UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 24, 2004
DELCATH SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 001-16133 06-1245881
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
1100 Summer Street, Stamford, Connecticut 06905
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 323-8668
N/A
(Former name or former address, if changes since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2 below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Section 1 - Registrant's Business and Operations
Item 1.01 Entry into a Material Definitive Agreement.
On November 24, 2004, Delcath Systems, Inc. (the "Company") issued a press
release relating to its having entered into a definitive agreement with
institutional and accredited investors named therein for the private placement
of $2 million through the sale of approximately 1.06 million shares of its
common stock and the issuance of Series A warrants to purchase approximately
427,000 shares. The Series A warrants have an exercise price of $2.78 per share,
subject to adjustment under certain circumstances, and will expire on November
24, 2009.
The Company also agreed to issue to the same investors Series B warrants to
purchase approximately 1.06 million shares at an exercise price of $2.60 per
share, subject to adjustment under certain circumstances, and will expire on the
date that is 90 trading days after the effectiveness of the registration
statement referred to in the following paragraph. Under certain circumstances
including that the average per share market value of a share of the Company's
common stock has been more than $2.60 for a period of 20 consecutive trading
days, the Company has the right to call the Series B warrants at a price of
$0.10 per warrant. If any of the Series B warrants is exercised, the holder will
also be entitled to exercise its Series C warrant to purchase up to 40% of the
shares purchased upon the exercise of such Series B warrant. Any such Series C
warrants will have a term expiring on the earlier of the date that is 90 trading
days following the effective date of the registration statement referred to in
the following paragraph and November 24, 2009. The exercise price of the Series
C warrants is $2.78 per share, subject to adjustment under certain
circumstances.
The Company also entered into a Registration Rights Agreement with the
investors named therein to register the resale of the shares of common stock
issued to the investors and the shares issuable upon exercise of the Series A
warrants, the Series B warrants and the Series C Warrants.
The sale of the shares described above and the issuance of the related
Series A, Series B and Series C warrants occurred on November 30, 2004. The net
proceeds received by the Company was approximately $1.85 million.
Section 3 - Securities and Trading Markets
Item 3.02 Unregistered Sales of Equity Securities
Reference is made to the response to Item 1.01.
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The Company claims an exemption from registration of the offer and sale of
the shares of common stock, the Series A warrants, the Series B warrants and the
Series C warrants under Rule 506 under the Securities Act of 1933 on the basis
that each of the purchasers is an accredited investor.
As compensation to the placement agent for services relating to the
transactions described in Item 1.01 hereof, the Company paid the placement agent
$140,000 and issued a Series A warrant to purchase up to approximately 74,000
shares of common stock.
In addition, during the period from September 24, 2004 to the date of
this report, the Company sold an aggregate of 152,025 shares of its common stock
upon the exercise of 152,025 warrants that had been issued upon the exercise of
Representative's Unit Warrants that were issued in connection with the Company's
underwritten public offering in 2003. The aggregate purchase price for such
shares was $194,592. The sales of these shares were made in transactions exempt
from registration under Rule 506 under the Securities Act to purchasers each of
whom qualified as an "accredited investor" within the meaning of Rule 501. No
underwriting costs were associated with these transactions.
Section 9 - Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
(a) Not applicable
(b) Not applicable.
(c) Exhibits:
Exhibit Description
4.1 Form of Series A Warrant to Purchase Shares of Common Stock
dated as of November 24, 2004.
4.2 Form of Series B Warrant to Purchase Shares of Common Stock
dated as of November 24, 2004.
4.3 Form of Series C Warrant to Purchase Shares of Common Stock
dated as of November 24, 2004.
10.1 Common Stock Purchase Agreement, dated as of November 24,
2004 by and among Delcath Systems, Inc. and the Purchasers
Listed on Exhibit A thereto.
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Exhibit Description
10.2 Registration Rights Agreement dated as of November 24, 2004
by and among Delcath Systems, Inc. and the Purchasers Listed
on Schedule I thereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DELCATH SYSTEMS, INC.
By: /s/ M. S. KOLY
---------------------
M. S. Koly
President and Chief Executive
Officer
Date: December 1, 2004
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR DELCATH SYSTEMS, INC. SHALL HAVE RECEIVED AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO DELCATH SYSTEMS, INC. THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
SERIES A WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
DELCATH SYSTEMS, INC.
Expires November 24, 2009
No.: W-A-04-__ Number of Shares: ___________
Date of Issuance: November 24, 2004
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, Delcath Systems, Inc., a Delaware corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that
_______________________________ or its registered assigns is entitled to
subscribe for and purchase, during the Term (as hereinafter defined), up to
____________________________________ (_____________) shares (subject to
adjustment as hereinafter provided) of the duly authorized, validly issued,
fully paid and non-assessable Common Stock of the Issuer, at an exercise price
per share equal to the Warrant Price then in effect, subject, however, to the
provisions and upon the terms and conditions hereinafter set forth. Capitalized
terms used in this Warrant and not otherwise defined herein shall have the
respective meanings specified in Section 9 hereof.
1. Term. The term of this Warrant shall commence on November 24, 2004 and
shall expire at 5:00 p.m., eastern time, on November 24, 2009 (such period being
the "Term").
2. Method of Exercise Payment; Issuance of New Warrant; Transfer and
Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant may
be exercised in whole or in part during the Term.
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at
the principal office of the Issuer, and by the payment to the Issuer of an
amount of consideration therefor equal to the Warrant Price in effect on the
date of such exercise multiplied by the number of shares of Warrant Stock with
respect to which this Warrant is then being exercised, payable at such Holder's
election (i) by certified or official bank check or by wire transfer to an
account designated by the Issuer, (ii) by "cashless exercise" in accordance with
the provisions of subsection (c) of this Section 2, but only until the date that
a registration statement under the Securities Act providing for the resale of
the Warrant Stock has been declared effective by the Securities and Exchange
Commission or (iii) by a combination of the foregoing methods of payment
selected by the Holder of this Warrant. The Holder shall surrender this Warrant
to the Issuer within three (3) Trading Days of the date of exercise.
(c) Cashless Exercise. Notwithstanding any provisions herein to the
contrary, if (i) the Per Share Market Value of one share of Common Stock is
greater than the Warrant Price (at the date of calculation as set forth below)
and (ii) a registration statement under the Securities Act providing for the
resale of the Warrant Stock has not been declared effective by the Securities
and Exchange Commission by the date such registration statement is required to
be effective pursuant to the Registration Rights Agreement (as defined in the
Purchase Agreement), in lieu of exercising this Warrant by payment of cash, the
Holder may exercise this Warrant by a cashless exercise and shall receive the
number of shares of Common Stock equal to an amount (as determined below) by
surrender of this Warrant at the principal office of the Issuer together with
the properly endorsed Notice of Exercise in which event the Issuer shall issue
to the Holder a number of shares of Common Stock computed using the following
formula:
X = Y - (A)(Y)
------
B
Where X = the number of shares of Common Stock to be issued to the
Holder.
Y = the number of shares of Common Stock purchasable upon
exercise of all of the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the Warrant being
exercised.
A = the Warrant Price.
B = the Per Share Market Value of one share of Common Stock.
(d) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after such
exercise (the "Delivery Date") or, at the request of the Holder (provided that a
registration statement under the Securities Act providing for the resale of the
Warrant Stock is then in effect), issued and delivered to the Depository Trust
Company ("DTC") account on the Holder's behalf via the Deposit Withdrawal Agent
Commission System ("DWAC") within a reasonable time, not exceeding three (3)
Trading Days after such exercise, and the Holder hereof shall be deemed for all
purposes to be the holder of the shares of Warrant Stock so purchased as of the
date of such exercise and (ii) unless this Warrant has expired, a new Warrant
representing
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the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been canceled in payment or partial payment of the Warrant Price as
hereinafter provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time. In addition to any other rights available to the
Holder, if the Issuer fails to deliver to the Holder such certificate or
certificates pursuant to Section 2(d) by the Delivery Date and if after the
Delivery Date the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by such Holder of
the Warrant Stock which the Holder anticipated receiving upon such exercise (a
"Buy-In"), then the Issuer shall pay in cash to the Holder an amount equal to
(A) the aggregate amount paid by such Holder for the shares of Common Stock so
purchased minus (B) the aggregate amount of net proceeds received by such Holder
from the sale of the shares of Common Stock issued by the Issuer pursuant to
such exercise. The Holder shall provide the Issuer written notice indicating the
amounts payable to the Holder in respect of the Buy-In.
(e) Transferability of Warrant. Subject to Section 2(g), this Warrant may
be transferred by a Holder without the consent of the Issuer. If transferred
pursuant to this paragraph and subject to the provisions of subsection (g) of
this Section 2, this Warrant may be transferred on the books of the Issuer by
the Holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant at the principal office of the Issuer, properly endorsed (by the
Holder's executing an assignment in the form attached hereto) and upon payment
of any necessary transfer tax or other governmental charge imposed upon such
transfer. This Warrant is exchangeable at the principal office of the Issuer for
Warrants for the purchase of the same aggregate number of shares of Warrant
Stock, each new Warrant to represent the right to purchase such number of shares
of Warrant Stock as the Holder hereof shall designate at the time of such
exchange. All Warrants issued on transfers or exchanges shall be dated the
Original Issue Date and shall be identical with this Warrant except as to the
number of shares of Warrant Stock issuable pursuant thereto.
(f) Continuing Rights of Holder. The Issuer will, at the time of or at any
time after each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
(g) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant and the shares of Warrant Stock to be issued upon
exercise hereof are being acquired solely for the Holder's own account and
not as a nominee for any other party, and for investment, and that the
Holder will not offer, sell or otherwise dispose of this Warrant or any
shares of Warrant Stock to be issued upon exercise hereof except pursuant
to an effective registration statement, or an exemption from registration,
under the Securities Act and any applicable state securities laws.
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(ii) Except as provided in paragraph (iii) below, this Warrant and all
certificates representing shares of Warrant Stock issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR
DELCATH SYSTEMS, INC. SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO DELCATH SYSTEMS, INC.
THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS IS NOT REQUIRED.
(iii) The Issuer agrees to reissue this Warrant or certificates
representing any of the Warrant Stock, without the legend set forth above
if at such time, prior to making any transfer of any such securities, the
Holder shall give written notice to the Issuer upon the occurrence of: (a)
either (i) the Issuer has received an opinion of counsel reasonably
satisfactory to the Issuer, to the effect that the registration of such
securities under the Securities Act is not required in connection with such
proposed transfer, (ii) a registration statement under the Securities Act
covering such proposed disposition has been filed by the Issuer with the
Securities and Exchange Commission and has become effective under the
Securities Act, (iii) the Issuer has received other evidence reasonably
satisfactory to the Issuer that such registration and qualification under
the Securities Act and state securities laws are not required, or (iv) the
Holder provides the Issuer with reasonable assurances that such security
can be sold pursuant to Rule 144 under the Securities Act; and (b) either
(i) the Issuer has received an opinion of counsel reasonably satisfactory
to the Issuer, to the effect that registration or qualification under the
securities or "blue sky" laws of any state is not required in connection
with such proposed disposition, or (ii) compliance with applicable state
securities or "blue sky" laws has been effected or a valid exemption exists
with respect thereto. The Issuer will respond to any such notice from a
holder within five (5) business days. In the case of any proposed transfer
under this Section 2(g), the Issuer will use reasonable efforts to comply
with any such applicable state securities or "blue sky" laws, but shall in
no event be required, (x) to qualify to do business in any state where it
is not then qualified, (y) to take any action that would subject it to tax
or to the general service of process in any state where it is not then
subject, or (z) to comply with state securities or "blue sky" laws of any
state for which registration by coordination is unavailable to the Issuer.
The restrictions on transfer contained in this Section 2(g) shall be in
addition to, and not by way of limitation of, any other restrictions on
transfer contained in any other section of this Warrant. Whenever a
certificate representing the Warrant Stock is required to be issued to a
the Holder without a legend, in lieu of delivering physical certificates
representing the Warrant Stock,
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provided the Issuer's transfer agent is participating in the DTC Fast
Automated Securities Transfer program, the Issuer shall use its reasonable
best efforts to cause its transfer agent to electronically transmit the
Warrant Stock to the Holder by crediting the account of the Holder's Prime
Broker with DTC through its DWAC system (to the extent not inconsistent
with any provisions of this Warrant or the Purchase Agreement).
(h) In no event may the Holder exercise this Warrant in whole or in part
unless the Holder is an "accredited investor" as defined in Regulation D under
the Securities Act.
3. Stock Fully Paid; Reservation and Listing of Shares; Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and agrees
that all shares of Warrant Stock which may be issued upon the exercise of this
Warrant or otherwise hereunder will, when issued in accordance with the terms of
this Warrant, be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges created by or through the Issuer. The
Issuer further covenants and agrees that during the period within which this
Warrant may be exercised, the Issuer will at all times have authorized and
reserved for the purpose of the issue upon exercise of this Warrant a sufficient
number of shares of Common Stock to provide for the exercise of this Warrant.
(b) Reservation. If any shares of Common Stock required to be reserved for
issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its reasonable best efforts as expeditiously as possible at its
expense to cause such shares to be duly registered or qualified. If the Issuer
shall list any shares of Common Stock on any securities exchange or market it
will, at its expense, list thereon, maintain and increase when necessary such
listing, of all shares of Warrant Stock from time to time issued upon exercise
of this Warrant or as otherwise provided hereunder (provided that such Warrant
Stock has been registered pursuant to a registration statement under the
Securities Act then in effect), and, to the extent permissible under the
applicable securities exchange rules, all unissued shares of Warrant Stock which
are at any time issuable hereunder, so long as any shares of Common Stock shall
be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.
(c) Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would
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adversely affect the rights of the Holders of the Warrants in their capacity as
Holders of the Warrants, (iii) take all such action as may be reasonably
necessary in order that the Issuer may validly and legally issue fully paid and
nonassessable shares of Common Stock, free and clear of any liens, claims,
encumbrances and restrictions (other than as provided herein) upon the exercise
of this Warrant, and (iv) use its reasonable best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be reasonably necessary to enable the Issuer to
perform its obligations under this Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
4. Adjustment of Warrant Price and Warrant Share Number. The number of
shares of Common Stock for which this Warrant is exercisable, and the price at
which such shares may be purchased upon exercise of this Warrant, shall be
subject to adjustment from time to time as set forth in this Section 4. The
Issuer shall give the Holder notice of any event described below which requires
an adjustment pursuant to this Section 4 in accordance with Section 5.
(a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale.
(i) In case the Issuer after the Original Issue Date shall do any of
the following (each, a "Triggering Event"): (a) consolidate or merge with
or into another corporation where the holders of outstanding Voting Stock
prior to such merger or consolidation do not own over 50% of the
outstanding Voting Stock of the merged or consolidated entity immediately
after such merger or consolidation, or (b) sell all or substantially all of
its properties or assets to any other Person, or (c) change the Common
Stock to the same or a different number of shares of any class or classes
of stock, whether by reclassification, exchange, substitution or otherwise
(other than by way of a stock split or combination of shares or stock
dividends or distributions provided for in Section 4(b) or Section 4(c)),
or (d) effect a capital reorganization (other than by way of a stock split
or combination of shares or stock dividends or distributions provided for
in Section 4(b) or Section 4(c)), then, and in the case of each such
Triggering Event, proper provision shall be made so that, upon the basis
and the terms and in the manner provided in this Warrant, the Holder of
this Warrant shall be entitled upon the exercise hereof at any time after
the consummation of such Triggering Event, to the extent this Warrant is
not exercised prior to such Triggering Event, to receive at the Warrant
Price in effect at the time immediately prior to the consummation of such
Triggering Event in lieu of the Common Stock issuable upon such exercise of
this Warrant prior to such Triggering Event, the securities, cash and
property to which such Holder would have been entitled upon the
consummation of such Triggering Event if such Holder had exercised the
rights represented by this Warrant immediately prior thereto, subject to
adjustments (subsequent to such corporate action) as nearly equivalent as
possible to the adjustments provided for elsewhere in this Section 4.
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(ii) Notwithstanding anything contained in this Warrant to the
contrary, a Triggering Event shall not be deemed to have occurred if, prior
to the consummation thereof, each Person (other than the Issuer) which may
be required to deliver any securities, cash or property upon the exercise
of this Warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the Holder of this Warrant,
(A) the obligations of the Issuer under this Warrant (and if the Issuer
shall survive the consummation of such Triggering Event, such assumption
shall be in addition to, and shall not release the Issuer from, any
continuing obligations of the Issuer under this Warrant) and (B) the
obligation to deliver to such Holder such shares of securities, cash or
property as, in accordance with the foregoing provisions of this subsection
(a), such Holder shall be entitled to receive, and such Person shall have
similarly delivered to such Holder a written acknowledgement executed by
the President or Chief Financial Officer of the Issuer, stating that this
Warrant shall thereafter continue in full force and effect and the terms
hereof (including, without limitation, all of the provisions of this
subsection (a)) shall be applicable to the securities, cash or property
which such Person may be required to deliver upon any exercise of this
Warrant or the exercise of any rights pursuant hereto.
(b) Stock Dividends, Subdivisions and Combinations. If at any time the
Issuer shall:
(i) make or issue or set a record date for the holders of its
Common Stock for the purpose of entitling them to receive a dividend
payable in, or other distribution of, shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (1) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (2) the Warrant Price then in
effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such adjustment.
Notwithstanding the foregoing, if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Warrant Price shall be adjusted pursuant to this
paragraph as of the time of actual payment of such dividends or distributions.
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(c) Certain Other Distributions. If at any time the Issuer shall make or
issue or set a record date for the determination of the holders of its Common
Stock for the purpose of entitling them to receive any dividend or other
distribution of:
(i) cash (other than a cash dividend payable out of earnings or earned
surplus legally available for the payment of dividends under the laws of
the jurisdiction of incorporation of the Issuer),
(ii) any evidences of its indebtedness, any shares of stock of any
class or any other securities or property of any nature whatsoever (other
than cash), or
(iii) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class or any
other securities or property of any nature whatsoever (other than cash),
then (1) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by a fraction (A) the numerator of which shall be the Per
Share Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable and of
the fair value (as determined in good faith by the Board of Directors of the
Issuer and supported by an opinion from an investment banking firm of recognized
national standing acceptable to (but not affiliated with) the Holder) of any and
all such evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights so distributable,
and (2) the Warrant Price then in effect shall be adjusted to equal (A) the
Warrant Price then in effect multiplied by the number of shares of Common Stock
for which this Warrant is exercisable immediately prior to the adjustment
divided by (B) the number of shares of Common Stock for which this Warrant is
exercisable immediately after such adjustment. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par value or
from no par value to par value) into shares of Common Stock and shares of any
other class of stock shall be deemed a distribution by the Issuer to the holders
of its Common Stock of such shares of such other class of stock within the
meaning of this Section 4(c) and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4(b).
Notwithstanding the foregoing, if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Warrant Price shall be adjusted pursuant to this
Section 4(c) as of the time of actual payment of such dividends or
distributions.
(d) Intentionally Omitted.
(e) Other Provisions applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common
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Stock for which this Warrant is exercisable and the Warrant Price then in effect
provided for in this Section 4:
(i) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4(b)) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than one percent (1%) of
the shares of Common Stock for which this Warrant is exercisable immediately
prior to the making of such adjustment. Any adjustment representing a change of
less than such minimum amount (except as aforesaid) which is postponed shall be
carried forward and made as soon as such adjustment, together with other
adjustments required by this Section 4 and not previously made, would result in
a minimum adjustment or on the date of exercise. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
(ii) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest one one-hundredth (1/100th) of a share.
(iii) When Adjustment Not Required. If the Issuer shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(f) Form of Warrant after Adjustments. The form of this Warrant need not be
changed because of any adjustments in the Warrant Price or the number and kind
of Securities purchasable upon the exercise of this Warrant.
(g) Escrow of Warrant Stock. If after any property becomes distributable
pursuant to this Section 4 by reason of the taking of any record of the holders
of Common Stock, but prior to the occurrence of the event for which such record
is taken, and the Holder exercises this Warrant, any shares of Common Stock
issuable upon exercise by reason of such adjustment shall be deemed the last
shares of Common Stock for which this Warrant is exercised (notwithstanding any
other provision to the contrary herein) and such shares or other property shall
be held in escrow for the Holder by the Issuer to be issued to the Holder upon
and to the extent that the event actually takes place, upon payment of the
current Warrant Price. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be cancelled by the Issuer and
escrowed property returned.
9
5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with respect to the matters set forth in such certificate may at
the option of the Holder of this Warrant be submitted to a national accounting
firm selected by the Holder, provided that the Issuer shall have ten (10) days
after receipt of notice from such Holder of its selection of such firm to object
thereto, in which case such Holder shall select another such firm and the Issuer
shall have no such right of objection. The firm selected by the Holder of this
Warrant as provided in the preceding sentence shall be instructed to deliver a
written opinion as to such matters to the Issuer and such Holder within thirty
(30) days after submission to it of such dispute. Such opinion shall be final
and binding on the parties hereto.
6. Fractional Shares. No fractional shares of Warrant Stock will be issued
in connection with any exercise hereof, but in lieu of such fractional shares,
the Issuer shall make a cash payment therefor equal in amount to the product of
the applicable fraction multiplied by the Per Share Market Value then in effect.
