EXPLANATORY NOTES TO THE AGENDA OF THE ANNUAL GENERAL MEETING OF SHAREHOLDERS (AGM) OF ESPERITE N.V. (THE COMPANY)

Transcription

1 EXPLANATORY NOTES TO THE AGENDA OF THE ANNUAL GENERAL MEETING OF SHAREHOLDERS (AGM) OF ESPERITE N.V. (THE COMPANY) to be held on 8 January 2019 at 14:00 hours CET at Hotel NH Amsterdam Barbizon Palace, Prins Hendrikkade 59-72, 1012 AD Amsterdam, The Netherlands Introduction These explanatory notes should be read in conjunction with the agenda for the AGM of the Company to be held on 8 January The paragraph numbering below corresponds with the numbering of the agenda items. 1. Opening and announcements 2. Approval Minutes of the Annual General Meeting of Shareholders of 4 July 2017 (Voting Item) The minutes of the Annual General Meeting of Shareholders of 4 July 2017 are available on the website of the Company ( 3. Proposal to appoint accon avm controlepraktijk B.V. (Accon) as external auditor in relation to the audit of the annual accounts 2017 (Voting Item) At the Annual General Meeting of Shareholders of 4 July 2017, the agenda item regarding the re-appointment of Ernst & Young Accountants LLP (EY) as external auditor was withdrawn, because the Company had mutually agreed with EY that they shall not to be re-appointed as the Company's external auditor. In accordance with Article 16(2) of the EU Regulation No 537/2014 regarding the statutory audit of public-interest entities (the Audit Regulation), the Audit Committee recommended two audit firms for the audit engagement to the Board of Directors and expressed its preference for Accon. In accordance with Article 16(5) of the Audit Regulation, the Board of Directors has decided to follow the Audit Committee s preference and proposes to appoint Accon as external auditor in relation to the audit of the annual accounts As the recommendation by the Audit Committee has been followed by the Board of Directors, the second paragraph of Article 16(5) of the Audit Regulation is not relevant. Please also note that the formal selection procedure as referred to in Article 16(3) of the Audit Regulation does not apply to Esperite, because it qualifies as a small or medium-sized enterprise and a company with reduced market capitalization. 4. Annual report 2017 including Corporate Governance Consideration of the annual report by the Board of Directors for the 2017 financial year. In accordance with the principles of the Dutch Corporate Governance Code, the Company's approach to the implementation of the Dutch Corporate Governance Code as set out in the annual report is tabled for discussion at the AGM. The Company applies all the relevant provisions of the Code with certain deviations, which together with the reasons for those deviations, are set out in the annual report The annual report 2017 can be downloaded from the website of the Company (

2 5. Remuneration policy Shareholders are invited to discuss the execution of the Company s remuneration policy as further set out in the annual report The annual report 2017 can be downloaded from the website of the Company ( 6. Adoption of annual accounts 2017 (Voting Item) It is proposed to adopt the annual accounts for the 2017 financial year as drawn up by the Board of Directors. 7. Allocation of results The loss for the financial year 2017 has been charged against the retained earnings. The Board of Directors decided not to propose any distribution. 8. Discharge of the members of the Board of Directors (Voting Item) It is proposed that the Executive Director and the Non-Executive Directors in office in the 2017 financial year be discharged for the fulfilment of their task in the 2017 financial year, insofar as such task is apparent from the annual accounts and on the basis of the information otherwise provided to the shareholders. 9. Re-appointment of Mr. Frédéric Amar as executive director of the Company until the AGM to be held in 2022 (Voting Item) It is proposed by the Board of Directors to re-appoint Mr. Frédéric Amar as executive director. As Mr. Amar s current term of office as executive director ends as per the date of the AGM, it is proposed to re-appoint Mr. Amar as executive director until the date of the annual general meeting of shareholders to be held in Re-appointment of Mr. Vincent Borgeot as non-executive director of the Company until the AGM to be held in 2022 (Voting Item) It is proposed by the Board of Directors to re-appoint Mr. Vincent Borgeot as non-executive director. As Mr. Borgeot s current term of office as non-executive director ends as per the date of the AGM, it is proposed to re-appoint Mr. Borgeot as non-executive director until the date of the annual general meeting of shareholders to be held in Mr. Borgeot is independent in the meaning of Dutch Corporate Governance Code. Mr. Borgeot holds options for shares in the Company. 11. Re-appointment of Mr. Ronald Lorijn as non-executive director of the Company until the next AGM to be held in 2019 (Voting Item) It is proposed by the Board of Directors to re-appoint Mr. Ronald Lorijn as non-executive director. As Mr. Lorijn's current term of office as non-executive director ends as per the date of the AGM, it is proposed to re-appoint Mr. Lorijn as non-executive director until the date of the next annual general meeting of shareholders to be held in Mr. Lorijn is independent in the meaning of Dutch Corporate Governance Code. Mr. Lorijn does not hold options or shares in the Company. 12. External Financing On June 19, 2018, the Company entered into an issuance agreement with European Select Growth Opportunities Fund, a fund based in Australia (the Investor) and managed by investment manager L1 Capital Pty Ltd. (the Issuance Agreement). 2

