Exhibit 10.3

Form of Warrant

          THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS SET FORTH
IN SECTION 3 HEREOF.

DELCATH SYSTEMS, INC.

WARRANT

 

 

Warrant No. _____

Original Issue Date: September __, 2007

 

(“Issue Date”)

          DELCATH SYSTEMS, INC., a Delaware corporation (the “Company”), hereby
certifies that, for value received, __________ or its permitted registered
assigns (the “Holder”), is entitled to purchase from the Company up to a total
of ________ shares of common stock, $0.01 par value (the “Common Stock”), of the
Company (each such share, a “Warrant Share” and all such shares, the “Warrant
Shares”) at an exercise price equal to $4.53 per share (as adjusted from time to
time as provided herein, the “Exercise Price”), at any time and from time to
time on or after the date occurring six months after the Closing Date (the
“Trigger Date”) and through and including September __, 2012 (the “Expiration
Date”), and subject to the following terms and conditions:

          This Warrant is one of a series of warrants issued pursuant to those
certain Subscription Agreements, each dated September 18, 2007, by and between
the Company and each of the purchasers identified therein (the “Subscription
Agreements”). All such warrants are referred to herein, collectively, as the
“Warrants.” The original issuance of the Warrants by the Company pursuant to the
Subscription Agreements has been registered pursuant to a Registration Statement
on Form S-3 (File No. 333-143280) (together with any registration statement
filed by the Company pursuant to Rule 462(b) under the Securities Act, the
“Registration Statement”).

          1. Definitions. In addition to the terms defined elsewhere in this
Warrant, capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Subscription Agreements.

          “Affiliate” of a person means a person that, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, the person specified.

          “Convertible Securities” means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for shares of Common Stock.

          “Options” means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities.

          “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.

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          “Trading Day” means any day on which trading of the Common Stock
occurs on the applicable Trading Market.

          “Trading Market” means the NASDAQ Capital Market or, if the Company’s
Common Stock is not then listed on the NASDAQ Capital Market, then such exchange
or quotation system on which the Common Stock then primarily trades.

          “Weighted Average Price” means, for any security as of any date, the
dollar volume-weighted average price for such security on the applicable Trading
Market during the period beginning at 9:30:01 a.m., New York City time, and
ending at 4:00:00 p.m., New York City time, as reported by Bloomberg through its
“Volume at Price” function or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at
9:30:01 a.m., New York City time, and ending at 4:00:00 p.m., New York City
time, as reported by Bloomberg, or, if no dollar volume-weighted average price
is reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets” by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.). If the Weighted Average Price
cannot be calculated for such security on such date on any of the foregoing
bases, the Weighted Average Price of such security on such date shall be the
fair market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section 15(b) hereof.
All such determinations shall be appropriately adjusted for any share dividend,
share split or other similar transaction during such period.

          2. List of Warrant Holders. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder (which shall include the initial
Holder or, as the case may be, any registered assignee to which this Warrant is
permissibly assigned hereunder from time to time). The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.

          3. List of Transfers; Restrictions on Transfer.

                    (a) This Warrant and the Warrant Shares are subject to the
restrictions on transfer set forth in this Section 3.

                    (b) The Company shall register any such transfer of all or
any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed,
to the Company at its address specified herein. Upon any such registration or
transfer, a new Warrant to purchase Common Stock, in substantially the form of
this Warrant (any such new Warrant, a “New Warrant”), evidencing the portion of
this Warrant so transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant by
the transferee thereof shall be deemed the

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acceptance by such transferee of all of the rights and obligations in respect of
the New Warrant that the Holder has in respect of this Warrant.

                    (c) If, at the time of the surrender of this Warrant in
connection with any transfer of this Warrant, the transfer of this Warrant shall
not be registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the “Securities Act”) and under applicable
state securities or blue sky laws, the Company may require, as a condition of
allowing such transfer (i) that the Holder or transferee of this Warrant, as the
case may be, furnish to the Company a written opinion of counsel (which opinion
shall be in form, substance and scope customary for opinions of counsel in
comparable transactions) to the effect that such transfer may be made without
registration under the Securities Act and under applicable state securities or
blue sky laws, (ii) that the Holder or transferee execute and deliver to the
Company an investment letter in form and substance acceptable to the Company and
(iii) that the transferee be an “accredited investor” as defined in Rule 501(a)
promulgated under the Securities Act.

