SCHEDULE 14A INFORMATION
Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
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Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DELCATH SYSTEMS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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DELCATH SYSTEMS, INC.
1100 Summer Street
Stamford, Connecticut 06905
(203) 323-8668
---------------------------------
Notice of Annual Meeting of Stockholders
To Be Held on June 4, 2003
Notice is hereby given that an Annual Meeting of Stockholders of
Delcath Systems, Inc., a Delaware corporation ("Delcath"), will be held on
Wednesday, June 4, 2003 at 11:00 a.m. (Eastern Time) at the Sheraton Stamford
Hotel, 2701 Summer Street, Stamford, Connecticut, for the following purpose:
1. To elect two Class III directors to serve until the 2006
Annual Meeting of Stockholders and until their successors are
duly elected and qualified; and
2. To transact such other business as may properly come before
the meeting or adjournment thereof.
Only stockholders of record of Delcath's Common Stock, $0.01 par value
per share, at the close of business on April 14, 2003 will be entitled to notice
of, and to vote at, the Annual Meeting of Stockholders or any adjournment
thereof. A list of Delcath's stockholders will be open for examination ten days
prior to the meeting by any stockholder at Delcath's executive offices, 1100
Summer Street, Stamford, Connecticut 06905.
A copy of Delcath's Annual Report to Stockholders for the year ended
December 31, 2002, which contains financial statements and other information of
interest to stockholders, accompanies this Notice and the enclosed Proxy
Statement.
All stockholders are cordially invited to attend the Annual Meeting of
Stockholders. 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 envelope in order to ensure representation of your shares.
By Order of the Board of Directors
M. S. KOLY
President and Chief Executive Officer
Stamford, Connecticut
April 30, 2003
---------------------------------
DELCATH SYSTEMS, INC.
1100 Summer Street
Stamford, Connecticut 06905
(203) 323-8668
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Proxy Statement
---------------------------------
Proxies in the form enclosed with this Proxy Statement are being
solicited by the Board of Directors of Delcath Systems, Inc., a Delaware
corporation ("Delcath"), for use at an Annual Meeting of Stockholders of Delcath
to be held at 11:00 a.m. (Eastern Time) on Wednesday June 4, 2003, at the
Sheraton Stamford Hotel, 2701 Summer Street, Stamford, Connecticut, and at any
adjournment thereof (the "Meeting").
Only stockholders of record as of the close of business on April 14,
2003 (the "Record Date"), of Delcath's Common Stock, $0.01 par value per share
(the "Common Stock"), will be entitled to notice of, and to vote at, the
Meeting. As of the Record Date, 4,118,897shares of Common Stock were issued and
outstanding. Holders of Common Stock are entitled to one vote per share held by
them. Stockholders may vote in person or by proxy. Granting a proxy does not in
any way affect a stockholder's right to attend the Meeting and vote in person.
Any stockholder giving a proxy has the right to revoke that proxy by (i) filing
a later-dated proxy or a written notice of revocation with Delcath's Secretary
at the address set forth above at any time before the original proxy is
exercised or (ii) voting in person at the Meeting.
Each of M. S. Koly and Samuel Herschkowitz, M.D. are named as attorneys
in the proxy. Mr. Koly is the President, Chief Executive Officer and Treasurer
of Delcath and is also a member of Delcath's Board of Directors. Dr.
Herschkowitz is the Chief Technical Officer of Delcath and is also the Chairman
of Delcath's Board of Directors. Mr. Koly or Dr. Herschkowitz will vote all
shares represented by properly executed proxies returned in time to be counted
at the Meeting, as described below under "Voting Procedures." Any stockholder
granting a proxy has the right to withhold authority to vote for any individual
nominee to the Board of Directors. Where a vote has been specified in the proxy
with respect to the matters identified in the Notice of the Annual Meeting,
including the election of directors, the shares represented by the proxy will be
voted in accordance with those voting specifications. Shares represented by
proxy will be voted for each proposal identified on the Notice of the Annual
Meeting if no voting instructions are indicated.
