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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
FORM 10-KSB/A
[X] Annual report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 2001
[_] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission file number: 001-16133
DELCATH SYSTEMS, INC.
---------------------
(Exact name of Small Business Issuer as specified in its charter)
DELAWARE 06-1245881
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 SUMMER STREET, STAMFORD, CONNECTICUT 06905
----------------------------------------- -----
(Address of principal executive offices) (Zip Code)
203-323-8668
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(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Name of Each Exchange
Title of Each Class On Which Registered
- -------------------------------------- -----------------------------
Common Stock, par value $.01 per share Boston Stock Exchange
Redeemable Warrants Boston Stock Exchange
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $0.01 per share
Redeemable Warrants
Check whether the Issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [_]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best of
the Issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB/A or any amendment to
this form. [_]
The issuer's revenues for its most recent fiscal year were: $0.
The aggregate market value of the voting common stock held by non-affiliates of
the issuer, based on the closing sales price of $1.39 per share, was $ 3,331,435
as of February 21, 2002.
At February 21, 2002, the registrant had outstanding 3,903,816 shares of par
value $0.01 Common Stock.
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EXPLANATORY NOTE
This Amendment No. 1 to the Annual Report on Form 10-KSB of Delcath Systems,
Inc. (the "Company") for the year ended December 31, 2001 (the "Annual Report")
is being filed:
1. To revise the information contained in Item 6 of the Annual Report to
revise the Company's Plan of Operation to provide additional information
pursuant to Item 303(a) of Regulation S-B.
2. To revise information contained in Item 11 of the Annual Report to include
beneficial shareholdings reported in Forms 3/A for Messrs. Corigliano,
Isdaner and Nevins.
3. To revise information contained in Item 13 (a) of the Annual Report to
indicate that Exhibit 10.12, 2001 Stock Option Plan has been filed
herewith.
1
ITEM 6. PLAN OF OPERATION.
Since our founding in 1988 by a team of physicians, we have been a development
stage company engaged primarily in developing and testing the Delcath system for
the treatment of liver cancer. A substantial portion of our historical expenses
have been for the development of our medical device and the clinical trials of
our product, and the vigorous pursuit of patents worldwide, which now total ten.
We expect to continue to incur significant losses from costs for product
development, clinical studies, securing patents, regulatory activities,
manufacturing and establishment of a sales and marketing organization without
any significant revenues. A detailed description of the cash used to fund
historical operations is in the financial statements and the notes thereto.
Without an FDA-approved product and commercial sales, we will continue to be
dependent upon existing cash and the sale of equity or debt to fund future
activities over at least the next three years. While the amount of future net
losses and time required to reach profitability are uncertain, our ability to
generate significant revenue and become profitable will depend on our success in
commercializing our device.
During 2001, Delcath initiated the clinical trial of the system for isolated
liver perfusion using the chemotherapeutic agent, melphalan. The Phase I trial
at the National Cancer Institute marks an expansion in the potential labeled
usage beyond doxorubicin, the chemotherapeutic agent used in our initial
clinical trials. The patent protection for the Delcath technology was also
expanded in 2001, with the issuance of a U. S. patent for the system for
isolated kidney perfusion. Similar applications are pending in several foreign
countries.
Our management continued to speak to potential investors and investment analysts
at a series of meetings in several major U. S. cities. In particular we were
invited to make a presentation at the New York Society of Security Analysts'
annual Health Care Conference in March 2001. This meeting led to further
discussions with several investment professionals and an article in the Gray
Sheet, a medical publication focused on healthcare and FDA issues.
The contracted manufacture and assembly of the commercial grade Delcath system
kit was completed in 2001, with the first human use kits shipped to NCI for use
in the clinical trials. We continue efforts to qualify additional sources of the
key components of our device, in an effort to further reduce manufacturing costs
and minimize dependency on a single source of supply.
Over the next 12 months, we expect to continue to incur substantial expenses
related to the research and development of our technology, including Phase III
clinical trials using doxorubicin with the Delcath system and Phase I clinical
trials using melphalan with the Delcath system. Additional funds, when
available, will be committed to pre-clinical and clinical trials for the use of
other chemotherapy agents with the Delcath system for the treatment of liver
cancer, and the development of additional products and components.
In January 2002, we announced that the New York University School of Medicine
plans to proceed with the FDA approved Phase III study using the Delcath system.
This trial is pending budget approval by NYU and approval by NYU's Institutional
Review Board. If this trial receives the required approvals and proceeds to
accrue patients, this study will involve a portion of the total of the 122
patients that are required by the FDA to participate in the Phase III trials at
several institutions. We cannot estimate the starting date or duration of the
trial.