          4. Exercise and Duration of Warrants.

                    (a) All or any part of this Warrant shall be exercisable by
the registered Holder in any manner permitted by Section 10 hereof at any time
and from time to time on or after the Trigger Date and through and including the
Expiration Date. Subject to Section 11 hereof, at 5:00 p.m., New York City time,
on the Expiration Date, the portion of this Warrant not exercised prior thereto
shall be and become void and of no value and this Warrant shall be terminated
and no longer outstanding. In addition, if cashless exercise would be permitted
under Section 10(b) hereof, then all or part of this Warrant may be exercised by
the registered Holder utilizing such cashless exercise provisions at any time,
or from time to time, on or after the Trigger Date and through and including the
Expiration Date.

                    (b) The Holder may exercise this Warrant by delivering to
the Company (i) an exercise notice, in the form attached hereto (the “Exercise
Notice”), completed and duly signed, and (ii) if such Holder is not utilizing
the cashless exercise provisions set forth in this Warrant, payment of the
Exercise Price for the number of Warrant Shares as to which this Warrant is
being exercised. The date such items are delivered to the Company (as determined
in accordance with the notice provisions hereof) is an “Exercise Date.” The
Holder shall not be required to deliver the original Warrant in order to effect
an exercise hereunder. Execution and delivery of the Exercise Notice shall have
the same effect as cancellation of the original Warrant and issuance of a New
Warrant evidencing the right to purchase the remaining number of Warrant Shares.

          5. Delivery of Warrant Shares.

                    (a) Upon exercise of this Warrant, the Company shall
promptly (but in no event later than three Trading Days after the Exercise Date)
issue or cause to be issued and cause to be delivered to or upon the written
order of the Holder and in such name or names as the Holder may designate
(provided that, if the Registration Statement is not then effective and the
Holder directs the Company to deliver a certificate for the Warrant Shares in a
name other than that of the Holder or an Affiliate of the Holder, it shall
deliver to the Company on the Exercise

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Date an opinion of counsel reasonably satisfactory to the Company to the effect
that the issuance of such Warrant Shares in such other name may be made pursuant
to an available exemption from the registration requirements of the Securities
Act and all applicable state securities or blue sky laws), a certificate for the
Warrant Shares issuable upon such exercise, free of restrictive legends unless
the Registration Statement is not then effective or the Warrant Shares are not
freely transferable without volume restrictions pursuant to Rule 144(k) under
the Securities Act. The Holder, or any Person permissibly so designated by the
Holder to receive Warrant Shares, shall be deemed to have become the holder of
record of such Warrant Shares as of the Exercise Date. If the Warrant Shares can
be issued without restrictive legends, the Company shall, upon the written
request of the Holder, use its best efforts to deliver, or cause to be
delivered, Warrant Shares hereunder electronically through the Depository Trust
and Clearing Corporation or another established clearing corporation performing
similar functions, if available; provided, that, the Company may, but will not
be required to, change its transfer agent if its current transfer agent cannot
deliver Warrant Shares electronically through the Depository Trust and Clearing
Corporation.

                    (b) If by the close of the third Trading Day after delivery
of an Exercise Notice, duly completed and executed by the Holder, the Company
fails to deliver to the Holder a certificate representing the required number of
Warrant Shares in the manner required pursuant to Section 5(a) hereof, and if
after such third Trading Day and prior to the receipt of such Warrant Shares,
the Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”),
then the Company shall, within three Trading Days after the Holder’s request,
and in the Holder’s sole discretion, either (i) pay in cash to the Holder an
amount equal to the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased (the “Buy-In
Price”), at which point the Company’s obligation to deliver such certificate
(and to issue such Warrant Shares) shall terminate or (ii) promptly honor its
obligation to deliver to the Holder a certificate or certificates representing
such Warrant Shares and pay cash to the Holder in an amount equal to the excess
(if any) of the Buy-In Price over the product of (A) such number of Warrant
Shares, times (B) the closing bid price on the date of the event giving rise to
the Company’s obligation to deliver such certificate.