The stockholders will consider and vote upon the proposal to elect two
Class III directors to serve until the 2006 Annual Meeting of Stockholders.
Stockholders will also consider and act upon such other business as may properly
come before the Meeting.
A copy of Delcath's Annual Report to Stockholders for the year ended
December 31, 2002, which contains financial statements and other information of
interest to stockholders, was mailed to stockholders along with these proxy
materials on or about May 9, 2003.
VOTING PROCEDURES
Mr. Koly or Dr. Herschkowitz will vote all shares represented by
properly executed proxies returned in time to be counted at the Meeting. The
presence, in person or by proxy, of at least a majority of the issued and
outstanding shares of Common Stock entitled to vote at the Meeting is necessary
to establish a quorum for the transaction of business. Shares represented by
proxies pursuant to which votes have been withheld for any nominee for director,
or which contain one or more abstentions, are counted as present for purposes of
determining the presence or absence of a quorum for the Meeting.
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Meeting as specified in such proxies.
Directors will be elected by a plurality of the votes cast, in person
or by proxy, at the Meeting. The two nominees receiving the highest number of
affirmative votes of the shares present or represented at the Meeting and voting
on the election of directors will each be elected as a director. Only shares
that are voted in favor of a particular nominee will be counted toward that
nominee's achievement of a plurality. Shares present at the Meeting that are not
voted for a particular nominee or shares present by proxy where the stockholder
properly withheld authority to vote for such nominee will not be counted toward
that nominee's achievement of a plurality. Votes at the Meeting will be
tabulated by one or more independent inspectors of elections appointed by
Delcath's Board of Directors.
For all other matters that may be submitted to stockholders at the
Meeting, the affirmative vote of the majority of shares present (in person or
represented by proxy) and voting on that matter is required for approval. Shares
abstaining, since they are not affirmative votes for a matter, will have the
same effect as votes against the matter.
ELECTION OF DIRECTORS
(PROXY ITEM 1)
Delcath's Board of Directors is divided into three classes of directors
serving staggered three-year terms. As a result, approximately one-third of the
Board of Directors will be elected each year. These provisions, together with
the provisions of our amended and restated certificate of incorporation and
by-laws, allow the Board of Directors to fill vacancies on or increase the size
of the Board of Directors, and may deter a stockholder from removing incumbent
directors and filling such vacancies with its own nominees in order to gain
control of the Board of Directors. The staggering of the election of our
directors may have the effect of delaying, deferring or discouraging a change of
control. Delcath's by-laws provide that its Board of Directors will consist of
not fewer than three members. The Board of Directors has fixed the current
number of directors at five
A plurality of the votes cast by the holders of Common Stock present or
represented by proxy and entitled to vote at the Meeting is required for the
election of a nominee. Proxies cannot be voted for a greater number of persons
than the number of nominees named or for persons other than the named nominees.
Delcath's Board of Directors has nominated the following persons for
election as Class III directors of Delcath at the Meeting. The nominees are
currently members of Delcath's Board of Directors. The nominees and the year
they first joined the Board of Directors are:
Nominee Age Year First Joined Current Position(s)
------- --- ----------------- -------------------
Board
-----
Mark A. Corigliano ....... 39 2001 Director
Victor Nevins ............ 81 2001 Director
2
BACKGROUND OF NOMINEES FOR THE BOARD OF DIRECTORS
Mark A. Corigliano, 39, was appointed a Class III director of Delcath
in 2001. His term expires at the 2003 Annual Meeting. Since 1991, Mr. Corigliano
has been Managing Director of Coast Cypress Associates, a company that designs
and implements microcomputer systems. Since 1993, he has also served as Officer
and Manager of Special Projects for DC Associates, a restaurant management
organization located in New York City. Mr. Corigliano also serves as Treasurer
of Rolls Royce Owners' Club, a non-profit organization with 8,500 members
worldwide. He holds a B.S. degree from Seton Hall University.
