UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2006
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD
FROM __________ TO __________
COMMISSION FILE NUMBER 001-16133
DELCATH SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1245881
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1100 SUMMER STREET
STAMFORD, CONNECTICUT 06905
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 323-8668
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAMES OF EACH EXCHANGE ON WHICH REGISTERED
-------------------------------------------------------------------------------
Common Stock, par value $0.01 Nasdaq Capital Market
Boston Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer (as
defined in Rule 405 of the Act). Yes |_| No |X|
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes |_| No |X|
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III or this Form 10-K or any amendment to this
Form 10-K. |_|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the
Act). Large accelerated filer |_| Accelerated filer |X| Non-accelerated filer
|_|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes |_| No |X|
The aggregate market value of the voting common stock held by non-affiliates of
the issuer, based on the closing sales price of $5.25 per share, was $98,834,096
as of June 30, 2006.
As of March 1, 2007, the registrant had outstanding 21,252,613 shares of par
value $0.01 Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE - NONE
EXPLANATORY NOTE
This amendment on Form 10-K/A (Amendment No. 1) amends our annual report on Form
10-K for the fiscal year ended December 31, 2006, which was filed with the
Securities and Exchange Commission (the "SEC") on March 16, 2007 (the "2006 Form
10-K"), and is being filed to include the information required by Items 10-14,
inclusive, required by Part III of Form 10-K. In accordance with General
Instruction G to Form 10-K, the 2006 Form 10-K as filed on March 16, 2007 did
not include the information required by Items 10-14 of Part III of Form 10-K. It
was contemplated that such information would be included in the Company's
definitive proxy statement pursuant to Regulation 14A prepared in connection
with the Company's 2007 Annual Meeting of Stockholders (the "Proxy Statement"),
which was expected to be filed on or before the 120th day after the end of the
fiscal year covered by the 2006 Form 10-K. Due to unforeseen delays in
connection with the printing and filing process, Delcath failed to file the
Proxy Statement on April 30, 2007, but filed the Proxy Statement the next day,
on May 1, 2007. Accordingly, the information required by Items 10-14 of Part III
is no longer being incorporated by reference to our Proxy Statement, and this
amendment is being filed to include such information herein.
As a result of this amendment, the Company is also filing as exhibits to this
Form 10-K/A the certifications required under Section 302 of the Sarbanes-Oxley
Act of 2002. Because no financial statements are contained within this Form
10-K/A, the Company is not including certifications pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
This amendment is not intended to update other information presented in this
annual report as originally filed, except where specifically noted.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
DIRECTORS AND EXECUTIVE OFFICERS
The following individuals were nominated for election as Class I directors of
Delcath at the Annual Meeting of Stockholders of Delcath, scheduled to be held
on June 5, 2007, and are currently members of Delcath's Board of Directors:
NOMINEE AGE YEAR FIRST JOINED BOARD CURRENT POSITIONS
--------------------------------------------------------------------------------
Harold S. Koplewicz, MD 54 2006 Chairman
Robert B. Ladd 48 2006 Director
--------------------------------------------------------------------------------
BACKGROUND OF NOMINEES FOR THE BOARD OF DIRECTORS
HAROLD S. KOPLEWICZ, MD, 54, was appointed a Class I director of Delcath in
September 2006. He was appointed Chairman in February 2007. In May 2006, Dr.
Koplewicz was appointed by then-New York Governor George Pataki to the position
of Executive Director of the Nathan S. Kline Institute for Psychiatric Research.
He is only the third person to hold this title since 1952. Dr. Koplewicz is also
the Arnold and Debbie Simon Professor and Chairman of the Department of Child
and Adolescent Psychiatry and Professor of Pediatrics and founder of the NYU
Child Study Center at the New York University School of Medicine. He has served
as a member of the National Board of Medical Examiners and as a commissioner of
the New York State Commission on Youth, Crime and Violence and Reform of the
Juvenile Justice System.
ROBERT B. LADD, 48, was appointed a Class I director of Delcath in October 2006.
Since January 2003 to the present, Mr. Ladd has served as the founder and
managing member of Laddcap Value Associates LLC, the general partner of Laddcap
Value Partners LP. From 1988 to November 2002, Mr. Ladd served as a Managing
Director for Neuberger Berman; his responsibilities at Neuberger Berman included
serving as a portfolio manager for various high net worth clients and as a
securities analyst. Mr. Ladd graduated from the University of Pennsylvania's
Wharton School with a B.S. in Economics in 1980. He received his MBA from
Northwestern University's Kellogg School of Management in 1983. Mr. Ladd has
also earned a CFA designation.
The following individuals are currently members of Delcath's Board of Directors
whose terms of office do not expire this year, and who consequently are not
nominees for re-election at the Meeting:
RICHARD TANEY, 51, was appointed a Class II Director of Delcath in November 2006
and Chief Executive Officer in December 2006. He was named President in April
2007. He is the founding member of T2 Capital Management, LLC, an investment
management company. Prior to establishing his money management venture, he spent
20 years advising and managing assets for high net worth and institutional
clients, most recently as Managing Director of Banc of America Securities. Mr.
Taney is also a founding partner of Sandpiper Capital Partners, an investment
partnership that focuses on private equity investments and advisory work for
privately held companies involved in a variety of emerging technologies. He
earned his BA from Tufts University and his JD from Temple University School of
Law.
SAMUEL HERSCHKOWITZ, M.D., 57, has been Chief Operating Officer since January
2007 and a Class II Director since 1988. His term expires at the 2008 Annual
Meeting. He also served as Delcath's Chief Technical Officer from 1991 to 2006
and as Chairman of the Board of Delcath from 1998 to December 2006. Dr.