7. Ownership Cap and Certain Exercise Restrictions.
(a) Notwithstanding anything to the contrary set forth in this Warrant, at
no time may a Holder of this Warrant exercise this Warrant if the number of
shares of Common Stock to be issued pursuant to such exercise, when aggregated
with all other shares of Common Stock owned by such Holder at such time, would
exceed the number of shares of Common Stock which would result in such Holder
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules thereunder) more than 4.99% of all of the Common
Stock outstanding at such time; provided, however, that upon the Holder of this
Warrant providing the Issuer with sixty-one (61) days notice (pursuant to
Section 12 hereof) (the "Waiver Notice") that such Holder would like to waive
this Section 7(a) with regard to any or all shares of Common Stock issuable upon
exercise of this Warrant, this Section 7(a) will be of no force or effect with
regard to all or a portion of the Warrant referenced in the Waiver Notice;
provided, further, that this provision shall be of no further force or effect
during the sixty-one (61) days immediately preceding the expiration of the term
of this Warrant. The Holder may waive this Section 7(a) by so indicating on the
signature page to the Purchase Agreement, any such waiver to be effective on and
as of the Original Issue Date.
(b) The Holder may not exercise the Warrant hereunder to the extent such
exercise would result in the Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder) in
excess of 9.99% of the then issued and outstanding shares of Common Stock,
including shares issuable upon exercise of this Warrant held by the Holder;
provided, however, that upon a holder of this Warrant providing the Issuer with
a Waiver Notice that such holder would like to waive this Section 7(b) with
regard to
10
any or all shares of Common Stock issuable upon exercise of this Warrant, this
Section 7(b) shall be of no force or effect with regard to those shares of
Warrant Stock referenced in the Waiver Notice; provided, further, that this
provision shall be of no further force or effect during the sixty-one (61) days
immediately preceding the expiration of the term of this Warrant.
8. Call. Notwithstanding anything herein to the contrary, commencing one
(1) year following the effective date of a registration statement under the
Securities Act providing for the resale of the Warrant Stock and the shares of
Common Stock issuable pursuant to the Purchase Agreement (the "Registration
Statement"), the Issuer, at its option, may call up to one hundred percent
(100%) of this Warrant if the average of the Per Share Market Value of the
Common Stock has been greater than one hundred fifty percent (150%) of the
Warrant Price (as may be adjusted for any stock splits or combinations of the
Common Stock) for a period of twenty (20) consecutive Trading Days immediately
prior to the date of delivery of the Call Notice (a "Call Notice Period") by
providing the Holder of this Warrant written notice pursuant to Section 13 (the
"Call Notice"); provided, that (a) the Registration Statement is then in effect
and has been effective, without lapse or suspension of any kind, for a period of
sixty (60) consecutive calendar days, (b) trading in the Common Stock shall not
have been suspended by the Securities and Exchange Commission or Nasdaq and (c)
the Issuer is in material compliance with the terms and conditions of this
Warrant and the other Transaction Documents (as defined in the Purchase
Agreement); provided, further, that the Registration Statement is in effect from
the date of delivery of the Call Notice until the date which is the later of (i)
the date the Holder exercises the Warrant pursuant to the Call Notice and (ii)
the 20th day after the Holder receives the Call Notice (the "Early Termination
Date"). The rights and privileges granted pursuant to this Warrant with respect
to the shares of Warrant Stock subject to the Call Notice (the "Called Warrant
Shares") shall expire on the Early Termination Date if this Warrant is not
exercised with respect to such Called Warrant Shares prior to such Early
Termination Date. In the event this Warrant is not exercised with respect to the
Called Warrant Shares, the Issuer shall remit to the Holder of this Warrant (A)
$.10 per Called Warrant Share and (B) a new Warrant representing the number of
shares of Warrant Stock, if any, which shall not have been subject to the Call
Notice upon the Holder's tendering to the Issuer the applicable Warrant
certificate.
9. Definitions. For the purposes of this Warrant, the following terms have
the following meanings:
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or
limited) in any Person which is a partnership, (iii) all membership
interests or limited liability company interests in any limited liability
company, and (iv) all equity or ownership interests in any Person of any
other type.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Issuer as in effect on the Original Issue Date, and as hereafter
from time to time amended, modified, supplemented or restated in accordance
with the terms hereof and thereof and pursuant to applicable law.
11
"Common Stock" means the Common Stock, par value $0.01 per share, of
the Issuer and any other Capital Stock into which such stock may hereafter
be changed.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority, commission,
board, agency or instrumentality, whether federal, state or local, and
whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Issuer) that is regularly engaged
in the business of appraising the Capital Stock or assets of corporations
or other entities as going concerns, and which is not affiliated with
either the Issuer or the Holder of any Warrant.
"Issuer" means Delcath Systems, Inc., a Delaware corporation, and its
successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable under
the Warrants at the time outstanding.
"Nasdaq" means the Nasdaq SmallCap Market.
"Original Issue Date" means November 24, 2004.
"OTC Bulletin Board" means the over-the-counter electronic bulletin
board.
"Person" means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on Nasdaq or another
registered national stock exchange on which the Common Stock is then
listed, as reported in The Wall Street Journal, or if there is no such
price on such date, then the closing bid price on such exchange or
quotation system on the date nearest preceding such date, or (b) if the
Common Stock is not listed then on Nasdaq or any registered national stock
exchange, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the OTC Bulletin Board or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business
on such date, or (c) if the Common Stock is not then reported by the OTC
Bulletin Board or the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the five days preceding
such date of determination, or (d) if the
12
Common Stock is not then publicly traded the fair market value of a share
of Common Stock as determined by an Independent Appraiser selected in good
faith by the Majority Holders; provided, however, that the Issuer, after
receipt of the determination by such Independent Appraiser, shall have the
right to select an additional Independent Appraiser, in which case, the
fair market value shall be equal to the average of the determinations by
each such Independent Appraiser; and provided, further that all
determinations of the Per Share Market Value shall be appropriately
adjusted for any stock dividends, stock splits or other similar
transactions during such period. The determination of fair market value by
an Independent Appraiser shall be based upon the fair market value of the
Issuer determined on a going concern basis as between a willing buyer and a
willing seller and taking into account all relevant factors determinative
of value, and shall be final and binding on all parties. The cost of such
Independent Appraiser shall be borne equally by the Issuer and the Holder.
"Purchase Agreement" means the Common Stock Purchase Agreement dated
as of November 24, 2004, among the Issuer and the investors a party
thereto.
"Securities" means any debt or equity securities of the Issuer,
whether now or hereafter authorized, any instrument convertible into or
exchangeable for Securities or a Security, and any option, warrant or other
right to purchase or acquire any Security. "Security" means one of the
Securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose outstanding
Voting Stock shall at the time be owned directly or indirectly by the
Issuer or by one or more of its Subsidiaries, or by the Issuer and one or
more of its Subsidiaries.
"Term" has the meaning specified in Section 1 hereof.
"Trading Day" means (a) a day on which the Common Stock is traded on
Nasdaq, or (b) if the Common Stock is not listed on Nasdaq, a day on which
the Common Stock is traded on any other registered national stock exchange,
or (c) if the Common Stock is not traded on any other registered national
stock exchange, a day on which the Common Stock is traded on the OTC
Bulletin Board, or (d) if the Common Stock is not traded on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its
functions of reporting prices); provided, however, that in the event that
the Common Stock is not listed or quoted as set forth in (a), (b) or (c)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions
in the State of New York are authorized or required by law or other
government action to close.
"Voting Stock" means, as applied to the Capital Stock of any
corporation, Capital Stock of any class or classes (however designated)
having ordinary voting power for the
13
election of a majority of the members of the Board of Directors (or other
governing body) of such corporation, other than Capital Stock having such
power only by reason of the happening of a contingency.
"Warrants" means the Warrants issued and sold pursuant to the Purchase
Agreement, including, without limitation, this Warrant, and any other
warrants of like tenor issued in substitution or exchange for any thereof
pursuant to the provisions of Section 2(c), 2(d) or 2(e) hereof or of any
of such other Warrants.
"Warrant Price" initially means U.S. $2.78, as such Warrant Price may
be adjusted from time to time as shall result from the adjustments
specified in this Warrant, including Section 4 hereto.
"Warrant Share Number" means at any time the aggregate number of
shares of Warrant Stock which may at such time be purchased upon exercise
of this Warrant, after giving effect to all prior adjustments and increases
to such number made or required to be made under the terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of any
Warrant or Warrants or otherwise issuable pursuant to any Warrant or
Warrants.
10. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the holders
of Common Stock; or
(B) the Issuer shall authorize the granting to all holders
of its Common Stock of rights to subscribe for or
purchase any shares of Capital Stock of any class or
other rights; or
(C) there shall be any reclassification of the Capital
Stock of the Issuer; or
(D) there shall be any capital reorganization by the
Issuer; or
(E) there shall be any (i) consolidation or merger
involving the Issuer or (ii) sale, transfer or other
disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other
reorganization in which the Issuer shall be the
surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and
except a consolidation, merger, sale, transfer or other
disposition involving a wholly-owned Subsidiary); or
(F) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Issuer or any partial
14
liquidation of the Issuer or distribution to holders of
Common Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the record date or effective date for the event specified in
such notice.
11. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 10 without the consent of the Holder of this Warrant.
12. Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Warrant
shall not be interpreted or construed with any presumption against the party
causing this Warrant to be drafted. The Issuer and the Holder agree that venue
for any dispute arising under this Warrant will lie exclusively in the state or
federal courts located in New York County, New York, and the parties irrevocably
waive any right to raise forum non conveniens or any other argument that New
York is not the proper venue. The Issuer and the Holder irrevocably consent to
personal jurisdiction in the state and federal courts of the state of New York.
The Issuer and the Holder consent to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Warrant and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section 11 shall affect or limit any right to serve process in any other
manner permitted by law. The Issuer and the Holder hereby agree that the
prevailing party in any suit, action or proceeding arising out of or relating to
the this Warrant or the Purchase Agreement, shall be entitled to reimbursement
for reasonable legal fees from the non-prevailing party.
13. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., eastern time, on a
Trading Day, (ii) the Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile telephone number
specified for notice later than 5:00 p.m., eastern time, on any date and earlier
than 11:59 p.m., eastern time, on such
15
date, (iii) the Trading Day following the date of mailing, if sent by overnight
delivery by nationally recognized overnight courier service or (iv) actual
receipt by the party to whom such notice is required to be given. The addresses
for such communications shall be with respect to the Holder of this Warrant or
of Warrant Stock issued pursuant hereto, addressed to such Holder at its last
known address or facsimile number appearing on the books of the Issuer
maintained for such purposes, or with respect to the Issuer, addressed to:
Delcath Systems, Inc.
1100 Summer Street, 3rd Floor
Stamford, Connecticut 06905
Attention: President and Chief Executive Officer
Tel. No.: (203) 323-8668
Fax No.: (203) 961-0120
Copies of notices to the Issuer shall be sent to Murtha Cullina LLP, Whitney
Grove Square, Two Whitney Avenue, New Haven, Connecticut 06503, Attention: Paul
G. Hughes, Tel. No.: (203) 772-7700, Fax No.: (203) 772-7723. Copies of notices
to the Holder shall be sent to Jenkens & Gilchrist Parker Chapin LLP, 405
Lexington Avenue, New York, New York 10174, Attention: Christopher S. Auguste,
Facsimile No.: (212) 704-6288. Any party hereto may from time to time change its
address for notices by giving at least ten (10) days written notice of such
changed address to the other party hereto.
14. Warrant Agent. The Issuer may, by written notice to each Holder of this
Warrant, appoint an agent having an office in New York, New York for the purpose
of issuing shares of Warrant Stock on the exercise of this Warrant pursuant to
subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to
subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
15. Remedies. The Issuer stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Issuer
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
16. Successors and Assigns. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Stock.
17. Modification and Severability. If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of
16
this Warrant, but this Warrant shall be construed as if such unenforceable
provision had never been contained herein.
18. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
17
IN WITNESS WHEREOF, the Issuer has executed this Series A Warrant as of the
day and year first above written.
DELCATH SYSTEMS, INC.
By:
-----------------------------
Name: M.S. Koly
Title: President and Chief Executive
Officer
18
EXERCISE FORM
SERIES A WARRANT
DELCATH SYSTEMS, INC.
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of Delcath
Systems, Inc. covered by the within Warrant.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise: _________________________
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
FOR USE BY THE ISSUER ONLY:
19
This Warrant No. W-A-04-___ canceled (or transferred or exchanged) this _____
day of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-A-04-_____ issued for ____ shares of Common Stock
in the name of _______________.
-20-
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR DELCATH SYSTEMS, INC. SHALL HAVE RECEIVED AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO DELCATH SYSTEMS, INC. THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
SERIES B WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
DELCATH SYSTEMS, INC.
No.: W-B-04-__ Number of Shares: ___________
Date of Issuance: November 24, 2004
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, Delcath Systems, Inc., a Delaware corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that
_______________________________ or its registered assigns is entitled to
subscribe for and purchase, during the Term (as hereinafter defined), up to
____________________________________ (_____________) shares (subject to
adjustment as hereinafter provided) of the duly authorized, validly issued,
fully paid and non-assessable Common Stock of the Issuer, at an exercise price
per share equal to the Warrant Price then in effect, subject, however, to the
provisions and upon the terms and conditions hereinafter set forth. Capitalized
terms used in this Warrant and not otherwise defined herein shall have the
respective meanings specified in Section 9 hereof.
1. Term. The term of this Warrant shall commence on November 24, 2004 and
shall expire at 5:00 p.m., eastern time, on the date that is ninety (90) Trading
Days following the effective date (the "Effectiveness Date") of a registration
statement (the "Registration Statement") under the Securities Act providing for
the resale of the Warrant Stock and the shares of Common Stock issuable pursuant
to the Purchase Agreement (such period being the "Term").
2. Method of Exercise Payment; Issuance of New Warrant; Transfer and
Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant may
be exercised in whole or in part during the Term commencing on the Effectiveness
Date and expiring on the date that is ninety (90) Trading Days following the
Effectiveness Date.
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election by certified or official bank check
or by wire transfer to an account designated by the Issuer. The Holder shall
surrender this Warrant to the Issuer within three (3) Trading Days of the date
of exercise.
(c) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after such
exercise (the "Delivery Date") or, at the request of the Holder (provided that a
registration statement under the Securities Act providing for the resale of the
Warrant Stock is then in effect), issued and delivered to the Depository Trust
Company ("DTC") account on the Holder's behalf via the Deposit Withdrawal Agent
Commission System ("DWAC") within a reasonable time, not exceeding three (3)
Trading Days after such exercise, and the Holder hereof shall be deemed for all
purposes to be the holder of the shares of Warrant Stock so purchased as of the
date of such exercise and (ii) unless this Warrant has expired, a new Warrant
representing the number of shares of Warrant Stock, if any, with respect to
which this Warrant shall not then have been exercised (less any amount thereof
which shall have been canceled in payment or partial payment of the Warrant
Price as hereinafter provided) shall also be issued to the Holder hereof at the
Issuer's expense within such time. In addition to any other rights available to
the Holder, if the Issuer fails to deliver to the Holder such certificate or
certificates pursuant to Section 2(d) by the Delivery Date and if after the
Delivery Date the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by such Holder of
the Warrant Stock which the Holder anticipated receiving upon such exercise (a
"Buy-In"), then the Issuer shall pay in cash to the Holder an amount equal to
(A) the aggregate amount paid by such Holder for the shares of Common Stock so
purchased minus (B) the aggregate amount of net proceeds received by such Holder
from the sale of the shares of Common Stock issued by the Issuer pursuant to
such exercise. The Holder shall provide the Issuer written notice indicating the
amounts payable to the Holder in respect of the Buy-In.
(d) Transferability of Warrant. Subject to Section 2(f), this Warrant may
be transferred by a Holder without the consent of the Issuer. If transferred
pursuant to this paragraph and subject to the provisions of subsection (f) of
this Section 2, this Warrant may be transferred on the books of the Issuer by
the Holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant at the principal office of the Issuer, properly endorsed (by the
Holder's executing an assignment in the form attached hereto) and upon payment
of any necessary transfer tax or other governmental charge imposed upon such
transfer. This Warrant is exchangeable at the principal office of the Issuer for
Warrants for the purchase of the same aggregate number of shares of Warrant
Stock, each new Warrant to represent the right to purchase such number of shares
of Warrant Stock as the Holder hereof shall designate at the time of such
exchange. All Warrants issued on transfers or exchanges shall be dated the
Original
2
Issue Date and shall be identical with this Warrant except as to the number of
shares of Warrant Stock issuable pursuant thereto.
(e) Continuing Rights of Holder. The Issuer will, at the time of or at any
time after each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
(f) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant and the shares of Warrant Stock to be issued upon
exercise hereof are being acquired solely for the Holder's own account and
not as a nominee for any other party, and for investment, and that the
Holder will not offer, sell or otherwise dispose of this Warrant or any
shares of Warrant Stock to be issued upon exercise hereof except pursuant
to an effective registration statement, or an exemption from registration,
under the Securities Act and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant and all
certificates representing shares of Warrant Stock issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND
UNDER APPLICABLE STATE SECURITIES LAWS OR DELCATH SYSTEMS,
INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO DELCATH SYSTEMS, INC. THAT REGISTRATION OF
SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
(iii) The Issuer agrees to reissue this Warrant or certificates
representing any of the Warrant Stock, without the legend set forth above
if at such time, prior to making any transfer of any such securities, the
Holder shall give written notice to the Issuer upon the occurrence of: (a)
either (i) the Issuer has received an opinion of counsel reasonably
satisfactory to the Issuer, to the effect that the registration of such
securities under the Securities Act is not required in connection with such
proposed transfer, (ii) a registration statement under the Securities Act
covering such proposed disposition has been filed by the Issuer with the
Securities and Exchange Commission and has become effective under
3
the Securities Act, (iii) the Issuer has received other evidence reasonably
satisfactory to the Issuer that such registration and qualification under
the Securities Act and state securities laws are not required, or (iv) the
Holder provides the Issuer with reasonable assurances that such security
can be sold pursuant to Rule 144 under the Securities Act; and (b) either
(i) the Issuer has received an opinion of counsel reasonably satisfactory
to the Issuer, to the effect that registration or qualification under the
securities or "blue sky" laws of any state is not required in connection
with such proposed disposition, or (ii) compliance with applicable state
securities or "blue sky" laws has been effected or a valid exemption exists
with respect thereto. The Issuer will respond to any such notice from a
holder within five (5) business days. In the case of any proposed transfer
under this Section 2(f), the Issuer will use reasonable efforts to comply
with any such applicable state securities or "blue sky" laws, but shall in
no event be required, (x) to qualify to do business in any state where it
is not then qualified, (y) to take any action that would subject it to tax
or to the general service of process in any state where it is not then
subject, or (z) to comply with state securities or "blue sky" laws of any
state for which registration by coordination is unavailable to the Issuer.
The restrictions on transfer contained in this Section 2(f) shall be in
addition to, and not by way of limitation of, any other restrictions on
transfer contained in any other section of this Warrant. Whenever a
certificate representing the Warrant Stock is required to be issued to a
the Holder without a legend, in lieu of delivering physical certificates
representing the Warrant Stock, provided the Issuer's transfer agent is
participating in the DTC Fast Automated Securities Transfer program, the
Issuer shall use its reasonable best efforts to cause its transfer agent to
electronically transmit the Warrant Stock to the Holder by crediting the
account of the Holder's Prime Broker with DTC through its DWAC system (to
the extent not inconsistent with any provisions of this Warrant or the
Purchase Agreement).
(g) In no event may the Holder exercise this Warrant in whole or in part
unless the Holder is an "accredited investor" as defined in Regulation D under
the Securities Act.
3. Stock Fully Paid; Reservation and Listing of Shares; Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and agrees
that all shares of Warrant Stock which may be issued upon the exercise of this
Warrant or otherwise hereunder will, when issued in accordance with the terms of
this Warrant, be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges created by or through the Issuer. The
Issuer further covenants and agrees that during the period within which this
Warrant may be exercised, the Issuer will at all times have authorized and
reserved for the purpose of the issue upon exercise of this Warrant a sufficient
number of shares of Common Stock to provide for the exercise of this Warrant.
(b) Reservation. If any shares of Common Stock required to be reserved for
issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its reasonable best efforts as expeditiously as possible at its
expense to cause such shares to be duly registered or qualified. If the Issuer
shall list any shares of Common Stock on any securities exchange or market it
will, at its expense, list thereon, maintain and increase when necessary such
listing, of all shares of Warrant Stock from
4
time to time issued upon exercise of this Warrant or as otherwise provided
hereunder (provided that such Warrant Stock has been registered pursuant to a
registration statement under the Securities Act then in effect), and, to the
extent permissible under the applicable securities exchange rules, all unissued
shares of Warrant Stock which are at any time issuable hereunder, so long as any
shares of Common Stock shall be so listed. The Issuer will also so list on each
securities exchange or market, and will maintain such listing of, any other
securities which the Holder of this Warrant shall be entitled to receive upon
the exercise of this Warrant if at the time any securities of the same class
shall be listed on such securities exchange or market by the Issuer.
(c) Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect the rights of the Holders of
the Warrants in their capacity as Holders of the Warrants, (iii) take all such
action as may be reasonably necessary in order that the Issuer may validly and
legally issue fully paid and nonassessable shares of Common Stock, free and
clear of any liens, claims, encumbrances and restrictions (other than as
provided herein) upon the exercise of this Warrant, and (iv) use its reasonable
best efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be reasonably
necessary to enable the Issuer to perform its obligations under this Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
4. Adjustment of Warrant Price and Warrant Share Number. The number of
shares of Common Stock for which this Warrant is exercisable, and the price at
which such shares may be purchased upon exercise of this Warrant, shall be
subject to adjustment from time to time as set forth in this Section 4. The
Issuer shall give the Holder notice of any event described below which requires
an adjustment pursuant to this Section 4 in accordance with Section 5.