Victor Nevins, 81, was appointed a Class III director of Delcath in
2001. His term expires at the 2003 Annual Meeting. Since 1957, Mr. Nevins has
been Chief Executive Officer of Max Abramson Enterprises, a medium size
conglomerate headquartered in Flushing, New York. He also is a licensed real
estate broker and, since 1962, has been the owner of Victor Nevins Realty. From
1968-1997, he served on the Board of Directors of Flushing Hospital and Medical
Center as Vice President of the Board, member of the Finance Committee, Chairman
of both the House and Grounds and Human Resources Committees and liaison to the
Medical Board. He currently is a Director and past President of the Flushing
Chamber of Commerce, a Director of the Flushing Merchants Association, and a
Director of the American Red Cross, North Shore Chapter.
The Board of Directors unanimously recommends that you vote for the
election of each of the nominees as a director of Delcath.
The following individuals are currently directors of Delcath whose
terms of office do not expire at the Meeting and who consequently are not
nominees for re-election at the Meeting:
Samuel Herschkowitz, M.D., 53, has been Chairman of the Board of
Delcath since 1998 and Delcath's Chief Technical Officer since 1991. His term
expires at the 2005 Annual Meeting. In 1987, he co-founded Venkol Ventures L.P.
and Venkol Ventures, Ltd., two affiliated venture capital funds specializing in
medical technology investments, which are no longer active. Dr. Herschkowitz is
board certified in psychiatry and neurology. He is an assistant professor at New
York University Medical Center, and has held academic positions at Beth Israel
Hospital, Mount Sinai Medical School and Downstate Medical Center. Dr.
Herschkowitz graduated from Syracuse University and received his medical degree
from Downstate Medical Center College of Medicine.
Daniel Isdaner, 38, was appointed a Class I director of Delcath in
2001. His term expires at the 2004 Annual Meeting. Since 1994, Mr. Isdaner has
been the owner and director of Camp Mataponi, Inc., a children's summer camp
located in Naples, Maine. He also serves on the Board of Directors of the
American Camping Association-New England Division and the Jewish Community
Center of Southern New Jersey. Mr. Isdaner holds a B.S.B.A. degree from the
Boston University School of Management.
M. S. Koly, 62, has been President, Chief Executive Officer and
Treasurer of Delcath since 1998 and has served as a Director since 1988. His
term expires at the 2005 Annual Meeting. From 1987 until June 1998, Mr. Koly
managed Venkol Ventures, L.P. and Venkol Ventures, Ltd., firms he co-founded
with Dr. Herschkowitz. From 1983 to 1987, Mr. Koly was president of Madison
Consulting Corporation, a firm he founded. From 1978 to 1983, Mr. Koly was
president of Becton-Dickinson Respiratory Systems. Prior to that time, he held
various senior management positions at Abbott Laboratories, Stuart
Pharmaceuticals and National Patent Development Corp. He received a B.A. from
American University and an M.B.A. in marketing and finance from Northwestern
University.
3
The following table provides information concerning the executive
officers of Delcath.
Name Age Office Currently Held
---- --- ---------------------
M. S. Koly 62 President, Chief Executive Officer and
Treasurer
Samuel Herschowitz, M.D 53 Chief Technical Officer and Chairman
of the Board
Thomas S. Grogan 51 Chief Financial Officer and Assistant
Secretary
A brief description of the business experience of Mr. Koly and Dr.