Herschkowitz is board certified in psychiatry and neurology. He is a professor
at New York University Medical Center and has held academic positions at Beth
Israel Hospital, Mount Sinai Medical School and SUNY Downstate Medical Center.
The following table provides information concerning the executive officers of
Delcath.
NAME AGE OFFICE CURRENTLY HELD
----------------------------------------------------------------------------------------
Richard Taney 51 President, Chief Executive Officer and Director
Paul M. Feinstein 59 Chief Financial Officer and Treasurer
Seymour Fein 58 Chief Scientific Officer
Samuel Herschkowitz, MD 57 Chief Operating Officer
--------------------------------------- ------------------------------------------------
A brief description of the business experience of Mr. Taney and Dr. Herschkowitz
is set forth above. The following is a brief description of the business
experience of Messrs. Feinstein and Fein:
PAUL M. FEINSTEIN, 59, joined the company as Chief Financial Officer in October
2003. He was named Treasurer in April 2007. From 1991-2002 he was Vice
President/Finance for the New York Road Runners in New York, New York. From
1988-1990 he was the Controller of Mechanical Plastics, Inc. Prior to that he
held senior financial positions with Holmes Protection Services, Jewelers
Protection Services and Parade Publications and was with Coopers & Lybrand, the
international accounting services firm that is now a part of
PricewaterhouseCoopers. He is licensed to practice law in New York State. He
holds a B.B.A. from Pace College, an LL.M. in Taxation from NYU School of Law
and graduated from Albany Law School of Union University.
SEYMOUR FEIN, 58, joined the Company as Chief Scientific Officer in August 2006.
He is board certified in both oncology and internal medicine, has served as a
Medical Director on Delcath's Scientific Advisory Board since 2005. He has more
than 38 years in clinical research and as a consultant for biotechnology and
medical device companies. As a medical director for Bayer Pharmaceuticals, he
was responsible for multiple therapeutic areas including oncology,
gastroenterology and cardiology. Dr. Fein also served as Director of Clinical
R&D at Anaquest/Ohmeda for almost five years, starting its clinical research
department and is responsible for growing it into a multidisciplinary team of
over thirty people. Dr. Fein is a graduate of the University of Pennsylvania
with a B.A. in biology. He received his M.D. degree with honors from New York
Medical College. After medical school he completed a three-year residency in
internal medicine at Dartmouth followed by a three-year fellowship in medical
oncology and hematology at Harvard. During the final year of his fellowship he
was appointed an instructor of medicine at Harvard Medical School.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors, officers, and persons who are beneficial owners of more than ten
percent of the Company's Common Stock to file with the Securities and Exchange
Commission (the "Commission") reports of their
ownership of the Company's securities and of changes in that ownership. To the
Company's knowledge, based upon a review of copies of reports filed with the
Commission with respect to the fiscal year ended December 31, 2006, and except
as noted below, all reports required to be filed under Section 16(a) by the
Company's directors and officers and persons who were beneficial owners of more
than ten percent of the Company's Common Stock were timely filed.
AUDIT COMMITTEE
The Audit Committee provides assistance to the Board in fulfilling its oversight
responsibilities with respect to the Company's financial statements, the
Company's system of internal accounting and financial controls and the
independent audit of the Company's financial statements. During 2006, the Audit
Committee met 2 times.
Functions of the Audit Committee include:
o the selection, evaluation and, where appropriate, replacement of the
Company's outside auditors;
o an annual review and evaluation of the qualifications, performance and
independence of the Company's outside auditors;
o the approval of all auditing services and permitted non-audit services
provided by the Company's outside auditors;
o the receipt of an annual communication from the Company's outside
auditors as required by Independence Standards Board Standard No. 1;
o the review of the adequacy and effectiveness of the Company's accounting
and internal controls over financial reporting;
o the review and discussion with management and the outside auditors of
the Company's financial statements to be filed with the Securities and
Exchange Commission; and
o the preparation of a report for inclusion in the Company's annual proxy
statement.
All members of the Audit Committee are required to satisfy the independence and
experience requirements of the NASDAQ Stock Market, Inc. and be free of any
relationship which, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment.
During fiscal 2006, the members of the Audit Committee were Mark A. Corigliano,
Daniel L. Isdaner and Robert B. Ladd. Following the resignations of Messrs.
Corigliano and Isdaner on April 16, 2007, Dr. Koplewicz was appointed to the
Audit Committee on April 17, 2007. Currently, Dr. Koplewicz and Mr. Ladd meet
the NASDAQ requirements.
A copy of the Audit Committee Charter as currently in effect was attached as
Appendix A to the proxy statement distributed in connection with the Company's
2005 Annual Meeting of Stockholders.
The Board has determined that at least one member of the Audit Committee is an
audit committee financial expert (as defined in applicable rules of the
Securities and Exchange Commission) based on such member's understanding of
generally accepted accounting principles and financial statements, ability to
assess the application of such principles in connection with accounting for
estimates, accruals and reserves, experience in preparing, analyzing and
evaluating financial statements, understanding of internal control over
financial reporting and understanding of audit committee functions. The Board
has determined that Robert B. Ladd is an audit committee financial expert.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION & ANALYSIS
The Company's executive compensation program is designed with two main
objectives:
1. to offer a competitive total compensation value that will allow the
Company to attract, retain and motivate highly talented individuals to
fill key positions; and
2. to align a significant portion of each executive's total compensation
with the annual and long-term performance of the Company and the
interests of the Company's shareholders.