(a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale.
(i) In case the Issuer after the Original Issue Date shall do any of
the following (each, a "Triggering Event"): (a) consolidate or merge with
or into another corporation where the holders of outstanding Voting Stock
prior to such merger or consolidation do
5
not own over 50% of the outstanding Voting Stock of the merged or
consolidated entity immediately after such merger or consolidation, or (b)
sell all or substantially all of its properties or assets to any other
Person, or (c) change the Common Stock to the same or a different number of
shares of any class or classes of stock, whether by reclassification,
exchange, substitution or otherwise (other than by way of a stock split or
combination of shares or stock dividends or distributions provided for in
Section 4(b) or Section 4(c)), or (d) effect a capital reorganization
(other than by way of a stock split or combination of shares or stock
dividends or distributions provided for in Section 4(b) or Section 4(c)),
then, and in the case of each such Triggering Event, proper provision shall
be made so that, upon the basis and the terms and in the manner provided in
this Warrant, the Holder of this Warrant shall be entitled upon the
exercise hereof at any time after the consummation of such Triggering
Event, to the extent this Warrant is not exercised prior to such Triggering
Event, to receive at the Warrant Price in effect at the time immediately
prior to the consummation of such Triggering Event in lieu of the Common
Stock issuable upon such exercise of this Warrant prior to such Triggering
Event, the securities, cash and property to which such Holder would have
been entitled upon the consummation of such Triggering Event if such Holder
had exercised the rights represented by this Warrant immediately prior
thereto, subject to adjustments (subsequent to such corporate action) as
nearly equivalent as possible to the adjustments provided for elsewhere in
this Section 4.
(ii) Notwithstanding anything contained in this Warrant to the
contrary, a Triggering Event shall not be deemed to have occurred if, prior
to the consummation thereof, each Person (other than the Issuer) which may
be required to deliver any securities, cash or property upon the exercise
of this Warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the Holder of this Warrant,
(A) the obligations of the Issuer under this Warrant (and if the Issuer
shall survive the consummation of such Triggering Event, such assumption
shall be in addition to, and shall not release the Issuer from, any
continuing obligations of the Issuer under this Warrant) and (B) the
obligation to deliver to such Holder such shares of securities, cash or
property as, in accordance with the foregoing provisions of this subsection
(a), such Holder shall be entitled to receive, and such Person shall have
similarly delivered to such Holder a written acknowledgement executed by
the President or Chief Financial Officer of the Issuer, stating that this
Warrant shall thereafter continue in full force and effect and the terms
hereof (including, without limitation, all of the provisions of this
subsection (a)) shall be applicable to the securities, cash or property
which such Person may be required to deliver upon any exercise of this
Warrant or the exercise of any rights pursuant hereto.
(b) Stock Dividends, Subdivisions and Combinations. If at any time the
Issuer shall:
(i) make or issue or set a record date for the holders of its
Common Stock for the purpose of entitling them to receive a dividend
payable in, or other distribution of, shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a
larger
6
number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (1) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (2) the Warrant Price then in
effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such adjustment.
Notwithstanding the foregoing, if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Warrant Price shall be adjusted pursuant to this
paragraph as of the time of actual payment of such dividends or distributions.
(c) Certain Other Distributions. If at any time the Issuer shall make or
issue or set a record date for the determination of the holders of its Common
Stock for the purpose of entitling them to receive any dividend or other
distribution of:
(i) cash (other than a cash dividend payable out of earnings or earned
surplus legally available for the payment of dividends under the laws of
the jurisdiction of incorporation of the Issuer),
(ii) any evidences of its indebtedness, any shares of stock of any
class or any other securities or property of any nature whatsoever (other
than cash), or
(iii) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class or any
other securities or property of any nature whatsoever (other than cash),
then (1) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by a fraction (A) the numerator of which shall be the Per
Share Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable and of
the fair value (as determined in good faith by the Board of Directors of the
Issuer and supported by an opinion from an investment banking firm of recognized
national standing acceptable to (but not affiliated with) the Holder) of any and
all such evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights so distributable,
and (2) the Warrant Price then in effect shall be adjusted to equal (A) the
Warrant Price then in effect multiplied by the number of shares of Common Stock
for which this Warrant is exercisable
7
immediately prior to the adjustment divided by (B) the number of shares of
Common Stock for which this Warrant is exercisable immediately after such
adjustment. A reclassification of the Common Stock (other than a change in par
value, or from par value to no par value or from no par value to par value) into
shares of Common Stock and shares of any other class of stock shall be deemed a
distribution by the Issuer to the holders of its Common Stock of such shares of
such other class of stock within the meaning of this Section 4(c) and, if the
outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 4(b).
Notwithstanding the foregoing, if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Warrant Price shall be adjusted pursuant to this
Section 4(c) as of the time of actual payment of such dividends or
distributions.
(d) Intentionally Omitted.
(e) Other Provisions applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price then in effect provided for in this Section 4:
(i) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4(b)) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than one percent (1%) of
the shares of Common Stock for which this Warrant is exercisable immediately
prior to the making of such adjustment. Any adjustment representing a change of
less than such minimum amount (except as aforesaid) which is postponed shall be
carried forward and made as soon as such adjustment, together with other
adjustments required by this Section 4 and not previously made, would result in
a minimum adjustment or on the date of exercise. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
(ii) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest one one-hundredth (1/100th) of a share.
(iii) When Adjustment Not Required. If the Issuer shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the
8
taking of such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(f) Form of Warrant after Adjustments. The form of this Warrant need not be
changed because of any adjustments in the Warrant Price or the number and kind
of Securities purchasable upon the exercise of this Warrant.
(g) Escrow of Warrant Stock. If after any property becomes distributable
pursuant to this Section 4 by reason of the taking of any record of the holders
of Common Stock, but prior to the occurrence of the event for which such record
is taken, and the Holder exercises this Warrant, any shares of Common Stock
issuable upon exercise by reason of such adjustment shall be deemed the last
shares of Common Stock for which this Warrant is exercised (notwithstanding any
other provision to the contrary herein) and such shares or other property shall
be held in escrow for the Holder by the Issuer to be issued to the Holder upon
and to the extent that the event actually takes place, upon payment of the
current Warrant Price. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be cancelled by the Issuer and
escrowed property returned.
5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with respect to the matters set forth in such certificate may at
the option of the Holder of this Warrant be submitted to a national accounting
firm selected by the Holder, provided that the Issuer shall have ten (10) days
after receipt of notice from such Holder of its selection of such firm to object
thereto, in which case such Holder shall select another such firm and the Issuer
shall have no such right of objection. The firm selected by the Holder of this
Warrant as provided in the preceding sentence shall be instructed to deliver a
written opinion as to such matters to the Issuer and such Holder within thirty
(30) days after submission to it of such dispute. Such opinion shall be final
and binding on the parties hereto.
6. Fractional Shares. No fractional shares of Warrant Stock will be issued
in connection with any exercise hereof, but in lieu of such fractional shares,
the Issuer shall make a cash payment therefor equal in amount to the product of
the applicable fraction multiplied by the Per Share Market Value then in effect.
7. Ownership Cap and Certain Exercise Restrictions.
(a) Notwithstanding anything to the contrary set forth in this Warrant, at
no time may a Holder of this Warrant exercise this Warrant if the number of
shares of Common Stock to be issued pursuant to such exercise, when aggregated
with all other shares of Common Stock
9
owned by such Holder at such time, would exceed the number of shares of Common
Stock which would result in such Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder) more
than 4.99% of all of the Common Stock outstanding at such time; provided,
however, that upon the Holder of this Warrant providing the Issuer with
sixty-one (61) days notice (pursuant to Section 12 hereof) (the "Waiver Notice")
that such Holder would like to waive this Section 7(a) with regard to any or all
shares of Common Stock issuable upon exercise of this Warrant, this Section 7(a)
will be of no force or effect with regard to all or a portion of the Warrant
referenced in the Waiver Notice; provided, further, that this provision shall be
of no further force or effect during the sixty-one (61) days immediately
preceding the expiration of the term of this Warrant. The Holder may waive this
Section 7(a) by so indicating on the signature page to the Purchase Agreement,
any such waiver to be effective on and as of the Original Issue Date.
(b) The Holder may not exercise the Warrant hereunder to the extent such
exercise would result in the Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder) in
excess of 9.99% of the then issued and outstanding shares of Common Stock,
including shares issuable upon exercise of this Warrant held by the Holder;
provided, however, that upon a holder of this Warrant providing the Issuer with
a Waiver Notice that such holder would like to waive this Section 7(b) with
regard to any or all shares of Common Stock issuable upon exercise of this
Warrant, this Section 7(b) shall be of no force or effect with regard to those
shares of Warrant Stock referenced in the Waiver Notice; provided, further, that
this provision shall be of no further force or effect during the sixty-one (61)
days immediately preceding the expiration of the term of this Warrant.
8. Call. Notwithstanding anything herein to the contrary, at any time
following the Effectiveness Date of the Registration Statement, the Issuer, at
its option, may call up to one hundred percent (100%) of this Warrant if the
average of the Per Share Market Value of the Common Stock has been greater than
$2.60 (as may be adjusted for any stock splits or combinations of the Common
Stock) for a period of twenty (20) consecutive Trading Days immediately prior to
the date of delivery of the Call Notice (a "Call Notice Period") by providing
the Holder of this Warrant written notice pursuant to Section 13 (the "Call
Notice"); provided, that (a) the Registration Statement is then in effect and
has been effective, without lapse or suspension of any kind, for a period of
twenty (20) consecutive calendar days, (b) trading in the Common Stock shall not
have been suspended by the Securities and Exchange Commission or Nasdaq and (c)
the Issuer is in material compliance with the terms and conditions of this
Warrant and the other Transaction Documents (as defined in the Purchase
Agreement); provided, further, that the Registration Statement is in effect from
the date of delivery of the Call Notice until the date which is the later of (i)
the date the Holder exercises the Warrant pursuant to the Call Notice and (ii)
the 20th day after the Holder receives the Call Notice (the "Early Termination
Date"). The rights and privileges granted pursuant to this Warrant with respect
to the shares of Warrant Stock subject to the Call Notice (the "Called Warrant
Shares") shall expire on the Early Termination Date if this Warrant is not
exercised with respect to such Called Warrant Shares prior to such Early
Termination Date. In the event this Warrant is not exercised with respect to the
Called Warrant Shares, the Issuer shall remit to the Holder of this Warrant (A)
$.10 per Called Warrant Share and (B) a new Warrant representing the number of
shares of Warrant Stock, if any, which shall not have been subject to the Call
Notice upon the Holder's tendering to the Issuer the applicable Warrant
certificate.
10
9. Definitions. For the purposes of this Warrant, the following terms have
the following meanings:
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or
limited) in any Person which is a partnership, (iii) all membership
interests or limited liability company interests in any limited liability
company, and (iv) all equity or ownership interests in any Person of any
other type.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Issuer as in effect on the Original Issue Date, and as hereafter
from time to time amended, modified, supplemented or restated in accordance
with the terms hereof and thereof and pursuant to applicable law.
"Common Stock" means the Common Stock, par value $0.01 per share, of
the Issuer and any other Capital Stock into which such stock may hereafter
be changed.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority, commission,
board, agency or instrumentality, whether federal, state or local, and
whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Issuer) that is regularly engaged
in the business of appraising the Capital Stock or assets of corporations
or other entities as going concerns, and which is not affiliated with
either the Issuer or the Holder of any Warrant.
"Issuer" means Delcath Systems, Inc., a Delaware corporation, and its
successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable under
the Warrants at the time outstanding.
"Nasdaq" means the Nasdaq SmallCap Market.
"Original Issue Date" means November 24, 2004.
"OTC Bulletin Board" means the over-the-counter electronic bulletin
board.
11
"Person" means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on Nasdaq or another
registered national stock exchange on which the Common Stock is then
listed, as reported in The Wall Street Journal, or if there is no such
price on such date, then the closing bid price on such exchange or
quotation system on the date nearest preceding such date, or (b) if the
Common Stock is not listed then on Nasdaq or any registered national stock
exchange, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the OTC Bulletin Board or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business
on such date, or (c) if the Common Stock is not then reported by the OTC
Bulletin Board or the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the five days preceding
such date of determination, or (d) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined by an
Independent Appraiser selected in good faith by the Majority Holders;
provided, however, that the Issuer, after receipt of the determination by
such Independent Appraiser, shall have the right to select an additional
Independent Appraiser, in which case, the fair market value shall be equal
to the average of the determinations by each such Independent Appraiser;
and provided, further that all determinations of the Per Share Market Value
shall be appropriately adjusted for any stock dividends, stock splits or
other similar transactions during such period. The determination of fair
market value by an Independent Appraiser shall be based upon the fair
market value of the Issuer determined on a going concern basis as between a
willing buyer and a willing seller and taking into account all relevant
factors determinative of value, and shall be final and binding on all
parties. The cost of such Independent Appraiser shall be borne equally by
the Issuer and the Holder.
"Purchase Agreement" means the Common Stock Purchase Agreement dated
as of November 24, 2004, among the Issuer and the investors a party
thereto.
"Securities" means any debt or equity securities of the Issuer,
whether now or hereafter authorized, any instrument convertible into or
exchangeable for Securities or a Security, and any option, warrant or other
right to purchase or acquire any Security. "Security" means one of the
Securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose outstanding
Voting Stock shall at the time be owned directly or indirectly by the
Issuer or by one or more of its Subsidiaries, or by the Issuer and one or
more of its Subsidiaries.
"Term" has the meaning specified in Section 1 hereof.
12
"Trading Day" means (a) a day on which the Common Stock is traded on
Nasdaq, or (b) if the Common Stock is not listed on Nasdaq, a day on which
the Common Stock is traded on any other registered national stock exchange,
or (c) if the Common Stock is not traded on any other registered national
stock exchange, a day on which the Common Stock is traded on the OTC
Bulletin Board, or (d) if the Common Stock is not traded on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its
functions of reporting prices); provided, however, that in the event that
the Common Stock is not listed or quoted as set forth in (a), (b) or (c)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions
in the State of New York are authorized or required by law or other
government action to close.
"Voting Stock" means, as applied to the Capital Stock of any
corporation, Capital Stock of any class or classes (however designated)
having ordinary voting power for the election of a majority of the members
of the Board of Directors (or other governing body) of such corporation,
other than Capital Stock having such power only by reason of the happening
of a contingency.
"Warrants" means the Warrants issued and sold pursuant to the Purchase
Agreement, including, without limitation, this Warrant, and any other
warrants of like tenor issued in substitution or exchange for any thereof
pursuant to the provisions of Section 2(c), 2(d) or 2(e) hereof or of any
of such other Warrants.
"Warrant Price" initially means U.S. $2.60, as such Warrant Price may
be adjusted from time to time as shall result from the adjustments
specified in this Warrant, including Section 4 hereto.
"Warrant Share Number" means at any time the aggregate number of
shares of Warrant Stock which may at such time be purchased upon exercise
of this Warrant, after giving effect to all prior adjustments and increases
to such number made or required to be made under the terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of any
Warrant or Warrants or otherwise issuable pursuant to any Warrant or
Warrants.
10. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the holders
of Common Stock; or
(B) the Issuer shall authorize the granting to all holders
of its Common Stock of rights to subscribe for or
purchase any shares of Capital Stock of any class or
other rights; or
13
(C) there shall be any reclassification of the Capital
Stock of the Issuer; or
(D) there shall be any capital reorganization by the
Issuer; or
(E) there shall be any (i) consolidation or merger
involving the Issuer or (ii) sale, transfer or other
disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other
reorganization in which the Issuer shall be the
surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and
except a consolidation, merger, sale, transfer or other
disposition involving a wholly-owned Subsidiary); or
(F) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Issuer or any partial
liquidation of the Issuer or distribution to holders of
Common Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the record date or effective date for the event specified in
such notice.
11. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 10 without the consent of the Holder of this Warrant.
12. Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Warrant
shall not be interpreted or construed with any presumption against the party
causing this Warrant to be drafted. The Issuer and the Holder agree that venue
for any dispute arising under this Warrant will lie exclusively in the state or
federal courts located in New York County, New York, and the parties irrevocably
waive any right to raise forum non conveniens or any other argument that New
York is not the proper venue. The Issuer and the Holder irrevocably consent to
personal jurisdiction in the state and federal courts of the state of
14
New York. The Issuer and the Holder consent to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Warrant and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 11 shall affect or limit any right to serve
process in any other manner permitted by law. The Issuer and the Holder hereby
agree that the prevailing party in any suit, action or proceeding arising out of
or relating to the this Warrant or the Purchase Agreement, shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing party.
13. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., eastern time, on a
Trading Day, (ii) the Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile telephone number
specified for notice later than 5:00 p.m., eastern time, on any date and earlier
than 11:59 p.m., eastern time, on such date, (iii) the Trading Day following the
date of mailing, if sent by overnight delivery by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to the Holder of this Warrant or of Warrant Stock issued pursuant
hereto, addressed to such Holder at its last known address or facsimile number
appearing on the books of the Issuer maintained for such purposes, or with
respect to the Issuer, addressed to:
Delcath Systems, Inc.
1100 Summer Street, 3rd Floor
Stamford, Connecticut 06905
Attention: President and Chief Executive Officer
Tel. No.: (203) 323-8668
Fax No.: (203) 961-0120
Copies of notices to the Issuer shall be sent to Murtha Cullina LLP, Whitney
Grove Square, Two Whitney Avenue, New Haven, Connecticut 06503, Attention: Paul
G. Hughes, Tel. No.: (203) 772-7700, Fax No.: (203) 772-7723. Copies of notices
to the Holder shall be sent to Jenkens & Gilchrist Parker Chapin LLP, 405
Lexington Avenue, New York, New York 10174, Attention: Christopher S. Auguste,
Facsimile No.: (212) 704-6288. Any party hereto may from time to time change its
address for notices by giving at least ten (10) days written notice of such
changed address to the other party hereto.
14. Warrant Agent. The Issuer may, by written notice to each Holder of this
Warrant, appoint an agent having an office in New York, New York for the purpose
of issuing shares of Warrant Stock on the exercise of this Warrant pursuant to
subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to
subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
15
15. Remedies. The Issuer stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Issuer
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
16. Successors and Assigns. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Stock.
17. Modification and Severability. If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
18. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
16
IN WITNESS WHEREOF, the Issuer has executed this Series B Warrant as of the
day and year first above written.
DELCATH SYSTEMS, INC.
By:
------------------------------
Name: M.S. Koly
Title: President and Chief
Executive Officer
17
EXERCISE FORM
SERIES B WARRANT
DELCATH SYSTEMS, INC.
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of Delcath
Systems, Inc. covered by the within Warrant.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise: _________________________
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature ____________________________
Address ____________________________
____________________________
FOR USE BY THE ISSUER ONLY:
18
This Warrant No. W-B-04-___ canceled (or transferred or exchanged) this _____
day of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-B-04-_____ issued for ____ shares of Common Stock
in the name of _______________.
-19-
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR DELCATH SYSTEMS, INC. SHALL HAVE RECEIVED AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO DELCATH SYSTEMS, INC. THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
SERIES C WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
DELCATH SYSTEMS, INC.
No.: W-C-04-__ Number of Shares: ___________
Date of Issuance: November 24, 2004
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, Delcath Systems, Inc., a Delaware corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that
_______________________________ or its registered assigns is entitled to
subscribe for and purchase, during the Term (as hereinafter defined), up to
____________________________________ (_____________) shares (subject to
adjustment as hereinafter provided) of the duly authorized, validly issued,
fully paid and non-assessable Common Stock of the Issuer, at an exercise price
per share equal to the Warrant Price then in effect, subject, however, to the
provisions and upon the terms and conditions hereinafter set forth. Capitalized
terms used in this Warrant and not otherwise defined herein shall have the
respective meanings specified in Section 9 hereof.
1. Term. The term of this Warrant shall commence on November 24, 2004 and
shall expire at 5:00 p.m., eastern time, on the earlier of (A) the date that is
ninety (90) Trading Days following the effective date of a registration
statement under the Securities Act providing for the resale of the Warrant Stock
and the shares of Common Stock issuable pursuant to the Purchase Agreement if
the Holder does not exercise its Series B Warrant issued pursuant to the
Purchase Agreement and (B) November 24, 2009 if the Holder exercises its Series
B Warrant (such period being the "Term").
2. Method of Exercise Payment; Issuance of New Warrant; Transfer and
Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant may
be exercised in whole or in part during the Term for only the number of shares
of Warrant Stock equal to the number of shares of Common Stock issuable upon
exercise of the Holder's Series B Warrant.
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election (i) by certified or official bank
check or by wire transfer to an account designated by the Issuer, (ii) by
"cashless exercise" in accordance with the provisions of subsection (c) of this
Section 2, but only until the date that a registration statement under the
Securities Act providing for the resale of the Warrant Stock has been declared
effective by the Securities and Exchange Commission or (iii) by a combination of
the foregoing methods of payment selected by the Holder of this Warrant. The
Holder shall surrender this Warrant to the Issuer within three (3) Trading Days
of the date of exercise.
