Document:

dcth-ex1038_228.htm

 

Exhibit 10.38

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM

THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD

BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED.

 

 

License, Supply and Marketing Agreement

Chemosat®

 

This License, Supply and Agreement is made as of December 10th, 2018 (hereinafter referred to as “EFFECTIVE DATE”) by and

 

between

 

Delcath Systems, Ltd.,

a company duly organised and existing under the laws of Ireland, having its registered office at Unit 19, Mervue Business Park, Mervue, Galway

(VAT No. IE9795453G)

 

- hereinafter referred to as "Delcath"-

 

and

 

medac Gesellschaft für klinische Spezialpräparate mbH,

a company duly organised and existing under the laws of Germany,

having its registered office at Theaterstrasse 6, 22880 Wedel, Germany

(VAT No. DE 118579535)

 

- hereinafter referred to as "medac"-

 

hereinafter individually and collectively referred to respectively as "a Party" and "the Parties"

WHEREAS the Parties are established pharmaceutical companies;

WHEREAS Delcath has developed the medical device Delcath Hepatic CHEMOSAT® Delivery System for the application of Melphalan and has obtained CE mark approval thereof;

WHEREAS medac is interested in receiving a license to use the EC certificate and its underlying KNOW-HOW in order to market and sell the PRODUCT in the TERRITORY, and whereas medac is interested in being supplied by Delcath with the medical device for this purpose. Delcath is willing to grant a respective license and to supply the medical device to medac under the terms and conditions set forth in this Agreement;

WHEREAS medac hereby appoints Delcath as its exclusive supplier of the PRODUCT in the TERRITORY;

 

 

License, Supply and Marketing Agreement – Delcath/medac_2018 December 10th

 

NOW, THEREFORE, in consideration of the mutual covenants and the premises contained herein, the Parties hereto enter into this License, Supply and Marketing Agreement (the "Agreement") as follows:

	
1.
	
Definitions

For the purposes of this Agreement, each word or expression set out in capital letters in this Agreement and all grammatical variations of such word or expression shall, when capitalized in the manner shown in this Article and used in this Agreement, have the meaning correspondingly assigned to such word or expression in this Article. When not capitalized in the manner shown in this Article and used in this Agreement, such word or expression shall have its ordinary meaning:

	
1.1.
	
"AFFILIATE" shall mean with respect to either Party, any person, corporation, company, partnership, joint venture, firm or other entity which is controlled by, controls or is under direct or indirect common control with such Party. For the purposes of this definition "control" shall mean (a) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares entitled to vote for the election of directors, managing directors and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct management and policies of such non-corporate entities.

	
1.2.
	
"APPLICABLE LAWS" shall mean all laws, guidelines, directives, ordinances, rules and regulations applicable to the manufacture of the PRODUCT and the obligations of either Party, as the context requires under this Agreement, including, without limitation and if applicable, (i) all applicable federal, state and local laws and regulations; (ii) the EU Commission Directive and regulations on the Community code relating to medicinal products for human use; (iii) the EU GMPs; and (iv) any other requirements by any other Regulatory Authority, government or governmental agency.

	
1.3.
	
"CONFIDENTIAL INFORMATION" shall mean all documents, methods, technical KNOW-HOW and all other information that is non-public, confidential and proprietary in nature irrespective of its form (including but not limited to oral, written, printed form or forms of electronic data) disclosed by one Party to the other or any of its directors, officers, employees, agents, consultants or representatives relating to the business of the disclosing Party.

	
1.4.
	
“EX FACTORY PRICE” shall mean the selling price in the various countries, exclusive of taxes and before subtraction of the deductions defined in Schedule 1 of this Agreement. EX-FACTORY PRICE is referred to as the EXF.

	
1.5.
	
 “INTELLECTUAL PROPERTY” shall mean patents, designs (registered or not), utility models including applications for any of the foregoing, copyright, rights in KNOW-HOW, brand / trademark, trade or business names trade secrets, and other similar rights or forms of protection of a similar nature or having equivalent or similar effect to any of these which may subsist anywhere in the world whether registrable or not and any licenses of any of the foregoing.

License, Supply and Marketing Agreement – Delcath/medac_2018 December 10th

 

2/23

 

	
1.6.
	
"INTELLECTUAL PROPERTY OF DELCATH” shall mean any and all INTELLECTUAL PROPERTY relating to the manufacture of the PRODUCT generally, that is; (i) owned by or licensed to Delcath or Delcath's AFFILIATES or Delcath’s Subcontractor at the Effective Date; and (ii) developed, filed or acquired by, or licensed to, Delcath or Delcath's AFFILIATES or Subcontractor after the Effective Date of this Agreement. 

	
1.7.
	
"KNOW-HOW" shall mean any and all techniques, data and information in the control of Delcath as of the date of this agreement that are necessary or useful to the development, manufacture or commercialization of the PRODUCT, including, but not limited to inventions and intellectual property rights (if any) pertaining thereto, discoveries, practices, processes, procedures, formulae, methods, knowledge, skill, trade secrets, experience, test data, data, records and information derived from development, adverse reactions, analytical and quality control data, including data included in or necessary or useful for obtaining regulatory approval. 

	
1.8.
	
"IMPROVEMENT" shall mean any further development, enhancements or improvement relating to the PRODUCT and its underlying KNOW-HOW, whether patentable or not.

	
1.9.
	
“MARKETABILITY” shall mean that the PRODUCT can be lawfully distributed within the TERRITORY which includes that the PRODUCT is free of any defects as well as no administrative orders or jurisdiction can hinder the lawful distribution of the PRODUCT.

	
1.10.
	
"NET SALES" shall mean the amount medac invoices to distributors and/or end users (hospitals, clinics, cancer centers, etc.) for the PRODUCT less

a) cash discounts, returns as well as purchase taxes and VAT, including but not limited to rebates like the German "Herstellerrabatt/Generikarabatt" and respective official rebates and tender related rebates; 

b) credits or allowances granted on account of rejections, returns and invoicing errors; and

c) logistic costs.

	
1.11.
	
"PRODUCT" shall mean the medical device Delcath Hepatic CHEMOSAT® Delivery System for the administration of Melphalan including the labelling, packaging and promotional material.

	
1.12.
	
"PRICE" shall have the meaning as set forth in Schedule 1.

	
1.13.
	
"TERRITORY" shall mean the territory of commercialization of the PRODUCT in the following countries: all member states of the European Union, Norway, Iceland, Liechtenstein, Switzerland and United Kingdom.  

TERRITORY can be extended by mutual agreement between the Parties.  Financial consideration should take into consideration the amounts already paid by medac under this Agreement.

License, Supply and Marketing Agreement – Delcath/medac_2018 December 10th

 

3/23

 

	
2.
	
Condition precedent

	
2.1.
	
As a condition precedent to this contract, medac will visit the premises of Delcath Ltd. which includes the offices and depots in Ireland and the Agreement shall only be set in force if medac approves Delcath Ltd. as a contractual partner. 

	
3.
	
Scope of the Agreement

	
3.1.
	
Delcath grants to medac an exclusive license for the PRODUCT in the TERRITORY including any trademarks and/or EC-certificates and/or any approvals which might be necessary for lawful marketing of the PRODUCT and use of the underlying KNOW-HOW and INTELLECTUAL PROPERTY OF DELCATH. Delcath furthermore grants medac the rights for the commercialisation of the PRODUCT in the TERRITORY which shall among others include the rights of promotion, sale and distribution. Other than for countries under 12.3, Delcath is not entitled to commercialise the PRODUCT in the TERRITORY and will refrain from any of these measures. 

	
3.2.
	
Delcath shall transfer a copy of all existing  EC-certificates and/or approvals as well as of any other documents which might be necessary for lawful marketing of the PRODUCT within thirty (30) calendar days after execution of this Agreement and shall provide medac with each and any update and/or amendment of these documents.

	
3.3.
	
medac agrees to use any document and/or information as well as INTELLECTUAL PROPERTY OF DELCATH licensed by Delcath in compliance with this Agreement. In particular medac must not market the PRODUCT in- or outside the TERRITORY for other pharmaceuticals than Melphalan. 

	
3.4.
	
Delcath hereby agrees to sell and supply the PRODUCT only and exclusively to medac for the TERRITORY and medac agrees to purchase the PRODUCT exclusively from Delcath. 

	
3.5.
	
All existing INTELLECTUAL PROPERTY OF DELCATH and any IMPROVEMENT made to the PRODUCT and its underlying KNOW-HOW during the Term shall belong to Delcath and will be considered as part of the PRODUCT with no additional milestone or other payments due by medac. Delcath will notify medac as soon as reasonably possible after making any such IMPROVEMENT giving reasonable details of the IMPROVEMENT and provide medac with all necessary information to evaluate the intellectual property situation, if needed. Any IMPROVEMENT of the PRODUCT and respective INTELLECTUAL PROPERTY OF DELCATH shall be automatically included in this Agreement and medac shall be granted a license within the scope of the license granted under 2.1 for this INTELLECTUAL PROPERTY OF DELCATH.