OVERVIEW
The Compensation and Stock Option Committee (the "Compensation Committee" or the
"Committee") of the Board administers our executive compensation program. Each
member of the Committee is a non-employee and an independent director. The
Compensation Committee is primarily responsible for establishing salaries,
administering our incentive programs, and determining the total compensation for
our Chief Executive Officer. The Committee also reviews and approves
recommendations made by the Chief Executive Officer with respect to compensation
of the other executive officers.
COMPENSATION PHILOSOPHY
The Company believes that a strong management team comprised of the most
talented individuals in key positions is critical to the development and growth
of the Company, and the Company's executive compensation program is an important
tool for attracting and retaining such individuals. Therefore, it is vital that
the Company's aggregate compensation package is both competitive with the
compensation received by similarly situated executive officers and reflective of
each executive officer's contributions to the success of the Company on both a
long-term and short-term basis.
ELEMENTS OF EXECUTIVE COMPENSATION
The compensation package for the Company's executives has both performance-based
and subjective elements. The specific elements include base salary, annual
incentive compensation, which is generally in the form of a year-end bonus, and
long-term compensation, which is usually in the form of stock options.
Base salary, as determined by the Compensation Committee, is based on two
factors. The first is an evaluation of the salaries paid in the marketplace to
executives with similar responsibilities, and the second is the executive's
unique role, job performance and other circumstances. Evaluating both of these
factors allows the Company to offer a competitive total compensation value to
each individual named executive officer (as defined below) taking into account
the unique attributes of, and circumstances relating to, each individual, as
well as marketplace factors. This allows the Company to meet its objective of
offering a competitive total compensation value and attracting and retaining key
personnel.
Annual incentive compensation is intended to establish a direct correlation
between annual awards and the performance of the Company. As a development stage
company, financial performance measurement cannot be the sole factor in
determining such compensation. However, the Compensation Committee can review on
an objective basis the progress that the Company has been making towards its
goals and, in its discretion, award an annual cash bonus in order to maintain a
competitive total compensation value appropriate to each executive officer.
Long-term compensation is an area of emphasis as this will align a significant
portion of each executive's total compensation with the long-term performance of
the Company and the interests of the Company's shareholders. On March 25, 2004,
the Company's Board of Directors adopted the Company's 2004 Stock Incentive Plan
(the "Plan"), under which 3,000,000 shares of Common Stock is reserved for
issuance pursuant to the grant or exercise of stock options, stock appreciation
rights, restricted stock or deferred stock under the Plan. The Plan was approved
by the Company's stockholders at the 2004 annual meeting of stockholders of the
Company.
Stock options granted under the Plan may be either "incentive stock options"
(within the meaning of Section 422 of the Internal Revenue Code) or nonstatutory
stock options. The exercise price per share that may be acquired on exercise of
a stock option will be determined by the Compensation Committee at the time of
grant and generally will be not less than the fair market value per share on the
date of grant. Generally, options will have a term of five years (or as of the
date of termination of employment to the extent exercisable at that date if the
participant terminates employment) and will become exercisable ratably over five
years, but the Committee has the authority to provide for other terms or other
exercise schedules. Payment may be made in cash or in the form of unrestricted
shares the participant already owns or by other means as determined by the
Committee including "cashless" exercises. The right to exercise an option may be
conditioned on the completion of a period of service or other conditions.
Stock appreciation rights (SAR's) entitle a participant to receive an amount in
cash, shares or both, equal to (i) the excess of the fair market value of one
share on the date of exercise over the fair market value on the date of grant
multiplied by (ii) the number of shares to which the SAR
relates. The right to exercise an SAR may be conditioned on the completion of a
period of service or other conditions. Generally, participants will be given
five years in which to exercise an SAR or by the date of termination of
employment to the extent exercisable at that date if a participant terminates
employment. SAR's may be granted independently or in conjunction with the grant
of a stock option. If an SAR is granted in conjunction with a stock option, the
exercise of either the SAR or the stock option will reduce the number of shares
covered by the related stock option or SAR, as the case may be.
Restricted stock may also be awarded under the Plan, which is the grant of
shares of Common Stock that requires the completion of a period of service or
the attainment of specified performance goals by the participant or the Company
or such other criteria as the Compensation Committee may determine in order to
retain the shares. Upon a participant's Termination of Employment (as defined in
the Plan), the restricted stock still subject to restriction generally will be
forfeited by the participant. The Committee may waive these restrictions in the
event of hardship or other special circumstances.
The Plan also provides for stock grants, which are shares that can be awarded to
a participant that may be delivered immediately or in the future, at a specified
time and under specified circumstances. The Committee will determine the
participants to whom, and the time or times at which, stock grants may be
awarded, the number of shares covered by the stock grant to be awarded to any
participant, the duration of the period, if any, during which, and the
conditions under which, receipt of the shares will be deferred and any other
terms and conditions of the stock grant.
Awards of stock options under the Plan have nearly always been used as the
long-term compensation of choice. This is because they directly align the value
of the benefit to the named executive officers with shareholder interests. The
term of stock options is the longest among various share award choices and
thereby provides an incentive to executive officers to create long-term
shareholder value. The Compensation Committee determines the number of options
to grant based on its analysis of awards of similarly situated companies and in
keeping with the Company's objective of offering a competitive total
compensation value.