(c) Cashless Exercise. Notwithstanding any provisions herein to the
contrary, if (i) the Per Share Market Value of one share of Common Stock is
greater than the Warrant Price (at the date of calculation as set forth below)
and (ii) a registration statement under the Securities Act providing for the
resale of the Warrant Stock has not been declared effective by the Securities
and Exchange Commission by the date such registration statement is required to
be effective pursuant to the Registration Rights Agreement (as defined in the
Purchase Agreement), in lieu of exercising this Warrant by payment of cash, the
Holder may exercise this Warrant by a cashless exercise and shall receive the
number of shares of Common Stock equal to an amount (as determined below) by
surrender of this Warrant at the principal office of the Issuer together with
the properly endorsed Notice of Exercise in which event the Issuer shall issue
to the Holder a number of shares of Common Stock computed using the following
formula:
X = Y - (A)(Y)
------
B
Where X = the number of shares of Common Stock to be issued to the
Holder.
Y = the number of shares of Common Stock purchasable upon
exercise of all of the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the Warrant being
exercised.
A = the Warrant Price.
B = the Per Share Market Value of one share of Common Stock.
(d) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise
2
and delivered to the Holder hereof within a reasonable time, not exceeding three
(3) Trading Days after such exercise (the "Delivery Date") or, at the request of
the Holder (provided that a registration statement under the Securities Act
providing for the resale of the Warrant Stock is then in effect), issued and
delivered to the Depository Trust Company ("DTC") account on the Holder's behalf
via the Deposit Withdrawal Agent Commission System ("DWAC") within a reasonable
time, not exceeding three (3) Trading Days after such exercise, and the Holder
hereof shall be deemed for all purposes to be the holder of the shares of
Warrant Stock so purchased as of the date of such exercise and (ii) unless this
Warrant has expired, a new Warrant representing the number of shares of Warrant
Stock, if any, with respect to which this Warrant shall not then have been
exercised (less any amount thereof which shall have been canceled in payment or
partial payment of the Warrant Price as hereinafter provided) shall also be
issued to the Holder hereof at the Issuer's expense within such time. In
addition to any other rights available to the Holder, if the Issuer fails to
deliver to the Holder such certificate or certificates pursuant to Section 2(d)
by the Delivery Date and if after the Delivery Date the Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Holder of the Warrant Stock which the Holder
anticipated receiving upon such exercise (a "Buy-In"), then the Issuer shall pay
in cash to the Holder an amount equal to (A) the aggregate amount paid by such
Holder for the shares of Common Stock so purchased minus (B) the aggregate
amount of net proceeds received by such Holder from the sale of the shares of
Common Stock issued by the Issuer pursuant to such exercise. The Holder shall
provide the Issuer written notice indicating the amounts payable to the Holder
in respect of the Buy-In.
(e) Transferability of Warrant. Subject to Section 2(g), this Warrant may
be transferred by a Holder without the consent of the Issuer. If transferred
pursuant to this paragraph and subject to the provisions of subsection (g) of
this Section 2, this Warrant may be transferred on the books of the Issuer by
the Holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant at the principal office of the Issuer, properly endorsed (by the
Holder's executing an assignment in the form attached hereto) and upon payment
of any necessary transfer tax or other governmental charge imposed upon such
transfer. This Warrant is exchangeable at the principal office of the Issuer for
Warrants for the purchase of the same aggregate number of shares of Warrant
Stock, each new Warrant to represent the right to purchase such number of shares
of Warrant Stock as the Holder hereof shall designate at the time of such
exchange. All Warrants issued on transfers or exchanges shall be dated the
Original Issue Date and shall be identical with this Warrant except as to the
number of shares of Warrant Stock issuable pursuant thereto.
(f) Continuing Rights of Holder. The Issuer will, at the time of or at any
time after each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
(g) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant and the shares of Warrant Stock to be issued upon
exercise hereof are being
3
acquired solely for the Holder's own account and not as a nominee for any
other party, and for investment, and that the Holder will not offer, sell
or otherwise dispose of this Warrant or any shares of Warrant Stock to be
issued upon exercise hereof except pursuant to an effective registration
statement, or an exemption from registration, under the Securities Act and
any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant and all
certificates representing shares of Warrant Stock issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND
UNDER APPLICABLE STATE SECURITIES LAWS OR DELCATH SYSTEMS,
INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO DELCATH SYSTEMS, INC. THAT REGISTRATION OF
SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
(iii) The Issuer agrees to reissue this Warrant or certificates
representing any of the Warrant Stock, without the legend set forth above
if at such time, prior to making any transfer of any such securities, the
Holder shall give written notice to the Issuer upon the occurrence of: (a)
either (i) the Issuer has received an opinion of counsel reasonably
satisfactory to the Issuer, to the effect that the registration of such
securities under the Securities Act is not required in connection with such
proposed transfer, (ii) a registration statement under the Securities Act
covering such proposed disposition has been filed by the Issuer with the
Securities and Exchange Commission and has become effective under the
Securities Act, (iii) the Issuer has received other evidence reasonably
satisfactory to the Issuer that such registration and qualification under
the Securities Act and state securities laws are not required, or (iv) the
Holder provides the Issuer with reasonable assurances that such security
can be sold pursuant to Rule 144 under the Securities Act; and (b) either
(i) the Issuer has received an opinion of counsel reasonably satisfactory
to the Issuer, to the effect that registration or qualification under the
securities or "blue sky" laws of any state is not required in connection
with such proposed disposition, or (ii) compliance with applicable state
securities or "blue sky" laws has been effected or a valid exemption exists
with respect thereto. The Issuer will respond to any such notice from a
holder within five (5) business days. In the case of any proposed transfer
under this Section 2(g), the Issuer will use reasonable efforts to comply
with any such applicable state securities or "blue sky" laws, but shall in
no event be required, (x) to qualify to do business in any state where it
is not then qualified, (y) to take any action that would subject it to tax
or to the general service of process in any state where it is not then
4
subject, or (z) to comply with state securities or "blue sky" laws of any
state for which registration by coordination is unavailable to the Issuer.
The restrictions on transfer contained in this Section 2(g) shall be in
addition to, and not by way of limitation of, any other restrictions on
transfer contained in any other section of this Warrant. Whenever a
certificate representing the Warrant Stock is required to be issued to a
the Holder without a legend, in lieu of delivering physical certificates
representing the Warrant Stock, provided the Issuer's transfer agent is
participating in the DTC Fast Automated Securities Transfer program, the
Issuer shall use its reasonable best efforts to cause its transfer agent to
electronically transmit the Warrant Stock to the Holder by crediting the
account of the Holder's Prime Broker with DTC through its DWAC system (to
the extent not inconsistent with any provisions of this Warrant or the
Purchase Agreement).
(h) In no event may the Holder exercise this Warrant in whole or in part
unless the Holder is an "accredited investor" as defined in Regulation D under
the Securities Act.
3. Stock Fully Paid; Reservation and Listing of Shares; Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and agrees
that all shares of Warrant Stock which may be issued upon the exercise of this
Warrant or otherwise hereunder will, when issued in accordance with the terms of
this Warrant, be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges created by or through the Issuer. The
Issuer further covenants and agrees that during the period within which this
Warrant may be exercised, the Issuer will at all times have authorized and
reserved for the purpose of the issue upon exercise of this Warrant a sufficient
number of shares of Common Stock to provide for the exercise of this Warrant.
(b) Reservation. If any shares of Common Stock required to be reserved for
issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its reasonable best efforts as expeditiously as possible at its
expense to cause such shares to be duly registered or qualified. If the Issuer
shall list any shares of Common Stock on any securities exchange or market it
will, at its expense, list thereon, maintain and increase when necessary such
listing, of all shares of Warrant Stock from time to time issued upon exercise
of this Warrant or as otherwise provided hereunder (provided that such Warrant
Stock has been registered pursuant to a registration statement under the
Securities Act then in effect), and, to the extent permissible under the
applicable securities exchange rules, all unissued shares of Warrant Stock which
are at any time issuable hereunder, so long as any shares of Common Stock shall
be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.
(c) Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this
5
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder hereof against dilution (to the
extent specifically provided herein) or impairment. Without limiting the
generality of the foregoing, the Issuer will (i) not permit the par value, if
any, of its Common Stock to exceed the then effective Warrant Price, (ii) not
amend or modify any provision of the Certificate of Incorporation or by-laws of
the Issuer in any manner that would adversely affect the rights of the Holders
of the Warrants in their capacity as Holders of the Warrants, (iii) take all
such action as may be reasonably necessary in order that the Issuer may validly
and legally issue fully paid and nonassessable shares of Common Stock, free and
clear of any liens, claims, encumbrances and restrictions (other than as
provided herein) upon the exercise of this Warrant, and (iv) use its reasonable
best efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be reasonably
necessary to enable the Issuer to perform its obligations under this Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
4. Adjustment of Warrant Price and Warrant Share Number. The number of
shares of Common Stock for which this Warrant is exercisable, and the price at
which such shares may be purchased upon exercise of this Warrant, shall be
subject to adjustment from time to time as set forth in this Section 4. The
Issuer shall give the Holder notice of any event described below which requires
an adjustment pursuant to this Section 4 in accordance with Section 5.
(a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale.
(i) In case the Issuer after the Original Issue Date shall do any of
the following (each, a "Triggering Event"): (a) consolidate or merge with
or into another corporation where the holders of outstanding Voting Stock
prior to such merger or consolidation do not own over 50% of the
outstanding Voting Stock of the merged or consolidated entity immediately
after such merger or consolidation, or (b) sell all or substantially all of
its properties or assets to any other Person, or (c) change the Common
Stock to the same or a different number of shares of any class or classes
of stock, whether by reclassification, exchange, substitution or otherwise
(other than by way of a stock split or combination of shares or stock
dividends or distributions provided for in Section 4(b) or Section 4(c)),
or (d) effect a capital reorganization (other than by way of a stock split
or combination of shares or stock dividends or distributions provided for
in Section 4(b) or Section 4(c)), then, and in the case of each such
Triggering Event, proper provision shall be made so that, upon the basis
and the terms and in the manner provided in this Warrant, the Holder of
this Warrant shall be entitled upon the exercise hereof at any time after
the consummation of such Triggering Event, to the extent this Warrant is
not exercised prior to such Triggering Event, to receive at the Warrant
Price in effect at the time immediately prior to the consummation of such
Triggering Event in lieu of the Common Stock
6
issuable upon such exercise of this Warrant prior to such Triggering Event,
the securities, cash and property to which such Holder would have been
entitled upon the consummation of such Triggering Event if such Holder had
exercised the rights represented by this Warrant immediately prior thereto,
subject to adjustments (subsequent to such corporate action) as nearly
equivalent as possible to the adjustments provided for elsewhere in this
Section 4.
(ii) Notwithstanding anything contained in this Warrant to the
contrary, a Triggering Event shall not be deemed to have occurred if, prior
to the consummation thereof, each Person (other than the Issuer) which may
be required to deliver any securities, cash or property upon the exercise
of this Warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the Holder of this Warrant,
(A) the obligations of the Issuer under this Warrant (and if the Issuer
shall survive the consummation of such Triggering Event, such assumption
shall be in addition to, and shall not release the Issuer from, any
continuing obligations of the Issuer under this Warrant) and (B) the
obligation to deliver to such Holder such shares of securities, cash or
property as, in accordance with the foregoing provisions of this subsection
(a), such Holder shall be entitled to receive, and such Person shall have
similarly delivered to such Holder a written acknowledgement executed by
the President or Chief Financial Officer of the Issuer, stating that this
Warrant shall thereafter continue in full force and effect and the terms
hereof (including, without limitation, all of the provisions of this
subsection (a)) shall be applicable to the securities, cash or property
which such Person may be required to deliver upon any exercise of this
Warrant or the exercise of any rights pursuant hereto.
(b) Stock Dividends, Subdivisions and Combinations. If at any time the
Issuer shall:
(i) make or issue or set a record date for the holders of its Common
Stock for the purpose of entitling them to receive a dividend payable in,
or other distribution of, shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (1) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (2) the Warrant Price then in
effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such adjustment.
7
Notwithstanding the foregoing, if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Warrant Price shall be adjusted pursuant to this
paragraph as of the time of actual payment of such dividends or distributions.
(c) Certain Other Distributions. If at any time the Issuer shall make
or issue or set a record date for the determination of the holders of its Common
Stock for the purpose of entitling them to receive any dividend or other
distribution of:
(i) cash (other than a cash dividend payable out of earnings
or earned surplus legally available for the payment of dividends under
the laws of the jurisdiction of incorporation of the Issuer),
(ii) any evidences of its indebtedness, any shares of stock
of any class or any other securities or property of any nature
whatsoever (other than cash), or
(iii) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of stock of any
class or any other securities or property of any nature whatsoever
(other than cash),
then (1) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by a fraction (A) the numerator of which shall be the Per
Share Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable and of
the fair value (as determined in good faith by the Board of Directors of the
Issuer and supported by an opinion from an investment banking firm of recognized
national standing acceptable to (but not affiliated with) the Holder) of any and
all such evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights so distributable,
and (2) the Warrant Price then in effect shall be adjusted to equal (A) the
Warrant Price then in effect multiplied by the number of shares of Common Stock
for which this Warrant is exercisable immediately prior to the adjustment
divided by (B) the number of shares of Common Stock for which this Warrant is
exercisable immediately after such adjustment. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par value or
from no par value to par value) into shares of Common Stock and shares of any
other class of stock shall be deemed a distribution by the Issuer to the holders
of its Common Stock of such shares of such other class of stock within the
meaning of this Section 4(c) and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4(b).
Notwithstanding the foregoing, if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Warrant Price shall be adjusted pursuant to this
Section 4(c) as of the time of actual payment of such dividends or
distributions.
8
(d) Intentionally Omitted.
(e) Other Provisions applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price then in effect provided for in this Section 4:
(i) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4(b)) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than one percent (1%) of
the shares of Common Stock for which this Warrant is exercisable immediately
prior to the making of such adjustment. Any adjustment representing a change of
less than such minimum amount (except as aforesaid) which is postponed shall be
carried forward and made as soon as such adjustment, together with other
adjustments required by this Section 4 and not previously made, would result in
a minimum adjustment or on the date of exercise. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
(ii) Fractional Interests. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest one one-hundredth (1/100th) of a share.
(iii) When Adjustment Not Required. If the Issuer shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(f) Form of Warrant after Adjustments. The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.
(g) Escrow of Warrant Stock. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any record
of the holders of Common Stock, but prior to the occurrence of the event for
which such record is taken, and the Holder exercises this Warrant, any shares of
Common Stock issuable upon exercise by reason of such adjustment shall be deemed
the last shares of Common Stock for which this Warrant is exercised
(notwithstanding any other provision to the contrary herein) and such shares or
other property shall be held in escrow for the Holder by the Issuer to be issued
to the Holder upon and to the extent that the event actually takes place, upon
payment of the current Warrant Price. Notwithstanding any
9
other provision to the contrary herein, if the event for which such record was
taken fails to occur or is rescinded, then such escrowed shares shall be
cancelled by the Issuer and escrowed property returned.
5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with respect to the matters set forth in such certificate may at
the option of the Holder of this Warrant be submitted to a national accounting
firm selected by the Holder, provided that the Issuer shall have ten (10) days
after receipt of notice from such Holder of its selection of such firm to object
thereto, in which case such Holder shall select another such firm and the Issuer
shall have no such right of objection. The firm selected by the Holder of this
Warrant as provided in the preceding sentence shall be instructed to deliver a
written opinion as to such matters to the Issuer and such Holder within thirty
(30) days after submission to it of such dispute. Such opinion shall be final
and binding on the parties hereto.
6. Fractional Shares. No fractional shares of Warrant Stock will be issued
in connection with any exercise hereof, but in lieu of such fractional shares,
the Issuer shall make a cash payment therefor equal in amount to the product of
the applicable fraction multiplied by the Per Share Market Value then in effect.
7. Ownership Cap and Certain Exercise Restrictions.
(a) Notwithstanding anything to the contrary set forth in this
Warrant, at no time may a Holder of this Warrant exercise this Warrant if the
number of shares of Common Stock to be issued pursuant to such exercise, when
aggregated with all other shares of Common Stock owned by such Holder at such
time, would exceed the number of shares of Common Stock which would result in
such Holder beneficially owning (as determined in accordance with Section 13(d)
of the Exchange Act and the rules thereunder) more than 4.99% of all of the
Common Stock outstanding at such time; provided, however, that upon the Holder
of this Warrant providing the Issuer with sixty-one (61) days notice (pursuant
to Section 12 hereof) (the "Waiver Notice") that such Holder would like to waive
this Section 7(a) with regard to any or all shares of Common Stock issuable upon
exercise of this Warrant, this Section 7(a) will be of no force or effect with
regard to all or a portion of the Warrant referenced in the Waiver Notice;
provided, further, that this provision shall be of no further force or effect
during the sixty-one (61) days immediately preceding the expiration of the term
of this Warrant. The Holder may waive this Section 7(a) by so indicating on the
signature page to the Purchase Agreement, any such waiver to be effective on and
as of the Original Issue Date.
(b) The Holder may not exercise the Warrant hereunder to the extent
such exercise would result in the Holder beneficially owning (as determined in
accordance with
10
Section 13(d) of the Exchange Act and the rules thereunder) in excess of 9.99%
of the then issued and outstanding shares of Common Stock, including shares
issuable upon exercise of this Warrant held by the Holder; provided, however,
that upon a holder of this Warrant providing the Issuer with a Waiver Notice
that such holder would like to waive this Section 7(b) with regard to any or all
shares of Common Stock issuable upon exercise of this Warrant, this Section 7(b)
shall be of no force or effect with regard to those shares of Warrant Stock
referenced in the Waiver Notice; provided, further, that this provision shall be
of no further force or effect during the sixty-one (61) days immediately
preceding the expiration of the term of this Warrant.
8. Call. Notwithstanding anything herein to the contrary, commencing one
(1) year following the effective date of a registration statement under the
Securities Act providing for the resale of the Warrant Stock and the shares of
Common Stock issuable pursuant to the Purchase Agreement (the "Registration
Statement"), the Issuer, at its option, may call up to one hundred percent
(100%) of this Warrant if the average of the Per Share Market Value of the
Common Stock has been greater than one hundred fifty percent (150%) of the
Warrant Price (as may be adjusted for any stock splits or combinations of the
Common Stock) for a period of twenty (20) consecutive Trading Days immediately
prior to the date of delivery of the Call Notice (a "Call Notice Period") by
providing the Holder of this Warrant written notice pursuant to Section 13 (the
"Call Notice"); provided, that (a) the Registration Statement is then in effect
and has been effective, without lapse or suspension of any kind, for a period of
sixty (60) consecutive calendar days, (b) trading in the Common Stock shall not
have been suspended by the Securities and Exchange Commission or Nasdaq and (c)
the Issuer is in material compliance with the terms and conditions of this
Warrant and the other Transaction Documents (as defined in the Purchase
Agreement); provided, further, that the Registration Statement is in effect from
the date of delivery of the Call Notice until the date which is the later of (i)
the date the Holder exercises the Warrant pursuant to the Call Notice and (ii)
the 20th day after the Holder receives the Call Notice (the "Early Termination
Date"). The rights and privileges granted pursuant to this Warrant with respect
to the shares of Warrant Stock subject to the Call Notice (the "Called Warrant
Shares") shall expire on the Early Termination Date if this Warrant is not
exercised with respect to such Called Warrant Shares prior to such Early
Termination Date. In the event this Warrant is not exercised with respect to the
Called Warrant Shares, the Issuer shall remit to the Holder of this Warrant (A)
$.10 per Called Warrant Share and (B) a new Warrant representing the number of
shares of Warrant Stock, if any, which shall not have been subject to the Call
Notice upon the Holder's tendering to the Issuer the applicable Warrant
certificate.
9. Definitions. For the purposes of this Warrant, the following terms have
the following meanings:
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or
limited) in any Person which is a partnership, (iii) all membership
interests or limited liability company interests in any limited liability
company, and (iv) all equity or ownership interests in any Person of any
other type.
11
"Certificate of Incorporation" means the Certificate of Incorporation
of the Issuer as in effect on the Original Issue Date, and as hereafter
from time to time amended, modified, supplemented or restated in accordance
with the terms hereof and thereof and pursuant to applicable law.
"Common Stock" means the Common Stock, par value $0.01 per share, of
the Issuer and any other Capital Stock into which such stock may hereafter
be changed.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority, commission,
board, agency or instrumentality, whether federal, state or local, and
whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Issuer) that is regularly engaged
in the business of appraising the Capital Stock or assets of corporations
or other entities as going concerns, and which is not affiliated with
either the Issuer or the Holder of any Warrant.
"Issuer" means Delcath Systems, Inc., a Delaware corporation, and its
successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable under
the Warrants at the time outstanding.
"Nasdaq" means the Nasdaq SmallCap Market.
"Original Issue Date" means November 24, 2004.
"OTC Bulletin Board" means the over-the-counter electronic bulletin
board.
"Person" means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on Nasdaq or another
registered national stock exchange on which the Common Stock is then
listed, as reported in The Wall Street Journal, or if there is no such
price on such date, then the closing bid price on such exchange or
quotation system on the date nearest preceding such date, or (b) if the
Common Stock is not listed then on Nasdaq or any registered national stock
exchange, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the OTC Bulletin Board or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close
12
of business on such date, or (c) if the Common Stock is not then reported
by the OTC Bulletin Board or the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the five days
preceding such date of determination, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an Independent Appraiser selected in good faith by the
Majority Holders; provided, however, that the Issuer, after receipt of the
determination by such Independent Appraiser, shall have the right to select
an additional Independent Appraiser, in which case, the fair market value
shall be equal to the average of the determinations by each such
Independent Appraiser; and provided, further that all determinations of the
Per Share Market Value shall be appropriately adjusted for any stock
dividends, stock splits or other similar transactions during such period.
