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DCTH > SEC Filings for DCTH > Form 8-K on 7-Jun-2016All Recent SEC Filings

Show all filings for DELCATH SYSTEMS, INC.



Entry into a Material Definitive Agreement, Other Events, Financial Stateme

Item 1.01 Entry into a Material Definitive Agreement.

Securities Purchase Agreement

On June 6, 2016, Delcath Systems, Inc. (the "Company") entered into a Securities Purchase Agreement (the "SPA") with certain investors named on the Schedule of Buyers attached to the SPA (each a "Buyer") pursuant to which the Company has agreed to issue $35 million in principal face amount of senior secured convertible notes of the Company (the "Notes") and related Series C Warrants (the "Series C Warrants") to purchase additional shares of the Company's common stock, par value $0.01 per share ("Common Stock"). The Buyers will purchase Notes and related Series C Warrants through payment of cash at an 8% original issue discount to the principal face amount.

The Notes will not bear any ordinary interest. However, interest shall commence accruing immediately upon the occurrence of, and shall continue accruing during the continuance of, an Event of Default (as described below), at 15% per annum and shall be computed on the basis of a 360-day year of twelve 30-day months and shall be payable, if applicable, in arrears for each calendar month on the first
(1st) business day of each calendar month after any such interest accrues after an Event of Default. The Company will receive total proceeds from the issuance of the Notes and Series C Warrants of $32.2 million.

As security for the Company's obligations under the Notes, $29.2 million of the total net cash proceeds will be subject to a cash covenant restricting its use and requiring it to be held in a Master Restricted Account ("Master Restricted Account") established in accordance with and pursuant to the terms and conditions of an account control agreement between the Company, the Buyers and Silicon Valley Bank (a "Controlled Account Agreement"). Subsequently, $3.0 million of the restricted cash shall become unrestricted cash on the 20th trading day after the later of the stockholder approval of the transaction in accordance with NASDAQ rules (as described below), or the six-month anniversary of the closing date (such 20th trading day, the "Trigger Date"). Thereafter, the remaining $26.2 million of restricted cash will become unrestricted in equal quarterly installments starting the 30th trading day after the Trigger Date, such that the balance will become unrestricted by December 29, 2017, subject to satisfaction of certain conditions contained in the Notes.

We have agreed to seek stockholder approval of the issuance of the shares of Common Stock upon the conversion of the Notes and the exercise of the Series C Warrants at a meeting to be held no later than September 1, 2016 (the "Stockholder Meeting Deadline").

The SPA contains customary representations and warranties of the Buyers and the Company regarding the purchase and sale, respectively, of the Notes and Series C Warrants. Under the SPA, the Company makes certain covenants including, but not limited to: (i) timely filing of its reports with the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii) provision of certain financial information to the Buyers, (iii) maintaining the listing of the shares of Common Stock on an eligible market, (iv) payment of certain fees of the Buyers, (v) maintaining a share reserve of the Common Stock for issuance upon conversion of the Notes and exercise of the Warrants of no less than (A) 7,034,564 shares of Common Stock if on or prior to the earlier to occur of (x) the meeting of stockholders of the Company which shall be held no later than the Stockholder Meeting Deadline and
(y) the date the stockholders approve resolutions providing for the approval of the issuance of all of the Securities (as defined below) (the "Stockholder Approval Date"), or (B) thereafter, 150% of (I) the maximum number of shares of Common Stock issuable upon conversion of the Notes then outstanding and (II) the maximum number of shares issuable upon exercise of all the Series C Warrants then outstanding. In addition, for as long as any Notes or Series C Warrants remain outstanding, the Company will not enter into or affect certain types of public offerings or private placements of equity securities ("Subsequent Placements") if such Subsequent Placement would cause the Company to be required to issue upon conversion of any Notes or exercise of any Series C Warrant any shares of Common Stock in excess of that number of shares of Common Stock which the Company may issue upon such conversion without breaching the Company's obligations under the rules or regulations of the principal market upon which the Common Stock is then traded and, until the Notes and all notes issued pursuant to the terms of the SPA are no longer outstanding, the Company will not effect any stock combination, reverse stock split or other similar transaction, except for a reverse stock split to be submitted for stockholder approval at the Company's 2016 annual meeting of stockholders, without the prior written consent of the Required Holders (as defined in the SPA).