FORWARD-LOOKING STATEMENTS
Disclosures in this Compensation Discussion & Analysis may contain certain
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933,
as amended. Statements that do not relate strictly to historical or current
facts are forward-looking and usually identified by the use of words such as
"anticipate," "estimate," "approximate," "expect," "intend," "plan," "believe"
and other words of similar meaning in connection with any discussion of future
operating or financial matters. Without limiting the generality of the
foregoing, forward-looking statements contained in this report include the
matters discussed regarding the expectation of compensation plans, strategies,
objectives, and growth and anticipated financial and operational performance of
the company and its subsidiaries. A variety of factors could cause the company's
actual results to differ materially from the anticipated results or other
expectations expressed in the company's forward-looking statements. The risks
and uncertainties that may affect the operations,
performance and results of the Company's business and forward-looking statements
include, but are not limited to, those set forth in the Company's Form 10-K for
the year ended December 31, 2006. Any forward-looking statement speaks only as
of the date on which such statement is made and the Company does not intend to
correct or update any forward-looking statements, whether as a result of new
information, future events or otherwise, unless required by law or regulation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2006, the members of our Compensation and Stock Option Committee were
Mark A. Corigliano, Daniel L. Isdaner and Harold S. Koplewicz. None of these
individuals were officers or employees of the Company during 2006 or previously,
nor did they have any relationship that would be required to be disclosed in
accordance with Item 404 of Regulation S-K (which would be included in the
Proxy Statement in this section, and in the section entitled "Certain
Relationships and Related Transactions" below.) During 2006, no interlocking
relationships existed between our Board of Directors or the Compensation and
Stock Option Committee, and the board of directors or compensation committee of
any other company.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
THE REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE (THE "COMPENSATION
REPORT") DOES NOT CONSTITUTE SOLICITING MATERIAL AND SHOULD NOT BE DEEMED FILED
OR INCORPORATED BY REFERENCE INTO ANY OTHER COMPANY FILING UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THE
COMPANY SPECIFICALLY INCORPORATES THIS COMPENSATION REPORT BY REFERENCE THEREIN.
RECOMMENDATIONS OF THE COMPENSATION AND STOCK OPTION COMMITTEE. We have reviewed
and discussed the Compensation Discussion & Analysis ("CD&A") with the Company's
management. Based on this review and these discussions, we recommended to the
Board of Directors that the CD&A be included in the Company's 2006 Annual Report
on Form 10-K and Proxy Statement for 2007.
THIS REPORT HAS BEEN FURNISHED BY THE COMPENSATION AND STOCK OPTION COMMITTEE OF
THE BOARD OF DIRECTORS.
Harold S. Koplewicz, Chairman
Robert B. Ladd
Dated: April 27, 2007
SUMMARY COMPENSATION TABLE FOR 2006
The following table sets forth, for the fiscal year ended December 31, 2006,
certain compensation paid by the Company, including salary, bonuses and certain
other compensation, to its Chief Executive Officer and its Chief Financial
Officer. There were no other executive officers whose total annual compensation
(including bonuses) for the year ended December 31, 2006 exceeded $100,000. The
executive officers listed in the table below are sometimes referred to as the
"named executive officers" in the Proxy Statement.
CHANGE IN
PENSION
VALUE AND
NON- NON-
EQUITY QUALIFIED
INCENTIVE DEFERRED
PLAN COMPEN- ALL OTHER
STOCK OPTION COMPEN- SATION COMPEN-
NAME AND SALARY BONUS AWARDS AWARDS SATION EARNINGS SATION TOTAL
PRINCIPAL POSITION YEAR ($) ($) ($) ($) ($) ($) ($) ($)
------------------------------------------------------------------------------------------------------------------------------
M.S. Koly 2006 313,217 25,000 0 131,000 0 0 0 469,217
Former CEO, President, Treasurer
and Director(1)
------------------------------------------------------------------------------------------------------------------------------
Richard Taney 2006 10,000 0 0 52,400 0 0 0 62,400
President, CEO and Director(2)
------------------------------------------------------------------------------------------------------------------------------
Paul Feinstein 2006 120,000 0 0 0 0 0 0 120,000
CFO and Treasurer(3)
------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Koly resigned as CEO, President and Treasurer on December 15, 2006.
Mr. Koly resigned from the Board of Directors on January 26, 2007.
(2) Mr. Taney commenced his employment as CEO on December 15, 2006. He was
named President in April 2007.
(3) Mr. Feinstein was named Treasurer in April 2007.
GRANTS OF PLAN-BASED AWARDS IN 2006
The following table sets forth grants of plan-based awards made during the
fiscal year ended December 31, 2006, by the Company to each of its former and
current Chief Executive Officer. Each award is currently exercisable.
ESTIMATED FUTURE PAYOUTS UNDER ESTIMATED FUTURE PAYOUTS UNDER
NON-EQUITY EQUITY
INCENTIVE PLAN AWARDS INCENTIVE PLAN AWARDS
------------------------------------------------------------------------------------------
THRESHOLD TARGET MAXIMUM THRESHOLD TARGET MAXIMUM
NAME GRANT DATE ($) ($) ($) ($) ($) ($)
----------------------------------------------------------------------------------------------------------------------
M.S. Koly 11/14/06
----------------------------------------------------------------------------------------------------------------------
Richard Taney 11/14/06
----------------------------------------------------------------------------------------------------------------------
Paul Feinstein --
----------------------------------------------------------------------------------------------------------------------
ALL OTHER
ALL OTHER OPTION
STOCK AWARDS: GRANT DATE
AWARDS: NUMBER OF EXERCISE OR FAIR VALUE OF
NUMBER OF SECURITIES BASE PRICE OF STOCK AND
STOCK OR UNDERLYING OPTION OPTION
UNITS OPTIONS AWARDS AWARDS
NAME (#) (#) ($/SH) ($)
------------------------------------------------------------------------
M.S. Koly 100,000 3.28 131,000
------------------------------------------------------------------------
Richard Taney 40,000 3.28 52,400
------------------------------------------------------------------------
Paul Feinstein -- -- --
------------------------------------------------------------------------
OUTSTANDING EQUITY AWARDS AT 2006 FISCAL YEAR-END
The following table sets forth the stock options held by the named executives as
of December 31, 2006. All options shown are currently exercisable.