LIQUIDITY AND CAPITAL RESOURCES
We currently anticipate that our available funds will be sufficient to meet our
anticipated needs for working capital and capital expenditures through at least
the next 12 months. The Company is not projecting any capital expenditures that
will significantly affect the Company's liquidity or the hiring of additional
employees during the next 12 months.
Our future liquidity and capital requirements will depend on numerous factors,
including the progress of our research and product development programs,
including clinical studies; the timing and costs of making various United States
and foreign regulatory filings, obtaining approvals and complying with
regulations; the timing and effectiveness of product commercialization
activities, including marketing arrangements overseas; the timing and costs
involved in
2
preparing, filing, prosecuting, defending and enforcing intellectual property
rights; and the effect of competing technological and market developments.
The Company's future results are subject to substantial risks and uncertainties.
The Company expects to require additional working capital in the future and
there can be no assurance that such working capital will be available on
acceptable terms, if at all.
FUTURE CAPITAL NEEDS; ADDITIONAL FUTURE FUNDING
The Company's future results are subject to substantial risks and uncertainties.
The Company has operated at a loss for its entire history and there can be no
assurance of it ever achieving consistent profitability. The Company had working
capital at December 31, 2001 of $3,189,943. The Company may still require
additional working capital in the future and there can be no assurance that such
working capital will be available on acceptable terms, if at all. In addition,
the Company may need additional capital in the future to fully implement its
business strategy as set forth herein.
FORWARD LOOKING STATEMENTS
Certain statements in this Form 10-KSB/A, including statements of our and
management's expectations, intentions, plans, objectives and beliefs, including
those contained in or implied by "Management's Discussion and Analysis or Plan
of Operation", are "forward-looking statements", within the meaning of Section
21E of the Securities Exchange Act of 1934, that are subject to certain events,
risks and uncertainties that may be outside our control. These forward-looking
statements may be identified by the use of words such as "expects,"
"anticipates," "intends," "plans" and similar expressions. They include
statements of our future plans and objectives for our future operations and
statements of future economic performance, information regarding our expansion
and possible results from expansion, our expected growth, our capital budget and
future capital requirements, the availability of funds and our ability to meet
future capital needs, the realization of our deferred tax assets, and the
assumptions described in this report underlying such forward-looking statements.
Actual results and developments could differ materially from those expressed in
or implied by such statements due to a number of factors, including without
limitation, those described in the context of such forward-looking statements,
our expansion and acquisition strategy, our ability to achieve operating
efficiencies, our dependence on network infrastructure, capacity,
telecommunications carriers and other suppliers, industry pricing and technology
trends, evolving industry standards, domestic and international regulatory
matters, general economic and business conditions, the strength and financial
resources of our competitors, our ability to find and retain skilled personnel,
the political and economic climate in which we conduct operations, the risks
discussed in Item 1 above under "Description of Business" and other risk factors
described from time to time in our other documents and reports filed with the
Securities and Exchange Commission (the "Commission"). We do not assume any
responsibility to publicly update any of our forward-looking statements
regardless of whether factors change as a result of new information, future
events or for any other reason. We advise you to review any additional
disclosures we make in our Form 10-QSB, Form 8-K and Form 10-KSB reports filed
with the Commission.
3
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's Common Stock as of February
21, 2002, for (i) each stockholder known by the Company to own beneficially 5%
or more of the outstanding shares of its Common Stock; (ii) each director; and
(iii) all directors and executive officers as a group. The Company believes that
the beneficial owners of the Common Stock listed below, based on information
furnished by such owners, have sole investment and voting power with respect to
such shares, subject to community property laws where applicable.
The address for each listed director and officer is c/o Delcath Systems, Inc.,
1100 Summer Street, Stamford, Connecticut 06905.
DIRECTORS, SHARES PERCENTAGE OF
EXECUTIVE OFFICERS BENEFICIALLY COMMON SHARES
AND 5% STOCKHOLDERS: OWNED OUTSTANDING
-------------------- ----- -----------
M. S. Koly (4) 1,673,497 40.4%
Venkol Trust (5) 1,374,013 35.2%
Samuel Herschkowitz, M.D. (6) 343,472 8.5%
Frank G. Mancuso, Jr. (7) 110,891 2.8%
James V. Sorrentino, PhD (8) 68,663 1.7%
William I. Bergman (9) 63,833 1.6%
Mark A. Corigliano (10) 3,000 *
Daniel Isdaner (11) 15,000 *
Victor Nevins (12) 10,000 *
Thomas S. Grogan (13) - *
All directors and executive
officers as a group (nine persons) (14) 2,092,981 46.9%
- ------------------------
* 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 exercisable within 60 days of
December 31, 2001 are deemed outstanding for computing the percentage of
the person or entity holding such securities.