Herschowitz is set forth above. The following is a brief description of the
business experience of Mr. Grogan:
Thomas S. Grogan, 51, has been Chief Financial Officer since September
2001. Mr. Grogan was appointed Assistant Secretary of Delcath in March 2003.
Prior to joining Delcath, Mr. Grogan was Vice President of Business Development
for the Jockey Club from 2000-2001. In 1999, he served as the Chief Financial
Officer for U.S. Homecare Corporation, a publicly traded provider of home
healthcare services. From 1998-1999, he was the Chief Financial Officer of the
healthcare division of Fairchild Properties, a privately held owner and operator
of skilled nursing facilities. From 1993-1998, Mr. Grogan served as the Chief
Financial Officer of NHS National Health Services, Inc., a privately-held
provider of medical services to corporations, industrial sites and corrections
institutions. He is a CPA, and holds a B.A. degree from Fordham University and
an M.B.A. from Cornell University.
BOARD AND COMMITTEE MEETINGS
The Board of Directors met four times during fiscal year ended December
31, 2002. During 2002, each of the 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 served.
The Compensation and Stock Option Committee of the Board of Directors
reviews the salaries and benefits of all officers and stock option grants to all
employees, consultants, directors and other individuals compensated by the
Company. The Compensation and Stock Option Committee is empowered by the Board
of Directors to act independently. The directors may be paid their expenses and
a fixed sum for their attendance at each meeting of the Board of Directors or a
stated salary as a director, and each may be reimbursed for his or her expenses.
The Compensation and Stock Option Committee also administers the Company's stock
option and other employee benefits plans. Currently, the members of the
Compensation and Stock Option Committee are Victor Nevins and Mark A.
Corigliano. During 2002, the Compensation and Stock Option Committee met three
times.
The Audit Committee of the Board of Directors approves the selection of
Delcath's independent accountants and meets and interacts with the independent
accountants to discuss questions in regard to Delcath's financial reporting. In
addition, the Audit Committee reviews the scope and results of the audit with
the independent accountants, reviews with management and the independent
accountants Delcath's annual operating results, considers the adequacy of
Delcath's internal accounting procedures and considers and reports to the Board
of Directors with respect to other auditing and accounting matters. The Audit
Committee also reviews the fees to be paid to and the performance of Delcath's
independent auditors. Currently, the members of the Audit Committee are Mark A.
Corigliano and Daniel Isdaner. During 2002, the Audit Committee met once.
The Board of Directors does not have a nominating committee or a
committee performing the functions of a nominating committee; the entire Board
of Directors performs the usual functions of such committee.
4
REPORT OF THE AUDIT COMMITTEE
The Audit Committee, at the direction of the Board of Directors, has
prepared the following report for inclusion in this Proxy Statement. The Audit
Committee is comprised of Mark A. Corigliano and Daniel Isdaner, two
non-employee directors who are "independent" within the meaning of Rule
4200(a)(15) of the National Association of Securities Dealers ("NASD") listing
standards. The Audit Committee has the responsibility for reviewing the
Company's accounting practices, internal accounting controls and financial
results and overseas the engagement of the Company's independent auditors. The
Audit Committee has reviewed and discussed the audited financial statements with
the Company's management.
The Audit Committee has discussed with the independent auditors the
matters required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards, AU Section 380), as may be modified or supplemented.
The Audit Committee has received the written disclosures and the letter
from the independent auditors required by Independence Standards Board Standard
No. 1 (Independence Standards Board Standard No. 1, Independence Discussions
with Audit Committees), as may be modified or supplemented, and has discussed
with the independent auditors the independent auditors' independence.
Based on the review and discussions referred to in the foregoing three
paragraphs, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 2002 for filing with the
Securities and Exchange Commission.
MARK. A. CORIGLIANO
DANIEL ISDANER
Dated: April 29, 2003
THE REPORT OF THE AUDIT COMMITTEE SHALL NOT BE DEEMED INCORPORATED BY REFERENCE
INTO ANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT
OF 1934, EXCEPT TO THE EXTENT THAT DELCATH SPECIFICALLY INCORPORATES IT BY
REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED TO BE FILED UNDER SUCH ACTS.
COMPENSATION AND OTHER INFORMATION CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ended December 31,
2002, 2001 and 2000, certain compensation paid by the Company, including salary,
bonuses and certain other compensation, to its Chief Executive Officer and all
other executive officers whose annual compensation (including bonuses) for the
year ended December 31, 2002 exceeded $100,000 (the "Named Executive Officers").