                    (c) To the extent permitted by law, the Company’s
obligations to issue and deliver Warrant Shares in accordance with the terms
hereof are absolute and unconditional, irrespective of any action or inaction by
the Holder to enforce the same, any waiver or consent with respect to any
provision hereof, the recovery of any judgment against any Person or any action
to enforce the same, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other Person
of any obligation to the Company or any violation or alleged violation of law by
the Holder or any other Person, and irrespective of any other circumstance that
might otherwise limit such obligation of the Company to the Holder in connection
with the issuance of Warrant Shares. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.

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          6. Charges, Taxes and Expenses. Issuance and delivery of certificates
for shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares or Warrants in a name other than that of the
Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.

          7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity (which shall not include a surety bond), if requested.
Applicants for a New Warrant under such circumstances shall also comply with
such other reasonable regulations and procedures and pay such other reasonable
third-party costs as the Company may prescribe. If a New Warrant is requested as
a result of a mutilation of this Warrant, then the Holder shall deliver such
mutilated Warrant to the Company as a condition precedent to the Company’s
obligation to issue the New Warrant.

          8. Reservation of Warrant Shares. The Company covenants that it will
at all times reserve and keep available out of the aggregate of its authorized
but unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares that are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of persons other than the Holder (taking into
account the adjustments and restrictions of Section 9 hereof). The Company
covenants that all Warrant Shares so issuable and deliverable shall, upon
issuance and the payment of the applicable Exercise Price in accordance with the
terms hereof, be duly and validly authorized, issued and fully paid and
nonassessable.

          9. Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 9.

                    (a) Stock Dividends and Splits. If the Company, at any time
while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock
or otherwise makes a distribution on any class of capital stock that is payable
in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, or (iii) combines outstanding shares of Common
Stock into a smaller number of shares, then in each such case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this
paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such

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dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of
this paragraph shall become effective immediately after the effective date of
such subdivision or combination.

                    (b) Pro Rata Distributions. If the Company, at any time
while this Warrant is outstanding, distributes to all holders of Common Stock
for no consideration (i) evidences of its indebtedness, (ii) any security (other
than a distribution of Common Stock covered by the preceding paragraph),
(iii) rights or warrants to subscribe for or purchase any security, or (iv) any
other asset (in each case, “Distributed Property”), then, upon any exercise of
this Warrant that occurs after the record date fixed for determination of
stockholders entitled to receive such distribution, the Holder shall be entitled
to receive, in addition to the Warrant Shares otherwise issuable upon such
exercise (if applicable), the Distributed Property that such Holder would have
been entitled to receive in respect of such number of Warrant Shares had the
Holder been the record holder of such Warrant Shares immediately prior to such
record date.

                    (c) Fundamental Transactions. If, at any time while this
Warrant is outstanding (i) the Company effects any merger or consolidation of
the Company with or into another Person, in which the shareholders of the
Company as of immediately prior to the transaction own less than a majority of
the outstanding stock of the surviving entity, (ii) the Company effects any sale
of all or substantially all of its assets in one or a series of related
transactions, (iii) any tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property, or (iv) the Company effects any reclassification of the Common Stock
or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(each, a “Fundamental Transaction”), then the Holder shall have the right
thereafter to receive, upon exercise of this Warrant, the same amount and kind
of securities, cash or property as it would have been entitled to receive upon
the occurrence of such Fundamental Transaction if it had been, immediately prior
to such Fundamental Transaction, the holder of the number of Warrant Shares then
issuable upon exercise in full of this Warrant (the “Alternate Consideration”).
The Company shall not effect any such Fundamental Transaction unless prior to or
simultaneously with the consummation thereof, any successor to the Company,
surviving entity or the corporation purchasing or otherwise acquiring such
assets or other appropriate corporation or entity shall assume the obligation to
deliver to the Holder, such Alternate Consideration as, in accordance with the
foregoing provisions, the Holder may be entitled to purchase, and the other
obligations under this Warrant. Notwithstanding anything to the contrary, in the
event of a Fundamental Transaction that is (1) an all cash transaction, (2) a
“Rule 13e-3 transaction” as defined in Rule 13e-3 under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), or (3) a Fundamental Transaction
involving a person or entity not traded on a national securities exchange, the
Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital
Market, the Company or any successor entity shall pay at the Holder’s option,
exercisable at any time concurrently with or within 30 days after the
consummation of the Fundamental Transaction, an amount of cash equal to the
value of this Warrant as determined in accordance with the Black Scholes Option
Pricing Model obtained from the “OV” function on Bloomberg L.P. using (i) a
price per share of Common Stock equal to the VWAP of the Common Stock for the
Trading Day immediately preceding the date of consummation of the applicable
Fundamental Transaction, (ii) a risk-free interest rate corresponding to the
U.S. Treasury rate for a period equal to the remaining term of this Warrant

