123R of
$0.41 per share.
|
|
(6)
|
Reflects
options to purchase 75,000 shares of Common Stock, granted on December 5,
2008, which are immediately exercisable at $1.25 per share and expire on
December 5, 2013, with a grant date fair value computed in accordance with
FAS 123R of $0.56 per share.
|
|
(7)
|
Dr.
Lewis resigned as a member of the Board of Directors on December 2,
2008.
|
The
following table provides information concerning the current executive officers
of Delcath.
|
Name
|
Age(1)
|
Office
Currently Held
|
|
Richard
Taney
|
52
|
President,
Chief Executive Officer, Treasurer and Director
|
|
Jason
Rifkin
|
31
|
Senior
Vice President Clinical Operations and
Secretary
|
___________________
|
(1)
|
As
of December 31, 2008.
|
Information
about Mr. Taney is provided under the heading “Information about Directors –
Continuing Directors.” The following is a brief description of the business
experience of Mr. Rifkin:
Jason Rifkin, Esq. joined
Delcath in June 2007. He was named Senior Vice President Clinical Operations and
Secretary of Delcath in December 2008. Prior to joining Delcath, from 2006 to
2007, Jason practiced law at Fox Rothschild LLP, where he was an Associate in
the Corporate Department - Pharmaceuticals and Biotechnology Group. There, Mr.
Rifkin worked extensively on intellectual property matters, including domestic
and international patent applications and regulatory and licensing issues. From
2004 to 2006, Mr. Rifkin practiced at a boutique litigation firm in New York
City, Goldstein & Weinstein, where he served as trial and appellate counsel
in a wide array of cases in both federal and state courts. Prior to that, Mr.
Rifkin worked for the Legal Aid Society. Mr. Rifkin holds a B.A. from the
University of Pennsylvania, a J.D. from Northeastern University School of Law
and a Masters in Biotechnology from the University of Pennsylvania, School of
Engineering and Applied Sciences.
The
Company’s executive compensation program is designed with two main
objectives:
|
1.
|
to
offer a competitive total compensation package that will allow the Company
to attract, retain and motivate highly talented individuals to fill key
positions; and
|
|
2.
|
to
align a significant portion of each executive’s total compensation with
the annual and long-term performance of the Company and the interests of
the Company’s stockholders.
|
The
Compensation and Stock Option Committee (the “Compensation Committee” or the
“Committee”) of the Board administers our executive compensation program. Each
member of the Committee is an independent director. The Compensation Committee
is primarily responsible for establishing salaries, administering our incentive
programs, and determining the total compensation for our Chief Executive
Officer. The Committee also reviews and approves recommendations made by the
Chief Executive Officer with respect to compensation of the other executive
officers.
The
Company believes that a strong management team comprised of the most talented
individuals in key positions is critical to the development and growth of the
Company, and the Company’s executive compensation program is an important tool
for attracting and retaining such individuals. Therefore, it is vital that the
Company’s aggregate compensation package is both competitive with the
compensation received by similarly situated executive officers as well as
performance-based, so as to reflect each executive officer’s contributions to
the success of the Company on both a long-term and short-term
basis.
On July
2, 2007, the Company entered into an employment agreement with Richard Taney,
which provides for Mr. Taney to serve the Company as its Chief Executive Officer
through July 1, 2009, with an automatic one-year renewal unless Mr. Taney gives
at least 90 days notice of non-renewal. Since Mr. Taney has not given such
notice, the Agreement will continue in effect through July 1, 2010.
The
compensation package for the Company’s executives has both performance-based and
subjective elements. The specific elements include base salary, annual incentive
compensation, which is generally in the form of a year-end bonus, and long-term
compensation, which is usually in the form of stock options or stock
grants.
Base salary.
Base salary is based on two factors. The first is an evaluation by the
Committee of the
salaries paid in the marketplace to executives with similar responsibilities,
and the second is the executive’s unique role, job performance and other
circumstances. Evaluating both of these factors allows the Company to offer a
competitive total compensation value to each individual executive officer taking
into account the unique attributes of, and circumstances relating to, each
individual, as well as marketplace factors. This allows the Company to meet its
objective of offering a competitive total compensation value and attracting and
retaining key personnel. Mr. Taney’s base salary for 2008 was $33,000
per month,
which is
the amount provided for under his employment agreement with the Company that was
negotiated in July 2007, which is the amount provided for under his employment
agreement with the Company that was negotiated in July 2007 in connection with
Mr. Taney’s initial employment by the Company.
Annual incentive
compensation. Annual incentive compensation is intended to
establish a direct correlation between annual awards and the performance of the
Company. As a development stage company, financial performance measurement
cannot be the sole factor in determining such compensation. The Compensation
Committee reviews the progress that the Company has been making towards its
goals and awards cash bonuses when it, in its discretion, deems appropriate.
Among the factors considered by the Committee is the need to maintain a
competitive total compensation value appropriate to each executive officer.
During 2008, Mr. Taney received a cash bonus of $60,000 as well as a cash
payment of $75,000 to reimburse him for a tax consequence from a stock grant to
him in 2007.
Long-term
compensation. Long-term compensation is an area of emphasis,
as this will align a significant portion of each executive’s total compensation
with the long-term performance of the Company and the interests of the Company’s
stockholders. The Company’s 2004 Stock Incentive Plan, which was approved by
stockholders, authorizes the grant of stock options, stock appreciation rights,
restricted stock, deferred stock, and fully vested stock grants.
Pursuant
to his employment agreement with the Company entered into in 2007, Mr. Taney is
entitled to be granted options to purchase 50,000 shares of Common Stock on
every six-month anniversary of the date of the agreement, with an exercise price
equal to the closing price of the stock on the date of grant. He is also
entitled to be granted 25,000 shares of fully vested Common Stock on each
twelve-month anniversary of the date of the agreement. During 2008, the Company
made equity grants to Mr. Taney in accordance with these provisions. Mr. Taney’s
employment agreement also provides that the Company will grant him specified
numbers of fully vested shares of Common Stock upon the attainment of specified
milestones. During 2008, he was granted 20,000 shares in accordance with these
provisions upon the enrollment of the 46th patient
in the Company’s Phase III Melphalan trial.
To date,
long-term equity awards to other executive officers have primarily been in the
form of stock options. This is because the Company believes that stock options
directly align the value of the benefit being provided to the executive officers
with shareholder interests, since an optionee realizes no value unless the stock
price increases. Options are generally exercisable over a five-year term. For
executive officers other than the CEO, the Compensation Committee determines the
number of options to grant based on its informal consideration of awards of
similarly situated companies and in keeping with the Company’s objective of
offering a competitive total compensation value.
Other
Compensation. As a development stage company, the Company does not have
pension or deferred compensation plans or arrangements.
We, the
members of the Compensation and Stock Option Committee of the Board of Directors
of the Company, have reviewed and discussed the foregoing Compensation
Discussion & Analysis (“CD&A”) with the Company’s management. Based on
this review and these discussions, we recommended to the Board of Directors that
the CD&A be included in this Proxy Statement.
Submitted
by the Compensation and Stock Option Committee of the Board of
Directors,
Roger Stoll,
Chairman
Dr. Harold S.
Koplewicz
Robert B.
Ladd
The
following table sets forth the total compensation paid by the Company to each of
the named executive officers for the fiscal years ended December 31, 2008, 2007,
and 2006. The Company’s named executive officers are its Chief Executive
Officer, its former Chief Financial Officer, and its Senior Vice President
Clinical Operations. There were no other executive officers whose total annual
compensation for the year ended December 31, 2008 exceeded
$100,000.
|
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock Awards(1)
($)
|
Option Awards(1)
($)
|
All
Other Compen-sation
($)
|
Total
($)
|
|
Richard
Taney
President,
CEO, Treasurer and Director(2)
|
2008
|
396,000
|
60,000
|
108,100
|
87,904
|
75,000(3)
|
727,004
|
|
2007
|
373,000
|
–
|
211,000
|
225,500
|
–
|
809,500
|
|
|
2006
|
10,000
|
–
|
–
|
52,400
|
–
|
62,400
|
|
|
Jason
Rifkin
Senior Vice President Clinical Operations and Secretary(4)
|
2008
|
150,000
|
–
|
–
|
20,204
|
–
|
170,204
|
|
2007
|
87,500
|
–
|
–
|
32,106
|
–
|
119,606
|
|
|
2006
|
–
|
–
|
–
|
–
|
–
|
–
|
|
|
Paul
Feinstein
Former CFO and Treasurer(5)
|
2008
|
145,000
|
–
|
–
|
(16,798)(6)
|
50,000(7)
|
178,202
|
|
2007
|
135,000
|
20,000
|
–
|
16,798
|
–
|
171,798
|
|
|
2006
|
120,000
|
–
|
–
|
–
|
–
|
120,000
|
|
(1)
|
The
amount shown reflects the dollar amount recognized for financial statement
reporting purposes of the outstanding stock and option awards held by the
named executives in accordance with FAS 123R. Assumptions used in the
calculation of such amounts with respect to stock options are included in
Note 3 to the Company’s audited financial statements for the fiscal year
ended December 31, 2008 included in the Company’s Annual Report on Form
10-K for such year. Amounts shown in the Stock Awards column are valued at
the market price of the Company’s common stock on the date of
grant.
|
|
(2)
|
Mr.
Taney’s employment with Delcath began on July 2,
2007.
|
|
(3)
|
Represents
a cash payment to reimburse Mr. Taney for a tax consequence from a stock
grant made to him in 2007.
|
|
(4)
|
Mr.
Rifkin’s employment with Delcath began on June 1,
2007.
|
|
(5)
|
Mr.
Feinstein resigned as Chief Financial Officer and Treasurer effective as
of December 16, 2008.
|
|
(6)
|
Reflects
forfeiture of options upon
resignation.
|
|
(7)
|
Reflects
one-time severance payment.
|
The
following table sets forth grants of plan-based awards made during the fiscal
year ended December 31, 2008 by the Company to the named executive officers. All
of such grants were made under the Company’s 2004 Stock Incentive
Plan.
|
Name
|
Grant
Date
|
All
Other Stock Awards:
Number
of Shares of Stock or Units
(#)
|
All
Other Option Awards:
Number
of Securities Underlying Options
(#)
|
Exercise
or Base Price of Option Awards
($/Sh)
|
Grant
Date Fair Value of Stock and Option Awards
($)
|
|
Richard
Taney
|
1/2/08
|
–
|
50,000(1)
|
$1.74
|
33,873
|
|
6/10/08
|
10,000
|
–
|
–
|
21,900
|
|
|
7/2/08
|
–
|
50,000(2)
|
$2.44
|
54,032
|
|
|
7/2/08
|
25,000(3)
|
–
|
–
|
61,000
|
|
|
12/9/2008
|
20,000(3)
|
–
|
–
|
25,200
|
|
|
Jason
Rifkin
|
5/1/2008
|
–
|
20,000(4)
|
$1.87
|
18,812
|
|
12/15/2008
|
–
|
25,000(5)
|
$1.43
|
16,024
|
|
|
Paul
Feinstein
|
–
|
–
|
–
|
–
|
–
|
|
(1)
|
These
options were granted in accordance with the terms of Mr. Taney’s
Employment Agreement with the Company. They were immediately exercisable
and expire on
January 2, 2013. |
|
(2)
|
These
options were granted in accordance with the terms of Mr. Taney’s
Employment Agreement with the Company. They were immediately exercisable
and expire on July 2, 2013.
|
|
(3)
|
These
shares were granted in accordance with the terms of Mr. Taney’s Employment
Agreement with the Company.
|
|
(4)
|
These
options vest ratably over three years and expire on May 1,
2013.
|
|
(5)
|
These
options were immediately exercisable at grant and expire on December 15,
2013.
|
The
following table sets forth information relating to the vested and unvested
option awards held by the named executive officers as of December 31, 2008.