License, Supply and Marketing Agreement – Delcath/medac_2018 December 10th

 

4/23

 

	
3.6.
	
In the event Delcath desires to grant a license for commercialization of an invention or discovery which does not meet the definition of PRODUCT or IMPROVEMENT in this Agreement, but is marketed or intended to be marketed at least in one of the indications of the PRODUCT, then Delcath shall inform medac of such desire and grant medac an exclusive right of first negotiation to acquire exclusive rights to commercialize this opportunity.

The exclusive negotiation period shall have a duration of ninety (90) days commencing on the date of delivery to medac by Delcath of a notice pursuant to advising medac of the opportunity. After expiration of this period without a definitive agreement effective upon signing between the negotiating parties, Delcath shall be free to negotiate with any other third party, provided however the definitive agreement with the third party shall not contain terms more favourable than those offered to medac.

	
3.7.
	
The name of the PRODUCT in the TERRITORY shall be Chemosat®. Delcath owns a respective trademark for the medical device in the TERRITORY and will uphold the respective trademark rights at their own costs including in Switzerland, Norway, Lichtenstein, and Iceland

	
4.
	
Regulatory Affairs

	
4.1.
	
Delcath is responsible to fully ensure the MARKETABILITY of the PRODUCT within the TERRITORY. In particular Delcath is responsible to obtain and maintain the EC-certificate and similar certificates as required by applicable law to uphold such MARKETABILITY.

	
4.2.
	
Delcath is responsible that within the TERRITORY the PRODUCT is fully compliant with any APPLICABLE LAWS and provisions. Delcath is in particular aware of the directive regarding medical devices of the European Union (EU directive 2017/745) including UDI requirements as well as of other APPLICABLE LAWS within the TERRITORY such as medical devices laws and as a material obligation ensures full compliance with the PRODUCT with any terms and provisions of these and any other laws. 

	
4.3.
	
Delcath shall bear all the fees which occur for ensuring the MARKETABILITY of the PRODUCT within the TERRITORY including but not exclusively trademark costs, costs for the EC-Certificate and similar certificates. 

	
4.4.
	
The Parties will enter into a separate Quality Assurance Agreement which also describes activities and responsibilities concerning vigilance.

License, Supply and Marketing Agreement – Delcath/medac_2018 December 10th

 

5/23

 

	
5.
	
Allowance

	
5.1.
	
In consideration of the rights granted under this Agreement medac shall pay to Delcath [*] including VAT in the following instalments:

[*]

Both Parties agree that if any payments under this agreement are subject to withholding tax according to local German tax law, e.g. allowance, royalties, all payments of medac shall be reduced by the applicable local tax rate. The respective tax amount will be paid by medac to the responsible local tax office. After that medac shall provide Delcath with a certificate stating the withheld tax amount which was transferred to the local tax office for the account of Delcath.

The reduced tax rate according to the corresponding double taxation treaty between Germany and Ireland is applicable if Delcath provides medac with a valid certificate of exemption issued by the German federal central tax office (Bundeszentralamt für Steuern) prior to the date the instalments are due. The Parties mutually assure each other all reasonable assistance in order to receive the certificate of exemption. 

	
6.
	
Purchase of the PRODUCT

	
6.1.
	
Subject to the terms and conditions of this Agreement, medac shall purchase the PRODUCT from Delcath exclusively for [*] starting with the first commercial supply from Delcath to medac, provided that there is no infringement issue or third party ́s right at medac ́s discretion. After the initial term the Parties intend to renew this Agreement for [*]. They will negotiate this in good faith at least six months in advance of expiry of the initial term.

	
6.2.
	
Delcath designs and manufactures the PRODUCT including material, packaging, instructions for use and labelling according to the Regulation (EU) 2017/745 on medical devices. Delcath ensures that the PRODUCT fulfills appropriate conformity assessment procedure established for its class as IIb according to Regulation (EU) 2017/745. Delcath is certified according to EN ISO 13485 via the notified body. 

	
6.2.1.
	
The PRODUCT is legally compliant, has a valid EU declaration of conformity, CE marking of conformity, accompanied by the required instruction for use.

	
6.2.2.
	
Where Delcath as manufacturer of the PRODUCT is not established in the European Union, Delcath ensures that the PRODUCT is placed on the European Union market according to the provisions of Article 11 of the Regulation (EU) 2017/745.

	
6.2.3.
	
In order to ensure the applicable requirements and responsibilities, Parties enter into a separate Quality Assurance Agreement at the latest before the PRODUCT is placed on the market.

[*] Confidential Treatment Requested

License, Supply and Marketing Agreement – Delcath/medac_2018 December 10th

 

6/23

 

	
6.2.4.
	
The Quality Agreement defines the responsibilities with respect to quality assurance including, but not limited to, the following obligations of Delcath, sole authorized representative and medac:

	
 
	
•
	
carrying out the manufacturing, quality testing and release of the PRODUCT in accordance with the requirements of the Regulation (EU) 2017/745 in a timely and efficient manner;

	
 
	
•
	
maintaining the certification of the PRODUCT; 

	
 
	
•
	
verifying EU declaration of conformity, carrying out the of the appropriate conformity assessment procedure by authorized representative;

	
 
	
•
	
regulation concerning qualification, selection, approval, purchase and maintenance of supplier in accordance with the requirements of quality management system.

	
6.2.5.
	
In case there is divergence between the Quality Agreement and this Agreement regarding quality issues the Quality Agreement shall be decisive. In all other respects this Agreement shall prevail.

	
7.
	
Forecast / Orders / Terms of delivery

[*]

	
8.
	
Audits

medac shall have the right to audit the manufacturing site and quality system of Delcath and its AFFILIATES, e.g. Delcath Systems Inc., USA, for the compliance with regulatory requirements for the manufacturing of the PRODUCT. These audits shall be limited to one time a year and shall take place on any business day after arrangement with Delcath and without unnecessary disturbance of operational procedures. Each Party shall bear its own costs, including, but not limited to, personnel and travel costs, itself. In case there is a reasonable indication that Delcath does not comply with this Agreement or other applicable legal regulations related to the manufacturing of the PRODUCT, medac shall always and without any limitation be entitled to audit the facilities of Delcath and AFFILIATES. In such an event and for any activities required to enhance compliance with regulatory requirements the respective costs shall be borne by Delcath. medac will audit the manufacturing site, the EU release site and the quality system of Delcath prior to the execution of this Agreement.

Delcath shall have the auditing right in order to confirm medac ́s sales reporting. This audit shall be limited to one time a year and shall take place on any business day after arrangement with medac and without unnecessary disturbance of operational procedures. Each Party shall bear its own costs, including but not limited to personnel and travel costs, itself. In case there is a reasonable indication that medac does not comply with this Agreement, the GxP or other applicable legal regulations, Delcath shall always and without any limitation be entitled to audit the facilities of medac. In such an event the respective costs shall be borne by medac. 

[*] Confidential Treatment Requested

License, Supply and Marketing Agreement – Delcath/medac_2018 December 10th

 

7/23

 

	
9.
	
PRICES and Payment for the Supply of the PRODUCT

	
9.1.
	
medac shall pay the PRICE for the PRODUCT as stated in Schedule 1. 

	
9.2.
	
Payment of invoices for PRODUCT are due thirty (30) days after receipt of each invoice for PRODUCT.

	
9.3.
	
All payments shall be made in Euro.

	
10.
	
Warranty, Defects in quality/quantity, recalls

	
10.1.
	
Delcath warrants that the PRODUCT is manufactured according to cGMP and that the PRODUCT has full MARKETABILITY in the TERRITORY.

	
10.2.
	
medac shall be obliged to inspect and examine the quantity and apparent defects of the PRODUCT immediately upon receipt. Should there be any apparent damage to the packaging of the PRODUCT, medac shall draw up a report of defects to be submitted to Delcath, if applicable. In the event that the PRODUCT does not conform to specifications and warranties of this Agreement or do not comply with legal requirements, medac shall inform Delcath within 10 working days after receipt of the PRODUCT of apparent defects in quality or quantity in writing. Failure or delay shall mean acceptance of the delivered PRODUCT and waiver any potential rights medac may have with respect to the delivered PRODUCT. 

	
10.3.
	
Hidden defects shall be announced to Delcath in writing as soon as possible after detection. 

	
10.4.
	
As soon as possible [*]  shall dispose and replace defective PRODUCT.

	
10.5.
	
If there is a disagreement between the Parties as to the compliance of the PRODUCT with specifications, warranties and legal requirements sample may be sent to an independent laboratory for final evaluation, which shall be binding for both Parties. The independent laboratory shall be selected by both Parties jointly. In case the Parties do not agree upon an independent laboratory, such shall be chosen by the Chamber of Commerce in Hamburg, Germany. If the independent laboratory finds the PRODUCT to conform to the specifications, warranties and legal requirements medac shall bear the costs of the laboratory and the Chamber of Commerce. Otherwise the costs shall be borne by Delcath.