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as of the date of consummation of the applicable Fundamental Transaction and
(iii) an expected volatility equal to the 100 day volatility obtained from the
“HVT” function on Bloomberg L.P. determined as of the Trading Day immediately
following the public announcement of the applicable Fundamental Transaction. The
provisions of this paragraph (c) shall similarly apply to subsequent
transactions analogous to a Fundamental Transaction.

                    (d) Number of Warrant Shares. Simultaneously with any
adjustment to the Exercise Price pursuant to paragraph (a) of this Section 9,
the number of Warrant Shares that may be purchased upon exercise of this Warrant
shall be increased or decreased proportionately, so that after such adjustment
the aggregate Exercise Price payable hereunder for the adjusted number of
Warrant Shares shall be the same as the aggregate Exercise Price in effect
immediately prior to such adjustment.

                    (e) Calculations. All calculations under this Section 9
shall be made to the nearest cent or the nearest 1/100th of a share, as
applicable. The number of shares of Common Stock outstanding at any given time
shall not include shares owned or held by or for the account of the Company, and
the disposition of any such shares shall be considered an issue or sale of
Common Stock.

                    (f) Adjustment upon issuance of shares of Common Stock. The
Exercise Price and the number of Warrant Shares shall be adjusted from time to
time if and whenever on or after the Issue Date, the Company issues or sells, or
is deemed to have issued or sold, any shares of Common Stock (including the
issuance or sale of shares of Common Stock owned or held by or for the account
of the Company for a consideration per share (the “New Issuance Price”) less
than a price (the “Applicable Price”) equal to the Exercise Price in effect
immediately prior to such issue or sale or deemed issuance or sale (the
foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance,
the Exercise Price then in effect shall be reduced to an amount equal to the New
Issuance Price. Upon each such adjustment of the Exercise Price hereunder, the
number of Warrant Shares shall be adjusted to the number of shares of Common
Stock determined by multiplying the Exercise Price in effect immediately prior
to such adjustment by the number of Warrant Shares acquirable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment. For purposes of
determining the adjusted Exercise Price under this Section 9(f), the following
shall be applicable:

 

 

 

(i) Issuance of Options. If the Company in any manner grants any Options and the
lowest price per share for which one share of Common Stock is issuable upon the
exercise of any such Option or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option is less than
the Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share. For purposes of this
Section 9(f)(i), the “lowest price per share for which one share of Common Stock
is issuable upon exercise of such Options or upon conversion, exercise or
exchange of such Convertible Securities issuable upon exercise of any such
Option” shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to any one share of
Common

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Stock upon the granting or sale of the Option, upon exercise of the Option and
upon conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Exercise Price or number
of Warrant Shares shall be made upon the actual issuance of such shares of
Common Stock or of such Convertible Securities upon the exercise of such Options
or upon the actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities.

 

 

 

(ii) Issuance of Convertible Securities. If the Company in any manner issues or
sells any Convertible Securities and the lowest price per share for which one
share of Common Stock is issuable upon the conversion, exercise or exchange
thereof is less than the Applicable Price, then such share of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this Section 9(f)(ii), the “lowest price per
share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the Convertible Security and
upon conversion, exercise or exchange of such Convertible Security. No further
adjustment of the Exercise Price or number of Warrant Shares shall be made upon
the actual issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which adjustment
of this Warrant has been or is to be made pursuant to other provisions of this
Section 9(f), no further adjustment of the Exercise Price or number of Warrant
Shares shall be made by reason of such issue or sale.