The determination of fair market value by an Independent Appraiser shall be
based upon the fair market value of the Issuer determined on a going
concern basis as between a willing buyer and a willing seller and taking
into account all relevant factors determinative of value, and shall be
final and binding on all parties. The cost of such Independent Appraiser
shall be borne equally by the Issuer and the Holder.
"Purchase Agreement" means the Common Stock Purchase Agreement dated
as of November 24, 2004, among the Issuer and the investors a party
thereto.
"Securities" means any debt or equity securities of the Issuer,
whether now or hereafter authorized, any instrument convertible into or
exchangeable for Securities or a Security, and any option, warrant or other
right to purchase or acquire any Security. "Security" means one of the
Securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose outstanding
Voting Stock shall at the time be owned directly or indirectly by the
Issuer or by one or more of its Subsidiaries, or by the Issuer and one or
more of its Subsidiaries.
"Term" has the meaning specified in Section 1 hereof.
"Trading Day" means (a) a day on which the Common Stock is traded on
Nasdaq, or (b) if the Common Stock is not listed on Nasdaq, a day on which
the Common Stock is traded on any other registered national stock exchange,
or (c) if the Common Stock is not traded on any other registered national
stock exchange, a day on which the Common Stock is traded on the OTC
Bulletin Board, or (d) if the Common Stock is not traded on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its
functions of reporting prices); provided, however, that in the event that
the Common Stock is not listed or quoted as set forth in (a), (b) or (c)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions
13
in the State of New York are authorized or required by law or other
government action to close.
"Voting Stock" means, as applied to the Capital Stock of any
corporation, Capital Stock of any class or classes (however designated)
having ordinary voting power for the election of a majority of the members
of the Board of Directors (or other governing body) of such corporation,
other than Capital Stock having such power only by reason of the happening
of a contingency.
"Warrants" means the Warrants issued and sold pursuant to the Purchase
Agreement, including, without limitation, this Warrant, and any other
warrants of like tenor issued in substitution or exchange for any thereof
pursuant to the provisions of Section 2(c), 2(d) or 2(e) hereof or of any
of such other Warrants.
"Warrant Price" initially means U.S. $2.78, as such Warrant Price may
be adjusted from time to time as shall result from the adjustments
specified in this Warrant, including Section 4 hereto.
"Warrant Share Number" means at any time the aggregate number of
shares of Warrant Stock which may at such time be purchased upon exercise
of this Warrant, after giving effect to all prior adjustments and increases
to such number made or required to be made under the terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of any
Warrant or Warrants or otherwise issuable pursuant to any Warrant or
Warrants.
10. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the holders
of Common Stock; or
(B) the Issuer shall authorize the granting to all holders
of its Common Stock of rights to subscribe for or
purchase any shares of Capital Stock of any class or
other rights; or
(C) there shall be any reclassification of the Capital
Stock of the Issuer; or
(D) there shall be any capital reorganization by the
Issuer; or
(E) there shall be any (i) consolidation or merger
involving the Issuer or (ii) sale, transfer or other
disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other
reorganization in which the Issuer shall be the
surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and
14
except a consolidation, merger, sale, transfer or other
disposition involving a wholly-owned Subsidiary); or
(F) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Issuer or any partial
liquidation of the Issuer or distribution to holders of
Common Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the record date or effective date for the event specified in
such notice.
11. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 10 without the consent of the Holder of this Warrant.
12. Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Warrant
shall not be interpreted or construed with any presumption against the party
causing this Warrant to be drafted. The Issuer and the Holder agree that venue
for any dispute arising under this Warrant will lie exclusively in the state or
federal courts located in New York County, New York, and the parties irrevocably
waive any right to raise forum non conveniens or any other argument that New
York is not the proper venue. The Issuer and the Holder irrevocably consent to
personal jurisdiction in the state and federal courts of the state of New York.
The Issuer and the Holder consent to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Warrant and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section 11 shall affect or limit any right to serve process in any other
manner permitted by law. The Issuer and the Holder hereby agree that the
prevailing party in any suit, action or proceeding arising out of or relating to
the this Warrant or the Purchase Agreement, shall be entitled to reimbursement
for reasonable legal fees from the non-prevailing party.
13. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective
15
on the earlier of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified for
notice prior to 5:00 p.m., eastern time, on a Trading Day, (ii) the Trading Day
after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified for notice later than 5:00
p.m., eastern time, on any date and earlier than 11:59 p.m., eastern time, on
such date, (iii) the Trading Day following the date of mailing, if sent by
overnight delivery by nationally recognized overnight courier service or (iv)
actual receipt by the party to whom such notice is required to be given. The
addresses for such communications shall be with respect to the Holder of this
Warrant or of Warrant Stock issued pursuant hereto, addressed to such Holder at
its last known address or facsimile number appearing on the books of the Issuer
maintained for such purposes, or with respect to the Issuer, addressed to:
Delcath Systems, Inc.
1100 Summer Street, 3rd Floor
Stamford, Connecticut 06905
Attention: President and Chief Executive Officer
Tel. No.: (203) 323-8668
Fax No.: (203) 961-0120
Copies of notices to the Issuer shall be sent to Murtha Cullina LLP, Whitney
Grove Square, Two Whitney Avenue, New Haven, Connecticut 06503, Attention: Paul
G. Hughes, Tel. No.: (203) 772-7700, Fax No.: (203) 772-7723. Copies of notices
to the Holder shall be sent to Jenkens & Gilchrist Parker Chapin LLP, 405
Lexington Avenue, New York, New York 10174, Attention: Christopher S. Auguste,
Facsimile No.: (212) 704-6288. Any party hereto may from time to time change its
address for notices by giving at least ten (10) days written notice of such
changed address to the other party hereto.
14. Warrant Agent. The Issuer may, by written notice to each Holder of this
Warrant, appoint an agent having an office in New York, New York for the purpose
of issuing shares of Warrant Stock on the exercise of this Warrant pursuant to
subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to
subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
15. Remedies. The Issuer stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Issuer
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
16. Successors and Assigns. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Stock.
16
17. Modification and Severability. If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
18. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
17
IN WITNESS WHEREOF, the Issuer has executed this Series C Warrant as of the
day and year first above written.
DELCATH SYSTEMS, INC.
By:
------------------------------------
Name: M.S. Koly
Title: President and Chief
Executive Officer
18
EXERCISE FORM
SERIES C WARRANT
DELCATH SYSTEMS, INC.
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of Delcath
Systems, Inc. covered by the within Warrant.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise: _________________________
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address ___________________________
___________________________
FOR USE BY THE ISSUER ONLY:
19
This Warrant No. W-C-04-___ canceled (or transferred or exchanged) this _____
day of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-C-04-_____ issued for ____ shares of Common Stock
in the name of _______________.
-20-
COMMON STOCK PURCHASE
AGREEMENT
Dated as of November 24, 2004
by and among
DELCATH SYSTEMS, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
Page
----
ARTICLE I Purchase and Sale of Common Stock and Warrants.................................1
Section 1.1 Purchase and Sale of Common Stock and Warrants.......................1
Section 1.2 Purchase Price and Closing...........................................1
ARTICLE II Representations and Warranties.................................................2
Section 2.1 Representations and Warranties of the Company........................2
Section 2.2 Representations and Warranties of the Purchasers....................12
ARTICLE III Covenants.....................................................................14
Section 3.1 Securities Compliance...............................................15
Section 3.2 Registration and Listing............................................15
Section 3.3 Compliance with Laws................................................15
Section 3.4 Keeping of Records and Books of Account.............................15
Section 3.5 Reporting Requirements..............................................15
Section 3.6 Other Agreements....................................................15
Section 3.7 Use of Proceeds.....................................................15
Section 3.8 Reporting Status....................................................16
Section 3.9 Disclosure of Transaction...........................................16
Section 3.10 Disclosure of Material Information..................................16
Section 3.11 Pledge of Securities................................................16
Section 3.12 Subsequent Placements...............................................16
ARTICLE IV Conditions....................................................................19
Section 4.1 Conditions Precedent to the Obligation of the Company to Close a
to Sell the Securities..............................................19
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Clos
and to Purchase the Securities......................................90
ARTICLE V Certificate Legend............................................................11
Section 5.1 Legend..............................................................21
ARTICLE VI Indemnification...............................................................22
Section 6.1 General Indemnity...................................................22
Section 6.2 Indemnification Procedure...........................................23
ARTICLE VII Miscellaneous.................................................................24
Section 7.1 Fees and Expenses...................................................24
Section 7.2 Specific Performance; Consent to Jurisdiction; Venue................24
Section 7.3 Entire Agreement; Amendment.........................................25
Section 7.4 Notices.............................................................25
Section 7.5 Waivers.............................................................26
Section 7.6 Headings............................................................26
Section 7.7 Successors and Assigns..............................................26
Section 7.8 No Third Party Beneficiaries........................................26
Section 7.9 Governing Law.......................................................26
TABLE OF CONTENTS
(continued)
Page
Section 7.10 Survival............................................................26
Section 7.11 Counterparts........................................................26
Section 7.12 Publicity...........................................................27
Section 7.13 Severability........................................................27
Section 7.14 Further Assurances..................................................27
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT this ("Agreement"), dated as of
November 24, 2004 by and between Delcath Systems, Inc., a Delaware corporation
(the "Company"), and the purchasers listed on Exhibit A hereto (each a
"Purchaser" and collectively, the "Purchasers"), for the purchase and sale of
shares of the Company's common stock, par value $.01 per share (the "Common
Stock") by the Purchasers.
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK AND WARRANTS
Section 1.1. Purchase and Sale of Common Stock and Warrants.
(a) Upon the following terms and conditions, the Company shall issue and
sell to the Purchasers, and the Purchasers shall purchase from the Company,
shares of Common Stock (the "Shares") at a price per share of $1.87 (the "Per
Share Purchase Price") for an aggregate purchase price of up to $2,000,000 (the
"Purchase Price"). The Company and the Purchasers are executing and delivering
this Agreement in accordance with and in reliance upon the exemption from
securities registration afforded by Section 4(2) of the U.S. Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act"), including Regulation D ("Regulation D"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.
(b) Upon the following terms and conditions, each of the Purchasers shall
be issued (i) Series A Warrants, in substantially the form attached hereto as
Exhibit B (the "Series A Warrants"), (ii) Series B Warrants, in substantially
the form attached hereto as Exhibit C (the "Series B Warrants"), and (iii)
Series C Warrants, in substantially the form attached hereto as Exhibit D (the
"Series C Warrants" and together with the Series A Warrants and the Series B
Warrants, the "Warrants"), to purchase the number of shares of Common Stock set
forth opposite such Purchaser's name on Exhibit A attached hereto. The Warrants
shall have an exercise price equal to the Warrant Price (as defined in the
respective Warrant) and shall be exercisable as stated therein. Any shares of
Common Stock issuable upon exercise of the Warrants (and such shares when
issued) are herein referred to as the "Warrant Shares". The Shares, the Warrants
and the Warrant Shares are sometimes collectively referred to herein as the
"Securities".
Section 1.2. Purchase Price and Closing. In consideration of and in express
reliance upon the representations, warranties, covenants, terms and conditions
of this Agreement, the Company agrees to issue and sell to the Purchasers and,
in consideration of and in express reliance upon the representations,
warranties, covenants, terms and conditions of this Agreement, the Purchasers,
severally but not jointly, agree to purchase the number of Shares and Warrants,
in each case, set forth opposite their respective names on Exhibit A. The
closing of the purchase
1
and sale of the Shares and Warrants to be acquired by the Purchasers from the
Company under this Agreement shall take place at the offices of Jenkens &
Gilchrist Parker Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New
York, New York 10174 (the "Closing") at such time and on such date as the
Purchasers and the Company may agree upon (the "Closing Date"), provided, that
all of the conditions set forth in Article IV hereof and applicable to the
Closing shall have been fulfilled or waived in accordance herewith. At the
Closing, in addition to the items required to be delivered by the Company
pursuant to Section 4.2 hereof, the Company shall deliver or cause to be
delivered to each Purchaser (i) a certificate registered in the name of the
Purchaser representing the number of Shares as is set forth opposite the name of
such Purchaser on Exhibit A and (ii) a certificate representing each series of
Warrant to purchase such number of shares of Common Stock as is set forth
opposite the name of such Purchaser on Exhibit A. At the Closing, each Purchaser
shall deliver its Purchase Price by wire transfer to an account designated by
the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchasers as follows, as of the date
hereof and the Closing Date, except as set forth on the Schedule of Exceptions
attached hereto with each numbered Schedule corresponding to the section number
herein:
(a) Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power to own, lease and
operate its properties and assets and to conduct its business as it is now being
conducted. The Company does not have any Subsidiaries (as defined in Section
2.1(g)) or own securities of any kind in any other entity except as set forth on
Schedule 2.1(g) hereto. The Company and each such Subsidiary (as defined in
Section 2.1(g)) is duly qualified as a foreign corporation to do business and is
in good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary except for
any jurisdiction(s) (alone or in the aggregate) in which the failure to be so
qualified could not reasonably be expected to have a Material Adverse Effect.
For the purposes of this Agreement, "Material Adverse Effect" means any effect
on the business, results of operations, assets or financial condition of the
Company that is material and adverse to the Company and its subsidiaries and/or
any condition, circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company from entering into and
performing any of its obligations under the Transaction Documents (as defined
below) in any material respect.
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement, the Warrants and
that certain Registration Rights Agreement by and among the Company and the
Purchasers, dated as of the date hereof, substantially in the form of Exhibit E
attached hereto (the "Registration Rights Agreement" and, together with this
Agreement and the Warrants, the "Transaction Documents") and to issue and sell
the Securities in accordance with the terms hereof. The execution, delivery
2
and performance of the Transaction Documents by the Company and the consummation
by it of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action, and, except as set forth
on Schedule 2.1(b), no further consent or authorization of the Company, its
Board of Directors or stockholders is required. When executed and delivered by
the Company, each of the Transaction Documents shall constitute a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
(c) Capitalization. The authorized capital stock of the Company as of
November 23, 2004 is set forth on Schedule 2.1(c) hereto. All of the outstanding
shares of the Common Stock and any other outstanding security of the Company
have been duly and validly authorized. Except as set forth in this Agreement or
as set forth on Schedule 2.1(c) hereto, no shares of Common Stock or any other
security of the Company are entitled to preemptive rights or registration rights
and there are no outstanding options, warrants, scrip, rights to subscribe to,
call or commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of capital stock of the Company.
Furthermore, except as set forth in this Agreement or as set forth on Schedule
2.1(c) hereto, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except for customary
transfer restrictions contained in agreements entered into by the Company in
order to sell restricted securities or as set forth on Schedule 2.1(c) hereto,
the Company is not a party to or bound by any agreement or understanding
granting registration or anti-dilution rights to any person with respect to any
of its equity or debt securities. Except as set forth on Schedule 2.1(c), the
Company is not a party to, and it has no knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of the capital
stock of the Company.
(d) Issuance of Securities. The Shares and the Warrants to be issued at the
Closing have been duly authorized by all necessary corporate action and, when
paid for and issued in accordance with the terms hereof and the Warrants,
respectively, the Shares and the Warrant Shares will be validly issued, fully
paid and nonassessable and free and clear of all liens, encumbrances and rights
of refusal of any kind and the holders shall be entitled to all rights accorded
to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) violate any
provision of the Company's Certificate of Incorporation (the "Certificate") or
Bylaws (the "Bylaws"), each as amended to date, or any Subsidiary's comparable
charter documents, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries' respective properties or assets are bound, or (iii) result in a
3
violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries is bound or
affected, except, in all cases, other than violations pursuant to clauses (i) or
(iii) (with respect to federal and state securities laws) above, except, for
such conflicts, defaults, terminations, amendments, acceleration, cancellations
and violations as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is required under federal, state, foreign or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under the Transaction
Documents or issue and sell the Securities in accordance with the terms hereof
(other than any filings, consents and approvals which may be required to be made
by the Company under applicable state and federal securities laws, rules or as
may be required for the Company to carry out its obligations under the
Registration Rights Agreement).
(f) Commission Documents, Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, except as disclosed
on Schedule 2.1(f) hereto, the Company has during at least the two (2) years
preceding the date hereof timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the Securities and Exchange
Commission (the "Commission") pursuant to the reporting requirements of the
Exchange Act (all of the foregoing including filings incorporated by reference
therein being referred to herein as the "Commission Documents"). At the times of
their respective filings, the Form 10-QSB for the fiscal quarters ended March
31, 2004, June 30, 2004 and September 30, 2004 (collectively, the "Form 10-QSB")
and the Form 10-KSB for the fiscal year ended December 31, 2003 (the "Form
10-KSB") complied in all material respects with the requirements of the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
the Form 10-QSB and Form 10-KSB at the time of their respective filings did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the Commission Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
accounting principles generally accepted in the United States ("GAAP") applied
on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the Notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial position of the Company and its Subsidiaries as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(g) Subsidiaries. Schedule 2.1(g) hereto sets forth each Subsidiary of the
Company, showing the jurisdiction of its incorporation or organization and
showing the
4
percentage of each person's ownership of the outstanding stock or other
interests of such Subsidiary. For the purposes of this Agreement, "Subsidiary"
shall mean any corporation or other entity of which at least a majority of the
securities or other ownership interests having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other Subsidiaries. All of the outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly issued, and are
fully paid and nonassessable. There are no outstanding preemptive, conversion or
other rights, options, warrants or agreements granted or issued by or binding
upon any Subsidiary for the purchase or acquisition of any shares of capital
stock of any Subsidiary or any other securities convertible into, exchangeable
for or evidencing the rights to subscribe for any shares of such capital stock.
Neither the Company nor any Subsidiary is subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any Subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence except as set forth
on Schedule 2.1(g) hereto. Neither the Company nor any Subsidiary is party to,
nor has any knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of any Subsidiary.
(h) No Material Adverse Change. Since September 30, 2004, the Company has
not experienced or suffered any Material Adverse Effect, except as disclosed on
Schedule 2.1(h) hereto.
(i) No Undisclosed Liabilities. Except as disclosed on Schedule 2.1(i)
hereto, since September 30, 2004, neither the Company nor any of its
Subsidiaries has incurred any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute, accrued,
contingent or otherwise) other than those incurred in the ordinary course of the
Company's or its Subsidiaries respective businesses or which, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect.
(j) No Undisclosed Events or Circumstances. Since September 30, 2004, no
event or circumstance has occurred or exists with respect to the Company or its
Subsidiaries or their respective businesses, properties, operations or financial
condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed.
(k) Indebtedness. Schedule 2.1(k) hereto sets forth as of the date hereof
all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments. For the
purposes of this Agreement, "Indebtedness" shall mean (a) any liabilities for
borrowed money or amounts owed in excess of $300,000 (other than trade accounts
payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of liabilities for
borrowed money of others in excess of $100,000, whether or not the same are or
should be reflected in the Company's balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and (c)
the present value of any lease payments in excess of $25,000 due under leases
required to be capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.
5
(l) Title to Assets. Each of the Company and the Subsidiaries has good and
valid title to all of its real and personal property reflected in the Commission
Documents, free and clear of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those indicated on Schedule 2.1(l)
hereto or such that, individually or in the aggregate, could not reasonably be
expected to cause a Material Adverse Effect. All said leases of the Company and
each of its Subsidiaries are valid and subsisting and in full force and effect.
(m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth on Schedule 2.1(m) hereto, there is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against or involving the
Company, any Subsidiary or any of their respective properties or assets, which
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any Subsidiary or any officers or
directors of the Company or any Subsidiary in their capacities as such, which
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(n) Compliance with Law. The business of the Company and the Subsidiaries
has been and is presently being conducted in accordance with all applicable
federal, state and local governmental laws, rules, regulations and ordinances,
except as set forth in the Commission Documents or on Schedule 2.1(n) hereto or
such that, individually or in the aggregate, the noncompliance therewith could
not reasonably be expected to have a Material Adverse Effect. The Company and
each of its Subsidiaries have all franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. Except as set forth on Schedule 2.1(o) hereto, the Company and
each of the Subsidiaries has accurately prepared and filed all federal, state
and other tax returns required by law to be filed by it, has paid or made
provisions for the payment of all taxes shown to be due and all additional
assessments, and adequate provisions have been and are reflected in the
financial statements of the Company and the Subsidiaries for all current taxes
and other charges to which the Company or any Subsidiary is subject and which
are not currently due and payable. Except as disclosed on Schedule 2.1(o)
hereto, none of the federal income tax returns of the Company or any Subsidiary
has been audited by the Internal Revenue Service. The Company has no knowledge
of any additional assessments, adjustments or contingent tax liability (whether
federal or state) of any nature whatsoever, whether pending or threatened
against the Company or any Subsidiary for any period, nor of any basis for any
such assessment, adjustment or contingency.
6
(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, the
Company has not employed any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' structuring fees,
financial advisory fees or other similar fees in connection with the Transaction
Documents.
(q) Disclosure. To the best of the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchasers by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made herein or therein, in the
light of the circumstances under which they were made herein or therein, not
misleading.
(r) Operation of Business. Except as set forth on Schedule 2.1(r) hereto,
the Company and each of the Subsidiaries owns or possesses the rights to all
patents, trademarks, domain names (whether or not registered) and any patentable
improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations which are necessary for the conduct of
its business as now conducted without any conflict with the rights of others.