(3) Percentage of beneficial ownership is calculated on the basis of the
amount of outstanding securities (Common Stock) at December 31, 2001
(3,903,816 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 38,507 shares held by Mr.
Koly, and 19,231 shares held by M. Ted Koly, Mr. Koly's minor son. The
figure above also includes the vested portion (241,746 shares) of
incentive/nonqualified stock options to purchase 114,350 shares of the
Company's Common Stock under the Company's 1992 Incentive Stock Option
Plan for a weighted average exercise price of $3.98 per share and 25,396
shares of Common Stock under the Company's 1992 Non-Incentive Stock
Option Plan for an exercise price of $4.93 per share; and 102,000 shares
of Common Stock under the Company's 2000 Stock Option Plan for $3.3125
per share. The figure also includes 1,374,013 shares held by Venkol
Trust. The figure above does not include the unvested portion (100,000
shares) of an incentive stock option to purchase 100,000 shares of the
Company's Common Stock under the Company's 2001 Stock Option Plan for an
exercise price of $0.60 per share.
4
(5) Mr. Koly is the trustee of Venkol Trust and is deemed the beneficial
owner of its shares.
(6) Dr. Herschkowitz is the Chairman of the Board of Directors of Delcath.
The figure above includes 17,738 shares held by Dr. Herschkowitz; and an
estimated 180,898 shares held by Venkol Trust, as to which Dr.
Herschkowitz has a beneficial remainder interest. The Venkol Trust share
amount is a maximum estimated distribution because the Venkol Trust has
not determined the final distribution amounts. The figure also includes
the vested portion (144,836 shares) of an incentive/non-qualified stock
options to purchase 75,427 shares of the Company's Common Stock under the
Company's 1992 Incentive Stock Option Plan for a weighted average
exercise price of $4.05 per share, and 9,109 shares of Common Stock under
the Company's 1992 Non-Incentive Stock Option Plan for $4.93 per share;
and 60,300 shares of Common Stock under the Company's 2000 Stock Option
Plan for an exercise price of $4.93 per share. The figure above does not
include the unvested portion (30,000 shares) of an incentive stock option
to purchase 30,000 shares of the Company's Common Stock under the
Company's 2001 Stock Option Plan for an exercise price of $ .85 per
share.
(7) Mr. Mancuso's resigned as a director of the Company on October 1, 2001.
The figure above includes an estimated 14,477 shares held by Venkol
Trust, as to which Mr. Mancuso has a beneficial remainder interest. The
Venkol Trust share amount is a maximum estimated distribution because the
Venkol Trust has not determined the final distribution amounts. The
figure above also includes 504 shares issuable upon the exercise of
warrants at a price of $10.87 per share until April 30, 2002. Also
includes the vested portion (56,932 shares) of a non-incentive stock
option to purchase 56,932 shares of the Company's Common Stock under the
Company's 1992 Non-Incentive Stock Option Plan for a weighted average
exercise price of $4.13 per share. Also includes 281,424 shares issuable
upon exercise of Warrants.
(8) Mr. Sorrentino resigned as director on October 26, 2001. Includes vested
portion (56,932 shares) of a non- incentive stock option to purchase
56,932 shares of the Company's Common Stock under the Company's 1992
Non-Incentive Stock Option Plan for a weighted average exercise price of
$4.13 per share.
(9) Mr. Bergman resigned as director on September 21, 2001. Includes vested
portion (56,932 shares) of a non- incentive stock option to purchase
56,932 shares of the Company's Common Stock under the Company's 1992
Non-Incentive Stock Option Plan for a weighted average exercise price of
$4.13 per share.
(10) Mr.Corigliano is a director of Delcath. The figure above represents 1,500
shares owned directly by him, and 1,500 shares issuable upon the exercise
of Warrants at a price of $6.60 per share until October 18, 2005. Does
not include a non-incentive stock option to purchase 30,000 shares of the
Company's Common Stock under the Company's 2000 Stock Option Plan for an
exercise price of $.85 per share, none of which are vested.
(11) Mr. Isdaner is a director of Delcath. The figure above represents 7,500
shares directly owned by him or jointly with his wife, and 7,500 shares
issuable upon the exercise of Warrants at a price of $6.60 per share
until October 18, 2005. Does not include a non-incentive stock option to
purchase 30,000 shares of the Company's Common Stock under the Company's
2000 Stock Option Plan for an exercise price of $.85 per share, none of
which are vested.