There were no unvested stock awards held by the named executive officers as of
December 31, 2008.
|
Name
|
Number
of Securities Underlying Unexercised Options
(#
Exercisable)
|
Number
of Securities Underlying Unexercised Options
(#
Unexercisable)
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
|
Richard
Taney
|
40,000
|
–
|
3.28
|
11/14/2011
|
|
50,000
|
–
|
3.90
|
7/2/2012
|
|
|
100,000
|
–
|
5.85
|
7/2/2012
|
|
|
50,000
|
–
|
1.74
|
1/2/2013
|
|
|
50,000
|
–
|
2.44
|
7/2/2013
|
|
|
Jason
Rifkin
|
16,667
|
33,333
|
$4.52
|
6/1/2012
|
|
20,000
|
–
|
$1.88
|
11/30/2012
|
|
|
–
|
20,000
|
$1.87
|
5/1/2013
|
|
|
25,000
|
–
|
$1.43
|
12/15/2013
|
|
|
Paul
Feinstein
|
–
|
–
|
–
|
–
|
The
following table provides information relating to exercises of option awards by,
and vesting of stock awards granted to, the named executive officers, during the
fiscal year ended December 31, 2008.
|
Option
Awards
|
Stock
Awards
|
|||
|
Name
|
Number
of Shares Acquired on Exercise
|
Value
Realized on Exercise
|
Number
of Shares Acquired on Vesting
(#)
|
Value
Realized on Vesting
($)
|
|
Richard
Taney
|
–
|
–
|
55,000
|
108,100
|
|
Jason
Rifkin
|
–
|
–
|
–
|
–
|
|
Paul
Feinstein
|
–
|
–
|
–
|
–
|
On July
2, 2007, the Company entered into an employment agreement with Richard Taney,
which provides for Mr. Taney to serve the Company as its Chief Executive Officer
through July 1, 2009, with an automatic one-year renewal unless Mr. Taney gives
at least 90 days notice of non-renewal. Since Mr. Taney has not given such
notice, the Agreement will continue through July 1, 2010.
Pursuant
to the terms of his employment agreement, in the event Mr. Taney’s employment is
terminated (1) by the Company without “cause,” (2) by Mr. Taney for “good
reason,” or (3) as a result of a “change in control,” Mr. Taney will be entitled
to receive (i) his unpaid base salary to the date of termination, (ii) a
pro-rata portion of any bonus that would have been payable had he completed a
full year of employment, (iii) a cash lump sum severance payment equal to his
base salary through the remaining term of the employment agreement (but no less
than 12 months of base salary), (iv) continued health and disability insurance
for the remaining term of the employment agreement (but no less than 12 months),
and (v) the accelerated vesting of all unvested stock options granted pursuant
to his employment agreement, which will remain exercisable until the later of
five years after such termination or the end of the option term. If Mr. Taney’s
employment terminated under this provision on December 31, 2008 he would have
received a total of $421,824, consisting of a lump sum severance payment in the
amount of $396,000 and continued medical/welfare benefits having a present value
of $25,824.
Mr. Taney
has the right to terminate the employment agreement at his sole discretion, upon
thirty days written notice, in which case he is entitled to receive his base
salary to the date of termination and the accelerated vesting of all unvested
stock options granted pursuant to his employment agreement, which will remain
exercisable until the later of five years after such termination or the end of
the option term. If Mr. Taney’s employment terminated under this provision on
December 31, 2008 he would have received no additional payment because all of
the stock options granted under his employment agreement are already
vested.
In the
event of Mr. Taney’s death or the Company’s termination of his employment on
account of disability (defined as his inability to perform his duties for a
period of 120 consecutive days in any 12-month period on account of mental or
physical incapacity), he is entitled to receive a cash lump sum payment equal to
his base salary through the remaining term of the employment agreement (but no
less than 6 months of base salary). If Mr. Taney’s employment terminated under
either of these provisions on December 31, 2008 he would have received a total
of $198,000. If the Company terminates Mr. Taney’s employment for “cause” he
would receive only his unpaid base salary to the date of
termination.
Under Mr.
Taney’s employment agreement, “cause” generally means (i) personal dishonesty
intended to enrich him at the expense of the Company, (ii) willful and repeated
violation of his material obligations under the employment agreement (after
notice and an opportunity to cure), or (iii) conviction of a felony. “Good
reason” generally means (i) a diminution in Mr. Taney’s position, authority,
duties or responsibilities from those set forth in his employment agreement or
the assignment of duties inconsistent with such position, (ii) the Company’s
breach of the employment agreement, (iii) relocation of Mr. Taney’s place of
employment more than 50 miles from the Company’s current executive offices, (iv)
a change in Mr. Taney’s reporting responsibilities, or (v) termination by Mr.
Taney of his employment for any reason during the three-month period following a
change of control. A “change of control” generally means (i) the acquisition
(other than from the Company) by any person or group of beneficial ownership of
shares constituting 50% or more of either the Company’s common stock or voting
power, (ii) the failure of the current directors or persons approved by them to
constitute a majority of the Board, (iii) shareholder approval of (A) a merger
in which the Company’s shareholders fail to own more than 75% of the voting
power of the surviving company, (B) a liquidation or dissolution of the Company,
or (C) a sale of substantially all the assets of the Company, unless any such
transaction is subsequently abandoned, or (iv) one or more sales, distributions,
transfers or other actions approved by the Board that results in the Company’s
ownership of less than 50% of its assets held on the date of the employment
agreement.
Mr. Taney
has agreed to preserve all confidential and proprietary information relating to
the Company's business during the term of his employment and for one year
thereafter. In addition, Mr. Taney has agreed to non-competition and
non-solicitation provisions that are in effect during the term of the Agreement
and for one year thereafter.
Effective
December 16, 2008, Mr. Feinstein resigned from the Company. In connection with
his resignation, Mr. Feinstein was paid $50,000 and entered into a severance
agreement containing mutual waivers and other customary provisions.
Under Mr.
Taney’s employment agreement, if the Company enters into a binding agreement for
the sale of more than 50% of the Common Stock or a sale of substantially all of
its assets of a price of in excess of $10 per share, he is entitled to receive
100,000 shares of Common Stock plus 20,000 additional shares for each $1 per
share that the sale price exceeds that amount. Based on the closing sale price
of the Common Stock on December 31, 2008 ($1.19 per share), 100,000 shares of
Common Stock would have a value of $119,000.
There are
no other change of control agreements or arrangements currently in effect for
the named executive officers.
The Audit
Committee of the Board of Directors has prepared the following report for
inclusion in this Proxy Statement. The Audit Committee is comprised of Dr. Laura
A. Philips, Mr. Eamonn Hobbs and Mr. Robert Ladd, three non-employee directors
each of whom is “independent” within the meaning of the rules of NASDAQ. The
Audit Committee assists the Board of Directors in fulfilling its responsibility
for oversight of the Company’s accounting, auditing and financial reporting
practices and is responsible for the engagement of the Company’s independent
registered public accountants. Management is responsible for the Company’s
financial reporting process, including the internal control function, and for
preparing the Company’s financial statements in accordance with generally
accepted accounting principles and assessing the effectiveness of the Company’s
internal control over financial reporting. The Company’s independent registered
public accounting firm is responsible for examining those financial statements
and expressing an opinion as to the conformity of those financial statements
with generally accepted accounting principles as well as expressing an opinion
on the effectiveness of the Company’s internal control over financial
reporting.
In
discharging its oversight responsibility, the Audit Committee (1) reviewed and
discussed the audited financial statements of the Company at and for the fiscal
year ended December 31, 2008 with management and the independent registered
public accounting firm, (2) discussed with the independent registered public
accounting firm the matters required to be discussed by Statement on Auditing
Standards No. 61, as amended, “Communication with Audit Committees,” as adopted
by the Public Company Accounting Oversight Board, (3) received the written
disclosures and the letter from the independent registered public accounting
firm required by applicable requirements of the Public Company Accounting
Oversight Board regarding the independent accountant’s communications with the
audit committee concerning independence, and (4) discussed with the independent
registered public accounting firm its independence from the
Company.
Based on
the review and discussions with management and the independent registered public
accounting firm referred to above, the Audit Committee recommended to the Board
of Directors that the Company’s audited financial statements be included in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2008 for
filing with the Securities and Exchange Commission.
Submitted
by the Audit Committee of the Board of Directors,
Dr. Laura A. Philips,
Chair
Eamonn
Hobbs
Robert B.
Ladd
Carlin,
Charron & Rosen, LLP (“CCR”) serves as the Company’s independent registered
public accounting firm and audited the Company’s financial statements for the
years ended December 31, 2008 and 2007. Aggregate fees for professional services
rendered to the Company by CCR for the two fiscal years ended December 31, 2008
and 2007 are set forth below:
|
Fiscal
Year
|
||||||||
|
2008
|
2007
|
|||||||
|
Audit
Fees
|
$ | 119,500 | $ | 99,600 | ||||
|
Audit-Related
Fees
|
$ | 0 | $ | 21,930 | ||||
|
Tax
Fees
|
$ | 0 | $ | 0 | ||||
|
Total
|
$ | 119,500 | $ | 121,530 | ||||
Audit
Fees. Audit Fees are
fees for professional services in connection with the audit of the Company’s
annual financial statements and internal control over financial reporting, and
reviews of the Company’s quarterly financial statements.
Audit-Related
Fees. During the fiscal year ended December 31, 2008, CCR did not provide
any audit-related services to the Company not included in “Audit Fees”. The
Audit-related fees during the fiscal year ended December 31, 2007 related to the
Company’s registration statement on Form S-3 and related prospectus for offering
of the Company’s common stock, and the Company’s Amendment to Form 10-K for the
fiscal year ended December 31, 2006.
Tax
Fees. Tax fees include fees for tax
compliance, tax advice, and tax planning. During the fiscal years
ended December 31, 2008 and 2007, CCR did not provide any tax services to the
Company.
All Other
Fees. During
the fiscal years ended December 31, 2008 and 2007, CCR did not provide any
services to the Company other than those described above.
The Audit
Committee pre-approves all audit and non-audit services provided by the
independent auditors prior to the engagement of the independent auditors with
respect to such services. The Chairman of the Audit Committee has been delegated
the authority by the Committee to pre-approve interim services by the
independent auditors other than the annual audit. The Chairman must report all
such pre-approvals to the entire Audit Committee at the next Committee
meeting.
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires directors,
officers, and persons who are beneficial owners of more than ten percent of the
Company’s Common Stock to file with the SEC reports of their ownership of the
Company’s equity securities and of changes in that ownership. To the Company’s
knowledge, based solely on a review of copies of reports furnished to the
Company or written representations that no other reports were required, the
Company believes that with respect to the fiscal year ended December 31, 2008,
all reports required to be filed under Section 16(a) by the Company’s directors
and officers and persons who were beneficial owners of more than ten percent of
the Company’s Common Stock were timely filed, except one filing by Mr. Ladd
reflecting one transaction and two filings by Mr. Taney reflecting two
transactions.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
(PROPOSAL
NO. 2)
The Audit
Committee has selected Carlin, Charron & Rosen, LLP (“CCR”) to be the
Company’s independent registered public accounting firm for the year ending
December 31, 2009. If the stockholders do not ratify the selection of CCR, the
Audit Committee will reconsider its selection.
CCR has
served as the Company’s independent registered public accounting firm since
April 27, 2005. A representative of CCR is expected to be present at the Annual
Meeting and will have the opportunity to make a statement or to respond to
appropriate questions from stockholders.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT
OF CARLIN, CHARRON & ROSEN, LLP AS THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM.
(PROPOSAL
NO. 3)
On April
8, 2009, subject to stockholder approval at the Annual Meeting, the Board of
Directors adopted the 2009 Stock Incentive Plan (the “2009 Plan”) pursuant to
which various opportunities to acquire up to 2,000,000 shares of Common Stock
would be available pursuant to the grant or exercise of stock options, stock
appreciation rights, restricted stock or deferred stock on the terms described
below. The 2009 Plan will not be implemented if it is not approved by a majority
of the votes cast, in person or by proxy, at the Annual Meeting.
The
purpose of the 2009 Plan is to promote the interests of Delcath through grants
of awards to employees, directors and consultants in order to: (i) attract and
retain employees, directors and consultants; (ii) provide an additional
incentive to each award holder to work to increase the value of Delcath’s stock;
and (iii) provide each award holder with a stake in the future of Delcath that
strengthens the mutuality of interests between such award holder and Delcath’s
shareholders.
The Board
believes that the size of the 2009 Plan is appropriate.