(s) Environmental Compliance. Except as disclosed on Schedule 2.1(s)
hereto, the Company and each of its Subsidiaries have obtained all material
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations of all governmental authorities, or from any
other person, that are required under any Environmental Laws. "Environmental
Laws" shall mean all applicable laws relating to the protection of the
environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except as set
forth on Schedule 2.1(s) hereto, the Company has all necessary governmental
approvals required under all Environmental Laws and used in its business or in
the business of any of its Subsidiaries, except for such instances as could not
individually or in the aggregate be reasonably expected to have a Material
Adverse Effect. The Company and each of its Subsidiaries are also in compliance
with all other limitations, restrictions, conditions, standards, requirements,
schedules and timetables required or imposed under all Environmental Laws.
Except for such instances as could not individually or in the aggregate be
reasonably expected to have a Material Adverse Effect, there are no past or
present events, conditions, circumstances, incidents, actions or omissions
relating to or in any way affecting the Company or its Subsidiaries that violate
or would be reasonably likely to violate any Environmental Law after the Closing
or that would be reasonably likely to give rise to any environmental liability,
or otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, study or investigation (i) under any Environmental Law or (ii) based on
or related to the manufacture, processing, distribution, use, treatment, storage
(including, without limitation, underground
7
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
(t) Books and Records; Internal Accounting Controls. The records and
documents of the Company and its Subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and its
Subsidiaries, the location and collection of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company or any Subsidiary. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the
Company, to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
actions are taken with respect to any differences.
(u) Material Agreements. Except for the Transaction Documents (with respect
to clause (i) only), as disclosed in the Commission Documents or as set forth on
Schedule 2.1(u) hereto, or as would not be reasonably likely to have a Material
Adverse Effect, (i) the Company and each of its Subsidiaries have performed all
obligations required to be performed by them to date under any written or oral
contract, instrument, agreement, commitment, obligation, plan or arrangement,
filed or required to be filed with the Commission (the "Material Agreements"),
(ii) neither the Company nor any of its Subsidiaries has received any notice of
default under any Material Agreement and (iii) to the best of the Company's
knowledge, neither the Company nor any of its Subsidiaries is in default under
any Material Agreement now in effect.
(v) Transactions with Affiliates. Except as set forth on Schedule 2.1(v)
hereto, there are no loans, leases, agreements, contracts, royalty agreements,
management contracts or arrangements or other continuing transactions between
(a) the Company, any Subsidiary or any of their respective customers or
suppliers on the one hand, and (b) on the other hand, any officer, employee,
consultant or director of the Company, or any of its Subsidiaries, or any person
owning any capital stock of the Company or any Subsidiary or any member of the
immediate family of such officer, employee, consultant, director or stockholder
or any corporation or other entity controlled by such officer, employee,
consultant, director or stockholder, or a member of the immediate family of such
officer, employee, consultant, director or stockholder which, in each case, is
required to be disclosed in the Commission Documents or in the Company's most
recently filed definitive proxy statement on Schedule 14A, that is not so
disclosed in the Commission Documents or in such proxy statement.
(w) Securities Act of 1933. Based in material part upon the representations
herein of the Purchasers, the Company has complied and will comply with all
applicable federal and state securities laws in connection with the offer,
issuance and sale of the Securities hereunder. Neither the Company nor, to its
knowledge, anyone acting on its behalf, directly or indirectly, has or will
sell, offer to sell or solicit offers to buy any of the Securities or similar
securities to, or solicit offers with respect thereto from, or enter into any
negotiations relating
8
thereto with, any person, or has taken or will take any action so as to bring
the issuance and sale of any of the Securities under the registration provisions
of the Securities Act and applicable state securities laws, and neither the
Company nor any of its affiliates, nor, to its knowledge, any person acting on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of any of the Securities.
(x) Governmental Approvals. Except as set forth on Schedule 2.1(x) hereto,
and except for the filing of any notice prior or subsequent to the Closing that
may be required under applicable state and/or federal securities laws (which if
required, shall be filed on a timely basis), no authorization, consent,
approval, license, exemption of, filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary for, or in connection with, the
delivery of the Shares, or for the performance by the Company of its obligations
under the Transaction Documents.
(y) Employees. Neither the Company nor any Subsidiary has any collective
bargaining arrangements or agreements covering any of its employees, except as
set forth on Schedule 2.1(y) hereto or disclosed in the Commission Documents.
Except as set forth on Schedule 2.1(y) hereto or disclosed in the Commission
Documents, neither the Company nor any Subsidiary has any employment contract,
agreement regarding proprietary information, non-competition agreement,
non-solicitation agreement, confidentiality agreement, or any other similar
contract or restrictive covenant, relating to the right of any officer, employee
or consultant to be employed or engaged by the Company or such Subsidiary
required to be disclosed in the Commission Documents that is not so disclosed.
Since September 30, 2004, no officer, consultant or key employee of the Company
or any Subsidiary whose termination, either individually or in the aggregate,
would be reasonably likely to have a Material Adverse Effect, has terminated or,
to the knowledge of the Company, has any present intention of terminating his or
her employment or engagement with the Company or any Subsidiary.
(z) Absence of Certain Developments. Except as provided on Schedule 2.1(z)
hereto, since September 30, 2004, neither the Company nor any Subsidiary has:
(i) issued any stock, bonds or other corporate securities or any
right, options or warrants with respect thereto;
(ii) borrowed any amount in excess of $300,000 or incurred or become
subject to any other liabilities in excess of $100,000 (absolute or contingent)
except current liabilities incurred in the ordinary course of business which are
comparable in nature and amount to the current liabilities incurred in the
ordinary course of business during the comparable portion of its prior fiscal
year, as adjusted to reflect the current nature and volume of the business of
the Company and its Subsidiaries;
(iii) discharged or satisfied any lien or encumbrance in excess of
$250,000 or paid any obligation or liability (absolute or contingent) in excess
of $250,000, other than current liabilities paid in the ordinary course of
business;
9
(iv) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital stock,
in each case in excess of $50,000 individually or $100,000 in the aggregate;
(v) sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, in each case in excess of $250,000, except in the
ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks,
trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights in excess of $250,000, or disclosed any proprietary
confidential information to any person except to participants in clinical
trials, customers in the ordinary course of business or to the Purchasers or
their representatives;
(vii) suffered any material losses or waived any rights of material
value, whether or not in the ordinary course of business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that aggregate
in excess of $500,000;
(x) entered into any material transaction, whether or not in the
ordinary course of business, other than the transactions contemplated by the
Transaction Documents;
(xi) made charitable contributions or pledges in excess of $25,000;
(xii) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
(xiii) experienced any material problems with labor or management in
connection with the terms and conditions of their employment; or
(xiv) entered into an agreement, written or otherwise, to take any of
the foregoing actions.
(aa) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon the Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
10
(bb) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan by the Company or any of its
Subsidiaries which is or could reasonably be expected to be materially adverse
to the Company and its Subsidiaries. The execution and delivery of this
Agreement and the issuance and sale of the Securities will not involve any
transaction which is subject to the prohibitions of Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or in connection
with which a tax could be imposed pursuant to Section 4975 of the Internal
Revenue Code of 1986, as amended, provided that, if any of the Purchasers, or
any person or entity that owns a beneficial interest in any of the Purchasers,
is an "employee pension benefit plan" (within the meaning of Section 3(2) of
ERISA) with respect to which the Company is a "party in interest" (within the
meaning of Section 3(14) of ERISA), the requirements of Sections 407(d)(5) and
408(e) of ERISA, if applicable, are met. As used in this Section 2.1(z), the
term "Plan" shall mean an "employee pension benefit plan" (as defined in Section
3 of ERISA) which is or has been established or maintained, or to which
contributions are or have been made, by the Company or any Subsidiary or by any
trade or business, whether or not incorporated, which, together with the Company
or any Subsidiary, is under common control, as described in Section 414(b) or
(c) of the Code.
(cc) Delisting Notification. Except as provided on Schedule 2.1(cc)
hereto, the Company has not received notice (written or oral) from the Nasdaq
SmallCap Market to the effect that the Company is not in compliance with the
listing or maintenance requirements of such market.
(dd) Independent Nature of Purchasers. The Company acknowledges that
the obligations of each Purchaser under the Transaction Documents are several
and not joint with the obligations of any other Purchaser, and no Purchaser
shall be responsible in any way for the performance of the obligations of any
other Purchaser under the Transaction Documents. The Company acknowledges that
the decision of each Purchaser to purchase Securities pursuant to this Agreement
has been made by such Purchaser independently of any other Purchaser and
independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or of
its Subsidiaries which may have made or given by any other Purchaser or by any
agent or employee of any other Purchaser, and no Purchaser or any of its agents
or employees shall have any liability to any Purchaser (or any other person)
relating to or arising from any such information, materials, statements or
opinions. The Company acknowledges that nothing contained herein, or in any
Transaction Document, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. The Company acknowledges that each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. The Company
acknowledges that such procedure with respect to the Transaction Documents in no
way creates a presumption that the Purchasers are in any way acting in concert
or as a group with respect to the Transaction Documents or the transactions
contemplated hereby or thereby.
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(ee) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Securities pursuant to Regulation D and Rule 506 thereof under
the Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or subsidiaries take
any action or steps that would cause the offering of the Securities to be
integrated with other offerings if such other offering, if integrated, would
cause the offer and sale of the Securities not to be exempt from registration
pursuant to Regulation D and Rule 506 thereof under the Securities Act. The
Company does not have any registration statement pending before the Commission
or currently under the Commission's review.
(ff) Sarbanes-Oxley Act. The Company is in substantial compliance with
the applicable provisions of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley
Act"), and the rules and regulations promulgated thereunder, that are effective
and for which compliance by the Company is required as of the date hereof and
intends to comply substantially with other applicable provisions of the
Sarbanes-Oxley Act, and the rules and regulations promulgated thereunder, upon
the effectiveness of such provisions or the date by which compliance therewith
by the Company is required.
Section 2.2. Representations and Warranties of the Purchasers. Each of
the Purchasers hereby represents and warrants to the Company with respect solely
to itself and not with respect to any other Purchaser as follows as of the date
hereof and as of the Closing Date:
(a) Organization and Standing of the Purchasers. If the Purchaser is
an entity, such Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization and Power. Such Purchaser has the requisite power
and authority to enter into and perform the Transaction Documents and to
purchase the Securities being sold to it hereunder. The execution, delivery and
performance of the Transaction Documents by such Purchaser and the consummation
by it of the transactions contemplated hereby have been duly authorized by all
necessary corporate, limited liability company, partnership or other action, and
no further consent or authorization of such Purchaser or its Board of Directors,
stockholders, partners or members, as the case may be, is required. When
executed and delivered by the Purchasers, the other Transaction Documents shall
constitute valid and binding obligations of such Purchaser enforceable against
such Purchaser in accordance with their terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) No Conflict. The execution, delivery and performance of the
Transaction Documents by such Purchaser and the consummation by such Purchaser
of the transactions contemplated thereby and hereby do not and will not (i)
violate any provision of such
12
Purchaser's charter or organizational documents, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which such Purchaser is a party or by which such Purchaser's respective
properties or assets are bound, or (iii) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to such
Purchaser or by which any property or asset of such Purchaser are bound or
affected, except, in all cases, other than violations pursuant to clauses (i) or
(iii) (with respect to federal and state securities laws) above, for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, materially and
adversely affect such Purchaser's ability to perform its obligations under the
Transaction Documents.
(d) Acquisition for Investment. Such Purchaser is purchasing the
Shares and Warrants and will purchase any Warrant Shares solely for its own
account for the purpose of investment and not with a view to or for sale in
connection with distribution. Such Purchaser does not have a present intention
to sell any of the Shares, Warrants or Warrant Shares, nor a present arrangement
(whether or not legally binding) or intention to effect any distribution of any
of the Shares, the Warrants or the Warrant Shares to or through any person or
entity; provided, however, that by making the representations herein, such
Purchaser does not agree to hold the Shares, the Warrants or the Warrant Shares
for any minimum or other specific term and reserves the right to dispose of the
Shares, the Warrants or the Warrant Shares at any time in accordance with
Federal and state securities laws applicable to such disposition. Such Purchaser
acknowledges that it (i) has such knowledge and experience in financial and
business matters that such Purchaser is capable of evaluating the merits and
risks of Purchaser's investment in the Company, (ii) is able to bear the
financial risks associated with an investment in the Securities and (iii) has
been given full access to such records of the Company and the Subsidiaries and
to the officers of the Company and the Subsidiaries as it has deemed necessary
or appropriate to conduct its due diligence investigation.
(e) Rule 144. Such Purchaser understands that the Securities must be
held indefinitely unless such Securities are registered under the Securities Act
or an exemption from registration is available. Such Purchaser acknowledges that
such person is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such Purchaser has been advised that Rule 144 permits resales only
under certain circumstances. Such Purchaser understands that to the extent that
Rule 144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(f) General. Such Purchaser understands that the Securities are being
offered and sold in reliance on a transactional exemption from the registration
requirements of federal and state securities laws and the Company is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Securities. Such Purchaser understands that no
13
United States federal or state agency or any government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
(g) No General Solicitation. Such Purchaser acknowledges that the
Securities were not offered to such Purchaser by means of any form of general or
public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio, or (ii) any seminar or meeting to
which such Purchaser was invited by any of the foregoing means of
communications. Such Purchaser, in making the decision to purchase the
Securities, has relied upon independent investigation made by it and has not
relied on any information or representations made by third parties.
(h) Accredited Investor. Such Purchaser is an "accredited investor"
(as defined in Rule 501 of Regulation D), and such Purchaser has such experience
in business and financial matters that it is capable of evaluating the merits
and risks of an investment in the Securities. Such Purchaser is not required to
be registered as a broker-dealer under Section 15 of the Exchange Act and such
Purchaser is not a broker-dealer. Such Purchaser acknowledges that an investment
in the Securities is speculative and involves a high degree of risk. Such
Purchaser has completed or caused to be completed the Investor Questionnaire
Certification attached hereto as Exhibit F certifying as to its status as an
"accredited investor" and understands that the Company is relying upon the truth
and accuracy of such information set forth therein to determine the suitability
of such Purchaser to acquire the Securities.
(i) Certain Fees. The Purchasers have not employed any broker or
finder or incurred any liability for any brokerage or investment banking fees,
commissions, finders' structuring fees, financial advisory fees or other similar
fees in connection with the Transaction Documents.
(j) Independent Investment. No Purchaser has agreed to act with any
other Purchaser for the purpose of acquiring, holding, voting or disposing of
the Securities purchased hereunder for purposes of Section 13(d) under the
Exchange Act, and each Purchaser is acting independently with respect to its
investment in the Securities. The Company acknowledges that for reasons of
administrative convenience only, the Transaction Documents have been prepared by
counsel for one of the Purchasers and such counsel does not represent all of the
Purchasers but only such Purchaser and the other Purchasers have retained their
own individual counsel with respect to the transactions contemplated hereby. The
Company acknowledges that it has elected to provide all Purchasers with the same
terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers.
ARTICLE III
COVENANTS
The Company covenants with each Purchaser as follows, which covenants are
for the benefit of each Purchaser and their respective permitted assignees.
14
Section 3.1. Securities Compliance. The Company shall notify the
Commission in accordance with its rules and regulations, of the transactions
contemplated by any of the Transaction Documents and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Securities to
the Purchasers, or their respective subsequent holders.
Section 3.2. Registration and Listing. The Company shall cause its
Common Stock to continue to be registered under Sections 12(b) or 12(g) of the
Exchange Act, to comply in all respects with its reporting and filing
obligations under the Exchange Act, to comply with all requirements related to
any registration statement filed pursuant to this Agreement, and to not take any
action or file any document (whether or not permitted by the Securities Act or
the rules promulgated thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under the Exchange
Act or Securities Act, except as permitted herein. The Company will use its
commercially reasonable efforts to continue the listing or trading of its Common
Stock on the Nasdaq SmallCap Market or any successor market.
Section 3.3. Compliance with Laws. The Company shall comply, and cause
each Subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which would be reasonably likely to have a Material
Adverse Effect.
Section 3.4. Keeping of Records and Books of Account. The Company
shall keep and cause each Subsidiary to keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its Subsidiaries.
Section 3.5. Reporting Requirements. If the Company ceases to file its
periodic reports with the Commission, or if the Commission ceases making these
periodic reports available via the Internet without charge, then the Company
shall, promptly after filing with the Commission, furnish the following to each
Purchaser so long as such Purchaser shall be obligated hereunder to purchase the
Securities or shall beneficially own Shares or Warrant Shares:
(a) Quarterly Reports filed with the Commission on Form 10-QSB;
(b) Annual Reports filed with the Commission on Form 10-KSB; and
(c) Copies of all notices, information and proxy statements in
connection with any meetings, that are, in each case, provided to holders of
shares of Common Stock, contemporaneously with the delivery of such notices or
information to such holders of Common Stock.
Section 3.6. Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability of the Company or any Subsidiary to perform its obligations
under any Transaction Document.
Section 3.7. Use of Proceeds. The net proceeds from the sale of the
Shares will be used by the Company for working capital and general corporate
purposes.
15
Section 3.8. Reporting Status; Eligibility to Use Form S-3. So long as
a Purchaser beneficially owns any of the Securities, the Company shall timely
file all reports required to be filed with the Commission pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination. The Company
currently meets, and will take all necessary action to continue to meet, the
"registrant eligibility" requirements set forth in the general instructions to
Form S-3 applicable to "resale" registrations on Form S-3 during the
Effectiveness Period (as defined in the Registration Rights Agreement).
Section 3.9. Disclosure of Transaction. The Company shall issue a
press release describing the material terms of the transactions contemplated
hereby (the "Press Release") no later than 9:00 A.M. Eastern Time on the first
Trading Day following the date of execution of this Agreement. The Company shall
also file with the Commission a Current Report on Form 8-K (the "Form 8-K")
describing the material terms of the transactions contemplated hereby (and
attaching as exhibits thereto this Agreement, the Registration Rights Agreement
and the form of each series of Warrant) as soon as practicable following the
Closing Date but in no event more than two (2) Trading Days following the
Closing Date, which Press Release and Form 8-K shall be subject to prior review
and comment by the Purchasers. The Company shall not disclose the names of any
of the Purchasers in the Press Release or Form 8-K without the prior written
consent of the Purchasers. "Trading Day" means any day during which the Nasdaq
SmallCap Market (or other principal exchange on which the Common Stock is
traded) shall be open for trading.
Section 3.10. Disclosure of Material Information. Except as may be
required pursuant to Section 3.12 hereof, the Company covenants and agrees that
neither it nor, to its knowledge, any other person acting on its behalf has
provided or will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
Section 3.11. Pledge of Securities. The Company acknowledges and
agrees that the Securities may be pledged by a Purchaser in connection with a
bona fide margin agreement or other loan or financing arrangement that is
secured by the Common Stock. The pledge of Common Stock shall not be deemed to
be a transfer, sale or assignment of the Common Stock hereunder, and no
Purchaser effecting a pledge of Common Stock shall be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document; provided that a
Purchaser and its pledgee shall be required to comply with the provisions of
Article V hereof in order to effect a sale, transfer or assignment of Common
Stock to such pledgee. At the Purchasers' expense, the Company hereby agrees to
execute and deliver such documentation as a pledgee of the Common Stock may
reasonably request in connection with a pledge of the Common Stock to such
pledgee by a Purchaser.
Section 3.12. Subsequent Placements.
16
(a) From the date hereof until the effective date of the registration
statement (the "Registration Statement") relating to the resale of the Shares
and Warrant Shares (the "Blockout Period"), the Company will not, directly or
indirectly, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition of) any of its or the Subsidiaries' equity or equity equivalent
securities, including without limitation any debt, preferred stock or other
instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for Common Stock
or Common Stock equivalents (any such offer, sale, grant, disposition or
announcement being referred to as a "Subsequent Placement").
(b) From the end of the Blockout Period until the 12 month anniversary
thereof, the Company will not, directly or indirectly, effect any Subsequent
Placement unless the Company shall have first complied with this Section
3.12(b).
(i) The Company shall deliver to each Purchaser a written notice
(the "Offer") of any proposed or intended issuance or sale or exchange of the
securities being offered (the "Offered Securities") in a Subsequent Placement,
which Offer shall (w) identify and describe the Offered Securities, (x) describe
the price and other terms upon which they are to be issued, sold or exchanged,
and the number or amount of the Offered Securities to be issued, sold or
exchanged, (y) identify the persons or entities (if known) to which or with
which the Offered Securities are to be offered, issued, sold or exchanged and
(z) offer to issue and sell to or exchange with each Purchaser a pro rata
portion of 50% of the Offered Securities equal to (A) the aggregate purchase
price paid by each Purchaser divided by (B) the aggregate purchase price paid by
the Purchasers for all of the Shares purchased hereunder (the "Basic Amount"),
and with respect to each Purchaser that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic Amounts
of other Purchasers as such Purchaser shall indicate it will purchase or acquire
should the other Purchasers subscribe for less than their Basic Amounts (the
"Undersubscription Amount").
(ii) To accept an Offer, in whole or in part, a Purchaser must
deliver a written notice to the Company prior to the end of the five (5) Trading
Day period of the Offer, setting forth the portion of the Purchaser's Basic
Amount that such Purchaser elects to purchase and, if such Purchaser shall elect
to purchase all of its Basic Amount, the Undersubscription Amount, if any, that
such Purchaser elects to purchase (in either case, the "Notice of Acceptance").
If the Basic Amounts subscribed for by all Purchasers are less than the total of
all of the Basic Amounts, then each Purchaser who has set forth an
Undersubcription Amount in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
Amount it has subscribed for; provided, however, that if the Undersubscription
Amounts subscribed for exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the "Available Undersubscription
Amount"), each Purchaser who has subscribed for any Undersubscription Amount
shall be entitled to purchase that portion of the Available Undersubscription
Amount as the Basic Amount of such Purchaser bears to the total Basic Amounts of
all Purchasers that have subscribed for Undersubscription Amounts, subject to
rounding by the Board of Directors to the extent its deems reasonably necessary.