(12) Mr. Nevins is a director of Delcath. The figure above represents 4,000
shares owned directly by him, and 4,000 shares issuable upon the exercise
of Warrants at a price of $6.60 per share until October 18, 2005. The
above figure also represents 1,000 shares owned directly by his wife, and
1,000 shares issuable upon the exercise of Warrants at a price of $6.60
per share until October 18, 2005. Does not include a non-incentive stock
option to purchase 30,000 shares of the Company's Common Stock under the
Company's 2000 Stock Option Plan for an exercise price of $.85 per share,
none of which are vested.
(13) Mr. Grogan is the Chief Financial Officer of Delcath. Does not include a
non-incentive stock option to purchase 30,000 shares of the Company's
Common Stock under the Company's 2001 Stock Option Plan for an exercise
price of $.85 per share, none of which are vested.
(14) The number of shares beneficially owned by all directors and executive
officers as a group includes 1,406,773 shares of Common Stock issuable
upon exercise of certain stock options granted to directors and executive
officers pursuant to the Company's various Stock Option Plans.
5
RIGHTS AGREEMENT
On October 30, 2001, the Company entered into a Rights Agreement with American
Stock Transfer & Trust Company (the "Rights Agreement") in connection with the
implementation of the Company's stockholder rights plan (the "Rights Plan"). A
copy of the Rights Agreement is incorporated by reference herein as Exhibit 4.7.
The purposes of the Rights Plan are to deter, and protect the Company's
shareholders from, certain coercive and otherwise unfair takeover tactics and to
enable the Board of Directors to represent effectively the interests of
shareholders in the event of a takeover attempt. The Rights Plan does not deter
negotiated mergers or business combinations that the Board of Directors
determines to be in the best interests of the Company and its shareholders.
To implement the Rights Plan the Board of Directors declared a dividend of one
Common Stock purchase right (a "Right") for each share of Common Stock of the
Company, par value $0.01 per share (the "Common Stock") outstanding at the close
of business on November 14, 2001 (the "Record Date") or issued by the Company on
or after such date and prior to the earlier of the Distribution Date, the
Redemption Date or the Final Expiration Date (as such terms are defined in the
Rights Agreement). The dividend was issued on November 14, 2001 to stockholders
of record on the Record Date. Each Right entitles the registered holder to
purchase from the Company one share of Common Stock, at a price of $5.00 per
share, subject to adjustment (the "Purchase Price"). The description and terms
of the Rights are set forth in the Rights Agreement.
RIGHTS ATTACHED TO COMMON STOCK INITIALLY
Common Stock certificates will evidence the Rights. A notation on the
certificates will incorporate the Rights Plan and advise the certificate holder
of the existence of the Rights. Until triggered, the Rights are transferred only
with the Common Stock certificates. Common Stock certificates issued after
November 14, 2001 will contain a legend referencing the existence of a
stockholder rights plan. The surrender for transfer of outstanding Common Stock
certificates will also constitute the transfer of the Rights associated with the
Common Stock.
DISTRIBUTION OF RIGHTS
The Company will mail separate certificates evidencing the Rights to holders of
record of the Common Stock on the Distribution Date. The Distribution Date will
be the date the Rights separate from the Common Stock, and will be the earlier
to occur of the following two events:
- - the close of business on the first day of a public announcement that a person
or group of affiliated or associated persons (an "Acquiring Person") has
acquired beneficial ownership of 15% or more of the outstanding Common Stock; or
- - 10 business days following the commencement of, or announcement of an
intention to make, a tender or exchange offer the consummation of which would
result in the beneficial ownership by a person or group of 15% or more of such
outstanding Common Stock. As soon as practicable following the Distribution
Date, separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the Common Stock as of the close of business on
the Distribution Date and such separate Right Certificates alone will evidence
the Rights. The Rights are not exercisable until the Distribution Date. The
Rights will expire on October 30, 2011, unless earlier redeemed or extended by
the Board.
RIGHT TO PURCHASE COMPANY STOCK
In the event a person becomes the owner of 15% or more of the outstanding shares
of Common Stock and thus becomes an Acquiring Person (a "Flip-In Event"), the
Rights not held by the Acquiring Person "flip-in" and, instead of continuing as
rights to buy one share of Common Stock, become rights to buy from the Company
shares of
6
Common Stock having a value equal to two times the Purchase Price of the Right.
In other words, a Rights holder (other than the Acquiring Person) may purchase
Common Stock at a 50% discount.
In the event there is insufficient Common Stock to permit exercise in full of
the Rights, the Company must issue cash, property or other securities of the
Company with an aggregate value equal to twice the Purchase Price.
Upon the occurrence of any such Flip-In Event, any Rights owned by an Acquiring
Person, its affiliates and associates and certain transferees thereof, shall
become null and void.