[*] Confidential Treatment Requested

License, Supply and Marketing Agreement – Delcath/medac_2018 December 10th

 

8/23

 

	
10.6.
	
If a recall of the PRODUCT from the market is necessary, or if a health authority requires such withdrawal or recall from a Party, the respective Party shall immediately advise the other Party of such necessity or request, and both Parties shall without delay discuss the modalities of such withdrawal or recall. The final decision on a withdrawal or recall in the TERRITORY shall rest with [*]. To the extent such withdrawal or recall is due to the non-compliance of the PRODUCT with specifications, warranties, cGMP about which medac informed Delcath in accordance with 9.2 or 9.3 and legal requirements and/or an infringement of third party rights.

[*].

	
10.7.
	
In the event that a Party recommends initiating a batch recall or that the health authority requires such batch recall, the Parties shall cooperate in good faith to determine the measures that should be taken. The Parties shall immediately commence research in order to determine the cause of the defect in the batch. The Parties will support each other and provide any necessary assistance in the handling of any PRODUCT return, quality complaint, vigilance activities, and recalls or other Field Safety Corrective Actions (responsibilities are further defined in the Quality Agreement). 

	
 
	
•
	
In the event of a batch recall in the following situations:

	
 
	
o
	
non-observance by Delcath of the APPLICABLE LAWS, the Quality Assurance Agreement, the GMPs, or any other document relevant to the execution of this Agreement; or

	
 
	
o
	
defects in the PRODUCT or its design (including defects of components)

	
 
	
o
	
defect in the quality control of the PRODUCT, 

[*]

	
10.8.
	
In an event as listed in Article 10.7, the disposal of the defective batch shall be carried out at [*]’s expense. The Party carrying out the disposal shall provide the other Party with a certificate of disposal including the following information:

	
 
	
•
	
The reference number of the corresponding batch; and

	
 
	
•
	
The name of the company which carried out the disposal; and

	
 
	
•
	
The quantity of the PRODUCT of which Delcath, or the company it has nominated, has disposed.

	
10.9.
	
The Parties shall inform each other immediately of any claims with regard to the PRODUCT arising from a third party or health authority and give each other all reasonable support.

[*] Confidential Treatment Requested

License, Supply and Marketing Agreement – Delcath/medac_2018 December 10th

 

9/23

 

	
11.
	
Responsibilities, Warranties, Indemnity and Liability

	
11.1.
	
Delcath is responsible for maintaining any CE mark as required by national law. Delcath is also responsible to uphold trademark protection for the PRODUCT within the TERRITORY.

	
11.2.
	
Delcath will name medac on the PRODUCT sold under the Agreement as Delcath’s exclusive marketing, sales, and distribution partner for the Territory. medac is entitled to apply a respective signature on PRODUCT, packaging and all other material relating to the PRODUCT.

	
11.3.
	
Delcath will identify and transfer all existing customers in the TERRITORY to medac in accordance with Schedule 4. 

	
11.4.
	
Delcath will provide all the background information and correspondence with authorities regarding reimbursement in the TERRITORY. 

	
11.5.
	
Delcath will supply medac with the PRODUCT from Delcath’s own manufacturing facility in the United States through its distribution center in Ireland.

	
11.6.
	
Delcath will be responsible for gaining, maintaining and or renewing import licenses and other regulatory clearances and approvals needed to import the PRODUCT into each country of the TERRITORY.

	
11.7.
	
Delcath will be responsible to prosecute, maintain, enforce and defend INTELLECTUAL PROPERTY OF DELCATH using commercially reasonable efforts.

	
11.8.
	
Delcath warrants and represents to and for the benefit of medac under this Agreement that all PRODUCT supplied by Delcath shall be manufactured, packaged, tested, stored, delivered in accordance with this Agreement, the general and specific manufacturing procedures, the Quality Agreement, the EU GMP, APPLICABLE LAWS and the specifications. 

	
11.9.
	
Delcath further warrants and represents to and for the benefit of medac:

	
 
	
•
	
that the PRODUCT has been lawfully assembled by Delcath in compliance with all industry norms and that all related documents disclosed by Delcath to medac will be true, correct and complete and there is no other fact or matter not disclosed to medac under this Agreement, which might reasonably affect medac’s willingness to enter into this Agreement;

	
 
	
•
	
 that the PRODUCT is feasible at an industrial level and  is of merchantable quality;

	
 
	
•
	
 the PRODUCT and related documents are provided to medac free and clear of all liens, claims and encumbrances.

License, Supply and Marketing Agreement – Delcath/medac_2018 December 10th

 

10/23

 

	
11.10.
	
medac, in its turn, guarantees, warrants and represents to and for the benefit of Delcath under this Agreement full compliance with all APPLICABLE LAWS and regulations in the TERRITORY as regards storage and/or handling and/or promotion and/or distribution and/or marketing of the PRODUCT in the TERRITORY.

	
11.11.
	
medac will be responsible for commercializing, including promoting the sale of, and distributing, the PRODUCT in the TERRITORY and will bear all costs related to the distribution and commercialization of the PRODUCT in the TERRITORY. Medac shall at its own cost employ, train and maintain suitably qualified personnel to ensure the proper fulfilment of all of its obligations in the TERRITORY. 

	
11.12.
	
medac will commercialize and distribute the PRODUCT in each country of the TERRITORY where it is commercially reasonable to do so and will commence these activities in a commercially reasonable timeframe. Medac will be responsible for marketing on a regional, local and hospital level in the TERRITORY. To the extent permitted by any APPLICABLE LAWS, the Parties will cooperate with each other with respect to all reimbursement and price negotiations  as well as health technology assessments. 

	
11.13.
	
medac will provide Delcath with quarterly reports of sales of PRODUCT in the TERRITORY.

	
11.14.
	
Each Party warrants to the other that:

	
 
	
•
	
it is a company duly incorporated, validly existing and in good standing under the law of the country of its incorporation and has the requisite capacity, power and authority to enter into and to perform its obligations under this Agreement; 

	
 
	
•
	
execution, delivery of and the performance by the Party of its obligations under this Agreement shall not:

	
 
	
o
	
result in a breach of any provisions of the memorandum or Articles of association of that Party;

	
 
	
o
	
result in a breach of, or constitute a default under, any instrument by which the Party is bound including any agreement or arrangement between itself, one of its AFFILIATES and any third party; or

	
 
	
o
	
result in a breach of any order, judgment or decree of any court or governmental agency by which the Party is bound; or result in breach by that Party (or any of its employees or agents) of any regulatory requirements.

	
11.15.
	
The warranties provided for in this Article 11 shall be in addition to those implied by law. 

License, Supply and Marketing Agreement – Delcath/medac_2018 December 10th

 

11/23

 

	
11.16.
	
Either Party shall defend, indemnify and hold the other Party harmless from and against any third party claim, damage, costs, expenses, injury or loss except indirect losses whatsoever based upon or arising out of any (a) breach of warranties by the former Party and/or (b) any gross negligence or wilful misconduct of the former Party under this Agreement and/or (c) any material breach, non-observance or non-performance by the former Party of its obligations under this Agreement.

	
11.17.
	
To the extent permitted by law, neither Party shall be liable for indirect, punitive, consequential or special damages whatsoever, unless not otherwise expressively agreed in this Agreement. 

	
11.18.
	
Nothing in this Agreement shall operate to exclude or restrict either Party's liability for: 

	
 
	
•
	
death or personal injury resulting from wilful misconduct;

	
 
	
•
	
fraud or deceit;

	
 
	
•
	
any other form of liability which may not be excluded or limited by APPLICABLE LAWS.

	
11.19.
	
In the light of this Article, the Parties agree to take out and keep up to date for the duration of this Agreement and any extensions thereof, an insurance policy financially substantial enough to cover all and any liability incurred by virtue of the said clauses. Each Party agrees that on request by the other Party it shall prove by written records the existence and conditions of such an insurance policy.

	
11.20.
	
The Parties each designate individuals who will participate in a monthly conference call, which can become less frequent as time goes on, to discuss clinical programs, medical information, customer feedback and issues.

Medac appoints the following individuals: 

	
 
	
1.
	
[*] (Vice President Therapeutic Area Oncology)

	
 
	
2.
	
[*] (Director Therapeutic Area Oncology)

	
 
	
3.
	
[*](Global Portfolio Manager Oncology)

	
 
	
4.
	
[*] (Responsible Person for Scientific Information)

[*] Confidential Treatment Requested

License, Supply and Marketing Agreement – Delcath/medac_2018 December 10th

 

12/23

 

Delcath appoints the following individuals:  

	
 
	
1.
	
[*] CEO, Delcath Systems, Inc.

	
 
	
2.
	
[*] Executive Vice President, Global Head of Operations, Delcath Systems, Inc.

	
 
	
3.
	
[*] Vice President – Medical Affairs, Delcath Systems, Inc.

	
 
	
4.
	
