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1992 NON-INCENTIVE
STOCK OPTION PLAN
OF
DELCATH SYSTEMS, INC.
1. Purpose of Plan
The purpose of this 1992 Non-Incentive Stock Option Plan (the "Plan") is to
further the growth and development of Delcath Systems, Inc. (the "Company") and
any direct and indirect subsidiaries thereof (collectively, "Subsidiaries", and
each, singly, a "Subsidiary") by encouraging selected employees, directors and
other persons who contribute and are expected to contribute materially to the
Company's success to obtain a proprietary interest in the Company through the
ownership of stock, thereby providing such persons with an added incentive to
promote the best interests of the Company and affording the Company a means of
attracting to its service persons of outstanding ability.
2. Non-Incentive Stock Options; Stock Subject to the Plan.
An aggregate of 240,000 shares of the Company's Common Stock, $.01 par value
("Common Stock"), subject, however, to adjustment or change pursuant to
paragraph 12 hereof, shall be reserved for issuance upon the exercise of
non-incentive stock options (i.e., stock options which do not qualify as
incentive stock options within the meaning of Section 422 (b) of the Internal
Revenue Code of 1986, as amended (the "Code")) which may be granted from time to
time in accordance with the Plan ("Options"). Such shares may be, in whole or in
part, as the Stock Option Committee (the "Committee") shall from time to time
determine, authorized but unissued shares or issued shares which have been
reacquired by the Company. If, for any reason, an Option shall lapse, expire or
terminate without having been exercised in full, the unpurchased shares covered
thereby shall again be available for purposes of the Plan.
3. Administration.
(a) The Board of Directors shall appoint the Committee from among its members.
Such Committee shall be composed of two or more Directors who shall be
"disinterested persons" as defined by Regulation .240.16b-3 under the Securities
Exchange Act of 1934, as amended. Such Committee shall have and may exercise any
and all of the powers relating to the administration of the Plan and the grant
of Options thereunder as are set forth in subparagraph 3 (b) hereof. The Board
of Directors shall have the power at any time to fill vacancies in, to change
the membership of, or to discharge such Committee. The Committee shall select
one of its members as its chairman and shall hold its meetings at such times and
at such places as it shall deem advisable. A majority of such Committee shall
constitute a quorum, and such majority shall determine its action. Any action
may be taken without a meeting by written consent of all the members of the
Committee. The Committee shall keep minutes of its proceedings and shall report
the same to the Board of Directors at the meeting next succeeding.
(b) The Committee shall administer the Plan and, subject to the provisions of
the Plan, shall have sole authority in its discretion to determine the persons
to whom, and the time or times at which. Options shall be granted, and the
number of shares to be subject to each such Option. In making such
determinations, the Committee may take into account the nature of the services
rendered by such persons, their present and potential contributions to the
Company's success and such other factors .as the Committee in its sole
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discretion may deem relevant. Subject to the express provisions of the Plan, the
Committee shall also have the authority to interpret the Plan, to prescribe,
amend and-rescind rules and regulations relating thereto, to determine the terms
and provisions of the respective Option Agreements, which shall be substantially
in the form attached hereto as Exhibit A, and to make all other determinations
necessary or advisable for the administration of the Plan, all of which
determinations shall be conclusive and not subject to review.
4. Eligibility for Receipt of Options.
Options hereunder may be granted to any employee, directors, consultants,
agents, independent contractors and other persons whom the Committee determines
will contribute to the Company's success. Nothing herein contained shall
prohibit the Company from granting Options hereunder to the holder of any other
non-incentive or incentive stock options of the Company, if any, provided the
prospective recipient of Options hereunder is otherwise eligible to receive such
Options pursuant to the terms of this Plan, and each type of option is clearly
designated.
5. Option Price.
The purchase price of the shares of Common Stock under each Option shall be
determined by the Committee, which determination shall be conclusive and not
subject to review. For purposes of the Plan, the date of grant of an Option
shall be the date on which the Committee shall by resolution duly authorize such
Option.
6. Term of Options.
The term of each Option shall be such number of years as the Committee shall
determine, subject to earlier termination as herein provided for employee
holders, and for non-employee holders upon or following the occurrence of such
events, all as the Committee may determine at the time of grant of an Option,
which events may include, without limitation, the termination or cessation of
the holder's performance of services to the Company or any subsidiary or the
holder's death or disability. In no event shall any Option be for a term of more
than ten years from the date of grant. No Option may be exercised following
termination thereof.
7. Exercise of Options.
(a) (i) Vesting. No Option granted under the Plan shall be exercisable until
such date or dates (inclusive of the date of grant and thereafter) as shall be
determined by the Committee, but in no event until at least six months from the
date of grant, with each Option to be so exercisable to the extent determined by
the Committee.