OPTION AWARDS
----------------------------------------------------------------------------------------------
EQUITY INCENTIVE
NUMBER OF NUMBER OF PLAN AWARDS: NUMBER
SECURITIES SECURITIES OF SECURITIES
UNDERLYING UNDERLYING UNDERLYING PTION EXERCISE
UNEXERCISED OPTIONS UNEXERCISED OPTIONS UNEXERCISED PRICE OPTION EXPIRATION
NAME (# EXERCISABLE) (# UNEXERCISABLE) UNEARNED OPTIONS (#) ($) DATE
M.S. Koly 71,850 0 0 3.3125 12/1/2010
100,000 0 0 0.71 9/19/2007
120,000 0 0 1.03 8/25/2008
200,000 0 0 2.78 7/7/2010
200,000 0 0 3.59 11/8/2010
100,000 0 0 3.28 11/14/2011
-------------------------------------------------------------------------------------------------------------------------
Richard Taney 40,000 0 0 3.28 11/14/2011
-------------------------------------------------------------------------------------------------------------------------
Paul Feinstein 10,000 0 0 3.59 11/08/2010
-------------------------------------------------------------------------------------------------------------------------
STOCK AWARDS
-------------------------------------------------------------------------------------
EQUITY INCENTIVE
EQUITY INCENTIVE PLAN AWARDS: MARKET
PLAN AWARDS: NUMBER OR PAYOUT VALUE OF
MARKET VALUE OF OF UNEARNED SHARES, UNEARNED SHARES,
NUMBER OF SHARES OR SHARES OR UNITS OF UNITS OR OTHER UNITS OR OTHER
UNITS OF STOCK THAT STOCK THAT HAVE RIGHTS THAT HAVE RIGHTS THAT HAVE
HAVE NOT VESTED NOT VESTED NOT VESTED NOT VESTED
NAME (#) ($) (#) ($)
M.S. Koly 0 0 0 0
0 0 0 0
0 0 0 0
0 0 0 0
0 0 0 0
0 0 0 0
-------------------------------------------------------------------------------------------------------------
Richard Taney 0 0 0 0
-------------------------------------------------------------------------------------------------------------
Paul Feinstein 0 0 0 0
-------------------------------------------------------------------------------------------------------------
OPTION EXERCISES AND STOCK VESTED IN 2006
There were no options exercised, and no stock vested, during the year ended
December 31, 2006.
PENSION BENEFITS IN 2006
There were no pension benefits during the year ended December 31, 2006.
NONQUALIFIED DEFERRED COMPENSATION IN 2006
There was no non-qualified deferred compensation during the year ended December
31, 2006.
DIRECTOR COMPENSATION FOR 2006
Neither Mr. Koly or Mr. Taney received, nor are Mr. Taney and Dr. Herschkowitz
currently receiving, any compensation for serving on the Board of Directors. Dr.
Herschkowitz did receive compensation for service as a director during the
period he was not an employee. Non-employee directors received $750 (increased
to $1,000 as of December 15, 2006) for each meeting of the Board of Directors
attended in person and $300 for each meeting of the Board of Directors
participated in telephonically, and they are reimbursed for their expenses.
The table below shows the total 2006 compensation of the Company's Independent
Directors:
CHANGE IN PENSION
VALUE AND
FEES NONQUALIFIED
EARNED OR PAID NON-EQUITY DEFERRED ALL OTHER
IN STOCK OPTIONS INCENTIVE PLAN COMPENSATION COMPEN-
CASH AWARDS AWARDS COMPENSATION EARNINGS SATION TOTAL
NAME ($) ($) ($)(1) ($) ($) ($) ($)
---------------------------------------------------------------------------------------------------------------------------------
Mark A. Corigliano(2) 18,050 0 52,400 0 0 0 70,450
---------------------------------------------------------------------------------------------------------------------------------
Victor Nevins(2) 17,050 0 0 0 0 0 17,050
---------------------------------------------------------------------------------------------------------------------------------
Daniel Isdaner(2) 18,050 0 52,400 0 0 0 70,450
---------------------------------------------------------------------------------------------------------------------------------
Harold S. Koplewicz, MD 0 0 52,400 0 0 0 52,400
---------------------------------------------------------------------------------------------------------------------------------
Samuel Herschkowitz, MD 2,100 0 52,400 0 0 0 54,500
---------------------------------------------------------------------------------------------------------------------------------
Robert B. Ladd 0 0 52,400 0 0 0 52,400
---------------------------------------------------------------------------------------------------------------------------------
(1) The grant date fair value computed in accordance with FAS 123R for each
award shown in this table is $52,400. As of December 31, 2006, the Company's
Independent Directors held the following number of option awards: Mr. Corigliano
- 180,000; Mr. Nevins - 0; Mr. Isdaner - 110,000; Mr. Koplewicz - 40,000; Mr.