Delcath Systems, Ltd.: within 10 (ten) days after signing of this Agreement Delcath will appoint a Representative of Delcath Systems, Ltd. and will notify medac accordingly.

	
11.21.
	
If there are no positive results of the FOCUS trial with respect to the efficacy as defined in the trial protocol, the Parties will, in good faith, discuss ways in which to maintain commercially reasonable viability. For the avoidance of doubt in this case medac is not obliged to pay the respective instalment according to Article 4.1.

	
11.22.
	
Delcath will inform medac about any changes in information material relating to the PRODUCT.

	
12.
	
Third party rights and enforcement of IP against third parties

	
12.1.
	
To the best of Delcath ́s knowledge, the execution of this Agreement by Delcath and/or medac, in particular the distribution/commercialisation of the PRODUCT in the TERRITORY, the manufacture of the PRODUCT in the country of manufacture, of batch release, of storage or importing  the PRODUCT do not infringe any third party INTELLECTUAL PROPERTY rights. All relevant INTELLECTUAL PROPERTY rights were provided by Delcath in September 2017 and there were no relevant updates, e.g. concerning divisional applications. If needed by medac, Delcath will provide medac with further documents and data to perform future IP checks. If medac infringes any third party INTELLECTUAL PROPERTY rights due to incorrect or missing information provided by Delcath, Delcath shall fully indemnify medac of any costs including lawyers’ fees occurring in this regard. 

	
12.2.
	
If medac is charged with the infringement of third party rights based on the execution of this Agreement, then medac shall immediately inform Delcath about this allegation. In this case Delcath has the obligation to support medac in any way and provide help to counterclaim; especially if analyses are requested on the PRODUCT provided by Delcath and/ or any data on the PRODUCT or the manufacturing process of the PRODUCT and will pay reasonable costs incurred by medac in defense of any such charge. 

	
12.3.
	
Delcath shall be solely responsible for the prosecution and maintenance of the underlying INTELLECTUAL PROPERTY OF DELCATH of the PRODUCT and for the conduct of any claims or proceedings relating to the INTELLECTUAL PROPERTY OF DELCATH including any validity challenges of third parties, nullity or opposition proceedings. Delcath shall keep medac reasonably informed at all times as to the status of the prosecution and maintenance of all INTELLECTUAL PROPERTY OF DELCATH and in any event providing a written update if requested by medac.

[*] Confidential Treatment Requested 

License, Supply and Marketing Agreement – Delcath/medac_2018 December 10th

 

13/23

 

Delcath shall enforce and defend the underlying INTELLECTUAL PROPERTY OF DELCATH of the PRODUCT at its own cost and expense, if such defence is judged by the patent attorneys in power as promising. medac shall fully co-operate with Delcath and its legal counsel, or otherwise assist in such proceedings. Delcath shall keep medac and its counsel reasonably informed at all times as to the status of the proceedings. 

If Delcath fails to enforce or defend the underlying INTELLECTUAL PROPERTY OF DELCATH of the PRODUCT within ten (10) days of becoming aware or of being notified of the same, then, medac may without prejudice to any other right it may have under this Agreement or otherwise give Delcath written notice requiring Delcath to take such proceedings within five (5) days of the date of the notice. If Delcath fails to do so, medac shall be entitled to enforce or defend the underlying INTELLECTUAL PROPERTY OF DELCATH of the PRODUCT at its cost and expense. The reasonable costs of any such settlement (including, without limitation, damages, legal costs, lump sums or other amounts) or, if no settlement is reached, of any judgement or award made against medac or its AFFILIATES, distributors or sublicenses, may be set off by medac against the PRICE payable by medac hereunder. However, medac shall only be entitled to a reimbursement if it can demonstrate that Delcath has wrongfully assessed insufficient prospects of success. Delcath shall provide all reasonable assistance to medac in relation to such proceedings at its own cost and expenses in a timely manner. Delcath is aware of the fact that especially in Germany but also in the further TERRITORY effective remedies against IP-infringements require immediate legal actions. 

	
13.
	
Term and Termination

	
13.1.
	
This Agreement becomes effective on the EFFECTIVE DATE and the supply of the PRODUCT shall continue for a period of seven (7) years starting with the first delivery of the PRODUCT. After the initial term the Parties intend to renew this agreement for another five (5) years. They will negotiate this in good faith at least six months in advance of expiry of the initial term.

[*]

	
13.2.
	
Either Party shall be entitled, by notice to the other, to terminate this Agreement immediately only, if 

	
 
	
•
	
the other Party loses a necessary approval for importing, manufacture, marketing or selling of the PRODUCT;

	
 
	
•
	
the other Party culpably commits or permits a material breach or default of any of the provisions of this Agreement and fails to remedy or cure such breach or default within sixty (60) calendar days after written notice of such breach has been received;

	
 
	
•
	
the other Party should be dissolved, becomes insolvent, bankrupt or otherwise be faced with circumstances reasonably warranting the conclusion that the Party will not be able within the foreseeable future, to adequately comply with its obligations under this agreement; 

	
 
	
•
	
[*]

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•
	
in case of Force Majeure Event as described in Article 14.  

	
13.3.
	
Either Party may terminate this Agreement because of an uncured breach provided the Party claiming a breach gives the other Party 50 day advanced written notice of such breach and the possibility to remedy such breach.  

[*]

	
 
	
b)
	
with immediate effect by medac: 

	
 
	
•
	
in the event that any health authority and/or a competent court takes any action, or raises any objection, that prevents medac from commercialising the PRODUCT in the TERRITORY.  Additionally, medac will have the right to terminate this Agreement immediately in the event that the PRODUCT cannot be reasonably commercialised for medical or  scientific reasons in the TERRITORY, unless a remedy is impossible neither of these 2 events is grounds for termination by medac if they are remedied within 60 days of written notification to Delcath of either events and the grounds on which the event is based;

	
 
	
•
	
in the event of an INTELLECTUAL PROPERTY infringement claim brought by any third party against medac or Delcath (or its subcontractor) which prevents or hinders the commercialisation, manufacture of the PRODUCT or which prevents medac or Delcath from exercising its obligations hereunder. 

	
13.4.
	
[*]

	
13.5.
	
At the sole discretion of medac, medac may resell any remaining non-expired PRODUCT to Delcath at the purchase price, and may assign to Delcath any trademarks obtained for the PRODUCT against a reasonable consideration payable by Delcath, which shall at the minimum cover the costs of medac for obtaining and maintaining the trademarks.

	
13.6.
	
Orders placed and confirmed and for which manufacture has started prior to the date of termination shall remain valid (except in the event of termination by for breach by Delcath pursuant to Article 11.3 or in the event of termination for quality failure), and for other orders placed by medac but not confirmed by Delcath, or for which manufacture has not started as of the termination date, the Parties shall discuss and agree on whether they shall remain valid or shall be cancelled.

	
13.7.
	
The expiry or termination of this Agreement for any reason shall not affect the rights and obligations of the Parties already accrued prior to the effective date of expiry or termination of the Agreement.

	
13.8.
	
[*]

	
13.9.
	
Termination or expiration of this Agreement will not relieve either Party of any obligation accruing prior to such expiration or termination, including any breach of such obligations, and all provisions which are expressed to or by implication survive this Agreement will remain in full force and effect.  (Provisions relating to Confidentiality, Indemnification and Liabilities; APPLICABLE LAWS, Quality, Effect of termination and INTELLECTUAL PROPERTY shall survive expiration or termination of this Agreement). 

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13.10.
	
[*]

	
14.
	
Force Majeure

	
14.1.
	
The Parties hereto shall not be responsible for any damage if the performance of all or parts of this Agreement is hindered or prevented by causes beyond the performing Party’s control and without its fault or negligence, including, but not limited to, acts of God or acts, laws, orders or regulations of any government or department or agency thereof acting in either its sovereign or contractual capacity, fires, floods, machinery breakages, strikes, work stoppages or other job actions, freight embargoes, boycotts, riots and wars.

	
14.2.
	
Either Party may, in the event that any Force Majeure cannot be removed or overcome within three (3) months from the date the Party affected first became affected, at the expiration of this period by notice to the other Party terminate this Agreement.

	
15.
	
Confidentiality

	
15.1.
	
The Parties agree to keep secret and not to communicate all CONFIDENTIAL INFORMATION. The Parties shall disclose such CONFIDENTIAL INFORMATION only to those employees, agents, etc. who have a need to know and only if such employees, agents etc. are bound by confidential obligations comparable to this provision.

	
15.2.
	
This secrecy obligation does not apply to any information of which the receiving Party can prove by written documents that it

	
 
	
•
	
was known to the public at the time of the receiving Party’s receipt;

	
 
	
•
	
was lawfully received by the Party from a third Party who has no obligation of Confidentiality to the disclosing Party;

	
 
	
•
	
was independently developed by the Party or available to it prior to this agreement;

	
 
	
•
	
was released from the restrictions of this provision by the express prior written consent of the disclosing Party; or

	
 
	
•
	
has been disclosed in compliance with any legal requirement, provided that the disclosing Party has notified the other Party prior to the disclosure of the information and provided that the Party shall disclose only the minimum amount of information required for the purpose of the said legal requirement;

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15.3.
	