3 Pursuant to the Issuance Agreement, the Investor has agreed to subscribe for up to 500 tranche warrants (the Tranche Warrants) in relation to which the Investor has committed, subject to the fulfilment of certain conditions, to subscribe for up to 500 convertible notes (the Notes), with an aggregate principal amount of EUR 5,000,000, with share subscription warrants attached (the Warrants). The Company intends to use the financing to support its commercial activities and for the development of innovative technologies in the field of genetics, data-driven medicine, regenerative medicine and Immuno-therapeutic drugs. The main terms and conditions of the Tranche Warrants, Notes and Warrants are, for information purposes, summarised in Appendix 1 attached hereto. Please also refer to the press release of 19 June 2018 available on the website of the Company ( 13. Delegation to the Board of Directors of the powers to issue, and grant rights to subscribe for, shares in the capital of the Company and to restrict or exclude preemptive rights accruing in connection with such issue of shares or grant of rights to subscribe for shares (Voting Item) In view of the proposed issuance of the Notes and Warrants under the Issuance Agreement, it is proposed to delegate to the Board of Directors (a) the powers to issue, and grant rights to subscribe for, such number of shares as may be required for the issuance of the 500 Tranche Warrants and the subsequent conversion of Notes and exercise of Warrants, all in accordance with the terms of the Issuance Agreement; and (b) the power to restrict or exclude the preemptive rights in connection with such issuance or grant of rights for shares. Reference is made to the main terms and conditions of the Tranche Warrants, Notes and Warrants as summarised in Appendix 1 and in particular to the terms of the conversion and exercise of the Notes and Warrants, respectively. The conversion price (in relation the Notes) will depend on the stock price of the Company during the period immediately prior to conversion, and the exercise price (in relation to the Warrants) will also depend on the future stock price of the Company. The Company does not know, as at the date of the AGM, the exact number of Notes and Warrants that will be issued or how many shares will need to be issued in connection with any conversions of Notes or exercises of Warrant. It is for that reason that the Board of Directors now proposes a delegation of powers that is linked to the terms of the Issuance Agreement and provides for the requisite flexibility. Such delegation is without prejudice to the option that the Company has to settle the Notes and Warrants not only in shares, but also in cash or a combination of shares in cash to provide further control over the resulting dilution for its shareholders. To provide the Company's shareholders with an illustration of what the dilutive impact could be of the issuances of shares in connection with the Issuance Agreement, Appendix 2 attached hereto reflects the theoretical future impact of the conversion of all Notes and exercise of all Warrants based on the current number of shares in the Company's share capital. 14. Approval of the options granted to members of the Board of Directors under the Esperite Share Option Scheme (Voting Item) The following non-executive members of the Board of Directors have been granted options pursuant to the Esperite Share Option Scheme, dated 23 December 2015 (the Esperite Share Option Scheme): On 26 May 2017, Mr. Gert-Jan van der Marel has been granted options for 120,000 shares with an exercise price of EUR 0.40, which can be exercised until 25 May 2023; and 3