The
following summary of our 2009 Plan is qualified in its entirety by the full text
of the plan, which is included as Appendix B to this Proxy
Statement.
Description
of the 2009 Plan
Purpose. The
purpose of the 2009 Plan is to enable the Company to attract and retain
employees, directors, and consultants by providing them with an additional
incentive to increase the value of Delcath stock and thereby strengthen the
mutuality of interests between award holders and our stockholders.
Eligibility. Awards may be
granted to current and prospective directors of the Company as well as current
and prospective employees and consultants of the Company and its
subsidiaries.
Administration. The plan will be
administered by the Compensation and Stock Option Committee of the Board,
consisting of non-employee directors (the “Committee”), except that the full
Board will administer the plan as it relates to awards to non-employee
directors. (References to the Committee in this description include
the Board with respect to non-employee director awards.) The
Committee will have the authority to establish rules and guidelines for the
administration of the plan; select the individuals to whom awards are granted;
determine the types of awards to be granted and the number of shares or amount
of cash covered by such awards; set the terms and conditions of such awards;
amend awards; interpret the plan and award documents; and make all
determinations necessary for the administration of the plan. The
Committee may delegate to a committee of two or more officers the authority to
grant awards other than to executive officers and directors.
Shares Available
for Awards. The number of
shares that may be issued under the 2009 Plan is 2,000,000 shares. In
addition, any shares previously authorized for grant under the Company’s 2004
Stock Incentive Plan that remain available for grant on the effective date of
the 2009 Plan or subsequently become available as a result of forfeitures will
be rolled over in the 2009 Plan. If any shares covered by an award
under the 2009 Plan are forfeited or an award is settled in cash or otherwise
terminated without delivery of shares, then the shares covered by that award
will again be available for future awards under the plan. Shares
withheld from awards for the payment of tax withholding obligations, shares
surrendered to pay the exercise price of stock options, and shares that were not
issued as a result of the net exercise or net settlement of stock options or
stock appreciation rights (“SARs”) will also become available for future awards
under the plan. No individual may be granted any combination of stock
options, SARs, restricted stock, restricted stock units (“RSUs”), or other
stock-based
awards with respect to more than 500,000 shares in any fiscal
year. The plan limits do not apply to any shares that may be issued
under awards assumed by the Company in a corporate acquisition or to dividend
equivalents that may be awarded as part of other awards and paid in
stock.
Stock Options and
Stock Appreciation Rights. The Committee
may award stock options (which may be nonqualified options or incentive stock
options) or stock appreciation rights, each with a maximum term of ten
years. Each stock option or SAR must have an exercise price not less
than the fair market value of the Company’s stock on the date of
grant. Unless approved by the stockholders, the Committee shall have
no power to amend the terms of outstanding stock options or SARs to reduce the
option price or base price of such awards or to cancel outstanding stock options
or SARs and grant substitute stock options or SARs with a lower option price or
base price than the cancelled awards. The Committee will establish
the vesting schedule for the award as well as the method of payment of the
option exercise price, which may include cash, shares, broker-assisted cashless
exercise, and net exercise. No more than 2,000,000 shares may be
issued with respect to incentive stock options.
Restricted Stock
and Restricted Stock Units. The Committee may award
restricted stock and RSUs and establish the conditions on which they vest, which
may include continued employment and/or satisfaction of performance
objectives. The Committee may provide for payment of an RSU award
upon vesting or at a later date. The Committee may determine whether
unvested awards entitle the holder to receive dividends or dividend equivalents,
and if so, the terms on which such amounts will be paid.
Other Stock-Based
Awards. The Committee
may grant other stock-based awards that are denominated or payable in shares or
valued in whole or in part by reference to shares, under such terms and
conditions as the Committee may determine, including a grant of fully vested
shares.
Cash
Awards. The Committee
may grant cash awards that entitle the award holder to receive cash upon the
satisfaction of performance objectives and other terms and conditions set forth
in the award. The performance objectives and amount of the award may
be stated as a range of amounts payable upon attainment of specified levels of
satisfaction of the performance objectives, and may relate to performance
periods of one year or multiple years. The Committee may provide for
payment of the award at the end of the performance period or at a later date,
and may provide for dividend equivalents or other earnings to be credited on
deferred amounts. The maximum cash award that may be paid to any
individual in any fiscal year (measured at the end of the performance period
ending in the fiscal year, and without regard to increase in value of the award
during any deferral period) is $500,000.
Performance
Awards. The Committee may designate any restricted stock, RSU,
other stock-based awards, or cash awards under the 2009 Plan as performance
awards which are intended to qualify as “performance-based compensation” under
Section 162(m) of the Code. The grant or vesting of such performance
awards will require the achievement of performance goals during performance
periods, as specified by the Committee in accordance with Section
162(m). Performance awards may be based on any one or more of the
following performance measures, which may be applied to the Company as a whole
or to a subsidiary, business unit, business segment or business
line:
|
(1)
|
Net
earnings or net income (before or after
taxes);
|
|
(2)
|
Earnings
per share;
|
|
(3)
|
Net
sales or revenue growth;
|
|
(4)
|
Gross
revenues (and/or gross revenue growth) and/or mix of revenues among the
Company’s business activities;
|
|
(5)
|
Net
operating profit (or reduction in operating
loss);
|
|
(6)
|
Return
measures (including, but not limited to, return on assets, capital,
invested capital, equity, sales, or
revenue);
|
|
(7)
|
Cash
flow (including, but not limited to, operating cash flow, free cash flow,
cash flow return on equity, and cash flow return on
investment);
|
|
(8)
|
Earnings
before or after taxes, interest, depreciation, amortization, and/or other
non-cash items;
|
|
(9)
|
Gross
or operating margins;
|
|
(10)
|
Productivity
ratios (and/or such ratios as compared to various stock market
indices);
|
|
(11)
|
Stock
price (including, but not limited to, growth measures and total
shareholder return);
|
|
(12)
|
Stock
price and market capitalization ratios (including, but not limited to,
price-to-earnings ratio and enterprise
multiple);
|
|
(13)
|
Expense
targets (including, but not limited to, expenses-to-sales
ratios);
|
|
(14)
|
Margins;
|
|
(15)
|
Operating
efficiency;
|
|
(16)
|
Market
share;
|
|
(17)
|
Customer
satisfaction;
|
|
(18)
|
Employee
satisfaction or retention;
|
|
(19)
|
Development
and implementation of employee or executive development programs
(including, but not limited to, succession
programs);
|
|
(20)
|
Working
capital targets;
|
|
(21)
|
Economic
value added;
|
|
(22)
|
Market
value added;
|
|
(23)
|
Debt
to equity ratio;
|
|
(24)
|
Strategic
business goals relating to acquisitions, divestitures and joint
ventures;
|
|
(25)
|
Attaining
specified clinical, trial site initiation or patient enrollment
targets;
|
|
(26)
|
Filing
of the company’s PMA application to the Food and Drug
Administration;
|
|
(27)
|
Obtaining
regulatory approvals, including of the Company’s PHP System in the United
States or other countries;
|
|
(28)
|
Sale
of the Company;
|
|
(29)
|
Consummating
a specified equity based capital
offering;
|
|
(30)
|
Reaching
specified technology development objectives;
and
|
|
(31)
|
Reaching
specified employment time-points governed by an employment
agreement.
|
Each goal
may be expressed as an absolute measure, as a measure of improvement relative to
prior performance, or as a measure of comparable performance relative to a peer
group of companies or published or special index.
Change in
Control. The Committee may provide that awards will become
fully or partially vested upon a change in control and may provide that awards
will be paid as soon afterwards as permitted under the tax laws. A
change in control is deemed to occur in very general terms upon (1) the
acquisition of 50% or more of the Company’s voting securities, (2) the
failure of the current directors (and any directors approved by them) to
constitute a majority of the Company’s Board, (3) a merger in which the
Company’s stockholders before the transaction fail to own at least a majority of
the voting power of the surviving corporation or the Company’s directors fail to
constitute at least a majority of the board of the surviving corporation,
(4) the sale of substantially all of the Company’s assets, and
(5) stockholder approval of the liquidation of the Company.
Adjustments. In the event of certain
corporate transactions or events affecting the number or type of outstanding
common shares of the Company, including, for example, a recapitalization, stock
split, reverse stock split, reorganization, merger, spin-off or distribution of
assets, if the Committee determines that certain adjustments are required in
order to prevent dilution or enlargement of benefits intended to be
made
available under the 2009 Plan, the Committee is required to make such
adjustments. These adjustments include changing the number and class
of shares available under the Plan; and changing the number and class of shares
subject to outstanding awards and the price of shares subject to outstanding
awards.
Amendment and
Termination. The Board may
amend the plan from time to time. The Board will seek stockholder
approval of material amendments to the plan as may be required by law,
regulation or stock exchange rules. The Committee may waive conditions or amend
the terms of outstanding awards, subject to certain limitations. No
award may be granted under the Plan after the tenth anniversary of stockholder
approval of the 2009 Plan unless the 2009 Plan has been re-approved by the
Company’s stockholders prior to such date. No performance award may
be granted after the Company’s annual meeting held in 2014 unless the
performance objectives and other Plan provisions that require approval under
Section 162(m) of the Code have been re-approved by the Company’s stockholders
prior to such date.
Federal
Income Tax Consequences
The
following is a summary of certain federal income tax consequences of certain
types of awards that may be made under the 2009 Plan.
Stock
options. No income is recognized by the award holder at the time of grant
of a non-qualified stock option. Upon exercise of the option, the holder
recognizes ordinary income in an amount equal to the excess of the fair market
value of the shares on the date of exercise over the exercise price. At
disposition of the shares, any appreciation after the date of exercise is
treated as capital gain. An employee generally will not recognize income upon
the grant of an ISO or upon its exercise while an employee (or within specified
times thereafter). However the “spread” between the fair market value of the
shares at the time of exercise and the exercise price may be subject to the
alternative minimum tax. If the shares received upon exercise are held for the
applicable holding period, the optionee will recognize capital gain or loss when
he/she disposes of the shares. Such gain or loss will be measured by the
difference between the exercise price and the amount received for the shares at
the time of disposition. If the shares acquired upon exercise of an ISO are
disposed of before the end of the applicable holding period, the optionee will
recognize ordinary income in an amount generally equal to the lesser of (i) the
excess of the value of the shares on the option exercise date over the exercise
price or (ii) the excess of the amount received upon disposition of the shares
over the exercise price. Any excess of the amount received upon disposition of
the shares over the value of the shares on the exercise date will be taxed to
the optionee as capital gain.
Other
awards. A recipient of SARs will generally recognize ordinary income at
the time of exercise of the SAR in an amount equal to the fair market value of
any shares received plus the amount of cash received. A recipient of restricted
stock generally will recognize ordinary income at the time the award is no
longer subject to a substantial risk of forfeiture, in an amount equal to the
fair market value of the stock at such time (less any amount paid for the
stock). A recipient of RSUs generally will recognize ordinary income equal to
the amount of cash or the fair market value (on the delivery date) of the stock
delivered in settlement of the award. A recipient of fully vested stock
generally will recognize ordinary income on the date of delivery of the stock in
an amount equal to the fair market value of the stock on such date. A recipient
of a cash performance award or other cash payment generally will recognize
ordinary income on the date of payment. RSUs and certain other awards will be
subject to the requirements applicable to nonqualified deferred compensation
under Code Section 409A (the failure to comply with which would subject the
recipient to an additional 20% tax and interest).
Company
Deductions. As a general rule, the Company or one of its subsidiaries
will be entitled to a deduction for federal income tax purposes at the same time
and in the same amount that an award holder recognizes ordinary income from
awards under the 2009 Plan, to the extent such income is considered reasonable
compensation under the Internal Revenue Code. The Company will not, however, be
entitled to a deduction with respect to payments that are contingent upon a
change in control if such payments are deemed to constitute “excess parachute
payments” under Section 280G of the Code and do not qualify as reasonable
compensation pursuant to that Section; such payments will subject the recipients
to a 20% excise tax. In addition, the Company will not be entitled to a
deduction to the extent compensation in excess of $1 million is paid to each of
certain executive officers, unless the compensation qualifies as “performance
based” under Section 162(m) of the Code. The Company intends that options and
SARs granted under the 2009 Plan will qualify as performance-based under Section
162(m). Other awards under the 2009 Plan may, but need not, qualify depending on
the terms of the particular award.
