RESTRICTED STOCK AGREEMENT

 

(a)

Grant. The Executive is hereby granted 200,000 shares (the “Restricted Stock”) of the Company’s common stock, par value $.01 per share (“Stock”), which shall be issued in the Executive’s name subject to the restrictions contained in this Agreement.  The Restricted Stock award pursuant to this Agreement is separate from and not in tandem with any other award(s) granted to the Executive under the Plan or otherwise.

 

(b)

Plan Incorporated. The Executive acknowledges receipt of a copy of the Plan and agrees that this award of Restricted Stock shall be subject to all of the terms and conditions set forth in the Plan, including future amendments thereto, if any, pursuant to the terms thereof, which Plan is incorporated herein by reference as a part of this Agreement. Any terms used in this Agreement and not defined herein have the meanings set forth in the Plan.

2.

Restrictions.  The shares of Restricted Stock are subject to the following restrictions (collectively, the “Restrictions”):

 

(a)

Forfeiture Restrictions.  If the Executive’s employment with the Company shall terminate for any reason other than those provided in Section 3 below, the Executive shall forfeit the right to receive any shares of Restricted Stock with respect to which the Restrictions have not lapsed as provided in Section 3 below as of the effective date of termination of Executive’s employment.

 

(b)

Restrictions on Transfer. The Executive may not sell, assign, pledge, exchange, hypothecate or otherwise transfer, encumber or dispose of any shares of Restricted Stock with respect to which the Restrictions have not lapsed as provided in Section 3 below. Upon any violation of this restriction, the shares of Restricted Stock with respect to which the Restrictions have not lapsed as provided in Section 3 below shall be forfeited.

 

(a)

Unless otherwise accelerated pursuant to this Section 3 or otherwise by the Committee pursuant to its authority under the Plan, the Restrictions will lapse with respect to the shares of Restricted Stock in accordance with the following schedule:

100,000 shares

October 20, 2010

100,000 shares

October 20, 2011

 

(b)

Notwithstanding the foregoing, if earlier than provided in the immediately preceding section (and, without duplication, reduced by any shares that previously vested pursuant to the immediately preceding sentence), the restrictions with respect to (i) 50,000 shares of Restricted Stock shall lapse upon receipt by the Company of financing from third party investors of $15 million or more (gross proceeds), (ii) 50,000 shares of Restricted Stock shall lapse on submission to the U.S. Food and Drug Administration (the “FDA”), with the consent of the Board, of a Premarket Approval or New Drug Approval (as such terms are used by the FDA) for the Company’s percutaneous hepatic perfusion treatment system, and (iii) 100,000 shares of Restricted Stock shall lapset upon the FDA’s formal written notice of such approval including FDA-approved labeling language for the percutaneous hepatic perfusion treatment.

 

(c)

Notwithstanding the foregoing, all shares subject to the Option and Restricted Stock shall immediately vest upon (i) the Executive’s Involuntary Termination (as defined in Section 5.5) after the first anniversary of the Effective Date or (ii) a Change of Control (as such term is defined in subsections (a)-(d) of the definition of “Change of Control” contained in the Company’s 2009 Stock Incentive Plan).  Upon the Executive’s Involuntary Termination between the Effective Date and its first anniversary, an additional number of shares such that a total of 50% of all shares under the Minimum Annual Stock Option Bonus, 50% of all shares subject to the Option and 50% of the Restricted Stock shall be vested as of the Severance Date (as defined in Section 5.3).

 

(d)

Notwithstanding the foregoing, in the event the Executive’s employment is terminated by reason of the Executive’s death or Disability, the Restrictions with respect to all shares of Restricted Stock will lapse immediately and automatically as of the date of the Executive’s death or as of the effective date of the Executive’s termination of employment by reason of his Disability.  For purposes of this Agreement, the term “Disability” shall have the meaning set forth in the Employment Agreement dated September 30, 2009 between the Company and the Executive.

 

(a)

Custody.  One or more stock certificates evidencing the shares of Restricted Stock granted hereunder shall be registered in the Executive’s name, however, such stock certificate(s) shall be delivered to and held by the Secretary of the Company until forfeiture occurs or the Restrictions lapse with respect to such shares of Restricted Stock pursuant to the terms of the Plan and this Agreement.