4 On 26 May 2017, Mr. Vincent Borgeot has been granted options for 100,000 shares with an exercise price of EUR 0.40, which can be exercised until 25 May In accordance with section 14.4 of the Company's articles of association and section 2:135 (5) of the Dutch Civil Code, the AGM is requested to approve the options granted to members of the Board of Directors under the Esperite Share Option Scheme. 15. Approval of the extension of the Esperite Share Option Scheme and delegation to the Board of Directors of the power to grant options and issue shares pursuant to the Esperite Share Option Scheme and of the power to restrict or exclude the pre-emptive rights in connection with option grants or share issuances under the Esperite Share Option Scheme (Voting Item) The Esperite Share Option Scheme had an initial term until 31 December The Board of Directors wishes to extend the Esperite Share Option Scheme with an additional term of five years until 31 December A copy of the Esperite Share Option Scheme can be downloaded from the Company s website ( The number of shares in respect of which options may be granted under the Esperite Share Option Scheme on any grant date when added to (a) the number of shares comprised in outstanding options granted pursuant to the Esperite Share Option Scheme and (b) the number of shares which have been issued on the exercise of options that have been granted pursuant to the Esperite Share Option Scheme, shall not exceed 15% of the number of ordinary shares in issue immediately prior to such grant date. The number of options that may be granted to the Chief Executive Officer (CEO) pursuant to the Esperite Share Option Scheme shall not exceed 20% of total number of options that can be granted pursuant to the Esperite Share Option Scheme. The number of options that may be granted to any other participant in the Esperite Share Option Scheme shall not exceed 10% of total number of options that can be granted pursuant to the Esperite Share Option Scheme. The AGM is proposed to approve the extension of the Esperite Share Option Scheme including the number of options that can be granted thereunder and to delegate to the Board of Directors the power to grant options and issue shares pursuant to the Esperite Share Option Scheme and the power to restrict or exclude the pre-emptive rights in connection with the option grants or share issuances under the Esperite Share Option Scheme. In relation to the grant of options to members of the Board of Directors, the proposal that the AGM is requested to approve regards a proposal in the meaning of section 14.4 of the Company's articles of association and section 2:135 (5) of the Dutch Civil Code. 16. Delegation to the Board of Directors of the powers to (a) issue, and grant rights to subscribe for, shares in the capital of the Company up to a maximum aggregate issuance price of EUR 7,000,000; and (b) restrict or exclude the pre-emptive rights in connection with such issue of, or grant of rights to subscribe for shares in the capital of the Company, each for a period of 18 months from the date of the AGM (Voting Item) Proposal to delegate to the Board of Directors of the powers to (a) issue, and grant rights to subscribe for, shares in the capital of the Company up to a maximum aggregate issuance price of EUR 7,000,000; and (b) restrict or exclude the pre-emptive rights in connection with such issue of, or grant of rights to subscribe for shares in the capital of the Company, each for a period of 24 months from the date of the AGM. The Board of Directors considers it desirable to be able to react in a timely manner when certain opportunities that need the issuance of shares or granting of rights to subscribe for shares arise. 4

5 Therefore the Board of Directors proposes to that this limited authority to issue shares and grant rights to subscribe for shares is delegated to it. 17. Delegation to the Board of Directors, for a period of 24 months from the date of the AGM, of the power to acquire - through purchases on Euronext Amsterdam or otherwise - up to a maximum of 10% of the issued share capital of the Company as at the date of the AGM by acquiring shares for a purchase price not less than 0.10 and not higher than the average closing price over the five trading days prior to the date of acquisition at Euronext Amsterdam plus a 10% premium (Voting Item) The Company considers it desirable to have the flexibility with regard to the acquisition of its own shares as part of a share buy-back program, or otherwise. 18. Proposal to amend article 4 of the Company s Articles of Association (Voting Item) In light of the aforementioned Issuance Agreement between the Company and the Investor, it is proposed to implement an authorised share capital increase. The present amount of EUR 4,800,000 corresponding to 48,000,000 shares would be increased up to EUR 17,500,000 corresponding to 175,000,000 shares. The proposed amendment is compliant with Dutch law, since article 2:67 sub 4 of the Dutch Civil Code prescribes that at least one fifth of the authorised share capital must have been issued. In order to be able to effect the amendments in the Company's Articles of Association, the proposal to amend the Articles of Association also includes the grant of authorisation to each member of the Executive Board as well as each employee of Dentons Boekel N.V. to apply for the required ministerial certificate of no-objection and to have executed the notarial deed of amendment to the Articles of Association. 19. Proposal to re-appoint Accon as external auditor for a term of 1 year (Voting Item) It is proposed to re-appoint Accon as external auditor for a term of one year. 20. Any other business 21. Closing The notice, the complete agenda and these explanatory notes thereto, the minutes referred to in agenda item 2 and the annual report 2017 are available for inspection and can be acquired at no costs at our offices and at F. Van Lanschot Bankiers N.V. (Beethovenstraat 300, 1077 WZ Amsterdam, facsimile +31(0) , proxyvoting@kempen.nl). These documents can also be downloaded from the website of the Company ( Amsterdam, 27 November