This provision shall continue in full force and effect, notwithstanding the expiration or termination of this Agreement for any reason for a period of five (5) years after expiration/termination.

	
15.4.
	
Notwithstanding the above provisions of this Article 14, medac shall be free to disclose the information received from Delcath i) to any AFFILIATES, or ii) in the course of executing the Agreement or in anticipation of termination or expiration of this Agreement, to any consultant or sub-contractor of its choosing; or iii) to the health authorities; or iv) to any third party provided such disclosure is necessary to achieve the purpose of this Agreement. Any party to whom medac discloses the information will be bound to the same confidentiality obligations as set forth herein.

	
16.
	
Miscellaneous

	
16.1
	
The Parties hereto agree that in connection with this Agreement the status of each of them in relation to the others is that of an independent trader acting in its own name and for its own account. Accordingly, none of the Parties has, or will be considered to have, any power of authority to act as an agent or representative of the other Party, nor have any power of authority to contract in the name, or create or assume any obligation or liability against, or otherwise legally bind the other Party in any way for any purpose, unless otherwise expressly provided herein. All costs and expenses connected with each Party's activities and performance under this Agreement are to be borne solely by the Party incurring such costs and expenses.

	
16.2
	
The general terms and conditions of both Parties shall be excluded, even if specific reference is made in respective order forms, order confirmations etc.

	
16.3
	
The failure by any Party at any time to enforce any of the terms, provisions or conditions of this Agreement or to exercise any right hereunder shall not constitute a waiver of the same or affect the validity of this Agreement or any part hereof, or that Party's right thereafter to enforce or to exercise the same. No waiver by a Party shall be valid or binding unless in writing and signed by a duly authorised representative of the waiving Party.

	
16.4
	
Other than a change of control, the Parties shall not assign any of their rights or obligations hereunder without the prior written consent of the other Party, provided that medac may assign all rights and obligations hereunder to any of its AFFILIATES.

	
16.5
	
The fulfilment of contractual rights and obligations arising out of this Agreement is subject to the compliance with (a) all requirements medac as a registered AEO (Authorised Economic Operator) is obliged to fulfil and to request from Delcath and (b) all relevant national and international regulations including but not limited to required export/import licenses, shipment authorisations, foreign trade legislation requirements or releases by the competent authorities and embargo or export/import regulations.

	
16.6
	
The Parties hereto acknowledge that this Agreement and possible future written amendments hereto set forth the entire Agreement.

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16.7
	
Modifications of this Agreement have to be made in writing. This applies to this modification provision as well.

	
16.8
	
This Agreement is construed in accordance with and shall exclusively be governed by the laws of [*]. The [*] and [*] shall not apply. 

	
16.9
	
All disputes, controversies or claims arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the Rules of the London Court of International Arbitration (LCIA), which Rules are deemed to be incorporated by reference into this clause. The arbitration shall be before a single arbitrator mutually agreed upon by the Parties who shall interpret this Agreement in accordance with the laws of England. The seat of the arbitration shall be in London. The language to be used in the arbitration shall be English. 

	
16.10
	
Should provisions of the present Agreement not be legally effective, completely or partially, or later lose their legal effectiveness, the validity of the remaining provisions of the contract shall not thereby be affected. Instead of the ineffective provision an appropriate provision shall be inserted, which – as far as legally permitted – comes close to that which the contracting Parties wanted or is nearest in meaning to their intended economic purpose.

	
16.11
	
During the Term, medac shall not market, promote or sell within the TERRITORY any other percutaneous hepatic perfusion devices intended to deliver a therapy directly (as opposed to systemically) into the liver and specifically reimbursed for the same indications as the PRODUCT.

 

			
	
Galway, date:
	
 
	
Wedel, date:

	
 
	
 
	
 

	
For and behalf of
	
 
	
For and behalf of

	
Delcath Ltd.
	
 
	
medac GmbH

	
 
	
 
	
 

	
/s/ Jennifer K. Simpson
	
 
	
/s/Heiner Will

	
Jennifer K. Simpson
	
 
	
Heiner Will

	
Director
	
 
	
CMO

	
 
	
 
	
 

	
 
	
 
	
/s/Jorg Hans

	
 
	
 
	
Jörg Hans

	
 
	
 
	
CEO

	
 
	
 
	
 

	
 
	
 
	
/s/Bergit Buettner

	
 
	
 
	
Bergit Buettner

	
 
	
 
	
Legal Council

 

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Schedule 1: Product, Price

Schedule 2: Supply chain at effective date

Schedule 3: Package Size

Schedule 4: Customer Transition Plan

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Schedule 1:
	
PRODUCT, PRICE

[*]

Within [*] during the Term, medac shall submit a report of the NET SALES of the preceding quarter to Delcath including the quantity of the sold PRODUCT (PS) differentiated by the respective countries of the TERRITORY. Simultaneously, medac will, by wire transfer, send to Delcath an amount calculated according to the calculation schemes above. 

medac shall keep a true and accurate accountancy and record all relevant data to illustrate the NET SALES pursuant to the generally accepted guidelines of the accountancy. 

In accordance with Article 7 of this Agreement, Delcath shall have the right to inspect these books by an independent public account at reasonable times and to such an extent as will not interfere with normal operations of medac. The costs for such an audit shall by borne by Delcath. However, in case of the discovery of any inaccuracies the costs shall be borne by medac.

 

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Schedule 2:
	
SUPPLY CHAIN AT EFFECTIVE DATE

 

	
Company
	
Address
	
Activity

	
Delcath Systems, Inc.

 
	
566 Queensbury Avenue

Queensbury, NY 12804

USA
	
Design, manufacture,

distribution of sterile hepatic

drug delivery and filtration devices

	
Delcath Systems, Inc
	
95 Park Rd.

Queensbury, NY 12804

USA
	
Design, manufacture

(packaging, labelling and final

release) and distribution of

sterile hepatic drug delivery and

filtration devices

	
Delcath Systems, Ltd

 
	
Unit 19 – Mervue Business

Park

Galway Ireland
	
Manufacture (packaging,

labelling and final release) and

distribution of sterile hepatic

drug delivery and filtration devices

	
Donawa Consulting S.r.l.
	
Piazza Albania 10, 

00153 Roma

Italy
	
EU representative

 

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Schedule 3:
	
PACKAGE SIZE 

[*]

 

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Schedule 4:
	
CUSTOMER TRANSITION PLAN

Within 10 business days following execution of this Agreement and receipt of initial exclusive marketing license upfront fee, Delcath will provide medac with a list of present customers by country, purchasing decision makers and related key people and contact coordinates for each along with a purchasing history. In the same period, Delcath will also provide medac with a list of prospective customers, a brief history of interaction, and key people and contact coordinates for each.

If not already provided, Delcath will provide medac with copies of all sales and marketing materials used in each country. Within 20 business days after receipt of these materials from Delcath, medac will provide its plan for sales and marketing materials and anticipated timing for use in the market as they will be subject to Delcath’ approval.

On or about [*], Delcath will notify present and prospective customers that medac will be marketing Chemosat in Europe and will introduce the appropriate medac personnel to said present and prospective customers.

Delcath to provide reasonable support to medac sales efforts through existing Delcath Sales staff for as long as feasible. 

 

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Exhibit 10.39

EXCHANGE AGREEMENT

This Exchange Agreement (the “Agreement”) is entered into as of the ____ day of December, 2018, by and between Delcath Systems, Inc., a Delaware corporation with offices located at 1633 Broadway, Suite 22C, New York, New York 10019  (the “Company”) and the investor signatory hereto (the “Holder”), with reference to the following facts: 

A.The Company issued to Holder that certain Warrant to Purchase Common Stock (the “Existing Warrant”), issued to the Holder on February 9, 2018, pursuant to (i) that certain Placement Agency Agreement (the “Placement Agency Agreement”), dated February 8, 2018, (ii) the Company’s Registration Statement on Form S-1 (File number 333-220898) and (iii) the Company’s final prospectus dated as of February 8, 2018 (the “Final Prospectus”) pursuant to, issued on February 9, 2018 and which Existing Warrant is currently exercisable into _______ (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events) shares of Common Stock (as defined in the Existing Warrant).  

B.The Company and the Holder desire to issue such aggregate number of shares of Common Stock as set forth on the signature page of the Holder (the “Exchange Shares”) in exchange for the Existing Warrant (collectively, the “Exchange” or the “Transaction”).  The Exchange Shares, the Leak-Out Agreement (as defined below) and this Agreement and such other documents and certificates related thereto are collectively referred to herein as the “Exchange Documents”.

C.The Exchange is being made in reliance upon the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended (the “1933 Act”).