5
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annuual Compensation Awards
-------------------- ------
Name and Principal Securities
Position Underlying All Other
Year Salary ($) Bonus ($) Options (#) Compensation
M. S. Koly, President, Chief ................ 2002 187,500 0 100,000 0
Executive Officer and .................... 2001 164,750 17,500(1) 100,000 0
Treasurer ................................ 2000 98,200 0 102,000 0
Samuel Herschkowitz, ........................ 2002 136,667 0 30,000 0
Chairman of the Board and ................... 2001 120,000 10,000(1) 30,000 0
Chief Technical Officer ..................... 2000 20,000 0 0 0
Thomas S. Grogan ............................ 2002 122,500 0 30,000 0
Chief Financial Officer ..................... 2001 35,500 1,500(1) 30,000 0
(1) Bonuses were declared payable in January 2002.
OPTION GRANTS IN LAST FISCAL YEAR
Stock options were granted to the Named Executive Officers during the
2002 fiscal year as follows:
Number of Shares of Percent of Total
Common Stock Options Granted to
Name Underlying Option Employees in 2002 Exercise Price ($/Sh.) Expiration Date
---- ----------------- ----------------- ---------------------- ---------------
M. S. Koly .... 100,000 58.8% 0.71 September 2007
S. Herschkowitz 30,000 17.6% 0.71 September 2007
T. Grogan ..... 30,000 17.6% 0.71 September 2007
(1) Options vest equally over two years on anniversary dates.
(2) Options vest equally over five years on anniversary dates.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during fiscal years ended
December 31, 2002 and unexercised options held as of the end of fiscal 2002.
6
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options at
Shares to be Options at FY- FY-End ($) (1)
Received Value Realized End Exercisable/ Exercisable/
Name On Exercise ($) Unexercisable Unexercisable
---- ----------- --- ------------- -------------
M. S. Koly .... 0 0 291,746/150,000 52,500/146,500
S. Herschkowitz 0 0 159,836/45,000 12,000/40,200
T. Grogan ..... 0 0 6,000/54,000 4,800/47,400
- -------------------
(1) Calculated based on the fair market value of $1.65 per share at the close
of trading on December 31, 2002 as reported by The Wall Street Journal,
minus the exercise price of the option.
DIRECTOR COMPENSATION
Directors who are employees of Delcath do not currently receive any
compensation for serving on the Board of Directors. Non-employee directors
receive $750 for each meeting of the Board of Directors attended in person or
participated in telephonically.
On September 19, 2002, Delcath's Compensation Committee granted stock
options to directors of Delcath, at an exercise price equal to $0.71 per share,
the fair market value at the close of trading on that date as reported by The
Wall Street Journal. The stock options granted to the directors are indicated
below:
Non-Qualified Stock
Name Incentive Stock Options (1) Options (1)
--------------------------- -----------
M. S. Koly .............. 100,000 0
Samuel Herschkowitz, M.D 30,000 0
Mark. Corigliano ........ 0 30,000
D. Isdaner .............. 0 30,000
V. Nevins ............... 0 30,000
(1) These options vest equally on the two anniversary dates from which the
options were granted. The right to exercise these options expires on
September 19, 2007.
KEY EMPLOYEE AGREEMENTS
On October 30, 2001 Delcath amended the employee agreements dated April
30, 1996, with M. S. Koly and Samuel Herschkowitz, M.D. The agreements provide
for a lump-sum severance payment of one year's base salary upon notice of
termination at any time without cause. In the event of termination without cause
due to a change in control (as defined in the employment agreement), Mr. Koly is
entitled to a lump sum severance payment equal to the greater of two years' base
salary or the base salary due for the remaining term of the agreement. Mr.