RIGHT TO PURCHASE ACQUIRING PERSON STOCK
In the event that a person becomes an Acquiring Person, the Company is then
merged, and the Common Stock is exchanged or converted in the merger, then each
Right (other than those formerly held by the Acquiring Person, which became
void) would "flip-over" and be exercisable for a number of shares of Common
Stock of the acquiring company having a market value of two times the Purchase
Price of the Right. In other words, a Rights holder may purchase the acquiring
company's common stock at a 50% discount.
EXCHANGE OF RIGHTS FOR COMMON STOCK
After a Flip-In Event but before a "flip-over" event (as described above) occurs
and before an Acquiring Person becomes the owner of 50% or more of the Common
Stock, the Board may cause the Rights (either in whole or in part) to be
exchanged for shares of Common Stock (or equivalent securities, of equal value)
at a one-to-one exchange ratio or pursuant to an equivalent cashless exercise
method. Rights held by the Acquiring Person, however, which became void upon the
Flip-In Event, would not be entitled to participate in such exchange.
REDEMPTION
The Rights may be redeemed by the Board at a redemption price of $0.01 per Right
at any time prior to the earlier of:
- - the time that a person or a group becomes an Acquiring Person, or
- - October 30, 2011, the expiration date of the Rights Agreement.
Immediately upon redemption and without further action and without any notice,
the right to exercise the Rights will terminate and the only right of the
holders will be to receive the redemption price.
EXPIRATION OF RIGHTS
The Rights will expire on October 30, 2011, unless the expiration date is
extended by amendment or unless the Rights are earlier redeemed or exchanged by
the Company as described above.
AMENDMENTS OR SUPPLEMENTS
For so long as the Rights are redeemable, the terms of the Rights may be amended
or supplemented by the Board of Directors at any time and from time to time
without the consent of the holders of the Rights. At any time when the Rights
are not redeemable, the Board of Directors may amend or supplement the terms of
the Rights, provided that such amendment does not adversely affect the interests
of the holders of the Rights.
NO RIGHTS AS STOCKHOLDERS
Until a Right is exercised, the holder thereof will have no rights as a
stockholder of the Company, including, without limitation, the right to vote or
to receive dividends.
7
MISCELLANEOUS
In order to prevent dilution, the Purchase Price, the number of Common Stock or
other securities or property purchasable upon exercise of each Right and the
number of Rights outstanding are subject to adjustment from time to time as
provided in the Rights Agreement.
The Company is not required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights (except as may be provided for in
the Rights Agreement). In lieu of such fractional Rights, the Company will pay
to the registered holders of the Right Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount of cash equal to the
same fraction of the current market value of a whole Right.
8
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Except where indicated, the following exhibits were previously filed in
connection with the Company's Registration Statement on Form SB-2,
Registration No. 333-39470 or subsequent periodic reports, and are
incorporated by reference.
Exhibit Number Description
-------------- -----------
1.1 Form of Underwriting Agreement
3.1 Revised form of Amended and Restated Certificate of
Incorporation of the Registrant
3.2 Revised form of By-Laws of the Registrant
4.1 Specimen Stock Certificate
4.2 Form of Underwriter's Warrant Agreement
4.3 Warrant Agreement among Registrant, Underwriter and
Transfer Agent
4.4 Specimen Redeemable Warrant
4.5 Warrant Agreement between the Registrant and
Euroland Marketing Solutions, Ltd.
4.6 Warrant No. W-2 to purchase up to 150,000 units
granted to Euroland Marketing Solutions, Ltd.
4.7 Rights Agreement dated October 30, 2001
5.1 Opinion of Morse, Zelnick, Rose & Lander, LLP
10.1 1992 Incentive Stock Option Plan
10.2 1992 Non-Incentive Stock Option Plan
10.3 2000 Stock Option Plan
10.4 Employment Agreement between the Registrant and M.S
Koly, as amended
10.5 Employment Agreement between the Registrant and
Samuel Herschkowitz, M.D., as amended
10.6 Distributorship Agreement with Nissho Corporation
10.7 Form of Lock-up Agreement
10.8 Form of Promissory Note
10.9 Consulting Services Agreement between the
Registrant and Euroland Marketing Solutions, Ltd.