Miscellaneous
The last
sales price of the Company’s stock on March 31, 2009 was $1.85 as reported on
NASDAQ.
THE
BOARD OF DIRECTORS, WHICH UNANIMOUSLY APPROVED THE ADOPTION OF THE 2009 PLAN,
RECOMMENDS A VOTE “FOR” THIS PROPOSAL.
The
following table shows shares reserved for issuance for outstanding awards
granted under the Company’s equity compensation plans as of December 31, 2008.
This table does not include the shares that will become issuable under the 2009
Stock Incentive Plan upon its approval by stockholders.
|
Plan
Category
|
Number
Of Securities
To
Be Issued Upon
Exercise
Of Outstanding
Options,
Warrants And
Rights
(a)
|
Weighted
Average
Exercise
Price Of
Outstanding
Options,
Warrants
And Rights
(b)
|
Number
Of Securities
Remaining
Available For
Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Reflected
In Column (a))
(c)
|
|
Equity
compensation plans approved by stockholders
|
1,460,000(1)
|
$
3.44
|
380,000(2)
|
|
Equity
compensation plans not approved by stockholders
|
N/A
|
N/A
|
N/A
|
|
Total
|
1,460,000
|
$
3.44
|
380,000
|
(1) Includes
1,460,000 shares subject to outstanding stock options granted under the
Company’s 2004. Does not include shares
issued as fully vested stock grants.
(2) These
shares are available for issuance under the Company’s 2004 Stock Incentive
Plan. This plan, as approved by shareholders, provides for the grant
of stock options, stock appreciation rights, restricted stock, deferred stock,
and stock grants.
In order
for a stockholder proposal to be eligible for inclusion in the Company’s proxy
materials for the 2010 Annual Meeting of Stockholders, it must be received at
the Company’s executive offices no later than December 31, 2008. Such proposals should be
sent to the attention of the Company’s Corporate Secretary. The inclusion of any
such proposal in the Company’s proxy materials will be subject to the
requirements of the SEC’s proxy rules.
In order
for a stockholder to present a proposal for action at the 2010 Annual Meeting of
Stockholders, whether or not the proposal is included in the Company’s proxy
materials, notice of the stockholder’s intent to present the proposal must be
received by the Company’s Corporate Secretary or President no later than
December 31, 2008. However, if the
date set for the 2010 Annual Meeting is more than 30 calendar days before or
after June 9, 2010, such notice must instead be received no later than 60
calendar days before the date set for such meeting. Any notice of a
stockholder’s intent to present a proposal must be signed by the stockholder and
must describe in detail the proposal to be presented.
The costs
of solicitation of proxies, including printing and mailing costs, will be borne
by Delcath. In addition to the solicitation of proxies by mail, proxies may also
be solicited personally by directors, officers and employees of Delcath, without
additional compensation to these individuals. Delcath may request banks, brokers
and other firms holding shares in their names which are beneficially owned by
others to send proxy materials and obtain proxies from such beneficial owners,
and will reimburse such banks, brokers and other firms for their reasonable
out-of-pocket costs.
The Board
of Directors knows of no other items that are likely to be brought before the
meeting except those that are set forth in the foregoing Notice of Annual
Meeting of Stockholders. If any other matters properly come before the meeting,
the persons designated on the enclosed proxy will vote in accordance with their
judgment on such matters.
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By
Order of the Board of Directors
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RICHARD
TANEY
President
and Chief Executive Officer
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New York,
New York
April 30,
2009
Appendix
A
OF
DELCATH
SYSTEMS, INC.
1. Purpose
The Audit
Committee (the “Committee”) is a committee of the Board of Directors (the
“Board”) of Delcath Systems, Inc. (the “Company”). Its
primary function is to provide assistance to the Board in fulfilling its
oversight responsibilities with respect to (a) the annual financial information
to be provided to stockholders and filed with the Securities and Exchange
Commission (the “SEC”); (b) the system of internal accounting and financial
controls that management has established; and (c) the independent audit of the
Company’s financial statements.
The
Committee will have the authority and perform the specific functions described
below. It is the responsibility of the Committee, in performing its
functions, to provide available avenues of communication among the Company’s
independent audit firm (the “Outside Auditors”), the Company’s
management and the Board. The Committee should have a clear
understanding with the Outside Auditors that they must maintain an open
relationship with the Committee and that the ultimate accountability of the
Outside Auditors is to the Committee and to the Board, as representatives of the
Company’s stockholders.
2. Composition
The
Committee shall be comprised of such number of directors as may be determined by
the Board; provided, however, that the number of members of the Committee shall
not be fewer than the number required from time by applicable rules of the SEC
or any registered securities exchange or national securities association on
which any securities of the Company are listed or quoted. Each member
of the Committee shall: (a) satisfy the independence and experience requirements
of The NASDAQ Capital Market (“NASDAQ”), the listing standards of any other
securities exchange or association on which the Company’s securities are traded
and the Securities Exchange Act of 1934 (the “Exchange Act”), and the rules and
regulations of the SEC adopted there under and (b) be free from any relationship
which, in the opinion of the Board, would interfere with the exercise of his or
her independent judgment as a member of the Committee.
All
members of the Committee must be able to read and understand fundamental
financial statements at the time of their appointment to the Committee, and at
least one member shall have accounting or related financial management expertise
that results in the member’s financial sophistication. At least one
member of the Committee shall be an “audit committee financial expert” as
defined by applicable SEC Regulations.
One of
the members of the Committee will be designated Committee Chairman by the
Board. The determination of the “independence” of each Committee
member and the designation of one or more Committee members as an “audit
committee financial expert,” shall be made
by the Board.
3. Meetings
The
Committee shall meet at least four times annually and as many additional times
as the Chairman or the Committee deems necessary or at the request of the
Outside Auditors. The Committee shall meet in separate executive
sessions with the Chief Financial Officer of the Company, internal auditor and
the Outside Auditors at least once a year and at other times when considered
appropriate.
The
operations of the Committee shall be subject to the provisions of the Company’s
Certificate of Incorporation and By-laws, as each shall be in effect from time
to time. The Committee is authorized and empowered to adopt its own
rules of procedure not inconsistent with (a) any provision of this Charter; (b)
any provision of the Company’s Certificate of Incorporation or By-laws or (c)
Delaware or any other applicable law.
Committee
members will strive to be present at all meetings of the
Committee. As necessary or desirable, the Committee Chairman may
request that members of management, outside legal counsel and the Outside
Auditors be present at Committee meetings and provide information to the
Committee. A majority of the total number of members of the Committee
shall constitute a quorum at all Committee meetings. A majority of
the members of the Committee acting shall be empowered to act on behalf of the
Committee. Minutes shall be kept of each meeting of the
Committee.
4. Committee
Authority and Specific Functions
In
assisting the Board in its oversight role, the Committee shall have full access
to all books, records, facilities and personnel of the Company and shall have
the authority, to the extent it deems necessary or appropriate, to retain
special legal, accounting or other consultants and approve their retention
terms. The Company shall provide appropriate funding, as determined
by the Committee, for (a) payment of compensation to the Outside Auditors for
the purpose of rendering or issuing an audit report or related work and to any
outside advisors retained by the Committee (b) payment
of compensation to any special legal, accounting or other consultants retained
by the Committee and (c) payment of any ordinary administrative expenses of the
Committee.
In
carrying out its responsibilities, the Committee’s policies and procedures
should remain flexible, in order to react appropriately to changing conditions
and to ensure to the Board and the Company’s
stockholders that the accounting and financial reporting practices of the
Company are in accordance with all requirements and are of the highest
quality. In carrying out these responsibilities, the Committee shall,
to the extent it deems necessary and appropriate, perform the following
functions:
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A.
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The
Committee shall have the sole authority and responsibility to select,
evaluate and, where appropriate, replace the Outside
Auditors. The Committee shall be
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directly
responsible for approving the level of compensation to be paid to the Outside
Auditors and the oversight of the work of the Outside Auditors (including
resolution of disagreements between management and the Outside Auditors
regarding financial reporting) for the purpose of preparing or issuing an audit
report or related work. The Outside Auditors shall report directly to
the Committee.
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B.
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The
Committee shall annually review and evaluate the qualifications,
performance and independence of the Outside Auditors’ lead audit partner
and assure regular rotation of the lead audit partner and reviewing
partner as required by law and evaluate the appropriateness of rotating
the independent audit firm and provide its conclusions to the
Board. The Committee shall review and approve the Company’s
hiring of employees and former employees of the Company’s current and
former Outside Auditors.
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C.
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The
Committee shall pre-approve all auditing services and permitted non-audit
services (including the fees and terms thereof) to be performed for the
Company by the Outside Auditors, subject to the de minimis exceptions for
non -audit services described in the Exchange Act. The
Committee may form and delegate authority to subcommittees consisting of
one or more members, including the authority to grant preapprovals of
audit and permitted non-audit services, provided that any decision of a
subcommittee to grant preapprovals shall be presented to the Committee at
its next scheduled meeting.
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D.
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On
an annual basis, the Committee shall obtain from the Outside Auditors a
written communication delineating all their relationships and professional
services as required by Independence Standards Board current
standards. The Committee shall review with the Outside Auditors
the nature and scope of any disclosed relationships or professional
services and take appropriate action, if necessary, to ensure the
continuing independence of the Outside
Auditors.
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E.
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The
Committee shall meet with the Outside Auditors and management of the
Company to review the scope and general intent of the proposed audit and
perform quarterly and annual reviews for the then current
year. The Committee shall determine whether any limitations
have been placed on the scope or nature of the Outside Auditors’ audit
procedures and shall also inquire about the cooperation received by the
Outside Auditors from Company personnel during their audit, including
their access to all requested Company records, data and
information. At the conclusion of the annual audit, the
Committee shall review such audit, including any comments or
recommendations of the Outside
Auditors.
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F.
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The
Committee shall review with the Outside Auditors and management the
adequacy and effectiveness of the accounting and internal controls over
financial reporting of the Company and elicit any recommendations for the
improvement of such internal controls or particular areas where new or
more detailed controls or procedures are desirable. At such
times as may be required under applicable laws and regulations, the
Committee shall also review and discuss with management
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and the
Outside Auditors (a) any annual report prepared by management with respect to
the Company’s internal control over financial reporting and (b) any attestation
report pertaining thereto delivered by the Outside Auditors. The
Committee shall also obtain from the Outside Auditors periodic assurances that
they are complying with all provisions of applicable law which require the
Outside Auditors, if they detect or become aware of any illegal act, to assure
that the Committee is adequately informed and to provide a report if they have
reached specified conclusions with respect to such illegal acts.
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G.
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The
Committee shall discuss in advance with management the Company’s practices
with respect to the types of information to be disclosed and the types of
presentations to be made in earnings press releases, including the use of
pro forma or adjusted” non-GAAP
information (if any), and financial information and earnings guidance-, and shall
also discuss with management and the Outside Auditors the effect of
off-balance sheet structures, if
any.
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H.
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The
Committee shall review and discuss the quarterly financial statements with
management and the Outside Auditors prior to the filing of each quarterly
report on Form 10-Q (and prior to the press release of results if
possible) to determine that the Outside Auditors do not take exception to
the disclosure and content of the financial statements, and shall also
discuss any other matters required to be communicated to the Committee by
the Outside Auditors under generally accepted accounting
standards. The Chairman of the Committee may represent the
entire Committee for purposes of this review. The Committee
shall review and discuss with management and the Outside Auditors the
financial statements to be included in the Company’s annual report under
the Exchange Act, to determine that the Outside Auditors are satisfied
with the disclosure and content thereof. The Committee shall
also review and discuss with management and the Outside Auditors: (a) the
results of their analysis of significant financial reporting issues and
practices including changes in, or adoptions of accounting
principles and disclosure practices; (b) the Outside Auditors’ judgment
about the quality, not just the acceptability, of accounting principles
and the clarity of the financial disclosure practices used or proposed to
be used, and particularly, the degree of aggressiveness or conservatism of
the Company’s accounting principles and underlying estimates, and other
significant decisions made in preparing the financial statements; (c) any
matters required to be communicated to the Committee by the Outside
Auditors under generally accepted auditing standards and (d) any other
reports of the Outside Auditors required by law or professional auditing
standards, including reports on: (i) critical accounting policies and
practices used in preparing the financial statements; (ii)
alternative treatments of financial information discussed with management,
ramifications of such alternative disclosures and treatments, and the
treatment preferred by the Outside Auditors; and (iii) other significant
written communications between the Outside Auditors and Company
management, such as any management letter issued or proposed to be issued,
and a schedule of unadjusted differences, if
any.