The SPA also provides that the Company shall give the Buyers the opportunity to participate in up to 35% of any Subsequent Placement.

The closing of the transactions contemplated by the SPA is expected to occur by June 10, 2016, subject to the satisfaction or waiver of certain closing conditions.

Senior Secured Convertible Notes

The Notes will be represented by a form of senior secured convertible note attached to the SPA as Exhibit A. In addition to the terms and conditions of the Notes as described above, the Notes provide that the Company will repay the principal amount of Notes in equal monthly installments beginning seven
(7) months after the original date of issuance (each a "Installment Date"). On each Installment Date, assuming the equity conditions described below are met, the installment payment shall be converted into shares of Common Stock, provided however that the Company may elect prior to any Installment Date to pay all or a portion of the installment amount in cash.

With respect to any given date of determination, the "Equity Conditions" include:

(i) on each day during the previous thirty (30) calendar days the shares of Common Stock into which such Notes are convertible (the "Underlying Securities") shall be eligible for sale pursuant to Rule 144 promulgated under the 1933 Act (or a successor rule thereto) (collectively, "Rule 144") and the Company has not failed to satisfy the requirements of Rule 144(c)(1) of the 1933 Act ("Current Public Information Failure");

(ii) on each day during such thirty (30) day period (or such other period as set forth in the Notes) (the "Equity Conditions Measuring Period"), the Common Stock (including all Underlying Securities) is listed or designated for quotation on an eligible market and, subject to limited exceptions, shall not have been suspended from trading on an eligible market nor shall delisting or suspension by an eligible market have been threatened or reasonably likely to occur or pending;

(iii) during the Equity Conditions Measuring Period, the Company shall have delivered all shares of Common Stock issuable upon conversion of the Notes on a timely basis and all other shares of capital stock required to be delivered by the Company on a timely basis as set forth in the other transaction documents;

(iv) any shares of Common Stock to be issued in connection with the event requiring determination (or otherwise issuable pursuant to the terms of the Note) may be issued in full without violating the rules or regulations of the eligible market on which the Common Stock is then listed or designated for quotation (as applicable);

(v) on each day during the Equity Conditions Measuring Period, no public announcement of a pending, proposed or intended Fundamental Transaction (as defined in the Notes) shall have occurred which has not been abandoned, terminated or consummated;

(vi) the holder of the Note shall not be in (and no other holder of Notes shall be in) possession of any material, non-public information provided to any of them by the Company, any of its subsidiaries or any of their respective affiliates, employees, officers, representatives, agents or the like;

(vii) on each day during the Equity Conditions Measuring Period, the Company otherwise shall have been in compliance with each, and shall not have breached any representation or warranty in any material respect (other than representations or warranties subject to material adverse effect or materiality, which may not be breached in any respect) or any covenant or other term or condition of any transaction document, including, without limitation, the Company shall not have failed to timely make any payment pursuant to any transaction document;

(viii) as of such applicable date of determination , (A) the aggregate daily dollar trading volume of the Common Stock on at least fifteen (15) trading days during the twenty (20) trading day period ending on the trading day immediately preceding such date of determination and on each of the last three (3) trading . . .

Item 8.01 Other Events.

On June 7, 2016, the Company issued a press release announcing its entry into the SPA and the transactions contemplated thereby. A copy of such press release is attached hereto as Exhibit 99.1 and is hereby incorporated by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

  No.        Description

10.1         Securities Purchase Agreement

10.2         Form of Senior Secured Convertible Note, filed as Exhibit A to the
             Securities Purchase Agreement

10.3         Form of Warrant, filed as Exhibit B to the Securities Purchase

10.4         Form of Security and Pledge Agreement, filed as Exhibit C to the
             Securities Purchase Agreement

99.1         Press Release dated June 7, 2016

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