Entry into a Material Definitive Agreement
As part of its continuing efforts to simplify its capital structure, on June 6, 2019, Delcath Systems, Inc. (the Company)
entered into an agreement (the Purchase Agreement) with Rosalind Opportunities Fund I LP and Rosalind Master Fund LP (together, the Warrant Sellers), pursuant to which the Warrant Sellers agreed to transfer and surrender to
the Company for cancellation certain warrants (the Warrants) to purchase shares of common stock of the Company held by the Warrant Sellers, including stock purchase warrants which the Company did not have the right to repurchase. Under
the terms of the Purchase Agreement, the Warrant Sellers agreed to defer the payment of the purchase price for the Warrants and, accordingly, the Company agreed to sell and issue to the Warrant Sellers 8% Senior Secured Promissory Notes
(Notes) in an aggregate principal amount of $2 million (the Subscription Amount) in full payment and satisfaction of the purchase price for the Warrants. The Warrants consist of (i) Warrants to purchase 53,374,624 shares
of common stock of the Company at a purchase price of $0.01 per share, issued by the Company on June 4, July 20 and August 29, 2018, (ii) Warrants to purchase 1,901,993 shares of common stock of the Company at a purchase
price of $4.00 per share, issued by the Company on June 4 and July 20, 2018 and (iii) warrants to purchase 2,021,410 shares of common stock of the Company at a purchase price of $1.75 per share, issued by the Company on
August 29, 2018.
The Companys obligations under the Notes are secured by a lien on substantially all of the assets of the
Company and each of its subsidiaries. Each subsidiary of the Company is a guarantor of the Companys obligations under the Notes.
The Notes bear interest at the rate of 8% per annum and accrued interest is payable thereunder on a quarterly basis, in arrears,
commencing in the second quarter of 2019. The outstanding principal amount of the Notes and all accrued and unpaid interest thereon is due and payable on June 6, 2021.
Closing of the transactions contemplated by the Purchase Agreement is subject to the satisfaction or waiver of various closing conditions,
including, but not limited to, the requirement that the Company consummate an equity financing transaction or transactions, by no later than June 21, 2019, from which the Company receives gross cash proceeds of at least $20 million, excluding
any conversion of existing indebtedness of the Company into securities of the Company (an Approved Financing).
The Company is
entitled to prepay the Notes, without penalty, upon prior notice to the Warrant Sellers. The Company is required to prepay the Notes with the net proceeds received by the Company from any offering of equity shares or debt in respect of which the
Company receives net proceeds of at least $10 million, other than an Approved Financing. The Company is also required to prepay the Notes in full upon the occurrence of a change in control transaction. Unless waived by the Warrant Sellers, the
Company must prepay the Notes out of the net proceeds from any sale of material assets or with any cash received by the Company in connection with its entry into certain types of commercial agreements relating to the distribution, sale, promotion or
regulatory approval of the Companys product.