Herschkowitz - 220,300.
(2) As described above, Messrs. Corigliano and Isdaner resigned as Directors on
April 16, 2007. Mr. Nevins resigned as a Director on October 23, 2006.
KEY EMPLOYEE ARRANGEMENTS - SEPARATION AGREEMENT
On December 21, 2006, the Company entered into a Settlement Agreement, dated as
of December 15, 2006 (the "Settlement Agreement"), in connection with Mr. Koly's
resignation as President and Chief Executive Officer and Treasurer of the
Company. The Settlement Agreement provides for the termination of Mr. Koly's
Employment Agreement, as amended as of October 1, 2003, and the relinquishment
by Mr. Koly of any rights he might have had under change of control arrangements
with the Company. The Settlement Agreement also provides for Mr. Koly to
continue to receive his regular salary, which was $13,390.00 for the period from
December 16 through December 31, 2006, and a lump sum payment of $650,000, which
was paid on January 2, 2007. This lump sum payment is being held in escrow, and
a portion of it will be used to exercise stock options to purchase Common Stock
of the Company granted to him.
The Settlement Agreement also provides for the continuation of his current
health insurance benefits through September 30, 2008.
CHANGE OF CONTROL PAYMENTS
There are no agreements currently in effect.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
SECURITY OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of April 19, 2007, certain information
regarding the ownership of Delcath's voting securities by (i) each director (or
nominee for director) of Delcath, (ii) each Named Executive Officer and (iii)
all directors and executive officers as a group. To the Company's knowledge,
except as disclosed in the table below, no person or group beneficially owns
more than 5% of the Company's outstanding common stock. Each of the stockholders
named below has a business address c/o Delcath Systems, Inc., 1100 Summer
Street, Stamford, Connecticut 06905.
------------------------------------------------------------------------------------------------
DIRECTORS, SHARES PERCENTAGE OF
EXECUTIVE OFFICERS BENEFICIALLY COMMON SHARES
AND 5% STOCKHOLDERS(1) OWNED(2) OUTSTANDING(3)
------------------------------------------------------------------------------------------------
Robert Ladd(4) 2,430,498 11.4%
Samuel Herschkowitz, M.D.(5) 373,675 1.7%
Richard Taney(6) 49,000 0.2%
Harold S. Koplewicz(7) 40,000 0.2%
Paul M. Feinstein(8) 13,375 0.1%
M.S. Koly(9) 1,505,025 7.0%
Venkol Trust 680,565 3.2%
----------------------------------------
All directors and executive officers as a 2,906,548 13.4%
group (five persons)(10)
(1) Except as otherwise noted in the footnotes to this table, each person or
entity named in the table has sole voting and investment power with
respect to all shares owned, based on the information provided to us by
the persons or entities named in the table.
(2) Shares of Common Stock subject to options or warrants exercisable within
60 days of the Record Date are deemed outstanding for computing the
percentage owned by the person or entity holding such options or warrants.
(3) Percentage of beneficial ownership is calculated on the basis of the
amount of outstanding securities (Common Stock) at the Record Date
(21,358,007 common shares) plus, for each person or entity, any securities
that person or entity has the right to acquire within 60 days pursuant to
stock options or other rights.
(4) Mr. Ladd is a director of Delcath. Mr. Ladd has sole voting and
dispositive power with respect to these shares. The figure above also
includes vested stock options to purchase 40,000 shares of Common Stock.
(5) Dr. Herschkowitz is the Chief Operating Officer of Delcath and a director.
The figure above represents 153,375 shares owned directly by him. The
figure above also includes vested stock options to purchase 220,300 shares
of Common Stock. The figure above excludes approximately 63,000 shares
held by the Venkol Trust, in which Dr. Herschkowitz has a pecuniary
interest.
(6) Mr. Taney is the President and CEO of Delcath and is also a director. The
figure above represents 9,000 shares owned directly by him. The figure
above also includes vested stock options to purchase 40,000 shares of
Common Stock.
(7) Dr. Koplewicz is the Chairman of the Board of Directors of Delcath. The
figure above includes vested stock options to purchase 40,000 shares of
Common Stock.
(8) Mr. Feinstein is the Chief Financial Officer and Treasurer of Delcath. The
figure above includes vested stock options to purchase 10,000 shares of
Common Stock.
(9) Includes 824,460 shares held by Mr. Koly and 680,565 shares held by the
Venkol Trust, of which Mr. Koly has a pecuniary interest in approximately
63,000 shares. Mr. Koly is a trustee of this trust and is deemed the
beneficial owner of its shares because of his voting power.
(10) The number of shares beneficially owned by all directors and executive
officers as a group includes 350,300 shares of Common Stock issuable
within 60 days of April 19, 2007 upon exercise of stock options granted to
directors and executive officers pursuant to our various stock option
plans.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH RELATED PERSONS
None.
REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS
The Board of Directors recognizes that related party transactions present a
heightened risk of conflicts of interest and/or improper valuation (or the
perception thereof) and, therefore, has adopted a policy, described below, which
shall be followed in connection with all related party transactions involving
the company.
Under this policy, any "Related Party Transaction" shall be consummated or shall
continue only if the Board of Directors, acting through the Audit Committee,
shall approve or ratify such transaction in accordance with the guidelines set
forth in this policy, provided that: (i) the transaction is on terms comparable
to those that could be obtained in arm's length dealings with an unrelated third
party; (ii) the transaction is approved by the disinterested members of the
Board of Directors; or (iii) the transaction involves compensation approved by
the Company's Compensation Committee. For these purposes, a "Related Party" is
an officer or director of the Company; a shareholder owning in excess of five
percent of the Company; a person who is an immediate family member of an officer
or director; or an entity which is owned or controlled by such person or an
entity in which such person has a substantial ownership interest or control of
such entity.