D.Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Existing Warrant.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants hereinafter contained, the parties hereto agree as follows:

1.Exchange.  On the date hereof, pursuant to Section 3(a)(9) of the 1933 Act, the Holder hereby agrees to convey, assign and transfer the Existing Warrant to the Company in exchange for which the Company agrees to issue the Exchange Shares to the Holder.  On the date hereof, in exchange for the Existing Warrant, the Company shall deliver (a) the Exchange Shares to the Holder by deposit/withdrawal at custodian in accordance with the instructions attached hereto as Schedule I, which Exchange Shares shall be issued without restricted legend and shall be freely tradable by the Holder.  Concurrently herewith, the Holder has executed and delivered to the Company a leak-out agreement, in the form attached hereto as Exhibit A (the “Leak-Out Agreement”).

2.No Amendment or Waiver.   Nothing herein shall amend, modify or waive any term or condition in any agreement by and between the Company and the Holder or any security issued by the Company to the Holder.

 

 

3.Representations and Warranties.  As of the date hereof:

3.1Organization and Qualification.  Each of the Company and each of its Subsidiaries are entities duly organized and validly existing and in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authority to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted.  Each of the Company and each of its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to have a Material Adverse Effect (as defined below).  As used in this Agreement, “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any Subsidiary, individually or taken as a whole, (ii) the transactions contemplated hereby or in any of the other Transaction Documents or (iii) the authority or ability of the Company or any of its Subsidiaries to perform any of their respective obligations under any of the Transaction Documents (as defined below).  Other than the Persons (as defined below) listed in the SEC Documents, the Company has no Subsidiaries.  “Subsidiaries” means any Person in which the Company, directly or indirectly, (I) owns any of the outstanding capital stock or holds any equity or similar interest of such Person or (II) controls or operates all or any part of the business, operations or administration of such Person, and each of the foregoing, is individually referred to herein as a “Subsidiary.”  For purposes of this Agreement, (x) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any Governmental Entity or any department or agency thereof and (y) “Governmental Entity” means any nation, state, county, city, town, village, district, or other political jurisdiction of any nature, federal, state, local, municipal, foreign, or other government, governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal), multi-national organization or body; or body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature or instrumentality of any of the foregoing, including any entity or enterprise owned or controlled by a government or a public international organization or any of the foregoing.

3.2Authorization and Binding Obligation.  The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by the Exchange Documents and to consummate the Transaction (including, without limitation, the issuance of the Exchange Shares in accordance with the terms hereof).  The execution and delivery of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Exchange Shares has been duly authorized by the Company’s Board of Directors and no further filing, consent, or authorization is required by the Company, its Board of Directors or its stockholders.  This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities laws.  

 

 

2

 

 

3.3No Conflict.  Except as set forth on Schedule 3.3, the execution, delivery and performance of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Exchange Shares) will not (i) result in a violation of the Certificate of Incorporation (as defined below) or any other organizational documents of the Company or any of its Subsidiaries, any capital stock of the Company or any of its Subsidiaries or Bylaws (as defined below) of the Company or any of its Subsidiaries, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of the OTCQB (the “Principal Market”) and including all applicable federal laws, rules and regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected except, in the case of clause (ii) or (iii) above, to the extent such violations that would not reasonably be expected to have a Material Adverse Effect.

3.4No Consents.  Neither the Company nor any Subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with (other than the filing with the Securities and Exchange Commission (the “SEC”) of a Form D with the SEC, any other filings as may be required by any state securities agencies, filing of UCC financing statements and approval by the Principal Market of a listing of additional shares application in respect of the Exchange Shares as required by Section 7 hereof), any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its respective obligations under or contemplated by the Exchange Documents, in each case, in accordance with the terms hereof or thereof.  All consents, authorizations, orders, filings and registrations which the Company or any Subsidiary is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof, and neither the Company nor any of its Subsidiaries are aware of any facts or circumstances which might prevent the Company or any of its Subsidiaries from obtaining or effecting any of the registration, application or filings contemplated by the Exchange Documents.  Except as disclosed in the SEC Documents, the Company is not in violation of the requirements of the Principal Market and has no knowledge of any facts or circumstances which would reasonably lead to delisting or suspension of the Common Stock in the foreseeable future.

3.5Securities Law Exemptions.  Assuming the accuracy of the representations and warranties of the Holder contained herein, the offer and issuance by the Company of the Exchange Shares is exempt from registration under the 1933 Act pursuant to the exemption provided by Rule 3(a)(9) thereof.  

3.6Issuance of Exchange Shares.  The issuance of the Exchange Shares has been duly authorized and upon issuance in accordance with the terms of the Exchange Documents, the Exchange Shares will be validly issued, fully paid and nonassessable and free from all Liens with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock.  By virtue of Rule 3(a)(9) under the 1933 Act, each of the Exchange Shares shall be freely tradeable and shall not bear any restrictive legends.  

3

 

 

3.7Transfer Taxes.  On the date hereof, all share transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the issuance of the Exchange Shares to be exchanged with the Holder hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.  

3.8SEC Documents; Financial Statements.  During the two (2) years prior to the date hereof, the Company has timely filed all reports, schedules, forms, proxy statements, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof, including without limitation, Current Reports on Form 8-K filed by the Company with the SEC whether required to be filed or not (but excluding Item 7.01 thereunder), and all exhibits and appendices included therein (other than Exhibits 99.1 to Form 8-K) and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”).  The Company has delivered or has made available to the Holder or its representatives true, correct and complete copies of each of the SEC Documents not available on the EDGAR system.  As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  As of their respective dates, the financial statements of the Company included in the SEC Documents complied in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto as in effect as of the time of filing.  Such financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”), consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which will not be material, either individually or in the aggregate).  No other information provided by or on behalf of the Company to the Holder which is not included in the SEC Documents (including, without limitation, information in the disclosure schedules to this Agreement) contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein not misleading, in the light of the circumstance under which they are or were made.  The Company is not currently contemplating to amend or restate any of the financial statements (including, without limitation, any notes or any letter of the independent accountants of the Company with respect thereto) included in the SEC Documents (the “Financial Statements”), nor is the Company currently aware of facts or circumstances which would require the Company to amend or restate any of the Financial Statements, in each case, in order for any of the Financials Statements to be in compliance with GAAP and the rules and regulations of the SEC.  The Company has not been informed by its independent accountants that they recommend that the Company amend or restate any of the Financial Statements or that there is any need for the Company to amend or restate any of the Financial Statements.

4

 

 

3.9Absence of Certain Changes.  Except as set forth in the SEC Documents, since the date of the Company’s most recent audited financial statements contained in a Form 10-K, there has been no material adverse change and no material adverse development in the business, assets, liabilities, properties, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any of its Subsidiaries.  Since the date of the Company’s most recent audited financial statements contained in a Form 10-K, neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, outside of the ordinary course of business or (iii) except as disclosed in the SEC Documents, made any capital expenditures, individually or in the aggregate, outside of the ordinary course of business.  Neither the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor does the Company or any Subsidiary have any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.  The Company and its Subsidiaries, individually and on a consolidated basis, are not as of the date hereof, and after giving effect to the transactions contemplated hereby to occur on the date hereof, will not be Insolvent (as defined below).  For the purpose of this Agreement (x) “Insolvent” means, (i) with respect to the Company and its Subsidiaries, on a consolidated basis, (A) the present fair saleable value of the Company’s and its Subsidiaries’ assets is less than the amount required to pay the Company’s and its Subsidiaries’ total Indebtedness (as defined below), (B) the Company and its Subsidiaries are unable to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (C) the Company and its Subsidiaries intend to incur or believe that they will incur debts that would be beyond their ability to pay as such debts mature; and (ii) with respect to the Company and each Subsidiary, individually, (A) the present fair saleable value of the Company’s or such Subsidiary’s (as the case may be) assets is less than the amount required to pay its respective total Indebtedness, (B) the Company or such Subsidiary (as the case may be) is unable to pay its respective debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (C) the Company or such Subsidiary (as the case may be) intends to incur or believes that it will incur debts that would be beyond its respective ability to pay as such debts mature; (y) “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, “capital leases” in accordance with GAAP) (other than trade payables entered into in the ordinary course of business consistent with past practice), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; and (z) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

3.10No Undisclosed Events, Liabilities, Developments or Circumstances.  Except as set forth in the SEC Documents, no event, liability, development or circumstance has occurred or exists, or is reasonably expected to exist or occur with respect to the Company, any of its Subsidiaries or any of their respective businesses, properties, liabilities, prospects, operations (including results thereof) or condition (financial or otherwise), that (i) would be required to be disclosed by the Company under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced, (ii) would reasonably expected to have a material adverse effect on the Holder’s investment hereunder or (iii) would reasonably be expected to have a Material Adverse Effect.  