 

 

 

(iii) Change in Option Price or Rate of Conversion. If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion, exercise or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or exercisable
or exchangeable for shares of Common Stock increases or decreases at any time,
then the Exercise Price and the number of Warrant Shares in effect at the time
of such increase or decrease shall be adjusted to the Exercise Price and the
number of Warrant Shares which would have been in effect at such time had such
Options or Convertible Securities provided for such increased or decreased
purchase price, additional consideration or increased or decreased conversion
rate, as the case may be, at the time initially granted, issued or sold. For
purposes of this Section 9(f)(iii), if the terms of any Option or Convertible
Security that was outstanding as of the date of issuance of this Warrant are
increased or decreased in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the shares of Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such increase or decrease. No
adjustment pursuant to this Section 9(f) shall be made if such adjustment would
result in an increase of the Exercise Price then in effect or a decrease in the
number of Warrant Shares.

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(iv) Calculation of Consideration Received. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options will be deemed to
have been issued for a consideration of $0.01. If any shares of Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the net amount received by the Company therefor. If any shares of Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of such consideration received by the Company will
be the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received by
the Company will be the Weighted Average Price of such security on the date of
receipt. If any shares of Common Stock, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any merger
in which the Company is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such shares of
Common Stock, Options or Convertible Securities, as the case may be. The fair
value of any consideration other than cash or securities will be determined
jointly by the Company and the Required Holders. If such parties are unable to
reach agreement within ten (10) days after the occurrence of an event requiring
valuation (the “Valuation Event”), the fair value of such consideration will be
determined within five (5) Business Days after the tenth (10th) day following
the Valuation Event by an independent, reputable appraiser jointly selected by
the Company and the Required Holders. The determination of such appraiser shall
be final and binding upon all parties absent manifest error and the fees and
expenses of such appraiser shall be borne by the Company.

 

 

 

(v) Record Date. If the Company takes a record of the holders of shares of
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in shares of Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase shares of Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

 

 

 

(vi) If the Company has not obtained shareholder approval that may be required
under applicable law, rules or regulations, then the Company may not issue upon
exercise of this Warrant a number of shares of Common Stock, which, when
aggregated with any shares of Common Stock issued upon prior exercise of this or
any other Warrant issued pursuant to the Subscription Agreements, would exceed
3,719,814, subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the Common Stock
that occur after the date of the Issue Date (such number of shares,

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the “Issuable Maximum”). The holder hereof and the holders of the other Warrants
issued pursuant to the Subscription Agreements shall be entitled to a portion of
the Issuable Maximum equal to the quotient obtained by dividing (x) the Holder’s
original aggregate Purchase Price by (y) the aggregate original aggregate
Purchase Price of all holders pursuant to the Subscription Agreements. In
addition, the Holder may allocate its pro-rata portion of the Issuable Maximum
among Warrants held by it in its sole discretion. Such portion shall be adjusted
upward ratably in the event a purchaser no longer holds any Warrants and the
amount of shares issued to such purchaser pursuant to its Warrants was less than
such purchaser’s pro-rata share of the Issuable Maximum. This provision shall
only limit the number of Warrant Shares issuable hereunder, not the Exercise
Price which shall have no limit or floor on adjustments.

 

 

 

(vii) For purposes of this Section 9(f), the following shall not be deemed
issuances of Common Stock or securities convertible into or exercisable or
exchangeable for shares of Common Stock or any options, warrants or other rights
to acquire shares of Common Stock: options exercisable for shares of Common
Stock issued pursuant to any duly adopted stock option plan of the Company
including the Company’s 2000 Stock Option Plan, 2001 Stock Option Plan and 2004
Stock Incentive Plan.

 

 

                    (g) Adjustment upon Subdivision or Combination of Common
Stock. If the Company at any time on or after the Issue Date subdivides (by any
stock split, stock dividend, recapitalization or otherwise) one or more classes
of its outstanding shares of Common Stock into a greater number of shares, the
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced and the number of Warrant Shares will be proportionately
increased. If the Company at any time on or after the Issue Date combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately decreased.
Any adjustment under this Section 9(g) shall become effective at the close of
business on the date the subdivision or combination becomes effective.

 

                    (h) Other Events. If any event occurs of the type
contemplated by the provisions of this Section 9 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company’s Board of Directors will make an appropriate adjustment in the
Exercise Price and the number of Warrant Shares so as to protect the rights of
the Holder; provided that no such adjustment pursuant to this Section 9(h) will
increase the Exercise Price then in effect or decrease the number of Warrant
Shares as otherwise determined pursuant to this Section 9.