17
(iii) The Company shall have ten (10) Trading Days from the
expiration of the period set forth in Section 3.12(b)(ii) above (the "Subsequent
Placement Closing Period") to issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by the
Purchasers (the "Refused Securities"), but only to the offerees described in the
Offer (if so described therein) and only upon terms and conditions (including,
without limitation, unit prices and interest rates) that are not more favorable
to the acquiring person or persons or less favorable to the Company than those
set forth in the Offer.
(iv) In the event the Company shall propose to sell less than all
the Refused Securities (any such sale to be in the manner and on the terms
specified in Section 3.12(b)(iii) above), then each Purchaser may, at its sole
option and in its sole discretion, reduce the number or amount of the Offered
Securities specified in its Notice of Acceptance to an amount that shall be not
less than the number or amount of the Offered Securities that the Purchaser
elected to purchase pursuant to Section 3.12(b)(ii) above multiplied by a
fraction, (i) the numerator of which shall be the number or amount of Offered
Securities the Company actually proposes to issue, sell or exchange (including
Offered Securities to be issued or sold to Purchasers pursuant to Section
3.12(b)(ii) above prior to such reduction) and (ii) the denominator of which
shall be the original amount of the Offered Securities. In the event that any
Purchaser so elects to reduce the number or amount of Offered Securities
specified in its Notice of Acceptance, the Company may not issue, sell or
exchange more than the reduced number or amount of the Offered Securities unless
and until such securities have again been offered to the Purchasers in
accordance with Section 3.12(b)(i) above.
(v) Upon the closing of the issuance, sale or exchange of all or
less than all of the Refused Securities, the Purchasers shall acquire from the
Company, and the Company shall issue to the Purchasers, the number or amount of
Offered Securities specified in the Notices of Acceptance, as reduced pursuant
to Section 3.12(b)(iv) above if the Purchasers have so elected, upon the terms
and conditions specified in the Offer. The purchase by the Purchasers of any
Offered Securities is subject in all cases to the execution and delivery by the
Company and the Purchasers of a purchase agreement relating to such Offered
Securities in the form proposed by the Company for use in connection with the
sale of any Refused Securities.
(vi) Any Offered Securities not acquired by the Purchasers or
other persons in accordance with Section 3.12(b)(iii) above may not be issued,
sold or exchanged until they are again offered to the Purchasers under the
procedures specified in this Agreement.
(c) The restrictions contained in paragraphs (a) and (b) of this
Section shall not apply to Excluded Stock. "Excluded Stock" means (i) securities
issued pursuant to a bona fide firm underwritten public offering of the
Company's securities with an aggregate initial public offering price of at least
$2,000,000 with a nationally recognized underwriter, (ii) securities issued
pursuant to the terms of this Agreement or pursuant to the conversion or
exercise of convertible or exercisable securities issued or outstanding on or
prior to the date hereof provided that the terms of such securities have not
changed after the date hereof, (iii) securities issued in connection with
strategic license agreements or other partnering arrangements so long as such
issuances are not for the purpose of raising capital, (iv) the
18
issuance of shares of Common Stock or the issuance or grants of options to
purchase shares of Common Stock pursuant to the Company's stock option plans and
employee stock purchase plans as they now exist, (v) the Warrant Shares, (vi)
securities issued (other than for cash) in connection with a merger, acquisition
or consolidation of the Company, (vii) any warrants issued to the placement
agent for the transactions contemplated by this Agreement, (viii) any securities
issued upon the conversion or exercise of any other securities issued in a
Subsequent Placement provided that the terms of such securities have not
changed, (ix) the sale of up to $500,000 of Common Stock on substantially the
same terms of this Agreement and (x) a warrant exchange between the Company and
the holders of warrants issued in connection with the Company's initial public
offering in 2000.
ARTICLE IV
CONDITIONS
Section 4.1. Conditions Precedent to the Obligation of the Company to
Close and to Sell the Securities. The obligation hereunder of the Company to
close and issue and sell the Securities to the Purchasers at the Closing is
subject to the satisfaction or waiver, at or before the Closing, of the
conditions set forth below. These conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion.
(a) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to the Closing Date.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) Delivery of Purchase Price. The Purchase Price for the Shares
shall have been delivered to the Company on the Closing Date in immediately
available funds.
(e) Delivery of Transaction Documents. The Transaction Documents shall
have been duly executed and delivered by the Purchasers to the Company.
Section 4.2. Conditions Precedent to the Obligation of the Purchasers
to Close and to Purchase the Securities. The obligation hereunder of each
Purchaser (x) to purchase the Securities is subject to the satisfaction or
waiver, at or before the Closing, of each of the conditions set forth below, and
(y) to exercise the Series B Warrant and to acquire and pay for
19
the Warrant Shares issuable upon exercise of the Series B Warrant is subject to
the satisfaction or waiver, at or before the Closing, of each of the conditions
set forth below. These conditions are for the Purchaser's sole benefit and may
be waived by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of
the representations and warranties of the Company in this Agreement and the
Registration Rights Agreement shall be true and correct in all material respects
as of the Closing Date, except for representations and warranties that speak as
of a particular date, which shall be true and correct in all material respects
as of such date.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date.
(c) No Suspension, Etc. Trading in the Common Stock shall not have
been suspended by the Commission or the Nasdaq SmallCap Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any time prior to
the Closing Date, trading in securities generally as reported by Bloomberg
Financial Markets ("Bloomberg") shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are
reported by Bloomberg, or on the New York Stock Exchange, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any Subsidiary, or any of the officers, directors or affiliates
of the Company or any Subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
(f) Opinion of Counsel. The Purchasers shall have received an opinion
of counsel to the Company, dated the date of such Closing, substantially in the
form of Exhibit G hereto, with such exceptions and limitations as shall be
reasonably acceptable to counsel to the Purchasers.
(g) Shares and Warrants. At or prior to the Closing, the Company shall
have delivered to the Purchasers certificates representing the Shares (in such
denominations as each Purchaser may request) and certificates representing the
Warrants, in each case, being acquired by the Purchasers at the Closing.
20
(h) Secretary's Certificate. The Company shall have delivered to the
Purchasers a secretary's certificate, dated as of the Closing Date, as to (i)
the resolutions adopted by the Board of Directors approving the transactions
contemplated hereby, (ii) the Certificate, (iii) the Bylaws, each as in effect
at the Closing, and (iv) the authority and incumbency of the officers of the
Company executing the Transaction Documents and any other documents required to
be executed or delivered in connection therewith.
(i) Officer's Certificate. On the Closing Date, the Company shall have
delivered to the Purchasers a certificate signed by an executive officer on
behalf of the Company, dated as of the Closing Date, confirming the accuracy of
the Company's representations, warranties and its compliance with covenants as
of the Closing Date and confirming the compliance by the Company with the
conditions precedent set forth in paragraphs (b)-(e) of this Section 4.2 as of
the Closing Date (provided that, with respect to the matters in paragraphs (d)
and (e) of this Section 4.2, such confirmation shall be based on the knowledge
of the executive officer after due inquiry).
(j) Registration Rights Agreement. As of the Closing Date, the parties
shall have entered into the Registration Rights Agreement in the form of Exhibit
E attached hereto.
(k) Material Adverse Effect. No Material Adverse Effect shall have
occurred at or before the Closing Date.
ARTICLE V
CERTIFICATE LEGEND
Section 5.1. Legend. Each certificate representing the Securities
shall be stamped or otherwise imprinted with a legend substantially in the
following form (in addition to any legend required by applicable state
securities or "blue sky" laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR DELCATH
SYSTEMS, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IT THAT REGISTRATION OF SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS
OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
The Company agrees to reissue certificates representing any of the
Shares or the Warrant Shares, without the legend set forth above if at such
time, prior to making any transfer of any such Shares or Warrant Shares, such
holder thereof shall give written notice to the Company upon the occurrence of:
(a) either (i) the Company has received an opinion of counsel reasonably
satisfactory to the Company, to the effect that the registration of the Shares
or Warrant Shares
21
under the Securities Act is not required in connection with such proposed
transfer, (ii) a registration statement under the Securities Act covering such
proposed disposition has been filed by the Company with the Commission and has
become and remains effective under the Securities Act, (iii) the Company has
received other evidence reasonably satisfactory to the Company that such
registration and qualification under the Securities Act and state securities
laws are not required, or (iv) the holder provides the Company with reasonable
assurances that such security can be sold pursuant to Rule 144 under the
Securities Act; and (b) either (i) the Company has received an opinion of
counsel reasonably satisfactory to the Company, to the effect that registration
or qualification under the securities or "blue sky" laws of any state is not
required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or "blue sky" laws has been effected or a valid
exemption exists with respect thereto. The Company will respond to any such
notice from a holder within three (3) business days. In the case of any proposed
transfer under this Section 5.1, the Company will use reasonable efforts to
comply with any such applicable state securities or "blue sky" laws, but shall
in no event be required, (x) to qualify to do business in any state where it is
not then qualified, (y) to take any action that would subject it to tax or to
the general service of process in any state where it is not then subject, or (z)
to comply with state securities or "blue sky" laws of any state for which
registration by coordination is unavailable to the Company. The restrictions on
transfer contained in this Section 5.1 shall be in addition to, and not by way
of limitation of, any other restrictions on transfer contained in any other
section of this Agreement. Whenever a certificate representing the Shares or
Warrant Shares is required to be issued to a Purchaser without a legend, in lieu
of delivering physical certificates representing the Shares or Warrant Shares,
provided the Company's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, the Company shall
use its reasonable best efforts to cause its transfer agent to electronically
transmit the Shares or Warrant Shares to a Purchaser by crediting the account of
such Purchaser's Prime Broker with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system (to the extent not inconsistent with any provisions
of this Agreement).
ARTICLE VI
INDEMNIFICATION
Section 6.1. General Indemnity. The Company agrees to indemnify and
hold harmless the Purchasers (and their respective directors, officers,
affiliates, agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys' fees, charges and disbursements) incurred by
the Purchasers and their directors, officers, affiliates, agents, successors and
assigns as a result of any inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein. Each Purchaser severally but
not jointly agrees to indemnify and hold harmless the Company and its directors,
officers, affiliates, agents, successors and assigns from and against any and
all losses, liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorneys' fees, charges and disbursements)
incurred by the Company and its directors, officers, affiliates, agents,
successors and assigns as result of any inaccuracy in or breach of the
representations, warranties or covenants made by such Purchaser herein. The
maximum aggregate liability of each Purchaser pursuant to its indemnification
22
obligations under this Article VI shall not exceed the portion of the Purchase
Price paid by such Purchaser hereunder.
Section 6.2. Indemnification Procedure. Any party entitled to
indemnification under this Article VI (an "indemnified party") will give written
notice to the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any indemnified party to give
notice as provided herein shall not relieve the indemnifying party of its
obligations under this Article VI except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action, proceeding or claim is brought against an indemnified party in respect
of which indemnification is sought hereunder, the indemnifying party shall be
entitled to participate in and, unless in the reasonable judgment of the
indemnifying party a conflict of interest between it and the indemnified party
exists with respect to such action, proceeding or claim (in which case the
indemnifying party shall be responsible for the reasonable fees and expenses of
one separate counsel for the indemnified parties), to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. In the event that
the indemnifying party advises an indemnified party that it will not contest
such a claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the indemnified party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any event, unless
and until the indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the indemnified party's
costs and expenses arising out of the defense, settlement or compromise of any
such action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VI to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Article VI shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law.
23
ARTICLE VII
MISCELLANEOUS
Section 7.1. Fees and Expenses. Each party shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, provided
that the Company shall pay all actual attorneys' fees and expenses (including
disbursements and out-of-pocket expenses) for one counsel to the Purchasers in
connection with (i) the preparation, negotiation, execution and delivery of this
Agreement, the Registration Rights Agreement and the transactions contemplated
thereunder, which payment shall be made at Closing and shall not exceed $20,000
(exclusive of disbursements and out-of-pocket expenses), of which up to $10,000
of such $20,000 shall be paid to counsel for Iroquois Capital and may be
withheld from the Purchase Price of Iroquois Capital at Closing, (ii) the filing
and declaration of effectiveness by the Commission of the Registration Statement
(as defined in the Registration Rights Agreement) and (iii) any amendments,
modifications or waivers of this Agreement or any of the other Transaction
Documents. In addition, the Company shall pay all reasonable fees and expenses
incurred by the Purchasers in connection with the enforcement of this Agreement
or any of the other Transaction Documents, including, without limitation, all
reasonable attorneys' fees and expenses.
Section 7.2.......Specific Performance; Consent to Jurisdiction; Venue.
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents are not performed in accordance
with their specific terms or are otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the other Transaction
Documents and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) The parties agree that venue for any dispute arising under this
Agreement will lie exclusively in the state or federal courts located in New
York County, New York, and the parties irrevocably waive any right to raise
forum non conveniens or any other argument that New York is not the proper
venue. The parties irrevocably consent to personal jurisdiction in the state and
federal courts of the state of New York. The Company and each Purchaser consent
to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 7.2 shall affect
or limit any right to serve process in any other manner permitted by law. The
Company and the Purchasers hereby agree that the prevailing party in any suit,
action or proceeding arising out of or relating to the Securities, this
Agreement or the Registration Rights Agreement, shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing party.
24
Section 7.3. Entire Agreement; Amendment. This Agreement and the
Transaction Documents contain the entire understanding and agreement of the
parties with respect to the matters covered hereby and, except as specifically
set forth herein or in the other Transaction Documents, neither the Company nor
any Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
Following the Closing, no provision of this Agreement may be waived or amended
other than by a written instrument signed by the Company and the Purchasers
holding at least a majority of all Shares then held by the Purchasers. Any
amendment or waiver effected in accordance with this Section 7.3 shall be
binding upon each Purchaser (and their permitted assigns) and the Company.
Section 7.4. Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to the Company: Delcath Systems, Inc.
1100 Summer Street, 3rd Floor
Stamford, Connecticut 06905
Attention: President and Chief Executive Officer
Tel. No.: (203) 323-8668
Fax No.: (203) 961-0120
with copies (which copies
shall not constitute notice
to the Company) to: Murtha Cullina LLP
Whitney Grove Square
Two Whitney Avenue
New Haven, Connecticut 06503
Attention: Paul G. Hughes
Tel. No.: (203) 772-7700
Fax No.: (203) 772-7723
If to any Purchaser: At the address of such Purchaser set forth on
Exhibit A to this Agreement.
25
with copies to: Jenkens & Gilchrist Parker Chapin LLP
The Chrysler Building
405 Lexington Ave.
New York, New York 10174
Attention: Christopher S. Auguste
Tel No.: (212) 704-6000
Fax No.: (212) 704-6288
Any party hereto may from time to time change its address for notices
by giving written notice of such changed address to the other parties hereto.
Section 7.5. Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 7.6. Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 7.7. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
After the Closing, the assignment by a party to this Agreement of any rights
hereunder shall not affect the obligations of such party under this Agreement.
Subject to Section 5.1 hereof and so long as any Purchaser is assigning at least
25,000 shares of Common Stock, such Purchaser may assign the Securities and its
rights under this Agreement and the other Transaction Documents and any other
rights hereto and thereto without the consent of the Company.
Section 7.8. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 7.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Agreement
shall not interpreted or construed with any presumption against the party
causing this Agreement to be drafted.
Section 7.10. Survival. The representations and warranties of the
Company and the Purchasers shall survive the execution and delivery hereof and
the Closing until the second anniversary of the Closing Date and the agreements
and covenants set forth in Articles I, III, V, VI and VII of this Agreement
shall survive the execution and delivery hereof and the Closing until the second
anniversary of the Closing Date.
Section 7.11. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall
26
become effective when counterparts have been signed by each party and delivered
to the other parties hereto, it being understood that all parties need not sign
the same counterpart.
Section 7.12. Publicity. The Company agrees that it will not disclose,
and will not include in any public announcement, the names of the Purchasers
without the consent of the Purchasers, which consent shall not be unreasonably
withheld or delayed, or unless and until such disclosure is required by law,
rule or applicable regulation, and then only to the extent of such requirement.
Section 7.13. Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 7.14. Further Assurances. From and after the date of this
Agreement, upon the request of the Purchasers or the Company, the Company and
each Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement, the Warrants
and the Registration Rights Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the date first
above written.
DELCATH SYSTEMS, INC.
By: /s/ M. S. KOLY
-------------------------
Name: M.S. Koly
Title: President and Chief Executive
Officer
PURCHASER:
By:
--------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the date first
above written.
DELCATH SYSTEMS, INC.
By:
-------------------------
Name: M.S. Koly
Title: President and Chief Executive
Officer
PURCHASER:
IROQUOIS CAPITAL LP
By: /s/ JOSHUA SILVERMAN
--------------------------
Name: Joshua Silverman
Title: Partner
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the date first
above written.
DELCATH SYSTEMS, INC.
By:
-------------------------
Name: M.S. Koly
Title: President and Chief Executive
Officer
PURCHASER:
OMICRON MASTER TRUST
By: OMICRON CAPITAL LP - advisor
By: OMICRON CAPITAL INC. - GP
By: /s/ BRUCE BERNSTEIN
--------------------------
Name: Bruce Bernstein
Title: Managing Member
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the date first
above written.
DELCATH SYSTEMS, INC.
By:
-------------------------
Name: M.S. Koly
Title: President and Chief Executive
Officer
PURCHASER:
CRANSHIRE CAPITAL, L.P.
By: /s/ MITCHELL R. KOPIN
--------------------------
Name: Mitchell R. Kopin
Title: President - Downsview Capital
The General Partner
EXHIBIT A
LIST OF PURCHASERS
Names and Addresses Number of Shares
of Purchasers & Warrants Purchased
- ------------- --------------------
[SEE ATTACHED SPREADSHEET]
i
Investor Registration Total Total "A" Total "B" Total "C"
Address Common Stock Warrants Warrants Warrants
Omicron Master 347,594 139,038 347,594 139,038
Trust
Cranshire Capital 666 Dundee Road 187,166 74,867 187,166 74,867
LP Suite 1901
Northbrook, IL 60062
Iroquois Capital 641 Lexington Avenue 534,760 213,904 534,760 213,904
LP 26th Floor
New York, NY 10022
EXHIBIT B
FORM OF SERIES A WARRANT
ii
EXHIBIT C
FORM OF SERIES B WARRANT
iii
EXHIBIT D
FORM OF SERIES C WARRANT
iv
EXHIBIT E
FORM OF REGISTRATION RIGHTS AGREEMENT
v
EXHIBIT F
INVESTOR QUESTIONNAIRE CERTIFICATION
DELCATH SYSTEMS, INC.
INVESTOR QUESTIONNAIRE
(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)
To: Delcath Systems, Inc.
This Investor Questionnaire ("Questionnaire") must be completed by each
potential investor in connection with the offer and sale of the shares of
restricted common stock and warrants of Delcath Systems, Inc. (the
"Securities"). The Securities are being offered and sold by Delcath Systems,
Inc. (the "Company") without registration under the Securities Act of 1933, as
amended (the "Act"), and the securities laws of certain states, in reliance on
the exemptions contained in Section 4(2) of the Act and on Regulation D
promulgated thereunder and in reliance on similar exemptions under applicable
state laws. The Company must determine that a potential investor meets certain
suitability requirements before offering or selling Securities to such investor.
The purpose of this Questionnaire is to assure the Company that each investor
will meet the applicable suitability requirements. The information supplied by
you will be used in determining whether you meet such criteria, and reliance
upon the private offering exemptions from registration is based in part on the
information herein supplied.
This Questionnaire does not constitute an offer to sell or a solicitation of an
offer to buy any security. Your answers will be kept strictly confidential.
However, by signing this Questionnaire, you will be authorizing the Company to
provide a completed copy of this Questionnaire to such parties as the Company
deems appropriate in order to ensure that the offer and sale of the Securities
will not result in a violation of the Act or the securities laws of any state
and that you otherwise satisfy the suitability standards applicable to
purchasers of the Securities. All potential investors must answer all applicable
questions and complete, date and sign this Questionnaire. Please print or type
your responses and attach additional sheets of paper if necessary to complete
your answers to any item.
A. BACKGROUND INFORMATION
Name:___________________________________________________________________________
Business Address:_______________________________________________________________
(Number and Street)
________________________________________________________________________________
(City) (State) (Zip Code)
Telephone Number: _____________________________
If an individual:
Age: __________ Citizenship: ____________
If a corporation, partnership, limited liability company, trust or other entity:
Type of entity:_________________________________________________________________
State of formation:______________________ Date of formation: _________________
Social Security or Taxpayer Identification No.__________________________________
B._______STATUS AS ACCREDITED INVESTOR
The undersigned is an "accredited investor" as such term is defined in
Regulation D under the Act, and at the time of the offer and sale of the
Securities the undersigned falls and will fall within one or more of the
following categories (Please initial one or more, as applicable): 1
- --------
1 As used in this Questionnaire, the term "net worth" means the excess
of total assets over total liabilities. In computing net worth for the purpose
of subsection (4), the principal residence of the investor must be valued at
cost, including cost of improvements, or at recently appraised value by an
institutional lender making a secured loan,
vi
____ (1) a bank as defined in Section 3(a)(2) of the Act, or a savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the Act
whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to Section 15 of the Securities Exchange Act of 1934; an
insurance company as defined in Section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that Act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions for the benefit of its
employees, if such plan has total assets in excess of $5,000,000; an employee
benefit plan within the meaning of the Employee Retirement Income Security Act
of 1974, if the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
the investment decisions made solely by persons that are accredited investors;
____ (2) a private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940;
____ (3) an organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended, corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the Securities
offered, with total assets in excess of $5,000,000;
____ (4) a natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of such person's purchase of the Securities
exceeds $1,000,000;
____ (5) a natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
____ (6) a trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Securities offered, whose purchase is directed
by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D;
and
____ (7) an entity in which all of the equity owners are accredited investors
(as defined above).