6 Appendix 1 Terms and conditions regarding the issuance of tranche warrants for the subscription of convertible notes with share subscription warrants attached Legal framework of the transaction On June 18, 2018, Esperite N.V. (Esperite) and European Select Growth Opportunities Fund, a fund based in Australia (the Investor) entered into an issuance agreement pursuant to which the Investor has agreed to subscribe for up to 500 tranche warrants (the Tranche Warrants) pursuant to which the Investor has committed to subscribe for up to 500 convertible notes, with a principal amount of EUR 10,000 each (the Notes), with share subscription warrants attached (the Warrants) over the 24 months following the issuance of the first tranche, subject to the fulfilment of certain conditions (as set out below), including shareholders' approval to be obtained at the AGM. Main characteristics of the Tranche Warrants During a period of 24 months as from the issuance of the first tranche, Esperite may request (a Request) the exercise of Tranche Warrants and the issuance of Notes with Warrants attached in tranches of EUR 300,000 (first tranche) and EUR 250,000 (subsequent tranches) each, upon the earlier of (i) the full conversion into shares and/or redemption in cash of all outstanding Notes and (ii) the 3-month anniversary of the issuance of the previous tranche of Notes, provided that the following conditions are satisfied: (i) (ii) (iii) (iv) (v) (vi) no more than 24 months shall have expired from the issuance of the first tranche; (a) all the Notes that had been issued in connection with a previous tranche have been converted into shares and/or repaid in full (including the Notes issued under the existing financing agreement dated March 8, 2017) or (b) more than three months have elapsed since the last Tranche Warrant exercise date; no material adverse change shall have occurred; no event that constitutes an event of default and no triggering event that would constitute an event of default if not cured during the applicable cure period, if any, shall be in existence; no suspension of the trading of the shares on Euronext (other than intra-day suspension at the request of Euronext Amsterdam under Euronext rules) shall have occurred over the 90 preceding calendar days (including the date of the sending of the Request); Esperite shall have at least: 2 times coverage of shares (based on the Conversion Price) authorised, available and approved for issuance to the Investor upon conversion of the maximum amount of Notes to be issued for the applicable Tranche, increased, as the case may be, by the amount of any other outstanding Notes; and 1 time coverage of shares authorised, available and approved for issuance to the Investor upon exercise of the maximum number of Warrants to be issued for the applicable tranche; (vii) (viii) taking into account the Notes to be issued to the Investor under the requested tranche, the Investor shall not hold more than EUR 750,000 of aggregate principal amount of Notes; the closing price and the daily volume weighted average price on each of the 5 preceding trading days shall be at least equal to EUR 0.70 (subject to adjustments resulting from share consolidation or share split); and 6