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I.
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The
Committee must be satisfied that adequate procedures are in place for the
review of the Company’s disclosure (whether in filings with the SEC, press
releases or other published documents) of financial information derived or
extracted from the Company’s financial statements. The
Committee shall consider whether the information contained in these
documents is consistent with the information contained in the financial
statements.
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J.
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The
Committee shall review disclosures, if any, made by the Company’s Chief
Executive Officer and Chief Financial Officer during their certification
process for the Company’s periodic reports regarding: (a) all significant
deficiencies and material weaknesses in the design or operation of
internal controls over financial reporting which are reasonably likely to
affect adversely the Company’s ability to record, process, summarize and
report financial information; and (b) any fraud, whether or not material,
that involves management or other employees who have a role in the
Company’s internal controls over financial
reporting.
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K.
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The
Committee shall prepare and publish a Committee report for inclusion in
the Company’s annual proxy statement and provide any additional
disclosures in the proxy statement or the Company’s annual report as
required under the rules of the Exchange Act or as may be required to be
made under the rules and regulations of the SEC or
NASDAQ.
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L.
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The
Committee shall discuss with the Outside Auditors the quality of the
Company’s financial and accounting personnel and shall also elicit the
comments of management regarding the responsiveness of the Outside
Auditors to the Company’s needs.
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M.
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The
Committee shall review and approve any “related party” transactions (as
defined in SEC regulations) involving the Company and officers, directors
or stockholders beneficially owning more than 10% of any class of equity
security of the Company.
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N.
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Generally
as part of its review of the annual financial statements, the Committee
shall have access to and receive oral reports, if desired, from the
Company’s outside counsel concerning legal and regulatory matters that may
have a material impact on the financial
statements.
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O.
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The
Committee shall consider such other matters in relation to the financial
affairs of the Company and in relation to the audit of the Company’s
financial statements as the Committee may, in its discretion, determine to
be advisable and shall perform any other duties consistent with this
Charter, the Company’s Certificate of Incorporation, By-laws and governing
laws as the Committee or the Board deems
necessary.
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P.
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The
Committee shall obtain the Board’s approval of this Charter, review and
reassess the adequacy of this Charter regularly and recommend any proposed
changes to the Board for approval.
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Q.
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The
Committee shall annually review the Committee’s own performance and
present a report to the Board of the performance evaluation of the
Committee.
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5. Receipt
and Treatment of Complaints
The
Committee shall establish and oversee procedures for the receipt, retention, and
treatment of complaints received by the Company regarding accounting, internal
accounting controls, auditing or other matters, and for the confidential or
anonymous submission by employees of the Company of concerns regarding
questionable accounting, auditing or other matters.
6. Limitation
of Committee’s Role
While the
Committee has the responsibilities and powers set forth in this Charter, it is
not the duty of the Committee to plan or conduct audits or to determine that the
Company’s financial statements are complete and accurate and are in accordance
with generally accepted accounting principles and applicable rules and
regulations. Management is responsible for the financial reporting
process, including the system of internal control over financial reporting and
for the preparation of financial statements in accordance with generally
accepted accounting principles. The Company’s Outside Auditors are
responsible for auditing those financial statements and expressing an opinion as
to their conformity with generally accepted accounting
principles. The Committee’s responsibility is to oversee and review
these processes. Each member of the Committee shall be entitled to
rely on information, opinions, reports or statements, including financial
statement and other financial data, prepared or presented by officers and
employees of the Company, legal counsel, the Outside Auditors or other persons
with professional or expert competence.
Appendix
B
2009
STOCK INCENTIVE PLAN
SECTION
1 Purpose
The
purpose of this Delcath Systems, Inc. 2009 Stock Incentive Plan is to promote
the interests of Delcath Systems, Inc. (the “Company”) and its Subsidiaries
through grants of awards to employees, directors and consultants in order to (i)
attract and retain employees, directors and consultants, (ii) provide an
additional incentive to each award holder to work to increase the value of
Delcath stock, and (iii) provide each award holder with a stake in the future of
Delcath that strengthens the mutuality of interests between such award holder
and Delcath’s shareholders.
SECTION
2 Types of Awards
Awards
under the Plan may be in the form of Stock Options, Stock Appreciation Rights
(SARs), Restricted Stock, Restricted Stock Units (RSUs), Other Stock-Based
Awards, and Cash Awards.
Awards
may be free-standing or granted in tandem. If two awards are granted
in tandem, the award holder may exercise (or otherwise receive the benefit of)
one award only to the extent he or she relinquishes the tandem
award.
SECTION
3 Definitions
“Beneficiary”
means an award holder’s designated beneficiary or estate, as determined under
Section 15.
“Board”
means the Board of Directors of Delcath.
“Cash
Award” means an award granted under Section 12 of the Plan.
“Delcath”
or the “Company” means Delcath Systems, Inc., a Delaware corporation, and any
successor to such corporation.
“Code”
means the Internal Revenue Code of 1986, as amended from time to
time.
“Committee”
means (i) with respect to awards to Non-Employee Directors, the entire Board;
and (ii) with respect to all other awards, a committee of the Board designated
by the Board to administer this Plan and which shall consist of at least two
members of the Board, or if no such committee is appointed, the entire
Board.
“Consultant”
means any individual, other than an Employee or Non-Employee Director, who is
engaged by Delcath or a Subsidiary to render services, other than a person whose
services are rendered in connection with capital-raising or promoting or
maintaining a market for Delcath securities.
“Employee”
means an employee of Delcath or of any Subsidiary.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended from time to
time.
“Fair
Market Value” of the Stock means (i) if the Stock is readily tradable on an
established securities market (within the meaning of Section 409A of the Code),
the closing price for a share of Stock on such exchange or market as is
determined by the Committee to be the primary market for the Stock on the date
in question, or if the date in question is not a trading day on such market, the
closing price on such exchange or market for the trading day immediately
preceding the day in question, and (ii) otherwise, such other price as the Board
determines is appropriate after taking into account the requirements of Section
409A of the Code.
“Incentive
Stock Option” or “ISO” means a Stock Option granted under the Plan that both is
designated as an ISO and qualifies as an incentive stock option within the
meaning of Section 422 of the Code.
“Non-Employee
Director” means a member of the Board who is not an Employee.
“Non-Qualified
Option” or “NQSO” means a Stock Option granted under the Plan which either is
designated as NQSO or does not qualify as an incentive stock option within the
meaning of Section 422 of the Code.
“Other
Stock Based Award” means an award described in Section 11 of the
Plan.
“Plan”
means this Delcath Systems, Inc. 2009 Stock Incentive Plan, as amended from time
to time.
“Performance
Award” means an award granted under Section 9, 10, 11, or 12 of the Plan that
meets the requirements of Section 13 of the Plan and is intended to qualify as
“performance-based compensation” under Section 162(m) of the Code.
“Performance
Objectives” means objective measures of performance for earning an award, which
in the case of Performance Awards, shall be based on one or more of the criteria
specified in Section 13.2.
“Restricted
Stock” means an award described in Section 9 of the Plan.
“Restricted
Stock Unit” or “RSU” means an award described in Section 10 of the
Plan.
“Stock”
means common stock of Delcath, par value one cent ($.01).
“Stock
Appreciation Right” or “SAR” means an award described in Section 8 of the
Plan.
“Stock
Option” means an Incentive Stock Option or a Non-Qualified Stock
Option.
“Subsidiary”
means any corporation, partnership, joint venture, or other entity in which
Delcath owns, directly or indirectly, 50% or more of the ownership
interests.
SECTION
4 Administration
4.1 The
Plan shall be administered by the Committee.
The
Committee shall have the following authority and discretion with respect to
awards under the Plan: to grant awards (subject to any limitations
contained in the Plan); to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall deem advisable; to
interpret the terms and provisions of the Plan and any award granted under the
Plan; to make all factual and other determinations necessary or advisable for
the administration of the Plan; and to otherwise supervise the administration of
the Plan. In particular, and without limiting its authority and
powers, the Committee shall have the authority:
(1) to
determine whether and to what extent any award or combination of awards will be
granted hereunder and whether they will be Performance Awards;
(2) to
select the Employees, Non-Employee Directors, and Consultants to whom awards
will be granted;
(3) to
determine the number of shares of Stock to be covered by each award granted
hereunder subject to the limitations contained herein;
(4) to
determine the terms and conditions of any award granted hereunder, including,
but not limited to, any vesting or other restrictions based on such Performance
Objectives, continued employment, and such other factors as the Committee may
establish, and to determine whether the Performance Objectives and other terms
and conditions of the award have been satisfied;
(5) to
determine the treatment of awards upon an award holder’s retirement, disability,
death, termination for cause or other termination of employment or
service;
(6) to
determine whether amounts equal to the amount of any dividends declared with
respect to the number of shares covered by an award (i) will be paid to the
award holder currently, or (ii) will be deferred and deemed to be
reinvested or otherwise credited to the award holder and paid at the date
specified in the award, or (iii) that the award holder has no rights with
respect to such dividends (in each case, subject to any restrictions imposed by
Section 409A of the Code);
(7) to
amend the terms of any award, prospectively or retroactively; provided however that (i) no
amendment shall impair the rights of the award holder with respect to an
outstanding award without his or her written consent; (ii) unless approved by
the stockholders, the Committee shall have no power to amend the terms of
outstanding Stock Options or SARs to reduce the option price or base price of
such awards or to cancel outstanding Stock Options or SARs and grant substitute
Stock Options or SARs with a lower option price or base price than the cancelled
awards; and (iii) the Committee shall consider the provisions of Section 409A of
the Code prior to amending any award;
(8)
to correct any defect, supply any omission, or reconcile any inconsistency in
the Plan or any award in the manner and to the extent it shall deem desirable to
carry out the purpose of the Plan;
(9) to
determine whether, to what extent, and under what circumstances Stock and other
amounts payable with respect to an award will be deferred either automatically
or at the election of an award holder, including providing for and determining
the amount (if any) of deemed earnings on any deferred amount during any
deferral period (in each case, subject to any restrictions imposed by Section
409A of the Code);
(10) to
determine, pursuant to a formula or otherwise, the Fair Market Value of the
Stock on a given date;
(11) subject
to any restrictions imposed by Section 409A of the Code, to provide that the
shares of Stock received as a result of an award shall be subject to a right of
repurchase by the Company and/or a right of first refusal, in each case subject
to such terms and conditions as the Committee may specify;
(12) to
adopt one or more sub-plans, consistent with the Plan, containing such
provisions as may be necessary or desirable to enable awards under the Plan to
comply with the laws of other jurisdictions and/or qualify for preferred tax
treatment under such laws;
(13) to
the extent permitted by law, to delegate to a committee of two or more officers
of the Company the authority to grant awards to Employees who are not officers
or directors of the Company for purposes of Section 16 of the Securities
Exchange Act of 1934; provided, however, that any such delegation shall be set
forth in
a
resolution of the Committee that specifies the total number of shares as to
which awards may be granted under such delegation and any other limitations as
may be imposed by the Committee; and
(14) to
delegate such administrative duties as it may deem advisable to one or more of
its members or to one or more employees or agents of the Company.
4.3 All
determinations and interpretations made by the Committee pursuant to the
provisions of the Plan shall be final and binding on all persons, including the
Company and award holders.
4.4 The
Committee may act by a majority of its members at a meeting (present in person
or by conference telephone), by unanimous written consent or by any other method
of director action then permitted under the General Corporation Law of the State
of Delaware.