Koly's amended employment agreement provides for a base salary of $225,000 per
annum and extends the term of the agreement until December 1, 2004. The
amendment also provides that in the event Delcath closes on a private placement
or public offering with gross proceeds of at least $5,000,000, a new three-year
term of employment shall commence upon the closing.
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The initial term of Dr. Herschowitz's employment agreement was three
years with automatic successive one year renewal periods thereafter. In addition
to the termination provisions set forth in the employment agreement, either
party may terminate the employment agreement by providing a minimum of three
months' prior written notice. The agreement provides for a lump-sum severance
payment of one year's base salary upon notice of termination at any time without
cause. In the event of termination without cause due to a change in control (as
defined in the employment agreement), Dr. Herschowitz is entitled to a lump sum
severance payment equal to the greater of one year's base salary or the base
salary due for the remaining term of the agreement. Dr. Herschkowitz's amendment
provides for a base salary of $140,000 per annum.
SECURITY OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the Record Date, certain
information regarding the ownership of Delcath's voting securities by (i) each
person who, to the knowledge of Delcath, beneficially owned more than 5% of
Delcath's voting securities outstanding on such date, (ii) each director (or
nominee for director) of Delcath, (iii) each Named Executive Officer and (iv)
all directors and executive officers as a group.
Directors, Shares Percentage of
Executive Officers Beneficially Common Shares
and 5% Stockholders (1): Owned (2) Outstanding (3)
------------------------ --------- ---------------
M. S. Koly (4) ..................................... 1,627,848 36.9%
Venkol Trust (5) ................................... 1,245.864 30.2%
Samuel Herschkowitz, M.D. (6) ...................... 178,074 4.2%
Yenom X Partners (7) ............................... 263,446 6.4%
Mark A. Corigliano (8) ............................. 28,000 *
Daniel Isdaner (9) ................................. 30,500 *
Victor Nevins (10) ................................. 37,100 *
Thomas S. Grogan (11) .............................. 6,000 *
All directors and executive officers as a group
(nine persons) (12) ................................ 1,907,522 41.2%
- -------------------
* Less than 1% of total voting securities
(1) Except as otherwise noted in the footnotes to this table, each person or
entity named in the table has sole voting and investment power with respect
to all shares owned, based on the information provided to use by the
persons or entities named in the table.
(2) Shares of Common Stock subject to options or warrants exercisable within 60
days of the Record Date are deemed outstanding for computing the percentage
of the person or entity holding such options or warrants.
(3) Percentage of beneficial ownership is calculated on the basis of the amount
of outstanding securities (Common Stock) at the Record Date (4,118,897
common shares) plus, for each person or entity, any securities that person
or entity has the right to acquire within 60 days pursuant to stock options
or other rights.
(4) Mr. Koly is a director of Delcath. Includes 78,507 shares held by Mr. Koly,
and 11,731 shares held by M. Ted Koly, Mr. Koly's son as to which Mr. Koly
disclaims beneficial ownership and approximately 181,000 shares held by the
Venkol Trust in which Mr. Koly has a pecuniary interest. The figure above
also includes the vested portion (291,746 shares) of stock options to
purchase shares of the Common Stock.
8
(5) Mr. Koly is the trustee of Venkol Trust and is deemed the beneficial owner
of its shares because of his voting power. Mr. Koly has a pecuniary
interest in approximately 181,000 of such shares.
(6) Dr. Herschkowitz is the Chairman of the Board of Directors of Delcath. The
figure above includes 18,238 shares held by Dr. Herschkowitz. The figure
excludes approximately 181,000 shares held by the Venkol Trust in which Dr.
Herschkowitz has a pecuniary interest. The figure also includes the vested
portion (159,836 shares) of stock options to purchase shares of Common
Stock.
(7) The figure above represents 243,181 shares owned directly by Yenom X
Partners and 20,265 shares which could be acquired within 60 days upon
exercise of warrants.
