UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A INFORMATION
Consent
Solicitation Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
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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
JONATHAN
A. FOLTZ
MICHAEL
KARPF, M.D.
PAUL
WILLIAM FREDERICK NICHOLLS
FRED
S. ZEIDMAN
LADDCAP
VALUE ASSOCIATES LLC
LADDCAP
VALUE PARTNERS LP
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Laddcap
Issues Open Letter Asking Delcath Stockholders to Support their
Experienced
Unaffiliated Slate by Returning the Blue Consent Cards
New
York,
August 18 - Laddcap Value Partners LP today announced that it issued the
following letter to Delcath (Nasdaq: DCTH) stockholders on or about August
18,
2006 asking for their written consent to remove and replace Delcath’s current
Board of Directors with the slate of experienced nominees who will work
diligently to advance Delcath’s technology and expand stockholder value in the
near and long-term.
Dear
Fellow Delcath Stockholders:
Laddcap
Value Partners LP (“Laddcap”)
is the
largest stockholder of Delcath Systems, Inc. (“Delcath”
or
the
“Company”),
currently owning 2,230,083 or over 11% of the Company’s outstanding shares. We
own more Delcath shares than all of Delcath’s officers and directors combined.
We believe that Delcath has significant inherent value that has been
inadequately exploited by the current Board of Directors and management.
We are
eager to advance the Company’s technology with a higher degree of urgency by
ensuring that the Board of Directors and management has access to all available
skills and resources. Our proposed changes are intended to increase the
likelihood of maximum value realization for the benefit of all Delcath
stockholders in the near and long-term.
We
are
asking for your written consent to remove all directors from Delcath’s board
and, upon such removal, to replace them with our nominees. As many of you
are
aware, we recently challenged the re-election of Mark Corigliano and Victor
Nevins to the Company’s board because we did not believe that they had the
necessary experience to guide Delcath in the future and because we questioned
the current board’s independence and oversight of management. Based on the
voting information disclosed by Delcath from the annual meeting, it appears
that
over 56% of the shares actually voted by Delcath stockholders were voted
to
withhold support for Messrs. Corigliano and Nevins. This significant showing
by
fellow stockholders does not include any shares voted by brokers on behalf
of
their clients who did not respond. In addition, nearly 60% of the votes cast
were in favor of Laddcap’s proposal that Delcath retain an investment banker,
despite the opposition from Delcath.
We
strongly believe that the vote at the annual meeting reflected stockholders’
desire for change and for a cessation of business as usual. As succinctly
stated
at the meeting by an institutional stockholder, “when is this company going to
grow up?” Based on many conversations with stockholders around the time of the
annual meeting, it appears to us that many stockholders feel that the great
promise of the Company’s device is potentially being compromised by a lack of
urgency on the part of a board that we view as inexperienced, and by
shortcomings in corporate governance and management oversight.
-2-
Shortly
after the annual meeting, we approached Delcath with a simple proposition:
Mark
Corigliano, Victor Nevins and Daniel Isdaner should resign as directors and
be
replaced with three, mutually agreeable, new independent directors with
professional experience from which Delcath can draw as it looks toward FDA
approval of its delivery system. Unfortunately, our simple proposal was rejected
and in its place, Delcath announced plans to expand the board to include
two
additional unnamed directors. We did not agree with this proposed change
as we
believe that adding two additional directors to the board will not change
the
oversight of management and will not provide the substantive change that
we
believe is necessary.
The
public disclosure by Delcath of the proposed board expansion occurred on
June
27, 2006, when it issued a press release. On July 10, 2006, two weeks later,
Laddcap withdrew its request for a special meeting of Delcath’s stockholders. 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.”
In
light
of the Company’s actions and in light of what we believe is the prevailing
desire of stockholders for substantive change, we believe that it is necessary
and appropriate to bring the issue to you, our fellow stockholders, as soon
as
possible. Delcath is your company and the choice is now yours to
make.
We
are
asking your consent to:
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1.
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remove
without cause M.S. Koly, Samuel Herschkowitz, M.D., Mark A. Corigliano,
Daniel Isdaner and Victor Nevins as directors of the Company and
any other
person or persons (other than the persons elected pursuant to this
proposed action by written consent) elected or appointed to the
Board of
Directors (the “Board”)
of the Company prior to the effectiveness of these Proposals; and
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2.
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elect
the following five persons as directors of the Company to fill
the
vacancies resulting from Proposal 1: Jonathan A. Foltz, Michael
Karpf,
M.D., Robert B. Ladd, Paul William Frederick Nicholls and Fred
S. Zeidman
(the “Unaffiliated
Slate”);
and
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-3-
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3.
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repeal
each of the provisions of the Company’s Bylaws or amendments of the Bylaws
that are adopted after December 31, 2005 and before the effectiveness
of
the foregoing two Proposals (as of the date of this consent solicitation
statement, we are not aware of any changes to the Company’s Bylaws that
were adopted after December 31,
2005).
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In
an
effort to increase both short-term and long-term stockholder value, we are
proposing the Unaffiliated Slate, which we believe would bring to the Company
diverse experiences from the medical, financial, and regulatory fields. We
believe that the experiences of the Unaffiliated Slate stand in contrast
to
Delcath’s existing Board. A biographical summary of each member of the
Unaffiliated Slate is included for your review in the Consent Solicitation
Statement.