10.10 Amendment to Key Employee Agreement between the
Registrant and M. S. Koly dated October 30, 2001
(incorporated by reference to Exhibit 10.10 to the
Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 2001 (Commission File
No. 001-16133))
10.11 Amendment to Key Employee Agreement between the
Registrant and Samuel Herschkowitz, M.D. dated
October 30, 2001 (incorporated by reference to
Exhibit 10.11 to the Company's Quarterly Report on
Form 10-QSB for the quarter ended September 30,
2001 (Commission File No. 001-16133))
10.12(*) 2001 Stock Option Plan
10.13 Engagement Agreement between the Registrant and
Redington Inc. for the period from November 1,
2000-October 31, 2001
24 Power of Attorney (incorporated by reference to
Exhibit 24 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 2001
(Commission File No. 001-16133))
(*) Filed herewith.
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(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the Company's fiscal
quarter ended December 31, 2001.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this amendment to its report to be signed on its behalf by the
undersigned, thereunto duly authorized. DELCATH SYSTEMS, Inc. Registrant
/s/ M. S. Koly
--------------------------
M. S. Koly, President
April 5, 2002
This amendment has been executed in the same manner as a Form 8 would have been
executed prior to the rescission of Form 8. SEE, Part V.F.2 of Release 34-31905
(February 23, 1993).
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EXHIBIT 10.12
-------------
DELCATH SYSTEMS, INC.
2001 STOCK OPTION PLAN
SECTION 1
GENERAL
1.1 PURPOSE OF PLAN
---------------
The purpose of this 2001 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.
1.2 STOCK SUBJECT TO THE PLAN
-------------------------
An aggregate of 750,000 shares of the Company's Common Stock, $0.01 par
value ("Common Stock"), subject, however, to adjustment or change pursuant to
Section 5.4 hereof, shall be reserved for issuance upon the exercise of
incentive stock options ("Incentive Stock Option(s)") within the meaning of
Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code") and
nonqualified stock options ("Nonqualified Stock Option(s)") (hereinafter
collectively referred to as "Options") which may be granted from time to time in
accordance with the Plan. Such shares may be, in whole or in part, as the
Compensation 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. Notwithstanding anything in
the Plan to the contrary, during the term of the Plan, the maximum aggregate
number of shares of Common Stock that shall be subject to Options granted under
the Plan to any single employee during any calendar year shall be 350,000
shares.
SECTION 2
COMPENSATION COMMITTEE
2.1 ADMINISTRATION
--------------
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 under Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Such Committee shall have
and may exercise any and all
C-1
of the powers relating to the administration of the Plan and the grant of
Options thereunder as are set forth in Section 2.2 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.
2.2 POWERS OF COMMITTEE
-------------------
The Committee's administration of the Plan shall be subject to the
following:
(a) 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 (collectively, "Optionholders", and each, singly, an
"Optionholder"), and the time or times at which, Options shall be granted, and
the number of shares to be subject to each such Option.
(b) 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 may deem relevant.
(c) 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.
2.3 DELEGATION BY COMMITTEE
-----------------------
Except to the extent prohibited by applicable law or the applicable rules
of a stock exchange, the Committee may allocate all or any portion of its
responsibilities and powers to any one or members and may delegate all or any
part of its responsibilities and powers to any person or persons selected by it.
Any such allocation or delegation may be revoked by the Committee at any time.
2.4 INFORMATION TO BE FURNISHED TO COMMITTEE
----------------------------------------
The Company and Subsidiaries shall furnish the Committee with such data and
information as it determines may be required for it to discharge its duties. The
records of the Company and Subsidiaries as to an employee's or Optionholder's
employment, termination of employment, leave of absence, reemployment and
compensation shall be conclusive on all persons unless determined to be
incorrect. Employees and other persons entitled to benefits under the Plan must
furnish the Committee such evidence, data or information as the Committee
considers desirable to carry out the terms of the Plan.
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SECTION 3
OPTIONS
3.1 ELIGIBILITY FOR RECEIPT OF OPTIONS
----------------------------------
Options hereunder may be granted to any employees, directors, consultants,
agents, independent contractors and other persons whom the Committee determines
will contribute to the Company's success, provided that non-employees shall only
be eligible to receive grants of Nonqualified Stock Options.
The aggregate Fair Market Value (as defined in Section 3.3 of the Plan),
determined as of the time an Incentive Stock Option is granted, of the shares of
the Company's Common Stock purchasable thereunder exercisable for the first time
by an Optionholder during any calendar year may not exceed $100,000.
Incentive Stock Options may not be granted to any person who, at the time
the Incentive Stock 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 Incentive Stock Option is
granted to a 10% Owner, the Exercise Price (as defined in Section 3.2) is at
least 110% of the Fair Market Value of the Common Stock subject thereto and such
Incentive Stock 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.