7 (ix) the average daily value traded of the shares over the 10 preceding trading days shall be at least equal to EUR 20,000, and the Investor shall have the obligation to subscribe for such tranches of Notes with Warrants attached. The Investor may waive these conditions at its sole discretion, for an additional consideration. The Investor shall also have the right to exercise Tranche Warrants at its sole and exclusive discretion in respect of the first 250 Tranche Warrants (i.e. up to an aggregate principal amount of EUR 2.5 million). The remaining 250 Tranche Warrants shall only be exercisable upon request of Esperite. The Tranche Warrants are not transferable, except that the Investor may transfer or assign all or part of its Tranche Warrants to one or more of its affiliates. The Tranche Warrants will not be admitted to trading on any financial market. Main characteristics of the Notes The Notes have a nominal value of EUR 10,000 each and will be subscribed at 99.5% of such nominal value. The Notes bear no interest and have a maturity of 12 months from their respective issuance date. Each Note gives its holders a conversion right to receive, at Esperite s discretion (i) cash, (ii) ordinary shares, or (iii) a combination of cash and ordinary shares (a Conversion). If Esperite chooses to remit cash, the corresponding amount shall be equal to: A = (Nv / Cp) * VWAP "A": cash amount payable to the Note holder; "Nv": nominal value of the Note (EUR 10,000); "Cp": equal to 94% of the lowest daily volume weighted average price of the Group's share during the relevant pricing period (Conversion Price); "VWAP": the volume weighted average price of the Group's share on the Conversion date. If Esperite chooses to remit new and/or existing shares, the corresponding number of shares shall be equal to: N = Nv / Cp "N": number of new and/or existing shares to be remitted to the Note holder; "Nv": nominal value of the Note (EUR 10,000); "Cp": the applicable Conversion Price. At maturity or upon the occurrence of any event of default, any Note for which no Conversion has occurred shall be redeemed at par in cash by the Group. The Notes may be freely transferred or assigned by the Investor to one or more of its affiliates and may not be transferred or assigned to any other third party without the prior written consent of Esperite. The Notes will not be admitted to trading on any financial market. Main characteristics of the Warrants The number of Warrants to be issued under each tranche will be such that, multiplied by their strike price (determined as described below), the resulting amount shall be equal to 45% of the principal 7

8 amount of the tranche, i.e. for the first tranche of EUR 300,000, an amount of EUR 135,000, and for each subsequent tranche of EUR 250,000, an amount of EUR 112,500. The Warrants shall be immediately detached from the Notes. They may be freely transferred or assigned by the Investor to one or more of its affiliates and may not be transferred or assigned to any other third party without the prior written consent of Esperite. The Warrants shall have a maturity of 5 years from their respective issuance date (the "Exercise Period"). Each Warrant will give right to its holder, during the Exercise Period, to subscribe 1 new share of Esperite, subject to customary anti-dilution protection. The strike price of the Warrants will be equal to 115% of the lowest daily volume weighted average price of the share over the 10 consecutive trading days preceding the Request from Esperite to issue a tranche (or the Tranche Warrant exercise date, in case of Tranche Warrants exercised at the discretion of the Investor). The Warrants will not be admitted to trading on any financial market. New shares resulting from Conversion of Notes or exercise of Warrants The new shares issued upon Conversion of Notes or exercise of Warrants will be admitted to trading on Euronext as from their issuance, will carry immediate and current dividend rights and will be fully assimilated to and fungible with the existing shares (ISIN code NL ). Commitment of the Investor Until the latest of (i) the 24-month anniversary of the issuance of the first tranche and (ii) the full conversion into shares and/or redemption of all the outstanding Notes, the Investor has committed: not to hold at any time a number of shares higher than 17% of the outstanding number of shares of Esperite; and not to request any representation on the board of directors of Esperite. 8

9 Appendix 2 Theoretical future impact of the issuance of the Notes with Warrants attached The below table reflects the theoretical future impact of the conversion of all Notes and exercise of all Warrants under the Issuance Agreement based on the current number of shares in the Company's share capital (i.e., EUR 3,861, as of 27 November 2018) and the following hypothetical volume weighted average prices (VWAP): (i) EUR , (ii) EUR (i.e., lowest daily VWAP over the 10 consecutive trading days preceding June 18, 2018) (iii) EUR : Number of shares to be issued upon Conversion of all Notes: Number of shares to be issued upon exercise of all Warrants: VWAP of EUR VWAP of EUR VWAP of EUR ,638,297 18,248,175 35,460,992 3,893,478 6,662,946 13,015,988 Total number shares to be issued: 14,531,775 24,911,121 48,476,980 Dilution expressed as a percentage: 38% 65% 126% 9