For these purposes, a "Related Party Transaction" is a transaction between the
Company and any Related Party (including any transactions requiring disclosure
under Item 404 of Regulation S-K under the Securities Exchange Act of 1934),
other than transactions available to all employees generally and transactions
involving less than $5,000 when aggregated with all similar transactions.
All Related Party Transactions, including the proposed aggregate value of such
transactions, if applicable, to be entered into by the Company shall be
disclosed to the Board of Directors. After review, the Board shall approve or
disapprove such transaction and management shall update the Board as to any
material change to those proposed transactions. Should ratification not be
forthcoming, management shall make all reasonable efforts to cancel or annul
such transaction.
PROMOTERS AND CERTAIN CONTROL PERSONS
Not applicable.
BOARD INDEPENDENCE
The Company applies the standards of the NASDAQ Stock Market, Inc., the stock
exchange upon which the Company's Common Stock is listed, for determining the
independence of the members of its Board of Directors and Board committees.
During fiscal 2006, the members of the Company's Board of Directors were Richard
Taney, Mark A. Corigliano, Daniel L. Isdaner and Harold S. Koplewicz, Samuel
Hershkowitz and Robert B. Ladd. During fiscal 2006, the members of the
Nominating Committee, and the Compensation and Stock Option Committee, were
Messrs. Corigliano and Isdaner and Dr. Koplewicz, and the members of the Audit
Committee were Messrs. Corigliano, Isdaner and Ladd.
Since then, certain changes were made to the composition of the Board and Board
committees. On April 16, 2007, Messrs. Corigliano and Isdaner resigned from our
Board of Directors and each Board committee on which they served. On April 17,
2007, Mr. Ladd was appointed to the Compensation and Stock Option Committee and
the Nominating Committee, and Dr. Koplewicz was appointed to the Audit
Committee.
The Board has determined that Dr. Koplewicz and Mr. Ladd are independent, as
"independence" is defined in Rule 4200(a)(15) of the National Association of
Securities Dealers ("NASD"), for service on the Company's Board and all Board
committees. Dr. Koplewicz and Mr. Ladd are currently the two members serving on
each of the Board's three committees.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
AUDIT AND NON-AUDIT FEES
Carlin, Charron & Rosen, LLP ("CCR") serves as the Company's independent
registered public accounting firm and audited the Company's financial statements
for the years ended December 31, 2006 and 2005.
AUDIT FEES. CCR billed Delcath $65,600 for professional services rendered for
the audit of Delcath's annual financial statements included in Delcath's Form
10-K for the fiscal year ended December 31, 2006 and the reviews of the
financial statements included in Delcath's Quarterly Reports on Form 10-QSB
filed for the first three quarters of the fiscal year ended December 31, 2006.
CCR billed Delcath $45,085 for professional services rendered for the audit of
Delcath's internal control over financial reporting for the fiscal year ended
December 31, 2006. CCR billed Delcath $55,000 for professional services rendered
for the audit of Delcath's annual financial statements included in Delcath's
Form 10-KSB for the fiscal year ended December 31,
2005 and the reviews of the financial statements included in Delcath's Quarterly
Reports on Form 10-QSB filed for each of the quarters in the fiscal year ended
December 31, 2005.
AUDIT-RELATED FEES. During the fiscal years ended December 31, 2006 and 2005,
CCR did not provide any audit-related services to the Company not described
under "Audit Fees" above.
TAX FEES. During the fiscal years ended December 31, 2006 and 2005, CCR did not
provide any tax services to the Company.
ALL OTHER FEES. None.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES OF INDEPENDENT AUDITORS
The Audit Committee pre-approves all audit and non-audit services provided by
the independent auditors prior to the engagement of the independent auditors
with respect to such services. The Chairman of the Audit Committee has been
delegated the authority by the Committee to pre-approve interim services by the
independent auditors other than the annual audit. The Chairman must report all
such pre-approvals to the entire Audit Committee at the next Committee meeting.
Approval of this proposal requires the affirmative vote of the majority of the
shares present in person or represented by proxy and entitled to vote at the
Annual Meeting.
PART IV
ITEM 15. EXHIBITS, AND FINANCIAL STATEMENT SCHEDULES.
Exhibits
No. Description
--- -----------
3.1 Amended and Restated Certificate of Incorporation of Delcath Systems,
Inc., as amended to June 30, 2005. (incorporated by reference to
Exhibit 3.1 to Registrant's Current Report on Form 8-K dated June 5,
2006 (Commission File No. 001-16133)).
3.2 Amended and Restated By-Laws of Delcath Systems, Inc. (incorporated
by reference to Exhibit 3.2 to Amendment No. 1 to Registrant's
Registration Statement on Form SB-2 (Registration No. 333-39470)).
4.1 Rights Agreement, dated October 30, 2001, by and between Delcath
Systems, Inc. and American Stock Transfer & Trust Company, as Rights
Agent (incorporated by reference to Exhibit 4.7 to Registrant's Form
8-A dated November 12, 2001 (Commission File No. 001-16133)).
4.2 Form of Underwriter's Unit Warrant Agreement between Delcath Systems,
Inc. and Roan/Meyers Associates L.P. (incorporated by reference to
Exhibit 4.1 to Amendment No. 1 to Registrant's Registration Statement
on Form SB-2 (Registration No. 333-101661)).