SECTION
5 Stock Subject to Plan
5.1 The
total number of shares of Stock that may be issued under the Plan shall be
2,000,000, plus any unused shares authorized for awards under the Company’s 2004
Stock Incentive Plan (the “2004 Plan”), in each case subject to adjustment as
provided in Section 5.4. No more than 2,000,000 shares may be granted
with respect to Incentive Stock Options (subject to adjustment as provided in
Section 5.4). Shares issued under the Plan may consist of authorized
but unissued shares or shares which have been issued and reacquired by the
Company. The payment of any award in cash shall not count against
this share limit, regardless of the original intent, structure or nature of such
award. Any dividend equivalents that are granted with respect to
other awards under this Plan and are paid in shares shall also not count against
the share limit for the Plan.
In
connection with a merger or consolidation of an entity with the Company or the
acquisition by the Company or a Subsidiary of property or stock of an entity,
the Company may assume awards granted by such entity or grant Stock Options or
other awards in substitution for awards granted by such entity or an affiliate
thereof, and such assumed or substituted awards shall not count against the
share limit under this Plan.
5.2 Subject
to the terms of Section 5.1, to the extent a Stock Option or Stock Appreciation
Right terminates without shares having been issued, or an award terminates
without the holder having received shares in payment of the award, or shares
awarded are forfeited (in each case including terminations and forfeitures of
outstanding awards granted under the 2004 Plan), the shares subject to such
award shall again be available for distribution in connection with future awards
under this Plan. Shares of Stock equal in number to the shares
surrendered in payment of the option price, and shares of Stock that are
withheld in order to satisfy federal, state or local tax withholding obligations
with respect to any award, shall not count against the above limit, and shall
again be available for grants under the Plan. In the event that any
Stock Option
or SAR is
exercised or settled by delivery of only the net shares representing the
appreciation in the Stock, only the net shares delivered shall be counted
against the Plan’s share limit.
5.3 No
individual shall be granted Stock Options, SARs, Restricted Stock, RSUs, or
Other Stock-Based Awards, or any combination thereof with respect to more than
500,000 shares of Stock in any fiscal year (subject to adjustment as provided in
Section 5.4). The maximum Cash Award that may be paid to any
individual in any fiscal year (measured at the end of the performance period or
periods ending in the fiscal year, and without regard to increase in value of
the award during any deferral period) is $500,000.
5.4
In the event of a change in the outstanding stock of the Company (including but
not limited to changes in either the number of shares or the value of shares) by
reason of any stock split, reverse stock split, dividend or other distribution
(whether in the form of shares, other securities or other property, but not
including regular cash dividends), extraordinary cash dividend,
recapitalization, merger in which the stockholders of the Company immediately
prior to the merger continue to own a majority of the voting securities of the
successor entity immediately after the merger, consolidation, split-up,
spin-off, reorganization, combination, repurchase or exchange of shares or other
securities, or other similar corporate transaction or event, if the Committee
shall determine in its sole discretion that, in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, such transaction or event equitably requires an adjustment in
the aggregate number and/or class of shares of Stock available under the Plan
(including for this purpose the number of shares of Stock available for issuance
under the Plan) or in the number, class and/or price of shares of Stock subject
to outstanding Stock Options and/or outstanding awards), such adjustment shall
be made by the Committee and shall be conclusive and binding for all purposes
under the Plan. A participant holding an outstanding award has a legal right to
an adjustment that preserves without enlarging the value of such award, with the
terms and manner of such adjustment to be determined by the
Committee.
In
addition, upon the dissolution or liquidation of the Company or upon any
reorganization, merger, or consolidation as a result of which the Company is not
the surviving corporation (or survives as a wholly-owned subsidiary of another
corporation), or upon a sale of substantially all the assets of the Company, the
Board or the Committee may take such action as it in its discretion deems
appropriate, subject to any limitations imposed by Section 409A of the Code, to
(i) accelerate the time when awards vest and/or may be exercised and/or may be
paid, (ii) cash out outstanding Stock Options and/or other awards at or
immediately prior to the date of such event, (iii) provide for the assumption of
outstanding Stock Options or other awards by surviving, successor or transferee
corporations or entities, (iv) provide that in lieu of shares of Stock, the
award recipient shall be entitled to receive the consideration he or she would
have received in such transaction in exchange for such shares of Stock (or the
fair market value thereof in cash), and/or (v) provide that Stock Options and
SARs shall be exercisable for a period of at least 10 business days from the
date of receipt of a notice from the Company of such proposed event, following
the expiration of which period any unexercised Stock Options or SARs shall
terminate.
No
fractional shares shall be issued or delivered under the Plan. The
Board or the Committee shall determine whether the value of fractional shares
shall be paid in cash or other property, or whether such fractional shares and
any rights thereto shall be cancelled without payment.
The
Board’s or Committee’s determination as to which adjustments shall be made under
this Section 5.4 and the extent thereof shall be final, binding and
conclusive.
SECTION
6 Eligibility
Employees,
Non-Employee Directors, and Consultants are eligible to be granted awards under
the Plan. In addition, awards may be granted to prospective
Employees, Non-Employee Directors, or Consultants but such awards shall not
become effective until the recipient’s commencement of employment or service
with the Company or Subsidiary. Incentive Stock Options may be
granted only to employees and prospective employees of the Company or of any
parent corporation or subsidiary of the Company (as those terms are defined in
Section 424 of the Code). The participants under the Plan shall be
selected from time to time by the Committee, in its sole discretion, from among
those eligible.
SECTION
7 Stock Options
7.1 The
Stock Options awarded under the Plan may be either Incentive Stock Options or
Non-Qualified Stock Options. To the extent that any Stock Option is
either designated as a Non-Qualified Stock Option or does not qualify as an
Incentive Stock Option, it shall constitute a Non-Qualified Stock
Option.
7.2 Subject
to the following provisions, Stock Options awarded under the Plan shall be in
such form and shall have such terms and conditions as the Committee may
determine:
(1) Option
Price. The option price per share of Stock purchasable under a Stock
Option shall be determined by the Committee, but shall not be less than the Fair
Market Value of the Stock on the date of grant of the Stock
Option. The date of grant of any Stock Option shall be the date of
Committee approval of the Stock Option or a prospective date specified by the
Committee, and for prospective Employees shall be no earlier than the first day
of employment.
(2) Option
Term. The term of each Stock Option shall be fixed by the Committee,
but shall not exceed ten years.
(3) Exercisability. Stock
Options shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. The Committee may
waive such exercise provisions or accelerate the exercisability of the Stock
Option at any time in whole or in part.
(4) Method
of Exercise. Stock Options may be exercised in whole or in part at
any time during the option period by giving notice of exercise, in such manner
as may be determined by the Company (which may be written or electronic),
specifying the number of whole shares to be purchased, accompanied by payment of
the aggregate option price for such shares. Payment of the option
price shall be made in such manner as the Committee may provide in the award,
which may include (i) cash (including cash equivalents), (ii) delivery (either
by actual delivery of the shares or by providing an affidavit attesting to
ownership of the shares) of shares of Stock already owned by the optionee, (iii)
broker-assisted “cashless exercise” in which the optionee delivers a notice of
exercise together with irrevocable instructions to a broker acceptable to the
Company to sell shares of Stock (or a sufficient portion of such shares)
acquired upon exercise of the Stock Option and remit to the Company a sufficient
portion of the sale proceeds to pay the total option price and any withholding
tax obligation resulting from such exercise, (iv) application of shares
subject to the Stock Option to satisfy the option price, (v) any other manner
permitted by law, or (vi) any combination of the foregoing. Any shares used to
pay the option price shall be valued at their Fair Market Value on the date of
exercise.
(5) No
Stockholder Rights. An optionee shall have neither rights to
dividends or other rights of a stockholder with respect to shares subject to a
Stock Option until the optionee has duly exercised the Stock Option and a
certificate for such shares has been duly issued (or the optionee has otherwise
been duly recorded as the owner of the shares on the books of the
Company).
(6) Surrender
Rights. The Committee may provide that options may be surrendered for
cash upon any terms and conditions set by the Committee.
(7) Non-transferability. Unless
otherwise provided by the Committee, (i) Stock Options shall not be transferable
by the optionee other than by will or by the laws of descent and distribution,
and (ii) during the optionee’s lifetime, all Stock Options shall be exercisable
only by the optionee or by his or her guardian or legal
representative. The Committee, in its sole discretion, may permit
Stock Options to be transferred to such transferees and on such terms and
conditions as may be determined by the Committee.
(8) Termination
of Employment. Following the termination of an optionee’s employment
or service with the Company or a Subsidiary, the Stock Option shall be
exercisable to the extent determined by the Committee. The Committee
may provide different post-termination exercise provisions with respect to
termination of employment or service for different reasons. The
Committee may provide at the time of grant that, notwithstanding the option term
fixed pursuant to Section 7.2(2), a Stock Option that is outstanding on the date
of an optionee’s death shall remain outstanding for an additional period after
the date of such death. The Committee shall have absolute discretion
to determine the date and circumstances of any termination of employment or
service.
7.3 Notwithstanding
the provisions of Section 7.2, Incentive Stock Options shall be subject to the
following additional restrictions:
(1) No
Incentive Stock Option shall have an option price that is less than 100% of the
fair market value (as determined for purposes of Section 422 of the Code) of the
Stock on the date of grant of the Incentive Stock Option. The date of
grant of any Incentive Stock Option shall be the date of Committee approval of
the Incentive Stock Option or a prospective date specified by the Committee, and
for prospective employees shall be no earlier than the first day of
employment.
(2) No
Incentive Stock Option shall be exercisable more than ten years after the date
such Incentive Stock Option is granted.
(3) No
Incentive Stock Option shall be awarded more than ten years after April 8, 2009,
the date of Board approval of the Plan.
(4) No
Incentive Stock Option granted to an employee who owns more than 10% of the
total combined voting power of all classes of stock of the Company or any of its
parent or subsidiary corporations, as defined in Section 424 of the Code, shall
(A) have an option price which is less than 110% of the fair market value of the
Stock on the date of grant of the Incentive Stock Option or (B) be exercisable
more than five years after the date such Incentive Stock Option is
granted.
(5) The
aggregate fair market value (determined as of the time the Incentive Stock
Option is granted) of the shares with respect to which Incentive Stock Options
(granted under the Plan and any other plans of the Company, its parent
corporation or subsidiary corporations, as defined in Section 424 of the Code)
are exercisable for the first time by an optionee in any calendar year shall not
exceed $100,000.
(6) An
optionee’s right to exercise an Incentive Stock Option shall be subject to the
optionee’s agreement to notify the Company of any “disqualifying disposition”
(for purposes of Section 422 of the Code) of the shares acquired upon such
exercise.
(7) Incentive
Stock Options shall not be transferable by the optionee, other than by will or
by the laws of descent and distribution, subject to such additional limitations
as may be imposed by the Committee. During the optionee’s lifetime,
all Incentive Stock Options shall be exercisable only by such
optionee.
The
Committee may, with the consent of the optionee, amend an Incentive Stock Option
in a manner that would cause loss of Incentive Stock Option status, provided the
Stock Option as so amended satisfies the requirements of Section
7.2.
7.4 Substitute
Options. In connection with a merger or consolidation of an entity
with the Company or the acquisition by the Company or a Subsidiary of property
or stock of an entity, the Committee may grant Stock Options in substitution for
any options or other stock awards or stock-based awards granted by such entity
or an affiliate thereof. Such substitute Stock Options may be granted
on such terms as the Committee deems appropriate to prevent dilution or
enlargement of the benefits under the prior award, notwithstanding any
limitations on Stock Options contained in other provisions of this Section 7,
but after considering the provisions of Section 409A of the Code.
SECTION
8 Stock Appreciation Rights
(SARs)
A Stock
Appreciation Right shall entitle the holder thereof to receive, for each share
as to which the award is granted, payment of an amount, in cash, shares of
Stock, or a combination thereof as determined by the Committee, equal in value
to the excess of the Fair Market Value of a share of Stock on the date of
exercise over an amount (the base price) specified by the
Committee. Any such award shall be in such form and shall have such
terms and conditions as the Committee may determine; provided, however, that no
SAR shall have a base price below the Fair Market Value of the Stock on the date
of grant or a term longer than ten years. The award shall specify the
number of shares of Stock as to which the SAR is granted.