(ii) Minimum Exercise. An Option may not be exercised for fewer than ten shares
at any one time (or the remaining shares then purchasable if less than ten) and
may not be exercised for fractional shares of the Company's Common Stock.
(b) Except as provided in paragraphs 9, 10 and 11 hereof, no Option granted to
an employee (including officers) of the Company and/or any of its Subsidiaries
shall be exercisable unless the holder thereof shall have been an employee of
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the Company and/or a Subsidiary continuously from the date of grant to the date
of exercise.
(c) (i) The exercise of an Option shall be contingent upon receipt by the
Company from the holder of such Option of:
(1) cash, or a check to the order of the Company, for the full purchase price of
the Option shares;
(2) a written representation that at the time of such exercise it is the
optionee's then present intention to acquire the Option shares for investment
and not with a view to the distribution or resale thereof (unless a Registration
Statement covering the shares purchasable upon exercise of the Options shall
have been declared effective by the Securities and Exchange Commission, the
Company being under no obligation to file such registration statement or process
it to effectiveness);
(3) a written acknowledgement by the Optionholder, in such form as may be
determined by the .Committee, that an investment in the Common Stock of the
Company involves a high degree of risk, that the Optionholder has received a
copy of the Company's financial statements for the most recently ended fiscal
year for which such statement is available (which shall be provided annually by
the Company to each Optionholder), and that the Optionholder has had the-
opportunity to ask questions of management concerning the Company prior to the
exercise of the Option (the Company to provide such information as the
Optionholder may reasonably request);
(4) such Stockholders' Agreement as the Company may require at the time of
exercise of such Option (the "Stockholders' Agreement"), executed and delivered
by the holder, the form of which the Company reserves the right to change at any
time and from time to time, and which, among other things, may restrict the sale
of the Option shares and other shares of capital stock of the Company
subsequently acquired by the holder. Specifically, these restrictions may
include, without limitation, that Venkol Ventures, L.P. and Venkol Ventures,
Ltd. have a right of first refusal to 'purchase any or all shares of the
Company's capital stock owned by the holder following a bona fide offer
therefore by a third party. Additionally, in the event the two Venkol entities
shall agree to sell all of their holdings in the Company to a third party, such
Venkol entities may cause the holder to sell all shares of capital stock of the
Company then owned by such holder to the third party. Further, the Stockholders'
Agreement may provide that to the extent requested by the managing underwriter-
in the event of and in respect of an underwritten offering of securities of the
Company, the holder will agree to refrain from selling or offering to sell any
securities of the Company for such reasonable period of time after the effective
date of the registration statement relating to the underwritten offering as the
holders of at least seventy-five percent (75%) of the outstanding shares of the
Company's Class A. Preferred Stock will have agreed to refrain from selling or
offering to sell their Class A Preferred Stock and/or Common Stock in the
Company issuable upon conversion thereof (the "Underwriter's Lockup"); and
(5) in the event such holder is an employee of the Company or a Subsidiary, such
Escrow Agreement, Pledge Agreement or other agreement as the Company may require
(the "Deposit Agreement"), pursuant to which such. Holder shall deposit, upon
such exercise by the holder, with the Company or such third party as may be
designated by the Company therefore, the Option shares acquired pursuant to the
exercise of such Option, together with stock powers executed in blank by such
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holder with respect to such Option shares as may be determined by the Company,
all so as to facilitate the enforcement of the Underwriter's Lockup described
above, the other provisions of the Stockholders' Agreement, and/or the
repurchase by the Company of the Option shares described in Paragraph 14 below,
and which Deposit Agreement shall remain in effect until the termination, if at
all, of the Stockholders' Agreement (at which time the Option Shares and related
stock powers would be returned).
(ii) No shares shall be issued until full payment therefore has been made.
(iii) In the event the representation described in Paragraph 7(c)(i)(2) above is
required and made and/or the holder executes and delivers the Stockholders'
Agreement, the Committee may cause each certificate evidencing the purchased
Common Stock to be endorsed with one or more legends setting forth the
restrictions on transfer or otherwise of such Common Stock.
(d) The holder of an Option shall have none of the rights of a stockholder with
respect to the shares purchasable upon exercise of the Option until a
certificate for such shares shall have been issued to the holder upon due
exercise of the Option.
(e) The proceeds received by the Company upon exercise of an Option shall be
added to the Company's working capital and be available for general corporate
purposes.
8. Non-Transferability of Options.
No Option granted pursuant to the Plan shall be transferable otherwise than by
will or the laws of descent and distribution, and an Option may be exercised
during the lifetime of the holder only by such holder.
9. Termination of Employment of Employee Holder of Option.
In the event the employment with the Company or a Subsidiary of the holder of an
Option shall be terminated for any reason other than by reason of death,
disability within the meaning of Section 22 (e) (3) of the Code, or retirement
at or after age 65, such holder's Option shall immediately terminate, lapse and
expire. Absence on leave approved by the employer corporation or entity shall
not be considered an interruption of employment for any purpose under the Plan.