IN WITNESS WHEREOF, the undersigned has executed this Questionnaire this ____
day of __________, 2004, and declares under oath that it is truthful and
correct.
_____________________________________________
Print Name
By: _________________________________________
Signature
Title: ______________________________________
(required for any purchaser that
is a corporation, partnership,
limited liability company, trust
or other entity)
________________________________________________________________________________
net of encumbrances. In determining income, the investor should add to the
investor's adjusted gross income any amounts attributable to tax exempt income
received, losses claimed as a limited partner in any limited partnership,
contributions to an IRA or KEOGH retirement plan, alimony payments, and any
amount by which income from long-term capital gains has been reduced in arriving
at adjusted gross income.
vii
EXHIBIT G
FORM OF OPINION
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has the requisite
corporate power to own, lease and operate its properties and assets, and to
carry on its business as described in its Annual Report on Form 10-KSB for the
year ended December 31, 2003. The Company is duly qualified as a foreign
corporation to do business and is in good standing in the State of Connecticut,
the only jurisdiction in which the Company has an office based on its Annual
Report on Form 10-KSB for the year ended December 31, 2003.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Transaction Documents and to issue
the Shares, the Warrants and the Warrant Shares. The execution, delivery and
performance of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly and
validly authorized by all necessary corporate action and no further consent or
authorization of the Company, its Board of Directors or its stockholders is
required. Each of the Transaction Documents has been duly executed and delivered
and each of the Transaction Documents constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its respective terms. The Shares and the Warrant Shares are not subject to any
preemptive rights under the Certificate of Incorporation or the Bylaws.
3. The Shares and the Warrants have been duly authorized and, the Shares
when delivered against payment in full as provided in the Purchase Agreement,
will be validly issued, fully paid and nonassessable. The shares of Common Stock
issuable upon exercise of the Warrants have been duly authorized and reserved
for issuance, and when delivered against payment in full as provided in the
Warrants, will be validly issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with the terms
of the Transaction Documents and the issuance of the Shares and the Warrants do
not (a) violate any provision of the Certificate of Incorporation or Bylaws, (b)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Company is a party and which has been
filed as an exhibit to any of the Commission Documents, (c) create or impose a
lien, charge or encumbrance on any property of the Company under any agreement
or any commitment to which the Company is a party and which the Company has
filed as an exhibit to any of the Commission Documents, or (d) result in a
violation of any Federal, state or local statute, rule or regulation (including
Federal and state securities laws and regulations) applicable to the Company or
by which any property or asset of the Company is bound or affected, except, in
all cases other than violations pursuant to clauses (a) and (d) above, for such
conflicts, default, terminations, amendments, acceleration, cancellations and
violations as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
viii
5. No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required
under Federal, state or local law, rule or regulation in connection with the
valid execution, delivery and performance of the Transaction Documents, or the
offer, sale or issuance of the Shares, the Warrants and the Warrant Shares other
than filings as may be required by applicable Federal and state securities laws.
6. To our knowledge, there is no action, suit, claim, investigation or
proceeding pending or threatened against the Company which questions the
validity of the Transaction Documents or the transactions contemplated thereby
or any action taken or to be taken pursuant thereto. To our knowledge, there is
no action, suit, claim, investigation or proceeding pending or threatened
against or involving the Company or any of its properties or assets which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect. To our knowledge, there are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any officers or directors of the Company
in their capacities as such that could reasonable be likely be expected to have
a Material Adverse Effect.
7. Assuming the accuracy of the representations and warranties made by each
of the Purchasers in the Investor Questionnaire Certification completed by such
Purchaser and that the Securities were not offered by means of any form of
general or public solicitation or general advertising or publicly disseminated
advertisements or sales literature, the offer, issuance and sale of the Shares
and the Warrants are exempt from the registration requirements of the Securities
Act of 1933, as amended.
8. The Company currently meets the "registrant eligibility" requirements
set forth in the general instructions to Form S-3 applicable to "resale"
registrations on Form S-3.
ix
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of November 24, 2004, by and among Delcath Systems, Inc., a Delaware
corporation (the "Company"), and the purchasers listed on Schedule I hereto (the
"Purchasers").
This Agreement is being entered into pursuant to the Common Stock Purchase
Agreement dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(m).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Board" shall have meaning set forth in Section 3(m).
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Closing Date" means the date of the closing of the purchase and sale of
the Shares pursuant to the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $0.01 per share.
"Effectiveness Date" means with respect to the Registration Statement the
earlier of the ninetieth (90th) day following the Closing Date or the date which
is within five (5) Business Days of the date on which the Commission informs the
Company that the Commission (i) will not review the Registration Statement or
(ii) that the Company may request the
acceleration of the effectiveness of the Registration Statement and the Company
makes such request.
"Effectiveness Period" shall have the meaning set forth in Section 2.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the thirtieth (30th) day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case may be, from
time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.
"Registrable Securities" means (i) the shares of Common Stock issued to the
Purchasers pursuant to the Purchase Agreement and (ii) the shares of Common
Stock issuable upon exercise of the Warrants.
"Registration Statement" means the registration statements and any
additional registration statements contemplated by Section 2, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference in such registration
statement.
-2-
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means one special counsel to the Holders.
2. Resale Registration.
On or prior to the Filing Date the Company shall prepare and file with the
Commission a "resale" Registration Statement covering all Registrable Securities
for an offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form S-3 (except if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in which
case such registration shall be on another appropriate form in accordance
herewith). The Company shall (i) not permit any securities other than the
Registrable Securities and the securities listed on Schedule II hereto to be
included in the Registration Statement and (ii) use its reasonable best efforts
to cause the Registration Statement to be declared effective under the
Securities Act as promptly as practicable after the filing thereof, but in any
event prior to the Effectiveness Date, and to keep such Registration Statement
continuously effective under the Securities Act until such date as is the
earlier of (x) the date when all Registrable Securities covered by such
Registration Statement have been sold or (y) the date on which the Registrable
Securities may be sold without any restriction pursuant to Rule 144 as
determined by the counsel to the Company pursuant to a written opinion letter,
addressed to the Company's transfer agent to such effect (the "Effectiveness
Period").
3. Registration Procedures.
In connection with the Company's registration obligations hereunder, the
Company shall:
(a) Prepare and file with the Commission on or prior to the Filing Date, a
Registration Statement on Form S-3 (or if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3 such registration
shall be on another appropriate form in accordance herewith) in accordance with
the method or methods of distribution thereof as specified by the Holders
(except if otherwise directed by the Holders), and use its reasonable best
efforts to cause the Registration Statement to become effective and remain
effective as provided herein; provided, however, that not less than five (5)
Business Days prior to the filing of the
-3-
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated therein by
reference), the Company shall (i) furnish to the Holders and any Special
Counsel, copies of all such documents proposed to be filed, which documents
(other than those incorporated by reference) will be subject to the review of
such Holders and such Special Counsel, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of Special
Counsel, to conduct a reasonable investigation within the meaning of the
Securities Act. Unless otherwise advised by outside counsel to the Company, the
Company shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities or any Special Counsel shall reasonably object in writing
within three (3) Business Days of their receipt thereof.
(b) (i) Promptly prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period; (ii) cause the
related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
(iii) respond as promptly as practicable, but in no event later than ten (10)
Business Days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as practicable
provide the Holders true and complete copies of all correspondence from and to
the Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
The Company and the Purchasers agree that the Holders will suffer damages if the
Company fails to comply with the provisions of subclause (iii) of this Section
3(b). The Company and the Holders further agree that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, if the Company
fails to comply with the time restrictions set forth in subclause (iii) of this
Section 3(b), the Company shall pay an amount in cash as liquidated damages to
each Holder equal to .025% for each day after the expiration of such ten (10)
Business Day period of the Holder's initial investment in the Shares pursuant to
the Purchase Agreement, until the event referred to in subclause (iii) of this
Section 3(b) is cured. No such liquidated damages shall be payable if,
notwithstanding the Company's compliance with the restrictions set forth in
subclause (iii) of this Section 3(b), the Registration Statement does not become
effective by the Effectiveness Date.
(c) Notify the Holders of Registrable Securities to be sold and any Special
Counsel as promptly as practicable (and, in the case of (i)(A) below, not less
than five (5) days prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one (1) Business Day following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is filed; (B) when the Commission
notifies the Company whether there will be a "review" of such Registration
Statement and whenever the Commission comments in writing on such Registration
Statement,
-4-
and (C) with respect to the Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any request by the
Commission or any other Federal or state governmental authority for amendments
or supplements to the Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) Use its reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of, (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
(f) Furnish to each Holder and any Special Counsel, without charge, at
least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(g) Promptly deliver to each Holder and any Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto in the manner
described therein.
-5-
(h) Prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the selling
Holders and any Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement
in the manner described therein; provided, however, that the Company shall not
be required to qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject or
subject the Company to any material tax in any such jurisdiction where it is not
then so subject.
(i) Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold pursuant
to the Registration Statement, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any Holder may request in writing
at least two (2) Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section 3(c)(vi), as
promptly as practicable, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(k) Use its reasonable best efforts to cause all Registrable Securities
relating to the Registration Statement to be listed on the Nasdaq SmallCap
Market or any other securities exchange, quotation system or market, if any, on
which similar securities issued by the Company are then listed as and when
required pursuant to the Purchase Agreement.
(l) The Company may require each selling Holder to furnish to the Company
information regarding such Holder and the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement,
and the Company may exclude from such registration the Registrable Securities of
any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or otherwise as
the holder of any securities of the Company, then such Holder shall have the
right to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
-6-
Each Holder covenants and agrees that (i) it will not sell any Registrable
Securities under the Registration Statement until it has received copies of the
Prospectus as then amended or supplemented as contemplated in Section 3(g) and
notice from the Company that such Registration Statement and any post-effective
amendments thereto have become effective as contemplated by Section 3(c) and
(ii) it and its officers, directors or Affiliates, if any, will comply with the
prospectus delivery requirements of the Securities Act as applicable to them in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
Each Holder agrees by its acquisition of such Registrable Securities that,
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi),
such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
(m) If (i) there is material non-public information regarding the Company
which the Company's Board of Directors (the "Board") reasonably determines to be
not in the Company's best interest to disclose and which the Company is not
otherwise required to disclose, or (ii) there is a significant business
opportunity (including, but not limited to, the acquisition or disposition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other similar transaction) available to the
Company which the Board reasonably determines not to be in the Company's best
interest to disclose, then the Company may at any time following the date that
is 30 business days following the effective date of the Registration Statement
(x) suspend filing of a registration statement for a period not to exceed 30
consecutive days or (y) suspend effectiveness of a registration statement for a
period not to exceed 20 consecutive days; provided that the Company may not
postpone or suspend effectiveness of a registration statement under this Section
3(m) for more than 45 days in the aggregate during any 12 month period;
provided, however, that no such postponement or suspension shall be permitted
for consecutive 30 day periods arising out of the same set of facts,
circumstances or transactions.
4. Registration Expenses.
All fees and expenses incident to the performance of or compliance with
this Agreement by the Company, except as and to the extent specified in this
Section 4, shall be borne by the Company whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with the
Nasdaq SmallCap Market and each other securities exchange or market on which
Registrable Securities are required hereunder to be listed, (B) with respect to
filing fees required to be paid to the National Association of Securities
Dealers, Inc. and the NASD Regulation, Inc. and (C) in compliance with state
securities or Blue Sky laws
-7-
(including, without limitation, fees and disbursements of counsel for the
Holders in connection with Blue Sky qualifications of the Registrable Securities
and determination of the eligibility of the Registrable Securities for
investment under the laws of such jurisdictions as the Holders of a majority of
Registrable Securities may designate)), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities
and of printing prospectuses if the printing of prospectuses is requested by the
holders of a majority of the Registrable Securities included in the Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company, (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the consummation
of the transactions contemplated by this Agreement, including, without
limitation, the Company's independent public accountants. In addition, the
Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the listing
of the Registrable Securities on any securities exchange as required hereunder.
5. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls any such Holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and attorneys' fees) and expenses (collectively, "Losses"),
as incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto,
or arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
(in the case of any Prospectus or form of prospectus or supplement thereto, in
the light of the circumstances under which they were made) not misleading,
except to the extent, but only to the extent, that (i) such untrue statements or
omissions are based solely upon information regarding any Holder or any such
other Indemnified Party furnished in writing to the Company by such Holder
expressly for use therein and (ii) the foregoing indemnity agreement is subject
to the condition that, insofar as it relates to any untrue statement, allegedly
untrue statement, omission or alleged omission made in any preliminary
prospectus but eliminated or remedied in the final prospectus (filed pursuant to
Rule 424 under the Securities Act), such indemnity agreement shall not inure to
the benefit of any Holder, underwriter, broker or other Person acting on behalf
of holders of the Registrable Securities, from whom the Person asserting any
loss, claim, damage, liability or expense purchased the Registrable Securities
which are the subject thereof, if a copy of such final prospectus had been made
available to such Person and such Holder, underwriter, broker or other Person
acting on behalf of holders of the Registrable
-8-
Securities and such final prospectus was not delivered to such Person with or
prior to the written confirmation of the sale of such Registrable Securities to
such Person. The Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents and employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder or other Indemnifying Party to the Company specifically for
inclusion in the Registration Statement or such Prospectus. Notwithstanding
anything to the contrary contained herein, each Holder shall be liable under
this Section 5(b) for only that amount as does not exceed the net proceeds to
such Holder as a result of the sale of Registrable Securities pursuant to such
Registration Statement.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel (which shall be reasonably acceptable to the
Indemnifying Party) that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have
-9-
the right to assume the defense thereof and such counsel shall be at the expense
of the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Business Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b)
is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative benefits received by the
Indemnifying Party on the one hand and the Indemnified Party on the other from
the offering of the Shares and Warrants. If, but only if, the allocation
provided by the foregoing sentence is not permitted by applicable law, the
allocation of contribution shall be made in such proportion as is appropriate to
reflect not only the relative benefits referred to in the foregoing sentence but
also the relative fault, as applicable, of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section were available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of
-10-
Section 11(f) of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties. Notwithstanding anything to the contrary contained herein,
the Holders shall be liable under this Section 5(d) for only that amount as does
not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.
6. Rule 144.
As long as any Holder owns any Shares, the Company covenants to timely file
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to Section 13(a) or 15(d) of the Exchange Act. As long as any Holder
owns any Shares, if the Company is not required to file reports pursuant to
Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the
Holders and make publicly available in accordance with Rule 144(c) promulgated
under the Securities Act annual and quarterly financial statements, together
with a discussion of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as
any other information required thereby, in the time period that such filings
would have been required to have been made under the Exchange Act. The Company
further covenants that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Person to sell the Shares without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act, including providing any legal opinions relating to such sale
pursuant to Rule 144.
7. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a Holder, of
any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof entered into, nor shall the Company or
any of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as disclosed in Schedule 2.1(c) of the Purchase
Agreement, neither the Company nor any of its subsidiaries has previously
entered into any agreement currently in effect granting any registration rights
with respect to any of its
-11-
securities to any Person. Without limiting the generality of the foregoing,
without the written consent of the Holders of a majority of the then outstanding
Registrable Securities held by the Holders, the Company shall not grant to any
Person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Holders set forth herein, and are
not otherwise in conflict with the provisions of this Agreement.
(c) No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto or as
disclosed on Schedule 2.1(c) of the Purchase Agreement) may include securities
of the Company in the Registration Statement, and the Company shall not after
the date hereof enter into any agreement providing such right to any of its
securityholders, unless the right so granted is subject in all respects to the
prior rights in full of the Holders set forth herein, and is not otherwise in
conflict with the provisions of this Agreement.
(d) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders of
a majority of the Registrable Securities then outstanding and held by the
Holders.
(e) Failure to File Registration Statement. The Company and the Purchasers
agree that the Holders will suffer damages if the Registration Statement is not
filed on or prior to the Filing Date. The Company and the Holders further agree
that it would not be feasible to ascertain the extent of such damages with
precision. Accordingly, if the Registration Statement is not filed on or prior
to the Filing Date (any such failure or breach being referred to as an "Event,"
and the date on which such Event occurs, being referred to as "Event Date"), the
Company shall pay an amount as liquidated damages to each Holder, payable in
cash equal to .025% for each day of the Holder's initial investment in the
Shares from the Event Date until the Event is cured.
(f) Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery by telecopy or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
Delcath Systems, Inc.
1100 Summer Street, 3rd Floor
Stamford, Connecticut 06905
Attention: President and Chief Executive
Officer
Tel. No.: (203) 323-8668
-12-
Fax No.: (203) 961-0120
with copies (which copies
shall not constitute notice
to the Company) to: Murtha Cullina LLP
Whitney Grove Square
Two Whitney Avenue
New Haven, Connecticut 06503
Attention: Paul G. Hughes
Tel. No.: (203) 772-7700
Fax No.: (203) 772-7723
If to any Holder: At the address of such Holder set forth on
Schedule I to this Agreement.
with copies to: Jenkens & Gilchrist Parker Chapin LLP
The Chrysler Building
405 Lexington Ave.
New York, New York 10174
Attention: Christopher S. Auguste
Tel No.: (212) 704-6000
Fax No.: (212) 704-6288
Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other parties hereto.
(g) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns and
shall inure to the benefit of each Holder and its successors and assigns. The
Company may not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of each Holder. Each Purchaser may
assign its rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.
(h) Assignment of Registration Rights. The rights of each Holder hereunder,
including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any Affiliate of such Holder or any
other Holder or Affiliate of any other Holder of all or a portion of the
Registrable Securities so long as at least 25,000 Registrable Securities are
being assigned by such Holder and (i) the Holder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) following such transfer or assignment
the further disposition of such securities by the transferee or assignees is
restricted under the Securities Act and applicable state securities laws, (iv)
at or before the time the Company receives the written notice contemplated by
clause (ii) of this
-13-
Section, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions of this Agreement, and (v) such transfer shall
have been made in accordance with the applicable requirements of the Purchase
Agreement. In addition, each Holder shall have the right to assign its rights
hereunder to any other Person with the prior written consent of the Company,
which consent shall not be unreasonably withheld. The rights to assignment shall
apply to the Holders (and to subsequent) successors and assigns.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(j) Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Agreement
shall not interpreted or construed with any presumption against the party
causing this Agreement to be drafted. The parties agree that venue for any
dispute arising under this Agreement will lie exclusively in the state or
federal courts located in New York County, New York, and the parties irrevocably
waive any right to raise forum non conveniens or any other argument that New
York is not the proper venue. The parties irrevocably consent to personal
jurisdiction in the state and federal courts of the state of New York. The
Company and each Purchaser consent to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section 7(j) shall affect or limit any right to serve process in any other
manner permitted by law. The Company and the Purchasers hereby agree that the
prevailing party in any suit, action or proceeding arising out of or relating to
the Registrable Securities, this Agreement, the Warrants or the Purchase
Agreement, shall be entitled to reimbursement for reasonable legal fees from the
non-prevailing party.
(k) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction of this
Agreement is held to be invalid, illegal, void or unenforceable in any respect,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
-14-
(m) Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-15-
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
DELCATH SYSTEMS, INC.
By: /s/ M. S. KOLY
-----------------------------
Name: M.S. Koly
Title: President and Chief Executive
Officer
PURCHASER:
By:
-----------------------------
Name:
Title:
-16-
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
DELCATH SYSTEMS, INC.
By:
-----------------------------
Name: M.S. Koly
Title: President and Chief Executive
Officer
PURCHASER:
IROQUOIS CAPITAL LP
By: /s/ JOSHUA SILVERMAN
-----------------------------
Name: Joshua Silverman
Title: Partner
-15-
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
DELCATH SYSTEMS, INC.
By:
-----------------------------
Name: M.S. Koly
Title: President and Chief Executive
Officer
PURCHASER:
OMICRON MASTER TRUST
By: OMICRON CAPITAL LP - advisor
By: OMICRON CAPITAL INC. - GP
By: /s/ BRUCE BERNSTEIN
-----------------------------
Name: Bruce Bernstein
Title: Managing Member
-15-
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
DELCATH SYSTEMS, INC.
By:
-----------------------------
Name: M.S. Koly
Title: President and Chief Executive
Officer
PURCHASER:
CRANSHIRE CAPITAL, L.P.
By: /s/ MITCHELL R. KOPIN
-----------------------------
Name: Mitchell R. Kopin
Title: President - Downsview Capital
The General Partner
-16-
Schedule I
List of Purchasers
[SEE ATTACHED SPREADSHEET]
-17-
Investor Registration Total Total "A" Total "B" Total "C"
Address Common Stock Warrants Warrants Warrants
Omicron Master 347,594 139,038 347,594 139,038
Trust
Cranshire Capital 666 Dundee Road 187,166 74,867 187,166 74,867
LP Suite 1901
Northbrook, IL 60062
Iroquois Capital 641 Lexington Avenue 534,760 213,904 534,760 213,904
LP 26th Floor
New York, NY 10022
Schedule II
Securities Allowed to be Included on Registration Statement
1. Shares of Common Stock issuable upon the exercise of warrants issuable
to the placement agent in connection with the transactions
contemplated by the Purchase Agreement.
-18-
