UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
(Amendment
No. )
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Preliminary
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Definitive
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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DELCATH
SYSTEMS, INC.
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(Name
of Registrant as Specified In Its Charter)
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ROBERT
B. LADD
LADDCAP
VALUE ASSOCIATES LLC
LADDCAP
VALUE PARTNERS LP
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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LADDCAP
VALUE PARTNERS LP
650
Fifth Avenue, Suite 600
New
York, New York 10019
info@laddcapvalue.com
(212)
259-2070 (tel)
(212)
259-2052 (fax)
August
10, 2006
Dear
Fellow Delcath Stockholders:
DELCATH
RESORTS TO LITIGATION ONCE AGAIN AND SEEKS TO INTERFERE WITH DELCATH’S
STOCKHOLDERS VOTING ON A NEW SLATE OF DIRECTORS
Laddcap
Value Partners LP is disappointed that Delcath initiated litigation against
us
and one of our nominees, Jonathan Foltz. In the litigation against us,
Delcath
seeks, among other things, to prevent us from soliciting consents from
our
fellow Delcath stockholders and as a result to interfere with Delcath’s
stockholders’ exercise of their right to replace the current board. Please be
assured that Laddcap intends to fight vigorously Delcath’s defensive
maneuvering. With respect to the separate suit filed by Delcath against
Jonathan
Foltz, we are shocked at Delcath’s tactics and believe that they are an attempt
to intimidate Mr. Foltz and have him withdraw as a nominee. Mr. Foltz has
advised us that he remains committed to serving as a nominee and as a director.
We
hope
that you are as outraged by Delcath’s litigious behavior as we are and will
consider it as another reason to remove all of Delcath’s current directors and
to replace them with our slate of nominees. In our opinion, the use of
Delcath’s
treasury and resources to attempt to smother stockholder democracy is wrong.
As
you know, we also believe that it is wrong for Delcath to initiate litigation
that is not related to its core business plan, but we recently learned
that
FOR
A SECOND TIME,
Delcath
filed litigation concerning M.S. Koly’s and Mark Corigliano’s personal
involvement in the Rolls-Royce Owner’s Club (Koly
v. Enney,
docket
number 3 06-CV-68, United States District Court, Northern District of
Georgia).
DELCATH’S
PRESS RELEASE AND LETTER TO STOCKHOLDERS MISLEADS AND CONTAINS
OMISSIONS
Laddcap
is committed to a full and frank discussion of the qualifications of our
proposed directors. We urge all stockholders to compare the qualifications
of
our nominees against the qualifications of Delcath’s current board members. If
you have any questions concerning the information that Laddcap has provided,
contact us and we would be pleased to answer your questions.
In
reviewing the information that Delcath recently disclosed to you, we observed
that it contains numerous inaccuracies and omissions. One of these omissions
involves the personal attack on one of our nominees, Paul Nicholls. Mr.
Nicholls
filed for personal bankruptcy in 2002. Delcath’s materials omitted
to state
that Mr. Nicholls’ personal bankruptcy resulted from his inability to maintain
employment while he battled Stage 4 Multiple Myeloma, a cancer occurring
in
his
bone
marrow. Mr. Nicholls required aggressive long-term treatment and we are
pleased
to report that he is now in full remission. We are proud to have Mr. Nicholls
as
part of our slate; we believe his unique perspective, as a cancer patient
(who
was a participant in clinical trials of developmental treatments and who
has
personally experienced the toxicities of melphalan) along with his contacts
developed as the President/CEO of Team Continuum, a non-profit organization
dedicated to helping people living with cancer, will prove to be an invaluable
asset to Delcath and its stockholders.
Delcath
also states that the market value of Delcath’s stock has increased by a large
percentage. We believe that in order for stockholders to consider the complete
performance of Delcath’s stock that they do so beginning with Delcath’s public
offering in October 2000 and not May 2003 as Delcath does, a point when
Delcath’s stock was trading at or near its historical low. In October 2000 when
Mr. Koly was Delcath’s President and CEO (as he is now) and Dr. Herschkowitz was
Decalth’s Chairman of the Board and Chief Technical Officer (as he is now),
Delcath went public at $6.00 per unit. A unit consisted of one share of
common
stock and one warrant to purchase a share of common stock at $6.60 per
share.1 We
believe that the fair and appropriate comparison is between the $6.00 offering
price of the units on October 19, 2000 and the $5.00 closing price of a
share of
Delcath’s common stock on August 7, 2006.
THERE
WAS NO SETTLEMENT BETWEEN LADDCAP AND DELCATH FOLLOWING THE ANNUAL
MEETING
At
the
annual meeting, which Robert Ladd attended, stockholders asked many direct
questions of Mr. Koly and stockholders expressed concern with the composition
of
the current board and Delcath’s management. We heard similar concerns directly
from stockholders. Mr. Ladd called Mr. Koly the morning after the annual
meeting
to propose a solution that he believed would benefit all Delcath stockholders
and which would address concerns that other stockholders expressed. Mr.
Ladd’s
basic proposal was simple: that the three current independent directors
resign
from Delcath’s board. These three directors would then be replaced by three,
mutually agreeable, new independent directors, each of whom would have
relevant
experience. Mr. Ladd believed that three new independent directors, to
replace
the current independent directors (none of whom has any demonstrable experience
regarding public companies and/or the medical device industry), would assist
Delcath in achieving its potential.
Mr.
Ladd
and Mr. Koly exchanged phone calls over approximately a two week period
discussing the proposal and various modifications proposed by Mr. Koly.
Mr. Ladd
considered Mr. Koly’s counter-proposals, but ultimately concluded that Mr.