3.2 EXERCISE PRICE
--------------
The "Exercise Price" of each Option granted under this Agreement shall be
established by the Committee or shall be determined by a method established by
the Committee at the time the Option is granted; provided, however, that:
(a) The Exercise Price of an Incentive Stock Option shall not be less than
100% of the Fair Market Value of a share of Common Stock on the date of grant,
(b) An Incentive Stock Option shall not be granted to any individual who,
at the time of grant, is a 10% Owner, unless the Exercise Price is not less than
110% of the Fair Market Value of a share of Common Stock on the date of grant,
and
(c) In no event, based upon the facts known at the time of the grant, may
an Exercise Price be established hereunder that would result in the disallowance
of the Company's expense deduction pursuant to Section 162(m) of the Code.
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3.3 FAIR MARKET VALUE
-----------------
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, 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.
3.4 DATE OF GRANT
-------------
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.
SECTION 4
EXERCISE OF OPTIONS
4.1 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
Optionholders, and subject to the limitations set forth in Section 3.1 of this
Plan with respect to grants to 10% owners, and for non-employee Optionholders
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 Optionholder's performance of
services to the Company or any subsidiary or the Optionholder's death or
disability. In no event shall any Option be for a term of more than ten years
from the date of grant. Notwithstanding the foregoing, the term of Options
intended to qualify as Incentive Stock Options shall not exceed five years from
the date of granting thereof if such Option is granted to any employee who at
the time such option is granted owns more than 10% of the total combined voting
power of all classes of stock of the Company. No Option may be exercised
following termination thereof.
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4.2 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
4.3 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.
4.4 RESTRICTION
-----------
Except as provided in Sections 5.1, 5.2 and 5.3 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.
4.5 PAYMENT OF OPTION EXERCISE PRICE
--------------------------------
The payment of the Exercise Price of an Option shall be subject to the
following:
(a) The Exercise Price shall be payable in cash, by check made payable to
the Company, or by tendering, by either actual delivery of shares or by
attestation, shares of Common Stock that: (i) the Optionholder has held for at
least six (6) months, and (ii) are valued at Fair Market Value as of the day of
exercise, or in any combination thereof, as determined by the Committee.
(b) The Committee may permit an Optionholder to elect to pay the Exercise
Price upon the exercise of an Option by irrevocably authorizing a third party to
sell shares of Common Stock (or a sufficient portion of the shares) acquired
upon exercise of the Option and remit to the Company a sufficient portion of the
sale proceeds to pay the entire Exercise Price and any tax withholding resulting
from such exercise, and upon receipt of such payment, the Company delivers the
exercised shares to the third party.
(c) The Committee may permit the Company to loan the Optionholder
sufficient funds to pay the Exercise Price (and any tax withholdings resulting
from such exercise) upon the exercise of an Option.
(d) 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);
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(e) 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;
(f) Such Stockholders' Agreement as the Company may require at the time of
exercise of such Option (the "Stockholders' Agreement"), executed and delivered
by the Optionholder, 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 Optionholder; and
(g) In the event such Optionholder 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
Optionholder shall deposit, upon such exercise by the Optionholder, with the
Company or such third party as may be designated by the Company, the Option
shares acquired pursuant to the exercise of such Option, together with stock
powers executed in blank by such Optionholder with respect to such Option shares
as may be determined by the Company, the other provisions of the Stockholders'
Agreement, and/or the repurchase by the Company of the Option shares described
in Section 5.6 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).
(h) Subject to the provisions of this Section 4.5, the full Exercise Price
for shares of Common Stock purchased upon the exercise of any Option shall be
paid at the time of such exercise (except that, in the case of an exercise
arrangement approved by the Committee and described in Sections 4.5(b) and
4.5(c), payment may be made as soon as practicable after the exercise).
(i) In the event the representation described in Section 4.5(d) is required
and made and/or the Optionholder 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.
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4.6 RESTRICTIONS ON OPTIONHOLDER'S RIGHTS
-------------------------------------
The Optionholder 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.
4.7 USE OF PROCEEDS
---------------
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.
4.8 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 Optionholder only by such Optionholder.
SECTION 5
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
5.1 TERMINATION OF EMPLOYMENT OF OPTIONHOLDER
-----------------------------------------
In the event the employment with the Company (or a Subsidiary thereof) of
an Optionholder shall be terminated for any reason other than by reason of
death, disability within the meaning of Section 22(e)(3) of the Code, retirement
at or after age 65, or termination of employment without cause, such
Optionholder's Option shall immediately terminate, lapse and expire. Absence or
leave approved by the Company shall not be considered an interruption of
employment for any purpose under the Plan.
In the event that the Optionholder's employment with the Company (or a
Subsidiary thereof) is terminated without cause, the unexpired vested portion of
the Optionholder's Option will immediately terminate, lapse and expire unless
the Optionholder provides written notice of exercise of the vested portion of
the Option within two weeks from the date of termination of the Optionholder's
employment with the Company (or a Subsidiary thereof).