4.3 Form of Warrant to Purchase Shares of Common Stock issued pursuant to
the Common Stock Purchase Agreement dated as of March 19, 2004
(incorporated by reference to Exhibit 4 to Registrant's Current
Report on Form 8-K dated March 19, 2004 (Commission File No,.
001-16133)).
4.4 Form of 2005 Series A Warrant to Purchase Shares of Common Stock
issued pursuant to the Common Stock Purchase Agreement dated as of
November 27, 2005 (incorporated by reference to Exhibit 4.1 to
Registrant's Current Report on Form 8-K dated November 28, 2005
(Commission File No. 011-16133)).
4.5 Form of 2005 Series C Warrant to Purchase Shares of Common Stock
issued pursuant to the Common Stock Purchase Agreement dated as of
November 27, 2005 (incorporated by reference to Exhibit 4.3 to
Registrant's Current Report on Form 8-K dated November 28, 2005
(Commission File No. 011-16133)).
10.1 2000 Stock Option Plan (incorporated by reference to Exhibit 10.3 to
Registrant's Registration Statement on Form SB-2 (Registration No.
333-39470)).
10.2 2001 Stock Option Plan (incorporated by reference to Exhibit 10.12 to
Amendment No. 1 to Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 2001 (Commission File No. 001-16133)). 10.3
2004 Stock Incentive Plan (incorporated by reference to Appendix B to
Registrant's definitive Proxy Statement dated April 29, 2004
(Commission File No. 001-16133)).
10.4 Common Stock Purchase Agreement dated as of March 19, 2004 by and
among Delcath Systems, Inc. and the Purchasers Listed on Exhibit A
thereto (incorporated by reference to Exhibit 10.1 to Registrant's
Current Report on Form 8-K dated March 19, 2004 (Commission File No.
001-16133)).
10.5 Registration Rights Agreement dated as of March 19, 2004 by and among
Delcath Systems, Inc. and the Purchasers Listed on Schedule I thereto
(incorporated by reference to Exhibit 10.2 to Registrant's Current
Report on Form 8-K dated March 19, 2004 (Commission File No.
001-16133)).
10.6 Common Stock Purchase Agreement dated as of November 27, 2005 by and
among Delcath Systems, Inc. and the Purchasers Listed on the Schedule
I thereto (incorporated by reference to Exhibit 10.1 to Registrant's
Current Report on Form 8-K dated November 28, 2005 (Commission File
No. 001-16133)).
10.7 Registration Rights Agreement dated as of November 27, 2005 by and
among Delcath Systems, Inc. and the Purchasers Listed on the Schedule
I thereto (incorporated by reference to Exhibit 10.2 to Registrant's
Current Report on Form 8-K dated November 28, 2005 (Commission File
No. 001-16133)).
10.8 Form of Incentive Stock Option Agreement under the Company's 2004
Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to
Registrant's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 2005)).
10.9 Form of Nonqualified Stock Option Agreement under the Company's 2004
Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to
Registrant's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 2005)).
10.10 Form of Stock Grant Agreement under the Company's 2004 Stock
Incentive Plan (incorporated by reference to Exhibit 10.3 to
Registrant's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 2005 (Commission File No. 001-16133)).
10.11 Settlement Agreement, dated as of October 8, 2006, by and between
Delcath Systems, Inc., Laddcap Value Partners LP, Laddcap Value
Advisors LLC, Laddcap Value Associates LLC, any affiliate of the
foregoing, and Robert B. Ladd (incorporated by reference to Exhibit
10.1 to Registrant's Current Report on Form 8-K dated October 8, 2006
(Commission File No. 001-16133)).
10.12 Settlement Agreement, dated as of December 15, 2006 between Delcath
Systems, Inc. and M. S. Koly (incorporated by reference to Exhibit
10.1 to Registrant's Current Report on Form 8-K dated December 21,
2006 (Commission File No. 001-16133)).
14 Code of Business Conduct (incorporated by reference to Exhibit 14 to
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 2003 (Commission File No. 001-16133)).
23 Consent of Carlin, Charron & Rosen, LLP.*
24 Power of Attorney.**
31.1 Certification by Chief Executive Officer Pursuant to Rule 13a-14.
31.2 Certification by Chief Financial Officer Pursuant to Rule 13a-14.
*Previously filed with the Company's Form 10K for the year ended December 31,
2006, filed with the Commission on March 16, 2007.
** Included on the signature page of the Company's Form 10K for the year ended
December 31, 2006, filed with the Commission on March 16, 2007.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DELCATH SYSTEMS, INC.
By: /s/ RICHARD TANEY
---------------------------------
Richard Taney
Chief Executive Officer
May 16, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
------------------------------------------------------------------------------------------------------------
By: /s/ Richard Taney Chief Executive Officer, and Director May 16, 2007
----------------------------------------- (principal executive officer)
Richard Taney
By: * Chief Financial Officer (principal financial May 16, 2007
----------------------------------------- officer and principal accounting officer)
Paul M. Feinstein
By: * Chairman of the Board May 16, 2007
-----------------------------------------
Harold S. Koplewicz, M.D.
By: * Director May 16, 2007
-----------------------------------------
Samuel Herschkowitz, M.D.
By: * Director May 16, 2007
-----------------------------------------
Robert B. Ladd
*By /s/ RICHARD TANEY
-------------------------
Richard Taney
Attorney-in-Fact,
Granted in the Company's Annual
Report on Form 10-K as filed
on March 16, 2007