 

                    (i) De Minimis Adjustments. No adjustment in the Exercise
Price shall be required unless such adjustment would require an increase or
decrease of at least $0.01 in such price; provided, however, that any adjustment
which by reason of this Section 9(i) is not required to be made shall be carried
forward and taken into account in any subsequent adjustments under this Section
9. All calculations under this Section 9 shall be made by the Company in good
faith

10

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and shall be made to the nearest cent or to the nearest one hundredth of a
share, as applicable. No adjustment need be made for a change in the par value
or no par value of the Company’s Common Stock.

 

                    (j) Notice of Adjustments. Upon the occurrence of each
adjustment pursuant to this Section 9, the Company at its expense will, at the
written request of the Holder, promptly compute such adjustment in accordance
with the terms of this Warrant and prepare a certificate setting forth such
adjustment, including a statement of the adjusted Exercise Price and adjusted
number or type of Warrant Shares or other securities issuable upon exercise of
this Warrant (as applicable), describing the transactions giving rise to such
adjustments and showing in detail the facts upon which such adjustment is based.
Upon written request, the Company will promptly deliver a copy of each such
certificate to the Holder and to the American Stock Transfer & Trust Company,
the transfer agent of the Company.

 

                    (k) Notice of Corporate Events. If, while this Warrant is
outstanding, the Company (i) declares a dividend or any other distribution of
cash, securities or other property in respect of its Common Stock, including
without limitation any granting of rights or warrants to subscribe for or
purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or
approves, enters into any agreement contemplating or solicits stockholder
approval for any Fundamental Transaction or (iii) authorizes the voluntary
dissolution, liquidation or winding up of the affairs of the Company, then,
except if such notice and the contents thereof shall be deemed to constitute
material non-public information, the Company shall deliver to the Holder a
notice describing the material terms and conditions of such transaction at least
10 Trading Days prior to the applicable record or effective date on which a
Person would need to hold Common Stock in order to participate in or vote with
respect to such transaction, and the Company will take all reasonable steps to
give Holder the practical opportunity to exercise this Warrant prior to such
time; provided, however, that the failure to deliver such notice or any defect
therein shall not affect the validity of the corporate action required to be
described in such notice.

          10. Payment of Exercise Price. The Holder may pay the Exercise Price
in one of the following manners:

                    (a) Cash Exercise. The Holder may deliver immediately
available funds; or

                    (b) Cashless Exercise. If an Exercise Notice is delivered at
a time when the Registration Statement (or, in lieu thereof, a resale
registration statement on Form S-3 covering the resale of the Warrant Shares) is
not then effective, then the Holder may notify the Company in an Exercise Notice
of its election to utilize cashless exercise, in which event the Company shall
issue to the Holder the number of Warrant Shares determined as follows:

 

 

 

 

 

X

=

Y [(A-B)/A]

 

 

 

 

          where

 

 

 

 

 

X

=

the number of Warrant Shares to be issued to the Holder

 

 

 

 

 

Y

=

the number of Warrant Shares with respect to which this Warrant is being
exercised

11

--------------------------------------------------------------------------------

 

 

 

 

 

A

=

the average of the Closing Prices for the five Trading Days immediately prior to
(but not including) the Exercise Date.

 

 

 

 

 

B

 

the Exercise Price.

          For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
commenced, on the date this Warrant was originally issued.

          If, but only if, at any time after the Trigger Date there is no
effective Registration Statement registering the Warrant Shares, the Company
shall use its best efforts to file a new Registration Statement on Form S-3
pursuant to General Instruction I.B.4(a)(3) (including compliance with General
Instruction I.B.4(b) and I.B.4(c) as required thereby) registering the Warrant
Shares issuable upon exercise of the Warrant.