(8) Mr. Corigliano is a director of Delcath. The figure above represents 11,500
shares owned directly by him, and 1,500 shares issuable upon exercise of
warrants. The figure above also includes the vested portion (15,000 shares)
of stock options to purchase shares of Common Stock.
(9) Mr. Isdaner is a director of Delcath. The figure above represents 8,000
shares directly owned by him or jointly with his wife, and 7,500 shares
issuable upon exercise of warrants. The figure above also includes the
vested portion (15,000 shares) of stock options to purchase shares of
Common Stock.
(10) Mr. Nevins is a director of Delcath. The figure above represents 16,100
shares owned directly by him, and 4,000 shares issuable upon exercise of
warrants. The above figure also represents 1,000 shares owned directly by
his wife, and 1,000 shares issuable upon exercise of warrants owned by her.
The figure above also includes the vested portion (15,000 shares) of stock
options to purchase shares of Common Stock.
(11) Mr. Grogan is the Chief Financial Officer of Delcath. The figure above
represents the vested portion of stock options to purchase shares of Common
Stock.
(12) The number of shares beneficially owned by all directors and executive
officers as a group includes 502,582 shares of Common Stock issuable within
60 days of the Record Date upon exercise of stock options granted to
directors and executive officers pursuant to our various stock option plans
and 14,000 shares of Common Stock issuable upon exercise of warrants.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 Securities and
Exchange Commission (the "Commission") reports of their ownership of the
Company's securities and of changes in that ownership. To the Company's
knowledge, based upon a review of copies of reports filed with the Commission
with respect to the fiscal year ended December 31, 2002, and except as noted
below, 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.
Form 4 reports due to be filed on September 23, 2002 by Messrs. Koly,
Herschkowitz, Grogan, Corigliano, Isdaner and Nevins were inadvertently not
timely filed. Such reports were filed on Form 5 on February 14, 2003.
INDEPENDENT AUDITORS
On April 12, 2002, KPMG LLP resigned as Delcath's independent auditors.
The report of KPMG on Delcath's balance sheet as of December 31, 2001 and the
related statements of operations, stockholders' equity and cash flows for each
of the years in the two-year period ended December 31, 2001 and
9
for the period from August 5, 1988 (inception) to December 31, 2001 did not
contain any adverse opinion or disclaimer of opinion, nor were they modified as
to uncertainty, audit scope or accounting principles.
In connection with the audits of the periods described above, and the
subsequent interim period through April 12, 2002, there were no disagreements
between Delcath and KPMG on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to KPMG's satisfaction, would have caused KPMG to
make reference to the subject matter of the disagreement(s) in connection with
its reports.
On April 25, 2002, Delcath engaged Eisner LLP, formerly Richard A.
Eisner & Company, LLP, New York, New York, as its independent auditors.
A representative of Eisner LLP is expected to be in attendance at the
Meeting, and be available to respond to appropriate questions.
AUDIT FEES
Audit Fees. Eisner LLP billed Delcath $65,500 for professional services
rendered for the audit of Delcath's annual financial statements for fiscal year
2002 and the reviews of the financial statements included in the Delcath's
Quarterly Reports on Form 10-Q filed for the first three quarters of 2002.
Financial Information Systems Design and Implementation Fees. Eisner
LLP did not render any services relating to financial information systems design
and implementation for the year ended December 31, 2002.
All Other Fees. Eisner LLP billed Delcath $69,500. These fees were for
professional services rendered in connection with the Registration Statement we
filed in December 2002 with the Securities and Exchange Commission and
subsequent amendments.
STOCKHOLDER PROPOSALS
It is contemplated that the next Annual Meeting of Stockholders will be
held on or about May 22, 2004. To be eligible for inclusion in the proxy
statement to be furnished to all stockholders entitled to vote at the 2004
Annual Meeting of Stockholders, proposals must be addressed to the Secretary of
Delcath and must be received at Delcath's principal executive offices not later
than January 5, 2003. In order to avoid controversy as to the date on which a
proposal was received by Delcath, it is suggested that any stockholder who
wishes to submit a proposal submit such proposal by Certified Mail, Return
Receipt Requested.