Nothing in the Plan or in any Option Agreement granted hereunder shall confer
upon any Optionholder any right to commence or continue in the employ of the
Company or any Subsidiary or obligate the Company or any Subsidiary to commence
or continue the employment of any Optionholder or interfere in any way with the
right of the Company or any such Subsidiary to terminate such Optionholder's
employment, if any, at any time.
10. Retirement or Disability of Employee Holder of Option.
If the employment with the Company or a Subsidiary of the holder of an Option
shall be terminated by reason of such holder's disability within the meaning of
Section 22 (e) (3) of the Code, or retirement at or after age 65, such holder
(or such holder's legal representative on such holder's behalf, if applicable)
may, within six months from the date of such termination, exercise such Option,
but only to the extent such Option was exercisable by such holder at the date of
such termination. Notwithstanding the foregoing, no Option may be exercised
subsequent to the date of its expiration.
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11. Death of Employee Holder of Option.
If the holder of any Option who is an employee of the Company or a Subsidiary,
shall die while in the employ of the Company or a Subsidiary (or within six
months following termination of employment due to disability within the meaning
of Section 22(e) (3) of the Code, or retirement at or after age 65), the Option
theretofore granted to such person may be exercised, but only to the extent such
Option was exercisable by such holder at the date of death (or the date of
termination of employment due to disability or retirement at or after age 65) by
the legatee or legatees of such person under such person's Last Will, or by such
person's personal representative or distributees, within six months from the
date of death but in no event subsequent to the expiration date of the Option.
12. Adjustments Upon Changes in Capitalization.
If at any time after the date of grant of an Option, the Company shall by stock
dividend, split-up, combination, reclassification or exchange, or through merger
or consolidation or otherwise, change its shares of Common Stock into a
different number or kind or class of shares or other securities or property,
then the number of shares covered by such Option-and the price per share thereof
shall be proportionately adjusted for any such change by the Committee, whose
determination thereon shall be conclusive. In the event that a fraction of a
share results from the foregoing adjustment, said fraction shall be eliminated
and the price per share of the remaining shares subject to the Option adjusted
accordingly.
13. Vesting of Rights Under Options.
Neither anything contained in the Plan nor in any resolution adopted or to be
adopted by the Committee or the stockholders of the Company shall constitute the
vesting of any rights under any Option. The vesting of such rights shall take
place only when a written Option Agreement, substantially in the form of the
Non-incentive Stock Option Agreement attached hereto as Exhibit A shall be duly
executed and delivered by and on behalf of the Company and the person to whom
the Option shall be granted.
14. Repurchase of Option Shares by the Company.
In the event Option shares are purchased by any individual who is an employee of
the Company or a Subsidiary pursuant to any Option granted under the Plan, and
such individual's employment shall terminate for any reason whatsoever
(including, without limitation, by reason of death, disability or retirement),
and the Company's Common Stock is not then listed on a national securities
exchange or traded on NASDAQ, and the Company in its sole and absolute
discretion elects to purchase such Option shares (the Company being under no
obligation to do so), such individual shall agree to sell to the Company all
Option shares acquired by such individual under this Plan for a purchase price
equal to the fair market value of such Option shares as determined by the
Committee based on a price that might be arrived at by a willing buyer and a
willing seller, neither being under a compulsion to buy or to sell, and taking
into account such factors as it shall deem appropriate, including, without
limitation, the restricted nature of such Option shares, including by virtue of
the provisions of the Stockholders' Agreement, the minority equity ownership
position represented by the Option shares (i.e. such Option shares would be
valued at a lower price by virtue thereof than that which might otherwise be
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calculated in respect of the relative percentage equity ownership of the Company
represented by such Option shares), and the option price established by the
Committee as applicable to the then most recent incentive stock options granted
by the Company (i.e.. within the meaning of Section 422 (b) of the Code), and
such other factors as the Committee may deem appropriate. The foregoing
determination hereunder by the Committee of the fair market value of the Option
shares shall be conclusive and not subject to review.
15. Termination and Amendment.
The Plan, which has been adopted by the Board of Directors and by the
stockholders of the Company on October 15, 1992, shall terminate on October 14,
2002, and no Option shall be granted under the Plan after such date. The Board
of Directors may at any time prior to such date terminate the Plan or make such
modifications or amendments thereto as it shall deem advisable; provided,
however, that:
(i) no increase shall be made in the aggregate number of shares which may be
issued under the Plan;
(ii) no such termination, modification or amendment shall materially adversely
affect the rights of a holder of an Option previously granted under the Plan;
(iii) no modification shall be made to the requirements of eligibility for
participation in the Plan; and
(iv) no material increase shall be made in the benefits accruing to participants
under the Plan.