If
elected, among other things, the Unaffiliated Slate anticipates reviewing
Delcath’s corporate governance practices against current best practices. This
review would include consideration of (i) rescinding Delcath’s poison pill
(which was never approved by Delcath’s stockholders), (ii) eliminating the
staggered terms of Delcath’s directors, and (iii) adopting majority voting for
directors. In addition, the Unaffiliated Slate will avail itself of specialists
in the field of executive compensation to set appropriate guidelines for
cash
and stock compensation for senior management and directors.
With
respect to the business operations of Delcath, if elected, during the balance
of
fiscal year 2006 the Unaffiliated Slate anticipates Delcath: (i) with the
support of the National Cancer Institute (NCI), seeking to establish at least
two additional sites for Delcath’s ongoing Phase III trial using melphalan; (ii)
seeking opportunities to enhance its working relationship with the NCI by
funding new initiatives using Delcath’s device; (iii) reviewing whether
continuing to devote resources to the doxorubucin Phase III trials undermines
the melphalan Phase III trial treating the same patient population; (iv)
establishing a collaboration with a filter expert to improve and customize
the
filters for use within the Delcath system, as well as for future filter
variations to address alternative uses of Delcath’s device; (v) testing the
feasibility of using its device in the treatment of Hepatitis C; and (vi)
retaining a nationally recognized investment banking firm with expertise
in the
medical device industry.
The
retention of a nationally recognized investment banking firm will allow Delcath
and its board to be provided with expert advice with respect to, among other
things, capital raising, strategic transactions, more visibility with research
analysts and more visibility within the medical device industry. Laddcap
believes that Delcath and its board can only benefit from hearing the views
and
perspective of industry experts. Moreover, Laddcap does not have a current
intention to compel an immediate sale of Delcath should Laddcap be successful
in
this consent solicitation. Any decision to retain investment bankers or to
take
other strategic decisions rests solely with Delcath’s Board of Directors; such
decisions cannot be taken unilaterally by Laddcap. Moreover, Laddcap believes
that a sale of Delcath would require the approval of Delcath’s
stockholders.
-4-
For
2007,
the Unaffiliated Slate anticipates Delcath also trying to (i) add at least
one
additional Phase III site to speed trial completion; (ii) expand testing
to at
least one new organ or body region; and (iii) establish a presence for Delcath
within at least one major cancer conference.
Through
the Consent Solicitation Statement that you will shortly be receiving in
the
mail, Laddcap
is
providing all holders of Delcath’s shares as of July 27, 2006 (the “Record
Date”)
with
an opportunity to remove and, subject to the qualifications set forth on
page 14
under the heading “CONSENT PROCEDURES”, replace the members of the Board with
the Unaffiliated Slate upon such removal. All Delcath stockholders, who hold
shares as of the Record Date, are being asked to express their written
consent
to the
three proposals by marking, signing, and dating the enclosed BLUE
Consent
Card and returning it in the enclosed, postage-paid envelope, to
The
Altman Group, Inc. at 1200 Wall Street West, 3rd Floor, Lyndhurst, NJ
07071.
LADDCAP
CAN ONLY IMPLEMENT ITS PLAN WITH YOUR HELP
LADDCAP
URGES YOU TO TAKE ADVANTAGE OF THIS OPPORTUNITY TO CHANGE THE COMPOSITION
OF THE
BOARD. LADDCAP BELIEVES THIS CHANGE WILL BENEFIT ALL STOCKHOLDERS. IF WE
FAIL IN
THIS EFFORT, WE MAY NOT INITIATE ANOTHER OPPORTUNITY TO BRING NEW LEADERSHIP
TO
DELCATH.
PLEASE
CONSENT WITH RESPECT TO ALL SHARES FOR WHICH YOU WERE ENTITLED TO GIVE CONSENT
AS OF THE RECORD DATE, AS SET FORTH ON YOUR BLUE
CONSENT CARD,
IN
FAVOR OF EACH PROPOSAL AS DESCRIBED IN THE CONSENT SOLICITATION
STATEMENT.
CONTACT
US
If
anything in this press release or in other materials you may receive from
us or
Delcath 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 below or you may call our consent solicitor, The Altman Group toll
free at (800) 581-5375.
-5-
Thank
you
for your support,
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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PLEASE
SIGN, DATE AND RETURN YOUR BLUE
CONSENT CARD
If
you have any questions or require any assistance in executing your
written
consent, please call:
The
Altman Group, Inc.
1200
Wall Street West, 3rd Floor, Lyndhurst, NJ 07071
(800)
581-5375
Banks
and Brokers Call Collect: (201) 806-7300
Laddcap
Value Partners LP
650
Fifth Avenue, Suite 600
New
York, NY 10019
(212)
259-2070
info@laddcapvalue.com
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In
connection with our consent solicitation, on August 17, 2006 we filed a
definitive consent solicitation statement with the Securities and Exchange
Commission (the “SEC”).
In
addition, we may file other consent solicitation materials regarding this
consent solicitation. STOCKHOLDERS ARE URGED TO READ THE DEFINITIVE CONSENT
SOLICITATION STATEMENT BECAUSE IT CONTAINS IMPORTANT INFORMATION. Definitive
consent solicitation statements and BLUE consent cards are currently being
mailed to Delcath stockholders. Stockholders are also able to obtain a free
copy
of the definitive consent solicitation statement at the SEC’s website,
www.sec.gov. The definitive consent solicitation statement may also be obtained
free of charge from our offices by contacting us via the contact information
set
forth above.
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