 

(b)

Additional Securities as Restricted Stock. Any securities received as the result of ownership of shares of Restricted Stock, including without limitation, securities received as a stock dividend or stock split, or as a result of a recapitalization or reorganization (all such securities to be considered “Restricted Stock” for all purposes under this Agreement), shall be held in custody in the same manner and subject to the same conditions as the shares of Restricted Stock with respect to which they were issued.

 

(c)

Delivery to the Executive.  With respect to shares of Restricted Stock for which the Restrictions have lapsed (without forfeiture), the stock certificate(s) representing such unrestricted shares of Stock shall be released to the Executive.  Notwithstanding any other provisions of this Agreement, the issuance or delivery of any shares of Stock (whether subject to restrictions or unrestricted) may be postponed for such period as may be required to comply with applicable requirements of any national securities exchange or any requirements of any regulation applicable to the issuance or delivery of such Stock.  The Company shall not be obligated to issue or deliver any shares of Stock if the issuance or delivery thereof shall constitute a violation of any provision of any law or of any regulation of any governmental authority or any securities exchange.  The Company shall not be required to transfer on its books any shares of Stock (whether subject to restrictions or unrestricted) which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement.

5.

Status of Stock.  Notwithstanding the Restrictions contained herein, and unless and until the shares of Restricted Stock are forfeited pursuant to the provisions of this Agreement, the Executive shall have all rights of a stockholder with respect to the shares of Restricted Stock, including the right to vote such shares and to receive dividends thereon.

 

(a)

No Effect on Company’s Rights or Powers. The existence of this Restricted Stock Agreement shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganization, or other changes in the Company’s capital structure or its business, or any merger or consolidation of Company or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the shares of Restricted Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

 

(b)

No Guarantee of Service. Neither this Restricted Stock Agreement nor the shares of Restricted Stock awarded hereby shall confer upon the Executive any right with respect to continuance of employment by the Company or any of the Company’s affiliates, nor shall this Restricted Stock Agreement or the shares of Restricted Stock awarded hereby interfere in any way with any right the Company, or its directors or stockholders, would otherwise have to terminate the Executive’s employment at any time.

7.

Agreement with Respect to Taxes.  The Executive shall be liable for any and all taxes, including withholding taxes, arising out of this Restricted Stock award or the lapse of the Restrictions hereunder.  The Executive agrees that if he does not pay, or make arrangements for the payment of, such amounts, the Company, to the fullest extent permitted by law, rule or regulation shall have the right to deduct such amounts from any payments of any kind otherwise due to the Executive (including from the Executive’s compensation) and that the Company shall have the right to withhold shares of Restricted Stock for which the Restrictions have lapsed such number of unrestricted shares of Stock having an aggregate market value at the time equal to the amount the Executive owes.

8.

Committee’s Powers.  No provision contained in this Agreement shall in any way terminate, modify or alter, or be construed or interpreted as terminating, modifying or altering any of the powers, rights or authority vested in the Committee pursuant to the terms of the Plan, including, without limitation, the Committee’s rights to make certain determinations and elections with respect to the shares of Restricted Stock granted hereby.

9.

Binding Effect.  This Agreement shall be binding upon and inure to the benefit of any successors and assigns of the Company and all persons lawfully claiming under the Executive.

10.

Counterparts.  This Agreement may be executed in two or more counterparts each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Delivery of a party’s signature hereto by facsimile or PDF shall bind the parties hereto.

11.

Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the laws of any jurisdiction other than the State of Delaware to be applied.

12.

Severability.  The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

13.

Acceptance of Terms and Conditions.  This Restricted Stock award will not be effective until the Executive has acknowledged and agreed to the terms and conditions set forth herein by executing this Agreement in the space provided below and returning the same to the Company.

DELCATH SYSTEMS, INC.

Accepted under the terms and conditions stated above:

By:/s/Eamonn P. Hobbs

By:/s/Krishna Kandarpa

Eamonn P. Hobbs, President

Krishna Kandarpa, MD, Ph.D.

And Chief Executive Officer