Koly’s proposals were cosmetic and lacking in substance. In their last
conversation, on or about June 27, 2006, regarding the composition of the
board,
Mr. Koly stated for the first time to Mr. Ladd that his preferred course
of
action was approved by the current board and that Delcath would not agree
to
have new independent directors replace any of Delcath’s current directors.
Rather the current board, of which two members received essentially a vote
of
non-confidence at the annual meeting from stockholders holding over half
of
Delcath’s shares, would at some point in the future, nominate and elect two
additional independent directors. Mr. Ladd was surprised that Mr. Koly
chose to
take this action unilaterally, particularly in light of stockholders’ concerns
as raised at the annual meeting.
_________________
1 Based
on
Delcath’s public filings, the units traded as low as $1.00 per unit shortly
before the warrants and the common stock were decoupled from the units
on
October 19, 2001. For the quarter in which the decoupling occurred, the
common
stock traded at a high of $1.80 per share and a low of $0.56 per
share.
-2-
Mr.
Ladd
believes that Delcath’s plan to have the current board nominate two new
directors, a minority of the total board, will not serve the best interests
of
Delcath’s stockholders. Moreover, Mr. Ladd believes the recent changes proposed
by Mr. Koly will not materially change the ability of Delcath’s board to
exercise true independent control over Delcath’s management or to set a
strategic direction for Delcath that seeks to increase stockholder
value.
Shortly
after Delcath publicly announced its plan to add two unnamed directors
to its
board (at some future point in time), Laddcap agreed to withdraw its previous
request for a special meeting. To effectuate this withdrawal, counsel between
Laddcap and Delcath exchanged a letter confirming the withdrawal of the
request
for a special meeting, the form of press release to be used by Delcath
and the
dismissal of litigation in Delaware. This letter specifically provided
that the
agreement shall not “prejudice or restrict any future actions that [Laddcap or
Delcath] may desire to take.”
At
the
time that Laddcap agreed to withdraw its requests for the special meeting,
it
considered different options that were available to it, particularly in
light of
Delcath having only recently filed the correct version of its certificate
of
incorporation with the Securities and Exchange Commission. At the time
that
Laddcap made its first request for a special meeting, the certificate of
incorporation that was filed with the SEC provided that directors could
only be
removed by stockholders for cause with the vote of stockholders holding
80% of
the outstanding shares. When Delcath filed the corrected version on June
5, 2006
and revealed that all directors could be removed without cause at any time
by
the vote of stockholders holding a majority of the outstanding shares,
Laddcap
acted immediately out of concern that Delcath would seek to make changes
before
another request for a special meeting could be made.
When
Laddcap was considering the withdrawal of the requests for the special
meeting,
it also took into account that nearly a month had elapsed since the second
request for the special meeting had been made and that Delcath had still
not
scheduled the meeting, nor announced a record date for the revised meeting,
nor
confirmed to Laddcap that it would honor the agenda items for the special
meeting that Laddcap requested. After consideration of the different factors,
Laddcap decided that the special meeting might not be the best strategic
alternative and that it could initiate the same process via a consent
solicitation without needing Delcath’s assistance or participation in scheduling
the meeting or agreeing to the agenda.
CONTACT
US
If
anything in Delcath’s press releases, letters or other statements raises any
questions for you, please contact us. We believe it is important to maintain
an
open and on-going dialogue with stockholders. We
want to hear from you, hear your views concerning Delcath and answer any
questions that you may have about our proposals or the unaffiliated slate
of
directors.
Therefore, please call,
write,
fax
or
email
us your
name, address, email address and number of shares of Delcath stock you
held on
July 27, 2006; please
also include your phone number.
Our
contact information is set forth above or you may call our consent solicitor,
The Altman Group toll free at (800) 581-5375.
-3-
SUPPORT
OUR CONSENT SOLICITATION
In
the
near future, you will receive from us a Definitive Consent Solicitation
Statement and a BLUE
Consent
Card. It
is important that you act immediately upon receipt of the Definitive Consent
Solicitation Statement and the BLUE
Consent Card.
In
connection with our solicitation, on August 1, 2006 we filed a preliminary
consent solicitation statement with the Securities and Exchange Commission
(“SEC”).
We
will prepare and file with the SEC a definitive consent solicitation statement
in support of our consent solicitation, and we may file other consent
solicitation materials regarding this consent solicitation. INVESTORS AND
SECURITY HOLDERS ARE URGED TO READ THE PRELIMINARY CONSENT SOLICITATION
STATEMENT BECAUSE IT CONTAINS IMPORTANT INFORMATION. Investors and security
holders are able to obtain a free copy of the preliminary consent solicitation
statement at the SEC’s website, www.sec.gov. The preliminary consent
solicitation statement may also be obtained free of charge from our offices
by
contacting us via the contact information set forth above.
Laddcap
Value Partners LP (“Laddcap”),
its
affiliates, their respective partners and members, Robert B. Ladd, Jonathan
A.
Foltz, Michael Karpf, M.D., Paul William Frederick Nicholls and Fred S.
Zeidman
(collectively, the “Laddcap
Participants”)
are
deemed participants in the solicitation of Delcath’s stockholders. Information
about the Laddcap Participants is set forth in the preliminary consent
solicitation statement, which has been filed with the SEC. The most recent
information about Delcath and its current directors and executive officers,
and
their ownership of Delcath securities, is set forth in the Schedule 14A,
which
was filed by Delcath with the SEC on August 7, 2006.
Sincerely,
LADDCAP
VALUE PARTNERS LP
By:
__________________________________________
Robert
B.
Ladd, in his capacity as the
managing
member of Laddcap Value
Associates
LLC, the general partner of
Laddcap
Value Partners LP
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