If any stockholder proposes to make any proposal at the 2004 Annual
Meeting of Stockholders which proposal will not be included in Delcath's proxy
statement for such meeting, such proposal must be received by March 20, 2003 to
be considered timely for purposes of Rule 14a-4(c) under the Securities Exchange
Act of 1934. The form of proxy distributed by the Board of Directors for such
meeting will confer discretionary authority to vote on any such proposal not
received by such date. If any such proposal is received by such date, the proxy
statement for the meeting will provide advice on the nature of the matter and
how Delcath intends to exercise its discretion to vote on each such matter.
10
EXPENSES AND SOLICITATION
The costs of printing and mailing proxies will be borne by Delcath. In
addition to soliciting stockholders by mail through its regular employees,
Delcath may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of Delcath registered in
the names of a nominee and, if so, will reimburse such banks, brokers and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket costs.
Solicitation by officers and employees of Delcath may also be made of some
stockholders following the original solicitation.
OTHER BUSINESS
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.
By Order of the Board of Directors
M. S. KOLY,
President and Chief Executive Officer
11
ANNUAL MEETING OF STOCKHOLDERS OF
DELCATH SYSTEMS, INC.
June 4, 2003
Please complete, date, sign and mail
your proxy card in the
envelope provided as soon
as possible
Please detach and mail in the envelope provided
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS.
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
- ------------------------------------------------------
1. Election of Directors. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO
NOMINEES DIRECTION IS MADE, THE PROXY SHALL BE VOTED FOR THE ELECTION OF THE
[ ] FOR ALL NOMINEES [ ] Mark A. Corigiliano LISTED NOMINEES AS DIRECTOR AND, IN THE CASE OF OTHER MATTERS THAT
[ ] WITHHOLD AUTHORITY [ ] Victor Nevins LEGALLY COME BEFORE THE MEETING, AS SAID ATTORNEY(S) MAY DEEM
FOR ALL NOMINEES ADVISABLE.
[ ] FOR ALL EXCEPT as Class III Directors
(See Instructions below)
INSTRUCTION: 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
- ------------------------------------------------------
- ------------------------------------------------------
To change the address on your account, please check PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING OF
the box at right and indicate your new address in the [ ] STOCKHOLDERS ON WEDNESDAY, JUNE 4, 2003 AT 11:00 A.M. AT THE
address space above. Please note that changes to SHERATON STAMFORD HOTEL, 2701 SUMMER STREET, STAMFORD, CONNECTICUT. [ ]
the registered name(s) on the account may be
submitted via this method.
- ------------------------------------------------------
Signature of Stockholder _______________________ Date: _____________
Signature of Stockholder _______________________ Date: _____________
- --------------------------------------------------------------------------------
Note: This proxy must be signed exactly as the name appears hereon. 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 duly authorized officer, giving full title as such.
If signer is a partnership, please sign in partnership name by
authorized person.
DELCATH SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 4, 2003
Revoking all prior proxies, the undersigned, a stockholder of DELCATH
SYSTEMS, INC. (the "Company"), hereby appoints M. S. Koly and Samuel
Herschkowitz, M.D., or either of them, as attorneys and agents of the
undersigned, with full power of substitution, to vote all of the shares of the
Company's Common Stock, par value $0.01 per share ("Common Stock") owned by the
undersigned at the Annual Meeting of the Stockholders of the Company to be held
at the SHERATON STAMFORD HOTEL, 2701 SUMMER STREET, STAMFORD, CONNECTICUT, AT
11:00 a.m. local time, and at any adjournment thereof, as fully and effectively
as the undersigned could do if personally present and voting, hereby approving,
ratifying, and confirming all that said attorney and agent or his substitute may
lawfully do in place of the undersigned as indicated on the reverse.
IMPORTANT: SIGNATURE REQUIRED ON THE REVERSE SIDE