SECTION
9 Restricted Stock
Subject
to the following provisions, all awards of Restricted Stock shall be in such
form and shall have such terms and conditions as the Committee may
determine:
(1) The
Restricted Stock award shall specify the number of shares of Restricted Stock to
be awarded, the price, if any, to be paid by the recipient of the Restricted
Stock and the date or dates on which, or the conditions upon the satisfaction of
which, the Restricted Stock will vest. The grant and/or the vesting
of Restricted Stock may be conditioned upon the completion of a specified period
of service with the Company and/or its Subsidiaries, upon the attainment of
specified Performance Objectives, and/or upon such other criteria as the
Committee may determine.
(2) Stock
certificates representing the Restricted Stock awarded shall be registered in
the award holder’s name (or the holder shall be recorded as the owner of the
shares on the books of the Company), but the Committee may direct that such
certificates be held by the Company or its designee on behalf of the award
holder (or that transfer restrictions be placed on the
shares). Except as may be permitted by the Committee, no share of
Restricted Stock may be sold, transferred, assigned, pledged or otherwise
encumbered by the award holder until such share has vested in accordance with
the terms of the Restricted Stock award. At the time Restricted Stock
vests, a certificate for such vested shares shall be delivered to the award
holder (or his or her Beneficiary in the event of death), (or the award holder
(or his or her Beneficiary in the event of death) shall be duly recorded as the
owner of the shares on the books of the Company), in each case free of all
restrictions.
(3) The
Committee may provide that the award holder shall have the right to vote and/or
receive dividends on Restricted Stock. Unless the Committee provides
otherwise, Stock received as a dividend on, or in connection with a stock split
of, Restricted Stock (or pursuant to adjustment under Section 5.4) shall be
subject to the same restrictions as the Restricted Stock.
(4) Except
as may be provided by the Committee, in the event of an award holder’s
termination of employment or service before all of his or her Restricted Stock
has vested, or in the event any conditions to the vesting of Restricted Stock
have not been satisfied prior to any deadline for the satisfaction of such
conditions set forth in the award, the shares of Restricted Stock which have not
vested shall be forfeited, and the Committee may provide that (i) any purchase
price paid by the award holder shall be returned to the award holder or (ii) a
cash payment equal to the Restricted Stock’s Fair Market Value on the date of
forfeiture, if lower, shall be paid to the award holder.
(5) The
Committee may waive, in whole or in part, any or all of the conditions to
receipt of, or restrictions with respect to, any or all of the award holder’s
Restricted Stock (except that the Committee may not waive conditions or
restrictions with respect to Performance Awards if such waiver would cause the
award to fail to qualify as “performance-based compensation” within the meaning
of Section 162(m) of the Code).
SECTION
10 Restricted Stock Units (RSUs)
Subject
to the following provisions, all awards of Restricted Stock Units shall be in
such form and shall have such terms and conditions as the Committee may
determine:
(1) The
Restricted Stock Unit award shall specify the number of RSUs to be awarded and
the duration of the period (the “Deferral Period”) during which, and the
conditions under which, receipt of the Stock will be deferred. The
Committee may condition the grant or vesting of Restricted Stock Units, or
receipt of Stock or cash at the end of the Deferral Period, upon the completion
of a specified period of service with the Company and/or its Subsidiaries, upon
the attainment of specified Performance Objectives, and/or upon such other
criteria as the Committee may determine.
(2) Except
as may be provided by the Committee, RSU awards may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Deferral
Period.
(3) At
the expiration of the Deferral Period, the award holder (or his or her
Beneficiary in the event of death) shall receive (i) certificates for the
number of shares of Stock equal to the number of shares covered by the RSU award
(or the shares shall be duly recorded as owned by such holder on the books of
the Company), (ii) cash equal to the Fair Market Value of such Stock, or
(iii) a combination of shares and cash, as the Committee may
determine.
(4) Except
as may be provided by the Committee, in the event of an award holder’s
termination of employment or service before the RSU has vested, his or her RSU
award shall be forfeited.
(5) The
Committee may waive, in whole or in part, any or all of the conditions to
receipt of, or restrictions with respect to, Stock or cash under a Restricted
Stock Unit award (except that the Committee may not waive conditions or
restrictions with respect to Performance Awards if such waiver would cause the
award to fail to qualify as “performance-based compensation” within the meaning
of Section 162(m) of the Code). In addition, the Committee shall not
accelerate the payment of an RSU if such acceleration would violate Section 409A
of the Code.
SECTION
11 Other Stock-Based Awards
The
Committee may grant Other Stock-Based Awards, which shall consist of any right
that is not an award described in Sections 7, 8, 9 or 10 hereof and that is
denominated or payable in Stock, or valued in whole or in part by reference to
or otherwise based on or related to Stock (including, without limitation,
securities convertible into Stock). The Committee shall determine the
terms and conditions of any such award, subject to any limitations contained in
the Plan.
SECTION
12 Cash Awards
12.1 The
Committee may grant Cash Awards, which shall entitle the award holder to receive
cash upon the satisfaction of the Performance Objectives and other terms and
conditions set forth in the award. At the time of grant of a Cash
Award, the Committee shall specify the applicable Performance Objectives and the
performance period to which they apply, as well as the amount of the Cash Award
to be paid upon satisfaction of the Performance Objectives (which may be stated
as a range of amounts payable upon attainment of specified levels of
satisfaction of the Performance Objectives). The Committee may
determine that a Cash Award shall be payable upon achievement of any one
Performance Objective, or any one of several Performance Objectives, or that two
or more of the Performance Objectives must be achieved as a condition to payment
of a Cash Award.
12.2 The
Committee shall specify at the time of grant of a Cash Award the date or dates
such Cash Award, to the extent earned, shall be payable, and may require all or
a portion of the Cash Award to be deferred and payable only upon satisfaction of
continued employment or other specified conditions. The Committee may also
permit all or a portion of a Cash Award to be deferred at the award holder’s
election, subject to Section 409A of the Code. Deferred portions of a
Cash Award may be credited with interest, deemed invested in Stock, or deemed
invested in such other investments as the Committee may specify.
SECTION
13 Performance Awards
13.1 The
Committee shall have the right to designate awards under Section 9, 10, 11 or 12
as Performance Awards, in which case the following provisions shall apply to
such awards (in addition to the provisions under Section 9, 10, 11, or 12, as
applicable).
13.2 The
grant or vesting of a Performance Award shall be subject to the achievement of
Performance Objectives established by the Committee based on one or more of the
following criteria, in each case applied to the Company on a consolidated basis
and/or to a Subsidiary, business unit, business segment or business line, and
which the Committee may use as an absolute measure, as a measure of improvement
relative to prior performance, or as a measure of comparable performance
relative to a peer group of companies or published or special index that the
Committee deems appropriate:
|
|
(1)
|
Net
earnings or net income (before or after
taxes);
|
|
|
(2)
|
Earnings
per share;
|
|
|
(3)
|
Net
sales or revenue growth;
|
|
|
(4)
|
Gross
revenues (and/or gross revenue growth) and/or mix of revenues among the
Company’s business activities;
|
|
|
(5)
|
Net
operating profit (or reduction in operating
loss);
|
|
|
(6)
|
Return
measures (including, but not limited to, return on assets, capital,
invested capital, equity, sales, or
revenue);
|
|
|
(7)
|
Cash
flow (including, but not limited to, operating cash flow, free cash flow,
cash flow return on equity, and cash flow return on
investment);
|
|
|
(8)
|
Earnings
before or after taxes, interest, depreciation, amortization, and/or other
non-cash items;
|
|
|
(9)
|
Gross
or operating margins;
|
|
|
(10)
|
Productivity
ratios (and/or such ratios as compared to various stock market
indices);
|
|
|
(11)
|
Stock
price (including, but not limited to, growth measures and total
shareholder return);
|
|
|
(12)
|
Stock
price and market capitalization ratios (including, but not limited to,
price-to-earnings ratio and enterprise
multiple)
|
|
|
(13)
|
Expense
targets (including, but not limited to, expenses-to-sales
ratios);
|
|
|
(14)
|
Margins;
|
|
|
(15)
|
Operating
efficiency;
|
|
|
(16)
|
Market
share;
|
|
|
(17)
|
Customer
satisfaction;
|
|
|
(18)
|
Employee
satisfaction or retention;
|
|
|
(19)
|
Development
and implementation of employee or executive development programs
(including, but not limited to, succession
programs);
|
|
|
(20)
|
Working
capital targets;
|
|
|
(21)
|
Economic
value added;
|
|
|
(22)
|
Market
value added;
|
|
|
(23)
|
Debt
to equity ratio;
|
|
|
(24)
|
Strategic
business goals relating to acquisitions, divestitures and joint
ventures;
|
|
|
(25)
|
Attaining
specified clinical, trial site initiation or patient enrollment
targets;
|
|
|
(26)
|
Filing
of the Company’s PMA application to the Food and Drug
Administration;
|
|
|
(27)
|
Obtaining
regulatory approvals, including of the company’s PHP System in the United
States or other countries;
|
|
|
(28)
|
Sale
of the company;
|
|
|
(29)
|
Consummating
a specified equity based capital
offering;
|
|
|
(30)
|
Reaching
specified technology development objectives; and
|
| (31) | Reaching specified employment time-points governed by an employment agreement |
The Committee may provide in any
Performance Award that any evaluation of performance may include or exclude any
of the following events that occurs during the performance period: (i) asset
write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect
of changes in tax laws, accounting principles, or other laws or provisions
affecting reported results, (iv) any reorganization and restructuring programs,
(v) extraordinary nonrecurring items as described in Accounting Principles Board
Opinion No. 30 and/or in management’s discussion and analysis of financial
condition and results of operations appearing in the Company’s annual report to
stockholders for the applicable year, (vi) the impact of adjustments to the
Company’s deferred tax asset valuation allowance, (vii) acquisitions or
divestitures, and (viii) foreign exchange gains and losses. To the extent such
inclusions or exclusions affect awards intended to be performance-based within
the meaning of Section 162(m) of the Code, they shall be prescribed in a form
that meets the requirements of Section 162(m).
13.3 The
following additional requirements shall apply to Performance
Awards:
(1) The
Performance Objectives shall be established by the Committee not later than the
earlier of (i) 90 days after the beginning of the applicable performance
period, or (ii) the time 25% of such performance period has
elapsed.
(2) The
Performance Objectives shall be objective and the achievement of such
Performance Objectives shall be substantially uncertain (within the meaning of
Section 162(m) of the Code) at the time the Performance Objectives are
established.
(3) The
amount of the Performance Award payable upon each level of achievement of the
Performance Objectives must be objectively determinable, except that the
Committee shall have the right to reduce (but not increase) the amount payable,
in its sole discretion.
(4) Prior
to payment of any Performance Award, the Committee shall certify in writing, in
a manner that satisfies the requirements of Section 162(m) of the Code, that the
Performance Objectives have been satisfied.
SECTION
14 Tax Withholding
Each
award holder shall, no later than the date as of which an amount with respect to
an award first becomes includible in such person’s gross income for applicable
tax purposes, pay to the Company, or make arrangements satisfactory to the
Company regarding payment of, any federal, state, local or other taxes of any
kind required by law to be withheld with respect to the award. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company (and, where applicable, any Subsidiaries),
shall, to the extent permitted by law, have the right to deduct the minimum
amount of any required tax withholdings from any payment of any kind otherwise
due to the award holder.
To the
extent permitted by the Committee, and subject to such terms and conditions as
the Committee may provide, an award holder may elect to have the minimum amount
of any required tax withholding with respect to any awards hereunder satisfied
by having the Company withhold shares of Stock otherwise deliverable to such
person with respect to the award. Alternatively, the Committee may
require that a portion of the shares of Stock or cash otherwise deliverable be
applied to satisfy the minimum withholding tax obligations with respect to the
award.
SECTION
15 Beneficiary of Award Holder
15.1 The
Committee may provide the holder with the right to designate any person or
persons as such person’s beneficiary or beneficiaries (both primary and
contingent) to whom payment in respect of one or more of the award holder’s
awards under this Plan shall be paid in the event of the award holder’s
death. Each beneficiary designation shall become effective only when
filed in writing with the Company during the award holder’s lifetime on a form
provided by the Company. If an award holder is married, his or her
designation of beneficiary or beneficiaries other than his/her spouse or his/her
estate shall not be effective unless the beneficiary designation has been signed
by the spouse and notarized.