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.
5.2 RETIREMENT OR DISABILITY OF OPTIONHOLDER
----------------------------------------
If the employment with the Company or a Subsidiary of the Optionholder
shall be terminated by reason of such Optionholder's disability within the
meaning of Section 22(e)(3) of the Code, or retirement at or after age 65, such
Optionholder (or such Optionholder's legal representative, on such
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Optionholder'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 Optionholder at the date of such termination.
Notwithstanding the foregoing, no Option may be exercised subsequent to the date
of its expiration.
5.3 DEATH OF OPTIONHOLDER
---------------------
If the Optionholder 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
Optionholder 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.
5.4 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.
5.5 CHANGE IN CONTROL
-----------------
Subject to the provisions of Section 5.4, and except as otherwise provided
in the Plan, upon the occurrence of a Change in Control (as defined in Section
5.6) the Committee may determine that:
(a) All outstanding Options shall become fully vested and exercisable on a
fully diluted basis and all Optionholders shall receive 30-days notice of a
Change in Control and an opportunity to exercise their respective Options; or
(b) All outstanding Options shall be paid out immediately in cash for the
full value of the Options as determined by the Committee on the date of the
occurrence of the Change in Control; or
(c) All outstanding Options shall be substituted for options in the
corporation resulting from the Change in Control.
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5.6 CHANGE IN CONTROL DEFINED
-------------------------
The term "Change in Control" means a change in the beneficial ownership of
the Company's voting stock or a change in the composition of the Company's Board
of Directors (the "Board") that occurs as follows:
(a) An acquisition by an individual, entity or group (within the meaning of
Section 13(d)(3) and 14(d)(2) of the Exchange Act) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of the total voting power of the Company's then outstanding
stock; excluding however, the following:
(i) Any acquisition directly from the Company, other than an
acquisition by virtue of the exercise of a conversion privilege
unless the security being so converted was itself acquired
directly from the Company,
(ii) Any acquisition by the Company, or
(iii) Any acquisition by any employee benefit plan sponsored or
maintained by the Company or any corporation controlled by the
Company, or
(iv) Any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c)
of this Section 5.5; or
(b) A change in the composition of the Board such that the individuals who
were the Board's nominees for election as directors of the Company immediately
prior to a meeting of the stockholders of the Company (the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board; provided,
however, that any individual who becomes a member of the Board whose election,
or nomination for election by the Company's stockholders, was approved by a vote
of at least a majority of those individuals comprising the Incumbent Board shall
be considered as though such individuals were a member of the Incumbent Board;
but, provided further, that any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board shall not be so considered as a member of the Incumbent Board; or
(c) The approval by the stockholders of the Company of a reorganization,
merger, consolidation, share exchange or sale or other disposition of all or
substantially all of the assets of the Company ("Corporate Transaction") or, if
consummation of such Corporate Transaction is subject, at the time of such
approval by stockholders, to the consent of any government or governmental
agency, the obtaining of such consent (either explicitly or implicitly by
consummation); excluding, however, such a Corporate Transaction pursuant to
which:
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(i) All or substantially all of the individuals and entities who are
the beneficial owners, respectively, of the Company's outstanding
securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 60% of the
outstanding stock of the corporation resulting from such
Corporate Transaction (including, without limitation, a
corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets
either directly or indirectly or through one or more
Subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Corporate Transaction, of
the Company's outstanding stock, as the case may be,
(ii) No Person (other than the Company, an employee benefit plan of
the Company or such corporation resulting from such Corporate
Transaction) will beneficially own, directly or indirectly, 20%
or more of the outstanding stock of the corporation resulting
from such Corporate Transaction, and
(iii) Individuals who were members of the Incumbent Board will
constitute at least a majority of the members of the Board of the
corporation resulting from such Corporate Transaction; or
(d) The approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
5.7 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 respective Option Agreements 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.
SECTION 6
TERMINATION AND AMENDMENT
6.1 TERMINATION AND AMENDMENT
-------------------------
The Plan, which has been adopted by the Board of Directors on May 8, 2001
and which shall be submitted for ratification by the stockholders of the Company
within twelve months of adoption, shall terminate on May 8, 2011, 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:
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(a) no increase shall be made in the aggregate number of shares which may
be issued under the Plan;
(b) no such termination, modification or amendment shall materially
adversely affect the rights of an Optionholder previously granted under the
Plan;
(c) no modification shall be made to the requirements of eligibility for
participation in the Plan; and
(d) no material increase shall be made in the benefits accruing to
participants under the Plan.
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