3.11Conduct of Business; Regulatory Permits.  Neither the Company nor any of its Subsidiaries is in violation of any term of or in default under its Certificate of Incorporation, any certificate of designation, preferences or rights of any other outstanding series of preferred stock of the Company or any of its Subsidiaries or Bylaws or their organizational charter, certificate of formation, memorandum of association, articles of association, Certificate of Incorporation or bylaws, respectively.  Except as set forth in the SEC Documents, neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except in all cases for possible violations which could not, individually or in the aggregate, have a Material Adverse Effect.  Except as set forth in the SEC Documents, without limiting the generality of the foregoing, the Company is not in violation of any of the rules, regulations or requirements of the Principal Market and has no knowledge of any facts or circumstances that could reasonably lead to delisting or suspension of the Common Stock by the Principal Market in the foreseeable future.  During the two years prior to the date hereof, (i) the Common Stock has been listed or designated for quotation on the Principal Market, (ii) trading in the Common Stock has not been suspended by the SEC or the Principal Market and (iii) the Company has received no communication, written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the Common Stock from the Principal Market.  The Company and each of its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.  There is no agreement, commitment, judgment, 

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injunction, order or decree binding upon the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries is a party which has or would reasonably be expected to have the effect of prohibiting or materially impairing any business practice of the Company or any of its Subsidiaries, any acquisition of property by the Company or any of its Subsidiaries or the conduct of business by the Company or any of its Subsidiaries as currently conducted other than such effects, individually or in the aggregate, which have not had and would not reasonably be expected to have a Material Adverse Effect on the Company or any of its Subsidiaries.  

3.12Transactions With Affiliates.  Except as set forth in the SEC Documents, no current or former employee, partner, director, officer or stockholder (direct or indirect) of the Company or its Subsidiaries, or any associate, or, to the knowledge of the Company, any affiliate of any thereof, or any relative with a relationship no more remote than first cousin of any of the foregoing, is presently, or has ever been, (i) a party to any transaction with the Company or its Subsidiaries (including any contract, agreement or other arrangement providing for the furnishing of services by, or rental of real or personal property from, or otherwise requiring payments to, any such director, officer or stockholder or such associate or affiliate or relative Subsidiaries (other than for ordinary course services as employees, consultants, officers or directors of the Company or any of its Subsidiaries)) or (ii) the direct or indirect owner of an interest in any corporation, firm, association or business organization which is a competitor, supplier or customer of the Company or its Subsidiaries (except for a passive investment (direct or indirect) in less than 5% of the common stock of a company whose securities are traded on or quoted through an Eligible Market), nor does any such Person receive income from any source other than the Company or its Subsidiaries which relates to the business of the Company or its Subsidiaries or should properly accrue to the Company or its Subsidiaries.  No employee, officer, stockholder or director of the Company or any of its Subsidiaries or member of his or her immediate family is indebted to the Company or its Subsidiaries, as the case may be, nor is the Company or any of its Subsidiaries indebted (or committed to make loans or extend or guarantee credit) to any of them, other than (i) for payment of salary for services rendered, (ii) reimbursement for reasonable expenses incurred on behalf of the Company, and (iii) for other standard employee benefits made generally available to all employees or executives (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of the Company).  

3.13Equity Capitalization.  

(a)Definitions:

(i)“Common Stock” means (x) the Company’s shares of common stock, $0.01 par value per share, and (y) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

(ii)“Preferred Stock” means (x) the Company’s blank check preferred stock, $0.01 par value per share, the terms of which may be designated by the board of directors of the Company in a certificate of designations and (y) any capital stock into which such preferred stock shall have been changed or any share capital resulting from a reclassification of such preferred stock (other than a conversion of such preferred stock into Common Stock in accordance with the terms of such certificate of designations).

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(b)Authorized and Outstanding Capital Stock.  As of the date hereof, the authorized capital stock of the Company consists of (A) 1.0 billion shares of Common Stock, of which, 9.0 million are issued and outstanding as of the date hereof and 71.1 million are reserved for issuance pursuant to Convertible Securities (as defined below), in each case exercisable or exchangeable for, or convertible into, shares of Common Stock, and (B) 10.0 million shares of Preferred Stock, of which 85 shares are issued and outstanding.  One share of Common Stock is held in the treasury of the Company.  “Convertible Securities” means any capital stock or other security of the Company or any of its Subsidiaries that is at any time and under any circumstances directly or indirectly convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any capital stock or other security of the Company (including, without limitation, Common Stock) or any of its Subsidiaries.

(c)Valid Issuance; Available Shares; Affiliates.  All of such outstanding shares are duly authorized and have been, or upon issuance will be, validly issued and are fully paid and nonassessable.  Schedule 3.13 sets forth the number of shares of Common Stock that are (A) reserved for issuance pursuant to Convertible Securities and (B) that are, as of the date hereof, owned by Persons who are “affiliates” (as defined in Rule 405 of the 1933 Act and calculated based on the assumption that only officers, directors and holders of at least 10% of the Company’s issued and outstanding Common Stock are “affiliates” without conceding that any such Persons are “affiliates” for purposes of federal securities laws) of the Company or any of its Subsidiaries.

(d)Existing Securities; Obligations.  Except as disclosed in the SEC Documents: (A) none of the Company’s or any Subsidiary’s shares, interests or capital stock is subject to from all preemptive or similar rights, mortgages, defects, claims, liens, pledges, charges, taxes, rights of first refusal, encumbrances, security interests and other encumbrances (collectively “Liens”) suffered or permitted by the Company or any Subsidiary; (B) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares, interests or capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares, interests or capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares, interests or capital stock of the Company or any of its Subsidiaries; (C) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act; (D) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (E) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Exchange Shares; and (F) neither the Company nor any Subsidiary has any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement.

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(e)Organizational Documents.  The Company has furnished to the Holder true, correct and complete copies of the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms of all Convertible Securities and the material rights of the holders thereof in respect thereto.

3.14Indebtedness and Other Contracts.  Neither the Company nor any of its Subsidiaries, (i) except as disclosed in the SEC Documents or Schedule 3(s) of the Securities Purchase Agreement, has any outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound, (ii) is a party to any contract, agreement or instrument, except as disclosed in the SEC Documents, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument could reasonably be expected to result in a Material Adverse Effect, (iii) has any financing statements securing obligations in any amounts filed in connection with the Company or any of its Subsidiaries, except as disclosed in the SEC Documents; (iv) is in violation of any term of, or in default under, any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect, or (v) is a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect.  Neither the Company nor any of its Subsidiaries have any liabilities or obligations required to be disclosed in the SEC Documents which are not so disclosed in the SEC Documents, other than those incurred in the ordinary course of the Company’s or its Subsidiaries’ respective businesses and which, individually or in the aggregate, do not or could not have a Material Adverse Effect.  

3.15Litigation.  There is no action, suit, arbitration, proceeding, inquiry or investigation before or by the Principal Market, any court, public board, other Governmental Entity, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries, the Common Stock or any of the Company’s or its Subsidiaries’ officers or directors that would reasonably be expected to have a Material Adverse Effect on the Company or its Subsidiaries, whether of a civil or criminal nature or otherwise, in their capacities as such, except as disclosed in the SEC Documents or in Schedule 3(t) of the Securities Purchase Agreement.  No director, officer or employee of the Company or any of its subsidiaries has willfully violated 18 U.S.C.  §1519 or engaged in spoliation in reasonable anticipation of litigation.  Without limitation of the foregoing, there has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company, any of its Subsidiaries or any current or former director or officer of the Company or any of its Subsidiaries.  The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the 1933 Act or the 1934 Act.  Neither the Company nor any of its Subsidiaries is subject to any order, writ, judgment, injunction, decree, determination or award of any Governmental Entity.  

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3.16Disclosure.  The Company confirms that neither it nor any other Person acting on its behalf has provided the Holder or its agents or counsel with any information that constitutes or would reasonably be expected to constitute material, non-public information concerning the Company or any of its Subsidiaries, other than the existence of the transactions contemplated by this Agreement and the other Exchange Documents.  The Company understands and confirms that the Holder will rely on the foregoing representations in effecting transactions in securities of the Company.  All disclosure provided to the Holder regarding the Company and its Subsidiaries, their businesses and the transactions contemplated hereby, including the schedules to this Agreement, furnished by or on behalf of the Company or any of its Subsidiaries is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.  Each press release issued by the Company or any of its Subsidiaries during the twelve (12) months preceding the date of this Agreement did not at the time of release contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading.  No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, liabilities, prospects, operations (including results thereof) or conditions (financial or otherwise), which, under applicable law, rule or regulation, requires public disclosure at or before the date hereof or announcement by the Company but which has not been so publicly announced or disclosed.  

4.Holder’s Representations and Warranties.  As a material inducement to the Company to enter into this Agreement and consummate the Exchange, the Holder represents, warrants and covenants with and to the Company as follows: 

4.1Reliance on Exemptions.  The Holder understands that the Exchange Shares are being offered and exchanged in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Holder set forth herein and in the Exchange Documents in order to determine the availability of such exemptions and the eligibility of the Holder to acquire the Exchange Shares.  

4.2No Governmental Review.  The Holder understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Exchange Shares or the fairness or suitability of the investment in the Exchange Shares nor have such authorities passed upon or endorsed the merits of the offering of the Exchange Shares.