15.2 If
an award holder is not given the right to designate a beneficiary or fails to
designate a beneficiary in accordance with the provisions of Section 15.1, or if
all designated beneficiaries predecease the award holder, payment of the
holder’s awards shall be made to the holder’s estate.
SECTION
16 Amendments and
Termination
16.1 No
award shall be granted under the Plan after June 8, 2019, the day preceding the
tenth anniversary of the date of approval by the Company’s stockholders of the
Plan, unless the Plan has been re-approved by the Company’s stockholders prior
to such date.
No
Performance Award shall be granted after the Company’s annual meeting held in
2014, unless the material terms of the performance goals (within the meaning of
Section 162(m) of the Code) have been re-approved by the Company’s stockholders
within the five years prior to such grant.
16.2 The
Board may discontinue the Plan at any time and may amend it from time to
time. No amendment or discontinuation of the Plan shall adversely
affect any award previously granted without the award holder’s written
consent. Amendments may be made without stockholder approval except
as required to satisfy applicable laws or regulations or the requirements of any
stock exchange or market on which the Stock is listed or traded.
16.3 The
Committee may amend the terms of any award prospectively or retroactively,
subject to the limitations set forth in Section 4.2(7) hereof.
16.4 Notwithstanding
the foregoing provisions of this Section 16, the Committee shall have the right,
in its sole discretion, to amend the Plan and all outstanding awards without the
consent of stockholders or award holders to the extent the Committee determines
such amendment is necessary or appropriate to comply with Section 409A of the
Code.
16.5 Notwithstanding
any other provision of the Plan or of any award, in the event of a change in
control event (as defined under Section 409A of the Code) the Committee shall
have the right, in its sole discretion, to terminate the Plan and all
outstanding awards (or, to the extent permitted under Section 409A of the Code,
to terminate all awards subject to Section 409A of the Code) and distribute
amounts payable under such awards immediately prior to or within 12 months after
the occurrence of the change in control event.
SECTION
17 Change of Control
17.1 The
Committee shall have the authority to determine the extent, if any, to which
outstanding awards will become vested upon a Change of Control. In
addition, to the extent permitted under Section 409A of the Code or with respect
to awards that are not subject to Section 409A of the Code, the Committee shall
have discretion to accelerate the payment date of awards in the event of a
Change of Control.
17.2 A
“Change of Control” means the happening of any of the following:
(1) the
acquisition by any person or group deemed a person under Sections 3(a)(9) and
13(d)(3) of the Exchange Act (other than the Company and its Subsidiaries as
determined immediately prior to that date and/or any of its or
their
employee
benefit plans) of beneficial ownership, directly or indirectly (with
beneficial ownership determined as provided in Rule 13d-3, or any successor
rule, under the Exchange Act) of securities of the Company representing more
than 50% of the total combined voting power of all classes of stock of the
Company having the right under ordinary circumstances to vote at an election of
the Board;
(2) the
date on which a majority of the members of the Board shall consist of persons
other than Current Directors (which term shall mean any member of the Board on
the date of adoption of the Plan and any member of the Board whose nomination or
election has been approved by a majority of the Current Directors then on the
Board);
(3) consummation
of a merger or consolidation of the Company with another corporation where (x)
the stockholders of the Company immediately prior to the merger or consolidation
would not beneficially own, immediately after the merger or consolidation,
shares entitling such stockholders to a majority of all votes (without
consideration of the rights of any class of stock to elect directors by a
separate class vote) to which all stockholders of the corporation issuing cash
or securities in the merger or consolidation would be entitled in the election
of directors in the same proportions as their ownership, immediately prior to
such merger or consolidation, of voting securities of the Company, or (y) where
the members of the Company’s board of directors, immediately prior to the merger
or consolidation, would not, immediately after the merger or consolidation,
constitute a majority of the board of directors of the corporation issuing cash
or securities in the merger or consolidation;
(4) the
sale or other disposition of all or substantially all of the assets of the
Company; or
(5) the
date of approval by the stockholders of the Company of the liquidation of the
Company.
SECTION
18 Section 409A
18.1 All
awards granted under the Plan are intended to be exempt from the requirements of
Section 409A or, if not exempt, to satisfy the requirements of Section 409A, and
the provisions of the Plan and of any award granted under the Plan shall be
construed in a manner consistent therewith.
18.2 For
purposes of Section 409A of the Code, the “specified employees” of the Company
shall be determined in such manner as may be specified by resolution of the
Committee in accordance with Section 409A of the Code.
18.3 Notwithstanding
any provision of the Plan or any award to the contrary, any amounts payable
under the Plan on account of termination of employment to an award holder who is
a “specified employee” within the meaning of Section 409A which constitute
“deferred compensation” within the meaning of Section 409A and which
are
otherwise
scheduled to be paid during the first six months following the award holder’s
termination of employment (other than any payments that are permitted under
Section 409A to be paid within six months following termination of employment of
a specified employee) shall be suspended until the six-month anniversary of the
award holder’s termination of employment (or until the award holder’s death, if
earlier), at which time all payments that were suspended shall be paid to the
award holder in a lump sum.
18.4 A
termination of employment shall not be deemed to have occurred for purposes of
any award under this Plan providing for the payment of any amounts upon or
following a termination of employment unless such termination is also a
“separation from service” within the meaning of Section 409A.
SECTION
19 General
Provisions
19.1 Each
award under the Plan shall be subject to the requirement that, if at any time
the Committee shall determine that (i) the listing, registration or
qualification of the Stock subject or related thereto upon any securities
exchange or market or under any state or federal law, or (ii) the consent
or approval of any government regulatory body or (iii) an agreement by the
recipient of an award with respect to the disposition of Stock, is necessary or
desirable in order to satisfy any legal requirements, or the issuance, sale or
delivery of any shares of Stock is or may in the circumstances be unlawful under
the laws or regulations of any applicable jurisdiction, the right to exercise
such Stock Option or SAR shall be suspended, such award shall not be granted,
and/or the shares subject to such award will not be issued, sold or delivered,
in whole or in part, unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee, and the Committee determines that
the issuance, sale or delivery of the shares is lawful. The
application of this Section shall not extend the term of any Stock Option or
other award. The Company shall have no obligation to effect any
registration or qualification of the Stock under federal or state laws or to
compensate the award holder for any loss caused by the implementation of this
Section 19.1.
19.2 Nothing
set forth in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including arrangements providing for the issuance of
Stock. Nothing in the Plan nor any award hereunder shall confer upon
any award holder any right to continued employment or service with the Company
or a Subsidiary, or interfere in any way with the right of any such company to
terminate such employment or service.
19.3 Determinations
by the Committee under the Plan relating to the form, amount, and terms and
conditions of awards need not be uniform, and may be made selectively among
persons who receive or are eligible to receive awards under the Plan, whether or
not such persons are similarly situated.
19.4 No
member of the Board or the Committee, nor any officer or employee of the Company
acting on behalf of the Board or the Committee, shall be personally liable for
any action, determination or interpretation taken or made with respect to the
Plan or any award hereunder, and all members of the Board or the Committee and
all officers or employees of the Company or any Subsidiary acting on their
behalf shall, to the extent permitted by law, be fully indemnified and protected
by the Company in respect of any such action, determination or
interpretation.
19.5 Although
the Company may endeavor to qualify an award for favorable tax treatment (e.g.
incentive stock options under Section 422 of the Code) or to avoid adverse tax
treatment (e.g. under Section 409A of the Code), the Company makes no
representation that the desired tax treatment will be available and expressly
disclaims any liability for the failure to maintain favorable or avoid
unfavorable tax treatment.
19.6 Neither
the Plan nor any award shall create or be construed to create a trust or
separate fund of any kind or a fiduciary relationship between the Company or
Subsidiary and an award holder, and no award holder will, by participation in
the Plan, acquire any right in any specific Company property, including any
property the Company may set aside in connection with the Plan. To
the extent that any award holder acquires a right to receive payments from the
Company or any Subsidiary pursuant to an award, such right shall not be greater
than the right of an unsecured general creditor.
19.7 All
provisions under the Plan calling for the delivery of Stock certificates may be
satisfied by recording the respective person as the owner of the shares on the
books of the Company, if permitted by applicable law.
19.8 The
Plan and all awards hereunder shall be governed by the laws of the State of
Delaware without giving effect to conflict of laws principles. Any
dispute arising out of any award granted under the Plan may be resolved in any
state or federal court located within New York County, New York State,
U.S.A. Any award granted under the Plan is granted on condition that
the award holder accepts such venue and submits to the personal jurisdiction of
any such court. Similarly, the Company accepts such venue and submits
to such jurisdiction.
19.9 This
Plan shall be effective upon approval by the Company’s stockholders at the 2009
annual meeting of stockholders of the Company.
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DELCATH SYSTEMS, INC.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 9, 2009
The
undersigned holder of Common Stock of DELCATH SYSTEMS, INC. (the “Company”),
revoking all proxies heretofore given, hereby constitute and appoint Richard
Taney and Barbra Keck and each of them, Proxies, with full power of
substitution, for the undersigned and in the name, place and stead of the
undersigned, to vote all of the undersigned’s shares of said stock, according to
the number of votes and with all the powers the undersigned would possess if
personally present, at the 2009 Annual Meeting of Stockholders of the Company,
to be held at the offices of Hughes Hubbard & Reed LLP at One Battery Park
Plaza, New York, NY, on Tuesday, June 9, 2009 at 11:00 A.M., local time, and at
any adjournments or postponements thereof.
IMPORTANT: SIGNATURE
REQUIRED ON THE REVERSE SIDE
■ 14475 ¢
ANNUAL
MEETING OF STOCKHOLDERS OF
DELCATH
SYSTEMS, INC.
June
9, 2009
NOTICE OF
INTERNET AVAILABILITY OF PROXY MATERIAL:
The
Notice of Meeting, Proxy Statement, Proxy Card
are
available at -https://materials.proxyvote.com/24661P
Please
mark, sign, date and
mail your
proxy card in the
envelope
provided as soon
as
possible.
â Please detach along perforated line
and mail in the envelope provided.â
¢ 20230300000000000000 4 060909
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THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL LISTED NOMINEES IN PROPOSAL
1, “FOR” PROPOSAL 2 AND “FOR” PROPOSAL 3.
PLEASE MARK, DATE, SIGN AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE
IN BLUE OR BLACK INK AS SHOWN HERE T
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1.
Election of Two Directors:
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FOR
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AGAINST
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ABSTAIN
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FOR
THE NOMINEES
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NOMINEES:
O
Laura A. Philips
O
Roger G. Stoll
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2.
Proposal to approve the appointment of Carlin, Charron & Rosen, LLP as
the Company’s independent registered public accounting firm for the year
ending December 31, 2009.
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o
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o
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o
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WITHHOLD
AUTHORITY
FOR
THE NOMINEES
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3.
Proposal to approve the 2009 Stock Incentive Plan.
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o
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FOR
ALL EXCEPT
(See
instruction below)
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The
undersigned hereby acknowledges receipt of the Notice of Meeting and Proxy
Statement relating to the meeting and hereby revokes any proxy or proxies
heretofore given.
Each
properly executed Proxy will be voted in accordance with the
specifications made on the reverse side of this Proxy and in the
discretion of the Proxies on any other matter that may come before the
meeting. Where no choice is specified, this Proxy will be voted
FOR all listed nominees to serve as directors and FOR each of the
proposals set forth on the reverse side.
The
proxies are authorized to vote in their discretion upon such other matters
as may properly come before the meeting.
The
shares represented by this proxy will be voted in the manner
directed. In the absence of any direction, the shares will be
voted FOR each nominee named in Proposal 1, FOR Proposal 2 and FOR
Proposal 3 and in accordance with their discretion on such other matters
as may properly come before the meeting.
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INSTRUCTIONS: To
withhold authority to vote for any individual nominee(s),
mark
“FOR
ALL EXCEPT” and fill in the circle next to each nominee you wish to
withhold, as shown here: ˜
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To
change the address on your account, please check the box at right and
indicate your new address in the address space above. Please
note that changes to the registered name(s) on the account may be
submitted via this method.
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Signature
of Stockholder
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Date:
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Signature
of Stockholder
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Date:
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Note:
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Please
sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing
as executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign
full corporate name by a duly authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership
name by an authorized person.
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