          11. Limitations on Exercise.

                    (a) Notwithstanding anything to the contrary contained
herein, the number of Warrant Shares that may be acquired by the Holder upon any
exercise of this Warrant (or otherwise in respect hereof) shall be limited to
the extent necessary to insure that, following such exercise (or other
issuance), the total number of shares of Common Stock then beneficially owned by
such Holder and its Affiliates and any other Persons whose beneficial ownership
of Common Stock would be aggregated with the Holder’s for purposes of Section
13(d) of the Exchange Act, does not exceed 4.999% of the total number of issued
and outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such exercise). For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. Each delivery of an
Exercise Notice hereunder will constitute a representation by the Holder that it
has evaluated the limitation set forth in this Section 11(a) and determined that
issuance of the full number of Warrant Shares requested in such Exercise Notice
is permitted under this Section 11(a). The Company’s obligation to issue shares
of Common Stock in excess of the limitation referred to in this Section 11(a)
shall be suspended (and, except as provided below, shall not terminate or expire
notwithstanding any contrary provisions hereof) until such time, if any, as such
shares of Common Stock may be issued in compliance with such limitation;
provided, that, if, as of 5:00 p.m., New York City time, on the Expiration Date,
the Company has not received written notice that the shares of Common Stock may
be issued in compliance with such limitation, the Company’s obligation to issue
such shares shall terminate. This provision shall not restrict the number of
shares of Common Stock that a Holder may receive or beneficially own in order to
determine the amount of securities or other consideration that such Holder may
receive in the event of a Fundamental Transaction as contemplated in Section 9
hereof. By written notice to the Company, the Holder may waive the provisions of
this Section 11(a) but any such waiver will not be effective until the 61st day
after such notice is delivered to the Company, nor will any such waiver effect
any other Holder. This provision shall not apply to Holders who, together with
Affiliates, as of the Closing Date beneficially own (as determined in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated

12

--------------------------------------------------------------------------------

thereunder) in excess of 5% of the total number of issued and outstanding shares
of Common Stock.

                    (b) Notwithstanding anything to the contrary contained
herein, the number of Warrant Shares that may be acquired by the Holder upon any
exercise of this Warrant (or otherwise in respect hereof) shall be limited to
the extent necessary to insure that, following such exercise (or other
issuance), the total number of shares of Common Stock then beneficially owned by
such Holder and its Affiliates and any other Persons whose beneficial ownership
of Common Stock would be aggregated with the Holder’s for purposes of Section
13(d) of the Exchange Act, does not exceed 9.999% of the total number of issued
and outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such exercise). For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. Each delivery of an
Exercise Notice hereunder will constitute a representation by the Holder that it
has evaluated the limitation set forth in this Section 11(b) and determined that
issuance of the full number of Warrant Shares requested in such Exercise Notice
is permitted under this Section 11(b). The Company’s obligation to issue shares
of Common Stock in excess of the limitation referred to in this Section 11(b)
shall be suspended (and, except as provided below, shall not terminate or expire
notwithstanding any contrary provisions hereof) until such time, if any, as such
shares of Common Stock may be issued in compliance with such limitation;
provided, that, if, as of 5:00 p.m., New York City time, on the Expiration Date,
the Company has not received written notice that the shares of Common Stock may
be issued in compliance with such limitation, the Company’s obligation to issue
such shares shall terminate. This provision shall not restrict the number of
shares of Common Stock that a Holder may receive or beneficially own in order to
determine the amount of securities or other consideration that such Holder may
receive in the event of a Fundamental Transaction as contemplated in Section 9
hereof. By written notice to the Company, the Holder may waive the provisions of
this Section 11(b) but any such waiver will not be effective until the 61st day
after such notice is delivered to the Company, nor will any such waiver effect
any other Holder. This provision shall not apply to Holders who, together with
Affiliates, as of the Closing Date beneficially own (as determined in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder) in excess of 10% of the total number of issued and outstanding
shares of Common Stock.

          12. No Fractional Shares. No fractional Warrant Shares will be issued
in connection with any exercise of this Warrant. In lieu of any fractional
shares that would otherwise be issuable, the Company shall pay cash equal to the
product of such fraction multiplied by the closing price of one Warrant Share as
reported by the applicable Trading Market on the Exercise Date.

          13. Notices. Any and all notices or other communications or deliveries
hereunder (including, without limitation, any Exercise Notice) shall be in
writing and shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number specified in this Section 13 at or prior to 5:00 p.m. (New
York City time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section 13 on a day that is not a Trading Day
or later than 5:00 p.m.

13

--------------------------------------------------------------------------------

(New York City time) on any Trading Day, (iii) the Trading Day following the
date of mailing, if sent by nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to be
given. The addresses for such notices or communications shall be: (a) if to the
Company, to Delcath Systems, Inc., 600 Fifth Avenue, 23rd Floor, New York, New
York 10017, Attention: Chief Executive Officer, Facsimile No.: (212) 489-2102
(or such other address as the Company shall indicate in writing in accordance
with this Section 13) or (b) if to the Holder, to the address or facsimile
number appearing on the Warrant Register (or such other address as the Company
shall indicate in writing in accordance with this Section 13).

