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1992 INCENTIVE
STOCK OPTION PLAN
OF
DELCATH SYSTEMS, INC.
1. Purpose of Plan
The purpose of this 1992 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 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. Incentive Stock Options; Stock Subject to the Plan.
An aggregate of 160,000 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
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 there under 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 discretion
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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 only to employees (including officers) of the
Company and/or any of its Subsidiaries.
The aggregate Fair Market Value (as defined in paragraph 5 of the Plan),
determined as of the time the Option is granted, of the shares of the Company's
Common Stock purchasable there under exercisable for the first time by an
employee during any calendar year may not exceed $100,000.
Options may not be granted to any person who, at the time the Option is granted,
owns (or is considered as owning within the meaning of Section 425 (d) of the
Code) stock possessing more than 10% of the total combined voting powers of all
classes of stock of the Company or any Subsidiary (a "10% Owner"), unless at the
time the Option is granted to a 10% Owner, the option price is at least 110% of
the fair market value of the Common Stock subject thereto and such Option by its
terms is not exercisable subsequent to five years from the date of grant.
Nothing herein contained shall prohibit the Company from granting Options
hereunder to any holder of any other incentive or non-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, but in no event shall the purchase price of the shares of
Common Stock under any Option be less than 100% of the fair market value of the
Common Stock on the date of grant (110% of fair market value in the case of
Options granted to a 10% Owner).
In determining the fair market value of the Common Stock as of a specified date
(the "Fair Market Value"), the Committee shall consider, if the Common Stock is:
(a) publicly traded and listed on the New York Stock Exchange or another
national securities exchange, the closing price of the Common Stock on the
business day immediately preceding the date as of which the Fair Market Value is
being determined, or on the next preceding date on which such Common Stock is
traded if no Common Stock was traded on such immediately preceding business day,
or, if the Common Stock is not so listed on a national securities exchange, but
publicly traded, the representative closing bid price in the over-the-counter
market as reported by NASDAQ or as quoted by the National Quotation Bureau or a
recognized dealer in the Common Stock, on the date immediately preceding the
date as of which the Fair Market Value is being determined, or on the next
preceding date on which such Common Stock is traded if no Common Stock was
traded on such immediately preceding business day; or (b) not publicly traded,
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the fair market value as determined by the Committee in good faith based on such
factors as it shall deem appropriate. The Committee may also consider such other
factors as it shall deem appropriate.
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, and subject to the
limitations set forth in paragraph 4 of this Plan with respect to grants to 10%
owners, but 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 fop fractional shares of the Company's Common Stock.
(b) Except as provided in paragraphs 9, 10 and II hereof, no Option shall be
exercisable unless the holder thereof shall have been an employee of 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);
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(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
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). No shares shall be issued until full
payment therefore has been made. 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.
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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 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 continue in the employ of the Company or any
Subsidiary or obligate the Company or any Subsidiary to 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 at any time.
10. Retirement or Disability of 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.
11. Death of Holder of Option.
If the holder of any Option 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 Chancres 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.
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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
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
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 (whether hereunder or otherwise 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.