4.3Validity; Enforcement.  This Agreement and the Exchange Documents to which the Holder is a party have been duly and validly authorized, executed and delivered on behalf of the Holder and shall constitute the legal, valid and binding obligations of the Holder enforceable against the Holder in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.  

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4.4No Conflicts.  The execution, delivery and performance by the Holder of this Agreement and the Exchange Documents to which the Holder is a party, and the consummation by the Holder of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of the Holder or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Holder is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to the Holder, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Holder to perform its obligations hereunder.  

4.5Investment Risk; Sophistication.  The Holder is acquiring the Exchange Shares hereunder in the ordinary course of its business.  The Holder has such knowledge, sophistication, and experience in business and financial matters so as to be capable of evaluation of the merits and risks of the prospective investment in the Exchange Shares, and has so evaluated the merits and risk of such investment.  The Holder is an “accredited investor” as defined in Regulation D under the 1933 Act.

4.6Ownership of Existing Warrant.  The Holder owns the Existing Warrant free and clear of any Liens (other than the obligations pursuant to this Agreement and applicable securities laws).  

5.Disclosure of Transaction.  The Company shall, on or before 8:30 a.m., New York City Time, on or prior to the first business day after the date of this Agreement, file a Current Report on Form 8-K describing the terms of the transactions contemplated hereby in the form required by the 1934 Act and attaching the Exchange Documents, to the extent they are required to be filed under the 1934 Act, that have not previously been filed with the SEC by the Company (including, without limitation, this Agreement) as exhibits to such filing (including all attachments, the “8-K Filing”).  From and after the filing of the 8-K Filing, the Company shall have disclosed all material, non-public information (if any) provided up to such time to the Holder by the Company or any of its Subsidiaries or any of their respective officers, directors, employees or agents.  In addition, effective upon the filing of the 8-K Filing, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement with respect to the transactions contemplated by the Exchange Documents or as otherwise disclosed in the 8-K Filing, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and any of the Holder or any of their affiliates, on the other hand, shall terminate.  Neither the Company, its Subsidiaries nor the Holder shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, the Company shall be entitled, without the prior approval of the Holder, to make a press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith or (ii) as is required by applicable law and regulations (provided that in the case of clause (i) the Holder shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release).  Without the prior written consent of the Holder (which may be granted or withheld in the Holder’s sole discretion), except as required by applicable law, the Company shall not (and shall cause each of its Subsidiaries and affiliates to not) disclose the name of the Holder in any filing, announcement, release or otherwise.  

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6.No Integration.  None of the Company, its Subsidiaries, any of their affiliates, or any Person acting on their behalf shall, directly or indirectly, make any offers or sales of any security (as defined in the 1933 Act) or solicit any offers to buy any security or take any other actions, under circumstances that would require registration of any of the Exchange Shares under the 1933 Act or cause this offering of the Exchange Shares to be integrated with such offering or any prior offerings by the Company for purposes of Regulation D under the 1933 Act.  

7.Listing.  The Company shall promptly secure the listing or designation for quotation (as applicable) of all of the Exchange Shares upon the Principal Market (subject to official notice of issuance) and shall maintain such listing of all the Exchange Shares from time to time issuable under the terms of the Exchange Documents.  The Company shall maintain the Common Stock’s authorization for quotation on the Principal Market.  Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market.  The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 7.  

8.Fees.  Each party to this Agreement shall bear its own expenses in connection with the structuring, documentation, negotiation and closing of the transactions contemplated hereby, except as provided in the previous sentence and except that the Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, transfer agent fees, Depository Trust Company (“DTC”) fees relating to or arising out of the transactions contemplated hereby.  

9.Holding Period.  For the purposes of Rule 144, the Company acknowledges that the holding period of the Exchange Shares may be tacked onto the holding period of the Existing Warrant, and the Company agrees not to take a position contrary to this Section 9.  The Company acknowledges and agrees that (assuming the Holder is not an affiliate of the Company) (i) the Exchange Shares are as of the date hereof, eligible to be resold pursuant to Rule 144, (ii) the Company is not aware of any event reasonably likely to occur that would reasonably be expected to result in the Exchange Shares (assuming the issuance thereof pursuant to a cashless exercise) becoming ineligible to be resold by the Holder pursuant to Rule 144 and (iii) in connection with any resale of any Exchange Shares pursuant to Rule 144, the Holder shall solely be required to provide reasonable assurances that such Exchange Shares are eligible for resale, assignment or transfer under Rule 144, which shall not include an opinion of Holder’s counsel.  The Company shall be responsible for any transfer agent fees or DTC fees or legal fees of the Company’s counsel with respect to the removal of legends, if any, or issuance of Exchange Shares in accordance herewith.  

10.Blue Sky.  The Company shall make all filings and reports relating to the Exchange required under applicable securities or “Blue Sky” laws of the states of the United States following the date hereof, if any.  

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11.Most Favored Nation.  The Company hereby represents and warrants as of the date hereof and covenants and agrees from and after the date hereof until the first anniversary of the date hereof, that none of the terms offered to any Person with respect to any consent, release, amendment, settlement or waiver relating to the terms, conditions and transactions contemplated hereby (each a “Settlement Document”), is or will be more favorable to such Person than those of the Holder and this Agreement or would otherwise result in  such other holder (each, an “Other Holder”) of the Existing Warrant  (each, a “Settlement Warrant”), or its designee, directly or indirectly, acquiring more than (or having the right to acquire more than, as applicable) one share of Common Stock, in exchange for (whether by exchange, reduction, cancelation or any other transaction with respect to) any one share of Common Stock issuable upon exercise (without regard to any cashless exercise) of such Settlement Warrant (a “Settlement Make-Whole Event”).  If, and whenever on or after the date hereof, the Company enters into a Settlement Document, then (i) the Company shall provide notice thereof to the Holder immediately following the occurrence thereof and (ii) the terms and conditions of this Agreement shall be, without any further action by the Holder or the Company, automatically amended and modified in an economically and legally equivalent manner such that the Holder shall receive the benefit of the more favorable terms and/or conditions (as the case may be) set forth in such Settlement Document and, if a Settlement Make-Whole Event occurs, the Company shall deliver to the Holder, as additional securities issuable pursuant to the Exchange hereunder for the Existing Warrant, such aggregate number of additional shares of Common Stock  as equal to the product of (a) ______ multiplied by (b) the difference of (i) the quotient of (x) the aggregate number of shares of Common Stock (on an as-converted and as-exercised (without regard to cashless exercise) basis) issued (or issuable to) such Other Holder (or its designee) pursuant to such Settlement Agreement and (y) the aggregate number of shares of Common Stock issuable upon exercise (without regard to any cashless exercise) of the Settlement Warrants subject to reduction, exchange, cancellation or otherwise pursuant to such Settlement Make-Whole Event, less (ii) one (1).   Notwithstanding the foregoing, upon written notice to the Company at any time the Holder may elect not to accept the benefit of any such amended or modified term or condition, in which event the term or condition contained in this Agreement shall apply to the Holder as it was in effect immediately prior to such amendment or modification as if such amendment or modification never occurred with respect to the Holder.  The provisions of this Section 11 shall apply similarly and equally to each Settlement Document.

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12.Independent Nature of Holder’s Obligations and Rights.  The obligations of the Holder under this Agreement are several and not joint with the obligations of any Other Holder, and the Holder shall not be responsible in any way for the performance of the obligations of any Other Holder under any other agreement with the Company (each, an “Other Agreement”).  Nothing contained herein or in any Other Agreement, and no action taken by the Holder pursuant hereto, shall be deemed to constitute the Holder and Other Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holder and Other Holders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement or any Other Agreement and the Company acknowledges that, to the best of its knowledge, the Holder and the Other Holders are not acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement or any Other Agreement.  The Company and the Holder confirm that the Holder has independently participated in the negotiation of the transactions contemplated hereby with the advice of its own counsel and advisors.  The Holder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement, and it shall not be necessary for any Other Holder to be joined as an additional party in any proceeding for such purpose.

13.Miscellaneous Provisions.  Section 9 of the Securities Purchase Agreement is hereby incorporated by reference herein, mutatis mutandis.

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IN WITNESS WHEREOF, Holders and the Company have executed this Agreement as of the date set forth on the first page of this Agreement.

 

	
COMPANY:

	
 

	
DELCATH SYSTEMS, INC.

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
By:
	
 
	
 

	
 
	
 
	
Name:
	
 
	
Jennifer K. Simpson

	
 
	
 
	
Title:
	
 
	
President & CEO

 

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IN WITNESS WHEREOF, Holders and the Company have executed this Agreement as of the date set forth on the first page of this Agreement.

 

	
HOLDER:

	
 

	
 

	
 
	
 
	
 
	
 
	
 

	
By:
	
 
	
 

	
 
	
 
	
Name:
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
Aggregate Number of Exchange Shares:

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 

 

15

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