          14. Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon 30 days’ notice to the Holder, the Company may appoint a new
warrant agent. Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last
address as shown on the Warrant Register.

          15. Miscellaneous.

                    (a) This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns.
Subject to the preceding sentence, nothing in this Warrant shall be construed to
give to any Person other than the Company and the Holder any legal or equitable
right, remedy or cause of action under this Warrant. This Warrant may be amended
only in writing signed by the Company and the Holder, or their successors and
assigns.

                    (b) All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of this Warrant and the transactions herein contemplated
(“Proceedings”) (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the courts of
the State of New York located in the City and County of New York or in the
United States District Court for the Southern District of New York (the “New
York Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any Proceeding, any claim that it is not personally subject to the jurisdiction
of any New York Court, or that such Proceeding has been commenced in an improper
or inconvenient forum. Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such Proceeding
by mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) 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 contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by

14

--------------------------------------------------------------------------------

applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Warrant or the transactions contemplated
hereby. If either party shall commence a Proceeding to enforce any provisions of
this Warrant, then the prevailing party in such Proceeding shall be reimbursed
by the other party for its attorney’s fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such Proceeding.

                    (c) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.

                    (d) In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefore, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.

                    (e) Prior to exercise of this Warrant, the Holder hereof
shall not, by reason of by being a Holder, be entitled to any rights of a
stockholder with respect to the Warrant Shares

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]

15

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          IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.

 

 

 

 

DELCATH SYSTEMS, INC.

 

 

 

 

 

By:

 

 

--------------------------------------------------------------------------------

 

Name: Richard L. Taney

 

Title:   Chief Executive Officer

16

--------------------------------------------------------------------------------

EXERCISE NOTICE

DELCATH SYSTEMS, INC.

WARRANT NO. ___DATED SEPTEMBER __, 2007

Ladies and Gentlemen:

(1) The undersigned hereby elects to exercise the above-referenced Warrant with
respect to ____________ shares of Common Stock. Capitalized terms used herein
and not otherwise defined herein have the respective meanings set forth in the
Warrant.

(2) The Holder intends that payment of the Exercise Price shall be made as
(check one):

 

 

 

 

o

Cash Exercise under Section 10(a)

 

 

 

 

o

Cashless Exercise under Section 10(b)

(3) If the Holder has elected a Cash Exercise, the holder shall pay the sum of
$___to the Company in accordance with the terms of the Warrant.

(4) Pursuant to this Exercise Notice, the Company shall deliver to the Holder
the number of Warrant Shares determined in accordance with the terms of the
Warrant.

(5) By its delivery of this Exercise Notice, the undersigned represents and
warrants to the Company that in giving effect to the exercise evidenced hereby
the Holder will not beneficially own in excess of the number of shares of Common
Stock (as determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934) permitted to be owned under Section 11 of this Warrant to which
this notice relates.

 

 

 

 

HOLDER:

 

 

 

--------------------------------------------------------------------------------

 

(Print name)

 

 

 

By:

 

 

--------------------------------------------------------------------------------

 

 

 

 

Title:

 

 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

WARRANT ORIGINALLY ISSUED SEPTEMBER __, 2007
WARRANT NO. ____

FORM OF ASSIGNMENT

To be completed and signed only upon transfer of Warrant

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
__________ the right represented by the within Warrant to purchase __________
shares of Common Stock to which the within Warrant relates and appoints
__________ attorney to transfer said right on the books of the Company with full
power of substitution in the premises.

 

 

 

 

Dated:

TRANSFEROR:

 

--------------------------------------------------------------------------------

 

 

 

 

 

--------------------------------------------------------------------------------

 

(Print Name)

 

 

 

By:

 

 

--------------------------------------------------------------------------------

 

 

 

 

Title:

 

 

--------------------------------------------------------------------------------

 

 

 

 

TRANSFEREE:

 

 

 

 

 

--------------------------------------------------------------------------------

 

(Print Name)

 

 

 

(Address of Transferee)

 

 

 

--------------------------------------------------------------------------------

 

 

 

--------------------------------------------------------------------------------

 

 

In the presence of:

 

 

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------